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           EXHIBIT 4(g) TO FRONTSTEP, INC. ANNUAL REPORT ON FORM 10-K





















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                                                               EXECUTION VERSION


THIS WARRANT AND ANY SECURITIES ACQUIRED UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAW OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THIS WARRANT AND SUCH
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS WARRANT.


                                 FRONTSTEP, INC.

                          COMMON SHARE PURCHASE WARRANT

No. W-1                                                            July 17, 2001
                                       Warrant to Purchase 550,000 Common Shares


                  FRONTSTEP, INC., an Ohio corporation (the "Company"), for
value received, hereby certifies that FOOTHILL CAPITAL CORPORATION, a California
corporation, or its registered assigns (the "Holder"), is entitled to purchase
from the Company 550,000 shares of duly authorized, validly issued, fully paid
and nonassessable common shares, no par value, of the Company (the "Common
Shares"), at a purchase price equal to the Purchase Price (this "Warrant"), at
any time or from time to time but prior to 5:00 P.M., New York City time, on
July 17, 2006 (the "Expiration Date"), all subject to the terms, conditions and
adjustments set forth below in this Warrant. Capitalized terms used herein and
not otherwise defined herein shall have the meanings assigned such terms in the
Loan Agreement.

         1. DEFINITIONS. As used herein, unless the context otherwise requires,
the following terms shall have the meanings indicated:

         "ADDITIONAL COMMON SHARES" shall mean all Common Shares (including
treasury shares) issued or sold (or, pursuant to Section 3.3 or 3.4, deemed to
be issued) by the Company after the date hereof, whether or not subsequently
reacquired or retired by the Company, other than

         (a) shares issued upon the exercise of this Warrant,

         (b) such number of additional shares as may become issuable upon the
exercise of this Warrant by reason of adjustments required pursuant to the
anti-dilution provisions applicable to this Warrant as in effect on the date
hereof,

         (c) shares, warrants, options and other securities issued by the
Company at any time to the Holder or any Affiliate thereof,


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         (d) (i) Common Shares or options exercisable therefor, issued or to be
issued under the Company's existing employee stock option and purchase plans and
stock option plan for outside directors, each as may be amended from time to
time or under any other employee stock option or purchase plan or plans, or
pursuant to compensatory or incentive agreements, for officers, directors,
employees or consultants of the Company or any of its Subsidiaries, in each case
adopted or assumed after such date by the Company's Board of Directors; PROVIDED
in each case that the exercise or purchase price for any such share shall not be
less than 90% of the fair market value (determined in good faith by the
Company's Board of Directors) of the Common Shares on the date of the grant, and
(ii) such additional number of shares as may become issuable pursuant to the
terms of any such plans by reason of adjustments required pursuant to
antidilution provisions applicable to such securities in order to reflect any
subdivision or combination of Common Shares, by reclassification or otherwise,
or any dividend on Common Shares payable in Common Shares,

         (e) (i) Common Shares issued upon the exercise of any warrants or
options, or upon conversion of any preferred shares of the Company. outstanding
on the date hereof and (ii) such additional number of shares as may become
issuable upon the exercise or conversion of any such securities by reason of
adjustments required pursuant to anti-dilution provisions applicable to such
securities as in effect on the date hereof, and

         (f) Common Shares (not to exceed 500,000 Common Shares in the aggregate
as constituted on the date hereof (and subject to adjustment for stock splits,
subdividions stock dividends and similar such transactions)) issued in
connection with acquisitions of assets and/or securities of another Person in a
transaction or series of transactions, each of which is approved by the Board of
Directors of the Company.

         "BUSINESS DAY" shall mean any day other than a Saturday or a Sunday or
any day on which national banks are authorized or required by law to close. Any
reference to "days" (unless Business Days are specified) shall mean calendar
days.

         "COMMISSION" shall mean the Securities and Exchange Commission or any
successor agency having jurisdiction to enforce the Securities Act.

         "COMMON SHARES" shall have the meaning assigned to it in the
introduction to this Warrant, such term to include any stock into which such
Common Shares shall have been changed or any stock resulting from any
reclassification of such Common Shares, and all other stock of any class or
classes (however designated) of the Company the holders of which have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference.

         "COMPANY" shall have the meaning assigned to it in the introduction to
this Warrant, such term to include any corporation or other entity which shall
succeed to or assume the obligations of the Company hereunder in compliance with
Section 4.


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         "CONVERTIBLE SECURITIES" shall mean any evidences of indebtedness,
shares of stock (other than Common Shares) or other securities directly or
indirectly convertible into or exchangeable for Additional Common Shares.

         "CURRENT MARKET PRICE" shall mean, on any date specified herein, the
average of the daily Market Price during the 10 consecutive trading days before
such date, except that, if on any such date the Common Shares are not listed or
admitted for trading on any national securities exchange or quoted in the
over-the-counter market, the Current Market Price shall be the Market Price on
such date.

         "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations thereunder, or any
successor statute.

         "EXPIRATION DATE" shall have the meaning assigned to it in the
introduction to this Warrant.

         "FAIR VALUE" shall mean, on any date specified herein (i) in the case
of cash, the dollar amount thereof, (ii) in the case of a security, the Current
Market Price, and (iii) in all other cases, the fair value thereof (as of a date
which is within 20 days of the date as of which the determination is to be made)
determined in good faith by the Company's Board of Directors.

         "HOLDER" shall have the meaning assigned to it in the introduction to
this Warrant.

         "INITIAL HOLDER" shall mean Foothill Capital Corporation.

         "LOAN AGREEMENT" shall mean that certain Loan and Security Agreement,
dated as of July 17, 2001, among the Company, certain subsidiaries of the
Company, the Lender parties thereto and Foothill Capital Corporation, as the
Arranger and Administrative Agent.

         "MARKET PRICE" shall mean, on any date specified herein, the amount per
Common Share, equal to (i) the last reported sale price of such Common Shares,
regular way, on such date or, in case no such sale takes place on such date, the
average of the closing bid and asked prices thereof regular way on such date, in
either case as officially reported on the principal national securities exchange
on which such Common Shares are then listed or admitted for trading, (ii) if
such Common Shares are not then listed or admitted for trading on any national
securities exchange but is designated as a national market system security by
the NASD, the last reported trading price of the Common Shares on such date,
(iii) if there shall have been no trading on such date or if the Common Shares
are not so designated, the average of the closing bid and asked prices of the
Common Shares on such date as shown by the NASD automated quotation system, or
(iv) if such Common Shares are not then listed or admitted for trading on any
national exchange or quoted in the over-the-counter market, the fair value
thereof (as of a date which is within 20 days of the date as of which the
determination is to be made) determined in good faith by the Company's Board of
Directors.

                  "NASD" shall mean the National Association of Securities
Dealers, Inc.


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         "OPTIONS" shall mean any rights, options or warrants to subscribe for,
purchase or otherwise acquire either Additional Common Shares or Convertible
Securities.

         "OTHER SECURITIES" shall mean any stock (other than Common Shares) and
other securities of the Company or any other Person (corporate or otherwise)
which the holders of the Warrants at any time shall be entitled to receive, or
shall have received, upon the exercise of the Warrants, in lieu of or in
addition to Common Shares, or which at any time shall be issuable or shall have
been issued in exchange for or in replacement of Common Shares or Other
Securities pursuant to Section 4 or otherwise.

         "PERSON" shall mean any individual, firm, partnership, corporation,
trust, joint venture, association, joint stock company, limited liability
company, unincorporated organization or any other entity or organization,
including a government or agency or political subdivision thereof, and shall
include any successor (by merger or otherwise) of such entity.

         "PURCHASE PRICE" shall mean initially $3.36 per share, subject to
adjustment and readjustment from time to time as provided in Section 3, and, as
so adjusted or readjusted, shall remain in effect until a further adjustment or
readjustment thereof is required by Section 3.

         "REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement, dated as of the date hereof between the Company and the Initial
Holder.

         "RESTRICTED SECURITIES" shall mean (i) any Warrants bearing the
applicable legend set forth in Section 9.1, (ii) any Common Shares (or Other
Securities) issued or issuable upon the exercise of Warrants which are (or, upon
issuance, will be) evidenced by a certificate or certificates bearing the
applicable legend set forth in such Section, and (iii) any Common Shares (or
Other Securities) issued subsequent to the exercise of any of the Warrants as a
dividend or other distribution with respect to, or resulting from a subdivision
of the outstanding Common Shares (or other Securities) into a greater number of
shares by reclassification, stock splits or otherwise, or in exchange for or in
replacement of the Common Shares (or Other Securities) issued upon such
exercise, which are evidenced by a certificate or certificates bearing the
applicable legend set forth in such Section.

         "RIGHTS" shall have the meaning assigned to it in Section 3.10.

         "SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time, and the rules and regulations thereunder, or any successor
statute.

         "WARRANT" shall have the meaning assigned to it in the introduction to
this Warrant.

         "WARRANT SHARES" means (a) the Common Shares issued or issuable upon
exercise of this Warrant in accordance with Section 2, (b) all other securities
or other property issued or issuable upon any such exercise or exchange in
accordance with this Warrant and (c) any securities of the Company distributed
with respect to the securities referred to in the preceding clauses (a) and (b).


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         2. EXERCISE OF WARRANT.

         2.1. MANNER OF EXERCISE; PAYMENT OF THE PURCHASE PRICE. (a) This
Warrant may be exercised by the Holder hereof, in whole or in part, at any time
or from time to time prior to the Expiration Date, by surrendering to the
Company at its principal office this Warrant, with a completed Election to
Purchase Shares in the form attached hereto as Exhibit A (or a reasonable
facsimile thereof) duly executed by the Holder and accompanied by payment of the
Purchase Price for the number of Common Shares specified in such form (the
"Aggregate Purchase Price"). Any partial exercise of this Warrant shall be for a
whole number of Warrant Shares only.

         (b) Payment of the Aggregate Purchase Price may be made as follows (or
by any combination of the following): (i) in United States currency by cash or
delivery of a certified check or bank draft payable to the order of the Company
or by wire transfer to the Company, (ii) by cancellation of all or any part of
the unpaid principal amount, plus accrued interest thereon, of the
then-outstanding Obligations (as defined in the Loan Agreement) in an amount
equal to the Aggregate Purchase Price; PROVIDED, that any such cancellations
shall be applied in accordance with Section 2.4(b) of the Loan Agreement, (iii)
by cancellation of such number of Common Shares otherwise issuable to the Holder
upon such exercise as shall be specified for cancellation in such Election to
Purchase Shares, such that the excess of the aggregate Current Market Price of
such specified number of shares on the date of exercise over the portion of the
Aggregate Purchase Price attributable to such shares shall equal the Aggregate
Purchase Price attributable to the Common Shares to be issued upon such
exercise, in which case such excess amount shall be deemed to have been paid to
the Company and the number of shares issuable upon such exercise shall be
reduced by such number specified for cancellation, or (iv) by surrender to the
Company for cancellation certificates representing Common Shares of the Company
owned by the Holder (properly endorsed for transfer in blank) having a Current
Market Price on the date of Warrant exercise equal to the Aggregate Purchase
Price.

         2.2. WHEN EXERCISE EFFECTIVE. Each exercise of this Warrant shall be
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to, and the
Purchase Price shall have been received by, the Company as provided in Section
2.1, and, to the extent permitted by law, at such time the Person or Persons in
whose name or names any certificate or certificates for Common Shares (or Other
Securities) shall be issuable upon such exercise as provided in Section 2.3
shall be deemed to have become the holder or holders of record thereof for all
purposes.

         2.3. DELIVERY OF STOCK CERTIFICATES, ETC.; CHARGES, TAXES AND EXPENSES.
(a) As soon as practicable after each exercise of this Warrant, in whole or in
part, and in any event within five Business Days thereafter, the Company shall
cause to be issued in the name of and delivered to the Holder hereof or, subject
to Section 9, as the Holder may direct,

         (i) a certificate or certificates for the whole number of Common Shares
     (or Other Securities) to which the Holder shall be entitled upon such
     exercise, and


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         (ii) in case such exercise is for less than all of the Common Shares
     purchasable under this Warrant, a new Warrant or Warrants of like tenor,
     for the balance of the Common Shares purchasable hereunder.

         (b) Issuance of certificates for Common Shares upon the exercise of
this Warrant shall be made without charge to the Initial Holder hereof for any
issue or transfer tax or other incidental expense, in respect of the issuance of
such certificates, all of which such taxes and expenses shall be paid by the
Company; PROVIDED, HOWEVER, that the Company shall not be required to pay any
tax that may be payable in respect of any issuance of any Warrant or any
certificate for, or any other evidence of ownership of, Warrant Shares in a name
other than that of the Initial Holder of this Warrant being exercised or
exchanged.

         2.4. TAX BASIS. The Company and the Holder shall mutually agree as to
the tax basis of this Warrant as of the date of issuance of this Warrant, for
purposes of the Internal Revenue Code of 1986, as amended, and the treatment of
this Warrant under such Code by each of the Company and the Holder shall be
consistent with such agreement.

         3. ADJUSTMENT OF PURCHASE PRICE AND COMMON SHARES ISSUABLE UPON
EXERCISE.

         3.1. ADJUSTMENT OF NUMBER OF SHARES.

         Upon each adjustment of the Purchase Price as a result of the
calculations made in this Section 3, this Warrant shall thereafter evidence the
right to receive, at the adjusted Purchase Price, that number of Common Shares
(calculated to the nearest one-hundredth) obtained by dividing (i) the product
of the aggregate number of shares covered by this Warrant immediately prior to
such adjustment and the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price by (ii) the Purchase Price in effect
immediately after such adjustment of the Purchase Price.

         3.2. ADJUSTMENT OF PURCHASE PRICE.

         3.2.1. ISSUANCE OF ADDITIONAL COMMON SHARES. In case the Company at any
time or from time to time after the date hereof shall issue or sell Additional
Common Shares (including Additional Common Shares deemed to be issued pursuant
to Section 3.3 or 3.4 but excluding Additional Common Shares purchasable upon
exercise of Rights referred to in Section 3.10) without consideration or for a
consideration per share less than the greater of the Purchase Price and the
Current Market Price in effect immediately prior to such issue or sale, then,
and in each such case, subject to Section 3.8, the Purchase Price shall be
reduced concurrently with such issue or sale, to a price (calculated to the
nearest .001 of a cent) determined by multiplying such Purchase Price by a
fraction

         (a) The numerator of which shall be the sum of (i) the number of Common
Shares outstanding immediately prior to such issue or sale and (ii) the number
of Common Shares which the aggregate consideration received by the Company for
the total number of such Additional Common Shares so issued or sold would
purchase at the greater of such Purchase Price and such Current Market Price,
and


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         (b) The denominator of which shall be the number of Common Shares
outstanding immediately after such issue or sale, provided that, for the
purposes of this Section 3.2.1, (x) immediately after any Additional Common
Shares are deemed to have been issued pursuant to Section 3.3 or 3.4, such
Additional Shares shall be deemed to be outstanding, and (y) treasury shares
shall not be deemed to be outstanding.

         3.2.2. EXTRAORDINARY DIVIDENDS AND DISTRIBUTIONS. In the case the
Company at any time or from time to time after the date hereof shall declare,
order, pay or make a dividend or other distribution (including, without
limitation, any distribution of other or additional stock or other securities or
property or Options by way of dividend or spin-off, reclassification,
recapitalization or similar corporate rearrangement) on the Common Shares other
than (a) a dividend payable in Additional Common Shares or (b) a regularly
scheduled cash dividend (at a rate not in excess of 110% of the rate of the last
regularly scheduled cash dividend theretofore paid) payable out of consolidated
earnings or earned surplus, determined in accordance with generally accepted
accounting principles, or (c) a dividend of Rights referred to in Section 3.10
hereof then, in each such case, subject to Section 3.8, the Purchase Price in
effect immediately prior to the close of business on the record date fixed for
the determination of holders of any class of securities entitled to receive such
dividend or distribution shall be reduced, effective as of the close of business
on such record date, to a price determined by multiplying such Purchase Price by
a fraction

         (x) the numerator of which shall be the Current Market Price in effect
     on such record date or, if the Common Shares trade on an ex-dividend basis,
     on the date prior to the commencement of ex-dividend trading, less the Fair
     Value of such dividend or distribution applicable to one Common Share, and

         (y) the denominator of which shall be such Current Market Price.

PROVIDED that, in the event that the amount of such dividend as so determined is
equal to or greater than 10% of such Current Market Price or in the event that
such fraction is less than 9/10ths, in lieu of the foregoing adjustment,
adequate provision shall be made so that the Holder shall receive, upon Warrant
exercise, a pro rata share of such dividend based upon the maximum number of
Common Shares at the time issuable to the Holder (determined without regard to
whether the Warrant is exercisable at such time.)

         3.3. TREATMENT OF OPTIONS AND CONVERTIBLE SECURITIES. In case the
Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities of the Company entitled to receive, any
Options or Convertible Securities (whether or not the rights thereunder are
immediately exercisable), then, and in each such case, the maximum number of
Additional Common Shares (as set forth in the instrument relating thereto,
without regard to any provisions contained therein for a subsequent adjustment
of such number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Common Shares issued as
of the time of such issue, sale, grant or assumption or, in case such a record
date shall have been fixed, as of the close of business on such record date (or,
if the Common Shares trade on an ex-dividend basis, on the date prior to the
commencement of ex-dividend trading),


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PROVIDED that such Additional Common Shares shall not be deemed to have been
issued unless (i) the consideration per share (determined pursuant to Section
3.5) of such shares would be less than the Current Market Price in effect on the
date of and immediately prior to such issue, sale, grant or assumption or
immediately prior to the close of business on such record date (or, if the
Common Shares trade on an ex-dividend basis, on the date prior to the
commencement of ex-dividend trading), as the case may be, and (ii) such
Additional Common Shares are not purchasable pursuant to Rights referred to in
Section 3.10, and PROVIDED, FURTHER, that in any such case in which Additional
Common Shares are deemed to be issued:

         (a) whether or not the Additional Common Shares underlying such Options
or Convertible Securities are deemed to be issued, no further adjustment of the
Purchase Price shall be made upon the subsequent issue or sale of Convertible
Securities or Common Shares upon the exercise of such Options or the conversion
or exchange of such Convertible Securities, except in the case of any such
Options or Convertible Securities which contain provisions requiring an
adjustment, subsequent to the date of the issue or sale thereof, of the number
of Additional Common Shares issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities by reason of (x) a change
of control of the Company, (y) the acquisition by any Person or group of Persons
of any specified number or percentage of the voting securities of the Company or
(z) any similar event or occurrence, each such case to be deemed hereunder to
involve a separate issuance of Additional Common Shares, Options or Convertible
Securities, as the case may be;

         (b) if such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any increase in the consideration
payable to the Company, or decrease in the number of Additional Common Shares
issuable, upon the exercise, conversion or exchange thereof (by change of rate
or otherwise), the Purchase Price computed upon the original issue, sale, grant
or assumption thereof (or upon the occurrence of the record date, or date prior
to the commencement of ex-dividend trading, as the case may be, with respect
thereto), and any subsequent adjustments based thereon, shall, upon any such
increase or decrease becoming effective, be recomputed to reflect such increase
or decrease insofar as it affects such Options, or the rights of conversion or
exchange under such Convertible Securities, which are outstanding at such time;

         (c) upon the expiration (or purchase by the Company and cancellation or
retirement) of any such Options which shall not have been exercised or the
expiration of any rights of conversion or exchange under any such Convertible
Securities which (or purchase by the Company and cancellation or retirement of
any such Convertible Securities the rights of conversion or exchange under
which) shall not have been exercised, the Purchase Price computed upon the
original issue, sale, grant or assumption thereof (or upon the occurrence of the
record date, or date prior to the commencement of ex-dividend trading, as the
case may be, with respect thereto), and any subsequent adjustments based
thereon, shall, upon such expiration (or such cancellation or retirement, as the
case may be), be recomputed as if:

         (i) in the case of Options for Common Shares or Convertible Securities,
     the only Additional Common Shares issued or sold were the Additional Common
     Shares, if any, actually issued or sold upon the exercise of such Options
     or the conversion or exchange of such Convertible Securities and the
     consideration received therefor was the


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     consideration actually received by the Company for the issue, sale, grant
     or assumption of all such Options, whether or not exercised, plus the
     consideration actually received by the Company upon such exercise, or for
     the issue or sale of all such Convertible Securities which were actually
     converted or exchanged, plus the additional consideration, if any, actually
     received by the Company upon such conversion or exchange, and

         (ii) in the case of Options for Convertible Securities, only the
     Convertible Securities, if any, actually issued or sold upon the exercise
     of such Options were issued at the time of the issue or sale, grant or
     assumption of such Options, and the consideration received by the Company
     for the Additional Common Shares deemed to have then been issued was the
     consideration actually received by the Company for the issue, sale, grant
     or assumption of all such Options, whether or not exercised, plus the
     consideration deemed to have been received by the Company (pursuant to
     Section 3.5) upon the issue or sale of such Convertible Securities with
     respect to which such Options were actually exercised;

         (d) no readjustment pursuant to subdivision (b) or (c) above shall have
the effect of decreasing the Purchase Price by an amount in excess of the amount
of the adjustment thereof originally made in respect of the issue, sale, grant
or assumption of such Options or Convertible Securities; and

         (e) in the case of any such Options which expire by their terms not
more than 30 days after the date of issue, sale, grant or assumption thereof, no
adjustment of the Purchase Price shall be made until the expiration or exercise
of all such Options, whereupon such adjustment shall be made in the manner
provided in subdivision (c) above.

         3.4. TREATMENT OF STOCK DIVIDENDS, STOCK SPLITS, ETC. In case the
Company at any time or from time to time after the date hereof shall declare or
pay any dividend on the Common Shares payable in Common Shares, or shall effect
a subdivision of the outstanding Common Shares into a greater number of Common
Shares (by reclassification or otherwise than by payment of a dividend in Common
Shares), then, and in each such case, Additional Common Shares shall be deemed
to have been issued (a) in the case of any such dividend, immediately after the
close of business on the record date for the determination of holders of any
class of securities entitled to receive such dividend, or (b) in the case of any
such subdivision, at the close of business on the day immediately prior to the
day upon which such corporate action becomes effective.

         3.5. COMPUTATION OF CONSIDERATION. For the purposes of this Section 3,

         (a) the consideration for the issue or sale of any Additional Common
Shares shall, irrespective of the accounting treatment of such consideration,

         (i) insofar as it consists of cash, be computed at the gross cash
     proceeds to the Company, without deducting any expenses paid or incurred by
     the Company or any commissions or compensations paid or concessions or
     discounts allowed to underwriters, dealers or others performing similar
     services in connection with such issue or sale,


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         (ii) insofar as it consists of property (including securities) other
     than cash, be computed at the Fair Value thereof at the time of such issue
     or sale, and

         (iii) in case Additional Common Shares are issued or sold together with
     other stock or securities or other assets of the Company for a
     consideration which covers both, be the portion of such consideration so
     received, computed as provided in clauses (i) and (ii) above, allocable to
     such Additional Common Shares, such allocation to be determined in the same
     manner that the Fair Value of property not consisting of cash or securities
     is to be determined as provided in the definition of 'Fair Value' herein;

         (b) Additional Common Shares deemed to have been issued pursuant to
Section 3.3, relating to Options and Convertible Securities, shall be deemed to
have been issued for a consideration per share determined by dividing

         (i) the total amount, if any, received and receivable by the Company as
     consideration for the issue, sale, grant or assumption of the Options or
     Convertible Securities in question, plus the minimum aggregate amount of
     additional consideration (as set forth in the instruments relating thereto,
     without regard to any provision contained therein for a subsequent
     adjustment of such consideration to protect against dilution) payable to
     the Company upon the exercise in full of such Options or the conversion or
     exchange of such Convertible Securities or, in the case of Options for
     Convertible Securities, the exercise of such Options for Convertible
     Securities and the conversion or exchange of such Convertible Securities,
     in each case computing such consideration as provided in the foregoing
     subdivision (a),

         by

         (ii) the maximum number of Common Shares (as set forth in the
     instruments relating thereto, without regard to any provision contained
     therein for a subsequent adjustment of such number to protect against
     dilution) issuable upon the exercise of such Options or the conversion or
     exchange of such Convertible Securities; and

         (c) Additional Common Shares deemed to have been issued pursuant to
Section 3.4, relating to stock dividends, stock splits, etc., shall be deemed to
have been issued for no consideration.

         3.6. ADJUSTMENTS FOR COMBINATIONS, ETC. In case the outstanding Common
Shares shall be combined or consolidated, by reclassification or otherwise, into
a lesser number of Common Shares, the Purchase Price in effect immediately prior
to such combination or consolidation shall, concurrently with the effectiveness
of such combination or consolidation, be proportionately decreased.

         3.7. DILUTION IN CASE OF OTHER SECURITIES. In case any Other Securities
shall be issued or sold or shall become subject to issue or sale upon the
conversion or exchange of any stock (or Other Securities) of the Company (or any
issuer of Other Securities or any other Person referred to in Section 4) or to
subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such


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as to dilute, on a basis consistent with the standards established in the other
provisions of this Section 3, the purchase rights, if any, with respect to such
Other Securities, granted by this Warrant, then, and in each such case, the
computations, adjustments and readjustments provided for in this Section 3 with
respect to the Purchase Price shall be made as nearly as possible in the manner
so provided and applied to determine the amount of Other Securities from time to
time receivable upon the exercise of the Warrants, so as to protect the holders
of the Warrants against the effect of such dilution.

         3.8. DE MINIMIS ADJUSTMENTS. If the amount of any adjustment of the
Purchase Price required pursuant to this Section 3 would be less than one tenth
(1/10) of one percent (1%) of the Purchase Price in effect at the time such
adjustment is otherwise so required to be made, such amount shall be carried
forward and adjustment with respect thereto made at the time of and together
with any subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate a change in the Purchase
Price of at least one tenth (1/10) of one percent (1%) of such Purchase Price.
All calculations under this Warrant shall be made to the nearest one-hundredth
of a share.

         3.9. ABANDONED DIVIDEND OR DISTRIBUTION. If the Company shall take a
record of the holders of its Common Shares for the purpose of entitling them to
receive a dividend or other distribution (which results in an adjustment to the
Purchase Price under the terms of this Warrant) and shall, thereafter, and
before such dividend or distribution is paid or delivered to shareholders
entitled thereto, legally abandon its plan to pay or deliver such dividend or
distribution, then any adjustment made to the Purchase Price by reason of the
taking of such record shall be reversed, and any subsequent adjustments, based
thereon, shall be recomputed.

         3.10. SHAREHOLDER RIGHTS PLAN. Notwithstanding the foregoing, in the
event that the Company shall distribute "poison pill" rights pursuant to a
"poison pill" shareholder rights plan (the "Rights"), the Company shall, in lieu
of making any adjustment pursuant to Section 3.2.1 or Section 3.2.2 hereof, make
proper provision so that each Holder who exercises a Warrant after the record
date for such distribution and prior to the expiration or redemption of the
Rights shall be entitled to receive upon such exercise, in addition to the
Common Shares issuable upon such exercise, a number of Rights to be determined
as follows: (i) if such exercise occurs on or prior to the date for the
distribution to the holders of Rights of separate certificates evidencing such
Rights (the "Distribution Date"), the same number of Rights to which a holder of
a number of Common Shares equal to the number of Common Shares issuable upon
such exercise at the time of such exercise would be entitled in accordance with
the terms and provisions of and applicable to the Rights; and (ii) if such
exercise occurs after the Distribution Date, the same number of Rights to which
a holder of the number of shares into which the Warrant so exercised was
exercisable immediately prior to the Distribution Date would have been entitled
on the Distribution Date in accordance with the terms and provisions of and
applicable to the Rights.

         4. CONSOLIDATION, MERGER, ETC.

         4.1. ADJUSTMENTS FOR CONSOLIDATION, MERGER, SALE OF ASSETS,
REORGANIZATION, ETC. In case the Company after the date hereof (a) shall
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation of such consolidation or merger,


                                       11
<PAGE>   13

or (b) shall permit any other Person to consolidate with or merge into the
Company and the Company shall be the continuing or surviving Person but, in
connection with such consolidation or merger, the Common Shares or Other
Securities shall be changed into or exchanged for stock or other securities of
any other Person or cash or any other property, or (c) shall transfer all or
substantially all of its properties or assets to any other Person, then, and in
the case of each such transaction, proper provision shall be made so that, upon
the basis and the terms and in the manner provided in this Warrant, the Holder
of this Warrant, upon the exercise hereof at any time prior to and subject to
the consummation of such transaction, shall be entitled to receive (at the
aggregate Purchase Price in effect at the time of such consummation for all
Common Shares or Other Securities issuable upon such exercise immediately prior
to such consummation), in lieu of the Common Shares or Other Securities issuable
upon such exercise prior to such consummation, the highest amount of securities,
cash or other property to which such Holder would actually have been entitled as
a shareholder upon such consummation, PROVIDED that if a purchase, tender or
exchange offer shall have been made to and accepted by the holders of more than
50% of the outstanding Common Shares, and if the Holder so designates in a
notice given to the Company on or before the date immediately preceding the date
of the consummation of such transaction, the Holder of this Warrant shall be
entitled to receive the highest amount of securities, cash or other property to
which it would actually have been entitled as a shareholder if the Holder of
this Warrant exercises this Warrant prior to the expiration of such purchase,
tender or exchange offer and accepted such offer. Unless exercised prior
thereto, this Warrant shall terminate upon consummation of any transaction
described in clauses (a) through (c) of this Section 4.1. Nothing in this
Section 4 shall be deemed to authorize the Company to enter into any transaction
not otherwise permitted by the Loan Agreement.

         5. NO DILUTION OR IMPAIRMENT. The Company shall not, by amendment of
its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the Holder of
this Warrant against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) shall not permit the par value of
any shares of stock receivable upon the exercise of this Warrant to exceed the
amount payable therefor upon such exercise, (b) shall take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of stock, free from all liens,
security interests, encumbrances (in each of the foregoing cases, other than
those imposed by the Holder), taxes, preemptive rights and charges on the
exercise of the Warrants from time to time outstanding, and (c) shall not take
any action which results in any adjustment of the Purchase Price if the total
number of Common Shares (or Other Securities) issuable after the action upon the
exercise of all of the Warrants would exceed the total number of Common Shares
(or Other Securities) then authorized by the Company's certificate of
incorporation and available for the purpose of issue upon such exercise.

         6. ACCOUNTANTS' REPORT. In each case of any adjustment or readjustment
in the number of Common Shares (or Other Securities) issuable upon the exercise
of this Warrant or in the Purchase Price, the Company at its sole expense shall
promptly compute


                                       12
<PAGE>   14

such adjustment or readjustment in accordance with the terms of this Warrant and
cause independent certified public accountants of recognized national standing
(which may be the regular auditors of the Company) selected by the Company to
verify such computation (other than any computation of the Fair Value of
property) and prepare a report setting forth such adjustment or readjustment and
showing in reasonable detail the method of calculation thereof and the facts
upon which such adjustment or readjustment is based, including a statement of
(a) the consideration received or to be received by the Company for any
Additional Common Shares issued or sold or deemed to have been issued, (b) the
number of Common Shares outstanding or deemed to be outstanding, and (c) the
Purchase Price in effect immediately prior to such issue or sale and as adjusted
and readjusted (if required by Section 3) on account thereof. The Company shall
forthwith mail a copy of each such report to each holder of a Warrant. The
Company shall also keep copies of all such reports at its principal office and
shall cause the same to be available for inspection at such office during normal
business hours by any holder of a Warrant or any prospective purchaser of a
Warrant designated by the holder thereof.

         7. NOTICES OF CORPORATE ACTION. In the event of:

         (a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or

         (b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any consolidation or
merger involving the Company and any other Person, any transaction or series of
transactions in which more than 50% of the voting securities of the Company are
transferred to another Person, or any transfer, sale or other disposition of all
or substantially all the assets of the Company to any other Person, or

         (c) any voluntary or involuntary dissolution, liquidation or winding-up
of the Company,

the Company shall mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, sale, disposition, dissolution, liquidation or winding-up is to take
place and the time, if any such time is to be fixed, as of which the holders of
record of Common Shares (or Other Securities) shall be entitled to exchange
their Common Shares (or Other Securities) for the securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
consolidation, merger, transfer, dissolution, liquidation or winding-up. Such
notice shall be mailed at least 20 days prior to the date therein specified.

         8. REGISTRATION OF COMMON SHARES. If any Common Shares required to be
reserved for purposes of exercise of this Warrant require registration with or
approval of any governmental authority under any federal or state law (other
than the Securities Act) before such shares may be issued upon exercise, the
Company shall, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered or


                                       13
<PAGE>   15

approved, as the case may be, PROVIDED, that the Company shall not be obligated
to make any filing in any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in order to effect
such registration or approval unless the Company is already subject to service
in such jurisdiction in the reasonable opinion of the Company's counsel. At any
such time as Common Shares is listed on any national securities exchange, the
Company shall, at its expense, obtain promptly and maintain the approval for
listing on each such exchange, upon official notice of issuance, the Common
Shares issuable upon exercise of the then outstanding Warrants and maintain the
listing of such shares after their issuance; and the Company shall also list on
such national securities exchange, shall register under the Exchange Act and
shall maintain such listing of, any Other Securities that at any time are
issuable upon exercise of the Warrants, if and at the time that any securities
of the same class shall be listed on such national securities exchange by the
Company.

         9. RESTRICTIONS ON TRANSFER.

         9.1. RESTRICTIVE LEGENDS. Except as otherwise permitted by this Section
9, each Warrant (including each Warrant issued upon the transfer of any Warrant)
shall be stamped or otherwise imprinted with a legend in substantially the
following form:

         "THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS
     WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
     AMENDED, OR THE SECURITIES LAW OF ANY STATE, AND MAY NOT BE SOLD,
     TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
     REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS
     OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF
     SUCH ACT AND SUCH LAWS. THIS WARRANT AND SUCH SECURITIES MAY NOT BE SOLD,
     TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE
     CONDITIONS SPECIFIED IN THIS WARRANT.

Except as otherwise permitted by this Section 9, each certificate for Common
Shares (or Other Securities) issued upon the exercise of any Warrant, and each
certificate issued upon the transfer of any such Common Shares (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:

         "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
     REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
     LAW OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
     EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
     APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO
     THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. SUCH SECURITIES
     MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE
     WITH THE CONDITIONS SPECIFIED IN THE COMMON SHARE PURCHASE WARRANT ISSUED
     BY FRONTSTEP, INC.,


                                       14
<PAGE>   16

     PURSUANT TO THE LOAN AND SECURITY AGREEMENT DATED AS OF JULY __, 2000 AMONG
     THE COMPANY, CERTAIN SUBSIDIARIES OF THE COMPANY, THE LENDERS PARTY THERETO
     AND FOOTHILL CAPITAL CORPORATION, AS ARRANGER AND ADMINISTRATIVE AGENT, A
     COMPLETE AND CORRECT COPY OF EACH OF WHICH IS AVAILABLE FOR INSPECTION AT
     THE COMPANY'S PRINCIPAL OFFICE AND WILL BE FURNISHED TO THE HOLDER OF SUCH
     SECURITIES UPON WRITTEN REQUEST AND WITHOUT CHARGE."

         9.2. TRANSFER TO COMPLY WITH THE SECURITIES ACT. Restricted Securities
may not be sold, assigned, pledged, hypothecated, encumbered or in any manner
transferred or disposed of (a "Transfer"), in whole or in part, except in
compliance with the provisions of the Securities Act and state securities or
Blue Sky laws and the terms and conditions hereof.

         9.3. NOTICE OF TRANSFER. Each Holder shall, prior to any Transfer of
any Warrants, give written notice to the Company of such Holder's intention to
Transfer.

         9.4. TERMINATION OF RESTRICTIONS. The restrictions imposed by this
Section 9 on the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities (a) when a registration
statement with respect to the sale of such securities shall have been declared
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement and applicable state
securities and blue sky laws, (b) when such securities are sold pursuant to Rule
144 (or any similar provision then in force) under the Securities Act and
applicable state securities and blue sky laws, or (c) when, in the reasonable
opinion of both counsel for the Holder and counsel for the Company, such
restrictions are no longer required or necessary in order to protect the Company
against a violation of the Securities Act or applicable state securities and
blue sky laws upon any sale or other disposition of such securities without
registration thereunder. Whenever such restrictions shall cease and terminate as
to any Restricted Securities, the Holder shall be entitled to receive from the
Company, without expense, new securities of like tenor not bearing the
applicable legends required by Section 9.1.

         9.5. EXEMPT TRANSFERS. The restrictions on the transfer of this Warrant
or the Warrant Shares set forth in this Section 9 shall not apply to any
transfer made in compliance with applicable state and federal securities laws.

         10. RESERVED.

         11. RESERVATION OF STOCK, ETC. The Company shall at all times reserve
and keep available, solely for issuance and delivery upon exercise of this
Warrant, the number of Common Shares (or Other Securities) from time to time
issuable upon exercise of this Warrant. All Common Shares (or Other Securities)
issuable upon exercise of any Warrant shall be duly authorized and, when issued
upon such exercise, shall be validly issued and, in the case of shares, fully
paid and nonassessable, with no liability on the part of the holders thereof,
and, in the case of all securities, shall be free from all liens, security
interests, encumbrances (in each of the foregoing cases, other than those
imposed by the Holder), taxes, preemptive rights and charges. The transfer agent
for the Common Shares, and every subsequent Transfer Agent for


                                       15
<PAGE>   17

any shares of the Company's capital stock issuable upon the exercise of any of
the purchase rights represented by this Warrant, are hereby irrevocably
authorized and directed at all times until the Expiration Date to reserve such
number of authorized and unissued shares as shall be requisite for such purpose.
The Company shall keep copies of this Warrant on file with the Transfer Agent
for the Common Shares and with every subsequent Transfer Agent for any shares of
the Company's capital stock issuable upon the exercise of the rights of purchase
represented by this Warrant. The Company shall supply such Transfer Agent with
duly executed stock certificates for such purpose. All Warrant Certificates
surrendered upon the exercise of the rights thereby evidenced shall be canceled,
and such canceled Warrants shall constitute sufficient evidence of the number of
shares of stock which have been issued upon the exercise of such Warrants.
Subsequent to the Expiration Date, no shares of stock need be reserved in
respect of any unexercised Warrant.

         12. REGISTRATION AND TRANSFER OF WARRANTS, ETC.

         12.1. WARRANT REGISTER; OWNERSHIP OF WARRANTS. Each Warrant issued by
the Company shall be numbered and shall be registered in a warrant register (the
"Warrant Register") as it is issued and transferred, which Warrant Register
shall be maintained by the Company at its principal office or, at the Company's
election and expense, by a Warrant Agent or the Transfer Agent. The Company
shall be entitled to treat the registered Holder of any Warrant on the Warrant
Register as the owner in fact thereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in such Warrant on the
part of any other Person, and shall not be affected by any notice to the
contrary, except that, if and when any Warrant is properly assigned in blank,
the Company may (but shall not be obligated to) treat the bearer thereof as the
owner of such Warrant for all purposes. Subject to Section 9, a Warrant, if
properly assigned, may be exercised by a new holder without a new Warrant first
having been issued.

         12.2. TRANSFER OF WARRANTS. Subject to compliance with Section 9, if
applicable, this Warrant and all rights hereunder are transferable in whole or
in part, without charge to the Holder hereof, upon surrender of this Warrant
with a properly executed Form of Assignment attached hereto as Exhibit B at the
principal office of the Company. Upon any partial transfer, the Company shall at
its expense issue and deliver to the Holder a new Warrant of like tenor, in the
name of the Holder, which shall be exercisable for such number of Common Shares
with respect to which rights under this Warrant were not so transferred. Prior
to effecting any transfer of this Warrant or any part hereof, each prospective
transferee shall represent in writing to the Company that:

                  (i) such transferee is acquiring the Warrant hereunder for its
     own account, without a view to the distribution thereof;

                  (ii) such transferee is an "accredited investor" within the
     meaning of Regulation D under the Securities Act and was not organized for
     the specific purpose of acquiring the Warrant or the Warrant Shares.

                  (iii) such transferee has sufficient knowledge and experience
     in investing in companies similar to the Company so as to be able to
     evaluate the risks and

                                       16
<PAGE>   18

     merits of its investment in the transferee and is able financially to bear
     the risks thereof; and

                  (iv) if applicable, such transferee understands that (i) this
     Warrant and the Warrant Shares have not been registered under the
     Securities Act in reliance upon an exemption from the registration
     requirements of the Securities Act pursuant to Section 4(2) thereof or Rule
     506 promulgated under such act and under applicable state securities laws,
     (ii) this Warrant and the Warrant Shares must be held indefinitely unless a
     subsequent disposition thereof is registered under the Securities Act and
     under applicable state securities laws or is exempt from such registration,
     (iii) this Warrant and the Warrant Shares will bear a legend to such
     effect, and (iv) the Company will make a notation on its transfer books to
     such effect.

         12.3. REPLACEMENT OF WARRANTS. On receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction of this Warrant, on delivery of an indemnity agreement reasonably
satisfactory in form and amount to the Company or, in the case of any such
mutilation, on surrender of such Warrant to the Company at its principal office
and cancellation thereof, the Company at its expense shall execute and deliver,
in lieu thereof, a new Warrant of like tenor.

         12.4. ADJUSTMENTS TO PURCHASE PRICE AND NUMBER OF SHARES.
Notwithstanding any adjustment in the Purchase Price or in the number or kind of
Common Shares purchasable upon exercise of this Warrant, any Warrant theretofore
or thereafter issued may continue to express the same number and kind of Common
Shares as are stated in this Warrant, as initially issued.

         12.5. FRACTIONAL SHARES. Notwithstanding any adjustment pursuant to
Section 3 in the number of Common Shares covered by this Warrant or any other
provision of this Warrant, the Company shall not be required to issue fractions
of shares upon exercise of this Warrant or to distribute certificates which
evidence fractional shares. In lieu of fractional shares, the Company shall make
payment to the Holder, at the time of exercise of this Warrant as herein
provided, in an amount in cash equal to such fraction multiplied by the Current
Market Price of a Common Share on the date of Warrant exercise.

         13. REMEDIES; SPECIFIC PERFORMANCE. The Company stipulates that there
would be no adequate remedy at law to the Holder of this Warrant in the event of
any default or threatened default by the Company in the performance of or
compliance with any of the terms of this Warrant and accordingly, the Company
agrees that, in addition to any other remedy to which the Holder may be entitled
at law or in equity, the Holder shall be entitled to seek to compel specific
performance of the obligations of the Company under this Warrant, without the
posting of any bond, in accordance with the terms and conditions of this Warrant
in any court of the United States or any State thereof having jurisdiction, and
if any action should be brought in equity to enforce any of the provisions of
this Warrant, the Company shall not raise the defense that there is an adequate
remedy at law. Except as otherwise provided by law, a delay or omission by the
Holder hereto in exercising any right or remedy accruing upon any such breach
shall not impair the right or remedy or constitute a waiver of or acquiescence
in any such


                                       17
<PAGE>   19

breach. No remedy shall be exclusive of any other remedy. All available remedies
shall be cumulative.

         14. NO RIGHTS OR LIABILITIES AS SHAREHOLDER. Nothing contained in this
Warrant shall be construed as conferring upon the Holder hereof any rights as a
shareholder of the Company or as imposing any obligation on the Holder to
purchase any securities or as imposing any liabilities on the Holder as a
shareholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.

         15. NOTICES. All notices and other communications (and deliveries)
provided for or permitted hereunder shall be made in writing by hand delivery,
telecopier, any nationally-recognized courier guaranteeing overnight delivery or
first class registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:

If to the Company:                   Frontstep, Inc.
                                     2800 Corporate Exchange Drive
                                     Columbus, Ohio 43231
                                     Attn:  Daniel P. Buettin
                                     Fax No.  614-895-2504

with copies to:                      Vorys, Sater Seymour & Pease LLP
                                     52 East Gay Street
                                     Columbus, Ohio 43231
                                     Attn: Ivery D. Foreman, Esq.
                                     Fax No. 614-464-6350

If to Holder:                        Foothill Capital Corporation
                                     2450 Colorado Avenue
                                     Suite 3000 West
                                     Santa Monica, CA 90404
                                     Attn:  Business Finance Division Manager
                                     Fax No. 310-453-7443

with copies to:                      Schulte Roth & Zabel LLP
                                     919 Third Avenue
                                     New York, New York 10022
                                     Attn:  Frederic L. Ragucci, Esq.
                                     Fax No. (212) 593-5955

                  All such notices and communications (and deliveries) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; when receipt is acknowledged, if telecopied; on the next Business
Day, if timely delivered to a courier guaranteeing overnight delivery; and five
days after being deposited in the mail, if sent first class or certified mail,
return receipt requested, postage prepaid; PROVIDED, that the exercise of any
Warrant shall be effective in the manner provided in Section 2.


                                       18
<PAGE>   20


         16. AMENDMENTS. This Warrant and any term hereof may not be amended,
modified, supplemented or terminated, and waivers or consents to departures from
the provisions hereof may not be given, except by written instrument duly
executed by the party against which enforcement of such amendment, modification,
supplement, termination or consent to departure is sought.

         17. DESCRIPTIVE HEADINGS, ETC. The headings in this Warrant are for
convenience of reference only and shall not limit or otherwise affect the
meaning of terms contained herein. Unless the context of this Warrant otherwise
requires: (1) words of any gender shall be deemed to include each other gender;
(2) words using the singular or plural number shall also include the plural or
singular number, respectively; (3) the words "hereof", "herein" and "hereunder"
and words of similar import when used in this Warrant shall refer to this
Warrant as a whole and not to any particular provision of this Warrant, and
Section and paragraph references are to the Sections and paragraphs of this
Warrant unless otherwise specified; (4) the word "including" and words of
similar import when used in this Warrant shall mean "including, without
limitation," unless otherwise specified; (5) "or" is not exclusive; and (6)
provisions apply to successive events and transactions.

         18. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the law of the State of New York.

         19. REGISTRATION RIGHTS AGREEMENT. The Common Shares (and Other
Securities) issuable upon exercise of this Warrant (or upon conversion of any
Common Shares issued upon such exercise) shall constitute Registrable Securities
(as such term is defined in the Registration Rights Agreement). Each holder of
this Warrant shall be entitled to all of the benefits afforded to a Holder of
any such Registrable Securities under the Registration Rights Agreement and such
Holder, by its acceptance of this Warrant, agrees to be bound by and to comply
with the terms and conditions of the Registration Rights Agreement applicable to
such holder as a Holder of such Registrable Securities.

         20. EXPIRATION. The right to exercise this Warrant shall expire at 5:00
p.m., New York City time, on July 17, 2006.

         21. COSTS AND ATTORNEYS' FEES. In the event that any action, suit or
other proceeding is instituted concerning or arising out of this Warrant, the
Company agrees and the Holder, by taking and holding this Warrant agrees, that
the prevailing party shall recover from the non-prevailing party all of such
prevailing party's costs and reasonable attorneys' fees incurred in each and
every such action, suit or other proceeding, including any and all appeals or
petitions therefrom.

         22. MOST FAVORED HOLDER. So long as the Loan Agreement or any extension
thereof remains in effect or any Obligations thereunder remain unpaid, the
Company agrees that if at any time or from time to time after the date hereof
and prior to the Expiration Date it enters into any agreement with, or issues
Options or Convertible Securities to, any Person other than a Holder of this
Warrant, which provides such Person with more favorable terms of the type set
forth in Sections 3, 4, 5 and 6 of this Warrant, then the Company shall issue to
the Holder a new Warrant in exchange for this Warrant, which shall contain such
terms, effective


                                       19
<PAGE>   21

from the date such agreement is consummated or Option or Convertible Security is
issued until the Expiration Date. Notwithstanding the foregoing, no additional
rights of any or all of the Holders by reason of this provision shall be created
or triggered by the existence and/or exercise of any rights of the holders of
the Company's presently outstanding preferred shares and/or warrants which arise
under the Investors' Rights Agreement dated May 10, 2000 among the Company,
Morgan Stanley Dean Witter Venture Partners IV, L.P. and the other investors
identified on the signature pages thereto (the "Rights Agreement"), or which
inure solely to the benefit of such investors in the Amended Articles of
Incorporation, as amended, of the Company, the Regulations, as amended, of the
Company and the terms and provisions of such outstanding warrants solely to the
extent provided under such Rights Agreement, Articles, Regulations and warrants
as of the date hereof.

         23. LIMITATION ON NUMBER OF WARRANT SHARES. The Company shall not be
obligated to issue Warrant Shares upon exercise of this Warrant only to the
extent that the issuance of such Common Shares would cause the Company to exceed
that number of Common Shares which the Company may issue upon exercise of this
Warrant (the "Exchange Cap") without breaching the Company's obligations under
the rules or regulations of the Commission, the NASDAQ Stock Market, Inc. or any
other national securities exchange or automated quotation system that regulates
the Company, except that such limitation shall not apply in the event that the
Company (a) obtains the approval of its stockholders as required by the
Principal Market (or any successor rule or regulation) for issuances of Common
Shares in excess of such amount or (b) obtains a written opinion from outside
counsel to the Company that such approval is not required, which opinion shall
be reasonably satisfactory to the holder of this Warrant. Until such approval or
written opinion is obtained, the holder of this Warrant shall not be issued,
upon exercise of this Warrant, Warrant Shares in an amount greater than the
number that may be issued without such approval or written opinion. The Company
shall use its reasonable best efforts to obtain the required stockholder
approval of such issuance at its next stockholders meeting after determining
that it is subject to the Exchange Cap. The Company shall continue to comply
with the shareholder approval requirements under the NASDAQ Stock Market, Inc.
rules in connection with the issuance of Common Shares under this Warrant during
the term of this Warrant even if the Common Shares are no longer listed on the
NASDAQ automated quotation system.

         24. REDEMPTION. In the event the Company is prohibited from issuing
additional Warrant Shares as required under the adjustment provisions contained
in Section 3 hereof, then, at any time prior to submitting the matter to
shareholders of the Company for their approval, upon the written request of the
Holder, the Company shall redeem for cash those Warrant Shares which can not be
issued, at a price equal to the excess, if any, of the Market Price of the
Common Shares above the Exercise Price of such Warrant Shares as of the date of
the attempted exercise.


                                       20
<PAGE>   22


                25. LIMITATION ON EXERCISE. Notwithstanding any provision to the
contrary contained herein, in no event shall the Holder be entitled to exercise
this Warrant, nor will the Company recognize such exercise, such that upon
giving effect to such exercise, the aggregate number of Common Shares then
beneficially owned by the Holder and its "affiliates" as defined in Rule 144 of
the Securities Act would exceed 4.99% of the total issued and outstanding shares
of the Common Shares following such exercise; PROVIDED, HOWEVER, that Holder may
elect to waive this restriction upon not less than sixty-one (61) days prior
written notice to the Company. For purposes of this Section, beneficial
ownership shall be calculated in accordance with Section 13(d) of the Exchange
Act.

                                      FRONTSTEP, INC.


                                      By:  /S/ DANIEL P. BUETTIN
                                           ------------------------------------
                                      Title: VICE PRESIDENT & CFO
                                             ----------------------------------




                                       21

<PAGE>   23



                                                  EXHIBIT A to
                                                  COMMON SHARES PURCHASE WARRANT



                                     FORM OF
                           ELECTION TO PURCHASE SHARES

                  The undersigned hereby irrevocably elects to exercise the
Warrant to purchase ____ common shares, no par value ("Common Shares"), of
FRONTSTEP, INC. and hereby makes payment of $________ therefor [or] makes
payment therefor by application pursuant to Section 2.1(b)(ii) of the Warrant of
$_______ aggregate principal amount and accrued interest thereon of the
then-outstanding Obligations (as provided in Section 2.4(b) in the Loan
Agreement) [or] makes payment by reduction pursuant to Section 2.1(b)(iii) of
the Warrant of the number of Common Shares otherwise issuable to the Holder upon
Warrant exercise by ___ shares [or] makes payment therefor by delivery of the
following Common Shares Certificates of the Company (properly endorsed for
transfer in blank) for cancellation by the Company pursuant to Section
2.1(b)(iv) of the Warrant, certificates of which are attached hereto for
cancellation ______________________________ [list certificates by number and
amount]. The undersigned hereby requests that certificates for such shares be
issued and delivered as follows:

ISSUE TO:
         -----------------------------------------------------------------------
                                     (NAME)

--------------------------------------------------------------------------------
                          (ADDRESS, INCLUDING ZIP CODE)

--------------------------------------------------------------------------------
                  (SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)

DELIVER TO:
           ---------------------------------------------------------------------
                                     (NAME)

--------------------------------------------------------------------------------
                          (ADDRESS, INCLUDING ZIP CODE)

                  If the number of Common Shares purchased (and/or reduced)
hereby is less than the number of Common Shares covered by the Warrant, the
undersigned requests that a new Warrant representing the number of Common Shares
not so purchased (or reduced) be issued and delivered as follows:

ISSUE TO:
         -----------------------------------------------------------------------
                                  (NAME OF HOLDER

--------------------------------------------------------------------------------
                          (ADDRESS, INCLUDING ZIP CODE)

DELIVER TO:
           ---------------------------------------------------------------------
                                (NAME OF HOLDER)

--------------------------------------------------------------------------------
                          (ADDRESS, INCLUDING ZIP CODE)

Dated: _____________, 20__                           [NAME OF HOLDER]

                                            By
                                              --------------------------------
                                               Name:
                                               Title:




                                       22
<PAGE>   24



                                                  EXHIBIT B to
                                                  COMMON SHARES PURCHASE WARRANT



                               FORM OF ASSIGNMENT

                  FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the Assignee named below all of the rights of the undersigned to
purchase Common Shares, no par value ("Common Shares") of FRONTSTEP, INC.
represented by the Warrant, with respect to the number of Common Shares set
forth below:


NAME OF ASSIGNEE                 ADDRESS                       NO. OF SHARES
----------------                 -------                       -------------




and does hereby irrevocably constitute and appoint ________ Attorney to make
such transfer on the books of maintained for that purpose, with full power of
substitution in the premises.

Dated: _______________, 20__                           NAME OF HOLDER

                                                       By
                                                          ---------------------
                                                          Name:
                                                          Title: