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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarter ended September 30, 1998.
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number: 000-24786
ASPEN TECHNOLOGY, INC.
(exact name of registrant as specified in its charter)
Delaware 04-2739697
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Ten Canal Park, Cambridge, Massachusetts 02141
(Address of principal executive office and zip code)
Registrant's telephone number, including area code: (617) 949-1000
Indicate by check mark whether the registrant: (1) has filed reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
Yes X No
------- -------
As of September 30, 1998, there were 24,665,779 shares of the Registrant's
common stock (par value $.10 per share) outstanding.
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ASPEN TECHNOLOGY, INC.
QUARTERLY REPORT ON FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets
as of September 30, 1998 and June 30, 1998 3
Consolidated Condensed Statements of
Operations for the Three Month Periods
Ended September 30, 1998 and 1997 4
Consolidated Condensed Statements of Cash Flows
for the Three Month Periods Ended
September 30, 1998 and 1997 5
Notes to Consolidated Condensed Financial Statements 6 - 10
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 10 - 15
Item 3. Quantitative And Qualitative Market Risk Disclosures 15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15 - 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
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<TABLE>
<CAPTION>
ASPEN TECHNOLOGY, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
(IN THOUSANDS)
UNAUDITED
September 30, 1998 June 30, 1998
------------------ -------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 68,667 $ 78,694
Short-term investments 38,721 34,987
Accounts receivable, net 53,951 71,803
Unbilled services 21,399 18,077
Current portion of long-term installments receivable, net 28,352 23,643
Prepaid expenses and other current assets 12,452 10,831
--------- ---------
Total current assets 223,542 238,035
Long-term installments receivable, net 37,149 36,203
Property and leasehold improvements, at cost 78,991 76,314
Accumulated depreciation (36,652) (33,578)
--------- ---------
42,339 42,736
Computer software development costs, net 5,742 5,696
Intangible assets, net 13,390 12,857
Other assets 7,210 7,355
--------- ---------
$ 329,372 $ 342,882
========= =========
Current Liabilities:
Current portion of long-term debt $ 1,878 $ 2,187
Accounts payable and accrued expenses 27,441 38,545
Unearned revenue 8,103 6,008
Deferred revenue 17,729 17,888
Deferred income taxes 541 541
--------- ---------
Total current liabilities 55,692 65,169
Long-term debt, less current maturities 4,455 4,385
5 1/4% Convertible subordinated debentures 86,250 86,250
Deferred revenue, less current portion 13,846 15,074
Other liabilities 845 914
Deferred income taxes 6,074 6,074
Stockholders' Equity:
Common stock 2,488 2,473
Additional paid-in capital 151,185 148,342
Retained earnings 8,562 14,922
Accumulated other comprehensive income (loss) 477 (219)
Treasury stock, at cost (502) (502)
--------- ---------
Total Stockholders' Equity 162,210 165,016
--------- ---------
$ 329,372 $ 342,882
========= =========
</TABLE>
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<TABLE>
<CAPTION>
ASPEN TECHNOLOGY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
Three Months Ended September 30,
-------------------------------
1998 1997
------------ -------------
<S> <C> <C>
Revenues:
Software licenses $ 16,004 $ 24,388
Maintenance and other services 30,705 25,065
-------- --------
Total revenues 46,709 49,453
-------- --------
Expenses:
Cost of software licenses 1,667 1,672
Cost of maintenance and other services 19,973 14,712
Selling and marketing 19,145 15,186
Research and development 11,604 10,163
General and administrative 5,475 4,502
One-time acquisition costs -- 509
-------- --------
Total costs and expenses 57,864 46,744
-------- --------
Income (loss) from operations (11,155) 2,709
Other income (expense), net 218 (67)
Interest income, net 1,152 1,453
-------- --------
Income (loss) before provision for
income taxes (9,785) 4,095
Provision (benefit from) for income taxes (3,425) 1,460
-------- --------
Net income (loss) $ (6,360) $ 2,635
======== ========
Diluted earnings (loss) per share $ (0.26) $ 0.11
======== ========
Weighted average shares outstanding-diluted 24,618 23,619
======== ========
Basic earnings (loss) per share $ (0.26) $ 0.12
======== ========
Weighted average shares outstanding-basic 24,618 22,335
======== ========
</TABLE>
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<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1998 1997
-------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ (6,360) $ 2,635
Adjustments to reconcile net income (loss) to net cash provided by
operating activities (net of acquisition-related activity disclosed below):
Depreciation and amortization 4,488 2,926
Deferred income taxes -- 1,327
Decrease in accounts receivable 17,852 743
(Increase) in unbilled services (3,294) (1,023)
(Increase) in installments receivable (5,655) (2,142)
(Increase) in prepaid expenses
and other current assets (1,621) (1,021)
(Decrease) in accounts payable
and accrued expenses (11,154) (3,003)
Increase in unearned revenue 2,055 575
Increase (decrease) in deferred revenue (1,387) 40
-------- --------
Net cash provided by (used in) operating activities (5,076) 1,057
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and leasehold
improvements (2,666) (4,448)
Purchase of investment securities (3,412) (1,425)
(Increase) decrease in other long-term assets 145 (99)
(Increase) in computer software development costs (742) (901)
Increase (Decrease) in other long-term liabilities (69) 28
Cash used in the purchase of business, net of cash acquired (1,200) (591)
-------- --------
Net cash used in investing activities (7,944) (7,436)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock under employee stock purchase plans 2,076 --
Exercise of stock options 782 887
Proceeds from (payments of) long-term debt and capital lease obligations (239) 774
-------- --------
Net cash provided by financing activities 2,619 1,661
-------- --------
EFFECTS OF EXCHANGE RATE CHANGES ON CASH 374 (160)
-------- --------
(DECREASE) IN CASH AND CASH EQUIVALENTS (10,027) (4,878)
CASH AND CASH EQUIVALENTS, beginning of period 78,694 18,284
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 68,667 $ 13,406
======== ========
During the three months ended September 30, 1998, the Company
acquired a company in a purchase transaction described in Note 4
This acquisition is summarized as follows-
Fair value of assets acquired, excluding cash $ 1,290
Issuance of common stock related to acquisitions --
Payments in connection with the acquisitions, net of cash acquired (1,200)
--------
Liabilities assumed $ 90
========
During the three months ended September 30, 1997, the Company
acquired certain companies in poolings-of-interests transactions
These acquisitions are summarized as follows-
Book value of assets acquired, excluding cash
Liabilities assumed $ 5,136
Book value of equity (1,419)
--------
Liabilities and stockholders' equity $ 3,717
========
</TABLE>
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ASPEN TECHNOLOGY, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying consolidated condensed
financial statements have been prepared in conformity with generally
accepted accounting principles and include all adjustments, consisting
only of normal recurring adjustments, necessary for a fair
presentation. The results of operations for the three month period
ended September 30, 1998 are not necessarily indicative of the results
to be expected for the full year. It is suggested that these interim
consolidated condensed financial statements be read in conjunction with
the audited consolidated financial statements for the year ended June
30, 1998, which are contained in the Company's Form 10-K, as previously
filed with the Securities and Exchange Commission.
2. ACCOUNTING POLICIES
(a) Revenue Recognition
The Company recognizes revenue from software licenses upon the shipment
of its products, pursuant to a signed noncancelable license agreement.
In the case of license renewals, revenue is recognized upon execution
of the renewal license agreement. The Company has no significant vendor
obligations or collectibility risk associated with its product sales.
The Company recognizes revenue from postcontract customer support
ratably over the period of the postcontract arrangement. The Company
accounts for insignificant vendor obligations by deferring a portion of
the revenue and recognizing it either ratably as the obligations are
fulfilled or when the related services are performed. If significant
application development services are performed in connection with the
purchase of a license, the license fees are recognized as the
application development services are performed.
Service revenues from fixed-price contracts are recognized on the
percentage-of-completion method, measured by the percentage of costs
(primarily labor) incurred to date as compared to the estimated total
costs (primarily labor) for each contract. When a loss is anticipated
on a contract, the full amount thereof is provided currently. Service
revenues from-time-and expense contracts and consulting and training
revenue are recognized as the related services are performed.
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Services that have been performed but for which billings have not been
made are recorded as unbilled services, and billings that have been
recorded before the services have been performed are recorded as
unearned revenue in the accompanying consolidated balance sheets.
Installments receivable represent the present value of future payments
related to the financing of noncancelable term license agreements that
provide for payment in installments over a one- to five-year period. A
portion of the revenue from each installment agreement is recognized as
interest income in the accompanying consolidated condensed statements
of income. The interest rate in effect for the three months ended
September 30, 1997 and September 30, 1998 was 8.5%. At September 30,
1998, the Company had long term installments receivable of
approximately $6.6 million denominated in foreign currencies. The
September 1998 installments receivable mature through January 2004 and
have been hedged with specific foreign currency contracts. There have
been no material gains or losses recorded relating to hedge contracts
for the periods presented. The Company does not use derivative
financial instruments for speculative or trading purposes.
(b) Computer Software Development Costs
In compliance with Statement of Financial Accounting Standards (SFAS)
No. 86, "Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed", certain computer software development
costs are capitalized in the accompanying consolidated condensed
balance sheets. Capitalization of computer software development costs
begins upon the establishment of technological feasibility and ends
upon market introduction. Amortization of capitalized computer software
development costs is included in cost of revenues and is provided on a
product-by-product basis at the greater of the amount computed using
(a) the ratio of current gross revenues for a product to the total of
current and anticipated future gross revenues or (b) the straight-line
method over the remaining estimated economic life of the product, not
to exceed three years. Total amortization expense charged to operations
in the three month period ended September 30, 1998 was approximately
$.7 million as compared to $.2 million for the three month period ended
September 30, 1997.
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-1 "Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use" ("SOP
98-1"). SOP 98-1 requires computer software costs associated with
internal use software to be expensed as incurred until certain
capitalization criteria are met. The Company adopted SOP 98-1 as of
July 1, 1998. Adoption of this Statement did not have a material
impact on the Company's consolidated financial position or results of
operations
(c) Net Income (Loss) Per Share
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The Company adopted SFAS No. 128, "Earnings per Share," during the
quarter ending December 31, 1997. In accordance with SFAS No. 128,
basic earnings (loss) per share is calculated by dividing net income
(loss) by the weighted average number of common shares outstanding for
the period. Diluted earnings (loss) per share reflect the dilution of
potentially dilutive securities, primarily stock options, based on the
treasury stock method.
Basic and diluted weighted average shares outstanding as required by
SFAS No. 128 are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended September 30,
--------------------------------
1998 1997
--------- ----------
<S> <C> <C>
Basic weighted average
shares outstanding 24,618 22,335
Weighted average common
equivalent shares -- 1,284
------ ------
Diluted weighted average
shares outstanding 24,618 23,619
------ ------
</TABLE>
As of September 30, 1998, 1,226,692 stock options and warrants were
not included in diluted weighted average shares outstanding as the
effect would have been anti-dilutive.
(d) Investments
The Company accounts for its investments in accordance with SFAS No.
115, "Accounting for Certain Investments in Debt and Equity
Securities". Under SFAS No. 115, securities purchased to be held for
indefinite periods of time, and not intended at the time of purchase to
be held until maturity, are classified as available-for-sale
securities. Securities classified as available-for-sale are required to
be recorded at market value in the financial statements. Unrealized
gains and losses have been accounted for as a separate component of
stockholders' equity. Investments held as of September 30, 1998 consist
$31.6 million in U.S. Corporate Bonds and $7.1 million in U.S.
Government Bonds. The Company does not use derivative financial
instruments in its investment portfolio.
3. SALE OF INSTALLMENTS RECEIVABLE
The Company sold, with limited recourse, certain of its installment
contracts to a financial institutions for approximately $1.8 million
during the three month period ended September 30, 1998. The financial
institutions have partial recourse to the Company only upon non-payment
by the customer under the installments receivable. The amount of
recourse is determined pursuant to the provisions of the Company's
contracts with the
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financial institutions and varies depending upon whether the customers
under the installment contracts are foreign or domestic entities.
Collections of these receivables reduce the Company's recourse
obligations, as defined.
At September 30, 1998, the balance of the uncollected principal portion
of all contracts sold was $83.6 million. The Company's potential
recourse obligation related to these contracts is approximately $4.6
million. In addition, the Company is obligated to pay additional costs
to the financial institutions in the event of default by the customer.
4. ACQUISITION
(a) OPTPEMS Business of Callidus Technologies, Inc.
On September 14, 1998 the Company paid $1.2 million in cash for certain
assets and personnel of Callidus Technologies, Inc., a consulting firm that
specializes in the modeling of predictive emissions monitoring. This
acquisition has been accounted for as a purchase transaction. The purchase
price has been allocated to various assets, primarily goodwill (intangible
assets), based on their fair values.
5. COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income ("SFAS No. 130"), effective July 1, 1998.
SFAS No. 130 requires that items defined as other comprehensive income,
such as foreign currency translation adjustments, be separately classified
in the financial statements and that the accumulated balance of other
comprehensive income be reported separately from retained earnings and
additional paid-in capital in the equity section of the balance sheet. The
components of comprehensive income for the three months ended September 30,
1998 and 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended
September 30,
-----------------------
1998 1997
------- -------
<S> <C> <C>
Comprehensive income (loss):
Net income (loss) $(6,360) $ 2,635
Other comprehensive income (loss):
Unrealized gain on investments 322 17
Foreign currency adjustment 374 (159)
------- -------
Comprehensive income (loss) $(5,664) $ 2,493
======= =======
</TABLE>
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5. REPRICING OF EMPLOYEE STOCK OPTIONS
On November 11, 1998 the Company's Board of Directors approved the
repricing of certain employee stock options with an exercise price in
excess of the fair market value of the Company's common stock. The exercise
price for 2.79 million shares of employee stock options was reset to
$14.125, the closing market price on November 11, 1998. All such options
were adjusted by resetting vesting back one year. Stock options held by
executive officers and directors were not eligible for such repricing.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
Revenues are derived from software licenses and maintenance and other services.
Total revenues for the three months ended September 30, 1998 were $46.7, a
decrease of 5.5% from $49.5 million in the comparable period of fiscal 1998.
Software license revenue represented 34.3% of total revenue for the three months
ended September 30, 1998, as compared to 49.3% in the comparable period of
fiscal 1998. Revenues from software licenses for the three months ended
September 30, 1998 were $16.0 million, a decrease of 34.4% from $24.4 million in
the comparable periods of fiscal 1998. The decline in software license revenues
was attributable to a delay in finalizing several large software licenses
transactions, mostly due to global economic conditions.
Total revenues from customers outside the United States were $24.1 million or
51.7% of total revenues for the three months ended September 30, 1998, as
compared to $21.6 million or 43.7% of total revenues for the comparable period
in fiscal 1998. The geographical mix of license revenues can vary from quarter
to quarter; however, for fiscal 1999, the overall mix of revenues from customers
outside the United States is expected to be relatively consistent with the prior
year.
Revenues from maintenance and other services consist of consulting services,
post contract support on software licenses, training and sales of documentation.
Revenues from maintenance and other services for the three months ended
September 30, 1998 were $30.7 million, an increase of 22.5% from $25.1 million
in the comparable period in fiscal 1998. This increase reflects a continued
focus during fiscal 1999 on providing high value-added consulting and training
services to existing customers.
Neither the Company's joint ventures nor any discounting, or similar activities,
have historically had a material effect on the Company's revenues.
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Cost of software licenses consist of royalties, amortization of previously
capitalized software costs, costs related to the delivery of software (including
disk duplication and third party software costs), printing of manuals and
packaging. Cost of software licenses for the three months ended September 30,
1998 was $1.7 million, approximately the same as the comparable period of fiscal
1998. Cost of software licenses as a percentage of revenues from software
licenses were 10.4% for the three months ended September 30, 1998 as compared to
6.9% for the three months ended September 30, 1997. The increase in this cost as
a percentage of software license revenue is due to incremental amortization of
computer software development costs and the spreading of the total costs over a
smaller revenue base.
Costs of maintenance and other services consists of the cost of execution of
application consulting services, technical support expenses, the cost of
training services and the cost of manuals sold separately. Costs of maintenance
and other services for the three months ended September 30, 1998 were $20.0
million, an increase of 35.8% from $14.7 million in the comparable period in
fiscal year 1998. Costs of maintenance and other services as a percentage of
their revenue was 65.0% in the three months ended September 30, 1998 and 58.7%
in the comparable period of fiscal year 1998. This percentage increase reflected
investments in personnel and related support which were made to improve the
execution of the services projects.
Selling and marketing expenses for the three months ended September 30, 1998
were $19.1 million, an increase of 26.1% from $15.2 million in the comparable
period in fiscal year 1998. As a percentage of revenues, selling and marketing
expenses were 41.0% for the three months ended September 30, 1998, as compared
to 30.7% for the comparable period in fiscal 1998. The Company has continued to
invest in sales personnel and regional sales offices to improve the Company's
geographic proximity to its customers, to maximize the penetration of existing
accounts and to add new customers. The increase in the percentage of selling and
marketing expenses, on a comparative period basis, is also ascribed to the
decline in total revenues identified above.
Research and development expenses consist primarily of personnel and outside
consultancy costs required to conduct the Company's product development efforts.
Capitalized research and development costs are amortized over three years.
Research and development expenses during the three months ended September 30,
1998 were $11.6 million, an increase of 14.2% from $10.2 million in the
comparable periods of fiscal 1998. As a percentage of revenues, research and
development costs were 24.8% for the three months ended September 30, 1998, as
compared to 20.6% for the same period in fiscal 1998. The increase in costs of
14.2% reflects continued investment in the development of the Company's core
modeling products and a common software architecture encompassing the Company's
expanded family of software products. The Company capitalized 6.0% of its total
research and development costs during the three months ended September 30, 1998
as compared to 8.1% in the comparable period of fiscal year 1998.
General and administrative expenses consist primarily of salaries of
administrative, executive, financial and legal personnel, outside professional
fees, and amortization of certain intangibles. General and administrative
expenses for the three months ended September 30, 1998 were $5.5
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million, an increase of 21.6% from $4.5 million in the comparable period of
fiscal 1998. The increase reflects the growth in the scale and scope of the
Company's operations.
Interest income is generated from the license of software pursuant to
installment contracts for off-line modeling software and the investment of
excess cash in short-term and long-term investments. Under these installment
contracts, the Company offers customers the option to make annual payments for
its term licenses instead of a single license fee payment at the beginning of
the license term. A substantial majority of the off-line modeling customers
elect to license these products through installment contracts. The Company
believes this election is made principally because the customers prefer to pay
for the Company's off-line modeling products out of their operating budgets,
rather than out of their capital budgets. Included in the annual payments is an
implicit interest charge based upon the interest rate established by the Company
at the time of the license. The Company sells a portion of the installment
contracts to unrelated financial institutions. The interest earned by the
Company on the installment contract portfolio in any period is the result of the
implicit interest established by the Company on installment contracts and the
size of the contract portfolio. Interest income was $2.5 million for the three
months ended September 30, 1998 as compared to $1.4 million for the comparable
periods in fiscal 1998. The increase reflects the interest income generated from
excess cash from the Company's 5 1/4% convertible debentures, which was not
issued and outstanding in the comparable three month period ended September 30,
1997.
Interest expense is generated from interest charged on the Company's 5 1/4%
convertible debentures, bank line of credit, notes payable and capital lease
obligations. Interest expense for the three months ended September 30, 1998 was
$1.4 million as compared to $0.07 million in the comparable period of fiscal
1998. The increase is primarily related to the interest expense on the Company's
5 1/4% convertible debentures, which did not exist in the period ended September
30, 1997.
The effective tax rate remained approximately the same for the three months
ended September 30, 1998, 35.0% of pretax income, versus 35.7% for the
comparable period of fiscal year 1998.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended September 30, 1998, the Company's cash and cash
equivalents balance decreased by $10.0 million. Operations used $5.0 million of
cash during this period, primarily related to the net loss for the current
fiscal quarter.
In recent years, the Company has had arrangements to sell long-term contracts to
two financial institutions, General Electric Capital Corporation ("GECC") and
Sanwa Business Credit Corporation ("SBCC"). During the three months ended
September 30, 1998, installment contracts increased to $65.5 million, net of
$1.8 million of installment contracts sold to GECC and SBCC. The Company's
arrangements with the two financial institutions provide for the sale of
installment contracts up to certain limits and with certain recourse
obligations. At September 30, 1998, the balance of the uncollected principal
portion of the contracts sold to these two
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financial institutions was $83.6 million, for which the Company has a partial
recourse obligation of approximately $4.6 million. The availability under these
arrangements will increase as the financial institutions receive payment on
installment contracts previously sold.
The Company maintains a $30.0 million bank line of credit, expiring December 31,
1998, that provides for borrowings of specified percentages of eligible accounts
receivable and eligible current installment contracts. Advances under the line
of credit bear interest at a rate equal to the bank's prime rate (8.25% at
September 30, 1998) plus a specified margin or, at the Company's option, a rate
equal to a defined LIBOR (5.31% at September 30, 1998) plus a specified margin.
The line of credit agreement requires the Company to provide the bank with
certain periodic financial reports and to comply with certain financial tests,
including maintenance of minimum levels of consolidated net income before taxes
and of the ratio of current assets to current liabilities. The Company is in the
process of renewing this line of credit. At September 30, 1998, there were no
outstanding borrowings under the line of credit.
In June 1998, the Company sold $86.3 million of 5 1/4% Convertible subordinated
debentures (the Debentures). The Debentures are convertible into shares of the
Company's common stock at any time prior to June 15, 2005, unless previously
redeemed or repurchased, at a conversion price of $52.97 per share, subject to
adjustment in certain events. Interest on the Debentures is payable on June 15
and December 15 of each year, commencing December 15, 1998. The Debentures are
redeemable in whole or part at the option of the Company at any time on or after
June 15, 2001 at various redemption prices expressed as a percentage of
principal plus accrued interest through the date of redemption.
In the event of a change of control, as defined, each holder of the Debentures
may require the Company to repurchase its Debentures, in whole or in part, for
cash or, at the Company's option, for common stock (valued at 95% of the average
last reported sale prices for the 5 trading days immediately preceding the
repurchase date) at a repurchase price of 100% of the principal amount of the
Debentures to be repurchased, plus accrued interest to the repurchase date. The
Debentures are unsecured obligations subordinate in right of payment to all
existing and future senior debt of the Company, as defined, and effectively
subordinate in right of payment to all indebtedness and other liabilities of the
Company's subsidiaries.
YEAR 2000 COMPLIANCE
INTRODUCTION
Management has initiated a Company-wide program to prepare the Company's
computer systems and applications as well as the Company's product offerings
for the year 2000. The Company has formed a Year 2000 Steering Committee
comprised of representatives from the different divisions of the Company,
including product development staff and internal systems staff. The Steering
Committee is responsible for defining Year 2000 compliance standards for the
entire Company, identifying Year 2000 requirements for each area of the
Company's business and internal requirements, assessing current compliance and
compliance efforts, and generally providing direction and management of the
Company's
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Year 2000 efforts. The Company's Year 2000 efforts are focused on the compliance
of its product and service offerings to customers and on internal
business-critical items. Hardware, software, systems, technologies and
applications are considered "business-critical" if a failure would either have a
material adverse impact on the Company's business, financial condition or
results of operations or involve a safety risk to employees or customers.
STATE OF READINESS
The Company has tested and determined that over 90% of its standard products
are compliant and has established a website which lists the status of the
substantial majority of products. The Company is also working on the work
processes of its service groups to incorporate Y2K compliance tests or
procedures in carrying out service projects and is in the process of determining
the readiness of its internal systems which are business-critical.
INTERNAL SYSTEMS
The Company has reviewed certain internal systems and future system plans 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. 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.
TESTING
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 results of this testing program are available on
the Company's public website.
The Company is also developing a plan to test any internal systems which have
not been certified as Year 2000 compliant or which have been determined to be
business-critical as described
14
<PAGE> 15
above. The experience of the Company in developing its internal product testing
program will be used in the development of any testing program for internal
systems.
COSTS TO ADDRESS YEAR 2000 COMPLIANCE
The Company expects to incur internal staff costs as well as consulting and
other expenses related to system enhancements for the year 2000. The Company
believes the total costs to be incurred for all year 2000 related projects will
not have a material impact on the future results from operations; however, the
Company is assessing such costs on an on-going basis in order to adjust spending
plans as necessary.
CONTINGENCY PLANNING AND RISKS
The Company has risks both that its products and services fail to be compliant
with certain Y2K functionality and that its business operations would be
interrupted or affected by the failure of other products or services to be Y2K
compliant.
The external risks are difficult to determine due to the general uncertainty
inherent from the Company's dependence upon the Y2K compliance of third party
software operating systems and applications with which the Company's software
operates, and third-party suppliers, vendors and customers with whom the Company
does business. The Company is unable to determine at this time its most
reasonably likely worst case scenario. While costs related to the lack of Y2K
compliance of third parties, business interruptions, litigation and other
liabilities related to Y2K issues could materially and adversely affect the
Company's business, results of operations and financial condition, the Company
expects its Y2K compliance efforts to reduce significantly the Company's level
of uncertainty about the impact of Y2K issues affecting both its products and
services and internal systems.
Item 3. Quantitative And Qualitative Market Risk Disclosures
Information relating to quantitative and qualitative disclosure about market
risk is set forth under the caption "Notes to Consolidated Condensed Financial
Statements," (2. (a) and (d)).
PART II. OTHER INFORMATION
15
<PAGE> 16
Item 1. Legal Proceedings
The Company is a party to lawsuits in the normal course of its business. The
Company believes that it has meritorious defenses in all lawsuits in which the
Company or its subsidiaries is a defendant. The Company notes that (i)
securities litigation in particular, can be expensive and disruptive to normal
business operations and (ii) the results of complex legal proceedings can be
very difficult to predict.
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 "Van Ormer
Complaint"). 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. On October 26 a second 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 which was verbatim identical to the Van Ormer Complaint except
only for the plaintiff's name. The Company believes it has meritorious legal
defenses to the lawsuits and intends to defend vigorously against these actions.
The Company is currently unable, however, to determine whether resolution of
these matters 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 these matters.
Item 2. Changes in Securities and use of Proceeds
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.35 Change in Control Agreement between the Company and Lisa W.
Zappala dated November 3, 1998.
(b) Reports on Form 8-K
Current Reports on Form 8-K dated July 28, 1998, October 6, 1998, and
October 7, 1998 and Current Report on Form 8-KA dated
September 17, 1998.
(c) Other Exhibits: Financial Data Schedule
16
<PAGE> 17
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ASPEN TECHNOLOGY, INC.
Date: November 13, 1998 By: /s/ Lisa W. Zappala
--------------------------------------
Lisa W. Zappala
Senior Vice President
Chief Financial Officer
17
<PAGE> 1
EXHIBIT 10.35
CHANGE IN CONTROL AGREEMENT
---------------------------
AGREEMENT dated as of November 3, 1998 by and between Aspen Technology,
Inc., a Delaware corporation (the "Company"), and Lisa Zappala (the
"Executive").
WHEREAS, the Company considers it essential to the best interests of its
stockholders to foster the continuous employment of key management personnel;
and
WHEREAS, the Company has determined that appropriate steps should be taken
to reinforce and encourage the continued attention and dedication of members of
the Company's management, including the Executive, to their assigned duties with
the Company without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control (as defined
herein);
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and for other valuable consideration, the Company and the
Executive hereby agree as follows:
1. DEFINED TERMS. The definitions of capitalized terms used in this
Agreement are provided in the last section hereof.
2. TERM OF AGREEMENT. This Agreement shall commence on the date hereof and
shall continue in effect through June 30, 2002. Thereafter, this Agreement shall
be automatically renewed for successive one year terms unless the Company sends
written notice of termination to the Executive at least 60 days before the
expiration date of this Agreement, which termination will be effective at that
expiration date. If a Change in Control shall have occurred during the term of
this Agreement, however, this Agreement shall continue in effect for a period of
three years beyond the last day of the month in which the Change in Control
occurred. Notwithstanding the foregoing provisions of this Section 2, this
Agreement shall terminate, unless earlier terminated in accordance with this
Agreement, (i) one year after the Executive is notified in accordance with
Section 9 hereof that the Compensation Committee, upon recommendation of the
Company's chief executive officer, has voted to terminate this Agreement or
(ii) if earlier, immediately after the Executive is notified in accordance with
Section 9 hereof that the Compensation Committee has determined that the
Executive's level of responsibility (other than reporting responsibility) has
substantially changed from the Executive's current level of responsibility,
<PAGE> 2
-2-
in either case only if the notification occurs prior to a Potential Change in
Control that results in a Change in Control.
3. PAYMENTS AFTER CHANGE IN CONTROL.
3.1 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the term of this Agreement, the Company
shall pay the Executive's full salary to the Executive through the Date of
Termination at the rate in effect at the time the Notice of Termination is
given, together with all compensation and benefits payable to the Executive
through the Date of Termination under the terms of any compensation or benefit
plan, program or arrangement maintained by the Company during such period.
3.2 Subject to Section 3.3, the Company shall pay to the Executive the
payments described in this Section 3.2 (the "Severance Payments") upon the
termination of the Executive's employment following a Change in Control and
during the term of this Agreement, in addition to the payments and benefits
described in Section 3.1, unless such termination is (i) by the Company for
Cause, (ii) by reason of death, (iii) by the Executive without Good Reason, or
(iv) after the Executive shall have attained age 70. In lieu of any further
salary payments to the Executive for periods subsequent to the Date of
Termination and in lieu of any severance benefits otherwise payable to the
Executive under any then existing broad-based employee severance plan, the
Company shall pay to the Executive a lump sum severance payment, in cash, equal
to three times the sum of (x) the higher of the Executive's annual base salary
in effect immediately prior to the occurrence of the event or circumstance upon
which the Notice of Termination is based or in effect immediately prior to the
Change in Control and (y) the higher of the average of the annual bonuses paid
to the Executive for the three years (or the number of years employed, if less)
immediately preceding the occurrence of the event or circumstance upon which the
Notice of Termination is based or the Change in Control. In lieu of any further
life, disability, accident and health insurance benefits otherwise due to the
Executive, the Company shall pay to the Executive a lump sum amount, in cash,
equal to the cost to the Company (as determined by the Company in good faith
with reference to its most recent actual experience) of providing such benefits,
to the extent that the Executive is eligible to receive such benefits
immediately prior to the Notice of Termination, for a period of three years
commencing on the Date of Termination.
3.3 The payments provided for in Section 3.2 shall be made not later than
the fifth day following the Date of Termination.
<PAGE> 3
-3-
3.4 The Company also shall pay to the Executive all legal fees and
expenses incurred by the Executive in seeking to obtain or enforce any benefit
or right provided by this Agreement, payable within five business days after
delivery of the Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may require.
4. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
4.1 Notwithstanding any other provisions of this Agreement, in the event
that any payment or benefit received or to be received by the Executive in
connection with a Change in Control or the termination of the Executive's
employment (all such payments and benefits, including the Severance Payments,
the "Total Payments") is determined to be subject (in whole or part) to the
Excise Tax, then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including without limitation any income taxes and Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an amount equal to the
Total Payments. Notwithstanding the foregoing provisions of this Section 4.1, if
it shall be determined that the Executive is entitled to a Gross-Up Payment, but
that the Total Payments do not exceed 110% of the greatest amount (the "Reduced
Amount") that could be paid to the Executive such that the receipt thereof would
not give rise to any Excise Tax, then no Gross-Up Payment shall be made to the
Executive and the Total Payments shall be reduced to the Reduced Amount.
4.2 All determinations required to be made under this Section 4,
including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by the Company's accountants or such other
certified public accounting firm reasonably acceptable to the Company as may be
designated by the Executive (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive.
5. TERMINATION PROCEDURES.
5.1 NOTICE OF TERMINATION. After a Change in Control and during the term
of this Agreement, any purported termination of the Executive's employment
(other than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in accordance with
Section 8. Further, a Notice of Termination for Cause is required to include a
copy of a resolution duly adopted by the
<PAGE> 4
-4-
affirmative vote of not less than three-quarters of the entire membership of the
Board at a meeting of the Board which was called and held for the purpose of
considering such termination (after reasonable notice to the Executive and an
opportunity for the Executive, together with the Executive's counsel, to be
heard before the Board) finding that, in the good faith opinion of the Board,
the Executive was guilty of conduct set forth in the definition of Cause.
5.2 DATE OF TERMINATION. "Date of Termination", with respect to any
purported termination of the Executive's employment after a Change in Control
and during the term of this Agreement, shall mean the date specified in the
Notice of Termination (which, in the case of a termination by the Company
otherwise than for Cause, shall not be less than thirty days and, in the case of
a termination by the Executive, shall not be less than fifteen days nor more
than sixty days, respectively, from the date such Notice of Termination is
given).
6. NO MITIGATION. If the Executive's employment by the Company is
terminated during the term of this Agreement, the Executive is not required to
seek other employment or to attempt in any way to reduce any amounts payable to
the Executive by the Company pursuant to Section 3. Further, the amount of any
payment or benefit provided for in Section 3 shall not be reduced by any
compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Company, or otherwise.
7. EXECUTIVE'S COVENANTS. The Executive agrees that, subject to the terms
and conditions of this Agreement, in the event of a Potential Change in Control
during the term of this Agreement, the Executive will remain in the employ of
the Company until the earliest of (i) a date which is six months from the date
of such Potential Change of Control, (ii) the date of a Change in Control, (iii)
the date of termination by the Executive of the Executive's employment for Good
Reason (determined by treating the Potential Change in Control as a Change in
Control in applying the definition of Good Reason), by reason of death or
Retirement; or (iv) the termination by the Company of the Executive's employment
for any reason.
8. SUCCESSORS; BINDING AGREEMENT.
8.1 In addition to any obligations imposed by law upon any successor to
the Company, the Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the
<PAGE> 5
-5-
Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place. Failure of the Company to obtain such
assumption and agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle the Executive to compensation
from the Company in the same amount and on the same terms as the Executive would
be entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change in Control, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
8.2 This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal or legal representatives. If the Executive shall die
while any amount would still be payable to the Executive hereunder (other than
amounts which, by their terms, terminate upon the death of the Executive) if the
Executive had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the
Executive's representatives.
9. NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth below, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
actual receipt:
To the Company:
Aspen Technology, Inc.
Ten Canal Park
Cambridge, MA 02141
Attention: General Counsel
To the Executive:
Lisa Zappala
379 Charles River Street
Needham, MA 02192
10. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or
<PAGE> 6
-6-
discharge is agreed to in writing and signed by the Executive and such officer
as may be specifically designated by the Board. Except as expressly provided
herein, no waiver by either party hereto at any time of any breach by the other
party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the Commonwealth of Massachusetts, and this Agreement shall be an
instrument under seal. All references to sections of the Exchange Act or the
Code shall be deemed also to refer to any successor provisions to such sections.
Any payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law and any additional
withholding to which the Executive has agreed.
11. SETTLEMENT OF DISPUTES; ARBITRATION. All claims by the Executive for
benefits under this Agreement shall be directed to and determined by the Board
and shall be in writing. Any denial by the Board of a claim for benefits under
this Agreement shall be delivered to the Executive in writing and shall set
forth the specific reasons for the denial and the specific provisions of this
Agreement relied upon. Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Boston, Massachusetts, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator' s award
in any court having jurisdiction. The Executive shall, however, be entitled to
seek specific performance of the Executive's right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement.
12. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the-meanings indicated below:
"Beneficial owner" shall have the meaning defined in Rule 13d-3
under the Exchange Act.
"Board" shall mean the Board of Directors of the Company.
"Cause" for termination by the Company of the Executive's
employment, after any Change in Control, shall mean (i) the willful
and continued failure by the Executive to
<PAGE> 7
-7-
substantially perform the Executive's duties with the Company (other
than any such failure resulting from the Executive's incapacity due to
physical or mental illness or any such actual or anticipated failure
after the issuance of a Notice of Termination for Good Reason by the
Executive) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand specifically
identifies the manner in which the Board believes that the Executive
has not substantially performed the Executive's duties, or (ii) the
willful engaging by the Executive in gross misconduct which is
demonstrably and materially injurious to the Company or any of its
subsidiaries, monetarily or otherwise. No act, or failure to act, on
the Executive's part shall be deemed "willful" unless done, or omitted
to be done, by the Executive not in good faith and without reasonable
belief that the Executive's act, or failure to act, was in the best
interest of the Company.
A "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have
been satisfied:
(a) Continuing Directors constitute two-thirds or less of
the membership of the Board, whether as the result of a proxy
contest or for any other reason or reasons; or
(b) Any Person is or becomes the Beneficial owner, directly
or indirectly, of securities of the Company representing
twenty-five percent or more of the combined voting power of the
Company's then outstanding voting securities; or
(c) There is a change in control of the Company of a nature
that would be required to be reported on Form 8-K or item 6(e) of
Schedule 14A of Regulation 14A or any similar item, schedule or
form under the Exchange Act, as in effect at the time of the
change, whether or not the Company is then subject to such
reporting requirement, including without limitation any merger or
consolidation of the Company with any other corporation, other
than (i) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding
or by being converted into voting securities of the surviving or
parent entity) fifty-one percent or more of the combined voting
power of the voting securities (entitled to vote generally for
the
<PAGE> 8
-8-
election of directors) of the Company or such surviving or parent
entity outstanding immediately after such merger or consolidation
and which would result in those persons who are Continuing
Directors immediately prior to such merger or consolidation
constituting more than two-thirds of the membership of the Board
or the board of such surviving or parent entity immediately
after, or subsequently at any time as contemplated by or as a
result of, such merger or consolidation or (ii) a merger or
consolidation effected to implement a recapitalization of the
company (or similar transaction) in which no Person acquired
twenty-five percent or more of the combined voting power of the
Company's then outstanding securities; or
(d) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale
or disposition by the Company of all or substantially all of the
Company's assets (or any transaction having a similar effect).
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Company" shall mean Aspen Technology, Inc. and any successor to its
business and/or assets which assumes or agrees to perform this Agreement, by
operation of law or otherwise.
"Compensation Committee" shall mean the Compensation and Nominating
Committee of the Board.
"Continuing Director" shall mean any director (i) who has continuously been
a member of the Board since not later than the date of a Potential Change in
Control or (ii) who is a successor of a director described in clause (i), if
such successor (and any intervening successor) shall have been recommended or
elected to succeed a Continuing Director by a majority of the then Continuing
Directors.
"Date of Termination" shall have the meaning stated in Section 5.2 hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Excise Tax" shall mean the tax imposed by Section 4999 of the Code.
<PAGE> 9
-9-
"Executive" shall mean the individual named in the first paragraph of this
Agreement.
"Good Reason" for termination by the Executive of the Executive's
employment shall mean the occurrence (without the Executive's express written
consent) of any one of the following acts or failures to act by the Company
unless, in the case of any act or failure to act described in paragraph (a),
(e), (f) or (g) below, such act or failure to act is corrected prior to the Date
of Termination specified in the Notice of Termination given in respect thereof
or, in the case of paragraph (c) below, such act is not objected to in writing
by the Executive within four months after notification by the Company to the
Executive of the Company's intention to take the action contemplated by such
paragraph (c):
(a) the assignment to the Executive of any duties
inconsistent with the Executive's status as a senior executive
officer of the Company or a meaningful alteration, adverse to the
Executive, in the nature or status of the Executive's
responsibilities (other than reporting responsibilities) from
those in effect immediately prior to the Change in Control;
(b) a reduction by the Company in the Executive's annual
base salary as in effect on the date hereof or as the same may be
increased from time to time except for across-the-board salary
reductions similarly affecting all senior executives of the
Company and all senior executives of any Person in control of the
Company;
(c) the Company's requiring the Executive to be based
anywhere other than the Boston Metropolitan Area (or, if
different, the metropolitan area in which the Company's principal
executive offices are located immediately prior to the Change in
Control) except for required travel on the Company business to an
extent substantially consistent with the Executive's present
business travel obligations;
(d) the failure by the Company, without the Executive's
consent, to pay to the Executive any portion of the Executive's
current compensation, or to pay to the Executive any portion of
an installment of deferred compensation under any deferred
compensation program of the Company, within fourteen days of the
date such compensation is due;
(e) the failure by the Company to continue in effect any
compensation plan in which the Executive participates
<PAGE> 10
-10-
immediately prior to the Change in Control which is material to
the Executive's total compensation, or the failure by the Company
to continue the Executive's participation therein on a basis not
materially less favorable, both in terms of the amount of
benefits provided and the level of the Executive's participation
relative to other participants, as existed at the time of the
Change in Control;
(f) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those enjoyed by
the Executive under any of the Company' s pension, life
insurance, medical, health and accident, or disability plans in
which the Executive was participating at the time of the Change
in Control, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive the Executive of any material fringe benefit enjoyed by
the Executive at the time of the Change in Control, or the
failure by the Company to provide the Executive with the number
of paid vacation days to which the Executive is entitled on the
basis of years of service with the Company in accordance with the
Company's normal vacation policy in effect at the time of the
Change in Control; or
(g) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 5.1.
"Notice of Termination" shall have the meaning stated in Section 5.1.
"Person" shall have the meaning given in Section 3(a)(9) of the Exchange
Act, as modified and used in Sections 13(d) and 14(d) thereof; however, a
Person shall not include (i) the Company or any of its subsidiaries, (ii) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any of its subsidiaries, (iii) an underwriter temporarily holding
securities pursuant to a registered offering of such securities in accordance
with an agreement with the Company, or (iv) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
"Potential Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have been
satisfied:
<PAGE> 11
-11-
(a) the Company enters into an agreement, the consummation
of which would result in the occurrence of a Change in Control;
(b) the Company or any Person publicly announces an
intention to take or to consider taking actions which, if
consummated, would constitute a Change in Control;
(c) any Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing fifteen
percent or more of the combined voting power of the Company's
then outstanding securities (entitled to vote generally for the
election of directors); or
(d) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has
occurred.
"Severance Payments" shall mean those payments described in Section 3.2
hereof.
"Total Payments" shall mean those payments described in Section 4 hereof.
IN WITNESS WHEREOF, the Company and the Executive have executed and
delivered this Agreement on the date first written above.
ASPEN TECHNOLOGY, INC.
By:
________________________________________
________________________________________
Lisa Zappala
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