This is big news, but just discovered it today, so had to share it with you all.
In these days we would call it a crossover, but at that time it could be a revolution.
Irrational Games and Looking Glass Studios in hand with Electronic Arts were actually in cooperation with Gale Anne Hurd (the rightholder of the original Terminator movie, at the time of the production of System Shock 2 she had 50% of the rights), some of the former Carolco Pictures founders and James Cameron, to actually introduce the Terminator into the System Shock franchise as part of the promotion of their new upcoming film.
The talks have been very advanced at that time, as the rightholders decided to give the responsibility to a less known studio, but the one that could create a convincing enviroment. They were actually very pleased with the way the original System Shock felt, even if it wasn't a commercial success. They also felt that the previous company that made games in the Terminator franchise, the Bethesda Softworks, put too much accent on action and not enough on the atmosphere in their Terminator: Future Shock (1994) and Terminator: SkyNET (1995) games. Both Bethesda products were also technologically impaired in comparison to the original Shock.
For some time the cooperation went smoothly as reported. The game subtitle were slated to be "The Rise of the Machine", the same as of the upcoming third part of the movie. They both were expected to be released in the same time, with the movie having classic System Shock elements in it, including SHODAN, the original Hacker and Citadel Station as a throwback to the original and cyber-terminals allowing cyberspace logging, that were to be actually present in the sequel of the game. The Soldier (codenamed B.A.) would be the main character, as one of the John Connor's soldiers. The game would feature many of the Terminator's enemies, namely silent HK (Hunter Killer) Seekers, HK-Drones, HK-Scouts, Raptors, Flencers, Spiderbots and in the end, even an HK-Goliath tank as a mid-boss. The main enemy force would be constructed of more advanced type of T-800s, seemingly human on the surface but deadly enemies in reality ; they were especially dangerous because the game was planned to have many NPC interactions. The game's main boss would welcome us in SHODAN-controlled enviroment, and would be an advanced type of Terminator (a next incarnation of T-1000, a female Terminator who the player would seemingly have no hope of destroying).
The problems began when the Mario Kassar and Andrew G. Vajna (of the former Carolco) actually expected an almost complete rewrite of System Shock 2's script, with SHODAN integrating with Skynet and releasing Terminators en masse to battle the Soldier in the later parts of the game, while Irrational & Looking Glass looked for a more balanced approach, with Skynet discretly integrated into the story and cooperating, rather than merging with SHODAN and Terminators being fewer in numbers, but stronger. Also, they clashed on the approach to the battle system, as they felt the proposed semi-automatic overlay HUD (that were to be forcibly integrated with player's interface as a part of the plot, making him more akin to his Terminator enemies, but allowing to infiltrate their ranks undetected for some time) would take over too much of the player's control, using auto-aim system and forcing too much hints along the way. The opposite side felt, on the contrary, that the freely contructed MFD system exerts too much pressure on the players, allowing too many choices and not being compatible enough with interactive movies that were planned as a part of the gameplay (that included both animations and parts of the movie itself).
Unfortunately (or perhaps for the better, as it would be a totally different game) the cooperation broke somewhere in early 1998 due to the above reasons and the change of the ownership of rights to the franchise. They were eventually acquired by the Carolco founders Mario Kassar and Andrew G. Vajna who had a different vision on the movie and the game, as Gale Anne Hurd sold them her part of the rights in mid-1999, following long negotiations that lasted well over a year. Kassar and Vajna founded C2 Pictures and created a totally different script with the help of screenwriter Tedi Sarafian, later revised by John Brancato and Michael Ferris, although some of the parts of System Shock 2's script were kept (like the main antagonist being a female machine). The rest is history. The games that were released alongside the movie by Atari Inc. received very low ratings by both critics and fans, the movie fared better but had generally mixed reviews.
It is worth noting that some of the Terminator elements were kept in the game but had to be changed due to potential copyright claims, namely the silent exploding HK-Drones becoming Protocol Droids, Spiderbots becoming Annelid Arachnids, HK-Scouts modified to Cyborg Assassins and female Terminators changed to Cyborg Midwives, with XERXES becoming a heavily remade version of Skynet. Also, there's one enemy in the game that was originally supposed to be the Flencer ( https://terminator.fandom.com/wiki/Flencer ) that the developers didn't have time to revamp, so it was cut at the last minute, but it is still available in the game using the summon code "talon droid", its name during the production.
We may never know how the final product would look like, but I for one am happy that System Shock 2 is what it is.
Let's hope that the remaster of System Shock 1 will not let us down and the System Shock 3 will be a worthy successor!