Exhibit 2(d)
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
--------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and CEO
