0000950152-01-505268.txt : 20011031
0000950152-01-505268.hdr.sgml : 20011031
ACCESSION NUMBER: 0000950152-01-505268
CONFORMED SUBMISSION TYPE: SC TO-I
PUBLIC DOCUMENT COUNT: 8
FILED AS OF DATE: 20011029
SUBJECT COMPANY:
COMPANY DATA:
COMPANY CONFORMED NAME: FRONTSTEP INC
CENTRAL INDEX KEY: 0000872443
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372]
IRS NUMBER: 311083175
STATE OF INCORPORATION: OH
FISCAL YEAR END: 0630
FILING VALUES:
FORM TYPE: SC TO-I
SEC ACT: 1934 Act
SEC FILE NUMBER: 005-41745
FILM NUMBER: 1769103
BUSINESS ADDRESS:
STREET 1: 2800 CORPORATE EXCHANGE DR
STREET 2: N/A
CITY: COLUMBUS
STATE: OH
ZIP: 43231
BUSINESS PHONE: 6145237000
MAIL ADDRESS:
STREET 1: 2800 CORPORATE EXCHANGE DR
CITY: COLUMBUS
STATE: OH
ZIP: 43231
FORMER COMPANY:
FORMER CONFORMED NAME: SYMIX SYSTEMS INC
DATE OF NAME CHANGE: 19930328
FILED BY:
COMPANY DATA:
COMPANY CONFORMED NAME: FRONTSTEP INC
CENTRAL INDEX KEY: 0000872443
STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372]
IRS NUMBER: 311083175
STATE OF INCORPORATION: OH
FISCAL YEAR END: 0630
FILING VALUES:
FORM TYPE: SC TO-I
BUSINESS ADDRESS:
STREET 1: 2800 CORPORATE EXCHANGE DR
STREET 2: N/A
CITY: COLUMBUS
STATE: OH
ZIP: 43231
BUSINESS PHONE: 6145237000
MAIL ADDRESS:
STREET 1: 2800 CORPORATE EXCHANGE DR
CITY: COLUMBUS
STATE: OH
ZIP: 43231
FORMER COMPANY:
FORMER CONFORMED NAME: SYMIX SYSTEMS INC
DATE OF NAME CHANGE: 19930328
SC TO-I
1
l90969ascto-i.txt
FRONTSTEP, INC. SC TO-I
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
SCHEDULE TO
(Rule 13e-4)
TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
----------
FRONTSTEP, INC.
(Name of Subject Company (Issuer))
----------
Frontstep, Inc.
(Name of Filing Person (Offeror))
----------
Options to Purchase Common Shares, No Par Value under the Frontstep, Inc.
Non-Qualified Stock Option Plan for Key Employees and the Frontstep, Inc. 1999
Non-Qualified Stock Option Plan for Key Employees
(Title of Class of Securities)
----------
35921W 10 1
(CUSIP Number of Class of Securities)
(Underlying Common Shares)
----------
Daniel P. Buettin
Vice President, Chief Financial Officer and Secretary
Frontstep, Inc.
2800 Corporate Exchange Drive
Columbus, Ohio 43231
(614) 523-7136
(Name, address and telephone number of person authorized to receive notices and
communications on behalf of filing person)
Copy to:
Ivery D. Foreman, Esq.
Vorys, Sater, Seymour and Pease LLP
52 East Gay Street
P. O. Box 1008
Columbus, Ohio 43216-1008
(614) 464-6322
CALCULATION OF FILING FEE
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Transaction valuation* Amount of filing fee
--------------------------------------------------------------------------------
$1,110,000 $222.00
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
* Calculated solely for purposes of determining the filing fee. This
amount assumes that options to purchase 600,000 common shares of
Frontstep, Inc. having an aggregate value of $1,110,000 as of
October 18, 2001 will be exchanged and/or cancelled pursuant to this
offer. The aggregate value of such options was calculated based on the
Black-Scholes option pricing model. The amount of the filing fee,
calculated in accordance with Rule 0-11(b) of the Securities Exchange
Act of 1934, as amended, equals 1/50th of one percent of the value of
the transaction.
[ ] Check the box if any part of the fee is offset as provided by Rule
0-11(a) (2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: Not applicable.
Form or Registration No.: Not applicable.
Filing party: Not applicable.
Date filed: Not applicable.
[ ] Check the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
Check the appropriate boxes below to designate any transactions to which the
statement relates:
[ ] third party tender offer subject to Rule 14d-l.
[X] issuer tender offer subject to Rule 13e-4.
[ ] going-private transaction subject to Rule 13e-3.
[ ] amendment to Schedule 13D under Rule 13d-2.
[ ] Check the following box if the filing is a final amendment reporting the
results of the tender offer.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Item 1. Summary Term Sheet.
The information set forth under "Summary Term Sheet" in the Offer to
Exchange, dated October 30, 2001 (the "Offer to Exchange"), attached hereto as
Exhibit (a)(1), is incorporated herein by reference.
Item 2. Subject Company Information.
(a) The name of the issuer is Frontstep, Inc., an Ohio corporation (the
"Company"), and the address of its principal executive office is 2800 Corporate
Exchange Drive, Columbus, Ohio 43231, (614) 523-7000. The information set forth
in the Offer to Exchange under Section 9 ("Information About Frontstep") is
incorporated herein by reference.
(b) This Tender Offer Statement on Schedule TO relates to an offer by
the Company to exchange all outstanding options to purchase the Company's common
shares, no par value (the "Common Shares"), under the Company's Non-Qualified
Stock Option Plan for Key Employees or the Company's 1999 Non-Qualified Stock
Option Plan for Key Employees (collectively, the "Option Plans") held by the
employees of the Company or its subsidiaries (the "Options") for new options
that will be granted under the Option Plans (the "New Options"). The exchange
will be made upon the terms and subject to the conditions described in the Offer
to Exchange, the related Election Form attached hereto as Exhibit (a)(2) (the
"Election Form") and the related Change of Election Form attached hereto as
Exhibit (a)(3) (the "Change of Election Form" and, together with the Offer to
Exchange and the Election Form, as they may be amended or supplemented from time
to time, the "Offer"). The information set forth in the Offer to Exchange on the
introductory pages and under "Summary Term Sheet," Section 1 ("Number of
Options; Expiration Date"), Section 5 ("Acceptance of Options for Exchange and
Cancellation and Issuance of New Options") and Section 8 ("Source and Amount of
Consideration; Terms of New Options") is incorporated herein by reference.
(c) The information set forth in the Offer to Exchange under Section 7
("Price Range of Common Shares") is incorporated herein by reference.
Item 3. Identity and Background of Filing Person.
(a) The Company is the filing person. The information set forth under
Item 2(a) above is incorporated herein by reference.
Item 4. Terms of the Transaction.
(a) The information set forth in the Offer to Exchange on the
introductory pages and under "Summary Term Sheet," Section 1 ("Number of
Options; Expiration Date"), Section 3 ("Procedures"), Section 4 ("Change in
Election"), Section 5 ("Acceptance of Options for Exchange and Cancellation and
Issuance of New Options"), Section 6 ("Conditions of the Offer"),
Section 8 ("Source and Amount of Consideration; Terms of New Options"), Section
11 ("Status of Options Acquired by Us in the Offer; Accounting Consequences of
the Offer"),
Section 12 ("Legal Matters; Regulatory Approvals"), Section 13 ("Material U.S.
Federal Income Tax Consequences") and Section 14 ("Extension of Offer;
Termination; Amendment") and Section 17 ("Forward Looking Statements;
Miscellaneous") is incorporated herein by reference.
(b) The information set forth in the Offer to Exchange under Section 10
("Interests of Directors and Officers; Transactions and Arrangements About the
Options; Other Material Agreements") is incorporated herein by reference.
Item 5. Past Contacts, Transactions, Negotiations and Arrangements.
(e) The information set forth in the Offer to Exchange under Section 10
("Interests of Directors and Officers; Transactions and Arrangements About the
Options; Other Material Agreements") is incorporated herein by reference.
Item 6. Purposes of the Transaction and Plans or Proposals.
(a) The information set forth in the Offer to Exchange on the
introductory pages and under "Summary Term Sheet" and under Section 2 ("Purpose
of the Offer") is incorporated herein by reference.
(b) The information set forth in the Offer to Exchange under Section 5
("Acceptance of Options for Exchange and Cancellation and Issuance of New
Options") and Section 11 ("Status of Options Acquired by Us in the Offer;
Accounting Consequences of the Offer") is incorporated herein by reference.
(c) The information set forth in the Offer to Exchange under Section 2
("Purpose of the Offer") is incorporated herein by reference.
Item 7. Source and Amount of Funds or Other Consideration.
(a) The information set forth in the Offer to Exchange under Section 8
("Source and Amount of Consideration; Terms of New Options") and Section 15
("Fees and Expenses") is incorporated herein by reference.
(b) The information set forth in the Offer to Exchange under Section 6
("Conditions of the Offer") is incorporated herein by reference.
(d) Not applicable.
Item 8. Interest in Securities of the Subject Company.
(a) Not applicable.
-2-
(b) The information set forth in the Offer to Exchange under Section 10
("Interests of Directors and Officers; Transactions and Arrangements About the
Options; Other Material Agreements") is incorporated herein by reference.
Item 9. Person/Assets, Retained, Employed, Compensated or Used.
(a) Not applicable.
Item 10. Financial Statements.
(a) The information set forth in the Offer to Exchange under Section 9
("Information About Frontstep) and Section 16 ("Additional Information"), and on
pages 24 through 44 of the Company's Annual Report on Form 10-K for its fiscal
year ended June 30, 2001 is incorporated herein by reference.
(b) Not Applicable.
Item 11. Additional Information.
(a) The information set forth in the Offer to Exchange under Section 10
("Interests of Directors and Officers; Transactions and Arrangements About the
Options; Other Material Agreements") and Section 12 ("Legal Matters; Regulatory
Approvals") is incorporated herein by reference.
(b) Not applicable.
Item 12. Exhibits.
(a) (1) Offer to Exchange, dated October 30, 2001.
(2) Form of Election Form.
(3) Form of Change of Election Form.
(4) Form of e-mail confirmation of receipt of Election
Form/Change of Election Form.
(5) Form of confirmation of acceptance of options for
exchange.
(6) Frontstep, Inc. Annual Report on Form 10-K for its
fiscal year ended June 30, 2001, filed with the Securities and Exchange
Commission on September 28, 2001 and incorporated herein by reference.
(b) Not applicable.
-3-
(d) (1) Frontstep, Inc. Non-Qualified Stock Option Plan for Key
Employees incorporated herein by reference from Exhibit 10(a) to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1993 (File No.
0-19024).
(2) Frontstep, Inc. 1999 Non-Qualified Stock Option Plan for Key
Employees, incorporated herein by reference from Exhibit 10(n) to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1999 (File No.
0-19024).
(3) Form of New Option Agreement pursuant to the Frontstep, Inc.
Non-Qualified Stock Option Plan for Key Employees.
(4) Form of New Option Agreement pursuant to the Frontstep, Inc.
1999 Non-Qualified Stock Option Plan for Key Employees.
(5) Frontstep, Inc. Non-Qualified Stock Option Plan for Key
Executives, incorporated herein by reference from Exhibit 10(a) to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 (File No.
0-19024).
(6) Frontstep, Inc. Stock Option Plan for Outside Directors,
incorporated herein by reference from Exhibit 10(i) to the Company's Annual
Report on Form 10-K for the fiscal year ended June, 30, 1993 (File No. 0-19024).
(7) Amended Articles of Incorporation of Frontstep, Inc. (as filed
with the Ohio Secretary of State on February 8, 1991), incorporated herein by
reference from Exhibit 3(a)(1) to the Company's Annual Report on Form 10-K for
the fiscal year ended June 30, 1997 (File No. 0-19024).
(8) Certificate of Amendment to the Amended Articles of
Incorporation of Frontstep, Inc. (as filed with the Ohio Secretary of State on
July 16, 1996), incorporated herein by reference from Exhibit 3(a)(2) to the
Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1997
(File No. 0-19024).
(9) Certificate of Amendment to the Amended Articles of
Incorporation, as amended, of Frontstep, Inc. (as filed with the Ohio Secretary
of State on May 10, 2000), incorporated herein by reference from Exhibit 3(a)(3)
to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
2000 (File No. 0-19024).
(10) Certificate of Amendment to the Amended Articles of
Incorporation, as amended, of Frontstep, Inc. (as filed with the Ohio Secretary
of State on November 8, 2000), incorporated herein by reference from Exhibit
3(a)(4) to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2000 (File No. 0-19024).
(11) Amended Articles of Incorporation, as amended, of Frontstep,
Inc. (reflecting amendments through November 8, 2000, for SEC reporting
compliance purposes
-4-
only), incorporated herein by reference from Exhibit 3(a)(5) to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2000 (File No.
0-19024).
(12) Investor Rights Agreement, dated as of May 10, 2000, among the
Company, the Investors identified therein and Lawrence J. Fox, incorporated
herein by reference from Exhibit 4(c) to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 2000 (File No. 0-19024).
(13) Amendment to Investor Rights Agreement, dated as of August 15,
2000, among the Company, the Investors identified therein and Lawrence J. Fox,
incorporated herein by reference to Exhibit 4(c) to the Company's Current Report
on Form 8-K, as filed on August 30, 2000 (File No. 0-19024).
(14) Warrant for the Purchase of Shares of Common Stock of the
Company issued to Morgan Stanley Dean Witter Venture Partners IV, L.P. on May
10, 2000, and Exhibit A identifying other identical warrants issued to the
investors identified on Exhibit A on the dates indicated, for the number of
common shares listed on Exhibit A, incorporated herein by reference from Exhibit
10(a)(f) of the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 2001 (File No. 0-19024).
(15) Assignment and Assumption Agreement, by and between Morgan
Stanley Dean Witter Equity Funding, Inc. and the Originators Investment Plan,
L.P., dated November 24, 2000, incorporated herein by reference from Exhibit
4(g) to the Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 2000 (File No. 0-19024).
(16) Common Share Purchase Warrant, dated July 17, 2001, issued to
Foothill Capital Corporation, incorporated herein by reference from Exhibit
10(v) to the Company's Annual Report on Form 10-K for the fiscal year ended June
30, 2001 (File No. 0-19024).
(17) Registration Rights Agreement, dated July 17, 2001, by and
between the Company and Foothill Capital Corporation, incorporated herein by
reference from Exhibit 10(w) to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 2001 (File No. 0-19024).
(g) Not applicable.
(h) Not applicable.
-5-
Item 13. Information Required by Schedule 13E-3.
(a) Not applicable.
-6-
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Schedule TO is true, complete and
correct.
FRONTSTEP, INC.
/s/ Daniel P. Buettin
--------------------------------------------------
Daniel P. Buettin, Vice President, Chief Financial
Officer and Secretary
Date: October 26, 2001
-7-
INDEX TO EXHIBITS
Exhibit
Number Description
------ -----------
(a)(1) Offer to Exchange, dated October 30, 2001.
(a)(2) Form of Election Form.
(a)(3) Form of Change of Election Form.
(a)(4) Form of e-mail confirmation of receipt of Election Form/Change
of Election Form.
(a)(5) Form of confirmation of acceptance of options for exchange.
(a)(6) Frontstep, Inc. Annual Report on Form 10-K for its fiscal year
ended June 30, 2001, filed with the Securities and Exchange
Commission on September 28, 2001 and incorporated herein by
reference.
(d)(1) Frontstep, Inc. Non-Qualified Stock Option Plan for Key
Employees incorporated herein by reference from Exhibit 10(a) to
the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1993 (File No. 0-19024).
(d)(2) Frontstep, Inc. 1999 Non-Qualified Stock Option Plan for Key
Employees, incorporated herein by reference from Exhibit 10(n)
to the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1999 (File No. 0-19024).
(d)(3) Form of New Option Agreement pursuant to the Frontstep, Inc.
Non-Qualified Stock Option Plan for Key Employees, as amended.
(d)(4) Form of New Option Agreement pursuant to the Frontstep, Inc.
1999 Non-Qualified Stock Option Plan for Key Employees.
(d)(5) Frontstep, Inc. Non-Qualified Stock Option Plan for Key
Executives, incorporated herein by reference from Exhibit 10(a)
to the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996 (File No. 0-19024).
(d)(6) Frontstep, Inc. Stock Option Plan for Outside Directors,
incorporated herein by reference from Exhibit 10(i) to the
Company's Annual Report on Form 10-K for the fiscal year ended
June, 30, 1993 (File No. 0-19024).
(d)(7) Amended Articles of Incorporation of Frontstep, Inc. (as filed
with the Ohio Secretary of State on February 8, 1991),
incorporated herein by reference from Exhibit 3(a)(1) to the
Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1997 (File No. 0-19024).
-8-
(d)(8) Certificate of Amendment to the Amended Articles of
Incorporation of Frontstep, Inc. (as filed with the Ohio
Secretary of State on July 16, 1996), incorporated herein by
reference from Exhibit 3(a)(2) to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1997 (File No.
0-19024).
(d)(9) Certificate of Amendment to the Amended Articles of
Incorporation, as amended, of Frontstep, Inc. (as filed with the
Ohio Secretary of State on May 10, 2000), incorporated herein by
reference from Exhibit 3(a)(3) to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 2000 (File No.
0-19024).
(d)(10) Certificate of Amendment to the Amended Articles of
Incorporation, as amended, of Frontstep, Inc. (as filed with the
Ohio Secretary of State on November 8, 2000), incorporated
herein by reference from Exhibit 3(a)(4) to the Company's
Quarterly Report on Form 10-Q for the quarter ended September
30, 2000 (File No. 0-19024).
(d)(11) Amended Articles of Incorporation, as amended, of Frontstep,
Inc. (reflecting amendments through November 8, 2000, for SEC
reporting compliance purposes only), incorporated herein by
reference from Exhibit 3(a)(5) to the Company's Quarterly Report
on Form 10-Q for the quarter ended September 30, 2000 (File No.
0-19024).
(d)(12) Investor Rights Agreement, dated as of May 10, 2000, among the
Company, the Investors identified therein and Lawrence J. Fox,
incorporated herein by reference from Exhibit 4(c) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2000 (File No. 0-19024).
(d)(13) Amendment to Investor Rights Agreement, dated as of August 15,
2000, among the Company, the Investors identified therein and
Lawrence J. Fox, incorporated herein by reference to Exhibit
4(c) to the Company's Current Report on Form 8-K, as filed on
August 30, 2000 (File No. 0-19024).
(d)(14) Warrant for the Purchase of Shares of Common Stock of the
Company issued to Morgan Stanley Dean Witter Venture Partners
IV, L.P. on May 10, 2000, and Exhibit A identifying other
identical warrants issued to the investors identified on Exhibit
A on the dates indicated, for the number of common shares listed
on Exhibit A, incorporated herein by reference from Exhibit
10(a)(f) of the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 2001 (File No. 0-19024).
(d)(15) Assignment and Assumption Agreement, by and between Morgan
Stanley Dean Witter Equity Funding, Inc. and the Originators
Investment Plan, L.P., dated November 24, 2000, incorporated
herein by reference from Exhibit 4(g) to the
-9-
Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 2000 (File No. 0-19024).
(d)(16) Common Share Purchase Warrant, dated July 17, 2001, issued to
Foothill Capital Corporation, incorporated herein by reference
from Exhibit 10(v) to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 2001 (File No. 0-19024).
(d)(17) Registration Rights Agreement, dated July 17, 2001, by and
between the Company and Foothill Capital Corporation,
incorporated herein by reference from Exhibit 10(w) to the
Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 2001 (File No. 0-19024).
-10-
EX-99.A.1
3
l90969aex99-a_1.txt
EXHIBIT 99(A)(1)
Exhibit(2)(1)
OFFER TO EXCHANGE
OUTSTANDING OPTIONS TO
PURCHASE COMMON SHARES, NO PAR VALUE
OF
FRONTSTEP, INC.
Any questions or requests for assistance or additional copies of any
documents referred to in the Offer to Exchange may be directed to Daniel P.
Buettin, Vice President, Chief Financial Officer and Secretary, Frontstep, Inc.,
2800 Corporate Exchange Drive, Columbus, Ohio 43231, telephone: (614) 523-7136,
facsimile: (614) 895-2972.
---------------------
October 30, 2001
FRONTSTEP, INC.
OFFER TO EXCHANGE
To Our Employees:
Frontstep is offering the participants of our stock option plans the
opportunity to participate in a voluntary stock option exchange program on the
terms described in this document. This program allows eligible Frontstep
employees holding options granted pursuant to either,
- our Non-Qualified Stock Option Plan for Key Employees or
- our 1999 Non-Qualified Stock Option Plan for Key Employees,
to exchange those options for new options to purchase our common shares. If you
believe that such an exchange may be beneficial to you, then you should
carefully consider the terms and conditions of this offer set forth in detail in
the remainder of this document.
We have initiated this voluntary stock option exchange program because we
are philosophically committed to providing our employees with the opportunity to
participate as owners of Frontstep. Over the years, we have issued options to
our employees for more than 2,000,000 common shares and today nearly 200
employees participate in our stock option plans. However, in light of the recent
stock market volatility, especially for technology stocks, many of our
outstanding options have exercise prices that are significantly higher than the
current market price of our common shares. This exchange program will give you
the opportunity to exchange these outstanding options for new options that will
have an exercise price equal to the fair market value of our common shares on
the date of grant. It is important to note that this program is not a stock
option repricing. A repricing would force us to take a significant charge to
earnings and would hinder our financial progress.
Your new options will be exercisable for the same number of common shares
as the old options that you return to us for exchange, unless you are an
executive officer of Frontstep. If you are an executive officer, then your new
options will be exercisable for that number of common shares which is equal to
80% of the number of common shares exercisable under the old options that you
return to us for exchange.
We anticipate that we will grant the new options on the first business day
that is at least six months and one day following the date we cancel the old
options accepted for exchange. This is the primary difference of this program
from a stock option repricing. We intend to cancel the tendered options on the
first business day following the expiration date of the offer. In order to be
eligible to receive the new options, you must be an employee of Frontstep or one
of our subsidiaries from the date you tender your options for exchange through
the date we grant the new options.
If you choose to participate in this offer, then you may exchange any or
all of the options that we have granted to you pursuant to either one of the
eligible option plans listed above. You must tender, however, the entire number
of shares from any one grant that has been given to you. You may not tender any
individual or separate option in part. In addition, if you tender any of your
options, then you must also tender all options granted to you during the six
months immediately preceding the date when we cancel options tendered and
accepted for exchange. We are not conditioning this offer upon a minimum number
of options being exchanged by employees, though the offer is subject to the
conditions which we describe in Section 6 of this document.
Each new option will have an exercise price per share equal to the fair
market value per share of our common shares on the date of grant. The fair
market value per share will equal the average of the highest and lowest prices
per share of our common shares as reported on the Nasdaq National Market on the
date of grant. If our common shares are not traded on the date of grant, then we
will use the next preceding day on which the common shares are traded.
Each new option will vest over a two year period beginning one year from
the date of grant in 2003, when one-half or 50% of each new option will vest and
become exercisable. The options will become fully vested and
exercisable two years from the date of grant. Each new option will have a term
that expires ten years from the date of grant subject to early termination under
provisions contained in our forms of stock option agreement.
Our common shares are quoted on the Nasdaq National Market under the symbol
"FSTP." On October 18, 2001, the closing price of our common shares on the
Nasdaq National Market was $3.15 per common share.
BECAUSE WE WILL NOT GRANT NEW OPTIONS UNTIL AT LEAST SIX MONTHS AND ONE DAY
AFTER THE DATE WHEN WE CANCEL THE OPTIONS ACCEPTED FOR EXCHANGE, IT IS POSSIBLE
THAT THE NEW OPTIONS MAY HAVE HIGHER EXERCISE PRICES THAN SOME OR ALL OF YOUR
OPTIONS THAT YOU TENDER FOR EXCHANGE. WE CANNOT PREDICT THE EXERCISE PRICE OF
THE NEW OPTIONS. WE RECOMMEND THAT YOU OBTAIN CURRENT MARKET QUOTATIONS FOR OUR
COMMON SHARES BEFORE DECIDING WHETHER TO TENDER YOUR OPTIONS. YOU, HOWEVER,
SHOULD RECOGNIZE THAT THE CURRENT MARKET PRICE OF OUR COMMON SHARES MAY PROVIDE
LITTLE OR NO BASIS FOR PREDICTING WHAT THE MARKET PRICE OF OUR COMMON SHARES
WILL BE ON THE GRANT DATE OF THE NEW OPTIONS OR AT ANY TIME IN THE FUTURE.
ALTHOUGH OUR BOARD OF DIRECTORS HAS APPROVED THIS OFFER, WE MAKE NO
RECOMMENDATION AS TO WHETHER OR NOT YOU SHOULD TENDER YOUR OPTIONS FOR EXCHANGE.
THE DECISION TO ACCEPT THIS OFFER IS AN INDIVIDUAL ONE THAT SHOULD BE BASED ON A
VARIETY OF FACTORS AND YOU SHOULD CONSULT WITH YOUR PERSONAL ADVISORS IF YOU
HAVE QUESTIONS ABOUT YOUR FINANCIAL OR TAX SITUATION. YOU MUST MAKE YOUR OWN
DECISION WHETHER TO TENDER YOUR OPTIONS.
You should direct questions about this offer or requests for assistance or
for additional copies of this document to:
Daniel P. Buettin
Vice President, Chief Financial Officer and Secretary
Frontstep, Inc.
2800 Corporate Exchange Drive
Columbus, Ohio 43231
telephone: (614) 523-7136, facsimile: (614) 895-2972.
IMPORTANT
Regardless of whether you accept or reject this offer, you must complete
and sign the Election Form accompanying this document in accordance with its
instructions and mail, fax or hand deliver it to Daniel P. Buettin, at the
address set forth above, before 5:00 p.m., Eastern Time, on the expiration date
for the offer. The currently scheduled expiration date for the offer is November
30, 2001. The offer and withdrawal rights will expire at that time, unless we
elect to extend the offer. You will be notified by public announcement of any
extension of the expiration date of the offer by 9:00 a.m., Eastern Time, on the
first business day following the scheduled expiration date of the offer by means
reasonably designed to inform you of the change, such as by press release. If
you do not submit a properly completed Election Form by the expiration date of
the offer, as originally scheduled or as extended, then we will assume that you
have elected not to exchange your options.
Also accompanying this document is a Change of Election Form. You may
change a previously made election by completing the Change of Election Form in
accordance with its instructions and mailing, faxing or hand delivering it to
Daniel P. Buettin, at the address set forth above. You must submit a properly
completed Change of Election Form by 5:00 p.m., Eastern Time, on the expiration
date for the offer identified above, or, if we elect to extend the offer, by
5:00 p.m., Eastern Time, on the expiration date as so extended. If you do not
submit a properly completed Change of Election Form by that time, then we will
assume that the most recent election you have made is still valid.
We are not making this offer to, and we will not accept any options from,
holders in any jurisdiction in which we believe this offer would not comply with
the laws of such jurisdiction. However, we may, at our discretion, take any
actions necessary for us to make this offer to option holders in any such
jurisdiction.
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF
AS TO WHETHER OR NOT YOU SHOULD TENDER YOUR OPTIONS PURSUANT TO THIS OFFER. YOU
SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT, THE ELECTION
FORM AND CHANGE OF ELECTION FORM. IF ANYONE MAKES ANY RECOMMENDATION OR
REPRESENTATION TO YOU OR GIVES YOU ANY OTHER INFORMATION REGARDING OUR EXCHANGE
OFFER PROGRAM, YOU SHOULD NOT RELY ON THAT RECOMMENDATION, REPRESENTATION OR
INFORMATION AS HAVING BEEN AUTHORIZED BY US.
TABLE OF CONTENTS
PAGE
SUMMARY TERM SHEET................................................. 1
Q1. What securities are we offering to exchange?................ 1
Q2. Why are we making the offer?................................ 1
Q3. Why don't we simply reprice the current options?............ 1
Q4. Are there conditions to the offer?.......................... 1
Q5. Are there any eligibility requirements I must satisfy in 1
order to receive the new options?...........................
Q6. What if I am not an employee when the new options begin to 1
vest?.......................................................
Q7. How many Frontstep common shares will be covered by the new 2
options that I receive in exchange for options I return?....
Q8. When will I receive my new options?......................... 2
Q9. Why won't I receive my new options immediately after the 2
expiration date of the offer?...............................
Q10. If I tender options in the offer, will I be eligible to 2
receive other option grants before I receive new options?...
Q11. What will the exercise price of the new options be?......... 2
Q12. When will the new options vest?............................. 2
Q13. Will I have to wait longer to purchase common shares under 3
my new options than I would under the options I exchange?...
Q14. If I elect to exchange options, do I have to exchange all of 3
my options or can I just exchange some of them?.............
Q15. Will I have to pay taxes if I exchange my eligible options 3
in the offer?...............................................
Q16. When does the offer expire? Can the offer be extended, and 3
if so, how will I know if it is extended?...................
Q17. What do I need to do now?................................... 3
Q18. During what period of time may I change my previous 4
election?...................................................
Q19. What happens to my options if I do not accept the offer or 4
if my options are not accepted for exchange?................
Q20. What happens if Frontstep merges into or is acquired by 4
another company after I have tendered my options for
exchange and before the new options are granted?............
Q21. What do we and our board of directors think of the offer?... 4
Q22. Who can I talk to if I have questions about the offer?...... 5
THE OFFER.......................................................... 5
1. Number of Options; Expiration Date.......................... 5
2. Purpose of the Offer........................................ 6
3. Procedures.................................................. 7
4. Change of Election.......................................... 7
5. Acceptance of Options for Exchange and Cancellation and 8
Issuance of New Options.....................................
6. Conditions of the Offer..................................... 9
7. Price Range of Common Shares................................ 11
8. Source and Amount of Consideration; Terms of New Options.... 11
9. Information About Frontstep................................. 14
10. Interests of Directors and Officers; Transactions and 18
Arrangements about the Options..............................
11. Status of Options Acquired by us in the Offer; Accounting 21
Consequences of the Offer...................................
12. Legal Matters; Regulatory Approvals......................... 22
13. Material U.S. Federal Income Tax Consequences............... 22
i
PAGE
14. Extension of Offer; Termination; Amendment.................. 23
15. Fees and Expenses........................................... 23
16. Additional Information...................................... 23
17. Forward-Looking Statements; Miscellaneous................... 24
SCHEDULE A -- Information About the Directors and Executive
Officers of Frontstep, Inc. ..................................... 26
ii
SUMMARY TERM SHEET
The following are answers to some of the questions that you may have about
this offer. We urge you to carefully read the remainder of this Offer to
Exchange and the accompanying Election Form and Change of Election Form, because
the information in this summary is not complete. We have included references to
the relevant sections in this Offer to Exchange where you can find a more
complete description of the topics in this summary.
Q1. WHAT SECURITIES ARE WE OFFERING TO EXCHANGE?
We are offering to exchange all outstanding stock options that are held by
current employees of Frontstep or one of its subsidiaries under the Frontstep,
Inc. Non-Qualified Stock Option Plan for Key Employees, or the Frontstep, Inc.
1999 Non-Qualified Stock Option Plan for Key Employees. (Section 1, page 5).
Q2. WHY ARE WE MAKING THE OFFER?
We, as a company, are philosophically committed to the concept of employees
as owners. In light of the recent stock market volatility, especially for
technology stocks, many of our outstanding options have exercise prices that are
significantly higher than the current market price of our common shares. This
program will allow you the opportunity to exchange those options for new options
that will have an exercise price equal to the fair market value of our common
shares on the date of grant. (Section 2, page 6).
Q3. WHY DON'T WE SIMPLY REPRICE THE CURRENT OPTIONS?
"Repricing" existing options would result in variable accounting for those
options, which would require us for financial reporting purposes to record
additional compensation expense each quarter until the repriced options are
exercised, cancelled or expired. (Section 11, page 21).
Q4. ARE THERE CONDITIONS TO THE OFFER?
The offer is subject to a number of conditions, including the conditions
described in Section 6, beginning on page 9 of this Offer to Exchange. However,
the offer is not conditioned on a minimum number of option holders accepting the
offer or a minimum number of options being exchanged. (Section 6, page 9).
Q5. ARE THERE ANY ELIGIBILITY REQUIREMENTS I MUST SATISFY IN ORDER TO RECEIVE
THE NEW OPTIONS?
Yes. In order to be eligible to receive the new options, you must be an
employee of Frontstep or one of our subsidiaries from the date you tender your
options for exchange through the date we grant the new options. We will not
grant the new options until on or about the first business day that is at least
six months and one day following the date we cancel the options accepted for
exchange. We intend to cancel the tendered options on the first business day
following the expiration date of the offer.
If you are not an employee of Frontstep or one of our subsidiaries from the
date you tender your options for exchange through the date we grant the new
options, you will not receive any new options or any other consideration in
exchange for your tendered options that we have accepted for exchange and
cancelled. This rule applies regardless of the reason for your termination,
including by reason of voluntary resignation, involuntary termination, death or
disability. Participation in the offer does not confer upon you the right to
remain in the employ of Frontstep or any of our subsidiaries. (Section 1, page
5; Section 8, page 11).
Q6. WHAT IF I AM NOT AN EMPLOYEE WHEN THE NEW OPTIONS BEGIN TO VEST?
If you will not be an employee of Frontstep or one of our subsidiaries on
the one year anniversary of the grant date in 2003 when the new options begin to
vest, the new options will be cancelled and you will lose all of your right to
exercise the new options. By contrast, if you do not accept this offer to
exchange your options which are partially or fully vested on the date your
employment ends, then you generally will be able to exercise those options, to
the extent to which they have vested and have not otherwise expired, for a
period of 90 days from the end of your employment. (Section 8, page 11).
1
Q7. HOW MANY FRONTSTEP COMMON SHARES WILL BE COVERED BY THE NEW OPTIONS THAT I
RECEIVE IN EXCHANGE FOR THE OPTIONS I RETURN?
Your new options will be exercisable for the same number of common shares
as the old options that you return to us for exchange, unless you are an
executive officer of Frontstep. If you are an executive officer, then your new
options will be exercisable for that number of common shares which is equal to
80% of the number of common shares exercisable under the old options that you
return to us for exchange. (Section 8, page 11).
Each new option will be granted under our stock option plan which the old
option was granted and will be subject to the terms and conditions of that plan
and a new stock option agreement between you and us. The new stock option
agreement will be substantially the same form as the option agreement or
agreements for your current options.
Q8. WHEN WILL I RECEIVE MY NEW OPTIONS?
We plan to grant the new options on the first business day that is at least
six months and one day after the date we cancel the options accepted for
exchange. For example, if we cancel tendered options on December 1, 2001, the
business day following the scheduled expiration date of the offer, the grant
date of the new options will be on or about June 2, 2002. (Section 5, page 8).
Q9. WHY WON'T I RECEIVE MY NEW OPTIONS IMMEDIATELY AFTER THE EXPIRATION DATE OF
THE OFFER?
If we were to grant the new options on any date that is earlier than six
months and one day after the date we cancel the options accepted for exchange,
we would be required to record compensation expense against our earnings for
financial reporting purposes. By deferring the grant of the new options for at
least six months and one day, we believe we will not have to record such
compensation expense. (Section 11, page 21).
Q10. IF I TENDER OPTIONS IN THE OFFER, WILL I BE ELIGIBLE TO RECEIVE OTHER
OPTION GRANTS BEFORE I RECEIVE NEW OPTIONS?
If we accept and cancel options you tender in the offer, we will defer
until the grant date for your new options our grant to you of other options for
which you may be eligible prior to the new option grant date. We will defer the
grant to you of these other options if we determine it is necessary for us to do
so to avoid incurring compensation expense against our earnings because of
accounting rules. If you do not tender options in the offer, however, we may
grant to you options for which you become eligible at any time following the
expiration of this offer. (Section 5, page 8).
Q11. WHAT WILL THE EXERCISE PRICE OF THE NEW OPTIONS BE?
Each new option will have an exercise price per share equal to the fair
market value per share of our common shares on the date of grant. Fair market
value per share will equal the average of the highest and lowest prices per
share of our common shares as reported on the Nasdaq National Market on the date
of grant of the new options. If our common shares are not traded on that day,
then we will use the next preceding day on which the common shares are traded.
Please note that we will not grant new options until at least six months
and one day after the date when we cancel the options accepted for exchange.
Therefore, it is possible that the new options may have higher exercise prices
than some or all of your options that you tender for exchange. We cannot predict
the exercise price of the new options. We recommend that you obtain current
market quotations for our common shares before deciding whether to tender your
options. You, however, should recognize that the current market price of our
common shares may provide little or no basis for predicting what the market
price of our common shares will be on the grant date of the new options or at
any time in the future. (Section 7, page 11).
Q12. WHEN WILL THE NEW OPTIONS VEST?
Each new option will vest over a two year period beginning one year from
the date of grant in 2003. The first vesting date will be on the one year
anniversary of the date of grant in 2003, when 50% of each new option
2
will vest and become exercisable. The second vesting date will be on the two
year anniversary of the date of grant in 2004, when the remaining 50% of each
new option will vest and become exercisable. Each new option will have a term
that expires ten years from the date of grant (in 2012), subject to earlier
termination upon your termination as an employee of Frontstep and its
subsidiaries as provided in the related stock option agreement. Even if the
options you exchange are partially or fully vested, the new options you receive
will not be vested and will be subject to a new two year vesting period.
(Section 8, page 11).
Q13. WILL I HAVE TO WAIT LONGER TO PURCHASE COMMON SHARES UNDER MY NEW OPTIONS
THAN I WOULD UNDER THE OPTIONS I EXCHANGE?
Yes, to the extent your options that you tender for exchange are or will
become fully or partially vested prior to the first anniversary of the grant
date of the new options in 2003. The new options you receive will not be vested
upon grant, even if the options you exchange are fully or partially vested.
(Section 8, page 11).
Q14. IF I ELECT TO EXCHANGE OPTIONS, DO I HAVE TO EXCHANGE ALL OF MY OPTIONS OR
CAN I JUST EXCHANGE SOME OF THEM?
You may tender one or more options in their entirety, without tendering all
options that you have received. However, you may not tender any individual or
separate option in part. In addition, if you elect to tender any option, then
you also will be required to tender all options that you have received during
the six months immediately prior to the date of this Offer to Exchange. (Section
1, page 5).
Q15. WILL I HAVE TO PAY TAXES IF I EXCHANGE MY ELIGIBLE OPTIONS IN THE OFFER?
If you accept the offer, we believe that under current law you will not
recognize income for U.S. federal income tax purposes at the time of the
exchange or at the time we grant new options to you. You should consult with
your own tax advisor to determine the tax consequences to you of accepting the
offer. (Section 13, page 22).
Q16. WHEN DOES THE OFFER EXPIRE? CAN THE OFFER BE EXTENDED, AND IF SO, HOW WILL
I KNOW IF IT IS EXTENDED?
The offer expires on November 30, 2001, at 5:00 p.m., Eastern Time, unless
we extend it. Although we do not currently intend to do so, we may, at our
discretion, extend the offer at any time or from time to time. If we extend the
offer, we will make a public announcement of the extension no later than 9:00
a.m., Eastern Time, on the next business day following the previously scheduled
expiration date, by means reasonably designed to inform you of the extension,
such as by press release. If we extend the offer, we may delay the acceptance of
any new options that have been tendered. (Section 14, page 23).
Q17. WHAT DO I NEED TO DO?
Whether you accept the offer or not, you need to make your election and
sign the Election Form in accordance with its instructions and mail, fax or
hand-deliver it to Daniel P. Buettin, at the address listed above . You should
review this offer to exchange and all accompanying documents, which include the
Election Form and Change of Election Form, before making your election. We will
accept only a paper copy of your Election Form or Change of Election Form.
Delivery by e-mail will not be accepted. If we do not receive your Election Form
by the time that the offer expires, we will assume that you have rejected the
offer to exchange any options. If we change the expiration date of the offer,
then you may submit your Election Form or Change of Election Form at any time
until the extended expiration of the offer.
We may reject any options to the extent that we determine the Election Form
is not properly completed or to the extent that we determine it would be
unlawful to accept the options. If you do not sign and deliver the Election Form
properly before the offer expires, it will have the same effect as if you
rejected the offer. (Section 3, page 7).
3
Q18. DURING WHAT PERIOD OF TIME MAY I CHANGE MY PREVIOUS ELECTION?
You may change your previous election at any time before 5:00 p.m., Eastern
Time, on the expiration date of the offer. If we extend the offer beyond that
time, you may change your previous election at any time until the extended
expiration of the offer. To change your election, you must mail, fax or
hand-deliver a properly completed Change of Election Form to Daniel P. Buettin
at the address listed above before the offer expires. You may change your
election more than once. (Section 4, page 7).
Q19. WHAT HAPPENS TO MY OPTIONS IF I DO NOT ACCEPT THE OFFER OR IF MY OPTIONS
ARE NOT ACCEPTED FOR EXCHANGE?
Nothing. If you do not accept the offer, or if we do not accept the options
you return, you will keep all of your current options and you will not receive
any new options. No changes will be made to your current options. (Section 5,
page 8).
Q20. WHAT HAPPENS IF FRONTSTEP MERGES INTO OR IS ACQUIRED BY ANOTHER COMPANY OR
ENTITY AFTER I HAVE TENDERED MY OPTIONS FOR EXCHANGE AND BEFORE THE NEW
OPTIONS ARE GRANTED?
The consequence and effect of a merger or acquisition of Frontstep will
differ depending upon the timing and form of the transaction.
If we merge with or are acquired by another entity before the end of the
period for accepting the offer, you may withdraw your returned options and have
all the rights afforded you to acquire our common shares under the existing
agreements evidencing those options.
If we are acquired in an asset purchase transaction after your returned
options are accepted for exchange and cancelled but before the new options are
granted, our obligations in connection with the offer would not be automatically
assumed by the acquiring entity. Whether or not the obligation to grant the new
options is assumed would depend on the terms of the acquisition agreement. While
we would seek to make provision for tendering option holders in the acquisition
agreement, we cannot guarantee what, if any, provision would be made. As a
result, we cannot guarantee that any new options would be granted by the
acquiror in the event of such an acquisition. Therefore, it is possible that you
could give up your options and not receive any new options from the acquiring
entity.
If we are merged directly into or with another entity after your returned
options are accepted for exchange and cancelled but before the new options are
granted, the surviving entity would automatically, by operation of law, assume
our obligations with respect to the offer, unless different terms are agreed to
in connection with the merger. While we would seek to make provision for
tendering option holders in the merger agreement, we cannot guarantee what, if
any, provision would be made. As a result, we cannot guarantee that any new
options would be granted in the event of such a merger. Therefore, it is
possible that you could give up your options and not receive any new options.
(Section 5, page 8).
Q21. WHAT DO WE AND OUR BOARD OF DIRECTORS THINK OF THE OFFER?
Our board of directors has approved this offer for the reasons we have
discussed in this Offer to Exchange. However, we make no recommendation as to
whether or not you should tender your options for exchange. The decision to
accept the exchange offer is an individual one that should be based on a variety
of factors and you should consult with your personal advisors if you have
questions about your financial or tax situation. You must make your own decision
whether to tender your options. (Section 17, page 24).
4
Q22. WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE OFFER?
For additional information or assistance, you should contact:
Daniel P. Buettin
Vice President, Chief Financial Officer and Secretary
Frontstep, Inc.
2800 Corporate Exchange Drive
Columbus, Ohio 43231
Telephone No. (614) 523-7136
Facsimile No. (614) 895-2972
THE OFFER
1. NUMBER OF OPTIONS; EXPIRATION DATE.
We are offering to exchange new options to purchase our common shares in
return for outstanding options held by current employees of Frontstep or one of
its subsidiaries under our Non-Qualified Stock Option Plan for Key Employees or
our 1999 Non-Qualified Stock Option Plan for Key Employees. As of October 18,
2001, options to purchase 1,586,054 common shares of Frontstep were issued and
outstanding under these two plans and all of these issued and outstanding
options are eligible for exchange.
You may tender one or more options in their entirety, without tendering all
options that you have received. You, however, may not tender any individual or
separate option in part. In addition, if you elect to tender any option, then
you will be subject to a six-month look back period pursuant to which you will
be required to tender all options that you have received during the six months
immediately prior to the date of this Offer to Exchange. We intend to cancel the
tendered options on the first business day following the expiration date of the
offer.
Our offer is subject to the terms and conditions described in this Offer to
Exchange, and the other accompanying forms, including the Election Form and
Change of Election Form. We will only accept options that are properly returned
and not validly withdrawn in accordance with Section 5 of this Offer to Exchange
before the offer expires on the "expiration date" as defined below. This offer
is not conditioned upon a minimum number of options being tendered.
Your new options will be exercisable for the same number of common shares
as the old options that you return to us for exchange, unless you are an
executive officer of Frontstep. If you are an executive officer, then your new
options will be exercisable for that number of common shares which is equal to
80% of the number of common shares exercisable under the old options that you
return to us for exchange.
You will receive only one new option, granted pursuant to one new stock
option agreement, in exchange for all of the options which you tender under each
of our plans. For example, assuming you are not an executive officer of
Frontstep, and you tender:
- one option for 1,000 common shares granted to you under the Non-Qualified
Stock Option Plan for Key Employees;
- one option for 500 common shares also granted to you under the
Non-Qualified Stock Option Plan for Key Employees; and
- one option for 1,000 common shares granted to you under the 1999
Non-Qualified Stock Option Plan for Key Employees.
then you will receive two new options, granted pursuant to two new stock option
agreements. The first option will be for a total of 1,500 common shares issued
under the Non-Qualified Stock Option Plan for Key Employees. The second option
will be for 1,000 common shares issued under the 1999 Non-Qualified Stock Option
Plan for Key Employees.
5
We will not issue any new options exercisable for fractional shares, and
will round up all fractional shares. All new options will be issued under the
same option plan pursuant to which the options you exchange were originally
issued, and a new option agreement between you and us.
We plan to grant the new options on the first business day that is at least
six months and one day following the date we cancel the options accepted for
exchange. If you are not an employee of Frontstep or one of its subsidiaries
from the date you tender your options for exchange through the date that we
grant the new options, then you will not receive any new options or any other
consideration in exchange for your tendered options that we have accepted for
exchange and cancelled. Participation in the offer does not confer upon you the
right to remain in the employ of Frontstep or one of its subsidiaries. This
means that if you quit, die or become disabled, or if we terminate your
employment for any reason, prior to the date we grant the new options, you will
not receive anything for the options that we have accepted for exchange and
cancelled. You also will have no right to the return of any options that we have
accepted for exchange.
The term "expiration date" means 5:00 p.m., Eastern Time, on November 30,
2001, unless and until we, in our discretion, extend the period of time during
which the offer will remain open. If we extend the period of time during which
the offer remains open, the term "expiration date" will refer to the latest time
and date at which the offer expires. See Section 14 for a description of our
rights to extend, delay, terminate and amend the offer.
2. PURPOSE OF THE OFFER.
We have initiated the voluntary stock option exchange program because we
are philosophically committed to the concept of employees as owners. In light of
the recent stock market volatility, especially for technology stocks, many of
our outstanding options have exercise prices that are significantly higher than
the current market price of our common shares. This program will allow our
employees the opportunity to exchange these options for new options that will
have an exercise price equal to the fair market value of our common shares on
the date of grant.
Except as otherwise described in this Offer to Exchange or in our filings
with the SEC, we presently have no plans or proposals or negotiations that
relate to or would result in:
- an extraordinary corporate transaction, such as a merger, reorganization
or liquidation, involving us or any of our subsidiaries;
- any purchase, sale or transfer of a material amount of our assets or any
assets of our subsidiaries;
- any material change in our present dividend rate or policy, or our
indebtedness or capitalization;
- any changes in our present board of directors or senior management,
except that two of our current directors, Larry Liebert and John Tait,
are retiring from our Board when their current term expires on November
7, 2001.
- any other material change in our corporate structure or business;
- our common shares not being authorized for quotation in an automated
quotation system operated by a national securities association;
- our common shares becoming eligible for termination of registration
pursuant to section 12(g) (4) of the Securities Exchange Act;
- the suspension of our obligation to file reports pursuant to section
15(d) of the Securities Exchange Act;
- the acquisition by any person of our securities or the disposition by any
person of our securities, other than in connection with the option plans;
or
- any change in our articles of incorporation or regulations, or any
actions which may make it more difficult for any person to acquire
control of us by any person.
6
Although our board of directors has approved this offer, we make no
recommendation as to whether or not you should tender your options for exchange.
The decision to accept the exchange offer is an individual one that should be
based on a variety of factors and you should consult with your personal advisors
if you have questions about your financial or tax situation. You must make your
own decision whether to tender your options.
3. PROCEDURES.
Making Your Election. To make your election to accept or reject this
offer, you need to sign the Election Form accompanying this Offer to Exchange in
accordance with its instructions and mail, fax or hand-deliver it to Daniel P.
Buettin, Vice President, Chief Financial Officer and Secretary, Frontstep, Inc.,
2800 Corporate Exchange Drive, Columbus, Ohio 43231, (facsimile no. (614)
895-2972) before the offer expires (as described in Sections 1 and 14 of this
Offer to Exchange). You should review this Offer to Exchange and all
accompanying forms, including the Election Form and Change of Election Form,
before making your election. We will only accept a paper copy of your Election
Form or Change of Election Form. Delivery by e-mail will not be accepted. If we
do not receive your Election Form by the time the offer expires, we will assume
that you have rejected the offer to exchange any options.
The method of delivery of all documents, including the Election Form and
Change of Election Form, is at your election and risk. If you deliver by mail,
we recommend that you use registered mail with return receipt requested and
properly insure the materials. In all cases, you should allow sufficient time to
ensure timely delivery.
Determination of Validity; Rejection of Options; Waiver of Defects; No
Obligation to Give Notice of Defects. We will determine, in our discretion, all
questions as to the number of common shares subject to options and the validity,
form, eligibility (including time of receipt) and acceptance of Election Forms
and Change of Election Forms. Our determination of these matters will be final
and binding on all parties. We may reject any or all Election Forms, Change of
Election Forms or returned options to the extent that we determine they were not
properly executed or delivered or to the extent that we determine it is unlawful
to accept the returned options. Otherwise, we will accept properly and timely
returned options that are not validly withdrawn. We may waive any of the
conditions of the offer or any defect or irregularity in any Election Form or
Change of Election Form with respect to any particular options or any particular
option holder. No options will be properly returned until all defects or
irregularities have been cured by the option holder returning the options or
waived by us. Except in accordance with the next sentence, an Election Form must
be executed by the option holder. If the signature is by a trustee, executor,
administrator, guardian, attorney-in-fact or other person acting in a fiduciary
or representative capacity, the signer's full title and proper evidence of the
authority of that person to act in that capacity must be indicated on the
Election Form. Neither we nor any other person is obligated to give notice of
any defects or irregularities involved in the return of any options, and no one
will be liable for failing to give notice of any defects or irregularities. We
will determine, in our discretion, all questions as to the form and validity,
including time of receipt, of Election Forms. Our determination of these matters
will be final and binding.
Our Acceptance Constitutes an Agreement. If you elect to exchange your
options and you return your options according to the procedures described above,
you will accept the terms and conditions of the offer. Our acceptance of options
that are properly returned will form a binding agreement between us and you on
the terms and subject to the conditions of this offer.
Subject to our rights to extend, terminate and amend the offer, we
currently expect that we will accept promptly after the expiration of the offer
all properly returned options that have not been validly withdrawn.
4. CHANGE OF ELECTION.
You may only change your election by following the procedures described in
this Section 4. We will automatically withdraw any options that you have
returned to us for exchange if your employment with us terminates prior to the
expiration of this offer. To the extent that those options are vested at the
time of your
7
termination, you may exercise those options subject to the terms and conditions
of your option agreement for such options.
You may change your election at any time before 5:00 p.m., Eastern Time, on
the expiration date of the offer. If we extend the offer beyond that time, you
may change your election at any time until the extended expiration of the offer.
You may change your election more than once. In addition, until we accept your
returned options for exchange and cancellation, you may withdraw your returned
options at any time.
To change your election, you must mail, fax or hand-deliver a properly
completed Change of Election Form to Daniel P. Buettin, at the address listed in
the first paragraph of Section 3 above, before the offer expires. You may change
your election more than once. We will only accept a paper copy of your Change of
Election Form. Delivery by e-mail will not be accepted. If we do not receive a
properly completed Change of Election Form by the time the offer expires, then
we will assume that your most recent election is still valid.
Although you may withdraw some or all of your returned options, you may not
withdraw any option that you are required to exchange as a result of the
six-month look back period discussed in Section 1 above, unless you withdraw all
of your returned options.
Except in accordance with the next sentence, a Change of Election Form must
be executed by the option holder. If the signature is by a trustee, executor,
administrator, guardian, attorney-in-fact or other person acting in a fiduciary
or representative capacity, the signer's full title and proper evidence of the
authority of that person to act in that capacity must be indicated on the Change
of Election Form.
Neither we nor any other person is obligated to give notice of any defects
or irregularities in any Change of Election Form, and no one will be liable for
failing to give notice of any defects or irregularities. We will determine, in
our discretion, all questions as to the form and validity, including time of
receipt, of Change of Election Forms. Our determinations of these matters will
be final and binding.
5. ACCEPTANCE OF OPTIONS FOR EXCHANGE AND CANCELLATION AND ISSUANCE OF NEW
OPTIONS.
On the terms and subject to the conditions of this offer and promptly
following the expiration date of the offer, we will accept for exchange and
cancel all options properly returned and not validly withdrawn before the
expiration date. We intend to grant new options for those options properly
tendered and accepted for exchange on the first business day that is at least
six months and one day following the date we cancel eligible options accepted
for exchange. Accordingly, if we cancel options accepted for exchange on
December 1, 2001, which is the first business day following the scheduled
expiration date of the offer, then we anticipate that new option grants will be
made on June 2, 2002.
If we accept and cancel options you tender in the offer, we will defer
until the grant date for your new options our grant to you of other options for
which you may be eligible prior to the new option grant date. We will defer the
grant to you of these other options if we determine it is necessary for us to do
so to avoid incurring compensation expense against our earnings because of
accounting rules. If you do not tender options in the offer, however, we may
grant to you options for which you become eligible at any time following this
offer.
The new options you receive will entitle you to purchase the number of
common shares calculated in accordance with the formula set forth in Section 1
and Section 8 of this Offer to Exchange. If you are not an employee of Frontstep
or one of our subsidiaries from the time that you tender your options until the
time that we grant the new options, then you will not be entitled to receive any
of the new options or any other consideration for your old options that we have
accepted for exchange and cancelled.
Acceptance of Options Returned for Exchange. For purposes of this Offer to
Exchange, we will be deemed to have accepted options that are validly returned
for exchange and are not properly withdrawn when we give oral or written notice
to the option holders of our acceptance for exchange of those options. When we
accept your returned options for exchange and we cancel those options, you will
have no further rights with respect to those options or under their
corresponding stock option agreements. By returning options, you agree that the
applicable stock option agreements will terminate upon our cancellation of your
returned options.
8
After we accept and cancel returned options for exchange, we will send each
option holder who accepted the offer a letter indicating the number of common
shares subject to the options that we have accepted and cancelled, the number of
common shares that will be subject to the new options and the expected grant
date of the new options.
Status of Options Not Exchanged. All options that you do not choose to
return for exchange or which we do not accept for exchange and cancel pursuant
to the offer will remain outstanding, and you will continue to hold those
options in accordance with their terms.
Consequences of Frontstep being Acquired. The consequence and effect of a
merger or acquisition of Frontstep will differ depending upon the timing and
form of the transaction.
If we merge with or are acquired by another entity before the end of the
period for accepting the offer, you may withdraw your returned options and have
all the rights afforded you to acquire our common shares under the existing
agreements evidencing those options.
If we are acquired in an asset purchase transaction after your returned
options are accepted for exchange and cancelled but before the new options are
granted, our obligations in connection with the offer would not be automatically
assumed by the acquiring entity. Whether or not the obligation to grant the new
options is assumed would depend on the terms of the acquisition agreement. While
we would seek to make provision for tendering option holders in the acquisition
agreement, we cannot guarantee what, if any, provision would be made. As a
result, we cannot guarantee that any new options would be granted by the
acquiror in the event of such an acquisition. Therefore, it is possible that you
could give up your options and not receive any new options from the acquiring
entity.
If we are merged directly into or with another entity after your returned
options are accepted for exchange and cancelled but before the new options are
granted, the surviving entity would automatically, by operation of law, assume
our obligations with respect to the offer, unless different terms are agreed to
in connection with the merger. While we would seek to make provision for
tendering option holders in the merger agreement, we cannot guarantee what, if
any, provision would be made. As a result, we cannot guarantee that any new
options would be granted in the event of such a merger. Therefore, it is
possible that you could give up your options and not receive any new options as
a result of a merger.
6. CONDITIONS OF THE OFFER.
We will not be required to accept any options returned to us, and we may
terminate or amend the offer, or postpone our acceptance and cancellation of any
options returned to us, in each case, subject to Rule 13e-4(f)(5) under the
Securities Exchange Act, if at any time on or after the date of this Offer to
Exchange and before the expiration date, we determine that any of the following
events has occurred, and, in our reasonable judgment, in any such case and
regardless of the circumstances giving rise thereto, including any action or
omission by us, the occurrence of the event or events makes it inadvisable for
us to proceed with the offer or to accept and cancel options returned to us:
- any action or proceeding by any government or governmental, regulatory or
administrative agency, authority or tribunal or any other person,
domestic or foreign, is threatened or pending before any court,
authority, agency or tribunal that directly or indirectly challenges the
making of the offer, the acquisition of some or all of the tendered
options, the issuance of new options, or otherwise relates to the offer
or that, in our reasonable judgment, could materially and adversely
affect our business, condition (financial or other), income, operations
or prospects or materially impair the benefits we believe we will receive
from the offer;
- any action is threatened, pending or taken, or any approval is withheld,
or any statute, rule, regulation, judgment, order or injunction
threatened, proposed, sought, promulgated, enacted, entered, amended,
enforced or deemed to be applicable to the offer or us, by any court or
any authority, agency or tribunal that, in our reasonable judgment, would
or might directly or indirectly:
9
(a) make it illegal for us to, or otherwise restrict our ability to,
accept some or all of the tendered options, or to issue some or all of
the new options or otherwise restrict or prohibit consummation of the
offer or otherwise relate to the offer;
(b) delay or restrict our ability, or render us unable, to accept the
tendered options for exchange and cancellation or to issue new options
for some or all of the tendered options;
(c) materially impair the benefits we believe we will receive from the
offer; or
(d) materially and adversely affect our business, condition (financial or
other), income, operations or prospects or otherwise materially impair
in any way the contemplated future conduct of our business or
materially impair the contemplated benefits of the offer to us;
- there is:
(a) any general suspension of trading in, or limitation on prices for,
securities on any national securities exchange or in the
over-the-counter market;
(b) the declaration of a banking moratorium or any suspension of payments
in respect of banks in the United States, whether or not mandatory;
(c) the commencement of a war, armed hostilities or other international or
national crisis directly or indirectly involving the United States;
(d) any limitation, whether or not mandatory, by any governmental,
regulatory or administrative agency or authority on, or any event that
in our reasonable judgment might affect, the extension of credit by
banks or other lending institutions in the United States;
(e) any significant decrease in the market price of our common shares or
any change in the general political, market, economic or financial
conditions in the United States or abroad that could, in our
reasonable judgment, have a material adverse effect on the business,
condition (financial or other), operations or prospects of Frontstep
or on the trading in our common shares; or
(f) any change, development, clarification or position taken in generally
accepted accounting principles which could or would require us to
record compensation expense against our earnings in connection with
the offer for financial reporting purposes;
- another person publicly makes or proposes a tender or exchange offer for
some or all of our common shares, or an offer to merge with or acquire
us, or we learn that:
(a) any person, entity or "group," within the meaning of section 13(d)(3)
of the Securities Exchange Act, has acquired or proposed to acquire
beneficial ownership of more than 5% of our outstanding common shares,
or any new group shall have been formed that beneficially owns more
than 5% of our outstanding common shares, other than any such person,
entity or group that has filed a Schedule 13D or Schedule 13G with the
SEC on or before the date of this Offer to Exchange;
(b) any such person, entity or group that has filed a Schedule 13D or
Schedule 13G with the SEC on or before the date of this Offer to
Exchange has acquired or proposed to acquire beneficial ownership of
an additional 2% or more of our outstanding common shares; or
(c) any person, entity or group shall have filed a Notification and Report
Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or
made a public announcement that it intends to acquire us or any of our
assets or securities; or
- any change occurs in our business, condition (financial or other),
assets, income, operations, prospects or share ownership that, in our
reasonable judgment, is or may be material to us.
The conditions to the offer are for our benefit. We may assert them in our
discretion before the expiration date and we may waive them at any time and from
time to time, whether or not we waive any other condition to the offer. Our
failure to exercise any of these rights is not a waiver of any of these rights.
The waiver of any of these rights with respect to particular facts and
circumstances is not a waiver with respect to any other facts
10
and circumstances. Any determination we make concerning the events described in
this Section 6 will be final and binding upon everyone.
7. PRICE RANGE OF COMMON SHARES.
No established trading market exists for options granted under the
Non-Qualified Stock Option Plan for Key Employees or under the 1999
Non-Qualified Stock Option Plan for Key Employees, and no established trading
market will exist for any of the new options that we may grant pursuant to this
offer.
Our common shares are quoted on the Nasdaq National Market under the symbol
"FSTP." The following table shows, for the periods indicated, the high and low
sales prices per common share of our common shares as reported by the Nasdaq
National Market.
HIGH LOW
------ ------
Fiscal year ended June 30, 2002
First Quarter............................................. $ 4.24 $ 3.14
Fiscal year ended June 30, 2001
First Quarter............................................. $10.00 $ 5.31
Second Quarter............................................ 6.88 2.63
Third Quarter............................................. 7.13 3.13
Fourth Quarter............................................ 3.90 1.89
Fiscal year ended June 30, 2000
First Quarter............................................. $12.38 $ 7.88
Second Quarter............................................ 18.50 9.50
Third Quarter............................................. 32.75 15.25
Fourth Quarter............................................ 20.25 8.13
As of October 18, 2001, the last reported sale price of our common shares,
as reported by the Nasdaq National Market, was $3.15 per common share and there
were 7,568,218 common shares issued and outstanding.
The price of our common shares has been, and in the future may be, highly
volatile. The price of our common shares could rise or fall prior to the grant
of the new options. We will not grant the new options until a trading date that
is at least six months and one day after the date your returned options are
accepted and cancelled. The exercise price per share of the new options will
equal the average of the highest and lowest prices per share of our common
shares as they are reported on the Nasdaq National Market on the date of the
grant. If the common shares are not traded on that day, then we will use the
next preceding day on which the common shares are traded. As a result, the
exercise price per share of the new options may be higher than the exercise
price per share of your tendered options. In addition, our common shares
thereafter may trade at prices below the exercise price per share of the new
options. Depending on the exercise price per share of your tendered options and
other factors, your new options may be more or less valuable than your tendered
options.
We recommend that you obtain current market quotations for our common
shares before deciding whether to tender your options. You, however, should
recognize that the current market price of our common shares may provide little
or no basis for predicting what the market price of our common shares will be on
the grant date of the new options or at any time in the future.
8. SOURCE AND AMOUNT OF CONSIDERATION; TERMS OF NEW OPTIONS.
Consideration. Your new options will be exercisable for the same number of
common shares as the old options that you return to us for exchange, unless you
are an executive officer of Frontstep. If you are an executive officer, then
your new options will be exercisable for that number of common shares which is
equal to 80% of the number of common shares exercisable under the old options
that you return to us for exchange. The exact number of option shares that you
have now is set forth in the enclosed Election Form. We will not issue any new
options exercisable for fractional common shares. Instead, we will round up to
the nearest whole number.
11
If we receive and accept return of all outstanding eligible options, we
will grant new options to purchase a total of 1,586,054 common shares. The
common shares issuable upon exercise of the new options will equal approximately
17% of our total outstanding common shares on a fully diluted basis, including
those common shares issued and outstanding as of October 18, 2001 and all other
securities that are convertible or exercisable into our common shares.
Terms of New Options. The new options will be issued under the same option
plan under which the tendered options were granted and a new option agreement
will be executed between Frontstep and each option holder who accepts the offer.
Except with respect to:
- the number of common shares that may be purchased under the option, in
the case of executive officers,
- the exercise price,
- the date that vesting and exercisability begins,
- the vesting period,
- the expiration date.
and as otherwise specified in this offer, the terms and conditions of the new
options will be substantially the same as the terms and conditions of the
tendered options. The terms and conditions of the new options will be
substantially similar to one another, regardless of the option plan under which
they are issued.
The issuance of new options under this offer will not create any
contractual or other right of the recipients to receive any future grants of
stock options or benefits in lieu of stock options.
The following description of the option plans and the new option agreements
are summaries, and are not complete. Complete information about the option plans
and the new options is included in the option plans and the new option agreement
between you and us. The forms of the new option agreements have been filed with
the SEC as exhibits to the Schedule TO. The Non-Qualified Stock Option Plan for
Key Employees is filed as Exhibit 10(a) to Frontstep's Annual Report on Form
10-K for the fiscal year ended June 30, 1993 (File No. 0-19024). The 1999
Non-Qualified Stock Option Plan for Key Employees is filed as Exhibit 10(n) to
Frontstep's Annual Report on Form 10-K for the fiscal year ended June 30, 1999
(File No. 0-19024). Please contact Daniel P. Buettin, Vice President, Chief
Financial Officer and Secretary, Frontstep, Inc., 2800 Corporate Exchange Drive,
Columbus, Ohio 43231, telephone: (614) 523-7136, facsimile: (614) 895-2972, to
request copies of the option plans or the forms of the new option agreements.
Copies will be provided promptly and at our expense.
General. As of October 18, 2001, the maximum number of common shares we
can issue in connection with options granted under the Non-Qualified Stock
Option Plan for Key Employees was 2,653,070 and under the 1999 Non-Qualified
Stock Option Plan for Key Employees was 600,000. Both option plans permit us to
grant only non-qualified stock options, which are options that do not qualify as
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code. Accordingly, all of the options that are subject to this offer are
non-qualified stock options and all of the new options that we may grant
pursuant to this offer will be non-qualified stock options.
Administration. Both option plans are administered by the stock option
committee of our board of directors. The committee members are intended to be
"non-employee directors" as defined in Rule 16b-3 under the Securities Exchange
Act and "outside directors" for purposes of section 162(m) of the Internal
Revenue Code. The committee members are appointed by our board of directors to
serve for the terms specified by the board. The board may remove or reconstitute
the committee members at any time, subject to the requirements of Rule 16b-3.
The stock option committee has broad discretion to fashion the terms of
options granted under the plans, including the number of common shares subject
to each option, the period of each option and the vested rights of each
participant in each option. The stock option committee also has authority to
choose those employees to whom, and the time or times at which, stock options
will be granted. The stock option committee is authorized
12
to construe and interpret the plans, to promulgate, amend and rescind rules and
regulations relating to the implementation of the plans and to make all other
determinations necessary or advisable for the administration of the plans. Any
determination of the stock option committee in connection with the construction,
interpretation, administration or application of the plans is final, conclusive
and binding on all plan participants and any person validly claiming through the
plan participants.
Term. The term of each option granted under the plans is fixed by the
stock option committee at the time of grant, except that no option may permit
the purchase of common shares under the option after the tenth anniversary of
the date of grant. The new options that we grant pursuant to this offer will
expire ten years from the date of grant in 2012.
Termination. If you are not an employee of Frontstep or one of its
subsidiaries from the date you tender your options for exchange through the date
that we grant the new options, then you will not receive any new options or any
other consideration in exchange for your tendered options that we have accepted
for exchange and cancelled. This means that if you quit, die or become disabled,
or we terminate your employment for any reason, prior to the date we grant the
new options, you will not receive anything for the options that we have accepted
for exchange and cancelled. You also will have no right to the return of any
options that we have accepted for exchange and cancelled.
After the grant date of the new options under the terms of our forms of
stock option agreement, if you cease to be an employee of Frontstep for cause,
then your options will expire and terminate immediately upon termination of your
employment. If you cease to be an employee of Frontstep for any other reason,
you will have until the earlier of (1) the expiration date of the option, or (2)
90 days from the date of your termination, to exercise the option to the extent
to which you otherwise would have been entitled to exercise the option on or
prior to the date of your termination. To the extent that you are not entitled
to exercise the option prior to the date of your termination, then any
outstanding and unexercised option shall immediately lapse and you will have no
further rights with respect to it, effective as of the date of your termination.
Exercise Price. The exercise price of options granted under the plans is
determined by the stock option committee, but cannot in any event be less than
one hundred percent (100%) of the fair market value of our common shares subject
to the option on the date of grant. The plans define fair market value as the
average of the highest and lowest prices of our common shares, as reported on
the Nasdaq National Market, or, if the common shares were not traded on that
date, then on the next preceding day on which the common shares were traded.
The new options will have an exercise price per share equal to the average
of the highest and lowest prices per share of our common shares as reported on
the Nasdaq National Market on the new grant date. If the common shares were not
traded on that day, then we will use the next preceding day on which the common
shares are traded. Because we will not grant new options until at least six
months and one day after the date when we cancel the options accepted for
exchange, it is possible that the new options may have higher exercise prices
per share than some or all of your options that you tender for exchange. We
cannot predict the exercise price per share of the new options. We recommend
that you obtain current market quotations for our common shares before deciding
whether to tender your options. You, however, should recognize that the current
market price of our common shares may provide little or no basis for predicting
what the market price of our common shares will be on the grant date of the new
options or at any time in the future.
Vesting and Exercise. Our stock option committee has the authority to
determine the time or times at which options granted under the option plans may
be exercised. Our stock option committee may also accelerate the exercisability
of options. Each new option will vest over a two year period beginning one year
from the date of grant in 2003. The first vesting date will be on the one year
anniversary of the date of grant in 2003, when 50% of each new option will vest
and become exercisable. The second vesting date will be on the two year
anniversary of the date of grant in 2004, when the remaining 50% of each new
option will vest and become exercisable. Accordingly, the new options will be
fully vested and exercisable on the second anniversary of the date of grant in
2004. Even if the options you exchange are partially or fully vested, the new
options you receive will not be vested on the date of grant and will be subject
to a new two year vesting period.
13
An option holder may exercise any vested option in accordance with the
terms of the plans and the option holder's option agreement, by delivering (1) a
notice in writing, in a form specified by our stock option committee, that
states the number of common shares subject to the option in respect of which the
holder is exercising the option, and (2) a check or cash in full payment of
those common shares.
Non-Transferability of Options. No option granted under the plans may be
transferred other than by will or the laws of descent and distribution and a new
option may not be exercised during the lifetime of a participating employee
except by the employee or by the employee's guardian or legal representative.
Change in Control. Options granted under the plans become fully
exercisable as of the date of a "change in control" event, whether or not then
exercisable, except that any option which has been outstanding less than six
months on the date of the change in control event does not automatically become
exercisable. A "change in control" event is defined in our forms of stock option
agreements and includes, among other things, approval of a definitive agreement
by our shareholders for a merger or consolidation in which we are not the
surviving or continuing corporation, the sale or disposition of substantially
all of our assets, and the acquisition by any person or entity (other than a
trustee or fiduciary of one of our employee benefit plans) of the beneficial
ownership (as defined in Rule 16(a) under the Securities Exchange Act of 1934)
or voting control of a percentage of our outstanding common shares which is
equal to or greater than the percentage beneficially owned by Lawrence J. Fox,
Chairman of our board of directors.
Adjustments. In the event of any change in our outstanding common shares
by stock dividend, stock split, combination, reclassification, recapitalization,
merger, reorganization or other similar event, our stock option committee may
determine any appropriate adjustments, if any, to be made in the number and
exercise price per share of common shares subject to outstanding options granted
under the plans, as well as the number of common shares reserved for options
which we may grant under the plans at any time in the future.
Amendment and Termination. We reserve the right, by action of our board of
directors, to amend, modify, or terminate either plan at any time. We, however,
may not, without prior shareholder approval, increase the total number of common
shares subject to options, except pursuant to an adjustment described in the
immediately preceding paragraph, materially increase the benefits or materially
modify the requirements as to eligibility under the plans.
Tax Consequences. We may require any person exercising an option to pay us
the amount of any taxes that we are required by law to withhold with respect to
the exercise of that option. The payment will be due on the date that we are
required to withhold taxes. In the event that the payment is not made when due,
we will have the right to deduct from any payment of any kind otherwise due to
that person from us, all or part of the amount required to be withheld, but only
to the extent permitted by law and by Rule 16b-3 of the Securities Exchange Act
for persons subject to Section 16 of the Securities Exchange Act.
You should refer to Section 13 of this Offer of Exchange for a complete
discussion of the U.S. federal income tax consequences of the new options and
the options tendered for exchange, as well as the consequences of accepting or
rejecting the new options under this offer to exchange.
Registration of Option Shares. All common shares issuable upon exercise of
options under the option plans, including the common shares that will be
issuable upon exercise of all new options have been registered under the
Securities Act on a registration statement on Form S-8 filed with the SEC.
Unless you are considered an "affiliate" of Frontstep, you will be able to sell
your option shares free of any transfer restrictions under applicable securities
laws.
9. INFORMATION ABOUT FRONTSTEP.
We are a leading global provider of integrated enterprise software
solutions for mid-sized manufacturing and distribution companies and business
units of larger companies. Until November 2000, we were known as Symix Systems,
Inc. Our name was changed to reflect our increasingly more diverse product
offering than we historically offered that redefines the business system needs
of mid-market companies as they seek to be more efficient and to collaborate
more effectively with their customers and suppliers in an increasingly more
competitive and global environment. We have been one of the mid-market leaders
in the enterprise software
14
industry for more than 20 years, particularly with manufacturing companies and
more recently with distribution companies. We provide our customers with the
software products we have developed, professional consulting services associated
with the installation of our products and related training for customer
personnel.
The software solutions we provide to our customers include a comprehensive
suite of integrated software and services that (1) support the traditional back
office management and resources of an enterprise ("ERP"), (2) support customer
relationship management ("CRM") and other front office business activities and
(3) support an enterprise's supply chain management activities. The software
products associated with each of these solutions typically provide a customer
with a comprehensive business system that is usually their primary system. Over
the last two years, we have advanced the architecture of these products to
include the use of the Internet as a backbone that provides an enterprise the
ability to collaborate effectively with their customers and suppliers in a
global economy. More specifically, we develop, market and support the following
products:
Extended Enterprise Resource Planning. Traditional ERP applications for
discrete manufacturing and industrial distribution with an add-on suite of
products that allows for collaborative operations and financial business
processes across an entire enterprise with analytical capabilities that turn
data into information that support the business management of an enterprise.
Front Office. A suite of products that foster customer loyalty and
retention by combining customer relationship management with order management
capabilities such as configuration, advanced pricing and rapid order entry.
Supply Chain. A suite of products that provide a solution for order
management with inventory and capacity visibility and production scheduling
based on actual material and capacity constraints. These products allow for
dynamic adjustments for unplanned events, exceptions and disruptions.
Enterprise Application Integration. Open applications architecture that
allows for the continued use of legacy systems in a shared, integrated
environment with newer, network-centric processes and systems.
We maintain a worldwide professional services organization of over 200
employees and a network of more than 50 business partners and strategic
alliances which offer to our customers a full range of services to support
installation and ongoing operations and to maximize the benefits of our software
products. These services include, but are not limited to, project management,
implementation support, product education, technical consulting, programming and
system integration services and ongoing maintenance and product support. We
employ our own structured services methodology to manage and support customer
implementation.
We have more than 4,400 customer sites and a worldwide network of 28
offices in 16 countries. Our offices are equipped to provide our services,
support our products and, in several countries around the world, translate our
products into other languages. As of June 30, 2001,we employed 680 persons of
which 213 were employed in international operations. The Company's principal
executive offices are located at 2800 Corporate Exchange Drive, Columbus, Ohio
43231,and its telephone number is (614)523-7000.
Financial Information. The following table sets forth consolidated
financial and operations data for Frontstep. The consolidated statements of
operations for the years ended June 30, 2001, 2000 and 1999 and the consolidated
balance sheets of June 30, 2001 and 2000 have been derived from the consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended June 30, 2001. The consolidated financial statements for the year ended
June 30, 2001 have been audited by KPMG LLP, independent certified public
accountants. The information presented below should be read in conjunction with
our consolidated financial statements and related notes. See Section 16 as to
how you can obtain copies of our SEC reports that contain the audited financial
statements that we have summarized below.
15
FRONTSTEP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED JUNE 30,
---------------------------------------
2001 2000 1999
----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Revenue:
License fees.............................................. $ 51,309 $ 57,858 $ 67,423
Service, maintenance and support.......................... 66,977 71,050 61,649
-------- -------- --------
Total revenue..................................... 118,286 128,908 129,072
Cost of revenue:
License fees.............................................. 19,972 19,636 18,317
Service, maintenance and support.......................... 36,941 40,352 33,708
-------- -------- --------
Total cost of revenue............................. 56,913 59,988 52,025
-------- -------- --------
Gross margin................................................ 61,373 68,920 77,047
Operating expenses:
Selling, general and administrative....................... 56,007 56,790 56,801
Research and development.................................. 13,332 15,684 10,217
Amortization of acquired intangibles...................... 3,285 3,593 2,140
Restructuring and other charges........................... 15,156 3,649 835
-------- -------- --------
Total operating expenses.......................... 87,780 79,716 69,993
-------- -------- --------
Operating income (loss)..................................... (26,407) (10,796) 7,054
Interest expense............................................ (623) (782) (324)
Other income (expense), net................................. 113 (184) 475
-------- -------- --------
Income (loss) before income taxes........................... (26,917) (11,762) 7,205
Provision for (benefit from) income taxes................... (2,063) (1,557) 3,206
-------- -------- --------
Net income (loss)........................................... $(24,854) $(10,205) $ 3,999
======== ======== ========
Net income (loss) per common share:
Basic..................................................... $ (3.30) $ (1.38) $ 0.60
======== ======== ========
Diluted................................................... $ (3.30) $ (1.38) $ 0.55
======== ======== ========
Shares used in computing per share amounts:
Basic..................................................... 7,535 7,411 6,711
Diluted................................................... 7,535 7,411 7,264
16
FRONTSTEP, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30,
-------------------
2001 2000
-------- -------
(IN THOUSANDS,
EXCEPT SHARE DATA)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 1,512 $11,868
Trade accounts receivable, net............................ 31,446 36,956
Prepaid expenses.......................................... 3,756 2,610
Income taxes receivable................................... 47 1,867
Deferred income taxes..................................... 2,026 1,510
Inventories............................................... 738 861
Other current assets...................................... 979 988
-------- -------
40,504 56,660
Capitalized software, net................................... 15,094 18,329
Intangibles, net............................................ 7,911 9,113
Property and equipment, net................................. 7,646 7,986
Other assets................................................ 1,438 2,280
-------- -------
Total assets................................................ $ 72,593 $94,368
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 15,610 $13,613
Deferred revenue.......................................... 19,067 18,223
Current portion of long-term obligations.................. 1,967 5,476
-------- -------
36,644 37,312
Noncurrent liabilities:
Long-term debt............................................ 8,337 3,000
Deferred income taxes..................................... 2,891 4,167
Other..................................................... 405 169
-------- -------
11,633 7,336
Minority interest........................................... 2,102 2,146
Series A Convertible Participating Preferred Stock, no par
value..................................................... -- 10,865
Shareholders' equity:
Series A Convertible Participating Preferred Stock, no par
value; 1,000,000 shares authorized; 566,933 shares
issued and outstanding at June 30, 2001; liquidation
preference $13,606,392.................................. 10,865 --
Common stock; no par value; 20,000,000 shares authorized;
7,872,418 and 7,807,857 shares issued at June 30, 2001
and 2000, respectively, at stated capital amounts of
$0.01 per share 79 78
Additional paid-in capital................................ 37,470 37,216
Treasury stock, at cost; 304,200 shares................... (1,320) (1,320)
Retained earnings (deficit)............................... (21,562) 3,292
Accumulated other comprehensive loss...................... (3,318) (2,557)
-------- -------
22,214 36,709
-------- -------
Total liabilities and shareholders' equity.................. $ 72,593 $94,368
======== =======
17
10. INTERESTS OF DIRECTORS AND OFFICERS; TRANSACTIONS AND ARRANGEMENTS ABOUT
THE OPTIONS; OTHER MATERIAL AGREEMENTS.
A list of our directors and executive officers is attached to this Offer to
Exchange as Schedule A. As of October 18, 2001, our executive officers as a
group beneficially owned options outstanding under both the Non-Qualified Stock
Option Plan for Key Employees and the 1999 Non-Qualified Stock Option Plan for
Key Employees to purchase 715,000 of our common shares or approximately 45% of
the total number of common shares subject to options outstanding under these
plans as of that date. Non-employee members of our board of directors are not
eligible to be granted options under either of the plans and accordingly hold no
options pursuant to these plans.
Neither we, nor to the best of our knowledge, any of our directors or
executive officers, affiliates or subsidiaries, engaged in transactions
involving the options or our common shares during the 60 days prior to this
Offer to Exchange.
MATERIAL AGREEMENTS, ARRANGEMENTS AND UNDERSTANDINGS INVOLVING OUR COMMON
SHARES.
On May 10, 2000, we sold 566,933 Series A Convertible Participating
Preferred Shares, each without par value, in a private placement to a group of
institutional investors for $24.00 per share, or an aggregate of approximately
$13.6 million in cash. Each Series A Preferred Share is convertible by the
holder, in whole or in part, at any time into two of our common shares, subject
to adjustments, at the conversion price of $12.00 per common share, subject to
adjustments.
Also on May 10, 2000, we issued to the investors warrants to purchase
453,546 common shares at an exercise price of $15.00 per share, subject to
adjustments. The exercise price of the warrants subsequently were adjusted to
$3.36 per common share in connection with the issuance of a warrant to Foothill
Capital Corporation, as discussed below. The warrants expire on May 10, 2005 and
are exercisable at any time prior to their expiration.
The investors currently holding the Series A Preferred Shares and warrants
described above, include:
- MSDW Venture Partners IV, L.L.C.;
- MSDW Venture Partners IV, Inc.;
- Morgan Stanley Dean Witter Venture Partners IV, L.P.;
- Morgan Stanley Dean Witter Venture Offshore Investors IV, L.P.;
- Morgan Stanley Dean Witter Venture Investors IV, L.P.;
- Fallen Angel Equity Fund, L.P.;
- Morgan Stanley Dean Witter Equity Funding, Inc.; and
- Originators Investment Plan, L.P. Originators Investment Plan, L.P.
acquired its interest in the Series A Preferred Shares and warrants on
November 24, 2000 pursuant, in part, to an Assignment and Assumption
Agreement with Morgan Stanley Dean Witter Equity Funding, Inc.
In connection with the private placement of the Series A Preferred Shares
and the warrants, we entered into an Investor Rights Agreement, dated May 10,
2000, with the investors and with Lawrence J. Fox, a principal shareholder and
Chairman of the Board of Frontstep. The Investor Rights Agreement was amended on
August 15, 2000. The Investor Rights Agreement, as amended, requires us to file
a registration statement with the SEC, registering the common shares issuable
upon conversion of the Series A Preferred Shares and upon exercise of the
warrants for resale by the investors under applicable federal and state
securities laws. We also agreed to use our reasonable best efforts to cause the
registration statement to become and to remain effective until each investor
could sell all of its registrable shares, as defined in the agreement, in
compliance with Rule 144 of the Securities Act without restrictions as to volume
under Rule 144(k) of the Securities Act.
Pursuant to the agreement, any investor may transfer its respective
registration rights to any other person who acquires at least 51% of the then
outstanding common share equivalents held by the investor at the time
18
of the transfer. The Investor Rights Agreement further provides for
cross-indemnification of the investors and us and the parties' respective
directors, officers, employees, partners, members and affiliates, including any
controlling persons, against specific liabilities in connection with the offer
and sale of the common shares covered by the registration statement, including
liabilities under the Securities Act.
In compliance with the Investor Rights Agreement, we filed a registration
statement on Form S-3 (Registration No. 333-42894) with the SEC registering the
common shares, which was declared effective by the SEC on August 25, 2000.
Other provisions included in the Investor Rights Agreement relate to:
- restrictions on the transfer of the Series A Preferred Shares, the
warrants and the common shares issuable upon conversion of the Series A
Preferred Shares and upon exercise of the warrants on the terms specified
in the agreement;
- the rights of the investors to specified information about us;
- the pre-emptive right of the investors to participate on a pro rata basis
in offerings of securities by us; and
- the right of the investors to sell their common shares on a pro rata
basis to any third party purchaser that is offering to acquire our common
shares held by Lawrence J. Fox.
The Investor Rights Agreement also gives the investors specified rights to
designate persons to serve on our board of directors. Pursuant to these
provisions, Guy de Chazal, who is an appointed representative of the Morgan
Stanley investors identified above, and Barry Goldsmith, who is an appointed
representative of Fallen Angel Equity Fund, L.P., were appointed to our board of
directors on May 10, 2000 and were subsequently re-elected to serve on our board
by our shareholders in November, 2000.
On July 17, 2001, we entered into a credit facility arrangement with
Foothill Capital Corporation. In connection with the credit facility arrangement
with Foothill, we issued to Foothill a warrant to purchase 550,000 common shares
at an initial exercise price of $3.36 per common share. The exercise price of
the warrant and the number of common shares issuable upon exercise of the
warrant are subject to adjustments from time to time under the anti-dilution
provision contained in the warrant. The warrant expires on July 17, 2006 and is
exercisable at any time prior to its expiration.
Also in connection with the credit facility and the issuance of the warrant
to Foothill, we entered into a Registration Rights Agreement with Foothill,
dated July 17, 2001. The Registration Rights Agreement requires us to file a
registration statement to register an amount of our common shares equal to at
least 125% of the common shares then issuable upon exercise of the warrant,
subject to adjustments, for resale by Foothill under applicable federal and
state securities laws. We also agreed to use our best efforts to cause the
registration statement to be declared effective by the SEC as soon as
practicable, but in no event later than 180 days after the closing date of the
loan transaction with Foothill, and to remain effective until all of the
registrable shares, as defined in the Registration Rights Agreement, are sold.
The Registration Rights Agreement further provides that Foothill may
transfer its registration rights to any person who is a permitted transferee of
the warrant, subject to the terms of the warrant, or of the registrable
securities, subject to the terms of the Registration Rights Agreement, other
than a transferee that acquires the registrable securities in a registered
public offering or pursuant to a sale under Rule 144 of the Securities Act.
The Registration Rights Agreement further provides for
cross-indemnification of Foothill and us and the parties' respective directors,
officers, employees, partners, members, shareholders, affiliates, advisers,
attorneys and agents and their respective controlling persons, against specific
liabilities in connection with the offer and sale of the common shares covered
by the registration statement, including liabilities under the Securities Act.
In compliance with the Registration Rights Agreement, we filed a
registration statement on Form S-3 (Registration No. 333-71434) with the SEC to
register the common shares on October 11, 2001. The registration statement has
not yet become effective.
19
In addition to the Non-Qualified Stock Option Plan for Key Employees and
the 1999 Non-Qualified Stock Option Plan for Key Employees, each of which is
described in Section 8 of this Offer to Exchange, we also maintain the following
additional stock option programs:
- Non-Qualified Stock Option Plan for Key Executives; and
- Stock Option Plan for Outside Directors.
The Non-Qualified Stock Option Plan for Key Executives provides for the
grant of non-qualified stock options to our executive officers who have
demonstrated a capacity for contributing in a substantial measure to our
success. The plan currently is administered by our stock option committee, which
has the authority to choose the individuals to whom and the time or times at
which options are to be granted, the number of common shares subject to each
option, the period of each option, the vested rights of each executive officer
in his or her options, the exercise price of the options and other terms and
conditions identified in the plan. Our stock option committee also has the power
to construe and interpret the plan, to promulgate, amend and rescind rules and
regulations relating to the implementation of the plan and to make all other
determinations necessary or advisable for the administration of the plan.
Currently, Stephen A. Sasser, our President and Chief Executive Officer, is
the only executive officer of Frontstep to whom we have granted options under
the plan. We have granted Mr. Sasser options to purchase a total of 400,000 of
our common shares under the plan leaving no further options for common shares
available for issuance under the plan.
The Stock Option Plan for Outside Directors provides for the grant of
non-qualified stock options to our non-employee directors. The plan provides
that we automatically will grant each outside director an option to purchase
20,000 common shares on the second business day after the day the individual is
elected or otherwise chosen to serve as an outside director. The exercise price
of each option granted under the plan must equal the fair market value of our
common shares on the date of grant. Options are exercisable upon grant. The plan
currently is administered by our stock option committee which has the authority
to construe and interpret the plan, to promulgate, amend and rescind rules and
regulations relating to the implementation of the plan and to make all other
determinations necessary or advisable for the administration of the plan. Our
stock option committee, however, does not have authority to choose who will be
eligible for the grant of options under the plan, to set the number of options
granted, to set the number of common shares subject to option grants or to set
the date and circumstances of grants of options, the term of the options, the
period within which the options may be exercised or the exercise price of the
options.
All of our current non-employee directors have been granted options
pursuant to the plan, except for Guy de Chazal and Barry Goldsmith, each of whom
has waived his right to receive options pursuant to the plan. The directors hold
options to purchase a total of 80,000 of our common shares under the plan and
100,000 of our common shares remain available for issuance under the plan.
We also have an employee stock purchase plan under which eligible
participants may purchase our common shares during the annual offering. Under
the plan, the purchase price for our common shares is determined by the
compensation committee of our board of directors on an annual basis prior to
each annual offering. The purchase price may not be less than 90% of the per
share fair market value of our common shares on either the effective date of the
annual offering or the option date for the offering, whichever is lesser. Our
directors and officers are not eligible to participate in the plan. As of
December 31, 2000, the plan did not have any more shares available for purchase.
Until and unless our compensation committee approves additional common shares to
be issued under the plan, the plan will remain inactive.
OTHER AGREEMENTS WITH OUR EXECUTIVE OFFICERS.
We have an employment agreement dated July 5, 1995, as amended in April,
1997 and December, 1998, with Stephen A. Sasser, our President and Chief
Executive Officer. Mr. Sasser also is one of our directors. The term of the
agreement extends to July 5, 2002. The agreement, however, provides for
automatic renewal for one additional year each July 4 thereafter unless prior
notice of non-renewal is given by us to Mr. Sasser at
20
least 150 days, or by Mr. Sasser to us at least 120 days, before the expiration
of the term of the agreement or the then extended term of the agreement.
Under the agreement, Mr. Sasser agrees to serve as our President and Chief
Executive Officer. He further agrees to serve as our director and as an officer
and/or director of any of our subsidiaries or affiliates if so elected. The
agreement provides for an annual base salary of not less than $272,000 and
additional compensation pursuant to a bonus plan approved by the compensation
committee of our board of directors with an annual target bonus opportunity of
$188,000.
If Mr. Sasser's employment is terminated as the result of his death or
disability, as defined in the agreement, or by us for cause, as defined in the
agreement, then he will be entitled to receive his base salary through the date
of termination and bonus compensation as provided for under the agreement on a
pro rata basis to the extent that we have achieved specified annual targets and
objectives. In the event of termination of Mr. Sasser's employment by us other
than for cause or disability, in each case, as defined in the agreement, or by
Mr. Sasser within one year after a "change in control" of Frontstep, as defined
in the agreement, in addition to the prorated base salary and bonus compensation
previously described, Mr. Sasser will be entitled to receive an amount equal to
his annual base salary, plus an amount equal to the highest bonus earned by him
under the terms of the agreement for any fiscal year prior to the date of
termination, and other specified benefits.
The agreement also provides for the grant of two separate options covering
400,000 and 140,000 common shares, respectively, to Mr. Sasser as additional
consideration. An option for 400,000 common shares was granted to Mr. Sasser
effective in January, 1996. An option for an additional 140,000 common shares
was granted to Mr. Sasser in July, 1996 pursuant to the terms of the agreement.
Under the agreement, if any of the compensation or other benefits paid to Mr.
Sasser upon termination of his employment by us without cause, or upon
termination of his employment by Mr. Sasser within a year after a change in
control, result in additional tax to him under Section 4999 of the Internal
Revenue Code, then we are required to make an additional payment to him so as to
provide Mr. Sasser with the benefits he would have received in the absence of
the tax. The agreement also requires us to maintain a policy of insurance on Mr.
Sasser's life in the amount of $1 million, the proceeds of which policy to be
payable upon his death to beneficiaries designated by Mr. Sasser or to his
estate if no designation is made.
Copies of Agreements, Arrangements and Understandings. We have filed copies
of each of the agreements, arrangements and understandings identified above
under the headings "Agreements Involving our Common Shares" and "Other
Agreements with Our Executive Officers" with the SEC in our annual, quarterly
and periodic reports and in our other SEC filings. In addition, we have listed
the location in those periodic reports and other SEC filings where you can find
copies of the foregoing agreements, arrangements and understandings in the
Exhibit Index of the Tender Offer Statement on Schedule TO that we have filed
with the SEC and of which this Offer to Exchange forms a part. Please see
Section 16 "Additional Information" for information as to how you can examine
and obtain copies of any of these documents.
11. STATUS OF OPTIONS ACQUIRED BY US IN THE OFFER; ACCOUNTING CONSEQUENCES OF
THE OFFER.
Options we acquire in connection with the offer will be cancelled and the
common shares that may be purchased under those options will be returned to the
pool of shares available for grants of new options under the option plans
without further shareholder action, except as required by applicable law or the
rules of the Nasdaq National Market or any other securities quotation system or
any stock exchange on which our common shares are then quoted or listed.
We are requiring that anyone returning an option for exchange pursuant to
this offer also return for exchange all options granted to that option holder
during the six month period immediately prior to the date when we cancel options
accepted for exchange. If these options were not required by us to be returned
for exchange by those participating in the offer, we would be required to record
additional stock-based compensation expense because the options would become
variable, as described below.
We believe that we will not incur any compensation expense solely as a
result of the transactions contemplated by the offer because we will not grant
any new options until a business day that is at least six
21
months and one day after the date that we accept and cancel eligible options
tendered for exchange; and the exercise price of all new options will equal the
market value of the common shares on the date we grant the new options.
We may incur compensation expense, however, if we grant any options to a
tendering option holder having an exercise price that is less than the exercise
price of any eligible options tendered for exchange by that tendering option
holder between the date of this offer and the scheduled new option grant date.
We will defer the grant to you of these other options if we determine it is
necessary for us to do so to avoid incurring compensation expense against our
earnings because of accounting rules.
12. LEGAL MATTERS; REGULATORY APPROVALS.
We are not aware of any license or regulatory permit that appears to be
material to our business that might be adversely affected by the offer, or of
any approval or other action by any government or regulatory authority or agency
that is required for the acquisition or ownership of the options as described in
the offer. If any other approval or action should be required, we presently
intend to seek the approval or take the action. This could require us to delay
the acceptance of options returned to us. We cannot assure you that we would be
able to obtain any required approval or take any other required action, or that
the failure to obtain any such approval or other action might not result in
adverse consequences to our business. Our failure to obtain any required
approval or take any required action might result in harm to our business. Our
obligation under the offer to accept exchanged eligible options and to issue new
options is subject to conditions, including the conditions described in Section
6.
13. MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES.
The following is a general summary of the material U.S. federal income tax
consequences of the exchange of options under the offer. This discussion is
based on the Internal Revenue Code, its legislative history, Treasury
Regulations and administrative and judicial interpretations as of the date of
the offer, all of which may change, possibly on a retroactive basis. This
summary does not discuss all of the tax consequences that may be relevant to you
in light of your particular circumstances, nor is it intended to apply in all
respects to all categories of option holders.
If you exchange outstanding non-qualified stock options for new options,
you will not be required to recognize income for federal income tax purposes at
the time of the exchange. We believe that the exchange will be treated as a
non-taxable exchange.
At the date of grant of the new options, you will not be required to
recognize additional income for federal income tax purposes. The grant of
options is not recognized as taxable income.
Under current law, you will not realize taxable income upon the grant of a
non-incentive or non-qualified stock option. However, when you exercise the
option, the difference between the exercise price of the option and the fair
market value of the shares subject to the option on the date of exercise will be
treated as taxable compensation income to you, and you will be subject to
withholding of income and employment taxes at that time. We will be entitled to
a deduction equal to the amount of compensation income taxable to you if we
comply with applicable withholding requirements.
If you exchange common shares in payment of part or all of the exercise
price of a non-incentive stock option, no gain or loss will be recognized with
respect to the common shares exchanged, and you will be treated as receiving an
equivalent number of common shares pursuant to the exercise of the option in a
non-taxable exchange. The tax basis of the common shares exchanged will be
treated as the substituted tax basis for an equivalent number of common shares
received, and the new common shares will be treated as having been held for the
same holding period as the holding period that expired with respect to the
transferred common shares. The difference between the aggregate exercise price
and the aggregate fair market value of the common shares received pursuant to
the exercise of the option will be taxed as ordinary income, just as if you had
paid the exercise price in cash.
22
The subsequent sale of the common shares acquired pursuant to the exercise
of a non-incentive stock option generally will give rise to capital gain or loss
equal to the difference between the sale price and the sum of the exercise price
paid for the common shares plus the ordinary income recognized with respect to
the common shares, and these capital gains or losses will be treated as long
term capital gains or losses if you held the common shares for more than one
year following exercise of the option.
We recommend that you consult your own tax advisor with respect to the
federal, state, local and foreign tax consequences of participating in the
offer.
14. EXTENSION OF OFFER; TERMINATION; AMENDMENT.
We may at any time and from time to time, and regardless of whether any
event specified in Section 6 of this offer has occurred or is deemed by us to
have occurred, extend the period of time during which the offer is open and
delay accepting any options surrendered or exchanged by publicly announcing the
extension and giving oral or written notice of the extension to the option
holders.
Prior to the expiration date, in order to terminate or amend the offer, we
may postpone accepting and canceling any options if any of the conditions
specified in Section 6 occur. In order to postpone accepting or canceling, we
must publicly announce the postponement and give oral or written notice of the
postponement to the option holders. Our right to delay accepting and canceling
eligible options is limited by Rule 13e-4 (f) (5) under the Securities Exchange
Act, which requires that we must pay the consideration offered or return the
surrendered options promptly after we terminate or withdraw the offer.
As long as we comply with any applicable laws, we may amend the offer in
any way, including decreasing or increasing the consideration offered in the
offer to option holders or by decreasing or increasing the number of eligible
options to be exchanged or surrendered in the offer. We may amend the offer at
any time by publicly announcing the amendment.
If we extend the length of time during which the offer is open, we will
make a public announcement no later than 9:00 a.m., Eastern Time, on the next
business day after the last previously scheduled or announced expiration date.
Any public announcement relating to the offer will be sent promptly to option
holders in a manner reasonably designed to inform option holders of the change,
for example, by press release.
If we materially change the terms of the offer or the information about the
offer, or if we waive a material condition of the offer, we will extend the
offer to the extent required by Rules 13e-4 (d) (2) and 13e-4 (e) (3) under the
Securities Exchange Act. Under these rules the minimum period an offer must
remain open following material changes in the terms of the offer or information
about the offer, other than a change in price or a change in percentage of
securities sought, will depend on the facts and circumstances including the
relative materiality of such terms or information. If we decide to take any of
the following actions, we will give notice of that action and keep the offer
open for at least ten business days after the date of the notification:
(1) we increase or decrease the amount of consideration offered for the
options;
(2) we decrease the number of options eligible to be exchanged in the
offer; or
(3) we increase the number of options eligible to be exchanged in the offer
by an amount that exceeds 2% of the common shares issuable upon
exercise of the options that are subject to the offer immediately prior
to the increase.
15. FEES AND EXPENSES.
We will not pay any fees or commissions to any broker, dealer or other
person for asking option holders to exchange their options under this Offer to
Exchange.
16. ADDITIONAL INFORMATION.
This Offer to Exchange is a part of a Tender Offer Statement on Schedule TO
that we have filed with the SEC. This Offer to Exchange does not contain all of
the information contained in the Schedule TO and the
23
exhibits to the Schedule TO. We recommend that you review the Schedule TO,
including its exhibits, and the following materials that we have filed with the
SEC before making a decision on whether to exchange your eligible options:
(a) our annual report on Form 10-K for our fiscal year ended June 30, 2001,
filed with the SEC on September 28, 2001, including the information
incorporated by reference in the Form 10-K from our definitive proxy
statement for our 2001 annual meeting of stockholders, filed with the
SEC on September 28, 2001;
(b) the description of our common shares included in our registration
statement on Form 8-A, dated February 12, 1991, as amended.
The SEC file number for these filings is 0-19024. These filings, our other
annual, quarterly and current reports, our proxy statements and our other SEC
filings may be examined, and copies may be obtained, at the following SEC public
reference rooms:
450 Fifth Street, N.W. 500 West Madison Street
Room 1024 Suite 1400
Washington, D.C. 20549 Chicago, Illinois 60661
You may obtain information on the operation of the public reference rooms
by calling the SEC at 1-800-SEC-0330. Our SEC filings are also available to the
public on the SEC's Internet site at http://www.sec.gov.
Our common shares are quoted on the Nasdaq National Market under the symbol
"FSTP," and our SEC filings can be read at the following Nasdaq address:
Nasdaq Operations
1735 K Street, N.W.
Washington, D.C. 20006
We also will provide without charge to each person to whom we deliver a
copy of this Offer to Exchange, upon the written or oral request of such person,
a copy of any or all of the documents to which we have referred you, other than
exhibits to these documents, unless the exhibits are specifically incorporated
by reference into the documents. Requests should be directed to:
Frontstep, Inc.
Attn: Daniel P. Buettin
2800 Corporate Exchange Drive
Columbus, Ohio 43231
Telephone No.: (614) 523-7126
Facsimile No.: (614) 895-2972
between the hours of 9:00 a.m. and 5:00 p.m., Eastern Time.
As you read the documents listed in Section 16, you may find some
inconsistencies in information from one document to another. Should you find
inconsistencies between the documents, or between a document and this Offer to
Exchange, you should rely on the statements made in the most recent document.
The information contained in this Offer to Exchange about Frontstep should
be read together with the information contained in the documents to which we
have referred you.
17. FORWARD-LOOKING STATEMENTS; MISCELLANEOUS.
This Offer to Exchange and our SEC reports referred to above include
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements involve risks and uncertainties that include, among
others, statements regarding future economic performance of Frontstep and the
plans, objectives and expectations of Frontstep's management. The words
"expect," "anticipate," "intend," "plan," "believe," "estimate" and similar
expressions identify forward-looking statements. These statements provide
current expectations and forecasts of
24
future events and are subject to certain risks and uncertainties, known and
unknown, that could cause actual results to differ materially from those
reflected in the forward-looking statements.
Although Frontstep believes that the plans, objectives and expectations
reflected in or suggested by the forward-looking statements are based upon
reasonable assumptions, no assurance can be given that such plans, objectives or
expectations will be achieved. In some cases, information regarding certain
important factors that could cause actual results to differ materially from a
forward-looking statement appear together with such statement. Other risk
factors are detailed in the Frontstep's filings with the SEC, including our
Annual Report on Form 10-K for the year ended June 30, 2001. Frontstep is not
obligated to update or revise these forward-looking statements to reflect new
events or circumstances.
If at any time, we become aware of any jurisdiction where the making of
this offer violates the law, we will make a good faith effort to comply with the
law. If we cannot comply with the law, the offer will not be made to, nor will
exchanges be accepted from or on behalf of, the option holders residing in that
jurisdiction.
Our board of directors recognizes that the decision to accept the exchange
offer is an individual one that should be based on a variety of factors and you
should consult your personal advisors if you have questions about your financial
or tax situation. The information about this offer from Frontstep is limited to
this Offer to Exchange and the accompanying Election Form and Change of Election
Form.
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF
AS TO WHETHER OR NOT YOU SHOULD TENDER YOUR OPTIONS PURSUANT TO THE OFFER. YOU
SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT, THE ELECTION
FORM AND CHANGE OF ELECTION FORM. IF ANYONE MAKES ANY RECOMMENDATION OR
REPRESENTATION TO YOU OR GIVES YOU ANY OTHER INFORMATION REGARDING OUR EXCHANGE
OFFER PROGRAM, YOU SHOULD NOT RELY ON THAT RECOMMENDATION, REPRESENTATION OR
INFORMATION AS HAVING BEEN AUTHORIZED BY US.
FRONTSTEP, INC.
October 30, 2001
25
SCHEDULE A
INFORMATION ABOUT THE DIRECTORS AND
EXECUTIVE OFFICERS OF FRONTSTEP, INC.
The directors and executive officers of Frontstep, Inc. and their positions
and offices as of October 18, 2001, are set forth in the following table:
NAME POSITIONS AND OFFICES HELD
---- --------------------------
Lawrence J. Fox.......................... Chairman of the Board
Roger D. Blackwell....................... Director
Guy de Chazal............................ Director
Barry Goldsmith.......................... Director
Larry L. Liebert......................... Director
James A. Rutherford...................... Director
John T. Tait............................. Director
Duke W. Thomas........................... Director
Stephen A. Sasser........................ President, Chief Executive Officer and
Director
Daniel P. Buettin........................ Vice President, Chief Financial Officer
and Secretary
Lawrence W. DeLeon....................... Executive Vice President, Frontstep
Worldwide Field Operations
Jorge L. Lopez........................... Vice President, Corporate Development and
Strategic Planning
Stephen A. Yount......................... Executive Vice President, Business
Development and Channel Operations
Daryll L. Wartluft....................... Executive Vice President, Frontstep
Product Group
Robert D. Williams....................... Vice President, Human Resources
Carolyn J. Morris........................ Vice President, Marketing
The address of each director and executive officer is: c/o Frontstep, Inc.,
2800 Corporate Exchange Drive, Columbus, Ohio 43231.
26
EX-99.A.2
4
l90969aex99-a_2.txt
EXHIBIT 99(A)(2)
Exhibit a(2)
FRONTSTEP, INC.
ELECTION FORM
Name of Optionee:
Social Security Number:
I have received and read the Offer to Exchange dated October 30, 2001,
accompanying this Election Form. I understand that I may tender any or all
options granted to me pursuant to the Non-Qualified Stock Option Plan for Key
Employees or the 1999 Non-Qualified Stock Option Plan for Key Employees. I
further understand that by so electing to exchange any of my eligible options, I
automatically will be deemed to have elected to exchange all options granted to
me within the six month period prior to the date when Frontstep cancels my
options accepted for exchange.
I also understand the following:
- I must be employed by Frontstep or one of its subsidiaries from the date
I tender my options until the grant date of the new options to receive
any new options or any other consideration for my tendered options that
Frontstep has accepted for exchange and cancelled. Frontstep anticipates
that it will grant the new options on the first business day that is at
least six months and one day following the date that it cancels any
tendered options accepted for exchange. Frontstep intends to cancel the
tendered options on the first business day following the expiration date
of the offer. If I am no longer employed by Frontstep on the grant date
for any reason, then I will have no right to return of my cancelled
options, receipt of any new options or receipt of any other consideration
for the exchange of my cancelled options.
- The exercise price per share of the new options will equal the average of
the highest and lowest prices per share of the common shares of Frontstep
on the date of grant, as they are reported on the Nasdaq National Market.
If the common shares are not traded on that day, then Frontstep will use
the next preceding day on which the common shares are traded. Frontstep
cannot predict the exercise price per share of the new options or
guarantee that it will be less than the exercise price per share of any
of my options that I tender for exchange.
- The number of common shares subject to purchase under the new options
will equal the number of common shares subject to purchase under the
options which I have elected to exchange, unless I am an executive
officer of Frontstep. If I am an executive officer of Frontstep, the
number of common shares subject to purchase under the new options will
equal 80% of the number of common shares subject to purchase under the
options which I have elected to exchange.
- The new options will not begin to vest until the one year anniversary of
the grant date in 2003, when 50% of each new option will vest and become
exercisable. The new options will not become fully vested and exercisable
until the two year anniversary of the grant date in 2004. This vesting
schedule will apply to my new options regardless of whether the options
that I exchange are partially or fully vested at the time that I tender
them for exchange.
- I am giving up my entire ownership interest in any options which I have
elected to exchange and such options will become null and void if
Frontstep accepts those options for exchange. This election is entirely
voluntary.
I hereby make the following election(s) with respect to the options identified
below, recognizing that if I elect to exchange any options, then I must also
elect to tender all options granted to me within the six month period prior to
the date when Frontstep cancels my options accepted for exchange:
CHECK BOX IF YOU
ELECT TO KEEP
OPTION (YOU DO CHECK BOX IF YOU
NUMBER OF COMMON NOT WISH TO ELECT TO
OPTION GRANT SHARES SUBJECT TO EXCHANGE & EXCHANGE &
NO. DATE OPTION CANCEL): CANCEL OPTION
--- ------------ ----------------- ---------------- ----------------
1. [ ] [ ]
2. [ ] [ ]
3. [ ] [ ]
4. [ ] [ ]
5. [ ] [ ]
I represent that the foregoing is a complete and accurate list of all
options held by me under the Non-Qualified Stock Option Plan for Key Employees
and the 1999 Non-Qualified Stock Option Plan for Key Employees.
Optionee's signature: Date: , 2001.
Instructions:
1. We have attached to this form a summary of the stock options held by you.
Please review your records and determine if you agree with this summary. Then,
please fill in the options that your records show we have granted to you
pursuant to the option plans that are the subject of this offer. You should
indicate as to each option whether you wish to accept our offer and exchange and
cancel the option, or whether you wish to decline our offer and keep the option
without change. YOU SHOULD COMPLETE THIS FORM EVEN IF YOU WISH TO REJECT THE
OFFER AS TO ALL OF YOUR ELIGIBLE OPTIONS.
2. Complete this form and mail, fax or hand deliver it to Daniel P. Buettin,
Vice President, Chief Financial Officer and Secretary, Frontstep, Inc., 2800
Corporate Exchange Drive, Columbus, Ohio 43231, (facsimile number: (614)
895-2972), as soon as possible, but no later than 5:00 p.m. Eastern Time on
November 30, 2001. The offer and withdrawal rights will expire at that time
unless we elect to extend the offer. If you do not properly complete and return
this Election Form by that time, then we will assume that you have elected not
to exchange your options. You will be notified of any change in the expiration
date of the offer by public announcement no later than 9:00 a.m., Eastern Time,
on December 1, 2001, by means reasonably designed to inform you of the change,
such as by press release.
3. Ensure that you receive confirmation from Frontstep of any election to
exchange options within five (5) business days. If you do not elect to exchange
any options, then you will not receive any confirmation of your election.
4. Except in accordance with the next sentence, this form must be executed by
the option holder. If the signature is by a trustee, executor, administrator,
guardian, attorney-in-fact or other person acting in a fiduciary or
representative capacity, the signer's full title and proper evidence of the
authority of that person to act in that capacity must be indicated on this form.
ACCEPTED BY FRONTSTEP, INC. ON:
, 2001
By:
Daniel P. Buettin, Vice President,
Chief Financial
Officer and Secretary
EX-99.A.3
5
l90969aex99-a_3.txt
EXHIBIT 99(A)(3)
Exhibit a(3)
FRONTSTEP, INC.
CHANGE OF ELECTION FORM
Name of Optionee:
----------------------------------------------
Social Security Number: - -
I previously received and read the Offer to Exchange dated October 30, 2001 and
the accompanying Election Form. I signed and returned the Election Form, in
which I made certain elections regarding my outstanding options identified on
the Election Form granted to me under the Non-Qualified Stock Option Plan for
Key Employees and under the 1999 Non-Qualified Stock Option Plan for Key
Employees. I now wish to change my elections with respect to those options as
set forth in the table below. I understand that this Change of Election Form
will supercede and cancel any prior Election Form and Change of Election Forms
signed and submitted by me to Frontstep. I further understand that by electing
to exchange any of my eligible options, I automatically will be deemed to have
elected to exchange all options granted to me within the six month period prior
to the date when Frontstep cancels my options accepted for exchange:
I also understand the following:
- I must be employed by Frontstep or one of its subsidiaries from the date
I tender my options until the grant date of the new options to receive
any new options or any other consideration for my tendered options that
Frontstep has accepted for exchange and cancelled. Frontstep anticipates
that it will grant the new options on the first business day that is at
least six months and one day following the date that it cancels any
tendered options accepted for exchange. Frontstep intends to cancel the
tendered options on the first business day following the expiration date
of the offer. If I am no longer employed by Frontstep on the grant date
for any reason, then I will have no right to return of my cancelled
options, receipt of any new options or receipt of any other consideration
for the exchange of my cancelled options.
- The exercise price per share of the new options will equal the average of
the highest and lowest prices of the common shares of Frontstep on the
date of grant, as they are reported on the Nasdaq National Market. If the
common shares are not traded on that day, then Frontstep will use the
next preceding day on which the common shares are traded. Frontstep
cannot predict the exercise price per share of the new options or
guarantee that it will be less than the exercise price per share of any
of my options that I tender for exchange.
- The number of common shares subject to purchase under the new options
will equal the number of common shares subject to purchase under the
options which I have elected to exchange, unless I am an executive
officer of Frontstep. If I am an executive officer of Frontstep, the
number of common shares subject to purchase under the new options will
equal 80% of the number of common shares subject to purchase under the
options which I have elected to exchange.
- The new options will not begin to vest until the one year anniversary of
the grant date in 2003, when 50% of each new option will vest and become
exercisable. The new options will not become fully vested and exercisable
until the two year anniversary of the grant date in 2004. This vesting
schedule will apply to my new options regardless of whether the options
that I exchange are partially or fully vested at the time that I tender
them for exchange.
- I am giving up my entire ownership interest in any options which I have
elected to exchange and such options will become null and void if
Frontstep accepts those options for exchange. This election is entirely
voluntary.
I hereby make the following election(s) with respect to the options identified
below, recognizing that if I elect to exchange any options, then I must also
elect to tender all options granted to me within the six month period prior to
the date when Frontstep cancels my options accepted for exchange:
CHECK BOX IF YOU
ELECT TO KEEP
OPTION (YOU DO CHECK BOX IF YOU
NUMBER OF COMMON NOT WISH TO ELECT TO
OPTION GRANT SHARES SUBJECT TO EXCHANGE & EXCHANGE &
NO. DATE OPTION CANCEL): CANCEL OPTION
--- ------------ ----------------- ---------------- ----------------
1. [ ] [ ]
2. [ ] [ ]
3. [ ] [ ]
4. [ ] [ ]
5. [ ] [ ]
I represent that the foregoing is a complete and accurate list of all options
held by me under the Non-Qualified Stock Option Plan for Key Employees and the
1999 Non-Qualified Stock Option Plan for Key Employees.
Optionee's signature: Date: , 2001.
Instructions:
1. We have attached to this Form a summary of the stock options held by you.
Please review your records to determine if you agree with this summary. Then
please fill in the options that your records show we have granted to you
pursuant to the option plans that are the subject of this offer. You should
indicate as to each option whether you wish to accept our offer and exchange and
cancel the option, or whether you wish to decline our offer and keep the option
without change. YOU DO NOT NEED TO COMPLETE THIS FORM IF YOU HAVE PREVIOUSLY
COMPLETED AN ELECTION FORM AND DO NOT WISH TO CHANGE YOUR ELECTION.
2. Complete this form and mail, fax or hand deliver it to Daniel P. Buettin,
Vice President, Chief Financial Officer and Secretary, Frontstep, Inc., 2800
Corporate Exchange Drive, Columbus, Ohio 43231, (facsimile number: (614)
895-2972), as soon as possible, but no later than 5:00 p.m., Eastern Time, on
November 30, 2001. The offer and withdrawal rights will expire at that time
unless we elect to extend the offer. If you do not properly complete and return
this Change of Election Form by that time, then we will assume that your most
recent election is still valid. You will be notified of any change in the
expiration date of the offer by public announcement no later than 9:00 a.m.,
Eastern Time, on December 1, 2001, by means reasonably designed to inform you of
the change, such as by press release.
3. Ensure that you receive confirmation from Frontstep of any change of election
within five (5) business days. If you do not elect to exchange any options, then
you will not receive any confirmation of your change of election.
4. Except in accordance with the next sentence, this form must be executed by
the option holder. If the signature is by a trustee, executor, administrator,
guardian, attorney-in-fact or other person acting in a fiduciary or
representative capacity, the signer's full title and proper evidence of the
authority of that person to act in that capacity must be indicated on this form.
ACCEPTED BY FRONTSTEP, INC. ON:
, 2001
By:
Daniel P. Buettin, Vice President,
Chief Financial
Officer and Secretary
EX-99.A.4
6
l90969aex99-a_4.txt
EXHIBIT 99(A)(4)
Exhibit a(4)
[Form of e-mail confirmation of receipt of Election Form/Change of Election
Form]
To: [Frontstep Employee]
From: Daniel P. Buettin, Vice President, Chief Financial Officer and
Secretary of Frontstep, Inc.
Dear [Frontstep Employee]:
This message confirms that we have received your properly completed
[Election Form/Change of Election Form] electing to tender options for exchange
pursuant to the Offer to Exchange dated October 30, 2001. Unless you withdraw
your tendered options before the expiration of the offer at 5:00 p.m., Eastern
Time on November 30, 2001 by properly completing and delivering to us a Change
of Election Form in accordance with its instructions, we may accept and cancel
those options which you have elected to exchange. We may extend the expiration
date for the offer as explained to you in the Offer to Exchange. You will be
notified of any extension as set forth in the Offer to Exchange.
Thank you,
Daniel P. Buettin
Vice President, Chief Financial Officer and Secretary
Frontstep, Inc.
EX-99.A.5
7
l90969aex99-a_5.txt
EXHIBIT 99(A)(5)
Exhibit a(5)
[Form of confirmation of acceptance of options for exchange]
To: [Frontstep Employee]
From: Daniel P. Buettin, Vice President, Chief Financial Officer and
Secretary of Frontstep, Inc.
Dear [Frontstep Employee]:
On behalf of Frontstep, Inc., I am writing to provide you with the
results of Frontstep's recent Offer to Exchange, pursuant to which Frontstep
employees could exchange for new options, options previously granted under our
Non-Qualified Stock Option Plan for Key Employees and options granted under our
1999 Non-Qualified Stock Option Plan for Key Employees.
The offer expired at 5:00 p.m., Eastern Time, on November 30, 2001. On
December 1, 2001, Frontstep accepted for exchange options tendered to it for a
total of ____________ common shares and cancelled all such options.
Pursuant to the offer, you tendered options for exchange as set forth
on Attachment A to this letter. Frontstep has accepted each of your tendered
options in exchange for new options to be granted, and each of your tendered
options has been cancelled. Accordingly, you have no further right or
entitlement to purchase any of our common shares pursuant to the terms of those
cancelled options. The number of common shares subject to the new options also
is set forth on Attachment A.
We anticipate that all new options will be granted to you on June 2,
2002, the first business day which is at least six months and one day following
the date upon which we cancelled the options tendered for exchange. As explained
in the Offer to Exchange, you must remain an employee of Frontstep until the new
grant date in order to receive your new options. If you do not remain an
employee of Frontstep until the new grant date, you will not receive any new
options or any other consideration for your old options and you will not have
the right to return of any of your old options.
If you have any questions, please do not hesitate to contact me at 2800
Corporate Exchange Drive, Columbus, Ohio 43231, telephone number (614) 523-7136,
facsimile number (614) 895-2972.
Sincerely,
Daniel P. Buettin
Vice President, Chief Financial Officer and Secretary
Frontstep, Inc.
Attachment A
Options Accepted for Exchange and Cancelled:
EX-99.D.3
8
l90969aex99-d_3.txt
EXHIBIT 99(D)(3)
Exhibit d (3)
[Form of New Option Agreement Pursuant to Non-Qualified Stock Option Plan for
Key Employees]
FRONTSTEP, INC.
(FKA SYMIX SYSTEMS, INC.)
STOCK OPTION AGREEMENT
This Agreement, made and entered into as of , by and
between Frontstep, Inc. (fka Symix Systems, Inc.), an Ohio corporation
(sometimes hereinafter called the "Company"), and [INSERT EMPLOYEE NAME]
(sometimes hereinafter called the "Optionee"),
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company has adopted the
Frontstep, Inc. (fka Symix Systems, Inc.) Non-Qualified Stock Option Plan for
Key Employees (sometimes hereinafter called the "Plan") and, pursuant to the
Plan, has appointed a Committee (sometimes hereinafter called the "Committee")
to administer the Plan; and
WHEREAS, pursuant to the Plan, the Committee has delegated to Lawrence
J. Fox ("Fox") all of its authority with regard to selection for, participation
of, and the granting of options to, persons not subject to Section 16(a) and
16(b) of the Securities Exchange Act of 1934; and
WHEREAS, Fox has determined that an option to acquire Common Shares
under the Plan should be granted to the Optionee upon the terms and conditions
set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual promises
contained herein, the parties hereto make the following agreement, intending to
be legally bound hereby;
(1) GRANT OF OPTION. The Company hereby grants to the Optionee an
option (sometimes hereinafter called the "Option") to purchase [INSERT NUMBER OF
SHARES] Common Shares of the Company.
(2) OPTION PRICE. The purchase price (sometimes hereinafter called the
"Option Price") to be paid by the Optionee to the Company upon the exercise of
the Option shall be Dollars ($ ) per share.
(3) OPTION TERM AND CHANGE IN CONTROL.
(a) VESTING SCHEDULE.
The Optionee may exercise the Option, from time to
time and at any time, in accordance with the following vesting schedule and
during the period commencing on the date first above written and expiring at
midnight on the tenth (10th) anniversary of the date first above written (said
period of time sometimes hereinafter called the "Option Period"):
VESTING SCHEDULE
50% vested 100% vested
as of as of
------ -----
Total Number Number of Number of
of Shares Shares Shares
------------ --------- ---------
Notwithstanding the foregoing, and subject to Paragraph 3(c) hereof, the Option
shall not vest with respect to any additional Common Shares of the Company on or
after the date on which the Optionee shall no longer be an employee of the
Company for any reason.
(b) CHANGE IN CONTROL.
(i) Anything contained in this Agreement or elsewhere
to the contrary notwithstanding, in the event of a Change in Control (as defined
below) of the Company, the Option granted hereunder shall become fully
exercisable as of the date of the Change in Control whether or not then
exercisable, subject to the limitation that any Option which has been
outstanding less than six months on the date of the Change in Control shall not
be afforded such treatment.
(ii) A "Change in Control" of the Company shall be
deemed to have occurred upon any one of the following events:
(A) the date any entity or person (including a
"group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934),
other than a trustee or other fiduciary of securities held under an employee
benefit plan of the Company or any of its subsidiaries, becomes the beneficial
owner (within the meaning of Rule 16(a)(l) and/or Rule 16(a)(2) promulgated
under the Securities Exchange Act of 1934) of, or obtains voting control over,
any percentage of the outstanding Common Shares of the Company greater than or
equal to the percentage of outstanding Common Shares of the Company beneficially
owned (as defined above) by Lawrence J. Fox on such date;
(B) the date the shareholders of the Company
approve a definitive agreement (1) to merge or consolidate the Company with or
into another corporation, in which the Company is not the continuing or
surviving corporation or pursuant to which any Common Shares of the Company
would be converted into cash, securities or other property of another
corporation, other than a merger of the Company in which holders of Common
Shares of the Company immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation immediately
after the merger as such holders had in Common Shares of the Company immediately
before the merger, or (2) to sell or otherwise dispose of substantially all of
the assets of the Company;
(C) the date Fox tenders, or expresses his
intention to tender, to any person making a tender offer for Common Shares of
the Company, all or any portion of the Common Shares of the Company beneficially
owned by Fox;
2
(D) the date a change in a majority of the Board of
Directors of the Company occurs within a twelve-month period, unless the
nomination for election by the Company's shareholders of each new director was
approved by the vote of two-thirds of the directors then still in office who
were in office at the beginning of the twelve-month period or who were appointed
by directors who were in office at the beginning of the twelve month period;
(E) the date that Fox ceases to hold the office of
Chairman of the Board of the Company and to beneficially own (within the meaning
set forth in subparagraph (A) above) Common Shares of the Company representing
at least 20 percent of the total voting power of the Company.
(c) AUTOMATIC VESTING OF OPTION UPON DEATH OR DISABILITY.
(i) Anything contained in this Agreement or elsewhere to the
contrary notwithstanding, in the event the Optionee dies or becomes Disabled (as
defined below), the Option granted hereunder shall become fully exercisable as
of the date of the Optionee's death or Disability, whether or not then
exercisable.
(ii) "Disability" shall mean that the Optionee has become so
permanently disabled that he is, has for a period of at least three months, and
probably will continue to be, unable to perform in a reasonably effective and
full-time manner the duties and responsibilities he performed for the Company
immediately prior to such permanent disability.
(4) EXERCISE OF OPTION: PAYMENT. The Option may be exercised prior
to its expiration only by:
(a) The Optionee; or
(b) If a fiduciary is appointed by a court to administer the estate
of the Optionee during his lifetime by reason of the physical or mental
disability of the Optionee, by such court-appointed fiduciary; or
(c) In case of the death of the Optionee prior to the expiration of
the Option, by the court-appointed fiduciary administering the estate of the
Optionee.
Any person entitled to exercise the Option may exercise the Option by giving
notice of such exercise to the Company stating the number of Common Shares
subject to the Option in respect of which it is being exercised, accompanied by
a check or cash in full payment of the total Option Price for such Common
Shares.
(5) ADJUSTMENT. In the event of any stock dividend, stock split, stock
combination, reclassification, recapitalization, merger, reorganization or other
change in respect of the Common Shares of the Company prior to the expiration of
the Option, the Committee shall determine appropriate adjustments, if any, to be
made in number of Common Shares thereafter subject to the Option and/or the
Option Price therefor.
3
(6) DELIVERY OF SHARE CERTIFICATES. In case the Option is exercised by
the Optionee from time to time or at any time, the Company shall, within a
reasonable time after receipt of such notice (or, if counsel to the Company
shall require any securities and/or blue sky laws compliance prior to such
issuance, as promptly thereafter as is reasonably practicable), take all such
action as is necessary to request the transfer agent to have delivered
appropriate share certificates evidencing the Common Shares purchased upon such
exercise of the Option.
(7) TERMINATION OF OPTION. Anything contained in this Agreement or
elsewhere to the contrary notwithstanding, the Option (and all of the rights of
the Optionee under this Agreement) shall expire and terminate:
(a) Immediately upon the termination for cause of the Optionee by
the Company;
(b) On the ninetieth (90th) calendar day next following the first
date when the Optionee shall no longer be an employee of the Company for reasons
other than a for cause termination (but in no event after the expiration of the
Option Period), if the Optionee is an employee of the Company as of the date
first above written; or
(c) On the ninetieth (90th) calendar day next following the date
of death of the Optionee (but in no event after the expiration of the Option
Period).
(8) RESTRICTIONS ON TRANSFER OF SHARES. Anything contained in this
Agreement or elsewhere to the contrary notwithstanding:
(a) The Option shall not be exercisable for the purchase of any
Common Shares subject thereto except for:
(i) Common Shares subject thereto which at the time of such
exercise and purchase are registered under the Securities Act of 1933, as
amended (the "Act") or which, upon the completion of such exercise, would be
issued in a transaction exempt from registration under the Act; and
(ii) Common Shares subject thereto which at the time of such
exercise and purchase are exempt or are the subject matter of an exempt
transaction, are registered by description, by coordination, or by
qualification, or at such time are the subject matter of a transaction which has
been registered by description, all in accordance with Chapter 1707 of the Ohio
Revised Code, as amended; and
(iii) Common Shares subject thereto in respect of which the
laws of any state applicable to such exercise and purchase have been satisfied.
(b) If any Common Shares subject to the Option are sold and
transferred upon the exercise thereof to a person who (at the time of such
exercise and transfer or at any time thereafter) controls, is controlled by or
is under common control with the Company, or are sold and transferred in
reliance upon an exemption claimed in respect of the Act, then upon such sale
and transfer:
4
(i) Such Common Shares shall not be transferable by the holder
thereof, and neither the Company nor its transfer agent or registrar, if any,
shall be required to register or otherwise to give effect to any transfer
thereof and may prevent any such transfer, unless the Company shall have
received an opinion from its counsel to the effect that any such transfer would
not violate the Act or the applicable laws of any state; and
(ii) The Company shall cause each share certificate evidencing
such Common Shares to bear a legend reflecting applicable restrictions on the
transfer thereof.
(c) Nothing contained in this Agreement or elsewhere shall be
construed to require the Company to take any action whatsoever to eliminate the
restrictions imposed by this paragraph (8) of this Agreement upon the exercise
of the Option or upon the transfer of Common Shares purchased upon the exercise
of the Option.
(9) CONFIDENTIALITY AND NON-SOLICITATION.
(a) Optionee hereby acknowledges that Optionee has or in the future
may have access to the Company's trade secrets and proprietary or confidential
information developed or acquired by or licensed to the Company, including, but
not limited to, information regarding the Company's operations, customers or
prospects, computer software products, and research and development information,
as such trade secrets and proprietary or confidential information may exist from
time to time ("Confidential Information"). As consideration for the Option
granted to Optionee hereunder, Optionee will not, at any time during Optionee's
employment with the Company, in whole or in part, disclose or cause any other
person to disclose the Confidential Information to any other person or entity
(except the Company and/or its subsidiaries) under any circumstances, except to
the extent required by the Company and/or its subsidiary in connection with the
performance of Optionee's duties as an employee of the Company or such
subsidiary. In addition, Optionee will not, during the term of Optionee's
employment with the Company and/or its subsidiary and for a period of one (1)
year thereafter, solicit or assist any other person or entity in soliciting any
employee of the Company and/or its subsidiary to terminate the employee's
employment with the Company or such subsidiary under any circumstances.
(b) Optionee acknowledges that if there is a breach of any
provision of this paragraph 9 by Optionee, the Company will suffer irreparable
harm in that monetary damages would be inadequate to compensate the Company for
such a breach. In the event of a breach or threatened breach of any such
provisions by Optionee, in addition to such monetary and other relief as may be
available, Optionee agrees that the Company will be entitled to injunctive
relief as may be necessary to restrain any breach or further breach of such
provisions by Optionee, without showing or proving any actual damages or loss
sustained by the Company or notice to Optionee.
(10) NOTICES AND PAYMENTS. All payments required or permitted
to be made under the provisions of this Agreement, and all notices and other
communications required or permitted to be given or delivered under this
Agreement to the Company or to the Optionee, which notices or communications
must be in writing, shall be deemed to have been given if delivered by hand, or
mailed by first-class mail (postage prepaid), addressed as follows:
5
(a) If to the Company, to:
Frontstep, Inc.
ATTN.: Chief Financial Officer
2800 Corporate Exchange Drive
Columbus, OH 43231
(b) If to the Optionee, to the address of the
Optionee set forth at the conclusion of
this Agreement.
The Company or the Optionee may, by notice given to the other in accordance with
this Agreement, designate a different address for making payments required or
permitted to be made, and for the giving of notices or other communications, to
the party designating such new address. Any payment, notice or other
communication required or permitted to be given in accordance with this
Agreement shall be deemed to have been given when placed in the U.S. Mail,
addressed and mailed as provided in this Agreement.
(11) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal substantive laws of the State of Ohio,
without regards to principles of conflict of laws.
(12) RIGHTS AND REMEDIES CUMULATIVE. All rights and remedies of the
Company and of the Optionee enumerated in this Agreement shall be cumulative
and, except as expressly provided otherwise in this Agreement, none shall
exclude any other rights or remedies allowed at law or in equity, and each of
said rights or remedies may be exercised and enforced concurrently.
(13) DUPLICATE ORIGINALS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be a duplicate original, but
all of which, taken together, shall be deemed to constitute a single instrument.
(14) CAPTIONS. The captions contained in this Agreement are
included only for convenience of reference and do not define, limit, explain or
modify this Agreement or its interpretation, construction or meaning and are in
no way to be construed as a part of this Agreement.
(15) SEVERABILITY. If any provision of this Agreement or the
application of any provision thereof to any person or any circumstance shall be
determined to be invalid or unenforceable, then such determination shall not
affect any other provision of this Agreement or the application of said
provision to any other person or circumstance, all of which other provisions
shall remain in full force and effect, and it is the intention of each party to
this Agreement that if any provision of this Agreement is susceptible of two or
more constructions, one of which would render the provision enforceable and
other or others of which would render the provision unenforceable, then the
provision shall have the meaning which renders it enforceable.
(16) NUMBER AND GENDER. When used in this Agreement, the number and
gender of each pronoun shall be construed to be such number and gender as the
context, circumstances or its antecedent may require.
6
(17) ENTIRE AGREEMENT. This Agreement constitutes the entire
Agreement between the Company and the Optionee in respect of the subject matter
of this Agreement, and this Agreement supersedes all prior and contemporaneous
Agreements between any party hereto in connection with the subject matter of
this Agreement. No officer, employee or other servant or agent of the Company,
and no servant or agent of the Optionee, is authorized to make any
representation, warranty or other promise not contained in this Agreement. No
change, termination or attempted waiver of any of the provisions of this
Agreement shall be binding upon any party hereto unless contained in a writing
signed by the party to be charged.
(18) NON-TRANSFERABLE; SUCCESSORS AND ASSIGNS. The Option shall not
be transferable by the Optionee other than by will or by the laws of descent and
distribution and the Option may not be exercised during the lifetime of the
Optionee except by him or by his court-appointed fiduciary. This Agreement shall
inure to the benefit of and be binding upon the successors and assigns
(including successive, as well as immediate, successors and assigns) of the
Company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed on the date first above written.
Company: Optionee:
FRONTSTEP, INC. [INSERT EMPLOYEE NAME]
(FKA SYMIX SYSTEMS, INC.)
By: By:
--------------------------- -------------------------------
Lawrence J. Fox [INSERT EMPLOYEE NAME
Its: Chief Executive Officer AND ADDRESS]
Social Security No.: [INSERT SSN]
7
EX-99.D.4
9
l90969aex99-d_4.txt
EXHIBIT 99(D)(4)
Exhibit d (4)
[Form of New Option Agreement Pursuant to 1999 Non-Qualified Stock Option Plan
for Key Employees]
FRONTSTEP, INC.
(FKA SYMIX SYSTEMS, INC.)
STOCK OPTION AGREEMENT
This Agreement, made and entered into as of ____________ by and between
Frontstep, Inc. (fka Symix Systems, Inc.), an Ohio corporation (sometimes
hereinafter called the "Company"), and _____________________________ (sometimes
hereinafter called the "Optionee"),
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company has adopted the
Frontstep, Inc. (fka Symix Systems, Inc.) 1999 Non-Qualified Stock Option Plan
for Key Employees (sometimes hereinafter called the "Plan") and, pursuant to the
Plan, has appointed a Committee (sometimes hereinafter called the "Committee")
to administer the Plan; and
WHEREAS, pursuant to the Plan, the Committee has delegated to Lawrence
J. Fox ("Fox") all of its authority with regard to selection for, participation
of, and the granting of options under the Plan to, persons not subject to
Section 16(a) and 16(b) of the Securities Exchange Act of 1934; and
WHEREAS, Fox has determined that an option to acquire Common Shares
under the Plan should be granted to the Optionee upon the terms and conditions
set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and mutual promises
contained herein, the parties hereto make the following agreement, intending to
be legally bound hereby;
(1) GRANT OF OPTION. The Company hereby grants to the Optionee an
option (sometimes hereinafter called the "Option") to purchase ______ common
shares, no par value, of the Company (the "Common Shares").
(2) OPTION PRICE. The purchase price (sometimes hereinafter called the
"Option Price") to be paid by the Optionee to the Company upon the exercise of
the Option shall be _____________________ Dollars ($______) per Common Share.
(3) OPTION TERM AND CHANGE IN CONTROL.
(a) VESTING SCHEDULE.
The Optionee may exercise the Option, from time to time and
at any time, in accordance with the following vesting schedule and during the
period commencing on the date first above written and expiring at midnight on
the tenth (10th) anniversary of the date first above written (said period of
time sometimes hereinafter called the "Option Period"):
VESTING SCHEDULE
50% vested 100% vested
as of as of
--------------- ----------------
Total Number Number of Number of
of Shares Shares Shares
------------ --------- ---------
[Shares] [hlf1] [Shares]
Notwithstanding the foregoing, and subject to Paragraph 3(c) hereof, the Option
shall not vest with respect to any additional Common Shares on or after the date
on which the Optionee shall no longer be an employee of the Company for any
reason.
(b) CHANGE IN CONTROL.
(i) Anything contained in this Agreement or
elsewhere to the contrary notwithstanding, in the event of a Change in Control
(as defined below) of the Company, the Option granted hereunder shall become
fully exercisable as of the date of the Change in Control whether or not then
exercisable, subject to the limitation that any Option which has been
outstanding less than six months on the date of the Change in Control shall not
be afforded such treatment.
(ii) A "Change in Control" of the Company shall be
deemed to have occurred upon any one of the following events:
(A) the date any entity or person (including a
"group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934),
other than a trustee or other fiduciary of securities held under an employee
benefit plan of the Company or any of its subsidiaries, becomes the beneficial
owner (within the meaning of Rule 16(a)(l) and/or Rule 16(a)(2) promulgated
under the Securities Exchange Act of 1934) of, or obtains voting control over,
any percentage of the outstanding Common Shares of the Company greater than or
equal to the percentage of outstanding common shares, no par value, of the
Company beneficially owned (as defined above) by Lawrence J. Fox on such date;
(B) the date the shareholders of the Company
approve a definitive agreement (1) to merge or consolidate the Company with or
into another corporation, in which the Company is not the continuing or
surviving corporation or pursuant to which any common shares, no par value, of
the Company would be converted into cash, securities or other property of
another corporation, other than a merger of the Company in which holders of
common shares, no par value, of the Company immediately prior to the merger have
the same proportionate ownership of common stock of the surviving corporation
immediately after the merger as such holders had in common shares, no par value,
of the Company immediately before the merger, or (2) to sell or otherwise
dispose of substantially all of the assets of the Company;
2
(C) the date Fox tenders, or expresses his
intention to tender, to any person making a tender offer for common shares, no
par value, of the Company, all or any portion of the common shares, no par
value, of the Company beneficially owned by Fox;
(D) the date a change in a majority of the Board
of Directors of the Company occurs within a twelve-month period, unless the
nomination for election by the Company's shareholders of each new director was
approved by the vote of two-thirds of the directors then still in office who
were in office at the beginning of the twelve-month period or who were appointed
by directors who were in office at the beginning of the twelve month period;
(E) the date that Fox ceases to hold the office of
Chairman of the Board of the Company and to beneficially own (within the meaning
set forth in subparagraph (A) above) common shares, no par value, of the Company
representing at least 20 percent of the total voting power of the Company.
(c) AUTOMATIC VESTING OF OPTION UPON DEATH OR DISABILITY.
(i) Anything contained in this Agreement or elsewhere
to the contrary notwithstanding, in the event the Optionee dies or becomes
Disabled (as defined below), the Option granted hereunder shall become fully
exercisable as of the date of the Optionee's death or Disability, whether or not
then exercisable.
(ii) "Disability" shall mean that the Optionee has
become so permanently disabled that he is, has for a period of at least three
months, and probably will continue to be, unable to perform, in a reasonably
effective and full-time manner, the duties and responsibilities he performed for
the Company immediately prior to such permanent disability.
(4) EXERCISE OF OPTION: PAYMENT. The Option may be exercised prior
to its expiration only by:
(a) The Optionee; or
(b) If a fiduciary is appointed by a court to administer
the estate of the Optionee during his lifetime by reason of the physical or
mental disability of the Optionee, by such court-appointed fiduciary; or
(c) In case of the death of the Optionee prior to the
expiration of the Option, by the court-appointed fiduciary administering the
estate of the Optionee.
Any person entitled to exercise the Option may exercise the Option by giving
notice of such exercise to the Company stating the number of Common Shares
subject to the Option in respect of which it is being exercised, accompanied by
a check or cash in full payment of the total Option Price for such Common
Shares.
(5) ADJUSTMENT. In the event of any stock dividend, stock split,
stock combination, reclassification, recapitalization, merger, reorganization or
other change in respect
3
of the common shares, no par value, of the Company prior
to the expiration of the Option, the Committee shall determine appropriate
adjustments, if any, to be made in number of Common Shares thereafter subject to
the Option and/or the Option Price therefor.
(6) DELIVERY OF SHARE CERTIFICATES. In case the Option is
exercised by the Optionee from time to time or at any time, the Company shall,
within a reasonable time after receipt of such notice (or, if counsel to the
Company shall require any securities and/or blue sky laws compliance prior to
such issuance, as promptly thereafter as is reasonably practicable), take all
such action as is necessary to request the transfer agent to have delivered
appropriate share certificates evidencing the Common Shares purchased upon such
exercise of the Option.
(7) TERMINATION OF OPTION. Anything contained in this Agreement or
elsewhere to the contrary notwithstanding, the Option (and all of the rights of
the Optionee under this Agreement) shall expire and terminate:
(a) Immediately upon the termination for cause of the
Optionee by the Company;
(b) On the ninetieth (90th) calendar day next following the
first date when the Optionee shall no longer be an employee of the Company for
reasons other than a for cause termination (but in no event after the expiration
of the Option Period), if the Optionee is an employee of the Company as of the
date first above written; or
(c) On the ninetieth (90th) calendar day next following the
date of death of the Optionee (but in no event after the expiration of the
Option Period).
(8) RESTRICTIONS ON TRANSFER OF SHARES. Anything contained in this
Agreement or elsewhere to the contrary notwithstanding:
(a) The Option shall not be exercisable for the purchase of
any Common Shares subject thereto except for:
(i) Common Shares subject thereto which at the time of
such exercise and purchase are registered under the Securities Act of 1933, as
amended (the "Act"), or which, upon the completion of such exercise, would be
issued in a transaction exempt from registration under the Act; and
(ii) Common Shares subject thereto which at the time of
such exercise and purchase are exempt or are the subject matter of an exempt
transaction, are registered by description, by coordination, or by
qualification, or at such time are the subject matter of a transaction which has
been registered by description, all in accordance with Chapter 1707 of the Ohio
Revised Code, as amended; and
(iii) Common Shares subject thereto in respect of which
the laws of any state applicable to such exercise and purchase have been
satisfied.
4
(b) If any Common Shares subject to the Option are sold and
transferred upon the exercise thereof to a person who (at the time of such
exercise and transfer or at any time thereafter) controls, is controlled by or
is under common control with the Company, or are sold and transferred in
reliance upon an exemption claimed in respect of the Act, then upon such sale
and transfer:
(i) such Common Shares shall not be transferable by the
holder thereof, and neither the Company nor its transfer agent or registrar, if
any, shall be required to register or otherwise to give effect to any transfer
thereof and may prevent any such transfer, unless the Company shall have
received an opinion from its counsel to the effect that any such transfer would
not violate the Act and the applicable laws of any state; and
(ii) the Company shall cause each share certificate
evidencing such Common Shares to bear a legend reflecting applicable
restrictions on the transfer thereof.
(c) Nothing contained in this Agreement or elsewhere shall
be construed to require the Company to take any action whatsoever to eliminate
the restrictions imposed by this paragraph (8) of this Agreement upon the
exercise of the Option or upon the transfer of Common Shares purchased upon the
exercise of the Option.
(9) CONFIDENTIALITY AND NON-SOLICITATION.
(a) Optionee hereby acknowledges that Optionee has or in
the future may have access to the Company's trade secrets and proprietary or
confidential information developed or acquired by or licensed to the Company,
including, but not limited to, information regarding the Company's operations,
customers or prospects, computer software products, and research and development
information, as such trade secrets and proprietary or confidential information
may exist from time to time ("Confidential Information"). As consideration for
the Option granted to Optionee hereunder, Optionee will not, at any time during
Optionee's employment with the Company, in whole or in part, disclose or cause
any other person to disclose the Confidential Information to any other person or
entity (except the Company and/or its subsidiaries) under any circumstances,
except to the extent required by the Company and/or its subsidiary in connection
with the performance of Optionee's duties as an employee of the Company or such
subsidiary. In addition, Optionee will not, during the term of Optionee's
employment with the Company and/or its subsidiary and for a period of one (1)
year thereafter, solicit or assist any other person or entity in soliciting any
employee of the Company and/or its subsidiary to terminate the employee's
employment with the Company or such subsidiary under any circumstances.
(b) Optionee acknowledges that if there is a breach of any
provision of this paragraph 9 by Optionee, the Company will suffer irreparable
harm in that monetary damages would be inadequate to compensate the Company for
such a breach. In the event of a breach or threatened breach of any such
provisions by Optionee, in addition to such monetary and other relief as may be
available, Optionee agrees that the Company will be entitled to injunctive
relief as may be necessary to restrain any breach or further breach of such
provisions by Optionee, without showing or proving any actual damages or loss
sustained by the Company or notice to Optionee.
5
(10) NOTICES AND PAYMENTS. All payments required or permitted to be
made under the provisions of this Agreement, and all notices and other
communications required or permitted to be given or delivered under this
Agreement to the Company or to the Optionee, which notices or communications
must be in writing, shall be deemed to have been given if delivered by hand, or
mailed by first-class mail (postage prepaid), addressed as follows:
(a) If to the Company, to:
Frontstep, Inc.
ATTN.: Chief Financial Officer
2800 Corporate Exchange Drive
Columbus, OH 43231
(b) If to the Optionee, to the address of the Optionee
set forth at the conclusion of this Agreement.
The Company or the Optionee may, by notice given to the other in accordance with
this Agreement, designate a different address for making payments required or
permitted to be made, and for the giving of notices or other communications, to
the party designating such new address. Any payment, notice or other
communication required or permitted to be given in accordance with this
Agreement shall be deemed to have been given when placed in the U.S. Mail,
addressed and mailed as provided in this Agreement.
(11) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio, without regards to
principles of conflict of laws.
(12) RIGHTS AND REMEDIES CUMULATIVE. All rights and remedies of the
Company and of the Optionee enumerated in this Agreement shall be cumulative
and, except as expressly provided otherwise in this Agreement, none shall
exclude any other rights or remedies allowed at law or in equity, and each of
said rights or remedies may be exercised and enforced concurrently.
(13) DUPLICATE ORIGINALS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be a duplicate original, but
all of which, taken together, shall be deemed to constitute a single instrument.
(14) CAPTIONS. The captions contained in this Agreement are
included only for convenience of reference and do not define, limit, explain or
modify this Agreement or its interpretation, construction or meaning and are in
no way to be construed as a part of this Agreement.
(15) SEVERABILITY. If any provision of this Agreement or the
application of any provision thereof to any person or any circumstance shall be
determined to be invalid or unenforceable, then such determination shall not
affect any other provision of this Agreement or the application of said
provision to any other person or circumstance, all of which other provisions
shall remain in full force and effect, and it is the intention of each party to
this Agreement that if any provision of this Agreement is susceptible of two or
more constructions, one of which would render the provision enforceable and
other or others of which would render
6
the provision unenforceable, then the provision shall have the meaning which
renders it enforceable.
(16) NUMBER AND GENDER. When used in this Agreement, the number and
gender of each pronoun shall be construed to be such number and gender as the
context, circumstances or its antecedent may require.
(17) ENTIRE AGREEMENT. This Agreement constitutes the entire
Agreement between the Company and the Optionee in respect of the subject matter
of this Agreement, and this Agreement supersedes all prior and contemporaneous
Agreements between any party hereto in connection with the subject matter of
this Agreement. No officer, employee or other servant or agent of the Company,
and no servant or agent of the Optionee, is authorized to make any
representation, warranty or other promise not contained in this Agreement. No
change, termination or attempted waiver of any of the provisions of this
Agreement shall be binding upon any party hereto unless contained in a writing
signed by the party to be charged.
(18) NON-TRANSFERABLE; SUCCESSORS AND ASSIGNS. The Option shall not
be transferable by the Optionee other than by will or by the laws of descent and
distribution and the Option may not be exercised during the lifetime of the
Optionee except by him or by his court-appointed fiduciary. This Agreement shall
inure to the benefit of and be binding upon the successors and assigns
(including successive, as well as immediate, successors and assigns) of the
Company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed on the date first above written.
Company: Optionee:
FRONTSTEP, INC. [NAME2]
(FKA SYMIX SYSTEMS, INC.)
By: By:
-------------------------------- --------------------------------
Lawrence J. Fox [Name]
Chairman of the Board
[Address 1]
Social Security No.: [SSN]
7