SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13E-3
Rule 13e-3 Transaction Statement
(Pursuant to Section 13(e) of the Securities Exchange Act of 1934)
(Amendment No. 4)
SEER TECHNOLOGIES, INC.
--------------------------------------------------
(Name of Issuer)
LEVEL 8 SYSTEMS, INC.
LIRAZ SYSTEMS LTD.
----------------------------------------------
(Name of Person(s) Filing Statement)
Common Shares, par value $0.01 per share
(Title of Class of Securities)
815780 10 1
----------------------------------------------
(CUSIP Number of Class of Securities)
Arie Killman
Level 8 Systems, Inc.
1250 Broadway, 35th Floor
New York, NY 10001
(212) 244-1234
----------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of Person(s) Filing Statement)
Copy to:
Edward W. Kerson, Esq.
Proskauer Rose LLP
1585 Broadway
New York, New York 10036
(212) 969-3000
- ------------------------------------------------------------------------------
This statement is filed in connection with (check the appropriate box):
a. |_| The filing of solicitation materials or an information statement subject
to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b. |_| The filing of a registration statement under the Securities Act of 1933.
c. |X| A tender offer.
d. |_| None of the above.
1
<PAGE>
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: |_|
Calculation of Filing Fee
Transaction valuation Amount of filing fee
--------------------- --------------------
$1,697,409 (1) $339.48 (2)
--------------------- --------------------
(1) Calculated by multiplying $0.35, the per share tender offer price, by
4,849,739, the number of shares of common stock being sought in the
tender offer.
(2) Calculated as 1/50 of 1% of the transaction value.
|X| Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: $339.48
Form or Registration No.: 14D-1
Filing Party: Level 8 Systems, Inc.
Date Filed: February 1, 1999
Page 1 of 5 Pages
2
<PAGE>
Amendment No. 4
The undersigned hereby amend Items 9 and 17 of their Schedule 13E-3 as
hereinafter set forth.
Item 9. Reports, Opinions, Appraisals and Certain Negotiations.
Item 9 is hereby amended to read in its entirety as follows:
(a)-(b) An outside technology consultant to Liraz, Burton Grad Associates,
Inc., conducted a preliminary due diligence study of the Company in the areas of
operations, technologies, customer attitudes and business/strategic plans. In
conducting the due diligence study, the consultant requested certain information
from the Company for each of the areas to be examined, which included financial
statements, corporate and technical strategy overviews, product research notes,
annual reports, a prospectus and marketing materials of the Company. The
consultant also conducted on-site and phone interviews with identified key
executives of the Company and performed a limited survey of representative
Company customers to determine their satisfaction with the Company products,
services and business operations.
The consultant's preliminary due diligence report on August 13, 1998
reported that, although the Company's technology products and services were
sound and competitive, the Company faced extensive business problems and risks.
Those problems and risks included (a) low employee/management morale and lost
loyalty from extensive layoffs; (b) perceived financial weakness and performance
concerns by customers; (c) very low revenue from new sales with flat maintenance
and lower services revenue; (d) lack of market opportunities; (e) strong
competition; (f) loss of key personnel; (g) loss of business momentum; (h)
dependence on IBM's marketing alliance for sales in Europe; and (i) poor U.S.
sales performance. The consultant's preliminary due diligence report on August
13, 1998 concluded that the acquisition of the Company would be a highly risky
undertaking, particularly considering the magnitude of the financial investment
required to cover the Company's existing debt and to reestablish the Company as
a growing, profitable company, and recommended that Liraz not proceed with a
transaction that would involve any investment, unless the bank debt could be
eliminated (or sharply reduced). The transaction proposed in August 1998 was
abandoned and no final report was prepared by the consultant.
(c) The report is available for inspection and copying at the principal
executive offices of Seer during its regular business hours by any interested
equity security holder of Seer or his/her representative who has been so
designated in writing. Confidential treatment has been requested for certain
provisions of this Exhibit pursuant to Rule 24b-2 under the Securities Exchange
Act of 1934. The omitted portions have been separately filed with the
Commission.
Item 17. Material to be Filed as Exhibits
Item 17 is hereby amended to add the following exhibit:
(b)(1) Preliminary Due Diligence Report dated August 13, 1998 prepared by
Burton Grad Associates, Inc. (Confidential treatment has been
requested for certain provisions of this Exhibit pursuant to Rule
24b-2 under the Securities Exchange Act of 1934. The omitted
portions have been separately filed with the Commission.)
3
<PAGE>
SIGNATURE
---------
After reasonable inquiry and to the best of the undersigned's
knowledge and belief, the undersigned certifies that the information set forth
in this statement is true, complete and correct.
Dated: March 26, 1999 LEVEL 8 SYSTEMS, INC.
By: /s/ Arie Kilman
-------------------------------------------
Name: Arie Kilman
Title: Chairman of the Board and
Chief Executive Officer
LIRAZ SYSTEMS LTD.
By: /s/ Arie Kilman
-------------------------------------------
Name: Arie Kilman
Title: Chairman of the Board and President
4
<PAGE>
13E-3 EXHIBIT INDEX
Exhibit Description
- ------- -----------
(a) None
(b)(1) Preliminary Due Diligence Report dated August 13, 1998 prepared by
Burton Grad Associates, Inc.**
(c)(1) Agreement dated as of November 23, 1998 among Level 8 Systems,
Inc., Welsh Carson Anderson & Stowe VI, L.P. ("WCAS") and
certain parties affiliated or associated with WCAS is
incorporated by reference to Exhibit 2.1 of Level 8 Systems,
Inc.'s Report on Form 8-K filed with the Securities and
Exchange Commission on January 15, 1999.
(d)(1) Offer to Purchase dated February 1, 1999*
(d)(2) Letter of Transmittal*
(d)(3) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees*
(d)(4) Letter To Our Clients*
(d)(5) Notice of Guaranteed Delivery*
(d)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9*
(d)(7) Press Release dated February 1, 1999*
(d)(8) Supplement to the Offer to Purchase dated February 24, 1999*
(d)(9) Press Release dated March 2, 1999*
(d)(10) Press Release dated March 16, 1999*
(e) None
(f) None
- -------------------------------
* Previously filed.
** Confidential treatment has been requested for certain provisions of this
Exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. The
omitted portions have been separately filed with the Commission.
5
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN PORTIONS OF
THIS EXHIBIT PURSUANT TO RULE 24b-2 UNDER THE SECURITIES EXCHANGE
ACT OF 1934. THE OMITTED PORTIONS HAVE BEEN SEPARATELY FILED WITH
THE COMMISSION.
Burton Grad Associates, Inc.
101 Post Road East
Westport, Connecticut 06880
(203) 222-8718
(203) 222-8728 Fax
[email protected]
August 13, 1998
Mr. Arik Kilman
Liraz Systems, Ltd.
1250 Broadway
35th Floor
New York, New York 10001
Dear Arik:
Seer Technologies - Preliminary Due Diligence Study
Enclosed is a preliminary due diligence report covering BGAI's findings,
conclusions and recommendations regarding Liraz Systems, Ltd. (Liraz)
considering acquiring a majority interest in Seer Technologies, Inc. (Seer).
Prior to signing a letter of intent with an option to purchase Seer shares,
Liraz has requested Burton Grad Associates, Inc. (BGAI) to perform a preliminary
due diligence study to help determine whether there are any serious identifiable
problems which would indicate that the downside risks associated with the
proposed purchase would be out of line with the upside potential. Liraz is
separately checking the legal and financial aspects of Seer for the same
purpose.
BGAI has focused on operations, technologies, customer attitudes and
business/strategic plans. The separate reports from Marty Silberberg
(operations), Sid Dunayer (technologies and development) and Specifics (customer
survey) are attached as appendices to the report.
The Seer representatives have been most cooperative in assisting BGAI in
performing this study, and we would appreciate your thanking them on our behalf.
Sincerely,
/s/ Burton Grad
Burton Grad
Enclosure
BG:3918
<PAGE>
PRELIMINARY DUE DILIGENCE STUDY OF
SEER TECHNOLOGIES, INC.
Prepared for: Liraz Systems, Ltd.
1250 Broadway
New York, New York
Prepared by: Burton Grad Associates, Inc.
101 Post Road East
Westport, CT 06880
Burton Grad
Sidney J. Dunayer
Martin Y. Silberberg
Specifics, Inc.
Date: August 13, 1998
<PAGE>
Table of Contents
Executive Summary
Section I Scope, Objectives and Work Plan
Section II Overview of Seer
Section III Consideration of Business Activities and Financial Position
Section IV Analysis of Operations
Section V Analysis of Technical and Development Activities
Section VI Customer Survey
Section VII Concerns and Recommendations
Appendices
- ----------
A-1 Burton Grad Professional Profile
A-2 Sidney J. Dunayer Professional Profile
A-3 Martin Y. Silberberg Professional Profile
A-4 Specifics, Inc. Description
B-1 Information Provided List
B-2 People Interviewed
C-1 Descriptive Materials - Seer
C-2 Seer Financials -- FY1996 and FY1997
C-3 Press Release and Financial Statements for First Nine Months
of FY1998
C-4 Seer Customers -- FY98
C-5 Selected Organization Charts -- July 31, 1998
D Seer Evaluation -- Martin Y. Silberberg
E Seer Preliminary Technical Review -- Sidney J. Dunayer
F Customer Survey -- Specifics, Inc.
<PAGE>
Executive Summary
- -----------------
Seer Technologies, Inc. (Seer) is a publicly held software products company
producing and maintaining certain application development products and providing
professional services to its customers to assist in the use of these products.
Seer is listed on NASDAQ; it has approximately 12M shares outstanding and has
recently traded in the $1.50-$2.00/share range, giving Seer a market
capitalization of $18M to $24M.
Liraz Systems, Ltd. (Liraz) was originally considering paying a total of $30M to
acquire new shares in Seer to give Liraz controlling ownership of the company,
with the $30M in cash available to help turn around and grow the Seer business.
Liraz is now considering a variety of other alternative proposals.
The purpose of the preliminary due diligence was to assist Liraz in deciding
whether the downside risks (business, operations, customers or technical) were
so great that it was not worth proceeding with a full due diligence study.
In performing this preliminary due diligence study, Burton Grad Associates, Inc.
(BGAI) identified a number of significant concerns which could make the
acquisition of Seer Technologies a very risky undertaking, particularly
considering the magnitude of the financial investment required:
o While the Seer technologies, as imbedded in their current HPS products,
are quite solid, they are relatively stronger for the MVS market than
for the NT/UNIX marketplace. Also, there are two separate HPS products
(externally identical, but internally quite different) for the two
markets; while one of these can probably be eliminated in the future,
both may still need to be maintained for existing customers.
o The Seer infrastructure has been seriously impacted not just by the
extensive layoffs during the 3QFY98, but also by the uncertainty felt by
many employees and customers in not knowing whether the company will
financially survive. Since any Liraz acquisition announcement would have
to wait for the completion of due diligence and financial negotiations,
and implementation would require stockholder approval under SEC rules,
the uncertainty could not be resolved for at least 45-60 days from the
date that Liraz and Seer sign a commitment letter. Further staff erosion
would even further weaken the technical and services staffs and
encourage prospects and customers to seek alternate solutions. This
would reduce the value of the company and increase the difficulty, time
and cost required to effect a major business turnaround.
o New product licenses have dried up (world-wide) and add-on licenses for
existing customers have been hard to come by. While many application
development tools suppliers have had their new sales affected by
customers and prospects concentrating on Y2K projects, most vendors have
maintained their customer revenues and relations by performing Y2K
corrections and now Euro conversions. Some have also focused on
performing application development projects for their customers using
<PAGE>
their own tools and so are not as dependent on standalone license sales
as Seer. Seer has not been successful in doing anything to replace their
lost new license revenue (or the impact on its maintenance and services
revenue). It is not at all clear that, at this late date, Seer can even
turn around the HPS business or implement any substitute revenue
generating offerings soon enough to pull in the revenue needed to
produce a positive cash flow in the next 6-12 months.
o One of the most valuable Seer assets is its relationship with IBM-Europe
and its potential revenues from IBM's planned CoreBank offering. Lack of
financial stability for Seer (including the threat of NASDAQ delisting)
could cause IBM to consider other alternatives to the use of HPS in
CoreBank and to be reluctant to recommend Seer for other application
development projects. This is a very serious threat, since virtually all
of Seer's European revenue comes as a result of the IBM marketing
alliance. Remember, IBM can (and does) recommend use of other
application development products from various vendors to IBM customers.
o Seer's financials seem to be fraught with high risk. The current balance
sheet and recent income statements (as of 6/30/98, covering 9 months of
FY98) show that Seer has accumulated extraordinary losses during the
last two quarters and now has a negative equity of $16M and outstanding
bank loans of approximately $37M. The AR less AP and other accrued
expenses has a net value of around $15M. This seriously negative
position has triggered a NASDAQ inquiry on delisting.
o In our opinion, a majority investment by Liraz in Seer common shares
will put Liraz at risk for the entire $37M debt as well as being
expected to provide the cash needed to carry Seer through the next 9-12
months. In our opinion, it will take at least $5M to $10M just to get
Seer back to operating on a break-even basis over the next 9-12 months.
In addition, Liraz would need to provide the cash required to develop
the proposed new application renewal product offerings, and to rebuild
the marketing, sales, support and services staffs required to launch
this new product line in the new marketing space. In our opinion, it
would cost at least $10-$15M to bring the new product line to a position
where it could start to generate period profits.
o These figures add up to a total exposure over the next 12 months of at
least $50M to $60M. While the $37M bank loans may not need to be repaid
within the year if Liraz/Seer successfully negotiates an extension, it
is likely that, with the removal of the WCAS guaranty, the bank (or even
an alternate bank) would seek to reduce the open balance by at least
$10M over the next 12 months. Also, the turnaround money for HPS and
launch money for the application renewal offerings could be spaced out
over the first 6-9 months. Nevertheless, real cash of at least $25M and
possibly $35M would be needed before Seer started to generate
significant positive cash flow. Most of the investment money may be
needed almost immediately in order to avoid NASDAQ delisting.
o The net effect is that Liraz would be paying essentially $50-60M for
ownership of a company whose FY1998 revenues will be, at best, $65M and
is operating at an annual going rate of $60M, and is still heading
downward in revenue. This translates into paying a p/r ratio of one.
Seer is still losing money and, if more layoffs are
<PAGE>
required, will have to incur even more restructuring charges, further
compromising the already severe equity deficiency. Why would Liraz (or
anyone else for that matter) pay 1 times revenue for a company with such
a very questionable future?
o In BGAI's opinion, even if WCAS would turn over all of its stock just to
eliminate their $17M debt guaranty, Liraz should not take over control
of Seer unless it can find a partner to provide a $15M-$20M investment
sharing the risk of failure and bankruptcy but, of course, sharing the
potential gain if the stock recovers to p/r and p/e ratios typical of
successful software products companies.
BGAI, given its technical and operations analyses and after examining the
financial situation as it was described in an 8/3/98 meeting with Liraz
representatives, has reached the conclusion that Liraz should not invest any
money in Seer under the present conditions. This investment does not even pass
the "gift" test.
However, if the bank debt could be eliminated (or sharply reduced) and Liraz
could form a partnership with another company to market Seer's new offerings on
a world-wide basis, then it might be possible to turn Seer into primarily a
development and services company which could maintain its HPS revenue level
while controlling (and reducing) its fixed operating costs (partially by paying
for the marketing, sales and service activities on a commission basis). This
approach may limit the upside potential, but would radically reduce the downside
financial risk. Note also that this more conservative approach would require
significant additional layoffs and finding a suitable marketing partner.
It is also worthwhile exploring other acquisition deal arrangements,
particularly those which might take Seer private, since the underlying
technologies, customers, and technical employee base are currently solid and
valuable. But any practical deal still has to provide enough money to cover the
existing debt and to enable Seer to develop and launch its new application
renewal offering in a timely fashion.
<PAGE>
Section I. Scope, Objectives and Work Plan
-------------------------------
Liraz Systems Ltd. (Liraz) wanted to have a preliminary independent due
diligence study performed prior to determining whether it wishes to make a
substantial controlling investment in Seer Technologies, Inc. (Seer). The actual
investment would only be made after a full due diligence study. This preliminary
study can help ensure that the initial representations made by Seer to Liraz are
accurate and complete and to be sure that there are no serious product, market,
customer, development or technical issues which would affect Liraz estimates of
current value or projections of future profits.
BGAI, an independent consulting firm with extensive experience in computer
software and services company due diligence and valuation studies, has performed
this due diligence study so that Liraz can proceed with its potential investment
decision in a more informed manner.
Work Process
- ------------
1. BGAI requested certain information from Seer for each of the areas to be
examined. The full request list is attached as Appendix B. For this preliminary
study, BGAI reduced the list substantially after discussions with Liraz and
Seer.
2. BGAI conducted on-site and phone interviews with identified key executives
of Seer and obtained other relevant Seer materials in the assigned due diligence
areas.
3. BGAI analyzed the Seer materials and interview notes to identify areas of
concern and any potential problems in the assigned due diligence areas. BGAI
made a preliminary analysis of the investment values relating to future revenues
and profits and identified what it believed to be the principal opportunities
and risks.
4. BGAI performed a limited survey of representative Seer customers to
determine their satisfaction with Seer products, services and business
operations. BGAI did not interview any of Seer's alliances/partners except for
IBM-Europe (CoreBank).
5. BGAI prepared a report to Liraz summarizing its preliminary findings and
recommendations.
Staffing
- --------
The project was managed by Burton Grad, president of BGAI, with BGAI Associates
Sid Dunayer and Marty Silberberg as consultants and Specifics, Inc. performing
the Customer Survey. The assignments are noted below:
o Business Analysis (Markets, Competition, Customer Base, Strategic Plans,
Financial Projections) -- Grad
o Operations (Sales and Marketing, Customer Service and Support) --
Silberberg
o Technical (Product Development, Technical Assessment) -- Dunayer
o Customer Satisfaction Survey -- Specifics, Inc.
Professional profiles for the BGAI participants are enclosed as Appendices A-1,
A-2 and A-3. A brief description of Specifics, Inc. is enclosed as Appendix A-4.
<PAGE>
Section II. Overview of Seer
----------------
During our preliminary review, BGAI identified the following principal business
values along with the principal business problems and specific areas of
potential risk. These are listed below:
Principal Seer Business Values
- ------------------------------
o Customer Base
-------------
o recurring maintenance, services and software add-on revenues
o customer satisfaction with products and services
o planned customer usage of products and services for new
development
o Staff Resources
o marketing and sales - U.S., Europe, Asia
o professional services - U.S., Europe, Asia
o product development and technical maintenance
o customer support
o finance and administration
o executives and management
o Products
o HPS - MVS
o HPS - NT/Unix, etc.
o Alliances o IBM - Europe
o Other Values
o CoreBank (IBM)
o Investment in Relativity (T1% of the company's stock)
o Net Essentials Programs -communications capability (being
enhanced)
o NTPA (brokerage application)
o Strategic New Concepts for Seer Future Direction
o enterprise application renewal software
o network computing facilities
o application warehouse capabilities
o Net Operating Loss Carryforward
<PAGE>
Principal Seer Problems
- -----------------------
o Obligations to customers and alliances
o Financial obligations: debt and taxes
o Current perceived financial weakness *
o Loss of key people (is it ongoing?)
o Very low revenues from new sales with flat maintenance and lower
services revenues, particularly in the Americas
o Anticipated costs of previous and future layoffs
o pensions
o vacations
Potential Risks
- ---------------
o Lack of market opportunities
o Strong competition
o Impact of layoffs on technical capabilities
o Lower employee and management morale and lost loyalty
o Loss of business momentum
o Lack of European sales independence (dependence on IBM)
o Poor U. S. sales performance
Seer Descriptive and Financial Materials
- ----------------------------------------
Seer is in the process of trying to change its primary focus from just selling
and maintaining proprietary application development tools to becoming a broad
provider of tools and services targeted at integrating applications written in
various languages running on a variety of platforms. Appendix C-1 describes the
previous strategy and the planned new strategy.
Seer financial results have been deteriorating rapidly since FY96 although FY97
results were not as negative as FY96. The financials for both years are shown in
Appendix C-2.
Appendix C-3 shows the even more severe losses and negative equity which
occurred during the first nine months of FY98 with a continuing increase in
debt.
Seer probably had close to * active customers during the first nine months of
FY98. Appendix C-4 shows that there have been relatively few additional license
fees, but that there were ongoing maintenance fees from * customers; there was
services work for * customers who were on maintenance plus * customers who were
not on maintenance.
Finally, Appendix C-5 shows the principal organizational units as of July 31,
1998. There were still 452 employees which is very high for a $60M going revenue
rate company in the software/services area. This would question whether the
radical reductions in personnel made during the past two months have gone
anywhere near far enough to bring costs into line with the sharply reduced
revenue (and the change in revenue mix).
_____________________________
* Confidential treatment requested.
<PAGE>
Section III. Consideration of Business Activities and Financial Position
-----------------------------------------------------------
Findings
- --------
Based on the interviews conducted and materials reviewed, BGAI has the following
findings regarding these values, problems and risks:
1. Seer has not been able to make any significant new software sales of HPS or
even any substantial add-on software sales during 2QFY98 or 3QFY98. Maintenance
revenues have been flat, and services revenues have dropped. Poor Americas
performance has been the largest problem, but it is a worldwide issue.
2. Seer shows a substantial loss in 3QFY98, but expects to break even in
4QFY98. The improved financial results will come from very sharp cost reductions
in 3QFY98, principally through reduction in marketing, sales and other personnel
and by closing offices.
3. Seer is an integral part of IBM-Europe's planned CoreBank strategy and
products. Each IBM sale of CoreBank systems would involve a major license of HPS
products to the IBM customer (plus ongoing maintenance fees) and may generate
significant initial and on-going services fees for training, usage assistance,
etc. IBM stated to BGAI that it plans to * , but IBM may make an announcement
and some sales much earlier.
4. The organization structure and key executive and senior management positions
are in flux as Seer is trying to adjust to the recent extensive layoffs. The
office of the president seems to be working satisfactorily to reduce costs, but
there are as yet no signs of a revenue resurgence.
5. Seer has identified a principal new strategic direction aimed at enterprise
application renewal. This strategy requires enhancing HPS to permit open use of
existing or future applications, written in various languages, interfaced with
the current or future HPS proprietary applications. This appears to be
technically achievable by Seer. It is too early to have any strong sense of the
market acceptance of this new strategy.
6. Seer has also identified an application warehousing direction which would
treat applications information in a manner similar to how data warehousing
treats data from various sources and data bases.
_____________________________
* Confidential treatment requested.
<PAGE>
Conclusions
- -----------
1. Seer is teetering on the edge of bankruptcy and, without major new money, it
probably cannot survive long enough to again become a growing, profitable
company.
2. Seer's problems are not just short term, but have been festering at least
since shortly after Seer made its IPO in 1995. Management direction has been
overly aggressive, inconsistent and plagued by poor reading of market
opportunities and market changes.
3. Seer has some assets which may have cash-in value and would not negatively
impact Seer's future revenues or operating income. Sale of these assets could
help in providing cash needed to produce and launch the new Seer products and to
rebuild the infrastructure where needed. These are: NTPA (brokerage package),
Relativity investment and, probably most significant, Net Essentials, a
middleware communications program.
4. The CoreBank system, when announced and sold by IBM-Europe, should provide
major incremental new sales and services revenue. While Seer expects this to
have impact in FY99, this is speculative since IBM has stated that it doesn't
expect general release until the * .
5. Seer faces heavy duty competition from Sterling Software (previous TIS and
Synon products), Sapiens, Rational and others as well as from Oracle, Informix,
et al. These are larger and better financed companies with their own independent
sales force selling on a worldwide basis. The key to the future for all of the
tools vendors lies in customer's acceptance of NT-based tools, able to integrate
mainframe application programs with new client/server initiatives.
6. Seer's new products will probably require 6-12 months before they are ready
for general release.
_____________________________
* Confidential treatment requested.
<PAGE>
Section IV. Analysis of Operations
----------------------
These comments are based upon Marty Silberberg's report which is in Appendix D.
Findings
- --------
1. Certain of Seer's organizations have been severely impacted by the recent
layoffs. Some of the key people have left the company and more may be seeking
new jobs. This may leave significant gaps in marketing and sales, and possibly
in services, support and, of greatest concern, in development.
2. Seer has been previously involved in various alliances, all of which have
now been dissolved (except for IBM-Europe). These were generally not successful;
significant reserves have been set up to cover non-payment by the partners under
the existing contracts.
Conclusions
- -----------
1. The current executive team has done a yeoman-like job in the past four
months to staunch the severe cash bleeding, but has not yet demonstrated that it
can successfully sell Seer's products and services (old or new).
2. The application development tools market has been significantly impacted by
user companies being focused on Y2K corrections which has delayed new
application development. Nevertheless, the revenue reduction has been far more
severe to Seer than to its principal competitors. Seer's particular weakness in
the Americas (especially the lack of new customers) is somewhat surprising and
of special concern. Is it product and platform decisions or just sales force
inadequacy and poor management? Since the Americas are the principal part of the
world where Seer sells directly (not through or with IBM), these dismal results
may indicate that the only way Seer's products can be sold successfully is
through a manufacturer or system integrator.
3. Seer is almost totally dependent on IBM as its only marketing partner in
Europe. This dependency is confirmed by the initial customer survey. While the
IBM-CoreBank strategic planning manager gives Seer high grades and IBM keeps
involving Seer in new proposals, this is still a serious long term exposure.
<PAGE>
Section V. Analysis of Technical and Development Activities
------------------------------------------------
These comments are based upon Sid Dunayer's report which is in Appendix E.
Findings
- --------
1. Seer's HPS products appear to be technically sound and competitive in both
the MVS and NT/Unix markets. It appears that the MVS products as rewritten
recently in C may be relatively better performers than the current programs for
the NT/Unix market.
2. Seer's HPS MVS products seem to be well structured and documented. The
non-MVS products are not as readable and are sparsely commented; documentation
seems to be satisfactory.
3. There was no evidence that any of the Seer programs were the property of any
third party, and Seer states that all current product code was developed by Seer
and is their property.
4. HPS analysis and design tools are not as robust as those in some competing
products, but the repository and construction tools seem to be quite strong and
have given Seer an edge on the code generation side, which is critical to many
customers.
5. The technologies needed to extend HPS to provide the open systems capability
needed for the enterprise application renewal offering appear to be available
for licensing or can be reasonably developed by Seer.
Conclusions
- -----------
1. The current HPS products are a valuable asset and provide a solid base for
future development work.
2. The technical staff has done high quality work, although the standards have
slipped recently with the NT/Unix products.
3. Going forward, the NT/Unix programs may be able to be eliminated by basing
these programs on the MVS implementation. This should help reduce the apparently
excessive number of technical development and maintenance employees.
4. The open language/application direction seems quite interesting and well
within Seer's current technical capabilities.
<PAGE>
Section VI. Customer Survey
---------------
These comments are based on Specifics' Customer Survey Report which is in
Appendix F.
Findings
- --------
1. Customer satisfaction with Seer's HPS products is good with generally
positive statements for the MVS product. * *, but they perform the application
development functions well.
2. Seer's consulting services are viewed favorably by its customers and are
considered essential to learning and using HPS successfully. However, * .
3. While most customers plan to write more applications using HPS, some are in
a wait and see position until Seer gets its financial and operational house in
order.
4. Customers are interested in Seer's Enterprise Application renewal direction,
but have doubts of Seer's ability to implement the necessary functionality in a
timely manner.
Conclusions
- -----------
1. Changing current customer perceptions regarding Seer's future will be
essential to rebuilding sales and service revenues from existing customers, but,
more importantly, to obtain new customers.
2. Seer will have a "concept-selling" hill to climb to get even existing
customers to consider Seer's new open products.
______________________________
* Confidential treatment requested.
<PAGE>
Section VII. General Conclusions and Recommendations
---------------------------------------
Conclusions
- -----------
1. There are no individual operational, technical or customer show stoppers
which would clearly indicate that Liraz should not proceed with a letter of
intent and a stock purchase option for Seer.
2. However, there are a large number of danger signals which indicate that
getting Seer to become a growth company again may be a Herculean task and may
over-stretch Liraz financial limitations.
3. Before proceeding with the actual purchase of the new shares, Liraz will
need to do a much more thorough due diligence study of technologies, operations,
customers and finances.
4. The most serious questions arise on the financials (which were not BGAI's
specific assignment). The amount of money needed to even have a chance of
turning Seer into a profitable company will be very large, probably risking a
total of * .
5. While there are a few assets which can be sold, this would probably yield
less than $10 million, not reducing the downside risk significantly.
Recommendations
- ---------------
The Executive Summary reviews the recommendations thoroughly; below is a brief
summary of them:
1. Liraz should not invest in Seer, given the very large debt and the
relatively high costs of re-establishing the market for HPS as a product.
Without time and money, Seer will not have the opportunity of introducing its
proposed new product line into its new market space.
2. Under certain circumstances, Liraz might find it worthwhile to acquire the
products, technologies, customer base and a subset of the personnel to construct
a new Seer, not encumbered with Seer's debts and potential public stockholder
liabilities. A new Seer, with clean books, could be regrown as a privately held
technical services company with its own proprietary application development
products and with a new application development management system to integrate
old and new applications written in various languages for a variety of
platforms. Going private may be blocked by WCAS concerns regarding potential
stockholder suits, the relative enormity of the debt and the continuing
operating and restructuring losses.
3. The possibility of Seer being acquired by a suitable other software company
might be pursued, but it is not clear how Liraz could benefit from such an
arrangement.
_____________________________
* Confidential treatment requested.
<PAGE>
Appendix A-1
BURTON GRAD Page 1
- --------------------------------------------------------------------------------
Professional Summary
Burton Grad, President of Burton Grad Associates, Inc. (BGAI), has a long record
of significant contributions to the computer software and services industry. He
has experience both as a user and developer of application and systems products
and as consultant, innovator, businessman and leader in the computer software
and services industry.
Since 1978 he has been a consultant to companies providing software products,
software professional services, processing services and other computer software
and services offerings:
- Strategic planning, management and organizational consulting, and
product analysis, evaluation and review
- Company and product acquisition studies including due diligence and
valuation for financial capitalization and write-off purposes
- Planning, assessment and analysis of business operations including
quality and productivity measurements
Work is performed personally or with the assistance of experienced specialists
in market analysis, customer services, systems programs and industry
applications on mainframe and departmental computers as well as on client/server
and personal computer systems.
This is a partial list from the more than 175 BGAI clients:
Broadview Associates i2 Technologies, Inc
Budgeting Technology, Inc. Infosafe
CIBER, Inc. Keane, Inc.
DA Consulting Group Mediware, Inc.
Decision Consultants, Inc. Platinum Technology
Discount Investment Corporation SPSS, Inc.
Elron Software, Inc. Sterling Commerce, Inc.
Geocapital Partners Sterling Software, Inc.
Grace Consulting and Technologies TSI International
- --------------------------------------------------------------------------------
<PAGE>
Appendix A-1
Burton Grad Page 2
- --------------------------------------------------------------------------------
Work Achievements
- -----------------
Burton Grad Associates, Inc. (1978 - Present)
* Strategic planning, management and organizational consulting, and
product analysis, assessment and review
* Company, product and technology valuation studies for financial, tax,
capitalization and acquisition purposes
* Due diligence studies on acquisitions of computer software/services
companies
* Business assessment studies and implementation projects for product
strategy, development, quality management and customer service
Customer Care, Inc. (1992 - 1996)
* Published CustomerCare Newsletter and CustomerCare Survey directed at
software companies' customer services activities: support,
documentation, training and product-related consulting
* Provided consulting on customer service processes, and training for
customer service personnel
Heights Information Technology Service (1979 - 1983)
* Performed professional services for applications and systems development
* Used professionals on a remote, work at home basis with effective
project management
International Business Machines Corporation (1960 - 1978)
* Definition, design and implementation of application development systems
strategy resulting in release of IBM's development management systems
* Development of application programs for every major industry
* Establishment of joint planning and programming development with
European operations
* Announcement, development and initial support of CICS
* Management of application development for small business and process
control systems
* Responsibility for the production, release and maintenance of almost 200
programs
* Conception of approach to and programs for text processing and office
automation systems
* Development and expansion of computer based training systems
* Development of management science and scientific programs
* Participation in the structuring and unbundling of IBM program products
<PAGE>
Appendix A-1
Burton Grad Page 3
- --------------------------------------------------------------------------------
* Creation of the Study Organization Plan for specifying and designing
application systems
General Electric Company (1949 - 1960)
* Programming of the first commercial computer (Univac I in Louisville)
* Development of discrete simulation techniques for manufacturing planning
and control
* Invention of decision tables
* Study of automated factory design and implementation
* Initiation and use of advanced techniques for production, inventory and
quality control
Other Professional Activities
- -----------------------------
1972-1996 ITAA
* Computer Software and Services Trade Association
* President, Treasurer and Board member of American Software
Association Division of ITAA
* Member of ITAA Board
* Chair and member of various committees (Industry Relations,
Software Capitalization, Software Openness, Technology
Information Services, Quality Management)
* Executive Committee of Information Technology Foundation
(Project Office)
1968 and 1979 Principal author of Management Systems, published by Holt,
Rinehart and Winston. Used for colleges and businesses for
computer application system methodology and design.
1950-Present Speaker and chair at conferences and workshops and
contributor to professional journals on various information
technology subjects including decision tables, quality
control, systems engineering and software capitalization.
<PAGE>
Appendix A-1
Burton Grad Page 4
- --------------------------------------------------------------------------------
Burton Grad Associates, Inc.
101 Post Road East
Westport, Connecticut 06880
(203)222-8718
(203) 222-8728 FAX
EDUCATION
- ---------
1949 Bachelor of Management Engineering
Rensselaer Polytechnic
Institute Troy, New York
POSITION HISTORY
- ----------------
1978-Present Burton Grad Associates, Inc.,
Founder and President
Consultants to computer software and services companies
1992-1996 CustomerCare, Inc.
Chairman
Publisher and Consultants for software company customer
services
1978-1984 Heights Information Technology Services, Inc.,
Founder and President
Professional software services
1960-1978 International Business Machines Corporation
Consultant - IBM Research Lab
Director of Development - Data Processing Division (DPD)
Manager - Development Services and Scientific
Application Programs (DPD)
Manager - Technical and Scientific Development (DPD)
1949-1960 General Electric Company
Consultant - Advanced Application and Systems Development,
Production Control Services
Manager - Production Control Operation - Large Steam
Turbine Division
Manufacturing Training Program
- --------------------------------------------------------------------------------
<PAGE>
Appendix A-2
Professional Profile - Sid Dunayer
Communications and Network Related Projects
Major International Chemical Manufacturer
- -----------------------------------------
Requirements analysis and design of the global network connecting the
various product design centers worldwide. The network is currently
implemented using Token-Ring and Ethernet local area networks connected via
private TI/T3 service, Fiber links, Asynchronous and Synchronous dial
connections, X.25 packet connections and SAA connections to the mainframes.
Through this network, the chemists worldwide can share data and work
together on new creations. The actual mechanism used to route any given
"transaction" is dependent on the required response time for that
transaction. Those that are "urgent" or require a timely response are routed
via an appropriate network connection. The lower priority data replication
messages are batched and sent using a cheaper network route.
Software Products Company
- -------------------------
As part of a strategic planning study, analyzed various current and proposed
message/document interchange models to establish requirements for an
integrated messaging system, including analysis of transport mechanisms and
use of available communications software packages.
Major Software Products and Services Company
- --------------------------------------------
As part of a study to determine whether to centralize company development
and processing services, prepared requirements statement for installing an
integrated communications network to cover development, processing services
and corporate administration as well as telephone and fax services.
Network Services Provider
- -------------------------
As part of a technical due diligence for an acquisition, performed an
analysis to determine possible methods for connecting the newly acquired
customers to the client's VAN. Analysis included the possibility of
connecting the VAN to the packet network used by these customers. In this
way, the packet service could reroute the customer transactions to the VAN.
As customers were migrated from the packet network to the VAN, service on
the packet network would decrease and eventually would cease, at which time
the connection to the packet network would no longer be required.
Major Financial Institution
- ---------------------------
Designed and implemented a corporate-wide customer service network including
the use of small computers (replacing mainframes), leased lines, dial-in
backup units and other interconnect facilities for regional processing
centers.
<PAGE>
Appendix A-3
Martin Y. Silberberg Page 1
- --------------------------------------------------------------------------------
2521 Palisade Avenue Telephone: (718) 549-4901
Riverdale, New York 10463 Fax: (718) 549-4825
Resume of Professional Experience
Summary of Qualifications
- -------------------------
Extensive experience and skills in project organization and management, people
management, problem analysis, solution design and implementation, negotiation
for agreement and strategic planning. Proven ability to organize and conduct
complex projects with both technical and marketing components through the
application of skills in planning, organizing, communicating and staff
motivation.
Current Status
- --------------
Retired from IBM August 1991 to start my own consulting company, Creative
Management Applications, Inc. Company name was later changed to MYS Management
Services.
IBM Experience
- --------------
During an extensive career in IBM, I held a wide range of business management,
product marketing, application marketing, strategic planning, software
development and application development positions. Gained significant people and
project management experience and training; managed both small teams of
high-level staff professionals and development teams of up to 60 people; and
worked both field and headquarters organizations. My family and I lived in Japan
for three years with IBM. I also had considerable work experience with IBM
country staff and organizations in Canada, Australia, Asia and Latin America.
Among the major accomplishments, I would note the following:
- Implemented the IBM/InterBold Agreement on ATM marketing in Latin
America (1990/91)
- Developed a strategy for marketing IBM point-of-sale products in Latin
America (1990/91)
- Defined and implemented the strategy for efficient electronic
dissemination of marketing information, design tools and messaging
capability to customers in Latin America. This required management of
development teams in Toronto and Buenos Aires and coordination of
multiple in-country planning and installation activities. (1988/90)
- Managed the operations of the six software distribution centers serving
the Latin America and Asia Pacific countries. A particular challenge was
to prepare for the announcement of the AS/400, which had some unique
requirements. (1986/88)
- Developed and applied strategies for marketing high-volume products
(personal computers, small systems and terminals) in Latin America and
Asia Pacific. This included analyzing and adapting the brand marketing
techniques of such companies as Procter & Gamble and General Foods.
(1979/84)
<PAGE>
Appendix A-2
Page 2
- Managed the application development activities of a selected group of
specialists assigned to work in Japan in key industry application areas.
Was responsible for our efforts in the manufacturing, process,
distribution and public sector industries. (1973/76)
- Managed the development of several major successful software packages
for process control and computer simulation applications. (1966/73)
Creative Management Applications Inc. (CMA) and MYS Management Services
Experience
- --------------------------------------------------------------------------------
Since leaving IBM, I have been involved in a variety of projects consistent with
my company business scope and objectives. Especially noteworthy are the
following:
- Performed a detailed technical assessment of a software vendor's
development projects that were experiencing difficulties; recommended
and helped implement corrective actions; then designed and helped
implement a successful technical, marketing and organization plan for
the products.
- Took a lead role in the preparation of a comprehensive report for MITI
on the evolution and status of the U. S. packaged software industry.
- Took a lead role in development of a strategic plan for an IS
professional services firm.
- Developed and helped introduce/implement a set of position descriptions,
project procedures and documentation standards for a software and
services vendor that had outgrown its informal structure and was very
much in need of procedures, better internal communications and controls.
- Managed the requirements definition and product options evaluation for
automation of a medical group laboratory.
- Served as acting director of operations for a medical group, focusing on
improving its administrative (billing/accounting), management and
personnel procedures.
- Participated in multiple due diligence studies with particular emphasis
on the operations and strategic planning activities of the target
organizations.
Education
- ---------
- Dr. Engineering, Yale University, 1957
- Masters in Engineering, Yale University, 1951
- BEE, Polytechnic Institute of Brooklyn, 1950
- Extensive management training in IBM (people management, project
management, negotiation skills)
- Certificate in Management of Non-profit Organizations, New York
University Summer Institute, 1991
Personal
- --------
- Married, two daughters no longer at home; resident of New York State
since 1976; served in the U. S. Army from 1954-1956; good health
<PAGE>
Appendix A-4
OVERVIEW OF SPECIFICS, INC.
Specifics was founded in 1985 as a full-service market research and consulting
firm committed to providing the highest quality customized research studies for
clients in the Information & Communications Technologies (IT) Industry. Studies
include customer and employee satisfaction, concept testing, market
opportunities, advertising effectiveness, product and service positioning, value
pricing, lost sales analysis and due diligence.
Specifics' studies are tailored to fit clients' needs, test their hypotheses and
answer their business questions. Research methods include conversational
telephone surveys, written surveys, personal interviews and focus groups.
Specifics' educational and support services ensure that clients can exploit the
potential of our research.
Specifics continues to grow by focusing on the business-to-business issues of
the Information & Communications Technologies Industry and by helping clients
realize their business goals and maximize the value they deliver to
stockholders, customers and employees. The consulting services of the firm help
clients establish "best practices" in the customer- and employee-support
functions of their business.
Specifics' IT Industry management experience combined with the results of over
400 studies for over 150 companies provides in-depth understanding of the
factors that contribute to results. Additionally, clients can compare their
performance with similar firms from the Specifics database. Specifics is
committed to providing clients with clear, reliable, and actionable information
consistent with the highest standards of quality, ethics and professionalism in
the industry.
A partial listing of Specifics' clients includes:
Ajilon Database Consultants Melita International
AMS DA Consulting Metro Information Sys.
Atlantic Data Services D&B Software / GEAC Napersoft
Bell Atlantic / Decision I Decision Consultants Oracle
BMC Software Devon Consultant RCG
CBSI EMC Corporation Resumix
Ceridian / Usertech Harbinger RIMS
CAP Gemini America HBO & Company Scopus
CIBER Hyperion Software Software 2000
Computer Associates IMI Systems Sterling Commerce
Computer People Information America Sterling Software
COMSYS J.D. Edwards Texas Instruments
Compuware / CPU Keane / AGS TSI International
CSC / Infonet Lawson Utility Partners
Computer Task Group MCI Wonderware
<PAGE>
Appendix B-1
Information Provided List
-------------------------
1. Seer Consolidated Financial Statements-- 1997
2. Seer Corporate Strategy Overview: Solutions for Application Renewal --
July 1998
3. Seer Technologies Corporate Strategy: Building the New Way Forward With
Application Renewal for the Enterprise
4. Gartner Group Research Note on Seer HPS -- July 16, 1997
5. Seer 1995 Annual Report
6. Seer 1996 Annual Report
7. Seer 1997 Annual Report
8. Seer Marketing Materials -- Product Brief Seer*HPS*
9. Seer Technologies, Inc. Prospectus -- June 30, 1995
<PAGE>
Appendix B-2
People Interviewed
------------------
Seer
- ----
Steven Dmiszewicki, CFO (co-CEO)
Ted Venema, CTO (co-CEO)
Eileen Ibenhart, Vice President - Marketing
Mark Fagan, Director - EMEA Consulting
Bill McMurray, Director - U. S. and Asia/Pacific Sales and Services
Bruce Anderson, Board Director, Partner WCAS
IBM
- ---
Mary Maher, Director Strategic Planning, Core Bank
<PAGE>
Appendix C-1
Page 1
Descriptive Materials - Seer
----------------------------
Page
----
o Management Description for 1997 -- Annual Report 2
o Gartner Group Research Note -- 7/16/97 3
o Excerpt from Seer Corporate Strategy -- 7/98 4-6
These documents represent Seer's previous strategy and its proposed new
directions.
<PAGE>
Appendix C-1
Page 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
General
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. During fiscal year 1997, the Company announced its new
strategic direction, which when fully implemented will transition the Company
from a distributor of application development tools and middleware to a supplier
of enterprise componentware for selected vertical markets. Enterprise
componentware is a combination of application components-reusable, customizable
partial applications-and the infrastructure technologies that enable their
creation, customization, and assembly.
Seer's componentware offering is a suite of products and services that enables
Global 5000-sized companies to accelerate the development and delivery of
mission-critical enterprise applications needed to efficiently run their
businesses and maintain a crucial competitive edge. Seer's products also help
organizations protect their investment in existing legacy systems by enabling
them to link legacy applications with new applications going into production.
As part of its strategic transition from technology supplier to market-driven
componentware solutions provider, Seer is now also leveraging software assets it
already owns and may acquire in the future from outside sources, such as
customers and alliance partners. Seer's approach is to commercially package and
broker a library of application components for resale along with its
componentware infrastructure technologies.
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.
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 using both internal and external resources to identify, correct
or reprogram, and test systems for 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 Year 2000 compliance expense will be
material to the Company's results of operations.
The Company has three categories of revenue: software products, maintenance, and
services. Software products revenue is comprised primarily of fees from
licensing the Company's proprietary software products and, to a lesser extent,
from product development contracts. Maintenance revenue is comprised of fees for
maintaining, supporting, and providing periodic upgrades of the Company's
software products. Services revenue is comprised primarily of fees for
consulting and training services.
Consistent with the American Institute of Certified Public Accountants Statement
of Position 91-1, Software Revenue Recognition, the Company allocates a portion
of the software license fee to initial period maintenance when the maintenance
period is greater than three months. The remainder is recognized as license fee
revenue upon delivery of the software product to, and acceptance by, the
customer. Revenue from the initial maintenance period and subsequently priced
maintenance agreements is recognized ratably over the term of the agreement.
Consulting and training services revenue is recognized as the services are
performed.
<PAGE>
ADM
Applications Development
& Management Strategies
GartnerGroup Products, P-260-1509 Research Note
Continuous Services M. Blechar July 16, 1997
Appendix C-1
Page 3
Seer Releases HPS 5.4
Seer Technologies upgrades its Seer 7000 Windows-
based AD product and integrates it into its OS/2
-based enterprise AD product, HPS.
- --------------------------------------- ----------------------------------------
Core Topics Seer Technologies' Seer*HPS is a traditional
Applications Development: client/server, enterprise-integrated, model-driven
Componentware; Enterprise (COBOL, C) code generator. HPS is one of the best,
Applications most proven, enterprise-scalable applications
Development Technology development (AD) technologies in the marketplace.
Seer released its last update to its OS/2-based
Key Issue product, HPS v.5.3.2, on Aug. 20, 1996. On June
What strategies, 30, 1996, Seer added a second AD product, Seer
technologies, tools and 7000, a Windows-based development environment
vendors will best enable with less functionality than HPS v.5.3, and
the effective development primarily targeted toward client/server Windows
of enterprise-class deployment environments. Release 5.4, an upgrade
applications during the to Seer 7000 and phasing out of its name, gives
next five years? Windows-based customers nearly equal functionality
with v.5.3 customers. Another HPS release is
Strategic Planing planned for late 1997 to complete the merger
Assumption of products.
By 2001, at least 60 percent
of all new AD will be based
on assemblies of
componentware, increasing
both speed to market and the
ability to cope with change
(0.7 probability).
HPS v.5.4 Seer's short-term challenge is to overcome the
factors negatively impacting the entire
Development Environment traditional client/server AD tool market (see ADM
Client Platforms: OS/2 and Research Note SPA-260-1500, June 27, 1997), Seer's
Windows NT main area of revenue generation. Although
Repository/Server Platforms: proprietary, Seer's NetEssential product, used by
MVS, AIX, OS/2, Windows HPS, is one of the best intelligent middleware
NT and HP-UX brokers. Seer*HPS for the Internet provides a
Deployment Environment development environment for creating Web browser
Client Platforms: OS/2, Common Gateway Interface access to applications
Windows 3.1.1,95 and NT) through NetEssential. However, those looking for
and 3270 more fully developed Internet-centric solutions
Server Platforms: MVS (CICS should consider vendors like Bluestone, Haht or
or IMS), OS/2, AIX, NetDynamics. Although HPS has some limited
Windows NT, HP-UX AS/400, support for object orientation (OO), those
Sun Solaris and Tandem requiring an object-oriented fourth generation
NSK (4Q97) language (OO4GL) solution should consider vendor
Databases: MS SQL Server, Antares Alliance Group, Dynasty Technologies or
Oracle, DB2, DB2/2, Fort Software. Texas Instruments' Composer (due
DB2/6000, DB2/400, to be acquired by Sterling Software) remains
Informix, Sybase and CA Seer's main competitor in the traditional
Open Ingres
Middleware: NetEssential
(proprietary)
Communications: TCP/IP,
Names Pipes, LU2, PU6.2
and Banyan Vines
Note: Windows NT development
environment clients do not
generate OS/2 clients or
New 5.4 Release Highlights
<PAGE>
o C++ container-type AD tool space. Texas Instruments has more alliance
Active X controls partnerships and independent consultants, a larger
support customer base and more-rigorous model-driven AD.
o Distribution of Freeway Conversely, Seer has finance/banking market
across multiple MS SQL expertise and componentware, required less
Server devices modeling rigor, and has NetEssential.
o Year 2000 compliancy
o User-defined tool and
report extension
capabilities for
Freeway
o Tighter integration
between Freeway and host
repositories
o Simplified packaging and
installation.
<PAGE>
Appendix C-1
Page 4
Our differentiation:
To be successful in marketing and selling solutions in the global marketplace,
we must strive to differentiate our offerings as being unique and providing a
compelling value proposition. We believe our ability to leverage powerful and
proven enabling technologies - both our own software products and third party
products and application assets - together with our experienced consulting force
will give us a competitive edge because it enables us to tailor solution
packages within the context of the business problems we're addressing to meet
each customer's unique application renewal needs.
This means that we will:
1) Continue to enhance our enabling technology products in ways that help us
further differentiate our solutions as unique in the marketplace.
The functional extension to our enabling technologies that are needed to
support the delivery of effective application renewal solutions fall into
two primary categories:
o Opening our repository and back-end tools to support application
warehousing
Just as a data warehouse combines production data from a variety of
sources into a single location in order to provide a single,
consistent and manageable source for queries and reports, the
Application Warehouse combines development information from a
variety of interactive development environments (or IDEs) in order
to manage the development, building and deployment of applications
developed using the different languages supported by these IDEs.
In order to fully support the application renewal process, the
Application Warehouse will need to have the ability to import
existing native applications written in languages such as COBOL,
Java and Visual Basic. Once incorporated into the Application
Warehouse, these applications can then be easily maintained and
enhanced through Application Warehouse IDE adapters.
These adapters will connect with language-specific IDEs in a manner
that allows source code to be exported to these IDEs for
modification and re-imported once modification is complete. The
already existing powerful capabilities to build and deploy these
applications across multiple platforms will be enhanced to support
the handling of native language programs in addition to those
developed using HPS rules. (See Product Evolution Strategy and
Lexicon documents for more detail)
Page 5
SEER PROPRIETARY AND CONFIDENTIAL
<PAGE>
Appendix C-1
Page 5
o Expanding our network computing capabilities
Product enhancements for network computing (NC) will be focused
around an open client strategy designed to support a number of new
initiatives. Together these initiatives should provide a powerful
solution for companies moving to network computing.
The initiatives include generating client-side Java applications and
applets as well as allowing third-party Java and Web HTML
development environments to be used to develop all or part of the
client side of an application. The parts developed in native Java
could then also be stored and managed through the Application
Warehouse as indicated above.
In order to better support a variety of NC environments, our NC
strategy also calls for the support of other middleware solutions
such as CORBA and IBM's Component Broker. This, together with
browser-based Java applications and applets, provides a powerful
technical infrastructure for any company thinking of renewing their
applications through network computing. (See Product Evolution
Strategy and Lexicon documents for more detail)
We must also track and support the functional needs of strategic third
party products that are based on our technology, such as IBM's CoreBank
and Telenor's application. (See Product Evolution Strategy and Lexicon
documents for more detail.)
2) Develop consulting practices and grow our consulting staff and skills
inventory to support effective whole solution delivery
Specific practice areas will be need to be developed and expanded over
time to support the delivery of complete, high quality application
renewal solutions. Some of these include legacy application
re-engineering, internet enablement, and a broad spectrum of project
services.
Growing the consulting practices will be an on-going effort to
continually expand and enhance our skills inventory through training and
growing current consulting staff as well as expanding the staff by
adding new consultants with specialized areas of expertise such areas as
Java programming, e-commerce, knowledge of network computing and
middleware such as CORBA, COM and DCOM, and others.
3) Identify and add complementary technologies developed by third parties to
our enabling technology portfolio that our consultants can utilize and/or
that we can resell
4) Expand our methodology from its traditional new development, design and
planning orientation to include a renewal-oriented section that focuses on
synthesis and assimilation of disparate pieces
Page 6
SEER PROPRIETARY AND CONFIDENTIAL
<PAGE>
Appendix C-1
Page 6
5) Identify, evaluate and harvest viable components and "used assets" from
third parties
Components are also a part of our strategic direction. We intend to work
with our customers and other third parties to build up a catalogue of
available "used assets", or whole and partial applications that can add
value to our solution offerings.
We will pursue component opportunities through one of two business models:
the OEM model and the broker model. In the OEM model we provide enabling
technology and possibly consulting services to support the implementation of
applications or components developed using our enabling technology and
marketed by third parties, such as IBM's CoreBank.
In the broker model, we will identify application assets that may have
potential value and then our marketing and sales forces will facilitate and
assist in the resale of these assets between the original owner and
interested purchasers. As part of a component-based whole solution offering,
we will also provide enabling technologies and consulting services to help
companies customize and deploy the application asset.
Page 7
SEER PROPRIETARY AND CONFIDENTIAL
<PAGE>
Appendix C-2
Seer Financials
---------------
Page
----
o Income Statements for FY95, FY96 and FY97 2
o Balance Sheets for 9/30/96 and 9/30/97 3
<PAGE>
Appendix C-4
Seer Customers 10/1/97 - 6/30/98
--------------------------------
Customers are defined as those for whom revenues were recognized during the
first nine months of FY98.
Software Maintenance Service
............... ................ ................. ......................
Americas * * *
............... ................ ................. ......................
Europe * * *
............... ................ ................. ......................
Asia * * *
............... ................ ................. ......................
Total * * *
............... ................ ................. ......................
Note 1: Covers only 9 months; may be additional customers during 4QFY98
Note 2: Omitted very low value items -- typically those under $5,000
Note3: On a worldwide basis, there were * of the * services customers who
were not on maintenance
Note 4: On a worldwide basis, there were * of the * software products
customers who were not on maintenance
__________________________
* Confidential treatment requested.
<PAGE>
Appendix D
3 Pages
--------------------------------------------------------------
MYS MANAGEMENT SERVICES
--------------------------------------------------------------
Date: July 29, 1998
Subject: SEER Evaluation
Prepared By: Martin Y. Silberberg
The content of this report is based on telephone interviews with the following
SEER executives and written material they provided: Ted Venema, CEO/CTO, Office
of the President; Eileen Ibenhard, VP of World Wide Marketing; Mark Fagan, head
of EMEA Consulting and Bill McMurray, head of AmAP Sales/Services. The
interviews/discussions took place over the period July 20 through July 27, 1998.
CURRENT STATUS
The current status of and immediate outlook for SEER for the current fiscal
quarter, July through September, 1998, is the following:
- - Steps have been taken to significantly reduce costs by eliminating
ineffective/costly activities and by letting go of nonproductive staff.
According to numbers given to me by Eileen and Bill, costs have been reduced by
a current going rate of some $11 million/quarter. Channel marketing has been
eliminated completely ($3 million/quarter) and Marketing has had a major
reduction (from $4 million to $0.25 million/quarter). The former made no sense
given the nature of SEER's offerings and marketplace and the latter was clearly
at too high a level. In addition, a small development office in New York City
has been closed and also the sale offices in South America and Singapore which
were not cost effective.
- - Major changes have been made at the top management levels and organization
changes are in process.
These include the Office of the President, reporting structures, appointment of
Eileen Ibenhard as VP of Marketing, selection of Bill McMurray to head Americas
Sales/Services in addition to AP, and other changes at the next levels. Bill
plans major changes in the Americas.
<PAGE>
- - A strategy has been defined that addresses the current situation with regard
to changes in SEER's marketplace and that focuses on SEER's strengths.
An excellent description of this strategy is in a document prepared by Eileen
entitled "Corporate Strategy Overview - Solutions for Application Renewal",
dated July 1998. It is logically structured and identifies exposures and
dependencies as well as opportunities.
- - The top levels of management I interviewed agree with and are making plans to
implement consistent with the strategy. Staff in general appears to be on board.
This applies at both Corporate HQ and in the field. I was told that attrition of
quality Consulting Services and Sales staff and other valued employees has been
reduced.
- - Steps are being taken to "test" the logic of the strategy with customers.
This includes some one-on-one discussions with selected customers and a
presentation at a user's council teleconference held on Thursday, July 23. I
have asked Ted to try to get us a copy of the minutes of that meeting.
- - The outlook for the current quarter is positive.
Revenue is projected to be about $18 million and costs will be about $16 million
for this quarter. This would be a dramatic change, but not an indicator for the
long term. IBM's plan to announce Core Bank of course provides long term upside
potential, as does the possibility of selling or selling the rights to NTPA and
generating other OEM models.
EXPOSURES/DEPENDENCIES
Although all of the above is positive, I view the strategy and its
implementation as being in alpha/beta test of validity. I identified what I saw
as key exposures and dependencies during my discussions with Ted, Mark and Bill.
I was very pleased to later find many of these identified in the strategy
document by Eileen referenced above. She reconfirmed her understanding in my
discussion with her, which was the last of the four. I think this recognition of
realities is also quite positive.
My view of the issues is outlined below:
- - Technical feasibility still to be confirmed.
I don't think that opening up the HPS repository as described in the strategy
will require rocket science; nevertheless the development required is still in
the design/planning phase.
- - Market feasibility still to be confirmed.
SEER has almost certainly made proper identification of the factors that caused
their revenue to drop, but that doesn't ensure that customers will place orders
based on the new strategy/offerings.
<PAGE>
- - SEER credibility is an issue for acceptance.
Customers are very aware of SEER's recent financial problems and may be
reluctant to make a major investment with them for fear they won't be around for
the long term required. Some customers have already expressed that concern.
- - Staff to implement the strategy is not in place.
Attrition, although now reduced, has been high and some good people have been
lost from consulting and sales. They will have to be replaced and additional
skills required for the new strategy will have to be obtained through both
training and new hires. SEER credibility will be key for the latter.
- - The ability to obtain "used" assets is not certain.
This is an important part of the strategy and it isn't a given that customers
will want to make such assets available for use by their competitors.
- - The current organization is not optimum in my opinion.
A two-person corporate office as currently structured is ripe for conflict in
future. Moreover it conveys a feeling of being in transition, which is not good
for the credibility issue.
Bill McMurray will be running the Americas remotely from Sydney, Australia for
the foreseeable future. My impression is that he is a very competent individual,
but remote management poses serious challenges, especially for an area that has
been as troubled and done as poorly as the Americas.
BOTTOM LINE
Investment in SEER looks like a good gamble at current prices for the stock, but
it is a gamble. Several of the issues and concerns noted above could be
addressed/assessed fairly quickly to improve the likelihood of a positive
outcome.
<PAGE>
Appendix E
3 Pages
Preliminary Technical Review of Seer Technologies, Inc.
-------------------------------------------------------
Sid Dunayer - 31 July 1998
The following comments reflect data gathered during an on-site visit to Seer on
July 23, 1998. The primary source of all information was Ted Venema who was
candid in his answers. Despite being at Seer for only a year, he seemed quite
knowledgeable about how the product worked today, as well as how the new product
would be structured.
Development
o All development areas report to Al Nisbet, VP of Development. There are
three Development area managers, a QA manager, a Planning manager and a
Project Management manager. Each of the development areas is further
subdivided into development teams for individual parts of HPS. Each
development area also has a dedicated documentation staff. Seer has a
"handbook" that is used to guide new developers and technicians as to the
overall development process including the automated testing methods.
o The MVS development teams have a defined set of standards that developers
are expected to and do follow. The non-MVS teams do not have a corresponding
set of standards and the lack of same is noticeable in the code.
o Seer has a documented development plan that shows all scheduled development
and maintenance activities. There are also planning documents and business
case justifications for new features.
o Seer has an excellent document describing the * currently in place. They use
several different tools to perform this function and reportedly have an * .
Unfortunately, these procedures have been * to be delivered to customers.
These practices have reportedly been stopped and the quality of the
delivered product is better than in the past.
o HPS is "internationalized", but many parts of the code still do not support
* . * . Seer has produced a business case and plan to upgrade the entire
product to support * .
Technical Review
- ----------------
o The HPS development workbench runs under Window/NT or OS/2. There is also a
version that runs under MVS, but it is not the recommended platform. The
generated client code can run on Windows (NT, 95, 3.x), OS/2, or on 3270
terminals. The generated server code can run on MVS, Windows/NT, OS/2, AIX,
AS/400, Sun, HP, or Sinix (Siemens UNIX). There is
______________________
* Confidential treatment requested.
<PAGE>
only one client using the Sinix code. There also is the ability to generate
code for the Tandem, but this is not being marketed.
o HPS provides a total development environment for creating new client/server
applications. It contains Analysis Tools (data flow diagrams, process
diagrams, etc.), Design/Preparation Tools (window painting, window flow
diagrams, HPS rule editor, etc.), a proprietary Repository and Construction
Tools that do the actual code generation and partitioning. The Repository
must reside on a server (MVS, NT, OS/2 or AIX).
o The non-MVS portions of the product are all written in either C or C++. The
MVS portions are written in C, Assembler, Cobol and a small amount of PL/1.
o All current product code was reportedly developed at and is the property of
Seer.
o In general, there are copyright notice in the source code. * .
o Change control is performed using standard tools, such as PVCS.
o Seer has documentation and design notes for current and recent development
activities.
o Some source code for the MVS and non-MVS components were reviewed. While
this was not an extensive examination, it was sufficient to note that the
MVS code (all languages) was * . Clearly, the MVS programmers follow the
standards and produce * code. The non-MVS code was * .
Observations
- ------------
o Seer markets HPS to large, mainframe-centric companies that are doing new
client/server development. The current product is an all-or-nothing deal.
You can only use HPS tools for all aspects of development. Unfortunately,
this market will continue to shrink. The new strategy of "application
renewal" will expand this market somewhat by including those large companies
that wish to modernize what they currently have or can buy (what Seer refers
to as "used assets"). While this will indeed expand the target market, it
still primarily addresses a limited mainframe market.
o The HPS analysis and design tools are not as robust as competing tools from
other vendors. Seer recognizes these weaknesses and indicates that the new
strategy would allow them to effectively retire these tools in favor of
allowing the customers the use of more robust tools, like Visual Basic. This
is probably not a bad move as it would free development resource for other
projects, but Seer will have to continue to satisfy those customers that are
already using the HPS tools.
_________________________
* Confidential treatment requested.
<PAGE>
o The repository and construction tools are highly versatile and this is an
area where HPS apparently gets high marks. *
o There are currently two separate code bases for the Repository support, one
for MVS and one for non-MVS. The reasons for this are historical and have
much to do with the fact that the original MVS repository code * . Most of
this code has reportedly * . This would have the benefits of freeing
valuable development resources and ensuring consistent operation of the
Repository on all targeted platforms.
o Seer uses a proprietary runtime package, which they developed, to
implemented window painting on the various client platforms. * .
o Communication between the client and server components is realized using a
middleware layer known as NetEssentials (NETE) and developed at Seer. The
code is reportedly reliable and fairly robust. Despite this, customers have
indicated the desire to utilize alternative communications schemes such as
PCOM. Seer acknowledges that it is not a middleware company and is working
to allow the use of other methods.
o Seer also has a product called NTPA, a brokerage application written in BPS.
It has been around since the beginning, but only two copies have been sold.
Seer indicates that it is not in the brokerage application business and does
not know how to market and support NTPA directly. If the package is a
functioning product, there may be opportunities to help realize the value of
this asset.
_________________________
* Confidential treatment requested.
<PAGE>
Appendix F
5 Pages
SEER Technologies, Inc.
Customer Study by Specifics, Inc. - 8/1/98
This preliminary report is offered with the understanding that at least one more
interview will be conducted on Monday, August 3. Considering the small sample,
no conclusions can be drawn from this report. The comments, herein, are based
solely on the limited number of quantitative and qualitative responses.
A total of six interviews were conducted, 3 in the U.S. and 3 in Europe. The
following organizations were contacted.
*
*
*
*
*
*
The Sales Process
Three respondents were involved in the sales process and rated the SEER sales
team a * overall on a 9-point scale, where 1 is very poor and 9 is excellent.
The primary business driver for the sale is generally the same - a desire to
reduce the programming load and create systems that are easily maintained.
In all cases multiple vendors were evaluated and in each case the respondent
believes that the SEER products did the best overall job and provided the
broadest functionality. Issues or compromises that might have prevented a sale
were minimal, because the need to generate code that was useable and easily
maintainable were paramount. Mentions of system cost and the need for an
infrastructure to properly implement were more related to after sale concerns
than pre-sale. Customers tended to be surprised by the cost of implementation
and the learning curve.
For European customers, the importance of IBM to the selection received mixed
ratings -- from * but the importance of IBM to the ongoing use of the SEER
products varied more widely, from *. This factor must be weighed and balanced
for each customer, since each approach is likely to be unique. The impact of Y2K
activity on new product development is considered very little, somewhat, and a
lot with 2 respondents in each category respectively.
The Product
Generally, the product meets expectations. It meets the criteria for its
selection and the systems that are generated seem to be reliable and easy to
maintain. Most customers are satisfied with the
__________________________
* Confidential treatment requested.
<PAGE>
product plan to use it for new system development, and would recommend it to
colleagues interested in case tools. *
*.*.*.*.
The product, designed to be used with OS2, is used mostly to prepare programs to
be run on the mainframe or in a UNIX environment, primarily on RS6000 platforms.
The customers in this study use it almost exclusively for these platforms and
plan to migrate to NT, but do not have any operational systems on NT.
Ratings on product and support attributes are as follows:
Average
Product / Service Feature Rating
1. The software product, overall *
2. Quality of the software (lack of bugs) *
3. Performance of the software (speed) *
4. Overall functionality of the software *
(it does what it's supposed to do)
5. Ease of use and learning of the software *
6. Printed and / or on-line documentation *
7. SEER's technical support, overall *
8. Accessability of technical support *
9. Responsiveness of technical support *
These ratings are * than are typically seen in other customer satisfaction
studies. A couple of customers are * efforts of SEER, * .
The lack of good new product releases clouds the perceptions of the respondents
of SEER's ability to deliver new product strategies. The perception of SEER's
ability to deliver the Application Renewal Strategy is only * on a 9-point
scale. The perceived ability to deliver on the Network Computing Strategy is
only * ranging from * . Finally, the perception of SEER's ability to deliver the
Application Warehouse is generally positive given the present use of a
repository, but
_________________________
* Confidential treatment requested.
<PAGE>
respondents feel that it may not be delivered on time, or that there are not
enough resources or budget to deliver the warehouse as promised.
The average value of SEER products overall is rated a * on a 9-point scale, with
a range of * .
Consulting Services
The consulting services of SEER are viewed more favorably. The average value is
rated a * with a range of * . Consultants are seen as working hard with the
right professional attitude, and trying to solve problems with products that
need to be enhanced.
The ratings for consulting services attributes are:
Average
Consulting Service Rating
1. SEER's consulting staff overall *
2. Technical knowledge of the consulting staff *
3. Product / application knowledge of the *
consulting staff
4. Professionalism of the consulting staff *
The complexity of large systems, the customer commitment required for
implementation and the long learning curve are an opportunity for SM consulting
services. Responses show that customers are solving the implementation problem
by hiring former SEER staff, by complaining loudly enough to get attention and
by using IBM consultants. There is an expressed concern that the financial
hardships of the company have caused experienced resources to leave and they
have not been replaced. This limits the supply of talent for consulting.
Future Use of SEER
Most customers plan to use SEER products and consulting for new application
development in the future. * responded "yes" to this question, * said "maybe,"
and * said "no." The overriding concern is whether the company has the financial
backing, to be a viable entity. One customer is so committed to SEER that they
are dependent for their entire operation and they don't have a clear
alternative. This customer also believes that it is * .
Conclusions
SEER's biggest challenge, outside of getting its financial house in order, is to
restore customer confidence in the products and the company. This can only be
done through execution, not promises. Customers have evidenced some
improvements, e.g., in documentation, in the last year, but they are still wary
of SEER's ability to maintain the technical expertise required to handle
multiple new technologies and platforms, as required by their new strategies.
_____________________
* Confidential treatment requested.
<PAGE>
The priorities they place on functionality for SEER products are:
Priority
Functionality of SEER's products Rating
CORBA (Common Object Request Broker Architecture) *
JAVA Front-end *
Incorporate legacy code *
JAVA code generation *
Incorporate other languages, through open interface *
JAVA to COBOL *
__________________________
* Confidential treatment requested.
<PAGE>
MEMORANDUM
Date: August 3, 1998
To: Burt Grad
From: Joe Blumberg
Subject: SEER Technologies
A last interview was conducted today with * . The client was very knowledgeable
about SEER products and the proposed strategies. They have used the products for
more than five years and have developed in excess of 30 applications, including
three on NT.
The information and ratings provided by the respondent do not shed new light nor
substantially change any of the findings on the report submitted, however the
ratings were generally one or two points higher than the average reported, and
therefore will raise the overall average by approximately 0.2 points on all
reported averages.
This respondent is highly dependent on the * .
The one item that is influenced somewhat by this respondent is the priorities
for new functionality in SEER products. Adding these ratings to the mix closely
balances the priorities to put the * slightly higher on the priority scale.
Again, the small sample is not a good basis to draw conclusions, but it is an
indicator of customer reactions and perceptions.
______________________
* Confidential treatment requested.
<PAGE>
