<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
SCHEDULE 14D-9
Solicitation/Recommendation Statement Pursuant to
Section 14(d)(4) of the Securities Exchange Act of 1934
SEER TECHNOLOGIES, INC.
(Name of Subject Company)
SEER TECHNOLOGIES, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, $.01 PAR VALUE
(Title of Class of Securities)
815 780 101
(CUSIP Number of Class of Securities)
______________________
Steven Dmiszewicki
Co-President and Chief
Financial Officer
SEER TECHNOLOGIES, INC.
8000 Regency Parkway
Cary, North Carolina 27511
(919) 380-5000
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of
the Person(s) Filing Statement)
______________________
Copy to:
SCOTT D. SMITH, ESQ.
ELIOT W. ROBINSON, ESQ.
Powell, Goldstein, Frazer & Murphy LLP
Sixteenth Floor
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
(404) 572-6600
<PAGE>
Item 1. Security and Subject Company.
The name of the subject company is Seer Technologies, Inc., a Delaware
corporation ("Seer" or the "Company"). The address of the executive offices of
Seer is 8000 Regency Parkway, Cary, North Carolina 27511. The class of equity
securities to which this Solicitation/Recommendation Statement on Schedule 14D-9
(this "Schedule 14D-9") relates is the common stock, $.01 par value (the "Common
Stock"), of Seer (the "Shares").
Item 2. Tender Offer of the Bidder
This Schedule 14D-9 relates to the tender offer disclosed in the
Tender Offer Statement on Schedule 14D-1 dated February 1, 1999 (the "Schedule
14D-1"), by Level 8 Systems, Inc., a New York corporation (the "Purchaser" or
"Level 8"), to purchase all outstanding Shares at a price of $0.35 per share,
net to the seller in cash, upon the terms and subject to the conditions set
forth in the Offer to Purchase dated February 1, 1999 (the "Offer to Purchase")
and the related Letter of Transmittal (which together constitute the "Offer" and
are filed as Exhibit 1 hereto). Tendering stockholders will not be obligated to
pay brokerage commissions or, except as set forth in Instruction 6 of the Letter
of Transmittal, transfer taxes on the purchase of Shares by Level 8 pursuant to
the Offer.
The Offer is being made pursuant to an agreement dated November 23,
1998 (the "Acquisition Agreement") between Level 8, on the one hand, and Welsh
Carson Anderson & Stowe VI, L.P. ("WCAS VI") and certain parties affiliated and
associated with WCAS VI (collectively the "WCAS Parties"). Pursuant to the
Acquisition Agreement, on December 31, 1998 Level 8 issued to the WCAS Parties
an aggregate of 1,000,000 shares of Level 8's common stock ("Level 8 Shares")
and warrants to purchase an additional 250,000 Level 8 Shares for $12.00 per
share (the "Level 8 Warrants") and the WCAS Parties (i) transferred to Level 8
an aggregate of 7,130,894 Shares and all of the outstanding shares of the
preferred stock of Seer, which are convertible into an aggregate of 3,856,258
Shares and (ii) contributed $16.9 million of additional capital to Seer. As a
consequence, Level 8 currently owns approximately 69% of the outstanding voting
stock of Seer. The aggregate market value of the Level 8 Shares issued to the
WCAS Parties was $6,625,000 as of November 20, 1998, the last trading day before
the execution of the Acquisition Agreement, and $9,687,500 as of December 31,
1998, the date of the closing of the acquisition under the Acquisition Agreement
in each case, based on the closing sale prices of the Level 8 Shares on the
Nasdaq National Market. The closing sale price of the Level 8 Shares on the
Nasdaq National Market was $6.625 per share on November 20, 1998 (the last
trading day before the execution of the Acquisition Agreement) and $9.6875 per
share on December 31, 1998, compared with the $12.00 per share exercise price
under the Level 8 Warrants.
In accordance with the Acquisition Agreement, as soon as practicable after
the completion of the Offer, Level 8 will cause each outstanding Share, other
than Shares held in treasury or by Level 8 and other than Shares held by
stockholders who properly exercise appraisal rights under the Delaware General
Corporation Law, to be converted into the right to receive $0.35 per Share in
cash through a merger of a wholly-owned subsidiary of Level 8 into Seer (the
"Merger"). As a result, Level 8, directly or through one or more subsidiaries,
will own all of the outstanding Seer common stock.
The address of the principal executive offices of Level 8, as set forth in
the Schedule 14D-1 is 1250 Broadway, 35th Floor, New York, N.Y. 10001.
<PAGE>
Item 3. Identity and Background.
(a) The name and address of Seer, which is the person filing this
Schedule 14D-9, are set forth in Item 1 above.
(b) Certain contracts, agreements, arrangements and understandings
between Seer and certain of its executive officers, directors or affiliates are
described on pages 7 through 17 of Amendment No. 1 to Seer's Annual Report on
Form 10-K/A filed with the Securities and Exchange Commission on January 28,
1999, which are attached as Annex A hereto and incorporated by reference herein.
-------
With respect to the options granted or repriced described in Annex A, the
-------
Company notes that the exercise price of all such options is greater than the
$0.35 per share to be paid in the Offer and Merger. Accordingly, all such
options will be terminated without any value or payment to optionholders upon
the Merger.
The information set forth under the captions "Background of the Offer"
and "Interests of Certain Persons in the Offer and the Merger" in the Offer to
Purchase is incorporated by reference herein.
Three of the six members of Seer's Board of Directors are general
partners of WCAS: Robert A. Minicucci, Chairman of the Board of Directors, Bruce
K. Anderson and Anthony J. de Nicola. In addition, the WCAS Parties effectively
had the power to direct the election of the entire Board of Directors as a
result of their beneficial ownership of approximately 69% of the outstanding
voting stock of Seer prior to December 31, 1998. Level 8 currently beneficially
owns 69% of the outstanding voting stock of Seer.
Because the voting stock of Seer held by the WCAS Parties was exchanged
for stock and warrants of Level 8, the WCAS Parties have the opportunity to
participate in the continued growth of the combined company. Other stockholders
will receive $0.35 per Share in cash in the Offer or the Merger, but will not
participate in the future growth of the combined company unless they choose to
use the proceeds to buy Level 8 Shares in the open market. The closing sale
price of Level 8 Shares as reported on the Nasdaq National Market was $6.6250
per share on November 20, 1998 (the last trading day prior to the execution of
the Acquisition Agreement) and $9.6875 per share on December 31, 1998 (the date
of the closing of the acquisition under the Acquisition Agreement).
Through December 31, 1998, WCAS had guaranteed Seer's obligations under
a $17 million guaranteed bank credit facility and a $0.5 million foreign
exchange line of credit. In connection with the sale of the Seer voting stock
held by the WCAS Parties to Level 8, on December 31, 1998, the WCAS Parties made
a $16.9 million capital contribution to Seer which was used to pay off and
terminate Seer's guaranteed credit facility and the WCAS Parties were released
from all liabilities and obligations to the lender with respect to the
obligations of Seer.
Pursuant to the Acquisition Agreement, Level 8 provided Seer with $12
million in the form of a long-term loan, and has agreed to guarantee certain of
Seer's indebtedness. Level 8 has also agreed to fund the Company's operations
through January 15, 2000.
Steven Dmiszewicki, the co-president and chief financial officer of
Seer, has become the chief operating officer of Level 8. Mr. Dmiszewicki will
receive a base salary of $200,000 and will be eligible to receive a bonus of up
to 100% of base salary in 1999. Level 8 also has granted Mr. Dmiszewicki options
to purchase 200,000 Level 8 Shares.
2
<PAGE>
In connection with the transactions contemplated by the Acquisition
Agreement, Ted Venema, resigned as Seer's Co-President and Chief Technology
Officer effective January 1, 1999. Seer has agreed to pay Mr. Venema $13,750
per month as severance for one year. In addition, Mr. Venema has agreed to
consult with Seer to assist in the transition for up to six months for a $12,000
monthly consulting fee.
Pursuant to the terms of the Acquisition Agreement, Level 8 agreed
that from December 31, 1998 until December 31, 2004 and except to the extent
otherwise required by law, it shall cause the Certificate of Incorporation and
Bylaws of Seer to contain provisions with respect to indemnification and
exculpation from liability no less favorable to the individuals who, on or prior
to December 31, 1998, were directors, officers, employees or agents of Seer
(collectively, the "Indemnified Parties") than those set forth in Seer's
Certificate of Incorporation and Bylaws in effect immediately before the
closing. For the period from December 31, 1998 until December 31, 2004, Level 8
agreed to use all reasonable efforts to cause Seer to maintain directors and
officers liability insurance covering those Indemnified Parties who are
currently covered by Seer's directors and officers liability insurance policy on
terms no less favorable to those Indemnified Parties than the terms of insurance
coverage in effect from time to time during that period for Level 8's own
directors and officers. In addition, the WCAS Parties and Level 8 both agree to
indemnify and hold the other party harmless from and against all losses,
liabilities, damages and expenses (including reasonable attorneys fees)
resulting from any breach of warranty or agreement or any misrepresentation by
such party under the terms of the Acquisition Agreement.
Except as set forth above, to the best knowledge of Seer, there are no
contracts, agreements or understandings or any actual or potential conflicts of
interest between Seer or its affiliates and (i) Seer's executive officers,
directors or affiliates or (ii) Level 8 or its respective executive officers,
directors or affiliates.
Item 4. The Solicitation or Recommendation.
(a) Seer's Board of Director expresses no opinion and is making no
recommendation as to whether stockholders should tender their Shares in response
to the Offer because of certain actual and potential conflicts of interest. To
the best knowledge of Seer, however, all of Seer's executive officers, director
and affiliates (other than Level 8) presently intend to tender the Shares they
beneficially own.
(b) Seer is not a party to the Acquisition Agreement between Level 8
and the WCAS Parties, and therefore board approval of the Acquisition Agreement
was neither required nor appropriate. As discussed under Item 3 above, the WCAS
Parties and their designees on Seer's Board of Directors have certain actual or
potential conflicts of interest with respect to the Offer and the Merger.
Because of such conflicts of interest, Seer's Board of Directors believes that
any recommendation by Seer's Board of Directors may not be meaningful to
stockholders. For this reason, Seer's Board of Directors expresses no opinion
and is not making any recommendation as to whether stockholders should tender
their Shares in response to the Offer. Stockholders should exercise their own
judgment, based on the advice of their own financial or legal advisors, in
evaluating the Offer. In this regard, stockholders may note that Level 8 holds
sufficient voting power to complete the Merger whether or not any Shares are
purchased in the Offer.
Item 5. Persons Retained, Employed or to be Compensated.
Level 8 will pay all charges and expenses of Beacon Hill Partners,
Inc., which is acting as the information agent (the "Information Agent"), and
American Stock Transfer & Trust Company, which
3
<PAGE>
is acting as the depositary (the "Depositary"), in connection with the Offer.
Neither Seer nor, to the best of Seer's knowledge, any person acting on its
behalf intends to employ, retain or compensate any person to make solicitations
or recommendations to stockholders in connection with the Offer and the Merger.
Item 6. Recent Transactions.
(a) Pursuant to the Acquisition Agreement, on December 31, 1998 Level
8 issued to the WCAS Parties an aggregate of 1,000,000 shares of Level 8's
common stock ("Level 8 Shares") and warrants to purchase an additional 250,000
Level 8 Shares for $12.00 per share (the "Level 8 Warrants") and the WCAS
Parties (i) transferred to Level 8 an aggregate of 7,130,894 Shares and all of
the outstanding shares of the preferred stock of Seer, which are convertible
into an aggregate of 3,856,258 Shares and (ii) contributed $16.9 million of
additional capital to Seer. As a consequence, Level 8 currently owns
approximately 69% of the outstanding voting stock of Seer. The aggregate market
value of the Level 8 Shares issued to the WCAS Parties was $6,625,000 as of
November 20, 1998, the last trading day before the execution of the Acquisition
Agreement, and $9,687,500 as of December 31, 1998, the date of the closing of
the acquisition under the Acquisition Agreement, in each case based on the
closing sale prices of the Level 8 Shares on the Nasdaq National Market. The
closing sale price of the Level 8 Shares on the Nasdaq National Market was
$6.625 per share on November 20, 1998 (the last trading day before the execution
of the Acquisition Agreement) and $9.6875 per share on December 31, 1998,
compared with the $12.00 per share exercise price under the Level 8 Warrants.
On December 22, 1998, Frank Cary, a member of Seer's Board of Directors,
sold 27,364 Shares for $0.29 per Share.
(b) To the best knowledge of Seer, all of Seer's executive officers,
directors and affiliates presently intend to tender the Shares they beneficially
own.
Item 7. Certain Negotiations and Transactions by the Subject Company.
(a) Except as described in Items 2 and 3(b) hereof, no negotiation is
underway or is being undertaken by Seer in response to the Offer which relates
to or could result in (i) an extraordinary transaction, such as a merger or
reorganization, involving Seer or any of its subsidiaries; (ii) a purchase, sale
or transfer of a material amount of assets by Seer or any of its subsidiaries;
(iii) a tender offer for or other acquisition of securities by or of Seer; or
(iv) any material change in the present capitalization or dividend policy of
Seer.
(b) Level 8 has provided Seer with $12 million of funding in exchange
for a subordinated promissory note and has agreed to fund Seer's operations
through January 15, 2000. Except for the foregoing and as described in Items
3(b) and 4 hereof, there are no transactions, board resolutions, agreements in
principle or signed contracts in response to the Offer, which relate to or would
result in one or more of the matters referred to in Item 7(a).
4
<PAGE>
Item 8. Additional Information to be Furnished.
To the best knowledge of Seer, there is no additional information
necessary to be furnished to make the statements hereunder, in light of the
circumstances under which they are made, not materially misleading.
Item 9. Material to be Filed as Exhibits.
<TABLE>
<C> <S>
2.1 Agreement dated November 23, 1998, among Level 8 and the WCAS Parties
relating to the acquisition of capital stock of Seer by Level 8
(incorporated by reference to Exhibit 2.1 to Seer's Annual Report on Form
10-K for the year ended September 30, 1998, File No. 0-26194).
10.2 Promissory Note dated December 31, 1998, in favor of Level 8 in the
principal amount of $12,000,000 (incorporated by referenced to Exhibit
10.2 to Seer's Current Report on Form 8-K dated December 31, 1998, File
No. 0-26194).
99.1 Offer to Purchase dated February 1, 1999 and related Form of Letter of
Transmittal (incorporated by reference to Exhibits (a)(1) and (a)(2),
respectively, to Level 8's Schedule 14D-1 filed on February 1, 1999 with
respect to the common stock of Seer).
99.2 Pages 7 through 17 of Seer's Amended Annual Report dated January 28, 1999
(see Annex A).*
-------
99.3 Press Release issued by Level 8 on February 1, 1999.
99.4 Letter to Stockholders of Seer February 1, 1999.*
</TABLE>
_______________________
* Included in copies mailed to stockholders.
5
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: February 1, 1999
By:/s/ Steven Dmiszewicki
----------------------------------------
Steven Dmiszewicki
Co-President and Chief Financial Officer
6
<PAGE>
EXHIBIT 99.2
ANNEX A
Excerpt from Seer's Annual Report on Form 10K/A
Filed January 28, 1999
EXECUTIVE COMPENSATION
The following summary compensation table sets forth the compensation earned
by the Company's former chief executive officer until his resignation on April
30, 1998, the two individuals who jointly fulfilled the duties of the Company's
chief executive officer during the remainder of fiscal 1998 and the one other
executive officer serving at the end of fiscal 1998 whose salary and bonus
exceeded $100,000 for services rendered to the Company during fiscal 1998. The
table reflects compensation earned for each of the last three years or for such
shorter period of service as an executive officer as is reflected below. For the
principal terms of the options granted during fiscal 1998, see "-Option Grants
in Fiscal 1998."
Summary Compensation Table
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Long-Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
-----------------------------------------------------------------------------------------
Name and Other Annual Restricted Securities
Principal Fiscal Compen- Stock Underlying LTIP All Other
Position Year Salary Bonus sation /(1)/ Award(s) Options Payouts Compensation
-------- ---- ------ ----- ------------- -------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Steven 1998 $170,000 $ 0 $ 0 $ 0 350,000 /(3)/ $ $ 0
Dmiszewicki
Co-President 1997 $154,000 $172,000 /(4)/ $ 0 $ 0 100,000 $ 0 $ 0
and Chief
Financial 1996 $104,583 $ 0 $ 0 $ 0 2,500 /(5)/ $ 0 $ 0
Officer /(2)/
Thomas A. Wilson 1998 $177,917 $ 0 $ 0 $ 0 150,000 /(7)/ $ 0 $162,274 /(8)/
Former President
and Chief 1997 $280,000 $252,000 /(9)/ $ 69,215 /(10)/ $ 0 0 $ 0 $ 0
Executive
Officer/(6)/ 1996 $ 23,341 $ 0 $125,000 /(10)/ $ 0 400,000 $ 0 $ 0
Dennis McKinnie 1998 $150,000 $ 0 $ 0 $ 0 29,500 /(11)/ $ 0 $ 0
Vice President:
Chief Legal and 1997 $145,000 $ 45,000 $ 0 $16,850 /(12)/ 40,500 $ 0 $ 0
Administrative
Officer 1996 $127,500 $ 0 $ 0 $ 0 2,000 $ 0 $ 0
Ted Venema 1998 $160,000 $ 0 $ 36,224 /(10)/ $ 0 250,000 /(13)/ $ 0 $ 0
Co-President
and Chief 1997 $ 58,750 $ 18,750 $ 59,072 /(10)/ $ 0 100,000 $ 0 $ 0
Technical
Officer
====================================================================================================================================
</TABLE>
(1) Except as noted in Note (9) below, the indicated amounts do not reflect non-
cash compensation in the form of personal benefits provided by the Company
that may have value to the recipient. Although such compensation cannot be
determined precisely, the Company has concluded that except as noted in Note
(9) below, the aggregate value of such benefits awarded to any named
executive officer did not exceed the lesser of $50,000 or 10% of his salary
and bonus for any fiscal year to which such benefits pertain.
<PAGE>
(2) Mr. Dmiszewicki has served as Co-President and Chief Financial Officer of
the Company since May 1, 1998 and, with Mr. Venema, fulfilled the duties of
the Company's chief executive officer throughout the remainder of fiscal
1998. He served as Vice President-Finance of the Company from 1993 to
February 1996 and as Vice President and Chief Financial Officer of the
Company from February 1996 to June 1996, at which time he left the Company.
He returned to the Company in October 1996 and served as its Senior Vice
President and Chief Financial Officer until May 1, 1998.
(3) Includes options to purchase 150,000 shares of Common Stock granted solely
to replace options that were cancelled and repriced on May 8, 1998. See
"Historical Information Regarding Repricing, Replacement or Cancellation
and Regrant of Options."
(4) Includes a $100,000 bonus granted pursuant to the terms of his employment
agreement. See "Employment Agreements."
(5) The unvested portions of the indicated options were cancelled in July 1996.
(6) Mr. Wilson served as President and Chief Executive Officer of the Company
through April 30, 1998. He continues to serve as a director of the Company.
(7) Includes options to purchase 100,000 shares of Common Stock granted solely
to replace options that were cancelled and repriced on October 17, 1997 and
options to purchase 50,000 shares of Common Stock granted in connection
with Mr. Wilson's severance agreement. See "Historical Information
Regarding Repricing, Replacement or Cancellation and Regrant of Options"
and " -Employment and Severance Agreements" below.
(8) Includes severance payments of $127,083 and payments for unused vacation
time of $35,191.
(9) Includes $109,000 that was advanced to Mr. Wilson for the purchase of his
home during fiscal 1997 and credited against his fiscal 1997 bonus.
(10) Reflects amounts paid to reimburse the named executive for expenses
incurred in connection with his relocation to the Cary, North Carolina
area.
(11) Includes options to purchase 4,500 shares of Common Stock granted solely to
replace options that were cancelled and repriced on May 8, 1998. See
"Historical Information Regarding Repricing, Replacement or Cancellation
and Regrant of Options."
(12) Reflects the value of 2,500 shares of restricted stock granted on December
12, 1996 at a purchase price of $.01 per share. The value is calculated
based on the fair market value of the Common Stock on December 12, 1996,
which was $6.75 per share. As of September 30, 1998, Mr. McKinnie held
2,500 shares of restricted stock valued at $1,875, based on the fair market
value of the Common Stock on that date, which was $0.75 per share. All of
Mr. McKinnie's restricted shares vested on December 31, 1997.
(13) Includes options to purchase 100,000 shares of Common Stock granted solely
to replace options that were cancelled and repriced on May 8, 1998. See
"Historical Information Regarding Repricing, Replacement or Cancellation
and Regrant of Options."
8
<PAGE>
The following table sets forth information regarding each grant of stock
options to each of the named executives during fiscal 1998. The Company is
required to withhold from the shares issued upon exercise a number of shares
sufficient to satisfy applicable withholding tax obligations. The Company did
not award any stock appreciation rights ("SARs") during fiscal 1998. See
"Historical Information Regarding repricing, Replacement or Cancellation and
Regrant of Options" for information relating to options listed below that were
granted to replace options that were cancelled and repriced during fiscal 1998.
A. Option Grants in Fiscal 1998
<TABLE>
<CAPTION>
Individual Grants
---------------------------
Potential Realizable Value
Number of Percent of at Assumed Annual Rates
Securities Total Options of Appreciation for
Underlying Granted to Exercise Option Term
Options Employees in Price Expiration -----------
Name Granted Fiscal Year /(1)/ ($/share) Date 5% ($) 10% ($)
---- ------- ----------- --------- ---- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Mr. Dmiszewicki 150,000 /(2)/ 5.3 $2.84 07/20/08 $ 268,380 $ 677,340
50,000 /(3)/ 1.8 $7.00 10/01/07 $ 220,500 $ 556,500
50,000 /(4)/ 1.8 $4.59 10/01/07 $ 133,650 $ 333,295
100,000 /(5)/ 3.6 $4.59 10/21/06 $ 236,106 $ 574,103
Mr. Wilson 50,000 /(6)/ 1.8 $2.50 04/30/99 $ 6,250 $ 12,500
100,000 /(7)/ 3.6 $6.06 08/21/06 $ 316,198 $ 770,956
Mr. McKinnie 25,000 /(2)/ * $2.84 07/20/08 $ 44,730 $ 112,890
2,000 /(8)/ * $4.59 05/21/06 $ 4,383 $ 10,498
2,500 /(9)/ * $4.59 12/12/06 $ 5,987 $ 14,599
Mr. Venema 150,000 /(2)/ 5.3 $2.84 07/20/08 $ 268,380 $ 677,340
100,000 /(10)/ 3.6 $4.59 05/12/07 $ 253,060 $ 623,298
____________________
</TABLE>
* Represents less than one percent of the options granted during fiscal 1998.
(1) Calculated using a denominator of 2,809,500 options, 532,400 of which were
granted to replace options cancelled in connection with the October 17, 1997
and May 8, 1998 repricings of certain of the Company's outstanding options.
The Company granted 2,277,100 options in fiscal 1998 that were not connected
with the repricing.
(2) The indicated options vest in three equal increments beginning on April 1,
1999.
(3) The indicated options were cancelled in connection with the repricing of
certain of the Company's outstanding options on May 8, 1998. See Note (4).
(4) The indicated options vest in four equal annual increments beginning on
October 1, 1998 and were granted to replace 50,000 options that were granted
on October 1, 1997 and cancelled in connection with the repricing of certain
of the Company's outstanding options on May 8, 1998.
(5) The indicated options were granted to replace options cancelled in
connection with the repricing of certain of the Company's outstanding
options on May 8, 1998. Consequently, they were 25% vested
9
<PAGE>
on the date of grant and were to vest in three equal remaining annual
increments beginning on October 1, 1998.
(6) The indicated options were granted in connection with Mr. Wilson's
severance agreement and vested immediately upon grant. See "-Employment
and Severance Agreements."
(7) Granted on October 17, 1997 to replace options to purchase the same number
of shares that were cancelled in connection with the option repricing on
that date. The options were to vest in four equal annual increments
beginning on September 30, 1997. These options were cancelled in June 1998
in connection with the terms of Mr. Wilson's severance agreement with the
Company. See "-Employment and Severance Agreements."
(8) The indicated options were granted to replace options cancelled in
connection with the repricing of certain of the Company's outstanding
options on May 8, 1998. Consequently, the options were 20% vested on the
date of grant and were to vest in four equal remaining annual increments
beginning on October 1, 1998.
(9) The indicated options are fully vested and were granted to replace options
cancelled in connection with the repricing of certain of the Company's
outstanding options on May 8, 1998.
(10) The indicated options were granted in connection with the repricing of
certain of the Company's outstanding options on May 8, 1998 and vest in
four equal annual increments beginning on May 12, 1998.
10
<PAGE>
The following table sets forth information concerning the options exercised
during fiscal 1998 and held at September 30, 1998 by the named executives.
Fiscal 1998 Year-End Option Holdings and Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at September 30, 1998 Options at September 30, 1998 /(1)/
----------------------------- -----------------------------
Shares Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Dmiszewicki 0 $ 0 25,000 275,000 $ 0 $ 0
Mr. Wilson 0 $ 0 50,000 - 0 - $ 0 $ 0
Mr. McKinnie 0 $ 0 18,891 58,609 $ 0 $ 0
Mr. Venema 0 $ 0 25,000 225,000 $ 0 $ 0
- -------------------
</TABLE>
(1) The exercise price of all of the options held by the named executives at
September 30, 1998 exceeded the fair market value of the Common Stock as of
that date.
Employment and Severance Agreements
Pursuant to a letter agreement dated September 23, 1996, Mr. Dmiszewicki is
entitled to receive an annual salary of $160,000, subject to annual adjustment
by the Compensation Committee. Mr. Dmiszewicki's salary and bonus for fiscal
1998 are listed above in the Summary Compensation Table. In addition, at the end
of each fiscal year, he is entitled to incentive compensation equal to 25% to
50% of his annual salary. Mr. Dmiszewicki also received: (i) options to
purchase 100,000 shares of Common Stock at an exercise price of $5.00 per share,
vesting in four annual increments of 25% commencing on September 30, 1997; and
(ii) options to purchase 50,000 shares of Common Stock at an exercise price of
$7.00 per share, vesting in four annual increments of 25% commencing on October
1, 1998. Mr. Dmiszewicki also received a one-time bonus of $100,000. In the
event of termination of his employment other than for cause during his first 24
months of employment, his base salary would be continued until the earlier of:
(i) 12 months after the date of his termination or (ii) his full time employment
in another position.
Pursuant to a letter agreement dated August 8, 1996, Mr. Wilson was
entitled to receive an annual salary of $280,000, subject to review annually by
the Compensation Committee. In addition, at the end of each fiscal year, he was
to receive incentive compensation equal to 50% to 100% of his annual salary,
with a minimum bonus of $140,000 for fiscal 1997 and payment thereafter to be
determined by the Compensation Committee based on the Company's achievement of
its annual operating plan. Mr. Wilson also received options with the terms
described in the Summary Compensation Table for fiscal 1996 and $125,000 in
reimbursement for moving expenses.
11
<PAGE>
Mr. Wilson's employment agreement was terminated in connection with his
resignation as the Company's President and Chief Executive Officer on April 30,
1998. In June 1998, Mr. Wilson entered into a severance agreement with the
Company providing for the continued payment of his regular salary of $25,417 per
month (less deductions) for a period of twelve months beginning on May 1, 1998
and continuation of his benefits until the earlier of his re-employment or May
1, 1999. All of Mr. Wilson's outstanding options (100,000 of which were vested
and 300,000 of which were unvested) were cancelled in exchange for options to
purchase 50,000 shares of Common Stock at an exercise price of $2.50 per share,
representing the fair market value of the Common Stock on the date of grant.
The agreement also contains a general release, non-disclosure provisions, a 12-
month non-solicitation provision and a non-competition agreement that prohibits
Mr. Wilson from engaging in substantially the same business as that of the
Company for a period of 12 months from the date of the agreement.
Mr. Venema did not have an employment agreement, but is a party to a letter
agreement with the Company dated December 7, 1998. The agreement states that as
of January 1, 1999, Mr. Venema would no longer serve as Co-President and Chief
Technology Officer of the Company, but would instead serve as a consultant to
the Company for a period of six months from the date of the agreement. Mr.
Venema will continue to receive his salary of $13,750 per month for one year
from the date of the agreement and will be paid $12,000 per month for his
consulting services. Mr. Venema's service as a consultant may be terminated by
the Company or by Mr. Venema upon one month's prior notice.
Non-Competition Agreements
All executive officers and substantially all of the Company's employee-
stockholders (each, an "Employee-Stockholder") have executed a Non-Competition,
Confidentiality and Invention Assignment Agreement (the "Non-Competition
Agreement").
Each Employee-Stockholder who executed the Non-Competition Agreement
agreed, for the term of employment and for a period of 12 months after the
voluntary termination of employment, not to engage in any business activity that
competes with the Company's financial services applications software or certain
related consulting or training services. An Employee-Stockholder is prohibited
from using or disclosing any confidential information without the prior consent
of the Company. All developments, works of authorship and other inventions
relating to the Company's services and products which an Employee-Stockholder
makes or conceives during his or her employment with the Company will be the
property of the Company.
12
<PAGE>
HISTORICAL INFORMATION REGARDING REPRICING, REPLACEMENT
OR CANCELLATION AND REGRANT OF OPTIONS
THE FOLLOWING TABLE SETS FORTH CERTAIN INFORMATION CONCERNING THE REPRICING,
REPLACEMENT OR CANCELLATION AND REGRANT OF OPTIONS HELD BY PERSONS WHO WERE
EXECUTIVE OFFICERS OF THE COMPANY AT THE TIME SUCH ACTION WAS TAKEN. THE TABLE
REFLECTS ALL SUCH REPRICINGS, REPLACEMENTS AND CANCELLATIONS AND REGRANTS OF
OPTIONS THAT HAVE OCCURRED SINCE THE COMPANY BECAME A REPORTING COMPANY UNDER
SECTION 13 OF THE SECURITIES EXCHANGE ACT OF 1934 IN 1995.
10-YEAR OPTION/SAR REPRICINGS
<TABLE>
<CAPTION>
Length of
Original Option
Term Remaining
Number of Market Price of Exercise Price at Date of
Options Stock at Time of at Time of New Repricing or
Repriced or Repricing or Repricing or Exercise Amendment
Name Date Amended Amendment Amendment Price (in years)
- ---------------------- ---------- ------- ---------- --------- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
Thomas A. Wilson 10/17/97 100,000 $6.06 $18.00 $6.06 8.6
President and Chief
Executive Officer
Steven Dmiszewicki 05/08/98 100,000 $4.59 $ 5.00 $4.59 8.5
Senior Vice President 05/08/98 50,000 $4.59 $ 7.00 $4.59 9.4
and Chief Financial 05/02/96 2,500 (1) $6.38 $14.50 $6.38 8.5
Officer
John F. Ryan 05/02/96 20,000 (2) $6.38 $14.50 $6.38 8.5
Former Executive Vice
President, Sales and
Services -- Americas
and EMEA
Dennis McKinnie 05/08/98 2,000 $4.59 $ 6.38 $4.59 8.0
Vice President: Chief 05/08/98 2,500 $4.59 $ 4.75 $4.59 8.6
Legal and
Administrative Officer
Ted Venema 05/08/98 100,000 $4.59 $ 5.00 $4.59 9.0
Co-President and Chief
Technical Officer
- ----------------------
</TABLE>
(1) The indicated options expired in July 1996.
(2) The indicated options expired in September 1996.
13
<PAGE>
Report on Fiscal 1998 Option Repricings
On October 17, 1997, the Compensation Committee of the Board of Directors
(the "Committee") approved a reduction of the exercise price of 100,000 options
held by Thomas A. Wilson. The exercise price of such options was reduced from
$18.00 to $6.06 per share, which was the fair market value of a share of Common
Stock on that date. All other terms of the options remained as they were prior
to the repricing.
The Compensation Committee approved the repricing because its members
believe that equity interests are a significant factor in the Company's ability
to retain key employees that are critical to the Company's long-range success.
The options that were repriced had an initial exercise price of $18.00 per
share, which represented the price at which the Company sold its Common Stock in
its initial public offering in June 1995. After the offering, the market value
of the Common Stock declined, reaching a market price of $6.06 per share by
October 17, 1997. In view of the number of underwater options held by Mr.
Wilson at that time, the significant decrease in the market price of the Common
Stock and the unlikelihood of an increase in such market price to match the
initial public offering price in the near future, the Compensation Committee
approved a reduction in the exercise price of 100,000 options held by Mr. Wilson
from $18.00 per share to $6.06 per share, the fair market value of the Company's
common stock on that date.
In addition to the repricing described above, on May 8, 1998, the Committee
also repriced a total of 432,400 options including 150,000 options held by Mr.
Dmiszewicki, 4,500 options held by Mr. McKinnie and 100,000 options held by Mr.
Venema, with an exercise price equal to or greater than $4.60 per share to $4.59
per share, which represented the fair market value of the Common Stock on that
date. The Committee took this action in order to retain key employees in view
of the decrease in the market price of the Common Stock and intense competition
in the Company's industry for employees with the skills and experience possessed
by the optionees.
Submitted by: THE COMPENSATION COMMITTEE
Bruce K. Anderson
George L. McTavish
Robert A. Minicucci
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report by the Compensation Committee of the Board of Directors
discusses the Committee's compensation objectives and policies applicable to the
Company's executive officers. The report reviews the Committee's policy
generally with respect to the compensation of all executive officers as a group
for fiscal 1998 and specifically reviews the compensation established for the
Company's Chief Executive Officer as reported in the Summary Compensation Table.
The Committee is composed entirely of non-employee directors of the Company.
14
<PAGE>
Report of the Compensation Committee of the Board of Directors on Executive
Compensation
The Compensation Committee of the Board of Directors, consisting
entirely of non-employee directors, approves all policies under which
compensation is paid or awarded to the Company's executive officers. The
Committee is composed of Messrs. Anderson, McTavish and Minicucci.
Compensation Philosophy
The Company's executive compensation program has three objectives: (1) to
align the interests of the executive officers with the interests of the
Company's stockholders by basing a significant portion of an executive's
compensation on the Company's performance, (2) to attract and retain highly
talented and productive executives, and (3) to provide incentives for superior
performance by the Company's executives. To achieve these objectives, the
Committee has crafted a program that consists of base salary, short-term
incentive compensation in the form of a bonus, and long-term incentive
compensation in the form of stock options. These compensation elements are in
addition to the general benefit programs that are offered to all of the
Company's employees.
Each year, the Committee reviews the Company's executive compensation
program. In its review, the Committee studies the compensation packages for
executives of a peer group of the Company's most direct publicly held
competitors for executive talent, assesses the competitiveness of the Company's
executive compensation program and reviews the Company's financial performance
for the previous fiscal year. The Committee also gauges the success of the
compensation program in achieving its objectives in the previous year and
considers the Company's overall performance objectives.
Each element of the Company's executive compensation program is discussed
below.
Base Salaries
The Committee annually reviews the base salaries of the Company's executive
officers. The base salaries for the Company's executive officers for fiscal
1998 are reflected in the Summary Compensation Table and were established by the
Committee at the beginning of that fiscal year. In addition to considering the
factors listed in the foregoing section that support the Company's executive
compensation program generally, the Committee reviews the responsibilities of
the specific executive position and the experience and knowledge of the
individual in that position. The Committee also measures individual performance
based upon a number of factors, including a measurement of the Company's
historic and recent financial performance and the individual's contribution to
that performance, the individual's performance on non-financial goals and other
contributions of the individual to the Company's success, and gives each of
these factors relatively equal weight without confining its analysis to a
rigorous formula. As is typical of most corporations, the actual payment of
base salary is not conditioned upon the achievement of any predetermined
performance targets.
15
<PAGE>
Incentive Compensation
Bonuses established for executive officers are intended to motivate the
individual to work hard to achieve the Company's financial and operational
performance goals or to otherwise motivate the individual to aim for a high
level of achievement on behalf of the Company in the coming year. The Committee
does not have a formula for determining bonus payments, but establishes general
target bonus levels for executive officers at the beginning of the fiscal year
based in relatively equal measures upon the Committee's subjective assessment of
the Company's projected revenues and other operational and individual
performance factors and may adjust these targets during the year. None of the
Company's executive officers received bonuses for fiscal 1998.
Long-Term Incentive Compensation
The Company's long-term incentive compensation plan for its executive
officers is based upon the Company's Stock Option and Restricted Stock Purchase
Plan. The Committee believes that placing a portion of executives' total
compensation in the form of stock options achieves three objectives. It aligns
the interest of the Company's executives directly with those of the Company's
stockholders, gives executives a significant long-term interest in the Company's
success and helps the Company retain key executives. In determining the number
and terms of options to grant an executive, the Committee primarily considers
subjectively the executive's past performance and the degree to which an
incentive for long-term performance would benefit the Company. Based on these
factors, and particularly in order to retain the Company's key executive
officers during a period of transition for the Company, the Committee awarded
the options shown in the Summary Compensation Table to the officers named
therein.
Benefits
The Committee believes the Company must offer a competitive benefits
program to attract and retain key executives. The Company provides the same
medical and other benefits to its executive officers that are generally
available to its other employees.
Compensation of the Chief Executive Officer
Mr. Wilson served as the Company's chief executive officer through April
30, 1998. On May 1, 1998, Messrs. Dmiszewicki and Venema were each named Co-
President of the Company and consequently shared the duties of its chief
executive officer. Accordingly, this section discusses the compensation paid to
each of Messrs. Wilson, Dmiszewicki and Venema for fiscal 1998.
The Committee determined the salaries, bonuses and stock options awarded to
Messrs. Wilson, Dmiszewicki and Venema based on its review of the compensation
packages for chief executive officers of the Company's most direct publicly held
competitors for such officers and its subjective assessment of their respective
experience, knowledge and abilities. The Committee also considered the type of
compensation (i.e., cash or stock-based compensation) to be awarded when it
determined each individual's compensation. For example, the Committee awarded a
significant portion of each chief executive officer's compensation in the form
of stock options as opposed to a
16
<PAGE>
cash bonus in order to further invest each such officer in the Company's success
and to maximize the cash available for the Company's operations.
Mr. Dmiszewicki's compensation was determined in accordance with the terms
of his employment agreement with the Company dated September 23, 1996, which is
described in " - Employment and Severance Agreements" above. Based on the
factors described above, and in view of his increasing responsibilities with the
Company, the Committee set Mr. Dmiszewicki's base salary at $170,000 for fiscal
1998 and awarded him the options listed in " -Option Grants in Fiscal 1998"
above.
Mr. Wilson's compensation was determined in accordance with the terms of
his employment agreement with the Company dated August 21, 1996, which is
described in "Employment and Severance Agreements" above. Based on the factors
described above, the Committee set Mr. Wilson's base salary at $305,000 for
fiscal 1998. Upon his commencement of employment with the Company in fiscal
1996, Mr. Wilson received stock options with the terms described in the Summary
Compensation Table. Mr. Wilson resigned as President and Chief Executive Officer
of the Company on April 30, 1998. See "Employment and Severance Agreements" for
the terms of his severance agreement.
Mr. Venema did not have an employment agreement, but was compensated based
on the factors described above and on his increasing responsibilities with the
Company. Mr. Venema resigned as Co-President and Chief Technical Officer of the
Company effective January 1, 1999. See "Employment and Severance Agreements" for
the terms of his severance agreement.
Section 162(m) of the Internal Revenue Code
It is the responsibility of the Committee to address the issues raised by
Section 162(m) of the Internal Revenue Code, as amended (the "Code"). The
revisions to this Code section made certain non-performance based compensation
in excess of $1,000,000 to executives of public companies non-deductible to the
companies beginning in 1994. The Committee has reviewed these issues and has
determined that no portion of compensation payable to any executive officer for
fiscal 1998 is non-deductible. The Company's Stock Option and Restricted Stock
Plan limits to 500,000 the number of options or shares that may be awarded to
any individual in a single year under that plan.
Submitted by: THE COMPENSATION COMMITTEE
Bruce K. Anderson
George L. McTavish
Robert A. Minicucci
17
<PAGE>
EXHIBIT 99.3
Contact: Ivan Casanova
1250 Broadway
35th Floor
New York, New York 10001 Level 8 Systems, Inc.
212-244-1234
212-244-1234 (Phone)
212-760-2327 (Fax)
www.level8.com
- --------------
LEVEL 8 SYSTEMS, INC. NEWS RELEASE
FOR IMMEDIATE RELEASE
Level 8 Systems, Inc. Commences Tender Offer for Seer Technologies, Inc.
New York, New York. February 1, 1999- Level 8 Systems, Inc. (LVEL: Nasdaq)
today announced that it has commenced a tender offer at $0.35 per share for all
the outstanding shares of common stock of Seer Technologies, Inc. that it does
not already own. Level 8 previously acquired from Welsh, Carson, Anderson &
Stowe 59% of the outstanding common and all of the outstanding preferred stock
of Seer, representing a total of 69% of the outstanding voting stock of Seer.
The tender offer is being made in accordance with the previously announced
acquisition agreement dated November 23, 1998 between Level 8 Systems and Welsh
Carson Anderson & Stowe VI, L.P. The tender offer is scheduled to expire at 5:00
p.m., New York City time, on Tuesday, March 2, 1999.
American Stock Transfer & Trust Company is the depositary for the tender
offer. For additional information regarding the tender and delivery procedures
and conditions of the offer, interested parties should refer to the Offer to
Purchase and related transmittal documents, copies of which are being mailed to
shareholders. Beacon Hill Partners, Inc. will serve as the information agent for
the offer and can address questions regarding tender and delivery procedures at
800/792-2829.
Level 8 Systems is a premier provider of scalable enterprise application
integration solutions through a combination of technologies and services that
enable organizations to meet their information systems integration and
management needs.
<PAGE>
EXHIBIT 99.4
SEER TECHNOLOGIES, INC.
February 1, 1999
TO OUR STOCKHOLDERS:
Level 8 Systems, Inc., a New York corporation ("Level 8"), has commenced a
tender offer for all the outstanding shares of the common stock, par value $.01
per share (the "Shares"), of Seer Technologies, Inc., a Delaware corporation
("Seer") at $0.35 per share, net to the seller in cash, upon the terms and
conditions set forth in the accompanying Offer to Purchase and the related
Transmittal Letter (which together constitute the "Offer"). The Offer is being
made pursuant to an agreement dated November 23, 1998 (the "Acquisition
Agreement") between Level 8 and Welsh Carson Anderson & Stowe VI, L.P. ("WCAS
VI") and certain other parties affiliated with WCAS VI (collectively, the "WCAS
Parties"). Pursuant to the Acquisition Agreement, on December 31, 1998 Level 8
issued to the WCAS Parties an aggregate of 1,000,000 shares of Level 8's common
stock ("Level 8 Shares") and warrants to purchase an additional 250,000 Level 8
Shares for $12.00 per share (the "Level 8 Warrants") and the WCAS Parties (i)
transferred to Level 8 an aggregate of 7,130,894 Shares and all of the
outstanding shares of the preferred stock of Seer, which are convertible into an
aggregate of 3,856,258 Shares and (ii) contributed $16.9 million of additional
capital to Seer. As a consequence, Level 8 currently owns approximately 69% of
the outstanding voting stock of Seer. The aggregate market value of the Level 8
Shares issued to the WCAS Parties was $6,625,000 as of November 20, 1998, the
last trading day before the execution of the Acquisition Agreement, and
$9,687,500 as of December 31, 1998, the date of the closing of the acquisition
under the Acquisition Agreement, in each case based on the closing sale prices
of the Level 8 Shares on the Nasdaq National Market. The closing sale price of
the Level 8 Shares on the Nasdaq National Market was $6.625 per share on
November 20, 1998 (the last trading day before the execution of the Acquisition
Agreement) and $9.6875 per share on December 31, 1998, compared with the $12.00
per share exercise price under the Level 8 Warrants.
In accordance with the Acquisition Agreement, as soon as practicable after
the completion of the Offer, Level 8 will cause each outstanding Share, other
than Shares held in treasury or by Level 8 and other than Shares held by
stockholders who properly exercise appraisal rights under the Delaware General
Corporation Law, to be converted into the right to receive $0.35 per Share in
cash through a merger of a wholly-owned subsidiary of Level 8 into Seer. As a
result, Level 8, directly or through one or more subsidiaries, will own all of
the outstanding Seer common stock.
A copy of Seer's Solicitation/Recommendation Statement on Schedule 14D-9,
which contains information regarding the Offer, is attached. In addition, the
Offer to Purchase from Level 8, including the Letter of Transmittal and related
materials to be used for tendering your shares, are also enclosed. I urge you
to read the enclosed materials carefully before making a decision with respect
to tendering your shares in the Offer.
As a result of certain conflicts of interest described in the enclosed
Schedule 14D-9, neither Seer nor its Board of Directors expresses any opinion or
makes any recommendation as to whether you should tender your common stock in
response to the Offer.
I personally, along with the Board of Directors, management and employees
of Seer, wish to thank you for your loyal support through the years.
Sincerely,
Steven Dmiszewicki
Co-President and Chief Financial Officer
