<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 16, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SYSTEM SOFTWARE ASSOCIATES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 36-3144515
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
500 WEST MADISON STREET, 32ND FLOOR
CHICAGO, ILLINOIS 60661
(312) 641-2900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MR. JOSEPH J. SKADRA
CHIEF FINANCIAL OFFICER
SYSTEM SOFTWARE ASSOCIATES, INC.
500 WEST MADISON STREET, 32ND FLOOR
CHICAGO, ILLINOIS 60661
(312) 641-2900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
WILLIAM E. DORAN, ESQ.
SACHNOFF & WEAVER, LTD.
30 SOUTH WACKER DRIVE, 29TH FLOOR
CHICAGO, ILLINOIS 60606
(312) 207-1000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filer pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
AMOUNT MAXIMUM AGGREGATE AMOUNT OF
TITLE OF SHARES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
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<S> <C> <C> <C> <C>
Common Stock, $.0033 par
value(3)............... 3,603,603 $14.41 $51,927,919 $15,736
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</TABLE>
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(1) In accordance with Rule 416 under the Securities Act of 1933, Common Stock
offered hereby shall also be deemed to cover additional securities to be
offered or issued to prevent dilution resulting from stock splits, stock
dividends or similar transactions.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rules 457(g) and 457(c), based on the average
of the high and low reported price of the Company's Common Stock on
September 9, 1997.
(3) Includes certain stock purchase rights issued pursuant to a Rights
Agreement.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED SEPTEMBER 15, 1997
3,603,603 SHARES
SYSTEM SOFTWARE ASSOCIATES, INC.
COMMON STOCK
$.0033 PAR VALUE
All of the shares of the Common Stock, par value $0.0033 per share (the
"Common Stock"), of System Software Associates, Inc., a Delaware corporation
("SSA" or the "Company"), offered hereby (the "Shares") are issuable by the
Company upon the conversion of a convertible subordinated promissory note (the
"Note"). All of the Shares are being offered by the noteholder who is named
herein under "Selling Stockholder" or by pledgees, donees, transferees or other
successors in interest and permitted assigns of such selling stockholder (the
"Selling Stockholder"). The Company will not receive any of the proceeds from
the sale of the Shares; however, in consideration of issuing the Note, the
Company received $12,000,000 which was used for working capital and other
general corporate purposes.
The Company has not made any underwriting arrangements with respect to the
Shares. SSA's Common Stock is quoted on the Nasdaq National Market under the
symbol SSAX. On September 12, 1997, the last sale price reported was $15.625.
This Prospectus is to be used in connection with the sale of the Shares from
time to time by the Selling Stockholder. The Shares may be sold from time to
time by the Selling Stockholder, directly or through underwriters, dealers or
agents, in market transactions, including block trades or ordinary brokers
transactions or in privately-negotiated transactions. The price at which any of
the Shares may be sold, and the commissions, if any, paid in connection with
any sale, may be privately negotiated, may be based on then prevailing market
prices and may vary from transaction to transaction and as a result are not
currently known. This Prospectus may be used by the Selling Stockholder or by
any broker-dealer who may participate in sales of securities covered hereby.
See "Plan of Distribution and Offering Price."
The Company will pay certain of the legal and other expenses of this offering
(estimated to be $32,000), except that the Selling Stockholder will bear the
cost of any brokerage commissions or discounts incurred in connection with the
sale of its Shares. The Company has agreed to indemnify the Selling Stockholder
against certain liabilities, including liabilities arising under the Securities
Act. See "Plan of Distribution and Offering Price."
-----------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
(SEE "RISK FACTORS" BEGINNING ON PAGE 2.)
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-----------
The date of this Prospectus is , 1997.
<PAGE>
No dealer, salesperson or other person has been authorized to give any
information or to make any representations not contained, or incorporated by
reference, in this Prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized by the
Company or the Selling Stockholder. This Prospectus does not constitute an
offer to sell or the solicitation of any offer to buy any of the securities
offered hereby in any jurisdiction to any person to whom it is unlawful to
make such offer in such jurisdiction. Neither the delivery of this Prospectus
nor any sale made hereunder shall, under any circumstances, create any
implication that the information herein is correct as of any time subsequent
to the date hereof or that there has been no change in the affairs of the
Company since such date.
Unless otherwise indicated, all information in this Prospectus assumes that
the noteholder has converted the entire Note into Shares.
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be carefully considered in evaluating an investment in the
Shares offered by this Prospectus:
NET LOSSES; UNCERTAINTY OF FUTURE RESULTS; POTENTIAL FUTURE CHARGES
Although the Company had net income for the quarter ended July 31, 1997, the
Company has experienced operating and net losses in 1996 and a net loss in the
nine months ended July 31, 1997. There can be no assurance that the Company
will not continue to incur operating and net losses. The Company's future
operating results will depend upon a number of business factors, including the
other factors discussed in these "Risk Factors," as well as general economic
conditions. Furthermore, prior to a given year or other fiscal period, the
Company hires sales and product development personnel and makes other fixed
cost decisions which will result in increased expenses in such year or other
period, based upon anticipated revenues for such year or other period. Due to
the seasonality and concentration of the Company's revenues at the end of
fiscal periods (particularly the fourth quarter) and the Company's cost
structure, if revenue targets are not met, any or all of the Company's
business, operating results and financial condition could be materially
adversely affected. See "--Variability of Quarterly Operating Results;
Seasonality." Since the initial release of version 6.0 of the Company's BPCS
Client/Server software product, the Company has performed services for certain
early adopter clients for which it has not been compensated (or has been only
partially compensated) in order to insure such clients' successful
implementation of BPCS Client/Server. In addition, in connection with certain
implementations, the Company has experienced delays in payments of license
fees owed and, in certain circumstances, has incurred settlement costs. The
Company has established reserves related to warranty services and accounts
receivable which the Company believes are adequate at present. The Company
periodically reviews the adequacy of these reserves in light of its experience
and, as such, may adjust the level of these and other reserves in the fourth
quarter of 1997 and in future quarters. Charges related to increases in
reserves could have a material adverse affect on the results of operations of
the Company for the quarter in which they are taken.
In connection with its recent prepayment of its multi-bank credit facility
("Credit Facility") and its Senior Secured Notes due November 1, 1997 (the
"Senior Notes"), the Company will be required to write off certain deferred
charges and pay certain fees related to the Existing Credit Facility and the
Senior Notes, which will result in a charge in the fourth quarter of 1997 of
approximately $2.0 million. Additionally, the Company believes that it may
have to pay Bain Capital, Inc. ("Bain") a "break-up" fee of up to $3.0 million
and reimburse Bain for Bain's expenses, limited to $250,000, in connection
with a private offering with which the Company elected not to proceed. See "--
Legal Proceedings."
LEVERAGE
Assuming the closing of the Company's recently completed public convertible
note offering (the "Public Offering"), and the application of the net proceeds
from the Public Offering, on a pro forma basis as of July 31, 1997, the ratio
of the Company's total debt to equity (including the Series A Preferred Stock
outstanding as
2
<PAGE>
equity) (expressed as a percentage) would have been 110%. Annual dividends on
the Company's newly issued Series A Preferred Stock will be $1.2 million.
Annual interest expense on the convertible notes issued in the Public Offering
(the "Public Notes") will be $9.7 million. Approximately $3.1 million in
Senior Indebtedness will remain outstanding immediately following the Public
Offering.
The degree to which the Company is leveraged could (i) adversely affect its
ability to obtain additional financing, (ii) make it more vulnerable to
general economic and market conditions, industry downturns and competitive
pressures, (iii) impair its ability to fund research and development and
respond to technological changes, and (iv) result in the dedication of a
significant amount of any cash generated from operating activities to the
payment of debt service and other financing obligations, thereby reducing
funds available for operations, its existing markets and future business
opportunities. The Company's ability to meet its debt service and other
obligations will be dependent on the Company's future performance, which will
be subject to financial, business and other factors affecting operations of
the Company, many of which are beyond its control.
COMPETITION
The enterprise resource planning ("ERP") application software market is
highly competitive, rapidly changing and significantly affected by new product
introductions and other market activities of industry participants. The
Company's BPCS Client/Server product line is targeted at both the market for
open systems, client/server ERP software solutions and the IBM AS/400 ERP
market. The Company's current and prospective competitors offer a variety of
products and solutions to address these markets. The Company's primary
competition comes from a large number of independent software vendors and
other sources including (i) companies offering products that run on AS/400 and
other mid-range computers, including J.D. Edwards and JBA, and (ii) companies
offering products that run on UNIX-based systems in a client/server
environment such as Oracle Corporation ("Oracle"), Baan Company N.V. and SAP
AG. The Company also faces competition from a variety of other vendors of ERP
software, including QAD Inc. In addition, the Company faces indirect
competition from suppliers of custom-developed business application software
that have focused mainly on proprietary mainframe- and minicomputer-based
systems \with highly customized software, such as the systems consulting
groups of major accounting firms and systems integrators. The Company also
faces indirect competition from proprietary systems developed by the internal
MIS departments of large organizations.
Some of the Company's competitors have longer operating histories, greater
financial, technical, marketing and other resources than the Company, greater
name recognition, and a larger installed base of customers in the UNIX-based,
client/server ERP market. Further, because the Company's product runs on
relational database management systems ("RDBMS") and Oracle has the largest
market share for RDBMS software, Oracle may have a competitive advantage in
selling its application products to its RDBMS customer base. Furthermore, as
the client/server computing market develops, companies with significantly
greater resources than the Company could attempt to increase their presence in
the ERP market by acquiring or forming strategic alliances with competitors of
the Company.
In the market for client/server ERP systems, the Company and its customers
rely on a number of systems consulting and systems integration firms for
implementation and other customer support services, as well as recommendations
of the Company's product during the evaluation stage of the purchase process.
Many of these third parties have similar, and usually more established,
relationships with the Company's principal competitors. If the Company is
unable to develop and retain effective, long-term relationships with a
sufficient number of these third parties, the Company's competitive position
could be materially adversely affected. See "--New Entrant into Complex Sales
Environment."
The Company believes that its future strength will depend in part on its
ability to expand sales of the BPCS Client/Server product line. Many of the
Company's competitors currently offer applications products for client/server
systems. There can be no assurance that the Company will be able to compete
successfully with existing or new competitors or that competition will not
have a material adverse effect on the Company's business, operating results or
financial condition.
3
<PAGE>
VARIABILITY OF QUARTERLY OPERATING RESULTS; SEASONALITY
The Company's revenues and operating results have varied, sometimes
substantially, from quarter to quarter. The Company anticipates that its
revenues in general, and its license fee revenues, in particular, will
continue to fluctuate and will be relatively difficult to forecast due to a
number of reasons, many of which are beyond the Company's control. The factors
affecting these fluctuations include (i) delays in sales due to the relatively
long sales cycles for the Company's BPCS Client/Server product line; (ii) the
size, timing and complexity of individual license transactions; (iii) customer
order deferrals in anticipation of product enhancements or new product
offerings by the Company or its competitors; (iv) market acceptance of new or
enhanced versions of the Company's product and hardware platforms, operating
systems and RDBMS with which the Company's products operate; (v) the timing of
the introduction of new product functionality by the Company or its
competitors; (vi) customer cancellation of major planned software
implementation programs; (vii) changes in operating expenses; (viii) the
publication of opinions about the Company, its products and technology by
industry analysts; (ix) foreign currency exchange rate fluctuations; (x)
changes in pricing policies by the Company or its competitors; (xi) delays in
localizing the Company's product for new markets; and (xii) general economic
factors.
A significant portion of the Company's revenues in any quarter may be
derived from a limited number of large, non-recurring license sales which may
cause significant variations in quarterly license fees. The Company
also believes that the purchase of its product is relatively discretionary and
generally involves a significant commitment of a customer's capital resources.
Therefore, a downturn in any potential customer's business could result in
order cancellations which could have a significant adverse impact on the
Company's revenue and quarterly results. Moreover, declines in general
economic conditions could precipitate significant reductions in corporate
spending for information technology, which could result in delays or
cancellations of orders for the Company's product line.
The Company has experienced a seasonal pattern in its operating results,
with the fourth quarter typically having the highest revenues and operating
income. The Company believes that fourth quarter revenues are positively
impacted by the Company's sales compensation plans. This factor, which the
Company believes is common in the computer software industry, typically
results in first quarter revenues in any year being lower than revenues in the
immediately preceding fourth quarter. In addition, the Company's European
operations generally provide lower revenues during the summer months as a
result of the generally reduced economic activity in Europe during such time.
This seasonal factor could materially adversely affect third quarter revenues.
The Company has also historically recognized a substantial portion of its
revenues from sales booked and shipped in the last month of a quarter. As a
result, the magnitude of quarterly fluctuations in license fees may not become
evident until late in a particular quarter. If sales forecasted from a
specific customer for a particular quarter are not realized in that quarter,
the Company is unlikely to be able to generate revenues from alternate sources
in time to compensate for the shortfall. As a result, a lost or delayed sale
could have a material adverse effect on the Company's quarterly operating
results. To the extent that significant sales occur earlier than expected,
operating results for subsequent quarters may be adversely affected. The
Company has also historically operated with little backlog because its
products are generally shipped as orders are received. As a result, revenues
from license fees in any quarter are substantially dependent on orders booked
and shipped in that quarter.
Based upon the factors described above, the Company believes that its
quarterly revenues and operating results are likely to vary significantly in
the future, that period-to-period comparisons of its results of operations are
not necessarily meaningful and that, as a result, such comparisons should not
be relied upon as indications of future performance. Moreover, although the
Company's revenues have generally increased in recent periods, there can be no
assurance that the Company's revenues will grow in future periods, at past
rates or at all, or that the Company will be profitable on a quarterly or
annual basis. In future periods, the Company's operating results may be below
the expectations of stock market analysts and investors. In such event, the
price of the Common Stock could be materially adversely affected.
4
<PAGE>
RISKS ASSOCIATED WITH LENGTHY SALES CYCLE
Because the license of the Company's BPCS Client/Server product line
generally involves a significant capital commitment by the customer (ranging
from approximately $100,000 to tens of millions of dollars), the sales cycle
associated with a customer's purchase of BPCS Client/Server product line is
generally lengthy (with a typical duration between three and 18 months),
varies from customer to customer and is subject to a number of significant
risks over which the Company has little or no control. These risks include
customers' budgetary constraints, timing of budget cycle, concerns about the
introduction of new products by the Company or its competitors and general
economic downturns which can result in delays or cancellations of information
systems investments. Due in part to the strategic nature of the BPCS
Client/Server product line, potential customers are typically cautious in
making product acquisition decisions. The decision to license the BPCS
Client/Server product line generally requires the Company to provide a
significant level of education to prospective customers regarding the uses and
benefits of the BPCS Client/Server product line, and the Company must
frequently commit substantial resources to presales support. The Company is
also sometimes reliant on third parties for implementation and systems
integration services, which may cause sales cycles to be lengthened or result
in the loss of sales. The uncertain outcome of the Company's sales efforts and
the length of its sales cycles could result in substantial fluctuations in
operating results. If sales forecasted from a specific customer for a
particular quarter are not realized in that quarter, then the Company is
unlikely to be able to generate revenue from alternative sources in time to
compensate for the shortfall. As a result, and due to the relatively large
size of some orders, a lost or delayed sale could have a material adverse
effect on the Company's quarterly operating results.
LEGAL PROCEEDINGS
On August 20, 1997, the Company terminated its engagement of the prior
underwriter of the September 8th Offering, and concurrently elected not to
proceed with its private offering of securities to a group of private
investors led by Bain. On August 27, 1997, Bain filed a complaint in the
Superior Court of Massachusetts against the Company, Roger E. Covey and
Hambrecht & Quist LLC, one of the Representatives of the Underwriters in the
Public Offering. The complaint seeks damages from the Company in excess of
$117.5 million for alleged breach of contract, breach of the implied covenant
of good faith and fair dealing, misrepresentation and unfair and deceptive
business acts and practices. The Company denies Bain's allegations and intends
to vigorously defend itself against Bain's lawsuit. The Company believes,
based upon the advice of its counsel, that pursuant to its terms letter with
Bain, liability, if any, would be limited to reimbursement of Bain's expenses,
capped at $250,000, and payment of a "break-up" fee of up to $3.0 million. Any
charge related to such expenses and "break-up" fee would likely be recorded in
the Company's fourth fiscal quarter in 1997. There can be no assurance that
this action will not have a material adverse impact on the operating results
and financial condition of the Company.
In January 1997, class action lawsuits against the Company and certain of
its officers were filed in state court in Illinois and in the federal court in
Chicago, Illinois. The state court action alleges damages to persons who
purchased the Company's Common Stock during the period from November 21, 1994
through January 7, 1997 arising from alleged violations of the Illinois
securities laws and associated statutory and common law. The federal actions
allege damages to persons who purchased the Company's Common Stock during the
period from August 22, 1994 through January 7, 1997 arising from alleged
violations of the federal securities laws and associated common laws. The
lawsuits name the Company and several of its officers and directors as
defendants, and allege violations of securities laws, fraud and negligence,
stemming from circumstances which resulted in the restatement of the Company's
financial statements for 1994 and 1995. See Note 2 of Notes to the Company's
Consolidated Financial Statements for the years ended October 31, 1994, 1995
and 1996. The complaints do not specify the amounts of damages sought.
The Company has executed a settlement agreement with the class plaintiffs in
the Illinois state court action titled Steinberg v. SSA, 97 CH 287 (the
"Settlement"). The Company has agreed to pay $1.7 million in cash and the
director and officer defendants collectively have agreed to contribute 100,000
shares of Common Stock.
5
<PAGE>
In the quarter ended July 31, 1997, the Company recorded a $1.7 million charge
related to the Settlement. The presiding judge in the Illinois case granted
preliminary approval to the Settlement on June 27, 1997. A final hearing on
the Settlement is scheduled for September 30, 1997. There can be no assurance
that the Settlement will be approved, nor can there be any assurance that the
Settlement, if approved, will legally bar the federal claims described above.
In addition, even if the Settlement bars the federal claims described above,
because the class period of the federal claim is slightly larger than the
class period of the state claim, the Settlement may not result in the
dismissal of the entire federal action. The failure to achieve a dismissal of
any of these actions or the failure to settle them on sufficiently
advantageous terms could have a material adverse effect on the business,
operating results and financial condition of the Company.
SEC INVESTIGATION
Since October 1995, the Company has been the subject of a private
investigation by the Securities and Exchange Commission. The Company believes
the inquiry relates to its revenue recognition policies. The investigation is
ongoing and the Company presently has no basis for determining when it is
likely to conclude. In January 1997, the Company restated its fiscal 1994
financial statements to reverse $10.1 million in revenues from a software
contract originally recognized in the third quarter of fiscal 1994. In
addition, the Company restated its fiscal 1995 financial statements to reverse
$15.0 million in revenues from two related Latin American reseller agreements
originally recognized in the third and fourth quarters of fiscal 1995, and
$5.0 million in revenues originally recognized in the third quarter of fiscal
1995 from the last two installments of a four-installment contract. See Note 2
to the Company's Consolidated Financial Statements for the years ended October
31, 1994, 1995 and 1996. Commencing with the fourth quarter of 1996, the
Company adopted a more conservative method of accounting for reseller
agreements under which revenue will not be recorded under such contracts until
software is sold to the end user. The adoption of this new method of
accounting resulted in the reversal of approximately $33.8 million in revenues
recognized in the first three quarters of fiscal 1996. The Company is unable
to predict at this time the scope or consequences to the Company of the
Commission's investigation, or whether the actions taken by the Company that
are described above address the issues being investigated by the Commission.
There can be no assurance that such investigation would not have a material
adverse effect on the business, financial condition or results of operations
of the Company.
RAPID TECHNOLOGICAL CHANGE; PRODUCT ROLLOUT DELAYS
The market for the Company's software products is characterized by rapid
technological advances, evolving industry standards in computer hardware and
software technology, changes in customer requirements and preferences, and
frequent new product introductions and enhancements. Customer requirements for
products can change rapidly as a result of innovations or changes within the
computer hardware and software industries, the introduction of new products
and technologies (including new hardware platforms and programming languages)
and the emergence, evolution or widespread adoption of industry standards. For
example, increasing commercial use of the Internet may give rise to new
customer requirements and new industry standards. The Company's future success
will depend upon its ability to continue to enhance its current product line
and to develop and introduce new product functionality that keeps pace with
technological developments, satisfies increasingly sophisticated customer
requirements and achieves market acceptance. In particular, the Company must
continue to anticipate and respond adequately to advances in RDBMS software
and desktop computer operating systems such as Windows. There can be no
assurance that the Company will be successful in developing and marketing on a
timely and cost-effective basis fully functional product enhancements or new
product functionality that respond to technological advances by others, or
that its new product functionality will achieve market acceptance.
As a result of the complexities inherent in both the RDBMS and client/server
environments and the broad functionality and performance demanded by customers
for ERP products, major new product enhancements and new product functionality
can require long development and testing periods to achieve market acceptance.
The Company has, in the past, experienced delays, as is common throughout the
software industry, in the scheduled
6
<PAGE>
introduction of new and enhanced product functionality. In addition, complex
software programs such as those offered by the Company may contain undetected
errors or "bugs" when first introduced or as new versions are released that
are discovered only after the product has been installed and used by
customers. There can be no assurance that errors will not be found in future
releases of the Company's software, or that any such errors will not impair
the market acceptance of the product and adversely affect the Company's
business, operating results and financial condition.
Problems encountered by customers implementing new releases or with
performance of the Company's product can be expected to occur, given the
inherent complexities of its client/server based product. In April 1996, the
Company introduced the first release of Version 6.0 of its BPCS Client/Server
product line to early adopter customers. These early adopters of Version 6.0
experienced difficulties in achieving full functionality and performance with
respect to some aspects of Version 6.0. Since the initial release of Version
6.0 to early adopters, the Company has spent a significant amount of time,
effort and expense in intensive collaborative efforts with such early adopters
to increase functionality and performance of the Version 6.0 product line.
DEPENDENCE ON AS/400 USERS
Although the Company has developed new versions of its BPCS Client/Server
product line for the open systems marketplace, a substantial portion of the
Company's revenues relates to licenses of BPCS Client/Server for IBM AS/400
installations in the industrial sector. In fiscal 1996, over 75% of the
Company's software license fee revenue was derived from the AS/400 market.
Therefore, even as the Company continues to innovate and market versions of
the BPCS Client/Server product line for the open systems environment, a
substantial portion of the Company's future revenues will be derived from and
will be dependent upon the continued widespread use of the AS/400 and the
continued support of IBM's AS/400 platform and proprietary DB/2 database
system. There can be no assurance that the Company's customers will continue
to use or that IBM will continue to support the AS/400 and DB/2. The Company
will be required and intends to continue to devote substantial resources to
supporting its installed base of AS/400 customers and the versions of the BPCS
Client/Server product line used by them. In order to retain its AS/400
customers, the Company may be required to adapt its BPCS Client/Server product
line to conform to any changes made in the AS/400 operating system in the
future. The Company's inability to adapt to future changes in the AS/400
and/or DB/2 systems, or delays in doing so, could have a material adverse
effect on the Company's business, operating results and financial condition.
NEW ENTRANT INTO COMPLEX SALES ENVIRONMENT
The Company has only recently developed and begun to market its BPCS
Client/Server product line for UNIX operating environments. The market for
open systems-based applications differs in many respects from the market for
AS/400-based applications, which historically had been the Company's exclusive
focus. Among other things, the UNIX market is characterized by numerous
database vendors, hardware vendors, systems integrators and consultants, all
of whom can influence the purchase of enterprise applications such as those
marketed by the Company. There can be no assurance that the Company's sales
and marketing efforts will be successful in this highly complex sales
environment. The Company's future success will depend in part upon the
productivity of its sales and marketing force and the ability of the Company
to attract, integrate, train, motivate and retain new sales and marketing
personnel. Competition for sales and marketing personnel in the software
industry is intense. There can be no assurance that the Company's recent and
planned expenses and personnel decisions in sales and marketing will
ultimately prove to be successful or that the incremental revenue generated
will exceed the significant incremental costs associated with these efforts.
In addition, there can be no assurance that the Company's sales and marketing
organization will be able to compete successfully against the significantly
more extensive and better funded sales and marketing operations of many of the
Company's current and potential competitors. The Company's inability to
implement successful sales and marketing efforts in the UNIX market could have
a material adverse effect on the Company's business, operating results and
financial condition.
7
<PAGE>
In the UNIX-based marketplace, the Company relies on a number of systems
consulting and systems integration firms to enhance its marketing, sales and
customer support efforts, particularly with respect to implementation and
support of its product as well as sales lead generation and assistance in the
sales process. As the Company continues to implement its strategy of focusing
on the licensing of its products in the UNIX-based marketplace, the Company
will become increasingly dependent upon third-party implementation providers
for product implementation, end user training and sales support. Although the
Company seeks to maintain close relationships with these firms, many such
firms have similar, and in some cases more established, relationships with the
Company's principal competitors. There can be no assurance that these third-
party service firms will provide the level and quality of service required to
meet the needs of the Company's end users, nor can there be any assurance that
such service firms will recommend the Company's product when assisting their
clients in product selection decisions. Failure by the Company to maintain its
existing relationships with such third parties or the failure to maintain
their support for the Company's products, could materially and adversely
affect the Company's UNIX marketing efforts and could have a material adverse
affect on the Company's business, operating results and financial condition.
RISKS FROM INTERNATIONAL OPERATIONS
The Company currently operates directly and through its Affiliates in over
90 countries. In the fiscal year ended October 31, 1996 and in the nine months
ended July 31, 1997, approximately 61% and 67%, respectively, of the Company's
total revenues were generated from sales outside of the United States. The
Company's
operations are subject to risks inherent in international business activities,
including, in particular, general economic conditions in each country, overlap
of different tax structures, management of an organization spread over various
countries, exposure to currency fluctuations, unexpected changes in regulatory
requirements, compliance with a variety of foreign laws and regulations, and
longer accounts receivables payment cycles in certain countries. Other risks
associated with international operations include import and export licensing
requirements, trade restrictions and changes in tariff rates. There can be no
assurance that the geographic, time zone, language and cultural differences
between the Company's international personnel and operations will not result
in problems that materially adversely affect the Company's business, operation
results and financial condition. The Company has in the past experienced and
may continue to experience operating losses in one or more regions of the
world for one or more periods. The Company's ability to manage such
operational fluctuations and the failure to sustain or increase international
revenue could have a material adverse effect on the Company's business,
operating results and financial condition.
The Company generates a significant portion of its revenues and expenses
from foreign operations in currencies other than United States dollars. As a
result, fluctuations in the values of the respective currencies in which the
Company generates revenue and incurs expense could materially adversely affect
its business, operating results and financial condition. While the Company may
in the future change its pricing practices, an increase in the value of the
United States dollar relative to foreign currencies could make the Company's
products more expensive and, therefore, less competitive in other markets.
Fluctuations in currencies relative to the United States dollar will affect
period-to-period comparisons of the Company's reported results of operations.
Due to the constantly changing currency exposures and the volatility of
currency exchange rates, there can be no assurance that the Company will not
experience currency losses in the future, nor can the Company predict the
effect of exchange rate fluctuations upon future operating results. The
Company does not currently undertake hedging transactions and has limited
resources to cover its currency exposure. The Company may choose to hedge a
portion of its currency exposure in the future as it deems appropriate.
INABILITY TO ENFORCE THE COMPANY'S INTELLECTUAL PROPERTY RIGHTS
The Company relies on a combination of the protections provided under
applicable copyright and trade secret laws, as well as on confidentiality
procedures and licensing arrangements, to establish and protect its rights in
its software. Despite the Company's efforts, it may be possible for
unauthorized third parties to copy certain
8
<PAGE>
portions of the Company's product or to reverse engineer or obtain and use
information that the Company regards as proprietary. In addition, the laws of
certain countries do not protect the Company's proprietary rights to the same
extent as do the laws of the United States. Accordingly, there can be no
assurance that the Company will be able to protect its proprietary software
against unauthorized third-party copying or use, which could adversely affect
the Company's competitive position and could have a material adverse effect on
the Company's business, operating results and financial condition.
CONTROL BY EXISTING STOCKHOLDER; POTENTIAL CONTROL BY PRIVATE INVESTOR
Roger E. Covey, Chairman and Chief Executive Officer of the Company,
currently beneficially owns approximately 31.1% of the Company's outstanding
Common Stock (approximately 23.8% on a fully-diluted basis after giving effect
to the Company's recently-concluded private securities offering (the "Private
Offering") and the Public Offering, and assuming conversion into Common Stock
of the Public Notes and the Series A Preferred Stock and the exercise of the
warrants both issued in the Private Offering, the senior lenders' warrants and
the Representative's warrants) issued in connection with the Public Offering.
Accordingly, Mr. Covey may have the effective power to influence significantly
the outcome of matters submitted for stockholder action, including the
election of members of the Company's Board and the approval of significant
change in control transactions, and may be deemed to have control over the
management and affairs of the Company. This significant equity interest in the
Company may have the effect of making certain transactions more difficult
absent the support of Mr. Covey and may have the effect of delaying or
preventing a change in control of the Company.
For so long as at least 2,500 shares of Series A Preferred Stock remain
outstanding, the Company may not take certain actions without the prior
written consent of the holder(s) of a majority of the outstanding shares of
Series A Preferred Stock, including the payment of dividends or any other
distribution with respect to the Common Stock, the incurrence of additional
debt (other than the notes, up to $40.0 million in additional Senior
Indebtedness and certain other exceptions), the entering into of any merger,
consolidation, sale, assignment, lease or transfer of any material portion of
the Company's assets and certain other material transactions. The Private
Investor also has the right either to designate one new member of the
Company's Board of Directors or one observer who may attend board meetings.
The terms of the Series A Preferred Stock may have the effect of making
certain transactions more difficult absent the support of the holders of the
Series A Preferred Stock or the redemption of the Series A Preferred Stock.
VOLATILITY OF STOCK PRICE
The market price of the Common Stock after the Offering may be significantly
affected by any or all of the factors cited herein in "Risk Factors,"
including quarterly fluctuations in the Company's results of operations,
demand for the Company's product and services, the size, timing and structure
of significant licenses by customers, market acceptance of new or enhanced
versions of the Company's BPCS Client/Server product line, the publication of
opinions about the Company, its products and technology by industry analysts,
the entry of new competitors and technological advances by competitors, delays
in sales as a result of lengthy sales cycles, changes in operating expenses,
foreign currency exchange rate fluctuations, changes in pricing policies by
the Company or its competitors, customer order deferrals in anticipation of
product enhancements by the Company or its competitors, the timing of the
release of new or enhanced versions of the Company's BPCS Client/Server
product line, customer cancellation of major planned software development
programs, general economic factors and other factors, many of which are beyond
the Company's control. In future quarters, the Company's operating results may
be below expectations of public market analysts and investors. In such event,
or in the event that adverse conditions prevail or are perceived to prevail
generally or with respect to the Company's business, the price of the
Company's Common Stock would likely be immediately materially adversely
affected. In addition, the stock market has experienced volatility that has
particularly affected the market prices of equity securities of many
technology companies and that often has been unrelated or disproportionate to
the operating performance
9
<PAGE>
of such companies. These broad market fluctuations, as well as general
economic, political and market conditions, such as recessions or international
currency fluctuations, may adversely affect the market price of the Common
Stock.
ANTI-TAKEOVER CONSIDERATIONS
The Company is subject to Section 203 of the Delaware General Corporation
Law which, subject to certain exceptions, prohibits a Delaware corporation
from engaging in any of a broad range of business combinations with an
"interested stockholder" for a period of three years following the date that
such stockholder became an interested stockholder. The Company has also
adopted a stockholders' rights plan, which can have a significant anti-
takeover effect by inhibiting a potential offeror, the value of whose acquired
shares would be substantially diluted by the operation of the plan. Upon a
Change in Control, the Company will also be obligated to pay dividends on the
Series A Preferred Stock at an annual rate equal to 14% multiplied by the
then-applicable Liquidation Price for the Series A Preferred Stock. A Change
in Control under similar circumstances would most likely also constitute an
event of default under any new bank credit facility to be entered into by the
Company (the "New Credit Facility"). These provisions could serve to impede or
prevent a change of control or have a depressive effect on the price of the
Company's Common Stock and securities convertible or exchangeable into Common
Stock.
COMMON STOCK AVAILABLE FOR RESALE; REGISTRATION RIGHTS
Sales of substantial amounts of Common Stock in the public market after this
Offering could adversely affect the prevailing market price of the Common
Stock. The directors and executive officers of the Company have agreed not to
offer, sell or otherwise dispose of any shares of Common Stock beneficially
owned by them for a period of 90 days after the Public Offering without the
prior written consent of the Representatives (as defined herein). Roger E.
Covey, Chairman and Chief Executive Officer of the Company, currently
beneficially owns 13,284,750 shares of Common Stock, representing
approximately 31.1% of the Company's outstanding stock as of July 31, 1997.
Beginning 90 days after the Public Offering, Mr. Covey's Common Stock will be
available for sale during any three-month period under Rule 144(e) under the
Securities Act without restriction up to an amount equal to the greater of (i)
1% of the Company's outstanding shares of Common Stock (426,526 as of July 31,
1997) or (ii) the average weekly trading volume of the Common Stock reported
on a national securities exchange during the four calendar weeks preceding the
filing of a notice of sale with the SEC (for example, approximately 10,090,000
for the four weeks ended August 29, 1997).
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files periodic reports and other information with the Securities
and Exchange Commission (the "Commission"). The Common Stock is listed on the
Nasdaq National Market. For further information with respect to the Company,
reference is hereby made to such reports and other information which can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's Regional Offices located at Seven World
Trade Center, 13th Floor, New York, New York 10048 and the Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at the
offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006 or
obtained by calling the Nasdaq Public Reference Room Disclosure Group at (800)
638-8241. Copies of such material may also be obtained at prescribed rates
from the Public Reference Section of the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and on the Commission's
Web site at http://www.sec.gov.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act of 1933, as amended (the "Securities Act")
10
<PAGE>
with respect to the Shares offered hereby. In accordance with the rules and
regulations of the Commission, this Prospectus omits certain of the
information contained in the Registration Statement. Reference is hereby made
to the Registration Statement and related exhibits and the documents
incorporated herein by reference for further information with respect to the
Company and the Company's Common Stock. Statements contained herein or
incorporated herein by reference concerning the provisions of any document are
not necessarily complete and, in each instance, reference is made to the copy
of such document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission. Each such statement is qualified in its
entirety by such reference. The Registration Statement, including the exhibits
and schedules thereto, is also available on the Commission's Web site at
http://www.sec.gov.
This Prospectus contains certain forward-looking statements that involve
substantial risks and uncertainties. When used in this Prospectus, the words
"anticipate," "believe," "estimate," "intend" and "expect" and similar
expressions are intended to identify such forward-looking statements. The
Company's actual results, performance or achievements could differ materially
from the results expressed in or implied by these forward-looking statements.
Factors that could cause or contribute to such differences include those
discussed in "Risk Factors." Prospective investors should consider carefully
these factors in addition to the other information set forth in this
Prospectus.
This Prospectus includes product names, trade names and trademarks of System
Software Associates, Inc. and its subsidiaries and other companies. BPCS(R),
BPCS Client/Server(TM), DOCA(TM) and AgileLink 2000(TM) are trademarks of the
Company.
INFORMATION INCORPORATED BY REFERENCE
The Company incorporates herein by reference the following documents it has
previously filed with the Commission (File No. 0-15322) pursuant to the
Exchange Act:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
October 31, 1996, as amended;
(b) the Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended January 31, 1997, April 30, 1997 and July 31, 1997;
(c) the Company's Proxy Statement for the Annual Meeting of Stockholders
held on May 28, 1997;
(d) the Company's Current Reports on Form 8-K filed November 8, 1996,
November 15, 1996, November 20, 1996, December 12, 1996, January 10, 1997,
May 1, 1997, July 15, 1997, August 14, 1997 and August 21, 1997;
(e) the description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A, declared effective February
12, 1987; and
(f) the description of the Company's Common Stock Purchase Rights
contained in the Company's Registration Statement on Form 8-A, filed May
18, 1988.
All documents and reports subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering of the Shares shall be
deemed to be incorporated herein by reference and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that
a statement contained herein or in any other subsequently filed document that
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
The Company will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the written or
oral request of such person, a copy of any or all the documents
11
<PAGE>
incorporated herein by reference, other than exhibits to such documents unless
such exhibits are specifically incorporated by reference in such documents,
and any other documents specifically identified herein as incorporated by
reference into the Registration Statement to which this Prospectus relates or
into such other documents. Requests should be addressed to: Investor Relations
Department, System Software Associates, Inc., 500 West Madison Street, 32nd
Floor, Chicago IL 60661, Telephone: (312) 641-2900.
THE COMPANY
System Software Associates, Inc. ("SSA" or the "Company") is a leading
provider of cost-effective business enterprise information systems to the
industrial sector worldwide. The Company's BPCS (Business Planning and Control
System) Client/Server product line provides business process re-engineering
and integration of an enterprise's operations, including multi-mode
manufacturing processes, supply chain management and global financial
solutions. The BPCS Client/Service product line delivers scalability,
interoperability and reconfigurability in a comprehensive product suite to
meet changing market demands. The distributed object computing architecture
("DOCA") of BPCS Client/Service produces the benefits of next generation
technology in conformity with industry standards. The Company markets, sells
and services its product to large- and intermediate-sixed industrial sector
firms primarily through its own world-wide sales organization and, to a much
lesser extent, through a network of over 100 independent software companies
("Affiliates"). The Company has strategic relationships with major computer
hardware manufacturers, such as IBM, Hewlett Packard and Digital Equipment;
supply chain management software companies, such as i2 and Manugistics; and
major systems integrators, such as CAP Gemini and the Big Six consulting
firms.
The Company's executive offices are located at 500 West Madison Street, 32nd
Floor, Chicago, IL 60661. The Company's telephone number is (312) 641-2900.
SELLING STOCKHOLDER
On March 27, 1997, the Company issued a $12,000,000 Convertible Subordinated
Promissory Note (the "Note") to the Selling Stockholder named below. The Note
is convertible into Common Stock at the rate of $3.33 per Share. As of the
date hereof all of the Shares obtainable upon conversion of the Note are being
offered by the Selling Stockholder by means of this Prospectus.
<TABLE>
<CAPTION>
NUMBER OF
SHARES NUMBER OF
BENEFICIALLY MAXIMUM SHARES
OWNED PRIOR NUMBER OF BENEFICIALLY
TO PERCENT OF SHARES OWNED AFTER PERCENT OF
SELLING STOCKHOLDER OFFERING(1) OUTSTANDING OFFERED(1) OFFERING OUTSTANDING
------------------- ------------ ----------- ---------- ------------ -----------
<S> <C> <C> <C> <C> <C>
[ ]............... 3,603,603 7.8% 3,603,603 0 0%
</TABLE>
- --------
(1) The shares to be sold shall include, in addition to the numbers indicated,
any additional shares of Common Stock of SSA that become issuable in
connection with the Shares by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the receipt
of consideration that results in an increase in the number of outstanding
shares of the Company's Common Stock.
PLAN OF DISTRIBUTION AND OFFERING PRICE
The Shares may be sold from time to time by the Selling Stockholder, or by
its pledgees, donees, transferees or other successors in interest. Such sales
may be made on one or more exchanges or in the over-the-counter market, or
otherwise at prices and at terms then prevailing or at prices related to the
then current market price or in negotiated transactions. The Shares may be
sold by any one or more of the following: (a) a block trade in which the
broker or dealer so engaged will attempt to sell the Shares as agent but may
purchase and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this Prospectus; (c) an
exchange distribution in
12
<PAGE>
accordance with the rules of such exchange; and (d) ordinary brokerage
transactions and transactions in which the broker solicits purchasers. In
effecting sales, brokers or dealers engaged by the Selling Stockholders may
arrange for other brokers or dealers to participate. Brokers and dealers will
receive commissions or discounts from the Selling Stockholders in amounts to
be negotiated prior to the sale. The Selling Stockholder and any brokers or
dealers participating in the distribution of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act in connection with
such sales, and any commissions received by such broker-dealers and any
profits realized on the resale of Shares by them may be deemed to be
underwriting discounts and commissions under the Securities Act. The Selling
Stockholder may agree to indemnify such broker-dealers with respect to the
Shares offered hereby against certain liabilities, including certain
liabilities under the Securities Act. In addition, the Company has agreed to
indemnify the Selling Stockholder with respect to the Shares offered hereby
against certain liabilities, including certain liabilities under the
Securities Act or, if such indemnity is unavailable, to contribute toward
amounts required to be paid in respect of such liabilities. In addition, any
securities covered by this Prospectus which qualify for sale pursuant to Rule
144 may be sold under Rule 144 rather than pursuant to this Prospectus.
The Company will pay the registration expenses incident to the offering and
sale of the Shares by the Selling Stockholder to the public. Such expenses
(estimated to be $32,000) include legal and accounting expenses, filing fees
payable to the Commission, applicable state "blue sky" filing fees and
printing expenses. The Company, however, will not pay for any expenses,
commissions or discounts of underwriters, dealers or agents for the Selling
Stockholder.
Any underwriters, brokers, dealers and agents who participate in any such
sale may also be customers of, engage in transactions with or perform services
for SSA or one or more of the Selling Stockholder in the ordinary course of
business.
SSA Common Stock is currently traded on the Nasdaq National Market. The
public offering price for any Shares that are sold will be determined by the
price indicated on such system at the time such sale occurs, or at such price
as shall be determined through private negotiations between the buyer and the
particular Selling Stockholder, or its agent.
VALIDITY OF STOCK
The validity of the Shares will be passed upon for the Company by Sachnoff &
Weaver, Ltd., Chicago, Illinois ("S&W"). In October 1992, in consideration for
the continued and future services on the Company's Board of Directors of
William N. Weaver, Jr., the Company granted a stock option to S&W, of which
Mr. Weaver is a member. This option covers 33,750 shares, is exercisable at
$10.3889 per share (the fair market value of the Company's Common Stock on
October 12, 1992, the date the options were granted) and becomes exercisable
in equal portions on the five anniversaries of the grant date. In
consideration of the option grant, S&W agreed to waive its fees for Mr.
Weaver's time expended attending meetings of the Board of Directors. In
December 1994, the Company granted S&W additional options to purchase 22,500
shares. The later options are exercisable at $9.83 per share, the fair market
value of the Company's Common Stock on the date of grant, and become
exercisable in equal portions on the five anniversaries of the grant date. In
addition to his beneficial ownership of the shares subject to the foregoing
options, Mr. Weaver personally owns 300,000 shares of the Company's Common
Stock.
EXPERTS
The consolidated financial statements of the Company as of October 31, 1996
and for the year then ended have been incorporated by reference herein in
reliance upon the report of KPMG Peat Marwick LLP, independent certified
public accountants, incorporated by reference herein and upon the authority of
said firm as experts in accounting and auditing.
The consolidated financial statements as of October 31, 1995 and for the two
years then ended incorporated by reference in this Prospectus have been so
included in reliance upon the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
13
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the issuance and distribution of the
securities being registered, other than underwriting compensation, are:
<TABLE>
<S> <C>
SEC Filing Fee for Registration Statement....................... $15,736
Accounting Fees................................................. 4,000*
Legal Fees and Expenses......................................... 10,000*
Miscellaneous................................................... 2,264*
-------
Total....................................................... $32,000*
=======
</TABLE>
- --------
*Estimated Amount
All of the expenses listed above will be borne by the Registrant.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The By-laws of the Registrant provide that the Registrant shall indemnify
its officers and directors to the fullest extent permitted by applicable law.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides, in
general, that each director and officer of a corporation may be indemnified
against expenses (including attorneys' fees, judgments, fines and amounts paid
in settlement) actually and reasonably incurred in connection with the defense
or settlement of any threatened, pending or completed legal proceedings in
which he is involved by reason of the fact that he is or was a director or
officer if he acted in good faith and in a manner that he reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, if he had no reasonable cause to
believe that his conduct was unlawful. If the legal proceeding, however, is by
or in the right of the corporation, the director or officer may not be
indemnified in respect of any claim, issue or matter as to which he shall have
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the company unless a court determines otherwise.
The Certificate of Incorporation of the Registrant, as amended to date,
provides that the personal liability of the directors of the Registrant shall
be eliminated to the fullest extent permitted by applicable law. The DGCL
permits a corporation's certificate of incorporation to provide that no
director of the corporation shall be personally liable to the corporation or
its stockholders for monetary damages for any breach of his fiduciary duty as
a director; provided, however, that such provision shall not apply to any
liability of a director (1) for any breach of a director's duty of loyalty to
the corporation or its stockholders, (2) for acts or omissions that are not in
good faith or involve intentional misconduct or a knowing violation of the
law, (3) under Section 174 of the DGCL or (4) for any transaction from which
the director derived an improper personal benefit.
ITEM 16. EXHIBITS.
(a) Exhibits:
<TABLE>
<C> <S>
4.1 Certificate of Incorporation, as amended to date (1)
4.2 By-Laws, as amended to date (2)
4.3 Rights Agreement Dated as of May 3, 1988 (3)
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
5.1 Opinion of Sachnoff & Weaver, Ltd. regarding the legality of the
securities being registered
23.1 Consent of Price Waterhouse LLP
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of Sachnoff & Weaver, Ltd. (included in Exhibit 5)
Powers of Attorney (included on the Signature Page of this
24 Registration Statement)
</TABLE>
- --------
(1) Incorporated by reference from the Registrant's Form 10-K Annual Report for
the fiscal year ended October 31, 1987 (File No. 0-15322).
(2) Incorporated by reference from the Registrant's Form 10-K Annual Report for
the fiscal year ended October 31, 1989 (File No. 0-15322).
(3) Incorporated by reference from the Registrant's Form 8-K Current Report
filed on May 18, 1988 (File No. 0-15322).
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
with or furnished to the Commission by the Registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
the indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF CHICAGO, STATE OF ILLINOIS, ON SEPTEMBER 15, 1997.
System Software Associates, Inc.
/s/ Joseph J. Skadra
By___________________________________
Joseph J. Skadra, Vice President
and Chief Financial Officer
THE UNDERSIGNED OFFICERS AND DIRECTORS OF SYSTEM SOFTWARE ASSOCIATES, INC.,
HEREBY SEVERALLY CONSTITUTE AND APPOINT JOSEPH J. SKADRA AND WILLIAM E. DORAN,
AND EACH OF THEM SINGLY, OUR TRUE AND LAWFUL ATTORNEYS AND AGENTS, WITH FULL
POWER TO THEM, AND EACH OF THEM, TO SIGN FOR US AND IN OUR NAMES IN THE
CAPACITIES INDICATED BELOW, THE REGISTRATION STATEMENT ON FORM S-3 FILED
HEREWITH AND ANY AND ALL PRE-EFFECTIVE AND POST-EFFECTIVE AMENDMENTS TO SAID
REGISTRATION STATEMENT, AND GENERALLY TO DO ALL SUCH THINGS IN OUR NAMES AND
ON OUR BEHALF IN OUR CAPACITIES AS OFFICERS AND DIRECTORS TO ENABLE SYSTEM
SOFTWARE ASSOCIATES, INC. TO COMPLY WITH THE PROVISIONS OF THE SECURITIES ACT
OF 1933, AS AMENDED, AND ALL REQUIREMENTS OF THE SECURITIES AND EXCHANGE
COMMISSION, HEREBY RATIFYING AND CONFIRMING OUR SIGNATURES AS THEY MAY BE
SIGNED BY OUR SAID ATTORNEYS, OR ANY OF THEM, TO SAID REGISTRATION STATEMENT
AND ANY AND ALL AMENDMENTS THERETO.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Roger E. Covey Chief Executive Officer and September 15, 1997
____________________________________ Chairman of the Board of
Roger E. Covey Directors (Principal
Executive Officer)
/s/ Joseph J. Skadra Chief Financial Officer, September 15, 1997
____________________________________ Vice President--Finance
Joseph J. Skadra (Principal Financial and
Accounting Officer)
/s/ Andrew J. Filipowski Director September 15, 1997
____________________________________
Andrew J. Filipowski
/s/ John W. Puth Director September 15, 1997
____________________________________
John W. Puth
/s/ William N. Weaver, Jr. Director September 15, 1997
____________________________________
William N. Weaver, Jr.
</TABLE>
II-3
<PAGE>
EXHIBIT 5.1
(312) 207-1000
September 15, 1997
System Software Associates, Inc.
500 West Madison Street
32nd Floor
Chicago, Illinois 60661
Re: Registration Statement on Form S-3. ("Registration Statement")
Gentlemen and Ladies:
In connection with the proposed registration for resale of 3,603,603 shares
of Common Stock, $0.0033 par value (the "Common Stock"), of System Software
Associates, Inc. (the "Company"), covered by the above-referenced Registration
Statement, we have examined such documents and have reviewed such questions of
law as we have considered necessary and appropriate for the purposes of this
opinion. We have assumed the genuineness of all signatures, the authenticity
of all documents submitted to as originals, the conformity to original
documents of all the documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such latter documents.
Based upon such examination, we advise you that, in our opinion:
(i) The Company has corporate authority to issue the shares of Common
Stock proposed to be offered as set forth in the Registration Statement
when such shares are issued upon conversion of the Note described in the
Registration Statement.
(ii) The shares of Common Stock registered for resale as set forth in the
Registration Statement have been duly authorized and, when issued upon
conversion of the Note, will be validly issued and fully paid and
nonassessable, and will continue to be so when sold as set forth in the
Registration Statement.
We hereby consent to the filing of this opinion as an exhibit to the above-
referenced Registration Statement and the reference to this firm under the
caption "Validity of Stock" in the Prospectus constituting a part of such
Registration Statement. In giving this consent, we do not hereby admit that we
are in the category of persons whose consent is required under Section 7 of
the Securities Act of 1933 or the rules and regulations of the Securities and
Exchange Commission.
Very truly yours,
/s/ Sachnoff & Weaver, Ltd.
Sachnoff & Weaver, Ltd.
DRN/WED
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report
dated January 7, 1997, except as to Notes 6, 7 and 11, which are as of January
29, 1997, appearing in the Company's Annual Report on Form 10-K for the year
ended October 31, 1996. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
Price Waterhouse LLP
Chicago, Illinois
September 15, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated January 7, 1997, except as to
Notes 6, 7, and 11 which are as of January 29, 1997, relating to the
consolidated balance sheet of System Software Associates, Inc. and
subsidiaries as of October 31, 1996, and the related consolidated statements
of operations, stockholders' equity, and cash flows for the year then ended
incorporated herein by reference and to the reference to our firm under the
heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
_____________________________________
KPMG Peat Marwick LLP
Chicago, Illinois
September 15, 1997
