Exhibit 2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
QUALIFIED UNDER THE TRUST INDENTURE ACT OF 1939. THIS NOTE MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER THE SECURITIES ACT. ADDITIONALLY, THE TRANSFER OF THIS
NOTE IS SUBJECT TO THE CONDITIONS SPECIFIED IN SECTION 6 OF THE NOTE
PURCHASE AGREEMENT PURSUANT TO WHICH THIS NOTE WAS PURCHASED AND NO
TRANSFER OF THIS NOTE SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS
HAVE BEEN FULFILLED.
Floating Rate Convertible Note Due 2000
March 27, 1997
SYSTEM SOFTWARE ASSOCIATES, INC., a Delaware corporation (the
Company), for value received, hereby promises to pay to the order of
Computer Associates International, Inc. or registered assigns, the sum
of the principal amount of
U.S. $12,000,000
on March 31, 2000 (or, if such day is not a business day (as defined in
Section 9 below), the next succeeding business day) (the Maturity
Date). The outstanding principal amount of this Note shall bear
interest from and including the date hereof (the Closing Date) to but
excluding the Maturity Date (or, if a Conversion Notice (as defined
below) has been delivered pursuant to Section 3(a), the Conversion Date
(as defined below)), for each Interest Period (as defined below)
applicable thereto, at a rate per annum (calculated on the basis of the
actual number of days elapsed over a year of 360 days) equal to the
Applicable Rate for such Interest Period. Applicable Rate means, for
any day during any Interest Period, (x) the Base Rate from time to time
in effect plus (y) 1.00%. Base Rate means, for any day, the higher of
(a) 0.50% per annum above the latest Federal Funds Rate, and (b) the
rate of interest in effect for such day as publicly announced from time
to time by Bank of America National Trust and Savings Association or its
successor, in San Francisco, California, as its reference rate.
Federal Funds Rate means, for any day, the rate set forth in the
weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Bank of New York
(including any such successor, H.15(519)) on the preceding Business
Day opposite the caption Federal Funds (Effective), or, if for any
relevant day such rate is not so published on any such preceding
business day, the rate for such day will be the arithmetic mean as
determined by the Holder of the rates for the last transaction in
overnight Federal funds arranged prior to 9:00 a.m. (New York City time)
on that day by each of three leading brokers of Federal funds
transactions in New York City selected by the Holder.
Interest shall be paid monthly in arrears on each Interest Payment
Date by wire transfer to the account of each holder of a Note (a Holder)
specified in writing to the Company. Interest Period means each period
beginning on and including an Interest Payment Date (or in
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the case of the first Interest Period, the Closing Date) and ending on
but excluding the immediately succeeding Interest Payment Date (or in
the case of the last Interest Payment Date, the Maturity Date (or, if a
Conversion Notice has been delivered pursuant to Section 3(a), the
Conversion Date)). Interest Payment Date means the last business day of
each calendar month commencing on April 30, 1997.
The outstanding principal amount of this Note (together with
accrued interest thereon) shall be payable to the Holder on the Maturity
Date in lawful money of the United States by wire transfer of
immediately available funds to such account as the Holder shall specify
in writing to the Company.
SECTION 1. The Notes. This Note is one of the Notes of the
Company which are being issued in the aggregate principal amount of
$12,000,000 and are designated as Floating Rate Convertible Notes Due
2000 (the Notes). This Note was issued pursuant to the terms of a Note
Purchase Agreement, dated as of March 27, 1997 (the Purchase Agreement),
between the Company and Computer Associates International, Inc. (the
Purchaser).
SECTION 2. Redemption. (a) Subject to Section 3, the Notes may
be redeemed at the option of the Company in whole (but not in part), at
any time prior to the earlier of (i) the Maturity Date or (ii) the
Company s receipt, or transmission, as the case may be, of a Conversion
Notice (as defined below). The redemption price (Redemption Price)
shall be equal to 100% percent of the principal amount, together with
accrued interest to the Redemption Date (as defined below).
(b) Notices to redeem the Notes shall be given to Holders in
writing mailed, by overnight courier, to each Holder at its address as
it appears in the register maintained by the Company, such mailing to be
not more than 60 days nor less than 30 days prior to the date fixed for
redemption. Neither the failure to give notice nor any defect in any
notice given to any particular Holder of a Note shall affect the
sufficiency of any notice with respect to other Notes. Notices to
redeem Notes shall specify the date fixed for redemption (the
Redemption Date), the Redemption Price, the place or places of
payment, that payment will be made upon presentation and surrender of
the Notes, that interest accrued to the date fixed for redemption will
be paid as specified in said notice, that on and after said date
interest thereon will cease to accrue.
(c) If notice of redemption has been given in the manner set
forth in this Section, upon presentation and surrender of each Note at
the place or places specified in such notice, such Note shall be paid
and redeemed by the Company by payment of the Redemption Price therefor
together with accrued interest thereon in lawful money of the United
States. Such payment shall be made to the Holder of such Note by wire
transfer of immediately available funds to such account as such Holder
shall specify in writing to the Company. If monies for the redemption
of the Notes shall have been available for redemption on the Redemption
Date, the Notes shall cease to bear interest, and the only right of the
Holders of such Notes shall be to receive payment of the Redemption
Price together with accrued interest to the Redemption Date.
SECTION 3. Conversion. (a) At the option of (x) the Holder, at
any time after the first anniversary of the Closing Date or any time
prior to such first anniversary following either the Company s issuance
of a notice to redeem the Notes pursuant to Section 2 or the occurrence
and continuance of an Event of Default (as defined below) or (y) the
Company, if the closing price of the Common Stock, par value $.0033 per
share (the Common Stock), of the Company, shall be equal to or in
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excess of $20.00 per share for any twenty Trading Days (as defined
below) in any thirty Trading Day period, the Notes, in whole or in part,
may be converted on the Conversion Date (as defined below) at the
principal amount thereof, into fully paid and nonassessable shares
(calculated as to each conversion to the nearest 1/100 of a share) of
Common Stock, including the associated Rights (as defined in the Note
Purchase Agreement), at the Conversion Price (as defined below), in
effect at the time of conversion; provided that, for the Company to
exercise the right specified in clause (y) above, the Company must issue
a Conversion Notice (as defined below) within twenty business days of
the end of any such thirty Trading Day period. In the event that a Note
is called for redemption pursuant to Section 2, such conversion right in
respect of the Note shall expire at the close of business on the
Redemption Date, unless the Company fails to make the payment due upon
redemption. The price at which the number of shares of Common Stock to
be delivered shall be determined upon conversion shall be $3.33 per
share of Common Stock (the Conversion Price). The Conversion Price
shall be adjusted in certain instances as provided in paragraph (d) of
this Section 3.
(b) If either the Holder or the Company elects to convert the
Notes, the Holder or the Company, as the case may be, shall provide
written notice (the Conversion Notice) to the Company (at the Company s
address) or the Holders (to each Holder s address as it appears on the
register), as applicable, which states that such party elects to convert
such Note. In the event that the Company elects to convert the Notes,
the Conversion Notice shall include a certification by the Company that
each of the conditions set forth in Section 3(f) will be satisfied as of
the Conversion Date. In order to exchange the securities, the Holder
shall surrender the Notes, duly endorsed or assigned to the Company or
in blank. If the Holder elects to convert the Notes, upon notice to the
Company thereof, the Company shall use its best efforts to cause the
conditions set forth in Section 3(f)(ii) through (v) to be satisfied as
promptly as possible thereafter. Each conversion shall be deemed to
have been effected immediately prior to the close of business on the
date all of the conditions set forth in Section 3(f) have been satisfied
or waived by the Holder (the Conversion Date). If such day is not a
business day, and a day on which the principal national securities
exchange or market quotation system on which the Common Stock is then
listed or admitted for trading is open (a Trading Day), then such
conversion will be deemed to have been effected on the next succeeding
Trading Day. As promptly as practicable on or after the Conversion
Date, the Company shall issue and deliver the certificates representing
the number of full shares of Common Stock, including the associated
Rights, issuable upon conversion, together with payment in lieu of any
fraction of a share, as provided in Section 3(c).
(c) No fractional shares of Common Stock shall be issued upon
conversion of Notes. Instead of any fractional share of Common Stock
which would otherwise be issuable upon conversion of any Note, the
Company shall pay a cash adjustment in respect of such fraction in an
amount equal to the same fraction of the market price per share of
Common Stock at the close of business on the Conversion Date.
(d) The Conversion Price shall be subject to the following
adjustments:
(i) if, on any Conversion Date, 80% of the closing price on
the trading day immediately preceding the Conversion Date is less than
$3.33, then the Conversion Price shall be reduced to equal 80% of such
closing price;
(ii) in case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall be
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proportionately reduced, and, conversely, in case outstanding shares of
Common Stock shall each be combined into a smaller number of shares of
Common Stock, the Conversion Price in effect at the opening of business
on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the
opening of business on the day following the day upon which such
subdivision or combination becomes effective;
(iii) in case the Company shall pay or make a dividend or
other distribution on any class of capital stock of the Company in
Common Stock, the Conversion Price in effect at the opening of business
on the day following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution
shall be reduced by multiplying such Conversion Price by a fraction of
which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination and the denominator shall be the sum of such number of
shares and the total number of shares constituting such dividend or
other distribution, such reduction to become effective immediately after
the opening of business on the day following the date fixed for such
determination;
(iv) in case the Company shall issue rights or warrants to
all holders of its Common Stock entitling them to subscribe for or
purchase shares of Common Stock at a price per share less than the
Conversion Price, the Conversion Price in effect at the opening of
business on the day following the date fixed for the determination of
stockholders entitled to receive such rights or warrants shall be
adjusted to such subscription or purchase price, such reduction to
become effective immediately after the opening of business on the day
following the date fixed for such determination;
(v) in case the Company shall issue Common Stock (other than
shares of Common Stock issued upon exercise of rights, options and
warrants outstanding as of the date hereof), or rights, options or
warrants convertible into, or exchangeable or exercisable for, Common
Stock to any third party, or shall reprice or adjust the conversion,
exchange or exercise price of rights, options or warrants outstanding as
of the date hereof, at or to a price per share of Common Stock less than
the Conversion Price, the Conversion Price in effect at the opening of
business on the day following the date of such issuance, repricing or
adjustment shall be adjusted to such issue, conversion, exchange or
exercise price or, in the case of a repricing or adjustment, such
conversion, exchange or exercise price as so adjusted, such reduction to
become effective immediately after the opening of business on the day
following the date of such issuance, repricing or adjustment, as the
case may be;
(vi) in case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock evidences of its
indebtedness or assets (including securities, but excluding any rights
or warrants referred to in clause (iv) of this Section, any dividend or
distribution paid in cash out of the retained earnings of the Company
and any dividend or distribution referred to in clause (iii) of this
Section), the Conversion Price in effect at the opening of business on
the date fixed for the determination of stockholders entitled to receive
such distribution shall be adjusted so that the same shall equal the
price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on the date fixed for the
determination of stockholders entitled to receive such distribution by a
fraction of which the numerator shall be the Conversion Price on the
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date fixed for such determination less the then fair market value of the
portion of the assets or evidences of indebtedness so distributed
applicable to one share of Common Stock and the denominator shall be
such Conversion Price, such adjustment to become effective immediately
prior to the opening of business on the day following the date fixed for
such determination; and
(vii) the reclassification of Common Stock into securities
including other than Common Stock shall be deemed to involve (A) a
distribution of such securities other than Common Stock to all holders
of Common Stock (and the effective date of such reclassification shall
be deemed to be the date fixed for the determination of stockholders
entitled to receive such distribution and the date fixed for such
determination within the meaning of clause (vi) of this Section), and
(B) a subdivision or combination, as the case may be, of the number of
shares of Common Stock outstanding immediately prior to such
reclassification into the number of shares of Common Stock outstanding
immediately thereafter (and the effective date of such reclassification
shall be deemed to be the day upon which such subdivision becomes
effective or the day upon which such combination becomes effective, as
the case may be, and the day upon which such subdivision or combination
becomes effective within the meaning of clause (ii) of this Section).
(e)Whenever the Conversion Price is adjusted pursuant to Section
3(d):
(i) the Company shall compute the adjusted Conversion Price
and shall prepare a certificate signed by the Company setting forth the
adjusted Conversion Price showing in reasonable detail the facts upon
which such adjustment is based; and
(ii) a notice stating that the Conversion Price has been
adjusted and setting forth the adjusted Conversion Price shall forthwith
be required, and as soon as practicable after it is required (together
with a copy of the certificate referred to in clause (i) above), such
notice shall be mailed by the Company to all Holders.
(f) The Company s right to convert the Notes shall be subject
to satisfaction of each of the following conditions:
(i) no Event of Default (as defined below) and no condition
or event which, with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default, shall have
occurred;
(ii) consummation of the conversion shall not result in a
violation of any law, regulation, judgment, injunction, order or decree
applicable to the Company or any Holder;
(iii) all Common Stock held by any Holder as of the
Conversion Date and to be held by such Holder as a result of the
conversion shall not, on the Conversion Date or thereafter, be subject
to any limitation or restriction on such Holder s ability or right to
hold, vote, transfer, dispose or take any other action with respect to
such Common Stock (other than any such limitation or restriction arising
as a result of the requirements of the Securities Act of 1933, as
amended, or as a result of agreements of such Holder with third
parties);
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(iv) all filings with, and all approvals, consents and
actions by any Person necessary to exempt any Reserved Shares (as
defined in the Purchase Agreement) issued upon conversion of the Notes
held by such Holder as of the Conversion Date and to be held by such
Holder as a result of the conversion and any such Holder with respect to
all such shares from, and to exclude such Reserved Shares from the
calculation of aggregate beneficial ownership of Common Stock of such
Holder for the purposes of, (x) the provisions of the Rights Agreement
(as defined in the Purchase Agreement) or from any similar agreement or
plan that the Company may have and (y) any applicable anti-takeover
statute or regulation, shall have been obtained and taken; and
(v) all filings with, and all approvals, consents and
actions by, any Person necessary to consummate the conversion
(including, without limitation, any approval required under the Xxxx-
Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended) shall have
been made and obtained.
The term Person shall mean an individual, a company, a partnership, a
limited liability company, a trust, an unincorporated association or any
other entity or organization, including, without limitation, a
government or political subdivision or an agency, instrumentality or
official thereof.
The conversion of the Notes by the Company pursuant to this Section 3
shall be deemed to be a representation and warranty by the Company that
all of the foregoing conditions are satisfied on and as of the
Conversion Date.
(g) Notwithstanding anything to the contrary set forth in the
Notes, unless and until the Company s stockholders have approved the
transactions contemplated by the Purchase Agreement and the Notes, the
Company shall not be obligated to issue more than 8,480,151 shares of
Common Stock (as adjusted to reflect stock dividends, stock splits,
recapitalization, reorganization, stock exchange or other combination)
(the Nasdaq Limit) upon conversion of the Notes. If, on any
Conversion Date, the Notes are converted into a number of shares of
Common Stock that is less than the number of shares that the Notes would
have been convertible into had the limitation on the issuance of shares
set forth in the immediately preceding sentence not been in effect, the
Company shall, on the Conversion Date, pay to the Holder by wire
transfer of immediately available funds an amount equal to the sum of
(x) the product of (1) the excess of (A) such number of shares that
would have been issued upon such conversion had such limitation not been
in effect over (B) such number of shares that were being issued upon
such conversion and (2) the closing price of the Common Stock on the
trading day immediately preceding the Conversion Date and (y) the Make-
Whole Amount; provided that the amount payable pursuant to this sentence
shall in no event exceed the maximum amount allowable under applicable
law. Make-Whole Amount means an amount equal to the excess of (x) the
amount of interest that would have been due on the outstanding principal
amount of the Notes from March 27, 1997 through and including the
Conversion Date had the Applicable Rate been equal to 21% over (y) the
amount of interest that was actually due on the outstanding principal
amount of the Notes for such period.
(h) At the next annual meeting of the Company s stockholders
following the Company s 1997 annual stockholders meeting, which the
Company shall cause to occur no later than May 31, 1998, the Company
shall use its best efforts to obtain the necessary approvals of its
stockholders of the transactions contemplated by the Purchase Agreement
and the Notes in order to satisfy the applicable rules of the Nasdaq
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National Market with respect to issuing more shares than the Nasdaq
Limit upon conversion of the Notes.
(i) The Company shall at all times reserve and keep available,
free from any pre-emptive rights, out of its authorized but unissued
Common Stock, for the purpose of effecting the conversion of Notes, the
full number of shares of Common Stock then issuable upon the conversion
of all outstanding Notes (but in no event less than 8,480,151 shares).
(j) The Company will pay any and all transfer, documentary and
similar taxes or charges that may be payable in respect of the issue or
delivery of shares of Common Stock on conversion of Notes pursuant
hereto. The Company shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue
and delivery of shares of Common Stock in a name other than that of the
Holder of the Note or Notes to be converted, and no such issue or
delivery shall be made unless and until the person requesting such issue
has paid to the Company the amount of any such tax, or has established
to the satisfaction of the Company that such tax has been paid.
(k) The Company covenants that all shares of Common Stock which
may be issued upon conversion of Notes will upon issue be fully paid and
nonassessable and, except as provided in Section 3(j), the Company will
pay all taxes, liens and charges with respect to the issue thereof.
(l) All Notes that have been converted shall be promptly
delivered to the Company to be canceled by the Company.
SECTION 4. Exchange or Replacement of Notes. (a) The Holder
of any Note, at such Holder s option may in person or by duly authorized
attorney surrender such Note for exchange, at the office or agency of
the Company maintained pursuant to Section 6(a) of this Note, and
receive in exchange therefor a new Note in the same principal amount as
the outstanding principal amount of the Note so surrendered and bearing
interest at the same annual rate as the Note so surrendered, each such
new Note to be dated as of the most recent Interest Payment Date on the
Note so surrendered and to be in such outstanding principal amount and
payable to such person or persons, or order, as such Holder may
designate in writing; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer
involved in the issuance and delivery of any new Note in a name other
than that of the Holder of the Note surrendered in exchange therefor;
provided, further, however, that the Company shall not be required to so
register the transfer unless the conditions for transfer in the Purchase
Agreement have been satisfied. The Holder shall give to the Company 10
days prior written notice of such Xxxxxx s intention to make such
exchange.
(b) Upon receipt by the Company of evidence satisfactory to it
of the loss, theft or destruction, mutilation of any Note and (in case
of loss, theft or destruction) of indemnity satisfactory to it, and upon
surrender and cancellation of such Note, if mutilated, the Company will
execute and deliver in lieu of such Note a new Note of like tenor. Any
such new Note shall be dated as of the most recent Interest Payment Date
on the Note in lieu of which such new Note is executed and delivered.
The term outstanding when used in this Note with reference to the
Notes as of any particular time shall not include (i) any Note in lieu
of which a new Note has been executed and delivered by the Company in
accordance with the provisions of this Section and (ii) any Note held or
beneficially owned by the Company or any of its affiliates.
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SECTION 5. Amendments and Waivers. With the written consent
of the Holders of 51% of the aggregate outstanding principal amount of
the Notes at the time outstanding and the written consent of the
Purchaser so long as it holds any of the Notes, any covenant, agreement
or condition contained in the Notes may be waived (either generally or
in a particular instance and either retroactively or prospectively), or
such Holders, the Purchaser (so long as it holds any of the Notes) and
the Company may from time to time enter into agreements for the purpose
of amending any covenant, agreement or condition of the Notes or
changing in any manner the rights of the holders of the Notes or the
Company; provided, however, that:
(i) no such amendment or waiver shall change the Maturity Date
of this Note or reduce the rate or extend the time of payment of
interest hereon, or reduce the amount of the payment of interest hereon,
or reduce the amount of the principal hereof, or modify any of the
provisions of this Note with respect to the payment hereof, or change
the conditions to conversion set forth in Section 4(f), without in any
such case the consent of the Holder of this outstanding Note;
(ii) no such amendment or waiver with respect to the provisions
of Section 8 shall be effective without the consent of the holders of
Senior Indebtedness; and
(iii) no such waiver shall extend or affect any obligation not
expressly waived or impair any right consequent thereon.
Any such amendment or waiver shall be binding upon each future
Holder of this Note and upon the Company, whether or not such Note shall
have been marked to indicate such amendment or waiver, but any Note
issued thereafter shall bear a notation referring to any such amendment
or continuing waiver.
SECTION 6. Covenants.
(a) The Company shall maintain an office where notices,
presentations and demands to or upon the Company in respect of Notes,
including those relative to conversion of the Notes, may be given.
(b) The Company shall keep at such office a register at its
expense, which shall provide for the registration and transfer of Notes.
The Company and any agent of the Company may treat the person in whose
name any Note is registered as the Holder of such Note for the purpose
of receiving payment of the principal and interest on such Note and for
all other purposes, whether or not such Note be overdue, and neither the
Company nor any such agent shall be affected by notice to the contrary.
(c) The Company agrees that so long as any of the Notes are
outstanding, it shall not directly or indirectly (i) declare or pay any
dividend (other than a stock dividend) or make any distribution on its
capital stock or to the holders of its capital stock, (ii) purchase,
redeem or otherwise acquire or retire for value, or permit any of the
Subsidiaries to, directly or indirectly, purchase, redeem or otherwise
acquire or retire for value, any such capital stock (or options,
warrants or other rights to acquire such capital stock), (iii) except as
provided under this Note, redeem, repurchase, defease (including, but
not limited to, in-substance or legal defeasance) or otherwise acquire
or retire for value, prior to any scheduled maturity, scheduled
repayment or scheduled sinking fund payment, Indebtedness of the Company
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which is pari passu or subordinate (whether pursuant to its terms or by
operation of law) in right of payment to the Notes and which is
scheduled to mature (after giving effect to any and all options to
extend the maturity thereof) on or after the maturity date of such Notes
(after giving effect to any and all options to extend the maturity
thereof).
(d) The Company agrees that as long as any of the Notes are
outstanding, it shall not (i) consolidate with or merge into any other
Person or (ii) sell, lease or otherwise transfer, directly or
indirectly, all or any substantial part of the assets of the Company and
the Subsidiaries, taken as a whole, to any other Person unless (A) the
successor formed by such consolidation or the survivor of such merger or
the Person that acquires by conveyance, transfer or lease all or any
substantial part of the assets of the Company and the Subsidiaries as an
entirety, as the case may be, shall be a solvent corporation organized
and existing under the laws of the United States or any State thereof
(including the District of Columbia), and, if the Company is not such
corporation, such corporation shall have executed and delivered to each
holder of any Notes its assumption of the due and punctual performance
and observance of each covenant and condition of the Purchase Agreement
and the Notes and (B) immediately after giving effect to such
transaction, no Event of Default and no condition or event which with
the giving of notice or lapse of time or both would, unless cured or
waived, become an Event of Default, shall have occurred and be
continuing.
(e) The Company agrees that so long as any of the Notes are
outstanding, neither the Company nor any of the Subsidiaries will in any
manner, directly or indirectly, incur or be liable in respect of any
Indebtedness senior to or ranking pari passu with the Notes, except:
(i) Indebtedness of the Company represented by the Notes;
(ii) Indebtedness of the Company existing as of March 27,
1997 as set forth on Schedule 3(b)(iii) of the Company Disclosure Letter
(as defined in the Purchase Agreement);
(iii) other Indebtedness not exceeding $2,000,000 in
aggregate principal amount at any time outstanding; and
(iv) extensions, refinancings, amendments and modifications
of any Indebtedness described in clause (ii) above, provided that the
principal amount of such Indebtedness is not increased.
Indebtedness of any Person means at any date, without
duplication, (i) all obligations of such Person for borrowed money, (ii)
all obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments, (iii) all obligations of such Person to pay
the deferred purchase price of property or services, except trade
accounts payable arising in the ordinary course of business, (iv) all
obligations of such Person as lessee which are capitalized in accordance
with generally accepted accounting principles, (v) all reimbursement
obligations of such Person (whether contingent or otherwise) in respect
of letters of credit, banker s acceptances, surety or other bonds and
similar instruments, (vi) all obligations of such Person to purchase
securities (or other property) which arise out of or in connection with
the sale of the same or substantially similar securities or property,
(vii) all Indebtedness of others secured by a Lien (as defined below) on
any asset of such Person, whether or not such Indebtedness is assumed by
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such Person, and (viii) all Indebtedness of others guaranteed by such
Person or for which such Person is otherwise contingently liable.
(f) The Company agrees that so long as any of the Notes are
outstanding, neither the Company nor any of the Subsidiaries shall
create, incur, assume or suffer to exist any mortgage, deed of trust,
security interest, lien or other encumbrance (each, a Lien) upon any
of its properties or assets, whether now owned or hereafter acquired,
except Liens in favor of holders of the Notes and Permitted Liens.
Permitted Liens shall mean: (i) liens for taxes not yet
payable or being contested in good faith and by appropriate proceedings
diligently pursued, provided that the reserve or other appropriate
provision, if any, as shall be required by generally accepted accounting
principles shall have been made therefor; (ii) deposits or pledges to
secure the payment of workmen s compensation, unemployment insurance,
old age pensions or other social security benefits or obligations; (iii)
deposits or pledges to secure the performance of bids, tenders,
contracts, leases, public or statutory obligations, surety or appeal
bonds, or other deposits or pledges for purposes of a like general
nature made or given in the ordinary course of business and not in
connection with the borrowing of money; (iv) Liens in favor of holders
of Indebtedness permitted under Section 6(e); (v) such utility, access
and other easements, rights of way, restrictions, exceptions, minor
defects or irregularities in or clouds on title or encumbrances not
arising out of the borrowing of money or the securing of advances or
credit, and which will not interfere with or impair in any respect the
utility, operation or value of any properties of the Company; (vi) liens
of mechanics, warehousemen, carriers or other similar statutory liens
incurred in good faith in the ordinary course of business; (vii) liens
existing as of March 27, 1997 on properties and assets of the Company or
any Subsidiary as set forth in Schedule 3(b)(iii) of the Company
Disclosure Letter; and (viii) other liens incidental to the conduct of
the Company s business or the ownership of its property and assets
(including landlord liens) that (1) are not incurred in connection with
the borrowing of money or the obtaining of advances or credit or the
guaranteeing of the obligations of another Person, (2) do not in the
aggregate materially detract from the value of the Company s properties
or assets or materially impair the Company s ability to use such
property or assets in the operation of its business and (3) do not
secure any obligation in an amount exceeding $250,000.
(g) The Company shall deliver (by overnight courier) to each
Holder promptly following the occurrence thereof written notice of (i)
an Event of Default or of any condition or event which, after notice,
lapse of time, or both, could constitute an Event of Default, and (ii)
the commencement of any action, suit, claim, investigation or legal or
administrative or arbitration proceeding which could have a material
adverse affect on the Company or any of the Subsidiaries.
SECTION 7. Events of Default.
(a) The following shall constitute an Event of Default under
the Notes:
(i) the Company shall fail to pay when due any principal of
or interest on any Note or any other amount payable under the Notes or
the Purchase Agreement;
(ii) the Company shall fail to observe or perform any
covenant contained in Section 6(c), 6(d), 6(e), or 6(f);
11
(iii) the Company shall fail to observe or perform any
covenant or agreement contained in the Notes or the Purchase Agreement
(other than those covered by clause (i) or (ii) above) for 15 days after
written notice thereof has been given to the Company;
(iv) any representation, warranty, certification or
statement made by the Company in the Purchase Agreement or in the Notes
or in any certificate, financial statement or other document delivered
pursuant to the Purchase Agreement or the Notes shall prove to have been
incorrect in any material respect when made;
(v) the Company or any of its subsidiaries shall fail to
make any payment in respect of any Material Indebtedness (as defined
below) when due or within any applicable grace period;
(vi) any event or condition shall occur which (A) results in
the acceleration of the maturity of any Material Indebtedness or (B)
enables (or, with the giving of notice or lapse of time or both, would
enable) the holder of such Indebtedness or any Person acting on such
holder s behalf to accelerate the maturity thereof;
(vii) the Company or any of its subsidiaries shall commence
a voluntary case or other proceeding seeking liquidation, reorganization
or other relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its property,
or shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as
they become due, or shall take any corporate action to authorize any of
the foregoing;
(viii) an involuntary case or other proceeding shall be
commenced against the Company or any of its subsidiaries seeking
liquidation, reorganization or other relief with respect to it or its
debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial
part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 60 days; or an
order for relief shall be entered against the Company or any of its
subsidiaries under the federal bankruptcy laws as now or hereafter in
effect;
(ix) any member of the ERISA Group shall fail to pay when
due an amount or amounts aggregating in excess of $100,000 which it
shall have become liable to pay under Title IV of ERISA; or notice of
intent to terminate a Material Plan shall be filed under Title IV of
ERISA by any member of the ERISA Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate, to impose liability (other than
for premiums under Section 4007 of ERISA) in respect of, or to cause a
trustee to be appointed to administer any Material Plan; or a condition
shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any Material Plan must be terminated; or there
shall occur a complete or partial withdrawal from, or a default, within
the meaning of Section 4219(c) (5) of ERISA, with respect to, one or
more Multiemployer Plans which could cause one or more members of the
ERISA Group to incur a current payment obligation in excess of $200,000;
12
(x) a judgment or order for the payment of money in excess
of $1,000,000 shall be rendered against the Company or any of its
subsidiaries and such judgment or order shall continue unsatisfied and
unstayed for a period of 30 business days; or
(xi) any person or group of persons (within the meaning of
Section 13 or 14 of the Securities Exchange Act of 1934, as amended)
(other than the Purchaser and its affiliates) after the date hereof
shall have acquired beneficial ownership (within the meaning of Rule
13d-3 promulgated by the Securities and Exchange Commission under said
Act) of 15% or more of the outstanding shares of common stock of the
Company; or individuals who were directors of the Company as of the date
hereof (together with any new director whose election by the Company s
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the
beginning of such period or whose election or nomination was previously
so approved) shall cease for any reason to constitute a majority of the
board of directors of the Company.
For purposes of this Section, Material Indebtedness means
Indebtedness (other than the Notes) of the Company or one or more of any
Subsidiaries, arising in one or more related or unrelated transactions,
in an aggregate principal amount exceeding $750,000; provided that such
term shall not include the Indebtedness described on Exhibit C to
Schedule 3(n) of the Company Disclosure Letter for so long as none of
the following has occurred: (i) any holder of such Indebtedness shall
have either accelerated such Indebtedness or commenced any enforcement
action with respect thereto, (ii) any holder of Senior Indebtedness
shall have ceased to waive any default under such Senior Indebtedness
arising out of such failure to pay any Indebtedness described on Exhibit
C to Schedule 3(n) and (iii) the aggregate dollar amount of all such
outstanding Indebtedness specified on Exhibit C to Schedule 3(n) (other
than fees, interest or penalties thereon) shall have increased above the
level so specified. As used herein, the terms ERISA, ERISA Group,
Material Plan, Multiemployer Plan and PBGC have the meanings set
forth in the Purchase Agreement.
(b) In case of the happening of an Event of Default, then, and
in every such happening and at any time thereafter during the
continuance of such Event of Default, the Holders of at least 51% in
interest of Notes at the time outstanding may, by written notice to the
Company, declare the Notes to be forthwith due and payable, whereupon
the Notes shall become forthwith due and payable, both as to the
outstanding principal amount thereof and accrued interest thereon,
without presentment, demand, protest, or other notice of any kind, all
of which are hereby expressly waived, anything contained herein or
therein to the contrary notwithstanding; provided that in the case of
any of the Events of Default specified in Section 7(a)(vii) or
7(a)(viii) above with respect to the Company, without any notice to the
Company or any other act by the Holders, the Notes shall become
forthwith due and payable, both as to the outstanding principal amount
thereof and accrued interest thereon, without presentment, demand,
protest, or other notice of any kind, all of which are hereby expressly
waived, anything contained herein or therein to the contrary
notwithstanding.
(c) In case an Event of Default shall have occurred and be
continuing, then, (i) the Holders of at least 51% in interest of the
Notes at the time outstanding may proceed to protect and enforce such
Holders rights either by suit in equity and/or by action at law,
whether for the specific performance of any covenant or agreement
contained in the Purchase Agreement or the Notes or in aid of the
13
exercise of any power granted in the Purchase Agreement or in the Notes,
or proceed to enforce the payment of the Notes or to enforce any other
legal or equitable right of the Holders of the Notes and (ii) the
interest rate per annum with respect to any Note shall, for each day
that such Event of Default exists, be automatically increased to a rate
per annum equal to the sum of (A) 3% plus (B) the Applicable Rate for
such day. Any overdue principal of or interest on this Note and any
overdue amount payable hereunder or under the Purchase Agreement shall
bear interest, payable on demand, and in lawful money of the United
States, for each day until paid at the rate per annum specified in
clause (ii) of the immediately preceding sentence. No remedy herein
conferred hereunder is intended to be exclusive of any other remedy and
each and every such remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or not or hereafter existing at
law or in equity or by statute or otherwise. No course of dealing
between the Company or any of its subsidiaries and any Holder of Notes
or any delay on the part of any Holder of Notes in exercising any rights
hereunder shall operate as a waiver of any rights of any such person
hereunder or under the Purchase Agreement.
SECTION 8. Subordination. (a) The Company, for itself, its
successors and assigns, covenants and agrees, and each Holder by its
acceptance hereof likewise covenants and agrees, that each Note shall be
subordinated, to the extent set forth below, to the prior payment in
full of all Senior Indebtedness (as hereinafter defined).
(b) During the period referred to in Section 8(g), the Company
shall not make or agree to make, and the Holder will not, demand, sue
for, take, or retain, any direct or indirect payment (in cash, property,
securities, by set-off or otherwise) on account of the principal of or
interest on this Note, provided, however, that the Company may pay and
the Holder may demand, sue for, take and retain any payments of interest
and principal, including, without limitation, payment upon the Company s
right to redeem under Section 2, under the terms and conditions of the
Notes made or due prior to the date on which the Holder shall have
received written notice (by registered mail, overnight courier or
confirmed facsimile) of any Subordination Event (as hereinafter
defined). Nothing in this Section 8 shall be deemed to prevent the
accrual of interest on outstanding amounts, contemplated by the
provisions of this Note including, without limitation, Section 7(c).
Nothing in this Section 8 shall be deemed to prevent the Holder from
demanding, suing for, taking or retaining any payments on account of
this Note after the earlier of (i) the date on which the Senior
Indebtedness has been paid in full and (ii) either (y) 180 days after
the occurrence of an Event of Default (other than an Event of Default
under Section 7(a)(iii) or an Event of Default under Section
7(a)(vi)(B)) shall have occurred or (y) 270 days after an Event of
Default under Section 7(a)(iii) shall have occurred, provided that in
all cases in which more than one Event of Default is outstanding at one
time, the applicable period for purposes of this clause (ii) shall be
the shortest period possible. Notwithstanding the preceding sentence,
if at the time of receipt by the Holder of any payment on account of the
Notes (w) any Senior Indebtedness shall have reached final maturity
(whether by acceleration or otherwise), (x) the holders of such Senior
Indebtedness referred to in clause (w) above shall have previously
commenced proceedings to enforce payment of such Senior Indebtedness,
(y) such proceedings shall be continuing and (z) prior to the Holder s
receipt of such payment, the holders of such Senior Indebtedness shall
have notified the Holder of the commencement of such proceedings, then
no such payment shall be made on account of the Notes until the Senior
Indebtedness described in clause (w) is paid in full and if any such
payment is received by the Holder it shall be paid over to the holder of
the Senior Indebtedness referred to in clause (w) above in an amount
equal to the lesser of (A) the outstanding amount of such Senior
Indebtedness and (B) the amount of such payment.
(c)(i) In the event of the occurrence of an event of default
under any agreement that includes the Company s obligation to pay Senior
14
Indebtedness of the Company, the failure to repay any Senior
Indebtedness upon the final maturity thereof or otherwise upon any
payment or distribution, whether of cash, securities, or other property,
to creditors of the Company in a total or partial liquidation,
reorganization or dissolution of the Company, whether voluntary or
involuntary, or in a bankruptcy, reorganization, insolvency,
receivership, assignment for the benefit of creditors, marshaling of
assets, or similar proceeding relating to the Company or its property
(the existence of such acceleration, failure to pay upon final maturity
or proceeding being herein referred to as a Subordination Event), then
except as set forth in the proviso set forth in the first sentence of
Section 8(b), all Senior Indebtedness (including any interest thereon
accruing after the occurrence of any such event) shall first be paid in
full before any payment or distribution, whether in cash, securities or
other property other than Subordinated Securities (as hereinafter
defined), shall be made to the Holder on account of this Note. Any
payment or distribution, whether in cash, securities, or other property
(other than the Subordinated Securities), which would otherwise (but for
these subordination provisions) be payable or deliverable in respect of
this Note shall be paid or delivered directly to the holder of the
Senior Indebtedness until all Senior Indebtedness (including any
interest thereon accruing after the occurrence of any such event) shall
have been paid in full. Subordinated Securities shall mean any
securities of the Company or any other corporation provided for by a
plan of reorganization or readjustment, the payment of which is
subordinate, at least to the extent provided in these subordination
provisions with respect to the Notes, to the payment of all Senior
Indebtedness at the time outstanding or to any securities issued in
respect thereof under any such plan of reorganization or readjustment.
(ii) In the case of a happening of any Event of Default
other than any of the Events of Default specified in Section 7(a)(vii)
or 7(a)(viii), the Holders will not declare the Notes to be forthwith
due and payable until the earliest of (x) the final maturity of any
Senior Indebtedness, (y) the acceleration of the maturity of any Senior
Indebtedness and (z) either (A) 180 days after the occurrence of an
Event of Default (other than an Event of Default under Section 7(a)(iii)
or an Event of Default under Section 7(a)(vi)(B)) shall have occurred or
(B) 270 days after an Event of Default under Section 7(a)(iii) shall
have occurred, provided that in all cases in which more than one Event
of Default is outstanding at one time, the applicable period for
purposes of this clause (z) shall be the shortest period possible.
(d) The provisions of this Section constitute a continuing
subordination agreement, and the holder of Senior Indebtedness may
continue, without notice to the Holder, to extend credit and make loans
and advances to or for the account of the Company in reliance hereon;
provided that such loans and advances are not prohibited by the
provisions of Section 6(e). The holder of Senior Indebtedness may, at
any time and from time to time, without consent or notice to the Holder,
without incurring responsibility to the Holder, and without impairing or
releasing any rights of the holder of Senior Indebtedness or any
obligations of the Holder hereunder: (i) change the manner, place or
terms of payment or change or extend the time of payment of, or renew or
alter any of the Senior Indebtedness, or otherwise amend in any manner
any of the Senior Indebtedness or any instrument evidencing the same or
any agreement under which any of the Senior Indebtedness is outstanding;
(ii) require such additional collateral from the Company or others to
secure any of the Senior Indebtedness as it may deem necessary or
desirable; (iii) sell, exchange, release or otherwise deal with any
collateral for the Senior Indebtedness; (iv) release any person (other
than the Company) liable in any manner for the payment or collection of
any of the Senior Indebtedness; and (v) exercise or refrain from
exercising any right against the Company and any other person.
15
(e) The holder of Senior Indebtedness shall not be prejudiced in
the right to enforce subordination of the Notes by any act or failure to
act on the part of the Company or of the holder of Senior Indebtedness.
(f) Except as otherwise expressly agreed to or undertaken by the
Holder herein, nothing contained herein shall be deemed to impose upon
the Holder any liability or obligation of the Company to the holder of
Senior Indebtedness or shall be construed as implying any guarantee,
warranty, undertaking or representation on the part of the Holder as to
the discharge by the Company of any liability or obligation of the
Company to the holder of Senior Indebtedness.
(g) As long as any Senior Indebtedness is outstanding, the
Holder shall not commence, or join with any creditor other than the
holder of Senior Indebtedness in commencing, any proceeding referred to
in Section 8(b) (which shall be deemed to include an involuntary
bankruptcy proceeding against the Company) until the earlier of (i) the
date on which the Senior Indebtedness has been paid in full and (ii)
either (x) 180 days after the occurrence of an Event of Default (other
than an Event of Default under Section 7(a)(iii) or an Event of Default
under Section 7(a)(vi)(B)) shall have occurred or (y) 270 days after an
Event of Default under Section 7(a)(iii) shall have occurred, provided
that in all cases in which more than one Event of Default is outstanding
at one time, the applicable period for purposes of this clause (ii)
shall be the shortest period possible.
(h) If the Holder receives any payment or distribution of any
character in contravention of any of the terms hereof, it shall hold
such payment or distribution in trust for the benefit of, and shall
promptly pay over or deliver and transfer such payment or distribution
to, the holder of the Senior Indebtedness.
(i) As used in this Section, Senior Indebtedness shall mean any
Indebtedness (as hereinafter defined) of the Company, other than the
Notes, permitted to be issued under Section 6(e), provided that in each
case the terms of any such Senior Indebtedness do not prohibit (except
on the terms set forth in this Note) the payment of principal of and
interest on the Note (including, without limitation, upon redemption by
the Company). Senior Indebtedness shall expressly include the
Indebtedness under the Amended and Restated Secured Credit Agreement,
dated as of February 28, 1997, among the Company, Bank of America
National Trust and Savings Association, as agent, and other named
institutions, as such agreement may be amended from time to time, except
to the extent that the Indebtedness thereunder is increased in a manner
not permitted under Section 6(e), and the Amended and Restated Note
Agreement, dated as of February 28, 1997, among the Company, Principal
Mutual Life Insurance Company and Massachusetts Mutual Life Insurance
Company, as such agreement may be amended from time to time, except to
the extent that the Indebtedness thereunder is increased in a manner not
permitted under Section 6(e).
(j) The provisions of this Section are for the purpose of
defining the relative rights of the holders of Senior Indebtedness on
the one hand, and the Holders on the other hand, against the Company and
its property, and nothing herein shall impair, as between the Company
and the Holders, the obligation of the Company, which is unconditional
and absolute, to pay to the Holder hereof the principal hereof and
interest hereon in accordance with the terms and provisions hereof; nor
shall anything herein prevent the Holders from exercising all remedies
otherwise permitted by applicable law hereunder upon default under this
Note, subject to the limitations set forth in Sections 8(b), 8(c)(ii)
and 8(g) and to the rights, if any, under this Section, of holders of
16
Senior Indebtedness to receive cash, property, stock or obligations
otherwise payable or deliverable to the Holders. Nothing in this
Section 8 shall prohibit or in any way restrict the Holder s right, at
any time (including without limitation following a Subordination Event),
to the benefit of the provisions of Section 3.
(k) After the payment in full of all amounts payable with
respect to Senior Indebtedness, the Holders shall be subrogated to the
rights of the holders of Senior Indebtedness to receive payments or
distributions of cash, property, stock or obligations applicable to
Senior Indebtedness until the principal of and interest on this Note
shall be paid in full, and, for the purposes of such subrogation, no
payments or distributions to the holders of Senior Indebtedness of any
cash, property, stock, or obligations to which the Holders would be
entitled except for the provisions of this Section, and no payment
pursuant to the provisions of this Section to the holders of Senior
Indebtedness by the Holders, shall, as between the Company, its
creditors other than holders of Senior Indebtedness and the Holders, be
deemed to be a payment by the Company to or on account of Senior
Indebtedness. Nothing contained in this Note shall prevent the Company
from making payments at any time of principal of or interest on the
Notes except under the conditions described in Section 8(b) or 8(c).
SECTION 9. Extension of Maturity. Should the principal of or
interest on this Note become due and payable on other than a business
day, the maturity thereof shall be extended to the next succeeding
business day, and interest shall be payable thereon at the rate per
annum (calculated on the basis of the actual number of days elapsed over
a year of 360 days) herein specified during such extension. The term
business day shall mean any day that is not a Saturday, Sunday or legal
holiday in the State of New York.
SECTION 10. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK.
SECTION 11. CONSENT TO JURISDICTION. EACH OF THE HOLDER AND THE
COMPANY HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY
NEW YORK STATE COURT SITTING IN NEW YORK CITY FOR PURPOSES OF ALL LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THE NOTES OR THE TRANSACTIONS
CONTEMPLATED HEREBY. EACH OF THE HOLDER AND THE COMPANY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. EACH OF THE HOLDER AND THE COMPANY CONSENT TO THE SERVICE OF
PROCESS IN ANY SUCH PROCEEDING BY THE DELIVERY (BY OVERNIGHT COURIER) TO
IT AT ITS ADDRESS SPECIFIED IN SECTION 9(c) OF THE PURCHASE AGREEMENT
(OR IN THE CASE OF A HOLDER OTHER THAN THE PURCHASER, TO ITS ADDRESS AS
IT APPEARS IN THE REGISTER MAINTAINED BY THE COMPANY). EACH OF THE
HOLDER AND THE COMPANY FURTHER AGREES THAT A FINAL JUDGMENT IN ANY SUCH
PROCEEDING SHALL BE CONCLUSIVE AND BINDING AND MAY BE ENFORCED IN OTHER
17
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW.
SECTION 12. WAIVER OF JURY TRIAL. EACH OF THE HOLDER AND THE
COMPANY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE NOTES OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
SYSTEM SOFTWARE ASSOCIATES, INC.
By: /s/ Xxxxx X. Xxxxx
------------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
18
[FORM OF TRANSFER NOTICE]
For value received ______________________ hereby sells, assigns and
transfers unto __________________________, whose social security or
other identifying number is ______________________ and whose address
(including postal zip code) is __________________________ and does
hereby irrevocably constitute and appoint _____________________ attorney
to transfer the said Note of the within named Company with full power of
substitution in the premises.
Dated: ____________
___________________
Transferor
NOTICE: The Signature to this Notice must correspond with the name as
written upon the face of this Note and every particular, without
alteration or enlargement or any change whatever.
