4FRONT TECHNOLOGIES, INC.
6300 SOUTH SYRACUSE WAY, SUITE 293
ENGLEWOOD, COLORADO 80111
303-721-7341
September 7, 1999
Dear Stockholder:
You are cordially invited to attend the Company's Annual Meeting of
Stockholders to be held at 11:00 A.M. on Friday, October 15, 1999, at the
offices of Fulbright & Jaworski L.L.P., 666 Fifth Avenue, New York, New York
10103.
At the meeting you will be asked to elect seven directors of the Company.
In addition, we will be pleased to report on the affairs of the Company and a
discussion period will be provided for questions and comments of general
interest to stockholders.
We look forward to greeting personally those stockholders who are able to
be present at the meeting; however, whether or not you plan to be with us at the
meeting, it is important that your shares be represented. Accordingly, you are
requested to sign and date the enclosed proxy and mail it in the envelope
provided at your earliest convenience.
Thank you for your cooperation.
Very truly yours,
Anil Doshi
Chairman of the Board
of Directors
Mark Ellis
President
<PAGE>
4FRONT TECHNOLOGIES, INC.
------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------------------
Englewood, Colorado
September 7, 1999
Notice is hereby given that the Annual Meeting of Stockholders of
4Front Technologies, Inc. will be held on Friday, October 15, 1999 at 11:00 A.M.
at the offices of Fulbright & Jaworski L.L.P., 666 Fifth Avenue, New York, New
York 10103 for the following purposes:
(1) To elect seven directors to serve for the ensuing year; and
(2) To transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.
Stockholders of record at the close of business on August 31, 1999
will be entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof.
All stockholders are cordially invited to attend the Annual Meeting
in person. Stockholders who are unable to attend the Annual Meeting in person
are requested to complete and date the enclosed form of proxy and return it
promptly in the envelope provided. No postage is required if mailed in the
United States. Stockholders who attend the Annual Meeting may revoke their proxy
and vote their shares in person.
CRAIG KLEINMAN
Secretary
<PAGE>
4FRONT TECHNOLOGIES, INC.
6300 South Syracuse Way, Suite 293
Englewood, Colorado 80111
------------------------------------
PROXY STATEMENT
------------------------------------
GENERAL INFORMATION
Proxy Solicitation
This Proxy Statement is furnished to the holders of Common Stock,
par value $.001 per share (the "Common Stock"), of 4Front Technologies, Inc.
(the "Company") in connection with the solicitation by the Board of Directors of
the Company of proxies for use at the Annual Meeting of Stockholders to be held
on Friday, October 15, 1999, or at any adjournment thereof, pursuant to the
accompanying Notice of Annual Meeting of Stockholders. The purposes of the
meeting and the matters to be acted upon are set forth in the accompanying
Notice of Annual Meeting of Stockholders. The Board of Directors is not
currently aware of any other matters which will come before the meeting.
Proxies for use at the meeting are being solicited by the Board of
Directors of the Company. Proxies will be mailed to stockholders on or about
September 7, 1999, and will be solicited chiefly by mail. The Company will make
arrangements with brokerage houses and other custodians, nominees and
fiduciaries to send proxies and proxy material to the beneficial owners of the
shares and will reimburse them for their expenses in so doing. Should it appear
desirable to do so in order to ensure adequate representation of shares at the
meeting, officers, agents and employees of the Company may communicate with
stockholders, banks, brokerage houses and others by telephone, facsimile or in
person to request that proxies be furnished. All expenses incurred in connection
with this solicitation will be borne by the Company. The Company has no present
plans to hire special employees or paid solicitors to assist in obtaining
proxies, but reserves the option of doing so if it should appear that a quorum
otherwise might not be obtained.
Revocability and Voting of Proxy
A form of proxy for use at the Annual Meeting of Stockholders and a
return envelope for the proxy are enclosed. Stockholders may revoke the
authority granted by their execution of proxies at any time before their
effective exercise by filing with the Secretary of the Company a written
1
<PAGE>
notice of revocation or a duly executed proxy bearing a later date, or by voting
in person at the meeting. Shares of the Company's Common Stock represented by
executed and unrevoked proxies will be voted in accordance with the choice or
instructions specified thereon. If no specifications are given, the proxies
intend to vote the shares represented thereby to approve Proposal No. 1 as set
forth in the accompanying Notice of Annual Meeting of Stockholders and in
accordance with their best judgment on any other matters which may properly come
before the meeting.
Record Date and Voting Rights
Only stockholders of record at the close of business on August 31,
1999 are entitled to notice of and to vote at the Annual Meeting or any and all
adjournments thereof. On August 31, 1999, there were 10,867,856 shares of Common
Stock outstanding; each such share is entitled to one vote on each of the
matters to be presented at the Annual Meeting. The holders of a majority of the
outstanding shares of Common Stock, present in person or by proxy and entitled
to vote, will constitute a quorum at the Annual Meeting. Abstentions and broker
non-votes will be counted for purposes of determining the presence or absence of
a quorum. "Broker non-votes" are shares held by brokers or nominees which are
present in person or represented by proxy, but which are not voted on a
particular matter because instructions have not been received from the
beneficial owner. The effect of broker non-votes on the specific item to be
brought before the Annual Meeting of Stockholders is discussed under such item.
2
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth information as of August 1, 1999
(except as otherwise noted in the footnotes) regarding the beneficial ownership
(determined in accordance with the rules of the Securities and Exchange
Commission (the "SEC"), which generally attribute beneficial ownership of
securities to persons who possess sole or shared voting power and/or investment
power with respect to those securities) of the Company's Common Stock of: (i)
each person known by the Company to own beneficially more than five percent of
the Company's outstanding Common Stock; (ii) each director and nominee for
director of the Company; (iii) each executive officer named in the Summary
Compensation Table (see "Executive Compensation"); and (iv) all directors and
executive officers of the Company as a group. Except as otherwise specified, the
named beneficial owner has the sole voting and investment power over the shares
listed.
<TABLE>
<CAPTION>
Amount and Nature of
Beneficial Ownership of Percentage of
Name of Beneficial Owner Common Stock Common Stock
- ------------------------ ------------- ------------
<S> <C> <C>
Anil Doshi (1) .................................... 1,006,878 9.03%
Mark Ellis (2) .................................... 568,646 5.10%
Terence Burt (3) .................................. 260,082 2.35%
Kenneth Newell (4) ................................ 268,411 2.43%
Stephen McDonnell (5) ............................. 36,167 *
Craig Kleinman (6) ................................ 55,750 *
Brian Murray (7) .................................. 18,500 *
Arthur Keith Ross (8) ............................. 173,350 1.59%
FMR Corporation (9) ............................... 1,059,000 9.77%
Putnam Investments (10) ........................... 610,076 5.63%
All Directors and Executive Officers as
a Group (8 persons) (11) ....................... 2,342,272 19.45%
- ---------------------
* Less than 1%
<FN>
(1) Includes 45,512 shares of Common Stock which are owned by Aliki
Financial Corp., a corporation in which Mr. Doshi has a 65% interest.
Also includes 316,666 shares of Common Stock purchasable pursuant to
immediately exercisable options.
(2) Includes 45,512 shares of Common Stock which are owned by Aliki
Financial Corp., a corporation in which Mr. Ellis has a 35% interest.
Also includes 313,333 shares of Common Stock purchasable pursuant to
immediately exercisable options.
(3) Includes 27,744 shares of Common Stock owned by Mr. Burt's wife and
14,395 shares held by Lex Nominees International as nominee for a
Jersey resident settlement established for the benefit of Mr. Burt and
his wife and
3
<PAGE>
children. Also includes 217,500 shares of Common Stock purchasable
pursuant to immediately exercisable options. Mr. Burt disclaims
beneficial ownership of the shares held by his wife.
(4) Includes 4,551 shares of Common Stock owned by Mr. Newell's wife and
14,397 shares held by Lex Nominees International as nominee for a
Jersey resident settlement established for the benefit of Mr. Newell
and his wife and children. Also includes 225,833 shares of Common
Stock purchasable pursuant to immediately exercisable options. Mr.
Newell disclaims beneficial ownership of the shares held by his wife.
(5) Consists of 36,167 shares purchasable pursuant to immediately
exercisable options.
(6) Includes 8,000 shares owned by Belaire Business Group, in which Mr.
Kleinman has a 50% interest. Also includes 6,000 shares purchasable
pursuant to immediately exercisable options.
(7) Includes 16,000 shares of Common Stock purchasable pursuant to
immediately exercisable options.
(8) Includes 74,500 shares purchasable pursuant to immediately exercisable
options.
(9) Based on information in an amended Schedule 13G, filed February 10,
1999 by the beneficial owner. The amended Schedule 13G states that
such beneficial owner has sole power to dispose of all of, and shared
power to vote, such shares. The address of such beneficial owner is 82
Devonshire Street, Boston, Massachusetts 02109.
(10) Based on information in an amended Schedule 13G, filed February 5,
1999 by the beneficial owner. The amended Schedule 13G states that
such beneficial owner has shares voting and dispositive power of the
shares. The address of such beneficial owner is One Post Office
Square, Boston, Massachusetts 02109.
(11) Includes 1,205,999 shares subject to options which are immediately
exercisable. Does not include 200,001 shares subject to options which
are not exercisable within 60 days of August 1, 1999.
</FN>
</TABLE>
PROPOSAL NO. 1--ELECTION OF DIRECTORS
Seven directors (constituting the entire Board) are to be elected at
the Annual Meeting. Unless otherwise specified, the enclosed proxy will be voted
in favor of the persons named below to serve until the next annual meeting of
stockholders and until their successors shall have been duly elected and shall
qualify. In the event any of these nominees shall be unable to serve as a
director, the shares represented by the proxy will be voted for the person, if
any, who is designated by the Board of Directors to replace the nominee. All
nominees have consented to be named and have indicated their intent to serve if
elected. The Board of Directors has no reason to believe that any of the
nominees will be unable to serve or that any vacancy on the Board of Directors
will occur.
4
<PAGE>
The nominees, their ages, the year in which each first became a
director and their principal occupations or employment during the past five
years are:
<TABLE>
<CAPTION>
Year First
Became Principal Occupation
Nominee Age Director During the Past Five Years
- ------- --- -------- --------------------------
<S> <C> <C> <C>
Anil Doshi 55 1993 Chairman of the Board of Directors, Chief
Executive Officer and a Director of the
Company since April 1993. Mr. Doshi
co-founded Communic8 Software (the Company's
predecessor-in-interest) in January 1990
and served as its Chairman from April 1992
to March 1993. Mr. Doshi is a Fellow of the
Institute of Chartered Accountants in England
and Wales, and he is also an Associate of
the Institute of Taxation. From 1988 until
1990, Mr. Doshi was a consultant to and then
Deputy Chairman of PPI Enterprises, Inc., a
New York based holding company ("PPI").
Mark Ellis 45 1993 Vice Chairman of the Board of Directors since
April 1998 and President and a Director of the
Company since April 1993. Mr. Ellis co-
founded Communic8 Software and served as a
director from January 1992 until March 1993.
From 1988 to January 1991, Mr. Ellis served as
the President of PPI. As President of PPI, he
managed that company's American expansion
program and negotiated a number of acquisitions
in the U.S., including the $875 million
acquisition of Del Monte Tropical Fruit from
RJR Nabisco. Mr. Ellis attended St. John's
College at Cambridge University in England and
received a B.A. in Law in 1975, an L.L.B. in
1976 and an M.A. in Law in 1978.
Terence Burt 43 1997 Vice President and Chief Operating Officer since
April 1998 and a Director of the Company since
April 1997. He co-founded K2 Group Plc (now
4Front Group Plc) in 1988, and was Managing
Director of the Company's systems integration
division between 1990 and 1996. He became
Managing Director of the Company's services
division in 1996 and Managing Director of
4Front Group in 1997. Mr. Burt graduated from
the University of Herfordshire where he
qualified as an Associate of the Association of
Cost and Management Accountants.
5
<PAGE>
Kenneth Newell 56 1996 Vice President of Corporate Affairs of the
Company since April 1998 and a Director of the
Company since April 1996. Co-founder of K2
Group Plc (now 4Front Group plc), the
Company's wholly-owned U.K. operating
subsidiary, in 1988 and 4Front Group plc's Chief
Executive until 1997. Prior to establishing K2
he worked for four years at Star Computer
Group, a publicly listed U.K. company, and one
of the early implementers of the open systems
computing concept in the U.K., where he held a
number of positions, including Sales Director
from 1985 through 1988. Mr. Newell is a
Fellow of the Institute of Chartered Secretaries
and Administrators following study at the City of
London College.
Craig Kleinman 43 1993 Secretary and a Director of the Company since
April 1993. Mr. Kleinman had served as Chief
Financial Officer of the Company from April
1993 until April 1996. For more than five years,
Mr. Kleinman has been a stockholder in the
certified public accounting firm Kleinman,
Guerra & Company, P.C. Mr. Kleinman
received a B.S. degree in accounting from the
University of Colorado in 1978 and is a member
of the American Institute of Certified Public
Accountants.
Brian V. Murray 51 1996 Director of the Company since April 1996. Mr.
Murray is President and Chief Executive Officer
of B.V. Murray & Co., an investment banking
firm, which he founded in July 1996. Prior
thereto, Mr. Murray held various positions at
Bear, Stearns & Co., Inc. from 1978 until July
1996, most recently as a Senior Managing
Director in the Emerging Markets Group. Mr.
Murray received a BS in Economics from
Villanova University in 1970 and an MBA with
Honors from the University of Chicago in 1975.
Mr. Murray is a Chartered Financial Analyst.
6
<PAGE>
Arthur Keith Ross 47 1996 Director of the Company since February 1996.
Mr. Ross is currently a private investor and a
consultant to the London law firm, Denton, Hall
and Burgin. From 1986 to 1994, Mr. Ross was
a partner in the London law firm Clifford
Chance, which he joined in 1984. Mr. Ross
headed the Clifford Chance Southeast Asian
office in Singapore from 1988 to 1991. Mr.
Ross attended Christ's College at Cambridge
University in England and received a BA in Law
in 1973 and an MA in Law in 1976.
</TABLE>
All directors hold office until the next meeting of the stockholders
of the Company and until their successors are elected and qualified.
The Board of Directors has an Audit Committee which is charged with
reviewing the Company's internal accounting procedures and consulting with and
reviewing the selection of the Company's independent auditors. The Audit
Committee currently consists of Messrs. Doshi, Ross and Murray. The Audit
Committee was formed in fiscal 1997. During fiscal 1999, the Audit Committee met
once. The Board of Directors also has a Compensation Committee charged with
recommending to the Board the compensation for the Company's executives and
administering the Company's stock option plans. The Compensation Committee is
currently composed of Messrs. Doshi, Ellis, Murray and Ross. The Compensation
Committee was formed in fiscal 1997. During fiscal 1999, the Compensation
Committee met twice. The Board of Directors has also established an Executive
Committee charged with exercising powers of the Board of Directors expressly
delegated to it. The Executive Committee is currently composed of Messrs. Doshi
and Ellis. During fiscal 1999, the Executive Committee did not meet. Each
director attended all of the meetings of all committees of the Board of
Directors on which he served.
During the fiscal year ended January 31, 1999, the Board of
Directors acted four times by unanimous written consent in lieu of a meeting and
met twice.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act, as amended (the
"Exchange Act") requires the Company's executive officers and directors, and
persons who beneficially own more than ten percent of the Company's Common
Stock, to file initial reports of ownership and reports of changes in ownership
with the SEC and the National Association of Securities Dealers, Inc. Executive
officers, directors and greater than ten percent beneficial owners are required
by SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
Based upon on a review of the copies of such forms furnished to the
Company and written representations from the Company's executive officers and
directors, the Company believes that
7
<PAGE>
during fiscal 1999 all Section 16(a) filing requirements applicable to its
executive officers, directors and greater than ten percent beneficial owners
were complied with, except that Messrs. Burt, Newell and Ross each reported a
transaction late on Form 5.
Vote Required
The seven nominees receiving the highest number of affirmative votes
of the shares present in person or represented by proxy and entitled to vote for
them, a quorum being present, shall be elected as directors. Only votes cast for
a nominee will be counted, except that the accompanying proxy will be voted for
all nominees in the absence of instruction to the contrary. Abstentions, broker
non-votes and instructions on the accompanying proxy card to withhold authority
to vote for one or more nominees will result in the respective nominees
receiving fewer votes. However, the number of votes otherwise received by the
nominee will not be reduced by such action.
THE BOARD OF DIRECTORS DEEMS "PROPOSAL NO. 1 - ELECTION OF DIRECTORS"
TO BE IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS AND RECOMMENDS A
VOTE "FOR" APPROVAL THEREOF.
8
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning all cash and
non-cash compensation paid or to be paid by the Company as well as certain other
compensation awarded, earned by and paid, during the fiscal years indicated, to
the Chairman of the Board and Chief Executive Officer and each of the four other
most highly compensated executive officers of the Company for such period in all
capacities in which they served.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
-------------------------- ------------------------
All
Securities Other
Name and Principal Fiscal Underlying Compen-
Position Year(1) Salary Bonus Stock Options sation(2)
-------- ------- ------ ----- ----------- ----------
<S> <C> <C> <C> <C> <C>
Anil Doshi
Chairman of the Board
and Chief Executive
Officer(3) ....................... 1999 $259,375 $136,120 100,000 $ 71,406
1998 205,375 90,365 -- 65,857
1997 169,821 24,105 -- 19,631
Mark Ellis
Vice Chairman of
the Board and President(3) ....... 1999 $228,250 $104,580 90,000 $ 39,810
1998 180,730 65,720 -- 43,918
1997 158,336 24,105 -- 15,260
Terence Burt
Vice President and
Chief Operating Officer .......... 1999 $191,816 $ 76,360 80,000 $ 27,836
1998 149,239 36,968 10,000 25,242
1997 110,080 44,996 -- 21,526
Kenneth Newell
Vice President
for Corporate Affairs ............ 1999 $187,976 $ 68,890 60,000 $ 47,901
1998 152,663 32,860 -- 37,934
1997 129,902 24,105 -- 25,604
Stephen McDonnell
Chief Financial
Officer .......................... 1999 $ 89,640 $ 49,800 15,000 $ 18,945
1998 71,950 24,645 10,000 10,246
1997 56,212 16,070 4,000 9,481
- --------
<FN>
(1) Represents the period beginning February 1 of the prior year and ending
January 31 of the year indicated.
(2) Represents contributions made by the Company to Executive Pension Plans of
$43,625, $16,285, $9,856, $9,856 and $7,470 for the year ended January 31,
1999, for Messrs. Doshi, Ellis, Burt, Newell and McDonnell, respectively,
the remainder being car allowances and insurance benefits.
(3) Messrs. Doshi and Ellis entered into employment agreements with the
Company in November 1995, which provide for annual base salaries of
$296,000 and $260,000 as of February 1, 1999, respectively. See "-
Employment Arrangements." Prior to November 1995, Messrs. Doshi and Ellis
did not receive any salary compensation for services to the Company.
</FN>
</TABLE>
9
<PAGE>
Stock Options
The following table sets forth certain summary information concerning
individual grants of stock options made during the year ended January 31, 1999
to each of the Company's executive officers named in the Summary Compensation
Table.
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------
% of
Total
Number of Options
Securities Granted to Exercise
Underlying Employees or Base
Options in Fiscal Price Expiration
Name Granted 1999 (1) Per Share (2) Date (3) 5% (4) 10% (4)
- ---- --------- ---------- ------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Anil J. Doshi.................. 40,000 7.3% $8.750 3/23/08 $ 270,400 $ 593,200
60,000 10.9% $5.625 10/6/08 593,100 1,077,300
Mark Ellis..................... 40,000 7.3% $8.750 3/23/08 270,400 593,200
50,000 9.1% $5.625 10/6/08 494,250 897,750
Terence W. Burt................ 40,000 7.3% $8.750 3/23/08 270,400 593,200
40,000 7.3% $5.625 10/6/08 395,400 718,200
Kenneth J. Newell.............. 40,000 7.3% $8.750 3/23/08 270,400 593,200
20,000 3.6% $5.625 10/6/08 197,700 359,100
Stephen McDonnell.............. 5,000 0.9% $8.750 3/23/08 33,800 74,150
10,000 1.8% $5.625 10/6/08 98,850 179,550
- ------------------------------
<FN>
(1) Based on aggregate of 550,360 options which were granted during fiscal 1999.
(2) All options were granted at fair market value on the date of grant.
(3) All options have a fixed term of ten years and vest in full over 30 months
from the date of grant, at a rate of 33- 1/3% after six months, a further
33-1/3% after 18 months and the remainder at 30 months.
(4) Potential gains are reported net of the option exercise price, but before
taxes associated with exercise. These amounts represent certain assumed
rates of appreciation only in the price of the Company's Common Stock
during the terms of the options in accordance with rates specified in
applicable federal securities regulations. Actual gains on stock option
exercises are dependent on the future performance of the Common Stock and
overall stock market conditions. The amounts reflected in this table may
not necessarily be achieved. The Company's Common Stock price, as reported
by the Nasdaq National Market on January 29, 1999, was $10.00 per share.
</FN>
</TABLE>
The following table sets forth at January 31, 1999 the number of
securities underlying unexercised options and the value of unexercised options
held by each of the executive officers named in the Summary Compensation Table.
During the fiscal year ended January 31, 1999, Messrs. Burt and Newell each
exercised 7,500 options and Mr. McDonnell exercised 10,000 options.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Year End In-the-Money
Name Exercisable Unexercisable Options at Year End(1)
---- ----------- ------------- -------------------------
<S> <C> <C> <C>
Anil Doshi.............................. 303,333 66,667 $1,604,166
Mark Ellis.............................. 300,000 60,000 1,589,584
Terence Burt............................ 190,834 56,666 966,118
Kenneth Newell.......................... 212,500 40,000 1,049,866
Stephen McDonnell....................... 27,834 14,166 137,833
10
<PAGE>
- --------------------
<FN>
(1) Computed based upon the difference between the stock option exercise price
and the closing price of the Company's Common Stock on January 29, 1999
($10.00).
</FN>
</TABLE>
Employment Arrangements
The Company has entered into employment agreements with Messrs.
Doshi and Ellis effective as of November 1, 1995. These agreements are
terminable at any time after an initial term of three years on one year's
notice. Under such agreements, Messrs. Doshi and Ellis are entitled to base
annual salaries of (pound)179,687 ($296,000) and (pound)158,125 ($260,000),
respectively. Prior to the execution of such employment agreements, neither
Messrs. Doshi nor Ellis had received salary compensation for services performed
for the Company and its affiliates.
Messrs. Newell and Burt entered into employment agreements with the
Company at salaries as of February 1, 1999 of (pound)136,562 ($225,000) each.
No other executive officer is currently party to an employment
agreement with the Company. As appropriate, other employment contracts may be
entered into with other key executives.
Stock Options and Benefit Plans
The Company maintains contributory, non-defined pension plans for
the benefit of Messrs. Doshi and Ellis to which it makes contributions of
approximately $54,000 ((pound)32,000) per annum. The Company also maintains
contributory, non-defined pension plans for the benefit of Messrs. Newell and
Burt to which it makes contributions of approximately $15,000 ((pound)9,000) per
annum.
1996 Equity Incentive Plan
In May 1996, the Company adopted the 4Front Technologies, Inc. 1996
Equity Incentive Plan, formerly the 4Front Software International, Inc. 1996
Equity Incentive Plan (the "Plan"), which as amended, provides for the issuance
of incentive stock options ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and non-qualified stock
options ("NQSOs") to purchase an aggregate of up to 1,100,000 shares of the
Common Stock of the Company. The Plan permits the granting of options to
officers, employees, directors and consultants of the Company. The Plan was
approved by stockholders on February 5, 1997 and pursuant to the Plan a total of
247,000 options, exercisable between $33/8 and $5 3/4 per share, being at or
above market value at time of grant, have been granted to employees and to two
directors. In November 1997, a total of 87,500 options, exercisable at $8.75,
being at or above market value at the time of
11
<PAGE>
grant, were granted to employees. During 1998, the Board granted 40,000 options
each to Messrs. Doshi, Ellis, Newell and Burt and 6,000 options each to Messrs.
Kleinman, Ross and Murray, each at an exercise price of $8.75 per share, equal
to the fair market value of the Common Stock on the date of grant. In October of
1998, the Board also granted 60,000 options to Mr. Doshi, 50,000 to Mr. Ellis,
40,000 to Mr. Burt, 20,000 options to Mr. Newell and 6,000 options to each of
Messrs. Kleinman, Ross and Murray, each at an exercise price of $5.625 per
share, equal to the fair market value of the Common Stock on the date of grant.
The purpose of the Plan is to provide incentives to attract, retain
and motivate eligible persons whose present and potential contributions are
important to the success of the Company and its subsidiaries and affiliates, by
offering them an opportunity to participate in the Company's future performance
through awards of stock options. The Plan is administered by the Compensation
Committee. Under the Plan, stock options may be granted to certain directors,
officers, employees, consultants, independent contractors and advisors of the
Company or its subsidiaries or affiliates. By encouraging stock ownership, the
Company seeks to attract, retain and motivate such persons and to encourage such
employees and persons to devote their best efforts to the business and financial
success of the Company. The Company also believes that stock incentive programs,
such as the Plan, are commonly employed by companies as an important element of
a total compensation program.
Grants under the Plan may consist of ISOs or NQSOs or a combination
thereof. Employees, officers, consultants, and certain directors and advisors of
the Company and its subsidiaries and affiliates whom the Compensation Committee
deems to have contributed significantly to the Company or who have the potential
to contribute to the future success of the Company will be eligible to receive
any of the different types of awards under the Plan. Directors who are not
employees of the Company, consultants and advisors will be entitled to receive
only NQSOs under the Plan.
An optionee will not realize taxable income upon the grant of an
option. In general, the holder of an NQSO (within the meaning of Section 422 of
the Code) will realize ordinary income when the option is exercised equal to the
excess of the value of the stock over the exercise price (i.e., the option
spread), and the Company receives a corresponding deduction, subject to the
executive compensation deduction limitations of Section 162(m) of the Code. (If
the optionee is subject to the six-month restrictions on sale of Common Stock
under Section 16(b) of the Exchange Act, the optionee generally will recognize
ordinary income on the date the restrictions lapse, unless an early income
recognition election is made.) Upon a later sale of the stock, the optionee will
realize gain or loss equal to the difference between the selling price and the
value of the stock at the time the option was exercised.
The holder of an ISO will not realize taxable income upon the exercise of
the option (although the option spread is an item of tax preference income
potentially subject to the alternative minimum tax). If the stock acquired upon
exercise of the ISO is sold or otherwise disposed of within two years from the
option grant date or within one year from the exercise date, then, in general,
gain realized on the sale is treated as ordinary income to the extent of the
option spread at the exercise date, and the Company receives a corresponding
deduction, subject to the executive compensation deduction limitations of
Section 162(m) of the Code. Any remaining gain is treated as capital gain. If
the stock is held for at least two years from the grant date and one year from
the exercise date, then gain
12
<PAGE>
or loss realized upon the sale will be capital gain or loss and the Company will
not be entitled to a deduction. A special basis adjustment is applied to reduce
the gain for alternative minimum tax purposes.
It is possible that all or a portion of the compensation realized under
the Plan by certain executive officers will not be deductible by the Company by
reason of the executive compensation deduction limitations of Section 162(m) of
the Code. Accordingly, although the Company expects that the Compensation
Committee will take into consideration the non-deductibility of compensation
attributable to a particular award under the Plan, no assurance can be given
that all or part of any such compensation will be deductible by the Company.
Compensation of Directors
Messrs. Murray and Ross each received compensation of $20,000 per
year in the fiscal year 1999. In February 1999, their compensation was increased
to $23,000 per year. No other director receives any compensation for services as
a director.
Compensation Committee Report to Stockholders
The report of the Compensation Committee shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of 1933, as
amended (the "Securities Act"), or under the Exchange Act, except to the extent
that the Company specifically incorporates this information by reference, and
shall not otherwise be deemed filed under such Acts.
The Compensation Committee of the Board of Directors currently
consists of Messrs. Doshi, Ellis, Murray and Ross. The Compensation Committee
administers the Company's executive compensation programs, monitors corporate
performance and its relationship to compensation of executive officers, and
makes appropriate recommendations concerning matters of executive compensation.
Compensation Philosophy
The Company believes that executive compensation should be closely
related to increased stockholder value. One of the Company's strengths
contributing to its successes is a strong management team. The compensation
program is designed to enable the Company to attract, retain and reward capable
employees who can contribute to the continued success of the Company,
principally by linking compensation with the attainment of key business
objectives. Equity participation and a strong alignment to stockholders'
interests are key elements of the Company's compensation philosophy.
Accordingly, the Company's executive compensation program is designed to provide
competitive compensation, support the Company's strategic business goals and
reflect the Company's performance.
The compensation program reflects the following principles:
o Compensation should encourage increased stockholder value.
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o Compensation programs should support the short- and
long-term strategic business goals and objectives of the
Company.
o Compensation programs should reflect and promote the
Company's values and reward individuals for outstanding
contributions toward business goals.
o Compensation programs should enable the Company to attract
and retain highly qualified professionals.
Pay Mix and Measurement
The Company's executive compensation is comprised of two components,
base salary and incentives, each of which is intended to serve the overall
compensation philosophy.
Base Salary
The Company's salary levels are intended to be consistent with
competitive pay practices and level of responsibility, with salary increases
reflecting competitive trends, the overall financial performance and resources
of the Company, general economic conditions as well as a number of factors
relating to the particular individual, including the performance of the
individual executive, and level of experience, ability and knowledge of the job.
Incentives
Incentives consist of stock options and, to a lesser extent, cash
awards. The Committee strongly believes that the pay program should provide
employees with an opportunity to increase their ownership and potentially gain
financially from Company stock price increases. By this approach, the best
interests of stockholders, executives and employees will be closely aligned.
Therefore, executives and other employees are eligible to receive stock options,
giving them the right to purchase shares of Common Stock of the Company at a
specified price in the future. The grant of options is based primarily on a key
employee's potential contribution to the Company's growth and profitability,
based on the Committee's discretionary evaluation. Options are granted at the
prevailing market value of the Company's Common Stock and will only have value
if the Company's stock price increases. Generally, grants of options vest over a
period of time and executives must be employed by the Company for such options
to vest. The granting of cash awards is discretionary and is not dependent on
any one factor.
Chief Executive Officer Compensation For the Fiscal Year
Ended January 31, 1999
In November 1995, Mr. Doshi entered into an employment agreement
with the Company which currently provides for an annual base salary of
(pound)179,687 ($296,000). Prior thereto, Mr. Doshi had not received
compensation for services rendered to the Company.
The employment arrangements with Mr. Doshi are deemed appropriate by
the Compensation Committee considering the overall performance of the Company
and Mr. Doshi.
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<PAGE>
Tax Effects
Changes made in 1993 to the Code impose certain limitations on the
deductibility of executive compensation paid by public companies for taxable
years beginning in or after 1994. In general, under the limitations, the Company
will not be able to deduct annual compensation paid to certain executive
officers in excess of $1,000,000 except to the extent that such compensation
qualifies as "performance-based compensation" (or meets other exceptions not
here relevant). Non- deductibility would result in additional tax cost to the
Company. It is possible that at least some of the cash and equity-based
compensation paid or payable to the Company's executive officers will not
qualify for the "performance-based compensation" exclusion under the deduction
limitation provisions of the Code. Nevertheless, the Committee anticipates that
in making compensation decisions it will give consideration to the net cost to
the Company (including, for this purpose, the potential limitation on
deductibility of executive compensation).
The Compensation Committee believes that linking executive
compensation to corporate performance results in a better alignment of
compensation with corporate business goals and stockholder value. The Committee
believes its compensation practices are directly tied to stockholder returns and
linked to the achievement of annual and longer-term financial and operational
results of the Company on behalf of the Company's stockholders. In view of the
Company's performance and achievement of goals and competitive conditions, the
Compensation Committee believes that compensation levels during fiscal 1998
adequately reflect the Company's compensation goals and policies.
COMPENSATION COMMITTEE
Anil Doshi
Mark Ellis
Brian Murray
Arthur Keith Ross
Compensation Committee Interlocks and Insider Participation
The Compensation Committee currently consists of Messrs. Doshi,
Ellis, Murray and Ross. Messrs. Doshi and Ellis abstain from votes on their
compensation.
15
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The Company's Performance
The Stock Price Performance Graph below shall not be deemed
incorporated by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act or under the
Exchange Act, except to the extent the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
[Graph omitted]
================================================================================
3/21/95 1/31/96 1/31/97 1/31/98 1/31/99
------- ------- ------- ------- -------
4FRONT TECH'S, INC. 100.00 114.67 66.67 128.17 156.67
SIC CODE INDEX 100.00 146.19 168.65 203.12 501.97
RUSSELL 2000 INDEX 100.00 122.76 146.03 172.39 172.39
NASDAQ MARKET INDEX 100.00 119.55 157.33 185.31 289.23
================================================================================
The above Graph compares the performance of the Company from March
21, 1995, the date that the Company's Common Stock commenced trading publicly,
through January 31, 1999, against the performance of the Nasdaq Market Index,
the Russell 2000 Index and the SIC Code Index, an index comprised of
approximately 130 computer companies, including the Company.
16
<PAGE>
RELATIONSHIP WITH INDEPENDENT AUDITORS
KPMG have been the independent auditors for the Company since
December 1995, and will serve in that capacity for the 2000 fiscal year. A
representative of KPMG will be present at the Annual Meeting and will have an
opportunity to make a statement if he desires to do so, and will respond to
appropriate questions from stockholders.
STOCKHOLDER PROPOSALS
All stockholder proposals which are intended to be presented at the
2000 Annual Meeting of Stockholders of the Company must be received by the
Company no later than July 3, 2000 for inclusion in the Board of Directors'
proxy statement and form of proxy relating to that meeting. In addition, proxies
received in connection with the 2000 Annual Meeting of Stockholders will confer
on the Company discretionary authority (i) to vote on any stockholder proposal
which is received by the Company after July 3, 2000 and (ii) to vote on any
stockholder proposal which is received by the Company on or before July 3, 2000
if the proxy statement includes advice on the nature of the matter and how the
Company intends to exercise its discretion to vote on such matter.
OTHER BUSINESS
The Board of Directors knows of no other business to be acted upon
at the Annual Meeting. However, if any other business properly comes before the
Annual Meeting, it is the intention of the persons named in the enclosed proxy
to vote on such matters in accordance with their best judgment.
The prompt return of your proxy will be appreciated and helpful in
obtaining the necessary vote. Therefore, whether or not you expect to attend the
Annual Meeting, please sign the proxy and return it in the enclosed envelope.
By Order of the Board of Directors
Craig Kleinman
Secretary
Dated: September 7, 1999
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<PAGE>
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED JANUARY 31, 1999 WILL BE SENT WITHOUT CHARGE TO ANY STOCKHOLDER REQUESTING
IT IN WRITING FROM: 4FRONT TECHNOLOGIES, INC., ATTENTION: CRAIG KLEINMAN, 6300
SOUTH SYRACUSE WAY, SUITE 293, ENGLEWOOD, COLORADO 80111.
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<PAGE>
PROXY 4FRONT TECHNOLOGIES, INC. PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 15, 1999
Anil Doshi and Mark Ellis, and each of them, as the true and lawful
attorneys, agents and proxies of the undersigned, with full power of
substitution, are hereby authorized to represent and to vote all shares of
Common Stock of 4Front Technologies, Inc. held of record by the undersigned on
August 31, 1999, at the Annual Meeting of Stockholders to be held at 11:00 a.m.
on Friday, October 15, 1999, at the offices of Fulbright & Jaworski L.L.P., 666
Fifth Avenue, New York, New York 10103 and any adjournment thereof. Any and all
proxies heretofore given are hereby revoked.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED BY THE
UNDERSIGNED. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED FOR EACH OF THE
NOMINEES FOR DIRECTOR LISTED BELOW.
1. Proposal - Election of Directors - Nominees are:
Anil Doshi, Mark Ellis, Terence Burt, Kenneth Newell, Craig Kleinman,
Brian V. Murray and Arthur Keith Ross.
[ ] FOR all listed nominees (except do not vote for the nominee(s)
whose name(s) appears(s) below):
--------------------------------------------------------------------------
[ ] WITHHOLD AUTHORITY to vote for the listed nominees.
(Continued on reverse side.)
<PAGE>
Discretionary authority is hereby granted with respect to such other matters as
may properly come before the meeting.
IMPORTANT: Please sign exactly as name appears below. Each joint owner shall
sign. Executors, administrators, trustees, etc. should give full title as such.
If signor is a corporation, please give full corporate name by duly authorized
officer. If a partnership, please sign in partnership name by authorized person.
Dated ____________________, 1999
__________________________________________
Signature
__________________________________________
Signature if held jointly
The above-signed acknowledges receipt of the
Notice of Annual Meeting of Stockholders and
the Proxy Statement furnished therewith.
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
