<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
________________________________
Date of Report (Date of earliest event reported): April 26, 2000
System Software Associates, Inc.
(Exact Name of Registrant as Specified in Charter)
<TABLE>
<S> <C> <C>
Delaware 0-15322 36-3144515
(State or Other Jurisdiction of Incorporation) (Commission File Number) (IRS Employer Identification No.)
</TABLE>
500 West Madison Street, Chicago, IL 60661
(Address of Principal Executive Offices, Including Zip Code)
(312) 258-6000
(Registrant's Telephone Number, Including Area Code)
(Former Name or Former Address, if Changed Since Last Report)
N/A
________________________________
<PAGE>
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
On May 3, 2000, System Software Associates, Inc., a Delaware corporation
(the "Company"), filed a voluntary petition for relief under Chapter 11 of the
United States Bankruptcy Code in the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court"), Case No. 00-1852 (RRM). The
Company's press release announcing its filing with the Bankruptcy Court is
attached hereto as Exhibit 99.1.
Also on May 3, 2000, the Company entered into a Senior Secured Super-
Priority Debtor-In-Possession Loan and Security Agreement (the "DIP Loan
Agreement") with Foothill Capital Corporation and its other senior secured
lenders. The DIP Loan Agreement provides for a revolving credit facility (the
"DIP Facility") of up to $5,000,000 through May 26, 2000. Extension of the DIP
Facility beyond May 26, 2000 is subject to, among other things, approval by the
Company's senior secured lenders of an acceptable budget for any such extended
period.
Also on May 3, 2000, the Company entered into an Asset Purchase Agreement
(the "Asset Purchase Agreement") with Gores Technology Group ("Gores") and its
wholly owned subsidiary, SSA Acquisition Corporation ("Newco"). A copy of the
Asset Purchase Agreement is attached hereto as Exhibit 99.2. The Asset Purchase
Agreement provides for the sale of substantially all of the assets of the
Company to Newco in exchange for (i) a cash payment of up to $51,932,000 and
(ii) 25% of the common stock of Newco. The actual cash consideration to be paid
by Newco will be equal to (A) the amount necessary to retire the Company's pre-
bankruptcy indebtedness to its senior secured lenders (approximately
$33,767,000), plus (B) up to $4,000,000 to cure defaults under leases and
contracts to be assumed by Newco, plus (C) the amount necessary to retire the
DIP Facility, as the same may be amended or modified, up to a maximum of
$11,740,000 plus related fees and expenses, plus (D) $2,000,000, to be retained
by the Company after the sale.
The closing of the proposed sale to Newco is subject to approval of the
Bankruptcy Court, the expiration of any waiting periods under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended, and other customary
closing conditions. The Asset Purchase Agreement may be terminated by the
Company or Newco, subject to certain limitations, at any time after June 17,
2000 if the closing has not yet occurred, and by Newco at any time after June 6,
2000 if the Bankruptcy Court has not yet entered a final order approving the
transactions contemplated by the Asset Purchase Agreement. In addition, the
Company or Newco may terminate the Asset Purchase Agreement if the Bankruptcy
Court approves a sale of the Company or its assets to a party other than Gores
or Newco; provided, that if the Bankruptcy Court approves any such transfer
prior to the termination of the Asset Purchase Agreement, the Company would be
required to pay Newco a termination fee of $2,000,000 plus related transaction
expenses.
On May 11, 2000, the Bankruptcy Court approved, among other things,
procedures for the solicitation of bids for the sale of the Company's assets
pursuant to Section 363 of the Bankruptcy Code (the "Bidding Procedures"). The
Bidding Procedures provide that all bids for the Company's assets must be
submitted by the close of business on May 31. If the Company receives any other
qualified
-2-
<PAGE>
bids, the Company intends to conduct an auction of its assets on June 2 and to
submit the highest and best offer for approval by the Bankruptcy Court on June
5. In the event the Company does not receive any higher bids for its assets, the
Company intends to proceed with the sale of substantially all of its assets to
Newco, subject to Bankruptcy Court approval.
If the sale to Newco is completed, the Company expects that all of the cash
to be received upon closing of the sale will be used to pay its senior secured
lenders and administrative claims in bankruptcy. Following the sale to Newco,
the Company intends to submit to the Bankruptcy Court a plan of reorganization
that would provide for the distribution of the 25% common stock interest in
Newco to creditors of the Company holding unsecured, pre-bankruptcy claims that
are not assumed by Newco. Those creditors would include holders of the
Company's 7% Convertible Subordinated Notes due 2002. The Asset Purchase
Agreement provides that, as of the closing, Newco will be capitalized with at
least $60,000,000 of equity and long-term debt, at least $20,000,000 of which
shall be represented by common stock, or such other capitalization which results
in the same economic allocation to the Company as is contemplated by the Asset
Purchase Agreement.
As previously disclosed, the Company does not expect the bankruptcy
proceedings to result in any distribution to holders of its preferred or common
stock.
The statements contained in this Form 8-K regarding the timing, process and
results of the bankruptcy proceeding and sale of the Company's assets are
"forward-looking" statements subject to the safe harbor created by the Private
Securities Litigation Reform Act of 1995. Where possible, the words "intend,"
"expect," "believe," and "belief" and similar expressions, as they relate to the
Company, have been used to identify such forward-looking statements. These
statements reflect current beliefs and specific assumptions of the Company with
respect to future events and are based on information currently available to it.
Accordingly, the statements are subject to significant risks, uncertainties and
contingencies, which could cause the results of the bankruptcy proceedings and
the proposed sale of SSA's assets to differ from the results expressed in, or
implied by, these statements.
ITEM 5. OTHER EVENTS
Effective as of April 26, 2000, William N. Weaver resigned from the Board
of Directors of the Company.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired:
Not applicable
(b) Pro Forma Financial Information:
Not applicable
-3-
<PAGE>
(c) Exhibits:
99.1 Press Release of the Company dated May 3, 2000
99.2 Asset Purchase Agreement dated as of May 3, 2000, by and among the
Company, Gores Technology Group and SSA Acquisition Corporation,
together with Schedules 1.01(a), 1.01(b), 1.02 and 1.04 thereto. The
Company will furnish supplementally a copy of any other schedules to
the Commission upon request.
-4-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
System Software Associates, Inc.
By: /s/ Kirk J. Isaacson
----------------------------------
Kirk J. Isaacson
Secretary
Dated: May 17, 2000
-5-
<PAGE>
EXHIBIT INDEX
99.1 Press Release of the Company dated May 3, 2000
99.2 Asset Purchase Agreement dated as of May 3, 2000, by and among the
Company, Gores Technology Group and SSA Acquisition Corporation,
together with Schedules 1.01(a), 1.01(b), 1.02 and 1.04 thereto. The
Company will furnish supplementally a copy of any other schedules to
the Commission upon request.
-6-
<PAGE>
99.1
Company Press Release
SSA Enters Into Asset Purchase Agreement With Gores and Files for Chapter 11
Protection
CHICAGO--(BUSINESS WIRE)--May 3, 2000--System Software Associates, Inc. and
Gores Technology Group, a leading international technology and management
company, announced today that they have entered into a definitive Asset Purchase
Agreement providing for the previously announced sale by SSA of substantially
all of its assets to a newly-formed subsidiary of Gores for a total of
approximately $52 million in cash and 25% of the common stock of the newly-
formed subsidiary.
SSA also announced today that it has reached agreement with its senior secured
lenders on the terms of a debtor-in-possession loan facility and, as expected,
has filed a voluntary petition for relief under Chapter 11 of the United States
Bankruptcy Code in the United States Bankruptcy Court for the District of
Delaware. The Chapter 11 proceeding is intended to, among other things, allow
SSA to complete the sale of its assets in an expeditious manner pursuant to
Section 363 of the Bankruptcy Code. The proposed DIP facility, which has been
submitted for bankruptcy court approval, provides SSA with up to $5,000,000 of
new funding for operations through May 26, 2000. Extension of the DIP facility
beyond May 26 is subject to approval by SSA's senior secured lenders of an
acceptable budget for such period.
Completion of the Gores transaction, which is scheduled for mid-June, remains
subject to bankruptcy court approval, among other things. If the Gores
transaction is completed, SSA expects that all of the cash received upon closing
of the sale will be used to pay SSA's senior secured lenders and administrative
claims in bankruptcy, leaving 25% of the common stock of the newly-formed
subsidiary available for claims of unsecured creditors of SSA in bankruptcy,
including the holders of SSA's 7% Convertible Subordinated Notes due 2002. As
previously disclosed, SSA does not expect any distribution to be made to holders
of its equity securities.
About SSA
System Software Associates is a worldwide ERP software and services provider
with fiscal year 1999 revenue of $316 million. Its principal product, eBPCS
Version 6.1 is primarily sold to the industrial sector including: automotive,
chemicals, consumer goods, electronics, general manufacturing, food and
beverage, forest products and pharmaceuticals.
About Gores Technology
Gores Technology Group (GTG) is a leading international technology acquisition
and management company with an aggressive strategy of acquiring promising high-
technology organizations, products and services, and managing them for increased
growth and profitability. GTG's established infrastructure currently manages a
portfolio of 18 companies that are located in 40 countries throughout the world.
Those companies provide a broad range of technology-based products and services
to a substantial customer base of 12,500 corporations that represent more than
1.5 million active users.
<PAGE>
Safe Harbor Provision
The statements contained in this release regarding the timing and process of the
bankruptcy proceeding and sale of SSA's assets and the financing and future
operations of SSA's business are "forward-looking statements" subject to the
safe harbor created by the Private Securities Litigation Reform Act of 1995.
Where possible, the words "intend," "expect," "believe," "belief", "scheduled"
and similar expressions, as they relate to SSA, GTG or their management, have
been used to identify such forward-looking statements. These statements reflect
current beliefs and specific assumptions of SSA with respect to future events
and are based on information currently available to it. Accordingly, the
statements are subject to significant risks, uncertainties and contingencies,
which could cause the actual bankruptcy and sale process and the financing and
operation of SSA's business to differ from the results expressed in, or implied
by, these statements.
_____________________
Contact:
System Software Associates
Joseph J. Skadra, 312/258-6000
Facsimile: 312/474-7500
<PAGE>
================================================================================
ASSET PURCHASE AGREEMENT
by and among
SYSTEM SOFTWARE ASSOCIATES, INC.
as Seller
and
GORES TECHNOLOGY GROUP
and
SSA ACQUISITION CORPORATION
as Purchaser
Dated as of May 3, 2000
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1. PURCHASE AND SALE OF ASSETS................................................................ 1
SECTION 1.01 Acquired Assets.................................................................. 1
SECTION 1.02 Excluded Assets.................................................................. 2
SECTION 1.03 Cure Costs....................................................................... 2
SECTION 1.04 Assumed Liabilities.............................................................. 2
SECTION 1.05 Excluded Liabilities............................................................. 3
SECTION 1.06 Purchase Price................................................................... 3
SECTION 1.07 Deposits......................................................................... 4
ARTICLE 2. THE CLOSING................................................................................ 4
SECTION 2.01 Closing.......................................................................... 4
SECTION 2.02 Deliveries at Closing............................................................ 5
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE SELLER............................................... 5
SECTION 3.01 Organization..................................................................... 5
SECTION 3.02 Authority Relative to this Agreement............................................. 6
SECTION 3.03 Consents and Approvals........................................................... 6
SECTION 3.04 Financial Statements............................................................. 6
SECTION 3.05 Certain Assets................................................................... 6
SECTION 3.06 Brokers.......................................................................... 7
SECTION 3.07 Material Contracts............................................................... 7
SECTION 3.08 Intellectual Property............................................................ 8
SECTION 3.09 Required and Other Consents...................................................... 9
SECTION 3.10 Absence of Certain Changes....................................................... 9
SECTION 3.11 Litigation and Proceedings....................................................... 10
SECTION 3.12 Compliance with Laws and Court Orders............................................ 10
SECTION 3.13 Year 2000 Compliance............................................................. 10
SECTION 3.14 Inventories...................................................................... 11
SECTION 3.15 Receivables...................................................................... 11
SECTION 3.16 Environmental Compliance......................................................... 11
SECTION 3.17 Conflict of Activities........................................................... 11
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER............................................ 12
SECTION 4.01 Organization..................................................................... 12
SECTION 4.02 Authority Relative to this Agreement............................................. 12
SECTION 4.03 Capital Stock.................................................................... 12
SECTION 4.04 Consents and Approvals........................................................... 12
SECTION 4.05 No Violations.................................................................... 12
SECTION 4.06 Brokers.......................................................................... 13
SECTION 4.07 Financing........................................................................ 13
ARTICLE 5. COVENANTS.................................................................................. 13
SECTION 5.01 Notice of the Section 363/365 Motion and Section 363/365 Order................... 13
SECTION 5.02 Access and Information........................................................... 13
SECTION 5.03 Books and Records................................................................ 14
SECTION 5.04 Additional Matters............................................................... 14
SECTION 5.05 Further Assurances............................................................... 15
SECTION 5.06 Employees and Benefit Programs................................................... 15
SECTION 5.07 Public Announcements; Confidential Information................................... 19
SECTION 5.08 Conduct of the Business.......................................................... 20
SECTION 5.09 Notices of Certain Events........................................................ 21
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 5.10 Bankruptcy Court Approval of Preliminary Order.................................... 21
SECTION 5.11 Name Changes...................................................................... 22
SECTION 5.12 Permits........................................................................... 22
SECTION 5.13 Consents; Assignments............................................................. 23
SECTION 5.14 Accounts Receivables.............................................................. 23
SECTION 5.15 Bidding Procedures................................................................ 24
SECTION 5.16 Registration; Disclosure.......................................................... 24
SECTION 5.17 DIP Budget........................................................................ 24
SECTION 5.18 Capitalization.................................................................... 24
SECTION 5.19 Disclosure Supplements............................................................ 24
ARTICLE 6. CONDITIONS PRECEDENT........................................................................ 25
SECTION 6.01 Conditions Precedent to Obligation of the Seller and the Purchaser................ 25
SECTION 6.02 Conditions Precedent to Obligation of the Seller.................................. 25
SECTION 6.03 Conditions Precedent to Obligation of the Purchaser............................... 25
ARTICLE 7. TERMINATION, AMENDMENT AND WAIVER........................................................... 26
SECTION 7.01 Termination....................................................................... 26
SECTION 7.02 Effect of Termination............................................................. 27
ARTICLE 8. GENERAL PROVISIONS.......................................................................... 28
SECTION 8.01 Survival of Representations, Warranties, and Agreements........................... 28
SECTION 8.02 Indemnity......................................................................... 28
SECTION 8.03 Transfer Taxes.................................................................... 28
SECTION 8.04 Notices........................................................................... 29
SECTION 8.05 Descriptive Headings; Certain Terms............................................... 30
SECTION 8.06 Entire Agreement, Assignment...................................................... 30
SECTION 8.07 Governing Laws.................................................................... 30
SECTION 8.08 Expenses.......................................................................... 31
SECTION 8.09 Amendment......................................................................... 31
SECTION 8.10 Waiver............................................................................ 31
SECTION 8.11 Counterparts; Effectiveness....................................................... 31
SECTION 8.12 Severability; Validity; Parties of Interest....................................... 31
SECTION 8.13 Bulk Sales........................................................................ 32
SECTION 8.14 Bankruptcy Court Approval......................................................... 32
ARTICLE 9. DEFINITIONS................................................................................. 32
SECTION 9.01 Defined Terms..................................................................... 32
ARTICLE 10. TAX MATTERS................................................................................ 36
SECTION 10.01 Tax Definitions................................................................... 36
SECTION 10.02 Tax Representations and Warranties................................................ 37
SECTION 10.03 Section 338(h)(10) Election....................................................... 38
SECTION 10.04 Tax Matters....................................................................... 39
</TABLE>
ii
<PAGE>
99.2
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT, dated as of May 3, 2000 (the "Agreement"),
is made by and among SYSTEM SOFTWARE ASSOCIATES, INC., a Delaware corporation
(the "Seller"), GORES TECHNOLOGY GROUP, a California corporation, but only for
purposes of Article 4 hereof ("Gores") and SSA Acquisition Corporation, a
Delaware corporation (the "Purchaser"). Capitalized terms used herein and not
otherwise defined shall have the meanings set forth in Article 9.
WHEREAS, the Seller is engaged, on its own behalf and through its
subsidiaries, in the business of developing, marketing, selling and delivering
enterprise resource planning software and related services (collectively, the
"Business");
WHEREAS, the Seller plans to seek relief under Chapter 11 of Title 11 of
the United States Code (the "Bankruptcy Code") by filing a case (the "Chapter 11
Case") in the United States Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court");
WHEREAS, the Purchaser desires to purchase the assets of the Seller related
to the Business and assume certain liabilities from the Seller, and the Seller
desires to sell, convey, assign and transfer to the Purchaser, substantially all
of the assets and properties related to the Business together with certain
obligations and liabilities relating thereto, all in the manner and subject to
the terms and conditions set forth herein and in accordance with Sections 105,
363 and 365 and other applicable provisions of the Bankruptcy Code; and
WHEREAS, the Acquired Assets will be sold pursuant to an order of the
Bankruptcy Court approving such sale under Section 363 of the Bankruptcy Code,
and such sale will include the assumption and assignment of certain executory
contracts and unexpired leases and liabilities thereunder under Section 365 of
the Bankruptcy Code and the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE 1.
PURCHASE AND SALE OF ASSETS
SECTION 1.01 Acquired Assets.
(a) Section 363 Assigned Assets. Pursuant to Section 363 of the
Bankruptcy Code and on the terms and subject to the conditions precedent
set forth in this Agreement, at the Closing the Seller shall sell, assign,
transfer, convey, and deliver to the Purchaser, and the Purchaser shall
purchase and accept from the Seller, all of the Seller's rights, title, and
interests in, to and under all of the assets, property, rights and claims
of the Seller of every kind and description, wherever located, real,
personal or mixed, whether tangible or intangible, owned, held or used in
the conduct of the Business by the Seller including,
<PAGE>
without limitation, as set forth in Schedule 1.01(a) (as amended by
Purchaser from time to time prior to Closing) (collectively, the "Section
363 Assigned Assets"); provided that the Section 363 Assigned Assets shall
not include any executory contracts or unexpired leases, which are dealt
with exclusively in Section 1.01(b), nor shall they include the Excluded
Assets as provided in Section 1.02.
(b) Section 365 Assumed Rights. Pursuant to Section 365 of the
Bankruptcy Code, at the Closing the Seller shall assume and assign to the
Purchaser, and the Purchaser shall accept from the Seller, all of the
Seller's and the Acquired Subsidiaries' rights under and title and interest
in all of Seller's executory contracts and unexpired leases listed on
Schedule 1.01(b) (as amended by Purchaser from time to time prior to
Closing) (collectively, the "Section 365 Assumed Rights"); provided,
however, that nothing in this Section 1.01(b) shall require Seller to
assume, and the Section 365 Assumed Rights shall not include, any executory
contracts or unexpired leases that would cause the Cure Costs (as defined
in Section 1.03) payable by Seller to exceed $4,000,000. Any other
executory contracts or leases not included as Section 365 Assumed Rights
are referred to herein as the "Excluded Contracts."
(c) Intellectual Property Rights. The assets so transferred shall,
pursuant to Sections 363 and 365 of the Bankruptcy Code, include all of
Seller's rights, title and interest in, to and under all Intellectual
Property, in each case owned or licensed by the Seller and used or held or
held for use in the Business, including the items listed in Schedule
3.08(a).
SECTION 1.02 Excluded Assets. Notwithstanding the foregoing, the
Purchaser expressly understands and agrees that (a) the assets and properties of
the Seller listed on Schedule 1.02 (as amended from time to time by Purchaser
prior to Closing) and (b) the Excluded Contracts (collectively, the "Excluded
Assets") shall be excluded from the Acquired Assets.
SECTION 1.03 Cure Costs. The Seller shall take all commercially
reasonable steps, including paying up to an aggregate of $4,000,000 of necessary
costs (the "Cure Costs"), to achieve cure and reinstatement of and the
assumption and assignment of the Section 365 Assumed Rights. The Purchaser shall
have the right to determine, prior to Closing, which executory contracts and
unexpired leases shall be assumed and assigned and shall have the right and full
authority to negotiate cure amounts with non-debtor parties to such contracts
and leases.
SECTION 1.04 Assumed Liabilities. On the terms and subject to the
conditions set forth in this Agreement, at the Closing, the Purchaser shall
assume from the Seller and thereafter pay, perform or discharge in accordance
with their terms all of the liabilities and obligations arising under the
Assumed Rights and all of the liabilities and obligations set forth on Schedule
1.04. The liabilities to be assumed pursuant to this Agreement shall be referred
to herein as the "Assumed Liabilities."
SECTION 1.05 Excluded Liabilities. Notwithstanding any provision in this
Agreement or any other writing or commitment (written or oral) to the contrary,
the Purchaser is assuming only the Assumed Liabilities and is not assuming any
other liability or obligation of the
2
<PAGE>
Seller (or any predecessors of the Seller or any prior owners of all or part of
their businesses and assets) of whatever nature, whether presently in existence
or arising hereafter. All such other liabilities and obligations shall be
retained by and remain obligations and liabilities of the Seller (all such
liabilities and obligations not being assumed being herein referred to as the
"Excluded Liabilities"). Notwithstanding anything to the contrary in Section
1.04, none of the following shall be Assumed Liabilities for the purposes of
this Agreement:
(a) any liability or obligation under any Environmental Laws
that is not an Assumed Liability;
(b) any liability or obligation related to employees of Seller,
except as provided in Section 5.06(c)(ii);
(c) any liability or obligation for Designated Chapter 11 Costs
and any contracts related thereto;
(d) any liability or obligation for indebtedness for borrowed
money or evidenced by bonds or notes (including accrued interest and
fees with respect thereto);
(e) any Taxes for which Seller is liable pursuant to Section
10.04(a)(i) or any other provision of this Agreement;
(f) any liability or obligation arising out of or relating to
any investigation of Seller's revenue recognition practices by the
Securities and Exchange Commission (the "SEC");
(g) any liability or obligation relating to an Excluded Asset;
and
(h) any liability or obligation under any International Plan,
Employee Plan or Benefit Arrangement, except as provided in Section
5.06(c)(ii).
SECTION 1.06 Purchase Price.
(a) In consideration for the Acquired Assets, the Purchaser shall pay
to the Seller at the Closing (i) cash by wire transfer in an amount
determined pursuant to the first sentence of Section 1.06(b) below (the
"Cash Proceeds") less (ii) the Deposits (as defined in Section 1.07 below)
and any interest credited thereon plus (iii) a number of shares equal to
25% of Purchaser's common stock, par value $.01 per share, to be
outstanding immediately after the Closing (the "Stock Proceeds" and
together with the Cash Proceeds, the "Purchase Price"). The Purchase Price
shall be paid as provided in Section 2.02(b).
(b) The Cash Proceeds shall be equal to: (i) (A) the amount necessary
to release from Seller's estate the first priority lien held by Seller's
existing senior secured lenders (the "Pre-Petition Facility") plus (B) the
cost to cure defaults under leases and contracts to be assumed by Purchaser
up to $4,000,000 plus (C) the amount necessary to
3
<PAGE>
retire a post-petition financing facility in the amount of up to
$11,740,000 (the "DIP Financing") plus the related fees and expenses of the
lenders providing the DIP Financing plus (D) $2,000,000. The parties hereto
recognize that the amount provided pursuant to Section 1.06(b)(i)(C) may be
less than $11,740,000. The Purchase Price (plus Assumed Liabilities to the
extent properly taken into account under the Code and the Treasury
Regulations promulgated thereunder), and any subsequent adjustments
thereof, shall be allocated among the Acquired Assets in a manner
consistent with the values set forth in the Purchase Price allocation
schedule set forth on Schedule 1.06(b), which schedule shall be prepared by
the Closing Date. The Purchaser and the Seller agree to be bound by such
allocation and to file all Tax returns and reports (including IRS Form
8594) with respect to the transactions contemplated by this Agreement
(including any subsequent adjustments to the Purchase Price), including,
but not limited to, all federal, state and local Tax returns, on the basis
of such allocation, and shall take no position contrary thereto unless
required to do so pursuant to a determination (as defined in Section
1313(a) of the Code) or any similar state, foreign or local tax provision.
SECTION 1.07 Deposits. Pursuant to the terms of that certain Letter
Agreement dated as of April 6, 2000 by and between the Seller and Gores
Technology Group (the "Letter Agreement"), Purchaser or one of its Affiliates
has paid to counsel for Seller a deposit in the amount of $250,000 (the "Initial
Deposit"). Upon receipt of commitments satisfactory to Purchaser from Foothill
Capital Corporation and Cerberus Partners with respect to the treatment of their
existing secured debt, Purchaser shall wire transfer to counsel for Seller an
additional $250,000 deposit (the "Additional Deposit," and together with the
Initial Deposit, and, with any interest credited to the Additional Deposit and
the Initial Deposit, the "Deposits"). Counsel for Seller will hold the Deposits
pursuant to a letter agreement dated as of April 7, 2000 by and among Seller,
Gores and counsel for Seller. The Deposits will be invested as provided in such
letter agreement. The Deposits shall be applied towards the Cash Proceeds on the
Closing Date; provided, however, that the Deposits shall be refunded to the
Purchaser in the event the Closing does not occur for any reason other than as
set forth in Section 7.02(b).
ARTICLE 2.
THE CLOSING
SECTION 2.01 Closing. The consummation of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Latham &
Watkins located at 233 South Wacker Drive, Suite 5800, Chicago, Illinois 60606
at 10:00 a.m. (a) within one business day after the conditions set forth in
Article 6 shall have been satisfied or waived or (b) at such other time, date
and place as shall be fixed by agreement among the parties (the date of the
Closing being herein referred to as the "Closing Date").
SECTION 2.02 Deliveries at Closing.
(a) At the Closing, the Seller shall deliver to the Purchaser (1)
such deeds, bills of sale, assignments of leases and contracts, and any
other instruments of conveyance (collectively, the "Conveyance Documents")
that, in the reasonable judgment of Purchaser, are reasonable and necessary
to effectively vest in Purchaser good, valid and
4
<PAGE>
insurable title to the Acquired Assets, free and clear of all liens,
claims, encumbrances, interests and security interests of any nature or
kind whatsoever (other than Permitted Exceptions) pursuant to the terms of
this Agreement, and (2) such other customary closing documents, instruments
or certificates required to be delivered as a condition precedent to the
Purchaser's obligations under this Agreement.
(b) At the Closing, the Purchaser shall deliver to the Seller (1)
such duly executed instruments as are deemed necessary or appropriate to
effectuate the assumption of the Assumed Liabilities by the Purchaser; (2)
such other customary closing documents, instruments or certificates
required to be delivered as a condition precedent to the Seller's
obligations under this Agreement; (3) the Cash Proceeds less the Deposits;
and (4) one or more stock certificates registered in the name of Seller or
as Seller may direct representing the Stock Proceeds.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE SELLER
The Seller represents and warrants to the Purchaser as follows:
SECTION 3.01 Organization. The Seller and each of the Acquired
Subsidiaries is a corporation validly existing and has the corporate power and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business. The Seller and each of the Material
Subsidiaries listed on Schedule 3.01 are in good standing under the laws of the
jurisdiction of its incorporation and in each jurisdiction where the operations
of the Business require such qualification, except where the failure to be in
good standing would not individually or in the aggregate have a Material Adverse
Effect. All of the outstanding and issued shares of capital stock of each of the
Acquired Subsidiaries (other than directors' qualifying shares) are owned,
directly or indirectly, of record and beneficially by Seller. None of the
capital stock of any Acquired Subsidiary is subject to the issuance of any
security, instrument, warrant, option, purchase right, conversion or exchange
right, call, commitment or claim of any right, title, or interest therein or
thereto. Schedule 3.01 lists all of Seller's subsidiaries and all holders of
directors' qualifying shares of any Acquired Subsidiary.
SECTION 3.02 Authority Relative to this Agreement. The Seller has the
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution, delivery and performance of this Agreement
by the Seller and the consummation by the Seller of the transactions
contemplated hereby have been duly authorized by all requisite corporate action.
This Agreement has been duly and validly executed and delivered by the Seller
and (assuming this Agreement constitutes a valid and binding obligation of the
Purchaser), will constitute a valid and binding obligation of the Seller after
the Petition Date upon the entry of the Section 363/365 Order; provided,
however, that, subject to the approval of this Agreement by the Bankruptcy
Court, if the Seller breaches this Agreement, the Purchaser's damages shall be
deemed an administrative priority claim under 11 U.S.C. Sections 503(b) and
507(a).
SECTION 3.03 Consents and Approvals. No consent, approval, order, or
authorization of, or declaration, filing or registration with, any governmental
or regulatory
5
<PAGE>
authority is required to be made or obtained by the Seller or any of the
Acquired Subsidiaries in connection with the execution, delivery and performance
by Seller of this Agreement and the consummation of the transactions
contemplated hereby, except (a) for consents, orders, approvals or
authorizations of, or declarations or filings with, the Bankruptcy Court, (b)
for consents, approvals or authorizations which may be required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and (c) for consents, orders, approvals, authorization, declarations,
filings or registrations, which, if not obtained, would not, individually or in
the aggregate, have a Material Adverse Effect.
SECTION 3.04 Financial Statements. The Seller has heretofore delivered or
made available to the Purchaser financial statements (the "Financial
Statements") for the fiscal year ended October 31, 1999 and the three months
ended January 31, 2000. The Financial Statements fairly present in all material
respects the financial condition, cash flows, changes in stockholders equity and
results of operation of the Business on a consolidated basis as at the dates
thereof and for the periods then ending in accordance with GAAP applied on a
consistent basis (except as may be indicated in the notes thereto and except, in
the case of unaudited financial statements for the lack of footnotes and normal,
immaterial year-end audit adjustments).
SECTION 3.05 Certain Assets.
(a) Schedule 3.05(a) sets forth the street addresses of all real
property used or held for use in the Business (the "Real Property"), which
the Seller owns, leases, operates or subleases, specifying whether such
Real Property is owned or leased and in the case of leases or subleases,
the name of the lessor or sublessor.
(b) The Seller (i) owns fee simple title to the Real Property
designated on Schedule 3.05(a) as being owned by the Seller and (ii) except
as set forth in Schedule 3.05(d), has a valid leasehold interest in the
Real Property designated on Schedule 3.05(a) as being leased or subleased
by the Seller.
(c) Except as set forth in Schedule 3.07(b), the Seller has good and
valid title to, or a valid leasehold interest in, all tangible personal
property included in the Acquired Assets.
(d) Except as described in Schedule 3.05(d), there does not exist
under any material lease of Real Property, any material default or any
event which with notice or lapse of time or both would constitute a default
other than defaults caused solely by filing the Chapter 11 Case.
(e) Except for the Excluded Assets, the Acquired Assets constitute
all of the property and assets used or held for use in the Business and are
adequate to conduct the Business as currently conducted.
SECTION 3.06 Brokers. Except for Houlihan, Lokey, Howard & Zukin, whose
fee is the sole responsibility of the Seller, no person is entitled to any
brokerage, financial advisory or finder's fee or similar fee or commission in
connection with the transactions contemplated by this
6
<PAGE>
Agreement based upon arrangements made by or on behalf of Seller or any of the
Acquired Subsidiaries.
SECTION 3.07 Material Contracts.
(a) Except as disclosed in Schedule 3.07(a) as of the date hereof,
the Seller is not a party to or bound by:
(i) any lease for personal property requiring aggregate
payments by Seller or an Acquired Subsidiary after Closing of $100,000
or more;
(ii) any agreement for the purchase of materials, supplies,
goods, services, equipment or other assets that has a term of at least
one year or that requires aggregate payments by Seller or an Acquired
Subsidiary after Closing of $100,000 or more;
(iii) any other agreement that requires aggregate payments by
Seller or an Acquired Subsidiary after Closing of $100,000 or more;
(iv) any sales, distribution or other similar agreements not
entered into in the ordinary course providing for the sale by the
Seller or (as of the Closing) an Acquired Subsidiary of materials,
supplies, goods, services, equipment or other assets that requires
aggregate payments after Closing of $100,000 or more;
(v) any partnership, joint venture or other similar agreement
or arrangement;
(vi) any agency, dealer, sales representative, marketing or
other similar agreement;
(vii) any agreement that limits the freedom of the Seller or (as
of the Closing) an Acquired Subsidiary to compete in any line of
business or with any Person or in any area or to own, operate, sell,
transfer, pledge or otherwise dispose of or encumber any Acquired
Asset or which would so limit the freedom of the Purchaser after the
Closing Date (other than Software License Agreements and Professional
Service Agreements which to Seller's knowledge after reasonable
inquiry have no such restrictions material to the Business); or
(viii) any contract or agreement (other than Software License
Agreements) to which a Subsidiary is also a party or guarantor.
The agreements and contracts required to be disclosed on Schedule
3.07(a) are referred to herein as the "Material Contracts."
(b) Except for payment defaults set forth on Schedule 3.07(b), to the
Seller's knowledge after reasonable inquiry, neither the Seller nor any
other party thereto is in default or breach in any material respect under
the terms of any Material Contract and no
7
<PAGE>
event or circumstance has occurred that, with notice or lapse of time or
both, would constitute a default or breach thereunder (except for defaults
and breaches caused solely by filing the Chapter 11 Case). True and
complete copies of each Material Contract have been delivered or made
available to the Purchaser.
(c) Seller has delivered to Purchaser a list of all contracts for
which deferred revenue is reflected on Seller's books and records as of
April 13, 2000.
SECTION 3.08 Intellectual Property.
(a) Schedule 3.08(a) of this Agreement contains a complete and
accurate list of all (i) registered Intellectual Property and unregistered
trademarks owned by Seller or any Acquired Subsidiary and (ii) computer
software sold or licensed by Seller or any Acquired Subsidiary in the
ordinary course of business. With respect to the trademarks and U.S.
patents listed on Schedule 3.08(a), such schedule also specifies (A) the
jurisdictions in which such trademarks or U.S. patents are registered or in
which an application for registration has been filed; (B) the registration
or application numbers; (C) with respect to the trademarks, the termination
or expiration dates; and (D) whether the owner thereof is not the Seller.
Seller has delivered to Purchaser a list, to Seller's knowledge after
reasonable inquiry, of all of Seller's customers who have entered into
Software License Agreements and Professional Services Agreements since
April 1988.
(b) Schedule 3.08(b) sets forth a list of all licenses, sublicenses
and other agreements (other than "shrink-wrap" license agreements) as to
which the Seller is a party and pursuant to which any Person is authorized
to use any Intellectual Property.
(c) Except as set forth on Schedule 3.08(c), as of the date hereof,
since January 1, 1999, neither Seller nor (as of the Closing) any Acquired
Subsidiary has been a defendant in any action, suit or proceeding relating
to, and has not received any written claim alleging that the Seller or any
Acquired Subsidiary is infringing upon the Intellectual Property of others.
To the Seller's knowledge after reasonable inquiry, no other person is
infringing upon any Intellectual Property owned by Seller or an Acquired
Subsidiary and the Seller is not infringing upon the Intellectual Property
of any other Person except in each case as would not have a Material
Adverse Effect. No Intellectual Property owned by Seller or an Acquired
Subsidiary is subject to any outstanding judgment, injunction, order,
decree or agreement restricting the use thereof by the Seller or (as of the
Closing) any Acquired Subsidiary with respect to the Business or
restricting the licensing thereof by the Seller or (as of the Closing) any
Acquired Subsidiary to any Person.
(d) Except as set forth on Schedule 3.08(d), there shall be no fees,
costs or assessments required to assign or sell the Intellectual Property
to Purchaser.
(e) Except as set forth on Schedule 3.08(e), the Seller is not aware
of any defenses which a non-Seller party may have to the assignment or sale
of the Intellectual Property to Purchaser.
8
<PAGE>
SECTION 3.09 Required and Other Consents. Schedule 3.09 sets forth each
agreement, contract, lease or other instrument binding upon Seller that will
constitute a Section 365 Assumed Right or an Assumed Liability which requires
the consent, including, without limitation, any consent with respect to a change
of control, or other action by any Person as a result of the execution, delivery
and performance of this Agreement, unless such document can be assumed and
assigned without such consent under the Bankruptcy Code except such consents or
actions as would not, individually or in the aggregate, have a Material Adverse
Effect if not received or taken by the Closing Date.
SECTION 3.10 Absence of Certain Changes. Except as disclosed in Schedule
3.10, since the Balance Sheet Date, the Business and the business of the
Acquired Subsidiaries have been conducted in the ordinary course, and there has
not been:
(a) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the Business or any Acquired Asset which,
individually or in the aggregate, has had or could reasonably be expected
to have individually or in the aggregate a Material Adverse Effect;
(b) any change in any method of accounting or accounting practice by
the Seller with respect to the Business or by the Acquired Subsidiaries
with respect to their respective businesses except for any such change
after the date hereof required by reason of a change in GAAP;
(c) any labor dispute, other than routine individual grievances, or
any activity or proceeding by a labor union or representative thereof to
organize any employees of the Business, which employees were not subject to
a collective bargaining agreement at the Balance Sheet Date, or any
lockouts, strikes, slowdowns, work stoppages or threats thereof by or with
respect to employees of the Business;
(d) any sale or other disposition of any material assets other than
sales of products in the ordinary course of business;
(e) any closing agreement or other agreement entered into with a
Taxing Authority to settle any claim or assessment for Taxes on a basis
that would increase the Tax liability of any of the Acquired Subsidiaries
for a Post-Closing Tax Period; or
(f) any material election made by the Seller or the Acquired
Subsidiaries with respect to Taxes.
SECTION 3.11 Litigation and Proceedings. Schedule 3.11 contains an
accurate list of all legal actions, suits and proceedings pending as of the date
hereof against the Seller or any Acquired Subsidiary, whether or not stayed
pursuant to Section 362 of the Bankruptcy Code. Except as described in Schedule
3.11, there is no action, suit, investigation or proceeding pending against or,
to Seller's knowledge after reasonable inquiry, threatened in writing against or
affecting the Business, any Acquired Asset or any Acquired Subsidiary before any
court or arbitrator or any government body, agency or official which (a) could
reasonably be expected to
9
<PAGE>
have, individually or in the aggregate, a Material Adverse Effect on the
Acquired Assets after the Closing or (b) in any manner challenges or seeks to
prevent, enjoin, after or materially delay the transactions contemplated by this
Agreement.
SECTION 3.12 Compliance with Laws and Court Orders. Except as set forth
on Schedule 3.12 and the matters covered by the investigation of Seller by the
SEC previously disclosed to Purchaser, since the Balance Sheet Date, the
Business and the business of each Acquired Subsidiary have been conducted in
material compliance with all laws, statutes, rules, regulations, judgments,
injunctions, orders or decrees applicable to the Acquired Assets or the conduct
of the Business or the businesses of the Acquired Subsidiaries and since January
1, 1999 neither the Seller nor, to the knowledge of Seller after reasonable
inquiry, any Acquired Subsidiary has received any written communication from a
government authority that alleges that the Business or the businesses of the
Acquired Subsidiaries has not been conducted in compliance with any laws,
statutes, rules, regulations, judgments, injunctions, orders or decrees, except
in each case for violations that have not had and could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
SECTION 3.13 Year 2000 Compliance. Beginning with Seller's Version 6 of
software products owned and developed by Seller or any Acquired Subsidiary, all
products (including hardware) sold or services performed by Seller or any
Acquired Subsidiary in connection therewith (collectively referred to as the
"Products") are Year 2000 Compliant. "Year 2000 Compliant" means, with respect
to the Products, such Products are designed to be used prior to, during and
after the calendar year 2000 A.D., and the Products used during each such time
period will accurately receive, provide and process date/time data (including,
but not limited to, calculating, comparing and sequencing) from, into and
between the twentieth and twenty-first centuries, including the years 1999 and
2000, and leap year calculations and will not materially malfunction, cease to
function or provide invalid or incorrect results as a result of date/time data.
There has been, and there will be, no interruption of, diminution of or adverse
impact on, the prompt and complete performance of any of the obligations under
any contract of Seller or the performance, reliability, utility, desirability or
value of the Acquired Assets, including without limitation, the Products,
arising directly or indirectly from the failure of any of the Acquired Assets,
including without limitation, the Products, to be Year 2000 Compliant. Attached
as Schedule 3.13 is Seller's published Year 2000 policies with respect to the
Business.
SECTION 3.14 Inventories. There are no inventories related to the
Business.
SECTION 3.15 Receivables. All accounts receivable (other than
receivables collected since the Balance Sheet Date) reflected on the Balance
Sheet on a consolidated basis are valid and arose from Seller's conduct of the
Business in the ordinary course. All accounts receivable arising out of or
relating to the Business at January 31, 2000 are included in the unaudited
balance sheet of Seller and its subsidiaries as of January 31, 2000, in
accordance with GAAP applied on a consistent basis.
SECTION 3.16 Environmental Compliance. Except as set forth in Schedule
3.16, Seller is in compliance with all applicable Environmental Laws and there
are no liabilities arising in connection with or relating to the Seller, any
Acquired Subsidiary, the Real Property, Business or
10
<PAGE>
Acquired Assets of any kind whatsoever, whether accrued, contingent, absolute,
determinable or otherwise, arising under or relating to any Environmental Laws.
Neither the Seller nor any Acquired Subsidiary has received any written notices
of violations or demand from any other person arising under such Environmental
Laws and there are no governmental investigations pending or threatened
regarding the Seller's compliance with or liability under any Environmental
Laws. The Seller and each of the Acquired Subsidiary have all Environmental
Permits required under Environmental Laws and, to Seller's knowledge after
reasonable inquiry there are no Hazardous Substances on the Real Property which
require any remediation or cleanup under applicable Environmental Laws.
SECTION 3.17 Conflict of Activities. Seller will be the debtor and
debtor-in-possession in its Chapter 11 Case. All of the operations of the
Business are operated by Seller or its subsidiaries, as the case may be.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser and Gores represent and warrant to the Seller as follows:
SECTION 4.01 Organization. The Purchaser is a corporation validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has the corporate power and authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its business as it is now being conducted. The Purchaser is duly qualified as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities make such qualification appropriate, except where
the failure to be so qualified would not individually or in the aggregate have a
material adverse effect on the Purchaser's ability to complete the transactions
contemplated by this Agreement.
SECTION 4.02 Authority Relative to this Agreement. The Purchaser has the
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution, delivery, and performance of this
Agreement by the Purchaser and the consummation by the Purchaser of the
transactions contemplated hereby have been duly authorized by all requisite
corporate action. This Agreement has been duly and validly executed and
delivered by the Purchaser and (assuming this Agreement constitutes a valid and
binding obligation of the Seller) constitutes a valid and binding agreement of
the Purchaser, enforceable against the Purchaser in accordance with its terms.
SECTION 4.03 Capital Stock. The authorized capital stock of Purchaser
consists of 1,000 shares of Common Stock, none of which are issued and
outstanding as of the date of the Agreement. All of the issued and outstanding
shares of capital stock of Purchaser are, and all shares to be issued pursuant
to this Agreement will be, when issued, duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights.
SECTION 4.04 Consents and Approvals. Except for consents, approvals or
authorizations which may be required under the Bankruptcy Code or the HSR Act,
no consent,
11
<PAGE>
approval, or authorization of, or declaration, filing or registration with, any
United States federal or state governmental or regulatory authority is required
to be made or obtained by the Purchaser in connection with the execution,
delivery, and performance of this Agreement and the consummation of the
transactions contemplated hereby.
SECTION 4.05 No Violations. Assuming that the conditions set forth in
Article 6 shall have been satisfied, neither the execution, delivery or
performance of this Agreement by the Purchaser, nor the consummation by the
Purchaser of the transactions contemplated hereby, nor compliance by the
Purchaser with any of the provisions hereof, will (a) conflict with or result in
any breach of any provisions of the articles or certificate of incorporation, as
the case may be, or bylaws of the Purchaser or Gores, (b) result in a violation
or breach of, or constitute (with or without due notice or lapse of time) a
default (or give rise to any right of termination, cancellation, acceleration,
vesting, payment, exercise, suspension, or revocation) under any of the terms,
conditions or provisions of any note, bond, mortgage, deed of trust, security
interest, indenture, license, contract, agreement, plan or other instrument or
obligation to which the Purchaser is a party or by which the Purchaser or the
Purchaser's properties or assets may be bound or affected, (c) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Purchaser or Gores or the Purchaser's properties or assets, (d) result in the
creation or imposition of any encumbrance on any asset of the Purchaser, or (e)
cause the suspension or revocation of any permit, license, governmental
authorization, consent or approval necessary for the Purchaser to conduct its
business as currently conducted or as proposed to be conducted, except in the
case of clauses (b), (c), (d), and (e) for violations, breaches, defaults,
terminations, cancellations, accelerations, creations, impositions, suspensions
or revocations that would not individually or in the aggregate have a material
adverse effect on the Purchaser's ability to complete the transactions
contemplated by this Agreement.
SECTION 4.06 Brokers. No person is entitled to any brokerage, financial
advisory, finder's or similar fee or commission payable by the Purchaser in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Purchaser, other than Gores Technology
Group and/or its affiliates, fees to which will not exceed $250,000 in the
aggregate plus reimbursement of reasonable out-of-pocket expenses (including
out-of-pocket payments to non-affiliated third parties).
SECTION 4.07 Financing. On the Closing Date, the Purchaser will have
cash on hand or financing sufficient to deliver the Cash Proceeds to the Seller.
ARTICLE 5.
COVENANTS
SECTION 5.01 Notice of the Section 363/365 Motion and Section 363/365
Order. The Seller shall notify, as is required by the Bankruptcy Rules, the
Bankruptcy Code and the Purchaser, all parties entitled to notice of all
motions, notices and orders referenced under this Agreement, as modified by
orders in respect of notice which may be issued at any time and from time to
time by the Bankruptcy Court.
12
<PAGE>
SECTION 5.02 Access and Information. The Seller and each of the Acquired
Subsidiaries shall afford to the Purchaser and to the Purchaser's financial
advisors, legal counsel, accountants, consultants, financing sources and other
authorized representatives reasonable access during normal business hours
throughout the period prior to the Closing Date to the books, records,
properties and personnel of the Seller and any Acquired Subsidiary and, during
such period, shall furnish as promptly as practicable to the Purchaser any and
all such information as the Purchaser reasonably may request, including all
pleadings and other documents or schedules filed with the Bankruptcy Court or
the Office of the United States Trustee. In addition, prior to the Closing Date,
Purchaser shall have the right to consult with and make specific recommendations
to Seller regarding the management and operation of the Business and potential
cost-cutting measures that may be implemented prior to the Closing Date. Seller
agrees to consider any such recommendations in good faith and to cooperate with
Purchaser in implementing any such recommendations as may be accepted by Seller
(such acceptance not to be unreasonably withheld).
SECTION 5.03 Books and Records.
(a) If the Purchaser wishes to dispose of or destroy any of the
business records or files of the Business which are transferred to the Purchaser
pursuant to this Agreement, they shall first give 10 days' prior written notice
to the Seller, and the Seller shall have the right, at its option and expense,
upon prior written notice to the Purchaser within such 10-day period, to take
possession of such records and files within 20 days after the date of the notice
from the Seller.
(b) The Purchaser shall allow the Seller and any of its then current
directors, officers, employees, counsel, representatives, accountants and
auditors (collectively, the "Seller's Representatives"), at Seller's expense,
access to all business records and files of the Seller or the Business that are
transferred to the Purchaser in connection herewith, which are reasonably
required by such Seller's Representatives in order to complete the Chapter 11
Case or for other valid business purposes, during regular business hours and
upon reasonable notice at the Seller's former offices and the Seller's
Representatives shall have the right to make copies of any such records and
files; provided, however, that any such access or copying shall be had or done
in such a manner so as not to unreasonably interfere with the normal conduct of
the Purchaser's business or operations.
(c) This Section 5.03 shall cease to be enforceable after the Seller
completes the Chapter 11 Case. The provisions of Article 10 shall control access
to records for the matters covered by Article 10.
SECTION 5.04 Additional Matters. Subject to the terms and conditions
herein, except as provided by the Bankruptcy Code, the Bankruptcy Rules or any
other orders entered or approvals or authorizations granted by the Bankruptcy
Court in the Chapter 11 Case, including any order contemplated by Section
7.01(ii) hereof, each of the parties hereto agrees to use all commercially
reasonable efforts to take, or cause to be taken, all action and to do, or cause
to be done, all things necessary, proper or advisable, including under
applicable laws and regulations, to consummate and make effective the
transactions contemplated by this Agreement, including using all commercially
reasonable efforts to obtain all necessary waivers, consents and approvals
13
<PAGE>
required under this Agreement. Without limiting the foregoing, the Purchaser and
the Seller shall (a) no later than three (3) business days after the Seller
obtains DIP Financing with a maturity date no earlier than June 16, 2000, make
all filings required under the HSR Act, (b) use their respective commercially
reasonable efforts to seek early termination of the 15-day waiting period under
the HSR Act, (c) respond promptly, but in no event in less than two (2) weeks,
to any additional requests for information under the HSR Act and (d) take all
other action necessary to expedite compliance with the HSR Act in order to
consummate the transactions contemplated hereby. The Purchaser shall pay fees
relating to filings required under the HSR Act.
SECTION 5.05 Further Assurances. In addition to the provisions of this
Agreement, from time to time after the Closing Date, the Seller and the
Purchaser will use all commercially reasonable efforts to execute and deliver
such other instruments of conveyance, transfer or assumption, as the case may
be, and take such other action as may be reasonably requested to implement more
effectively the conveyance and transfer of the Acquired Assets to the Purchaser
and the assumption of the Assumed Liabilities by the Purchaser in accordance
with the Section 363/365 Order. The Purchaser and the Seller hereby irrevocably
consent to the personal and subject-matter jurisdiction of the Bankruptcy Court
for all purposes necessary to effectuate this Section. The Seller will seek to
include in any plan of reorganization in the Chapter 11 Case supported by it,
provision for retained jurisdiction of the Bankruptcy Court to effectuate this
Section 5.06, and will use commercially reasonable efforts to oppose any such
plan of reorganization which fails to include such provisions.
SECTION 5.06 Employees and Benefit Programs.
(a) Employee Benefits Definitions. The following terms, as used in
this Agreement, having the following meanings:
"Benefit Arrangements" has the meaning set forth in Section
5.06(b)(i).
"COBRA" means Part 6 of Title I of ERISA or any similar state law.
"Employee Plans" has the meaning set forth in Section 5.06(b)(i).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" of any entity means any other entity which, together
with such entity, would be treated as a single employer under Section 414
of the Code.
"International Plan" means an employment, severance or similar
contract, arrangement or policy (exclusive of any such contract which is
terminable within 30 days without liability of the Seller or any of its
ERISA Affiliates), or a plan or arrangement providing for severance,
insurance coverage (including any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits,
vacation benefits, pension or retirement benefits or for deferred
compensation, profit-sharing, bonuses, stock options, stock appreciation
rights or other forms of incentive compensation or post-retirement
insurance, compensation or benefits that (a) is exempt from ERISA
14
<PAGE>
pursuant to Section 4(b)(4) of ERISA, (b) is maintained or contributed to
by the Seller or any of its subsidiaries and (c) covers any employee or
former employee of the Seller or any of its subsidiaries.
"Multiemployer Plan" means each Employee Plan that is a multiemployer
plan, as defined in Section 3(37) of ERISA.
"Retained Employees" means the employees engaged in the Business that
are identified by the Seller prior to the Closing Date to remain employees
of the Seller after the Closing Date.
"Seller's Employee Liabilities" means, except as provided in Section
5.06(c)(ii), all liabilities, obligations and commitments arising out of or
related to the employment (or termination of employment) by the Seller of
its employees and former employees, including, but not limited to, any
obligation or liability for (a) accrued but unpaid wages, salary, incentive
or bonus compensation, vacation benefits and pay, unpaid contributions to
any Employee Plans or other compensation, (b) all claims for severance or
other termination benefits, (c) all workers compensation claims, (d)
employee tort claims or claims under federal and state employee
discrimination or sexual harassment laws including claims under Title VII
of the Civil Rights Act of 1964, and (e) any actions, suits or proceedings
brought by employees or former employees which are set forth on Schedule
3.11.
"Transferred Employees" has the meaning set forth in Section
5.06(c)(ii).
(b) ERISA Representations. The Seller hereby represents and warrants
to the Purchaser that:
(i) Schedule 5.06(b)(i) lists (A) each material "employee
benefit plan," as such term is defined in Section 3(3) of ERISA, which
is maintained, administered or contributed to by the Seller or any of
its ERISA Affiliates which covers employees of Seller or any of its
ERISA Affiliates or in which such employees participate other than any
plan exempt from ERISA pursuant to Section 4(b)(4) of ERISA
(hereinafter referred to collectively as the "Employee Plans") and (B)
each material employment, severance or other similar contract and
material policy, plan or arrangement providing for insurance coverage
(including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits, deferred compensation, profit-sharing,
bonuses, stock options, stock appreciation or other forms of incentive
compensation or post-retirement insurance, compensation or benefits
which (1) is not an Employee Plan, (2) is entered into, maintained or
contributed to, as the case may be, by the Seller or any of its
subsidiaries to cover employees or former employees of the Seller or
any of its subsidiaries, (3) is not entered into, maintained or
contributed to primarily for the benefit of persons substantially all
of whom are nonresident aliens of the United States and (4) is not an
International Plan. Such contracts, policies, plans and
15
<PAGE>
arrangements described in clause (B) above are hereinafter referred to
collectively as the "Benefit Arrangements." Schedule 5.06(b)(i) lists
all fees and/or termination penalties applicable to investment of the
assets of any Employee Plan intended to qualify under Code Section
401(a) which could be imposed upon termination of an Employee Plan
against the assets of such Employee Plan.
(ii) No Employee Plan is a Multiemployer Plan or is subject to
Title IV of ERISA or Section 412 of the Code. Neither the Seller nor
any of the Seller's ERISA Affiliates has incurred any liability under
Title IV of ERISA arising in connection with the termination of any
plan covered or previously covered by Title IV of ERISA, or has
maintained a plan subject to Section 412 of ERISA, for which any
liability remains outstanding.
(iii) To Seller's knowledge after reasonable inquiry, each
Employee Plan, which is intended to be qualified under section 401(a)
of the Code, is so qualified or, if such Employee Plan fails to be so
qualified, can become qualified on a retroactive basis, or Seller will
notify Purchaser of such failure prior to the rollover of any
participant's accounts from such plan to any plan of the Purchaser.
(iv) The Acquired Assets are not now nor will they after the
passage of time be subject to any Lien imposed under Code Section
412(n) by reason of the failure of the Seller or its ERISA Affiliates
to make timely installments or other payments required by Code Section
412 with respect to any plan maintained by Seller or its ERISA
Affiliates prior to the Closing.
(v) With respect to the employees of the Seller or any of the
Seller's Subsidiaries the principal work location of which is located
in the United States who are residents or citizens of the United
States, there are no employee post-retirement medical or health plans
in effect, except as required by COBRA.
(vi) No ERISA Affiliate of Seller maintains (A) any Employee
Plans which are intended to qualify under Code section 401(a), or (B)
any Benefit Arrangement.
(c) Employees and Offers of Employment
(i) Schedule 5.06(c)(i) sets forth a true and complete list of
the names, titles, and annual salaries of all employees of the
Business whose annual base salary exceeds $100,000.
(ii) Subject to further due diligence and negotiation, Purchaser
intends to offer employment to substantially all of Seller's active
employees engaged in the Business other than the Retained Employees
and to negotiate a management retention plan; provided, that the
Purchaser may terminate at any time after the Closing Date the
employment of any employee who accepts such offer. On the day
immediately prior to the Closing Date, Purchaser shall provide Seller
with a
16
<PAGE>
list of those employees of Seller other than the Retained Employees to
whom Purchaser does not intend to offer employment following the
Closing Date (the "Non-Retained Employees") and Seller shall take all
action necessary to terminate the Non-Retained Employees of Seller
engaged in the Business at its Chicago, Illinois headquarters. The
Purchaser shall be solely responsible for any WARN Act notification
and any liability under the WARN Act, relating to any termination of
any of Seller's employees occurring on or after the date of this
Agreement. Seller acknowledges that it is Purchaser's policy and
intention to provide equity incentives to management and key
employees, which may be dilutive to other holders of common stock of
Purchaser. Except as otherwise provided in this Section 5.06(c)(ii),
any severance or other obligations to officers and employees of Seller
shall not be Assumed Liabilities. For purposes of this Section 5.06,
an employee shall be an "active" employee of Seller if on the day
immediately prior to the Closing Date, such person is actively
employed by the Seller or who is on short-term disability leave,
authorized leave of absence or military service as of the day
immediately prior to the Closing Date (such inactive employees may be
offered employment by the Purchaser as of the date they would
otherwise return to active employment), but shall exclude any other
inactive or former employee including any Person who has been on lay-
off, long-term disability leave or unauthorized leave of absence or
who has terminated his or her employment, retired or died on or before
the day immediately prior to the Closing Date. Any such offer of
employment shall be at such salary or wage and benefit levels made
available by the Purchaser to similarly-situated employees and on such
other terms and conditions as the Purchaser shall in its sole
discretion deem appropriate. The employees engaged in the Business who
accept and commence employment with the Purchaser are hereinafter
collectively referred to as the "Transferred Employees." The Seller
will not take, and will cause each of its subsidiaries not to take,
any action which would impede, hinder, interfere or otherwise compete
with the Purchaser' effort to hire any Transferred Employees.
(d) Seller's Employee Liabilities and Benefit Plans. Except as
provided in Section 5.06(c)(ii), all (i) Seller's Employee Liabilities,
(ii) obligations and liabilities under the Employee Plans and Benefit
Arrangements and (iii) obligations and liabilities with respect to each
Retained Employee, and any former employee of Seller who is not a
Transferred Employee to the extent any such liability or obligation relates
to the period prior to the Closing Date shall not be Assumed Liabilities.
No assets of any Employee Plan or Benefit Arrangement shall be transferred
to the Purchaser or any of its Affiliates or to any plan of the Purchaser
or any of its Affiliates.
(e) Purchaser Benefit Plans.
(i) The Purchaser or one of its Affiliates will recognize all
years of service of the Transferred Employees with the Seller (or its
predecessors) or any of its Affiliates, only for purposes of
eligibility to participate in and to vest under those employee benefit
plans, within the meaning of Section 3(3) of ERISA, in which the
Transferred Employees are enrolled by the Purchaser or one of its
17
<PAGE>
Affiliates immediately after the Closing Date. The Purchaser shall
cause all pre-existing condition exclusions under any medical and
dental plans ("Purchaser's Health Plans") made available by the
Purchaser to Transferred Employees to be waived in respect of such
employees and dependents, but only to the extent Seller's medical and
dental plans recognize such Transferred Employees and their dependents
as having satisfied any pre-existing conditions exclusion under
Seller's medical and dental plans.
(ii) To the extent Seller is unable to maintain a group health
plan for Retained Employees after the Closing, Purchaser in its sole
discretion and upon Seller's request may allow Retained Employees to
participate in and Seller to provide benefits to Retained Employees
pursuant to Purchaser's Health Plans after the Closing. Purchaser's
obligations under this Section 5.06(e)(ii) are subject to Seller's
payment of all premiums and additional administrative costs associated
with participation of the Retained Employees in Purchaser's Health
Plans, as determined by Purchaser in its sole discretion, and provided
such payments are made at such times as Purchaser may require.
(f) No Third Party Beneficiaries. No provision of this Article shall
create any third party beneficiary or other rights in any employee or
former employee (including any beneficiary or dependent thereof) of the
Seller or of any of its subsidiaries in respect of continued employment (or
resumed employment) with either the Business, the Purchaser any of its
Affiliates and no provision of this Section 5.06 shall create any such
rights in any such Persons in respect of any benefits that may be provided,
directly or indirectly, under any Employee Plan or Benefit Arrangement or
any plan or arrangement which may be established by the Purchaser or any of
its Affiliates. No provision of this Agreement shall constitute a
limitation on rights to amend, modify or terminate after the Closing Date
any such plans or arrangements of the Purchaser or any of its Affiliates.
SECTION 5.07 Public Announcements; Confidential Information. The Purchaser
and the Seller shall consult with each other before issuing any press release or
making any public statement or other public communication with respect to the
Agreement or the transactions contemplated hereby. The Purchaser and the Seller
shall not issue any such press release or make any such public statement or
public communication without the prior consent of the other party, which shall
not be unreasonably withheld; provided, however, that a party may, without the
prior consent of the other party, issue such press release or make such public
statement as may, upon the advice of counsel, be required by law or any listing
agreement with any national securities exchange. After the Closing, the Seller
shall (a) not disclose to others any confidential information about the Business
without the prior consent of the Purchaser except to the extent such disclosure
is required by law or order of any governmental authority (in which case the
Seller shall, to the extent practicable, inform the Purchaser in advance of any
such disclosure, shall cooperate with the Purchaser in obtaining a protective
order or other protection in respect of such required disclosure, and shall
limit such disclosure to the extent possible while still complying with such
requirements) and (b) use reasonable care to safeguard confidential information
about the Business and to protect such information against disclosure, misuse,
espionage, loss and theft.
18
<PAGE>
SECTION 5.08 Conduct of the Business. Except as otherwise provided herein
or authorized by the Bankruptcy Court prior to the date hereof, from the date
hereof until the Closing Date, the Seller, subject to Purchaser's reasonable
consent rights:
(a) subject to the constraints imposed by the Budget, shall, and shall
cause each of the Acquired Subsidiaries to, conduct the Business and the
business of each of the Acquired Subsidiaries in the ordinary course and
shall use commercially reasonable efforts to preserve intact the business
or organizations and relationships with third parties and to keep available
the services of the present employees of the Business and the business of
each of the Acquired Subsidiaries;
(b) shall not, and shall not permit any Acquired Subsidiary to, take
or agree to commit to take any action that they know would make any
representation or warranty of Seller hereunder inaccurate in any material
respect at, or as of any time prior to, the Closing Date;
(c) shall not, and shall not permit any Acquired Subsidiary to, offer
credit terms or trade promotions to any customers except in the ordinary
course consistent with past practices with respect to the applicable
product lines of Seller or any Acquired Subsidiary or except to the extent
reasonably necessary to be competitive with competitors' product offerings;
(d) shall not, and shall not permit any Acquired Subsidiary to,
without Purchaser's prior written consent (which shall not unreasonably be
withheld) enter into any contract (other than a Software License Agreement
or a Professional Services Agreement, purchase order or sale order entered
into in the ordinary course) which requires aggregate payments of at least
$100,000. If Purchaser disapproves of any such arrangement or contract
pursuant to this clause (d), then any event, condition or matter that
arises in connection with, or as a result of, such disapproval shall not in
any manner (i) be deemed to be a breach of any of Seller's representations,
warranties, covenants or obligations under this Agreement, or (ii)
constitute a material adverse change for purposes of Section 6.03(b);
(e) shall not, and shall not permit any Acquired Subsidiary to, borrow
funds from any Person or declare or pay dividends, or make advances, to any
Person, except for intercompany borrowing and related cash management
practices in the ordinary course consistent with past practices;
(f) shall not, and shall not permit any Acquired Subsidiary to, cancel
or modify any existing insurance policies;
(g) shall not enter into with any Taxing Authority any closing
agreement or other agreement to settle any claim or assessment for Taxes on
a basis that would increase the Tax liability of any of the Acquired
Subsidiaries; and
(h) shall not make any material election with respect to Taxes.
19
<PAGE>
SECTION 5.09 Notices of Certain Events. The Seller shall promptly notify
the Purchaser of damage or destruction by fire or other casualty of any material
Acquired Asset or in the event that any material Acquired Asset becomes the
subject of any proceeding or, to the knowledge of the Seller, threatened
proceeding for the taking thereof or any part thereof or of any right relating
thereto by condemnation, eminent domain or other similar governmental action.
SECTION 5.10 Bankruptcy Court Approval of Preliminary Order.
(a) The Seller hereby confirms that it is critical to the process of
arranging an orderly sale of the Seller's assets to proceed by selecting
the Purchaser to enter into this Agreement in order to present the
Bankruptcy Court with arrangements for obtaining the highest realizable
prices for such assets and that, without the Purchaser having committed
substantial time and effort to such process, the estate of the Seller would
have to employ a less orderly process of sale and thereby incur higher
costs and risk attracting lower prices. Accordingly, the contributions of
the Purchaser to the process have indisputably provided very substantial
benefit to the estate of the Seller. The Seller acknowledges that the
Purchaser would not have invested the effort in negotiating and documenting
the transaction provided for herein and incurring duties to pay its outside
advisors if the Purchaser were not entitled to the Break-Up Fee plus
reasonable fees and disbursements of its counsel incurred as a result of
the Purchaser's attempt to purchase the Acquired Assets, if the Purchaser
is not the successful bidder for the Acquired Assets.
(b) As promptly as practicable after the date hereof, the Seller shall
file and serve motions with the Bankruptcy Court seeking:
(i) an order approving the Break-Up Fee and all other payments
to Purchaser arising under this Agreement after the Petition Date as
obligations of the Seller having priority as an administrative expense
in its case before the Bankruptcy Court under 11 U.S.C. Sections
503(b) and 507(a), approving procedures relating to the sale of the
Acquired Assets under Sections 363 and 365 of the Bankruptcy Code,
approving the adequacy of notice to creditors and parties in interest
for the approval of the transactions contemplated hereby and setting a
date for a hearing on the asset sale no later than June 6, 2000 (the
"Preliminary Order"); and
(ii) an order authorizing the Seller to sell the Acquired Assets
to the Purchaser pursuant to this Agreement and Sections 363 and 365
of the Bankruptcy Code, free and clear of all Liens in or on the
Acquired Assets (including any and all "claims and interests" in the
Assets within the meaning of Section 363(f) of the Bankruptcy Code),
other than Liens related to the Assumed Liabilities and Permitted
Exceptions and otherwise free and clear of claims and liabilities,
such that the Purchaser shall not, among other things, incur any
liability as a successor to the Business and authorizing, among other
things, the Seller, pursuant to Section 365 of the Bankruptcy Code, to
assume and to assign to the Purchaser the Section 365 Assumed Rights
(the "Section 363/365 Order").
20
<PAGE>
(c) The Seller shall seek to obtain the Preliminary Order no later
than May 15, 2000, and the Section 363/365 Order no later than June 6,
2000. The Preliminary Order shall be in form and substance reasonably
satisfactory to the Seller and the Purchaser and consistent with the motion
relating to the Preliminary Order provided to the Purchaser. The Section
363/365 Order shall be in form and substance reasonably satisfactory to the
Seller and the Purchaser. The motions relating to the Preliminary Order
and the Section 363/365 Order shall be in form and substance reasonably
satisfactory to the Purchaser.
(d) Subject to the Preliminary Order, the Seller shall promptly make
any filings, take all actions, and use commercially reasonable efforts to
obtain any and all other approvals and orders necessary or appropriate for
consummation of the transactions contemplated hereby, subject to Seller's
obligations to comply with any order of the Bankruptcy Court and other
applicable law.
(e) In the event an appeal is taken, or a stay pending appeal is
requested or reconsideration is sought, from either the Preliminary Order
or the Section 363/365 Order, the Seller shall immediately notify the
Purchaser of such appeal or stay request and shall provide to the Purchaser
within one business day a copy of the related notice of appeal or order of
stay or application for reconsideration. The Seller shall also provide the
Purchaser with written notice, (and copies of) any other or further notice
of appeal, motion or application filed in connection with any appeal from
or application for reconsideration of, either of such orders and any
related briefs.
SECTION 5.11 Name Changes. Within 45 days after the Closing, the Seller
agrees (a) to change its name to some other name not using the words "System
Software" or the initials "SSA" and (b) after the Closing, until papers are duly
filed with the applicable Secretaries of State to effect such name changes, not
to use its name in any way for the purpose of selling or marketing any product
or service or otherwise in any manner which does or might compete with the
Purchaser or, in any other way which, in the Purchaser's reasonable judgment,
would, could or might be detrimental to the Purchaser's enjoyment of the rights
and goodwill it sought when it paid for and acquired the assets of Seller.
SECTION 5.12 Permits. Prior to the Closing Date, the Seller (1) shall
use its reasonable best efforts to identify all material permits (including
Environmental Permits) necessary to operate the Business from and after the
Closing Date, and (2) shall use its reasonable best efforts to obtain consents
to the transfer of such material permits which are transferable to Purchaser at
or prior to Closing and which are not otherwise covered by the Section 363/365
Order. Prior to and after the Closing, the Seller shall cooperate with Purchaser
with respect to the transfer of all material permits.
SECTION 5.13 Consents; Assignments. The Seller and the Purchaser shall
use their respective best efforts to obtain any consent, approval or amendment
required to novate and/or assign all agreements, leases, licenses, and other
rights of any nature whatsoever relating to the Acquired Assets; provided,
however, that except for filing and other administrative charges, the Purchaser
shall not be obligated to pay any consideration therefor to the third party from
whom such consents, approvals, and amendments are requested. In the event and to
the extent that the
21
<PAGE>
Seller and the Purchaser are unable to obtain any such required consent,
approval or amendment, or if any attempted assignment would be ineffective or
would adversely affect the rights of the Seller with respect to the Acquired
Assets so that the Purchaser would not in fact receive all the rights with
respect to the Acquired Assets, the Seller and the Purchaser will cooperate (to
the extent permitted by law or the terms of any applicable agreement) in a
mutually agreeable arrangement under which the Purchaser, to the extent
possible, obtain the benefits and assume the obligations with respect to such
Acquired Asset in accordance with this Agreement, including sub-contracting,
sub-licensing, or sub-leasing to the Purchaser, or under which the Seller would
enforce for the benefit of the Purchaser, with the Purchaser assuming the
Seller's obligations, any and all rights of the Seller against a third party
thereto. The Seller shall, without further consideration therefor, pay and remit
to the Purchaser promptly all monies, rights, and other considerations received
in respect of the Purchaser's performance of such obligations. Following the
Closing, the Seller shall use its best efforts to obtain required consents with
respect to any Acquired Assets which are not assigned to the Purchaser pursuant
to the Section 363/365 Order. If and when any such consent shall be obtained or
such agreement, lease, license, or other right shall otherwise become assignable
or able to be novated, the Seller shall promptly assign and novate all its
rights and obligations thereunder to the Purchaser without the payment of any
further consideration therefor, assume such rights and obligations. The
foregoing shall not limit the right of the Purchaser to require the Seller to
assign any contract to it or constitute a waiver to any condition precedent to
Closing. Any Seller action required or requested by Purchaser to be taken under
this Section 5.13 shall be at Purchaser's expense and shall not materially
interfere with Seller's ability to close or resolve the Bankruptcy Case.
SECTION 5.14 Accounts Receivables. As of the Closing, Seller shall
irrevocably designate, make, constitute and appoint Purchaser (and all persons
designated by Purchaser) as Seller's true and lawful attorney in fact, to (i)
demand payment of all accounts receivable sold under this Agreement, (ii)
enforce payment of all accounts receivable sold under this Agreement by legal
proceedings or otherwise, (iii) exercise all of the Seller's rights and remedies
with respect to proceedings brought to collect any accounts receivables sold
under this Agreement, (iv) sell or assign any accounts receivable sold under
this Agreement upon such terms, for such amount and at such time or times as
Purchaser deems advisable, and (v) take control in any manner of any item of
payment or proceeds of any accounts receivable sold under this Agreement.
SECTION 5.15 Bidding Procedures. The Seller (1) shall conduct the
auction process in accordance with the Bidding Procedures and (2) shall not
amend, waive, modify or supplement in a material respect the Bidding Procedures
except as set forth therein.
SECTION 5.16 Registration; Disclosure. Distribution of the Stock
Proceeds as provided for under Seller's plan of reorganization or liquidation
shall be effected to the extent practicable, subject to Purchaser's approval as
to structure, to comply with exemptions from registration under applicable
federal and state law. In the event that an exemption from such registration is
not available, the Purchaser shall use its reasonable best efforts to cause to
become effective a registration statement under the Securities Act of 1933, as
amended, and applicable state securities law for the purpose of registering the
sale of the shares representing the Stock Proceeds pursuant to Seller's plan of
reorganization or liquidation. The obligation of Purchaser to cause the
effectiveness of any such registration statement shall be subject to reasonable
delay (not
22
<PAGE>
to exceed 30 days) if the board of directors of Purchaser reasonably and in good
faith determines that such effectiveness would require the disclosure of
material information that the Purchaser has a bona fide business purposes for
preserving as confidential. The Purchaser shall provide adequate disclosure
about Purchaser pursuant to 11 U.S.C. Section 1125 in connection with any
liquidating plan of reorganization proposed by Seller after the Closing.
SECTION 5.17 DIP Budget. The Seller shall operate under the Budget,
which shall be used to fund the operations of the Seller from the Petition Date
to a date no later than (a) the Closing (if the Purchaser consummates the
transactions contemplated hereby) and (b) a date that is no later than 60 days
after the Petition Date if Purchaser does not consummate the transactions
contemplated hereunder.
SECTION 5.18 Capitalization. As of Closing, Purchaser shall be
capitalized with at least $60,000,000 of equity and long-term debt, at least
$20,000,000 of which shall be represented by common stock, or such other
capitalization which results in the same economic allocation to Seller's estate
as contemplated hereunder.
SECTION 5.19 Disclosure Supplements. From time to time prior to the
Closing, Seller shall supplement or amend the Schedules referred to in Article 3
(the "Disclosure Schedules") with respect to (a) any matter arising after the
date hereof which, if existing or occurring at or prior to the date hereof,
would to the knowledge of Seller have been required to be set forth or described
in the Disclosure Schedules or which is necessary to complete or correct any
information in the Disclosure Schedules or in any representation or warranty of
Seller which has been rendered inaccurate thereby and (b) within 14 days after
the date hereof, any matter arising prior to the date hereof regarding the
Acquired Subsidiaries that is not known to Seller as of the date hereof. All
such supplements and amendments shall be taken into account for purposes of
determining whether the condition set forth in Section 6.03(a) has been
satisfied.
ARTICLE 6.
CONDITIONS PRECEDENT
SECTION 6.01 Conditions Precedent to Obligation of the Seller and the
Purchaser. The respective obligations of each party to effect the transactions
contemplated by this Agreement shall be subject to the satisfaction of the
following conditions:
(a) the Section 363/365 Order shall have been entered by the
Bankruptcy Court and such order shall not have been stayed, modified,
reversed or amended;
(b) the waiting period, if any, under the HSR Act shall have expired
or been terminated;
(c) there shall be no injunction, order or decree of any nature of any
court or government authority of competent jurisdiction that is in effect
that prohibits or materially restrains the consummation of the transactions
contemplated under this Agreement; and
23
<PAGE>
(d) no statute, rule or regulation shall have been promulgated by any
federal or state governmental authority which prohibits the consummation of
the transactions contemplated by this Agreement.
SECTION 6.02 Conditions Precedent to Obligation of the Seller. The
obligation of the Seller to effect the transactions contemplated by this
Agreement shall be subject to the satisfaction or waiver at or prior to the
Closing Date of the following additional conditions:
(a) the Purchaser shall have performed in all material respects its
obligations under this Agreement required to be performed by the Purchaser
at or prior to the Closing Date; and
(b) the representations and warranties of the Purchaser contained in
this Agreement shall be true and correct in all material respects as of the
Closing Date as if made at and as of such date except as otherwise
contemplated by this Agreement.
SECTION 6.03 Conditions Precedent to Obligation of the Purchaser. The
obligation of the Purchaser to effect the transactions contemplated by this
Agreement shall be subject to the satisfaction or waiver at or prior to the
Closing Date of the following additional conditions:
(a) The Seller shall have performed in all material respects its
obligations under this Agreement required to be performed by the Seller at
or prior to the Closing Date, and the representations and warranties of the
Seller contained in this Agreement shall be true in all material respects
as of the date hereof and on and as of the Closing Date.
(b) Except for the matters subject to the investigation of the Seller
by the SEC previously disclosed to Purchaser and the litigation and
proceedings disclosed in Schedule 3.12, there shall exist no material
violations of federal, state, local or foreign laws, statutes, regulations
or codes of any kind or nature whatsoever that would materially adversely
affect the value of the Acquired Assets after the Closing and the value of
the Acquired Assets shall not have changed materially from the value that
existed on March 31, 2000; provided, however, that none of the following
shall constitute a material adverse change for purposes of this Section
6.03(b): (i) normal intra-quarter fluctuations in assets of the Seller,
(ii) the departure of any employee (x) whose contract obligations are not
assumed by the Purchaser or (y) who does not receive an offer of
employment on substantially the same terms as his present employment
(including, without limitation, compensation, location and
responsibilities) from Purchaser prior to Closing, (iii) the impact of the
departure of any employee or employees referred to in clause (ii) above, or
(iv) reasonable levels of deterioration in Seller's business, including but
not limited to erosion of its customer base, loss or deferral of expected
sales and loss of employees, resulting from the announcement or
implementation of the transactions contemplated hereby.
(c) Upon consummation of the transactions contemplated hereby, the
Purchaser will have acquired good title in and to, or a valid leasehold
interest in, as
24
<PAGE>
applicable, each of the Acquired Assets, free and clear of all Liens other
than Liens related to the Assumed Liabilities and Permitted Exceptions.
(d) The Section 363/365 Order shall have been entered by the
Bankruptcy Court and such order shall have become a final order.
ARTICLE 7.
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.01 Termination.
This Agreement may be terminated:
(i) by mutual written agreement of the Seller and the
Purchaser prior to the Closing Date;
(ii) by the Seller or Purchaser if a Competing Transaction is
approved by the Bankruptcy Court, whether or not in accordance with
the bidding procedures contained in the Preliminary Order (the
"Bidding Procedures");
(iii) at any time before the Closing, by the Purchaser if any of
the conditions set forth in Section 6.01 or Section 6.03 shall have
become incapable of fulfillment or cure and shall not have been waived
by the Purchaser, provided that the Purchaser is not then in breach of
this Agreement;
(iv) at any time before the Closing, by the Seller if any of
the conditions set forth in Section 6.01 or Section 6.02 shall have
become incapable of fulfillment or cure and shall not have been waived
by the Seller, provided that the Seller is not then in breach of this
Agreement.
(v) at any time after June 17, 2000, by the Seller if the
Closing fails to occur on or before such date, unless such failure is
due to the action or inaction of the Seller;
(vi) at any time after June 17, 2000, by the Purchaser if the
Closing fails to occur on or before such date, unless such failure is
due to the action or inaction of the Purchaser;
(vii) by the Purchaser, at any time after May 15, 2000 if the
Preliminary Order has not been entered by the Bankruptcy Court;
(viii) at any time after June 6, 2000, by the Purchaser if by
such date the Section 363/365 Order has not been entered; or
(ix) by the Purchaser in the event of a material breach of the
covenants contained in Section 5.15.
25
<PAGE>
SECTION 7.02 Effect of Termination. If this Agreement is terminated under
Section 7.01, written notice thereof will forthwith be given to the other party
and this Agreement will thereafter become void and have no further force and
effect and, except for those provisions that expressly survive the termination
of this Agreement, all further obligations of the Seller and the Purchaser to
each other under this Agreement will terminate without further obligation or
liability of the Seller or the Purchaser to the other, except that:
(a) each party will return all documents, workpapers and other
material of any other party relating to the transactions contemplated by
this Agreement, whether so obtained before or after the execution of this
Agreement, to the party furnishing the same, and all confidential
information received by any party to this Agreement with respect to the
business of any other party will be treated in accordance with the
confidentiality agreement between Gores Technology Group and Seller;
(b) if this Agreement is terminated by Seller pursuant to Section
7.01(iv) or 7.01(v) as a result of Purchaser's breach of any of its
representations, warranties, covenants or obligations in this Agreement,
then the Seller will be entitled to retain the Deposits; provided, however,
that under no circumstances will the liability of Purchaser exceed the
amount of the Deposits, which the parties agree constitute liquidated
damages and shall be Seller's sole and exclusive remedy available for
breach by Purchaser of any obligation hereunder, whether sounding in
contract or tort;
(c) if this Agreement is terminated pursuant to Section 7.01(ii), the
Seller, upon approval by Bankruptcy Court of a Competing Transaction, shall
pay the Purchaser the Break-Up Fee; and
(d) the Seller and Purchaser agree that the remedy set forth in
Section 7.02(b) is not a penalty and is, after consultation with counsel,
an appropriate measure of Seller's damages for Purchaser's breach (which
damages are otherwise inherently uncertain). Seller recognizes that, but
for the provisions of this paragraph, Purchaser would not have executed
this Agreement.
ARTICLE 8.
GENERAL PROVISIONS
SECTION 8.01 Survival of Representations, Warranties, and Agreements. No
representations or warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive beyond the Closing Date. The covenants
contained in Sections 1.03, 1.04, 1.05, 1.07, 5.03, 5.05, 5.06(c), 5.06(d),
5.06(e), 5.11, 5.13, 8.02, 8.03, 10.03 and 10.04 shall survive the Closing.
SECTION 8.02 Indemnity. The Seller shall indemnify the Purchaser for any
liability or expense resulting from the payment by Purchaser anytime up to five
business days before the confirmation date of Seller's plan of reorganization of
an Excluded Liability (a) that the Purchaser legally is compelled to pay or (b)
that the Purchaser pays with consent of the Seller. The Purchaser shall
indemnify Seller for any liability or expense resulting from the Purchaser's
failure
26
<PAGE>
to (i) pay any Assumed Liability in accordance with its terms and (ii) comply
with the applicable requirements of COBRA.
SECTION 8.03 Transfer Taxes. The Seller shall seek an order approving
this Agreement which provides that (a) in accordance with section 1146(c) of the
Bankruptcy Code, the making or delivery of any instrument of transfer under a
plan confirmed under section 1129 of the Bankruptcy Code shall not be taxed
under any law imposing a stamp tax or similar tax, and (b) the instruments
transferring the Acquired Assets to the Purchaser shall contain the following
endorsement:
"Because this [instrument] has been authorized
pursuant to Order of the United States Bankruptcy
Court for the District of Delaware relating to a
plan of reorganization of the Grantor, it is
exempt from transfer taxes, stamp taxes or similar
taxes pursuant to 11 U.S.C. (S) 1146(c)."
In the event transfer Taxes are required to be paid in order to consummate the
transactions hereunder, or in the event any such Taxes are assessed at any time
thereafter, such transfer Taxes (including any interest, penalties or other
additions thereon) incurred as a result of the transactions contemplated hereby
shall be paid by the Seller. In the event sales, use or other similar Taxes are
assessed at Closing or at any time thereafter on the transfer of any of the
Acquired Assets, such Taxes (including any interest, penalties or other
additions thereon) incurred as a result of the transactions contemplated hereby
shall be paid by the Seller. The Purchaser and the Seller shall cooperate in
providing each other with any appropriate resale exemption certifications and
other similar documentation.
SECTION 8.04 Notices. All notices, claims, demands and other
communications hereunder shall be in writing and shall be deemed given upon (a)
confirmation of receipt of a facsimile transmission, (b) confirmed delivery by a
standard overnight carrier or when delivered by hand, or (c) the expiration of
three (3) business days after the day when mailed by registered or certified
mail (postage prepaid, return receipt requested), addressed to the respective
parties at the following addresses (or such other address for a party as shall
be specified by like notice):
(a) If to the Purchaser, to
SSA Acquisition Corporation
c/o Gores Technology Group
10877 Wilshire Blvd., Suite 1805
Los Angeles, California 90024
Telecopy: 310-209-3310
Attention: Eric Hattler, Esq.
27
<PAGE>
and
Gores Technology Group
6260 Lookout Road
Boulder, Colorado 80301
Telecopy: 303-531-3200
Attention: Cathy Scanlon
with the copy (which shall not constitute notice) to:
Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071-2007
Telecopy: 213-891-8763
Attention: Robert A. Klyman, Esq.
and
(b) If to the Seller, to:
System Software Associates, Inc.
500 West Madison Street
Chicago, Illinois 60661
Telecopy: 312-474-7451
Attention: Kirk Isaacson, Esq.
with the copy (which shall not constitute notice) to:
Sidley & Austin
One Bank One Plaza
10 South Dearborn Street
Chicago, Illinois 60603
Telecopy: 312-853-7036
Attention: John Box, Esq.
SECTION 8.05 Descriptive Headings; Certain Terms. The headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. All references to "$" or
dollars shall be to United States dollars and all references to "days" shall be
to calendar days unless otherwise specified.
SECTION 8.06 Entire Agreement, Assignment. This Agreement (including the
Exhibits, and the other documents and instruments referred to herein) (a)
constitutes the entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties or any of them, with
respect to the subject matter hereof, including any transaction between or among
the parties hereto and (b) shall not be assigned by operation of law or
otherwise; provided, however that Purchaser may assign all or part of its rights
or obligations
28
<PAGE>
(other than Purchaser's obligation to issue the Stock Proceeds and its
obligations under Section 5.16) under this Agreement to one of its wholly-owned
subsidiaries so long as Purchaser remains liable for its obligations hereunder.
SECTION 8.07 Governing Laws. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
the rules of conflict of laws of the State of Delaware or any other
jurisdiction. The Purchaser and Seller irrevocably and unconditionally consent
to submit to the jurisdiction of the Bankruptcy Court for any litigation arising
out of or relating to this Agreement and the transactions contemplated thereby
(and agree not to commence any litigation relating thereto except in the
Bankruptcy Court).
SECTION 8.08 Expenses. Except as set forth in this Agreement, whether or
not the transactions contemplated by this Agreement are consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses. The
foregoing shall not affect the legal right, if any, that any party hereto may
have to recover expenses from any other party that breaches its obligations
hereunder. Upon and after the Closing, the Purchaser shall be responsible for
(i) the costs incurred in connection with the registration of the Stock Proceeds
under federal or state securities laws, if required to allow Seller to
distribute the Stock Proceeds under a plan of reorganization or liquidation;
(ii) its own reasonable costs and expenses associated with providing adequate
disclosure about Purchaser pursuant to 11 U.S.C. Section 1125 in connection with
any liquidating plan of reorganization proposed post-Closing by Seller; and
(iii) any lenders fees incurred in connection with the DIP Financing.
SECTION 8.09 Amendment. This Agreement and the Exhibits and Schedules
hereto may not be amended except by an instrument in writing signed on behalf of
all the parties hereto.
SECTION 8.10 Waiver. At any time prior to the Closing Date, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
SECTION 8.11 Counterparts; Effectiveness. This Agreement may be executed
in two or more counterparts, each of which shall be deemed to be an original but
all of which shall constitute one and the same agreement. This Agreement shall
become effective when each party hereto shall have received counterparts thereof
signed by all the other parties hereto.
SECTION 8.12 Severability; Validity; Parties of Interest. If any
provision of this Agreement or the application thereof to any person or
circumstance is held invalid or unenforceable, the remainder of this Agreement,
and the application of such provision to other persons or circumstances, shall
not be affected thereby, and to such end, the provisions of this
29
<PAGE>
Agreement are agreed to be severable. Nothing in this Agreement, express or
implied, is intended to confer upon any person not a party to this Agreement any
rights or remedies of any nature whatsoever under or by reason of this
Agreement.
SECTION 8.13 Bulk Sales. The Purchaser hereby waives compliance by the
Seller with any bulk sales or other similar laws in any applicable jurisdiction
in respect of the transactions contemplated by this Agreement.
SECTION 8.14 Bankruptcy Court Approval. The Seller's obligations
hereunder are subject to Bankruptcy Court approval.
ARTICLE 9.
DEFINITIONS
SECTION 9.01 Defined Terms. As used herein, the terms below shall have
the following meanings.
"Acquired Assets" means the Section 363 Assigned Assets, the Section
365 Assumed Rights and the Intellectual Property.
"Acquired Subsidiaries" means all subsidiaries of Seller except those
excluded on Schedule 1.02.
"Additional Deposit" has the meaning set forth in Section 1.07.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control
with such other Person.
"Agreement" has the meaning set forth in Preamble.
"Assumed Liabilities" has the meaning set forth in Section 1.04.
"Balance Sheet" means the audited balance sheet of Seller and its
subsidiaries as of October 31, 1999.
"Balance Sheet Date" means October 31, 1999.
"Bankruptcy Code" has the meaning set forth in the Recitals.
"Bankruptcy Court" has the meaning set forth in the Recitals.
"Bankruptcy Rules" means the Federal Rules of Bankruptcy Procedures,
as amended.
"Bidding Procedures" has the meaning set forth in Section 7.01(ii).
"Break-Up Fee" means the fee payable by the Seller to the Purchaser in
the amount of $2,000,000 plus Purchaser's actual and reasonable costs and
expenses incurred
30
<PAGE>
in connection with the transactions contemplated by the Letter Agreement
and this Agreement upon the approval by the Bankruptcy Court of a Competing
Transaction.
"Budget" means the budget agreed upon from time to time by the Seller
and the Seller's senior secured lenders; provided, however, that the total
-------- -------
amount of the budget shall not exceed $11,740,000.
"Business" has the meaning set forth in the Recitals.
"Cash Proceeds" has the meaning set forth in Section 1.06(a).
"Chapter 11 Case" has the meaning set forth in the Recitals.
"Closing" has the meaning set forth in Section 2.01.
"Closing Date" has the meaning set forth in Section 2.01.
"Competing Transaction" means any transfer or other disposition or
retention under a Chapter 11 plan of reorganization of all or substantially
all of the Acquired Assets or any significant portion thereof, or any
transfer of an ownership interest in, the Seller, the Business or any
significant portion thereof, in a single transaction or series of related
transactions, provided that the Purchaser has not theretofore terminated
this Agreement pursuant to Section 7 hereof and provided that Seller has
not theretofore terminated this Agreement pursuant to Section 7.01(iv) or
(v) hereof.
"Conveyance Documents" has the meaning set forth in Section 2.02(a).
"Deposits" has the meaning set forth in Section 1.07.
"Designated Chapter 11 Costs" means all out of pocket fees and
expenses incurred or owed in connection with the administration of the
Chapter 11 Case including the U.S. Trustee fees, the fees and expenses of
attorneys, accountants, financial advisors, consultants and other
professionals retained by the Seller, the Creditors' Committee, or the
prepetition lenders incurred or owed in connection with the administration
of the Chapter 11 Case (but specifically excluding ordinary course
professionals as authorized by the Bankruptcy Court), and all out of pocket
expenses of the Seller in connection with the transactions contemplated
under this Agreement.
"DIP Financing" has the meaning set forth in Section 1.06.
"Environmental Laws" means any federal, state, local or foreign law
(including, without limitation, common law), treaty, judicial decision,
regulation, rule, judgment, order, decree, injunction, permit or
governmental restriction or any agreement with any governmental authority
or other third party, relating to the environment, human health and safety
or to pollutants, contaminants, wastes or chemicals or any toxic,
radioactive, ignitable, corrosive, reactive or otherwise hazardous
substances, wastes or materials.
31
<PAGE>
"Environmental Permits" means all permits, licenses, franchises,
certificates, approvals and other similar authorizations of governmental
authorities relating to or required by Environmental Laws and affecting, or
relating in any way to, the Business.
"Excluded Assets" has the meaning set forth in Section 1.02.
"Excluded Contracts" has the meaning set forth Section 1.01(b).
"Excluded Liabilities" has the meaning set forth in Section 1.05.
"Financial Statements" has the meaning set forth in Section 3.04.
"Hazardous Substances" means any pollutant, contaminant, waste or
chemical or any toxic, radioactive, ignitable corrosive, reactive or
otherwise hazardous substance, waste or material or any substance, waste or
material having any constituent elements displaying any of the foregoing
characteristics including petroleum, its derivatives, by-products and other
hydrocarbons, and any substance, waste or material regulated under any
Environmental Law.
"HSR Act" has the meaning set forth in Section 3.03.
"including" shall always be read as "including without limitation."
"Initial Deposit" has the meaning set forth in Section 1.07.
"Intellectual Property" means all trademarks, service marks, trade
names, logos, domain names, computer software, mask work, invention,
patent, trade secret, copyright, technology, processes, inventions,
proprietary data, formulae, research and development data, computer
software programs, know-how (including any registrations or applications
for registration of any of the foregoing) or any other similar type of
proprietary intellectual property right.
"knowledge" or known means, with respect to Seller, the actual
knowledge of Robert Carpenter, Kirk Isaacson, Joseph Skadra, Robert
Williams or Carol Wolniakowski.
"Leases" means the Seller's material real property leases to which the
Sellers are a party related to the operation of the Business.
"Letter Agreement" has the meaning set forth in Section 1.07.
"Lien" means any interest in the Acquired Assets by a Person other
than the Seller, including any mortgage, lien, pledge, charge, security
interest encumbrance or other adverse claim of any kind in respect of any
Acquired Asset.
"Material Adverse Effect" means any event, condition or matter in
respect of the operation of the Business, the Acquired Assets and the
Assumed Liabilities that in the
32
<PAGE>
aggregate will result in or have a material adverse effect on the Acquired
Assets, the Assumed Liabilities, or the ability of Purchaser to operate the
Business after the Closing.
"Material Contracts" has the meaning set forth in Section 3.07(a).
"Non-Retained Employees" has the meaning set forth in Section
5.06(c)(ii).
"Permitted Exceptions" means imperfections of title, restrictions or
encumbrances, if any, that (a) cannot be released or cured under the
Bankruptcy Code pursuant to a sale of assets under Sections 363 or 365 of
the Bankruptcy Code and that either (i) would not involve material costs to
correct or remove or (ii) do not materially impair the use and operation of
such asset in the Business as currently conducted or (b) are caused solely
by Purchaser.
"Person" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
"Petition Date" means the date on which the Seller files a petition
for relief under the Bankruptcy Code in the Bankruptcy Court.
"Preliminary Order" has the meaning set forth in Section 5.10(b)(i).
"Pre-Petition Facility" has the meaning set forth in Section 1.06(b).
"Products" has the meaning set forth in Section 3.13.
"Professional Service Agreements" means any agreement entered into in
the ordinary course of business of the Business related to the provision of
professional services by Seller or an Acquired Subsidiary in connection
with a Software License Agreement or the Intellectual Property of Seller or
an Acquired Subsidiary, including, but not limited to, agreements to
provide Intellection Property or modifications, improvements, enhancements,
adaptations or translations thereto, or the provision of technical support
(excluding on-going support), education and training.
"Purchase Price" has the meaning set forth in Section 1.06(a).
"Purchaser" has the meaning set forth in the Preamble.
"Real Property" has the meaning set forth in Section 3.05(a).
"Section 365 Assumed Rights" has the meaning set forth in Section
1.01(b).
"Section 363/365 Motion" means the motion filed by the Sellers in the
Case seeking entry of the Section 363/365 Order.
"Section 363/365 Order" has the meaning set forth in Section
5.10(b)(ii).
33
<PAGE>
"Seller" has the meaning set forth in the Preamble.
"Seller's Representatives" has the meaning set forth in Section
5.03(b).
"Software License Agreements" means a software license agreement
entered into between Seller, Seller's customer and, if appropriate, a
subsidiary or authorized software distributor of Seller, pursuant to which
(a) the customer is granted a perpetual, personal and non-exclusive right
and license to use software product(s) identified therein; and (b) Seller,
such subsidiary or authorized software distributor of Seller (as determined
by Seller) makes available to the customer software updates (error
corrections), software upgrades (enhancements for which there is not a
separate charge) and access (via telephone or other electronic means as
determined by Seller) to technical support for advice and consultation
regarding the customer's use of the licensed software.
"Stock Proceeds" has the meaning set forth in Section 1.06(a).
"Transferred Employees" has the meaning set forth in Section
5.06(c)(ii).
"WARN Act" means the Worker Adjustment and Retraining Notification Act
of 1988.
"Year 2000 Compliant" has the meaning set forth in Section 3.13.
ARTICLE 10.
TAX MATTERS
SECTION 10.01 Tax Definitions. The following terms, as used in this
Agreement, have the following meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Pre-Closing Tax Period" means any tax period ending on or before the
Closing Date and the portion of any Straddle Period ending on the Closing
Date.
"Post-Closing Tax Period" means any tax period beginning after the
Closing Date and that portion of a Straddle Period beginning after the
Closing Date.
"Straddle Period" means any taxable period beginning before and ending
after the Closing Date.
"Tax" and, with correlative meaning, "Taxes" means with respect to any
Person (1) all federal, state, local, county, foreign and other taxes,
assessments or other government charges, including, without limitation, any
income, alternative or add-on minimum tax, gross income, gross receipts,
sales, use, ad valorem, value added, transfer, franchise, profits, license,
registration, recording, documentary, conveyancing, gains, withholding,
payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom duty or other tax,
governmental fee
34
<PAGE>
or other like assessment or charge of any kind whatsoever, together with
any interest, penalty, addition to tax or additional amount imposed by any
governmental authority (a "Taxing Authority") responsible for the
imposition of any such tax (domestic or foreign), or (2) liability for the
payment of any amounts of the type described in (1) relating to any other
Person as a result of being party to any agreement to indemnify such other
Person, being a successor or transferee of such other Person, or being a
member of the same affiliated consolidated, combined, unitary or other
group with such other Person.
"Tax Returns" means any return (including information return), report,
notice, form, declaration, claim for refund, estimate, election, or
information statement or other document relating to any Tax, including any
schedule or attachment thereto, and any amendment thereof filed or to be
filed with any Taxing Authority in connection with the determination,
assessment or collection of Taxes.
"U.S. Acquired Subsidiaries" means the Acquired Subsidiaries that for
United States federal income tax purposes are United States domestic
corporations.
SECTION 10.02 Tax Representations and Warranties. The Seller hereby
represents and warrants to the Purchaser that:
(a) Except as set forth on Schedule 10.02(a), the Seller and each of
the Acquired Subsidiaries has timely filed all Tax Returns relating to any
Pre-Closing Tax Period which are required to be filed, such Tax Returns are
correct and complete in all material respects and the Taxes due on such Tax
Returns have been paid to the extent the non-filing of such Tax Returns,
the failure of such Tax Returns to be correct and complete, or the non-
payment of such Taxes would result in a Lien on any Acquired Asset or asset
of any Acquired Subsidiary (that would not be released pursuant to the
Section 363/365 Order). The Seller has delivered or made available to
Purchaser complete and accurate copies of all federal and all other
material Tax Returns filed with the Taxing Authorities for all open tax
years of the Seller and each Acquired Subsidiary. Each of the Seller and
the Acquired Subsidiaries has timely paid or will timely pay, or made
provision for the payment of, all Taxes that have or may become due in
respect of periods (or portions thereof) ending on or before the Closing
Date the non-payment of which would result in a Lien on any Acquired Asset
or asset of any Acquired Subsidiary (that would not be released pursuant to
the Section 363/365 Order), except such Taxes, if any, as are listed in
Schedule 10.02(a) or as to which adequate financial statement reserves have
been determined in accordance with GAAP.
(b) Except as set forth on Schedule 10.02(b), all Taxes that the
Seller or any Acquired Subsidiary is or was required to withhold or collect
have been duly withheld or collected in all material respects and, to the
extent required, have been paid to the proper Taxing Authority or other
Person. Except where payment of sales, use or other similar Taxes have
been made, the Acquired Subsidiaries have properly requested, received and
retained all necessary exemption certificates and other documentation
supporting any claimed exemption or waiver of sales, use or other similar
Taxes as to which the Acquired Subsidiaries would have otherwise been
obligated to collect or withhold Taxes.
35
<PAGE>
(c) Except as set forth on Schedule 10.02(c), there is, in writing, no
claim, action, audit or other proceeding now pending or threatened relating
to the Taxes of the Seller or any of the Acquired Subsidiaries. Schedule
10.02(c) sets forth for the Seller and each Acquired Subsidiary the federal
and other material Tax Returns which have been audited by the relevant
Taxing Authorities for each period set forth on Schedule 10.02(c) after
1993. Except as set forth on Schedule 10.02(c), (i) neither the Seller nor
any Acquired Subsidiary has been notified in writing by any Taxing
Authority that it intends to audit a Tax Return for any period to the
extent such notification is still pending, (ii) no power of attorney has
been executed by any of the Acquired Subsidiaries with respect to any
matters relating to Taxes which is currently in force, and (iii) no
extension or waiver of a statute of limitations relating to Taxes is in
effect with respect to any of the Acquired Subsidiaries.
(d) There are no Liens for Taxes (other than for current Taxes not yet
due and payable) upon the Acquired Assets. None of the assets of the
Acquired Subsidiaries or the Acquired Assets is property that is required
to be treated for Tax purposes as being owned by any other Person.
(e) The transactions contemplated herein are not subject to the Tax
withholding provisions of Section 3406 or of Subchapter A of Chapter 3 of
the Code or of any other provisions of federal, state, local or foreign
law.
(f) Except as set forth on Schedule 10.02(f), except with respect to
any group of which the Seller is the common parent for tax purposes,
neither the Seller nor any of the Acquired Subsidiaries has any liability
for the Taxes of any other Person under Treasury Regulation Section 1.1502-
6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract (including any Tax sharing or
allocation agreement) or otherwise.
(g) None of the Acquired Subsidiaries has been a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of
the Code during the applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.
SECTION 10.03 Section 338(h)(10) Election.
(a) With respect to Seller's sale of the shares of the U.S. Acquired
Subsidiaries (including any deemed sale for tax purposes of the shares of
any U.S. Acquired Subsidiaries not directly owned by Seller) to Purchaser,
at the request of Purchaser, Seller and Purchaser shall jointly make, if
permissible under applicable law, timely and irrevocable elections under
Section 338(h)(10) of the Code, and similar elections under any applicable
state or local tax laws. Purchaser, Seller and the U.S. Acquired
Subsidiaries shall report the transaction consistently with such elections
under Section 338(h)(10) of the Code or any similar state, foreign or local
tax provision (the "Elections") and agree not to take any action that could
cause such Elections to be invalid, and shall take no position contrary
thereto unless required to do so pursuant to a
36
<PAGE>
determination (as defined in Section 1313(a) of the Code or any similar
state, foreign or local tax provision).
(b) To the extent possible, Purchaser, Seller and the U.S. Acquired
Subsidiaries shall deliver at the Closing any and all forms necessary to
effectuate the Elections (including, without limitation, Internal Revenue
Service Form 8023 and any similar forms under applicable state, foreign and
local tax laws (collectively, the "Section 338 Forms")). In the event,
however, any Section 338 Forms are not executed by the Closing, Purchaser,
Seller and the U.S. Acquired Subsidiaries shall prepare and complete each
such Section 338 Form no later than 15 days prior to the date such Section
338 Form is required to be filed. Purchaser and Seller shall each cause
the Section 338 Forms to be duly executed by an authorized person for
Purchaser and Seller, and shall duly and timely file the Section 338 Forms
in accordance with applicable tax laws and the terms of this Agreement.
Purchaser and Seller shall also cooperate with each other to take all
actions necessary and appropriate (including, without limitation, filing
such additional forms, Tax Returns, elections, schedules and other
documents as may be required) to effect and preserve the Elections in
accordance with the provisions of Treasury Regulation Section 1.338(h)(10)-
1 (and comparable provisions of each applicable state and local tax law) or
any successor provisions.
(c) As soon as practicable, Seller and Purchaser shall agree on the
allocation of the "aggregate deemed sales price (ADSP)" of the assets of
the U.S. Acquired Subsidiaries resulting from the Elections (as required
pursuant to Section 338(h)(10) of the Code and regulations promulgated
thereunder and consistent with Schedule 1.06(b)) among such assets.
SECTION 10.04 Tax Matters.
(a) Liability for Taxes.
-------------------
(i) Seller shall be liable for and pay, and pursuant to Section
8.02 shall indemnify Purchaser against, (A) all Taxes imposed on the
Seller or any Acquired Subsidiary, or for which the Seller or any
subsidiary may otherwise be liable, as a result of having been a
member of a consolidated group (including, without limitation, Taxes
for which the Seller or any Acquired Subsidiary may be liable pursuant
to Treasury Regulation Section 1.1502-6 or similar provisions of
state, local or foreign law as a result of having been a member of
such a consolidated group), (B) all Taxes imposed on the Seller, or
for which the Seller may otherwise be liable, for any taxable year or
period that ends on or before the Closing Date and, with respect to
any Straddle Period, the portion of such Straddle Period ending on and
including the Closing Date (including, without limitation, any
obligations to contribute to the payment of a Tax determined on a
consolidated, combined or unitary basis with respect to any
consolidated group and any Taxes resulting from the Seller or any
Acquired Subsidiary ceasing to be a member of any such group), (C) all
Taxes arising from making the Elections, and (D) all Taxes
37
<PAGE>
imposed on the Seller pursuant to Section 8.03 or any other provision
of this Agreement.
(ii) Purchaser shall be liable for and pay, and pursuant to
Section 8.02 shall indemnify Seller against, (A) all Taxes imposed on
the Acquired Assets (other than an Acquired Subsidiary) for any
taxable year or period that begins after the Closing Date and, with
respect to any Straddle Period, the portion of such Straddle Period
beginning after the Closing Date, and (B) all Taxes imposed on any
Acquired Subsidiary for any taxable year or period; provided, however,
-------- -------
that Purchaser shall not be liable for or pay, and shall not indemnify
Seller against, any Taxes for which Seller is liable under this
Agreement (including, without limitation, Section 10.04(a)(i)).
(b) In the case of any Straddle Period:
(i) real, personal and other similar intangible property Taxes
("Property Taxes") relating to the Acquired Assets for the Pre-Closing
Tax Period shall be equal to the amount of such Property Taxes for the
entire Straddle Period multiplied by a fraction, the numerator of
which is the number of days during the Straddle Period that are in the
Pre-Closing Tax Period and the denominator of which is the total
number of days in the Straddle Period; and
(ii) the Taxes relating to the Acquired Assets (other than
Property Taxes) for any Pre-Closing Tax Period shall be computed,
using the closing of the books method, as if such taxable period ended
as of the close of business on the Closing Date.
(c) For any taxable period of the Acquired Subsidiaries that ends on
or before the Closing Date, Seller shall timely prepare, consistent with
past practices (unless a contrary position is required by law), and file
with the appropriate Taxing Authority all consolidated, combined or unitary
Tax Returns that include any of the Acquired Subsidiaries required to be
filed (and shall provide Purchaser a reasonable opportunity to review all
such Tax Returns prior to filing) and shall pay all Taxes due with respect
to such Tax Returns. Seller shall not file any Tax Return relating to a
Pre-Closing Tax Period without Purchaser's consent (which consent shall not
be unreasonably withheld) if the filing of such Return may cause a net
increase of the Tax liability of any of the Acquired Subsidiaries for a
Post-Closing Tax Period in excess of $100,000. Purchaser shall timely
prepare and file with the appropriate Taxing Authority all other Tax
Returns of the Acquired Subsidiaries relating to a Pre-Closing Tax Period
or Straddle Period required to be filed and shall pay all Taxes due with
respect to such Tax Returns (and shall provide Seller with a reasonable
opportunity to review all such Tax Returns prior to filing). Purchaser and
Seller agree to cause the Acquired Subsidiaries to file all Tax Returns for
the period including the Closing Date on the basis that the relevant
taxable period ended as of the close of business on the Closing Date,
unless the relevant Taxing Authority will not accept a Tax Return filed on
that basis. Seller shall file or caused to be filed when due (taking into
account all extensions properly obtained) all Tax Returns that
38
<PAGE>
do not include any Acquired Subsidiary and Seller shall remit or cause to
be remitted any Taxes due in respect of such Tax Returns.
(d) The Purchaser and the Seller agree to (i) furnish or cause to be
furnished to each other, upon request, as promptly as practicable, such
information and assistance relating to the Business and the Acquired Assets
(including access to books and records) as is reasonably necessary for the
filing of all Tax returns, the making of any election relating to Taxes,
the preparation for any audit by any taxing authority, and the prosecution
or defense of any claim, suit or proceeding relating to any Tax and (ii)
cooperate fully in preparing for any audits of, or disputes with Taxing
Authorities regarding, any Tax relating to the Business or the Acquired
Assets; (iii) provide timely notice to the other in writing of any pending
or threatened Tax audits or assessments relating to the Business or the
Acquired Assets for taxable periods for which the other may have a
liability; (iv) furnish the other with copies of all correspondence
received from any Taxing Authority in connection with any Tax audit or
information request with respect to any such taxable period; and (v) timely
provide to the other powers of attorney or similar authorizations necessary
to carry out the purposes of this Article 10. The Purchaser shall retain
all books and records with respect to Taxes pertaining to the Acquired
Assets for a period of at least six years following the Closing Date. The
Seller shall retain any records retained by the Seller related to Taxes
until liquidation. Each party shall provide the other with at least ten
days prior written notice before destroying or transferring custody of any
such books and records, during which period the party receiving such notice
can elect to take possession, at its own expense, of such books and
records.
(e) Seller shall deliver to Purchaser at the Closing all necessary
forms and certificates complying with applicable law, duly executed and
acknowledged, certifying that the transactions contemplated hereby are
exempt from withholding under Section 1445 of the Code.
[Remainder of page intentionally blank; next page is signature page]
39
<PAGE>
IN WITNESS WHEREOF, the Seller, Gores and the Purchaser have caused this
Agreement to be executed on their behalf by their officers thereunto duly
authorized, as of the date first above written.
SYSTEM SOFTWARE ASSOCIATES, INC.
By:_____________________________
Name:___________________________
Title:__________________________
GORES TECHNOLOGY GROUP (for purposes of Article 4
only)
By:_____________________________
Name:___________________________
Title:__________________________
SSA ACQUISITION CORPORATION
By:_____________________________
Name:___________________________
Title:__________________________
<PAGE>
Schedule 1.01(a)
----------------
The Section 363 Assigned Assets shall include, without limitation, all of the
following:
1. Cash and investments and similar accounts.
2. Lockbox accounts.
3. Accounts receivable, trade receivable and similar rights, including
intercompany receivables.
4. Notes and other receivable and similar rights.
5. Prepaid assets and credits.
6. Property, plant and equipment, including without limitation, assets used by
Retained Employees, equipment, machinery, computer hardware and software
and related items, furniture, fixtures, telecommunications equipment.
7. Books and records.
8. Customer lists.
9. Internet and intranet websites, including all data, code and content.
10. Telephone numbers.
11. Stock of all subsidiaries other than those excluded on Schedule 1.02.
12. Causes of action in favor of Seller or the Business.
13. Permits.
14. Guarantees, warranties, indemnities and similar rights in favor of the
Seller or the Business.
15. Intellectual property, goodwill and other intangible assets.
16. General intangibles.
Schedule 1.01(b)
----------------
All executory contracts and unexpired leases of Seller except those specifically
excluded prior to closing.
<PAGE>
Schedule 1.02
-------------
1. All inactive entities, except the stock of each of the following shall be
an included asset: (a) System Software Associates (FSC), Inc., a U.S.
Virgin Islands corporation, (b) System Software Japan Corporation, a
Delaware corporation, and (c) System Software Pacific Rim Corporation, a
Delaware corporation.
2. System Software Associates AG, Basel, a Switzerland corporation.
3. Finland entity.
4. Wallop Investments (Proprietary) Ltd., a South Africa corporation.
5. India entity.
6. Pacific Pte Ltd., a Singapore corporation.
7. Object entity.
Schedule 1.04
-------------
1. Accrued compensation and benefits with respect to the Transferred
Employees.
2. Deferred revenue to the extent contract obligation is assumed.
3. All expenses and obligations of Seller incurred in accordance with the
Budget prior to the Closing Date, but unpaid as of the Closing Date, so
long as payment of amounts so incurred does not exceed the amount available
under the DIP Facility.
4. All WARN obligations pursuant to Section 5.06 (c)(ii).
