<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Filed by the registrant [X]
Filed by a party other than the registrant [_]
Check the appropriate box:
[_] Preliminary proxy statement [_] Confidential, For Use Of The
Commission Only (As Permitted By
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[_] Definitive additional materials
[_] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
System Software Associates, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing proxy statement, if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[_] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22 (a)(2) of Schedule 14A.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
4) Date filed:
<PAGE>
SYSTEM SOFTWARE ASSOCIATES, INC.
500 West Madison Street, 32nd Floor
Chicago, Illinois 60661
To Our Stockholders:
You are cordially invited to attend a special meeting of stockholders of
System Software Associates, Inc. We will hold the meeting on August 17, 1999,
at 9:00 a.m. at the offices of Sachnoff & Weaver, Ltd., 30 S. Wacker Drive,
29th Floor, Chicago, Illinois.
The accompanying notice of the special meeting and proxy statement
describes the two items of business which will be discussed during the
meeting: first, a proposal to amend our Certificate of Incorporation to effect
a 1 for 4 reverse stock split and, second, a proposed new stock option plan.
It is important that you vote your shares whether or not you plan to attend
the meeting. Your participation is important regardless of the number of
shares that you hold. To be sure your vote is counted, we urge you to
carefully review the proxy statement and to vote your choices. Please sign,
date and return the enclosed proxy card in the accompanying envelope as soon
as possible. If you later decide to attend the meeting, you can always revoke
your proxy at that time and vote your shares in person.
I look forward to seeing you at the meeting.
Sincerely,
WILLIAM M. STUEK
Chairman of the Board and
Chief Executive Officer
Chicago, Illinois
July 9, 1999
<PAGE>
SYSTEM SOFTWARE ASSOCIATES, INC.
500 West Madison Street, 32nd Floor
Chicago, Illinois 60661
NOTICE OF A SPECIAL MEETING OF STOCKHOLDERS
To Be Held on August 17, 1999
To the Stockholders of System Software Associates, Inc.:
The special meeting of stockholders of System Software Associates, Inc., a
Delaware corporation, will be held at the offices of Sachnoff & Weaver, Ltd.,
at 30 S. Wacker Drive, 29th Floor, in Chicago, on August 17, 1999, at 9:00
a.m. The meeting's purpose is to:
1. To amend the Certificate of Incorporation to effect a 1 for 4 reverse
split of the company's outstanding common stock, par value $.0033 per
share, and to decrease the authorized shares of common stock from
250,000,000 to 62,500,000;
2. To approve a new stock option plan for our employees; and
3. To consider and act upon such other business as may properly come
before the meeting or any adjournment thereof.
If you were a stockholder of record at the close of business on July 1,
1999, the record date fixed by the Board of Directors, you are entitled to
notice of, and to vote at, the meeting.
For ten days prior to the meeting, we will keep a list of stockholders
entitled to vote at the meeting. You may inspect the list at any time during
usual business hours.
All stockholders are cordially invited to attend the meeting. Those who
cannot attend are urged to sign, date and otherwise complete the enclosed
proxy and return it promptly in the envelope provided. Any stockholder who
submits a proxy to us has the right to revoke it at any time before it is
voted.
For the Board of Directors
Kirk Isaacson
Secretary
Chicago, Illinois
July 9, 1999
----------------
YOUR VOTE IS IMPORTANT.
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY CARD PROMPTLY,
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING.
<PAGE>
SYSTEM SOFTWARE ASSOCIATES, INC.
500 West Madison Street, 32nd Floor
Chicago, Illinois 60661
----------------
PROXY STATEMENT
----------------
GENERAL INFORMATION
We have sent this Proxy Statement to you in connection with the
solicitation of proxies for a special meeting of the stockholders. The special
meeting will be held at 9:00 a.m. Central Time on August 17, 1999.
Record Date: We chose the close of business on July 1, 1999, as the record
date for the special meeting. All holders of record on July 1, 1999, of the
company's common stock, par value $.0033 per share, will be entitled to vote.
As of the record date, 47,898,488 shares of common stock were issued and
outstanding. Each share has one vote for each item of business described in
this proxy statement.
Mailing Date: The date of this proxy statement is July 9, 1999. This proxy
statement and proxy card are being mailed on or about July 9, 1999.
Quorum: A majority of the outstanding shares, represented in person or by
proxy, constitutes a quorum. A quorum is the number of represented
stockholders needed to have a valid meeting to transact business.
Voting: A majority vote of the outstanding shares is needed to approve the
proposed amendment to our Certificate of Incorporation. A majority vote of the
quorum is needed to approve the new stock plan. Shares represented by valid
proxies, those proxies that have been received in time for the special meeting
and have not been revoked, will be voted.
Returning Your Proxy: If you do not attend the special meeting you may
still vote your shares by signing and returning your proxy card.
. If you specify a choice on your proxy card, either for or against a
proposal, your shares will be voted according to your choice.
. If you sign and return your proxy card but do not mark any choices, then
your shares will be voted in favor of the below proposals:
(1) FOR the amendment to the Certificate of Incorporation to effect the
1 for 4 reverse split of the outstanding shares of common stock and to
decrease the number of authorized shares of common stock; and
(2) FOR the approval of the new stock option plan for our employees.
Your signed proxy also gives the persons named on the proxy card, called
the proxies, the authority to vote your shares in the event that other matters
are properly brought up at the meeting.
. If you mark your proxy card to "abstain", your vote will not be counted in
determining whether a majority vote was obtained.
. If a broker or other person holding shares for you does not vote on a
proposal (broker non-votes), your shares will not be counted in determining
the number of votes cast.
Accordingly, abstentions will have the same effect as votes against the
proposal to amend our Certificate of Incorporation and to approve the new
stock option plan. Broker non-votes will have the same effect as votes against
the proposal to amend our Certificate of Incorporation but will have no effect
on the vote to approve the new stock option plan.
Revoking Your Proxy: If you vote by proxy, you may revoke that proxy at any
time before it is voted at the meeting by sending us a proxy bearing a later
date or by attending the meeting in person and casting a ballot.
<PAGE>
Cost of Solicitation: We are soliciting the proxies solicited by this proxy
statement. We will pay all costs associated with the special meeting including
the solicitation of proxies. We ask banks, brokers and other institutions,
nominees and fiduciaries to forward the proxy material to their principals to
obtain authority to execute proxies. We will reimburse them for expenses. In
addition to the solicitation of proxies by mail, our directors, officers
and/or employees may solicit proxies in person or by telephone without
additional compensation.
SECURITY OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
Except as otherwise indicated in the footnotes, the following table sets
forth information as of December 31, 1998, with respect to the beneficial
ownership of our outstanding common stock by each stockholder known by us to
be the beneficial owner of more than 5% of our common stock, and as of June
25, 1999, with respect to each director, each current executive officer, each
person who served as an executive officer during our last fiscal year, and all
the directors and officers as a group. Except as otherwise indicated, the
stockholders have sole voting and investment power with respect to shares
beneficially owned by them. The shares below have not been adjusted to reflect
the proposed reverse stock split.
<TABLE>
<CAPTION>
Amount and Percent
Nature of of
Name and Address Beneficial Class
of Beneficial Owner Ownership (1)
- ------------------- ---------- -------
<S> <C> <C>
Roger E. Covey...................................... 9,425,250 (2) 19.7%
2225 N. Lakewood
Chicago, IL 60614
Gardner Lewis Asset Management, L.P. ............... 5,244,624 (3) 11.0%
285 Wilmington, W. Chester Pike
Chadds Ford, PA 19317
Paul Tudor Jones II................................. 3,661,800 (4) 7.6%
c/o Tudor Investment Corporation
600 Steamboat Road
Greenwich, CT 06830
Hambrecht & Quist Group............................. 3,393,452 (5) 7.1%
One Bush Street
San Francisco, CA 94104
Putnam Investments, Inc. ........................... 2,709,394 (6) 5.7%
One Post Office Square
Boston, MA 02109
Massachusetts Financial Services Company............ 2,368,617 (7) 4.9%
500 Boylston Street
Boston, MA 02116
William M. Stuek.................................... 492,333 (8)(9) 1.0%
William N. Weaver, Jr. ............................. 333,950 (10) *
Riz Shakir.......................................... 147,535 (8) *
Lawrence A. Zimmerman............................... 100,000 (8) *
Lorraine H. Fenton.................................. 80,000 (8) *
Andrew J. Filipowski................................ 31,200 (8) *
Joseph J. Skadra.................................... 29,500 (8) *
Douglas P. Smith.................................... 15,000 (8)(11) *
All Officers and Directors as a Group (nine
persons)........................................... 10,644,768 (2)(8) 22.2%
(9)(10)
(11)
</TABLE>
2
<PAGE>
- --------
* Less than 1%.
(1) Percentage of class based on the 47,892,343 shares of common stock
outstanding on June 25, 1999.
(2) According to a statement by Roger Covey, he does not personally own any
shares of common stock but is the beneficial owner of 8,825,250 shares
held of record by the Xerxes Trust and 600,000 shares held of record by
the Tang Research Foundation, of which Mr. Covey is a Director.
(3) According to a Report on the SEC's Schedule 13G, as of December 31, 1998,
Gardner Lewis Asset Management has sole dispositive power for all
5,244,624 listed shares, and exercises sole voting power over 4,806,975
shares and shared voting power over 73,200 of such shares.
(4) According to a Report on the SEC's Schedule 13G, as of December 31, 1998,
Paul Tudor Jones, II shares dispositive and voting power over all
3,661,000 shares, and Tudor Investment Corporation ("TIC") shares
dispositive and voting power over 3,413,800 shares (or 7.1% of SSA's
common stock). The 13G Report indicates that TIC is the financial advisor
to five entities which also share dispositive and voting power over the
total of 3,413,800 shares; however, none of the five companies by itself
is a beneficial owner of more than 5% of the outstanding shares of common
stock.
(5) Hambrecht & Quist Group ("H&Q") shares dispositive and voting power over
all listed shares. Such shares are issuable upon conversion of the shares
of our Series A Preferred Stock and the exercise of certain warrants held
by Hambrecht & Quist LLC ("H&Q LLC") and H&Q SSA Investors L.P. Mr. Smith
is a Managing Director of H&Q LLC, an indirect wholly owned subsidiary of
H&Q, and as such may have beneficial ownership of the listed shares. See
note (11) below.
(6) According to a Report on the SEC's Schedule 13G/A, filed March 10, 1999,
Putnam Investments, Inc. ("PI") has shared voting power over 834,818
shares and shared dispositive power over 2,709,394 shares. PI wholly owns
two registered investment advisors: Putnam Investment Management, Inc.
which beneficially owns 728,387 shares and The Putnam Advisory Company,
Inc. which beneficially owns 1,981,007 shares. PI beneficially owns the
shares held by its two subsidiaries.
(7) According to a Report on the SEC's Schedule 13G, as of December 31, 1998,
Massachusetts Financial Services Company has sole dispositive power over
2,368,617 shares and sole voting power over 1,366 shares.
(8) Includes unissued shares of common stock, subject to options exercisable
within 60 days of June 25, 1999, as follows: Mr. Stuek 442,499; Mr.
Shakir 52,569; Mr. Zimmerman 90,000; Ms. Fenton 80,000; Mr. Filipowski
31,200; Mr. Skadra 29,500; and Mr. Smith 15,000.
(9) Includes 49,834 shares of the common stock issuable upon conversion of 7%
Convertible Notes held by Mr. Stuek.
(10) Includes 81,150 unissued shares of common stock, subject to a currently
exercisable option held by Sachnoff & Weaver, Ltd., of which Mr. Weaver
is a member. Mr. Weaver disclaims beneficial ownership of all but his
allocated portion of the shares covered by the option.
(11) Mr. Smith's share holdings as indicated in the table exclude: (i)
1,404,000 shares issuable upon the conversion of shares of Series A
Preferred Stock or upon the exercise of common stock purchase warrants,
all held by H&Q SSA Investors, L.P., an entity of which Mr. Smith is a
limited partner and of whose general partner, H&Q LLC, Mr. Smith is also
a member; and (ii) 1,989,452 shares issuable upon the exercise of certain
warrants held by H&Q LLC.
3
<PAGE>
ITEM NO. 1
AMENDMENT TO THE CERTIFICATE OF
INCORPORATION TO EFFECT A REVERSE STOCK SPLIT
General
At the special meeting, the stockholders will consider and vote upon a
proposal providing for a 1 for 4 reverse split of the outstanding common stock
and a decrease of the authorized shares of common stock from 250,000,000 to
62,500,000. Our Certificate of Incorporation will need to be amended to effect
the reverse stock split and to decrease the number of authorized shares. The
proposed amendment is contained in Exhibit A to this Proxy Statement. If the
stockholders approve the amendment it will become effective upon its filing
with the Secretary of State of Delaware.
Amendment to the Certificate of Incorporation
The amendment will amend Article Fourth of our Certificate of Incorporation.
Upon filing the amendment, without further action by us or you, each
outstanding share of common stock will be converted into one-fourth of a share
of common stock. A vote for this proposal will include authorization for our
Board of Directors not to file the amendment in the event the Board of
Directors determines that it would not be in the best interests of our
stockholders.
Reasons for the Reverse Stock Split
The reverse stock split is being proposed to prevent the common stock from
being delisted from the Nasdaq National Market. On March 24, 1999, Nasdaq
National Market notified us that shares of our common stock had failed to
maintain a closing bid price on the Nasdaq National Market of greater than or
equal to $5.00 per share for 30 consecutive trading days. Therefore, we had
failed to comply with one of the requirements for continued listing on the
Nasdaq National Market, subjecting the common stock to possible delisting. In
order to avoid delisting, the common stock must trade on the Nasdaq National
Market at a closing bid price of $5.00 per share or greater for ten consecutive
trading days. Based on recent trading prices, we anticipate that, following the
reverse stock split, the common stock will trade higher than $5.00 per share
during the relevant period to satisfy the Nasdaq National Market's continuing
listing requirements.
However, there can be no assurance that, after the consummation of the
reverse stock split, the shares of common stock will trade at four times the
market price of the common stock prior to the reverse stock split. Further, we
cannot offer any assurance that the common stock will continue to meet Nasdaq
National Market listing requirements following the reverse stock split.
If the reverse stock split is not approved, it is highly likely that our
shares of common stock will cease to be listed and traded on the Nasdaq
National Market. Such delisting would significantly, adversely affect the
trading in and liquidity of the common stock.
In addition, management also believes that without the reverse stock split
it may be more difficult to attract new investors to the company because the
common stock trades at a relatively low price (the closing price on June 30,
1999 was $1.656 per share). Stockbrokers are sometimes subject to internal
restrictions on their ability to recommend stocks trading at less than $5.00
per share because of the general presumption that the stock may be highly
speculative.
Effects of the Proposed Amendment
Stockholders have no right under Delaware law, the Certificate of
Incorporation or our By-Laws, as amended, to dissent from the reverse stock
split.
4
<PAGE>
If the amendment is approved by the stockholders, the principal effect of
the reverse stock split will be to decrease the number of outstanding shares
of Common Stock from 47,892,343 shares to approximately 11,973,086 shares,
based on outstanding share information as of June 25, 1999. The amendment will
not affect your proportionate equity interest or the relative rights,
preferences or priorities you may currently be entitled to, except for minor
differences resulting from adjustments for fractional shares. The amendment
would also decrease the amount of authorized shares of common stock from
250,000,000 shares to 62,500,000 shares.
The number of shares subject to stock options granted to our directors,
officers and employees under our stock option plans and the exercise price for
these options will automatically be proportionately adjusted for the reverse
stock split. The number of shares of common stock authorized for future
issuances under the stock option plans will also be proportionately adjusted.
The outstanding preferred stock is presently convertible into an aggregate
of 1,404,000 shares of common stock. If the reverse stock split is approved,
the conversion price of the preferred stock and, accordingly, the number of
shares of common stock issuable upon the conversion of the outstanding
preferred stock, will be proportionately adjusted. We have issued warrants to
certain investors to purchase 1,989,452 shares of common stock. If the reverse
stock split is approved, the exercise price of the warrants and, accordingly
the number of shares of common stock issuable upon the exercise of the
warrants, will be proportionately adjusted. In addition, if the reverse stock
is approved, the conversion price and number of shares of common stock
issuable upon the conversion of our 7% Convertible Notes will be
proportionately adjusted.
The reverse stock split is likely to result in some stockholders owning
"odd-lots" of less than 100 shares of common stock. Brokerage commissions and
other costs of transactions in odd-lots are generally somewhat higher than the
costs of transaction on "round-lots" of even multiples of 100 shares.
Exchange of Stock Certificates and Payment for Fractional Shares
The exchange of shares of common stock will occur on the date we file the
amendment with the Secretary of State of Delaware without any action on your
part and without regard to the date that you physically surrender your
certificates representing pre-split shares of common stock for certificates
representing post-split shares. Our transfer agent, First Chicago Trust
Company, a division of Equiserve, will exchange your certificates. You will
not be required to pay a transfer or other fee to exchange your certificates.
In the event that the number of shares of post-split common stock includes a
fraction, we will pay you, in lieu of the issuance of fractional shares, a
cash amount equal to the fair market value of that fractional share.
As soon as practicable after the amendment has been filed, we will mail you
instructions and other necessary materials to inform you of the procedure to
surrender and exchange your certificates. After you receive the instructions,
you should surrender the certificates representing pre-split shares of common
stock. When you surrender your certificates, you will receive new certificates
representing the whole number of shares of post-split common stock to which
you are entitled and any cash payable in lieu of a fractional share.
YOU SHOULD NOT SEND YOUR CERTIFICATES UNTIL YOU RECEIVE INSTRUCTIONS ON HOW
TO DO SO.
After the amendment is filed, each certificate representing pre-split
shares of common stock will, until surrendered and exchanged as described
above, be deemed, for all corporate purposes, to represent the number of post-
split shares of common stock and the right to receive the amount of cash for
any fractional shares. However, you will not be entitled to receive any
dividends or other distributions payable by us after the amendment is filed,
until you surrender and exchange your certificates. If there are any dividends
or distributions, they will accumulate and be paid to you, without interest,
once you surrender and exchange your certificates.
5
<PAGE>
Federal Income Tax Consequences
The following discussion describes certain federal income tax consequences
of the reverse stock split and decrease in our authorized shares. This
discussion is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), existing and proposed regulations thereunder, reports of
congressional committees, judicial decisions and current administrative
rulings and practices, all as amended and in effect on the date of this proxy
statement. Any of these authorities could be repealed, overruled or modified
at any time. Any such change could be retroactive and, accordingly, could
cause the tax consequences to vary substantially from the consequences
described below. No ruling from the Internal Revenue Service (the "IRS") with
respect to the matters discussed herein has been requested or will be
requested, and there is no assurance that the IRS would agree with the
conclusions set forth in this discussion.
YOU ARE URGED TO CONSULT YOUR TAX ADVISORS AS TO THE PARTICULAR TAX
CONSEQUENCES TO YOU BECAUSE OF THE REVERSE STOCK SPLIT, INCLUDING THE
APPLICABILITY OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, CHANGES IN APPLICABLE
TAX LAWS AND ANY PENDING OR PROPOSED LEGISLATION.
This discussion is for general information only and does not address the
federal income tax consequences that may be relevant to particular
stockholders in light of their personal circumstances or to certain types of
stockholders (such as dealers in securities, insurance companies, foreign
individuals and entities, financial institutions and tax-exempt entities) who
may be subject to special treatment under the federal income tax laws. This
discussion also does not address any tax consequences under state, local or
foreign laws.
In summary:
1) Gain or Loss. Management believes that the reverse stock split will
constitute a tax-free recapitalization under the Code and the company
should not recognize any gain or loss as a result of the reverse stock
split. In addition, stockholders should not recognize any gain or loss if
they receive only common stock upon the reverse stock split. If you receive
cash in lieu of a fractional share of common stock that otherwise would be
held as a capital asset, you will recognize capital gain or loss equal to
the difference, if any, between the cash received and your basis in the
fractional share.
2) Basis. Your aggregate tax basis of your post-split shares of common
stock will equal your aggregate tax basis in the pre-split shares of common
stock you owned prior to the reverse stock split. Generally, the aggregate
basis will be allocated among your post-split shares on a pro rata basis.
If you have used the specific identification method to identify your basis
in pre-split shares of common stock surrendered in the reverse stock split,
you should consult your tax advisors to determine your basis in the post-
split shares.
Vote Required; Directors' Recommendation
The Board of Directors recommends that you vote FOR this amendment to our
Certificate of Incorporation to effect the reverse stock split and to decease
our authorized common stock. The holders of a majority of the shares of common
stock outstanding as of the record date must vote in favor of the proposed
amendment for it to be approved. Unless you specify otherwise on your proxy,
your proxy will be voted FOR approval of this amendment.
6
<PAGE>
ITEM NO. 2
PROPOSAL TO APPROVE THE COMPANY'S STOCK OPTION PLAN
Proposal
On May 19, 1999, the Board adopted the System Software Associates, Inc.
Stock Option Plan, subject to stockholder approval. If stockholder approval is
received, the stock option plan will read as set forth in Exhibit B.
Reasons for the Plan
The purpose of the stock option plan is to promote the interests and
enhance the value of System Software Associates, Inc. by linking the personal
interests of our employees and non-employee directors with those of our
stockholders, by inducing individuals of outstanding ability and potential to
join and remain with us and by providing our employees with an additional
incentive to promote our success.
Our successful growth and development depends in a large part on our
ability to recruit and retain highly skilled professionals. The market for
skilled professionals in the software industry is extremely tight. Most of our
competitors have greater financial resources than we do and are able to use
those resources to gain a competitive advantage in the hiring of exceptional
personnel. In addition, most of our competitors in the software industry use
stock options to provide long-term incentives and rewards. We believe that our
ability to issue stock options as incentive compensation through the stock
option plan will greatly increase our ability to recruit, motivate and retain
skilled professionals in this extremely competitive environment.
Description of the Plan
The stock option plan allows us to grant incentive stock options, within
the meaning of Section 422 of the Code, and non-qualified stock options. The
stock option plan will be administered by a committee of our Board consisting
of two or more non-employee members of the Board. The committee will have the
discretion to determine which employees or non-employee directors will be
recipients of options under the stock option plan, and to establish the terms,
conditions and limitations of each option (subject to the terms of the stock
option plan and the applicable provisions of the Code), including the type and
amount of the options, the number of shares of common stock to be subject to
any option, the exercise price of any options (subject to the requirement that
all options be issued at an exercise price at or above fair market value on
the date of grant), and the date or dates upon which options become
exercisable. Options also may be granted to a prospective employee conditioned
upon such person becoming employed by us. The foregoing notwithstanding, no
member of the committee and none of our executive officers who were executive
officers on the day the Board adopted the stock option plan will be entitled
to receive any options pursuant to the stock option plan. The committee also
has full power to construe and interpret the stock option plan and the options
granted under the stock option plan, and to establish rules and regulations
necessary or advisable for its administration. The determination of the
committee with respect to any matter under the stock option plan to be acted
upon by the committee will be conclusive and binding.
The stock option plan requires that incentive options and nonstatutory
options have an exercise price per share equal to at least the fair market
value of a share at the time the option is granted. As required by the Code,
if an incentive option is granted to any participant who owns more than ten
percent of our issued and outstanding common stock (a "Significant
Stockholder"), then the exercise price per share to such participant will be
not less than one hundred ten percent (110%) of fair market value on the date
of grant. Fair market value equals the closing sales price of our common stock
on the date of grant.
The committee may at any time and from time to time grant one or more
options to one or more of our employees or non-employee directors and may
designate the number of shares to be subject to each option so granted,
provided, however, that (i) each participant receiving an incentive option
must be employed by us (or
7
<PAGE>
one of our affiliates) at the time an incentive option is granted; (ii) the
maximum term of all incentive options granted under the stock option plan may
not be greater than ten years (incentive options granted to a Significant
Stockholder have a maximum term of five years); and (iii) the fair market
value of the shares (determined at the time the option is granted) as to which
incentive options are exercisable for the first time by any employee during
any single calendar year (under the stock option plan and under any other of
our (or our affiliate's) incentive option plans) may not exceed $100,000.
Except as otherwise determined by the committee, all options are non-
transferable and may be exercised during a participant's lifetime only by the
participant. No options may be granted more than ten years from the date the
stock option plan is adopted.
At the time an option is awarded, the committee will specify the date or
dates upon which the option, or portions of the option, become exercisable.
The permissible manner of payment for the purchase price upon exercise of the
option (such as cash, check, the transfer of previously owned, fully paid
shares or through a "cashless" exercise) will be set by the committee in each
participant's option agreement or by general rules.
A participant who ceases to be our employee or non-employee director for
any reason other than death, disability or termination "for cause" will be
permitted to exercise any option, to the extent it was exercisable on the date
of such cessation, but only within three months of such cessation (or, if
earlier, within the originally prescribed term of the option.) A participant
who is terminated for "cause," as defined in the stock option plan, will
immediately lose all rights to exercise any options. If a participant dies,
his or her estate or personal representative may exercise the option, to the
extent it was exercisable on the date of death. If a participant becomes
permanently disabled, he or she may exercise an option to the extent it was
exercisable at the time of the onset of the disability or, if the option vests
periodically, to the extent it would have been exercisable as of the next
periodic vesting date. In the case of either death or disability, the option
must be exercised within twelve (12) months after the date of death or onset
of disability, and prior to the original expiration date of the option.
Repricing of options is expressly prohibited under our stock option plan.
Accordingly, the committee may not at any time reduce the exercise price of an
option previously granted under the stock option plan. However, if we pay a
stock dividend or make a distribution of shares, or combine, reclassify or
substitute other securities for our outstanding shares of common stock, the
committee will make an appropriate adjustment to the number of shares subject
to outstanding options and the exercise prices thereof to prevent either the
dilution or enlargement of the options previously granted.
The Board may amend the stock option plan in any respect, provided,
however, that any amendment will be subject to the approval of our
stockholders at or before the next annual meeting of our stockholders if
stockholder approval is required by the Code, any federal or state law or
regulation, the rules of any stock exchange or automated quotation system on
which the shares may be listed or quoted, or if the Board determines to submit
such changes to the stock option plan to our stockholders for approval.
The Board of Directors may terminate the stock option plan at any time.
However, no termination or amendment will affect the rights of participants
under options previously granted without a participant's consent. Unless
previously terminated, the stock option plan will terminate on May 18, 2009,
and no options will be granted after that date.
Under the stock option plan, and assuming the approval of the 1 for 4
reverse stock split set forth in Item 1 of this Proxy Statement, a total of
1,000,000 shares of common stock will be made available for issuance. As of
June 25, 1999, and assuming the approval of the reverse stock split, the
market value of the 1,000,000 shares to be made available for issuance under
the stock option plan was $7,500,000.
Federal Income Tax Consequences
The following is a summary of the United States federal income tax
consequences that generally will arise with respect to the grant and exercise
of options under the stock option plan and with respect to the sale of common
stock acquired under the stock option plan.
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Incentive Stock Options. In general, a participant will not recognize
ordinary income upon the grant or exercise of an incentive stock option. If
the participant holds the stock acquired through the exercise of an incentive
stock option for one year from the date of exercise and two years from the
date of the grant, the participant will thereafter recognize a long-term
capital gain or loss upon a subsequent sale of the stock, based upon the
difference between the incentive stock option's exercise price and the sale
price. If the participant sells the stock before the requisite holding period,
the participant will recognize ordinary income based upon the difference
between the exercise price and the lesser of the sales price or the fair
market value upon the date of exercise.
Nonstatutory Options. As in the case of an incentive stock option, a
participant will not recognize ordinary income upon the grant of a
nonstatutory option. Unlike in the case of an incentive stock option, however,
upon exercise of a nonstatutory option, a participant generally will recognize
ordinary income in an amount equal to the difference between the exercise
price for the option and the fair market value of our common stock on the
exercise date. With respect to any common stock acquired upon exercise of a
nonstatutory option ("NSO Stock"), a participant will have a tax basis equal
to the exercise price plus any income recognized upon the exercise of the
option. Upon selling NSO Stock, a participant generally will recognize capital
gain or loss in an amount equal to the excess of the sale price of the NSO
Stock over the participant's tax basis in the NSO Stock. The capital gain or
loss will be long-term or short-term gain or loss, depending upon the holding
period of the shares.
Tax Consequences to System Software Associates, Inc. The grant of an option
under the stock option plan will have no tax consequences to us. Moreover, in
general, neither the exercise of an incentive stock option acquired under the
stock option plan nor the sale of any common stock acquired under the stock
option plan will have any tax consequences to us. We generally will be
entitled to a business-expense deduction, however, with respect to any
ordinary compensation income recognized by a participant under the stock
option plan, provided we include and report such amounts on a timely filed
Form W-2 or Form 1099-MISC (or similar such IRS form filing).
Vote Required; Directors' Recommendation
The Board of Directors recommends a vote FOR approval of the stock option
plan. Approval of the stock option plan requires the majority vote of the
quorum present at the special meeting. Unless you specify otherwise on your
proxy, your proxy will be voted FOR approval of the stock option plan.
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STOCKHOLDER PROPOSALS
Stockholder proposals submitted for evaluation as to inclusion in the proxy
materials for our next annual meeting of stockholders must be received by us
not later than September 30, 1999, at our principal executive offices at 500
West Madison Street, 32nd Floor, Chicago, Illinois 60661.
OTHER BUSINESS
As of the date of this proxy statement, management knows of no other
business which may come before the special meeting. However, if any additional
matters are properly presented at the meeting, it is intended that the persons
named in the enclosed proxy, or their substitutes, will vote such proxy in
accordance with their judgment on such matters.
For the Board of Directors
Kirk Isaacson, Secretary
Chicago, Illinois
July 9, 1999
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EXHIBIT A
CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION
OF SYSTEM SOFTWARE ASSOCIATES, INC.
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation") is
System Software Associates, Inc.
2. Article Fourth of the Certificate of Incorporation of the Corporation
is hereby amended to replace paragraph (i) with the following:
(i) 62,500,000 shares of Common Stock, $0.0033 par value per share
(hereinafter called the "Common Stock").
Article Fourth shall also be amended by adding the following after
paragraph (ii):
REVERSE STOCK SPLIT. As of the date of the filing of this
Certificate of Amendment, each issued and outstanding share of
Common Stock of the Corporation shall be reclassified and changed
into one-fourth of one share of the Common Stock having the terms
specified in this Article Fourth. Each outstanding stock certificate
which immediately prior to the date hereof represented a number of
shares of Common Stock shall, without any action on the part of the
holder, hereupon and hereafter, until surrendered as hereinafter
provided, represent one-fourth of the shares of the Common Stock
represented by such certificate, however, the Corporation shall not
issue certificates for fractional shares, but any fractional shares
shall be converted into the right to receive from the Corporation an
amount of cash equal to the fair market value of such fractional
share. The registered holder of each such certificate may after the
date hereof surrender such certificate to the Corporation for
cancellation and, upon such surrender, shall receive in exchange
therefor, without charge, a new certificate registered in the name
of such holder representing one-fourth of the number of shares of
the Common Stock which, prior to the date of filing hereof, was
represented by the certificate(s) representing such shares of Common
Stock.
3. The Amendment of the Certificate of Incorporation herein certified
has been duly adopted in accordance with the provisions of Sections 228 and
242 of the General Corporation Law of the State of Delaware.
Signed on _______________, 1999
System Software Associates, Inc.
-------------------------------------
Kirk Isaacson, Secretary
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EXHIBIT B
SYSTEM SOFTWARE ASSOCIATES, INC.
STOCK OPTION PLAN
I. Purpose and Definitions
A. Purpose of the Plan
The Plan is intended to encourage ownership of Shares by Eligible Employees
and Key Non-Employees in order to attract and retain such Eligible Employees
in the employ of the Company or an Affiliate, or to attract such Key Non-
Employees to provide services to the Company or an Affiliate, and to provide
additional incentive for such persons to promote the success of the Company or
an Affiliate.
B. Definitions
Unless otherwise specified or unless the context otherwise requires, the
following terms, as used in this Plan, have the following meanings:
1. Affiliate means a corporation which, for purposes of Section 424 of
the Code, is a parent or subsidiary of the Company, direct or indirect.
2. Board means the Board of Directors of the Company.
3. Code means the Internal Revenue Code of 1986, as amended.
4. Committee means the committee to which the Board delegates the power
to act under or pursuant to the provisions of the Plan, or the Board if no
committee is selected. If the Board delegates powers to a committee, then,
if necessary for compliance with Section 16 of the Exchange Act, such
committee shall consist initially of not less than two (2) members of the
Board, each member of which must be a "non-employee director," within the
meaning of the applicable rules promulgated pursuant to the Exchange Act.
No member of the Committee shall receive any Option pursuant to the Plan or
any similar plan of the Company or any Affiliate while serving on the
Committee unless the Board determines that the grant of such an Option
satisfies the then current Rule 16b-3 requirements under the Exchange Act.
Notwithstanding anything herein to the contrary, and insofar as the Board
determines that it is necessary in order for compensation recognized by
Participants pursuant to the Plan to be fully deductible to the Company for
federal income tax purposes, each member of the Committee also shall be an
"outside director" (as defined in regulations on other guidance issued by
the Internal Revenue Service under Code Section 162(m)).
5. Company means System Software Associates, Inc., a Delaware
corporation, and includes any successor or assignee corporation or
corporations into which the Company may be merged, changed, or
consolidated; any corporation for whose securities the securities of the
Company shall be exchanged; and any assignee of or successor to
substantially all of the assets of the Company.
6. Disability or Disabled means permanent and total disability as
defined in Section 22(e)(3) of the Code.
7. Eligible Employee means an employee of the Company or of an Affiliate
(excluding, however, any employee who on the date the Plan is adopted by
the Board is an "executive officer," as defined under the Exchange Act or
any regulations promulgated thereunder), designated by the Board or the
Committee as being eligible to be granted one or more Options under the
Plan.
8. Exchange Act means the Securities Exchange Act of 1934, as amended
from time to time, or any successor statute thereto.
9. Incentive Option means an Option which, when granted, is intended to
be an "incentive stock option," as defined in Section 422 of the Code.
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10. Key Non-Employee means a non-employee director, consultant or
independent contractor of the Company or of an Affiliate who is designated
by the Board or the Committee as being eligible to be granted one or more
Options under the Plan.
11. Nonstatutory Option means an Option which, when granted, is not
intended to be an "incentive stock option," as defined in Section 422 of
the Code.
12. Option means a right or option granted under the Plan.
13. Option Agreement means an agreement between the Company and a
Participant executed and delivered pursuant to the Plan.
14. Participant means an Eligible Employee to whom one or more Incentive
Options or Nonstatutory Options are granted under the Plan, and a Key Non-
Employee to whom one or more Nonstatutory Options are granted under the
Plan.
15. Plan means this Stock Option Plan, as amended from time to time.
16. Shares means the following shares of the capital stock of the
Company as to which Options have been or may be granted under the Plan:
treasury shares or authorized but unissued Common Stock, $.0033 par value,
or any shares of capital stock into which the Shares are changed or for
which they are exchanged within the provisions of Article VI of the Plan.
II. Shares Subject to the Plan
The aggregate number of Shares as to which Options may be granted from time
to time shall be Four Million (4,000,000) Shares (subject to adjustment for
stock splits, stock dividends, and other adjustments described in Article VI
hereof); provided, however, that the aggregate number of Shares as to which
Options may be granted in any calendar year to any one Eligible Employee shall
not exceed Eight Hundred Thousand (800,000) Shares (subject to adjustment for
stock splits, stock dividends, and other adjustments described in Article VI
hereof). The number of Shares set forth in this Article II does not reflect
the 1 for 4 reverse stock split being proposed to stockholders in 1999 for
approval. If such stockholder approval is obtained, the number of Shares shall
be adjusted accordingly.
Shares subject to Options that are forfeited, terminated, expire
unexercised, canceled by agreement of the Company and the Participant, settled
in cash in lieu of Common Stock or in such manner that all or some of the
Shares covered by such Options are not issued to a Participant, or are
exchanged for Options that do not involve Common Stock, shall immediately
become available for Options. In addition, if the exercise price of any Option
is satisfied by tendering Shares to the Company (by actual delivery or
attestation), only the number of Shares issued net of the Shares tendered
shall be deemed delivered for purposes of determining the maximum number of
Shares available for Options.
Subject to the provisions of Article VI, the aggregate number of Shares as
to which Incentive Options may be granted shall be subject to change only by
means of an amendment of the Plan duly adopted by the Company and approved by
the stockholders of the Company within one year before or after the date of
the adoption of any such amendment.
III. Administration of the Plan
The Plan shall be administered by the Committee. A majority of the
Committee shall constitute a quorum at any meeting thereof (including by
telephone conference) and the acts of a majority of the members present, or
acts approved in writing by a majority of the entire Committee without a
meeting, shall be the acts of the Committee for purposes of this Plan. The
Committee may authorize one or more of its members or an officer of the
Company to execute and deliver documents on behalf of the Committee. A member
of the Committee shall not exercise any discretion respecting himself or
herself under the Plan. The Board shall have the authority to remove, replace
or fill any vacancy of any member of the Committee upon notice to the
Committee and the affected member. Any member of the Committee may resign upon
notice to the Board. The Committee may allocate among one or more of its
members, or may delegate to one or more of its agents, such duties and
responsibilities as it determines.
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Subject to the provisions of the Plan, the Committee is authorized to:
A. interpret the provisions of the Plan or of any Option or Option
Agreement and to make all rules and determinations which it deems necessary
or advisable for the administration of the Plan;
B. determine which employees of the Company or of an Affiliate shall be
designated as Eligible Employees and which of the Eligible Employees shall
be granted Options;
C. determine the Key Non-Employees to whom Nonstatutory Options shall be
granted;
D. determine whether the Option to be granted shall be an Incentive
Option or Nonstatutory Option;
E. determine the number of Shares for which an Option or Options shall
be granted;
F. provide for the acceleration of the right to exercise an Option (or
portion thereof); and
G. specify the terms and conditions upon which Options may be granted;
provided, however, that with respect to Incentive Options, all such
interpretations, rules, determinations, terms, and conditions shall be made and
prescribed in the context of preserving the tax status of the Incentive Options
as incentive stock options within the meaning of Section 422 of the Code.
All determinations of the Committee shall be reduced to writing and signed
by or on behalf of the Committee. No member of the Committee shall be liable
for any action or determination made in good faith with respect to the Plan or
any Option.
IV. Eligibility for Participation
The Committee may at any time and from time to time grant one or more
Options to one or more Eligible Employees or Key Non-Employees and may
designate the number of Shares to be subject to each Option so granted,
provided, however, that (i) each Participant receiving an Incentive Option must
be an Eligible Employee of the Company or of an Affiliate at the time an
Incentive Option is granted; (ii) no Incentive Options shall be granted after
the expiration of ten (10) years from the earlier of the date of the adoption
of the Plan by the Company or the approval of the Plan by the stockholders of
the Company; and (iii) the fair market value of the Shares (determined at the
time the Option is granted) as to which Incentive Options are exercisable for
the first time by any Eligible Employee during any single calendar year (under
the Plan and under any other incentive option plan of the Company or an
Affiliate) shall not exceed $100,000.
Notwithstanding any of the foregoing provisions, the Committee may authorize
the grant of an Option to a person not then in the employ of the Company or of
an Affiliate, conditioned upon such person becoming eligible to become a
Participant at or prior to the execution of the Option Agreement evidencing the
actual grant of such Option.
V. Terms and Conditions of Options
Each Option shall be set forth in an Option Agreement, duly executed on
behalf of the Company and by the Participant to whom such Option is granted.
Except for the setting of the Option price under Paragraph A, no Option shall
be granted and no purported grant of any Option shall be effective until such
Option Agreement shall have been duly executed on behalf of the Company and by
the Participant. Each such Option Agreement shall be subject to at least the
following terms and conditions:
A. Option Price
The exercise price of the Shares covered by each Option granted under the
Plan shall be determined by the Committee. In the case of the grant of an
Incentive Option (provided the Participant owns directly or by reason of the
applicable attribution rules ten percent (10%) or less of the total combined
voting power of all classes of share capital of the Company), and in the case
of any grant of a Nonstatutory Option, the price (per share) of the
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Shares covered by each such Option shall be not less than the fair market
value of the Shares on the date of the grant of the Option. In all cases of
Incentive Options not covered by the preceding sentence, the Option price
shall be not less than one hundred ten percent (110%) of the fair market value
on the date of grant. The fair market value shall be the closing sales price
on the largest national securities exchange on which the Shares are listed on
the date of the grant of the Option, or, if there is no closing sales price,
on the most recent trade date thirty (30) days or less prior to the date of
the grant of the Option. If the Shares are not then listed on any such
exchange, the fair market value of such Shares shall be the closing sales
price if such is reported or otherwise the mean average of the closing "Bid"
and the closing "Ask" prices, if any, as reported on the National Association
of Securities Dealers Automated Quotation System ("NASDAQ") for the date of
the grant of the Option, or if none, on the most recent trade date thirty (30)
days or less prior to the date of the grant of the Option for which such
quotations are reported.
B. Number of Shares
Each Option shall state the number of Shares to which it pertains.
C. Term of Option
Each Incentive Option shall terminate not more than ten (10) years from the
date of the grant thereof, or at such earlier time as the Option Agreement may
provide, and shall be subject to earlier termination as herein provided,
except that if the Option price is required under Paragraph A of this Article
V to be at least one hundred ten percent (110%) of fair market value, each
such Incentive Option shall terminate not more than five (5) years from the
date of the grant thereof, and shall be subject to earlier termination as
herein provided.
D. Date of Exercise
Upon the authorization of the grant of an Option, or at any time
thereafter, the Committee may, subject to the provisions of Paragraph C of
this Article V, prescribe the date or dates on which the Option becomes
exercisable, and may provide that the Option rights become exercisable in
installments over a period of years, or upon the attainment of stated goals.
E. Medium of Payment
The Option price shall be paid on the date of purchase specified in the
notice of exercise, as set forth in Paragraph I. It shall be paid in such form
(permitted by Section 422 of the Code in the case of Incentive Options) as the
Committee shall, either by rules promulgated pursuant to the provisions of
Article III of the Plan, or in the particular Option Agreement, provide.
F. Termination of Employment
1. A Participant who ceases to be an employee or Key Non-Employee of the
Company or of an Affiliate for any reason other than death, Disability, or
termination for cause, may exercise any Option granted to such Participant, to
the extent that the right to purchase Shares thereunder has become exercisable
on the date of such termination, but only within three (3) months after such
date, or, if earlier, within the originally prescribed term of the Option, and
subject to the condition that no Option shall be exercisable after the
expiration of the term of the Option. A Participant's employment shall not be
deemed terminated by reason of a transfer to another employer which is the
Company or an Affiliate.
2. A Participant who ceases to be an employee or Key Non-Employee for cause
shall, upon such termination, cease to have any right to exercise any Option.
For purposes of this Plan, cause shall be deemed to include (but shall not be
limited to) wrongful appropriation of funds of the Company or an Affiliate,
divulging confidential information about the Company or an Affiliate to the
public, the commission of a gross misdemeanor or felony, or the performance of
any other action that the Board or the Committee, in their sole discretion,
may
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deem to be sufficiently injurious to the interests of the Company or an
Affiliate to constitute substantial cause for termination. The determination
of the Board or the Committee as to the existence of cause shall be conclusive
and binding upon the Participant and the Company.
3. A Participant who is absent from work with the Company or an Affiliate
because of temporary disability (any disability other than a permanent and
total Disability as defined at Paragraph B(6) of Article I hereof), or who is
on leave of absence for any purpose permitted by any authoritative
interpretation (i.e., regulation, ruling, case law, etc.) of Section 422 of
the Code, shall not, during the period of any such absence, be deemed, by
virtue of such absence alone, to have terminated his employment or
relationship with the Company or with an Affiliate, except as the Committee
may otherwise expressly provide or determine.
4. Paragraph F(1) shall control and fix the rights of a Participant who
ceases to be an employee or Key Non-Employee of the Company or of an Affiliate
for any reason other than death, Disability, or termination for cause, and who
subsequently becomes Disabled or dies. Nothing in Paragraphs G and H of this
Article V shall be applicable in any such case except that, in the event of
such a subsequent Disability or death within the three (3) month period after
the termination of employment or, if earlier, within the originally prescribed
term of the Option, the Participant or the Participant's estate or personal
representative may exercise the Option permitted by this Paragraph F, in the
event of Disability, within twelve (12) months after the date that the
Participant ceased to be an employee or Key Non-Employee of the Company or of
an Affiliate or, in the event of death, within twelve (12) months after the
date of death of such Participant.
G. Total and Permanent Disability
A Participant who ceases to be an employee or Key Non-Employee of the
Company or of an Affiliate by reason of Disability may exercise any Option
granted to such Participant (i) to the extent that the right to purchase
Shares thereunder has become exercisable on or before the date such
Participant becomes Disabled as determined by the Committee, and (ii) if the
Option becomes exercisable periodically under Paragraph D, to the extent of
any additional rights that would have become exercisable had the Participant
not become so Disabled until after the close of business on the next periodic
exercise date.
A Disabled Participant shall exercise such rights, if at all, only within a
period of not more than twelve (12) months after the date that the Participant
became Disabled as determined by the Committee (notwithstanding that the
Participant might have been able to exercise the Option as to some or all of
the Shares on a later date if the Participant had not become Disabled) or, if
earlier, within the originally prescribed term of the Option.
H. Death
In the event that a Participant to whom an Option has been granted ceases
to be an employee or Key Non-Employee of the Company or of an Affiliate by
reason of such Participant's death, such Option, to the extent that the right
is exercisable but not exercised on the date of death, may be exercised by the
Participant's estate or personal representative within twelve (12) months
after the date of death of such Participant or, if earlier, within the
originally prescribed term of the Option, notwithstanding that the decedent
might have been able to exercise the Option as to some or all of the Shares on
a later date if the Participant were alive and had continued to be an employee
or Key Non-Employee of the Company or of an Affiliate.
I. Exercise of Option and Issue of Stock
Options shall be exercised by giving written notice to the Company. Such
written notice shall: (l) be signed by the person exercising the Option, (2)
state the number of Shares with respect to which the Option is being
exercised, (3) contain the warranty required by paragraph M of this Article V,
and (4) specify a date (other than a Saturday, Sunday or legal holiday) not
less than five (5) nor more than ten (10) days after the date of such written
notice, as the date on which the Shares will be purchased. Such tender and
conveyance shall take place at the principal office of the Company during
ordinary business hours, or at such other hour and place agreed upon by the
Company and the person or persons exercising the Option. On the date specified
in such written
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notice (which date may be extended by the Company in order to comply with any
law or regulation which requires the Company to take any action with respect
to the Option Shares prior to the issuance thereof, whether pursuant to the
provisions of Article VI or otherwise), the Company shall accept payment for
the Option Shares and shall deliver to the person or persons exercising the
Option in exchange therefor an appropriate certificate or certificates for
fully paid non-assessable Shares. In the event of any failure to take up and
pay for the number of Shares specified in such written notice on the date set
forth therein (or on the extended date as above provided), the right to
exercise the Option shall terminate with respect to such number of Shares, but
shall continue with respect to the remaining Shares covered by the Option and
not yet acquired pursuant thereto.
J. Rights as a Stockholder
No Participant to whom an Option has been granted shall have rights as a
stockholder with respect to any Shares covered by such Option except as to
such Shares as have been issued to or registered in the Company's share
register in the name of such Participant upon the due exercise of the Option
and tender of the full Option price.
K. Assignability and Transferability of Option
Unless otherwise permitted by the Code and by Rule 16b-3 of the Exchange
Act and approved in advance by the Committee, an Option granted to a
Participant shall not be transferable by the Participant and shall be
exercisable, during the Participant's lifetime, only by such Participant or,
in the event of the Participant's incapacity, his guardian or legal
representative. Except as otherwise permitted herein, such Option shall not be
assigned, pledged or hypothecated in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment, or similar
process. Any attempted transfer, assignment, pledge, hypothecation or other
disposition of any Option or of any rights granted thereunder contrary to the
provisions of this Paragraph K, or the levy of any attachment or similar
process upon an Option or such rights, shall be null and void.
L. Other Provisions
The Option Agreement for an Incentive Option shall contain such limitations
and restrictions upon the exercise of the Option as shall be necessary in
order that such Option can be an "incentive stock option" within the meaning
of Section 422 of the Code. Further, the Option Agreements authorized under
the Plan shall be subject to such other terms and conditions including,
without limitation, restrictions upon the exercise of the Option, as the
Committee shall deem advisable and which, in the case of Incentive Options,
are not inconsistent with the requirements of Section 422 of the Code.
M. Purchase for Investment
Unless the Shares to be issued upon the particular exercise of an Option
shall have been effectively registered under the Securities Act of 1933, as
now in force or hereafter amended, the Company shall be under no obligation to
issue the Shares covered by such exercise unless and until the following
conditions have been fulfilled. In accordance with the direction of the
Committee, the persons who exercise such Option shall warrant to the Company
that, at the time of such exercise, such persons are acquiring their Option
Shares for investment and not with a view to, or for sale in connection with,
the distribution of any such Shares, and shall make such other
representations, warranties, acknowledgments and affirmations, if any, as the
Committee may require. In such event, the persons acquiring such Shares shall
be bound by the provisions of the following legend (or similar legend) which
shall be endorsed upon the certificate(s) evidencing their Option Shares
issued pursuant to such exercise.
The shares represented by this certificate have been acquired
for investment and they may not be sold or otherwise
transferred by any person, including a pledgee, in the absence
of an effective registration statement for the shares under
the Securities Act of 1933 or an opinion of counsel
satisfactory to the Company that an exemption from
registration is then available.
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Without limiting the generality of the foregoing, the Company may delay
issuance of the Shares until completion of any action or obtaining any consent
that the Company deems necessary under any applicable law (including without
limitation state securities or "blue sky" laws).
N. Repricing
The Committee may not at any time reduce the exercise price of an Option
previously awarded to any Participant, whether through amendment, cancellation
or replacement grants, or any other means, except as otherwise provided for
under Article VI of the Plan.
VI. Adjustments Upon Changes in Capitalization; Sale of Company
In the event that the outstanding Shares of the Company are changed into or
exchanged for a different number or kind of shares or other securities of the
Company or of another corporation by reason of any reorganization, merger,
consolidation, recapitalization, reclassification, change in par value, stock
split-up, combination of shares or dividend payable in capital stock, or the
like, appropriate adjustments to prevent dilution or enlargement of the rights
granted to, or available for, Participants shall be made in the manner and
kind of shares for the purchase of which Options may be granted under the
Plan, and, in addition, appropriate adjustment shall be made in the number and
kind of Shares and in the Option price per share subject to outstanding
Options. No such adjustment shall be made which shall, within the meaning of
Section 424 of the Code, constitute such a modification, extension, or renewal
of an Option as to cause the adjustment to be considered as the grant of a new
Option.
Notwithstanding anything herein to the contrary, the Company may, in its
sole discretion, accelerate the timing of the exercise provisions of any
Option in the event of a tender offer for the Company's Shares, the adoption
of a plan of merger or consolidation under which all the Shares of the Company
would be eliminated, or a sale of all or substantially all of the Company's
assets. Alternatively, the Company may, in its sole discretion, cancel any or
all Options upon any of the foregoing events and provide for the payment to
Participants in cash of an amount equal to the difference between the Option
price and the price of a Share, as determined in good faith by the Committee,
at the close of business on the date of such event, multiplied by the number
of Shares subject to Option so canceled. The preceding two sentences of this
Article VI notwithstanding, the Company shall be required to accelerate the
timing of the exercise provisions of any Option if (i) any such business
combination is to be accounted for as a pooling-of-interests under APB Opinion
16 (or any successor opinion) and (ii) the timing of such acceleration does
not prevent such pooling-of-interests treatment; provided, moreover, that if
any provision of the Plan or Option Agreement would disqualify the combination
from pooling-of-interests accounting treatment, then the Plan and Option
Agreement shall be interpreted to preserve such accounting treatment or, if
necessary, the applicable provision shall be null and void. All determinations
to be made in connection with the preceding sentence shall be made by the
independent accounting firm whose opinion with respect to the pooling-of-
interests treatment is required as a condition to the Company's consummation
of such combination.
Upon a business combination by the Company or any of its Affiliates with
any corporation or other entity through the adoption of a plan of merger or
consolidation or a share exchange or through the purchase of all or
substantially all of the capital stock or assets of such other corporation or
entity, the Board or the Committee may, in its sole discretion, grant Options
pursuant hereto to all or any persons who, on the effective date of such
transaction, hold outstanding options to purchase securities of such other
corporation or entity and who, on and after the effective date of such
transaction, will become employees of, or consultants to, the Company or its
Affiliates. The number of Shares subject to such substitute Options shall be
determined in accordance with the terms of the transaction by which the
business combination is effected. Notwithstanding the other provisions of this
Plan, the other terms of such substitute Options shall be substantially the
same as or economically equivalent to the terms of the options for which such
Options are substituted, all as determined by the Board or by the
B-7
<PAGE>
Committee, as the case may be. Upon the grant of substitute Options pursuant
hereto, the options to purchase securities of such other corporation or entity
for which such Options are substituted shall be canceled immediately.
VII. Dissolution or Liquidation of the Company
Upon the dissolution or liquidation of the Company other than in connection
with a transaction to which the preceding Article VI is applicable, all
Options granted hereunder shall terminate and become null and void; provided,
however, that if the rights of a Participant under the applicable Options have
not otherwise terminated and expired, the Participant shall have the right
immediately prior to such dissolution or liquidation to exercise any Option
granted hereunder to the extent that the right to purchase shares thereunder
has become exercisable as of the date immediately prior to such dissolution or
liquidation.
VIII. Termination of the Plan
The Plan shall terminate (10) years from the earlier of the date of its
adoption or the date of its approval by the stockholders. The Plan may be
terminated at an earlier date by vote of the stockholders or the Board;
provided, however, that any such earlier termination shall not affect any
Options granted or Option Agreements executed prior to the effective date of
such termination. Except as may otherwise be provided for under Articles VI
and VII, and notwithstanding the termination of the Plan, any Options granted
prior to the effective date of the Plan's termination may be exercised until
the earlier of (i) the date set forth in the Option Agreement, or (ii) ten
(10) years from the date the Option is granted, and the provisions of the Plan
with respect to the full and final authority of the Committee under the Plan
shall continue to control.
IX. Amendment of the Plan
The Plan may be amended by the Board and such amendment shall become
effective upon adoption by the Board; provided, however, that any amendment
shall be subject to the approval of the stockholders of the Company at or
before the next annual meeting of the stockholders of the Company if such
stockholder approval is required by the Code, any federal or state law or
regulation, the rules of any stock exchange or automated quotation system on
which the Shares may be listed or quoted, or if the Board, in its discretion,
determines to submit such changes to the Plan to its stockholders for
approval.
X. Employment Relationship
Nothing herein contained shall be deemed to prevent the Company or an
Affiliate from terminating the employment of a Participant, nor to prevent a
Participant from terminating the Participant's employment with the Company or
an Affiliate.
XI. Indemnification of Committee
In addition to such other rights of indemnification as they may have as
directors or as members of the Committee, the members of the Committee shall
be indemnified by the Company against all reasonable expenses, including
attorneys' fees, actually and reasonably incurred in connection with the
defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken by them as members of the Committee and against all amounts paid by them
in settlement thereof (provided such settlement is approved by independent
legal counsel selected by the Company) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that the
Committee member is liable for gross negligence or willful misconduct in the
performance of his or her duties. To receive such indemnification, a Committee
member must first offer in writing to the Company the opportunity, at its own
expense, to defend any such action, suit or proceeding.
B-8
<PAGE>
XII. Mitigation of Excise Tax
If any payment or right accruing to a Participant under this Plan (without
the application of this Article XII), either alone or together with other
payments or rights accruing to the Participant from the Company or an
Affiliate ("Total Payments") would constitute a "parachute payment" (as
defined in Section 280G of the Code and regulations thereunder), such payment
or right shall be reduced to the largest amount or greatest right that will
result in no portion of the amount payable or right accruing under the Plan
being subject to an excise tax under Section 4999 of the Code or being
disallowed as a deduction under Section 280G of the Code. The determination of
whether any reduction in the rights or payments under this Plan is to apply
shall be made by the Company. The Participant shall cooperate in good faith
with the Company in making such determination and providing any necessary
information for this purpose.
XIII. Savings Clause
In case any one or more provisions of this Plan shall be held invalid,
illegal, or unenforceable in any respect under applicable law and regulation
(including Code Section 162(m)), the validity, legality, and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby
and the invalid, illegal, or unenforceable provision shall be deemed null and
void; however, to the extent permitted by law, any provision that could be
deemed null and void shall first be construed, interpreted, or revised
retroactively to permit this Plan to be construed in compliance with all
applicable law (including Code Section 162(m)) so as to foster the intent of
this Plan.
XIV. Withholding
Except as otherwise provided by the Committee,
A. The Company shall have the power and right to deduct or withhold, or
require a Participant to remit to the Company, an amount sufficient to
satisfy the minimum federal, state, and local taxes required by law to be
withheld with respect to any grant, exercise, or payment made under or as a
result of this Plan; and
B. In the case of any taxable event hereunder, a Participant may elect,
subject to the approval in advance by the Committee, to satisfy the
withholding requirement, if any, in whole or in part, by having the Company
withhold Shares of Common Stock that would otherwise be transferred to the
Participant having a Fair Market Value, on the date the tax is to be
determined, equal to the minimum marginal tax that could be imposed on the
transaction. All elections shall be made in writing and signed by the
Participant.
XV. Effective Date
This Plan shall become effective upon adoption by the Board, provided that
within one (1) year before or after such adoption by the Board the Plan is
approved by the stockholders of the Company. If such approval is not obtained,
then this Plan and all Options granted hereunder shall be null and void ab
initio.
XVI. Governing Law
This Plan shall be governed by the laws of the State of Illinois and
construed in accordance therewith.
Adopted this 19th day of May, 1999.
B-9
<PAGE>
PROXY PROXY
SYSTEM SOFTWARE ASSOCIATES, INC.
500 West Madison Street
Chicago, Illinois 60661
This Proxy is Solicited on Behalf of the Board of Directors.
The undersigned hereby appoints William M. Stuek and Lawrence A. Zimmerman
as Proxies, and each of them, with the power to appoint their substitutes, and
authorizes each of them to represent and to vote, as designated below, all the
shares of common stock, $0.0033 par value per share, of System Software
Associates, Inc., a Delaware corporation, held of record by the undersigned on
July 1, 1999 at the special meeting of stockholders to be held on Tuesday,
August 17, 1999, or any adjournment thereof.
This proxy when properly executed will be voted in the manner directed herein
by the undersigned stockholder. If no selection is made, this proxy will be
voted "FOR" Proposals 1 and 2.
1. PROPOSAL to amend the
Certificate of Incorporation
to effect a 1 for 4 reverse
stock split of the outstanding
shares of common stock and to
decrease the authorized shares
of common stock from
250,000,000 to 62,500,000.
FOR AGAINST ABSTAIN
[_][_][_]
2. PROPOSAL to approve the new
Stock Option Plan:
FOR AGAINST ABSTAIN
[_][_][_]
3. In their discretion, the
Proxies are authorized to vote
upon such other business as
may properly come before the
meeting, or any adjournment
thereof. --
- --
DATED: _______________________ , 1999
<<Name>> -------------------------------------
Signature
- -- --
-------------------------------------
Signature (if held jointly)
Please sign exactly as name appears
at left. When shares are held by
joint tenants, both should sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If
as a corporation, please sign in
full corporate name by President or
other authorized officer. If as a
partnership, please sign in full
partnership name by authorized
person.
PLEASE MARK, DATE, SIGN AND RETURN
THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE. IF YOU HAVE ANY
QUESTIONS, PLEASE CONTACT LAWRENCE
A. ZIMMERMAN AT THE COMPANY AT
(312) 258-6000.
