- ------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ......... to ...........
Commission file number 0-26194
SEER TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3556562
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8000 Regency Parkway
Cary, North Carolina
27511
(Address of principal executive offices)
(Zip Code)
(919) 380-5000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes ....X.... No ........
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 13, 1998
Common Stock, $0.01 par value 11,950,633 shares
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1
SEER TECHNOLOGIES, INC.
Index
Page
PART I. Financial Information Number
Item 1. Consolidated Financial Statements:
Consolidated balance sheets as of March 31, 1998
(unaudited)and September 30, 1997 3
Consolidated statements of operations (unaudited)
for the three and six months ended March 31, 1998
and 1997 4
Consolidated statements of cash flows (unaudited)
for the six months ended March 31, 1998 and 1997 5
Notes to consolidated financial statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II. Other Information 16
SIGNATURES 17
2
PART I. Financial Information
Item 1. Financial Statements
SEER TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
March 31, September 30,
1998 1997
------------- -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 1,723 $ 4,268
Trade accounts receivable, less allowance
for doubtful accounts of $2,787 and $1,360
at March 31, 1998 and September 30, 1997,
respectively 22,437 31,383
Prepaid expenses and other current assets 1,312 1,947
Deferred income taxes 1,156 1,152
----------- -----------
Total current assets 26,628 38,750
Trade accounts receivable, net 1,744 2,041
Property and equipment, net 2,588 4,528
Capitalized software costs, net 1,850 3,206
Deferred income taxes 17,599 17,599
Other assets 411 411
----------- -----------
Total assets $50,820 $66,535
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Notes payable, due on demand $33,787 $22,052
Accounts payable 3,000 4,279
Accrued expenses:
Compensation 395 1,964
Commissions 1,371 1,536
Restructuring 6,286 -
Other 5,389 5,241
Deferred revenue 7,904 7,813
Income taxes payable 2,178 1,826
---------- ----------
Total current liabilities 60,310 44,711
Deferred revenue 620 981
Stockholders' equity (deficiency):
Series A convertible preferred stock,
$.01 par value 21 21
Common stock, $0.01 par value 119 119
Additional paid-in-capital - preferred stock 12,281 12,281
Additional paid-in-capital - common stock 58,680 58,486
Cumulative translation adjustments (609) (644)
Accumulated deficit (80,602) (49,420)
---------- -----------
Total stockholders' equity (deficiency) (10,110) 20,843
---------- -----------
Total liabilities and stockholders' equity $50,820 $66,535
========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
SEER TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue:
Software license $ 1,441 $ 7,272 $ 4,139 $13,418
Maintenance 3,400 3,900 6,849 7,037
Services 11,119 12,940 23,328 26,782
-------- -------- -------- --------
Total operating revenue 15,960 24,112 34,316 47,237
Cost of revenue:
Software products 497 336 1,004 661
Maintenance 2,127 2,013 4,310 4,122
Services 10,910 9,881 21,861 20,642
-------- -------- -------- --------
Total cost of revenue 13,534 12,230 27,175 25,425
Gross profit 2,426 11,882 7,141 21,812
Operating expenses:
Sales and marketing 7,107 7,662 14,000 14,566
Research and product
development 3,643 3,207 7,469 6,605
General and administrative 2,759 2,704 5,853 9,436
Restructuring charges 9,000 - 9,000 500
-------- -------- -------- --------
Total operating expenses 22,509 13,573 36,322 31,107
-------- -------- -------- --------
Loss from operations (20,083) (1,691) (29,181) (9,295)
Other income (expense):
Interest income 126 105 261 259
Interest expense (860) (411) (1,645) (822)
-------- -------- -------- --------
Other expense, net (734) (306) (1,384) (563)
-------- -------- -------- --------
Loss before provision
for income taxes (20,817) (1,997) (30,565) (9,858)
Income tax provision 458 439 618 848
-------- -------- -------- --------
Net loss $(21,275) $(2,436) $(31,182) $(10,706)
======== ======== ======== ========
Basic loss per common share $ (1.78) $(0.21) $(2.62) $(0.92)
======== ======== ======== ========
Weighted average common shares
outstanding 11,937 11,687 11,912 11,655
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
SEER TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
1998 1997
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(31,182) $(10,706)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 2,368 2,384
Deferred income taxes (4) 3
Provision for uncollectible accounts 439 4,040
Write-down of assets 2,701 -
Changes in assets and liabilities:
Trade accounts receivable 7,872 8,031
Prepaid expenses and other assets 483 2,170
Accounts payable, accrued expenses,
and income taxes payable 3,773 (7,365)
Deferred revenue (270) (3,109)
-------- --------
Net cash used in operating activities (13,820) (4,552)
Cash flows from investing activities:
Purchases of property and equipment (353) (467)
Capitalization of software development costs (128) (494)
-------- --------
Net cash used in investing activities (481) (961)
Cash flows from financing activities:
Issuance of common shares 194 319
Repurchase of common shares - (100)
Net borrowings under line of credit 11,595 5,821
-------- --------
Net cash provided by financing activities 11,789 6,040
Effect of exchange rate changes on cash (33) (15)
-------- --------
Net increase (decrease) in cash and
cash equivalents (2,545) 512
Cash and cash equivalents:
Beginning of period 4,268 377
-------- --------
End of period $ 1,723 $ 899
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
SEER TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Interim Financial Statements
The accompanying unaudited financial statements should be read in
conjunction with the audited financial statements and notes thereto contained
in the Company's Annual Report on Form 10-K for fiscal year 1997. The
Company's fiscal year ends September 30. The results of operations for the
interim periods shown in this report are not necessarily indicative of results
to be expected for other interim periods or for the full fiscal year. In the
opinion of management, the information contained herein reflects all
adjustments necessary for a fair statement of the interim results of
operations. All such adjustments are of a normal, recurring nature, except
for the $9 million restructuring charge recorded in the second quarter of
fiscal year 1998. See Note 6.
Note 2. Loss Per Share
During the first quarter of fiscal year 1998, the Company adopted the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 128,
"Earnings per Share", which specifies the computation, presentation, and
disclosure requirements for earnings per share. All prior period earnings per
share data has been restated, as applicable, to conform with the provisions of
the statement.
Basic loss per share is computed based upon the weighted average number
of common shares outstanding. Diluted loss per share is not presented for any
periods since the inclusion of potentially dilutive securities would be
antidilutive to the basic loss per share calculations. Potentially dilutive
securities outstanding during the first and second quarters of fiscal years
1998 and 1997 include stock options, nonvested stock, and Series A convertible
preferred stock.
Note 3. Income Taxes
The Company's effective tax rate differs from the statutory rate
primarily due to the fact that an income tax benefit was not recorded for the
net loss for the first and second quarters of fiscal year 1998. Management
believes that it is more likely than not that the realization of the reported
deferred tax assets will occur in the future based on current earnings
forecasts, tax planning strategies and reversals of book-tax temporary
differences. The Company will continue to assess the realization of deferred
tax assets on an ongoing basis.
The income tax provision for the first and second quarters of fiscal year
1998 is primarily related to income taxes from profitable foreign operations
and foreign withholding taxes.
Note 4. Use of Accounting Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual amounts could differ from these estimates.
6
Note 5. Recent Accounting Pronouncements
In June, 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income", and SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information". Both SFAS No. 130 and
SFAS No. 131 are required to be adopted for fiscal years beginning after
December 15, 1997. Upon the effective date of each of the new statements,
the Company will make the necessary changes to comply with the provisions of
each statement and restate all prior periods presented. The Company does
not expect the adoption of these statements to have a material impact on the
Company's financial condition or results of operations.
The American Institute of Certified Public Accountants has issued
Statement of Position 97-2, "Software Revenue Recognition". SOP 97-2 is
effective for transactions entered into in fiscal years beginning after
December 15, 1997 and provides guidance on applying generally accepted
accounting principles in recognizing revenue on software transactions. The
Company does not expect the application of the SOP to have a material impact
on the Company's financial condition or results of operations.
Note 6. Restructuring Charges
During the second quarter of fiscal year 1998, the Company began work on
a revised business plan, necessitated by a decline in demand for the Company's
software products. As a result of this effort, at the end of the second
quarter of fiscal year 1998, the Company announced its plans to streamline its
sales and marketing organizations, as well as reorganize its technical
operations into one cohesive unit, providing improved product support and more
focused development of new products. The general and administrative
organization within the Company was also streamlined to support the newly-
restructured operating divisions. The restructuring included a staff
reduction of approximately 5%, the abandonment of leased facilities in the US,
Brazil, and Singapore, and the write-down to fair value of certain assets or
accrual of costs related to products, distribution channels, and vendor-
provided product support contracts which were being discontinued. The Company
recorded a restructuring charge of $9 million during the second quarter of
fiscal year 1998, which consisted of approximately $1.4 million in personnel-
related charges, approximately $1.1 million of costs associated with carrying
vacated space until the lease expiration date, approximately $2.7 million in
write-down of assets, approximately $3.0 million for contractually obligated
product support services, and approximately $.7 million in professional fees
related to the restructuring. To date, the Company has paid approximately
$100,000 in cash related to the restructuring. The Company believes the
accrued restructuring costs of $6.3 million at March 31, 1998 represents its
remaining cash obligations.
The Company anticipates recording an additional restructuring charge
during the third quarter of fiscal year 1998 as it further refines its revised
business plan.
Note 7. Subsequent Events
During April, 1998, the Company completed its agreement to sell 1,762,115
shares of its Series B Convertible Preferred Stock (the "Preferred Stock") to
its primary shareholder Welsh, Carson, Anderson, and Stowe VI L.P. ("WCAS")
and certain WCAS affiliates, resulting in gross proceeds to the Company of $5
million. The proceeds from the sale of the Preferred Stock will be used for
general corporate purposes. The sale of the Preferred Stock was made in a
private transaction exempt from the registration requirements of the federal
securities laws.
Each share of Preferred Stock may be converted at any time at the option
of the holder into shares of common stock of the Company at a conversion rate
of one common share for each share of Preferred Stock, subject to adjustment
upon the occurrence of certain events. The Preferred Stock is not entitled to
receive dividends in any fixed amount but will receive dividends on an as
converted basis in the event that a dividend is paid on the Company's common
stock. The Preferred Stock will rank senior in right of payment to the
Company's common stock. In the event of any liquidation, dissolution or
winding up of the Company, holders of Preferred Stock will be entitled to
receive a liquidation preference of $2.8375 per share before payment is made
or assets are distributed to holders of the Company's common stock. In
addition, the holders of Preferred Stock are entitled to vote together with
the holders of common stock and the Series A Convertible Preferred Stock on
all matters to be voted on by the stockholders of the Company. The Series B
Convertible Preferred Stock ranks pari passu with the Series A Convertible
Preferred Stock as to liquidation and dividend payments.
7
The Company is subject to certain restrictions while shares of Preferred
Stock remain outstanding, including restrictions on the Company's ability
to declare dividends, purchase or redeem any outstanding shares of its common
stock, create or authorize the creation of additional classes of capital stock
of the Company, increase the authorized amount of Preferred Stock, create or
authorize the creation of any securities convertible into shares of Preferred
Stock or any other class of capital stock of the Company.
At March 31, 1998, the Company maintained two credit facilities (the
"Revolving Facility" and the "Guaranteed Facility") for working capital
purposes and a line of credit to enter foreign exchange contracts. Subsequent
to March 31, 1998, the Company and its lenders completed several amendments to
its existing agreements. The Guaranteed Facility, which is guaranteed by
WCAS, was amended to increase the available borrowings under the facility from
$12.5 million to $17 million and to extend its expiration date to June 30,
1999. WCAS also agreed to guarantee the Company's line of credit to enter
foreign exchange contracts, and the availability of this line was reduced from
$3.5 million to $.5 million. In connection with these amendments to WCAS'
guarantees, the Company issued 30,000 shares of its common stock to WCAS. The
Company's Revolving Facility was also amended to extend the expiration date to
May 31, 1999; however, it is automatically renewed for successive terms of one
year unless terminated by either party.
8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
General Information and Recent Developments
Seer Technologies, Inc. (the "Company" or "Seer") is one of the software
industry's earliest pioneers and a long-time leader in component-based
software application development. The Company is currently transitioning from
being a distributor of application development tools to being a provider of
services and technologies to enable Global 5000 companies to deploy electronic
commerce ("E-commerce") enabled enterprise solutions. Through consulting
services, proven technology products and componentized applications, the
Company will enable and accelerate the integration of large-scale enterprise
operational systems directly to the Internet. There can be no assurance that
the Company will be successful in this strategic transition, and the failure
to do so could have a material adverse impact on the Company's financial
condition and results of operations.
E-commerce enabling enterprise operational systems provides a crucial
competitive edge while at the same time allowing organizations to leverage the
significant investment they are having to make in renovating their enterprise
applications for Year 2000 compliance. The Company expects to differentiate
its services in the marketplace through the breadth and depth of enterprise-
relevant skills of its consulting staff augmented by the use of its
production-tested application deployment engine, functional bridgeware, and
web-enablement technology along with complementary products, methodologies and
models.
In addition, the Company intends to facilitate the resale of
componentized, or highly customizable, applications developed by its customers,
which include many of the world's largest financial services,
insurance, and telecommunications companies. Seer's software products and
services could be used to implement and Internet-enable these applications as
enterprise E-commerce solutions.
A key element of Seer's strategy involves forging alliances with
suppliers of complementary products and services to jointly offer best-of-
breed solutions to the marketplace. Seer has relationships in place with
several of the industry's leading vendors and systems integrators.
During the second quarter of fiscal year 1998, the Company began work on
a revised business plan, necessitated by a decline in demand for the Company's
software products. This decline is based on the apparent trend of Global
5000 companies to spend more of their Information Technology budgets on Year
2000 systems renovation efforts than on new application development tools.
The revised business plan calls for refocusing the Company and its
positioning in the marketplace, restructuring the company to centralize key
functions and consolidate operations around areas of technical focus to both
improve productivity and reduce worldwide infrastructure costs in line with
future business prospects. Management believes that the changes will lead to
profitability, but there are no assurances it will be successful or when
profitability will be reached.
The Company also has created an office of the President. Steven
Dmiszewicki, chief financial officer, and Ted Venema, chief technology
officer, will share this office with equal responsibility for daily
operations. As part of the management changes, Thomas Wilson has resigned as
CEO, but will remain as a member of the Company's Board of Directors.
During the third quarter of fiscal year 1998, the Company has refined its
transition strategy and business plan. As a result, the Company will record
an additional restructuring charge during the third quarter.
Subsequent to March 31, 1998, the Company received $10 million in equity
and financing from its principal stockholder, Welsh, Carson, Anderson, and
Stowe VI L.P. ("WCAS"). Proceeds of $5 million were received from WCAS in
exchange for 1,762,115 shares of the Company's Series B Convertible Preferred
Stock. Additionally, WCAS increased its guaranty on one of the Company's
credit facilities from $12.5 million to $17 million and guaranteed the
Company's credit facility for foreign exchange contracts for $.5 million. See
further discussion in "-Liquidity and Capital Resources."
9
Risks
The Company's revenues vary from quarter to quarter, with the largest
portion of revenue typically recognized in the last month of each fiscal
quarter and the third and fourth quarters of each fiscal year. The Company
believes that these patterns are partly attributable to the Company's sales
commission policies, which compensate sales personnel for meeting or exceeding
quarterly and annual quotas, and to the budgeting and purchasing cycles of
customers. Furthermore, as the size of individual sales is generally large,
a single customer may have a significant impact on a quarter. In addition,
the substantial commitment of executive time and financial resources
historically required of a potential customer to make a decision to purchase
the Company's products increases the risk of quarter-to-quarter fluctuations.
The Company typically does not have any material backlog of unfilled software
orders, and product revenue in any quarter is substantially dependent upon
orders received in that quarter. Because the Company's operating expenses are
based on anticipated revenue levels and are relatively fixed over the short
term, variations in the timing of recognition revenue can cause significant
variations in operating results from quarter to quarter. Fluctuations in
operating results may result in volatility in the price of the Company's
common stock.
The Company is aware of the issues associated with the programming code
in existing computer systems as the millennium (Year 2000) approaches. The
"Year 2000" problem is pervasive and complex as virtually every computer
operation will be affected in some way by the rollover of the two digit year
value to 00. The issue is whether computer systems will properly recognize
date sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail. The Company is utilizing both internal and external resources
to identify, correct or reprogram, and test its internal systems for the Year
2000 compliance. It is anticipated that all reprogramming efforts will be
completed in time to allow for adequate testing. To date, confirmations have
been received from the Company's primary processing vendors that the Company's
existing systems are "Year 2000" compliant or plans are being developed to
address processing of transactions in the Year 2000. Management does not
expect that the Company's Year 2000 compliance expense will be material to its
results of operations. Management believes, however, that as other companies
allocate increasing portions of their information technology budgets to Year
2000 compliance issues, they become less likely to purchase new application
development tools. Management believes this trend has negatively affected,
and is likely to continue to negatively affect, the Company's software
products revenue and results of operations while the Company implements its
new business plan. See "-General Information and Recent Developments" and
"-Results of Operations - Revenue and Gross Profit - Software Products."
This report contains forward-looking statements relating to such matters
as anticipated financial performance, business prospects, technological
developments, new products, research and development activities and similar
matters. The Private Securities Litigation Reform Act of 1995 provides a safe
harbor for forward-looking statements. In order to comply with the terms of
the safe harbor, the Company notes that a variety of factors could cause its
actual results to differ materially from the anticipated results or other
expectations expressed in the Company's forward-looking statements. The
Company's performance, development and results of operations may be affected
by the risks presented by: (i) market acceptance of the Company's new
strategic direction; (ii) continued market acceptance of the Company's
existing technology; (iii) fluctuations in quarterly operating results and
volatility of the price of the Company's common stock; (iv) competition; (v)
the Company's reliance on its relationship with IBM; (vi) customer
concentration; (vii) the potential failure to meet product delivery dates;
(viii) matters relating to international operations; (ix) intellectual
property and proprietary rights; (x) the inability to attract and retain
consultants and development professionals; (xi) the Company's ability to
attract, retain and train qualified sales professionals and the ability of
those sales professionals to perform to quota; and (xii) the sufficiency of
the Company's liquidity and capital resources. See the Company's Registration
Statement on Form S-1 (Registration N. 33-92050) and "-Liquidity and Capital
Resources" for a more detailed description of these and other risks presented
by the Company's operations.
10
Results of Operations
The following table sets forth, for the periods indicated, the Company's
unaudited results of operations expressed as a percentage of revenue:
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31, March 31,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue:
Software products 9.0 % 30.2 % 12.0 % 28.4 %
Maintenance 21.3 % 16.2 % 20.0 % 14.9 %
Services 69.7 % 53.6 % 68.0 % 56.7 %
-------- -------- -------- --------
Total 100.0 % 100.0 % 100.0 % 100.0 %
Cost of revenue:
Software products 3.1 % 1.4 % 2.9 % 1.4 %
Maintenance 13.3 % 8.3 % 12.6 % 8.7 %
Services 68.4 % 41.0 % 63.7 % 43.7 %
-------- -------- -------- --------
Total 84.8 % 50.7 % 79.2 % 53.8 %
Gross profit 15.2 % 49.3 % 20.8 % 46.2 %
Operating expenses:
Sales and marketing 44.5 % 31.8 % 40.8 % 30.8 %
Research and product development 22.8 % 13.3 % 21.8 % 14.0 %
General and administrative 17.3 % 11.2 % 17.1 % 20.0 %
Restructuring charges 56.4 % - 26.2 % 1.1 %
-------- -------- -------- --------
Total 141.0 % 56.3 % 105.9 % 65.9 %
Other income (expense), net (4.5)% (1.3)% (4.0)% (1.2)%
-------- -------- -------- --------
Income (loss) before taxes (130.3)% (8.3)% (89.1)% (20.8)%
Income tax provision (benefit) 2.9 % 1.8 % 1.8 % 1.8 %
-------- -------- -------- --------
Net loss (133.2)% (10.1)% (90.9)% (22.6)%
======== ======== ======== ========
</TABLE>
9
The following table sets forth unaudited data for total revenue by
country of origin as a percentage of total revenue for the periods indicated:
<TABLE>
<CAPTION>
Three months ended Six months ended
March 31, June 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
United States 30.3% 39.5% 30.0% 35.1%
Mexico/Canada 1.7% 2.6% 2.0% 2.5%
South America 0.6% 2.0% 1.1% 3.8%
Europe 56.3% 49.3% 57.3% 51.4%
Middle East/Africa 3.3% 1.6% 3.5% 2.0%
Asia Pacific 7.8% 5.0% 6.1% 5.2%
-------- -------- -------- --------
100.0% 100.0% 100.0% 100.0%
======== ======== ======== ========
</TABLE>
11
Revenue and Gross Profit. The Company's total revenue decreased 34% for
the second quarter and decreased 27% for the year-to-date period of fiscal
year 1998 as compared to the same periods of fiscal year 1997. Gross profit
decreased to 15% as compared to 49% for the second quarter and declined to 21%
from 46% for the year-to-date period of fiscal year 1998 in relation to the
same periods of fiscal year 1997. These declines were primarily attributable
to a significant decrease in software products revenue, as well as less
significant declines in services revenue and maintenance revenue.
Software products. Software products revenue decreased 80% for the
second quarter and 69% for the year-to-date period of fiscal year 1998 as
compared to the same periods of fiscal year 1997. In comparing fiscal year
1998 to 1997, software gross margins decreased from 95% to 66% in the second
quarter and from 95% to 76% for the year-to-date period. There were several
reasons for the decrease in software sales. As mentioned above, Global 5000-
sized corporations have increased the level of their Year 2000 systems
renovation efforts, rather than investing in new applications and development
tools. As a result, deals expected to close in the first or second quarter of
fiscal year 1998 have been deferred indefinitely. Also, the Americas
operating division was redesigning its direct sales force by replacing a
significant number of its salespeople with fewer, more experienced personnel
in the first quarter of fiscal year 1998. In the second quarter of fiscal
year 1998, there were no sales by these newly-hired salespeople due to the
length and complexity of the sales cycle for the Company's products.
Unanticipated delays in the completion of transactions through the Company's
primary indirect channels in the European region caused revenues in Europe to
fall below expectations in the first half of the year. Additionally,
potential sales of software products to Asian prospects in the first half of
fiscal year 1998 were impeded by the downturn in the Asian economy.
Software gross margin decreased in the first half of fiscal year 1998 in
comparison to the same period a year ago primarily because of the decline in
software products revenue discussed above and also due to an increase in the
amortization of capitalized software costs. Amortization of capitalized
software costs increased in the first half of fiscal year 1998 due to several
new products becoming generally available in the second half of fiscal year
1997.
Maintenance. Maintenance revenue decreased 13% for the second quarter
and 3% for the year-to-date periods of fiscal year 1998 as compared to the
same period a year ago. The decrease in maintenance revenue over the prior
year periods is a result of losses to the installed customer base, reduction
in maintenance usage, and differences in the timing of revenue recognition for
certain customers who had delayed payments for maintenance contracts.
Maintenance revenue will also be negatively impacted in future quarters due to
significantly lower product sales in the first half of fiscal year 1998, as
compared to the same periods of fiscal year 1997.
Maintenance gross margins decreased 33% in the second quarter and 13% in
the year-to-date period of fiscal year 1998 as compared to the same periods of
fiscal year 1997. This decrease in gross margins is a result of decreasing
maintenance revenue while expenses remained relatively constant. Cost of
Maintenance, which is primarily composed of personnel costs and fees for
contracted services to provide product support, did not correspondingly
decrease with revenue since the Company must maintain a certain core base of
personnel with varying skills to provide support and the contracts with
vendors providing support are fixed. The Company believes that by combining
the personnel performing maintenance into one functional group, including
development and product management, that the new technical operations group
will help improve business efficiency and maintenance margins should improve.
Additionally, the Company is in the process of renegotiating its fixed fee
contract for vendor-provided support, with the intention of providing these
services through its own product support personnel for a savings over the
contracted price.
Services. For the second quarter and year-to-date periods of fiscal year
1998, services revenue decreased 14% and 13%, respectively, as compared to the
same periods of fiscal year 1997. Services gross margins decreased to 2% from
24% in the second quarter and to 6% from 23% in the year-to-date period of
fiscal year 1998 in relation to the same periods of the prior fiscal year.
The decrease in revenue and services margin in the first half of fiscal year
1998 is primarily a result of a decrease in the utilization of billable
personnel and a reduction in demand for consulting and training services. The
declining demand for services in the first half of fiscal year 1998 was caused
by unforeseen organizational changes by a significant customer in the first
quarter of fiscal year 1998 and lower than expected software sales during the
first half of fiscal year 1998. The Company is in the process of aligning its
services personnel, quantitatively and qualitatively, to better serve its
present customer base. Also, the Company is expanding the scope of its
consulting organization to services outside of its own product line to better
mitigate short-term fluctuations in demand caused by variances in software
revenue from one period to another.
12
Operating Expenses. Operating expenses in both fiscal years 1998 and
1997 were significantly impacted by unusual charges. In the second quarter
of fiscal year 1998, the Company recorded a $9 million restructuring charge.
In the first quarter of fiscal year 1997, the Company recorded a $3.8 million
reserve for an account which was determined to be uncollectible and a $.5
million dollar restructuring charge. Excluding these unusual adjustments,
total operating expenses remained relatively unchanged between the second
quarter and the year-to-date periods of fiscal year 1998 as compared to the
same periods of fiscal year 1997, with a difference of less than 2% for both
periods.
Sales and marketing expenses decreased 7% in the second quarter and 4% in
the year-to-date period of fiscal year 1998 as compared to the same periods of
fiscal year 1997. Sales expenses significantly decreased in the second
quarter and year-to-date periods of fiscal year 1998 as compared to the same
periods of fiscal year 1997 in direct correlation to an approximate 35%
reduction in headcount due to changes in the sales model and the sales force
implementing the new sales model as discussed above. The decrease in sales
expenses were offset by increased expenses in marketing in order to launch a
series of strategically-positioned marketing initiatives to increase
visibility and lead generation.
Sales and marketing expenses will be lower in the future due to the
following actions the Company is taking as part of its revised business plan.
The Company is halting its direct sales operation in Latin America and is
working to establish indirect channels of distribution in this region. Also,
the Company reevaluated its efforts with indirect distribution channels in the
United States and decided to pursue fewer new partnerships and focus on
further developing existing relationships. Finally, the sales forces in the
rest of the Americas and Asia Pacific are being streamlined in the third
quarter of fiscal year 1998, so that sales expenses will more closely conform
to the Company's current license revenue prospects in these regions.
Marketing expenses will decline as the Company focuses more on execution of
its plans and less on design of new strategic initiatives.
The 13% increase in research and development expenses for both the second
quarter and year-to-date periods of fiscal year 1998 as compared to the same
periods of fiscal year 1997, is primarily a result of an approximate 12%
increase in average personnel costs and an increase in the number and cost of
contract employees utilized. During the first quarter of fiscal year 1998,
the Company determined that a significant one-time overall increase in
salaries was necessary to ensure the Company's competitiveness in the
recruiting and retention of research and development personnel. As mentioned
above, the reorganization of personnel into one technical operations group is
expected to bring efficiency to the development process and produce cost
savings as well.
Total general and administrative expense, excluding the $3.8 million
reserve of accounts receivable mentioned above, did not change significantly
in both the second quarter and year-to-date periods of fiscal year 1998 in
comparison to the same periods of fiscal year 1997. Increases in personnel
costs due to an approximate 15% increase in headcount were offset by cost
decreases in several other categories of general and administrative expense.
The increases in headcount were principally made in the Company's Corporate
Information Services department, as the Company planned to make investments in
its internal information systems. In order to bring its expenses in line with
the Company's current forecast, the general and administrative functions will
be streamlined, as necessary.
As previously mentioned, the Company recorded a $9 million restructuring
charge in the second quarter of fiscal year 1998. The restructuring included a
staff reduction of approximately 5%, the abandonment of leased facilities in
the US, Brazil, and Singapore, and the write-down to fair value of certain
assets or accrual of costs related to products, distribution channels, and
vendor-provided product support contracts which were being discontinued. The
Company recorded a restructuring charge of $9 million during the second
quarter of fiscal year 1998, which consisted of approximately $1.4 million in
personnel-related charges, approximately $1.1 million of costs associated with
carrying vacated space until the lease expiration date, approximately $2.7
million in write-down of assets, approximately $3.0 million for contractually
obligated product support services, and approximately $.7 million in
professional fees related to the restructuring. To date, the Company has paid
approximately $100,000 in cash related to the restructuring. The Company
believes the accrued restructuring costs of $6.3 million at March 31, 1998
represents its remaining cash obligations.
The $500,000 restructuring charge recorded in the first quarter of fiscal
year 1997 related primarily to severance benefits and the consolidation of
leased facilities.
13
Income Taxes. The small increase in income taxes is due solely to
differences in foreign income tax expenses and foreign taxes withheld. No
United States income tax benefits were recorded in either period. Management
believes that it is more likely than not that the realization of the reported
deferred tax assets will occur in the future based on current earnings
forecasts, tax planning strategies and reversals of book-tax temporary
differences. The Company will continue to assess the realization of deferred
tax assets on an ongoing basis.
Liquidity and Capital Resources
During the first half of fiscal year 1997, cash flow used by operations
and investing activities was $5.5 million, while in the first half of fiscal
year 1998 there was a net usage of $14.3 million in cash. The decline in cash
flow provided by operations and investing activities is primarily due to a
$10.3 million decrease in cash received from customers due to lower revenues
and an approximate $800,000 increase in interest on credit facilities, which
were offset by an approximate $2.0 million decrease in cash needed to fund
operations. As of March 31, 1998, the Company did not have any material
commitments for capital expenditures.
The Company financed its net cash outflow in the first half of fiscal
year 1998 through credit facilities with commercial banks. At March 31, 1998,
the Company maintained two credit facilities (the "Revolving Facility" and the
"Guaranteed Facility") which provide for combined borrowings of up to $37.5
million. The Revolving Facility allows for borrowings of up to $25 million,
bears interest at the London Interbank Offered Rate ("LIBOR") plus 5.0% and is
collateralized by the Company's accounts receivable, equipment and
intangibles. The Guaranteed Facility allows for borrowings of up to $12.5
million and bears interest at the higher of LIBOR plus 1.25% or .5% plus the
prime rate quoted by the Federal Reserve. The Guaranteed Facility is
guaranteed by WCAS, pursuant to an agreement with the Company. Borrowings
under the Revolving Facility must always exceed borrowings under the
Guaranteed Facility. There are no other financial covenants for either credit
facility. As of March 31, 1998, the Company had outstanding borrowings of
$22.2 million under the Revolving Facility and $11.6 million under the
Guaranteed Facility. The interest rates for the Revolving Facility and the
Guaranteed Facility were 10.7% and 8.5% respectively, at March 31, 1998.
Additionally, at March 31, 1998, the Company had a line of credit of $3.5
million available to enter foreign exchange contracts. Under this agreement,
the aggregate notional amount of foreign exchange contracts outstanding cannot
exceed $23.3 million. At March 31, 1998 the aggregate notional amount of
foreign exchange contracts outstanding was $6.8 million.
Subsequent to March 31, 1998, the Company and its lenders completed
several amendments to its existing credit facilities. The Guaranteed Facility
was amended to increase the available borrowings under the facility from $12.5
million to $17 million and to extend its expiration date to June 30, 1999.
WCAS also agreed to guarantee the Company's line of credit to enter foreign
exchange contracts, and the availability of this line was reduced from $3.5
million to $.5 million. In connection with these amendments to WCAS'
guarantees, the Company issued 30,000 shares of its common stock to WCAS. The
Company's Revolving Facility was also amended to extend the expiration date to
May 31, 1999; however, it is automatically renewed for successive terms of one
year unless terminated by either party.
During April 1998, the Company completed its agreement to sell 1,762,115
shares of its Series B Convertible Preferred Stock (the "Preferred Stock") to
its primary shareholder Welsh, Carson, Anderson, and Stowe VI L.P. ("WCAS")
and certain WCAS affiliates, resulting in gross proceeds to the Company of $5
million. The proceeds from the sale of the Preferred Stock will be used for
general corporate purposes. The sale of the Preferred Stock was made in a
private transaction exempt from the registration requirements of the federal
securities laws.
Each share of Preferred Stock may be converted at any time at the option
of the holder into shares of common stock of the Company at a conversion rate
of one common share for each share of Preferred Stock, subject to adjustment
upon the occurrence of certain events. The Preferred Stock is not entitled to
receive dividends in any fixed amount but will receive dividends on an as
converted basis in the event that a dividend is paid on the Company's common
stock. The Preferred Stock will rank senior in right of payment to the
Company's common stock. In the event of any liquidation, dissolution or
winding up of the Company, holders of Preferred Stock will be entitled to
receive a liquidation preference of $2.8375 per share before payment is made
or assets are distributed to holders of the Company's common stock. In
addition, the holders of Preferred Stock are entitled to vote together with
the holders of common stock and the Series A Convertible Preferred Stock on
all matters to be voted on by the stockholders of the Company. The Series B
Convertible Preferred Stock ranks pari passu with the Series A Convertible
Preferred Stock as to liquidation and dividend payments.
14
The Company is subject to certain restrictions while shares of Preferred
Stock remain outstanding, including restrictions on the Company's ability
to declare dividends, purchase or redeem any outstanding shares of its common
stock, create or authorize the creation of additional classes of capital stock
of the Company, increase the authorized amount of Preferred Stock, create or
authorize the creation of any securities convertible into shares of Preferred
Stock or any other class of capital stock of the Company.
Due to payment terms of certain software contracts, a portion of the
related receivables are classified as non-current assets. As of March 31,
1998, the Company has evaluated the collectibility of the non-current
receivables based upon the customers' prior payment history and determined
that the receivables are collectible.
The Company believes that existing cash on hand, cash provided by future
operations, cash received through the issuance of its Series B Convertible
Preferred Stock as discussed above, and additional borrowings under its lines
of credit will be sufficient to finance its operations and expected working
capital and capital expenditure requirements for at least the next twelve
months, so long as the Company performs to its operating plan. Thereafter,
the Company's liquidity will depend upon the results of future operations, as
well as available sources of financing. Although the Company's results of
operations for the first half of fiscal year 1998 fell below expectations for
the reasons described in "-Results of Operations" above, management is
implementing changes in its business plan in an effort to improve the
Company's long-term prospects for profitability. In view of the relatively
long lead time necessary to realize profits as a result of these activities,
however, management does not expect a material short-term improvement in the
Company's results of operations as a result of these activities alone.
Rather, as is discussed above, the Company's short-term results of operations
are more likely to be affected by the timing of its recognition of software
revenue generated through its existing distribution channels. Because sales
of the Company's products typically involve a substantial commitment of its
potential customers' time and resources, the Company's ability to influence
the timing of such transactions is often limited. Accordingly, management is
unable to predict with certainty whether the Company will ultimately perform
in accordance with its operating plan. Therefore, there can be no assurance
that the Company will be able to continue to meets its cash requirements
through operations or, if needed, obtain additional financing on acceptable
terms, and the failure to do so may have a materially adverse impact on the
Company's business and operations.
Recent Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", and SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information". Both SFAS No. 130 and SFAS No. 131 are required to be
adopted for fiscal years beginning after December 15, 1997. Upon the
effective date of each of the new statements, the Company will make the
necessary changes to comply with the provisions of each statement and restate
all prior periods presented. The Company does not expect the adoption of
these statements to have a material impact on the Company's financial
condition or results of operations.
The American Institute of Certified Public Accountants has issued
Statement of Position ("SOP") 97-2, "Software Revenue Recognition". SOP 97-2
is effective for transactions entered into in fiscal years beginning after
December 15, 1997 and provides guidance on applying generally accepted
accounting principles in recognizing revenue on software transactions. The
Company does not expect the application of the SOP to have a material impact
on the Company's financial condition or results of operations.
15
PART II. Other Information
Item 1. Legal Proceedings
In December 1997, the Company filed a lawsuit against Saadi Abbas and
Cambridge Business Solutions (UK) Limited ("CBS") alleging that Mr. Abbas
and CBS had injured the Company by interfering with the Company's ability
to market and sublicense the LightSpeed Financial Model. Mr. Abbas
counterclaimed, alleging he was constructively dismissed by the Company.
The Company obtained a preliminary injunction against Mr. Abbas and CBS.
The trial of the case is expected to take place in October 1998. At the
present point in the litigation, it is impossible to calculate the
chances of success in this litigation. However, the Company intends to
vigorously pursue this matter and does not believe that the results of
this litigation will have a material effect on the financial position or
results of operations of the Company.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of the Company was held on
February 20, 1998.
The following is a brief description of each matter voted upon at the
meeting and the number of affirmative votes and the number of negative
votes cast with respect to each matter.
(a) The stockholders elected the following persons as directors of the
Company: Bruce K. Anderson, Frank T. Cary, Anthony J. de Nicola,
George L. McTavish, Robert A. Minicucci, and Thomas A. Wilson. The
votes for, against(withheld) and votes abstaining for each nominee
were as follows:
<TABLE>
<CAPTION>
Votes Votes Votes
Nominee For Withheld Abstained
------- --------- -------- ---------
<S> <C> <C> <C>
Bruce K. Anderson 15,481,128 58,938 -
Frank T. Cary 15,485,652 54,414 -
Anthony J. de Nicola 15,485,852 54,214 -
George L. McTavish 15,485,852 54,214 -
Robert A. Minicucci 15,485,852 54,214 -
Thomas A. Wilson 15,486,352 53,714 -
</TABLE>
16
(b) The shareholders were also asked to approve an amendment to the
Company's Stock Option and Restricted Stock Purchase Plan
increasing the number of shares of common stock reserved for
issuance. The Amendment was approved with 12,082,890 shares voting
for, 352,819 shares voting against, and 15,039 shares abstained.
(c) The shareholders ratified the appointment of Coopers & Lybrand as
the Company's independent public accountants by a vote of
15,494,361 shares voting for, 30,155 shares voting against, and
15,250 shares abstained.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4.5 Specimen Preferred Stock Certificate of Series B
Convertible Preferred Stock
4.6 Certificate of Designation of Series B Convertible
Preferred Stock of the Company
10.53 Amendment to Credit Agreement between Seer
Technologies, Inc. and Greyrock Business Credit,
dated May 5, 1998
10.54 Second Amendment to Credit Agreement dated
April 27, 1998 between Seer Technologies, Inc. and
NationsBank, N.A.
10.55 Agreement dated April 27, 1998 between Seer
Technolgies, Inc. and Welsh, Carson, Anderson, &
Stowe VI, L.P. ("WCAS")
10.56 Consent of Series A Convertible Preferred Stock
Holders, dated April 27, 1998
10.57 Preferred Stock Purchase Agreement dated
April 27, 1998 among Seer Technologies, Inc.,
WCAS, and certain WCAS affiliates named therein
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
17
SIGNATURES
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 thereunto duly authorized.
SEER TECHNOLOGIES, INC.
/s/ Steven Dmiszewicki
Date: May 15, 1998 ..............................................
Steven Dmiszewicki
Co-President and Chief Financial Officer
17
EXHIBIT 4.5
Incorporated Under the Laws of the State of Delaware
[Certificate Number] [Number of shares]
Seer Technologies, Inc.
Series B Convertible Preferred Stock
Par Value $.01 Each
This is to certify that _________________________________ is the owner of
______________________________________________________________________
fully paid and non-assessable shares of the Series B Convertible Preferred
Stock of Seer Technologies, Inc. transferable on the books of the Corporation
by the holder hereof in person or by duly authorized Attorney, upon surrender
of this Certificate, properly endorsed.
Witness, the seal of the Corporation and the signatures of its duly
authorized officers.
Dated:
_____________________________ ________________________________
Secretary/Treasurer President
Exhibit 4.6
CERTIFICATE OF DESIGNATION
OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
SEER TECHNOLOGIES, INC.
(Pursuant to Section 151(g) of the General
Corporation Law of the State of Delaware)
Seer Technologies, Inc., a corporation organized and existing under the
General Corporation Law (the "GCL") of the State of Delaware (hereinafter
called the "Corporation"), hereby certifies that, pursuant to authority vested
in the Board of Directors of the Corporation by Article Fourth of the Restated
Certificate of Incorporation of the Corporation, the following resolution was
adopted at a meeting of the Board of Directors of the Corporation held on
April 24 , 1998, pursuant to Section 151(g) of the GCL:
RESOLVED that, pursuant to authority vested in the Board of Directors of
the Corporation by Article Fourth of the Restated Certificate of Incorporation
of the Corporation, 1,762,115 shares of the Corporation's Preferred Stock,
par value $.01 per share, designated as "Series B Convertible Preferred
Stock" ("Series B Preferred Stock") are authorized for issuance with the
voting powers, preferences and other special rights, and qualifications,
limitations and restrictions thereof set forth below:
1. Dividends. The holders of Series B Preferred Stock shall not be
entitled to receive dividends in any fixed amount, provided, however, that in
the event that the Corporation shall at any time pay a dividend on the Common
Stock (other than a dividend payable solely in shares of Common Stock), it
shall, at the same time, pay to each holder of Series B Preferred Stock a
dividend equal to the dividend that would have been payable to such holder if
the shares of Series B Preferred Stock held by such holder had been converted
into Common Stock on the date of determination of holders of Common Stock
entitled to receive such dividend.
In no event, so long as any shares of Series B Preferred Stock shall
remain outstanding, shall any shares of Common Stock be purchased or redeemed
by the Corporation, nor shall any moneys be paid to or made available for a
sinking fund for the purchase or redemption of any shares of Common Stock,
(without the written consent of the holders of 66 2/3% of the outstanding
Series B Preferred Stock) except that the Corporation may repurchase or redeem
shares of Common Stock owned by employees, consultants, agents, brokers,
officers or directors of the Corporation, provided, that the Corporation shall
not repurchase or redeem any shares of Common Stock for a consideration in
excess of the amount paid therefor by such employee, consultant, broker,
officer or director unless such repurchase or redemption shall have been
authorized or approved by at least 75% of the members of the Board of
Directors of the Corporation.
2. Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the shares of
Series B Preferred Stock shall be entitled, before any distribution or payment
is made upon any Common Stock, to be paid an amount equal to $2.8375 per
share, plus any accrued but unpaid dividends thereon to the date of such
payment, and the holders of the Series B Preferred Stock shall not be entitled
to any further payment, such amounts being herein sometimes referred to as the
"Liquidation Payments". If upon such liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the assets to be
distributed among the holders of Series B Preferred Stock of the Corporation
shall be insufficient to permit payment to the holders of Series B Preferred
Stock of the full amount of the Liquidation Payments, then, notwithstanding
anything to the contrary contained in the Corporation's Restated Certificate
of Incorporation or the Certificate of Designation of Series A Convertible
Preferred Stock of the Corporation and pursuant to a consent (the "Consent"),
dated as of April 27, 1998, obtained by the Corporation from the holders of at
least 66 2/3% of the outstanding Series A Convertible Preferred Stock, $.01
par value (the "Series A Preferred Stock"), of the Corporation, the entire
assets of the Corporation to be so distributed shall be distributed ratably
per share among the holders of Series A Preferred Stock and Series B Preferred
Stock in proportion to the amounts to which they respectively are entitled.
Upon any such liquidation, dissolution or winding up of the Corporation, after
the holders of the Series A Preferred Stock and Series B Preferred Stock shall
have been paid in full the amounts to which they shall be entitled, the
remaining net assets of the Corporation shall be distributed ratably to the
holders of Common Stock. Written notice of such liquidation, dissolution or
winding up, stating a payment date, the amount of the Liquidation Payment and
the place where said sums shall be payable shall be given by mail, postage
prepaid, not less than 30 or more than 60 days prior to the payment date
stated therein, to the holders of record of the Series B Preferred Stock and
the Common Stock, such notice to be addressed to each shareholder at his post
office address as shown by the records of the Corporation. Neither the
consolidation or merger of the Corporation into or with any other corporation
or corporations, nor the sale or transfer by the Corporation of all or any
part of its assets, shall be deemed to be a liquidation, dissolution or
winding up of the Corporation within the meaning of any of the provisions of
this paragraph 2.
3. Conversion.
3A. Right to Convert. Subject to the terms and conditions of this
paragraph 3, the holder of any share or shares of Series B Preferred Stock
shall have the right, at its option at any time, to convert any such shares of
Series B Preferred Stock (except that upon any liquidation of the Corporation
the right of conversion shall terminate at the close of business on the last
full business day next preceding the date fixed for payment of the amount
distributable on the Series B Preferred Stock) into such number of fully paid
and nonassessable whole shares of Common Stock as is obtained by multiplying
the number of shares of Series B Preferred Stock so to be converted by $2.8375
and dividing the result by the conversion price of $2.8375 per share or, if
there has been an adjustment of the conversion price, by the conversion price
as last adjusted and in effect at the date any share or shares of Series B
Preferred Stock are surrendered for conversion (such price, or such price as
last adjusted, being referred to herein as the "Series B Conversion Price").
Such rights of conversion shall be exercised by the holder thereof by giving
written notice that the holder elects to convert a stated number of shares of
Series B Preferred Stock into Common Stock and by surrender of a certificate
or certificates for the shares so to be converted to the Corporation at its
principal office (or such other office or agency of the Corporation as the
Corporation may designate by notice in writing to the holder or holders of the
Series B Preferred Stock) at any time during its usual business hours on the
date set forth in such notice, together with a statement of the name or names
(with address), subject to compliance with applicable laws to the extent such
designation shall involve a transfer, in which the certificate or certificates
for shares of Common Stock shall be issued.
3B. Issuance of Certificates; Time Conversion Effected. Promptly after
the receipt by the Corporation of the written notice referred to in
subparagraph 3A and surrender of the certificate or certificates for the share
or shares of the Series B Preferred Stock to be converted, the Corporation
shall issue and deliver, or cause to be issued and delivered, to the holder,
registered in such name or names as such holder may direct, subject to
compliance with applicable laws to the extent such designation shall involve a
transfer, a certificate or certificates for the number of whole shares of
Common Stock issuable upon the conversion of such share or shares of Series B
Preferred Stock. To the extent permitted by law, such conversion shall be
deemed to have been effected and the Series B Conversion Price shall be deter
mined as of the close of business on the date on which such written notice
shall have been received by the Corporation and the certificate or
certificates for such share or shares shall have been surrendered as afore-
said, and at such time the rights of the holder of such share or shares of
Series B Preferred Stock shall cease, and the person or persons in whose name
or names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby.
3C. Fractional Shares; Dividends; Partial Conversion. No fractional
shares shall be issued upon conversion of the Series B Preferred Stock into
Common Stock and the number of shares of Common Stock to be issued shall be
rounded to the nearest whole share, and no payment or adjustment shall be made
upon any conversion on account of any cash dividends on the Series B Preferred
Stock so converted or the Common Stock issued upon such conversion. In case
the number of shares of Series B Preferred Stock represented by the certifi
cate or certificates surrendered pursuant to subparagraph 3A exceeds the
number of shares converted, the Corporation shall, upon such conversion,
execute and deliver to the holder thereof, at the expense of the Corporation,
a new certificate or certificates for the number of shares of Series B Pre
ferred Stock, represented by the certificate or certificates surrendered which
are not to be converted.
3D. Adjustment of Price Upon Issuance of Common Shares. Except as
provided in subparagraph 3E hereof, if and whenever the Corporation shall
issue or sell, or is, in accordance with subparagraphs 3D(1) through 3D(7),
deemed to have issued or sold, any shares of its Common Stock without
consideration or for a consideration per share less than the Series B Conver-
sion Price in effect immediately prior to the time of such issue or sale,
then, forthwith upon such issue or sale, the Series B Conversion Price shall
be reduced to the price (calculated to the nearest cent) determined by
dividing (i) an amount equal to the sum of (a) the number of shares of Common
Stock outstanding immediately prior to such issue or sale (including as
outstanding all shares of Common Stock issuable upon conversion of outstanding
Series B Preferred Stock) multiplied by the then existing Series B Conversion
Price, and (b) the consideration, if any, received by the Corporation upon
such issue or sale, by (ii) the total number of shares of Common Stock out
standing immediately after such issue or sale (including as outstanding all
shares of Common Stock issuable upon conversion of outstanding Series B
Preferred Stock without giving effect to any adjustment in the number of
shares so issuable by reason of such issue and sale).
No adjustment of the Series B Conversion Price, however, shall be made in
an amount less than $.01 per share, and any such lesser adjustment shall be
carried forward and shall be made at the time and together with the next
subsequent adjustment which together with any adjustments so carried forward
shall amount to $.01 per share or more.
For purposes of this subparagraph 3D, the following subparagraphs 3D(1) to
3D(7) shall also be applicable:
3D(1). Issuance of Rights or Options. In case at any time the
Corporation shall in any manner grant (whether directly or by assumption in a
merger or otherwise) any rights to subscribe for or to purchase, or any
options for the purchase of, Common Stock or any stock or securities
convertible into or exchangeable for Common Stock (such rights or options
being herein called "Options" and such convertible or exchangeable stock or
securities being herein called "Convertible Securities") whether or not such
Options or the right to convert or exchange any such Convertible Securities
are immediately exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon conversion or exchange of
such Convertible Securities (determined by dividing (i) the total amount, if
any, received or receivable by the Corporation as consideration for the
granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Corporation upon the exercise of all such
Options, plus, in the case of such Options which relate to Convertible
Securities, the minimum aggregate amount of additional consideration, if any,
payable upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (ii) the total maximum number of shares of
Common Stock issuable upon the exercise of such Options or upon the conversion
or exchange of all such Convertible Securities issuable upon the exercise of
such Options) shall be less than the Series B Conversion Price in effect
immediately prior to the time of the granting of such Options, then the total
maximum number of shares of Common Stock issuable upon the exercise of such
Options or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to have been issued for such price per share as of the date of granting
of such Options and thereafter shall be deemed to be outstanding. Except as
otherwise provided in subparagraph 3D(3), no adjustment of the Series B
Conversion Price shall be made upon the actual issue of such Common Stock or
of such Convertible Securities upon exercise of such Options or upon the
actual issue of such Common Stock upon conversion or exchange of such Convert-
ible Securities.
3D(2). Issuance of Convertible Securities. In case the Corporation
shall in any manner issue (whether directly or by assumption in a merger or
otherwise) or sell any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the price per
share for which Common Stock is issuable upon such conversion or exchange
(determined by dividing (i) the total amount received or receivable by the
Corporation as consideration for the issue or sale of such Convertible Securi-
ties, plus the minimum aggregate amount of additional consideration, if any,
payable to the Corporation upon the conversion or exchange thereof, by (ii)
the total maximum number of shares of Common Stock issuable upon the conver-
sion or exchange of all such Convertible Securities) shall be less than the
Series B Conversion Price in effect immediately prior to the time of such
issue or sale, then the total maximum number of shares of Common Stock
issuable upon conversion or exchange of all such Convertible Securities shall
be deemed to have been issued for such price per share as of the date of the
issue or sale of such Convertible Securities and thereafter shall be deemed to
be outstanding, provided that (a) except as otherwise provided in subparagraph
3D(3) below, no adjustment of the Series B Conversion Price shall be made upon
the actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities, and (b) if any such issue or sale of such Convertible
Securities is made upon exercise of any Option to purchase any such Convert-
ible Securities for which adjustments of the Series B Conversion Price have
been or are to be made pursuant to other provisions of this subparagraph 3D,
no further adjustment of the Series B Conversion Price shall be made by reason
of such issue or sale.
3D(3). Change in Option Price or Conversion Rate. Upon the happening of
any of the following events, namely, if the purchase price provided for in any
Option referred to in subparagraph 3D(1), the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities
referred to in subparagraph 3D(1) or 3D(2), or the rate at which any Con-
vertible Securities referred to in subparagraph 3D(1) or 3D(2) are convertible
into or exchangeable for Common Stock shall change at any time (in each case
other than under or by reason of provisions designed to protect against
dilution), the Series B Conversion Price in effect at the time of such event
shall forthwith be readjusted to the Series B Conversion Price which would
have been in effect at such time had such Options or Convertible Securities
still outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time initially
granted, issued or sold; and on the expiration of any such Option or the
termination of any such right to convert or exchange such Convertible
Securities, the Conversion Price then in effect hereunder shall forthwith be
increased to the Conversion Price which would have been in effect at the time
of such expiration or termination had such Option or Convertible Securities,
to the extent outstanding immediately prior to such expiration or termination,
never been issued, and the Common Stock issuable thereunder shall no longer be
deemed to be outstanding. If the purchase price provided for in any such
Option referred to in subparagraph 3D(1) or the rate at which any Convertible
Securities referred to in subparagraph 3D(1) or 3D(2) are convertible into or
exchangeable for Common Stock shall be reduced at any time under or by reason
of provisions with respect thereto designed to protect against dilution, then,
in case of the delivery of Common Stock upon the exercise of any such Option
or upon conversion or exchange of any such Convertible Securities, the
Conversion Price then in effect hereunder shall forthwith be adjusted to such
respective amount as would have been obtained had such Option or Convertible
Securities never been issued as to such Common Stock and had adjustments been
made upon the issuance of the shares of Common Stock delivered as aforesaid,
but only if as a result of such adjustment the Conversion Price then in effect
hereunder is thereby reduced.
3D(4). Stock Dividends. In case the Corporation shall declare a
dividend or make any other distribution upon any stock of the Corporation
payable in Common Stock, Options or Convertible Securities, any Common Stock,
Options or Convertible Securities, as the case may be, issuable in payment of
such dividend or distribution shall be deemed to have been issued or sold
without consideration.
3D(5). Subdivision or Combination of Stock. In case the Corporation
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares or shall declare or pay a dividend on its outstanding
shares of Common Stock payable in shares of Common Stock, the Series B Conver-
sion Price in effect immediately prior to such subdivision shall be
proportionately reduced, and conversely, in case the outstanding shares of
Common Stock of the Corporation shall be combined into a smaller number of
shares, the Series B Conversion Price in effect immediately prior to such
combination shall be proportionately increased.
3D(6). Consideration for Stock. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received by
the Corporation therefor, without deduction therefrom of any expenses incurred
or any underwriting commissions or concessions paid or allowed by the
Corporation in connection therewith. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by
the Corporation shall be deemed to be the fair value of such consideration as
determined in good faith by the Board of Directors of the Corporation, without
deduction of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith. The
amount of consideration deemed to be received by the Corporation pursuant to
the foregoing provisions of this subparagraph 3D(6) upon any issuance and/or
sale of shares of Common Stock, Options or Convertible Securities, pursuant to
an established compensation plan of the Corporation, to directors, officers or
employees of the Corporation in connection with their employment shall be
increased by the amount of any tax benefit realized by the Corporation as a
result of such issuance and/or sale, the amount of such tax benefit being the
amount by which the Federal and/or state income or other tax liability of the
Corporation shall be reduced by reason of any deduction or credit in respect
of such issuance and/or sale. In case any Options shall be issued in
connection with the issue and sale of other securities of the Corporation,
together comprising one integral transaction in which no specific con-
sideration is allocated to such Options by the parties thereto, such Options
shall be deemed to have been issued without consideration.
3D(7). Record Date. In case the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock, Options or Convertible
Securities, or (ii) to subscribe for or purchase Common Stock, Options or Con-
vertible Securities, then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
3E. Certain Issues of Common Stock Excepted. Anything herein to the
contrary notwithstanding, the Corporation shall not make any adjustment of the
Series B Conversion Price in the case of (i) the issuance of shares of Common
Stock upon conversion of Series B Preferred Stock, (ii) the issuance of Common
Stock or stock options granted pursuant to the Corporation's Stock Option and
Restricted Stock Purchase Plan or Stock Option Plan for Non-Employee Directors
or pursuant to any other employee benefit plan approved by the Board of
Directors of the Corporation, or (iii) the issuance of Common Stock upon
conversion of any convertible securities or exercise of any rights or warrants
outstanding as of the date hereof.
3F. Reorganization or Reclassification. If any capital reorganization
or reclassification of the capital stock of the Corporation shall be effected
in such a way (including, without limitation, by way of consolidation or
merger) that holders of Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock, then, as
a condition of such reorganization or reclassification, lawful and adequate
provision (in form satisfactory to the holders of at least 66-2/3% of the
outstanding shares of Series B Preferred Stock) shall be made whereby each
holder of a share or shares of Series B Preferred Stock shall thereafter have
the right to receive, upon the basis and upon the terms and conditions speci-
fied herein and in lieu of the shares of Common Stock of the Corporation
immediately theretofore receivable upon the conversion of such share or shares
of the Series B Preferred Stock, such shares of stock, securities or assets as
may be issued or payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of shares of such
stock immediately theretofore so receivable had such reorganization or
reclassification not taken place, and in any such case appropriate provision
shall be made with respect to the rights and interests of such holder to the
end that the provisions hereof (including without limitation provisions for
adjustments of the Series B Conversion Price) shall thereafter be applicable,
as nearly as may be, in relation to any shares of stock, securities or assets
thereafter deliverable upon the exercise of such conversion rights (including
an immediate adjustment, by reason of such reorganization or reclassification,
of the Series B Conversion Price to the value for the Common Stock reflected
by the terms of such reorganization or reclassification if the value so
reflected is less than the Series B Conversion Price in effect immediately
prior to such reorganization or reclassification). In the event of a merger
or consolidation of the Corporation as a result of which a greater or lesser
number of shares of common stock of the surviving corporation are issuable to
holders of Common Stock of the Corporation outstanding immediately prior to
such merger or consolidation, the Series B Conversion Price in effect immedi-
ately prior to such merger or consolidation shall be adjusted in the same
manner as though there were a subdivision or combination of the outstanding
shares of Common Stock of the Corporation. The Corporation will not effect
any such consolidation or merger, or any sale of all or substantially all its
assets and properties, unless prior to the consummation thereof the successor
corporation (if other than the Corporation) resulting from such consolidation
or merger or the corporation purchasing such assets shall assume by written
instrument (in form reasonably satisfactory to the holders of at least 66-2/3%
of the shares of Series B Preferred Stock at the time outstanding) executed
and mailed or delivered to each holder of shares of Series B Preferred Stock
at the last address of such holder appearing on the books of the Corporation,
the obligation to deliver to such holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holder may be
entitled to receive.
3H. Notice of Adjustment. Upon any adjustment of the Series B
Conversion Price, then and in each such case the Corporation shall give
written notice thereof, by first class mail, postage prepaid, addressed to
each holder of shares of Series B Preferred Stock at the address of such
holder as shown on the books of the Corporation, which notice shall state the
Series B Conversion Price resulting from such adjustment, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
3I. Other Notices. In case at any time:
(1) the Corporation shall declare any dividend upon
its Common Stock payable in cash or stock or make any other distribution to
the holders of its Common Stock;
(2) the Corporation shall offer for subscription pro rata to the holders
of its Common Stock any additional shares of stock of any class or other
rights;
(3) there shall be any capital reorganization or
reclassification of the capital stock of the Corporation, or a consolidation
or merger of the Corporation with, or a sale of all or substantially all its
assets to, another corporation; or
(4) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by first
class mail, postage prepaid, addressed to each holder of any shares of Series
B Preferred Stock at the address of such holder as shown on the books of the
Corporation, (a) at least 15 days' prior written notice of the date on which
the books of the Corporation shall close or a record shall be taken for such
dividend, distribution or subscription rights or for determining rights to
vote in respect of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, and (b) in the case of
any such reorganization, reclassification, consolidation, merger, sale, disso-
lution, liquidation or winding up, at least 15 days' prior written notice of
the date when the same shall take place. Such notice in accordance with the
foregoing clause (a) shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders of Common
Stock shall be entitled thereto, and such notice in accordance with the
foregoing clause (b) shall also specify the date on which the holders of
Common Stock shall be entitled to exchange their Common Stock for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, as the
case may be.
3J. Stock to be Reserved. The Corporation will at all times reserve and
keep available out of its authorized but unissued Common Stock, solely for the
purpose of issuance upon the conversion of the Series B Preferred Stock as
herein provided, such number of shares of Common Stock as shall then be
issuable upon the conversion of all outstanding shares of Series B Preferred
Stock. All shares of Common Stock which shall be so issued shall be duly and
validly issued and fully paid and nonassessable and free from all taxes, liens
and charges arising out of or by reason of the issue thereof, and, without
limiting the generality of the foregoing, the Corporation covenants that it
will from time to time take all such action as may be requisite to assure that
the par value per share of the Common Stock is at all times equal to or less
than the effective Series B Conversion Price. The Corporation will take all
such action within its control as may be necessary on its part to assure that
all such shares of Common Stock may be so issued without violation of any
applicable law or regulation, or of any requirements of any national securi-
ties exchange upon which the Common Stock of the Corporation may be listed.
The Corporation will not take any action which results in any adjustment of
the Series B Conversion Price if after such action the total number of shares
of Common Stock issued and outstanding and thereafter issuable upon exercise
of all options and conversion of Convertible Securities, including upon
conversion of the Series B Preferred Stock, would exceed the total number of
shares of Common Stock then authorized by the Corporation's Restated
Certificate of Incorporation.
3K. No Reissuance of Series B Preferred Stock. Shares of Series B
Preferred Stock that are converted into shares of Common Stock as provided
herein shall not be reissued.
3L. Issue Tax. The issuance of certificates for shares of Common Stock
upon conversion of the Series B Preferred Stock shall be made without charge
to the holders thereof for any issuance tax in respect thereof, provided that
the Corporation 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
certificate in a name other than that of the holder of the Series B Preferred
Stock which is being converted.
3M. Closing of Books. The Corporation will at no time close its
transfer books against the transfer of any Series B Preferred Stock or of any
shares of Common Stock issued or issuable upon the conversion of any shares of
Series B Preferred Stock in any manner which interferes with the timely
conversion of such Series B Preferred Stock.
3N. Definition of Common Stock. As used in this paragraph 3, the term
"Common Stock" shall mean and include the Corporation's authorized Common
Stock as constituted on the date of filing of this Certificate of Designation
and shall also include any capital stock of any class of the Corporation
thereafter authorized that shall not be limited to a fixed sum in respect of
the rights of the holders thereof to participate in dividends or in the
distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation; provided, however, that such
term, when used to describe the securities receivable upon conversion of
shares of the Series B Preferred Stock of the Corporation, shall include only
shares designated as Common Stock of the Corporation on the date of filing of
this Certificate of Designation, any shares resulting from any combination or
subdivision thereof referred to in paragraph 3D(5), or in case of any reorga-
nization or reclassification of the outstanding shares thereof, the stock,
securities or assets provided for in subparagraph 3F.
4. Voting. Series B Preferred. Except as otherwise provided by law and
the Corporation's Restated Certificate of Incorporation, the holders of Series
B Preferred Stock shall vote together with the holders of Common Stock on all
matters to be voted on by the stockholders of the Corporation, and each holder
of Series B Preferred Stock shall be entitled to one vote for each share of
Common Stock that would be issuable to such holder upon the conversion of all
the shares of Series B Preferred Stock held by such holder on the record date
for the determination of shareholders entitled to vote.
5. Restrictions. At any time when shares of Series B Preferred Stock
are outstanding, and in addition to any other vote of stockholders required by
law or by the Corporation's Restated Certificate of Incorporation, without the
prior consent of the holders of 66 2/3% of the outstanding Series B Preferred
Stock, given in person or by proxy, either in writing or at a special meeting
called for that purpose, at which meeting the holders of the shares of such
Series B Preferred Stock shall vote together as a class:
(i) the Corporation will not (x) create or authorize the creation of any
additional class of shares unless the same ranks junior to the Series B
Preferred Stock as to the distribution of assets on liquidation and pari passu
as to dividends, or (y) increase the authorized amount of the Series B
Preferred Stock, or increase the authorized amount of any additional class of
shares unless the same ranks junior to the Series B Preferred Stock as to the
distribution of assets on liquidation and pari passu as to dividends or (z)
create or authorize any obligations or securities convertible into shares of
Series B Preferred Stock or into shares of any other class unless the same
ranks junior to the Series B Preferred Stock as to the distribution of assets
on liquidation and pari passu as to dividends, in each case whether any such
creation or authorization or increase shall be by means of amendment of the
Corporation's Restated Certificate of Incorporation, merger, consolidation or
otherwise; and
(ii) the Corporation will not amend, alter or repeal the Corporation's
Restated Certificate of Incorporation or By-laws in any manner, or file any
directors' resolutions pursuant to the General Corporation Law of the State of
Delaware containing any provision, in either case which affects the respective
preferences, voting power, qualifications, special or relative rights or
privileges of the Series B Preferred Stock or which in any manner adversely
affects the Series B Preferred Stock or the holders thereof.
IN WITNESS WHEREOF, this Certificate of Designation has been executed by
the Corporation by its President and Chief Executive Officer and attested by
its Secretary as of this 11th day of May, 1998.
SEER TECHNOLOGIES, INC.
By /s/ Steven Dmiszewicki
President
ATTEST:
/s/ Dennis McKinnie
Secretary
Exhibit 10.53
Greyrock
Business
Credit
A NationsBank Company
Amendment to Loan Documents
Borrower: Seer Technologies, Inc.
Address: 8000 Regency Parkway
Cary, North Carolina 27511
Date: May 5, 1998
THIS AMENDMENT ("Amendment") is entered into as of the above date between
GREYROCK BUSINESS CREDIT, a Division of NationsCredit Commercial Corporation
("GBC"), whose address is 10880 Wilshire Blvd., Suite 950, Los Angeles, CA
90024 and the borrower named above ("Borrower") with respect to the Loan and
Security Agreement between GBC and Borrower, dated March 26, 1997, as amended
from time to time (the "Loan Agreement"). (This Amendment, the prior
Amendments dated February 24, 1998 and March 11, 1998, the Loan Agreement, any
other prior written amendments to said agreements signed by GBC and the
Borrower, and all other written documents and agreements between GBC and the
Borrower are referred to herein collectively as the "Loan Documents".
Capitalized terms used but not defined in this Amendment, shall have the
meanings set forth in the Loan Agreement.)
The parties agree to amend the Loan Agreement as follows, effective on the
date hereof:
1. Modification to Maturity Date. The following is substituted in place
and stead of Section 4 of the Schedule to Loan and Security Agreement:
"4. Maturity Date
(Section 6.1): May 31, 1999, subject to automatic renewal as provided in
Section 6.1 above, and early termination as provided in
Section 6.2 above."
2. Modification to Section 6.1. The following is substituted in place
and stead of Section 6.1 of the Loan Agreement:
"6.1 Maturity Date. This Agreement shall continue in effect until the
maturity date set forth on the Schedule (the "Maturity Date"); provided
that the Maturity Date shall automatically be extended, and this
Agreement shall automatically and continuously renew, for successive
additional terms of one year each, unless one party gives written notice
to the other, not less than sixty (60) days prior to the next Maturity
Date, that such party elects to terminate this Agreement effective on
the next Maturity Date."
1
3. Representations True. Borrower represents and warrants to GBC that
all representations and warranties set forth in the Loan Agreement, as amended
hereby, are true and correct.
4. General Provisions. This Amendment, the Loan Agreement, and the
other Loan Documents set forth in full all of the representations and
agreements of the parties with respect to the subject matter hereof and
supersede all prior discussions, representations, agreements and
understandings between the parties with respect to the subject hereof. Except
as herein expressly amended, all of the terms and provisions of the Loan
Agreement and the other Loan Documents shall continue in full force and effect
and the same are hereby ratified and confirmed.
Borrower: GBC:
SEER TECHNOLOGIES, INC. GREYROCK BUSINESS CREDIT,
a Division of
NationsCredit Commercial Corporation
By /s/ Steven Dmiszewicki
President or Vice-President
By /s/ Dennis McKinnie By /s/ Lisa Nagano
Secretary or Ass't Secretary Title: Vice President of Operations
CONSENT
The undersigned, guarantors, acknowledge that their consent to the
foregoing Agreement is not required, but the undersigned nevertheless do
hereby consent to the foregoing Agreement and to the documents and agreements
referred to therein and to all future modifications and amendments thereto,
and any termination thereof, and to any and all other present and future
documents and agreements between or among the foregoing parties. Nothing
herein shall in any way limit any of the terms or provisions of the Continuing
Guarantees of the undersigned, all of which are hereby ratified and affirmed.
This Consent may be executed in counterparts. The signatures of the
undersigned shall be fully effective even if other persons named below fail to
sign this Consent.
SEER TECHNOLOGIES IRELAND LIMITED SEER TECHNOLOGIES BENELUX B.V.
By /s/ Steven Dmiszewicki By /s/ Steven Dmiszewicki
Title: Title:
By /s/ Dennis McKinnie By /s/ Dennis McKinnie
Title: Title:
2
Exhibit 10.54
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Second
Amendment"), dated as of April 27, 1998, is entered into between SEER
TECHNOLOGIES, INC., a Delaware corporation (the "Borrower"), and
NATIONSBANK, N.A. (the "Bank").
BACKGROUND
A. The Borrower and the Bank heretofore entered into that
certain Credit Agreement, dated as of July 15, 1996, as amended by that
certain First Amendment to Credit Agreement, dated as of March 27, 1997
(said Credit Agreement, as amended, the "Credit Agreement"; the terms
defined in the Credit Agreement and not otherwise defined herein shall
be used herein as defined in the Credit Agreement).
B. The Borrower and the Bank desire to amend the Credit
Agreement.
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereinafter set forth, and for other good and valuable
consideration, the receipt and adequacy of which are all hereby
acknowledged, the Borrower and the Bank covenant and agree as follows:
1. AMENDMENTS.
(a) The dollar amount of "$12,500,000" set forth in the
Background provision of the Credit Agreement is hereby deleted and the
dollar amount of "$17,000,000" is hereby substituted in lieu thereof.
(b) The definition of "Commitment" set forth in Article 1
of the Credit Agreement is hereby deleted and the following is hereby
substituted in lieu thereof:
"'Commitment' means $17,000,000, as reduced pursuant
to Section 2.6 hereof."
(c) The definition of "Hedge Agreements" is hereby added
to Article 1 of the Credit Agreement in proper alphabetical order to
read as follows:
"'Hedge Agreements' means any and all agreements,
devices or arrangements designed to protect at least one of the parties
thereto from the fluctuations of interest rates, currency exchange
rates, forward rates applicable to such party's assets, liabilities or
exchange transactions, including, but not limited to, dollar-denominated
or cross-currency interest rate exchange agreements, forward currency
exchange agreements, interest rate cap, swap or collar protection
agreements, and forward rate currency or interest rate options, as the
same may be amended or modified and in effect from time to time, and any
and all cancellations, buy backs, reversals, terminations or assignments
of any of the foregoing."
(d) The definition of "Maturity Date" set forth in Article
1 of the Credit Agreement is hereby deleted and the following is hereby
substituted in lieu thereof:
"'Maturity Date' means (a) June 30, 1999 or (b) the
earlier date of termination in whole of the Commitment pursuant to
Section 2.6 of 6.2 hereof."
(e) Exhibit A to the Credit Agreement is hereby amended to
be in the form of Exhibit A to this Second Amendment (defined herein as
the "Replacement Note").
2. REPRESENTATIONS AND WARRANTIES TRUE; NO EVENT OF DEFAULT.
By its execution and delivery hereof, the Borrower represents and
warrants that, as of the date hereof and after giving effect to the
amendments contemplated by the foregoing Section 1:
(a) the representations and warranties contained in the
Credit Agreement (other than with respect to Section 4.5 of the Credit
Agreement as a result of that certain Loan and Security Agreement,
Security Agreement in Copyrighted Works and Patent and Trademark
Security Agreement, each dated March 26, 1997, with Greyrock Business
Credit, a division of NationsCredit Commercial Corporation) are true and
correct on and as of the date hereof as made on and as of such date;
(b) no event has occurred and is continuing which
constitutes a Default or an Event of Default;
(c) the Borrower has full power and authority to execute
and deliver this Second Amendment and the Replacement Note, and this
Second Amendment, the Replacement Note, and the Credit Agreement, as
amended hereby, constitute the legal, valid and binding obligations of
the Borrower, enforceable in accordance with their respective terms,
except as enforceability may be limited by applicable debtor relief laws
and by general principles of equity (regardless of whether enforcement
is sought in a proceeding in equity or at law) and except as rights to
indemnity may be limited by federal or state securities laws;
(d) neither the execution, delivery and performance of
this Second Amendment, the Replacement Note or the Credit Agreement, as
amended hereby, nor the consummation of any transaction contemplated
herein or therein, will conflict with any law, rule or regulation to
which the Borrower is subject, or any indenture, agreement or other
instrument to which the Borrower or any of its property is subject; and
(e) no authorization, approval, consent, or other action
by, notice to, or filing with, any governmental authority or other
Person (including any partner of the Guarantor) not already obtained is
required for the execution, delivery or performance by (i) the Borrower
of this Second Amendment or (ii) the Guarantor of the Guaranty
Agreement.
3. CONDITIONS OF EFFECTIVENESS. This Second Amendment shall be
effective as of the date first above written, subject to the following:
(a) the Bank shall have received counterparts of this
Second Amendment executed by the Borrower;
(b) the Bank shall have received an amendment fee from the
Borrower in the amount of $25,000, paid in immediately available funds;
(c) the Bank shall have received the Replacement Note,
duly executed by the Borrower;
(d) the Bank shall have received a copy of the certified
resolution of the Board of Directors of the Borrower authorizing the
execution, delivery and performance of this Second Amendment and the
Replacement Note;
(e) the Bank shall have received a Guaranty Agreement duly
executed by the Guarantor in substantially the form of Exhibit B hereto;
(f) the Bank shall have received an opinion of counsel to
the Guarantor in form and substance satisfactory to the Bank; and
(g) the Bank shall have received, in form and substance
satisfactory to the Bank and its counsel, such other documents,
certificates and instruments as the Bank shall require.
4. REFERENCE TO THE CREDIT AGREEMENT.
(a) Upon the effectiveness of this Second Amendment, each
reference in the Credit Agreement to "this Agreement", "hereunder", or
words of like import shall mean and be a reference to the Credit
Agreement, as affected and amended hereby.
(b) The Credit Agreement, as amended by the amendments
referred to above, shall remain in full force and effect and is hereby
ratified and confirmed.
5. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay on
demand all costs and expenses of the Bank in connection with the
preparation, reproduction, execution and delivery of this Second
Amendment and the other instruments and documents to be delivered
hereunder (including the reasonable fees and out-of-pocket expenses of
counsel for the Bank with respect thereto and with respect to advising
the Bank as to its rights and responsibilities under the Credit
Agreement, as hereby amended).
6. EXECUTION IN COUNTERPARTS. This Second Amendment may be
executed in any number of counterparts and by different parties hereto
in separate counterparts, each which when so executed and delivered
shall be deemed to be an original and all of which when taken together
shall constitute but one and the same instrument.
7. GOVERNING LAW: BINDING EFFECT. This Second Amendment shall
be governed by and construed in accordance with the laws of the State of
North Carolina and shall be binding upon the Borrower and each Bank and
their respective successors and assigns.
8. HEADINGS. Section headings in this Second Amendment are
included herein for convenience of reference only and shall not
constitute a part of this Second Amendment for any other purpose.
9. ENTIRE AGREEMENT. THE CREDIT AGREEMENT, AS AMENDED BY THIS
SECOND AMENDMENT, AND THE OTHER LOAN PAPERS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE
PARTIES. THERE ARE NO ORAL UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment as the date first above written.
SEER TECHNOLOGIES, INC.
By: /s/ Steven Dmiszewicki
Name: Steven Dmiszewicki
Title: Co-President & CFO
NATIONSBANK, N.A.
By: /s/ Timothy M. O'Connor
Name: Timothy M. O'Connor
Title: Vice-President
ACKNOWLEDGED AND AGREED:
WELSH, CARSON, ANDERSON & STOWE VI, L.P.,
a Delaware limited partnership
By: WCAS VI PARTNERS, a Delaware
limited partnership, General Partner
By: /s/ Laura VanBuren,
General Partner
Name: Laura VanBuren
EXHIBIT A
PROMISSORY NOTE
Dallas, Texas $17,000,000.00 April 27, 1998
SEER TECHNOLOGIES, INC., a Delaware corporation (the "Borrower"),
for value received, promises to pay to the order of NATIONSBANK, N.A.
("Bank"), in lawful money of the United States of America, the principal
sum of SEVENTEEN MILLION AND NO/100 DOLLARS ($17,000,000.00), or such
lesser sum as shall be due and payable from time to time hereunder, as
hereinafter provided. All terms used but not defined herein shall have
the meanings set forth in the Credit Agreement described below.
The Borrower promises to pay principal of and interest on the
unpaid principal balance of Advances under this Promissory Note from
time to time outstanding as set forth in the Credit Agreement.
Both principal and interest are payable in lawful money of the
United States of America to the Bank as provided in the Credit
Agreement.
This Promissory Note is issued pursuant to and evidences Advances
under a Credit Agreement, dated as of July 15, 1996, between the
Borrower and the Bank (as amended, restated, supplemented, renewed,
extended or otherwise modified from time to time, "Credit Agreement"),
to which reference is made for a statement of the rights and obligations
of the Bank and the duties and obligations of the Borrower in relation
thereto; but neither this reference to the Credit Agreement nor any
provision thereof shall affect or impair the absolute and unconditional
obligation of the Borrower to pay the principal sum of and interest on
this Promissory Note when due. This Promissory Note is an increase,
renewal and restatement (but not a novation of the debt evidenced
thereby) of that certain Promissory Note of the Borrower, dated July 15,
1996, in the principal amount of $12,500,000.
The Borrower and all endorsers, sureties and guarantors of this
Promissory Note hereby severally waive demand, presentment for payment,
protest, notice of protest, notice of acceleration, notice of intention
to accelerate the maturity of this Promissory Note, and all other
notices of any kind, diligence in collecting, the bringing of any suit
against any party and any notice of or defense on account of any
extensions, renewals, partial payments or changes in any manner of or in
this Promissory Note or in any of its terms, provisions and covenants,
or any releases or substitutions of any security, or any delay,
indulgence or other act of any trustee or any holder hereof, whether
before or after maturity.
THIS PROMISSORY NOTE, TOGETHER WITH THE OTHER LOAN PAPERS,
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
SEER TECHNOLOGIES, INC.
By: /s/ Steven Dmiszewicki
Name: Steven Dmiszewicki
Title: Co-President & CFO
EXHIBIT B
AMENDED AND RESTATED GUARANTY
THIS AMENDED AND RESTATED GUARANTY AGREEMENT dated as of April 27,
1998 (the "Guaranty"), is made by Welsh, Carson, Anderson & Stowe VI,
L.P., a Delaware limited partnership (the "Guarantor"), in favor of
NATIONSBANK, N.A., a national banking association (the "Bank").
RECITALS
C. Seer Technologies, Inc., a Delaware corporation (the
"Borrower"), has a line of credit from the Bank in the aggregate
principal amount of $12,500,000 (the "Original Line of Credit") pursuant
to the terms of that certain Credit Agreement, dated as of July 15,
1996, between the Borrower and the Bank (said Credit Agreement, as
heretofore and hereafter amended, modified or supplemented, the "Credit
Agreement"), which has been guaranteed by the Guarantor pursuant to the
terms of that certain Guaranty in favor of the Bank, dated July 15, 1996
(the "Original Guaranty").
D. In addition, the Borrower is or may be a party to Hedge
Agreements (as defined in the Credit Agreement) with the Bank or an
affiliate of the Bank (herein an "Affiliate").
E. The Borrower has requested that the Bank increase the amount
of the Original Line of Credit to $17,000,000.
F. As a condition to (i) the Bank increasing the Line of Credit
to the Borrower and (ii) the Bank or its Affiliates entering into Hedge
Agreements with the Borrower, the Guarantor is required, among other
things, to execute and deliver this Guaranty.
G. The Guarantor has reviewed all notes, documents, agreements,
instruments and certificates furnished by or on behalf of the Borrower
or the Guarantor in connection with the Credit Agreement (all of the
foregoing with extensions, renewals and amendments thereof, being
collectively herein called the "Financing Documents") and the Guarantor
has determined that its execution and delivery of this Guaranty and the
execution of the Financing Documents by the parties to them will either
directly or indirectly benefit the Guarantor.
AGREEMENT
As an inducement to the Bank to enter into the transactions
contemplated by the Financing Documents, the Guarantor agrees with the
Bank as follows.
1. The Guaranty. The Guarantor hereby unconditionally and
irrevocably guarantees the full and punctual payment (whether at stated
maturity, upon acceleration or otherwise) of the Guaranteed Indebtedness
(hereinafter defined). Upon failure by the Borrower to pay the
Guaranteed Indebtedness when due (whether upon maturity, acceleration or
otherwise), the Guarantor shall forthwith on demand pay the amount not
so paid at the place and in the manner specified by the Bank.
2. Definition of Guaranteed Indebtedness. The term "Guaranteed
Indebtedness," as used herein, means: (i) the indebtedness evidenced by
that certain promissory note (as the same may hereafter be renewed,
extended, amended, modified, supplemented, and/or restated from time to
time and at any time, with or without notice to the Guarantor, herein
called the "Note") dated April 27, 1998, in the principal amount of
$17,000,000, executed by the Borrower, payable to the order of the Bank;
(ii) all obligations and liabilities of the Borrower to the Bank or any
Affiliate pursuant to any Hedge Agreement; (iii) interest on the
indebtedness and liabilities evidenced by the Note or arising under any
Hedge Agreement, whether accruing before or after the commencement of
any case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of any one or more of the Borrower and the
Guarantor and whether or not allowed in such case, proceeding or other
action; (iv) any and all costs, attorneys fees, and expenses incurred by
the Bank in enforcing this Guaranty; and (v) any renewal or extension of
the indebtedness, costs, fees, or expenses described in (i) through (iv)
preceding, or any part thereof; provided, however, notwithstanding
anything herein to the contrary, the aggregate amount of indebtedness,
liabilities and obligations constituting Guaranteed Indebtedness under
clauses (i) and (ii) immediately preceding shall not exceed an amount
equal to the remainder of (a) $17,500,000 minus (b) the aggregate amount
of any payment of Advances (as defined in the Credit Agreement) which
result in an permanent reduction of the Commitment (as defined in the
Credit Agreement).
3. Continuing Guaranty. This Guaranty is a continuing and
irrevocable guaranty and the circumstance that at any time or from time
to time the Guaranteed Indebtedness may be paid in full shall not affect
the obligations of the Guarantor with respect to Guaranteed Indebtedness
thereafter incurred by the Borrower to Bank or any Affiliate.
4. Guaranty Unconditional. The obligations of the Guarantor
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or
otherwise affected by, and the Guarantor, to the maximum extent
permitted by applicable law, hereby waives any defense to any of its
obligations hereunder that might otherwise be available to it on account
of:
(i) any extension, renewal, settlement,
compromise, waiver or release in respect of any obligation of the
Borrower or any other guarantor under any Financing Document, by
operation of law or otherwise;
(ii) any modification or amendment of or
supplement to any Financing Document;
(iii) any modification, amendment, waiver,
release, non-perfection or invalidity of any direct or indirect
security, or of any guarantee or any liability of any third party, for
any obligation of the Borrower under any Financing Document;
(iv) any change in the corporate existence,
structure or ownership of the Borrower or any other guarantor, or any
insolvency, bankruptcy, reorganization or other similar proceeding
affecting the Borrower or any other guarantor or any of its assets or
any release or discharge of any obligation of the Borrower or any other
guarantor contained in any Financing Document;
(v) the existence of any claim, setoff or other
rights which the Guarantor may have at any time against the Borrower,
the Bank or any Affiliate, whether or not arising in connection herewith
or with any Financing Document; provided that nothing herein shall
prevent the assertion of any such claim by separate suit or compulsory
counterclaim;
(vi) any invalidity or unenforceability relating
to or against the Borrower or any other guarantor for any reason of any
Financing Document, or any provision of applicable law or regulation
purporting to prohibit the payment by the Borrower or any other
guarantor of the Guaranteed Indebtedness;
(vii) any other act or omission to act or delay of
any kind by the Borrower, the Bank or any Affiliate or any other
circumstance whatsoever that might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of the Guarantor's
obligations hereunder;
(viii) the absence of any attempt to collect any of
the Guaranteed Indebtedness from the Borrower or from any other
guarantor or any other action to enforce the same or the election of any
remedy by the Bank or any Affiliate; or
(ix) any suretyship laws of the State of North
Carolina.
5. Reinstatement In Certain Circumstances. If at any time an
payment of the Guaranteed Indebtedness is rescinded or must be otherwise
restored or returned upon the insolvency, bankruptcy or reorganization
of the Borrower or otherwise, the Guarantor's obligations hereunder with
respect to such payment shall be reinstated as though such payment had
been due but not made at such time.
6. Waiver by the Guarantor. The Guarantor irrevocably waives
acceptance hereof, presentment, demand, protest and any notice not
provided for herein, as well as any requirement that at any time any
action be taken by the Bank or any Affiliate against the Borrower or any
other guarantor or any property subject to any security interest,
pledge, lien, assignment or against securing any obligations of the
Borrower or the Guarantor.
7. Waiver of Subrogation. Until the final payment in full of
the Guaranteed Indebtedness, the Guarantor shall not exercise any rights
against the Borrower arising as a result of payment by the Guarantor
hereunder, by way of subrogation, reimbursement, restitution,
contribution or otherwise.
8. Stay of Acceleration. If acceleration of the time for
payment of any amount payable by the Borrower under any Financing
Document is stayed upon the insolvency, bankruptcy or reorganization of
the Borrower, all such amounts otherwise subject to acceleration under
the terms of the Financing Documents shall nonetheless be payable by the
Guarantor hereunder forthwith on demand by the Bank.
9. Insolvency. The Guarantor agrees that, in the event of the
dissolution or insolvency of the Borrower or the insolvency of the
Guarantor, or the inability of the Borrower or the Guarantor to pay
debts as they mature, or an assignment by the Borrower or the Guarantor
for the benefit of creditors, or the institution of any proceeding by or
against the Borrower or the Guarantor alleging that the Borrower or the
Guarantor is insolvent or unable to pay debts as they mature, and if
such event shall occur at a time when any of the Guaranteed Indebtedness
may not then be due and payable, the Guarantor will pay to the Bank
forthwith the full amount which would be payable hereunder by the
Guarantor if all Guaranteed Indebtedness were then due and payable.
10. Limit of Liability. The obligations of the Guarantor
hereunder shall be limited to the largest amount that would not render
its obligations hereunder and thereunder subject to avoidance under
Section 548 of the Bankruptcy Code of 1978, as amended, or any
comparable provisions of applicable state law.
11. Representations and Warranties. The Guarantor represents
and warrants to the Bank that:
(i) Partnership Existence and Power. The Guarantor
is a limited partnership duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization, has all
powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted and is duly
qualified as a foreign limited partnership licensed and in good standing
in each jurisdiction where qualification or licensing is required by the
nature of its business or the character and location of its property,
business or customers and in which the failure to have such license,
authorization, consent, approval or qualification, as the case may be,
in the aggregate, could have a material adverse effect on the ability of
the Guarantor to perform its obligations under this Guaranty.
(ii) Partnership and Governmental Authorization; No
Contravention. The execution, delivery and performance by the Guarantor
of this Guaranty are within the power of the Guarantor, have been duly
authorized by all necessary partnership action, require no action by or
in respect of, or filing with, any governmental body, agency or official
and do not contravene, or constitute a default under, any provision of
applicable law or regulation or of the charter or partnership agreement
of the Guarantor or of any agreement, judgment, injunction, order,
decree or other instrument that is material, individually or in the
aggregate, to the business of the Guarantor and that is binding upon the
Guarantor or result in any asset of the Guarantor being subject to any
security interest, pledge, lien, assignment or setoff.
(iii) Binding Effect. This Guaranty constitutes a valid and
binding agreement of the Guarantor.
12. Covenants. The Guarantor hereby covenants to the Bank as
follows:
(a) Financial Information. As soon as available but in
any event not later than 90 days after the end of each fiscal year of
the Guarantor, the Guarantor shall deliver to the Bank copies of the
audited financial statements of the Guarantor consisting of at least the
balance sheet, statement of operations, with related notes specifying
significant accounting practices and their impact on such financial
statements and schedules as at and for the year then ended for the
Guarantor, certified by a firm of independent certified public
accountants. Within 45 days after the end of each of the first three
quarters of the fiscal year of the Guarantor, the Guarantor shall
deliver to the Bank copies of the unaudited financial statements of the
Guarantor. The Guarantor shall also furnish to the Bank any other
documents or information which the Bank may from time to time reasonably
request.
(b) Liquidity Covenant. The Guarantor will ensure that at
any time and from time to time until all of the Guaranteed Obligations
have been paid in full the aggregate fair market value of the
Guarantor's assets (including non-restricted marketable securities and
restricted securities readily saleable pursuant to Rule 144 under the
Securities Act of 1933, as amended) that are readily available to pay
the Guaranteed Indebtedness is sufficient to pay the Guaranteed
Indebtedness in full together with any of the other indebtedness or
contingent liabilities of the Guarantor, and forthwith upon any amount
becoming due and payable hereunder will take all steps necessary to
liquidate or otherwise apply such assets and call cash capital
contributions in an amount sufficient, and use the proceeds thereof, to
pay the Guaranteed Indebtedness in full.
13. Notices. Unless otherwise specified herein, all notices,
requests and other communications to any party hereunder shall be in
writing (including bank wire, telex, facsimile transmission or similar
writing) and shall be given to such party at its address or telex or
facsimile transmission number set forth on the signature pages hereof or
such other address or telex or facsimile transmission number as such
party may hereafter specify for the purpose by notice to the other
party. Each such notice, request or other communication shall be
effective (i) if given by telex, when such telex is transmitted to the
telex number specified pursuant to this paragraph and the appropriate
answerback is received, (ii) if given by facsimile transmission, when
such facsimile is transmitted to the facsimile transmission number
specified pursuant to this paragraph and telephonic confirmation of
receipt thereof is received, (iii) if given by mail, 72 hours after such
communication is deposited in the malls with first class postage
prepaid, addressed as aforesaid, or (iv) if given by any other means,
when delivered at the address specified pursuant to this paragraph.
14. No Waiver. No failure or delay by the Bank or any
Affiliate in exercising any right, power or privilege under any
Financing Document shall operate as waiver thereof nor shall any single
or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
15. Amendments and Waivers. Any provision of this guaranty may
be amended or waived if, but only if, such amendment or waiver is in
writing and is signed by the Guarantor and is consented to in writing by
the Bank.
16. Successors and Assigns. This Guaranty is for the benefit
of the Bank, and its successors and assigns and in the event of an
assignment of the Guaranteed Indebtedness, the rights hereunder, to the
extent applicable to the Guaranteed Indebtedness so assigned, may be
transferred with such Guaranteed Indebtedness. All of the provisions of
this Guaranty shall be binding upon the parties hereto and their
respective successors and assigns, except that the Guarantor may not
assign or transfer any of its rights or obligations under this Guaranty.
17. Counterparts. This Guaranty may be signed m any number of
counterparts, each of which shall be an original, and all of which taken
together shall constitute a single instrument, with the same effect as
if the signature thereto and hereto were upon the same instrument.
18. Governing Law; Submission to Jurisdiction; Waiver of Jury
Trial. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF NORTH CAROLINA. THE GUARANTOR HEREBY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE WESTERN DISTRICT OF NORTH CAROLINA AND OF ANY NORTH
CAROLINA STATE COURT SITTING IN DALLAS FOR PURPOSES OF ALL LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE
TRANSACTIONS CONTEMPLATED HERE. THE GUARANTOR 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 HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. THE GUARANTOR HEREBY AGREES THAT PROCESS MAY
BE SERVED ON IT BY THE MAILING OF SUCH PROCESS TO IT IN ACCORDANCE WITH
PARAGRAPH 10. THE GUARANTOR HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY.
19. Notice of Final Agreement. THIS WRITTEN GUARANTY AND THE
FINANCING DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.
20. Amendment and Restatement. This Guaranty is an amendment
and restatement of the Original Guaranty.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
THIS GUARANTY is executed as of the date first above written.
"GUARANTOR"
WELSH, CARSON, ANDERSON & STOWE VI,
L.P., a Delaware limited partnership
By:WCAS VI PARTNERS, General Partner
By: /s/ Laura VanBuren, General Partner
Name: Laura VanBuren
Address:
Telephone Number:
Facsimile Transmission
Number:
Executed by the Bank for the purpose of the Notice of Final Agreement
set forth above.
"BANK"
NATIONSBANK, N.A., a national
banking association
By: /s/ Timothy M. O'Connor
Name: Timothy M. O'Connor
Title: Vice-President
Address: c/o NationsBank of Texas, N.A.
901 Main Street, 67th Floor
Dallas, Texas 75202
Telephone Number: (214) 508-3347
Facsimile Transmission
Number: (214) 508-0980
Exhibit 10.55
Execution Copy
AGREEMENT
AGREEMENT, dated as of April 27, 1998, between SEER TECHNOLOGIES, INC., a
Delaware corporation (the "Company"), and WELSH, CARSON, ANDERSON & STOWE VI
L.P., a Delaware limited partnership (the "Guarantor").
WHEREAS, the Guarantor is the owner of a majority of the outstanding
Common Stock, $.01 par value ("Common Stock"), of the Company; and
WHEREAS, the Company and the Guarantor have determined that it is
critical to the financial condition of the Company that the Company amend the
Credit Agreement dated as of August 8, 1996 (the "Credit Agreement") with
NationsBank, N.A., a national banking association (the "Bank"), to increase
the maximum principal amount that may be borrowed under the credit facility
from $12,500,000 to $17,000,000 (such increased amount being referred to
herein as the "Increased Amount"); and
WHEREAS, the Bank is unwilling to amend the Credit Agreement to provide
for the Increased Amount unless such amount is guaranteed by the Guarantor;
and
WHEREAS, in order to protect and enhance its existing substantial equity
investment in the Company and to ensure the Company's ongoing financial
viability, the Guarantor has agreed to make an additional equity investment in
the Company, pursuant to the Preferred Stock Purchase Agreement, dated on or
about the date hereof, among the Company, the Guarantor and the several other
purchasers listed on Schedule I thereto (the "Purchase Agreement"), and is
willing to assume additional financial risk in its role as stockholder by
giving certain guaranties with respect to the loans to be made by the Bank to
the Company with respect to the Increased Amount and certain obligations and
liabilities (the "Hedge Amount") of the Company to the Bank pursuant to
"Hedge" Agreements; and
WHEREAS, in recognition of the additional financial risk that the
Guarantor is assuming in its capacity as stockholder by making such guaranty
(and not as compensation or a payment for any services or otherwise in
connection with the pursuit of a trade or business), the Company is willing to
issue to the Guarantor shares of its Common Stock;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereby agree as follows:
I.
ISSUANCE OF COMMON STOCK
SECTION 1.01 Issuance of Common Stock. Upon the execution and delivery
by the Guarantor of the Amended and Restated Guaranty made by the Guarantors
in favor of the Bank pursuant to which the Guarantor guarantees the Increased
Amount and the Hedge Amount (the "Guaranty"), the Company agrees to issue to
the Guarantor 30,000 shares of Common Stock (the "Shares") and to issue and
deliver to the Guarantor stock certificates in definitive form, registered in
the name of the Guarantor, representing the Shares.
SECTION 1.02 Tax and Accounting Treatment. The Company and the
Guarantor agree that for federal, state and local income tax, as well as for
financial accounting, purposes the execution and delivery of the Guaranty and
the issuance of the Shares by the Company to the Guarantor is a capital
transaction and is not compensation or a payment for any services or otherwise
in connection with the pursuit of a trade or business, and each hereby agrees
to treat the issuance of the Shares in such manner for all such purposes, all
to the maximum extent permitted by applicable law.
II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Guarantor as follows:
SECTION 2.01 Organization. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Delaware and is duly licensed or qualified to do business as a
foreign corporation and is in good standing in each of the jurisdictions in
which it owns or leases any real property or in which the nature of business
transacted by it makes such licensing or qualification necessary and where the
failure to be so licensed or qualified would have a material adverse affect on
the business, operations or financial condition of the Company. The Company
has the corporate power and authority to own and hold its properties and to
carry on its business as currently conducted, to execute, deliver and perform
this Agreement and to issue, sell and deliver the Shares.
SECTION 2.02 Authorization of Agreement, Etc. (a) The execution,
delivery and performance by the Company of this Agreement and the issuance,
sale and delivery of the Shares, have been duly authorized by all requisite
corporate action and will not violate any provision of law, any order of any
court or other agency of government, the Restated Certificate of Incorporation
or By-laws of the Company, or any provision of any indenture, agreement or
other instrument by which the Company or any of its subsidiaries or any of
their respective properties or assets is bound, or conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any such indenture, agreement or other instrument, or result in the
creation or imposition of any lien, charge or incumbrance of any nature upon
any of the properties or assets of the Company or any of its subsidiaries.
(b) The Shares have been duly authorized and when issued in accordance
with the terms of this Agreement will be validly issued and outstanding, fully
paid and nonassessable shares of Common Stock. The issuance and delivery of
the Shares are not subject to any preemptive rights of stockholders of the
Company or to any right of first refusal or other similar right in favor of
any person.
SECTION 2.03 Validity. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding obliga-
tion of the Company, enforceable in accordance with its terms.
SECTION 2.04 Authorized Capital Stock. (a) The authorized capital stock
of the Company consists of 30,000,000 shares of Common Stock and 10,000,000
shares of Preferred Stock, par value $.01 per share, of which 2,094,143 shares
are designated Series A Convertible Preferred Stock ("Series A Preferred
Stock") and a certain number of shares as determined pursuant to the Preferred
Stock Purchase Agreement, dated as of April 27, 1998, among the Company, the
Guarantor and the several other purchasers listed therein will be designated
Series B Convertible Preferred Stock. As of the date hereof, immediately
prior to giving effect to the issuance of the Shares as contemplated hereby,
11,944,689 shares of Common Stock and 2,094,143 shares of Series A Preferred
Stock are validly issued and outstanding, fully paid and nonassessable.
(b) Except as set forth in the Company's Form 10-K for the 1997 fiscal
year or the Company's Form 10-Q for the first quarter ended December 31, 1997,
referred to in Section 2.06 of the Purchase Agreement, (i) no subscription,
warrant, option, convertible security or other right (contingent or other) to
purchase or acquire any shares of any class of capital stock of the Company is
authorized or outstanding, (ii) there is not any commitment of the Company to
issue any shares, warrants, options or other such rights or to distribute to
holders of any class of its capital stock any evidences of indebtedness or
assets, and (iii) the Company has no obligation (contingent or other) to
purchase, redeem or otherwise acquire any shares of its capital stock or any
interest therein or to pay any dividend or make any other distribution in
respect thereof.
III.
REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR
The Guarantor represents and warrants to the Company that it is acquiring
the Shares, for its own account for purposes of investment and not with a view
to or for sale in connection with any distribution thereof. The Guarantor
further represents that it understands (i) that the Shares have not been
registered under the Securities Act by reason of their issuance in transac-
tions exempt from the registration requirements of the Securities Act pursuant
to Section 4(2) thereof, (ii) the Shares must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act or is
otherwise exempt from such registration, (iii) the Shares will bear a legend
to such effect and (iv) the Company will make a notation on its transfer books
to such effect. The Guarantor further understands that the exemption from
registration afforded by Rule 144 under the Securities Act depends on the
satisfaction of various conditions and that, if applicable, affords the basis
of sales of the Shares in limited amounts under certain conditions. The
Guarantor acknowledges that it has had a full opportunity to request from the
Company to review and has received all information deemed relevant in making a
decision to enter into this Agreement and consummate the transactions
contemplated hereby. The Guarantor is an "Accredited Investor" within the
meaning of Rule 501(a) of the Securities Act.
IV.
AGREEMENTS OF THE COMPANY
The Company covenants and agrees that any right to payment received by
the Guarantor in respect of the loans made under the Credit Agreement and its
guaranty thereof, whether by way of purchase, subrogation or otherwise, and
regardless whether and to what extent the same shall be subordinated to other
indebtedness to the Bank or shall have been waived pending certain events, may
be applied, both as to principal and accrued and unpaid interest, dollar for
dollar, by the Guarantor, as the purchase price of any equity securities
offered by the Company to investors for cash. In addition, in the event that
the Company shall be unable to make a payment under the Credit Agreement, the
Guarantor shall have the right (but not the obligation) (i) to purchase
additional equity securities of the Company and (ii) to require the Company to
use the net proceeds of such purchase to make such payment of its obligations
under the Credit Agreement. The equity securities so purchased shall be
issued at fair value, based upon current market conditions for the issuance of
equity securities. The Company shall use its best efforts to provide the
Guarantor with sufficient notice in advance of a payment default under the
Credit Agreement to enable the Guarantor to exercise its rights under this
Article IV.
V.
MISCELLANEOUS
SECTION 5.01 Expenses. Each party hereto will pay its own expenses in
connection with the transactions contemplated hereby, whether or not such
transactions shall be consummated.
SECTION 5.02 Survival of Agreements. All covenants, agreements,
representations and warranties made herein shall survive the execution and
delivery of this Agreement and the issuance, sale and delivery of the Shares.
SECTION 5.03 Parties in Interest. All covenants and agreements contained
in this Agreement by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of the parties
hereto whether so expressed or not.
SECTION 5.04 Notices. All notices, requests, consent and other
communications hereunder shall be in writing and shall be mailed by first
class registered mail, postage prepaid, or sent by a recognized courier
service addressed as follows:
If to the Company to it at:
8000 Regency Parkway
Cary, North Carolina 27511
Attention: President
If to the Guarantor to it at:
320 Park Avenue
Suite 2500
New York, New York 10022-9500
Attention: Robert A. Minicucci
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the other.
SECTION 5.05 Law Governing. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 5.06 Entire Agreement. This Agreement constitutes the entire
Agreement of the parties with respect to the subject matter hereof and may not
be modified or amended except in writing.
SECTION 5.07 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one in and the same instrument.
IN WITNESS WHEREOF, the Company and the Guarantor have executed this
Agreement as of the day and year first above written.
SEER TECHNOLOGIES, INC.
By /s/ Steven Dmiszewicki
Name: Steven Dmiszewicki
Title: Co-President and CFO
WELSH, CARSON, ANDERSON &
STOWE VI, L.P.
By WCAS VI Partners, L.P., General
Partner
By /s/ Laura VanBuren
General Partner
Exhibit 10.56
Execution Copy
SEER TECHNOLOGIES, INC.
Consent of Series A Convertible Preferred Stock Holders
The undersigned (the "Series A Stockholders"), being the holders of at least
66 2/3% of the outstanding Series A Convertible Preferred Stock, $.01 par
value (the "Series A Preferred Stock"), of Seer Technologies, Inc. (the
"Company"), hereby consent to (x) the authorization of the Series B
Convertible Preferred Stock, $.01 par value (the "Series B Preferred Stock"),
of the Company in accordance with the Certificate of Designation annexed
hereto as Exhibit A and (y) the issuance, sale and delivery of shares of
Series B Preferred Stock to Welsh, Carson, Anderson & Stowe VI ("WCAS VI")
pursuant to the Preferred Stock Purchase Agreement, dated as of the date
hereof, between the Company and WCAS VI.
IN WITNESS WHEREOF, the Series A Stockholders have executed this Consent as of
the 27th day of April 1998.
WELSH, CARSON, ANDERSON
& STOWE VI, L.P.
By WCAS VI Partners, L.P., General
Partner
By /s/ Laura VanBuren
General Partner
WCAS INFORMATION PARTNERS, L.P.
By WCAS INFO Partners,
General Partner
By /s/ Laura VanBuren
General Partner (Attorney in fact)
*
Patrick J. Welsh
*
Russell L. Carson
*
Bruce K. Anderson
*
Richard H. Stowe
*
Andrew M. Paul
*
Thomas E. McInerney
/s/ Laura VanBuren
Laura VanBuren, individually
and as attorney-in-fact*
/s/ James B. Hoover
James B. Hoover
DELAWARE CHARTER TRUST CO., as
Trustee for the Benefit of the
IRA Rollover of James B. Hoover
By /s/ James B. Hoover
*
Robert A. Minicucci
*
Anthony J. de Nicola
TRUST U/A DATED 11/26/84 for the
Benefit of Eric Welsh (Carol
Ann Welsh, Trustee)
By /s/ Carol A. Welsh
TRUST U/A DATED 11/26/84 for the
Benefit of Randall Welsh (Carol
Ann Welsh, Trustee)
By /s/ Carol A. Welsh
TRUST U/A DATED 11/26/84 for the
Benefit of Jennifer Welsh (Carol
Ann Welsh, Trustee)
By /s/ Carol A. Welsh
/s/ David F. Bellet
David F. Bellet
REBOUL, MACMURRAY, HEWITT, MAYNARD
& KRISTOL
By /s/ Robert A. Schwed
Exhibit 10.57
Execution Copy
PREFERRED STOCK PURCHASE AGREEMENT
among
SEER TECHNOLOGIES, INC.,
WELSH, CARSON, ANDERSON & STOWE VI, L.P.
and
THE SEVERAL OTHER PURCHASERS LISTED ON SCHEDULE I HERETO
Dated as of April 27, 1998
TABLE OF CONTENTS
Page
ARTICLE I. PURCHASE AND SALE OF SHARES 1
SECTION 1.01 Issuance, Sale and Delivery of the Shares 1
SECTION 1.02 Closing Date 2
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 2
SECTION 2.01 Organization, Qualifications and Corporate Power 2
SECTION 2.02 Authorization of Agreements, Etc. 2
SECTION 2.03 Validity 3
SECTION 2.04 Authorized Capital Stock 3
SECTION 2.05 Financial Statements 3
SECTION 2.06 Disclosure 4
SECTION 2.07 Actions Pending 4
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS 4
ARTICLE IV. CONDITIONS TO THE OBLIGATIONS OFTHE PURCHASERS AND
THE COMPANY 5
SECTION 4.01 Conditions to the Obligations of the Purchasers 5
SECTION 4.02 Conditions to the Obligations of the Company 6
ARTICLE V. COVENANTS OF THE COMPANY 7
SECTION 5.01 Certain Registration Rights 7
SECTION 5.02 Availability of Rule 144 7
SECTION 5.03 Payment on Credit Agreement and Reduction
of Guaranty 8
ARTICLE VI. MISCELLANEOUS 8
SECTION 6.01 Expenses 8
SECTION 6.02 Survival of Agreements 8
SECTION 6.03 Brokerage 8
SECTION 6.04 Parties in Interest 8
SECTION 6.05 Notices 8
SECTION 6.06 Law Governing 9
SECTION 6.07 Entire Agreement 9
SECTION 6.08 Counterparts 9
INDEX TO SCHEDULES
Schedule Description
I Purchasers
2.06 Amendments and Supplements
INDEX TO EXHIBITS
Exhibit
A Certificate of Designation of Series B Preferred Stock
PREFERRED STOCK PURCHASE AGREEMENT, dated as of April 27, 1998, among
SEER TECHNOLOGIES, INC., a Delaware corporation (the "Company"), WELSH,
CARSON, ANDERSON & STOWE VI, L.P., a Delaware limited partnership ("WCAS VI"),
and the several other purchasers listed on Schedule I hereto (such other
purchasers together with WCAS VI being herein referred to individually as a
"Purchaser" and collectively the "Purchasers").
WHEREAS, after giving effect to the filing of a Certificate of
Designation of the Company in the form annexed hereto as Exhibit A (the
"Certificate of Designation"), the Company shall designate shares of Series B
Convertible Preferred Stock ("Series B Preferred Stock") from the Company's
authorized 10,000,000 shares of Preferred Stock, par value $.01 per share (the
"Preferred Stock");
WHEREAS, the Company wishes to issue and sell to the Purchasers shares of
Series B Preferred Stock for an aggregate purchase price of $5,000,000 (the
"Purchase Price"); and
WHEREAS, the Purchasers wish to purchase said shares of Series B
Preferred Stock, all on the terms and subject to the conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereby agree as follows:
I.
PURCHASE AND SALE OF SHARES
SECTION I.1 Issuance, Sale and Delivery of the Shares. On the Closing
Date (as defined below), the Company shall issue and sell to the Purchasers,
and each Purchaser shall purchase from the Company, the number of authorized
but unissued shares of Series B Preferred Stock, rounded to the nearest whole
share (said aggregate shares being purchased by the Purchasers being herein
collectively called the "Shares"), obtained by dividing the amount set forth
opposite the name of such Purchaser in Schedule I hereto under the heading
"Purchase Price", by the Average Share Price (as defined below), and the
Company shall issue and deliver to each Purchaser stock certificates in
definitive form, registered in the name of such Purchaser, representing the
Shares being purchased by such Purchaser hereunder.
(1) The price per Share to be paid by each Purchaser on the Closing Date
(the "Average Share Price") shall be determined by taking the average of the
last reported sales price per share of Common Stock, par value $.01 per share
("Common Stock"), of the Company quoted by the National Association of
Securities Dealers Automated Quotation System for the twenty (20) consecutive
trading days beginning on April 13, 1998.
(2) As payment in full for the Shares being purchased by each Purchaser
hereunder, and against delivery of the stock certificates therefor as
aforesaid, on the Closing Date each Purchaser shall wire transfer to the
account of the Company in immediately available funds the sum set forth
opposite the name of such Purchaser in Schedule I hereto under the heading
"Purchase Price".
SECTION I.2 Closing Date. The closing of the sale and purchase of the
Shares shall take place at the offices of Reboul, MacMurray, Hewitt, Maynard &
Kristol, 45 Rockefeller Plaza, New York, New York, at 10 a.m., New York time,
on April 27, 1998, or at such other date and time as may be mutually agreed
upon between the Purchasers and the Company (such date and time of closing
being herein called the "Closing Date").
II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchasers as follows:
SECTION II.1 Organization, Qualifications and Corporate Power. The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware and is duly licensed or
qualified to transact business as a foreign corporation and is in good
standing in each jurisdiction in which the nature of its business or the
ownership of its properties makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not have a
material adverse effect on the operations or financial condition of the
Company. The Company has the corporate power and authority to own and hold
its properties and to carry on its business as currently conducted, to
execute, deliver and perform this Agreement and to issue, sell and deliver the
Shares.
SECTION II.2 Authorization of Agreements, Etc. (1) The execution and
delivery by the Company of this Agreement and the performance by the Company
of its obligations hereunder have been duly authorized by all requisite
corporate action and will not violate any provision of law, any order of any
court or other agency of government, the Restated Certificate of Incorporation
or By-laws of the Company, or any provision of any indenture, agreement or
other instrument by which the Company or any of its subsidiaries or any of
their respective properties or assets is bound, or conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under any such indenture, agreement or other instrument, or result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company or any of its
subsidiaries.
(2) The Shares have been duly authorized and designated, and when issued
in accordance with the terms of this Agreement, will be validly issued, fully
aid and nonassessable shares of Series B Preferred Stock. The issuance, sale
and delivery of the Shares are not subject to any preemptive rights of
stockholders of the Company or to any right of first refusal or other similar
right in favor of any person.
SECTION II.3 Validity. This Agreement has been duly executed and
delivered by the Company and constitutes the legal, valid and binding
obligation of the Company, enforceable in accordance with its terms.
SECTION II.4 Authorized Capital Stock. (1) On the date hereof, the
authorized capital stock of the Company consists of 30,000,000 shares of
Common Stock and 10,000,000 shares of Preferred Stock of which 2,094,143
shares are designated Series A Convertible Preferred Stock (the "Series A
Preferred Stock"). After giving effect to the filing of the Certificate of
Designation, a number of shares of Preferred Stock equal to 5,000,000 divided
by the Average Share Price shall have been designated Series B Preferred
Stock. As of the date hereof, immediately prior to giving effect to the
purchase and sale of the Shares as contemplated hereby, 11,944,689 shares of
Common Stock and 2,094,143 shares of Series A Preferred Stock are validly
issued and outstanding, fully paid and nonassessable.
(2) Except for the transactions contemplated herein or as set forth in
the Company's Form 10-K for the 1997 fiscal year or the Company's Form 10-Q
for the first quarter ended December 31, 1997 referred to in Section 2.06
hereof, (i) no subscription, warrant, option, convertible security or other
right (contingent or other) to purchase or acquire any shares of any class of
capital stock of the Company is authorized or outstanding, (ii) there is not
any commitment of the Company to issue any shares, warrants, options or other
such rights or to distribute to holders of any class of its capital stock any
evidences of indebtedness or assets, and (iii) the Company has no obligation
(contingent or other) to purchase, redeem or otherwise acquire any shares of
its capital stock or any interest therein or to pay any dividend or make any
other distribution in respect thereof.
SECTION II.5 Financial Statements. The Company has heretofore furnished
to the Purchasers: (i) the audited consolidated balance sheet of the Company
and its subsidiaries as of September 30, 1997, and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
the year then ended, certified by Coopers & Lybrand L.L.P., independent
certified public accountants, and (ii) the unaudited consolidated balance
sheet of the Company and its subsidiaries as of December 31, 1997, and the
related unaudited consolidated statements of operations, changes in
stockholders' equity and cash flows for the three month period then ended,
certified by the principal financial officer of the Company. All such
financial statements (including any related schedules and/or notes, if any)
are complete and correct in all material respects and have been prepared in
accordance with generally accepted accounting principles consistently applied.
Each such balance sheet fairly and accurately presents the financial position
of the Company and its subsidiaries as of its date, and each of said
statements of operations, changes in stockholders' equity and cash flows
fairly and accurately presents the results of operations of the Company and
its subsidiaries for the period covered thereby, subject, in the case of
unaudited financial statements, to normal year-end adjustments which are not,
in the aggregate, material. Since December 31, 1997, neither the business,
operations, property nor financial condition of the Company and its
subsidiaries, taken as a whole, have been materially adversely affected by any
occurrence or development known to the Company, whether or not insured
against.
SECTION II.6 Disclosure. Neither the Company's Annual Report on Form
10-K for the year ended September 30, 1997 nor its Quarterly Report on Form
10-Q for the first quarter ended December 31, 1997 contains any untrue
statement of material fact, or omits to state any material fact necessary in
order to make the statements contained therein, in light of the circumstances
under which they were made, not misleading. Neither this Agreement nor any of
the schedules, attachments, written statements, documents, certificates or
other items delivered by the Company to the Purchasers pursuant to this
Agreement contain any untrue statement of material fact, or omit to state any
material fact necessary in order to make the statements contained therein, in
light of the circumstances under which they were made, not misleading. The
Company has furnished the Purchasers with an accurate and complete copy of its
annual report on Form 10-K for the 1997 fiscal year and of all other reports
or documents required to be filed by the Company pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission thereunder (the "Exchange Act"), since the
filing of the most recent annual report to its stockholders. The Company has
made all filings with the Securities and Exchange Commission (the
"Commission") that it has been legally required to make. Except as disclosed
in Schedule 2.06 attached hereto, the Company has not received any request
from the Commission to file any amendment or supplement to any of the reports
described in this Section 2.06.
SECTION II.7 Actions Pending. Except as set forth in the Company's Form
10-K for the 1997 fiscal year or the Company's Form 10-Q for the first quarter
ended December 31, 1997 referred to in Section 2.06 hereof, there is no
action, suit, proceeding or, to the knowledge of the Company, investigation
pending or, to the knowledge of the Company, threatened against or affecting
the Company or any of its subsidiaries or any of their respective properties
or rights before any court or by or before any governmental body or
arbitration board or tribunal, the outcome of which might result in any
material adverse effect on the business, prospects, operations, property or
financial condition of the Company or any of its subsidiaries, taken as a
whole. To the knowledge of the Company, there does not exist any basis for
any such action, suit, investigation or proceeding.
III.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser represents and warrants to the Company that it is
acquiring the Shares being purchased by it hereunder for its own account for
the purpose of investment and not with a view to, or for sale in connection
with, any distribution thereof. Each Purchaser further represents that it
understands that (i) the Shares have not been registered under the Securities
Act of 1933, as amended (the "Securities Act"), by reason of their issuance in
a transaction exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) thereof, (ii) the Shares must be held indefinitely
unless a subsequent disposition thereof is registered under the Securities Act
or is exempt from such registration, (iii) the Shares will bear a legend to
such effect and (iv) the Company will make a notation on its transfer books to
such effect. Each Purchaser further understands that the exemption from
registration afforded by Rule 144 under the Securities Act depends on the
satisfaction of various conditions and that, if applicable, Rule 144 affords
the basis of sales of the Shares (or of the shares of Common Stock issuable
upon conversion thereof) in limited amounts under certain conditions. Each
Purchaser acknowledges that it has had a full opportunity to request from the
Company to review and has received all information deemed relevant in making a
decision to enter into this Agreement and consummate the transactions
contemplated hereby.
IV.
CONDITIONS TO THE OBLIGATIONS
OF THE PURCHASERS AND THE COMPANY
SECTION IV.1 Conditions to the Obligations of the Purchasers. The
obligation of each Purchaser to purchase and pay for the Shares being
purchased by it hereunder on the Closing Date is, at its option, subject to
the satisfaction, on or before such date, of the following conditions:
(1) Representations and Warranties to be True and Correct. The
representations and warranties contained in Article II hereof shall be true
and correct on and as of the Closing Date with the same force and effect as
though such representations and warranties had been made on and as of such
date, and the Company shall have certified to such effect to the Purchasers in
writing.
(2) Performance. The Company shall have performed and complied with all
agreements and conditions contained herein required to be performed or
complied with by it prior to or at the Closing Date, and the Company shall
have certified to such effect to the Purchasers in writing.
(3) Credit Line Agreement. The $12,500,000 Credit Agreement (the
"Credit Agreement"), dated as of July 15, 1996, as amended by that certain
First Amendment To Credit Agreement, dated as of March 27, 1997, between the
Company and NationsBank, N.A., a national banking association ("NationsBank"),
shall have been increased by $4,500,000 (the "Increased Amount") to
$17,000,000 and shall be in full force and effect and the Second Amendment To
Credit Agreement (the "Second Amendment To Credit Agreement") between the
Company and NationsBank shall have been executed and delivered by the Company
and NationsBank and shall be in full force and effect.
(4) Guaranty Agreement. The Agreement (the "Second Guaranty Agreement")
between the Company and WCAS VI pursuant to which (i) WCAS VI shall agree to
execute a guaranty in connection with the Increased Amount and certain
liabilities and obligations (the "Hedge Amount") of the Company to NationsBank
or one of its affiliates pursuant to "Hedge" Agreements for an additional
aggregate amount of $5,000,000 in order to protect and enhance its existing
substantial equity investment in the Company and to induce NationsBank to
increase the funds available under the Credit Agreement, and (ii) the Company
shall agree to issue to WCAS VI in recognition for the additional financial
risk assumed by WCAS VI in guaranteeing the Increased Amount and the Hedge
Amount (and not as compensation or a payment for any services or otherwise in
connection with the pursuit of a trade or business) 30,000 shares (the
"Additional Guaranty Shares") of Common Stock, shall have been executed and
delivered by the Company and shall be in full force and effect.
(5) Additional Guaranty Shares. The Additional Guaranty Shares shall
have been issued and delivered to WCAS VI pursuant to the Second Guaranty
Agreement.
(6) Extension of Revolver. The maturity date of the Loan and Security
Agreement, dated as of March 26, 1997, between the Company and Greyrock
Business Credit, a division of NationsCredit Commercial Corporation, shall
have been extended until at least one year from the Closing Date.
(7) Certificate of Designation. The Certificate of Designation shall
have been adopted by the Company by all necessary action of the Board of
Directors, and shall have been duly filed with the Secretary of State of
Delaware and become legally effective.
(8) All Proceedings to be Satisfactory. All corporate and other
proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be satisfactory
in form and substance to the Purchasers and the Purchasers shall have received
all such counterpart originals or certified or other copies of such documents
as it may reasonably request, including, without limitation, certified copies
of the resolutions of the Board of Directors of the Company approving and
authorizing the execution, delivery and performance of this Agreement and the
issue, sale and delivery of the Shares.
All such documents shall be satisfactory in form and substance to the
Purchasers.
SECTION IV.2 Conditions to the Obligations of the Company. The
obligation of the Company to sell the Shares on the Closing Date is, at its
option, subject to the satisfaction, on or before the Closing Date, of the
following conditions:
(1) Increased Credit Agreement. The Credit Agreement shall have been
amended to reflect the Increased Amount and shall be in full force and effect.
(2) Guaranty Agreement. The Second Guaranty Agreement shall have been
executed and delivered by WCAS VI and shall be in full force and effect.
(3) Guaranty. The Amended and Restated Guaranty (the "Amended
Guaranty") by WCAS VI in favor of NationsBank shall have been executed and
delivered and shall be in full force and effect.
(4) Certificate of Designation. The Certificate of Designation shall
have been adopted by the Company by all necessary action of the Board of
Directors, and shall have been duly filed with the Secretary of State of
Delaware and become legally effective.
V.
COVENANTS OF THE COMPANY
SECTION V.1 Certain Registration Rights. The Company hereby affirms and
agrees that the registration rights granted to the Purchasers and certain
other stockholders of the Company as set forth in Section 12 of the Preferred
Stock Purchase Agreement dated as of March 7, 1990, among the Company and
International Business Machines, CS First Boston Securities Corporation and
the other parties named therein, as amended by, among other things, the
Securities Purchase Agreement dated as of September 30, 1994, among the
Company, WCAS Capital Partners II, L.P and the several securityholders named
in Annexes I and II thereto and the Preferred Stock Purchase Agreement, dated
as of July 31, 1996, among the Company, WCAS VI and the several other
purchasers named in Schedule I thereto (said Section 12, as amended, herein
referred to as the "Registration Rights Agreement"), shall be deemed to
continue in full force and effect, provided, however, that the term
"Registration Shares" shall be modified to include (i) any shares of Common
Stock issuable upon conversion of the shares of Series B Preferred Stock
issued to the Purchasers pursuant to this Agreement, (ii) any shares of Common
Stock issued to WCAS VI pursuant to the Second Guaranty Agreement, and (iii)
any securities issued or issuable with respect to any shares of Series B
Preferred Stock or Common Stock referred to in clause (i) or (ii) by way of
stock dividend or stock split or in connection with any merger, consolidation
or other reorganization or otherwise.
SECTION V.2 Availability of Rule 144. So long as there are Registration
Shares (as defined in the Registration Rights Agreement) outstanding, the
Company hereby covenants and agrees that it shall file the reports required to
be filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder, to the extent required from
time to time to enable any holder of Registration Shares to sell such
Registration Shares without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 or any similar rule or
regulation allowing such holders to sell without registration under the
Securities Act, as such Rule may be amended from time to time; provided,
however, that so long as there are Registration Shares outstanding, the
Company shall continue to file such reports as may be required to satisfy the
requirements of Rule 144(c) even if not required to do so pursuant to the
Exchange Act.
SECTION V.3 Payment on Credit Agreement and Reduction of Guaranty. The
Company hereby affirms and agrees that, in the event either (a) it issues
equity securities, in addition to those outstanding immediately after the
consummation of the transactions contemplated in this Agreement, that have a
value of $5,000,000 or more or (b) it enters into a contractual agreement for
providing services pursuant to which it receives an advance payment of
$5,000,000 or more, it shall use at least $5,000,000 of such funds to
permanently reduce its Commitment (as defined in the Credit Agreement) under
the Credit Agreement (as amended by the Second Amendment To Credit Agreement).
In the event that either (a) or (b) above occurs, the Company shall use
its best efforts to assist WCAS VI in reducing the Guaranty (as amended by
the Amended Guaranty) issued in connection with the Credit Agreement by at
least $5,000,000.
VI.
MISCELLANEOUS
SECTION VI.1 Expenses. Each party hereto will pay its own expenses in
connection with the transactions contemplated hereby, whether or not such
transactions shall be consummated.
SECTION VI.2 Survival of Agreements. All covenants, agreements,
representations and warranties made herein shall survive the execution and
delivery of this Agreement and the issuance, sale and delivery of the Shares
pursuant hereto, and all statements contained in any certificate or other
instrument delivered by the Company hereunder shall be deemed to constitute
representations and warranties made by the Company.
SECTION VI.3 Brokerage. The Company, on the one hand, and the
Purchasers, on the other hand, shall indemnify and hold harmless the other
against and in respect of any claim for brokerage or other commissions
relative to this Agreement or to the transactions contemplated hereby, based
in any way on agreements, arrangements or understandings made or claimed to
have been made by such party with any third party.
SECTION VI.4 Parties in Interest. All covenants, agreements,
representations and warranties contained in this Agreement by or on behalf of
the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto whether so expressed or not.
SECTION VI.5 Notices. All notices, requests, consents and other
communications hereunder shall be in writing and shall be sent by national
overnight courier service or certified mail, return receipt requested, in each
case with postage prepaid, addressed as follows:
(1) if to the Company, at 8000 Regency Parkway, Cary, North Carolina
27511, Attention: President; and
(2) if to the Purchasers, to their addresses as set forth on Schedule I
hereto;
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
SECTION VI.6 Law Governing. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION VI.7 Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and may not
be modified or amended except in writing.
SECTION VI.8 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and the Purchasers have executed this
Agreement as of the day and year first above written.
SEER TECHNOLOGIES, INC.
By /s/ Steven Dmiszewicki
Name: Steven Dmiszewicki
Title: Co-President & CFO
WELSH, CARSON, ANDERSON
& STOWE VI, L.P.
By WCAS VI Partners, L.P., General
Partner
By /s/ Laura VanBuren
General Partner
WCAS INFORMATION PARTNERS, L.P.
By WCAS INFO Partners,
General Partner
By /s/ Laura VanBuren
General Partner
*
Patrick J. Welsh
*
Russell L. Carson
*
Bruce K. Anderson
*
Richard H. Stowe
*
Andrew M. Paul
*
Thomas E. McInerney
/s/ Laura VanBuren
Laura VanBuren, individually
and as attorney-in-fact*
*
James B. Hoover
DELAWARE CHARTER TRUST CO., as
Trustee for the Benefit of the
IRA Rollover of James B. Hoover
By /s/ James B. Hoover
*
Robert A. Minicucci
*
Anthony J. de Nicola
TRUST U/A DATED 11/26/84 for the
Benefit of Eric Welsh (Carol
Ann Welsh, Trustee)
By /s/ Carol A. Welsh
TRUST U/A DATED 11/26/84 for the
Benefit of Randall Welsh (Carol
Ann Welsh, Trustee)
By /s/ Carol A. Welsh
TRUST U/A DATED 11/26/84 for the
Benefit of Jennifer Welsh (Carol
Ann Welsh, Trustee)
By /s/ Carol A. Welsh
/s/ David F. Bellet
David F. Bellet
REBOUL, MACMURRAY, HEWITT, MAYNARD
& KRISTOL
By /s/ Robert A. Schwed
Schedule I
Series B Preferred Stock Purchasers
Name of Purchaser Purchase Price
Welsh, Carson, Anderson & Stowe VI, L.P. $ 4,724,210
WCAS Information Partners, L.P. 56,451
Patrick J. Welsh 28,226
TRUST U/A DATED 11/26/84 for the 4,032
Benefit of Eric Welsh (Carol Ann Welsh, Trustee)
TRUST U/A DATED 11/26/84 for the 4,032
Benefit of Randall Welsh (Carol Ann Welsh, Trustee)
TRUST U/A DATED 11/26/84 for the 4,032
Benefit of Jennifer Welsh (Carol Ann Welsh, Trustee)
Russell L. Carson 40,321
Bruce K. Anderson 40,321
Richard H. Stowe 16,126
Andrew M. Paul 9,676
Thomas E. McInerney 8,064
Laura VanBuren 1,612
James B. Hoover 12,096
Delaware Charter Trust Co., as Trustee for 4,032
the Benefit of the IRA Rollover of James B. Hoover
Robert A. Minicucci 20,160
Anthony J. de Nicola 2,418
David F. Bellet 16,128
Reboul, MacMurray, Hewitt, Maynard & Kristol 8,064
TOTAL: $5,000,000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF INCOME FILED AS PART OF
THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 1,723
<SECURITIES> 0
<RECEIVABLES> 25,224
<ALLOWANCES> 2,787
<INVENTORY> 0
<CURRENT-ASSETS> 26,628
<PP&E> 9,339
<DEPRECIATION> 6,751
<TOTAL-ASSETS> 50,820
<CURRENT-LIABILITIES> 60,310
<BONDS> 0
0
21
<COMMON> 119
<OTHER-SE> (10,250)
<TOTAL-LIABILITY-AND-EQUITY> 50,820
<SALES> 0
<TOTAL-REVENUES> 34,316
<CGS> 0
<TOTAL-COSTS> 27,175
<OTHER-EXPENSES> 35,883
<LOSS-PROVISION> 439
<INTEREST-EXPENSE> 1,645
<INCOME-PRETAX> (30,565)
<INCOME-TAX> 618
<INCOME-CONTINUING> (31,182)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31,182)
<EPS-PRIMARY> (2.62)
<EPS-DILUTED> (2.62)
</TABLE>
