SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant |X| Filed by a Party other than the Registrant |_|
- --------------------------------------------------------------------------------
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
|X| Definitive Proxy Statement |_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-12
Gensym Corporation
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No Fee Required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies: _______
2) Aggregate number of securities to which transaction applies: __________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):_________
4) Proposed maximum aggregate value of transaction:_______________________
5) Total fee paid:________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or Form or Schedule and the date of its filing.
1) Amount Previously Paid: $______________________________________________
2) Form, Schedule or Registration Statement No.:__________________________
3) Filing Party:__________________________________________________________
4) Date Filed:____________________________________________________________
GENSYM CORPORATION
52 Second Avenue
Burlington, MA 01803
-----------------
Notice of Annual Meeting of Stockholders
to be Held May 16, 2002
-----------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Gensym
Corporation, a Delaware corporation (the "Company"), will be held on Thursday,
May 16, 2002 at 10:00 a.m., at the offices of the Company, 52 Second Avenue,
Burlington, Massachusetts, for the purpose of considering and voting upon the
following matters:
1. To elect two Class III Directors of the Company to serve for the ensuing
three years;
2. To approve the amendment to the Company's 1995 Employee Stock Purchase
Plan increasing from 1,000,000 to 1,200,000 the number of shares of
common stock reserved for issuance under the plan;
3. To ratify the appointment by the Board of Directors of
PricewaterhouseCoopers LLP as independent auditors for the fiscal year
ending December 31, 2002; and
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has no knowledge of any other business to be
transacted at the meeting.
The Board of Directors has fixed the close of business on April 1, 2002 as
the record date for the determination of stockholders entitled to notice of and
to vote at the meeting and at any adjournments thereof. The list of
stockholders entitled to vote at the meeting will be open to the examination of
any stockholder, for any purpose relevant to the meeting, for a period of ten
days prior to the meeting during regular business hours at the offices of the
Company at 52 Second Avenue, Burlington, Massachusetts, 01803, and at the time
and place of the annual meeting.
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 2001, which contains consolidated financial statements and other
information of interest to stockholders, accompanies this Notice and the
enclosed Proxy Statement.
By Order of the Board of Directors,
Lowell B. Hawkinson
Secretary
April 12, 2002
Burlington, Massachusetts
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. NO
POSTAGE NEED BE AFFIXED IF THE PROXY IS MAILED IN THE UNITED STATES.
GENSYM CORPORATION
52 Second Avenue
Burlington, MA 01803
PROXY STATEMENT
2002 Annual Meeting of Stockholders
To Be Held May 16, 2002
This Proxy Statement is furnished to the stockholders of Gensym Corporation
("Gensym" or the "Company") in connection with the solicitation of proxies by
the Board of Directors for use at the Annual Meeting of Stockholders to be held
on Thursday, May 16, 2002 at 10:00 a.m. at the offices of the Company, 52
Second Avenue, Burlington, Massachusetts and at any adjournments of that
meeting.
All proxies will be voted in accordance with the instructions of the
stockholder, and if no choice is specified, the proxies will be voted in favor
of the matters set forth in the accompanying notice of meeting. A stockholder
may revoke any proxy at any time before its exercise by delivery of a written
revocation to the Secretary of the Company. Attendance at the meeting will not
by itself constitute revocation of a proxy unless the stockholder affirmatively
revokes the proxy.
On April 1, 2002, the record date for determination of stockholders entitled
to notice of and to vote at the annual meeting, there were issued and
outstanding and entitled to vote 6,632,947 shares of Gensym's common stock.
Each share entitles the record holder to one vote on each of the matters to be
voted upon at the meeting.
The notice of meeting, this proxy statement, the enclosed proxy and the
Company's Annual Report to Stockholders for the year ended December 31, 2001
are being mailed to stockholders on or about April 18, 2002.
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 2001, as filed with the Securities and Exchange Commission,
excluding exhibits, will be furnished without charge to any stockholder upon
written request to Gensym. Please address all such requests to Gensym
Corporation, 52 Second Avenue, Burlington, Massachusetts 01803, Attention:
Corporate Secretary. Exhibits will be provided upon written request and payment
of an appropriate processing fee.
1
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of April 1, 2002, except as
otherwise noted, with respect to the beneficial ownership of shares of the
Company's common stock by:
. each person known to the Company to own beneficially more than 5% of the
outstanding shares of common stock;
. each current director and director nominee of the Company;
. the Company's chief executive officer and former chief executive officer and
the other executive officers listed in the summary compensation table below;
and
. the directors and executive officers of the Company as a group.
Amount and Nature Percent of
of Beneficial Common Stock
Name and Address of Beneficial Owner Ownership(1) Outstanding
------------------------------------ ----------------- ------------
Johan H. Magnusson (2)............................................. 953,000 13.6%
c/o Rocket Software, Inc., 2 Apple Hill Drive, Natick, MA 01760
Rocket Software, Inc. (2).......................................... 642,400 9.2%
Two Apple Hill Drive, Natick, MA 01760
Austin W. Marxe (3)................................................ 719,400 10.3%
153 East 53rd Street, 55th Floor, New York, NY 10022
David M. Greenhouse (3)............................................ 719,400 10.3%
153 E. 53 Street, 51st Floor, New York, NY 10022
Special Situations Fund III, L.P. (3).............................. 532,100 7.6%
153 East 53rd Street, 55th Floor, New York, NY 10022
MGP Advisors Limited Partnership (3)............................... 532,100 7.6%
153 East 53rd Street, 55th Floor, New York, NY 10022
Special Situations Cayman Fund, L.P.(3)............................ 187,300 2.7%
c/o CIBC Bank and Trust Company (Cayman) Limited,
CIBC Bank Building, P.O. Box 694, Grand Cayman,
Cayman Islands, British West Indies
Dimensional Fund Advisors Inc. (4)................................. 314,900 4.5%
1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401
AWM Investment Company, Inc. (4)................................... 187,300 2.7%
153 East 53rd Street, 55th Floor New York, NY 10022
Laurence W. Lytton (5)............................................. 443,275 6.3%
28 Sherwood Place, Scarsdale, NY 10583
Lowell B. Hawkinson (6)(7)......................................... 470,333 6.7%
Theodore G. Johnson (6)(8)......................................... 191,875 2.7%
John A. Shane (6)(9)............................................... 64,298 *
Barry R. Gorsun (6)(10)............................................ 38,000 *
Thomas E. Swithenbank (6)(11)...................................... 37,000 *
Robert A. Degan (6)(12)............................................ 33,000 *
Jeffrey A. Weber (6)(13)........................................... 56,667 *
Patrick Courtin (6)(14)............................................ -- *
James J. Slane (6)(15)............................................. -- *
Joseph Massey (6)(16).............................................. -- *
All executive officers and directors as a group (10 persons) (17).. 891,173 12.8%
- --------
* Less than 1% of outstanding shares of common stock
(1) The number of shares beneficially owned by each director and executive
officer is determined under rules promulgated by the Securities and
Exchange Commission, and the information is not necessarily indicative
2
of beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any shares as to which the individual has sole or shared
voting power or investment power and also any shares which the individual
has the right to acquire within 60 days after April 1, 2002 through the
exercise of any stock option or other right. The inclusion herein of such
shares, however, does not constitute an admission that the named stockholder
is a direct or indirect beneficial owner of such shares. Unless otherwise
indicated, each person or entity named in the table has sole voting power
and investment power (or shares such power with his or her spouse) with
respect to all shares of capital stock listed as owned by such person or
entity.
(2) Johan Magnusson is the direct beneficial owner of 310,600 shares and may be
deemed to be an indirect owner of the 642,400 shares held by Rocket
Software, Inc. ("Rocket"). Rocket, Mr. Magnusson, Andrew Youniss and
Matthew Kelly share voting and investment power with respect to 642,400
shares. Rocket is the beneficial owner of the 642,400 shares. Mr. Youniss
is the direct beneficial owner of 1,500 shares and may be deemed to be an
indirect owner of the 642,400 shares held by Rocket. Mr. Kelly is the
direct beneficial owner of no shares and may be deemed to be an indirect
owner of the 642,400 shares held by Rocket. Mr. Magnusson expressly
disclaims beneficial ownership of any shares held by Rocket or Mr. Youniss.
Rocket expressly disclaims beneficial ownership of any shares held by
Messrs. Magnusson or Youniss. Mr. Youniss expressly disclaims beneficial
ownership of any shares held by Rocket or Mr. Magnusson. Mr. Kelly
expressly disclaims beneficial ownership of any shares held by Rocket, Mr.
Youniss or Mr. Magnusson. The foregoing information is based solely on a
Schedule 13D/A, dated January 17, 2002, filed with the Securities and
Exchange Commission by Rocket and Messrs. Youniss, Magnusson and Kelly.
(3) AWM Investment Company, Inc., a Delaware corporation ("AWM"), is the
general partner of MGP Advisers Limited Partnership, a Delaware limited
partnership ("MGP") and the general partner of and investment adviser to
Special Situations Cayman Fund, L.P., a Cayman Islands limited
partnership (the "Cayman Fund"). MGP is the general partner of and
investment adviser to Special Situations Fund III, L.P., a Delaware limited
partnership ("SSF III"). Austin W. Marxe and David M. Greenhouse are
officers, directors and members or principal shareholders of MGP and AWM.
SSF III and MGP beneficially own 532,100 shares, and the Cayman Fund and
AWM beneficially own 187,300 shares. Messrs. Marxe and Greenhouse have sole
voting power and sole dispositive power over an aggregate of 719,400
shares, comprised of the 532,100 shares beneficially owned by SSF III and
MGP and the 187,300 shares beneficially owned by the Cayman Fund and AWM.
The foregoing information is based on a Schedule 13D/A, dated November 30,
2001, filed with the Securities and Exchange Commission collectively by SSF
III, the Cayman Fund, MGP, AWM and Messrs. Marxe and Greenhouse.
(4) Dimensional Fund Advisors, Inc., a Delaware corporation ("Dimensional"),
possesses both voting and investment power over 314,900 shares. Dimensional
is an investment company registered under the Investment Advisors Act of
1940 that furnishes investment advice to four investment companies
registered under the Investment Company Act of 1940 and serves as
investment manager to certain other investment vehicles, including
commingled group trusts. These investment companies and investment vehicles
are referred to as the "Funds." In its role as investment advisor and
investment manager, Dimensional possesses both voting and investment power
over the 314,900 shares. The Funds own all securities reported and
Dimensional disclaims beneficial ownership of all such securities. The
foregoing information is based solely on a Schedule 13G/A, dated February
12, 2002, filed with the Securities and Exchange Commission by Dimensional.
(5) The information reported is based solely on a Schedule 13G, dated February
11, 2002, filed with the Securities and Exchange Commission by Laurence W.
Lytton.
(6) The address of the stockholder is c/o Gensym Corporation, 52 Second Ave.,
Burlington, MA 01803.
(7) Includes 12,000 shares held by trust for the benefit of Mr. Hawkinson's
children, as to which shares Mr. Hawkinson disclaims beneficial ownership,
and shares held by Mr. Hawkinson's spouse, as to which shares Mr. Hawkinson
disclaims beneficial ownership. Also includes 93,333 shares of common stock
subject to outstanding stock options that are exercisable within the 60-day
period following April 1, 2002.
3
(8) Includes 51,200 shares of common stock subject to outstanding stock options
that are exercisable within the 60-day period following April 1, 2002.
(9) Includes 3,405 shares held by Palmer Service Corporation, of which Mr.
Shane is the President and sole stockholder. Mr. Shane disclaims beneficial
ownership of such shares except to the extent of his pecuniary interest
therein. Also includes 51,000 shares of common stock subject to outstanding
stock options that are exercisable within the 60-day period following April
1, 2002.
(10) Includes 33,000 shares of common stock subject to outstanding stock
options that are exercisable within the 60-day period following April 1,
2002.
(11) Includes 33,000 shares of common stock subject to outstanding stock
options that are exercisable within the 60-day period following April 1,
2002.
(12) Consists of 33,000 shares of common stock subject to outstanding stock
options that are exercisable within the 60-day period following April 1,
2002.
(13) Mr. Weber's employment with the Company was terminated effective February
8, 2002. Consists of 56,667 shares of common stock subject to outstanding
stock options that are exercisable within the 60-day period following
April 1, 2002.
(14) Mr. Courtin's employment with the Company was terminated effective August
2, 2001. Mr. Courtin had no outstanding stock options as of April 1, 2002.
(15) Mr. Slane's employment with the Company was terminated effective August 7,
2001. Mr. Slane had no outstanding stock options as of April 1, 2002.
(16) Mr. Massey's employment with the Company was terminated effective November
15, 2001. Mr. Massey had no outstanding stock options as of April 1, 2002.
(17) Includes 351,200 shares of common stock subject to outstanding stock
options that are exercisable by the directors and executive officers
within the 60-day period following April 1, 2002.
Votes Required
The holders of a majority of the shares of the Company's common stock issued
and outstanding and entitled to vote at the annual meeting shall constitute a
quorum for the transaction of business at the annual meeting. Shares of the
Company's common stock present in person or represented by proxy, including
shares that abstain or do not vote with respect to one or more of the matters
presented for stockholder approval, will be counted for purposes of determining
whether a quorum exists at the annual meeting.
The affirmative vote of the holders of a plurality of the votes cast by the
stockholders entitled to vote at the annual meeting is required for the
election of directors. The affirmative vote of the holders of a majority of the
votes cast by the stockholders entitled to vote at the annual meeting is
required for the approval of the amendment to the Company's 1995 Employee Stock
Purchase Plan and the ratification of the appointment of the Company's
independent auditors.
Shares held by stockholders who abstain from voting as to a particular
matter, and shares held in "street name" by brokers or nominees who indicate on
their proxies that they do not have discretionary authority to vote such shares
as to a particular matter, will not be counted as shares voted in favor of such
matter and will not be counted as shares voting on such matter. Accordingly,
abstentions and "broker non-votes" will have no effect on the voting on the
election of directors, the amendment to the Company's 1995 Employee Stock
Purchase Plan or the ratification of the Company's independent auditors,
because each of those matters requires the affirmative vote of a plurality or
majority of the shares voting on that matter.
4
PROPOSAL I--ELECTION OF DIRECTORS
The Company's Board of Directors is divided into three classes, with members
of each class holding office for a staggered three-year term. The terms of
Messrs. Degan and Gorsun (Class III Directors) will expire at this Annual
Meeting of Stockholders; the terms of Messrs. Shane and Swithenbank (Class I
Directors) will expire at the 2003 Annual Meeting of Stockholders; and the
terms of Messrs. Hawkinson and Johnson (Class II Directors) will expire at the
2004 Annual Meeting of Stockholders. Upon the expiration of the term of a class
of directors at an annual meeting of stockholders, directors will be elected,
or reelected, to serve within such class for a succeeding three-year term.
The persons named in the enclosed proxy will vote to elect Messrs. Degan and
Gorsun as Class III Directors, unless the proxy is marked otherwise. Messrs.
Degan and Gorsun are currently directors of the Company. Each Class III
Director will be elected to hold office until the Annual Meeting of
Stockholders held in 2005 and until his successor is elected and qualified. The
nominees have indicated their willingness to serve, if elected; however, if any
nominee should be unable to serve, the persons acting under the proxy may, in
their discretion, vote for a substitute nominee. The Board of Directors has no
reason to believe that any of the nominees will be unable to serve if elected.
Set forth below are the names of each nominee for director and each current
director and executive officer of the Company, their ages, the year in which
they first became a director of the Company, their principal occupations and
employment during the past five years and the names of the other public
companies of which they serve as a director.
Nominees For Terms Expiring in 2005 (Class III Directors)
Principal Occupation, Other Business Experience Director
Name Age During The Past Five Years and Other Directorships Since
---- --- -------------------------------------------------- --------
Robert A. Degan 63 Mr. Degan has been a private investor since January 1999
2000. From November 1998 to December 1999,
Mr. Degan served as General Manager of the
Enhanced Services & Migration Unit (formerly,
Summa Four, Inc.) of Cisco Systems, Inc. From
January 1997 to November 1998, Mr. Degan was
chairman, president and chief executive officer of
Summa Four, Inc. Mr. Degan is also a director of
FlexiInternational Software, Inc., CaminoSoft
Corp. and Overland Data, Inc.
Barry R. Gorsun 59 Mr. Gorsun served as chairman of Summa Four, Inc. 1998
from July 1993 until July 1998. Since July 1998,
Mr. Gorsun has been a private investor.
5
Directors Whose Terms Expire in 2003 (Class I Directors)
Principal Occupation, Other Business Experience Director
Name Age During The Past Five Years and Other Directorships Since
---- --- -------------------------------------------------- --------
John A. Shane........ 69 Since 1972, Mr. Shane has been president of Palmer 1995
Service Corporation, a venture capital
management company. Mr. Shane is also a
director of Arch Wireless, Inc., Eastern Bank
Corporation and Overland Data, Inc.
Thomas E. Swithenbank 57 Mr. Swithenbank has served as chief financial 1997
officer of Gensym since March 25, 2002. From
1990 until August 1998, Mr. Swithenbank served
as president and chief executive officer of Harte-
Hanks Data Technologies, a computer software
and service company specializing in database
marketing systems. Mr. Swithenbank served as an
executive vice president of Pegasystems, Inc., a
developer of communications software products,
from August 1998 to April 1999.
Mr. Swithenbank served as an executive vice
president and chief financial officer of Techmar
Communications, Inc. from April 1999 to
December 2001.
Directors Whose Terms Expire in 2004 (Class II Directors)
Principal Occupation, Other Business Experience Director
Name Age During The Past Five Years and Other Directorships Since
---- --- -------------------------------------------------- --------
Lowell B. Hawkinson 59 Mr. Hawkinson has served as Gensym's chairman, 1986
president and chief executive officer since August
2001. Mr. Hawkinson had previously served as
chairman, chief executive officer, treasurer and
secretary of the Company from September 1986 to
October 1999. From November 1999 to August
2001, Mr. Hawkinson was an independent
consultant.
Theodore G. Johnson 70 Mr. Johnson has been an independent venture 1986
investor since 1982. Mr. Johnson is also a director
of a number of privately held corporations.
The Board of Directors recommends a vote FOR the election of each of the
nominees for Director named above.
For information relating to shares of common stock owned by each of the
directors and the director nominees, see "Security Ownership of Certain
Beneficial Owners and Management" above.
Board and Committee Meetings
The Board of Directors met 24 times during 2001. All directors attended at
least 75% of the meetings of the Board of Directors and of the committees on
which they served.
6
The Board of Directors has a Compensation Committee, which makes
recommendations concerning salaries and incentive compensation for employees of
and consultants to the Company and administers stock option grants pursuant to
the Company's employee stock plans. The Compensation Committee met nine times
during 2001. The members of the Compensation Committee are Messrs. Degan,
Gorsun and Shane.
The Board of Directors has an Audit Committee, which reviews the results and
scope of the audit and other services provided by the Company's independent
public accountants and reviews the Company's internal controls. The Audit
Committee held nine meetings during 2001. During 2001 and through March 25,
2002, the date of the auditor's report relating to the Company's audited
financial statements for the year ended December 31, 2001, the members of the
Audit Committee were Messrs. Degan, Shane and Swithenbank. Mr. Swithenbank
resigned from the Audit Committee on March 25, 2002 following the Audit
Committee's meeting at which it reviewed the Company's audited financial
statements for the year ended December 31, 2001 and the issuance of the Audit
Committee's report relating to the Company's audited financials for fiscal year
2001. Mr. Swithenbank subsequently was appointed chief financial officer of the
Company.
The Board of Directors also has a Corporate Governance Committee, which is
responsible for making recommendations as to the number of members of the Board
of Directors and composition of the Board and its committees and periodic
evaluations of performance. Specific duties of the Corporate Governance
Committee include the nomination of new Board members after consultation with
the Chief Executive Officer and an annual written evaluation of the Board of
Directors and its committees. The Corporate Governance Committee will consider
nominees recommended to the committee by stockholders. Stockholders wishing to
recommend director candidates for consideration by the Corporate Governance
Committee may do so by writing to the Secretary of the Company, giving the
recommended candidate's name, biographical data and qualifications. The
Corporate Governance Committee met four times during 2001. The members of the
Corporate Governance Committee are Messrs. Gorsun, Johnson and Shane.
Director Compensation
Directors who are not employees of the Company receive $12,000 annually,
plus $1,000 for physical attendance at each meeting of the Board of Directors
and $500 for participation in a Board meeting telephonically. Non-employee
directors also receive a $1,500 quarterly retainer for each committee on which
the director serves. Non-employee directors are eligible to receive stock
options under the Company's 2000 Stock Incentive Plan and the Company's 1995
Director Stock Option Plan, and all directors are eligible to receive stock
options under the Company's 1994 Stock Option Plan and 1997 Stock Incentive
Plan.
Upon their initial election as a director, each non-employee director is
granted a nonstatutory option for the purchase of 3,000 shares of the Company's
common stock. On June 30 of each year, each non-employee director receives a
nonstatutory option for the purchase of 10,000 shares of the Company's common
stock. All options granted to directors are granted at an exercise price equal
to the fair market value of the Company's common stock on the date of the grant
and are immediately exercisable.
In addition, Mr. Degan was paid $24,000 for consulting services that he
provided to the Company from August 2001 to December 2001 relating to the
Company's strategic restructuring plan.
7
Compensation of Executive Officers
The following table sets forth certain information with respect to the
annual and long-term compensation, for each of the last three fiscal years, of
(1) the Company's chief executive officer and former chief executive officer,
(2) one other executive officer of the Company whose total annual salary and
bonus for fiscal year 2001 exceeded $100,000 and who was serving as an
executive officer of the Company on December 31, 2001 and (3) two former
executive officers of Gensym who would have otherwise qualified among the four
most highly compensated executive officers of the Company if they had continued
to be Gensym executive officers as of December 31, 2001.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation(1) Awards
------------------------- ------------
Securities All Other
Underlying Compensation
Name and Principal Position Year Salary ($) Bonus ($) Options(#) ($)(2)
--------------------------- ---- ---------- --------- ------------ ------------
Lowell B. Hawkinson (3).................. 2001 $102,404 98,702 260,000 $139,375
President and Chief Executive Officer 1999 198,218 18,490 -- 50,694
Patrick Courtin (4)...................... 2001 157,500 -- -- 157,119
Former President and 2000 270,000 -- -- 24,872
Chief Executive Officer 1999 45,000 -- 463,000 3,393
Jeffrey A. Weber (5)..................... 2001 175,915 5,000 20,000 18,848
Vice President, Finance and 2000 153,327 20,000 110,000 16,632
Chief Financial Officer
James J. Slane (6)....................... 2001 105,649 15,749 -- 97,188
Former Vice President, Marketing 2000 153,327 42,134 62.000 11,990
Joseph Massey (7)........................ 2001 148,750 48,950 -- 32,596
Former Vice President, Engineering 2000 88,269 7,854 81,000 7,824
- --------
(1) In accordance with the rules of the Securities and Exchange Commission,
Other Annual Compensation in the form of perquisites and other personal
benefits has been omitted in those instances where the aggregate amount of
such perquisites and other personal benefits constituted less than the
lesser of $50,000 or 10% of the total amount of annual salary and bonus for
the executive officer for the fiscal year indicated.
(2) In fiscal year 2001, All Other Compensation included the following amounts:
(A) Company contributions under its 401(k) Plan for Messrs. Courtin, Weber,
Slane and Massey in the amounts of $3,225, $3,205, $3,190 and $4,037,
respectively; (B) Company payments for health and dental benefits, life
insurance, and long and short term disability insurance for Messrs.
Hawkinson, Courtin, Weber, Slane and Massey in the amounts of $12,305,
$20,022, $15,643, $8,994 and $14,274, respectively; and (C) amounts paid by
the Company in connection with the resignation or termination of
employment: (1) severance payments for Messrs. Hawkinson, Courtin and Slane
in the amounts of $127,070, $112,500 and $70,267, respectively, and (2)
payments with respect to accrued vacation for Messrs. Courtin, Slane and
Massey in the amounts of $23,372, $14,737 and $14,285, respectively.
In fiscal year 2000, All Other Compensation included the following amounts:
(A) Company contributions under its 401(k) Plan for Messrs. Courtin, Weber,
Slane and Massey in the amounts of $3,225, $3,206, $2,194 and $995,
respectively; and (B) Company payments for health and dental benefits, life
insurance, and long and short term disability insurance for Messrs. Courtin,
Weber, Slane and Massey in the amounts of $21,647, $15,426, $9,796 and
$6,828, respectively.
8
In fiscal year 1999, All Other Compensation included the following amounts:
(A) Company contributions under its 401(k) Plan for Messrs. Hawkinson and
Courtin in the amounts of $3,619 and $0, respectively; (B) Company payments
for health and dental benefits, life insurance, and long and short term
disability insurance for Messrs. Hawkinson and Courtin in the amounts of
$11,242 and $3,393, respectively; and (C) amounts paid by the Company in
connection with the resignation or termination of employment comprised of
severance payments to Mr. Hawkinson in the amount of $35,833.
(3) Mr. Hawkinson rejoined the Company as its president and chief executive
officer on August 3, 2001. Mr. Hawkinson had previously served as the
Company's president and chief executive officer from September 1986 through
October 1999. Mr. Hawkinson did not serve as an executive officer of the
Company during fiscal year 2000. During fiscal year 2000, Mr. Hawkinson
received severance payments totaling $215,000 from the Company. Mr.
Hawkinson also received options to purchase 10,000 shares of common stock
in June 2000 as a non-employee director of the Company.
(4) Mr. Courtin resigned as president and chief executive officer of the
Company effective August 3, 2001. He was appointed president and chief
executive officer in November 1999.
(5) Mr. Weber resigned as vice president, finance and chief financial officer
effective February 8, 2002. He joined the Company in February 2000.
(6) Mr. Slane's employment with the Company was terminated effective August 7,
2001. He joined the Company in February 2000.
(7) Mr. Massey resigned as vice president, engineering effective November 15,
2001. He joined the Company in June 2000.
Stock Options
The following table sets forth information regarding options granted during
the fiscal year ended December 31, 2001 by the Company to the executive
officers named in the Summary Compensation Table. No stock appreciation rights
were granted during 2001.
OPTION GRANTS IN 2001
Potential Realizable
Value at Assumed Annual
Number of Rates of Stock Price
Shares Percent of Total Appreciation for
Underlying Options Granted Exercise Option Term(2)
Options to Employees Price -----------------------
Granted in 2001 ($/Share)(1) Expiration Date 5%($) 10%($)
---------- ---------------- ------------ --------------- ------ ------
Lowell B. Hawkinson 10,000(3) 1.0% 0.97 06/29/11 6,100 15,459
100,000(4) 10.3% 0.37 08/03/11 26,280 58,960
150,000(5) 15.5% 0.37 08/03/11 39,420 88,440
Jeffrey A. Weber... 6,851(6) 0.7% 0.27 10/03/11 1,163 2,948
13,149(6) 1.4% 0.27 10/03/11 2,233 5,658
- --------
(1) The exercise price is equal to the fair market value of the Company's
common stock on the date of the grant.
(2) Potential realizable value is based on an assumption that the market price
of the stock will appreciate at the stated rate, compounded annually, from
the date of grant of the original option until the end of the 10-year term.
These values are calculated based on rules promulgated by the Securities
and Exchange Commission and do not reflect the Company's estimate or
projection of future stock prices. Actual gains, if any, on stock option
exercises will be dependent upon the future performance of the price of the
Company's common stock.
(3) Stock option granted under the Company's 2000 Stock Incentive Plan. The
option was granted to Mr. Hawkinson as a non-employee director of the
Company, and was fully vested and exercisable on the date of grant of the
option.
9
(4) Stock option granted under the Company's 1997 Stock Incentive Plan. The
option vests and becomes exercisable in three equal annual installments
commencing on the date of grant of the option.
(5) Stock option granted under the Company's 2000 Stock Incentive Plan. The
option vests and becomes exercisable in three equal annual installments
commencing on the date of grant of the option.
(6) Stock options granted under the Company's 2000 Stock Incentive Plan. The
option vests and becomes exercisable in three equal annual installments
commencing on the first anniversary of the date of grant of the option.
The following table sets forth information regarding the number and value of
unexercised options to purchase the Company's common stock held by each of the
executive officers named in the Summary Compensation Table as of December 31,
2001. There were no stock appreciation rights outstanding at the end of 2001.
No stock options were exercised during 2001.
FISCAL YEAR-END OPTION VALUES
Number of Shares Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
Fiscal Year-End Fiscal Year-End (1)
--------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
Lowell B. Hawkinson 103,334 166,666 $19,167 $38,338
Jeffrey A. Weber... 31,668 98,332 -- $ 6,600
Joseph Massey...... 18,334 -- -- --
- --------
(1) The value of the unexercised in-the-money options is calculated by
multiplying the number of shares of common stock underlying the option by
the difference between $0.60, which was the closing price per shares of the
Company's common stock on the OTC Bulletin Board on December 31, 2001, and
the applicable per share exercise price of the option.
Executive Employment and Severance Agreements
In August 2001, the Company entered into an employment agreement with Lowell
B. Hawkinson, relating to his employment as president and chief executive
officer of the Company. Under the terms of that agreement, Mr. Hawkinson
receives an annual base salary of $250,000 and is eligible to receive an annual
performance bonus of up to 50% of his annual base salary. In 2001, Mr.
Hawkinson was also eligible to receive an event bonus if the Company received
proceeds totaling $2.0 million or more from either a rights offering of its
common stock or the sale of its NetCure product line before November 16, 2001.
The amount of the event bonus is equal to $40,000 plus 1.5% of the proceeds
from the rights offering or the sale of the NetCure product line in excess of
$2.0 million. The Company sold its NetCure product line on November 9, 2001 to
Rocket Software, Inc. for $2.5 million in cash. Mr. Hawkinson's employment
agreement has a term expiring on October 31, 2002. Prior to October 31, 2001,
the Company may terminate Mr. Hawkinson's employment only for cause, as that
term is defined in the agreement. Also pursuant to the employment agreement,
Mr. Hawkinson was granted options to purchase 250,000 shares of the Company's
common stock. The options vest in three equal annual installments commencing on
August 3, 2001.
In October 1999, the Company entered into an employment agreement with
Patrick Courtin, relating to his employment as president and chief executive
officer of the Company. Under the terms of that agreement, Mr. Courtin received
an annual base salary of $270,000 and was eligible to receive annual
performance bonuses of up to 50% of his annual base salary. The agreement
provided that Mr. Courtin's employment could be terminated by either party upon
thirty days notice, except that Mr. Courtin could be terminated by the Company
immediately for cause, as that term was defined in the agreement. If Mr.
Courtin's employment was terminated
10
by the Company for cause, or if Mr. Courtin resigned without cause or good
reason, as that term was defined in the agreement, Mr. Courtin would have been
entitled to receive salary and benefits through the last day of employment with
the Company. In the event that Mr. Courtin's employment was terminated by the
Company without cause, or if Mr. Courtin resigned for good reason, Mr. Courtin
would be entitled to receive his base salary and benefits for (1) 18 months if
the termination was prior to November 1, 2000, (2) 12 months if the termination
was between November 1, 2000 and November 1, 2002, or (3) six months if the
termination was after November 1, 2002. As a result of Mr. Courtin's August 3,
2001 resignation from the Company, Mr. Courtin received severance payments
totaling $112,500 during the period from August 4, 2001 through December 31,
2001, and is entitled to receive severance payments through September 2002.
In February 7, 2000, the Company entered into severance agreements with each
of Messrs. Slane and Weber. These severance agreements provide that upon
termination without cause, the employee will be entitled to receive his base
salary and certain other benefits from the Company for a period of six months
following termination. Under the severance agreements, cause is defined to
include, among other things, a good faith finding by the Company of the failure
of the employee to perform his duties assigned by the Company, dishonesty,
gross negligence, misconduct or the conviction of the employee for, or guilty
plea by the employee to, a crime involving moral turpitude or any felony. Mr.
Slane's employment with the Company was terminated on August 7, 2001. Pursuant
to his severance agreement with the Company, Mr. Slane received severance
payments totaling $70,266 during the period from August 8, 2001 through
December 31, 2001, and was entitled to receive severance payments through
February 15, 2002. Mr. Weber resigned from the Company effective February 8,
2002. Mr. Weber is not entitled to any benefits under his severance agreement
with the Company.
Report of the Compensation Committee on Executive Compensation
The Compensation Committee of the Company's Board of Directors is
responsible for establishing compensation policies with respect to the
Company's executive officers, including the president and chief executive
officer, and the other executive officers of the Company, and setting the
compensation for these individuals.
The Compensation Committee seeks to achieve three broad goals in connection
with the Company's executive compensation programs and decisions regarding
individual compensation. First, the Compensation Committee structures executive
compensation programs in a manner that the Committee believes will enable the
Company to attract and retain key executives. Second, the Compensation
Committee establishes compensation programs that are designed to reward
executives for the achievement by the Company of operating income goals and the
achievement by the executives of certain assigned objectives. By tying
compensation in part to particular goals, the Compensation Committee believes
that a performance-oriented environment is created for the Company's
executives. Finally, the Company's executive compensation programs are intended
to provide executives with an equity interest in the Company so as to link a
portion of the compensation of the Company's executives with the performance of
the Company's common stock.
The compensation programs for the Company's executives generally consist of
three elements based upon the foregoing objectives: base salary; annual cash
bonus; and a stock-based equity incentive in the form of participation in the
Company's stock option plans. In establishing base salaries for executives,
including the chief executive officer, the Compensation Committee monitors
salaries at other companies, particularly those that are in the same industry
as the Company or related industries and/or are located in the same general
geographic area as the Company, considers historic salary levels of the
individual and the nature of the individual's responsibilities and compares the
individual's base salary with those of other executives at the Company.
The Compensation Committee links cash bonuses to annual profitability goals
and the achievement by the executives of certain assigned objectives. The
individual objectives set for executive officers of the Company are generally
both objective and subjective in nature and include such goals as bookings,
revenue, profit and departmental objectives. The Compensation Committee
believes that these arrangements tie the executive's performance closely to a
key measure of success of the Company or the executive's business unit.
11
Stock option grants are designed to make a portion of the overall
compensation of the executive officers receiving such awards vary depending
upon the long range performance of the Company. As a result of the applicable
vesting arrangements, such grants also serve as a means for the Company to
retain the services of these individuals over several years.
The compensation philosophy applied by the Compensation Committee in
establishing the compensation for the Company's chief executive officer is the
same as for the other executive officers. The Compensation Committee believes
that the compensation of the chief executive officer is consistent with the
Company's general policies concerning executive compensation and is appropriate
in light of the Company's financial objectives and performance. Awards of
long-term incentive compensation to the chief executive officer are considered
concurrently with awards to other executive officers and follow the same
general policies as such other long-term incentive awards.
Mr. Courtin joined the Company as its chief executive officer in November
1999. The Compensation Committee set Mr. Courtin's annualized salary for 2001
at $270,000. Mr. Courtin did not receive a performance bonus in 2001. Mr.
Courtin resigned as chief executive officer of the Company effective August 3,
2001.
Mr. Hawkinson rejoined the Company as its chief executive officer and
president on August 3, 2001. Mr. Hawkinson's base salary for 2001 was $250,000.
Mr. Hawkinson also received options to acquire 250,000 shares of the Company's
common stock at an exercise price of $0.37 per share, the closing price per
share of the Company's common stock on the date of grant. In fiscal 2001, Mr.
Hawkinson received an annual performance bonus of $51,202 based upon his
achievement of performance objectives determined by the Board of Directors and
an event bonus of $47,500 in connection with the sale of the Company's NetCure
product line. Mr. Hawkinson's compensation was designed to align his interest
with those of the Company's stockholders by tying the value of the stock option
award and his eligibility for performance and event bonuses to the success of
his efforts toward restructuring the Company, and returning the Company to
operational profitability. The Compensation Committee believes that Mr.
Courtin's and Mr. Hawkinson's compensation has been consistent with the
Compensation Committee's compensation philosophy.
Section 162(m) of the Internal Revenue Code of 1986, as amended, generally
disallows a tax deduction to public companies for compensation over $1,000,000
paid to its chief executive officer and its four other most highly compensated
executive officers. Qualifying performance-based compensation will not be
subject to the deduction limit if certain requirements are met. In this regard,
the Company has limited the number of shares subject to stock options that may
be granted to Company employees in a manner that complies with certain
performance-based requirements of Section 162(m). Based on the compensation
awarded to the executive officers of the Company, it does not appear that the
Section 162(m) limitation will have a significant impact on the Company in the
near term. While the Committee does not currently intend to qualify its
incentive awards, other than stock option issuances, as a performance-based
plan, it will continue to monitor the impact of Section 162(m) on the Company.
Compensation Committee
Robert A. Degan John A. Shane Barry
R. Gorsun
12
Compensation Committee Interlocks and Insider Participation
The current members of the Company's Compensation Committee are Messrs.
Degan, Gorsun and Shane. No executive officer of the Company has served as
director or member of the compensation committee, or other committee serving an
equivalent function, of any other entity, whose executive officers served as a
director of or member of the Compensation Committee of the Company.
Certain Business Relationships of Management and Others
September 2001 Bridge Loan
In September 2001, the Company obtained bridge loans of approximately $1.0
million from MinnovEX Technologies, Inc., a business partner of the Company,
and eight individuals, Peng Ong and Mark David, a Gensym founder and a Company
employee, respectively, and each of the six members of the Company's Board of
Directors. The terms and conditions of the bridge loans were determined by
arms-length negotiations among the Company, MinnovEX and Messrs. Ong and David.
Once the terms and conditions of the bridge loans were negotiated among those
parties, the members of the Company's Board of Directors participated in the
transaction upon identical terms. The amounts loaned to the Company by the
members of the Company's Board of Directors in connection with the bridge loan
transaction are as follows: Mr. Degan--$25,000, Mr. Gorsun--$30,000, Mr.
Hawkinson--$133,333, Mr. Johnson--$100,000, Mr. Shane--$36,000 and Mr.
Swithenbank--$35,000. The interest rate on the bridge loans was 10% per annum.
On November 9, 2001, the principal and accrued interest on the bridge loans
were repaid from the net proceeds form the Company's sale of its NetCure
product line.
Sale of NetCure Product Line
On November 9, 2001, the Company completed the sale of its NetCure product
line to Rocket Software, Inc. The sale of the NetCure product line was
effectuated pursuant to an Asset Purchase Agreement, dated November 9, 2001, by
and between the Company and Rocket Software. The purchase price paid by Rocket
Software was approximately $2.5 million in cash plus the assumption of certain
liabilities relating to the NetCure product line. The purchase price and the
other terms and conditions of the Asset Purchase Agreement were determined by
arms-length negotiation between the Company and Rocket Software.
According to a Schedule 13D filed with the Securities and Exchange
Commission on July 27, 2001, as amended, at the time of the consummation of the
sale of the NetCure product line, Rocket Software owned an aggregate of 200,000
shares of common stock of the Company. Andrew Youniss, director, president,
chief executive officer and 40% stockholder of Rocket Software, owned an
additional 1,500 shares of common stock of the Company, and Johan Magnusson,
director, chief operating officer and 40% stockholder of Rocket Software, owned
an additional 335,600 shares of common stock of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and 10% stockholders to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission. Directors, executive officers and 10% stockholders are required by
Securities and Exchange Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file. Based on a review of the copies of
reports furnished to the Company and written representations from the Company's
directors and executive officers, the Company believes that during 2001 its
directors, executive officers and 10% stockholders have complied with all
Section 16(a) filing requirements, except that the Initial Report on Form 3 for
Marilyn Kain, the Company's former Vice President, Global Sales & Service,
which was filed on March 12, 2001, was not timely.
13
Comparative Stock Performance
The comparative stock performance graph below compares the cumulative total
stockholder return on the common stock of the Company for the period from
December 31, 1996 through December 31, 2001 with the cumulative total return on
the Nasdaq Composite Index and the Nasdaq Computer Index. The comparison
assumes the investment of $100 on December 31, 1996 in the Company's common
stock and in each of the indices and, in each case, assumes reinvestment of all
dividends, if any.
[CHART]
Gensym Nasdaq Nasdaq
Corporation Composite Index Computer Index
----------- --------------- --------------
1996 $100 $100 $100
1997 38 122 119
1998 26 170 219
1999 48 315 448
2000 7 191 250
2001 5 151 189
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1996 1997 1998 1999 2000 2001
-------- -------- -------- -------- -------- --------
Gensym Corporation.... $100 $ 38 $ 26 $ 48 $ 7 $ 5
Nasdaq Composite Index $100 $122 $170 $315 $191 $151
Nasdaq Computer Index. $100 $119 $219 $448 $250 $189
Report of the Audit Committee of the Board of Directors
During 2001 and through March 25, 2002, the date of the auditor's report
relating to the Company's audited financial statements for the year ended
December 31, 2001, the Audit Committee of the Company's Board of Directors was
comprised of three members, Messrs. Degan, Shane and Swithenbank. Mr.
Swithenbank resigned from the Audit Committee on March 25, 2002 following the
Audit Committee's meeting at which it reviewed the Company's audited financial
statements for the year ended December 31, 2001 and the issuance of the Audit
Committee's report relating to the Company's audited financials for fiscal year
2001. Mr. Swithenbank subsequently was appointed chief financial officer of the
Company.
The Audit Committee acts under a written charter first adopted and approved
on April 28, 2000. During 2001, Messrs. Degan, Shane and Swithenbank were
independent directors, as defined by the rules of the Nasdaq Stock Market.
14
The Audit Committee reviewed the Company's audited financial statements for
the fiscal year ended December 31, 2001 and discussed these financial
statements with the Company's management. The Audit Committee also reviewed and
discussed the audited financial statements and the matters required by
Statement on Auditing Standards 61 (Communication with Audit Committees) with
Arthur Andersen LLP, the Company's independent auditors.
The Company's independent auditors also provided the Audit Committee with
the written disclosures and the letter required by Independence Standards Board
Standard No. 1 (Independence Discussions with Audit Committees). In addition,
the Audit Committee discussed with the independent auditors their independence
from the Company. The Audit Committee discussed with the independent auditors
the matters disclosed in this letter and their independence from the Company.
The Audit Committee also considered whether the independent auditors' provision
of the other, non-audit related services to the Company which are referred to
below in the discussion relating to Proposal III is compatible with maintaining
such auditors' independence.
Based on its discussions with management and the independent auditors, and
its review of the representations and information provided by management and
the independent auditors, the Audit Committee recommended to the Company's
Board of Directors that the audited financial statements be included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2001.
By the Audit Committee of the Board of Directors of the Company.
John A. Shane Robert A. Degan Thomas
E. Swithenbank
PROPOSAL II--APPROVAL OF AMENDMENT TO 1995 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors believes that the continued growth and profitability
of the Company depends, in large part, upon the ability of the Company to
maintain a competitive position in attracting and retaining key personnel. As
of December 31, 2001, 249,422 shares were available for future purchase under
the Company's 1995 Employee Stock Purchase Plan (the "Purchase Plan").
Accordingly, on January 31, 2002, the Board of Directors adopted, subject to
stockholder approval, an amendment to the Purchase Plan that increased from
1,000,000 to 1,200,000 the number of shares of the Company's common stock
available for issuance under the Purchase Plan, subject to a proportionate
adjustment for certain changes in the Company's capitalization, such as a stock
split.
The board of directors believes adoption of the amendment to the Purchase
Plan is in the best interests of the Company and its stockholders and
recommends a vote IN FAVOR of this proposal.
Summary of the Purchase Plan
The following is a brief summary of the material terms of the Purchase Plan.
All employees of the Company, including directors of the Company who are
employees, and all employees of any participating subsidiaries, (1) whose
customary employment is more than 20 hours per week and for more than five
months in any calendar year, (2) who have been employed by the Company or a
participating subsidiary for at least three months prior to enrolling in the
Purchase Plan, and (3) who are employees on the first day of the designated
payroll deduction period (the "Offering Period"), are eligible to participate
in the Purchase Plan.
15
Employees who would immediately after the grant own 5% or more of the total
combined voting power or value of the stock of the Company or any subsidiary
may not be granted an option under the Purchase Plan. As of March 31, 2002,
approximately 62 of the Company's employees were eligible to participate in the
Purchase Plan.
On April 11, 2002, the last reported sale price of the Company's common
stock on the OTC Bulletin Board was $.81 per share.
On the first day of an Offering Period (an "Offering Date"), the Company
grants to each eligible employee who has elected to participate in the Purchase
Plan an option to purchase such number of whole shares of the Company's common
stock of the Company reserved for the purposes of the Purchase Plan as does not
exceed the number of shares determined by dividing (1) the quotient of $25,000
divided by two (or such other number of offerings as the Board of Directors may
determine will be conducted during that calendar year) by (2) the closing price
of the common stock as reported on OTC Bulletin Board, or any other national
securities exchange or trading system on which the Company's common stock may
then be listed or quoted, on the Offering Date of such Plan Period. The
employee may authorize an amount (a whole percentage from 1% to 10% of such
employee's earnings) to be deducted by the Company from his or her compensation
during the Offering Period. On the last day of the Offering Period, the
employee is deemed to have exercised the option, at the option exercise price,
to the extent of accumulated payroll deductions. Under the terms of the
Purchase Plan, the option price is an amount equal to 85% of the fair market
value per share of common stock on either the Offering Date or the last day of
the Offering Period, whichever is lower. The Compensation Committee may, in its
discretion, choose an Offering Period of twelve months or less for each of the
offerings and choose a different Offering Period for each offering.
If an employee's employment is terminated before the last day of the
Offering Period, that employee is not entitled to exercise any option, and the
amount of such employee's accumulated payroll deductions will be refunded. An
employee's rights under the Purchase Plan terminate upon voluntary withdrawal
from the Purchase Plan at any time, or when the employment of such employee
ceases for any reason.
Federal Income Tax Consequences
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to purchases made under the
Purchase Plan and with respect to the sale of common stock acquired under the
Purchase Plan.
Tax Consequences to Participants
In general, a participant will not recognize taxable income upon enrolling
in the Purchase Plan or upon purchasing shares of common stock at the end of an
Offering. Instead, if a participant sells common stock acquired under the
Purchase Plan at a sale price that exceeds the price at which the participant
purchased the Company's common stock, then the participant will recognize
taxable income in an amount equal to the excess of the sale price of the
Company's common stock over the price at which the participant purchased the
common stock. A portion of that taxable income will be ordinary income, and a
portion may be capital gain.
If the participant sells the common stock more than one year after acquiring
it and more than two years after the date on which the offering commenced (the
"Grant Date"), then the participant will be taxed as follows. If the sale price
of the common stock is higher than the price at which the participant purchased
the common stock, then the participant will recognize ordinary compensation
income in an amount equal to the lesser of (1) fifteen percent of the fair
market value of the common stock on the Grant Date, and (2) the excess of the
sale price of the common stock over the price at which the participant
purchased the common stock.
16
Any further income will be long-term capital gain. If the sale price of the
common stock is less than the price at which the participant purchased the
common stock, then the participant will recognize long-term capital loss in an
amount equal to the excess of the price at which the participant purchased the
common stock over the sale price of the common stock.
If the participant sells the common stock within one year after acquiring it
or within two years after the Grant Date (a "Disqualifying Disposition"), then
the participant will recognize ordinary compensation income in an amount equal
to the excess of the fair market value of the common stock on the date that it
was purchased over the price at which the participant purchased the common
stock. The participant will also recognize capital gain in an amount equal to
the excess of the sale price of the common stock over the fair market value of
the common stock on the date that it was purchased, or capital loss in an
amount equal to the excess of the fair market value of the common stock on the
date that it was purchased over the sale price of the common stock. This
capital gain or loss will be long-term capital gain or loss if the participant
has held the common stock for more than one year prior to the date of the sale
and will be a short-term capital gain or loss if the participant has held the
common stock for a shorter period.
Tax Consequences to the Company
The offering of common stock under the Purchase Plan will have no tax
consequences to the Company. Moreover, in general, neither the purchase nor the
sale of common stock acquired under the Purchase Plan will have any tax
consequences to the Company except that the Company will be entitled to a
business-expense deduction with respect to any ordinary compensation income
recognized by a participant upon making a Disqualifying Disposition. Any such
deduction will be subject to the limitations of Section 162(m) of the Code.
PROPOSAL III
RATIFICATION OF THE APPOINTMENT OF AUDITORS
The Audit Committee of the Board of Directors of Gensym Corporation annually
considers and recommends to the Board the selection of Gensym's independent
public accountants. As recommended by Gensym's Audit Committee, Gensym's Board
of Directors has selected the firm of PricewaterhouseCoopers LLP, independent
accountants, to be the Company's auditors for the fiscal year ending December
31, 2002 and recommends to the stockholders that they vote for ratification of
that selection.
A representative of Arthur Andersen LLP, which served as auditors for the
year ended December 31, 2001, is expected to be present at the meeting to
respond to appropriate questions, and to make a statement if he or she desires.
The selection of independent auditors is approved annually by the Board of
Directors and subsequently submitted to the stockholders for ratification.
Although stockholder ratification of the Board of Directors' selection of
PricewaterhouseCoopers LLP is not required by law, the Board of Directors
believes that it is advisable to give stockholders the opportunity to ratify
this selection. If this proposal is not approved at the annual meeting, the
Board of Directors will reconsider its selection of PricewaterhouseCoopers LLP.
The Board of Directors recommends a vote IN FAVOR of the ratification of
PricewaterhouseCoopers LLP as independent auditors for 2002.
Change in Accountants
As recommended by Gensym's Audit Committee, Gensym's Board of Directors on
March 27, 2002 decided to no longer engage Arthur Andersen LLP as the Company's
independent pubic accountants. On April 8, 2002, the Company engaged
PricewaterhouseCoopers LLP to serve as its independent public accountants for
fiscal year 2002, in accordance with the recommendation of the Audit Committee.
17
In the years ended December 31, 2001 and 2000 and through April 8, 2002, the
Company did not consult PricewaterhouseCoopers LLP with respect to the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's consolidated financial statements, or any other matters or
reportable events as set forth in Item 304(a)(2)(ii) of Regulation S-K.
Arthur Andersen's audit report on the Company's consolidated financial
statements for the fiscal year ended December 31, 2000 contained an explanatory
paragraph regarding the Company's ability to continue as a going concern.
Except as stated above, Arthur Andersen's audit reports on the Company's
consolidated financial statements for the fiscal years ended December 31, 2001
and 2000 did not contain an adverse opinion or disclaimer of opinion, nor were
they qualified or modified as to uncertainty, audit scope or accounting
principles.
During the Company's two fiscal years ended December 31, 2001 and 2000 and
the subsequent interim period preceding the decision to change independent
public accountants, there were no disagreements with Arthur Andersen on any
matter of accounting principles or practices, financial statement disclosure,
or auditing scope or procedure which, if not resolved to Arthur Andersen's
satisfaction, would have caused it to make reference to the subject matter of
the disagreement in connection with its audit reports on the Company's
consolidated financial statements for such years. In connection with its work
on the Company's consolidated financial statements for the year ended December
31, 2001, Arthur Andersen communicated certain matters and recommendations to
the Company's management concerning the design and implementation of its
internal financial controls, including the need to further develop and document
formal policies and procedures relating to the closing and review process, the
consolidation process and foreign operations and to improve the analysis
supporting recorded amounts. These matters were discussed with the Company's
Audit Committee, and the Company has authorized Arthur Andersen to respond
fully to inquiries regarding these matters by the Company's successor auditors.
Except for the foregoing, there were no reportable events as defined in Item
304(a)(1)(v) of Regulation S-K.
Arthur Andersen has furnished the Company with a letter addressed to the
Securities and Exchange Commission stating that it agrees with the statements
set forth in the previous two paragraphs. A copy of that letter, dated April 3,
2002, was filed as an exhibit to the Company's Current Report on Form 8-K
dated March 27, 2002 and filed with the Securities and Exchange Commission on
April 3, 2002.
Independent Auditor Fees and Other Matters
The following is a description of the audit and non-audit services performed
by Arthur Andersen LLP for the Company during fiscal year 2001 and the fees
associated with such services.
Audit Fees
Arthur Andersen LLP billed the Company an aggregate of $152,000 in fees for
professional services rendered in connection with the audit of the Company's
financial statements for the most recent fiscal year and the reviews of the
financial statements included in each of the Company's Quarterly Reports on
Form 10-Q during the fiscal year ended December 31, 2001.
Financial Information Systems Design and Implementation Fees
Arthur Andersen LLP has not billed the Company for any professional services
rendered to the Company and its affiliates for the fiscal year ended December
31, 2001 in connection with the design and implementation of financial
information systems, the operation of information systems and the management of
local area networks.
All Other Fees
Arthur Andersen LLP billed the Company an aggregate of $110,000 in fees for
other services rendered to the Company and its affiliates for the fiscal year
ended December 31, 2001. These services included the review of Securities and
Exchange Commission filings, tax services, benefit plan audits and
consultations relating to the Company's international operations.
18
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Stockholder proposals submitted pursuant to Rule 14a-8 under the Securities
Exchange Act of 1934 and intended to be presented in the proxy material for the
2003 Annual Meeting of Stockholders must be received by the Company at its
offices, 52 Second Avenue, Burlington, MA 01803, no later than December 16,
2002 in order to be considered for inclusion in the proxy statement relating to
that meeting. The Company suggests that proponents submit their proposals by
certified mail, return receipt requested, addressed to the Secretary of the
Company.
The Company's Amended and Restated By-Laws also establish advance notice
procedures with respect to a stockholder nomination of candidates for election
as directors and for the conduct of other business to be brought before an
annual meeting by a stockholder not submitted pursuant to Rule 14a-8. A notice
regarding a director nomination or a proposal for other business must be
received by the Company not less than 60 days nor more than 90 days prior to
the applicable stockholder meeting. However, in the event that less than 70
days' notice or prior disclosure of the date of the meeting is given or made to
the Company's stockholders, the notice must be received by the Company not
later than the tenth day following the date on which such notice of the date of
the meeting was mailed or such public disclosure was made, whichever occurs
first. Any such notice must contain certain specified information concerning
the persons to be nominated and/or the other business to be brought before the
annual meeting and the stockholder submitting the director nomination or
proposal for other business. The Company has not yet publicly announced the
date of the 2003 Annual Meeting. The advance notice provisions of the Company's
by-laws supersede the notice requirements contained in recent amendments
to Rule 14a-4. Director nominations or stockholder proposals for other business
to be brought before the annual meeting should be mailed to: Corporate
Secretary, Gensym Corporation, 52 Second Avenue, Burlington, MA 01803.
SOLICITATION OF PROXIES
The cost of the solicitation of proxies will be borne by Gensym. In addition
to solicitations by mail, certain directors, officers and employees of the
Company may solicit proxies in person or by use of other communication media.
Gensym will reimburse banks, brokerage firms and others for forwarding proxy
materials to beneficial owners of the Company's common stock.
The Company will provide free of charge to any stockholder from whom a proxy
is solicited pursuant to this proxy statement, upon written request from such
stockholder, a copy of the Company's annual report filed with the Securities
and Exchange Commission on Form 10-K for Gensym's fiscal year ended December
31, 2001 without exhibits. Requests for such report should be directed to
Gensym Corporation, 52 Second Avenue, Burlington, Massachusetts 01803,
Attention: Corporate Secretary. Exhibits will be provided upon request and
payment of an appropriate processing fee.
19
OTHER MATTERS
The Board of Directors knows of no other business that will be presented for
consideration at the Meeting other than that described above. However, if any
other business should come before the Meeting, it is the intention of the
persons named in the enclosed proxy to vote, or otherwise act, in accordance
with their best judgment on such matters.
By order of the Board of Directors,
Lowell B. Hawkinson Secretary
April 12, 2002
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION IS
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK
PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXIES.
20
Appendix A
GENSYM CORPORATION
AMENDMENT NO. 1
TO
1995 EMPLOYEE STOCK PURCHASE PLAN
The first paragraph of Section 9 of the Company's 1995 Employee Stock
Purchase Plan is amended and restated in its entirety to read as follows:
9. Purchase of Shares. On the Offering Commencement Date of each Plan
Period, the Company will grant to each eligible employee who was then a
participant in the Plan an option (an "Option") to purchase on the last
business day of such Plan Period (the "Exercise Date"), at the Option Price
hereinafter provided for, such number of whole shares of Common Stock of
the Company reserved for the purposes of the Plan as does not exceed the
number of shares determined by dividing (i) the quotient of $25,000 divided
by two (or such other number of Offerings as the Board of Directors may
determine will be conducted during that calendar year) by (ii) the closing
price of the Common Stock as reported on the Nasdaq National Market (or
such other national securities exchange or trading system on which the
Company's Common Stock may then be listed or quoted) on the Offering
Commencement Date of such Plan Period.
Adopted by the Board of Directors on October 29, 1997
GENSYM CORPORATION
AMENDMENT NO. 2
TO
1995 EMPLOYEE STOCK PURCHASE PLAN
The first paragraph of the Company's 1995 Employee Stock Purchase Plan is
amended and restated in its entirety to read as follows:
"The purpose of this Plan is to provide eligible employees of Gensym
Corporation (the "Company") and certain of its subsidiaries with
opportunities to purchase shares of the Company's common stock, $.01 par
value per share (the "Common Stock"). 500,000 shares of Common Stock in the
aggregate have been approved for this purpose."
Adopted by the Board of Directors on January 27, 1998.
Approved by the Stockholders of the Company on May 20, 1998.
GENSYM CORPORATION
AMENDMENT NO. 3
TO
1995 EMPLOYEE STOCK PURCHASE PLAN
The first paragraph of the Company's 1995 Employee Stock Purchase Plan is
amended and restated in its entirety to provide as follows:
"The purpose of this Plan is to provide eligible employees of Gensym
Corporation (the "Company") and certain of its subsidiaries with
opportunities to purchase shares of the Company's common stock, $.01 par
value per share (the "Common Stock"). 700,000 shares of Common Stock in the
aggregate have been approved for this purpose."
Adopted by the Board of Directors on February 14, 2000.
Approved by the Stockholders of the Company on May 17, 2000.
GENSYM CORPORATION
AMENDMENT NO. 4
TO
1995 EMPLOYEE STOCK PURCHASE PLAN
The first paragraph of the Company's 1995 Employee Stock Purchase Plan is
amended and restated in its entirety to provide as follows:
"The purpose of this Plan is to provide eligible employees of Gensym
Corporation (the "Company") and certain of its subsidiaries with
opportunities to purchase shares of the Company's common stock, $.01 par
value per share (the "Common Stock"). 1,000,000 shares of Common Stock in
the aggregate have been approved for this purpose."
Adopted by the Board of Directors on January 31, 2001.
Approved by the Stockholders of the Company on May 16, 2001.
GENSYM CORPORATION
AMENDMENT NO. 5
TO
1995 EMPLOYEE STOCK PURCHASE PLAN
The first paragraph of the Company's 1995 Employee Stock Purchase Plan is
amended and restated in its entirety to provide as follows:
"The purpose of this Plan is to provide eligible employees of Gensym
Corporation (the "Company") and certain of its subsidiaries with
opportunities to purchase shares of the Company's common stock, $.01 par
value per share (the "Common Stock"). 1,200,000 shares of Common Stock in
the aggregate have been approved for this purpose."
Adopted by the Board of Directors on January 31, 2002.
Approved by the Stockholders of the Company on May __, 2002
GENSYM CORPORATION
1995 EMPLOYEE STOCK PURCHASE PLAN
The purpose of this Plan is to provide eligible employees of Gensym
Corporation (the "Company") and certain of its subsidiaries with opportunities
to purchase shares of the Company's common stock, $.01 par value per share (the
"Common Stock"). 200,000 shares of Common Stock in the aggregate have been
approved for this purpose.
1. Administration. The Plan will be administered by the Company's Board of
Directors (the "Board") or by a Committee appointed by the Board (the
"Committee"). The Board or the Committee has authority to make rules and
regulations for the administration of the Plan and its interpretation and
decisions with regard thereto shall be final and conclusive.
2. Eligibility. Participation in the Plan will neither be permitted nor
denied contrary to the requirements of Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"), and regulations promulgated thereunder. All
employees of the Company, including Directors who are employees, and all
employees of any subsidiary of the Company (as defined in Section 424(f) of the
Code) designated by the Board or the Committee from time to time (a "Designated
Subsidiary"), are eligible to participate in any one or more of the offerings of
Options (as defined in Section 9) to purchase Common Stock under the Plan
provided that:
(a) they are regularly employed by the Company or a Designated
Subsidiary for more than 20 hours a week and for more than five months in a
calendar year; and
(b) they have been employed by the Company or a Designated Subsidiary
for at least three months (or such number of days as may be determined by
the Board of Directors or Committee) prior to enrolling in the Plan; and
(c) they are employees of the Company or a Designated Subsidiary on
the first day of the applicable Plan Period (as defined below).
No employee may be granted an Option hereunder if such employee,
immediately after the Option is granted, owns 5% or more of the total combined
voting power or value of the stock of the Company or any subsidiary. For
purposes of the preceding sentence, the attribution rules of Section 424(d) of
the Code shall apply in determining the stock ownership of an employee, and all
stock which the employee has a contractual right to purchase shall be treated as
stock owned by the employee.
3. Offerings. The Company will make one or more offerings (each, an
"Offering" and collectively, "Offerings") to employees to purchase stock under
this Plan. Offerings will begin on such dates as may be determined by the Board
of Directors or the Committee (the "Offering Commencement Dates"). Each Offering
Commencement Date will begin an approximately six month period (a "Plan Period")
during which payroll deductions will be made and held for the purchase of Common
Stock at the end of the Plan Period. The Board or the Committee may, at its
discretion, choose different Plan Periods of twelve (12) months or less for
Offerings.
4. Participation. An employee eligible on the Offering Commencement Date of
any Offering may participate in such Offering by completing and forwarding a
payroll deduction authorization form to the employee's appropriate payroll
office at least seven days prior to the applicable Offering Commencement Date.
The form will authorize a regular payroll deduction from the Compensation
received by the employee during the Plan Period. Unless an employee files a new
form or withdraws from the Plan, his deductions and purchases will continue at
the same rate for future Offerings under the Plan as long as the Plan remains in
effect. The term "Compensation" means the amount of money reportable on the
employee's Federal Income Tax Withholding Statement, excluding, to the extent
determined by the Board or the Committee, overtime, shift premium, incentive or
bonus awards, allowances and reimbursements for expenses such as relocation
allowances for travel expenses, income or gains on the exercise of Company stock
options or stock appreciation rights, and similar items, whether or not shown on
the employee's Federal Income Tax Withholding Statement, and including, in the
case of salespersons, sales commissions to the extent determined by the Board or
the Committee.
5. Deductions. The Company will maintain payroll deduction accounts for all
participating employees. With respect to any Offering made under this Plan, an
employee may authorize a payroll deduction in any whole number percentage from
1% to 10% of the Compensation he or she receives during the Plan Period or such
shorter period during which deductions from payroll are made, subject to such
lesser maximum rate as may be determined by the Board of Directors or Committee
prior to the applicable Offering Commencement Date.
No employee may be granted an Option (as defined in Section 9) which
permits his rights to purchase Common Stock under this Plan and any other stock
purchase plan of the Company and its subsidiaries to accrue at a rate which
exceeds $25,000 of the fair market value of such Common Stock (determined at the
Offering Commencement Date of the Plan Period) for each calendar year in which
the Option is outstanding at any time.
6. Deduction Changes. An employee may decrease or discontinue such
employee's payroll deduction once during any Plan Period, by filing a new
payroll deduction authorization form. However, an employee may not increase his
payroll deduction during a Plan Period. If an employee elects to discontinue
such employee's payroll deductions during a Plan Period, but does not elect to
withdraw such employee's funds pursuant to Section 8 hereof, funds deducted
prior to such employee's election to discontinue will be applied to the purchase
of Common Stock on the Exercise Date (as defined below).
7. Interest. Interest will not be paid on any employee payroll deduction
accounts, except to the extent that the Board or its Committee, in its sole
discretion, elects to credit such accounts with interest at such per annum rate
as it may from time to time determine.
8. Withdrawal of Funds. An employee may at any time prior to the close of
business on the last business day in a Plan Period and for any reason
permanently withdraw all of the balance accumulated in the employee's payroll
deduction account and thereby withdraw from participation in an Offering.
Partial withdrawals are not permitted. The employee may not begin participation
again during the remainder of the Plan Period. The employee may participate in
any subsequent Offering in accordance with terms and conditions established by
the Board or the Committee, except that employees who are also directors or
officers of the Company within the
meaning of Section 16 of the Securities Exchange Act of 1934 (the "Exchange
Act") and the rules promulgated thereunder may not participate again for a
period of at least six months as provided in Rule 16b-3(d)(2)(i) or any
successor provision.
9. Purchase of Shares. On the Offering Commencement Date of each Plan
Period, the Company will grant to each eligible employee who is then a
participant in the Plan an option (an "Option") to purchase on the last business
day of such Plan Period (the "Exercise Date"), at the Option Price hereinafter
provided for, such number of whole shares of Common Stock of the Company
reserved for the purposes of the Plan as does not exceed the number of shares
determined by dividing 15% of such employee's annualized Compensation for the
immediately prior six-month period by the price determined in accordance with
the formula set forth in the following paragraph but using the closing price on
the Offering Commencement Date of such Plan Period.
The purchase price (the "Option Price") for each share purchased will be
85% of the closing price of the Common Stock as reported on the Nasdaq National
Market (or such other national securities exchange or trading system on which
the Company's Common Stock may then be listed or quoted) on (i) the first
business day of such Plan Period or (ii) on the Exercise Date, whichever closing
price shall be less. If no such price is reported on such date, the price of the
Common Stock for purposes of clauses (a) and (b) above shall be the reported
price for the nearest preceding day.
Each employee who continues to be a participant in the Plan on the Exercise
Date shall be deemed to have exercised his Option at the Option Price on such
date and shall be deemed to have purchased from the Company the number of full
shares of Common Stock reserved for the purpose of the Plan that such employee's
accumulated payroll deductions on such date will pay for pursuant to the formula
set forth above (but not in excess of the maximum number determined in the
manner set forth above).
Any balance remaining in an employee's payroll deduction account at the end
of a Plan Period will be automatically refunded to the employee, except that any
balance which is less than the purchase price of one share of Common Stock will
be carried forward into the employee's payroll deduction account for the
following Offering, unless the employee elects not to participate in the
following Offering under the Plan, in which case the balance in the employee's
account shall be refunded.
10. Issuance of Certificates. Certificates representing shares of Common
Stock purchased under the Plan may be issued only in the name of the employee,
or in the name of the employee and another person of legal age as joint tenants
with rights of survivorship.
11. Rights on Retirement, Death, or Termination of Employment. In the event
of a participating employee's termination of employment prior to the last
business day of a Plan Period, no payroll deduction shall be taken from any pay
due and owing to an employee and the balance in the employee's payroll deduction
account shall be paid to the employee or, in the event of the employee's death,
(a) to a beneficiary previously designated in a revocable notice signed by the
employee (with any spousal consent required under state law) or (b) in the
absence of such a designated beneficiary, to the executor or administrator of
the employee's estate or
(c) if no such executor or administrator has been appointed to the knowledge of
the Company, to such other person(s) as the Company may, in its discretion,
designate. If, prior to the last business day of the Plan Period, the Designated
Subsidiary by which an employee is employed shall cease to be a subsidiary of
the Company, or if the employee is transferred to a subsidiary of the Company
that is not a Designated Subsidiary, the employee shall be deemed to have
terminated employment for the purposes of this Plan.
12. Optionees Not Stockholders. Neither the granting of an Option to an
employee nor the deductions from such employee's pay shall constitute such
employee a stockholder of the shares of Common Stock covered by an Option under
this Plan until such shares have been purchased by and issued to such employee.
13. Rights Not Transferable. Rights under this Plan are not transferable by
a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
14. Application of Funds. All funds received or held by the Company under
this Plan may be combined with other corporate funds and may be used for any
corporate purpose.
15. Adjustment in Case of Changes Affecting Common Stock. In the event of a
subdivision of outstanding shares of Common Stock, or the payment of a dividend
in Common Stock, the number of shares approved for this Plan, and the share
limitation set forth in Section 9, shall be increased proportionately, and such
other adjustment shall be made as may be deemed equitable by the Board or the
Committee. In the event of any other change affecting the Common Stock, such
adjustment shall be made as may be deemed equitable by the Board or the
Committee to give proper effect to such event.
16. Merger. If the Company shall at any time merge or consolidate with
another corporation and the holders of the capital stock of the Company
immediately prior to such merger or consolidation continue to hold at least 80%
by voting power of the capital stock of the surviving corporation ("Continuity
of Control"), the holder of each Option then outstanding will thereafter be
entitled to receive at the next Exercise Date upon the exercise of such Option
for each share as to which such Option shall be exercised the securities or
property which a holder of one share of the Common Stock was entitled to upon
and at the time of such merger, and the Board or the Committee shall take such
steps in connection with such merger as the Board or the Committee shall deem
necessary to assure that the provisions of Section 15 shall thereafter be
applicable, as nearly as reasonably may be, in relation to the said securities
or property as to which such holder of such Option might thereafter be entitled
to receive thereunder.
In the event of a merger or consolidation of the Company with or into
another corporation which does not involve Continuity of Control, or of a sale
of all or substantially all of the assets of the Company while unexercised
Options remain outstanding under the Plan, (a) subject to the provisions of
clauses (b) and (c), after the effective date of such transaction, each holder
of an outstanding Option shall be entitled, upon exercise of such Option, to
receive in lieu of shares of Common Stock, shares of such stock or other
securities as the holders of shares of Common Stock received pursuant to the
terms of such transaction; or (b) all outstanding Options may be cancelled by
the Board or the Committee as of a date prior to the effective date of any
such transaction and all payroll deductions shall be paid out to the
participating employees; or (c) all outstanding Options may be cancelled by the
Board or the Committee as of the effective date of any such transaction,
provided that notice of such cancellation shall be given to each holder of an
Option, and each holder of an Option shall have the right to exercise such
Option in full based on payroll deductions then credited to his account as of a
date determined by the Board or the Committee, which date shall not be less than
ten (10) days preceding the effective date of such transaction.
17. Amendment of the Plan. The Board may at any time, and from time to
time, amend this Plan in any respect, except that (a) if the approval of any
such amendment by the stockholders of the Company is required by Section 423 of
the Code or by Rule 16b-3 under the Exchange Act, such amendment shall not be
effected without such approval, and (b) in no event may any amendment be made
which would cause the Plan to fail to comply with Section 16 of the Exchange Act
and the rules promulgated thereunder, as in effect from time to time, or Section
423 of the Code.
18. Insufficient Shares. In the event that the total number of shares of
Common Stock specified in elections to be purchased under any Offering plus the
number of shares purchased under previous Offerings under this Plan exceeds the
maximum number of shares issuable under this Plan, the Board or the Committee
will allot, in such manner as it may determine, the shares then available.
19. Termination of the Plan. This Plan may be terminated at any time by the
Board. Upon termination of this Plan all amounts in the payroll deduction
accounts of participating employees shall be promptly refunded.
20. Governmental Regulations. The Company's obligation to sell and deliver
Common Stock under this Plan is subject to listing on a national stock exchange
or quotation on Nasdaq and the approval of all governmental authorities required
in connection with the authorization, issuance or sale of such stock.
The Plan shall be governed by Delaware law except to the extent that such
law is preempted by federal law.
The Plan is intended to comply with the provisions of Rule 16b-3
promulgated under the Securities Exchange Act of 1934. Any provision
inconsistent with such Rule shall to that extent be inoperative and shall not
affect the validity of the Plan.
21. Issuance of Shares. Shares may be issued upon exercise of an Option
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
22. Notification upon Sale of Shares. Each employee agrees, by entering the
Plan, to promptly give the Company notice of any disposition of shares purchased
under the Plan where such disposition occurs within two years after the date of
grant of the Option pursuant to which such shares were purchased.
23. Effective Date and Approval of Stockholders. The Plan shall take effect
upon the closing of the Company's initial public offering of Common Stock
pursuant to an effective registration statement under Securities Act of 1933, as
amended, subject to approval by the stockholders of the Company as required by
Rule 16b-3 under the Exchange Act and by Section 423 of the Code, which approval
must occur within twelve months of the adoption of the Plan by the Board.
Adopted by the Board of Directors on November 2,1995
Approved by the Stockholders of the Company on January 16, 1996
DETACH HERE
PROXY
GENSYM CORPORATION
PROXY for Annual Meeting of Stockholders - May 16, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all prior proxies, hereby appoint(s) Lowell B.
Hawkinson and Thomas E. Swithenbank, and each of them, with full power of
substitution, as attorneys or attorney for the undersigned, for and in the
name(s) of the undersigned to vote and act at the annual meeting of stockholders
of Gensym Corporation to be held at the offices of the Company, 52 Second
Avenue, Burlington, Massachusetts, on Thursday, May 16, 2002 at 10:00 a.m., or
any adjournment thereof, upon or in respect of all the shares of stock of Gensym
Corporation upon or in respect of which the undersigned would be entitled to
vote or act, and will all the powers the undersigned would possess, if
personally present, upon all matters which may properly come before said
meeting, as described in the Proxy Statement and Notice dated April 12, 2002,
receipt of which is hereby acknowledged.
Unless a contrary direction is indicated, this Proxy will be voted FOR all
nominees listed in Proposal 1, FOR the amendment to the 1995 Employee Stock
Purchase Plan in Proposal 2 and FOR the ratification of the appointment of
PricewaterhouseCoopers LLP as independent auditors in Proposal 3, in each case
as more specifically set forth in the Proxy Statement. If specific instructions
are indicated, this Proxy will be voted in accordance therewith.
The Board of Directors recommends a vote FOR all nominees named in Proposal 1
and a vote FOR Proposals 2 and 3.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting or any adjournment thereof.
SEE REVERSE SEE REVERSE
SIDE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
DETACH HERE
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
NOTE: Signature should be exactly as name appears on imprint. If stock is
registered in the names of two or more persons as joint owners, trustees or
otherwise, this proxy should be personally signed by each of them or accompanied
by proof of authority of less than all to act. In the case of executors,
administrators, trustees, guardians and attorneys, unless the stock is
registered in their names, proof of authority should accompany this proxy.
- -----------------------------------------------------------------------------------------------------------------------------------
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR ALL NOMINEES NAMED
IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3.
- -----------------------------------------------------------------------------------------------------------------------------------
1. Election of Class III Directors 2. Approve an amendment to the Company's 1995 Employee Stock
Nominees: (01) Robert A. Degan Purchase Plan increasing from 1,000,000 to 1,200,00 the
(02) Barry A. Gorsun number of shares of Common Stock reserved for issuance under
the plan.
For All Nominees Withhold From All Nominees
|_| |_| For Against Abstain
|_| |_| |_|
For All Except
|_| _____________________________ 3. Ratify the appointment of PricewaterhouseCoopers LLP as the
(Instructions: To withhold authority to vote for any Company's independent auditors for the fiscal year 2002.
individual nominee, write the nominees name in the
space provided above) For Against Abstain
|_| |_| |_|
|_| MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED POSTAGE PREPAID ENVELOPE.
Signature: _____________________________________ Signature: _____________________________________
Date: ____________________ Date: ____________________