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                                                                    Exhibit 10.7

                              CONSULTING AGREEMENT

      This Consulting Agreement is between Thomas M. Palka (the "Consultant")
and Netegrity, Inc. (the "Company"). Capitalized terms herein shall have the
same meaning as in the Transition Agreement between Netegrity and Consultant
dated September 6, 2002.

      1. CONSULTANT'S SERVICES. The Consultant shall act as a consultant to the
Company commencing on the first day after the Resignation Date and ending one
year thereafter unless terminated earlier as provided for in Section 4 below
(the "Consultancy Period"). No compensation payments will be made under Section
2 of this Consulting Agreement until the Consultancy Period has commenced. The
Consultant shall, at such times and such places as the Company may reasonably
request, provide consulting services and advice relating to, among other things,
the organization, business objectives and policies of the Company (the
"Services"). However, the Company will have no obligation whatsoever to make any
request for the Services during the term of this Consulting Agreement. In the
event that the Transition Agreement is terminated pursuant to Section 2 thereof,
or in the event of revocation as provided in Section 11(c) hereof, this
Consulting Agreement shall be void and of no legal force or effect.

      2. COMPENSATION.

            (a) In full payment for performance of the Services, the Company
      shall pay the Consultant a consulting fee, (the "Consulting Fee"), in an
      amount equal to Consultant's 2002 base salary ($200,000.00), plus earned
      incentive bonus as defined in Schedule A if any. For the purpose of
      calculating Consultant's earned incentive bonus, Company shall utilize the
      2002 quota of License Bookings and defined and set forth in Schedule A
      (the "2002 Quota").

            (b) Notwithstanding paragraph 2(a) above, in the event Consultant
      fails to achieve at least 90% of the 2002 Quota (the "Consulting Bonus
      Threshold"), the Consulting Fee will be based solely on the base salary
      paid to Consultant during 2002.

            (c) Notwithstanding paragraph 2(a) above, if Consultant achieves the
      Consulting Bonus Threshold during calendar year 2002, but achieves less
      than 100% of the 2002 Quota, the amount of Consulting Fee paid to
      Consultant will include 2002 base salary plus an earned incentive bonus
      calculated in accordance with the chart set forth in Schedule A. The
      earned incentive bonus will be calculated based on a quarterly number and
      the payment of the fourth quarter incentive bonus is not contingent on
      achieving the third quarter incentive bonus.

            (d) Notwithstanding paragraph 2(a) above and subject to paragraphs
      2(b) and 2(c) above, if the Consultant's employment pursuant to the
      Transition Agreement is terminated by the Company without cause prior to
      December 31, 2002, the Consulting Fee will be computed based on the full
      year 2002 base salary, plus the incentive bonus, if any, actually earned
      for his Services up to the Resignation Date, provided however, that the
      Consulting Bonus Threshold specified in paragraph 2(b) shall be
      recalculated as 90% of the 2002 Quota of License Bookings applicable to
      the period up to the Resignation Date.

            (e) The Consulting Fee shall be paid to Consultant on the last day
      of each month during the Consultancy Period in accordance with a schedule
      of equal monthly installments between twelve (12) and thirty-six (36)
      months to be agreed in writing between Consultant and the Company.

            (f) During the Consultancy Period, Consultant shall not be entitled
      to, and shall not receive, any of the benefits he had been receiving from
      the Company prior to the Resignation

<PAGE>

      Date, including, but not limited to, health or dental insurance and
      vacation accrual, except pursuant to COBRA at his cost if elected by the
      Consultant.

      3. NO OTHER COMPENSATION OR BENEFITS. Except as expressly set forth
herein, the Company shall not be obligated to pay any compensation or Benefits
to Consultant during the Consultancy Period. Consultant shall not continue to
vest during the Consultancy Period in the stock options granted to him prior to
the Resignation Date. Exercise of any options vested as of the Resignation Date
shall be governed by the terms of the applicable stock option plan(s) and the
option agreement(s) between Consultant and the Company. Consultant shall not
accrue any vacation entitlement during the Consultancy Period. The Company will
reimburse Consultant for properly documented business expenses in accordance
with the Company's policies therefor.

      4. TERMINATION

            (a) This Consulting Agreement will expire at the end of the
Consultancy Period, at which time Consultant and the Company agree that any and
all obligations which the Company may owe to the Consultant under this
Consulting Agreement or otherwise will terminate.

            (b) This Agreement may be terminated by the Company at any time for
Cause, as that term is defined in the Transition Agreement. Upon termination for
Cause, the Company's sole obligation to Consultant shall be to pay a prorata
portion of the Consulting Fee due through the date of termination, which payment
shall be Consultant's sole and exclusive remedy on account of termination for
cause.

      5. CONTINUED EFFECTIVENESS OF NON-COMPETITION, NON-DISCLOSURE AND
INVENTIONS AGREEMENT. Consultant hereby acknowledges and agrees that the
Non-Competition, Non-Disclosure and Inventions Agreement dated 10/12/01 between
Consultant and the Company ("NDA") shall remain in full force and effect during
the Consultancy Period and thereafter in accordance with its terms and
applicable law. Such NDA is hereby incorporated by reference into this
Consulting Agreement.

      6. INDEPENDENT CONTRACTOR. It is expressly understood and agreed that
during the term of this Consulting Agreement, the Consultant's relationship to
the Company will be that of an independent contractor, and that neither this
Consulting Agreement nor the Services to be rendered hereunder shall for any
purpose whatsoever or in any way or manner create, expressly or by implication,
any employer-employee relationship, partnership, joint venture or other
relationship with the Company, other than that of independent parties
contracting with each other solely for the purpose of carrying out the
provisions of this Consulting Agreement. Accordingly, Consultant acknowledges
and agrees that he shall not be entitled to any benefits provided by the Company
to its employees (including, without limitation, such items as health and
disability benefits, except this section will not affect Consultant's rights to
health and dental insurance pursuant to COBRA as set forth in Section 2 hereof.
The Consultant shall have sole and exclusive responsibility for the payment of
all federal, state and local income taxes, for all employment and disability
insurance and for Social Security and other similar taxes with respect to the
Consulting Fee. The Consultant further agrees that if the Company pays or
becomes liable for such taxes or related civil penalties or interest as a result
of the Consultant's failure to pay taxes or report same, or due to the Company's
failure to withhold taxes, the Consultant shall indemnify and hold the Company
harmless for any such liability. The Consultant shall assume and accept all
responsibilities which are imposed on independent contractors by any statute,
regulation, rule of law or otherwise. Further, the Consultant understands and
agrees that the work to be performed is not covered under the unemployment
compensation laws and that the work to be performed is not intended to be
covered by applicable worker's compensation laws.

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      7. NO AGENCY AUTHORITY. The Consultant is not authorized to bind the
Company, or to incur any obligation or liability on behalf of the Company,
except as expressly authorized by the Company in writing.


      8. INDEMNIFICATION. Consultant agrees to defend, indemnify and hold the
Company harmless from any and all claims, damages, liability, attorney's fees
and expenses on account of (i) an alleged breach of, or failure by Consultant to
satisfy any of his obligations under, the Consulting Agreement or the Transition
Agreement; or (ii) any other act or omission of Consultant.

      9. RELEASE. In consideration of the payments and agreements set forth in
Sections 1 and 2 hereof, the sufficiency and receipt of which are hereby
acknowledged, Consultant unconditionally and irrevocably agrees that he and his
representatives, agents, attorneys, executors, administrators, estates, heirs,
successors and assigns (collectively, the "Releasor") hereby completely release,
remise and forever discharge the Company, its predecessors, successors, assigns,
parents, affiliates, subsidiaries, divisions, insurers, and its and their past
and present directors, officers, employees, stockholders, partners, agents,
trustees, fiduciaries, attorneys, and representatives of any kind, in both their
official and individual capacities (the "Releasees") of and from any and all
claims, actions, causes of actions, cross-claims, motions, counterclaims, suits,
charges, debts, dues, obligations, complaints, liabilities, accounts, covenants,
contracts, agreements, promises, entitlements to damages, judgments, costs,
expenses, rights and demands of any nature whatsoever, either in law or in
equity, known or unknown, existing or contingent, including, but not limited to:
(i) any and all claims arising out of or in connection with Consultant's
employment, change in employment status and/or termination of employment with
the Company; (ii) any and all claims arising out of or in connection with any
relationship between Consultant and the Company, including without limitation,
Consultant's status as an employee, consultant or stockholder of the Company;
(iii) any and all claims for stock, stock options, equity or ownership in the
Company; and (iv) any and all claims based on any federal, state or local law,
constitution or regulation regarding either employment or employment
discrimination and/or retaliation including, without limitation, those laws or
regulations concerning discrimination on the basis of race, color, age,
handicap, physical or mental disability, creed, religion, sex, sex harassment,
sexual orientation, marital status, national origin, ancestry, veteran status,
military service and/or application for military service; (v) any and all claims
arising out of or in connection with any contract, whether oral or written,
express or implied; any tort; and/or any other statutory or common law claim of
any nature whatsoever. This provision is intended by the parties hereto to be
all-encompassing, and to include all claims that Consultant has, may have or has
had against the Releasees, or any of them, from the beginning of the world to
the Effective Date of this Transition Agreement. This release provision will not
affect Consultant's rights under the Netegrity 1994 Stock Option Plan, the
Netegrity 1997 Stock Option Plan and the Netegrity 2000 Stock Option Plan.

      10. ACCORD AND SATISFACTION. Consultant accepts the payments and
agreements set forth above in Sections 1 and 2 as full and complete payment,
settlement, consideration, accord and/or satisfaction with respect to any and
all obligations and liabilities, whether financial or otherwise, of the
Releasees to Consultant, and with respect to all claims, causes of action and
damages that could be asserted by Consultant against the Releasees, regarding
Consultant's employment, change in employment status and/or termination,
including but not limited to, any and all claims for accrued compensation and
benefits, salary, wages, severance pay, draws, bonuses, commissions, incentive
pay, deferred compensation, reimbursement of expenses, attorneys fees, vacation
pay, equity, claims of ownership, stock and/or stock options and all other
payments, compensation or reimbursements of any kind and/or

                                       3

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nature. This section will not affect Consultant's rights under the Netegrity
1994 Stock Option Plan, the Netegrity 1997 Stock Option Plan, the Netegrity 2000
Stock Option Plan.

      11. WAIVER OF RIGHTS AND CLAIMS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT
ACT OF 1967. SINCE CONSULTANT IS 40 YEARS OF AGE OR OLDER, HE HAS BEEN INFORMED
THAT HE HAS OR MIGHT HAVE SPECIFIC RIGHTS AND/OR CLAIMS UNDER THE AGE
DISCRIMINATION IN EMPLOYMENT ACT OF 1967 (THE "ADEA"), AND HE AGREES AND
UNDERSTANDS THAT:

            (A) IN CONSIDERATION FOR THE PAYMENTS AND AGREEMENTS DESCRIBED IN
SECTIONS 1 AND 2 HEREOF, CONSULTANT SPECIFICALLY WAIVES SUCH RIGHTS AND/OR
CLAIMS TO THE EXTENT THAT SUCH RIGHTS AND/OR CLAIMS AROSE PRIOR TO OR ON THE
DATE THIS CONSULTING AGREEMENT IS EXECUTED;


            (B) CONSULTANT IS ADVISED OF HIS RIGHT TO CONSULT WITH AN ATTORNEY
OF HIS CHOICE OR ANY OTHER PERSON OF HIS CHOOSING PRIOR TO EXECUTING THIS
CONSULTING AGREEMENT. CONSULTANT ACKNOWLEDGES THAT HE HAS CONSULTED WITH COUNSEL
OF HIS CHOOSING AND HAS NOT BEEN SUBJECT TO ANY UNDUE OR IMPROPER INFLUENCE
INTERFERING WITH THE EXERCISE OF HIS FREE WILL IN DECIDING WHETHER TO EXECUTE
THIS CONSULTING AGREEMENT;

            (C) CONSULTANT WAS AND IS HEREBY INFORMED THAT HE HAS AT LEAST 21
DAYS FROM THE DATE HE IS PRESENTED WITH THIS CONSULTING AGREEMENT WITHIN WHICH
TO CONSIDER THE TERMS OF AND TO EXECUTE THIS CONSULTING AGREEMENT, AND SEVEN (7)
DAYS FOLLOWING EXECUTION TO REVOKE HIS ACCEPTANCE OF IT. SUCH REVOCATION MUST BE
DELIVERED TO THE COMPANY IN WRITING PRIOR TO THE CLOSE OF BUSINESS ON SUCH
SEVENTH DAY. THIS CONSULTING AGREEMENT SHALL NOT BE EFFECTIVE UNTIL THE EIGHTH
DAY FOLLOWING EXECUTION BY CONSULTANT (WITHOUT REVOCATION).

            (D) THE 21-DAY PERIOD WILL NOT BE AFFECTED OR EXTENDED BY ANY
REVISION THAT MIGHT BE MADE TO THIS CONSULTING AGREEMENT.

      12. MISCELLANEOUS.

            (a) This Consulting Agreement, the Transition Agreement and the NDA
set forth the complete, sole and entire agreement between the parties and
supersedes all prior agreements, communications, understandings, representations
and negotiations between the parties, whether oral or written, except for the
stock plan and the stock option agreement between the Consultant and the Company
which shall remain in full force and effect in accordance with their respective
terms.

            (b) No provision of this Consulting Agreement shall be waived,
amended, modified, superseded, canceled, terminated, renewed or extended except
in a written instrument signed by the party against whom any of the foregoing
actions is asserted. Any waiver shall be limited to the particular instance and
for the particular purpose when and for which it is given.

            (c) Consultant hereby agrees that each provision herein shall be
treated as a separate and independent clause, and the unenforceability of any
one clause shall in no way impair the

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enforceability of any of the other clauses of this Consulting Agreement.
Moreover, if one or more of the provisions contained in this Consulting
Agreement shall for any reason be held to be excessively broad as to scope,
activity, subject or otherwise so as to be unenforceable at law, such provision
or provisions shall be construed by the appropriate judicial body by limiting or
reducing it or them, so as to be enforceable to the maximum extent compatible
with the applicable law as it shall then appear.

            (d) This Consulting Agreement, the Services to be performed and all
rights hereunder are personal to the Consultant and may not be transferred or
assigned by the Consultant at any time. The Company may assign this Consulting
Agreement to its successors and assigns and all rights and obligations under
this Agreement will inure to the benefit of and be binding upon the Company.

            (e) This Consulting Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Massachusetts, and shall be
considered a sealed instrument thereunder.

      IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals as of the dates written below.


NETEGRITY, INC.                                     Thomas M. Palka

By: /s/ Barry N. Bycoff                             /s/  Thomas M. Palka
   --------------------                             --------------------
        Barry N. Bycoff
President, Chief Executive Officer,



Dated:   September 6, 2002                          Dated: September 6, 2002
       ----------------------------                        -----------------

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<PAGE>

                                   SCHEDULE A

DEFINITIONS:

FOR THE PURPOSE OF THIS AGREEMENT, "LICENSE BOOKINGS" SHALL MEAN THE LICENSE
FEES (EXCLUDING ANY FEES FOR SUPPORT, MAINTENANCE, TRAINING OR INSTALLATION
SERVICES) FOR NETEGRITY SOFTWARE UNDER LICENSE AGREEMENTS EXECUTED IN THE
APPLICABLE QUARTER, WHICH MEET THE CRITERIA FOR NETEGRITY'S THEN CURRENT REVENUE
RECOGNITION GUIDELINES,

                                   2002 QUOTA
                               QUARTERLY BREAKDOWN

<TABLE>
<CAPTION>
                                                Q3                    Q4
<S>                                      <C>                     <C>
LICENSE BOOKINGS                         $11,510,000             $13,763,000
MAXIMUM INCENTIVE BONUS PER QUARTER      $ 40,000.00             $ 40,000.00
</TABLE>

                  CONSULTING FEE - INCENTIVE BONUS CALCULATION

<TABLE>
<CAPTION>
   % of Quarterly 2002 Quota Achieved         % of 2002 Incentive Bonus Paid as Part of Consulting Fee
<S>                                           <C>
                 <90%                                                     0
                 =90%                                                    50%
                **91%                                                    55%
                **92%                                                    60%
                **93%                                                    65%
                **94%                                                    70%
                **95%                                                    75%
                **96%                                                    80%
                **97%                                                    85%
                **98%                                                    90%
                **99%                                                    95%
               **100%                                                   100%
</TABLE>

** Less than or equal to.


For example, in the event Company's License Booking for Q3 2002 is $10,590,000
which is = 92% of the Q3 2002 Quota, for the purpose of this example, the 2002
Incentive Bonus for Q3 would be $24,000 (i.e. $40,000 x 60%).

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