<PAGE> 1
Filed Persuant to Rule 424 B 3
Registration No. 333-63483
321,532 SHARES
ASPEN TECHNOLOGY, INC.
COMMON STOCK
All of the 321,532 shares of common stock, $.10 par value ("Common Stock"),
of Aspen Technology, Inc. ("AspenTech" or the "Company") offered hereby are
being sold by the Selling Stockholders named under "Selling Stockholders." The
Company will not receive any of the proceeds from sales of shares by the Selling
Stockholders.
The Common Stock trades on the Nasdaq National Market under the symbol
"AZPN." On October 13, 1998, the closing sale price of the Common Stock, as
reported by the Nasdaq National Market, was $9.50 per share.
The shares of Common Stock offered hereby may be sold from time to time by
the Selling Stockholders, or by pledges, donees, transferees or other successors
in interest of the Selling Stockholders. Such sales may be made on the Nasdaq
National Market, or otherwise, at prices and on terms then prevailing or at
prices related to the then-current market prices, or in negotiated transactions
at negotiated prices. The shares may be sold by one or a combination of the
following: (a) a block trade in which the broker or dealer so engaged will
attempt to sell the shares as agent, but may position and resell a portion of
the block as principal to facilitate the transaction; (b) purchases by a broker
or dealer as principal and resale by such broker or dealer for its account
pursuant to this Prospectus; and (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers. Brokers or dealers will
receive commissions or discounts from Selling Stockholders in amounts to be
negotiated immediately prior to the sale. The Selling Stockholders will be
responsible for any discounts, concessions, commissions or other compensation
due to any broker or dealer in connection with the sale of any of the shares
offered hereby. All of the other expenses of this offering, estimated at $8,000,
will be paid by the Company. See "Plan of Distribution."
----------
SEE "RISK FACTORS" COMMENCING ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF SHARES OF COMMON STOCK
OFFERED HEREBY.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
October 13, 1998
<PAGE> 2
- --------------------------------------------------------------------------------
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 and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information may be
inspected and copies may be obtained (at prescribed rates) at the Commission's
Public Reference Section, 450 Fifth Street, N.W., Room 1024, Washington D.C.
20549, and at the Commission's Regional Offices at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World
Trade Center, Suite 1300, New York, New York 10048. Electronic filings made by
the Company through the Commission's Electronic Data Gathering, Analysis and
Retrieval System are publicly available through the Commission's world wide web
site (http://www.sec.gov).
This Prospectus constitutes part of a Registration Statement on Form S-3
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus
does not contain all of the information contained in the Registration Statement,
and reference is hereby made to the Registration Statement and related exhibits
for further information with respect to the Company and the securities offered
hereby. Any statements contained herein concerning the provisions of any
document are not necessarily complete, and, in such instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference.
INFORMATION INCORPORATED BY REFERENCE
The following documents heretofore filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by reference: (1) Annual
Report on Form 10-K for the fiscal year ended June 30, 1998; and (2) Current
Reports on Form 8-K dated October 2, 1998 and October 5, 1998.
All reports and other documents subsequently filed by the Company pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering made hereby shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of the filing of such reports and 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 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 the Registration Statement or
this Prospectus.
Any person to whom a copy of this Prospectus is delivered may obtain,
without charge, upon written or oral request, a copy of any of the documents
incorporated by reference herein, except for the exhibits to such documents
(other than exhibits expressly incorporated by reference into such documents).
Requests for such documents should be addressed to the Manager of Investor
Relations of the Company, Ten Canal Park, Cambridge, Massachusetts 02141 or
directed to the Manager of Investor Relations at either telephone number (617)
949-0100 or e-mail address [email protected].
- --------------------------------------------------------------------------------
2
<PAGE> 3
- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus or incorporated by reference herein. This
Prospectus contains and incorporates by reference certain forward-looking
statements that involve risks and uncertainties. See "Risk Factors" and
"Forward-Looking Statements."
THE COMPANY
Aspen Technology, Inc. (the "Company" or "AspenTech") is the leading
supplier of software and service solutions used by companies in the process
industries to design, operate and manage their manufacturing processes. The
process industries include manufacturers of chemicals, petrochemicals, petroleum
products, pharmaceuticals, pulp and paper, electric power, food and beverages,
consumer products, and metals and minerals. AspenTech offers a comprehensive,
integrated suite of process manufacturing optimization solutions that help
process manufacturers enhance profitability by improving efficiency,
productivity, capacity utilization, safety and environmental compliance
throughout the entire manufacturing life-cycle, from research and development to
engineering, planning and scheduling, procurement, production and distribution.
In addition to its software solutions, AspenTech offers systems implementation,
advanced process control, real-time optimization and other consulting services
through its staff of more than 450 project engineers. As part of its strategy to
offer the broadest, most integrated suite of process manufacturing optimization
solutions, AspenTech has acquired businesses from time to time to obtain
technologies and expertise that complement or enhance its core solutions.
AspenTech currently has more than 750 customers worldwide, including 44 of the
50 largest chemical companies, 17 of the 20 largest petroleum refiners and 16 of
the 20 largest pharmaceutical companies.
AspenTech believes its customers increasingly view their investments in its
solutions as strategic because of the substantial potential economic benefits
these solutions offer and the broad range of production issues they address. The
Company's competitive advantage is based upon its technology leadership, broad
suite of integrated solutions and substantial process industry expertise.
AspenTech believes that, through its research and development and strategic
acquisitions and partnerships, it has established itself as the technology
leader among providers of process manufacturing optimization solutions. The
Company's technologies have been applied to create what the Company believes is
the most complete suite of integrated software and service solutions available
for the design, operation and management of manufacturing processes in the
process industries. Over the past 17 years, AspenTech has developed a
significant base of chemical engineering and process manufacturing experience
and knowledge, which it has enhanced through extensive interaction with
customers that have performed millions of simulations using AspenTech's
software. To complement its software expertise, AspenTech has assembled a large
engineering team that the Company believes provides an important source of
competitive differentiation.
AspenTech's principal objective is to extend its leadership in providing
process management optimization solutions to the process industries. Key
elements of the Company's strategy to achieve this objective are to: (i) extend
its technology leadership position by continuing to invest in research and
development and to identify and pursue opportunities for strategic acquisitions;
(ii) leverage its installed customer base in the chemical, petrochemicals,
petroleum products, and pharmaceuticals industries by increasing the number of
users of software currently licensed by its existing customers and by licensing
complementary software and services to those customers; (iii) increase its
penetration of other process industries, particularly the pulp and paper,
electric power, and food and beverage industries, as well as the semiconductor
industry; (iv) pursue strategic acquisitions of complementary technologies and
services capabilities; and (v) selectively partner with providers of
complementary products and services to supplement the Company's ability to offer
enterprise-wide solutions.
The Company was incorporated as a Massachusetts corporation on August 11,
1981 and was reincorporated in Delaware on March 12, 1998. AspenTech's principal
executive offices are located at Ten Canal Park, Cambridge, Massachusetts 02141,
and its telephone number at that address is (617) 949-1000.
- --------------------------------------------------------------------------------
3
<PAGE> 4
- --------------------------------------------------------------------------------
THE OFFERING
All of the 321,532 shares of Common Stock offered hereby are being sold by
the Selling Stockholders. The offered shares were issued to the Selling
Stockholders pursuant to (i) the Agreement and Plan of Merger dated as of April
28, 1998 between the Company, AT Acquisition Corp., Chesapeake Decision
Sciences, Inc. ("Chesapeake") and Dr. Thomas E. Baker (the former principal
stockholder of Chesapeake), under which 307,532 of the offered shares were
issued as part of the consideration exchanged for the outstanding capital stock
of Chesapeake, and (ii) the Share Exchange Agreement dated as of May 29, 1998
(the "Treiber Agreement") between the Company, Treiber Controls Inc. ("Treiber")
and Dr. Steven Treiber (the sole former stockholder of Treiber), under which
14,000 of the offered shares were issued as part of the consideration exchanged
for the outstanding capital stock of Treiber. The 14,000 shares are currently
held in escrow pursuant to the indemnification provisions of the Treiber
Agreement, and the net proceeds of those shares will be deposited in escrow in
lieu of those shares.
Under an Amended and Restated Declaration of Registration Rights adopted by
the Company in favor of the former stockholders of Chesapeake (the "Chesapeake
Declaration") and the Company's agreement with Dr. Steven Treiber, the Company
is obligated to use its best efforts to keep the Registration Statement in
effect until (a) a period of ninety days has elapsed since the effective date of
the Registration Statement or (b) all of the shares offered hereby have been
sold hereunder. The Company may elect, in its sole discretion, to maintain the
effectiveness of the Registration Statement for more than ninety days in the
event a portion or all of the shares offered hereby have not been sold.
The Company will not receive any of the proceeds from sales of shares by
the Selling Stockholders. See "Use of Proceeds."
----------
"ASPENTECH" is a registered trademark of the Company.
- --------------------------------------------------------------------------------
4
<PAGE> 5
RISK FACTORS
In addition to the other information in this Prospectus, the following risk
factors should be considered in evaluating the Company and its business.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS AND CASH FLOW
The Company's operating results and cash flow have fluctuated in the past
and may fluctuate significantly in the future as a result of a variety of
factors, including purchasing patterns, timing of introductions of new solutions
and enhancements by the Company and its competitors, and fluctuating economic
conditions. Because license fees for the Company's software products are
substantial and the implementation of the Company's solutions often requires the
services of the Company's engineers over an extended period of time, the sales
process for the Company's solutions is lengthy and can exceed one year.
Accordingly, software revenue is difficult to predict, and the delay of any
order could cause the Company's quarterly revenues to fall substantially below
expectations. Moreover, to the extent that the Company succeeds in shifting
customer purchases away from individual software solutions and toward integrated
suites of its software and service solutions, the likelihood of delays in
ordering may increase and the effect of any delay may become more pronounced.
The Company ships software products within a short period after receipt of
an order and usually does not have a material backlog of unfilled orders of
software products. Consequently, revenues from software licenses in any quarter
are substantially dependent on orders booked and shipped in that quarter.
Historically, a majority of each quarter's revenues from software licenses has
been derived from license agreements that have been consummated in the final
weeks of the quarter. Therefore, even a short delay in the consummation of an
agreement may cause revenues to fall below expectations for that quarter. Since
the Company's expense levels are based in part on anticipated revenues, the
Company may be unable to adjust spending in a timely manner to compensate for
any revenue shortfall and any revenue shortfalls would likely have a
disproportionately adverse effect on net income. The Company expects that these
factors will continue to affect its operating results for the foreseeable
future.
Prior to fiscal 1996, the Company experienced a net loss for the first
quarter of each fiscal year, in part because a substantial portion of the
Company's total revenues is derived from countries other than the United States
where business is slow during the summer months and also in part because of the
timing of renewals of software licenses. Although the Company generated a profit
for the first quarter of each of fiscal 1997 and fiscal 1998, it incurred a net
loss for the first quarter of fiscal 1999 and the Company expects that it will
continue to experience declines in total revenues and net income in the first
fiscal quarter as compared to the immediately preceding fiscal quarter. Because
of the foregoing factors, the Company believes that period-to-period comparisons
of its operating results are not necessarily meaningful and should not be relied
upon as indications of future performance.
Due to all of the foregoing factors, it is possible that in one or more
future quarters the Company's operating results will be below the expectations
of public market analysts and investors. In such event, the price of the Common
Stock would likely be materially adversely affected. As a result principally of
slower-than-anticipated growth in the Company's services revenue and
higher-than-expected levels of expenses throughout the AspenTech organization in
the fiscal quarter ended June 30, 1998, the Company's operating results for the
fiscal quarter and fiscal year ended June 30, 1998 were below the expectations
of certain public market analysts and investors. In addition, on October 5,
1998, the Company announced that its operating results for the fiscal quarter
ended September 30, 1998 were expected to be below its plan. The Company is in
the process of reassessing its business prospects for the remainder of fiscal
1999. The Company believes that revenue and earnings will be significantly
reduced from previously anticipated levels. From July 27, 1998, the date on
which the Company preliminarily announced its results for the fiscal quarter and
year ended June 30, 1998, through the close of business on October 13, 1998, the
price per share of Common Stock, as reported by the Nasdaq National Market,
decreased from $48.25 to $9.50. See "Litigation."
5
<PAGE> 6
The Company derives a substantial portion of its total revenues from
service engagements and a majority of these engagements have been undertaken on
a fixed-price basis. The Company bears the risk of cost overruns and inflation
in connection with fixed-price engagements, and as a result, any of these
engagements may be unprofitable.
LIMITED SUPPLY OF QUALIFIED PROJECT ENGINEERS
The Company derives a substantial portion of its total revenues from
services, particularly projects involving advanced process control and
optimization and similar projects. These projects can be extremely complex and
in general only highly qualified, highly educated project engineers have the
necessary training and skills to complete these projects successfully. In order
to continue to staff its current and future projects, the Company will need to
attract, motivate and retain a significant number of highly qualified, highly
educated chemical and other project engineers. The Company primarily hires as
project engineers individuals who have obtained a doctoral or master's degree in
chemical engineering or a related discipline or who have significant relevant
industry experience. As a result, the pool of potential qualified employees is
relatively small, and the Company faces significant competition for these
employees, from not only the Company's direct competitors but also the Company's
clients, academic institutions and other enterprises. Many of these competing
employers are able to offer potential employees significantly greater
compensation and benefits or more attractive lifestyle choices, career paths or
geographic locations than the Company. The failure to recruit and retain a
significant number of qualified project engineers could have a material adverse
effect on the Company's business, operating results and financial condition.
Moreover, increasing competition for these engineers may also result in
significant increases in the Company's labor costs, which could have a material
adverse effect on the Company's business, operating results and financial
condition.
INTEGRATION OF CHESAPEAKE AND OTHER RECENTLY ACQUIRED COMPANIES
Through its acquisitions of Chesapeake and several smaller companies in
1998, the Company has expanded its product and service offerings, has entered
new markets and has increased its scope of operations and the number of its
employees. The successful and timely integration of Chesapeake and these other
companies into the Company's operations is critical to the Company's future
financial performance. This integration will require that the Company, among
other things, integrate the companies' software products and technologies,
retain key employees, assimilate diverse corporate cultures, integrate
management information systems, consolidate the acquired operations and manage
geographically dispersed operations, each of which could pose significant
challenges. To succeed in the market for supply chain management solutions, the
Company must also invest additional resources, primarily in the areas of sales
and marketing, to extend name recognition and increase market share. The
diversion of the attention of management created by the integration process, any
disruptions or other difficulties encountered in the integration process, and
unforeseen liabilities or unanticipated problems with the acquired businesses
could have a material adverse effect on the business, operating results and
financial condition of the Company. The difficulty of combining these companies
may be increased by the need to integrate personnel, and changes effected in the
combination may cause key employees to leave. There can be no assurance that
these acquisitions will provide the benefits expected by the Company or that the
Company will be able to integrate and develop the operations of Chesapeake and
these other companies successfully. Any failure to do so could have a material
adverse effect on the Company's business, operating results and financial
condition.
COMPETITION
The Company faces three primary sources of competition: commercial vendors
of software products for one or more elements in the design, operation and
management of manufacturing processes; vendors of hardware that offer software
solutions in order to add value to their proprietary DCS; and large companies in
the process industries that have developed their own proprietary software
solutions. Because of the breadth of its software and service offerings, the
Company faces competition from different vendors depending on the solution in
6
<PAGE> 7
question. The Company competes with respect to the largest number of its
solutions with Simulation Sciences, Inc., a subsidiary of Siebe plc. With
respect to particular software solutions, the Company also competes with
Chemstations, Inc., Hyprotech, Ltd. (a subsidiary of AEA Technology plc), The
Foxboro Company and Wonderware Corporation (both of which are subsidiaries of
Siebe plc), OSI Software, Inc., the Simcon division of ABB Asea Brown Boveri
(Holding) Ltd., and several smaller competitors, such as Pavilion Technologies,
Inc. With the acquisition of Chesapeake, the Company now competes with
established commercial vendors of supply chain management software, including i2
Technologies, Inc. and Manugistics Group, Inc. A number of vendors of ERP
software products, such as Baan Company N.V., J.D. Edwards Inc., Oracle
Corporation, PeopleSoft, Inc., and SAP A.G., have announced their intentions to
enter or expand their existing presence in the market for supply chain
management solutions. The Company also expects to encounter increasing
competition from DCS solution vendors, such as Honeywell Inc., as they expand
their software and service offerings to include additional aspects of process
manufacturing. Moreover, in recent years, there has been consolidation in the
markets in which the Company competes that has expanded the breadth of product
and service offerings by certain of the Company's competitors, such as the
acquisitions by Siebe plc of Simulation Sciences, Inc. and Wonderware
Corporation. As a result of this consolidation and the expansion of DCS and ERP
vendors into additional markets, the Company from time to time may compete with
divisions of companies with which it collaborates on other occasions, such as
Honeywell Inc. and Siebe plc. There can be no assurance that the Company's
efforts to compete and cooperate simultaneously with these or other companies
will be successful. The further consolidation of existing competitors or the
emergence of new competitors could have a material adverse effect on the
Company's business, operating results and financial condition. Certain
competitors also supply related hardware products to existing and potential
customers of the Company and may have established relationships that afford
those competitors an advantage in supplying software and services to those
customers. The Company's continued success depends on its ability to compete
effectively with its commercial competitors and to persuade prospective
customers to use the Company's products and services instead of, or in addition
to, software developed internally or services provided by their own personnel.
In light of these factors, there can be no assurance that the Company will be
able to maintain its competitive position.
RISKS ASSOCIATED WITH FUTURE ACQUISITIONS
An element of the Company's business strategy is to continue to pursue
strategic acquisitions that will provide it with complementary products,
services and technologies and with additional engineering personnel. The
identification and pursuit of these acquisition opportunities and the
integration of acquired personnel, products, technologies and businesses require
a significant amount of management time and skill. There can be no assurance
that the Company will be able to identify suitable acquisition candidates,
consummate any acquisition on acceptable terms or successfully integrate any
acquired business into the Company's operations. In light of the consolidation
trend in the Company's industry, the Company expects to face competition for
acquisition opportunities, which may substantially increase the cost of any
acquisition consummated by the Company. There can also be no assurance that any
future acquisition will not have a material adverse effect upon the Company's
operating results as a result of non-recurring charges associated with the
acquisition or as a result of integration problems in the fiscal quarters
following consummation of the acquisition. Acquisitions may also expose the
Company to additional risks, including diversion of management's attention,
failure to retain key acquired personnel, assumption of legal or other
liabilities and contingencies, and amortization of goodwill and other acquired
intangible assets, some or all of which could have a material adverse effect on
the Company's business, operating results and financial condition. Moreover,
customer dissatisfaction with, or problems caused by, the performance of any
acquired technologies could have a material adverse impact on the reputation of
the Company as a whole. In addition, there can be no assurance that acquired
businesses will achieve anticipated revenues and earnings. The Company may use
Common Stock or Preferred Stock or may incur long-term indebtedness or a
combination thereof for all or a portion of the consideration to be paid in
future acquisitions. The issuance of Common Stock or Preferred Stock in
acquisitions could result in dilution to existing stockholders, while the use of
cash reserves or significant debt financing to fund acquisitions could reduce
the Company's liquidity.
7
<PAGE> 8
CONCENTRATION OF REVENUES IN THE CHEMICALS, PETROCHEMICALS AND PETROLEUM
INDUSTRIES
The Company derives a substantial majority of its total revenues from
companies in the chemicals, petrochemicals and petroleum industries.
Accordingly, the Company's future success depends upon the continued demand for
process manufacturing optimization software and services by companies in these
industries. The chemicals, petrochemicals and petroleum industries are highly
cyclical. The Company believes that worldwide economic downturns and pricing
pressures experienced by chemical, petrochemical and petroleum companies in
connection with cost-containment measures and environmental regulatory pressures
have in the past led to worldwide delays and reductions in certain capital and
operating expenditures by many of these companies. There can be no assurance
that these industry patterns, as well as general domestic and foreign economic
conditions and other factors affecting spending by companies in these
industries, will not have a material adverse effect on the Company's business,
operating results and financial condition.
PRODUCT DEVELOPMENT AND TECHNOLOGICAL CHANGE
The market for software and services for process manufacturing optimization
is characterized by rapidly changing technology and continuing improvements in
computer hardware, operating systems, programming tools, programming languages
and database technology. The Company's future success will depend on its ability
to enhance its current software products and services, integrate its current and
future software offerings, modify its products to operate on additional or new
operating platforms or systems, and develop in a timely and cost-effective
manner new software and services that meet changing market conditions, including
evolving customer needs, new competitive software and service offerings,
emerging industry standards and changing technology. The Company has announced
its intention to further integrate its software products with each other and to
integrate those products with ERP, DCS and other business software solutions.
The Company believes additional development will be necessary before its
products are fully integrated with each other and with these other solutions,
particularly with respect to ERP solutions. In the past, the Company has
experienced delays in the development and enhancement of new and existing
products, particularly the Windows version of Aspen Plus, and has on occasion
postponed scheduled delivery dates for certain of its products. There can be no
assurance that the Company will be able to meet customers' expectations with
respect to product development, enhancement and integration or that the
Company's software and services will otherwise address adequately the needs of
customers. Like many other software products, the Company's software has on
occasion contained undetected errors or "bugs." Because new releases of the
Company's software products are initially installed only by a selected group of
customers, any errors or "bugs" in those new releases may not be detected for a
number of months after the delivery of the software. If the Company's products
do not perform substantially as expected or are not accepted in the marketplace,
the Company's business, operating results and financial condition would be
materially adversely affected.
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends to a significant extent on Lawrence B.
Evans, the principal founder of the Company and its Chairman and Chief Executive
Officer, its other executive officers, and certain engineering, technical,
managerial and marketing personnel. The loss of the services of any of these
individuals or groups of individuals could have a material adverse effect on the
Company's business, operating results and financial condition. None of the
Company's executive officers has entered into an employment agreement with the
Company, and the Company does not have, and is not contemplating securing, any
significant amount of key-person life insurance on any of its executive officers
or other key employees. In addition to the need to recruit qualified project
engineers, the Company believes that its future success will also depend
significantly upon its ability to attract, motivate and retain additional 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 the personnel it requires to
continue to grow and operate profitably.
8
<PAGE> 9
PRODUCT LIABILITY
The sale and implementation of certain of the Company's software products
and services, particularly in the areas of advanced process control and
optimization, may entail the risk of product liability claims. The Company's
software products and services are used in the design, operation and management
of manufacturing processes at large facilities, and any failure of the software
at those facilities could result in significant claims for damages or for
violations of environmental, safety and other laws and regulations. The
Company's agreements with its customers generally contain provisions designed to
limit the Company's exposure to potential product liability claims. It is
possible, however, that the limitation of liability provisions in the Company's
agreements may not be effective as a result of federal, state or local laws or
ordinances or unfavorable judicial decisions. A substantial product liability
claim against the Company could have a material adverse effect upon the
Company's business, operating results and financial condition.
DEPENDENCE ON PROPRIETARY TECHNOLOGY
The Company regards its software as proprietary and relies on a combination
of copyright, patent, trademark and trade secret laws, license and
confidentiality agreements, and software security measures to protect its
proprietary rights. AspenTech has United States patents for the expert guidance
system in its proprietary graphical user interface, the simulation and
optimization methods in its optimization software, a process flow diagram
generator in its planning and scheduling software, and a process simulation
apparatus in its polymers software. The Company has registered or has applied to
register certain of its significant trademarks in the United States and in
certain other countries. The Company generally enters into non-disclosure
agreements with its employees and customers, and historically has restricted
access to its software products' source codes, which it regards as proprietary
information. In a few cases, the Company has provided copies of the source code
for certain products to customers solely for the purpose of special
customization of the products and has deposited copies of the source code for
certain products in third-party escrow accounts as security for on-going service
and license obligations. In these cases, the Company relies on nondisclosure and
other contractual provisions to protect its proprietary rights.
The laws of certain countries in which the Company's products are licensed
do not protect the Company's products and intellectual property rights to the
same extent as the laws of the United States. The laws of many countries in
which the Company licenses its products protect trademarks solely on the basis
of registration. The Company currently possesses a limited number of trademark
registrations in certain foreign jurisdictions and does not possess, and has not
applied for, any foreign copyright or patent registrations. In fiscal 1996,
fiscal 1997 and fiscal 1998, the Company derived approximately 42.0%, 50.0% and
45.4% of its total revenues, respectively, from customers outside the United
States. There can be no assurance that the steps taken by the Company to protect
its proprietary rights will be adequate to deter misappropriation of its
technology or independent development by others of technologies that are
substantially equivalent or superior to the Company's technology. Any such
misappropriation of the Company's technology or development of competitive
technologies could have a material adverse effect on the Company's business,
operating results and financial condition. The Company could incur substantial
costs in protecting and enforcing its intellectual property rights. Moreover,
from time to time third parties may assert patent, trademark, copyright and
other intellectual property rights to technologies that are important to the
Company. In such an event, the Company may be required to incur significant
costs in litigating a resolution to the asserted claims. There can be no
assurance that such a resolution would not require that the Company pay damages
or obtain a license of a third party's proprietary rights in order to continue
licensing its products as currently offered or, if such a license is required,
that it will be available on terms acceptable to the Company, if at all.
9
<PAGE> 10
MANAGEMENT OF GROWTH
The Company has experienced substantial growth in recent years in the
number of its employees, the scope of its operating and financial systems, and
the geographic area of its operations. The Company's operations have expanded
significantly through both internally generated growth and acquisitions. This
growth has resulted in increased responsibilities for the Company's management.
To manage its growth effectively, the Company must continue to expand its
management team, attract, motivate and retain employees, including qualified
project engineers, and implement and improve its operating and financial
systems. There can be no assurance that the Company's current management systems
will be adequate or that the Company will be able to manage the Company's recent
or future growth successfully. Any failure to do so could have a material
adverse effect on the Company's business, operating results and financial
condition.
INTERNATIONAL OPERATIONS
In fiscal 1996, fiscal 1997 and fiscal 1998, the Company derived
approximately 42.0%, 50.0% and 45.4% of its total revenues, respectively, from
customers outside the United States. The Company anticipates that revenues from
customers outside the United States will continue to account for a significant
portion of its total revenues for the foreseeable future. The Company's
operations outside the United States are subject to additional risks, including
unexpected changes in regulatory requirements, exchange rates, tariffs and other
barriers, political and economic instability, difficulties in managing
distributors or representatives, difficulties in staffing and managing foreign
subsidiary operations, difficulties or delays in translating products and
product documentation into foreign languages, and potentially adverse tax
consequences. In addition, the Company currently is unable to determine the
effect, if any, that recent economic downturns in Asia, particularly Japan, or
the adoption and use of the euro, the single European currency to be introduced
in January 1999, will have on the Company's business. There can be no assurance
that any of these factors will not have a material adverse effect on the
Company's business, operating results and financial condition.
The impact of future exchange rate fluctuations on the Company's financial
condition and operating results cannot be accurately predicted. In recent years,
the Company has increased the extent to which it denominates arrangements with
customers outside the United States in the currencies of the country in which
the software or services are provided. From time to time the Company has engaged
in, and may continue to engage in, hedges of a significant portion of
installment contracts denominated in foreign currencies. There can be no
assurance that any hedging policies implemented by the Company will be
successful or that the cost of such hedging techniques will not have a
significant impact on the Company's business, operating results and financial
condition.
DEPENDENCE ON INCREASED MARKET PENETRATION
Increased use in the process industries of software and services for
process manufacturing optimization in general and of the Company's software
products and services in particular is critical to the Company's future growth.
The Company believes that a number of factors will determine its ability to
increase market penetration. These factors include product performance, accuracy
of results, reliability, breadth and integration of product offerings, scope of
applications, and ease of implementation and use. Failure of the Company to
achieve increased market penetration in the process industries would
substantially restrict the future growth of the Company and could have a
material adverse effect on the Company's business, operating results and
financial condition.
10
<PAGE> 11
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software applications are
designed to accept only two digit entries in the date code field used to
identify years. These date code fields will need to be modified to recognize
twenty-first century years. As a result, computer systems and software
applications used by many companies may need to be upgraded to comply with "year
2000" requirements. Significant uncertainty exists in the software industry
concerning the potential effects of failure to comply with such requirements.
The Company has developed a testing and compliance program to ascertain
whether and to what extent the Company may need to update its software products
to become year 2000 compliant. The Company does not intend to test or modify all
prior versions of its software products, current products used on year 2000
non-compliant systems, custom applications developed by or for customers, or
certain current software products that the Company plans to replace with either
new software products or year 2000 compliant releases by the end of 1999.
Certain of the Company's software products are currently year 2000 compliant;
however, the Company has not completed testing on many of the other software
products that it intends to test. There can be no assurance that the Company
will complete in a timely manner the testing of such software products or the
development of any updates necessary to render such software products year 2000
compliant. Although the Company has obtained representations as to year 2000
compliance from the sellers of certain of its recently acquired technologies,
there can be no assurance that the Company will not encounter year 2000 problems
arising from these technologies or any other technologies that the Company may
acquire in the future. Moreover, the ability of the Company's software products
to comply with year 2000 requirements depends in part upon the availability of
year 2000 compliant versions of operating systems and software applications used
by or with the Company's products. Any delay in developing or offering, or the
failure to develop or offer year 2000 compliant products or any necessary
updates to existing products, could result in delays in the purchasing of the
Company's products and services or in reduced demand for those products and
services, and could also result in errors that materially impair the utility of
one or more of the Company's products, any of which could have a material
adverse effect on the Company's business, operating results and financial
condition. Although the Company does not expect the costs associated with its
year 2000 compliance program to be material, there can be no assurance that
unidentified year 2000 problems will not cause the Company to incur material
expenses in responding to such problems or otherwise have a material adverse
effect on the Company's business, operating results and financial condition.
Moreover, customer purchasing patterns may be affected by year 2000 issues as
customers delay purchases in anticipation of the future release of year 2000
compliant products or releases, and as customers expend significant resources to
upgrade their current software systems and applications for year 2000
compliance. These expenditures may result in reduced funds available to purchase
software products such as those offered by the Company.
The Company has reviewed certain internal systems and future system plans
on a preliminary basis to assess Year 2000 compliance. The Company expects that
its internal system development plans will address the Year 2000 issue and will
correct any existing non-compliant systems without the need to accelerate the
overall information systems implementation plans. The Company believes that the
cost of any modifications will not be material. The Company's ability to
implement its information systems plan and to make the necessary modifications
or replacements may be adversely affected by a number of factors outside the
control of the Company, including the availability and cost of trained personnel
and the ability of such personnel to acquire Year 2000 compliant systems and
otherwise to locate and correct all relevant computer codes. The Company is also
conducting an additional assessment of its systems and operations in order to
more fully identify and plan for any Year 2000 risks, although it believes that
its business would not be materially affected by the failure of any internal
systems to be Year 2000 compliant. If there are unidentified dependencies on
internal systems to operate the business, or if any required modifications are
not completed on a timely basis or are more costly to implement than currently
anticipated, the Company's business, financial condition or results of
operations could be materially adversely affected.
11
<PAGE> 12
NEW ACCOUNTING STANDARD
In October 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position No. 97-2 ("SOP 97-2"), "Software Revenue
Recognition," which the Company adopted for software license agreements entered
into with customers on or after January 1, 1998. This statement provides
accounting standards for software revenue recognition. The Company believes that
its revenue recognition policies comply with SOP 97-2; however, unanticipated
changes or new interpretations by the AICPA of SOP 97-2 could require changes in
the Company's revenue recognition practices, which could have a material adverse
effect on the Company's operating results and financial condition.
POTENTIAL VOLATILITY OF PRICE OF COMMON STOCK
The equity markets have from time to time experienced extreme price and
volume fluctuations, particularly in the high technology sector, and those
fluctuations have often been unrelated to the operating performance of
particular companies. In addition, factors such as the financial performance of
the Company, announcements of technological innovations or new products by the
Company or its competitors, as well as market conditions in the computer
software or hardware industries, may have a significant impact on the market
price of the Common Stock. From July 27, 1998, the date on which the Company
preliminarily announced its results for the fiscal quarter and year ended June
30, 1998, through the close of business on October 13, 1998, the price per share
of Common Stock, as reported by the Nasdaq National Market, decreased from
$48.25 to $9.50. See "--Fluctuations in Quarterly Operating Results and Cash
Flow" and "Litigation."
EFFECT OF CERTAIN CHARTER AND BY-LAW PROVISIONS AND ANTI-TAKEOVER PROVISIONS;
POSSIBLE ISSUANCES OF PREFERRED STOCK; STOCKHOLDER RIGHTS PLAN
The Company's Certificate of Incorporation, its By-Laws and certain
Delaware laws contain provisions that may discourage acquisition bids for the
Company and that may deprive stockholders of certain opportunities to receive a
premium for their shares as part of an acquisition of the Company. Preferred
Stock may be issued by the Company in the future without stockholder approval
and upon such terms as the Board of Directors may determine. 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, or of
discouraging a third party from acquiring, a majority of the outstanding stock
of the Company. The Company has adopted a stockholder rights plan, which may
deter or delay attempts to acquire the Company or accumulate shares of Common
Stock. Except for the stockholder rights plan, the Company has no present plans
to designate or issue any shares of Preferred Stock.
LITIGATION
On October 5, 1998, a purported class action lawsuit was filed in the
United States District Court for the District of Massachusetts against the
Company and certain of its officers and directors on behalf of purchasers of the
Company's common stock between April 28, 1998 and October 2, 1998. The lawsuit
seeks an unspecified amount of damages and claims violations of Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934, alleging that the defendants
issued a series of materially false and misleading statements concerning the
Company's financial condition, its operations and integration of several
acquisitions. The Company believes it has meritorious legal defenses to the
lawsuit and intends to defend vigorously against this action. The Company is
currently unable, however, to determine whether resolution of this matter will
have a material adverse impact on the Company's financial position or results of
operations, or reasonably estimate the amount of the loss, if any, that may
result from resolution of this matter.
12
<PAGE> 13
FORWARD-LOOKING STATEMENTS
This Prospectus contains and incorporates by reference certain
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act, which are intended to be covered by the
safe harbors created thereby. For this purpose, any statements contained or
incorporated by reference 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. Readers are cautioned that all
forward-looking statements involve risks and uncertainties, many of which are
beyond the Company's control, including the factors set forth under "Risk
Factors." Although the Company believes that the assumptions underlying the
forward-looking statements contained or incorporated by reference herein are
reasonable, any of the assumptions could be inaccurate and there can be no
assurance that actual results will be the same as those indicated by the
forward-looking statements included or incorporated by reference in this
Prospectus. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion or incorporation by
reference of such information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the Company will be
achieved. Moreover, the Company assumes no obligation to update these
forward-looking statements to reflect actual results, changes in assumptions or
changes in other factors affecting such forward-looking statements.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock by
the Selling Stockholders, nor will any such proceeds be available for use by the
Company or otherwise for the Company's benefit. See "Selling Stockholders."
13
<PAGE> 14
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock by the Selling Stockholders as of September
1, 1998 and as adjusted to reflect the sale of the shares of Common Stock
offered hereby.
<TABLE>
<CAPTION>
Shares Shares to be
Beneficially Number Beneficially Owned
Owned of After Offering if
Prior to Offering(1) Shares All Shares Sold(1)
--------------------- Being ---------------------
Name Number Percent Offered Number Percent
- ------ --------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C>
Thomas E. Baker.......... 1,927,820 (2) 7.7% 200,000 1,727,820(2) 6.9%
Donald E. Shobrys........ 233,725 (3) * 53,466 180,259(3) *
Steven Treiber........... 140,000 * 14,000(4) 126,000(4) *
David L. Linkin.......... 113,214 (6) * 15,843 97,371(6) *
Dwight E. Collins........ 88,852 (7) * 9,901 78,951(7) *
Jeffrey B. Howard........ 82,337 (8) * 11,881 70,456(8) *
Laura H. Rhoden.......... 60,168 (9) * 3,960 56,208(9) *
Christopher V. Jones..... 35,644 * 11,881 23,763 *
Joseph F. Faccenda....... 2,942(10) * 600 2,342(10) *
</TABLE>
- ----------
* Percentage of shares beneficially owned is less than 1.0%.
(1) Unless otherwise noted, each person or group identified possesses sole
voting and investment power with respect to shares, subject to community
property laws where applicable. Shares not outstanding but deemed
beneficially owned by virtue of the right of a person or group to acquire
them within 60 days are treated as outstanding only for purposes of
determining the number of and percent owned by such person or group. As of
September 1, 1998, there were 24,902,218 shares of Common Stock
outstanding.
(2) Includes 17,822 shares held by Mr. Baker's wife and 71,287 shares held by a
trust for the benefit of Mr. Baker's children. Also includes 103,034 shares
and 24,782 shares held in the Chesapeake Decision Sciences, Inc. Employee
Stock Ownership Plan and Trust effective January 1, 1987, as amended and
restated effective January 1, 1989 (the "Chesapeake ESOP") on behalf of Mr.
Baker and Mr. Baker's wife, respectively. All such shares were acquired on
May 27, 1998 in exchange for shares of capital stock of Chesapeake.
(3) Includes 73,329 shares held in on behalf of Mr. Shobrys.
(4) All of these 14,000 shares are currently held in escrow pursuant to the
indemnification provisions of the Treiber Agreement, and the net proceeds
of those shares will be deposited in escrow in lieu of those shares.
(5) All of these 126,000 shares have been registered under a registration
statement on Form S-3 (registration no. 333-61121) declared effective by
the Commission on August 25, 1998.
(6) Includes 65,689 shares held in the Chesapeake ESOP on behalf of Mr. Linkin.
(7) Includes 59,149 shares held in the Chesapeake ESOP on behalf of Mr.
Collins.
(8) Includes 46,693 shares held in the Chesapeake ESOP on behalf of Mr. Howard.
(9) Includes 48,287 shares held in the Chesapeake ESOP on behalf of Ms. Rhoden.
(10) Includes 1,141 shares held in the Chesapeake ESOP on behalf of Mr.
Faccenda.
14
<PAGE> 15
PLAN OF DISTRIBUTION
This Prospectus and the Registration Statement are in furtherance of a
"shelf" registration pursuant to Rule 415 promulgated by the Commission under
the Securities Act. Under the Chesapeake Declaration and the Company's agreement
with Dr. Steven Treiber, the Company is obligated to use its best efforts to
keep the shelf registration in effect until (a) a period of ninety days has
elapsed since the effective date of the Registration Statement or (b) all of the
shares offered hereby have been sold hereunder. The Company may elect, in its
sole discretion, to maintain the effectiveness of the Registration Statement for
more than ninety days in the event a portion or all of the shares offered hereby
have not been sold.
The shares offered hereby may be sold from time to time by the Selling
Stockholders, or by pledges, donees, transferees or other successors in interest
of the Selling Stockholders. Such sales may be made on the Nasdaq National
Market, or otherwise, at prices and on terms then prevailing or at prices
related to the then-current market prices, or in negotiated transactions at
negotiated prices. The shares may be sold by one or a combination of the
following: (a) a block trade in which the broker or dealer so engaged will
attempt to sell the shares as agent, but may position and resell a portion of
the block as principal to facilitate the transaction; (b) purchases by a broker
or dealer as principal and resale by such broker or dealer for its account
pursuant to this Prospectus; and (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers. In effecting sales,
brokers or dealers engaged by the Selling Stockholders may arrange for other
brokers or dealers to participate. Brokers or dealers will receive commissions
or discounts from Selling Stockholders in amounts to be negotiated immediately
prior to the sale. The Selling Stockholders and any broker-dealers that
participate in the distribution may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, and any commission received by
them and any profit on the resale of shares sold by them may be deemed to be
underwriting discounts and commissions.
Upon the Company being notified by the Selling Stockholders that any
material arrangement has been entered into with a broker-dealer for the sale of
shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplemented
prospectus will be filed, if required, pursuant to Rule 424(c) under the
Securities Act, setting forth (i) the name of each of the participating
broker-dealers, (ii) the number of shares involved, (iii) the price at which
such shares were sold, (iv) the commissions paid or discounts or concessions
allowed to such broker-dealers, where applicable, (v) a statement to the effect
that such broker-dealers did not conduct any investigation to verify the
information set out or incorporated by reference in this Prospectus, and (vi)
other facts material to the transaction.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby has been passed
upon for the Company by Foley, Hoag & Eliot LLP, Boston, Massachusetts.
EXPERTS
The consolidated balance sheets of the Company as of June 30, 1997 and 1998
and the related consolidated statements of operations, stockholders' equity and
cash flows for the years ended June 30, 1996, 1997 and 1998 incorporated by
reference herein from the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1998 have been audited by Arthur Andersen LLP, independent
public accountants, to the extent and for the periods indicated in their reports
included in such Form 10-K, and are incorporated by reference herein in reliance
upon the authority of that firm as experts in giving those reports.
15
<PAGE> 16
================================================================================
No broker, dealer or any other 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
information or representations must not be relied upon as having been authorized
by the Company or the Selling Stockholders. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any securities other than
the shares of Common Stock to which it relates or an offer to, or a solicitation
of, any person in any jurisdiction where such an offer or solicitation would be
unlawful. 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 information
contained herein is correct as of any time subsequent to its date.
-----------------
TABLE OF CONTENTS
-----------------
Page
----
Available Information................................................. 2
Information Incorporated by Reference................................. 2
Prospectus Summary.................................................... 3
Risk Factors.......................................................... 5
Forward-Looking Information........................................... 13
Use of Proceeds....................................................... 13
Selling Stockholders.................................................. 14
Plan of Distribution.................................................. 15
Legal Matters......................................................... 15
Experts............................................................... 15
================================================================================
================================================================================
321,532 SHARES
ASPEN TECHNOLOGY, INC.
COMMON STOCK
----------
PROSPECTUS
----------
October 13 , 1998
================================================================================
