July 25, 2001
BY TELECOPY
-----------
Xxxxxxx Xxxxxxx, Chairman of the Board,
Chief Executive Officer and President
Gensym Corporation
00 Xxxxxx Xxxxxx
Xxxxxxxxxx, XX, 00000
Dear Xx. Xxxxxxx:
This letter supplements the letter, dated July 23, 2001 (the "Original Proposal
Letter"), from Rocket Software, Inc. to Gensym Corporation and supersedes the
letter, dated July 24, 2001, from Rocket to Gensym. We understand that Xxxxxx
wishes to understand better the proposed loan transaction that Rocket is
prepared to consider entering into with Gensym and its subsidiaries in
connection with negotiations of a proposed merger transaction described in the
Original Proposal Letter and supplemented hereby.
The proposed loan transaction that Xxxxxx is prepared to consider would include
the following terms and provisions:
Borrowers: Gensym and its subsidiaries.
---------
Principal Amount: To be determined and based upon Gensym's reasonable
---------------- needs, and to be advanced from time to time in
accordance with those needs. Rocket preliminarily
contemplates that the aggregate principal amount of
the loan will be up to $1,250,000.
Interest Rate: At the rate of 24% per year.
-------------
Maturity: October 31, 2001.
--------
Debt Service: No payments of principal or interest to be due before
------------ maturity (whether at the stated maturity of the loan
or by acceleration or otherwise). Prepayments of
principal and interest by Xxxxxx at any time, in
whole or in part and without any prepayment fee or
penalty, to be permitted. All payments to be made by
bank wire transfer in immediately available funds.
2
Use of Proceeds: To pay off any outstanding indebtedness of Gensym tor
--------------- Silicon Valley Bank and for general working capital
purposes.
Security: First mortgage and first priority perfected security
-------- interest in all tangible and intangible property,
real, personal and other, now existing or hereafter
acquired or created, of Gensym and its subsidiaries.
Closing Date: As soon as practicable.
------------
Events of Default: To be negotiated.
-----------------
Other Terms and
Conditions: The loan documents would contain, affirmative and
---------- negative covenants (including but not limited to (i)
restrictions on incurrence of indebtedness for money
borrowed, (ii) restrictions on investments, (iii)
restrictions on dispositions of assets outside the
ordinary course, (iv) restrictions on dividends and
redemptions and other restricted payments, (v)
restrictions on liens and encumbrances, (vi)
informational requirements, (vii) customary
"housekeeping" covenants, (viii) restrictions on
mergers, consolidations, acquisitions and
dispositions of assets, (ix) restrictions on sales
and leasebacks, (x) restrictions on transactions with
affiliates, and (xi) indemnification provisions)
events of default and remedies, and Gensym and its
subsidiaries would make representations and
warranties, all as is customary for transactions of
this type or as negotiated by the parties in this
particular transaction.
Xxxxxx would require appropriate opinions of counsel
in form and substance satisfactory to Rocket.
Rocket would have full and continuing access to any
material it deems necessary to monitor its loans to
the Company.
The closing of the loan transaction would be subject
to necessary third party and governmental consents
and filings.
No brokers, finders, "break up", investment brokers
or like fees would be payable to any person in
connection with this transaction.
All reasonable out-of-pocket expenses incurred by
Rocket in connection with the loan transaction under
consideration, including legal expenses (up to a
maximum of $25,000), would be payable by Gensym at
closing.
Additionally, Xxxxxx would expect that the outstanding principal and accrued
interest on the loan transaction would be deducted from the aggregate merger
consideration (which,
3
which on a per share basis, is $.80 per share of Gensym common stock) that
Rocket otherwise would pay in the proposed merger transaction described in the
Original Proposal Letter.
This letter, together with the Original Proposal Letter, sets forth Rocket's
proposal regarding potential loan and merger transactions. This letter
supersedes the letter, dated July 24, 2001, from Rocket to Gensym. Neither this
letter nor the Original Proposal Letter creates or gives rise to any binding
obligation on the part of any party. Neither this letter nor the Original
Proposal Letter describes all matters upon which agreement must be reached in
order for the loan or merger transaction contemplated by the Original Proposal
Letter, as supplemented hereby, to be consummated. The transactions are subject
to the satisfactory completion of customary due diligence, to the successful
negotiation and execution of definitive loan and merger documents, and to
conditions customary in transactions of these types. Please understand, however,
that the loan transaction will not be contingent or conditioned upon the merger
transaction or the negotiation or execution of definitive merger documents, and
that Rocket contemplates that due diligence for the loan transaction would
necessarily have to be abbreviated in accordance with the circumstances of
Gensym. We will coordinate all our due diligence activities with you and conduct
such inquiries with appropriate discretion and sensitivity to your business
relationships.
We appreciate this opportunity to supplement for you the proposals set forth in
the Original Proposal Letter. We believe that the negotiation of satisfactory
documents can be accomplished in a relatively short period of time. We reserve
the right to discontinue negotiations and withdraw the above proposals at any
time, and in any event if not acted on by you by July 31, 2001.
Very truly yours,
ROCKET SOFTWARE, INC
By:
-------------------------------------
Xxxxx Xxxxxxxxx, Chief
Operating Officer
Accepted as of the date first above written:
GENSYM CORPORATION
By:
-----------------------------------------
Name:
Title:
Dated: July __, 2001
