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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): July 31, 2000
System Software Associates, Inc.
(Exact Name of Registrant as Specified in Charter)
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<S> <C> <C>
Delaware 0-15322 36-3144515
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
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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
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On July 31, 2000, System Software Associates, Inc. (the "Company")
completed the sale of substantially all of the Company's assets to SSA
Acquisition Corporation ("Newco") pursuant to the Asset Purchase Agreement dated
May 3, 2000, as amended (the "Asset Purchase Agreement"). Consideration received
by the Company consisted of:
. $44,599,677, which was used to retire all amounts owing to the
Company's senior secured lenders under the Company's pre-bankruptcy
and debtor-in-possession loan agreements;
. $1,585,049, to be used to pay amounts owed to parties whose
agreements with the Company were assigned to Newco as part of the
sale;
. $2,000,000, to be used to pay administrative and priority claims
arising out of the Company's bankruptcy proceeding;
. 20% of the initial common equity of Newco (the "SSA Common Stock
Allocation");
. Rights (the "SSA Rights") to purchase units of stock in Newco
representing, in the aggregate, up to $5.3565 million face amount of
preferred stock in Newco and 20% of Newco's common stock for an
aggregate purchase price of $6.4278 million; and
. The assumption of certain liabilities specified in the Asset
Purchase Agreement and the Schedules thereto.
Prior to the closing, the Company, Newco and Gores Technology Group ("GTG")
entered into a Fourth and Fifth Amendment to the Asset Purchase Agreement that,
among other things:
. Increased the aggregate exercise price of the SSA Rights from
$5.3565 million to $6.4278 million;
. Clarified the liabilities to be assumed by Newco at closing; and
. Required Newco to provide certain administrative assistance to
the Company after the closing.
Copies of the Fourth and Fifth Amendments are attached as Exhibits 99.1 and
99.2 hereto and copies of revised Schedules 1.01(a), 1.01(b), 1.02 and 1.04 to
the Asset Purchase Agreement are attached as Exhibit 99.3 hereto.
Victor Shepherd, the current Chief Executive Officer and a Director of the
Company, is also the Chief Executive Officer and a Director of Newco. The
following officers of the Company also have been offered employment by Newco in
the capacities indicated below: Kirk Isaacson (Vice President, General Counsel
and Secretary), Chuck Biebighauser (Senior Vice President -
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Global Services & Marketing), Howard Sproxton (Vice President - Research &
Development), Rick Gonzales (President - North America), Graeme Cooksley
(President - Asia Pacific Japan), Phil Gray (President - Europe Middle East
Africa), Martin Ambrose (Vice President - Solutions Management), Julie Paul
(Treasurer) and Carol Wolniakowski (Corporate Counsel and Assistant Secretary).
Newco obtained the funds for the acquisition from (i) a $15.0 million
equity investment by an investment vehicle formed by Cerberus Partners L.P. on
behalf of various funds and accounts managed by it (the "Investor Group") and
(ii) a $55.35 senior secured loan facility from Ableco Finance LLC (an affiliate
of Cerberus Partners L.P.) and Foothill Capital Corporation.
The initial equity of Newco was allocated as follows:
. 60% of the common equity, together with preferred stock with a
liquidation preference of $15.0 million, to the Investor Group in
exchange for the equity investment described above;
. 20% of the common equity to GTG, in exchange for management
services to be provided to Newco; and
. 20% of the common equity to the Company, as partial payment of
the purchase price for the Company's assets.
If Newco does not redeem at least $5 million of preferred stock held by
Cerberus within the earlier of 30 days after consummation of the Company's plan
of reorganization or liquidation or 180 days after the closing of the sale to
Newco, the Investor Group will receive warrants (the "Investor Warrants") to
acquire an additional ten percent (10%) of the initial common equity of Newco at
a strike price of $.01 per share. If issued, these warrants will effectively
reduce the SSA Equity Allocation from 20% to 10% of the initial common equity.
Newco's senior lenders also have received warrants (the "Senior Lender
Warrants") to purchase 35% of the common equity of Newco on a fully-diluted
basis at a strike price of $0.01 per share.
If both the Investor Warrants and Senior Lender Warrants are issued and
exercised, then, without taking the SSA Rights into account, the SSA Common
Stock Allocation would be reduced to 6.5% of the common equity of Newco, as
opposed to the 25% provided for in the original Asset Purchase Agreement. If, in
addition, all of the SSA Rights are exercised, the SSA Common Stock Allocation
and the SSA Rights would represent an aggregate of 18.2% of the common stock of
Newco. The per unit purchase price provided for in the SSA Rights is equal to
120% of the per unit purchase price paid by Cerberus for its preferred stock.
As noted above, $2,000,000 of the cash consideration received by the
Company has been allocated to pay administrative and priority claims arising out
of the Company's bankruptcy proceeding. Such administrative and priority claims
will not be known with certainty until a bar date has occurred and any such
claims are reconciled and allowed. Accordingly, there can be no assurance that
$2,000,000 will be sufficient to pay all such claims. If the funds are
sufficient, the Company intends to submit to the Bankruptcy Court, within six
months after the closing, a plan of reorganization or liquidation that would
provide for the distribution of the SSA Common Stock Allocation and the SSA
Rights in Newco to creditors of the Company holding unsecured,
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pre-bankruptcy claims not assumed by Newco, including holders of the Company's
7% Convertible Subordinated Notes due 2002. Those creditors would then be
entitled to exercise the SSA Rights during a limited period of time after the
distribution. Any such plan and distribution would be subject to, among other
things, bankruptcy court approval.
If $2,000,000 is not sufficient to pay all administrative and priority
claims arising out of the Company's bankruptcy proceeding, some or all of the
SSA Common Stock Allocation and SSA Rights may need to be liquidated or
otherwise allocated to pay such claims. Thus, there can be no assurance that the
Company's unsecured, pre-bankruptcy creditors will receive any distribution in
the bankruptcy proceeding. As previously disclosed, the Company does not expect
the bankruptcy proceeding to result in any distribution to holders of its
preferred or common stock.
Newco is currently privately held, and financial information regarding
Newco is not publicly available. If the SSA Common Stock Allocation and SSA
Rights are distributed to the Company's unsecured, pre-bankruptcy creditors,
Newco is expected to become a public company subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended.
The statements contained in this Form 8-K and the exhibits hereto regarding
the timing, process and results of the bankruptcy proceeding 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 to
differ from the results expressed in, or implied by, these statements.
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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
(c) Exhibits:
99.1 Fourth Amendment to Asset Purchase Agreement dated as of July 26, 2000
99.2 Fifth Amendment to Asset Purchase Agreement dated as of July 31, 2000
99.3 Final Versions of Schedules 1.01(a), 1.01(b), 1.02 and 1.04 to the
Asset Purchase Agreement. The Company will furnish supplementally a
copy of all other schedules to the Asset Purchase Agreement upon
request.
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
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Kirk J. Isaacson
Vice President and General
Counsel
Dated: August 4, 2000
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EXHIBIT INDEX
99.1 Fourth Amendment to Asset Purchase Agreement dated as of July 26, 2000
99.2 Fifth Amendment to Asset Purchase Agreement dated as of July 31, 2000
99.3 Final Versions of Schedules 1.01(a), 1.01(b), 1.02 and 1.04 to the Asset
Purchase Agreement.
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