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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): April 6, 2000
System Software Associates, Inc.
(Exact Name of Registrant as Specified in Charter)
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<CAPTION>
<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 5. Other Events
On April 7, 2000, the Registrant issued a press release announcing that it
has executed a letter of intent to enter into a transaction with Gores
Technology Group pursuant to which it has agreed to sell substantially all of
its assets to a newly formed subsidiary of Gores Technology Group. A copy of
this press release is filed herewith as Exhibit 99.1 and a copy of the letter of
intent is filed herewith as Exhibit 99.2.
Item 7. Financial Statements and Exhibits
(a) Financial Statements
Not Applicable
(b) Pro Forma Financial Information
Not Applicable
(c) Exhibits
99.1 Press Release of the Registrant dated April 7, 2000.
99.2 Letter of Intent between the Registrant and Gores Technology Group
dated April 6, 2000.
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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
Secretary
Dated: April 10, 2000
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EXHIBIT INDEX
99.1 Press Release of the Registrant dated April 7, 2000.
99.2 Letter of Intent between the Registrant and Gores Technology Group dated
April 6, 2000.
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Exhibit 99.1
Company Press Release
Gores Technology Group to Acquire SSA
CHICAGO--(BUSINESS WIRE)--April 7, 2000-Gores Technology Group, a leading
international technology and management company, and System Software Associates
announced today that SSA has agreed to sell substantially all of its assets to a
newly-formed subsidiary of Gores Technology for a total of approximately
$52,000,000 in cash and 25% of the common stock of the newly-formed subsidiary.
The parties intend to effect the sale in an expeditious manner via a voluntary
Chapter 11 bankruptcy proceeding to be filed on or about April 14. The Chapter
11 proceeding will not include SSA's subsidiaries.
Alec Gores, Chairman of Gores Technology, stated "We are very pleased to be
adding SSA to the Gores family of technology companies. We place a high
importance on the current and potential value of SSA's extensive customer base,
skilled professionals, strong portfolio of SSA and partner software and
services, and significant international operations. We intend to focus on
the future growth and development of the Company."
"This transaction is the result of an intense and thorough evaluation of all of
SSA's strategic alternatives by our advisors, Houlihan, Lokey, Howard & Zukin,
senior management and the SSA Board," said Robert R. Carpenter, Chairman and
Chief Executive Officer of SSA. "We believe that the Gores Technology Group
capital resources, technical and business expertise and philosophy of creating
value for customers, employees and investors make them an excellent partner for
the future. We believe that our combined resources will both allow us to
continue to serve our customers, without interruption, during the restructuring
proceeding and enable us to continue to build upon our combined strengths after
completion of the sale."
SSA anticipates that it will be required to use all of the cash received upon
closing of the sale 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 its 7% convertible subordinated notes due 2002. SSA
does not expect any distribution to be made to holders of its equity securities.
The parties anticipate that the sale will close within 45-60 days. The closing
of the sale is subject to, among other things, completion of definitive
documentation, bankruptcy court approval and approval of SSA's senior secured
lenders.
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,
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electronics, general manufacturing, food and beverage, forest products and
pharmaceuticals. Please visit our website at www.ssaportfolio.com.
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 with approximately 50% of revenues derived from outside North America.
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.
Safe Harbor Provision
The statements contained in this release regarding the timing and process of the
anticipated sale and bankruptcy proceeding and the plans and future operations
of SSA and Gores Technology 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," "anticipate" and similar
expressions, as they relate to SSA, Gores Technology or their management, have
been used to identify such forward-looking statements. These statements reflect
current beliefs and specific assumptions of SSA and Gores Technology with
respect to future events and are based on information currently available to
them. Accordingly, the statements are subject to significant risks,
uncertainties and contingencies, which could cause actual timing and process of
the anticipated sale and bankruptcy proceeding and actual future expectations
and the results thereof to differ from those expressed in, or implied by, these
statements.
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Exhibit 99.2
[Gores Letterhead]
April 6, 2000
VIA FACSIMILE
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System Software Associates, Inc.
500 West Madison, Suite 3200
Chicago, IL 60661
Attn: Robert R. Carpenter
Chairman and Chief Executive Officer
Re: Acquisition of System Software Associates, Inc.
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Dear Bob:
On behalf of Gores Technology Group or one of its affiliates
(collectively, "Buyer"), this letter constitutes an offer to acquire certain
assets and assume specified liabilities of System Software Associates, Inc.
("Seller") pursuant to the provisions of section 363 of the Bankruptcy Code, 11
U.S.C. (S)(S) 101-1330 (the "Bankruptcy Code").
Buyer, through Newco, offers to purchase certain assets of Seller's
estate on and subject to the following terms and conditions:
1. On or before April 14, 2000, the Seller shall file a petition for
relief under the Bankruptcy Code in the District of Delaware (the "Petition
Date"). For purposes of this Letter Agreement, the term "Seller" refers to
Seller in its current corporate capacity and its future capacity as a debtor and
debtor-in-possession.
2. Purchase Price. Buyer shall pay a purchase price of cash in an
amount determined pursuant to the next sentence (the "Cash Proceeds") plus 25
percent of Newco's common stock (the "Stock Proceeds" and, collectively with the
Cash Proceeds, the "Sale Proceeds"). The Cash Proceeds shall be: (i) (a) the
amount necessary to pay off the first priority lien held by Seller's existing
senior secured lenders plus (b) the cost to cure defaults under leases and
contracts to be assumed by Newco up to $4,000,000 plus (c) the amount necessary
to pay off a post-petition financing facility of $13,000,000, pursuant to a
budget reasonably acceptable to Buyer, which shall be used to fund the
operations of Seller from the Petition Date to (I) the Closing (if the Buyer
consummates the transactions contemplated hereunder) and (II) a date that is no
later than 60 days after the Petition Date if Buyer does not consummate the
transactions contemplated hereunder (the "DIP Financing") plus (d) $2,000,000.
Newco 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. Seller shall be responsible for
distributing the Cash Proceeds (save for the DIP Financing) following the
Closing; the distribution of the Stock Proceeds shall be made, subject to
Buyer's approval as to structure, to comply with exemptions for registration
under federal and state securities laws. In the event no exemption is
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available, Buyer shall be responsible for the costs of any such registration. In
addition, Buyer shall provide, and be responsible for, its own reasonable costs
and expenses associated with providing adequate disclosure about Newco pursuant
to 11 U.S.C. Section 1125 in connection with any liquidating plan of
reorganization proposed post-Closing by Seller. The cash portion of the Sale
Proceeds shall be payable in full by wire transfer of immediately available
funds at the Closing (as hereinafter described) of the purchase contemplated
hereby. Seller shall be solely responsible for any sales or use taxes levied on
the transactions contemplated hereby.
3. Deposit. Buyer shall pay to the Seller, a non-refundable $250,000
deposit upon execution of this Letter Agreement and an additional non-refundable
deposit of $250,000 upon receipt of commitments, satisfactory to Buyer, from
Foothill Capital Corporation and Cerberus Partners with respect to the treatment
of their existing secured debt. Buyer shall wire such deposits in immediately
available funds or deliver a cashier's check in the amount of such deposits to
an escrow established by Seller. The deposits shall be applied towards the Sale
Proceeds on the date of the Closing. Notwithstanding the foregoing, in the event
the Closing does not occur for any reason (including failure to obtain the DIP
Financing) other than the breach of this Letter Agreement or Asset Purchase
Agreement by Buyer or Buyer's failure to obtain financing, all deposits provided
hereunder shall be refunded promptly to Buyer; provided that, if the Closing
does not occur as a result of Buyer's prior breach of this Letter Agreement or
the Asset Purchase Agreement or Buyer's failure to obtain financing (excluding
the DIP Financing), the Seller shall retain all deposits already paid hereunder
as its sole damages and remedy.
4. Assets to be Purchased. Buyer shall buy substantially all of the
assets of the Company (the "Assets"). Buyer shall list those assets on a
schedule to be provided to Seller no later than April 12, 2000. The Assets shall
be conveyed to Buyer free and clear of all liens, claims, interests and
encumbrances (except as provided herein), with all such liens, claims, interests
and encumbrances to attach to the Sale Proceeds.
5. Transfer of Assets. The transfer and sale of the Assets by the
Seller shall be effected by delivery by the Seller to Buyer, at the Closing, of
such bills of sale, endorsements, assignments, and other good and sufficient
instruments of sale, transfer, assignment and conveyance, as shall be, in the
reasonable judgment of Buyer, reasonable and necessary to effectively vest in
Buyer good, valid and insurable title to the Assets, free and clear of all
liens, claims, encumbrances, interests and security interests of any nature or
kind whatsoever (except as provided herein), pursuant to Court order under
section 363 of the Bankruptcy Code and other applicable bankruptcy law. The
Seller will, to the extent required after Closing, upon the request of Buyer,
execute, acknowledge and deliver, or cause to be done, executed, acknowledged
and delivered, all such additional documents as may reasonably be required by
Buyer, to effectuate the sale, conveyance, transfer, assignment and delivery by
the Seller of the Assets and the ownership by Buyer of the Assets.
6. Employees. Subject to further due diligence and negotiation, Buyer
intends to offer employment to substantially all of Seller's employees and to
negotiate a management retention plan. It is Buyer's policy and intention to
provide equity incentives to management and key employees, which may be dilutive
to other holders of common stock in Newco. Any
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severance or other obligations to officers and employees not offered employment
with Buyer shall remain the obligations of Seller.
7. Liabilities of Buyer. Buyer shall not assume any debt, liability
or obligation of the Seller of any kind or nature whatsoever, including, without
limitation claims for unpaid taxes, except for those liabilities set forth on a
list to be provided no later than April 12, 2000. Buyer shall assume all
obligations under any leases or executory contracts included in the Assets, and
shall be responsible for any lenders fees with the DIP Financing.
8. Procedure for Sale.
A. On or before one business day after the Petition Date, and in no
event later than April 17, 2000, the Seller shall file a motion
with the Court requesting the Court to approve the transactions
contemplated by this Letter Agreement (the "Motion") and, in
addition, on that same date shall file a motion for order
approving the terms and conditions set forth in this paragraph 8
(the "Procedures Motion"), which Procedures Motion shall be heard
on an expedited basis. Buyer shall approve the form and substance
of the Motion and Procedures Motion and related orders prior to
filing.
B. Buyer recognizes that this offer may be subjected to higher and
better bids. Bids, however, must (i) close no later than June 15,
2000, (ii) have no contingencies or conditions precedent other
than those set forth in the Asset Purchase Agreement, (iii) be for
substantially the same assets and assumption of liabilities and
(iv) be from bidders qualified as having the financial wherewithal
to close a competing Transaction at least five business days prior
to the Hearing (as defined below). In any such bidding, all
competing bids shall be required to be at least $3,000,000 in
excess of the Sale Proceeds and must include the payment of a
deposit of $500,000 to the Seller which will be forfeited if the
competing bidder becomes the winning bidder at a hearing approving
a sale and fails to close a Transaction (other than as a result of
a failure of conditions to closing to be satisfied). Each
subsequent bid must be in increments of no less than $200,000.
Upon entry of an order approving any competing bid or upon
Seller's breach of this Letter Agreement or the Asset Purchase
Agreement, the Seller shall pay Buyer a "break-up" fee in an
amount equal to $2,000,000 (the "Break-up Fee"), plus Buyer's
actual and reasonable costs and expenses incurred in connection
with this transaction (the "Fees"). Both Buyer and all qualified
competing bidders shall be entitled to improve their offers at an
auction pursuant to the Procedures Motion. Notwithstanding the
foregoing, if Buyer breaches this Letter Agreement or the Asset
Purchase Agreement, the Seller may sell the Assets to any other
entity without any liability to Buyer for the Break-up Fee or the
Fees. Any competing bidder must provide for the full and immediate
(i) (x) repayment of the DIP Financing (if Buyer funds any portion
of the DIP Financing) or (y), subject to the approval of the
lender providing the DIP Financing, the
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assumption at Closing of the DIP Financing and (z) in any event,
the release of Buyer from any guarantee provided by Buyer of the
DIP Financing and (ii) payment of the Break-up Fee to Buyer as
part of its bid. In the event of a prevailing competing bid, the
Fees incurred on or after the Petition Date shall be treated as an
administrative priority claim under 11 U.S.C. Sections 503(b)(1)
and 507(a).
C. Within five business days after the Petition Date, and in no event
later than April 21, 2000, the Bankruptcy Court shall enter a
preliminary order granting the Procedures Motion and (a) setting a
hearing on the Seller's Motion no later than June 4, 2000 (the
"Hearing"), (b) granting Buyer the bid protection and Break-up Fee
set forth in this paragraph 8, (c) requiring prospective
purchasers become "qualified" by serving upon the Seller and Buyer
copies of their proposed offers, together with evidence
satisfactory to Seller of financial wherewithal to perform, five
(5) business days before the Hearing, and (d) in any such
competitive bidding, Buyer shall continue to be credited with
$2,000,000, in addition to its actual bid, due to the Seller's and
any other bidder's obligation to pay the Break-up Fee (the
"Preliminary Order").
D. The closing of the transactions contemplated hereby (the
"Closing") shall occur no later than one business day after the
entry of a final order of the Bankruptcy Court (i.e. an order that
has not been reversed, stayed, modified or amended and as to which
(i) the time to appeal or seek review, reargument or rehearing has
expired and as to which no appeal or petition for certiorari,
review or rehearing is pending, or (ii) if appeal, review,
reargument, rehearing or certiorari of such order has been sought,
such order has been affirmed and the time to request a further
review, reargument, rehearing or certiorari has expired, as a
result of which such order has become final and nonappealable in
accordance with applicable law), in form and substance reasonably
satisfactory to Buyer, approving the Asset Purchase Agreement and
related documentation and authorizing the Seller to consummate the
transactions contemplated hereby (the "Order"). Notwithstanding
the foregoing sentence, and subject to applicable law, Buyer, at
its sole option, may close the transaction contemplated herein
prior to the Order becoming final, provided that the Bankruptcy
Court enters an order in form and substance satisfactory to Buyer
approving the Asset Purchase Agreement and related documentation
and authorizing the Seller to consummate the transactions
contemplated hereby, in which order the Court finds, pursuant to
11 U.S.C. (S)363(m), that the transactions were negotiated at
arms-length and in good faith, and the order is not stayed pending
appeal.
E. If either the Preliminary Order or the Order approving the
transactions contemplated by this Letter Agreement is not entered
by the deadlines set forth in paragraph 8(C), or the Closing has
not occurred by June 15, 2000,
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then Buyer may terminate the Asset Purchase Agreement or any
agreements based upon this Letter Agreement at any time
thereafter. Any withdrawal or termination of the Asset Purchase
Agreement or any agreement based on this Letter Agreement to
purchase the Assets in accordance with this subparagraph shall not
result in liability to any of the parties hereto.
9. The Seller's Obligations. The Seller shall use its best efforts to
obtain the entry of the Preliminary Order and the Order within the time frames
set forth herein. The Seller and Buyer agree to be fully bound to the terms and
conditions of this Letter Agreement.
10. Other Conditions. The obligations of Buyer to consummate the
transactions contemplated hereunder are subject to and conditioned upon Buyer's
satisfaction, in its reasonable discretion, that immediately prior to the
Closing (a) except for the investigation by the Securities and Exchange
Commission previously disclosed to Buyer, there exist no material violations of
federal, state, or local laws, statutes, regulations or codes of any kind or
nature whatsoever that would materially adversely affect the value of the assets
after the Closing and (b) the value of the Assets shall not change materially
from the value that existed on April 5, 2000; provided however that none of the
following shall constitute a material adverse change for purposes of this clause
(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
Buyer 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 Newco 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. Seller shall continue to
operate its businesses in the ordinary course from the date hereof through the
Closing. If the conditions set forth herein are not satisfied, then, and in such
event, Buyer may withdraw or terminate this Letter Agreement or the Asset
Purchase Agreement, as applicable. Buyer shall have no liability to Seller
whatsoever for withdrawing or terminating this Letter Agreement or the Asset
Purchase Agreement in accordance with this paragraph.
11. Cooperation in Collection of Receivables. The Seller agrees to
cooperate in all reasonable respects with Buyer. In addition, as of the Closing,
Seller shall irrevocably designate, make, constitute and appoint Buyer (and all
persons designated by Buyer) as Seller's true and lawful attorney in fact, to
(i) demand payment of all accounts receivable sold under the Asset Purchase
Agreement, (ii) enforce payment of all accounts receivable sold under the Asset
Purchase 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 the Asset Purchase Agreement, (iv) sell or
assign any account receivable sold under the Asset Purchase Agreement upon such
terms, for such amount and at such time or times as Buyer deems advisable, and
(v) take control in any manner of any item of payment or proceeds of any
accounts receivable sold under the Asset Purchase Agreement.
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12. Interim Access to Seller's Premises. Pending the Closing, Buyer
and its principals shall have full and complete access to Seller's premises and
Seller's officers, agents, employees and professionals during normal business
hours upon reasonable notice. In addition, Buyer shall have reasonable consent
rights with respect to Seller's operations pending the Closing. Prior to the
Petition Date, Buyer and Seller shall negotiate and draft a management agreement
which reflects the terms and intent of this paragraph; provided, however, that
Buyer and Seller shall use their best efforts to implement this paragraph 12
pending any final documentation.
13. Exclusivity. The Seller agrees that, until the Termination Date,
as defined below (the "Exclusivity Period"), neither it nor any of its members,
affiliates, employees, representatives, consultants, advisors, successors and
assigns, will directly or indirectly, initiate contact with, solicit, encourage,
negotiate, discuss, or enter into, with any person or entity other than Buyer or
any of its designated affiliates, any possible proposal or agreement for any
investment in or funding of a plan of reorganization for the Seller, or an
acquisition, restructuring, recapitalization or reorganization of any or all or
substantially all of the assets, business, properties, equity interests or
indebtedness of the Seller (a "Transaction"), other than a Transaction with
Buyer. In furtherance and not in limitation of the foregoing, the Seller agrees,
that until the end of the Exclusivity Period, Buyer shall have the exclusive
right to conduct due diligence with respect to a Transaction.
14. Further Documentation. Although this Letter Agreement is
intended to be fully binding and enforceable pursuant to its terms, the Seller
and Buyer recognize that other customary terms and conditions will be included
in other documents to be presented to the Bankruptcy Court (including without
limitation an asset purchase agreement, management agreement and shareholder
agreement, all as acceptable to Buyer and Seller) and they agree to use their
respective best efforts to negotiate and document such agreements as promptly as
is practicable and possible. This Letter Agreement shall terminate upon the
earlier to occur of April 21, 2000, and the execution by Seller and Buyer of
definitive documentation, including an Asset Purchase Agreement, for the
transaction contemplated hereby (the "Termination Date"); provided, however,
that the parties will use their best efforts to complete definitive
documentation by April 12, 2000.
15. Press Release. The Buyer and Seller shall cooperate in the
drafting and issuance of any press release with respect to this Letter
Agreement.
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If this Letter Agreement meets with your approval, kindly indicate
such acceptance by executing the enclosed copy of this letter returning it to
the undersigned.
Very truly yours,
GORES TECHNOLOGY GROUP
By: /s/ Alec Gores
Title: Chairman
AGREED AND ACKNOWLEDGED:
By: /s/ Robert R. Carpenter
Title: Chairman & CEO
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