EXHIBIT 9
November 24, 2002
Board of Directors
Frontstep, Inc.
0000 Xxxxxxxxx Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Xx. Xxxxxxx X. Xxxxxx
President and Chief Executive Officer
Frontstep, Inc.
0000 Xxxxxxxxx Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Gentlemen:
In connection with the execution of the Agreement and Plan of Merger by and
among MAPICS, Inc. ("MAPICS"), Xxxxxx Sub, and Frontstep, Inc. ("Frontstep")
dated on or about November 24, 2002 (the "Merger Agreement"), each of the
undersigned confirm and agree to the following. Terms used herein, which are
not otherwise defined, have the meaning ascribed to them in the Merger
Agreement.
MSDW Venture Partners IV, Inc. and its related investment funds ("Venture
Partners"), Xxxxxx Xxxxxxx Xxxx Xxxxxx Equity Funding, Inc. and its affiliates
("Equity Funding") and Fallen Angel Equity Fund, L.P. ("Fallen Angel") (Venture
Partners, together with Equity Funding and Fallen Angel, the "Series A
Investors") currently hold all of the 566,933 shares of Series A Convertible
Participating Preferred Shares (the "Series A Preferred") of Frontstep, with
453,546 associated warrants at an exercise price of $3.36 (the "Series A
Warrants"). Pursuant to the Articles of Incorporation of Frontstep, as amended,
upon the occurrence of a Liquidation Event (as such term is defined in the
Articles of Incorporation), the Series A Investors will be entitled to receive
a liquidation preference in the amount of $13,606,392, plus any accumulated but
unpaid dividends.
Venture Partners and Fallen Angel also currently hold $3,000,000 in principal
amount of convertible debt in Frontstep and 360,000 associated xxxxx warrants
(the "Frontstep Note Warrants").
In connection with the Merger Agreement, the Series A Investors agree to the
following terms and conditions in connection with the transactions contemplated
by the Merger Agreement:
1. Discount on the Series A Preferred
At the request of Frontstep, in order to induce MAPICS to enter into the
Merger Agreement, and in order to enhance the return to the holders of the
Frontstep Common Stock, in connection with the Merger, the Series A
Investors have agreed to accept a discount on their liquidation preference
on the Series A Preferred in an amount of 25%.
MAPICS intends to issue 4.2 million shares of MAPICS Common Stock in
exchange for all the outstanding shares of Frontstep (assuming conversion
of the Series A Preferred and the exercise of the Frontstep Note Warrants)
pursuant to the terms and conditions set forth in the Merger Agreement.
The Series A Investors will accept the number of MAPICS shares equal to a
25% discount on the Series A liquidation preference, or $10,204,794, based
on the average closing price of a share of MAPICS Common Stock ten trading
days prior to the two trading days prior to the day the Board of Directors
of Frontstep approves the transaction. The holders of the Frontstep Common
Stock will receive the remainder of the 4.2 million shares.
2. Conversion of the Series A Preferred and Exercise of Frontstep Note Warrants
Prior to the signing of the Merger Agreement, Frontstep will certify that
all options to purchase Frontstep's Common Stock issued pursuant to the
Director Plan shall have been exercised or cancelled, and the Series A
Investors shall have received evidence of such exercises and/or
cancellations.
At the request of Frontstep, in order to induce MAPICS to enter into the
Merger Agreement, the holders of the Series A Preferred agree to convert
their Series A Preferred, and to exercise their Frontstep Note Warrants,
into shares of Frontstep Common Stock prior to the Frontstep record date
set for the Frontstep shareholders meeting; provided that, to the extent
that MAPICS must obtain the consent of its senior lender in order to
execute the guarantee contemplated in 4(a) below, MAPICS will have
obtained such consent; provided that the conversion price of the Series A
Preferred will have been reduced to $2.35; and further provided that the
Series A Investors shall have received a written certification from
Frontstep stating that the following conditions to closing in the Merger
Agreement have been satisfied, waived or are no longer a condition to
closing: Section 9.2 (l) (Xxxxx Xxx) and Section 9.2 (q) (Mitsui Notes).
All such Frontstep Common Stock will be exchanged for MAPICS Common Stock
at the Closing of the Merger.
3. Conversion Price Adjustment on the Series A Preferred
The Series A Investors hold 566,933 shares of Series A Preferred. The
terms of the Series A Preferred contain a conversion price adjustment in
the event that securities of Frontstep are issued for consideration below
the conversion price of the Series A Preferred. The current conversion
price of the Series A Preferred is $2.85, and it is understood that the
conversion price of the Series A Preferred will be reduced to $2.35 prior
to the conversion of the Series A Preferred into shares of Common Stock of
Frontstep, such that the Series A Preferred will be convertible into
5,792,397 shares of Frontstep Common Stock in order to effect the
agreed-to discount of 25% referred to above.
4. Other Agreements
a. At the request of Frontstep and MAPICS, in connection with the
Closing of the Merger Agreement and the consummation of the Merger,
Venture Partners and Fallen Angel agree to exchange their convertible
notes in exchange for new unsecured subordinate promissory notes
issued either by (i) MAPICS or (ii) Frontstep and guaranteed by
MAPICS and which in either case will not be convertible (the "New
Notes") in the principal amount of the principal plus all accrued but
unpaid interest to and including the Closing Date of the Merger. The
New Notes will mature on February 28, 2004, with an interest rate of
10% per annum payable in cash from the Closing Date of the Merger to
and including August 31, 2003 and an interest rate thereafter of 12%
per annum payable in cash until the notes are repaid, with no penalty
for prepayment and will be in the form of note attached hereto as
Exhibit A. Payment defaults on the New Notes will cause a
cross-default in the senior MAPICS debt documents.
b. At the request of Frontstep, each of the Series A Investors agrees
that the Series A Warrants will be cancelled as provided in the
Merger Agreement and that the Frontstep Note Warrants will be
exercised prior to the Merger.
c. At the request of Frontstep and MAPICS, each of the Series A
Investors agree to execute, prior to the signing of the Merger
Agreement, the Shareholder Agreements for each of the Series A
Investors in the form attached hereto as Exhibit B.
d. The agreements of Ventures Partners and Equity Funding described in
the Shareholder Agreements will only be binding on the signatories to
such agreements. Such agreements shall not be binding on any other
entity affiliated with Xxxxxx Xxxxxxx.
e. To the extent permitted by Law, the Merger Agreement may be amended
by a subsequent writing signed by each of the Parties upon the
approval of each of the Parties, whether before or after shareholder
approval of the Merger Agreement has been obtained; provided that (i)
there shall be made no amendment that reduces or modifies in any
respect the consideration to be received by holders of Frontstep
Common Stock without the further approval of the Series A Investors;
(ii) the provisions of the Merger Agreement relating to the manner or
basis in which shares of Frontstep Common Stock will be exchanged for
shares of MAPICS Common Stock shall not be amended in a manner
adverse to the holders of Frontstep Common Stock without any
requisite approval of the Series A Investors and (iii) the
termination date set forth in Section 10.1(e) of the Merger Agreement
shall not be extended without approval of the Series A Investors.
f. The failure to explicitly delineate a provision or our agreement
thereto, in the above list shall not be construed as our acquiescence
to any such provision.
Sincerely yours,
Xxxxxx Xxxxxxx Xxxx Xxxxxx Venture Partners IV, X.X.
Xxxxxx Xxxxxxx Xxxx Xxxxxx Venture Investors IV, X.X.
Xxxxxx Xxxxxxx Xxxx Xxxxxx Venture Offshore Investors IV, L.P.
By: MSDW Venture Partners IV, L.L.C.
By: MSDW Venture Capital IV, Inc.
By: /s/ Xxx xx Xxxxxx
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Name: Xxx xx Xxxxxx
Title: Managing Director
Xxxxxx Xxxxxxx Xxxx Xxxxxx Equity Funding, Inc.
By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
Title: Vice President
Originators Investment Plan, L.P.
By: MSDW OIP Investors, Inc.
By: /s/ Xxxxx X. Xxxxx
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Name: Xxxxx X. Xxxxx
Title: Vice President
Fallen Angel Equity Fund, L.P.
By: Fallen Angel Capital, L.L.C.
By: /s/ Xxxxx Xxxxxxxxx
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Name: Xxxxx Xxxxxxxxx
Title: Member
AGREED AND ACCEPTED:
FRONTSTEP, INC.
By: /s/ Xxxxxxx X. Xxxxxx
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Name: Xxxxxxx X. Xxxxxx
Title: President and CEO
