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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
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Date of Report (Date of earliest event reported): July 10, 2000
System Software Associates, Inc.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-15322 36-3144515
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
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 5. OTHER EVENTS.
On July 10, 2000, the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court") approved the proposed sale of substantially
all of the Company's assets to SSA Acquisition Corporation ("Newco") pursuant to
the Asset Purchase Agreement dated May 3, 2000 (the "Asset Purchase Agreement"),
as amended. Immediately prior to the hearing on the proposed sale, the Company,
Gores Technology Group ("GTG") and Newco entered into an amendment to the Asset
Purchase Agreement that provides, among other things, that:
. the common stock component of the purchase price to be received by the
Company will be reduced from 25% to 20% of the initial common equity
of Newco (the "SSA Common Stock Allocation");
. in addition to the SSA Common Stock Allocation, the Company will
receive 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 $5.3565 million;
. the capitalization of Newco at closing will be consistent with the
term sheet described below, rather than the $20,000,000 of common
stock and $40,000,000 of long-term debt provided for in the original
Asset Purchase Agreement.
A copy of the amendment is attached as Exhibit 99.3 hereto. There is no change
to the cash consideration to be received by the Company pursuant to the Asset
Purchase Agreement.
Also on July 10, GTG, Cerberus Partners L.P. on behalf of various funds and
accounts managed by it ("Cerberus"), and Romulus Holdings, Inc. ("RHI") entered
into a term sheet regarding the financing of Newco's bid for the assets of the
Company. A copy of the term sheet is attached as Exhibit 99.4 hereto. The term
sheet provides, among other things, for (i) an investment vehicle to be formed
by RHI, Cerberus and others (the "Investor Group") to contribute $15 million in
working capital to Newco in exchange for 60% of the initial common equity of
Newco and preferred stock with a liquidation preference of $15 million, (ii)
Newco to allocate 20% of its initial common equity to the Company as the SSA
Common Stock Allocation and (iii) GTG to retain 20% of the initial common equity
of Newco. The term sheet further provides that if Newco does not redeem at least
$5 million of preferred stock held by the Investor Group 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
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. The term sheet also
provides for Cerberus and other senior lenders to provide a credit facility for
Newco of up to $50.0 million and to receive 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
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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
the per unit purchase price to be paid by the Investor for its preferred and
common stock in Newco.
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
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, pre-bankruptcy claims that are 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. 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 parties intend to close the sale to Newco by July 21. As previously
disclosed, the Company's Senior Secured Super-Priority Debtor-In-Possession Loan
and Security Agreement (the "DIP Facility") provides for up to $9,000,000 to
fund the operations of the Company through July 21. There can be no assurance,
however, that the amount available under the DIP Facility will be sufficient to
fund the operations of the Company through July 21. Moreover, the financing of
Newco's bid and, therefore, the completion of the sale of the Company's assets
to Newco are subject to, among other things, completion of definitive
documentation. Accordingly, there can be no assurance that the proposed sale of
the Company's assets to Newco will be completed. If the sale is not completed by
July 22, both Newco and the Company will have the right to terminate the Asset
Purchase Agreement.
The statements contained in this Form 8-K and the exhibits hereto regarding
the timing, process and results of the bankruptcy proceeding and the proposed
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.
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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 Amendment to Asset Purchase Agreement dated as of June 5, 2000
99.2 Second Amendment to Asset Purchase Agreement dated as of June 9,
2000
99.3 Third Amendment to Asset Purchase Agreement dated as of July 10,
2000
99.4 Term Sheet dated July 10, 2000 among Gores Technology Group,
Romulus Holdings Inc. and Cerberus Partners L.P. with respect to
the financing of SSA Acquisition Corporation
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: July 11, 2000
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EXHIBIT INDEX
99.1 Amendment to Asset Purchase Agreement dated as of June 5, 2000
99.2 Second Amendment to Asset Purchase Agreement dated as of June 9, 2000
99.3 Third Amendment to Asset Purchase Agreement dated as of July 10, 2000
99.4 Term Sheet dated July 10, 2000 among Gores Technology Group, Romulus
Holdings Inc. and Cerberus Partners L.P. with respect to the financing of
SSA Acquisition Corporation
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