As filed with the Securities and Exchange Commission on August 24, 2001
Registration Statement No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GENSYM CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-2932756
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
52 Second Avenue
Burlington, Massachusetts 01803
(781) 265-7100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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Lowell B. Hawkinson
President and Chief Executive Officer
Gensym Corporation
52 Second Avenue
Burlington, Massachusetts 01803
(781) 265-7100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copy to:
John K.P. Stone, III, Esq.
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
(617) 526-6000
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Approximate date of commencement of proposed sale to public: From time to
time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_] .
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] .
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum
Proposed Maximum Aggregate
Title of Each Class of Securities Amount to be Offering Price Offering Amount of
to be Registered (1) Registered Per Share (2) Price (2) Registration Fee
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Rights to Purchase Shares of
Common Stock, $.01 par value per
share.......................... (4) -- -- (3)
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Common Stock, $.01 par value per
share.......................... (4) (4) $3,150,000 $788
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(1) Pursuant to Rule 416(a), includes any additional securities that may be
issued in connection with any stock split, stock dividend or similar
transaction.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(3) Pursuant to Rule 457(g), no separate registration fee is required for the
rights since they are being registered in the same registration statement
as the common stock underlying the rights.
(4) The actual number of rights and shares of common stock to be registered and
the proposed offering price per share are omitted pursuant to Rule 457(c)
as they cannot be determined at this time.
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The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Company shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
shall determine.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated August 24, 2001
Gensym Corporation
Rights Offering
of Shares of Common Stock
at $ per Share
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. If you held our common stock on , 2001, Gensym Corporation has granted
you rights to purchase additional shares of common stock. You have been
granted 1.25 rights for every share of common stock you held on that date.
Each whole right entitles you to purchase one share of our common stock for a
subscription price of $ per share. This is your basic subscription
privilege.
. If you fully exercise your rights and other stockholders do not fully
exercise their rights, you may be able to purchase additional shares at a
subscription price of $ per share. This is your oversubscription privilege.
. We will not issue fractional rights or fractional shares. If the number of
shares of common stock you held of record on the record date would result in
your receipt of fractional rights, the number of rights issued to you is
being rounded down to the nearest whole number.
. The rights are exercisable beginning on the date of this prospectus and
expire on , 2001, at 5 p.m., New York City time. We have the option of
extending the expiration date.
. The rights are transferable. However, the rights will not be listed for
trading on any stock exchange.
. Our common stock is traded on the OTC Bulletin Board under the symbol "GNSM".
On August 20, 2001, the closing price for our common stock was $0.50 per
share.
. [ ] and [ ], stockholders of Gensym, have committed to exercise at
least $ of rights in the rights offering. Also, our directors have
committed to exercise their basic subscription and oversubscription
privileges for up to an aggregate of $[ ] of rights in the rights offering.
In addition, if the proceeds to Gensym in the rights offering are less than
$[ ], [ ] has committed to purchase, at $ per share, additional shares
of common stock to make up the shortfall, but only up to a total investment
in this offering of $[ ].
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Investing in our common stock involves risks. See "Risk Factors" on page 6.
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Rights Our
Price Proceeds(1)
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Per Share............................................. $ [ ] $ [ ]
Total................................................. $3,150,000 $3,150,000
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(1) Before deducting expenses payable by us, estimated to be $[ ].
Subscription Agent: Equiserve Trust Company, N.A.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
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Prospectus dated , 2001.
TABLE OF CONTENTS
Page
----
QUESTIONS AND ANSWERS ABOUT THE RIGHTS OFFERING............................ ii
PROSPECTUS SUMMARY......................................................... 1
OUR COMPANY................................................................ 1
SUMMARY OF THE TERMS OF THIS RIGHTS OFFERING............................... 1
RISK FACTORS............................................................... 4
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION......................... 4
SELECTED HISTORICAL FINANCIAL DATA......................................... 5
RISK FACTORS............................................................... 6
THE RIGHTS OFFERING........................................................ 12
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS................................. 19
USE OF PROCEEDS............................................................ 21
DETERMINATION OF OFFERING PRICE............................................ 21
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY............................ 22
PLAN OF DISTRIBUTION....................................................... 23
LEGAL MATTERS.............................................................. 23
EXPERTS.................................................................... 23
WHERE YOU CAN FIND MORE INFORMATION........................................ 23
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ 24
i
Questions and Answers about the Rights Offering
Q.What is a rights offering?
A. A rights offering is an opportunity for you to purchase additional shares of
our common stock at a fixed price of $[ ] per share and in an amount
proportional to your existing interest, which enables you to maintain your
current percentage ownership in Gensym.
Q.What is a right?
A. Each right enables you to purchase one share of our common stock for $[ ]
per share. On August 20, 2001, the closing price for our common stock on the
OTC Bulletin Board was $0.50 per share.
You will receive 1.25 rights for every share of common stock that you owned
as of the close of business on [ ], 2001. Additionally, if you are a
holder of our stock options, you will receive 1.25 rights for each share of
common stock underlying the vested portion of those options as of the close
of business on [ ], 2001. Your rights will be aggregated for all the
shares that you owned or held vested options to purchase on that date, and
then rounded down to the nearest whole number, so that you will not receive
fractional rights.
When you "exercise" a right, that means that you choose to purchase the
common stock that the right entitles you to purchase. You may exercise any
number of your rights, or you may choose not to exercise any rights. Each
right carries with it a basic subscription privilege and an
oversubscription privilege.
Q.What is the basic subscription privilege?
A. The basic subscription privilege of each right entitles you to purchase one
share of our common stock at a subscription price of $[ ].
Q.What is the oversubscription privilege?
A. If you fully exercise your basic subscription privilege, the over-
subscription privilege entitles you to subscribe for additional shares of
common stock not acquired by other holders of rights at the same
subscription price of $[ ] per share.
We do not expect that all of our stockholders will exercise all of their
basic subscription privileges. By extending oversubscription privileges to
our stockholders, we are providing for the purchase of those shares which
are not purchased through exercise of basic subscription privileges.
Q.What are the limitations on the oversubscription privilege?
A. We will issue up to [ ] shares of common stock in the rights offering.
We will be able to satisfy your exercise of the oversubscription privilege
only if other shareholders do not elect to purchase all of the shares
offered to them under their basic subscription privilege. We will honor
oversubscription privileges in full to the extent sufficient shares are
available following the exercise of rights under the basic subscription
privilege. If oversubscription requests exceed shares available, we will
allocate the available shares pro rata based on the number of shares each
oversubscribing shareholder purchased under the basic subscription
privilege. Your oversubscription privilege is subject to the following
conditions:
. You must exercise the oversubscription privilege at the same time you
exercise your basic subscription privilege;
. You must exercise your basic subscription privilege in full;
. In exercising your oversubscription privilege, you must pay the full
subscription price for all the shares you are electing to purchase;
and
ii
. Other stockholders and optionholders receiving rights must elect not
to purchase all of the shares offered under their basic subscription
privilege.
Additionally, in some circumstances, in order to comply with applicable
state securities laws, we may not be able to honor all oversubscription
privileges even if we have shares available.
Q.Why are we engaging in a rights offering?
A In early August 2001, we announced a strategic restructuring of our company
that included a 40% reduction in workforce, a realignment of our software
and services into two major product lines and a renewed focus on our
existing customer base and well established products. Also in early August
2001, Lowell B. Hawkinson, a founder of our company, was named as our
chairman, president and chief executive officer. Mr. Hawkinson previously
served as our chairman and chief executive officer from 1986 to 1999. With
the restructuring, we believe that we have taken the required steps to
return our company to profitability on an operating basis, but we require
cash in the near term to pay expenses, repay indebtedness to Rocket
Software, Inc. and cover the costs of the restructuring, which we estimate
will be approximately $975,000. However, there can be no assurance that we
will be profitable in the future.
We chose this rights offering over other financing alternatives to provide
stockholders with the opportunity to avoid dilution by participating in the
offering of the shares of common stock on a pro rata basis. If the rights
offering is fully subscribed, we would receive $3,150,000 (before fees and
expenses of this offering).
Q.How many shares may I purchase?
A. You will receive 1.25 rights for each share of common stock that you owned
on [ ], 2001, the record date. Also, if you hold options to purchase
our stock, you will receive 1.25 rights for each share of common stock
underlying the vested portion of those options as of the close of business
on the record date. Each right entitles you to purchase one share of common
stock for $[ ]. If you exercise all of the rights that you receive, you may
have the opportunity to purchase additional shares of common stock. On the
enclosed subscription certificate, you may exercise your oversubscription
privilege by indicating the number of additional shares that you wish to
purchase for $[ ] per share. However, we may not be able to honor your
oversubscription privilege for as many additional shares as you request on
your subscription certificate if there are not enough shares available to
fill all subscriptions for additional shares. In this situation, the
available shares will be allocated pro rata based on the number of shares
each subscriber for additional shares has purchased under the basic
subscription.
Q.How did Gensym arrive at the $[ ] per share price?
A. In determining the price at which a share of common stock may be purchased
in this rights offering, our board of directors considered several factors,
including our recent restructuring, the historic and current market price of
the common stock, our business prospects, our history of profits and losses,
general conditions in the securities market, our need for capital,
alternatives available to us for raising capital, the amount of proceeds
desired, the liquidity of our common stock, the level of risk to our
investors, and the need to offer shares at a price that would be attractive
to our investors relative to the then current trading price of our common
stock. We did not seek or obtain any opinion of financial advisors or
investment bankers in establishing the subscription price.
Q.Has the Board of Directors made a recommendation regarding this offering?
A. Our Board of Directors makes no recommendation to you about whether you
should exercise any rights.
Q.What fees or charges apply if I purchase shares?
A. We are not charging any fee or sales commission to issue rights to you or to
issue shares to you if you exercise rights. If you exercise rights through a
record holder of your shares, you are responsible for paying any fees that
person may charge.
iii
Q.How do I exercise my rights?
A. You must properly complete the attached subscription certificate and deliver
it to the subscription agent before 5 p.m., New York City time, on [
], 2001. Your subscription certificate must be accompanied by proper
payment for each share that you wish to purchase.
Q. What should I do if I want to participate in this rights offering, but my
shares are held in the name of my broker, dealer or other nominee?
A. If you hold your shares of our common stock through a broker, dealer or
other nominee (for example, through a custodian bank), then your broker,
dealer or other nominee is the record holder of the shares you own. This
record holder must exercise the rights on your behalf for shares you wish to
purchase. Therefore, you will need to have your record holder act on your
behalf.
If you wish to participate in this rights offering and purchase shares,
please promptly contact the record holder of your common stock. To indicate
your decision with respect to your rights, you should complete and return
to your record holder the form entitled "Beneficial Owner Election Form."
You should have received this form from your record holder with the other
rights offering materials. If you did not receive this form, please contact
the subscription agent, Equiserve Trust Company, N.A., at [( )
].
Q.What if I am unable to deliver my subscription certificate by the expiration
time of this offering?
A. There is an alternate procedure called "Notice of Guaranteed Delivery,"
which allows an extra three days to deliver the subscription certificate if
full payment is received before the expiration date and a securities broker
or qualified financial institution signs the "Notice of Guaranteed Delivery"
form to guaranty that your properly completed subscription certificate will
be timely delivered.
Q.To whom should I send forms and payment?
A. You should send your subscription documents and payment by mail or courier
service to the subscription agent at the following address:
By Hand: By First Class Mail: By Overnight Courier:
For instructions on how your subscription payment should be sent to
Equiserve, see "The Rights Offering--Required Forms of Payment of
Subscription Price" on page 16. Securities brokers and other qualified
financial institutions can use an alternate procedure called "Notice of
Guaranteed Delivery." See "The Rights Offering--Special Procedure under
"Notice of Guaranteed Delivery' Form" on page 16.
Q.How long will the rights offering last?
A. You will be able to exercise your rights only during a limited period. If
you do not exercise your rights before 5 p.m., New York City time, on [
], 2001, your rights will expire. Although we have the option of extending
the expiration date, we currently do not intend to do so. In addition, if
the commencement of the rights offering is delayed, the expiration date will
similarly be extended.
Q.After I exercise my rights, can I change my mind?
A. No. Once you send in your subscription certificate and payment, you cannot
revoke the exercise of your rights, even if you later learn information
about us that you consider to be unfavorable. You should not exercise your
rights unless you are certain that you wish to purchase additional shares of
our common stock at a price of $[ ] per share.
iv
Q.Is exercising my rights risky?
A. The exercise of your rights involves risks, and there is a possibility that
you could lose all of the money you invest in our common stock. Exercising
your rights means buying additional shares of our common stock, and should
be as carefully considered as you would view other equity investments. Among
other things, you should carefully consider the risks described under the
heading "Risk Factors," beginning on page 6.
Q.Must I exercise any rights?
A. No. You are not required to exercise any rights, purchase any shares, or
otherwise take any action in response to this rights offering.
Q.What happens if I choose not to exercise my rights?
A. You will retain your current number of shares of common stock in Gensym even
if you do not exercise your rights. However, if other stockholders exercise
their rights and you do not, your relative percentage ownership of Gensym
will decrease, and your relative voting rights and economic interests will
be diluted. Because [ ], [ ] and our directors have agreed
to exercise their respective basic subscription privileges and
oversubscription privileges up to an aggregate amount of $[ ] and
[ ] has agreed to exercise its basic subscription and oversubscription
privileges if the proceeds to Gensym are less than $[ ] to make up the
shortfall, your percentage ownership in Gensym will be reduced and your
economic interest will be diluted if you do not exercise your basic
subscription privileges.
Q.Can I sell or give away my rights?
A. Yes. The rights are transferable. However, we do not plan to list the rights
for trading on any stock exchange. Additionally, we do not expect that any
market for the rights will develop or, if a market does develop, that the
market will remain available throughout the period in which the rights may
be exercised.
Q.What are the federal income tax consequences of exercising my rights?
A. The receipt and exercise of rights granted to holders of our common stock
are intended to be nontaxable. The receipt of rights granted to holders of
our stock options is intended to be nontaxable, but optionholders will
recognize ordinary income upon the exercise of rights in an amount equal to
the excess, if any, of the fair market value of the common stock at the time
of exercise over the subscription price. You should seek specific tax advice
from your personal tax advisor.
Q.When will I receive my new shares?
A. If you purchase shares of common stock through the rights offering, you will
receive shares as soon as practicable after the expiration date of this
rights offering. Subject to state securities laws and regulations, we have
the discretion to delay allocation and distribution of any shares you may
elect to purchase by exercise of your basic or oversubscription privilege in
order to comply with state securities laws.
Q.Can Gensym cancel the rights offering?
A. Yes. Our board of directors may cancel the rights offering at any time
before 5:00 p.m., New York City time, on the expiration date of this rights
offering for any reason. If we cancel the rights offering, any money
received from stockholders will be refunded promptly, without interest. If
we cancel the rights offering, we may have to find an alternative way to
raise capital. We cannot assure you that we will be able to do so.
Q.How much money will Gensym receive from the rights offering?
A. Our gross proceeds from the rights offering will depend on the number of
shares that are purchased. If we sell all [ ] shares which may be
purchased upon exercise of the rights offered by this prospectus, then we
will receive proceeds of $3,150,000, before deducting expenses payable by
us, estimated to be $[ ]. Since [ ], [ ] and our
directors have agreed to exercise their basic subscription privileges and
oversubscription privileges in full up to $[ ] and [ ] has
v
agreed to exercise its basic subscription and oversubscription privileges
if the proceeds to Gensym are less than $[ ] to make up the
shortfall, we expect to issue at least [ ] shares and to receive
proceeds of at least $[ ] from the rights offering, before deducting
expenses.
Q.How many shares of common stock will be outstanding after the rights
offering?
A. The number of shares of common stock that will be outstanding after the
rights offering depends on the number of shares that are purchased. We
expect to issue at least [ ] shares during this rights offering,
and if we sell all of the shares offered by this prospectus, then we will
issue [ ] new shares of common stock. As a result, we expect to have
between approximately [ ] and 15,504,321 shares of common stock
outstanding immediately after the rights offering, excluding shares
issuable upon exercise of outstanding stock options.
Q.What should I do if I have other questions?
A. If you have questions, need additional copies of offering documents or
otherwise need assistance, please contact Equiserve, the subscription
agent, at [( ) ].
To ask other questions or to receive copies of our recent SEC filings, you
can also contact us by mail or telephone, or refer to the other sources
described under "Where You Can Find More Information" on page 23 of this
prospectus.
vi
PROSPECTUS SUMMARY
This summary highlights some of the information in this prospectus. The
summary is not complete and may not provide all information you should consider
before deciding whether or not to exercise the rights. Therefore, we urge you
to read the entire prospectus carefully. We also encourage you to review the
financial statements and other information provided in reports and other
documents that we file with the Securities and Exchange Commission, as
described under "Where You Can Find More Information" on page 23.
OUR COMPANY
We are a provider of software products and services for expert operations
management. Since the inception of our company, we have focused on solving the
complex operational problems of Fortune 1000 companies worldwide. Our software
is powered by G2(R), our unique, high-performance reasoning-engine technology.
Our products are used in a broad range of industries, including communications,
manufacturing, aerospace and transportation.
Our principal office is located at 52 Second Avenue, Burlington,
Massachusetts 01803, and our telephone number is (781) 265-7100.
Recent Developments
On August 6, 2001, we announced a strategic restructuring of our company.
The restructuring included a 40% reduction in workforce and a renewed focus on
our existing customer base and our G2 and G2-based products. As part of the
restructuring we also realigned our software and services into two major
product lines: one comprised of G2 and G2-based products and the other
comprised of NetCure and related products. Our G2 and G2-based products are
well-established, generate substantially all of our revenue and will remain our
primary focus following the restructuring.
We have experienced strong competition in the market segment targeted by our
newly introduced NetCure product, and our market presence in that segment is
relatively weak compared to that of our competitors. As part of our
restructuring, we are seeking strategic partners to promote and exploit the
NetCure product line and we are exploring and considering our options with
respect to the sale of the NetCure product line to an established market
participant capable of exploiting it. If we are unable to find such a strategic
partner with which to jointly promote the NetCure product or if we are unable
to find a suitable buyer for NetCure, we will likely withdraw NetCure from the
market.
SUMMARY OF THE TERMS OF THIS RIGHTS OFFERING
Securities Offered........ We are offering [ ] shares of common stock to be
issued upon exercise of the rights.
Record Date............... [ ], 2001. Our stockholders of record as of the
close of business on the record date will receive
rights to subscribe for shares of common stock.
Close of business means 5:00 p.m., New York City
time.
Additionally, holders of options to purchase shares
of our common stock as of the record date will
receive rights to subscribe for shares of common
stock based on the number of shares of common stock
underlying the vested portion of those options on
the record date.
1
Exercise Period........... The rights may be exercised beginning on the date
of this prospectus and expire on [ ], 2001 at
5:00 p.m., New York City time. Rights not exercised
by the expiration date will be null and void. We
have the option of extending the expiration date
for any reason.
Basic Subscription You are receiving 1.25 rights for every share of
Privilege................. common stock owned as of the record date and 1.25
rights for every share of common stock underlying
the vested portion of options held as of the record
date. Each whole right entitles you to purchase one
share of common stock for the subscription price.
We are not issuing any fractional rights or
fractional shares. If the number of shares of
common stock and vested options held by you on the
record date would result in your receipt of
fractional rights, the number of rights issued to
you is being rounded down to the nearest whole
right. So, for example, if you were the record
holder of 10 shares of common stock on the record
date, you are receiving rights to subscribe to 12
shares of common stock instead of 12.5 shares.
You may not purchase fractional shares. You may,
however, subscribe for any whole number of shares
by exercising less than all of your rights.
Subscription Price........ For the basic subscription privilege, $[ ] per
share, payable in cash or, at our option, the
cancellation of indebtedness. For the
oversubscription privilege, $[ ] per share, also
payable in cash or, at our option, the cancellation
of indebtedness. All payments must be cleared on or
before the expiration date.
Oversubscription If you fully exercise your basic subscription
Privilege................. privilege, you may also purchase additional shares
of common stock that are not purchased by other
stockholders. If there are not enough shares
available to fill all subscriptions for additional
shares, the available shares will be allocated pro
rata based on the number of shares each subscriber
for additional shares has purchased under the basic
subscription privilege.
Use of Proceeds........... We estimate that the net proceeds of this offering
will be between approximately $[ ] and
approximately $[ ], after deducting the estimated
offering expenses. We plan to use the proceeds of
this offering for working capital and other general
corporate expenses, including the repayment of
indebtedness to Rocket Software, Inc. and expenses
associated with our recently announced
restructuring.
Transferability of The rights are transferable. However, we do not
Rights.................... plan to list the rights for trading on any stock
exchange. Additionally, we do not expect that any
market for the rights will develop or, if a market
does develop, that the market will remain available
throughout the period in which the rights may be
exercised.
No Board Recommendation... Our Board of Directors does not make any
recommendation to stockholders regarding the
exercise of rights in this offering.
No Revocation............. If you exercise any rights, you are not allowed to
revoke or change your exercise or request a refund
of monies paid.
2
Certain United States
Federal Income Tax For United States federal income tax purposes, we
Consequences.............. believe that a stockholder will not recognize
taxable income upon the receipt or exercise of
rights. We also believe that optionholders will not
recognize taxable income upon the receipt of rights
but will recognize ordinary income upon the
exercise of rights in an amount equal to the
excess, if any, of the fair market value of the
common stock at the time of exercise over the
subscription price. See "Material Federal Income
Tax Considerations" beginning on page 19. Each
stockholder and optionholder should consult their
own tax adviser concerning the tax consequences of
this offering. This prospectus does not summarize
tax consequences arising under state tax laws, non-
U.S. tax laws, or any tax laws relating to special
tax circumstances or particular types of taxpayers.
Extension, Withdrawal and
Amendment................. We have the option of extending this rights
offering and the offering period, although we
presently do not intend to do so. We also reserve
the right to withdraw, terminate or amend this
rights offering at any time for any reason. If this
offering is withdrawn or terminated, or any
submitted subscriptions no longer comply with the
amended terms of this offering, we will return all
funds received from such subscriptions, without
interest.
Procedure for Exercising
Rights.................... To exercise rights, you must complete the
subscription certificate and deliver it to the
subscription agent, Equiserve Trust Company, N.A.,
with full payment for all the rights you elect to
exercise. Equiserve must receive the proper forms
and actual payment of the subscription price on or
before the expiration date. You may deliver your
subscription documents and payments by mail or
commercial courier. If regular mail is used for
this purpose, we recommend using insured,
registered mail. You may use an alternative "Notice
of Guaranteed Delivery" procedure if you are unable
to deliver the subscription certificate before the
expiration date, subject to the requirements of
this procedure described under "The Rights
Offering--Special Procedure under "Notice of
Guaranteed Delivery' Form" on page 16.
Shares of common stock
outstanding as of the 6,554,016 shares of common stock, excluding shares
Date of this Prospectus... issuable upon the exercise of outstanding stock
options.
Shares of common stock
outstanding upon [ ] shares of common stock, excluding shares
completion of rights issuable upon the exercise of outstanding stock
offering.................. options, if this rights offering is fully
subscribed.
3
RISK FACTORS
Exercising your rights and purchasing our common stock involves a high
degree of risk. Stockholders and optionholders who purchase shares in the
rights offering risk losing all of the money invested. We cannot assure you
that the subscription price will remain below any trading price for our common
stock or that its trading price will not decline to below the subscription
price during or after this rights offering. For more information regarding some
of the risks inherent in this rights offering, please see "Risk Factors"
beginning on page 6.
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
This prospectus, any prospectus supplement and the documents we incorporate
by reference in this prospectus contain "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. For this purpose, any statements contained in
this prospectus or incorporated by reference in this prospectus that are not
statements of historical fact may be deemed to be forward-looking statements.
We may, in some cases, use words such as "project," "believe," "anticipate,"
"plan," "expect," "estimate," "intend," "should," "will," "could" or "may" or
other words that convey uncertainty of future events or outcomes to identify
forward-looking statements. There are a number of important factors that could
cause our results to differ materially from the results anticipated by these
forward-looking statements. Factors that could contribute to these differences
include those discussed under "Risk Factors" in any prospectus supplement as
well as documents incorporated by reference in this prospectus, including our
Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q. You should
read these factors and the other cautionary statements made in this prospectus
and in the documents we incorporate by reference as being applicable to all
forward-looking statements wherever they appear in this prospectus and in the
documents incorporated by reference.
4
SELECTED HISTORICAL FINANCIAL DATA
The selected historical financial data set forth below for the six months
ended June 30, 2001 and 2000, and the related balance sheet data as of June 30,
2001, are derived from the unaudited condensed consolidated financial
statements and notes contained in our quarterly report on Form 10-Q filed on
August 14, 2001, which, in the opinion of our management, include all
adjustments (consisting of only normal recurring adjustments) considered
necessary for a fair presentation. The selected historical financial data set
forth below as of and for each of the five years in the period ended December
31, 2000 are derived from our consolidated financial statements and notes for
the relevant periods, which were audited by Arthur Andersen LLP, independent
accountants. You should read the following financial data in conjunction with
our annual report on Form 10-K for the year ended December 31, 2000 and our
quarterly reports on Form 10-Q for the quarters ended March 31, 2001 and June
30, 2001, which are incorporated into this prospectus by reference. See "Where
You Can Find More Information" on page 23.
Six Months
Year Ended December 31, Ended June 30,
------------------------------------------- ----------------
1996 1997 1998 1999 2000 2000 2001
------- ------- ------- ------- -------- ------- -------
(dollars in thousands, except per share amounts)
Statements of Operations
Data:
Product revenues....... $21,358 $18,433 $16,911 $19,628 $ 11,992 $ 6,234 $ 3,203
Service revenues....... 15,877 17,076 18,067 16,799 15,583 8,410 7,231
------- ------- ------- ------- -------- ------- -------
Total revenues....... 37,235 35,509 34,978 36,427 27,575 14,374 10,434
Cost of revenues....... 7,385 9,352 8,698 8,574 8,396 4,362 2,593
------- ------- ------- ------- -------- ------- -------
Gross profit.......... 29,850 26,157 26,280 27,853 19,179 10,012 7,841
Operating expenses:
Sales and marketing.... 17,433 18,802 18,276 18,214 17,379 8,384 5,865
Research and
development........... 5,984 6,977 6,023 6,470 7,614 3,762 3,194
General and
administrative........ 3,699 4,528 4,134 5,288 4,942 2,606 2,139
Restructuring charge... -- 1,558 -- -- -- -- 1,732
------- ------- ------- ------- -------- ------- -------
Total operating
expenses............ 27,116 31,865 28,433 29,972 29,935 14,752 12,930
------- ------- ------- ------- -------- ------- -------
Operating income
(loss)................. 2,734 (5,708) (2,153) (2,119) (10,756) (4,740) (5,089)
Other income (expense),
net.................... 518 779 715 503 211 60 (22)
------- ------- ------- ------- -------- ------- -------
Income (loss) before
provision for income
taxes.................. 3,252 (4,929) (1,438) (1,616) (10,545) (4,680) (5,111)
Provision for income
taxes.................. 1,204 40 50 336 2,271 75 109
------- ------- ------- ------- -------- ------- -------
Net income (loss)....... $ 2,048 $(4,969) $(1,488) $(1,952) $(12,816) $(4,755) $(5,220)
======= ======= ======= ======= ======== ======= =======
Basic income (loss) per
share.................. $ 0.35 $ (0.79) $ (0.23) $ (0.32) $ (2.01) $ (0.75) $ (0.80)
======= ======= ======= ======= ======== ======= =======
Diluted income (loss)
per share.............. $ 0.33 $ (0.79) $ (0.23) $ (0.32) $ (2.01) $ (0.75) $ (0.80)
======= ======= ======= ======= ======== ======= =======
Weighted average common
shares outstanding..... 5,910 6,310 6,371 6,149 6,365 6,313 6,489
======= ======= ======= ======= ======== ======= =======
Weighted average common
shares outstanding
assuming dilution...... 6,286 6,310 6,371 6,149 6,365 6,313 6,489
======= ======= ======= ======= ======== ======= =======
As of December 31, As of
-------------------------------------- June 30,
1996 1997 1998 1999 2000 2001
------- ------- ------- ------- ------ --------
(dollars in thousands)
Consolidated Balance Sheet
Data:
Cash, cash equivalents and
short-term investments....... $19,590 $15,801 $14,534 $11,685 $3,355 $1,379
Working capital (deficit)..... 20,470 15,149 14,650 12,814 285 (4,331)
Total assets.................. 36,258 31,517 28,268 26,934 15,540 9,031
Total stockholders' equity
(deficit).................... 24,068 19,828 17,483 14,922 2,412 (1,955)
5
RISK FACTORS
You should carefully consider the risks described below and the other
information in this prospectus before deciding to purchase shares in this
rights offering. Our common stock is subject to significant investment risks,
and if you purchase shares in the rights offering you may lose all of the
money invested. Many factors, including the risks described below and other
risks we have not recognized, could cause our operating results to differ from
our expectations and plans.
Risks Related to the Rights Offering
If you do not exercise all of your rights, you may suffer significant
dilution of your percentage ownership of our common stock.
This rights offering is designed to enable Gensym to raise capital while
allowing all stockholders on the record date to maintain their relative
proportionate voting and economic interests. [ ] and
[ ], have committed to exercise at least $ of rights in
the rights offering. Also, our directors have committed to exercise their
basic subscription and oversubscription privileges for up to an aggregate of
$[ ] of rights in the rights offering. In addition, if the proceeds to
Gensym in the rights offering are less than $[ ], [ ] has committed
to purchase, at $[ ] per share, additional shares of common stock to make up
the shortfall, but only up to a total investment in this offering of
$[ ]. To the extent that you do not exercise your rights and shares are
purchased by other stockholders in the rights offering, your proportionate
voting interest will be reduced, and the percentage that your original shares
represent of our expanded equity after exercise of the rights will be
disproportionately diluted.
The price of our common stock may decline before or after the rights expire.
We cannot assure you that the public trading market price of our common
stock will not decline after you elect to exercise your rights. If that
occurs, you will have committed to buy shares of common stock at a price above
the prevailing market price and you will have an immediate unrealized loss.
Moreover, we cannot assure you that following the exercise of rights you will
be able to sell your shares of common stock at a price equal to or greater
than the subscription price. Until shares are delivered upon expiration of the
rights offering, you may not be able to sell the shares of our common stock
that you purchase in the rights offering. Certificates representing shares of
our common stock purchased will be delivered as soon as practicable after
expiration of the rights offering. We will not pay you interest on funds
delivered to the subscription agent pursuant to the exercise of rights.
The subscription price is not an indication of our value.
Our board of directors set the subscription price after considering a
variety of factors, including the desire to encourage full stockholder
participation in the rights offering. The subscription price does not
necessarily bear any relationship to the book value of our assets, past
operations, cash flows, losses, financial condition or any other established
criteria for value. We have neither sought nor obtained a valuation opinion
from an outside financial consultant or investment banker.
You cannot revoke or change your subscription.
You are not allowed to revoke or change your exercise of rights after you
send in your subscription certificate and payment. If we cancel this rights
offering, we are obligated only to refund payments actually received, without
interest.
You need to act promptly and follow the subscription instructions in order to
participate.
Stockholders who desire to purchase shares in this rights offering must act
promptly to ensure that all required forms and payments are actually received
by the subscription agent, Equiserve Trust Company, N.A.,
6
prior to the expiration date. If you fail to complete and sign the required
subscription forms, send an incorrect payment amount, or otherwise fail to
follow the subscription procedures that apply to your desired transaction,
Equiserve may, depending on the circumstances, reject your subscription or
accept it to the extent of the payment received. Neither we nor Equiserve
undertakes to contact you concerning, or attempt to correct, an incomplete or
incorrect subscription form or payment. We have the sole discretion to
determine whether a subscription exercise properly follows the subscription
procedures.
Risks Related to the Company
Unless we succeed with completing rights offering or finding an alternative
source of capital, we may not be able to continue as a going concern.
We have incurred operating losses for each of the four years in the period
ended December 31, 2000 and for the six months ended June 30, 2001, and need
additional funding to continue as a going concern. In early August 2001, we
announced a strategic restructuring of our company that included a 40%
reduction in workforce, a realignment of our software and services into two
major product lines and a renewed focus on our existing customer base and well
established products. With the restructuring, we believe that we have taken
the required steps to return the company to profitability on an operating
basis, but we require cash in the near term to pay expenses, repay
indebtedness to Rocket Software and cover the costs of the restructuring,
which we estimate will be approximately $975,000. However, there can be no
assurance that we will be profitable in the future. We will also continue to
explore and consider our equity or financing options and a range of strategic
alternatives. However, there can be no assurance that any of these plans will
be successful or that such funding or financial support will be available or
adequate.
We must repay $300,000 of indebtedness to Rocket Software, Inc. This
repayment could cause liquidity problems.
In early August 2001, we were negotiating a loan agreement with Rocket
Software, Inc., pursuant to which Rocket would provide a $1.25 million credit
facility. During the course of those negotiations, Rocket advanced $300,000 to
us in anticipation of the consummation of the loan agreement. However, the
loan agreement has not been consummated and on August 14, 2001 Rocket filed
suit for repayment of the advance. We are presently engaged in discussions
with Rocket regarding the repayment of the advance, and on August 23, 2001 we
repaid $50,000 of the advance. The repayment of this advance will put
increased pressure on our liquidity. There can be no assurance that our
discussions with Rocket will be successful or that we will be permitted to
repay the advance on terms that are favorable to us. Additionally, there can
be no assurance that Rocket will not seek to enforce legal remedies relating
to the repayment of the advance.
Our common stock has been delisted from the Nasdaq National Market. As a
result of the delisting, you may face a decreased market for the shares of
our stock that you own.
Our common stock was delisted from the Nasdaq National Market on August 20,
2001 because we failed to meet the listing standards required by Nasdaq. The
delisting may negatively impact the liquidity of our common stock, not only in
the number of shares that can be bought or sold, but also through delays in
the timing of transactions and the reductions in potential security analyst
and media coverage. This may reduce the demand for our common stock and its
trading price. The delisting may also impair our ability to raise additional
working capital.
Our common stock currently trades on the OTC Bulletin Board and is subject
to regulation as a "penny stock." The Securities and Exchange Commission has
adopted regulations that generally define "penny stock" to be any equity
security that has a market price or exercise price of less than $5.00 per
share, subject to certain exceptions, including listing on the Nasdaq National
Market or the Nasdaq SmallCap Market. For transactions covered by the "penny
stock" rules, broker-dealers must make a special suitability determination for
the purchase of the securities and must have received the purchaser's written
consent to the transaction prior to the purchase. Additionally, for any
transaction involving a penny stock, unless exempt, the rules require the
7
delivery, prior to the transaction, of a risk disclosure document mandated by
the Securities and Exchange Commission relating to the penny stock market. The
broker-dealer is also subject to additional sales practice requirements. The
additional burdens imposed upon broker-dealers by these requirements may
discourage broker-dealers from effecting transactions in our common stock and
may limit the ability of purchasers in this offering to sell the common stock
in the secondary market.
Competition in the market for expert operations management systems is
intensifying and may reduce our revenues.
Substantially all of our revenues are derived from the licensing and support
of software platforms and products for expert operations management, network
management and supply-chain design. Although many organizations have begun to
deploy, or have announced plans to deploy, such systems, these systems are
different from the basic monitoring and control systems that are traditionally
employed by these organizations. There can be no assurance that these
organizations will be able to introduce expert operations management systems
successfully, nor that such systems will gain widespread acceptance. In
addition, the timing of the implementation of operations management systems by
organizations may be affected by economic factors, government regulations, and
other factors. Delays in the introduction of expert operations management
systems or the failure of these systems to gain widespread market acceptance
would materially and adversely affect our business, results of operations, or
financial condition. In addition, we believe that end-users in our markets are
increasingly seeking application-specific products and components as well as
complete solutions, rather than general software tools to develop application-
specific functionality and solutions. Meeting this demand has required us to
modify our sales approach. We are also increasingly reliant on value-added
resellers and systems integrators to satisfy market requirements. The modified
sales approach may also lengthen our average sales cycle. Our failure to
respond appropriately to shifts in market demand could have a material adverse
effect on our business, results of operations, or financial condition.
We rely heavily on indirect distribution channels and strategic partner
relationships for the sales of our products. If these relationships are
disrupted, our revenues may be adversely effected.
We sell our products in part through value-added resellers, systems
integrators, original equipment manufacturers and distributors, which are not
under our control. Sales of our products by value-added resellers and systems
integrators represented 31% and 30% of our product revenues in the first six
months of 2001 and 2000, respectively. In January 2001, we significantly
reduced our direct sales force for our expert operations management products
and in early August 2001 we announced another workforce reduction in connection
with our strategic restructuring. We are continuing to manage our relationships
with existing expert operations management customers. But we now rely
increasingly on our many indirect sales partners for sales of our expert
operations management products to new customers. The loss of major original
equipment manufacturers or resellers of our products, a significant decline in
their sales, or difficulty on the part of such third-party developers or
resellers in developing successful G2-based or other of our core technology
products and applications could have a material adverse effect on our business,
results of operations, or financial condition. There can be no assurance that
we will be able to attract or retain additional qualified third-party
resellers, or that third-party resellers will be able to effectively sell and
implement our products. In addition, we rely on third-party resellers to
provide post-sales service and support to our customers, and any deficiencies
in such service and support could adversely affect our business, results of
operations, or financial condition.
We depend heavily on our sales and marketing force.
Our future success in the expert operations management marketplace will
depend, in part, upon the productivity of our sales and marketing personnel and
our ability to continue to attract, integrate, train, motivate and retain new
sales and marketing personnel. There can be no assurance that our investment in
sales and marketing will ultimately prove to be successful. In addition, there
can be no assurance that our sales and marketing personnel will be able to
compete successfully against the significantly more extensive and better
8
funded sales and marketing operations of many of our current and potential
competitors. Our inability to manage our sales and marketing personnel
effectively could have a material adverse effect on our business, operating
results and financial condition.
Our quarterly operating results vary, leading to fluctuations in trading
prices for our common stock and possible liquidity problems.
We have experienced, and may experience in the future, significant quarter-
to-quarter fluctuations in our operating results. We have recorded quarterly
losses in each quarter in 2000 and for the first two quarters of 2001, and
there can be no assurance that revenue growth or profitable operations can be
attained on a quarterly or annual basis in the future. Our sales cycle
typically ranges from six to 12 months, and the cost of acquiring our software,
building and deploying applications, and training users represents a
significant expenditure for customers. Our relatively long sales cycle and high
license fees, together with fixed short-term expenses, can cause significant
variations in operating results from quarter to quarter, based on a relatively
small variation in the timing of major orders. Factors such as the timing of
new product introductions and upgrades and the timing of significant orders
could contribute to this quarterly variability. In addition, we ship software
products within a short period after receipt of an order and typically does not
have a material backlog of unfilled orders of software products. Therefore,
revenues from software licenses in any quarter are substantially dependent on
orders booked in that quarter. Historically, a majority of each quarter's
revenues from software licenses has come from license contracts that have been
effected in the final weeks of that quarter. The revenues for a quarter
typically include a number of large orders. If the timing of any of these
orders is delayed, it could result in a substantial reduction in revenues for
that quarter. Our expense levels are based in part on expectations of future
revenue levels. A shortfall in expected revenues could therefore result in a
disproportionate decrease in our net income. Our financial performance has
generally been somewhat weaker in the first quarter than in the other fiscal
quarters, due to customer purchasing patterns.
Sales of our products are highly dependent on our customers capital
expenditure budgets. If an economic downturn causes our customers to reduce
their capital expenditures, our revenues may be adversely effected.
Because capital expenditures are often viewed as discretionary by
organizations, sales of our products for capital budget projects are subject to
general economic conditions. Future recessionary conditions in the industries
that use our products may adversely affect our business, results of operations,
or financial condition.
We rely heavily on revenues from our G2 and G2 based products. If demand for
the G2 and G2 based products declines, our revenues may be adversely effected.
Our main product offerings are G2, a customizable object-oriented
development and deployment platform for building expert operations management
systems, and software application products based on G2 and other core
technologies. Accordingly, our business and financial results are substantially
dependent upon the continued customer acceptance and deployment of G2 and our
G2 based products. The timing of major G2 releases may affect the timing of
purchases of our products. We have introduced several G2-based products for
building applications and are developing others. We believe that market
acceptance of these products will be important to our future growth. There can
be no assurance that such products will achieve market acceptance or that new
products will be successfully developed. In addition, we rely on many of our
distribution partners to develop G2-based products for specialized markets.
Accordingly, our business and financial results are also linked to the
continued successful product development by our partners and market acceptance
of such G2-based products. Any decline in the demand for G2 and our G2 based
products, whether as a result of competitive products, price competition, the
lack of success of our partners, technological change, the shift in customer
demand toward complete solutions, or other factors, could have a material
adverse effect on our business, results of operations, or financial condition.
9
Our business may be adversely affected if we fail to develop new products and
respond to the changes in technology.
The market for our products is relatively new and is characterized by rapid
technological change, evolving industry standards, changes in end-user
requirements, and frequent new product introductions and enhancements. Our
future success will depend in part upon our ability to enhance our existing
products, to introduce new products and features to meet changing customer
requirements and conform to emerging industry standards, and to manage
transitions from one product release to the next. We have from time to time
experienced delays in introducing new products and product enhancements. There
can be no assurance that we will not experience difficulties that could delay
or prevent the successful development, introduction and marketing of these new
products and product enhancements. There also can be no assurance that we will
successfully complete the development of new or enhanced products, that we
will successfully manage the transition to future versions of G2, or to
successor technology, or that our future products will achieve market
acceptance. In addition, the introduction of products embodying new
technologies and the emergence of new industry standards could render our
existing products and products currently under development obsolete and
unmarketable. From time to time, new products, capabilities, or technologies
may be announced that have the potential to replace or shorten the life cycle
of our existing product offerings. There can be no assurance that
announcements of currently planned or other new product offerings will not
cause customers to defer purchasing our existing products.
Our business may suffer if we fail to address the challenges associated with
international operations.
Our international revenues represented 46% and 45% of total revenues in the
first six months of 2001 and 2000, respectively. We categorize our revenues
according to product shipment destination and therefore do not necessarily
reflect the ultimate country of installation. The international portion of our
business is subject to a number of inherent risks, including difficulties in
building and managing international operations, difficulties in localizing
products and translating documentation into local languages, fluctuations in
the value of international currencies including the euro, fluctuating
import/export duties and quotas, and unexpected regulatory, economic, or
political changes in international markets. In particular, the continuing
economic problems in Asia pose challenges to our sales and marketing
operations in that region. There can be no assurance that these factors will
not adversely affect our business, results of operations, or financial
condition.
Our business may suffer if we fail to remain competitive with other companies
offering similar products and services.
Although we believe that there are no other commercially available products
that offer the full range of high-level capabilities embodied in our products,
a number of companies offer products that perform certain functions of G2 for
specific applications. In all of our markets, there is competition from "point
solutions", real-time and expert system products, and internally developed
software. At the fundamental level, there are commercially available software
development tools that software application developers or potential customers
could use to build software having functionality similar to our products.
Certain companies, such as Objective Systems Integrators, Inc., Micromuse,
RiverSoft and Systems Management Arts (SMARTS), sell "point solutions" that
compete with our network management products with respect to specific
applications or uses. Several companies, including AspenTech, Ilog S.A.,
Pavilion and System Management Arts, offer expert operations management
products with limited real-time, expert system, or fault isolation
capabilities, some at lower price points than those provided by us. Many of
these products often require extensive programming with languages such as C or
C++ for complete implementation. Although we believe that these products offer
a less productive development environment than G2 and that they lack the
comprehensive capabilities of G2-based products, certain competitors in this
category have greater financial and other resources than we do and might
introduce new or improved products to compete with G2, possibly at lower
prices.
10
Our software is also integrated into industry-specific solutions by value-
added resellers. A number of software companies offer products that compete in
specific application areas addressed by these value-added resellers, such as
cement kiln control and refinery scheduling, and they could be successful in
supplying alternatives to products based on our software.
Many of our customers have significant investments in their existing
solutions and have the resources necessary to enhance existing products and to
develop future products. These customers may develop and incorporate competing
technologies into their systems or may outsource responsibility for such
systems to others who do not use our products. There is no assurance that we
can successfully persuade development personnel within these customers'
organizations to use G2-based products that can cost effectively compete with
their internally developed products. This would reduce the need for our
products and services and may limit our future opportunities.
We believe that continued investment in research and development and sales
and marketing will be required to maintain our competitive position. There can
be no assurance that competitors will not develop products or provide services
that are superior to our products or services or achieve greater market
acceptance. Competitive pressures faced by us could force us to reduce our
prices, which could result in reduced profitability. There can be no assurance
that we will be able to compete successfully against current and future sources
of competition or that such competition will not have a material adverse effect
on our business, results of operations, or financial condition.
Our software is complex and may contain undetected errors. Such errors could
cause costly delays in product introduction or require costly software design
modifications.
Complex software products such as those offered by us may contain unintended
errors or failures commonly referred to as "bugs". There can be no assurance
that, despite significant testing by us and by current and potential customers,
errors will not be found in new products after commencement of commercial
shipments. Although we have not experienced material adverse effects resulting
from any such errors or defects to date, there can be no assurance that errors
or defects will not be discovered in the future that could cause delays in
product introduction and shipments or require design modifications that could
adversely affect our business, results of operations, or financial condition.
Because we rely heavily upon proprietary technology, our business could be
adversely affected if we are unable to protect our proprietary technology or
if third parties successfully assert infringement claims against us.
Our success is heavily dependent upon our proprietary technology. We rely
upon a combination of trade secret, contract, copyright, patent, and trademark
law to protect its proprietary rights in its products and technology. We enter
into confidentiality and/or license agreements with our employees, third-party
resellers, and end-users and limit access to and distribution of our software,
documentation, and other proprietary information. In addition, we have placed
technical inhibitors in our software that prevent such software from running on
unauthorized computers. However, effective patent, copyright, and trade secret
protection may not be available in every country in which our products are
distributed. There can be no assurance that the steps taken by us to protect
our proprietary technology will be adequate to prevent misappropriation of our
technology by third parties, or that third parties will not be able to develop
similar technology independently. In addition, there can be no assurance that
third parties will not assert infringement claims in the future or that such
claims will not be successful.
On August 2, 2001, we received a letter from a third party alleging that we
are infringing one or more of their patents relating to neural networks, expert
systems and the control of processes. At this time, no formal legal action has
been filed. We believe that these allegations are without merit, and we are
currently engaged in discussions with that party to resolve this matter. The
can be no assurance that our discussions will be successful and resolve the
infringement allegations satisfactorily. Additionally, there can be no
assurance that the third party will not file formal legal action relating to
its claims or, if formal legal action is filed, that our defense against those
claims will be successful. Regardless of the outcome, the cost of defending
ourselves against formal legal action could be significant.
11
THE RIGHTS OFFERING
Before exercising any rights, you should read carefully the information set
forth under "Risk Factors" beginning on page 6 of this prospectus.
The Rights
As soon as practicable after the date of this prospectus, we are
distributing, at no charge, to holders of our common stock as of 5:00 p.m. on
the record date of [ ], 2001, 1.25 rights for each share of common stock
owned at that time to purchase additional shares of common stock. Holders of
stock options as of [ ], 2001 also will receive 1.25 rights for each share
of common stock underlying the vested portion of those stock options on that
date. Each whole right entitles you to purchase one share of our common stock
for the subscription price of $[ ] per share. On August 20, 2001, the last
reported sales price for our common stock on the OTC Bulletin Board was $0.50
per share.
We will not issue fractional rights. If the number of shares of common stock
or vested options to purchase common stock you held on the record date would
have resulted in your receipt of fractional rights, the number of rights issued
to you will be rounded down to the nearest whole number.
Subscription Price
The subscription price for this rights offering is $0.35 per share payable
in cash or, at our option, the cancellation of indebtedness. All payments must
be cleared on or before the expiration date.
Basic and Oversubscription Privileges
Basic Subscription Privilege. You are entitled to purchase one share of
common stock at the subscription price for every whole right exercised.
Oversubscription Privilege. If you exercise your basic subscription
privilege in full, you may also subscribe for additional shares that other
stockholders have not purchased under their basic subscription privilege. If
there are not enough shares available to fill all such subscriptions for
additional shares, the available shares will be allocated pro rata based on the
number of shares each subscriber for additional shares has purchased under the
basic subscription privilege. We will not allocate to you more than the number
of shares you have actually subscribed and paid for.
You are not entitled to exercise the oversubscription privilege unless you
elect to exercise your basic subscription privilege in full. For this
oversubscription purpose, you would only count the shares you own in your own
name, and not other shares that might, for example, be jointly held with a
spouse, held as a custodian for someone else, or held in an individual
retirement account.
You can elect to exercise the oversubscription privilege only at the same
time you exercise your basic subscription privilege in full. In exercising the
oversubscription privilege, you must pay the full subscription price for all
the shares you are electing to purchase. If we do not allocate to you all of
the shares you have subscribed for under the oversubscription privilege, we
will refund by mail to you any payment you have made for shares which are not
available to issue to you, as soon as practicable after completion of this
rights offering. Interest will not be payable on amounts refunded.
Banks, brokers and other nominees who exercise the oversubscription
privilege on behalf of beneficial owners of shares must report certain
information to Equiserve and us and report certain other information received
from each beneficial owner exercising rights. Generally, banks, brokers and
other nominees must report:
. the number of shares held on the record date on behalf of each beneficial
owner,
12
. the number of rights as to which the basic subscription privilege has
been exercised on behalf of each beneficial owner,
. that each beneficial owner's basic subscription privilege held in the
same capacity has been exercised in full, and
. the number of shares subscribed for under the oversubscription privilege
by each beneficial owner.
If you complete the portion of the subscription certificate to exercise the
oversubscription privilege, you will be representing and certifying that you
have fully exercised your basic subscription privilege as described above. You
must exercise your oversubscription privilege at the same time you exercise
your basic subscription privilege.
Reason for this Rights Offering
In early August 2001, we announced a strategic restructuring of our company
that included a 40% reduction in workforce, a realignment of our software and
services into two major product lines and a renewed focus on our existing
customer base and well established products. With the restructuring, we believe
that we have taken the required steps to return our company to profitability on
an operating basis, but we require cash in the near term to pay expenses, repay
indebtedness to Rocket Software and cover the costs of the restructuring, which
we estimate will be approximately $975,000. However, there can be no assurance
that we will be profitable in the future.
We have concluded that other alternatives would not likely be successful in
raising the desired funds on a timely basis. Additionally, we chose to do this
rights offering over other financing alternatives to provide our stockholders
with an opportunity to participate in the issuance of shares of common stock on
a pro rata basis. We plan to use the net proceeds of this offering for working
capital and other general corporate purposes, including repayment of
indebtedness to Rocket Software and expenses associated with our recently
announced restructuring, which we estimate will be approximately $975,000. See
"Use of Proceeds" on page 21 of this prospectus.
No Board Investment Recommendation to Stockholders
While our directors have committed to exercise specific amounts of rights
granted to them as stockholders and vested optionholders, our board of
directors does not make any recommendation to you about whether you should
exercise any rights. In making the decision to exercise or not exercise your
rights, you must consider your own best interests.
If you choose not to exercise your rights in full, your relative ownership
interest in our company will be diluted to the extent other stockholders
exercise their rights. If you exercise your rights, you risk investment loss on
new money invested. The trading price of our common stock may decline below the
subscription price. We cannot assure you that the trading price for our common
stock will not decline to a price that is below the subscription price during
or after this rights offering. For a summary of some of the risks a new
investment would entail, see "Risk Factors" beginning on page 6.
Expiration Time and Date
The rights may be exercised beginning as of the date of this prospectus and
expire on [ ], 2001, at 5:00 p.m., New York City time. Rights not
exercised by the expiration date will be null and void.
In order to exercise rights in a timely manner, Equiserve must receive,
prior to the expiration date, the properly executed and completed subscription
certificate or "Form of Notice of Guaranteed Delivery," together with full
payment for all shares you wish to purchase.
No Revocation
You are not allowed to revoke or change your exercise of rights after you
send in your subscription forms and payment.
13
Transferability of Rights
The rights are transferable. However, we do not plan to list the rights for
trading on any stock exchange, nor do we anticipate that any market for the
rights will develop or, if a market does develop, that the market will remain
available throughout the period in which the rights may be exercised.
You may transfer all of the rights evidenced by a single subscription
certificate by endorsing the subscription certificate for transfer in
accordance with the accompanying instructions. You may transfer a portion of
the rights evidenced by a single subscription certificate, but not fractional
rights, by delivering to the subscription agent a subscription certificate
properly endorsed for transfer, with instructions to register that portion of
the rights indicated in the name of the transferee and to issue to it a new
subscription certificate evidencing the transferred rights. In that event, a
new subscription certificate evidencing the balance of the rights will be
issued to you or, if you so instruct, to an additional transferee, or will be
sold by the subscription agent in the manner described below upon your
instructions.
You should take into account that transfers, particularly those requiring
the issuance of new subscription certificates, can take several business days.
Neither we nor the subscription agent will have any liability if an
subscription certificate or any other required documents are not received in
time for exercise or sale prior to the expiration date.
You will be issued a new subscription certificate upon the partial exercise
or sale of rights only if the subscription agent receives a properly endorsed
subscription certificate before 5:00 p.m., New York City time, on the third
trading day before the expiration date. Unless you make other arrangements with
the subscription agent, a new subscription certificate issued after 5:00 p.m.,
New York City time, on the fifth business day before the expiration of this
offering will be held for pick-up at the subscription agent's hand delivery
address. You assume all risk associated with the delivery of newly issued
subscription certificate.
You are responsible for all commissions, fees and other expenses, including
brokerage commissions and transfer taxes, incurred in connection with the
purchase, sale or exercise of rights.
Extension, Withdrawal and Amendment
We reserve the right to withdraw or terminate this rights offering at any
time for any reason. In the event that this offering is withdrawn or
terminated, all funds received from subscriptions by rights holders will be
returned. Interest will not be payable on any returned funds.
We reserve the right to amend the terms of this rights offering. If we make
an amendment that we consider significant, we will:
. mail notice of the amendment to all stockholders of record as of the
record date,
. extend the expiration date by at least ten days and
. offer all subscribers no less than ten days to revoke any subscription
already submitted.
The extension of the expiration date will not, in and of itself, be treated
as a significant amendment for these purposes.
Exercise Commitment of Certain Parties
[ ] and [ ], stockholders of Gensym, have
committed to exercise at least $ of rights in the rights offering.
Also, our directors have committed to exercise their basic subscription and
oversubscription privileges for up to an aggregate of $[ ] of rights in the
rights offering.
In addition, if the proceeds to Gensym in the rights offering are less than
$[ ], [ ] has committed to purchase, at $[ ] per share, additional
shares of common stock to make up the shortfall, but only up to a total
investment in this offering of $[ ].
14
Mailing of Subscription Certificate and Record Holders
We are sending a subscription certificate to each record holder along with
this prospectus and related instructions to evidence the rights. In order to
exercise rights, you must fill out and sign the subscription certificate and
deliver it with full payment for the shares to be purchased in a timely
fashion. Only the holders of record of our common stock as of the close of
business as of the record date may exercise rights. You are a record holder for
this purpose only if your name is registered as a stockholder with our transfer
agent, Equiserve, as of the record date.
A depository bank, trust company or securities broker or dealer which is a
record holder for more than one beneficial owner of shares may divide or
consolidate subscription certificates to represent shares held as of the record
date by their beneficial owners, upon proper showing to Equiserve.
If you own shares held in a brokerage, bank or other custodial or nominee
account, in order to exercise your rights you must promptly send the proper
instruction form to the person holding your shares. Your broker, dealer,
depository or custodian bank or other person holding your shares is the record
holder of your shares and will have to act on your behalf in order for you to
exercise your rights. We have asked your broker, dealer or other nominee
holders of our stock to contact the beneficial owners to obtain instructions
concerning rights the beneficial owners it represents are entitled to exercise.
Foreign and Unknown Addresses
We are not mailing subscription certificates to stockholders whose addresses
are outside the United States or who have an APO or FPO address. In those
cases, the subscription certificates will be held by Equiserve for those
stockholders. To exercise their rights, these stockholders must notify
Equiserve attention: [ ], ( ) , prior to 11:00 a.m., New York
City time, on the third business day prior to the expiration date.
Right to Block Exercise Due to Regulatory Issues
We reserve the right to refuse the exercise of rights by any holder of
rights who would, in our opinion, be required to obtain prior clearance or
approval from any state, federal or foreign regulatory authorities for the
exercise of rights or ownership of additional shares if, at the expiration
date, this clearance or approval has not been obtained. We are not undertaking
to pay any expenses incurred in seeking such clearance or approval.
We are not offering or selling, or soliciting any purchase of, shares in any
state or other jurisdiction in which this rights offering is not permitted. We
reserve the right to delay the commencement of this rights offering in certain
states or other jurisdictions if necessary to comply with local laws. However,
we may elect not to offer rights to residents of any state or other
jurisdiction whose law would require a change in this rights offering in order
to carry out this rights offering in such state or jurisdiction.
Procedures to Exercise Rights
Please do not send subscription certificates or related forms to us. Please
send the properly completed and executed form of subscription certificate with
full payment to Equiserve, the subscription agent for this rights offering.
You should read carefully the subscription certificate and related
instructions and forms which accompany this prospectus. You should call
Equiserve, at the address and telephone number listed below under the caption
"--Questions and Assistance Concerning the Rights" promptly with any questions
you may have.
15
You may exercise your rights by delivering to Equiserve at the address
specified below and in the instructions accompanying this prospectus, on or
prior to the expiration date:
. Properly completed and executed subscription certificate(s) which
evidence your rights. See "-- Delivery of Subscription Certificate and
Other Documents" below for instructions on where to send these.
. Payment in full of the subscription price for each share of our common
stock you wish to purchase under the basic subscription privilege and the
oversubscription privilege. See "--Required Forms of Payment of
Subscription Price" below for payment instructions.
Required Forms of Payment of Subscription Price
The subscription price is $[ ] per share subscribed for, payable in cash.
All payments must be cleared on or before the expiration date. If you exercise
any rights, you must deliver to Equiserve full payment in the form of:
. a personal check, certified or cashier's check or bank draft drawn upon a
U.S. bank, or a U.S. postal money order, payable to "Equiserve Trust
Company, N.A., as Subscription Agent"; or
. a wire transfer of immediately available funds to the account maintained
by Equiserve for this rights offering. If you desire to make payment by
wire transfer, you must contact [ ], at Equiserve, at ( )
, to receive a Wire Authorization Form.
In order for you to timely exercise your rights, Equiserve must actually
receive the subscription price before the expiration date. Funds paid by
uncertified personal check may take at least five business days to clear.
Accordingly, if you pay the subscription price by means of uncertified personal
check, you should make payment sufficiently in advance of the expiration date
to ensure that your check actually clears and the payment is received before
such date. We are not responsible for any delay in payment by you and suggest
that you consider payment by means of certified or cashier's check, money order
or wire transfer of funds.
Delivery of Subscription Certificate and Other Documents
All subscription certificates, payments of the subscription price, nominee
holder certifications, notices of guaranteed delivery and DTC participant
oversubscription exercise forms, to the extent applicable to your exercise of
rights, must be delivered to Equiserve as follows:
By Mail: By Hand Overnight Courier:
[ ] [ ]
[ ] [ ]
[ ] [ ]
Eligible institutions may deliver "Notice of Guaranteed Delivery" forms by
facsimile transmission. Equiserve's facsimile number is ( ) ,
Attention: [ ]. You should confirm receipt of all facsimiles by
calling ( ) .
Special Procedure Under "Notice of Guaranteed Delivery" Form
If you wish to exercise rights but cannot ensure that Equiserve will
actually receive the executed subscription certificate before the expiration
date, you may alternatively exercise rights by causing all of the following to
occur within the time prescribed:
. Full payment must be received by Equiserve prior to the expiration date
for all of the shares of our common stock you desire to purchase pursuant
to the basic subscription privilege and the oversubscription privilege.
. A properly executed "Notice of Guaranteed Delivery" substantially in the
form distributed by us with your subscription certificate and accompanied
by a Medallion Guaranty must be received by Equiserve at or prior to the
expiration date.
16
. The "Notice of Guaranteed Delivery" form must be executed by both you and
one of the following:
--a member firm of a registered national securities exchange,
--a member of the National Association of Securities Dealers, Inc.
(NASD),
--a commercial bank or trust company having an office or correspondent in
the United States, or
--other eligible guarantor institution qualified under a guarantee
program acceptable to Equiserve.
The co-signing institution must provide a Medallion Guaranty on the
Notice of Guaranteed Delivery guaranteeing that the subscription
certificate will be delivered to Equiserve within three business days
after the date of the form. Your Notice of Guaranteed Delivery form must
also provide other relevant details concerning the intended exercise of
your rights.
. The properly completed subscription certificate(s) with any required
signature guarantee must be received by Equiserve within three business
days following the date of the related Notice of Guaranteed Delivery.
. If you are a nominee holder of rights, the "Nominee Holder Certification"
must also accompany the Notice of Guaranteed Delivery.
A Notice of Guaranteed Delivery may be delivered to Equiserve in the same
manner as subscription certificates at the addresses set forth above under the
caption "--Delivery of Subscription Certificate and Other Documents" or
facsimile transmission.
Additional copies of the form of Notice of Guaranteed Delivery are available
upon request from Equiserve, whose address and telephone number were previously
listed under the caption "--Delivery of Subscription Certificate and Other
Documents."
Incomplete Forms; Insufficient or Excess Payment
If you do not indicate on your subscription certificate the number of rights
being exercised, or do not forward sufficient payment for the number of rights
that you indicate are being exercised, then we will accept the subscription
forms and payment only for the maximum number of rights that may be exercised
based on the actual payment delivered. We will make this determination as
follows:
. you will be deemed to have exercised your basic subscription privilege to
the full extent of the payment received, and
. if any funds remain, you will be deemed to have exercised your
oversubscription privilege to the extent of the remaining funds.
We will return any payment not applied to the purchase of shares under this
rights offering as soon as practicable by mail. Interest will not be payable on
amounts refunded.
Prohibition on Fractional Shares
Each whole right entitles you to purchase one share of common stock at the
subscription price per share. We will accept any inadvertent subscription
indicating a purchase of fractional shares by rounding down to the nearest
whole share and, as soon as practicable, refunding without interest any payment
received for a fractional share.
Instructions to Nominee Holders
If you are a broker, trustee or depository for securities or other nominee
holder for beneficial owners of our common stock, we are requesting that you
contact such beneficial owners as soon as possible to obtain instructions and
related certifications concerning their rights. Our request to you is further
explained in the suggested form of letter of instructions from nominee holders
to beneficial owners accompanying this prospectus.
17
To the extent so instructed, nominee holders should complete appropriate
subscription certificates on behalf of beneficial owners and, in the case of
any exercise of the oversubscription privilege, the related form of "Nominee
Holder Certification," and submit them on a timely basis to Equiserve with the
proper payment.
Risk of Loss on Delivery of Subscription Certificate Forms and Payments
Each holder of rights bears all risk of the method of delivery to Equiserve
of subscription certificates and payments of the subscription price. If
subscription certificates and payments are sent by mail, you are urged to send
these by registered mail, properly insured, with return receipt requested, and
to allow a sufficient number of days to ensure delivery to Equiserve and
clearance of payment prior to the expiration date.
Because uncertified personal checks may take at least five business days to
clear, you are strongly urged to pay, or arrange for payment, by means of
certified or cashier's check, money order or wire transfer of funds.
How Procedural and Other Questions Are Resolved
We are entitled to resolve all questions concerning the timeliness,
validity, form and eligibility of any exercise of rights. Our determination of
such questions will be final and binding. We, in our sole discretion, may waive
any defect or irregularity, or permit a defect or irregularity to be corrected
within such time as we may determine, or reject the purported exercise of any
right because of any defect or irregularity.
Subscription certificates will not be considered received or accepted until
all irregularities have been waived or cured within such time as we determine
in our sole discretion. Neither we nor Equiserve have any duty to give
notification of any defect or irregularity in connection with the submission of
subscription certificates or any other required document. Neither we nor
Equiserve will incur any liability for failure to give such notification.
We reserve the right to reject any exercise of rights if the exercise does
not comply with the terms of this rights offering or is not in proper form or
if the exercise of rights would be unlawful or materially burdensome.
Issuance of Stock Certificates
Stock certificates for shares purchased in this rights offering will be
issued as soon as practicable after the expiration date. Equiserve will deliver
subscription payments to us only after consummation of this rights offering and
the issuance of stock certificates to our stockholders that exercised rights.
Unless you instruct otherwise in your subscription certificate form, shares
purchased by the exercise of rights will be registered in the name of the
person exercising the rights.
Questions and Assistance Concerning the Rights
You should direct any questions, requests for assistance concerning the
rights or requests for additional copies of this prospectus, forms of
instructions or the Notice of Guaranteed Delivery to:
Equiserve Trust Company, N.A.
18
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material United States federal income tax
consequences of the rights offering to the holders of common stock and options.
This summary is based on the provisions of the Internal Revenue Code of
1986, as amended (the "Code"), existing and proposed Treasury regulations
promulgated thereunder and administrative and judicial interpretations thereof,
all as of the date hereof and all of which are subject to change, possibly on a
retroactive basis.
This summary is limited to those who have held the common stock, and will
hold the rights and any shares acquired upon the exercise of rights as "capital
assets" within the meaning of section 1221 of the Code. This summary does not
address all of the tax consequences that may be relevant to particular holders
in light of their personal circumstances, or to holders who are subject to
special rules (such as banks and other financial institutions, broker-dealers,
real estate investment trusts, regulated investment companies, insurance
companies, tax-exempt organizations and foreign taxpayers). This summary does
not address the effect of federal estate and gift tax laws nor any state, local
or foreign tax laws that may be applicable to a particular holder.
Holders are urged to consult their own tax advisors with respect to the
particular U.S. federal income and estate tax consequences to them of this
offering, as well as the tax consequences under state, local, foreign. and
other tax laws and the possible effects of changes in tax laws.
Distribution of Rights
Neither holders of common stock nor holders of stock options will not
recognize taxable income for federal income tax purposes upon the distribution
of the rights.
Shareholder Basis and Holding period of the Rights
Except as provided in the following sentence, the basis of the rights
received by a shareholder as a distribution with respect to such shareholder's
common stock will be zero. If, however, either (1) the fair market value of the
rights on the date of distribution is 15% or more of the fair market value on
the same date of the shares of common stock with respect to which the rights
are distributed or (2) the shareholder properly elects, in his or her federal
income tax return for the taxable year in which the rights are received, to
allocate part of the basis of such common stock to the rights, then upon
exercise or transfer of the rights, the shareholder's basis in such common
stock will be allocated between the common stock and the rights in proportion
to the fair market values of each on the date of distribution.
The holding period of rights received as a distribution on a shareholder's
common stock will include that shareholder's holding period for the common
stock prior to the distribution of the rights.
In the case of a purchaser of rights, the tax basis of such rights will be
equal to the purchase price paid, and the holding period for such rights will
commence on the day following the date of the purchase. For information on the
persons to whom the rights can be transferred, as well as information on how
the rights can be transferred, see "The Rights Offering--Transferability of
Rights."
Transfer of the Rights
A holder who transfers rights generally will recognize gain or loss equal to
the difference between the sale proceeds and the tax basis, if any, of such
rights. The holder's gain on the sale of rights will be long-term capital gain
if the holding period for the rights is more than one year.
19
Lapse of the Rights
Holders who allow the rights received by them in this offering to lapse will
not recognize any gain or loss, and no adjustment will be made to the basis of
the common stock, if any, they own. Purchasers of the rights will recognize a
loss equal to the tax basis of their rights, if such rights expire unexercised.
Any loss recognized on the expiration of the rights acquired by a purchaser
will be a short-term capital loss.
Exercise of the Rights; Basis and Holding Period of the Common Stock
Shareholders will not recognize any gain or loss upon the exercise of
rights. The basis of the shares acquired through exercise of the rights will be
equal to the sum of the subscription price for the rights and the holder's
basis in such rights, if any. The holding period for the shares acquired
through exercise of the rights will begin on the date the rights are exercised.
Option holders will recognize ordinary income upon the exercise of rights in
an amount equal to the excess, if any, of the fair market value of the common
stock at the time of exercise over the exercise price. The tax basis of the
common stock acquired upon exercise will equal the fair market value of the
common stock on the date of exercise and the holding period for the common
stock generally will begin on the day following exercise.
Sale of Shares
The sale of shares will result in the recognition of gain or loss to the
shareholder in an amount equal to the difference between the amount realized
and the shareholder's basis in the shares. Gain or loss upon the sale of the
shares will be long-term capital gain or loss if the holding period for the
shares is more than one year.
Information Reporting and Backup Withholding
Information reporting may apply to a holder that is not a corporation (or
other exempt recipient) with respect to any dividend payments on common stock
received upon the exercise of the rights and to payments on the proceeds of
sale of the common stock. A 30.5% backup withholding tax may apply to these
payments unless the holder provides a correct taxpayer identification number
and otherwise complies with the backup withholding requirements.
20
USE OF PROCEEDS
We estimate that the net proceeds of this offering will be between
approximately $[ ] and approximately $[ ], after deducting
the estimated offering expenses. We expect to use these proceeds for working
capital and other general corporate expenses, including repayment of
indebtedness to Rocket Software and expenses associated with our recently
announced restructuring, which we estimate will be approximately $975,000.
DETERMINATION OF OFFERING PRICE
Our board of directors decided to set a $[ ] per share subscription price
after considering a variety of factors described elsewhere in this prospectus.
The $[ ] per share price should not be considered an indication of the actual
value of Gensym or of our common stock. We cannot assure you that the market
price of the common stock will not decline during or after the rights offering.
We also cannot assure you that you will be able to sell shares of our common
stock purchased during the rights offering at a price equal to or greater than
$[ ] per share. We have neither sought, nor obtained, any valuation opinion
from outside financial advisors or investment bankers.
21
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Our common stock was traded in the Nasdaq National Market until August 17,
2001 and has traded since then on the OTC Bulletin Board under the symbol
"GNSM." As of , 2001, there were approximately [ ] record
holders of the common stock. The last reported sales price of our common stock
on the OTC Bulletin Board on August 20, 2001 was $0.50. The following table
sets forth the high and low sales prices of our common stock for each quarterly
period within our three most recent fiscal years on the Nasdaq National Market
through August 17, 2001 and on the OTC Bulletin Board after that date.
High Low
-------- -------
Fiscal 1998
First Quarter............................................ $ 8.8750 $4.5625
Second Quarter........................................... 8.7500 4.3125
Third Quarter............................................ 4.6875 2.9375
Fourth Quarter........................................... 4.6875 1.7500
Fiscal 1999
First Quarter............................................ 4.1250 2.5938
Second Quarter........................................... 4.5000 2.5625
Third Quarter............................................ 4.6250 3.1250
Fourth Quarter........................................... 9.0000 3.1250
Fiscal 2000
First Quarter............................................ 22.2500 4.2500
Second Quarter........................................... 10.7500 3.1250
Third Quarter............................................ 4.2656 2.8750
Fourth Quarter........................................... 3.2500 0.5312
Fiscal 2001
First Quarter............................................ 1.9688 0.7500
Second Quarter........................................... 1.9900 0.5200
Third Quarter (through August 20, 2001).................. 0.9700 0.2000
We have never declared or paid cash dividends to the holders of our common
stock and do not intend to pay dividends in the future. We intend to retain
earnings for use in the operation of our business.
22
PLAN OF DISTRIBUTION
On or about , 2001, we will distribute the rights, subscription
certificates and copies of this prospectus to individuals who owned shares of
our common stock on [ ], 2001. If you wish to exercise your rights and
purchase shares of common stock, you should complete the subscription
certificate and return it with payment for the shares, to the subscription
agent, Equiserve, at the address on page 16. If you have any questions, you
should contact Equiserve.
We are offering shares of our common stock directly to you pursuant to this
offering. We have not employed any brokers, dealers or underwriters in
connection with the solicitation or exercise of subscription privileges in this
offering and no commissions, fees or discounts will be paid in connection with
it. Certain of our officers and other employees may solicit responses from you,
but such officers and other employees will not receive any commissions or
compensation for such services other than their normal employment compensation.
We have agreed to pay the subscription agent a fee of $[ ] plus
certain expenses. We estimate that our total expenses in connection with the
rights offering will be $[ ].
LEGAL MATTERS
The validity of the shares of common stock offered pursuant to this
prospectus will be passed upon for us by Hale and Dorr LLP, Boston,
Massachusetts.
EXPERTS
The financial statements as of December 31, 2000 and 1999 and for each of
the three years in the period ended December 31, 2000, incorporated by
reference in this prospectus and elsewhere in the registration statement, have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report dated March 30, 2001 with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report. Reference is made to said
report, which includes an explanatory paragraph with respect to the uncertainty
regarding the Company's ability to continue as a going concern as discussed in
Note 1 to the financial statements.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission as required by the
Securities Exchange Act. You can find, copy and inspect information filed by us
with the Securities and Exchange Commission at the public reference facilities
maintained by the Securities and Exchange Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at its regional offices located at 7
World Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. You can obtain copies of
information filed by us with the Securities and Exchange Commission at
prescribed rates by writing to the Securities and Exchange Commission's Public
Reference Section, 450 Fifth Street, N.W. Washington, D.C. 20549. You can call
the Securities and Exchange Commission at 1-800-SEC-0330 for further
information about the public reference rooms. You can review our electronically
filed reports, proxy and information statements on the Securities and Exchange
Commission's web site at http://www.sec.gov.
This prospectus is part of a registration statement on Form S-3 that we
filed with the Securities and Exchange Commission. The registration statement
contains more information than this prospectus regarding us and the securities,
including certain exhibits and schedules. You can obtain a copy of the
registration statement from the Securities and Exchange Commission at any
address listed above or from the Securities and Exchange Commission's web site.
23
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Securities and Exchange Commission allows us to "incorporate by
reference" into this prospectus information that we file with the Securities
and Exchange Commission in other documents. This means that we can disclose
important information to you by referring to other documents that contain that
information. Any information that we incorporate by reference is considered
part of this prospectus. The documents and reports that we list below are
incorporated by reference into this prospectus. In addition, all documents and
reports which we file pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act after the date of this prospectus are incorporated by
reference in this prospectus as of the respective filing dates of these
documents and reports. Statements contained in documents that we file with the
Securities and Exchange Commission and that are incorporated by reference in
this prospectus will automatically update and supersede information contained
in this prospectus, including information in previously filed documents or
reports that have been incorporated by reference in this prospectus, to the
extent the new information differs from or is inconsistent with the old
information.
The following documents previously filed with the Securities and Exchange
Commission are incorporated by reference in this prospectus:
(1) our Annual Report on Form 10-K for the year ended December 31, 2000;
(2) our Quarterly Report on Form 10-Q for the quarter ended March 31,
2001;
(3) our Quarterly Report on Form 10-Q for the quarter ended June 30,
2001;
(4) our Current Report on Form 8-K, dated March 28, 2001, filed with the
Securities and Exchange Commission on April 12, 2001;
(5) our Current Report on Form 8-K, dated June 7, 2001, filed with the
Securities and Exchange Commission on June 14, 2001;
(6) all our filings pursuant to the Securities Exchange Act after the
date of filing the initial registration statement and prior to the
effectiveness of the registration statement; and
(7) the description of our common stock contained in our registration
statement on Form 8-A filed with the Securities and Exchange Commission on
January 18, 1994, including any amendments or reports filed for the purpose
of updating that description.
You may request, orally or in writing, a copy of these documents, which will
be provided to you without charge, by contacting:
Gensym Corp.
52 Second Avenue
Burlington, Massachusetts 01803
Attention: Jeffrey A. Weber
Telephone: (781) 265-7100
You should rely only on the information contained in this prospectus,
including information incorporated by reference as described above, or any
prospectus supplement that we have specifically referred you to. We have not
authorized anyone else to provide you with different information. You should
not assume that the information in this prospectus or any prospectus supplement
is accurate as of any date other than the date on the front of those documents
or that any document incorporated by reference is accurate as of any date other
than its filing date. You should not consider this prospectus to be an offer or
solicitation relating to the securities in any jurisdiction in which such an
offer or solicitation relating to the securities is not authorized.
Furthermore, you should not consider this prospectus to be an offer or
solicitation relating to the securities if the person making the offer or
solicitation is not qualified to do so, or if it is unlawful for you to receive
such an offer or solicitation.
24
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses in connection with this offering are:
SEC registration fee................................................... $788
Printing and engraving expenses........................................ *
Legal fees and expenses................................................ *
Accounting fees and expenses........................................... *
Miscellaneous.......................................................... *
----
Total expenses....................................................... *
- --------
* To be filed by amendment.
Item 15. Indemnification of Directors and Officers.
Section 145 of the Delaware Corporation Law (the "DGCL") allows for the
indemnification of officers, directors, and other corporate agents in terms
sufficiently broad to indemnify such person under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended.
Gensym's Certificate of Incorporation provides that Gensym will, to the
fullest extent permitted by the DGCL, indemnify all persons whom it has the
power to indemnify against all costs, expenses and liabilities incurred by them
by reason of having been officers or directors of Gensym, any subsidiary of
Gensym or any other corporation for which such person acted as an officer of
director at the request of Gensym.
Gensym's Certificate of Incorporation also provides that the directors of
Gensym will not be personally liable for monetary damages to Gensym or its
stockholders for any act or omission provided that the foregoing shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to Gensym or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of the law, (iii) under Section 174 of the DGCL (relating to
illegal dividends or stock redemptions), or (iv) for any transaction from which
the director derived an improper personal benefit. If the DGCL is amended to
permit further elimination or limitation of the personal liability of
directors, then the liability of a director of Gensym shall be eliminated or
limited to the fullest extent permitted by the DGCL as so amended.
Item 16. Exhibits and Financial Statement Schedules.
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
5.1+ Opinion of Hale and Dorr LLP
23.1* Consent of Arthur Andersen LLP
23.2+ Consent of Hale and Dorr LLP (to be included in Exhibit 5.1 hereto)
24.1* Power of Attorney (included in signature page)
99.1+ Form of Subscription Certificate
99.2+ Form of Instructions to Stockholder and Optionholders
99.3+ Form of Notice of Guaranteed Delivery
99.4+ Form of Letter to Stockholders and Optionholders
99.5+ Form of Letter to Brokers
99.6+ Form of Subscription Agent Agreement
- ----------
* Filed herewith.
+ To be filed by amendment.
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement. Notwithstanding the foregoing, any
increase or decrease in the volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in "Calculation of
Registration Fee" table in the effective Registration Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration Statement
or any material change to such information in this Registration
Statement;
(2) That, for the purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at the time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the 'registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein and the offering of such
securities at the time shall be deemed to be the initial bona fide offering
thereof.
(5) The undersigned registrant understands that, insofar as
indemnification for liabilities arising under the Securities Act of 1933
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the indemnification provisions described herein, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Burlington, Commonwealth of Massachusetts, on
August 23, 2001.
Gensym Corporation
By: /s/ Lowell B. Hawkinson
Lowell B. Hawkinson
President and Chief Executive
Officer
SIGNATURES AND POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Lowell B. Hawkinson and Jeffrey A. Weber
as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-
effective amendments) to this Registration Statement on Form S-3 and any
related Rule 462(b) registration statement or amendment thereto, and to file
the same with all exhibits thereto and any other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or desirable to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Lowell B. Hawkinson President, Chief Executive August 23, 2001
______________________________________ Officer (Principal
Lowell B. Hawkinson Executive Officer) and
Director
/s/ Jeffrey A. Weber Vice President, Finance August 23, 2001
______________________________________ and Chief Financial
Jeffrey A. Weber Officer (Principal
Financial and Accounting
Officer)
/s/ Robert A. Degan Director August 23, 2001
______________________________________
Robert A. Degan
/s/ Barry R. Gorsun Director August 23, 2001
______________________________________
Barry R. Gorsun
/s/ Theodore G. Johnson Director August 23, 2001
______________________________________
Theodore G. Johnson
/s/ John A. Shane Director August 23, 2001
______________________________________
John A. Shane
/s/ Thomas E. Swithenbank Director August 23, 2001
______________________________________
Thomas E. Swithenbank
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
5.1+ Opinion of Hale and Dorr LLP
23.1* Consent of Arthur Andersen LLP
23.2+ Consent of Hale and Dorr LLP (to be included in Exhibit 5.1 hereto)
24.1* Power of Attorney (included in signature page)
99.1+ Form of Subscription Certificate
99.2+ Form of Instructions to Stockholder and Optionholders
99.3+ Form of Notice of Guaranteed Delivery
99.4+ Form of Letter to Stockholders and Optionholders
99.5+ Form of Letter to Brokers
99.6+ Form of Subscription Agent Agreement
- ----------
* Filed herewith.
+ To be filed by amendment.