| Tue 30 Mar 2004, 10:40 | | Frontrange Limited Press Release |
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Frontrange Limited Press Release
Release Date: 30/03/2004 09:59:01 Code(s): FRO
FRONTRANGE LIMITED PRESS RELEASE
FRONTRANGE LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1997/009928/06)
Share code: FRO ISIN: ZAE000035325
("FrontRange")
30 March 2004
FrontRange shareholders to vote on option grant for new CEO
FrontRange Limited, the JSE-listed developer of integrated business relationship
solutions, is to ask shareholders to vote on a resolution that, if approved,
would see a significant share option grant being made to get its acting chief
executive, Michael McCloskey, on board long term.
The grant of an additional 19,6-million share options is conditional on
McCloskey accepting a permanent appointment as Chief Executive of FrontRange
Limited, as well as Chairman, President and Chief Executive of its 100%-held, US
based subsidiary, FrontRange Solutions Inc. McCloskey would then have share
options amounting to 10% of FrontRange Limited on a fully-diluted basis.
The resolution requires the approval of 75% of shareholders voting at a special
meeting to be held on 16 April 2004 in Johannesburg. A circular to shareholders
containing details of the proposal is currently being distributed, and is also
available on the FrontRange website at
www.frontrange.co.za/InvestorRelations/circular.asp
Key shareholders have been solicited on the proposal and have expressed their
approval through irrevocable letters of undertaking. FrontRange Limited chairman
Dana Buys says the share option grant is being proposed in line with the group"s
strategy to appoint world class executives.
"We completed the turnaround of FrontRange in the year to June 2003 and are in a
good position to grow as economic conditions in the main world markets improve.
We are shaping the business so that we can look to growing revenue and profits
on a sustainable basis. FrontRange develops its own products, thus intellectual
capacity is key for us to succeed against much larger companies entering our
market space," says Buys.
He says the group is excited about having attracted an established US business
leader with an exceptional track record in growing companies in the IT sector.
"Given that the core of FrontRange"s business is driven from the US, we believe
that we need a strong, experienced leader there who can help drive the group to
a new level and consequently deliver shareholder value. Michael McCloskey has
the qualities needed to accomplish this. In addition, he has already recruited
some top talent that will help FrontRange to grow in a very competitive market.
We anticipate substantial benefits to flow from his appointment," says Buys.
McCloskey brings a wealth of business experience to FrontRange, having served in
numerous upper management roles including CEO and Chairman of Kana
Communications where he undertook the highest performing IPO of the year (1999)
led by Goldman Sachs. McCloskey recruited new management into that company and
increased revenues from about $1-million a quarter to over $42-million a quarter
through internal growth initiatives and a series of acquisitions.
Prior to Kana, McCloskey was President and Director of Genesys Telecom, where he
was instrumental in growing partner-touched revenues to over 50% of total
revenues before Genesys was sold to Alcatel for approximately $1,2-billion. He
also served tenure as chief financial officer and vice-president of operations
for Network Appliance, during which time the company grew from about $1,2-
million a quarter to the most valuable company in its market segment (current
revenues exceed $1-billion).
Following McCloskey"s appointment as acting Chief Executive, several other
significant new management recruits have joined FrontRange, including Dave
Smith, the new Vice President of US Sales, who was previously Vice President of
US Sales for 3Com. Keith Barr, the new VP of Product Development, is a software
development veteran and was the co-founder of Echopass, a hosted call centre
solutions provider. Patrice Tollenaere, the new Senior Director of Development,
joined FrontRange from Network Associates where he was Chief Technology Officer
and VP of Engineering of its Magic Solutions Business Unit.
The strike price of the option grant for cash is 138,4 cents a share, which was
arrived at by taking the weighted average of the strike price of the initial
option grant of 106 cents made to McCloskey when he joined the FrontRange board
and the strike price of the remaining 19 582 905 options of 141 cents.
The initial options were granted on 16 June 2003, while the strike price of the
remaining options was determined on 20 August 2003, the date that McCloskey took
over as acting CEO of FrontRange Solutions. Once the new option grant has been
approved by FrontRange"s shareholders, the initial grant will be cancelled.
As the share option grant is to a related party, FrontRange Limited employed
Ernst & Young Corporate Finance (EYCF) as independent experts to assess the
proposal.
EYCF considered the "fairness" of the grant, based primarily on quantitative
issues, as well as its "reasonableness", based on qualitative issues. EYCF"s
assessment is published in the circular to shareholders. In its report, the firm
says it analysed a range of pertinent information about the grant and the likely
benefits to flow from the employment of McCloskey.
"For the reason that the majority of the ultimate benefits of Mr McCloskey"s
employment are currently incapable of quantification, and given the quantitative
nature of "fairness" we consider that the issue of the grant is unfair to
current shareholders of FrontRange.
"However, given the strategic requirement for FrontRange to be able to attract
an executive of the stature and with the track record of Mr McCloskey, as well
as the nature of the arm"s length negotiations, we nevertheless consider that
the decision to award the grant is reasonable in the circumstances," says the
report, signed by EYCF director Trevor Cuss.
The report says further that "if shareholders concur with FrontRange management
and believe that Mr McCloskey will, with the effluxion of time, deliver
performance benefits and value in excess of the cost of the grant, they should
vote in favour of the resolutions."
ENDS
