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Rule 424(b)(3)
Reg. No. 333-49413
PROSPECTUS
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2,592,918 SHARES
ASPECT DEVELOPMENT, INC.
COMMON STOCK
The 2,592,918 shares of Common Stock, par value $0.001 ("Common Stock"),
of Aspect Development, Inc., a Delaware corporation ("Aspect" or the "Company"),
offered by this Prospectus (the "Shares") were issued in connection with the
merger (the "Merger") of CADIS, Inc., a Delaware corporation ("CADIS"), with
Hawaii Acquisition Corporation, a Delaware corporation and wholly-owned
subsidiary of Aspect ("Sub"), which was consummated on November 25, 1997. The
Shares may be sold from time to time by or on behalf of certain former
stockholders of CADIS (the "Selling Stockholders") who are described in this
Prospectus under "Selling Stockholders." As part of the Merger, the Company
agreed to register the Shares under the Securities Act of 1933, as amended (the
"Securities Act"). The Company also agreed to use its best efforts to cause the
registration statement covering the Shares to remain effective until November
25, 1998.
On August 14, 1998, the Company effected a two-for-one stock split, by
means of a stock dividend, to stockholders of record on July 31, 1998 (the
"Stock Split"). All share numbers in this Prospectus have been adjusted to give
effect to the Stock Split.
The Company has been advised by the Selling Stockholders that they intend
to sell all or a portion of the Shares from time to time in the Nasdaq National
Market, in negotiated transactions or otherwise, and on terms and at prices then
obtainable. The Selling Stockholders may effect such transactions by selling the
Shares to or through broker-dealers, and such broker-dealers may receive
compensation in the form of discounts, concessions or commissions from the
Selling Stockholders or the purchasers of the Shares for whom such broker-
dealers may act as agents or to whom they sell as principal or both (which
compensation to a particular broker-dealer may be in excess of customary
commissions). The Company will not receive any proceeds from the sale of Common
Stock by the Selling Stockholders. The aggregate proceeds to the Selling
Stockholders from the sale of the Shares will be the price of the Shares sold
less the aggregate agents' commissions and underwriters' discounts, if any, and
other expenses of issuance and distribution not borne by the Company. See
"Selling Stockholders" and "Plan of Distribution."
The Selling Stockholders and any broker-dealers, agents or underwriters
that participate with the Selling Stockholders in the distribution of any of the
Shares may be deemed to be "Underwriters" within the meaning of the Securities
Act, and any commission received by them and any profit on the resale of the
Shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. The Company has agreed to indemnify the
Selling Stockholders, and the Selling Stockholders have agreed to indemnify the
Company, against certain liabilities, including liabilities under the Securities
Act.
The Company's Common Stock is quoted on the Nasdaq National Market under the
symbol "ASDV." On September 9, 1998, the last sale price of the Company's
Common Stock as reported on the Nasdaq National Market was $34.19.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY INVESTORS
IN EVALUATING AN INVESTMENT IN THE SECURITIES OFFERED HEREBY, SEE "RISK
FACTORS" COMMENCING ON PAGE 3.
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THE 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 ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
________________________________________
THE SHARES HAVE NOT BEEN REGISTERED FOR SALE UNDER THE SECURITIES LAWS OF ANY
STATE OR JURISDICTION AS OF THE DATE OF THIS PROSPECTUS. BROKERS OR DEALERS
EFFECTING TRANSACTIONS IN THE SHARES SHOULD CONFIRM THE REGISTRATION OF THE
SHARES UNDER THE SECURITIES LAWS OF THE STATES IN WHICH SUCH TRANSACTIONS OCCUR,
OR THE EXISTENCE OF ANY EXEMPTIONS FROM SUCH REGISTRATION.
Except as described in this Prospectus under "Plan of Distribution," the
Company will pay all expenses incident to the offering and sale of the Shares to
the public. See "Plan of Distribution."
September 9, 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
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Room 1024, Washington, D.C. 20549, and at the Commission's
Regional Offices located at Northwest Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661; and Seven World Trade Center, 13th Floor,
New York, New York 10048. Copies of such material can be obtained at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549. Reports, proxy statements and
other information filed electronically by the Company with the Commission are
available at the Commission's worldwide web site at http://www.sec.gov. The
Company's Common Stock is listed for trading on the Nasdaq National Market and
reports, proxy statements and other information concerning the Company may also
be inspected at the offices of the National Association of Securities Dealers,
1735 K Street, N.W., Washington, D.C. 20006.
ADDITIONAL INFORMATION
A registration statement on Form S-3 with respect to the Shares offered
hereby (together with all amendments, exhibits and schedules thereto, the
"Registration Statement") has been filed with the Commission under the
Securities Act. This Prospectus does not contain all of the information
contained in such Registration Statement, certain portions of which have been
omitted pursuant to the rules and regulations of the Commission. For further
information with respect to the Company and the Shares offered hereby,
reference is made to the Registration Statement. Statements contained in this
Prospectus regarding the contents of any contract or any other documents are
not necessarily complete and, in each instance, reference is hereby made to
the copy of such contract or document filed as an exhibit to the Registration
Statement. The Registration Statement may be inspected without charge at the
Securities and Exchange Commission's principal office in Washington, D.C., and
copies of all or any part thereof may be obtained from the Public Reference
Section, Securities and Exchange Commission, Washington, D.C. 20549, upon
payment of the prescribed fees.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission and are
incorporated herein by reference:
1. The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997;
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31 and June 30, 1998;
3. The Company's Current Report on Form 8-K dated August 14, 1998; and
4. The description of the Company's Common Stock set forth in its
Registration Statement on Form 8-A filed with the Commission on May
20, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act (i) after the date of the initial Registration
Statement and prior to effectiveness of the Registration Statement and (ii)
after the date of this Prospectus and prior to the termination of the offering,
shall be deemed to be incorporated by reference herein 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, including any
beneficial owner, to whom this Prospectus is delivered, upon the request of such
person, a copy of any or all of the documents incorporated herein by reference,
other than exhibits to such documents (unless such exhibits are specifically
incorporated by reference into such documents). Requests for such documents
should be directed to Aspect Development, Inc., Attention: Chief Financial
Officer, 1300 Charleston Road, Mountain View, California 94043, telephone
(650) 428-2700.
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FORWARD LOOKING STATEMENTS
This Prospectus contains forward-looking statements that involve risks and
uncertainties. When used in this Prospectus, the words "anticipate," "believe,"
"estimate," and "expect" and similar expressions as they relate to the Company
or its management are intended to identify such forward-looking statements. The
Company's actual results, performance, or achievements could differ materially
from the results expressed in, or implied by, these forward-looking statements.
Factors that could cause or contribute to such differences include those
discussed below under the caption "Risk Factors" and in the documents
incorporated herein by reference.
THE COMPANY
Aspect develops, markets and supports enterprise client/server software and
content products that enable manufacturers to improve product development and
business through component and supplier management (CSM). The Aspect CSM
solution incorporates four interrelated elements: the Explore family of
enterprise client/server software products, the VIP family of component and
supplier content databases, Professional Services for legacy data conversion and
business process consulting and the Krakatoa Web Catalog Publisher. The
Company's principal executive offices are located at 1300 Charleston Road,
Mountain View, California 94043, and its telephone number is (650) 428-2700.
RISK FACTORS
An investment in the Shares offered hereby involves a high degree of risk.
Prospective investors should carefully consider the following risk factors, in
addition to the other information contained or incorporated by reference in this
Prospectus, in evaluating an investment in the Common Stock offered hereby.
FLUCTUATIONS IN OPERATING RESULTS
The Company's revenues and results of operations have varied on a quarterly
and an annual basis in the past and are expected to vary significantly in the
future. The Company's revenues and results of operations are difficult to
forecast and could be materially adversely affected by many factors, some of
which are outside the control of the Company, including, among others, the
relatively long sales and implementation cycles for the Company's products; the
size and the timing of individual license transactions; seasonality of revenues;
changes in the Company's operating expenses; changes in the mix of products and
services sold; timing of introduction or enhancement of products by the Company
or its competitors; market acceptance of new products; technological changes in
software or database technology; personnel changes and difficulties in
attracting and retaining qualified sales, marketing, technical and consulting
personnel; changes in customers' budgeting cycles; foreign currency exchange
rates; quality control of products sold; and economic conditions generally and
in specific industry segments.
The Company's business has experienced and is expected to continue to
experience seasonality, in part due to customer buying patterns and the
Company's expense patterns. In recent years, the Company has generally had
stronger demand for its products during the quarter ending December 31, and has
incurred higher personnel costs in the quarter ending March 31. The Company
believes that these patterns will continue for the foreseeable future.
Licenses of the Company's client/server software and reference content
products have historically accounted for a substantial majority of the Company's
revenues, and the Company anticipates that this trend will continue for the
foreseeable future. The Company generally ships its products within a short
period of time after execution of a license. As a result, the Company typically
does not have a material backlog of unfilled license orders, and revenues in any
quarter are substantially dependent on license contracts signed in that quarter.
The Company's expense levels are based, in part, on its expectations as to
future revenues and to a large extent are fixed in the short term. Accordingly,
the Company may be unable to adjust spending in a timely manner to compensate
for any unexpected shortfall in revenues, and any significant shortfall of
demand in relation to the Company's expectations or any material delay of
customer orders would have an almost immediate material adverse effect on the
Company's business, financial condition and results of operations. As a result,
it is likely that in some future period the Company's results of operations
could fail to meet the expectations of public market analysts or investors. In
such event, or in the event that adverse conditions prevail or are perceived to
prevail generally or with respect to the Company's business, the price of the
Company's Common Stock would likely drop significantly.
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LENGTHY SALES AND IMPLEMENTATION CYCLES
The licensing of the Company's client/server software and reference content
products generally requires the Company to engage in a sales cycle lasting six
to twelve months or longer, during which the Company typically provides a
significant level of education to prospective customers regarding the use and
benefits of the Company's products. In addition, the implementation of the
Company's standard products typically involves a significant commitment of
resources by its customers over an extended period of time and is commonly
associated with reengineering of product development and business processes. For
these reasons, sales and customer implementation cycles are susceptible to a
number of significant delays over which the Company may have little or no
control. Any delay in the sale or customer implementation of a larger license
or a number of smaller licenses would have a material adverse effect on the
Company's business, financial condition and results of operations and cause the
Company's operating results to vary significantly from quarter to quarter.
RELIANCE ON ACCEPTANCE OF CSM SOLUTION
Substantially all of the Company's revenues are derived from fees for
licensed products and for services which enable CSM by manufacturers. The
Company's future financial performance will depend to a large extent on the
growth in the number of organizations adopting client/server software and
reference content solutions for CSM and engaging outside vendors to provide
and maintain such solutions. The Company's future growth, if any, will also
depend upon the extent to which such organizations choose to implement CSM
solutions across their enterprises and on their continued reliance on the
Company's subscription, maintenance and support offerings. Because the CSM
market is relatively new and evolving, it is difficult to assess or predict
with any assurance its size or growth rate. There can be no assurance that the
market for CSM products and services will continue to develop, or that the
Company's CSM products or services will continue to achieve market acceptance.
If the CSM market develops more slowly than expected or fails to attract new
competitors, or if the Company's products do not continue to achieve broader
market acceptance, the Company's business, financial condition and results of
operations would be materially adversely affected.
DEPENDENCE ON FEW PRODUCTS
The Company currently derives substantially all of its revenues from the
licensing of its Explore client/server software and VIP family of reference
databases and fees from related services. These products and services are
expected to continue to account for substantially all of the Company's revenues
for the foreseeable future. The Company first made its Explore client/server
software and VIP reference databases generally commercially available in the
second quarter of 1995, and has issued regular updates since then. While the
Company believes that to date its customers have not experienced significant
problems with such products, if the Company's customers were to do so in the
future or if they were dissatisfied with product functionality or performance,
the Company's business, financial condition and results of operations would be
materially adversely affected.
There can be no assurance that the Company's products will achieve broader
market acceptance or that the Company will be successful in marketing its
products or product enhancements. In the event that the Company's current or
future competitors release new products that have more advanced features, offer
better performance or are more price competitive than the Company's products,
demand for the Company's products would decline. A decline in demand for the
Explore client/server software or the VIP family of reference databases as
result of competition, technological change, evolution of the Internet or other
factors would have a material adverse effect on the Company's business,
financial condition and results of operations.
MANAGEMENT OF EXPANDING OPERATIONS; KEY PERSONNEL
The Company's business has grown rapidly in recent years, and the Company
has experienced significant growth in the number of its employees, the scope
of its operating and financial systems and the geographic area of its
operations, which has placed a significant strain on the Company's management.
The Company's future results of operations will depend in part on the ability
of its officers and other key employees to continue to implement and expand
its operational, customer support and financial control systems and to grow,
train and manage its employee base. Should the Company's business continue to
expand, there can be no assurance that the Company will be able
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to manage this expansion successfully, and any inability to do so would have a
material adverse effect on the Company's business, financial condition or
results of operations. In addition, the Company believes that its future
success will also depend to a significant extent upon its ability to attract,
train and retain highly skilled technical, management, sales, marketing and
consulting personnel. Competition for such personnel is intense, and the
Company expects that such competition will continue for the foreseeable
future. The Company has from time to time experienced difficulty in locating
candidates with appropriate qualifications. There can be no assurance that the
Company will be successful in attracting or retaining such personnel, and the
failure to attract or retain such personnel could have a material adverse
effect on the Company's business, financial condition and results of
operation.
RISKS RELATED TO ACQUISITIONS
The Company acquired CADIS in November 1997. The successful integration of
CADIS will require substantial additional attention from management. The
majority of the costs associated with the acquisition have already been
incurred, but the anticipated benefits of the acquisition will not be achieved
unless the CADIS operations are successfully combined with the Company's. The
diversion of the attention of management from the day-to-day operations of the
Company, or difficulties encountered in the transition and integration process,
could have a material adverse effect on the business, financial condition and
results of operations of the Company.
In connection with the Merger, the Company terminated current or potential
contractual relationships between CADIS and certain customers of CADIS. Although
the Company believes that this action was not in breach of contractual
obligations of CADIS or any rights of other parties that may have existed at the
time, there can be no assurance that any of these customers will not bring an
action against CADIS or the Company claiming contract or tort damages arising
out of the Company's termination of these relationships, or that, in the event
any such action is brought, the Company will be successful in defending it.
In connection with its investigation of certain potential antitrust issues
arising out of the Merger, the Federal Trade Commission (the "FTC") has issued a
civil investigative demand and a subpoena requesting certain information and
documentation with respect to the Company's business. Although no premerger
notification was required under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 for the CADIS Merger because of the size of the parties, the FTC's
demand is similar in scope to that of a request for information by the FTC that
may follow a premerger notification. While the Company intends to cooperate with
the FTC's investigation, it does not believe that the Merger was in violation of
federal antitrust laws. Although the Company could incur significant expenses in
cooperating with the investigation, the Company does not believe that the
outcome of the FTC's investigation will have a material adverse effect on the
Company's business or results of operations. However, there can be no assurance
of such outcome.
To implement its business plans, the Company may make further
acquisitions in the future, which will require significant financial and
management resources both at the time of the transaction and during the
process of integrating the newly-acquired business into the Company's
operations. The Company's operating results could be adversely affected if it
is unable to successfully integrate such new companies into its operations.
There can be no assurance that any acquired products, technologies or
businesses will contribute at anticipated levels to the Company's sales or
earnings, or that sales and earnings from combined businesses will not be
adversely affected by the integration process. Certain acquisitions or
strategic transactions may be subject to approval by the other party's board
of directors or stockholders, domestic or foreign governmental agencies or
other third parties. Accordingly, there is a risk that important acquisitions
or transactions could fail to be concluded as planned. Future acquisitions by
the Company could also result in issuances of equity securities or the rights
associated with the equity securities, which could potentially dilute earnings
per share. In addition, future acquisitions could result in the incurrence of
additional debt, taxes, contingent liabilities, amortization expenses related
to goodwill and other intangible assets and expenses incurred to align the
accounting policies and practices of the acquired companies with those of the
Company. These factors could adversely affect the Company's future operating
results, financial position and cash flows. As some of the Company's
competitors have pursued a strategy of growth through acquisition, there is a
risk that future acquisitions could be more expensive due to competition among
bidders for target companies.
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CUSTOMER CONCENTRATION
Historically, a relatively small number of customers has accounted for a
significant percentage of the Company's total revenues, and the Company expects
that it will continue to experience significant customer concentration for the
foreseeable future. In the year ended December 31, 1997 SAP AG ("SAP") accounted
for 11% of the Company's revenues. No other customer in any of the three years
ended December 31, 1997 accounted for more than 10% of revenues. There can be
no assurance that such customers or any other customers will in the future
continue to license or purchase products or services from the Company at levels
that equal or exceed those prior periods, or at all.
COMPETITION
The market for the Company's products is highly competitive, subject to
rapid change and significantly affected by new product introductions and other
market activities of industry participants. The Company's products are
targeted at the emerging market for open, client/server software solutions,
and the Company's competitors offer a variety of products and services to
address this market. Among the Company's principal competitors is the
Information Handling Systems division of IHS Group, Inc. ("IHS"), a privately
held software and data publishing company. The Company had licensed a
reference data product, CAPS, from IHS from 1992 until the license expired in
October 1997. Prior to October 1997, the Company offered CAPS on a limited
basis to certain current and potential customers who typically use it in
addition to the Company's VIP reference databases. There can be no assurance
that the Company will be able to retain all of these customers following the
expiration of the Company's license to CAPS. Further, the Company currently
faces indirect competition from third-party professional service organizations
and internal management information systems and computer-aided design
departments of potential customers that develop custom internal software.
In the future, in light of relatively low barriers to entry in the software
industry, the Company could experience additional competition from other
established or emerging companies as the client/server application software
market continues to develop and expand. In particular, Relational Database
Management Systems ("RDBMS") vendors, enterprise resource planning ("ERP")
firms, PDM vendors, supply chain management companies, computer aided design
("CAD") distributors or professional service providers may in the future enter
the Company's market with competitive products. To the extent that the Company
expands into Internet-based or other forms of delivery of data, the Company may
encounter additional competition from its existing competitors and other
established or emerging companies. Many of these potential competitors have
well-established relationships with the Company's current and potential
customers, have extensive knowledge of the client/server industry, better name
recognition and significantly greater financial, technical, sales, marketing and
other resources and are capable of offering single vendor solutions that span
multiple industries. It is also possible that new competitors or alliances
among competitors may emerge and rapidly acquire significant market share. The
Company also expects that competition will increase as a result of software
industry consolidations. The Company's competitors may be able to respond more
quickly to new or emerging technologies and changes in customer requirements, or
to devote greater resources to the development, promotion and sale of their
products.
DISTRIBUTION RISKS
An integral part of the Company's strategy is to expand its direct sales
force and to establish marketing, selling and consulting relationships both
domestically and internationally. In addition, the Company intends to leverage
its relationships with hardware and software vendors and systems integrators
to encourage these parties to recommend or distribute the Company's products.
The Company has invested resources and may invest additional resources to
develop these channels. The ability of the Company to achieve revenue growth
in the future will depend on its success in adding a substantial number of
direct sales employees and establishing marketing, selling and consulting
relationships during 1998 and future periods. There can be no assurance that
the Company will be able to attract sufficient direct sales personnel,
software vendors, systems integrators or other marketing or selling partners
to market the Company's products effectively. There can be no assurance that
the cost of the Company's investment in direct and indirect sales channels
will not exceed the revenues generated from such investment, if any, or that
the Company's sales and marketing organization will successfully compete
against the sales and marketing organizations of the Company's competitors.
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INTERNATIONAL SALES
In fiscal 1995, 1996 and 1997, and the first six months of 1998,
international sales accounted for approximately 18.9%, 20.3%, 17.0% and 18.0%
of the Company's revenues, respectively. In addition, although the Company
records revenues based on the billing location, certain domestic billings
include licenses that may be deployed by customers or resold through indirect
channels into international locations. The Company expects that international
sales will continue to account for a significant percentage of the Company's
revenues for the foreseeable future. However, there can be no assurance that
the Company will achieve any significant degree of penetration in any
international market.
There are a number of risks inherent in the Company's international
business activities, including unexpected changes in regulatory requirements,
tariffs and other trade barriers, costs and risks of localizing products for
foreign countries, longer accounts receivable payment cycles, potentially
adverse tax consequences, repatriation of earnings and the burdens of
complying with a wide variety of foreign laws. International sales are
denominated and collected in both U.S. and foreign currency. Accordingly, a
portion of the Company's international revenues are subject to currency
fluctuation risks. In those jurisdictions in which the Company's sales are
denominated in foreign currency, fluctuations in such currencies could
adversely affect the profitability of sales made in such jurisdictions and
therefore adversely affect the Company's business, financial condition or
results of operations. Further, an increase in the value of the U.S. dollar
relative to foreign currencies could make the Company's products more
expensive and, therefore, potentially less competitive in those markets where
the Company's sales are denominated in U.S. dollars. The Company to date has
engaged in foreign currency hedging denominated in U.S. dollars only to a
limited extent. In addition, the Company's revenues earned in various
countries in which the Company does business may be subject to taxation by
more than one jurisdiction, thereby adversely affecting the Company's
earnings. There can be no assurance that any of the foregoing factors will not
have a material adverse effect on the revenues from the Company's future
international sales and, consequently, the Company's financial condition and
results of operations.
Significant fluctuations in currency exchange rates against the U.S.
dollar, such as the recent significant fluctuations in Asian currencies, may
cause deferrals, delays and cancellation of orders. The financial systems in
Japan, South Korea, Taiwan, Singapore, and other Asian nations have
experienced significant turmoil. Recently announced financial failures by
leading Asian financial institutions have increased concerns over Asian
economic stability. Such turmoil in the financial markets has caused
manufacturers in these countries to delay or defer capital expenditures.
Diminished economic growth in Asia could reduce consumer demand for the
Company's products and related services.
RISK OF INDIAN OPERATIONS
The Company has operations in Bangalore, India with 284 employees as of
June 30, 1998. The Company is dependent to a significant extent upon the
ability of its Indian operations to successfully maintain and upgrade its
reference data products. The Company believes that the success of its Indian
operations will depend in large part upon its ability to attract, train and
retain highly skilled technical and management personnel in India. Competition
for such personnel in India is intense, and there can be no assurance that the
Company will be successful in attracting a sufficient number of qualified
personnel. The Company is directly affected by the political and economic
conditions to which India is subject. In addition, many of the Company's
expenses in India are paid in Indian currency, thereby subjecting the Company
to the risk of foreign currency fluctuations. Any difficulties in coordinating
or managing the Indian operations due to cultural, geographic, communication
or other reasons could have a material adverse effect on the Company's
business, financial condition or results of operations.
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NEED TO DEVELOP, MAINTAIN AND IMPROVE REFERENCE CONTENT PRODUCTS
The Company's VIP component reference databases are comprised of a large
amount of information supplied by component suppliers that requires frequent
updating and expansion. As a result, the Company must continue to invest
substantial resources in its reference content products. The information
regarding components and suppliers contained in the Company's VIP component
reference databases is derived from supplier databooks and is not proprietary to
the Company. Therefore, other parties may independently create similar
reference data products. Furthermore, the Company currently plans to develop,
license or acquire reference content products for additional global vertical
markets, which will impose significant additional burdens on its content product
development efforts. As the information contained in the Company's reference
content products expands or if the Company's customer base demands more frequent
updates, unforeseen problems with entering, updating, managing or delivering the
data could arise. Because the Company's customers rely on the information
contained in the Company's VIP family of component reference databases to design
and procure components for their products, the accuracy, completeness and
currency of the information in those content products is critical. To the
extent that the Company is unable to keep its reference content products
accurate, complete or current, its customers may become dissatisfied with these
products and discontinue their purchase of the Company's products and services.
In the event that the Company's VIP family of component reference databases is
or is perceived to be inaccurate, incomplete or out-of-date, the Company's
business, financial condition and results of operations could be materially
adversely affected.
RISK OF PRODUCT DEFECTS
Software and reference content products as complex as those offered by the
Company frequently contain undetected errors or failures when first introduced
or when new versions are released. The Company has in the past discovered
software bugs and data errors in certain of its products and enhancements, both
before and after initial shipment. There can be no assurance that, despite
testing by the Company and its customers, errors will not occur in products,
data or releases after commencement of commercial shipments, resulting in loss
of or delay in market acceptance, which could have a material adverse effect
upon the Company's business, financial condition and results of operations.
RISKS ASSOCIATED WITH EMERGING INTERNET MARKET
A portion of the Company's strategy is to leverage the Web to provide
access to its VIP reference databases, as well as to additional value-added
content. The Company may devote substantial resources to developing products
designed for use with the Web, and there can be no assurance that the revenues
generated, if any, from the use of the Web will be greater than the costs of
developing and modifying products for such use. Further, the Company's
solutions may be rendered obsolete by, or less valuable in comparison to,
competitive solutions made possible by future development of the Web. If this
were to occur, the Company's business, financial condition and results of
operations would be materially adversely affected.
DEPENDENCE ON PROPRIETARY AND LICENSED TECHNOLOGY
The Company's success is heavily dependent upon proprietary technology. The
Company relies primarily on a combination of copyright, trademarks, trade
secrets, confidentiality procedures and contractual provisions with its
employees, consultants and business partners and in its license agreements to
protect its proprietary rights. The Company seeks to protect its software,
published data, documentation and other written materials under trade secret and
copyright laws, which afford only limited protection. Despite the Company's
efforts to protect its proprietary rights, unauthorized parties may attempt to
copy aspects of the Company's products or to obtain and use information that the
Company regards as proprietary.
The Company has submitted a patent application for various technology
innovations in its Explore client/server software. In addition, certain patent
applications have been filed by CADIS, but patents have not yet been issued.
There can be no assurance that any such patents will be issued or that any
patent, if issued, will provide sufficiently broad protection or will prove
enforceable in actions against alleged infringements.
8
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While the Company is not aware that any of its products infringes the
proprietary rights of third parties, there can be no assurance that third
parties will not claim infringement by the Company with respect to current or
future products. The Company expects that it may increasingly be subject to
infringement claims as the number of products and competitors in the Company's
industry segment grows and the functionality of products in different industry
segments overlaps. Any such claims, with or without merit, could be time-
consuming, result in costly litigation, cause product shipment delays or require
the Company to enter into royalty or licensing agreements. Such royalty or
licensing agreements, if required, may not be available on terms acceptable to
Company or at all, which could have a material adverse effect upon the Company's
business, financial condition or results of operations.
In addition, the Company relies on certain software and data that it
licenses from third parties, including software and data that are used in the
Company's products to perform certain functions. There can be no assurance
that such firms will remain in business, that they will continue to support
their products or that their products will otherwise continue to be available
to the Company on commercially reasonable terms. The Company believes that
substantially all of the software it licenses is available from vendors other
than the Company's current vendors and could be replaced with equivalent
software in a timely manner. However, it is possible that the loss of or
inability to maintain any of these software licenses could result in delays or
cancellations in products shipments until equivalent software can be
identified and licensed or developed and integrated with the Company's
products. Any such delay or cancellation could materially adversely affect the
Company's business, financial condition and results of operations.
IMPACT OF THE YEAR 2000
Many older computer software programs use two digits in their date
fields, identifying years by the last two digits only. Such programs may
interpret the year 2000 as 1900 instead, causing such systems to fail after
1999. The Company has assembled an internal task force to determine the
impact, if any, of the Year 2000 issues related to the Company's products,
third party databases embedded in the Company's products, internal computer
and information systems, office equipment, customers' internal management
systems, and third party suppliers, but has not yet performed the testing and
analysis necessary to permit identification and correction of problems that
could result in date-related failures. There can be no assurance that the
Company will be able to identify and correct any such problems successfully
and in the requisite time frame. The Company will continue to expend
appropriate resources to address this issue on a timely basis. No
determination has yet been made as to the cost of this compliance program but
such expenditures could be significant. The Company has not yet begun its
assessment of the impact on it, if any, of its customers' and suppliers' Year
2000 issues. Unresolved Year 2000 issues with respect to the Company's
products, internal systems, suppliers or customers could result in unforeseen
costs or delays, which could have a materially adverse impact on the Company's
operations and earnings.
CONCENTRATION OF STOCK OWNERSHIP
The present directors, executive officers and principal stockholders of
the Company and their affiliates beneficially own approximately 42.1% of the
outstanding Common Stock. As a result, these stockholders may be able to
exercise significant influence over all matters requiring stockholder
approval, including the election of directors and approval of significant
corporate transactions. Such concentration of ownership may have the effect of
delaying or preventing a change in control of the Company.
RISKS RELATED TO CERTAIN ANTI-TAKEOVER PROVISIONS
The Company is a Delaware corporation and is subject to Section 203 of
the Delaware General Corporation Law (the "Delaware Law"). In general, Section
203 of the Delaware Law prevents an "interested stockholder" (defined
generally as a person owning 15% or more of a corporation's outstanding voting
stock) from engaging in a "business combination" (as defined in the Delaware
Law) with a Delaware corporation for three years following the date such
person became an interested stockholder, subject to certain exceptions such as
the approval of the board of directors and of the holders of at least two-
thirds of the outstanding shares of voting stock not owned by the interested
stockholder. The existence of this provision would be expected to have an anti-
takeover effect, including attempts that might result in a premium over the
market price for the shares of Common Stock held by stockholders.
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The Company's By-Laws provide that only the Company's Chief Executive
Officer, a majority of the members of the Company's Board of Directors or
holders of capital stock constituting at least 10% of the outstanding voting
power may call a special meeting of stockholders. This provision of the By-Laws
could discourage potential acquisition proposals and could delay or prevent a
change in control of the Company. This provision also may have the effect of
preventing changes in the management of the Company.
BLANK CHECK PREFERRED STOCK
The Board of Directors has authority to issue up to 2,000,000 shares of
Preferred Stock, and to fix the rights, preferences, privileges and
restrictions, including voting rights, of these shares without any vote or
action by the stockholders. The rights of the holders of Common Stock will be
subject to, and may be adversely affected by, the rights of the holders of any
Preferred Stock that may be issued in the future. The issuance of Preferred
Stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire a majority of the outstanding voting
stock of the Company, thereby delaying, deferring or preventing a change in
control of the Company. Furthermore, such Preferred Stock may have other
rights, including economic rights, senior to the Common Stock, and as a result,
the issuance of such Preferred Stock could have a material adverse effect on the
market value of the Common Stock. The Company has no present plan to issue
shares of Preferred Stock.
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<PAGE>
SELLING STOCKHOLDERS
The Selling Stockholders hold Shares that were issued by Aspect in
connection with the Merger. The following table sets forth certain information
known to the Company with respect to beneficial ownership of the Company's
Common Stock by each Selling Stockholder as of February 28, 1998, prior to the
commencement of the offering of the Shares hereunder. In addition, certain of
the Selling Stockholders are venture capital funds, corporations or trusts
which may distribute their shares to their partners, shareholders or trust
beneficiaries, respectively, which distributees may likewise distribute such
shares to their partners, shareholders or trust beneficiaries or any of their
respective distributees. Except as indicated, none of the Selling Stockholders
has held any position or office (other than a non-officer employment
relationship) or had any other material relationship with the Company or any
of its affiliates within the past three years other than as a result of the
ownership of the Company's Common Stock. The Company may amend or supplement
this Prospectus from time to time to update the disclosure set forth herein.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES OFFERED SHARES BENEFICIALLY
OWNED PRIOR TO THE BY THIS OWNED AFTER
SELLING STOCKHOLDERS OFFERING (1) PROSPECTUS (2) THE OFFERING (1)
- ---------------------------------------------------- ---------------------- --------------- ----------------------
<S> <C> <C> <C>
Aperture Associates, L.P............................ 200,032 183,768 16,264
Christopher W. Beall................................ 20,484 18,820 1,664
Chancellor Venture Capital II, L.P. (3)............. 65,438 60,118 5,320
Sherrie L. Clapp.................................... 500 460 40
Commonwealth Venture Partners II, L.P............... 33,436 30,718 2,718
Drake & Co. for the Account of Citiventure III (3).. 263,130 241,736 21,394
Janet Eden-Harris................................... 3,462 1,122 2,340
Daniel J. Ellis..................................... 4,074 3,744 330
EOS Partners SBIC, L.P.............................. 126,122 115,868 10,254
Frontenac VI LP..................................... 358,582 329,426 29,156
Linda Gartner....................................... 32 30 2
Edward A. Green..................................... 13,044 11,984 1,060
Caroline D. Himes................................... 1,194 1,098 96
J.H. Whitney & Co................................... 53,282 48,950 4,332
Bruce A. Jacquemard................................. 5,094 4,680 414
Thomas S. Kavanagh.................................. 163,076 149,816 13,260
KME Venture III, L.P. (3)........................... 13,764 12,646 1,118
James L. Mann....................................... 5,104 4,690 414
Marquette Venture Partners II, L.P.................. 97,324 89,412 7,912
Venkat A. Mohan..................................... 47,562 43,696 3,866
John C. Morley...................................... 21,420(4) 19,312 2,108(4)
John D. Motycka..................................... 1,630 1,498 132
MVP II Affiliates Fund LP........................... 2,780 2,554 226
Norwest Equity Partners V........................... 216,212 198,632 17,580
Samuel S. Pendleton................................. 486 448 38
Philadelphia Ventures II, L.P....................... 106,380 97,730 8,650
Philadelphia Ventures Japan II, L.P................. 13,114 12,048 1,066
Robert E. King, Trustee for Heather Pines GS........ 3,334 3,064 270
Robert E. King, Trustee for M. Elizabeth King GS.... 3,334 3,064 270
Robert E. King, Trustee for Robert E. King, Jr. GS.. 3,334 3,064 270
Thomas Smallwood.................................... 336 310 26
Brooke E. Terpening................................. 6,522 5,992 530
The Hill Partnership III............................ 393,388 361,402 31,986
Transition Three Limited Partnership................ 94,134 86,480 7,654
Whitney 1990 Equity Fund L.P........................ 213,132 195,802 17,330
Todd A. Wichers..................................... 376 346 30
Wind Point Partners II, L.P......................... 270,374 248,390 21,984
- ----------------------
</TABLE>
(1) The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 promulgated under the Exchange Act. Under such
rule, beneficial ownership includes any shares as to which the
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individual has sole or shared voting or investment power and also any shares
which the individual had the right to acquire within 60 days of the date set
forth above through the exercise of any stock option or other right. Unless
otherwise indicated in the footnotes, each person has sole voting and
investment power (or shares such powers with his or her spouse) with respect
to the shares shown as beneficially owned.
(2) As of the date of this Prospectus, approximately 121,632 shares of Common
Stock have been sold hereunder.
(3) Chancellor LGT Asset Management, Inc. ("Chancellor LGT") is the investment
manager for KME Venture III, L.P., Chancellor Venture Capital II, L.P. and
Drake & Co. for the Account of Citiventure III (the "Chancellor Selling
Shareholders") and other separately managed clients (the "Chancellor LGT
Separate Accounts"). On behalf of the Chancellor Selling Stockholders and
the Chancellor LGT Separate Accounts, Chancellor LGT has full discretion as
to the voting and dispositive power and therefore may have "beneficial"
ownership under the securities laws of 563,532 shares of Common Stock. As of
March 31, 1998, Chancellor LGT had voting and dispositive power over 342,332
shares of Common Stock purchased in privately negotiated transactions for
the account of the Chancellor Selling Stockholders and 221,200 shares of
Common Stock purchased in the public market on behalf of the Chancellor LGT
Separate Accounts of which Drake & Co. for the Account of Citiventure III
holds 8,200 shares.
(4) Includes 400 shares held by McDonald & Co. for the account of John C.
Morley.
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<PAGE>
PLAN OF DISTRIBUTION
Any or all of the Shares may be sold from time to time to purchasers
directly by any of the Selling Stockholders. Alternatively, the Selling
Stockholders may from time to time offer the Shares through underwriters,
dealers or agents who may receive compensation in the form of underwriting
discounts, concessions or commissions from the Selling Stockholders and/or the
purchasers of Shares for whom they may act as agents. The Selling Stockholders
and any such underwriters, dealers or agents that participate in the
distribution of Shares may be deemed to be "underwriters," and any profit on the
sale of the Shares by them and any discounts, commissions or concessions
received by them may be deemed to be underwriting discounts and commissions
under the Securities Act. The Shares may be sold from time to time in one or
more transactions at a fixed offering price, which may be changed, or at varying
prices determined at the time of sale or at negotiated prices.
The Shares offered hereby may be sold from time to time in one or more
transactions at fixed prices, at prevailing market prices at the time of sale,
any varying prices determined at the time of sale or at negotiated prices. The
sale of the Shares may be effected in transactions (which may involve crosses or
block transactions) (i) on any national securities exchange or quotation service
on which the Shares may be listed or quoted at the time of sale, (ii) in the
over-the-counter market or (iii) in transactions otherwise than on such
exchanges or in the over-the-counter market. There is no assurance that any of
the Selling Stockholders will sell any or all of the Shares offered by them. In
addition, certain of the Selling Stockholders are venture capital funds,
corporations or trusts which may distribute their shares to their partners,
shareholders or trust beneficiaries, respectively, which may likewise
distribute such shares to their partners, shareholders or trust beneficiaries.
Those shares may later be sold by those partners, shareholders or trust
beneficiaries, or any of their respective distributees. At the time a
particular offer of Shares is made a supplement to this Prospectus, if required,
will be distributed that will identify and set forth the aggregate amount of
Shares being offered and the terms of the offering, including the name or names
of any underwriters, dealers or agents, the purchase price paid by any
underwriter for Shares purchased from the Selling Stockholders, any discounts,
commissions and other items constituting compensation from the Selling
Stockholders and/or the Company, and any discounts, commissions or concessions
allowed or reallowed or paid to dealers, including the proposed selling price to
the public. The Company will not receive any of the proceeds from the sale by
the Selling Stockholders of the Shares offered hereby.
The Selling Stockholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the Shares by the Selling
Stockholders. The foregoing may affect the marketability of the Shares.
The Company has agreed to indemnify in certain circumstances the Selling
Stockholders against certain liabilities, including liabilities under the
Securities Act. The Selling Stockholders have agreed to indemnify in certain
circumstances the Company against certain liabilities, including liabilities
under the Securities Act.
The Company has agreed to use its best efforts to keep the Registration
Statement, of which this Prospectus constitutes a part, effective until November
25, 1998.
LEGAL MATTERS
The legality of 1,296,459 shares of Common Stock the securities offered
hereby (the "Original Shares") has been passed upon for the Company by Gray Cary
Ware & Freidenrich llp, Palo Alto, California. The legality of 1,296,459 shares
of Common Stock offered hereby, which were issued as a dividend on the Original
Shares, has been passed upon for the Company by Cooley Godward LLP, Palo Alto,
California.
EXPERTS
The consolidated financial statements of Aspect Development, Inc. appearing
in the Company's Annual Report on Form 10-KSB for the year ended December 31,
1997, have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report thereon included therein and incorporated herein by reference,
which report as to all years presented, is based in part on the report of Arthur
Andersen LLP, independent auditors.
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<PAGE>
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of CADIS, Inc. as of December 31,
1996 and 1997, and for each of the three years in the period ended December 31,
1997, which are not presented separately in the Company's Annual Report on Form
10-KSB, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report dated January 20, 1998 with respect
thereto, and are referred to herein in reliance upon the authority of said firm
as experts in giving said reports.
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such other information and representations
must not be relied upon as having been authorized by the Company. This
Prospectus does not constitute an offer or solicitation by anyone in any state
in which such offer or solicitation is not authorized, or in which the person
making such offer or solicitation is not qualified to do so, or to any person to
whom it is unlawful to make such offer or solicitation. The delivery of this
Prospectus at any time does not imply that the information herein is correct as
of any time subsequent to the date hereof.
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