PHOENIX INTERNATIONAL LTD INC, 424B4, 1996-07-03

PHOENIX INTERNATIONAL LTD INC
424B4, 1996-07-03
PREPACKAGED SOFTWARE

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<PAGE> 1
Filed Pursuant to Rule 424(b)(4)
PROSPECTUS Registration No. 333-03355

1,077,500 SHARES

[PHOENIX INTERNATIONAL LTD., INC. LOGO]

COMMON STOCK

Of the 1,077,500 shares of Common Stock, par value $0.01 per share (the
"Common Stock"), offered hereby, 670,000 shares are being sold by Phoenix
International Ltd., Inc. ("Phoenix" or the "Company") and 407,500 shares are
being sold by certain shareholders of the Company (the "Selling Shareholders").
See "Principal and Selling Shareholders." The Company will not receive any
proceeds from the sale of shares by the Selling Shareholders other than the
receipt of $1,319,000 in payment of stock subscriptions receivable plus accrued
interest thereon of approximately $159,000 through the Closing Date (as defined
herein) from one of the Selling Shareholders.

Prior to this offering (the "Offering"), there has been no public market
for the Common Stock. See "Underwriting" for the factors considered in
determining the initial public offering price. The Common Stock has been
approved for listing on the Nasdaq Stock Market's National Market (the "Nasdaq
National Market") under the symbol "PHXX."

Immediately after the Offering, the present directors and executive
officers of the Company and their respective affiliates will beneficially own in
the aggregate approximately 57.1% of the outstanding shares of Common Stock.

SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.

---------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDERS(2)
- ----------------------------------------------------------------------------------------------------
Per Share......................... $12.00 $0.84 $11.16 $11.16
- ----------------------------------------------------------------------------------------------------
Total(3).......................... $12,930,000 $905,100 $7,477,200 $4,547,700
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>

(1) The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting estimated expenses of $927,000 payable by the Company.
(3) Certain of the Selling Shareholders have granted the Underwriters a 30-day
over-allotment option to purchase up to 161,625 additional shares of Common
Stock on the same terms and conditions as set forth above. If all such
shares are purchased by the Underwriters, the total Price to Public will be
$14,869,500, the total Underwriting Discount will be $1,040,865, the total
Proceeds to the Company will be $7,477,200 and the total Proceeds to
Selling Shareholders will be $6,351,435. See "Principal and Selling
Shareholders" and "Underwriting."

---------------------

The shares of Common Stock are offered subject to receipt and acceptance by
the several Underwriters, to prior sale and to the Underwriters' right to reject
orders in whole or in part and to withdraw, cancel or modify the offer without
notice. It is expected that certificates for the shares of Common Stock will be
available for delivery on or about July 8, 1996.

---------------------

[J.C. Bradford & Co. Logo] [Advest, Inc. Logo]

July 1, 1996
<PAGE> 2

[INSERT ARTWORK AS DETERMINED BY COMPANY AND UNDERWRITERS]

Graphic of Company logo on inside front
cover.

Fold-out graphic
which displays the
client/server banking environment.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
---------------------

FOLLOWING CONSUMMATION OF THE OFFERING, THE COMPANY INTENDS TO FURNISH ITS
SHAREHOLDERS WITH ANNUAL REPORTS CONTAINING AUDITED FINANCIAL STATEMENTS AND AN
OPINION THEREON EXPRESSED BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS AND WITH
QUARTERLY REPORTS CONTAINING UNAUDITED FINANCIAL INFORMATION FOR THE FIRST THREE
QUARTERS OF EACH FISCAL YEAR.
<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. Prospective investors should carefully
consider the matters set forth under "Risk Factors" herein. Unless the context
otherwise indicates, (i) the information in this Prospectus assumes no exercise
of the Underwriters' over-allotment option and (ii) all share and per share data
has been restated to reflect (a) a 2.3231-for-one stock split in the form of a
132% stock dividend on all shares of capital stock outstanding on May 6, 1996
and (b) a recapitalization on the closing date of the Offering (the "Closing
Date") in which all outstanding shares of the Company's five classes of common
stock (designated as A through E) will be converted into Common Stock on a share
for share basis. All references to "Phoenix" or the "Company" include Phoenix
International Ltd., Inc. and its subsidiary.

This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ materially from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors."

THE COMPANY

Phoenix International Ltd., Inc. ("Phoenix" or the "Company") designs,
develops, markets and supports highly adaptable, enterprise-wide client/server
application software for the financial services industry, with a primary focus
on middle market banks. Phoenix combined (i) its management's extensive
experience with banking and banking software systems, (ii) input from a
consortium of financial institutions (the "U.S. Bank Partners") concerning bank
operational and flexibility needs and (iii) the most recent advances in client/
server technology to design and develop an innovative new banking software
system. The Phoenix Retail Banking System (the "Phoenix System"), through its
client/server technology, addresses many of the deficiencies of the mainframe-
and minicomputer-based legacy systems on which most banks currently operate by
allowing financial institutions to integrate data into a comprehensive
management information network. Like legacy systems, the Phoenix System supports
all core areas of bank data processing, including system administration, account
processing, nightly processing, teller functions, holding company accounting and
budgeting. Unlike legacy systems, the Phoenix System is a fully integrated
system that provides significant advantages in three critical areas: (i)
customer relationship management; (ii) management decision support; and (iii)
bank product creation and support.

Since its formation in January 1993, the Company has entered into 28
ongoing contracts with banks or bank holding companies for installation of the
Phoenix System supporting 29 United States and eight international financial
institutions. As of June 30, 1996, the Phoenix System has been fully implemented
and is operating in 18 of these 37 financial institutions. The Company had total
revenues of approximately $5.0 million and net income of approximately $554,000
for the fiscal year ended December 31, 1995 and total revenues of approximately
$1.8 million and net income of approximately $142,000 for the quarter ended
March 31, 1996.

The Company's Chief Executive Officer, Bahram Yusefzadeh, has over 27 years
of experience in the banking software industry. In addition, the Company has
assembled a senior management team with over 120 years of experience in the
banking and software industries. In the 1970s, Mr. Yusefzadeh co-founded Nu-Comp
Systems, Inc. and led its development of one of the first integrated legacy core
banking systems, the Liberty Banking System, which at one time was used by over
260 banks. Mr. Yusefzadeh founded Phoenix for the purpose of developing and
marketing a new generation of integrated banking software applications using
client/server technology that would replace less flexible and technologically
dated legacy systems. The Phoenix System's development was the result of a joint
effort among the Company's management, Hewlett-Packard Company
("Hewlett-Packard") and the U.S. Bank Partners. In addition, the U.S. Bank
Partners provided a substantial portion of the Company's initial capital.

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<PAGE> 4

banks are highly regulated, and they historically have provided a limited range
of products and faced limited competition. These banks typically used legacy
computer systems that generally only processed transactions and provided a
general ledger. Today, the competitive landscape has changed dramatically as
diversified financial service providers compete directly with middle market
banks. As a result, these banks need detailed information about their
institutions and customers in order to develop and market profitable new
products and services and to expand customer relationships.

The Phoenix System addresses this increasing need for detailed information
by allowing financial institutions to integrate data into a comprehensive
management information network that is (i) readily accessible throughout the
entire financial institution, (ii) flexible with shared information and (iii)
easily interfaced with other software systems. The Company believes that the
Phoenix System is easy to use and simple to learn, which enables a bank to
provide higher quality customer service with reduced operating and training
costs. As a result of these benefits, the Company believes that its customers'
competitive positions are enhanced. Phoenix believes that very few middle market
banks have fully realized the potential benefits offered by client/server
technology due to the small number of true client/server systems currently
available to banks.

The Company's primary business objective is to become a leading supplier of
enterprise-wide client/ server application software for the financial services
industry by pursuing the following strategies:

- Maintain Technology Leadership and Enhance Product Functionality. The
Company believes that the Phoenix System is the most advanced
client/server computing solution for banks because it incorporates new
open technologies and standards, such as client/server architectures,
relational databases, graphical user interfaces and advanced application
development tools. Phoenix intends to maintain its leadership position by
integrating new technologies, adding new applications, enhancing existing
applications and increasing functionality.

- Focus on United States Middle Market Banks. The Company intends to
continue its marketing focus in the United States on the approximately
3,800 middle market banks with asset sizes ranging from $100 million to $1
billion. The Company believes that most middle market banks are
technologically sophisticated, seek banking software applications that
support strategic objectives and have the capital and human resources to
finance and effectively use advanced technological solutions.

- Expand International Market. Phoenix believes that many international
financial institutions are seeking technology as a means to offer a
broader array of financial products and services to meet the increasing
demand for retail banking services in the international market. Phoenix
has designed its software products to incorporate numerous international
features and intends to continue enhancing functionality.

- Increase Worldwide Distribution. The Company plans to continue expanding
its distribution both in the United States and internationally by
increasing its sales and implementation forces and seeking additional
strategic alliances. In March 1996, Phoenix and Unisys Corporation
("Unisys") entered into a software license agreement (the "Unisys
Agreement") whereby Unisys exclusively markets the Phoenix System to banks
in Central and South America, Mexico, the Caribbean and Bermuda. In April
1996, the Company and Computer Systems Associates (Nigeria) Limited
("CSA") entered into a remarketing agreement (the "CSA Agreement") whereby
CSA exclusively markets the Phoenix System to banks in certain countries
of Africa and non-exclusively markets the Phoenix System to banks in the
Republic of South Africa.

- Maximize Recurring Revenues. Phoenix signs customers to long-term
license agreements and charges annual service fees which are generally
15-20% of the base license fee. As the asset size of a bank increases or
as branches are added, customers pay additional incremental license fees
and increased service fees over the life of the license agreement.
Additionally, the Company's disaster recovery service is a separate
five-year contract which has an initial implementation fee and annual
service fees. Phoenix plans to continue to build this base of recurring
revenue and to develop additional sources of recurring revenue.

- Leverage Existing Customer Base and Broaden Primary Market. The Company
intends to expand its current bank customer relationships by providing
additional products and services and by licensing the Phoenix System to
additional bank subsidiaries of existing clients. In addition, the Company
intends to use its implemented customer base as an important source of
references, which are vital in marketing

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to the financial services industry. In 1997, the Company also intends to
expand the market for the Phoenix System to include banks with asset sizes
greater than $1 billion by increasing product functionality and
flexibility. Furthermore, in 1997 the Company intends to develop a product
specifically for banks with assets of less than $100 million which
operates on the Microsoft Windows NT platform (the "NT Version").

- Pursue Complementary Acquisitions. Phoenix intends to leverage its
position as a provider of client/ server technology to financial
institutions by pursuing strategic acquisitions of providers of
complementary technologies, products and services, such as companies that
offer legacy retail banking systems. The Company intends to pursue such
acquisitions in order to more rapidly expand the Company's customer base
by converting the acquired customers to the Phoenix System. Management
believes such strategic acquisitions will permit the Company to expand its
customer base, enter new markets, provide outsourcing alternatives and
acquire additional products and applications.

The Company was incorporated in Florida in January 1993. The Company's
principal offices are located at 900 Winderley Place, Suite 140, Maitland,
Florida 32751, and its telephone number is (407) 667-0033.

THE OFFERING

Common Stock offered by the Company... 670,000 shares

Common Stock offered by the Selling
Shareholders........................ 407,500 shares

Common Stock to be outstanding after
the Offering.......................... 3,832,599 shares(1)

Use of Proceeds....................... To fund product development; to
expand sales, marketing and
implementation resources; to retire
certain outstanding indebtedness;
and for general corporate purposes,
including the possible acquisition
of complementary technologies,
products and services. See "Use of
Proceeds."

Nasdaq National Market symbol......... PHXX
- ---------------

(1) Excludes 603,459 shares of Common Stock issuable upon exercise of stock
options outstanding as of June 30, 1996 at exercise prices ranging from
$4.30 to $12.00 per share.

RISK FACTORS

In addition to the other information contained in this Prospectus,
prospective investors should consider carefully a number of factors that could
affect the Company's operations and financial results. Such factors include,
among others, the Company's limited operating history, ability to realize
growth, dependence on new products, expansion of distribution channels,
dependence on a single product line, concentration of stock ownership and
certain anti-takeover defenses. See "Risk Factors" beginning on page 7 for a
discussion of certain factors that should be considered by prospective
purchasers of the Common Stock offered hereby.

5
<PAGE> 6

SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA

<TABLE>
<CAPTION>
ELEVEN
FISCAL YEARS ENDED MONTHS THREE MONTHS ENDED
-------------------------- ENDED ------------------------
JANUARY 31, JANUARY 31, DECEMBER 31, MARCH 31, MARCH 31,
1994 1995 1995(1) 1995 1996
----------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
License fees and other............... $ 30,000 $ 57,776 $ 3,467,547 $ -- $1,127,607
Implementation, customer and software
support and other service fees..... -- 369,711 1,556,164 90,745 653,723
----------- ----------- ------------ ---------- ----------
Total revenues................ 30,000 427,487 5,023,711 90,745 1,781,330
Expenses:
Cost of license fees and other....... -- -- 375,783 -- 131,029
Cost of implementation, customer and
software support and other service
fees............................... 104,818 637,427 1,246,886 222,822 457,196
Sales and marketing.................. 96,911 358,948 983,290 224,839 268,818
General and administrative........... 225,458 981,930 1,058,190 287,072 358,260
Product development.................. 621,373 1,362,780 654,797 60,272 299,067
----------- ----------- ------------ ---------- ----------
Total expenses................ 1,048,560 3,341,085 4,318,946 795,005 1,514,370

Other income (expense):
Interest income...................... 3,603 26,610 121,815 29,607 28,647
Interest expense..................... -- (19,366) (12,060) (6,590) (1,081)
Other income (expense)............... 1,815 75,989 (4,252) 75,270 --
----------- ----------- ------------ ---------- ----------
Income (loss) before income taxes...... (1,013,142) (2,830,365) 810,268 (605,973) 294,526
Income tax expense..................... -- -- 255,999 -- 153,000
----------- ----------- ------------ ---------- ----------
Net income (loss)...................... $(1,013,142) $(2,830,365) $ 554,269 $ (605,973) $ 141,526
============ ============ ============ ========== ==========
Net income (loss) per share(2)......... $ (0.51) $ (1.11) $ 0.17 $ (0.20) $ 0.04
Weighted average shares
outstanding(2)....................... 1,971,573 2,560,151 3,235,532 3,076,813 3,298,444

OTHER DATA:
Total product development
expenditures(3)...................... $ 621,373 $ 1,455,781 $ 1,788,172 $ 364,935 $ 612,346
Total personnel(4)..................... 23 48 87 52 93
Implemented customers(5)............... 0 2 12 2 14
</TABLE>

<TABLE>
<CAPTION>
AT
--------------------------- AT MARCH 31, 1996
JANUARY 31, DECEMBER 31, -----------------------------
1995 1995 ACTUAL AS ADJUSTED(6)
----------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)........................ $(2,156,814) $(2,263,338) $(2,338,673) $ 5,530,051
Total assets..................................... 1,726,511 3,228,289 3,495,641 11,364,365
Long-term obligations............................ -- -- -- --
Accumulated deficit.............................. (3,843,507) (3,289,238) (3,147,712) (3,147,712)
Total shareholders' equity (deficit)............. (1,619,412) (568,102) (376,576) 7,492,148
</TABLE>

- ---------------

(1) During 1995, the Company changed its fiscal year end from January 31 to
December 31. Accordingly, the consolidated financial statements for the
period ended December 31, 1995 include only eleven months of operations.
However, the information presented for the quarter ended March 31, 1995
consists of three months, including January 1995.
(2) See Note 1 of Notes to Consolidated Financial Statements.
(3) The total of capitalized software development costs and product development
expenses.
(4) All personnel, including contract workers and part-time employees.
(5) Customers using the Phoenix System to support daily operations.
(6) Adjusted to reflect the sale of 670,000 shares of Common Stock offered by
the Company hereby at the initial public offering price of $12.00 per share,
the receipt of approximately $1,319,000 from Mr. Yusefzadeh for payment of
stock subscriptions receivable due from Mr. Yusefzadeh and his affiliate and
the application of the estimated net proceeds therefrom as described under
"Use of Proceeds."

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<PAGE> 7

RISK FACTORS

In addition to the other information in this Prospectus, prospective
investors should carefully consider the following risk factors in evaluating an
investment in the Common Stock offered hereby.

HISTORY OF RECENT LOSSES; LIMITED OPERATING HISTORY

Phoenix was incorporated in January 1993 but did not begin shipping
nondevelopment versions of its products until June 1995, and it incurred
substantial losses for the quarters ended March 31, September 30, and December
31, 1995. As of June 30, 1996, the Company had only 19 fully implemented
customers. The Company's limited operating history makes it difficult to predict
future operating results. The Company's expense levels are based, in part, on
its expectations as to future revenues. If revenue levels are below expectations
or if the Company is unable or unwilling to reduce expenses proportionately,
operating results will be adversely affected. Therefore, there can be no
assurance that Phoenix will be profitable on a quarterly or annual basis. At
December 31, 1995, the Company had net operating loss carryforwards of $2.8
million available to offset future taxable income, as well as $111,000 of
research and development credit carryforwards and $514,000 of foreign tax credit
carryforwards. A valuation allowance of $1.7 million against deferred tax assets
resulting from the net operating loss and tax credit carryforwards and other tax
benefits has been recorded because management believes it is more likely than
not that the deferred tax assets for which the valuation allowance has been
recorded will not be realized. The Company's prospects must be considered in
light of the risks, expenses and difficulties frequently encountered by
companies in their early stages of development, particularly companies in new
and rapidly evolving markets. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements and the related Notes thereto.

ABILITY TO CONTINUE AND MANAGE GROWTH

Phoenix has experienced significant growth in its operations. The Company's
success will depend upon its ability to continue product development; upgrade
its technologies and commercialize products and services utilizing such
technologies; respond to competitive developments; expand its sales, marketing
and implementation forces; enter into sales agency and reseller agreements for
both United States and international markets; and attract, train, motivate and
retain management and technical personnel on a timely basis. The Company's
growth will also require the Company to continue to improve its financial and
management controls and its reporting systems and procedures. The Company's
failure to do so could have a material adverse effect upon the Company's
business, operating results and financial condition. See "Business."

DEPENDENCE ON NEW PRODUCTS AND RAPID TECHNOLOGICAL CHANGE; RISK OF PRODUCT
ERRORS

The client/server application software market is characterized by rapid
technological change, frequent new product introductions and evolving industry
standards. The introduction of products embodying new technologies and the
emergence of new industry standards can render existing products obsolete and
unmarketable in short periods of time. The Company expects new products and
services, and enhancements to existing products and services, to be developed
and introduced by others, which will compete with the products and services
offered by the Company. The life cycles of the Company's products are difficult
to estimate. The Company's future success will depend upon its ability to
enhance its current products and to develop and introduce new products that keep
pace with technological developments and emerging industry standards and address
the increasingly sophisticated needs of its customers. There can be no assurance
that Phoenix will be successful in developing and marketing new products or
product enhancements that meet these changing demands, that Phoenix will not
experience difficulties that could delay or prevent the successful development,
introduction and marketing of these products or that its new products and
product enhancements will adequately meet the demands of the marketplace and
achieve market acceptance. Historically, the Company's product development
efforts have been limited due to the Company's limited financial resources.
Phoenix plans to introduce and market several new products which will be subject
to significant technical risks. In the past, Phoenix has experienced delays in
the commencement of commercial shipments of new products and enhancements. If
Phoenix is unable to develop and introduce new products or product enhancements
in a

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timely manner, or if a new release of the Phoenix System or a new product does
not achieve market acceptance, the Company's business, operating results and
financial condition will be materially adversely affected.

Software products as complex as those offered by Phoenix may contain
undetected errors or failures when first introduced or when new versions are
released. Phoenix previously has discovered software errors in certain of its
new products and enhancements after their introduction and has experienced
delays and lost revenues during the periods required to correct these errors.
There can be no assurance that errors will not be found in new products or
releases after commencement of commercial shipments, resulting in loss or delay
in market acceptance, which could have a material adverse effect upon the
Company's business, operating results and financial condition. See
"Business -- Strategy" and "-- Product Development and New Products."

INTENSE COMPETITION

The financial institutions software market is intensely competitive,
rapidly evolving and subject to rapid technological change. Competitors vary in
size and in the scope and breadth of the products and services offered. Phoenix
encounters competition from a number of sources, including FiServ, Inc., Bisys,
Inc., Marshall & Isley Corp., Electronic Data Systems Corp., Jack Henry &
Associates, Inc., ALLTEL Information Services, Inc., EastPoint Technology, Inc.
and Perot Systems Corp., which all offer core retail software systems to the
financial institutions industry. In addition, Phoenix expects additional
competition from other established and emerging companies as the client/server
application software market continues to develop and expand. Phoenix also
expects that competition will increase as a result of software industry
consolidations including particularly the acquisition of any of the above named
companies or any of the client/server based retail banking system providers by
one of the larger service providers to the financial services industry. For
example, M&I Data Services, a division of Marshall & Isley Corp., recently
announced an agreement to acquire EastPoint Technology, Inc., a provider of
client/server technology. Some of the Company's current, and many of the
Company's potential, competitors have longer operating histories, greater name
recognition, larger customer bases and significantly greater financial,
personnel, engineering, technical, marketing and other resources than the
Company. As a result, they may be able to respond more quickly to new or
emerging technologies and changes in customer requirements or to devote greater
resources to the development, promotion and sale of their products than the
Company. In addition, current and potential competitors have established or may
establish cooperative relationships among themselves or with third parties to
increase the ability of their products to address the needs of the Company's
prospective customers. Accordingly, it is possible that new competitors or
alliances among competitors may emerge and rapidly acquire significant market
share. The Company expects that the financial institutions software market will
continue to attract new competitors and new technologies, possibly involving
alternative technologies that are more sophisticated and cost effective than the
Company's technology. There can be no assurance that Phoenix will be able to
compete successfully against current or future competitors or that competitive
pressures faced by Phoenix will not materially adversely affect its business,
operating results and financial condition. See "Business -- Competition."

CONSOLIDATION IN THE FINANCIAL INSTITUTIONS INDUSTRY

Merger and acquisition activity has been widespread in the financial
institutions industry in recent years and is expected to continue in future
years. As a result, the industry has experienced consolidation on a large scale,
and this consolidation has had and will continue to have the effect of reducing
the number of potential customers of the Company. Any significant increase in
the level of such consolidation could adversely affect the Company's business,
operating results and financial condition. See "Business -- Strategy" and
"-- Target Markets."

EXPANSION OF SALES FORCE, IMPLEMENTATION FORCE AND INDIRECT DISTRIBUTION
CHANNELS

Phoenix will be required to hire additional sales and implementation
personnel in 1996 and beyond if Phoenix is to achieve significant revenue growth
in the future. Competition for such personnel is intense, and there can be no
assurance that Phoenix will be able to retain its existing sales and
implementation personnel or

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<PAGE> 9

to attract, assimilate or retain additional highly qualified sales or
implementation personnel in the future. If Phoenix is unable to hire such
personnel on a timely basis, the Company's business, operating results and
financial condition could be materially adversely affected.

An integral part of the Company's strategy is to develop the marketing
channel of value added resellers ("VARs") and agents and to increase the
proportion of the Company's customers licensed through these channels, which
will enable the Company to offer its services to a larger customer base than the
Company could otherwise reach through its direct marketing efforts.
Consequently, the Company's success depends in part on the ultimate success of
these sales relationships and on the ability of these VARs and agents to market
effectively the Company's products. Although all of the Company's revenues in
1995 came from direct sales channels, the Company is currently investing, and
intends to continue to invest, significant resources to develop indirect
distribution channels. There can be no assurances that Phoenix will be able to
attract or retain VARs and agents that will be able to market the Company's
products effectively and that will be qualified to provide timely and
cost-effective customer support and service. In addition, the Company's current
agreements with VARs and agents may not be exclusive and may be terminated under
certain circumstances by either party without cause, and certain of the
Company's VARs and agents may offer competing product lines. Therefore, there
can be no assurance that any VAR or agent will continue to represent the
Company's products or to represent the Company's products effectively. Gross
margins and composition of revenues and expenses may vary depending on whether a
sale was made directly by the Company or by a VAR or agent. The inability to
recruit or retain important VARs or agents or any gross margin erosion as a
result of dealing with such third parties could adversely affect the Company's
business, operating results and financial condition. See "Business -- Strategy"
and "-- Sales and Marketing."

EXPANSION OF INTERNATIONAL SALES

International sales represented approximately 70% of the Company's revenues
for the 11 months ended December 31, 1995. Phoenix believes that its continued
growth and profitability will require expansion of its international operations.
Accordingly, Phoenix intends to continue to expand its international activities,
including its strategic alliances, and to enter additional foreign markets,
which will require significant management attention and financial resources. To
date, the Company has only limited experience in marketing and distributing its
products and services internationally. In order to successfully expand
international sales in 1996 and subsequent periods, Phoenix must successfully
implement its recent strategic alliances with Unisys and CSA, hire additional
sales and implementation personnel and recruit additional international
resellers. To the extent that Phoenix is unable to do so, the Company's growth
in international sales will be limited, and the Company's business, operating
results and financial condition could be materially adversely affected. In
addition, there can be no assurance that Phoenix will be able to maintain or
increase international market demand for the Company's products.

The Company's international sales are currently denominated in United
States dollars. An increase in the value of the United States dollar relative to
foreign currencies could make the Company's products more expensive and,
therefore, potentially less competitive in those markets. Additionally, risks
inherent in the Company's international business activities generally include
unexpected changes in regulatory requirements, tariffs and other trade barriers,
costs of localizing products for foreign countries, lack of acceptance of
localized products in foreign countries, longer accounts receivable payment
cycles, difficulties in managing international operations, political
instability, potentially adverse tax consequences, restrictions on the
repatriation of earnings and the burdens of complying with a wide variety of
foreign laws and regulations. In addition, the laws of some foreign countries do
not protect the Company's proprietary rights to as great an extent as do the
laws of the United States. There can be no assurance that such factors will not
have a material adverse effect on the Company's future international sales and,
consequently, the Company's business, operating results and financial condition.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business -- Strategy" and "-- Sales and Marketing."

9
<PAGE> 10

DEPENDENCE ON SINGLE PRODUCT LINE

The Company's revenues are derived from two primary sources: (i) license
fees for software products; and (ii) fees for a full range of services
complementing its products, including implementation services, interface
services and customer and software support services. All of these fees are
derived from the licensing of the Company's principal product, the Phoenix
System. Broad acceptance of the Phoenix System by middle market banks is
critical to the Company's future success. In addition, the Company's future
financial performance will depend in part on the successful development,
introduction and customer acceptance of new and enhanced versions of the Phoenix
System and other products. A decline in demand for, or failure to achieve broad
market acceptance of, the Phoenix System or any enhanced version as a result of
competition, technological change or otherwise, will have a material adverse
effect on the business, operating results and financial condition of the
Company. See "Business -- Strategy," "-- The Phoenix System," "-- Product
Development and New Products" and "-- Competition."

DEPENDENCE UPON KEY PERSONNEL

The Company's future performance depends in significant part upon the
continued service of its executive and senior management and key technical,
implementation and sales personnel. The loss of the services of Mr. Yusefzadeh
or Mr. Reichard or one or more of the Company's other senior officers or key
technical, implementation or sales personnel could have a material adverse
effect on the Company's business, operating results and financial condition. The
Company's future success also depends on its continuing ability to attract and
retain highly qualified managerial, technical, implementation and sales
personnel. Competition for such personnel is intense, and there can be no
assurance that Phoenix will be able to retain its key managerial, technical,
implementation and sales employees or to attract, assimilate or retain other
highly qualified managerial, technical, implementation and sales personnel in
the future. The Company has entered into employment agreements with
substantially all of its executive and senior management and intends to enter
into employment agreements with its remaining executive and senior management.
In addition, the Company maintains $1.0 million in key man life insurance on Mr.
Yusefzadeh. See "Business -- Sales and Marketing" and "Management -- Employment
Agreements."

DEPENDENCE ON THIRD-PARTY TECHNOLOGY

The Phoenix System incorporates technology developed and owned by third
parties. Consequently, Phoenix must rely upon third parties to develop and
introduce technologies that enhance the Company's current products and enable
Phoenix, in turn, to develop its own products on a timely and cost-effective
basis to meet changing customer needs and technological trends in the financial
services software industry. The Phoenix System uses a relational database
technology known as Sybase that the Company licenses from Sybase, Inc. Sybase,
Inc. is currently the sole provider of this database software, and Phoenix
currently would not be able to license the Phoenix System to its customers
without using this software. Furthermore, the license between Sybase, Inc. and
the Company is nonexclusive, and this technology has been licensed to numerous
other companies. Any impairment or termination of the Company's relationship
with any licensor of third-party technology would force Phoenix to find other
developers on a timely basis or develop its own technology and could have an
adverse effect on the Company's business, operating results and financial
condition. There can be no assurance that Phoenix will be able to obtain the
third-party technology necessary to continue to develop and introduce new and
enhanced products, that Phoenix will obtain third-party technology on
commercially reasonable terms or that Phoenix will be able to replace
third-party technology in the event such technology becomes unavailable,
obsolete or incompatible with future versions of the Company's products. See
"Business -- Technology."

DEPENDENCE ON PROPRIETARY TECHNOLOGY; RISKS OF INFRINGEMENT

The Company's success is heavily dependent upon the Phoenix System's
architecture and design. Phoenix relies primarily on a combination of copyright
and trademark laws, trade secrets, confidentiality procedures and contractual
provisions to protect its proprietary rights. Phoenix seeks to protect its
software, documentation and other written materials under trade secret and
copyright laws, which afford only limited

10
<PAGE> 11

protection. Phoenix presently has no patents or patent applications pending.
Despite the Company's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy aspects of the Company's products or to obtain and
use information that Phoenix regards as proprietary. Policing unauthorized use
of the Company's products is difficult, and while Phoenix is unable to determine
the extent to which piracy of its software products occurs, such piracy can be
expected to be a persistent problem, particularly in foreign countries, where
the laws do not protect the Company's proprietary rights to as great an extent
as do the laws of the United States. There can be no assurance that the
Company's means of protecting its proprietary rights will be adequate or that
the Company's competitors will not develop similar technology independently.

Phoenix is not aware that any of its products infringe the proprietary
rights of third parties. There can be no assurance, however, that third parties
will not claim infringement by Phoenix with respect to current or future
products. Phoenix expects that software product developers will increasingly be
subject to infringement claims. Any such claims, with or without merit, could be
time-consuming, result in costly litigation, cause product shipment delays or
require Phoenix to enter into royalty or license agreements or cause the Company
to discontinue the use of the challenged tradename, service mark or technology
at potentially significant expense to the Company associated with the marketing
of a new name or the development or purchase of replacement technology, all of
which could have a material adverse effect on the Company. Such royalty or
license agreements, if required, may not be available on terms acceptable to the
Company, or at all, which could have a material adverse effect upon the
Company's business, operating results and financial condition. See
"Business -- Intellectual Property and Other Proprietary Rights."

DEPENDENCE ON GROWTH IN THE CLIENT/SERVER MARKET

Substantially all of the Company's revenues have been attributable to
licenses of the Phoenix System, which is utilized in client/server computing
environments. This product is currently expected to account for substantially
all of the Company's future revenues. Although the use of client/server
technology has grown in recent years, the client/server market is still an
emerging market. The Company's future financial performance will depend in large
part on continued growth in the number of financial institutions installing
client/server technology. If the client/server market fails to grow or grows
more slowly than Phoenix currently anticipates, the Company's business,
operating results and financial condition will be materially adversely affected.
See "Business -- Industry Background."

POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS

The Company's quarterly operating results have varied significantly in the
past and may vary significantly in the future. Special factors that may cause
the Company's future operating results to vary include, without limitation, the
size and timing of significant orders; the mix of direct and indirect sales; the
mix and timing of foreign and domestic sales; the timing of new product
announcements and changes in pricing policies by the Company and its
competitors; market acceptance of new and enhanced versions of the Company's
products; increased competition; changes in operating expenses, including
expenses related to acquisitions; changes in Company strategy; personnel
changes; changes in legislation and regulation; foreign currency exchange rates
and general economic factors. Product revenues are also difficult to forecast
because the market for client/server application software products is rapidly
evolving, and the Company's sales cycle, from initial review to purchase and the
provision of support services, varies substantially from customer to customer.
As a result, Phoenix believes that quarter to quarter comparisons of its results
of operations are not necessarily meaningful and should not be relied upon as
indications of future performance. The Company's results of operations will be
adversely affected by an increase in its projected effective tax rate if
legislation reenacting certain research and development tax credits is not
passed by the United States Congress. In addition, the Company currently has a
net operating loss carryforward of approximately $2.8 million. Once the net
operating loss is utilized or expires, the Company's tax rate will increase. Due
to all of the foregoing factors, it is likely that in some future quarter the
Company's operating results will be below the expectations of public market
analysts and investors. In such an event, the price of the Common Stock would
likely be materially adversely affected. See "Selected Consolidated Financial
and Operating Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

11
<PAGE> 12

RISKS ASSOCIATED WITH ACQUISITIONS

As part of its business strategy, Phoenix intends to acquire complementary
technologies, products and services such as companies that offer legacy retail
banking systems. The Company intends to pursue such acquisitions in order to
more rapidly expand the Company's customer base by converting the acquired
customers to the Phoenix System. Any such future acquisition would be
accompanied by risks commonly encountered in acquisitions of companies. Such
risks include, among other things, the difficulty of assimilating the operations
and personnel of the acquired companies; potential disruption of Phoenix's
ongoing business; inability to incorporate successfully acquired technologies
and rights into Phoenix's products; maintenance of uniform standards, controls,
procedures and policies; risks of entering markets in which Phoenix has little
or no direct prior experience; and impairments of relationships with employees
and subscribers of the acquired business as a result of changes in management.
There can be no assurance that Phoenix would be successful in making any
acquisitions or overcoming the risks or any other problems encountered in
connection with such acquisitions. In addition, any such acquisitions could
materially adversely affect the Company's operating results due to dilutive
issuances of equity securities, the incurrence of additional debt, and the
amortization of expenses related to goodwill and other intangible assets, if
any. The Company is not currently engaged in any negotiations with respect to
specific acquisitions. See "Business -- Strategy."

PRODUCT LIABILITY

The Company's license agreements with its customers typically contain
provisions designed to limit the Company's exposure to potential product
liability claims. The agreements generally contain provisions such as
disclaimers of warranties and limitations on liability for special,
consequential and incidental damages. In addition, the Company's license
agreements generally limit the amounts recoverable for damages to the amounts
paid by the licensee to the Company for the product or service giving rise to
the damages claimed. Although Phoenix has not experienced any product liability
claims to date, the sale and support of products by Phoenix may entail the risk
of such claims. The Company currently does not have product liability insurance.
A successful product liability claim brought against the Company could have a
material adverse effect upon the Company's business, operating results and
financial condition.

CONCENTRATION OF STOCK OWNERSHIP

Upon completion of the Offering, the present directors, executive officers
and their respective affiliates will beneficially own 2,302,235 shares
(approximately 57.1%) of the outstanding Common Stock. In addition to the shares
and options included in the calculation of beneficial ownership, the present
directors, executive officers and their respective affiliates hold options to
acquire an additional 268,254 shares of Common Stock, at exercise prices ranging
from $4.30 to $12.00 per share, which are not exercisable within 60 days of the
date of this Prospectus. These additional shares, together with shares currently
beneficially owned would represent 59.8% of the Common Stock outstanding after
consummation of the Offering, after giving effect to the exercise of those
options. As a result, if these shareholders were to vote as a group, they would
be able to exercise significant influence over all matters requiring shareholder
approval, including the election of directors and approval of significant
corporate transactions. However, on the Closing Date, there will be no
agreements or understandings in effect whereby these shareholders are bound to
vote as a group. Such concentration of ownership may also have the effect of
delaying or preventing a change in control of the Company. See "Principal and
Selling Shareholders" and "Description of Capital Stock."

TRANSACTIONS WITH RELATED PARTIES

The Company has in the past entered into agreements and arrangements with
certain officers, directors and shareholders of the Company involving loans of
funds, grants of options and discounts on certain license, implementation and
customer and software support fees. As an incentive to provide initial capital
to the Company, the Company agreed to give certain pricing discounts to the U.S.
Bank Partners if they licensed the Phoenix System for use in their banks. These
transactions were on terms more favorable to the U.S. Bank Partners than they
could obtain in transactions with unaffiliated third parties. In addition, Mr.
Yusefzadeh and his affiliate issued interest-bearing promissory notes to the
Company to purchase 296,815 shares of non-voting

12
<PAGE> 13

common stock pursuant to the Company's rights offering in 1994 and to exercise
options to acquire 22,567 shares of non-voting common stock which he earned as a
director of the Company. All future transactions between the Company and its
officers, directors, principal shareholders and their affiliates will be
approved by a majority of the independent directors of the Company and, except
for contracts pursuant to the discount program for the U.S. Bank Partners, will
be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties. See "Management -- Compensation Committee Interlocks
and Insider Participation" and "Certain Transactions."

ANTI-TAKEOVER EFFECTS OF THE ARTICLES OF INCORPORATION, THE BYLAWS AND THE
FLORIDA ACT; EMPLOYMENT AGREEMENTS

On the Closing Date, the Company will file with the Florida Secretary of
State Amended and Restated Articles of Incorporation (the form of which is filed
as an exhibit to the Company's Registration Statement on Form S-1, the "Articles
of Incorporation"). Furthermore, the Board of Directors and shareholders have
approved, effective as of the Closing Date, Amended and Restated Bylaws (the
form of which is filed as an exhibit to the Company's Registration Statement,
the "Bylaws"). The Board of Directors has the authority to issue up to
10,000,000 shares of preferred stock and to determine the price, rights,
preferences, privileges and restrictions, including voting rights, of those
shares, without any further vote or action by the shareholders. The rights of
the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any preferred stock that may be issued in the
future. The issuance of preferred stock, while providing desirable flexibility
in connection with possible acquisition and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire a majority
of the outstanding voting stock of the Company. The Company has no current plans
to issue shares of preferred stock. Further, certain provisions of the Articles
of Incorporation, the Bylaws and the Florida Business Corporation Act (the
"Florida Act") could delay or make more difficult a merger, tender offer or
proxy contest involving the Company. For example, the Articles of Incorporation
and Bylaws contain provisions that limit the rights of shareholders to call
special shareholder meetings and require shareholders to follow an advance
notification procedure for director nominations. Furthermore, the Company's
Board of Directors is divided into three classes with only one class being
elected each year, and directors may only be removed for cause. In addition, all
of the Company's executive and senior management have entered into or are
expected to enter into employment agreements with the Company which contain
change in control provisions. The change in control provisions may hinder,
delay, deter or prevent a tender offer, proxy contest or other attempted
takeover because the covered employees can terminate their employment (with
adequate justification required in certain circumstances), be paid a severance
equal to the salary and bonus that they would receive for the remaining term of
their respective agreements and thereafter compete with the Company. See
"Management -- Employment Agreements" and "Description of Capital Stock."

ABSENCE OF PRIOR PUBLIC MARKET; OFFERING PRICE DETERMINED BY AGREEMENT;
VOLATILITY OF MARKET PRICE

Prior to the Offering, there has been no public market for the Common
Stock. Although the Common Stock has been approved for listing on the Nasdaq
National Market, there can be no assurance that an active trading market will
develop or be sustained after the Offering or that the market price of the
Common Stock will not decline below the initial public offering price. The
initial public offering price of the Common Stock has been determined solely by
negotiations among the Company, the Selling Shareholders and the Underwriters
and is not necessarily related to the Company's book value, net worth or any
other established criteria of value and may not be indicative of the market
price for shares of Common Stock after the Offering. See "Underwriting" for a
discussion of the factors considered in determining the initial public offering
price for the Common Stock. From time to time after the Offering, there may be
significant volatility in the market price for the Common Stock. The stock
market has from time to time experienced significant price and volume
fluctuations, which have particularly affected the market prices of the stocks
of high technology companies, and which may be unrelated to the operating
performance of particular companies. Factors such as actual or anticipated
operating results, growth rates, changes in estimates by analysts, market
conditions in the industry, announcements by competitors, regulatory actions and
general economic conditions will vary from period to period. As a result of the
foregoing, the Company's operating results and prospects from time to time

13
<PAGE> 14

may be below the expectations of public market analysts and investors. Any such
event would likely result in a material adverse effect on the price of the
Common Stock.

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

Future sales of substantial amounts of the Common Stock could adversely
affect the market price of the Common Stock. Several of the Company's principal
shareholders hold a significant portion of the outstanding Common Stock, and a
decision by one or more of these shareholders to sell their shares could
adversely affect the market price of the Common Stock. The shares of Common
Stock offered hereby (plus any shares issued upon exercise of the Underwriters'
over-allotment option) will be freely tradeable without restriction.
Substantially all of the Company's officers, directors, shareholders and
optionholders have agreed to enter into contractual agreements with the
Underwriters (the "Lock-up Agreements") generally providing that for a period of
180 days after the date of this Prospectus, they will not, except in connection
with the Offering, directly or indirectly, offer, sell, loan, pledge or
otherwise dispose of, or grant any options or other rights with respect to, any
shares of Common Stock or any securities that are convertible into or
exchangeable or exercisable for Common Stock owned by them without the prior
written consent of J.C. Bradford & Co. Similarly, the Company has agreed
generally that, for a period of 180 days after the date of this Prospectus, it
will not, directly or indirectly, issue, offer, sell, grant options to purchase
or otherwise dispose of any of its equity securities or any other securities
convertible into or exchangeable or exercisable for its Common Stock or any
other equity security, except that the Company may grant stock options under the
Stock Option Plans and issue shares of Common Stock upon the exercise of options
previously granted. As a result, notwithstanding possible earlier eligibility
for sale under the provisions of Rule 144 and Rule 701 under the Securities Act
of 1933, as amended (the "Securities Act"), shares subject to the Lock-up
Agreements will not be eligible for sale until the Lock-up Agreements expire or
their terms are waived by J.C. Bradford & Co. J.C. Bradford & Co. does not
presently intend to waive the Lock-up Agreements. If a shareholder should
request J.C. Bradford & Co. to waive the 180-day lock-up period, J.C. Bradford &
Co., consistent with past practice with regard to other issuing companies, would
take into consideration the number of shares as to which such request relates,
the identity of the requesting shareholder, the relative demand for additional
shares of Common Stock in the market, the period of time since the completion of
the Offering, and the average trading volume and price performance of the Common
Stock during such period. Assuming J.C. Bradford & Co. does not release any
shareholders from the Lock-up Agreements, the following shares will be eligible
for sale in the public market at the following times: beginning on the date of
this Prospectus, only the shares sold in the Offering will be immediately
available for sale in the public market; and beginning 180 days following the
date of this Prospectus, approximately 2,552,000 shares will be eligible for
sale pursuant to Rule 144, Rule 701 and one or more Registration Statements on
Form S-8 which the Company intends to file approximately 30 days after the date
of this Prospectus with regard to shares issued and issuable under the Company's
stock option plans. See "Shares Eligible for Future Sale" and "Underwriting."

Upon expiration of the Lock-up Agreements, if his employment is terminated
for any reason or if he is no longer a director of the Company, Mr. Yusefzadeh,
who will beneficially hold approximately 1,077,992 shares of Common Stock after
the Offering, will be entitled to certain demand registration rights with
respect to such shares. If Mr. Yusefzadeh, by exercising his demand registration
rights, causes a large number of shares to be registered and sold in the public
market, such sales could have a material adverse effect on the market price for
the Common Stock. See "Shares Eligible for Future Sale -- Registration Rights."

DILUTION

Investors participating in the Offering will incur immediate and
substantial dilution in the net tangible book value per share of Common Stock of
$10.33 per share based upon the initial public offering price of $12.00 per
share. To the extent outstanding options to purchase the Common Stock are
exercised, there will be further dilution. See "Dilution."

14
<PAGE> 15

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 670,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$6,550,000, after deducting underwriting discounts and commissions and estimated
offering expenses and based upon the initial public offering price of $12.00 per
share. Additionally, the Company will receive approximately $1,319,000 from Mr.
Yusefzadeh for payment of stock subscriptions receivable due from Mr. Yusefzadeh
and his affiliate plus accrued interest of approximately $159,000 through the
Closing Date, which Mr. Yusefzadeh will pay with a portion of the proceeds from
the sale of Common Stock by him in the Offering. See "Management -- Compensation
Committee Interlocks and Insider Participation." Other than the proceeds from
the sale of Common Stock by Mr. Yusefzadeh, the Company will not receive any
proceeds from the sale of Common Stock offered hereby by the Selling
Shareholders.

The Company expects to use approximately $4.5 million of the estimated net
proceeds from the Offering to fund development of future products, such as the
NT Version, an Internet banking application, a home banking application and an
online business banking application, and approximately $2.2 million to expand
its sales, marketing and implementation resources, which will primarily consist
of increased personnel and related expenses. The Company plans to use
approximately $97,000 to repay all outstanding amounts owed by the Company to
Barnett Bank of Central Florida, N.A. ("Barnett Bank") pursuant to a $250,000
term loan facility (the "Term Loan"). The Company also intends to repay
approximately $150,000 outstanding as of the Closing Date under the Company's
$750,000 line of credit loan facility with Barnett Bank (the "Line of Credit").
The outstanding balance of the Term Loan bears interest at an annual rate equal
to Barnett Bank's prime rate plus 1.50% (9.75% at June 30, 1996), is due on May
15, 1998, is secured by a lien on all of the assets of the Company and is
guaranteed by Mr. Yusefzadeh. The funds borrowed under the Term Loan were used
to finance the purchase of furniture, fixtures and equipment. The Line of Credit
bears interest at an annual rate equal to Barnett Bank's prime rate plus 1.75%
(10.00% at June 30, 1996), matures on November 10, 1996, is secured by a lien on
all of the assets of the Company and is guaranteed by Mr. Yusefzadeh. See
"Management -- Compensation Committee Interlocks and Insider Participation." The
funds borrowed under the Line of Credit have been used for working capital and
general corporate purposes. The Company will also use approximately $45,000 of
the estimated net proceeds to repay a loan to Mr. Yusefzadeh, the proceeds of
which were used to purchase the Company's telephone system. The loan was made in
January 1994, has a stated interest rate of 12.00% and is payable on demand. The
remainder of the net proceeds of the Offering will be used for general corporate
purposes, including the acquisition of complementary technologies, products and
services. However, the Company does not have any present agreements or
commitments in place and is not currently engaged in any negotiations with
respect to any such acquisitions. Pending any such expenditures, the Company
plans to invest the net proceeds of the Offering in investment grade,
interest-bearing securities.

DIVIDEND POLICY

Phoenix has never paid any cash dividends on its capital stock and does not
expect to pay cash dividends in the foreseeable future. Future declaration and
payment of dividends, if any, will be determined in light of the then-current
conditions, including the Company's earnings, operations, capital requirements,
financial condition, restrictions in financing agreements and other factors
deemed relevant by the Board of Directors. Unless waived in writing, the Line of
Credit prohibits the payment of dividends. The Company plans to use part of the
net proceeds of the Offering to repay all amounts outstanding as of the Closing
Date under the Term Loan and the Line of Credit, and both loans will be
terminated. See "Use of Proceeds" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

15
<PAGE> 16

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
March 31, 1996 after giving effect to a 2.3231-for-one stock split in the form
of a stock dividend on all shares of capital stock outstanding on May 6, 1996
and on an as adjusted basis to reflect (a) a recapitalization on the Closing
Date in which all outstanding shares of Class A Common Stock, Class B Common
Stock, Class C Common Stock, Class D Common Stock and Class E Common Stock will
be converted into Common Stock on a share for share basis, (b) the receipt of
the proceeds from the sale by the Company of 670,000 shares of Common Stock
offered hereby at the initial public offering price of $12.00 per share, (c) the
receipt of approximately $1,319,000 from Mr. Yusefzadeh for payment of stock
subscriptions receivable and (d) the application of the estimated net proceeds
therefrom. See "Use of Proceeds." This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. Par values have been rounded in the
table below.

<TABLE>
<CAPTION>
MARCH 31, 1996
-------------------------
ACTUAL AS ADJUSTED
----------- -----------
<S> <C> <C>
Long-term debt...................................................... $ -- $ --
========== ==========
Shareholders' equity (deficit):
Preferred Stock, $1.00 par value, 10,000,000 shares authorized, no
shares outstanding............................................. $ -- $ --
Common Stock, $0.01 par value, 20,000,000 shares authorized, no
shares outstanding, 3,673,946 shares issued and outstanding as
adjusted(1).................................................... -- 36,739
Class A Common Stock, $0.0043 par value, 1,500,000 shares
authorized, 1,393,859 shares issued and outstanding, no shares
outstanding as adjusted........................................ 6,000 --
Class B Common Stock, $0.43 par value, 10,000,000 shares
authorized, 511,082 shares issued and outstanding, no shares
outstanding as adjusted........................................ 220,000 --
Class C Common Stock, $2.15 par value, 200,000 shares authorized,
185,848 shares issued and outstanding, no shares outstanding as
adjusted....................................................... 400,000 --
Class D Common Stock, $4.30 par value, 50,000 shares authorized,
23,231 shares issued and outstanding, no shares outstanding as
adjusted....................................................... 100,000 --
Class E Common Stock, $1.08 par value, 1,000,000 shares
authorized, 889,926 shares issued and outstanding, no shares
outstanding as adjusted........................................ 957,690 --
Additional paid-in capital........................................ 2,405,970 10,603,121
Stock subscriptions receivable(2)................................. (1,318,524) --
Accumulated deficit............................................... (3,147,712) (3,147,712)
----------- -----------
Total shareholders' equity (deficit)........................... (376,576) 7,492,148
----------- -----------
Total capitalization........................................... $ (376,576) $ 7,492,148
========== ==========
</TABLE>

- ---------------

(1) As of June 30, 1996, 3,832,599 shares of Common Stock were issued and
outstanding as adjusted, 603,459 shares of Common Stock were issuable upon
exercise of stock options outstanding at exercise prices ranging from $4.30
to $12.00 per share and approximately 151,390 shares of Common Stock were
reserved for grant of future options or direct issuances under the
Company's stock options plans. See "Management -- Stock Option Plans" and
Note 5 of Notes to Consolidated Financial Statements.
(2) Represents stock subscriptions receivable from Mr. Yusefzadeh and his
affiliate which are due and payable upon completion of the Offering. See
"Management -- Compensation Committee Interlocks and Insider
Participation."

16
<PAGE> 17

DILUTION

The net tangible book value of the Company as of March 31, 1996 was
$(1,743,422), or approximately $(0.58) per share. Net tangible book value per
share represents the amount of the Company's shareholders' deficit, less
intangible assets, divided by a total of 3,003,946 shares of capital stock
outstanding as of March 31, 1996.

Dilution per share represents the difference between the amount per share
paid by purchasers of shares of Common Stock in the Offering and the pro forma
net tangible book value per share of Common Stock immediately after completion
of the Offering. After giving effect to (i) the sale of 670,000 shares of Common
Stock in the Offering at the initial offering price of $12.00, (ii) the receipt
of approximately $1,319,000 from Mr. Yusefzadeh for payment of stock
subscriptions receivable due from Mr. Yusefzadeh and his affiliate and (iii) the
application of the estimated net proceeds therefrom, the pro forma net tangible
book value of the Company as of March 31, 1996 would have been $6,125,302, or
$1.67 per share. This represents an immediate increase in net tangible book
value of $2.25 per share to existing shareholders and an immediate dilution in
net tangible book value of $10.33 per share to purchasers of Common Stock in the
Offering. Investors participating in the Offering will incur immediate and
substantial dilution. This is illustrated in the following table:

<TABLE>
<S> <C> <C>
Initial public offering price per share.......................... $ 12.00
Net tangible book value per share before the Offering.......... $ (0.58)
Increase per share attributable to payment of stock
subscriptions receivable.................................... .44
--------
Pro forma net tangible book value attributable to existing
shareholders................................................ (.14)
Increase per share attributable to new investors............... 1.81
--------
Pro forma net tangible book value per share after the Offering... 1.67
--------
Dilution per share to new investors.............................. $ 10.33
========
</TABLE>

The following table sets forth, as of March 31, 1996 and after giving
effect to the conversion of all outstanding shares of Class A Common Stock,
Class B Common Stock, Class C Common Stock, Class D Common Stock and Class E
Common Stock into Common Stock upon completion of the Offering, the difference
between the existing shareholders and the purchasers of shares in the Offering
with respect to the number of shares purchased from the Company, the total
consideration paid and the average price per share paid:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders.............. 3,003,946 81.76% $ 4,139,974 33.99% $ 1.38
New investors...................... 670,000 18.24 8,040,000 66.01 12.00
--------- ------- ----------- -------
Total.................... 3,673,946 100.00% $12,179,974 100.00%
======== ====== ========== ======
</TABLE>

As of March 31, 1996, there were options outstanding to purchase a total of
637,608 shares of Common Stock at a weighted average exercise price of $3.89 per
share under the Company's stock option plans. If all options outstanding as of
March 31, 1996 are exercised, the pro forma net tangible book value per share
immediately after completion of the Offering would be $2.00. This represents an
immediate increase in net tangible book value of $0.33 per share to purchasers
of Common Stock in the Offering. See "Management -- Stock Option Plans" and Note
5 of Notes to Consolidated Financial Statements.

17
<PAGE> 18

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

The following table sets forth selected consolidated financial and
operating data for the periods indicated. The statements of operations and per
share data for the fiscal years ended January 31, 1994 and 1995 and for the
eleven months ended December 31, 1995 and the balance sheet data as of January
31 and December 31, 1995 were derived from the consolidated financial statements
of the Company, which have been audited by Ernst & Young LLP. The statements of
operations and per share data for the three months ended March 31, 1995 and 1996
and the balance sheet data as of March 31, 1996 were derived from unaudited
consolidated financial statements which, in the opinion of management, include
all adjustments, consisting only of normal recurring accruals, necessary for a
fair presentation of financial condition and results of operations. Operating
results for the three months ended March 31, 1996 are not necessarily indicative
of the results that may be expected for the fiscal year ended December 31, 1996.
Other data for all periods presented were derived from the Company's records.
The following data should be read in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
Consolidated Financial Statements and the Notes thereto appearing elsewhere in
this Prospectus.

<TABLE>
<CAPTION>
FISCAL YEARS ENDED ELEVEN MONTHS THREE MONTHS ENDED
------------------------- ENDED ----------------------
JANUARY 31, JANUARY 31, DECEMBER 31, MARCH 31, MARCH 31,
1994 1995 1995(1) 1995 1996
----------- ----------- ------------- --------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
License fees and other...................................... $ 30,000 $ 57,776 $ 3,467,547 $ -- $1,127,607
Implementation, customer and software support and other
service fees.............................................. -- 369,711 1,556,164 90,745 653,723
----------- ----------- ------------- --------- ----------
Total revenues........................................ 30,000 427,487 5,023,711 90,745 1,781,330
Expenses:
Cost of license fees and other.............................. -- -- 375,783 -- 131,029
Cost of implementation, customer and software support and
other service fees........................................ 104,818 637,427 1,246,886 222,822 457,196
Sales and marketing......................................... 96,911 358,948 983,290 224,839 268,818
General and administrative.................................. 225,458 981,930 1,058,190 287,072 358,260
Product development......................................... 621,373 1,362,780 654,797 60,272 299,067
----------- ----------- ------------- --------- ----------
Total expenses........................................ 1,048,560 3,341,085 4,318,946 795,005 1,514,370
Other income (expense):
Interest income............................................. 3,603 26,610 121,815 29,607 28,647
Interest expense............................................ -- (19,366) (12,060) (6,590) (1,081)
Other income (expense)...................................... 1,815 75,989 (4,252) 75,270 --
----------- ----------- ------------- --------- ----------
Income (loss) before income taxes............................. (1,013,142) (2,830,365) 810,268 (605,973) 294,526
Income tax expense............................................ -- -- 255,999 -- 153,000
----------- ----------- ------------- --------- ----------
Net income (loss)............................................. $(1,013,142) $(2,830,365) $ 554,269 $(605,973) $ 141,526
========== ========== ============= ========= =========
Net income (loss) per share(2)................................ $ (0.51) $ (1.11) $ 0.17 $ (0.20) $ 0.04
Weighted average shares outstanding(2)........................ 1,971,573 2,560,151 3,235,532 3,076,813 3,298,444
OTHER DATA:
Total product development expenditures(3)..................... $ 621,373 $ 1,455,781 $ 1,788,172 $ 364,935 $ 612,346
Total personnel(4)............................................ 23 48 87 52 93
Implemented customers(5)...................................... 0 2 12 2 14
</TABLE>

<TABLE>
<CAPTION>
AT
-------------------------- AT MARCH 31, 1996
JANUARY 31, DECEMBER 31, ----------------------------
1995 1995 ACTUAL AS ADJUSTED(6)
----------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)............................................. $(2,156,814) $(2,263,338) $(2,338,673) $ 5,530,051
Total assets.......................................................... 1,726,511 3,228,289 3,495,641 11,364,365
Long-term obligations -- -- -- --
Accumulated deficit................................................... (3,843,507) (3,289,238) (3,147,712) (3,147,712)
Total shareholders' equity (deficit).................................. (1,619,412) (568,102) (376,576) 7,492,148
</TABLE>

- ---------------

18
<PAGE> 19

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in connection with the Consolidated
Financial Statements and the Notes thereto included elsewhere in this
Prospectus. Effective December 31, 1995, Phoenix changed its fiscal year end
from January 31 to December 31. For purposes hereof, the Company defines the
fiscal year ended January 31, 1994 as "Fiscal 1993," the fiscal year ended
January 31, 1995 as "Fiscal 1994," and the 11 months ended December 31, 1995 as
"Fiscal 1995." Dollar amounts are rounded.

OVERVIEW

Phoenix designs, develops, markets and supports highly adaptable,
enterprise-wide client/server application software for the financial services
industry, with a primary focus on middle market banks. Phoenix combined (i) its
management's extensive experience with banking and banking software systems,
(ii) the U.S. Bank Partners' input concerning bank operational and flexibility
needs for bank and banking software systems and (iii) the most recent advances
in client/server technology to design and develop an innovative new banking
software system. The Phoenix System, through its client/server technology,
addresses many of the deficiencies of the mainframe- and minicomputer-based
legacy systems on which most banks currently operate by allowing financial
institutions to integrate data into a comprehensive information network. The
Phoenix System, like legacy systems, supports all core areas of bank data
processing, including system administration, account processing, nightly
processing, teller functions, holding company accounting and budgeting. Unlike
legacy systems, the Phoenix System is a fully integrated system that provides
significant advantages in three critical areas: (i) customer relationship
management; (ii) management decision support; and (iii) bank product creation
and support. Phoenix was founded in January 1993 and made its initial
nondevelopment stage product shipments in June 1995. During its development
stage, the Company's business focused primarily on the development of its
software and marketing of the Phoenix System to certain development stage
customers.

The Company's revenues are derived from two primary sources: (i) license
fees for software products and other revenues and commissions from the sale and
delivery of software and hardware products of third party vendors; and (ii) fees
for a full range of services complementing its products, including
implementation, conversion and installation services, training, interface
services for tying the Phoenix System to third-party application software, and
customer and software support services. License fees for the Company's software
products are charged separately from fees for the Company's services and are
recognized upon delivery, when no significant vendor obligations remain and
collection of the resulting receivables is deemed probable. As of June 30, 1996,
there have been no returns or cancellations of the Company's sales. Revenues for
implementation, conversion, installation, training and interface services are
recognized when the services are performed. Service revenues for ongoing
customer and software support and product updates provide recurring revenues as
they are recognized ratably over each year of the license agreement, the term of
which is typically five years. Payments for license fees and services are
predominately received in advance of, or at the time of, revenue recognition.

The Company intends to maintain its marketing focus in the United States on
the approximately 3,800 middle market banks with asset sizes ranging from $100
million to $1 billion. In addition, Phoenix will continue to expand its presence
in the international market. The Company intends to pursue both markets by
increasing its direct and indirect sales forces. Since its inception, Phoenix
primarily has used a direct sales force to market the Phoenix System. However,
in March 1996, Phoenix and Unisys entered into the Unisys Agreement whereby
Unisys exclusively markets the Phoenix System in Central and South America,
Mexico, the Caribbean and Bermuda. Additionally, in April 1996, Phoenix and CSA
entered into the CSA Agreement whereby CSA exclusively markets the Phoenix
System to banks in certain countries of Africa and non-exclusively markets the
Phoenix System to banks in the Republic of South Africa. Phoenix believes that,
in the future, revenues from strategic alliances and other indirect channels may
become an increasingly significant source of the Company's total revenues. Gross
margins and composition of revenue and expenses

19
<PAGE> 20

may vary depending on whether a sale was made directly by the Company or by a
VAR or agent. However, the Company believes that the difference in the margins
obtained from direct and indirect sales should not have a material adverse
effect on the Company's business, operating results and financial condition. See
"Business -- Target Markets -- The International Market" and " -- Sales and
Marketing."

The Company expects increased competition and intends to invest
significantly in product development and other aspects of its business.
Management believes that the banking software market for middle market banks is
diffuse with medium-to-high barriers to entry, including costs of entry and time
to market. As client/server technology in the financial industry is early in its
life cycle, management further believes that client/server technology will
continue to gain market share for the next five to ten years as it displaces
legacy hardware and software. Although client/server technology is characterized
by rapidly evolving developments, the open architecture design and attributes of
the Phoenix System facilitate rapid adaptation to evolving technological
changes. Phoenix intends to maintain its leadership position by integrating new
technologies, adding new applications, enhancing existing applications and
increasing functionality.

The Company intends to leverage its current bank customer relationships by
providing additional products and services, such as Internet and Intranet
services and disaster recovery services, and by licensing the Phoenix System to
additional bank subsidiaries of existing clients. In 1997, the Company also
intends to expand the market for the Phoenix System to include banks with asset
sizes greater than $1 billion by increasing product functionality and
flexibility and to develop and deliver the NT Version specifically for banks
with assets of less than $100 million.

Future operating results will depend on many factors, including, without
limitation, the demand for the Company's products, the level of product and
price competition, the Company's success in expanding its direct sales force and
indirect distribution channels, the mix of direct and indirect sales, the mix of
foreign and domestic sales, the ability of the Company to develop and market new
products, the ability of the Company to control operating expenses, changes in
Company strategy, personnel changes, changes in legislation and regulation,
foreign currency exchange rates and general economic factors.

RESULTS OF OPERATIONS

Comparison of Three Months Ended March 31, 1995 to Three Months Ended March 31,
1996

General. The Company changed its fiscal year end to December 31 during
1995. However, the three months ended March 31, 1995 includes operating results
for the month of January 1995 which were included in Fiscal 1994 financial
statements. The Company defines the three months ended March 31, 1995 as the
"1995 Period" and the three months ended March 31, 1996 as the "1996 Period."

Revenues. Total revenues were $91,000 and $1.8 million in the 1995 Period
and the 1996 Period, respectively. The growth in revenues was primarily due to
increased license fees and a related increase in implementation fees in the 1996
Period.

License fees and other revenues during the 1995 Period were $0 because
Phoenix was in the process of developing its products and, as a result, did not
recognize any revenues from the licensing of its software. During the 1996
Period, Phoenix recognized $1.1 million in license fees. These revenues include
$153,000 in foreign withholding taxes which are contractually paid by foreign
customers and such amount is also recorded as an income tax expense. The
completion of a commercially viable version of the Phoenix System and acceptance
of the Phoenix System in both the United States and international markets were
major factors in the increase in license fees during the 1996 Period.

Implementation, customer and software support and other service fee
revenues were $91,000 and $654,000 during the 1995 Period and the 1996 Period,
respectively. This growth was primarily due to increased implementation fees,
which resulted from increased licensing activity.

Expenses. The Company's total expenses were $795,000 and $1.5 million in
the 1995 Period and the 1996 Period, respectively. The growth in expenses
occurred primarily due to increases in personnel related costs resulting from
higher staffing levels.

Cost of license fees and other consists of the amortization of capitalized
software development costs and software royalties paid to third parties. Cost of
license fees and other was $0 and $131,000 in the 1995 Period

20
<PAGE> 21

and the 1996 Period, respectively. These costs consisted of amortization of
capitalized software development costs after general release of the Phoenix
System during the second quarter of Fiscal 1995 and third party software
royalties which relate to software which is sold and installed with the
Company's products.

Cost of implementation, customer and software support and other service
fees consists primarily of personnel related costs incurred in providing
implementation, conversion and installation services, training and customer
support. Cost of implementation, customer and software support and other service
fees was $223,000 and $457,000 in the 1995 Period and the 1996 Period,
respectively. Increases in these costs in the 1996 Period were due to increased
implementation costs related to the Company's installation of the Phoenix System
and the release of its software and increased personnel related costs.

Sales and marketing expenses were $225,000 and $269,000 in the 1995 Period
and the 1996 Period, respectively. The increase in sales and marketing expenses
was primarily due to the expansion of sales and marketing staffing and increased
marketing activities, including advertising and trade shows.

General and administrative expenses were $287,000 and $358,000 in the 1995
Period and the 1996 Period, respectively. The increase was primarily the result
of increased staffing and associated equipment expenses necessary to manage and
support the Company's growth.

Product development expenses were $60,000 and $299,000 in the 1995 Period
and the 1996 Period, respectively. The increase in product development expenses
was primarily due to the continued development of the Phoenix System. The total
of capitalized software development costs and product development expenses
("Product Development Expenditures") increased from $365,000 during the 1995
Period to $612,000 during the 1996 Period. The Company anticipates that Product
Development Expenditures will continue to be significant during the remainder of
1996 as the Company continues to expand and enhance the Company's product line.

Other Income (Expense). Interest income, consisting primarily of interest
accrued on a related party stock subscriptions receivable, was $30,000 and
$29,000 in the 1995 Period and the 1996 Period, respectively. Other income of
$75,000 in the 1995 Period consisted principally of the fair market value of
computer equipment given to Phoenix by a computer company to enable Phoenix to
develop and test the Phoenix System on such company's equipment.

Income tax expense of $153,000 in the 1996 Period represents foreign
withholding taxes which relates to the license of Company products to a foreign
customer and which are contractually payable by that customer. There was no
United States income tax expense in the 1995 Period or the 1996 Period. The
Company has a net operating loss carry forward and tax credits that should limit
the Company's United States income tax liability during the remainder of 1996.

Comparison of Fiscal 1993, Fiscal 1994 and Fiscal 1995

Revenues. Total revenues were $30,000, $427,000 and $5.0 million in Fiscal
1993, Fiscal 1994 and Fiscal 1995, respectively. In Fiscal 1993, Fiscal 1994 and
Fiscal 1995, international sales accounted for approximately 0%, 33% and 70%,
respectively, of total revenues.

License fees and other revenues during Fiscal 1993 and Fiscal 1994 were $0
because Phoenix was in the process of developing its products and, as a result,
did not recognize any revenue from the licensing of its software. However,
Phoenix did recognize $30,000 and $58,000 in Fiscal 1993 and Fiscal 1994,
respectively, from commissions earned from the sale and delivery of third party
products. The Company's business strategy for third party product sales is to
generate incremental revenues from sales of products and services which are
important to the overall operations of the customer's system and that interface
and integrate directly with the Phoenix System. During Fiscal 1995, Phoenix
recognized $3.5 million in license fees. Approximately 19% and 43% of Phoenix's
total revenues for Fiscal 1995 were derived from two customers, respectively.
Management believes, however, that the Company's continued growth will reduce
reliance on individual contracts or relationships for material revenue
contribution. Revenues during Fiscal 1995 include $256,000 in foreign tax
withholdings which are contractually paid by foreign customers, and such amount
is also recorded as an income tax expense. The completion of a commercially
viable version of the Phoenix System and acceptance of the Phoenix System in
both the United States and international markets were major factors in the
increase in license fees during Fiscal 1995. Phoenix has increased the price of
its products since the conclusion of Fiscal

21
<PAGE> 22

1995. During Fiscal 1995, approximately 70% of the Company's revenues were
derived from its foreign sales activities, of which over half of such revenue
was from one customer. In the future, the Company does not expect that any one
customer will account for such a high percentage of total annual revenues or for
foreign sales to comprise such a high percentage of total annual revenues.

Implementation, customer and software support and other service fees were
$0, $370,000 and $1.6 million during Fiscal 1993, Fiscal 1994 and Fiscal 1995,
respectively. This growth was primarily due to increased implementation fees,
which resulted from increased licensing activity.

Expenses. The Company's total expenses were $1.0 million, $3.3 million and
$4.3 million in Fiscal 1993, Fiscal 1994 and Fiscal 1995, respectively. The
growth in expenses has occurred primarily due to increases in personnel related
costs resulting from higher staffing levels.

Cost of license fees and other of $376,000 in Fiscal 1995, consisting
primarily of amortization of capitalized software development costs and software
royalties to third parties, was recognized after general release of the Phoenix
System.

Cost of implementation, customer and software support and other service
fees was $105,000, $637,000 and $1.2 million in Fiscal 1993, Fiscal 1994 and
Fiscal 1995, respectively. The establishment of formal implementation and
customer and software support services within the Company occurred in Fiscal
1993. The increases in these costs in Fiscal 1994 and Fiscal 1995 were due to
increased implementation costs related to the Company's initial installation of
the Phoenix System and the release of its software and increased personnel
related costs, as the Company continued to build its implementation and customer
and software support services.

Sales and marketing expenses were $97,000, $359,000 and $983,000 in Fiscal
1993, Fiscal 1994 and Fiscal 1995, respectively. The increases in sales and
marketing expenses were primarily due to the expansion of sales and marketing
staffing and increased marketing activities, including advertising and trade
shows.

General and administrative expenses were $225,000, $982,000 and $1.1
million in Fiscal 1993, Fiscal 1994 and Fiscal 1995, respectively. The increases
were primarily the result of increased staffing and associated expenses
necessary to manage and support the Company's growth.

Product development expenses were $621,000, $1.4 million and $655,000 in
Fiscal 1993, Fiscal 1994 and Fiscal 1995, respectively. The increase in product
development expenses from Fiscal 1993 to Fiscal 1994 was primarily due to the
continued development of the Phoenix System. Technological feasibility of the
Phoenix System was established during Fiscal 1994, and, therefore, as required
by Statement of Financial Standards No. 86, "Accounting for the Costs of
Computer Software to Be Sold, Leased or Otherwise Marketed," certain
expenditures were capitalized during Fiscal 1994 and Fiscal 1995. Product
development expenses decreased during Fiscal 1995 due to the capitalization of
certain software development costs. Capitalized software development costs
increased from $93,000 at the end of Fiscal 1994 to $1.1 million at the end of
Fiscal 1995. Product Development Expenditures, therefore, were $621,000, $1.5
million and $1.8 million for Fiscal 1993, Fiscal 1994 and Fiscal 1995,
respectively. The increase in Product Development Expenditures was primarily
attributable to increased staffing required to expand and enhance the Company's
product line.

Other Income (Expense). Interest income was $4,000, $27,000 and $122,000
for Fiscal 1993, Fiscal 1994 and Fiscal 1995, respectively. Interest income
increased from Fiscal 1994 to Fiscal 1995 as a result of interest accrued on a
related party stock subscriptions receivable. Interest expense decreased from
$19,000 in Fiscal 1994 to $12,000 in Fiscal 1995 as a result of repayment of a
note payable during Fiscal 1995. Other income of $76,000 in Fiscal 1994
consisted principally of the fair market value of computer equipment given to
Phoenix by a computer company to enable Phoenix to develop and test the Phoenix
System on such company's equipment.

Income tax expense for federal income tax was $0 in Fiscal 1993, Fiscal
1994 and Fiscal 1995 due to the large net operating losses incurred in Fiscal
1993 and Fiscal 1994. Income tax expense in Fiscal 1995 of $256,000 represents
foreign withholding taxes related to revenue from customers in certain foreign
countries.

22
<PAGE> 23

As a result of the Company's start-up losses, the Company has a net
operating loss carryforward. At December 31, 1995, Phoenix had available net
operating loss carryforwards of $2.8 million that expire in years 2008 through
2010 to offset future taxable income for federal income tax purposes. In
addition, Phoenix has available research and development tax credit
carryforwards of $111,000 that expire in years 2008 through 2010 and foreign tax
credit carryforwards of $514,000 that expire in years 2000 through 2001.
Utilization of these carryforwards to reduce future income taxes will depend on
the Company's ability to generate sufficient taxable income prior to expiration
of the carryforwards. Further, the Offering may cause an ownership change, as
defined by the Internal Revenue Code of 1986, as amended (the "Code"). In the
event of an ownership change, the annual amount of net operating loss
carryforwards and tax credit available to offset taxable income may be limited
under the provisions of the Code. A valuation allowance of $1.7 million against
deferred tax assets resulting from the net operating loss and tax credit
carryforwards and other tax benefits has been recorded because management
believes it is more likely than not that the deferred tax assets for which the
valuation allowance has been recorded will not be realized. See Note 7 of Notes
to Consolidated Financial Statements.

QUARTERLY OPERATING RESULTS

The following table sets forth consolidated statements of operations data
for each of the five quarters in the period beginning January 1, 1995 and ended
March 31, 1996. This information has been derived from the Company's unaudited
consolidated financial statements. The unaudited consolidated financial
statements have been prepared on substantially the same basis as the audited
consolidated financial statements and, in management's opinion, include all
adjustments, consisting only of normal recurring accruals, necessary for a fair
presentation of such information when read in conjunction with the Consolidated
Financial Statements and Notes thereto appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1995(1) 1995 1995 1995 1996
--------- ---------- ------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Revenues:
License fees and other.................. $ -- $2,802,782(2) $ 316,002 $ 349,064 $1,127,607
Implementation, customer and software
support and other service fees........ 90,745 397,070 472,765 601,918 653,723
--------- ---------- ------------- ------------ ----------
Total revenues................... 90,745 3,199,852 788,767 950,982 1,781,330
Expenses:
Cost of license fees and other.......... -- 176,122 111,553 88,107 131,029
Cost of implementation, customer and
software support and other service
fees.................................. 222,822 276,259 365,455 457,510 457,196
Sales and marketing..................... 224,839 237,263 266,707 289,939 268,818
General and administrative.............. 287,072 305,731 262,130 324,466 358,260
Product development..................... 60,272 149,438 192,152 267,345 299,067
--------- ---------- ------------- ------------ ----------
Total expenses................... 795,005 1,144,813 1,197,997 1,427,367 1,514,370
Other income (expense):
Interest income......................... 29,607 32,958 35,091 33,504 28,647
Interest expense........................ (6,590) (5,533) (1,082) (1,125) (1,081)
Other income (expense).................. 75,270 -- (2,216) (1,316) --
--------- ---------- ------------- ------------ ----------
Income (loss) before income taxes......... (605,973) 2,082,464 (377,437) (445,322) 294,526
Income tax expense........................ -- 255,999 -- -- 153,000
--------- ---------- ------------- ------------ ----------
Net income (loss)......................... $(605,973) $1,826,465 $(377,437) $ (445,322) $ 141,526
========== ========== ============ ============ ==========
Net income (loss) per share............... $ (0.20) $ 0.57 $ (0.12) $ (0.14) $ 0.04
Weighted average shares outstanding(3).... 3,076,813 3,231,943 3,146,234 3,262,362 3,298,444
</TABLE>

- ---------------

(1) In 1995, Phoenix changed its fiscal year end from January 31 to December 31.
However, the information presented above for the quarter ended March 31,
1995 consists of three months, including the month of January 1995.
(2) License fees and other was $2.8 million for the quarter ended June 30, 1995
in large part due to license fees of $2.1 million from a single foreign
customer (which includes approximately $205,000 in foreign withholding taxes
that are payable by that customer) and from the recognition of revenue from
the backlog of customers with whom Phoenix had signed contracts while the
Phoenix System was under development.
(3) See Note 1 of Notes to Consolidated Financial Statements.

23
<PAGE> 24

Company and its competitors; market acceptance of new and enhanced versions of
the Company's products; increased competition; changes in operating expenses,
including expenses related to acquisitions; changes in Company strategy;
personnel changes; changes in legislation and regulation; foreign currency
exchange rates and general economic factors. Product revenues are also difficult
to forecast because the market for client/server application software products
is rapidly evolving, and the Company's sales cycle, from initial review to
purchase and the provision of support services, varies substantially from
customer to customer. As a result, Phoenix believes that quarter to quarter
comparisons of its results of operations are not necessarily meaningful and
should not be relied upon as indications of future performance.

BACKLOG

Backlog, defined as the contract value of executed agreements minus revenue
recognized from these contracts, totaled $212,000, $3.1 million, $7.3 million
and $7.1 million at the end of Fiscal 1993, Fiscal 1994, Fiscal 1995 and the
1996 Period, respectively. At May 31, 1996, backlog totaled $7.5 million and
consisted of $1.8 million for software licenses, $636,000 for implementation and
$5.1 million for five-year customer support service agreements. Backlog of
software license and implementation revenue is expected to be realized within a
period of approximately one year, and customer support service backlog is
expected to be realized within a period of approximately five years.

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, Phoenix has financed its operations primarily from
private sales of capital stock and from cash payments from customers prior to
implementation of the Phoenix System. The Company also has relied, to a lesser
extent, on short-term bank borrowings from time to time.

Operating activities used $672,000 in cash in Fiscal 1993 and $474,000 in
cash in Fiscal 1994 and provided $1.0 million in cash in Fiscal 1995 and
$250,000 in the 1996 Period. Contributing to cash use were net losses of $1.0
million and $2.8 million in Fiscal 1993 and Fiscal 1994, respectively. Cash
payments from customers as provided by contracts in advance of revenue
recognition equalling deferred revenues plus deferred taxes provided cash of
$149,000, $2.2 million, $386,000 and $28,000 in Fiscal 1993, Fiscal 1994, Fiscal
1995 and the 1996 Period, respectively.

In Fiscal 1993, Fiscal 1994, Fiscal 1995 and the 1996 Period, the Company's
investing activities consisted entirely of purchases of property and equipment
and development of the Phoenix System. Purchases of property and equipment,
consisting primarily of computer equipment, were $173,000, $342,000, $253,000
and $62,000 in Fiscal 1993, Fiscal 1994, Fiscal 1995 and the 1996 Period,
respectively. Capitalized software development costs used $93,000, $1.1 million
and $313,000 in cash in Fiscal 1994, Fiscal 1995 and the 1996 Period,
respectively.

Financing activities provided $975,000, $1.4 million, $187,000 and $50,000
in cash in Fiscal 1993, Fiscal 1994, Fiscal 1995, and the 1996 Period,
respectively. Short-term debt provided $194,000 and $291,000 in cash in Fiscal
1993 and Fiscal 1994, respectively, and repayment of short-term debt used
$310,000 in cash in Fiscal 1995. Net proceeds from issuance of capital stock and
cash payments for stock subscription receivables provided $781,000, $1.1
million, $497,000 and $50,000 in cash in Fiscal 1993, Fiscal 1994, Fiscal 1995,
and the 1996 Period, respectively.

At March 31, 1996, the Company had cash and cash equivalents of $351,000
and a working capital deficit of $2.3 million.

The Company believes that the net proceeds from the sale of the Common
Stock offered by the Company hereby, together with its current cash balances and
cash flow from operations, will be sufficient to meet its working capital,
capital expenditure and capitalized software development requirements for the
next 12 months. The Company intends to terminate its current financing
arrangements with Barnett Bank upon the completion of the Offering. Cash flows
from operating activities are dependent on continued advance payments from
customers, and there is no assurance that the Company will continue to receive
these payments from customers or that it will continue to receive these payments
in advance on the same terms as it has in the past. The Company anticipates that
its operating and investing activities may use cash in the future, particularly
from growth in operations and development activities. Consequently, any such
future growth may require the Company to obtain additional equity or debt
financing.

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BUSINESS

Phoenix designs, develops, markets and supports highly adaptable,
enterprise-wide client/server application software for the financial services
industry, with a primary focus on middle market banks. Phoenix combined (i) its
management's extensive experience with banking and banking software systems,
(ii) the U.S. Bank Partners' input on bank operational and flexibility needs and
(iii) the most recent advances in client/server technology to design and develop
an innovative new banking software system. The Phoenix System, through its
client/server technology, addresses many of the deficiencies of the mainframe-
and minicomputer-based legacy systems on which most banks currently operate by
allowing financial institutions to integrate data into a comprehensive
management information network. The Phoenix System, like legacy systems,
supports all core areas of bank data processing, including system
administration, account processing, nightly processing, teller functions,
holding company accounting and budgeting. Unlike legacy systems, the Phoenix
System is a fully integrated system that provides significant advantages in
three critical areas: (i) customer relationship management; (ii) management
decision support; and (iii) bank product creation and support. Phoenix combines
its technological expertise with specific knowledge of the financial services
industry to provide information solutions to complex banking issues, such as
total data integration, customer management, customer profitability analysis and
management information requirements.

The Company's Chief Executive Officer, Bahram Yusefzadeh, has over 27 years
of experience in the banking software industry. In addition, the Company has
assembled a senior management team with over 120 years of experience in the
banking and software industries. In the 1970s, Mr. Yusefzadeh co-founded Nu-Comp
Systems, Inc. and led its development of one of the first integrated legacy core
banking systems, the Liberty Banking System, which at one time was used by over
260 banks. Mr. Yusefzadeh founded Phoenix for the purpose of developing and
marketing a new generation of integrated banking software applications using
client/server technology that would replace less flexible and technologically
dated legacy systems. The Phoenix System's development was the result of a joint
effort among the Company's management, Hewlett-Packard and the U.S. Bank
Partners. In addition, the U.S. Bank Partners provided a substantial portion of
the Company's initial capital. After the Offering, it is anticipated that
Hewlett-Packard will continue its strategic marketing alliance with the Company
and that the U.S. Bank Partners will continue to contribute to plans for new
products and enhancements through the Phoenix User Group ("PUG").

INDUSTRY BACKGROUND

The Company's primary market consists of middle market banks, which the
Company defines as commercial banks and savings institutions with asset sizes
ranging between $100 million and $1 billion. These banks are highly regulated,
and they historically have provided a limited range of products and faced
limited competition. These banks used legacy computer systems that generally
only processed transactions and provided a general ledger. Today, the
competitive landscape has changed dramatically as diversified financial service
providers compete directly with middle market banks. As a result, these banks
need detailed information about their institutions and customers in order to
develop and market profitable new products and services and to expand customer
relationships.

In response to this changing environment, the industry developed
modifications to the legacy data structures that took data extracts from legacy
systems and transported these extracts to personal computer application systems.
However, such modified legacy systems generally are written for mainframes and
minicomputers, are difficult and expensive to maintain and support, require
substantial training costs and, because they often use proprietary operating
systems and data structures, are limited in their ability to interact with other
information resources and systems used in a bank. Although modified legacy
systems may offer a graphical user interface for ease of use, and some have
introduced database technologies to provide increased

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data storage and more flexible access to data, these systems are generally
limited because they are still based on decades-old architecture which does not
permit full integration of data. Without full integration of data, the
information provided by these modified legacy systems generally is neither
complete nor readily accessible, and, thus, Phoenix believes that banks using
legacy systems are at a competitive disadvantage.

In the 1990s, the emergence of client/server computing made possible the
development of powerful applications which are capable of addressing
enterprise-wide business problems in a flexible and cost-effective manner. The
client/server model consists of personal computer workstation "clients"
connected on enterprise-wide networks to "servers" that provide data storage and
update capabilities. The client/server architecture allocates the processing of
application software between the client and the server to allow the clients to
handle the user interface and local data manipulation and to allow the server to
perform computing intensive functions. Because of this partitioning, a
client/server system is scalable such that responsiveness and capacity can be
increased by upgrading the server or replacing it with a more powerful model.
Furthermore the client/server architecture design minimizes network traffic.
Client/server systems also offer the level of data integrity and security that
banks require because access to information can be controlled by server-based
relational database management systems. Phoenix believes that very few middle
market banks have fully realized the potential benefits offered by client/server
technology due to the small number of true client/server systems currently
available to banks.

THE PHOENIX SOLUTION

The Phoenix System allows institutions to integrate data into a
comprehensive management information network that is readily accessible
throughout the entire financial institution, flexible with shared information
and easily interfaced. The Phoenix System gives bank personnel immediate access
to a broad range of customer information including balances, transactions,
financial statements, contact history, related accounts and demographic data.
The Company believes that the Phoenix System is easy to use and simple to learn,
which enables a bank to provide higher quality customer service with reduced
operating and training costs. Like legacy systems, the Phoenix System supports
all core areas of bank data processing, including system administration, account
processing, nightly processing, teller functions, holding company accounting,
and budgeting. Unlike legacy systems, the Phoenix System is a fully integrated
system that provides significant advantages in three critical areas: (i)
customer relationship management; (ii) management decision support; and (iii)
bank product creation and support.

- Customer Relationship Management. The Relationship Information
Management ("RIM") module integrates a customer's account data,
transactional activity, financial data from third party financial
applications, marketing information, relationships with other customers
and other accounts, financial statements and other types of information
required to view a customer's total relationship record. The RIM module
allows a bank to determine the profitability of each account and customer.
Banks can use information generated by the Phoenix System to determine
which products or services should be offered at a particular point in a
customer relationship in order to maximize profitability. The Company
anticipates that in early 1997 the Phoenix System will be able to
integrate and include data from third party software services, including
information on brokerage accounts, insurance accounts and credit card
accounts, in the RIM.

- Management Decision Support. Through its Executive Information System
("EIS"), the Phoenix System allows bank managers to track bank performance
and model the effects of business strategies and changes in market
conditions on such performance. EIS provides modeling tools which permit a
bank's management team to use real-time data to perform trend analysis and
to conduct extensive modeling activities, such as customer profitability
and overall bank profitability. In addition, the EIS provides a bank with
both statistical measures of product penetration and performance.

- Bank Product Creation and Support. The Phoenix System gives banks the
capability to quickly develop, deliver and process bank products and
services that can be as simple or as sophisticated as a bank's customers
and competition demand. New bank products can be developed rapidly and do
not require programming or the support of technical personnel.

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STRATEGY

Maintain Technology Leadership and Enhance Product Functionality. The
Company believes that the Phoenix System is the most advanced client/server
computing solution for banks because it incorporates new open technologies and
standards, such as client/server architectures, relational databases, graphical
user interfaces and advanced application development tools. Phoenix intends to
maintain its leadership position by integrating new technologies, adding new
applications, enhancing existing applications and increasing functionality. The
Phoenix System can run on any central server that will support a structured
query language ("SQL") standard relational database, such as hardware from
Hewlett-Packard, International Business Machines Corp. ("IBM"), AT&T Corp.,
Motorola, Inc., Sun Microsystems, Inc. and all other UNIX compliant hardware.

Focus on United States Middle Market Banks. The Company intends to
continue its marketing focus in the United States on the approximately 3,800
middle market banks with asset sizes ranging between $100 million and $1
billion. The Company believes that most middle market banks are technologically
sophisticated, seek banking software applications that support strategic
objectives and have the capital and human resources to finance and use
effectively advanced technological solutions. However, middle market banks are
subject to significant merger and acquisition activity, and the resulting
consolidation has the effect of reducing the number of potential customers for
the Company's products.

Expand International Market. Phoenix believes that many international
financial institutions are seeking technology as a means to offer a broader
array of financial products and services to meet the increasing demand for
retail banking services in the international market. The Company believes that
international institutions generally are less risk averse than United States
banks, are willing to skip technology generations and are looking for
technological solutions that will last at least 10 to 15 years. The Company
designed its software products to incorporate numerous international features,
such as support for different languages; the ability to process simultaneously
all currencies formatted in accordance with standards established by the
International Organization for Standardization; numeric, date and address
formatting to fit individual country standards; accounting for local tax
computations, including value-added taxation, and reporting to satisfy different
regulatory requirements. In order to expand international sales successfully in
1996 and subsequent periods, Phoenix must hire additional sales and
implementation personnel and recruit additional international resellers. The
risks inherent in the Company's international business activities generally
include currency risk, trade barriers, costs of localizing products for foreign
countries, difficulties in managing international operations, political
instability, potentially adverse tax consequences, restrictions on the
repatriation of earnings and the additional burdens of intellectual property
protections in foreign markets.

Increase Worldwide Distribution. The Company plans to continue expanding
its distribution both in the United States and internationally by increasing its
sales and implementation force and seeking additional strategic alliances.

- Direct Sales and Implementation. Phoenix generates a majority of its
revenues through its direct sales force which consisted of four people
serving the United States market, one person serving the international
market and an administrative staff of two people as of June 30, 1996. The
Company currently does not have an office outside the United States;
however, it plans to open an international sales office in 1997.
Competition for such personnel is intense, and there can be no assurance
that Phoenix will be able to retain its existing sales and implementation
personnel or to attract, assimilate or retain additional highly qualified
sales or implementation personnel in the future. As of June 30, 1996, the
Company had 29 implementation and training personnel. Phoenix intends to
increase substantially the number of sales staff and implementation staff
in 1996 and 1997.

- Strategic Alliances. Phoenix has established and intends to continue
expanding alternate channels of distribution through VARs and agents. In
particular, Phoenix recently established a strategic alliance with Unisys,
whereby Unisys exclusively markets the Phoenix System in Central and South
America, Mexico, the Caribbean and Bermuda. Additionally, in April 1996
Phoenix and CSA entered into the CSA Agreement whereby CSA exclusively
markets the Phoenix System to banks in certain countries

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of Africa and non-exclusively markets the Phoenix System to banks in the
Republic of South Africa. See "-- Target Markets." Although VARs and
agents increase the Company's ability to reach new markets, the Company
bears the risk that the VARs and agents will not be able to market the
Company's products effectively or will not be qualified to provide timely
and cost-effective customer support and service. In addition, gross
margins and composition of revenue and expenses may vary depending on
whether a sale was made directly by the Company or by a VAR or an agent.

Maximize Recurring Revenues. Phoenix signs customers to long-term license
agreements and charges annual service fees which are generally 15-20% of the
base license fee. As the asset size of a bank increases or as branches are
added, customers pay additional incremental license fees and increased service
fees over the life of the license agreement. Additionally, the Company's
disaster recovery service is a separate five-year contract which has an initial
implementation fee and annual service fees. Phoenix plans to continue to build
this base of recurring revenue and to develop additional sources of recurring
revenue by providing such services as networking support to its customers.

Leverage Existing Customer Base and Broaden Primary Market. The Company
intends to expand its current bank customer relationships by providing
additional products and services and licensing the Phoenix System to additional
bank subsidiaries of existing client bank holding companies. In addition, the
Company believes its implemented customer base represents an important source of
references, which are vital in marketing to the financial services industry. In
1997, the Company also intends to expand the market for the Phoenix System to
include banks with asset sizes greater than $1 billion and less than $100
million by increasing product functionality and flexibility for larger banks and
by delivering the NT Version for smaller banks. Although the license fees for
the NT Version will be comparable to the license fees for the Phoenix System,
the Company believes that the NT Version will be more acceptable to smaller
banks because these banks will incur lower overall acquisition costs related to
operating in a Microsoft Windows NT ("Windows NT") environment.

Pursue Complementary Acquisitions. Phoenix intends to leverage its
position as a provider of client/server technology to financial institutions by
pursuing strategic acquisitions of providers of complementary technologies,
products and services, such as companies that offer legacy retail banking
systems. The Company intends to pursue such acquisitions in order to more
rapidly expand the Company's customer base by converting the acquired customers
to the Phoenix System. Phoenix believes such strategic acquisitions will permit
Phoenix to enter new markets, provide outsourcing alternatives and acquire
additional products and applications. However, such future acquisitions, if any,
would be accompanied by risks, including, among other things: the difficulty of
assimilating the operations and personnel of the acquired company; potential
disruption of Phoenix's ongoing business; inability to successfully incorporate
acquired technologies and rights into Phoenix's products; entering markets in
which Phoenix has little or no direct prior experience; and impairments of
relationships with employees and subscribers of the acquired business as a
result of changes in management.

THE PHOENIX SYSTEM

The Phoenix System is a fully integrated, enterprise-wide client/server
application software system for the financial services industry. The Phoenix
System gives bank personnel at all levels the tools and information needed to
enhance and speed their decision-making. In addition, the Phoenix System is
designed to fit the evolving needs of a growing bank. The following are some of
the important capabilities included in the Phoenix System:

Customer Relationship Management. The Phoenix System places a structural
emphasis on managing customer relationships, which allows a bank to pursue a
more personalized and profitable approach to its products and services. The RIM
module integrates a customer's account data, transactional activity, financial
data from third party financial applications, marketing information,
relationships with other customers and

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other accounts, financial statements and other types of information required to
view a customer's total relationship record. The primary customer relationship
management features include:

- Marketing and Other Personal Information. For purposes of marketing and
creditworthiness assessments, the RIM module tracks a range of personal
information, such as employment history, home ownership status, other
credit providers and other bank accounts.

- On-line Financial Statements and Portfolios. To facilitate improved
management of customer relationships, enhanced analysis of a customer's
financial condition and improved tracking of customer profitability, the
RIM module maintains information regarding a customer's assets,
liabilities, income and expense in a unified file.

- Extensive Customer Relationship Tracking. To facilitate marketing and
management decision-making, based not only on a bank's overall
relationship with individual customers but also on its overall
relationship with related groups of customers, the RIM module can track
relationships between customers, groups of customers and between customers
(or groups of customers) and accounts.

- Customer-Based Statements. Combined customer statements can contain an
unlimited number of accounts, including related accounts owned by other
customers, and each account included on a statement can be configured to
show only summary information or both summary information and transaction
detail. Copies of account statements and other correspondence can be
automatically sent to an unlimited number of additional addresses,
including temporary and seasonal addresses.

- Integrated Signature, Photograph and Document Imaging. The RIM module
maintains an on-line signature card with a photograph for each customer
and can store and display photographs of loan collateral and other
customer assets, Social Security cards and drivers' licenses.

- Flexible Inquiry Capability. The Phoenix System enables users to
progress through increasingly detailed levels of display data on all
inquiry screens. This capability allows customer service representatives
and platform officers to research questions thoroughly and quickly,
without having to enter arcane codes or wade through stacks of printed
reports.

Management Decision Support. Using EIS, senior bank executives can track
performance and model the effect of business strategies and changes in market
conditions. The Phoenix System draws upon real-time data to present financial
institutions with graphical displays that highlight important business trends
and facilitate rapid interpretation and analysis. Unlike the reporting
facilities of legacy systems, information presented to a bank's manager by the
Phoenix EIS is not static. The EIS takes into account both the relationship of a
particular indicator to other related categories of information, as well as the
trends for that indicator over time. At its core, the Phoenix System is focused
on providing bank decision-makers with the following real-time capabilities: (i)
a fully integrated general ledger; (ii) a broad suite of standard reports
augmented by a flexible ad hoc reporting capability; (iii) an integrated set of
budgeting templates; and (iv) customer and account profitability analysis. In
addition, the EIS provides a bank with both statistical measures of product
penetration and performance.

Bank Product Creation and Support. The Phoenix System provides the
capability to quickly develop, deliver and process bank products and services
that can be as simple or as sophisticated as a bank's customers and competition
demand. Because all bank product development is parameter-driven, banks can
design products and services by simply selecting product features from a variety
of options. New bank products can be developed rapidly and do not require
programming or the support of technical personnel. Some of the Phoenix System's
tools for bank product creation and support include:

- Parameterized Customization Controls. The Phoenix System was designed
around parameterization and reflects an appreciation for the continuously
changing demand for banking products and services. This design gives banks
the ability to respond by enabling bankers to create new bank products and
services quickly and easily.

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- "What If" Analysis. The Phoenix System provides a unique "what if"
analysis feature that enables banks to perform complex calculations by
simply entering a few fields of information. This facility can be used to
model the effects on a bank's profitability of new products and services.

- Cost Tracking. To facilitate cost and profitability tracking at all
operation levels, the Phoenix System ties transactional activity and other
account information to the integrated general ledger at the product-class
level. Thus, for each loan and deposit product a bank offers, it can
direct financial data on balance components, interest, loan loss, escrow,
dealer reserves, participations, insurance and charges and fees to a
specific set of general ledger accounts.

- Integrated Profitability Analysis. The Phoenix System allows banks to
analyze the profitability of individual loans and customer relationships,
as well as of broad categories of customers.

- Flexible Rate Controls. Within the Phoenix System, rate calculations for
all products and accounts are managed through a centralized table of rate
indices. The Phoenix System allows banks to create an unlimited number of
rate indices and maintains a life-to-date on-line history of all rate
changes for all rate indices. It also permits banks to schedule rate
changes in advance or backdate them.

Complete Integration of Core Applications. The Phoenix System provides the
same core bank data processing capabilities as are found in older legacy systems
but does so within an integrated "open systems" environment that uses a
graphical user interface, modern relational database technology and
nonproprietary hardware and software components. The Phoenix System divides core
processing functions among seven discrete, but fully integrated, software
modules: (i) system administration; (ii) account processing; (iii) nightly
processing; (iv) teller system; (v) holding company financial statements; (vi)
EIS; and (vii) budgeting. The following are some of the core applications of the
Phoenix System:

- Deposit and Loan Processing. In addition to supporting the processing
requirements of traditional deposit and loan products, the Company built
the deposit and loan processing modules around a framework of extremely
flexible controls that allow a bank to customize and implement an
analysis-based approach tailored to the bank's products and services.

- General Ledger. Phoenix provides a self-balancing general ledger system
that supports both batch and on-line, real-time transaction processing
functions. Real-time posting of on-line transactions ensures that banks
can correct errors anytime during the day, without having to wait for the
next overnight posting to run.

- On-line Transaction Processing. The Phoenix System's core account
processing module, through which customers and accounts are added to the
Phoenix System and maintained over time, provides a full on-line
transaction processing capability. Through this module's transaction
processing facility, users can post on-line transactions to any account in
the Phoenix System.

- System Security. Phoenix provides a comprehensive set of controls for
restricting employees' access to different levels of bank, customer and
account information, as well as for limiting the transactional amounts
that employees are permitted to post to accounts. In case an internal
problem occurs, the Phoenix System maintains detailed on-line audit trails
for all records that track actions resulting in a record being viewed,
created or modified.

- Integrated On-line Help System. All areas of the Phoenix System provide
integrated connections to an interactive on-line help system.

TECHNOLOGY

Phoenix has partnered with leading hardware manufacturers, tools
manufacturers and relational database vendors in the client/server community,
such as Hewlett-Packard, Gupta Corporation ("Gupta") and Sybase, Inc., to
produce software based on leading-edge technological developments. Using these
tools, the Company has created a product that enables the Company's customers to
utilize what the Company believes is the most current technology in the
financial institutions industry.

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Centralized Relational Database Management System ("RDBMS"). The Phoenix
System uses a relational database technology known as Sybase, currently provided
by Sybase, Inc. Phoenix chose Sybase System 10 as its SQL database. The Phoenix
System can run on hardware platforms from Hewlett-Packard, IBM and Unisys, and
all others which are UNIX compliant. Phoenix is currently involved in the
integration of Sybase, Inc.'s new relational database System 11 into the Phoenix
System. System 11 is expected to provide substantial performance gains for
existing and future customers and to improve processing times.

An advantage of the Phoenix System as compared to legacy or modified legacy
systems is that the Phoenix System stores data in a relational database rather
than in a proprietary file format. Consequently, the data can be integrated by
using hundreds of different third-party query and report writing tools. In
addition, with a relational database, it is very easy to expand and change the
structures of parameter tables and data. This "open" approach to data storage
also provides the ability to move the Phoenix System to other relational
database management systems. The Company plans to adapt the Phoenix System for
Microsoft Corporation's SQL Server 6.5 on Windows NT to create the NT Version
for use by smaller banks. The NT Version is scheduled to be released in 1997.

Replication and Distributed Data Processing. Phoenix has leveraged the
open interfaces of the Phoenix System to implement an advanced distributed
database for support of its off-line teller system. The off-line teller system
uses a local database at each branch computer to perform replicated transactions
in the event of hardware or network failure at the central server. Off-line
branches are supported using Gupta's SQLBase for either Novell NetWare or
Windows NT.

Open Protocols for Data Communication. Phoenix uses the industry standard
TCP/IP protocol for communicating with the relational database server and
IPX/SPX for customers implementing a network using NetWare instead of Windows
NT. This allows the Company's customers to implement a broad array of local area
network and wide area network topologies and configurations. In addition,
customers that have an existing network infrastructure in place that supports
TCP/IP do not have to reinvest in new technology simply to run the Company's
product.

32-bit Application Support. The Company is currently engaged in an effort
that will enable the Company's customers to use the latest client operating
systems from Microsoft (Windows 95 and Windows NT Workstation) with native
32-bit applications. These applications offer the Company's customers
substantial benefits in the areas of fault tolerance, ability to support more
complex transaction processing, enhanced performance and advanced security.

TARGET MARKETS

Since the release of its product in June 1995, the Company has entered into
28 ongoing contracts with banks and bank holding companies for installation of
the Phoenix System supporting 29 United States and eight international financial
institutions. As of June 30, 1996, the Phoenix System has been fully implemented
and is operating in 18 of these 37 financial institutions. Phoenix believes that
customers in both the United States market and the international market are
increasingly accepting of client/server technology.

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The United States Market. Phoenix currently divides commercial banks and
savings institutions in the United States market into three groups based on
asset size(1):

[GRAPH]
- ---------------

(1) Numbers in the graphic are derived from The FDIC Quarterly Banking Profile,
Fourth Quarter, 1995.

The Company primarily focuses its marketing and sales efforts on middle
market banks with total assets ranging between $100 million and $1 billion. In
the bank data processing services industry, service contracts for banks
typically have an initial term of five years, and, therefore, the Company
estimates that each year approximately 20% of banks evaluate data processing
alternatives because their current contracts expire. Management believes that
recently an increasing number of banks have renewed their service contracts for
shorter periods in order to maintain the flexibility to change software
companies due to rapid developments in banking software technology which may
result in increased demand. Moreover, a number of banks are evaluating data
processing alternatives due to the acquisition of their software providers and
servicers by other software companies and the age of their current software and
hardware solutions.

Phoenix is also marketing the Phoenix System on an opportunistic basis to
financial institutions with assets greater than $1 billion and has licensed and
implemented the Phoenix System in eight banks with assets under $100 million.
The Company intends to continue to license to financial institutions and other
businesses outside of its primary market on an opportunistic basis; for example,
one of the Company's customers is a church. As a means to increase its target
market, the Company intends to release its NT Version targeted at smaller banks
in 1997. The Company also believes that larger banks will become target banks
for the Phoenix System in 1997 as new product features and enhancements increase
the Phoenix System's functionality for larger banks.

The International Market. At this time, Phoenix and its strategic sales
partners are actively marketing the Company's products and services in Central
and South America, Mexico, the Caribbean, Australia and Africa, and Phoenix is
pursuing inquiries from a variety of other areas in Western Europe, Eastern
Europe and the Middle East. In the international market, the Company has
primarily focused on technology-minded financial institutions operating in
countries where the primary language is either Spanish or English. The Company
believes the international market offers significant opportunity because
economic expansion and other market factors have increased the demand for
sophisticated retail banking services. Sophisticated international banks offer a
broad array of financial products and services and demand technology, like the
Phoenix System, that can integrate numerous applications, such as trade finance.
Furthermore, management believes that a significant number of international
banks have accepted, to a greater degree than United States banks, that
technology should be used as a competitive tool and not just as a service
delivery vehicle. International banks are searching for hardware and software
platforms that are open, powerful and economical. The Company also believes that
these institutions are looking for technology solutions that will

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last at least 10 to 15 years. The Company currently does not have an office
outside the United States; however, it plans to open an international sales
office in 1997.

PRODUCT PRICING

The Company prices its product in two components: (i) license fees for
software products and other revenues and commissions from the sale and delivery
of software and hardware products of third party vendors; and (ii) fees for a
full range of services complementing its products, including implementation,
conversion training and installation services, interface services for tying the
Phoenix System to third-party applications and customer and software support
services. License fees are paid at the beginning of the license agreement and
are recognized as revenue upon delivery, when no significant vendor obligations
remain and collection of the resulting receivables is deemed probable. When a
customer enters into a license agreement with the Company, the license agreement
includes a service agreement for the same term. Implementation, conversion
training and installation fees and interface fees are paid at the beginning of
the license agreement or when the service is performed. Customer and software
support fees are paid in advance over the life of the license agreement. The
service portion of the license agreement is recurring revenue which is paid in
advance over the term of the agreement. In the event that a customer fails to
pay its service fees, the license reverts to the Company. Otherwise, the license
is perpetual, and the service fees are recurring revenue. Phoenix has increased
the price of its products since the conclusion of Fiscal 1995.

In the United States, license fees are based on the asset size of the bank.
Internationally, each bank is charged a base license fee and an incremental
license fee based on the number of branches for such bank. Implementation,
conversion, training and interface fees vary based on the complexity of a
particular project. In the United States, the customer and software support fees
are generally 15-20% of the license fee per year. Internationally, the customer
and software support fees are 20% of the base license fees and branch fees. As
the asset size of the bank increases or as branches are added, customers pay an
additional incremental license fee and increased service fees over the life of
the license agreement. The Company's VARs and agents license the Company's
products at a discount for relicensing.

SALES AND MARKETING

The Company markets its software and services directly through its sales
and marketing personnel and through VARs and agents that are involved in
providing products and services to the financial services industry. As of June
30, 1996, the Company's sales and marketing department, including administrative
staff, consisted of four individuals located at the Company's offices in
Maitland, Florida and three sales persons located in Oklahoma City, Oklahoma,
Des Moines, Iowa and Philadelphia, Pennsylvania. The Company currently does not
have an office outside of the United States; however, the Company plans to open
an international sales office in early 1997. In addition, the Company has
limited marketing relationships with representatives in Panama, Mexico and
Colombia.

The Company's direct sales personnel are experienced in the sales process
for banking software products. The Company's marketing personnel generate leads
for the sales force through a program of direct mail, networking, telemarketing,
seminars and trade shows, and contacts with independent consultants. The
marketing personnel also assist in the sales process by providing sales support
literature and ongoing customer communications.

The Company's direct sales and marketing force is complemented by a growing
network of indirect distribution channels, including VARs and agents. Some VARs
and agents may also provide training, support and other services to the
end-user. In all cases, the Phoenix System software remains the sole property of
the Company, and if the Company terminates its relationship with any VAR or
agent, customers sold by that VAR or agent will to pay support fees to the
Company. The Company intends to expand its network for indirect distribution and
anticipates that the percentage of its total revenues derived from indirect
sales will increase in the future. In particular, the Company recently signed
the Unisys Agreement whereby Unisys exclusively markets the Phoenix System in
Central and South America, Mexico, the Caribbean and Bermuda. Unisys has
guaranteed a certain level of annual sales to retain its exclusive rights in
these territories.

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Additionally, in April 1996, the Company entered into a strategic alliance with
CSA whereby CSA will exclusively market the Phoenix System to banks in certain
countries in Africa and non-exclusively market the Phoenix System to banks in
the Republic of South Africa. CSA has guaranteed a minimum number of sales to
retain its exclusive right in the territory.

IMPLEMENTATION SERVICES

The Company provides comprehensive implementation services to customers
converting to the Phoenix System. Phoenix assigns each customer an
implementation team of experts who work with the customer through all phases of
the project, including project management, data mapping and conversion, software
installation and network certification, education and consulting. Each
implementation team can work on multiple projects at the same time. As of June
30, 1996, the Company had 29 people assigned to the implementation department.
The Company intends to hire additional people and add resources as necessary.

Project Management and Coordination. Phoenix provides extensive project
planning and coordination as part of the implementation process. Phoenix assigns
a full-time project manager to guide the customer through the installation
process and to coordinate all conversion and implementation activities.

Data Conversion. Application analysts and conversion programmers map and
convert a bank's current account data to the Phoenix System. Data conversion
activities include data mapping, program development, extensive testing,
detailed data auditing and a complete trial conversion prior to the final
implementation date.

Software Installation and Network Certification. Phoenix provides network
engineers to install software and certify the customer's network prior to
installation of the Phoenix System. This on-site service ensures that all
hardware and software is installed correctly and that the proper network
security is in place.

Education. Phoenix offers a comprehensive education and training program
to customers. The Company offers training classes for product set-up at the
Company's headquarters in Maitland, Florida. Phoenix also provides hands-on
application training services at the customer site prior to installation.
Additional on-site training for ancillary products is available upon request.

Consulting. The Company's consultants are available to work closely with
customers. These consulting services generally consist of assisting customers
who are planning large implementations, who are engaged in operational
reorganizations or who wish to customize the Phoenix System to their unique
needs.

Fees for project management and coordination, data conversion, and software
installation and network certification are included in the cost of
implementation. Generally, fees for education and consulting are charged
separately from the Company's software products.

CUSTOMER SERVICE AND SUPPORT

The Company believes that maintaining a high level of support and service
is critical to customer satisfaction because of the critical nature of the
Phoenix System to a bank's day-to-day operations. The Company's customer service
and support personnel assist banks in the use of the Phoenix System and with the
maintenance of their network and technology infrastructures. As of June 30,
1996, the Company had ten people in its product development group that primarily
provide customer service and support. Customer service and support personnel
provide service 24 hours a day, seven days a week, and have beepers, cellular
phones and laptop computers which enable them to answer a customer's question
from any location via a modem connection to the Company's computers. The Company
is in the process of and will continue to train personnel at Unisys and CSA and
will train personnel of additional VARs who in the future agree to market the
Phoenix System overseas so that these VARs will be able to provide certain
levels of service and support to customers overseas.

Product Support. Phoenix delivers product support services through all
traditional avenues, including telephone, Internet, electronic mail and
facsimile. Due to the unique nature of client/server computing systems, many
critical customer support activities can also be performed through high speed
telecommunication lines directly to a customer's location. Phoenix support
personnel have the ability to connect quickly to a server at a customer site and
to perform work as if they were physically at the customer's site. Using this

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<PAGE> 35

approach, Phoenix is able to offer effective and direct support to its customers
without the traditional expense associated with on-site visits.

Networking Support. Phoenix offers a full range of networking support
services upon request. Phoenix performs on-site network certification for all
customers during their initial software installation, and network engineers are
available for ongoing support by telephone. Networking support and on-site
consulting are available upon request for an additional fee.

Disaster Recovery Service. Phoenix also offers a disaster recovery service
that provides customers with assistance in reestablishing the Phoenix System's
processing capacity within 24 hours if a disaster occurs. The disaster recovery
service is a separate five-year contract which has an initial implementation fee
and annual service fees. This added-cost service satisfies the United States
bank regulatory obligation to maintain and annually test a disaster recovery
plan and allows Phoenix to generate additional recurring revenue from its
implemented customer base.

SupportNet. Phoenix also administers SupportNet, part of the Company's
World Wide Web site which provides an additional vehicle of support for client
banks. SupportNet is a free service which allows users with Internet access to
obtain support through features such as (i) online discussion forum, (ii) online
support documents for the Phoenix System, (iii) online software bug recording,
(iv) online enhancement requests and (v) online file transfers from the Company.
In mid-1997, the Company expects to add a feature called "knowledge base" which
will provide a first level of resolution for troubleshooting issues with the
Phoenix System.

Internet Consulting Service. Phoenix also offers Internet Consulting
Service ("ICS"), which provides both Internet and Intranet services to client
banks. ICS allows client banks to establish a presence on the World Wide Web
through home pages and web sites. ICS can also provide client banks with the
services to create an internal web environment, known as an Intranet. Through
client/server technology and the Company's software, the client bank receives
the benefit of an Intranet which enables the bank to improve and increase
productivity without additional cost. The ICS is an added-cost service which
allows Phoenix to generate additional recurring revenues through monthly access
and maintenance fees.

PRODUCT DEVELOPMENT AND NEW PRODUCTS

Phoenix was founded in January 1993 for the purpose of developing and
marketing a new generation of integrated banking software applications that
would replace less flexible and technologically dated legacy systems. From the
Company's inception through Fiscal 1995, product development represented
approximately 40% of the Company's aggregate expenditures. Hewlett-Packard
provided developmental-stage assistance to the Company by supplying computer
hardware to the Company for development and testing of the Company's products.
Early in the Company's history, each of the U.S. Bank Partners participated in
the Company's joint application development program under which end-users were
involved in product development and testing. The joint application development
program helped reduce the development cycle by increasing the efficiency with
which design problems were identified and corrected. After the Offering, it is
anticipated that Hewlett-Packard will continue its strategic marketing alliance
with the Company and the U.S. Bank Partners will continue to contribute to plans
for new products and enhancements through the PUG.

Phoenix believes that its future success will depend in large part on its
ability to maintain and enhance its current product and service offerings and to
develop and introduce new products and features that will keep pace with
technological advances and satisfy evolving customer requirements. As of June
30, 1996, the product development group consisted of 40 individuals in addition
to ten customer service and support personnel. Phoenix develops and adjusts
product direction in response to two core trend areas: (i) developments within
the financial industry and (ii) changes within the technology arena.

Product Development Cycle. Phoenix develops plans for new products and
enhancements following extensive discussions with the PUG, which consists of all
current users of the Phoenix System. The U.S. Bank Partners continue to
participate in the development of the Company's products by their participation
in the PUG. The PUG meets at least twice a year with the Company to offer
recommendations and to help prioritize

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<PAGE> 36

product development and enhancement projects. In addition, the Company's product
development personnel continually develop new product ideas and enhancements.
Once a product idea has been formalized, the Company uses an internal review
process to determine: (i) whether to develop the enhancement; (ii) a development
schedule; and (iii) a budget for the enhancement.

Development Methodology. Development tools, such as 4GL programming tools,
enable rapid prototyping and have dramatically reduced development time.
Enhancements developed in a client/server environment take significantly less
time to complete than in a legacy system environment. Phoenix believes that the
efficiencies of its product architecture and development methodology allow it to
move products from planning to delivery more quickly than its legacy
system-based competitors.

Product Plans. The Company's product development efforts are currently
focused on enhancing the functionality of the Phoenix System so that it will be
attractive to a broader range of customers. Phoenix believes that it will be
able to improve its competitive position by successfully completing the
following new products, among others:

- Multi-language enhancements. Phoenix is presently completing the first
of several important system features that are designed to improve the
Company's competitive position in the international market. Phoenix has
designed a unique language independence engine that will allow the
Company's core product to be rapidly localized into any single-byte
character set language. This engine is currently being used to implement a
Spanish version of the Phoenix System which the Company plans to release
in late 1996.

- Multi-currency enhancements. Phoenix has designed and plans to implement
its multi-currency enhancement in late 1996. With the multi-currency
enhancement, the Phoenix System will support the world currencies
formatted in accordance with standards established by the International
Organization for Standardization.

- Secondary marketing and other enhancements. Significant enhancements for
the United States market are focused on the loan processing area, such as
investor reporting for secondary mortgage marketing including reports
required by the Federal Home Loan Mortgage Corporation and Federal
National Mortgage Association. Phoenix is also developing modules that
permit the processing of dealer loans, accounting for non-accrual loans
and the integration of data from third party sources such as credit card
processors, and brokerage accounts. Phoenix believes that such
enhancements will broaden the appeal of the Phoenix System for larger
banks.

- NT Version of the Phoenix System. The NT Version will employ Windows NT
as the network operating system and Microsoft SQL Server as the RDBMS and
will support both Windows 95 and Windows NT on the client. The Company
intends to release its NT Version in 1997. This enhancement will improve
the cost-competitiveness of the Phoenix System within the smaller bank
market (i.e., banks with assets under $100 million).

- Internet-banking enhancement. Phoenix plans to deliver an enhancement to
the Phoenix System that will allow the Company's customers to provide
on-line banking services through the Internet. The Company's client/server
architecture is built upon the same industry standards utilized on the
Internet. Phoenix believes that the delivery of its Internet banking
capability will give the Phoenix System a competitive advantage over many
existing products. The Company intends to charge an additional fee for
this enhancement.

These potential new enhancements and products are subject to significant
technical risks, including delay in the development, introduction or production
of the new enhancements or products, failure to achieve market acceptance and
undetected errors or failures. See "Risk Factors -- Dependence on New Products
and Rapid Technological Change; Risk of Product Errors" and "-- Dependence on
Single Product Line."

COMPETITION

The financial institution software market is intensely competitive and
subject to rapid change. Competitors vary in size and in the scope and breadth
of the products and services offered. Phoenix encounters competition from a
number of sources, including FiServ, Inc., Bisys, Inc., Marshall & Isley Corp.,
Electronic

36
<PAGE> 37

Data Systems Corp., Jack Henry & Associates, Inc., ALLTEL Information Services,
Inc., EastPoint Technology, Inc. and Perot Systems Corp., which all offer core
retail software systems or outsourcing alternatives to the financial
institutions industry. See "Risk Factors -- Intense Competition." In general,
Phoenix competes on the basis of: (i) product architecture, including
distributed computing capability, access to commercial SQL databases and ease of
customization and integrations with other applications; (ii) functionality,
including the breadth and depth of features and functions and ease of use; (iii)
service and support, including the range and quality of technical support,
training, implementation and consulting services and the capability to provide
these on a global basis; (iv) management expertise, including management's
banking software experience and financial services industry knowledge; and (v)
product pricing in relation to performance. Management believes that the Phoenix
System is a market leader in the areas of product architecture and management
expertise and that the Company competes favorably in the areas of functionality,
service and support and product pricing.

Financial institutions have two fundamental alternatives for obtaining data
processing capabilities: (i) in house applications, either those that are
developed internally or those that are purchased from third party vendors; and
(ii) outsourcing, either as a part of a total outsourcing solution or where a
third party acts as a service bureau. Until the introduction of client/server
technology, the only in-house processing systems offered were proprietary legacy
systems running on mainframe or minicomputer hardware. In the United States
market, client/server application software has only recently been made available
to banks, but it is gaining market acceptance and market share. In the
international market, there are a number of client/server alternatives
available, as well as traditional legacy systems. Management believes the
Company is currently the leading provider of client/server core processing
application software solutions to the banking industry.

The Company believes that none of its current competitors offers
application software that provides the level of flexibility and functionally
featured in the Company's customer relationship management, customer
profitability analysis or executive information components. The Company expects
additional competition from other established and emerging companies as the
client/server market continues to develop and expand. In addition, competition
could increase as a result of software industry consolidations, including
particularly the acquisition of any of the client/server based retail banking
system providers by one of the larger service providers to the financial
services industry. For example, M&I Data Services, a division of Marshall Isley
Corp., recently announced an agreement to acquire EastPoint Technology, Inc., a
provider of client/server technology. See "Risk Factors -- Intense Competition."

INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS

Phoenix relies primarily on a combination of copyright and trademark laws,
trade secrets, confidentiality procedures and contractual provisions to protect
its proprietary rights. Phoenix seeks to protect its software, documentation and
other written materials under trade secret and copyright laws, which afford only
limited protection. The Company's license agreements contain provisions which
limit the number of users, state that title remains with the Company, protect
confidentiality, permit the termination of license for misuse or abuse and
require licensees to notify the Company of infringements on the Company's
property and rights. Phoenix presently has no patents or patent applications
pending and has no trademark or copyright registrations. Despite the Company's
efforts to protect its proprietary rights, unauthorized parties may attempt to
copy aspects of the Company's products or to obtain and use information that the
Company regards as proprietary. Policing unauthorized use of the Company's
products is difficult, particularly overseas, and while the Company is unable to
determine the extent to which piracy of its software products exists, software
piracy can be expected to be a persistent problem. In addition, the laws of some
foreign countries do not protect the Company's proprietary rights to as great an
extent as do the laws of the United States. Nevertheless, the Company believes
that due to the rapid pace of technological change in the information technology
and software industries, factors such as the technological and creative skills
of its employees, new product developments, frequent product enhancements and
the timeliness and quality of support services are more important to
establishing and maintaining a competitive advantage in the industry.

Phoenix does not believe that any of its products infringes the proprietary
rights of third parties. There can be no assurance, however, that third parties
will not claim infringement by the Company with respect to

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<PAGE> 38

current or future products. The Company expects that software product developers
will be increasingly subject to infringement claims as the number of products
and competitors in the Company's industry segment grows and the functionality of
products in different industry segments overlaps. Any such claims, with or
without merit, could be time-consuming, result in costly litigation, cause
product shipment delays or require Phoenix to enter into royalty or licensing
agreements. Such royalty or licensing agreements, if required, may not be
available on terms acceptable to the Company or at all, which could have a
material adverse effect upon the Company's business, operating results and
financial conditions. See "Risk Factors -- Dependence on Proprietary Technology;
Risks of Infringement."

EMPLOYEES

As of June 30, 1996, Phoenix had a total of 98 employees and contractors,
of which 50 were engaged in product development and support, 29 were in
implementation and training, seven were in sales and marketing, nine were in
finance and administration and three were in executive management. Substantially
all of the Company's senior and executive officers who were employed by the
Company on June 30, 1996 have entered into employment agreements with the
Company. See "Management -- Employment Agreements." None of the Company's
employees is represented by a labor union. The Company has not experienced any
work stoppages and considers its relations with its employees to be
satisfactory.

FACILITIES

Phoenix's principal administrative, sales, marketing, support and product
development facility is located in approximately 18,500 square feet of space in
a commercial building in Maitland, Florida. This facility is leased to the
Company pursuant to a main lease which terminates on January 31, 1998 and two
subleases which terminate on December 31, 1996 and March 31, 1997, respectively.
The Company is currently investigating potential facilities to relocate its main
headquarters to accommodate growth in its business. The Company believes that
suitable additional or alternative space will be available in the future on
commercially reasonable terms as needed.

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<PAGE> 39

MANAGEMENT

OFFICERS AND DIRECTORS

The executive officers, directors and significant employees of the Company,
and their ages as of May 31, 1996, are as follows:

<TABLE>
<CAPTION>
NAME AGE CLASS(1) POSITION
- --------------------------------------- --- -------- ---------------------------------------
<S> <C> <C> <C>
Executive Officers and Directors
Bahram Yusefzadeh(2).............. 50 III Chairman of the Board, Chief Executive
Officer and Director
Ralph H. Reichard................. 53 III President, Chief Operating Officer and
Director
Clay E. Scarborough............... 41 -- Senior Vice President and Chief
Financial Officer
Michael R. Newes.................. 50 -- Senior Vice President of Marketing and
International Sales
Harold C. Boughton................ 44 -- Senior Vice President of National Sales
Gerald P. Nissen.................. 47 -- Senior Vice President of Technology
Services
Twanna C. Soifer.................. 47 -- Senior Vice President of Implementation
Services
Ronald E. Fenton(2)(3)............ 67 III Director
William E. Hess................... 59 I Director
James C. Holly(2)(3).............. 55 III Director
Paul A. Jones..................... 41 II Director
J. Michael Murphy................. 55 II Director
Glenn W. Sturm.................... 42 II Director
O. Jay Tomson..................... 59 I Director
Significant Employees
Ruthann M. Rackawack.............. 39 -- Treasurer
Raju M. Shivdasani(4)............. 45 -- Senior Vice President and Division
President of International Sales
</TABLE>

- ---------------

(1) Class I term expires in 1997; Class II term expires in 1998; and Class III
term expires in 1999.
(2) Member of Compensation Committee. Mr. Holly is the Chairman of the
Compensation Committee, and Mr. Yusefzadeh is a non-voting member of the
Compensation Committee.
(3) Member of Audit Committee. Mr. Fenton is the Chairman of the Audit
Committee.
(4) Mr. Shivdasani accepted an offer of employment from the Company on June 25,
1996. The Company currently anticipates that he will commence employment on
July 15, 1996.

Executive Officers and Directors

Bahram Yusefzadeh. Mr. Yusefzadeh, the founder, Chairman of the Board and
Chief Executive Officer of Phoenix, has over 27 years of experience in the
banking software industry. In 1969, he co-founded Nu-Comp Systems, Inc.
("Nu-Comp"), where he developed the Liberty Banking System and served as Nu-
Comp's president and chief executive officer. Mr. Yusefzadeh became chairman of
the board of Broadway & Seymour, Inc. ("Broadway & Seymour") upon its
acquisition of Nu-Comp in June 1986 and remained in that position until November
1986. From 1986 to 1992, he worked for The Kirchman Corporation ("Kirchman"),
first as president of the product and marketing strategies division, and later
as president of both the independent banking group and the outsourcing division.
Mr. Yusefzadeh currently serves as a member of the Executive Committee and as a
non-voting member of the Compensation Committee.

Ralph H. Reichard. Mr. Reichard joined Phoenix as a consultant and advisor
in 1994. He officially joined the Company in January 1995 as President and Chief
Operating Officer. He also serves as a director and as a member of the Executive
Committee. From 1990 to 1994, Mr. Reichard was the president of the banking
business unit of Newtrend, L.P. ("Newtrend"), a software and outsourcing
services provider to banks, thrifts and credit unions. He served on Newtrend's
executive management committee and was

39
<PAGE> 40

responsible for the day-to-day operation and management of the banking software
and outsourcing business. From 1989 to 1990, Mr. Reichard served as president
and chief operating officer for the professional services division of Credit
Card Software, Inc. He was president of research and development for Kirchman
from 1987 to 1989. From 1983 to 1987, he was senior vice president and regional
professional services manager for Broadway and Seymour.

Clay E. Scarborough. Mr. Scarborough joined the Company in March 1996 as a
Senior Vice President and Chief Financial Officer. From 1995 to 1996, he served
as chief financial officer and senior vice president of Medifax, Inc., a health
industry services company. From 1992 to 1995, he was chief financial officer and
vice president of administration for A.D.A.M. Software, Inc., a multimedia
software publishing company. In 1991, Mr. Scarborough served as vice president
of finance at Gerber Alley Healthcare, a hospital information systems software
company. From 1986 to 1991, Mr. Scarborough was employed by Digital
Communication Associates, a publicly traded data communications technology
company where he last served as director of finance. Mr. Scarborough holds a
M.B.A. from the Harvard Graduate School of Business Administration and is a
certified public accountant.

Michael R. Newes. Mr. Newes joined the Company in 1993 and serves as
Senior Vice President of Marketing and International Sales. From 1990 to 1993,
he was a senior vice president for OKRA Marketing Corporation ("OKRA"), a
financial institutions data base software marketing company. He worked with Mr.
Yusefzadeh at both Nu-Comp and Kirchman and has nearly 25 years of experience in
marketing, sales and customer support for technology companies.

Harold C. Boughton. Mr. Boughton joined the Company in May 1996 as Senior
Vice President of National Sales and is responsible for all domestic sales and
marketing activities. From 1992 to 1996, Mr. Boughton worked for FiServ, Inc.,
first as national sales manager for the CBS Service Bureau and later as national
sales manager for InformEnt. From 1990 to 1992 he served as regional sales
manager and national sales manager for DCR Technologies, an optical storage
technology company.

Gerald P. Nissen. Since February 1995, Mr. Nissen has served as Senior
Vice President of Technology Services for Phoenix and has responsibility for
product development, customer support, documentation, quality assurance,
networking services and disaster recovery services components of the Phoenix
System. From 1992 to 1995, Mr. Nissen worked at Newtrend in the banking business
unit where he served as senior vice president of product services and was
responsible for product development, product support and consulting services.

Twanna C. Soifer. Ms. Soifer joined the Company in 1993 as Senior Vice
President of Client Services and is now responsible for training and
implementation of Phoenix System users. Prior to joining Phoenix, Ms. Soifer
managed documentation for the Horizon Product for Systematics, Inc. from 1991 to
1993. From 1990 to 1991, she was a consultant for Prophet Management Information
Services and for OKRA. Prior to 1990, Ms. Soifer held management positions at
Kirchman and Broadway & Seymour.

Ronald E. Fenton. Mr. Fenton has been a director of Phoenix since 1993,
currently serves as a member of the Compensation Committee and Executive
Committee and is the Chairman of the Audit Committee. He has served as the
president, the chief executive officer and a director of BancSecurity
Corporation since 1982 and the president, chief executive officer and director
of Security Bank since 1976. Mr. Fenton is the chairman of the board of Story
County Bank & Trust, Story City, Iowa and is the chairman of the board of
Security Bank Jasper-Poweshiek, Kellogg, Iowa. He is also a director, executive
committee member and former chairman of the board of Shazam, Inc. ("Shazam"), a
regional electronic funds transfer network.

William E. Hess. Mr. Hess has been a director of the Company since 1993.
Since 1984, he has been the president of Iowa Savings Bank, and since 1981, he
has been chairman of the board of Sac City State Bank. He is also a director of
Audubon State Bank, Iowa Savings Bank, Perry State Bank, Raccoon Valley State
Bank and Home State Bank. Mr. Hess is a past director of Shazam, a past director
of the Iowa Bankers Mortgage Association and Iowa Bankers Association and a past
member of the member of the board of directors of the Iowa Department of
Banking.

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<PAGE> 41

James C. Holly. Mr. Holly has been a director of Phoenix since 1993,
currently serves as a member of the Audit Committee and the Executive Committee
and is Chairman of the Compensation Committee. For the past 19 years, he has
served as president, chief executive officer and director of Bank of the Sierra.
He is also the current president of the California Independent Bankers
Association. Mr. Holly holds an M.B.A. from the University of Wisconsin and was
a commissioned officer in the United States Army (Armor).

Paul A. Jones. Mr. Jones has been director of the Company since 1995. He
is the president, chief executive officer and a director of Glenview State Bank
and was the president of such bank from 1986 to 1996. Mr. Jones is a director of
Cummins-American Corp. and Cummins-Allison Corp.

J. Michael Murphy. Mr. Murphy has been a director of Phoenix since 1993.
Since 1977, he has served as president of Drum Service Co. of Florida, a large
steel drum reconditioning and recycling company. In 1995, he became the chairman
of the board of Lochaven Federal Savings and Loan Association, Orlando Florida.
He is the past president of the National Trade Association of Drum
Reconditioners and was chairman of the board of the International Federation of
Drum Reconditioners from 1990 to 1993. Mr. Murphy holds a M.B.A. from the
Harvard Graduate School of Business Administration.

Glenn W. Sturm. Mr. Sturm has been a director of the Company since 1996.
Since 1992, Mr. Sturm has been a partner in the law firm of Nelson Mullins Riley
& Scarborough, L.L.P., where he serves as corporate chairman. Prior to joining
Nelson Mullins Riley & Scarborough, L.L.P., Mr. Sturm was a shareholder of the
law firm of Trotter, Smith & Jacobs P.A.

O. Jay Tomson. Mr. Tomson has been a director of the Company since 1993
and was Chairman of the Board of the Company from August 1993 to February 1994.
Since 1974, he has served as chairman and chief executive officer of First
Citizens National Bank, and since 1977, he has been chairman of the board of
First Citizens Financial Corporation. He is a director of Seilon, Inc., a
reporting company under the Exchange Act. Mr. Tomson was a member of the Federal
Reserve Bank of Chicago from 1980 to 1986. He is a former director and president
of Shazam.

Significant Employees

Ruthann M. Rackawack. Ms. Rackawack has been the controller and treasurer
of the Company since 1994. From 1989 to 1994, she worked for Transportation
Consulting Group, Inc. ("TCG"), where she handled compliance audits and
established a fully automated job cost system. Ms. Rackawack was promoted from
business manager to controller and an associate of TCG in 1993.

Raju M. Shivdasani. Mr. Shivdasani is expected to join the Company in July
1996 as a Senior Vice President and as Division President of International
Sales. From 1990 to 1996, he worked for FiServ, Inc. where he served as group
executive vice president of the bank services sector and president of CBS
Worldwide, a banking software division. Mr. Shivdasani has over 15 years of
experience working for companies in the banking software, service bureau and
data center services industries.

DIRECTOR COMPENSATION

In February 1994, the Board of Directors adopted Incentive Stock Option
Plan Number 3 and Incentive Stock Option Plan Number 12 (collectively, the
"Director Plans"). Under each of the Director Plans, 83,632 shares of Common
Stock were authorized to be granted to directors of the Company. In February
1994, the Board of Directors granted options to purchase 18,585 shares of Common
Stock as compensation for Fiscal 1993 and Fiscal 1994, which options vested on
the date of grant, to each of the Company's nine directors or affiliates of
directors. The exercise price for options granted under the Director Plans was
$1.08 per share. During Fiscal 1994, two directors resigned from the Board of
Directors, and options to purchase 27,874 shares of Common Stock held by them
were reallocated to the seven remaining directors or affiliates of directors.
Six of the directors or affiliates of directors received options to purchase
3,982 shares of Common Stock at an exercise price of $4.30 per share, and Mr.
Yusefzadeh received options to purchase 3,982 shares of Common Stock at an
exercise price of $4.74 per share. Options for all 167,264 shares authorized
under the Director Plans have been granted, and all of the options expire on the
earlier of the last

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<PAGE> 42

business day prior to an initial public offering or five years from the date of
grant. Pursuant to the March 1995 Plan (as defined herein) and as compensation
for serving as a director in Fiscal 1994, in March 1995, each director or his
affiliate, except for Mr. Yusefzadeh, received options to purchase 9,292 shares
of Common Stock at an exercise price of $4.30 per share. Mr. Yusefzadeh received
options to purchase 9,292 shares of Common Stock at an exercise price of $4.74
per share. The options vested upon grant and expire in the year 2005. All of
such options, except for Mr. Yusefzadeh's options which were granted at an
exercise price of 110% of the fair market value of the Common Stock, were issued
at the fair market value of the Common Stock as determined by the Board of
Directors based on the Company's financial condition and prospects at such time
and recent sales of the securities of the Company. Each director elected by the
shareholders at the annual meeting of the shareholders on June 12, 1996 received
an automatic grant under the 1996 Director Plan (as defined herein) of options
to acquire 2,000 shares of Common Stock at an exercise price of $12.00 per
share. See "-- Stock Option Plans." In addition, the Company has paid all travel
expenses and reimbursed the directors for their out-of-pocket expenses related
to their services as directors. Directors do not receive cash fees for their
services as directors of the Company.

EXECUTIVE COMPENSATION

The following Summary Compensation Table sets forth the compensation earned
by the Chief Executive Officer and the other executive officers whose salary and
bonus for the calendar year ended December 31, 1995 were in excess of $100,000
(collectively, the "Named Executive Officers") for services rendered in all
capacities to the Company and its subsidiary for that year.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL ---------------
COMPENSATION SECURITIES
------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SARS(#) COMPENSATION
- ----------------------------------------- ---- -------- ------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Bahram Yusefzadeh........................ 1995 $194,795 $19,000(1) 78,985 $7,538(2)
Chairman of the Board and Chief
Executive Officer
Ralph H. Reichard........................ 1995 140,000 -- 148,679 --
President and Chief Operating Officer
Michael R. Newes......................... 1995 107,436 40,474(3) 18,584 --
Senior Vice President of International
Sales
Gerald P. Nissen......................... 1995 100,833 -- 43,094 --
Senior Vice President of Technology
Services
</TABLE>

- ---------------

(1) Represents an incentive bonus earned in Fiscal 1994 but paid in Fiscal 1995.
(2) Includes $2,887 for long-term disability premiums paid by the Company,
$1,824 for term life insurance premiums paid by the Company for the Named
Executive Officer's beneficiaries and $2,827 for health insurance premiums
paid by the Company for the Named Executive Officer's dependents.
(3) Reflects an incentive-based commission of $36,474 paid for Fiscal 1995 and a
bonus of $4,000 earned in Fiscal 1994 but paid in Fiscal 1995.

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<PAGE> 43

OPTION GRANTS IN LAST FISCAL YEAR

The following table contains information concerning the stock option grants
made to each of the Named Executive Officers in Fiscal 1995. No stock
appreciation rights were granted during such year.

<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANT REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OR OPTION TERM(2)
OPTIONS IN BASE PRICE EXPIRATION -------------------
GRANTED FISCAL YEAR $/SH(1) DATE 5% ($) 10% ($)
---------- ----------- ------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Bahram Yusefzadeh.............. 9,292(3) 1.87% $ 4.74 2005 $ 21,036 $ 59,589
69,693(4) 14.05 4.74 2005 157,774 446,935
Ralph H. Reichard.............. 9,292(3) 1.87 4.30 2005 25,124 63,677
23,231(5) 4.68 4.30 1995 -- --
58,078(4) 11.71 4.30 2005 157,034 398,003
58,078(6) 11.71 4.30 2005 157,034 398,003
Michael R. Newes............... 9,292(3) 1.87 4.30 2005 25,124 63,677
9,292(4) 1.87 4.30 2005 25,124 63,677
Gerald P. Nissen............... 116(7) * 4.30 2005 314 795
2,323(5) * 4.30 1995 -- --
11,616(4) 2.34 4.30 2005 31,408 79,603
29,039(8) 5.86 4.30 2005 78,517 199,002
</TABLE>

- ---------------

* Indicates amount less than 1%.
(1) All options, except for those granted to Mr. Yusefzadeh, were granted at the
fair market value on the date of grant as determined by the Board of
Directors. For Mr. Yusefzadeh, options were granted at 110% of the fair
market value on the date of grant as determined by the Board of Directors.
(2) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There can
be no assurance provided to any executive officer or any other holder of
the Company's securities that the actual stock price appreciation over the
term will be at the assumed 5% and 10% levels or at any other defined
level. Unless the market price of the Common Stock appreciates over the
option term, no value will be realized from the option grants made to the
executive officers.
(3) Represents director stock options that are fully vested.
(4) Represents incentive stock options that vest ratably on each of February 1,
1996, 1997, 1998 and 1999.
(5) Represents options granted on June 22, 1995 which vested and were exercised
in 1995. See "-- Aggregate Option Exercises in Last Fiscal Year and Option
Values as of December 31, 1995."
(6) These options were granted as an employment inducement. 23,231 shares vested
on each of January 1, 1995 and 1996. The remaining 11,616 shares will vest
on December 31, 1996.
(7) Represents options granted on July 7, 1995 which vest on July 7, 1996 and
expire on July 6, 2005.
(8) These options were granted as an employment inducement and vest ratably on
each of March 18, 1995, 1996, 1997 and 1998.

43
<PAGE> 44

AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND OPTION VALUES AS OF DECEMBER
31, 1995

The following table sets forth information concerning option exercises and
option holdings for Fiscal 1995 with respect to each of the Named Executive
Officers. No stock appreciation rights were exercised during such year or were
outstanding at the end of that year.

<TABLE>
<CAPTION>
NUMBER NUMBER OF VALUE OF
OF SECURITIES UNDERLYING UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY
ACQUIRED AT DEC. 31, 1995 OPTIONS AT DEC. 31, 1995(1)
ON VALUE --------------------------- -----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bahram Yusefzadeh............. -- $ -- 9,292 69,693 $ 67,460 $ 505,971
Ralph H. Reichard............. 23,231 100,000 32,523 92,925 250,427 715,515
Michael R. Newes.............. -- -- 55,089 9,292 424,193 71,548
Gerald P. Nissen.............. 2,323 10,000 7,260 33,511 55,900 258,033
</TABLE>

- ---------------

(1) There was no public market for the Common Stock at December 31, 1995.
Accordingly, these values have been calculated based on the initial
offering price of $12.00, less the applicable exercise price.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of the Board of Directors was formed on March
18, 1995. The members of the Compensation Committee are Messrs. Fenton and
Holly, and Mr. Yusefzadeh is a non-voting member. Mr. Holly is chairman of the
Compensation Committee. Neither Mr. Fenton nor Mr. Holly has been an officer or
employee of the Company at any time.

Transactions with Ronald E. Fenton and Affiliates. Mr. Ronald E. Fenton,
the president, chief executive officer and a director of BancSecurity
Corporation ("BancSecurity"), is a director of the Company, Chairman of the
Audit Committee and a member of the Compensation Committee and Executive
Committee. From November 1994 through January 1995, the Company sold a total of
628,610 shares of Class E Common Stock to existing shareholders, employees,
officers and directors at a price of $4.30 per share pursuant to a rights
offering and certain preemptive rights (the "Rights Offering").

Pursuant to the Rights Offering, BancSecurity purchased 35,404 shares of
Class E Common Stock at a price of $4.30 per share in December 1994. In October
1993 and pursuant to the Company's Private Placement Memorandum, dated August
31, 1993 (the "August PPM"), BancSecurity purchased 92,924 shares of Class E
Common Stock at a price of $1.08 per share. In April 1993 and pursuant to the
Company's Private Placement Memorandum, dated April 5, 1993 (the "April PPM"),
BancSecurity purchased 92,924 shares of Class B Common Stock at a price of $1.08
per share.

In July 1995, Mr. Fenton exercised options to purchase 9,292 shares of
Class E Common Stock at a price of $4.30 per share. Pursuant to the Rights
Offering, Mr. Fenton purchased 5,929 shares of Class E Common Stock at a price
of $4.30 per share in December 1994. In November 1994, Mr. Fenton exercised
options to purchase 9,292 shares of Class E Common Stock at a price of $1.08 per
share and options to purchase 3,982 shares of Class E Common Stock at a price of
$4.30 per share. In September 1994, Mr. Fenton exercised options to purchase
9,293 shares of Class E Common Stock at a price of $1.08 per share. Pursuant to
the April PPM, Mr. Fenton purchased 4,646 shares of Class B Common Stock at a
price of $1.08 per share. As of June 30, 1996, Mr. Fenton held outstanding
options to purchase 2,000 shares of Common Stock at an exercise price of $12.00
per share.

The Company believes, based on available information regarding the Company
and its financial condition and prospects and recent sales of the Company
securities, that all of the shares sold and options granted to BancSecurity and
Mr. Fenton were sold or granted at a price equal to the fair market value per
share of the stock on the date of the sale or grant.

44
<PAGE> 45

In February 1996, the Company licensed the Phoenix System to BancSecurity.
Pursuant to the U.S. Bank Partners' Discount Program (as defined hereafter),
BancSecurity was given a discount on the license and service fees with an
aggregate value of approximately $299,000. See "Certain Transactions."

In May 1994, the Company borrowed $250,000 from BancSecurity, Iowa Savings
Bank, First Citizens National Bank and Bank of the Sierra for the purpose of
purchasing furniture and equipment. The loan matured in May 1995, was secured by
such furniture and equipment and bore interest at a rate of 9.0% per annum. The
Company repaid the note in full in May 1995.

Transactions with James C. Holly and Affiliates. Mr. James C. Holly, the
president, chief executive officer and director of Bank of the Sierra, is a
director of the Company, Chairman of the Compensation Committee and a member of
the Audit Committee and Executive Committee. In May 1995, Bank of the Sierra
exercised options to purchase 9,292 shares of Class E Common Stock at an
exercise price of $4.30 per share. These options were transferred from Mr.
Holly, who was granted these options for his service as a director of the
Company for Fiscal 1995. Pursuant to the Rights Offering, Bank of the Sierra
purchased 38,044 shares of Class E Common Stock at a price of $4.30 per share.
In November 1994, Bank of the Sierra exercised options to purchase 18,585 shares
of Class E Common Stock at an exercise price of $1.08 per share and options to
purchase 3,982 shares of Class E Common Stock at an exercise price of $4.30 per
share. These options were transferred from Mr. Holly, who was granted these
options for his service as a director of the Company during Fiscal 1993 and
Fiscal 1994. Pursuant to the August PPM, Bank of the Sierra purchased 23,231
shares of Class C Common Stock at a price of $2.15 per share and 46,462 shares
of Class E Common Stock at a price of $1.08 per share. Pursuant to the April
PPM, Bank of the Sierra purchased 46,462 shares of Class B Common Stock at a
price of $1.08 per share. See "-- Stock Option Plans."

Pursuant to the Rights Offering, Mr. Holly purchased 1,770 shares of Class
E Common Stock at a price of $4.30 per share in December, 1994. In March 1994,
Mr. Holly purchased, on his own behalf, 9,292 shares of Class E Common Stock at
a price of $1.08 per share. As of June 30, 1996, Mr. Holly held outstanding
options to purchase 2,000 shares of Common Stock at an exercise price of $12.00
per share.

The Company believes, based on available information regarding the Company
and its financial condition and prospects and recent sales of the Company's
securities, that all of the shares sold and options granted to Bank of the
Sierra and Mr. Holly were sold or granted at a price equal to the fair market
value per share of the stock on the date of sale or grant.

In March 1994, the Company licensed the Phoenix System to Bank of the
Sierra. Pursuant to the U.S. Bank Partners' Discount Program and because Bank of
the Sierra was the second commercial installation site for the Phoenix System,
Bank of the Sierra was given a discount on the customer and software support
fees with an aggregate value of approximately $354,000. See "Certain
Transactions."

Transactions with Bahram Yusefzadeh. Pursuant to the Rights Offering, in
January 1995 the Company issued the Yusefzadeh Family Limited Partnership, of
which Mr. Yusefzadeh is the general partner (the "Yusefzadeh Partnership"),
80,091 shares of Class E Common Stock at a price of $4.30 per share. In
exchange, the Yusefzadeh Partnership gave the Company a promissory note for
$344,760 which bears interest at a rate of 7.92% per year and is unsecured.
Pursuant to the Rights Offering, in December 1994 the Company issued the
Yusefzadeh Partnership 216,724 shares of Class E Common Stock at a price of
$4.30 per share. In exchange, the Yusefzadeh Partnership gave the Company a
promissory note for $932,910 which bears interest at a rate of 7.92% per year
and is unsecured. In November 1994, Mr. Yusefzadeh exercised options granted to
him as a director of the Company to purchase 18,585 shares of Class E Common
Stock at an exercise price of $1.18 per share and 3,982 shares of Class E Common
Stock at an exercise price of $4.74. The Company issued Mr. Yusefzadeh 22,567
shares of Class E Common Stock in exchange for a promissory note for $40,854
from Mr. Yusefzadeh which bears interest at a rate of 7.92% per year and is
unsecured. The principal and interest on the notes are due and payable upon the
consummation of the Offering. As of June 30, 1996, the Yusefzadeh Partnership
and Mr. Yusefzadeh owed $1,429,505 and $46,090 under the notes, respectively.
Mr. Yusefzadeh intends to repay all amounts due under the promissory notes with
the proceeds realized by him from this Offering.

45
<PAGE> 46

As part of the Company's initial capitalization in April 1993, Mr.
Yusefzadeh purchased 1,115,088 shares of Class A Common Stock. The Company
recorded a compensation expense of $6,000. In addition, Mr. Yusefzadeh has
outstanding options to acquire 80,985 shares of Common Stock at exercise prices
ranging from $4.74 to $12.00 per share. See "-- Executive Compensation" and
"-- Stock Option Plans." In Fiscal 1993, the Company paid Mr. Yusefzadeh a
salary of $20,000. In Fiscal 1994, the Company paid Mr. Yusefzadeh a salary of
$160,000 and a bonus of $30,000. The bonus was a reimbursement of certain costs
incurred by Mr. Yusefzadeh with respect to the Company.

The Company believes, based on available information regarding the Company
and its financial condition and prospects and recent sales of the Company's
securities, that all of the shares sold and options granted to Mr. Yusefzadeh
and the Yusefzadeh Partnership were sold or granted at a price equal to or
greater than the fair market value per share of the stock on the date of sale or
grant. Mr. Yusefzadeh abstained from voting on the matters in which he had a
direct financial interest.

In May 1996, Mr. Yusefzadeh unconditionally guaranteed the Company's
obligations under the Line of Credit the Term Loan. See "Use of Proceeds." In
Fiscal 1994 and Fiscal 1995, the Company used Mr. Yusefzadeh's personal American
Express card for purchasing equipment and for other general business expenses,
including travel expenses for directors and office supplies. The Company paid
approximately $205,000 in Fiscal 1994 and approximately $175,000 in Fiscal 1995
to American Express directly in full reimbursement for the purchases by Mr.
Yusefzadeh. In January 1994, Mr. Yusefzadeh loaned an aggregate of $35,203 to
the Company to finance the Company's purchase of certain office equipment. The
loan is secured by such office equipment and is payable on demand with interest
payable at 12% per annum. As of June 30, 1996, the Company owed approximately
$45,000 under the loan. The Company intends to repay this loan with the net
proceeds realized by the Company from this Offering. In addition, Mr. Yusefzadeh
has personally guaranteed the office lease for the Company's headquarters in
Maitland, Florida and certain other leases for general office equipment.

EMPLOYMENT AGREEMENTS

Yusefzadeh Agreement. On December 28, 1995, Mr. Yusefzadeh and the Company
entered into an employment agreement (the "Yusefzadeh Agreement") pursuant to
which he will serve as the Chief Executive Officer of the Company. The
Yusefzadeh Agreement provides that Mr. Yusefzadeh will receive a base salary of
not less than $200,000 per year, an annual bonus prior to the Offering and a
quarterly bonus after the Offering as determined by the Compensation Committee
based upon achievement of targeted levels of performance and such other criteria
as the Compensation Committee shall establish from time to time, and an
additional annual bonus as determined by the Compensation Committee. In
addition, he may participate in the Phoenix International Limited, Inc. Stock
Option Plan, dated October 21, 1995 (the "October 1995 Plan"), and will receive
health insurance for himself and his dependents, long-term disability insurance,
civic and social club dues, use of an automobile owned or leased by the Company
and other benefits of similarly situated employees. Mr. Yusefzadeh's base salary
may be increased upon a periodic review by the Board of Directors or a committee
thereof. The Yusefzadeh Agreement has a term of three years and renews daily
until either party fixes the remaining term at three years by giving written
notice. The Company can terminate Mr. Yusefzadeh's employment upon his death or
disability or for cause, and Mr. Yusefzadeh can terminate his employment for any
reason within a 90-day period beginning on the 30th day after any occurrence of
a change in control or within a 90-day period beginning on the one-year
anniversary of the occurrence of any change in control. If Mr. Yusefzadeh's
employment is terminated by the Company in breach of the Yusefzadeh Agreement or
if Mr. Yusefzadeh terminates the Yusefzadeh Agreement for any reason after a
change in control, the Company must pay Mr. Yusefzadeh one-twelfth of his annual
base salary and bonus for each of 36 consecutive 30-day periods following the
termination and must continue Mr. Yusefzadeh's life and health insurance until
he reaches age 65, and Mr. Yusefzadeh's outstanding options to purchase Common
Stock would vest and become immediately exercisable.

In the Yusefzadeh Agreement, the Company also granted Mr. Yusefzadeh, with
respect to his shares of Common Stock, piggyback and, after any termination of
employment or if he is no longer a director of the Company, demand registration
rights. See "Shares Eligible for Future Sale." Under the Yusefzadeh

46
<PAGE> 47

Agreement, Mr. Yusefzadeh agrees to maintain the confidentiality of the
Company's trade secrets. Mr. Yusefzadeh agrees that for a period of two years,
if he is terminated for cause, not to compete with or solicit employees or
customers of the Company within the United States.

Reichard Agreement. On December 28, 1995, Mr. Reichard and the Company
entered into an employment agreement (the "Reichard Agreement") pursuant to
which he will serve as the Chief Operating Officer and President of the Company.
The Reichard Agreement provides that Mr. Reichard will receive a base salary of
not less than $140,000 per year, an annual bonus prior to the Offering and a
quarterly bonus after the Offering as determined by the Compensation Committee
based upon achievement of targeted levels of performance and such other criteria
as the Compensation Committee shall establish from time to time, and an
additional annual bonus as determined by the Compensation Committee. In
addition, he may participate in the October 1995 Plan and will receive health
insurance for himself and his dependents, civic and social club dues, use of an
automobile owned or leased by the Company and other benefits of similarly
situated employees. Mr. Reichard's base salary may be increased upon a periodic
review by the Board of Directors or a committee thereof. The Reichard Agreement
has a term of three years and renews daily until either party fixes the
remaining term at three years by giving written notice. The Company can
terminate Mr. Reichard's employment upon his death or disability or for cause,
and Mr. Reichard can terminate his employment for any reason within a 90-day
period beginning on the 30th day after any occurrence of a change in control or
within a 90-day period beginning on the one-year anniversary of the occurrence
of any change in control. If Mr. Reichard's employment is terminated by the
Company in breach of the Reichard Agreement or if Mr. Reichard terminates the
Reichard Agreement for any reason after a change in control, the Company must
pay Mr. Reichard one-twelfth of his annual base salary and bonus for each of 36
consecutive 30-day periods following the termination and must continue Mr.
Reichard's life and health insurance until he reaches age 65, and Mr. Reichard's
outstanding options to purchase Common Stock would vest and become immediately
exercisable. Under the Reichard Agreement, Mr. Reichard agrees to maintain the
confidentiality of the Company's trade secrets. Mr. Reichard also agrees for a
period of two years, if he is terminated for cause, not to compete with or
solicit employees or customers of the Company within the United States.

Other Employment Agreements. In April and May of 1996, the Company entered
into employment agreements with each of Messrs. Newes, Nissen and Scarborough
and Ms. Soifer, and the Company intends to enter into employment agreements with
Mr. Boughton and Mr. Shivdasani (collectively, the "Other Agreements").
Generally, the Other Agreements provide for a minimum base salary per year, an
annual bonus prior to the Offering and a quarterly bonus after the Offering as
determined by the Chief Executive Officer and President based upon achievement
of targeted levels of performance and such other criteria as the they shall
establish from time to time, and an additional annual bonus as determined by
them. The agreement for Mr. Newes contains, and for Mr. Boughton will contain,
provisions for commission compensation paid in accordance with a commission plan
established each year by the Chief Executive Officer and President. In addition,
each employee may participate in the October 1995 Plan and will receive
insurance and other benefits of similarly situated employees. Each of the Other
Agreements, except for Mr. Scarborough's, have a term of one year and renews
daily until either party fixes the remaining term at one year by giving written
notice. The term of Mr. Scarborough's agreement is 18 months. The Company can
terminate each of the employees upon death or disability or for cause, and the
employee can terminate his employment for any reason within one year of a change
in control with adequate justification. If the employee's employment is
terminated by the Company for any reason within one year after a change in
control or if the employee terminates the agreement with adequate justification,
the Company must pay the employee one-twelfth of his base salary and bonus for
each of 12 consecutive 30-day periods following the termination and must
continue the employee's life and health insurance until he reaches age 65, and
the employee's outstanding options to purchase Common Stock would vest and
become immediately exercisable. For Mr. Scarborough, the Company would pay his
base salary and bonus for each of 18 consecutive 30-day periods following the
termination. Under the Other Agreements, each employee agrees to maintain the
confidentiality of the Company's trade secrets. The employee also agrees for a
period of one year, if he is terminated for cause or resigns without adequate
justification, not to compete with or solicit employees or customers of the
Company within the United States. Mr. Scarborough's non-compete and
non-solicitation period is 18 months.

47
<PAGE> 48

STOCK OPTION PLANS

From February 1994 through November 1995, the Board of Directors adopted 13
stock option plans (the "Stock Option Plans") which permitted options to be
granted to various classes of employees, officers, directors and service
providers of the Company. At the Closing Date, the Company will have outstanding
options to purchase 603,459 shares of Common Stock at prices ranging from $4.30
to $12.00 per share and authorized but unissued options to purchase
approximately 151,390 shares of Common Stock. At the Closing Date, no options
will be outstanding under plans 1 through 8 and plans 10 through 12. The Board
of Directors intends to terminate all such plans after the Closing Date.
Therefore, no information regarding those plans is set forth below.

March 1995 Plan. In March 1995, the Board of Directors adopted, and the
Company's shareholders approved, the Phoenix International Ltd., Inc. 1995 Stock
Option Plan (the "March 1995 Plan"). As of June 30, 1996, options to acquire
approximately 497,020 shares had been issued under the March 1995 Plan, and
options to acquire approximately 394,490 shares were outstanding. All of such
options were issued at the fair market value of the Common Stock as determined
by the Board of Directors based on the Company's financial condition and
prospects at such time and recent sales of the securities of the Company.
Effective May 24, 1996, the Board of Directors and shareholders approved an
amendment to the March 1995 Plan which reduced the number of authorized shares
to 520,000, and the Board of Directors will not issue any additional options
under the March 1995 Plan.

October 1995 Plan. Effective October 21, 1995, the Board of Directors
adopted and the Company's shareholders approved the October 1995 Plan, the
primary focus of which is to provide an incentive to key employees who are in a
position to serve the best interests of the Company. Under the October 1995
Plan, a stock option committee comprised of two independent directors has
discretion to award either incentive stock options ("ISOs") within the meaning
of Section 422 of the Code which permits the deferral of taxable income related
to the exercise of such options, or nonqualified options not entitled to such
deferral. Subject to the provisions of the October 1995 Plan, the stock option
committee, in its discretion, selects the recipients of awards and the number of
shares or options granted thereunder and determines other matters such as (i)
vesting schedules, (ii) the exercise price of options (which cannot be less than
100% of the fair market value of the Common Stock on the date of grant for ISOs)
and (iii) the duration of awards (which cannot exceed ten years from the date of
grant or modification of the option). Effective May 24, 1996, the Board of
Directors and the shareholders approved an amendment to the October 1995 Plan
which increased the number of authorized shares to 250,000. As of June 30, 1996,
options to acquire approximately 190,970 options were outstanding under the
October 1995 Plan. All of such options were issued at the fair market value of
the Common Stock as determined by the Board of Directors based on the Company's
financial condition and prospects at such time and recent sales of the
securities of the Company.

1996 Director Stock Option Plan. In June 1996, the Company adopted the
Phoenix International Ltd., Inc. 1996 Director Stock Option Plan (the "1996
Director Plan"). The 1996 Director Plan provides for the granting of
non-qualified stock options to the directors of the Company. The 1996 Director
Plan authorizes the issuance of up to 99,000 shares of Common Stock pursuant to
options having an exercise price equal to the fair market value of the Common
Stock on the date the options are granted. The 1996 Director Plan contains
provisions providing for adjustment of the number of shares available for option
and subject to unexercised options in the event of stock splits, dividends
payable in Common Stock, business combinations or certain other events affecting
the Common Stock of the Company. The Board of Directors administers the 1996
Director Plan subject to certain limitations.

The 1996 Director Plan provides for the grant of options to purchase 2,000
shares to (i) each director of the Company on the date of such director's
election to the Board of Directors and on the anniversary date of such election
and (ii) each non-employee director of the Company on the date of such
director's election to a committee of the Board of Directors at an exercise
price equal to the fair market value of the Common Stock on the date the options
are granted. Each option shall be exercisable in full beginning six months after
the date of grant and shall expire five years after the date of grant, unless
cancelled sooner as a result of termination of

48
<PAGE> 49

service or death, or unless such option is fully exercised prior to the end of
the option period. As of June 30, 1996, options to acquire 18,000 shares of
Common Stock were outstanding under the 1996 Director Plan.

PROFIT SHARING PLAN

The Company maintains a tax-qualified profit sharing plan for eligible
employees that includes a 401(k) component (the "Profit Sharing Plan"). All
full-time employees are eligible to participate in the Profit Sharing Plan upon
the attainment of age 21 and completion of six months of service. Under the
Profit Sharing Plan, an employee may elect to defer a portion of his
compensation by reducing his compensation by up to 20% and directing the Company
to contribute such reduction to the Profit Sharing Plan. Each year, the Company
will determine whether to make a discretionary matching contribution equal to a
percentage, determined by the Company, not to exceed 100% of the employee's
deferred compensation contribution. An employee must meet certain employment
requirements to be eligible to participate in any such matching contribution
made by the Company. The Company did not make any matching contributions in
Fiscal 1995. All contributions to the Profit Sharing Plan by or on behalf of
employees are subject to annual limits prescribed by the Code.

49
<PAGE> 50

CERTAIN TRANSACTIONS

In June 1995, Mr. Reichard exercised options to purchase 23,231 shares of
Class E Common Stock at an exercise price of $4.30 per share, which is believed
by the Company to equal the fair market value per share of the Class E Common
Stock on the date of grant of the options. In addition, Mr. Reichard has
outstanding options to purchase 127,447 shares of Common Stock at exercise
prices ranging from $4.30 to $12.00 per share. See "Management -- Executive
Compensation" and "-- Stock Option Plans." In December 1995, the Company and Mr.
Reichard entered into an employment agreement. See "Management -- Employment
Agreements -- Reichard Agreement."

In 1993, the Company granted 116,155 shares of restricted stock to William
Toole. Additionally, in 1993, the Company granted 23,231 shares of restricted
stock to Michael Newes, and in 1994, Mr. Yusefzadeh transferred to Mr. Newes
92,924 shares of restricted stock. As of the Closing Date, the restricted stock
will no longer be subject to any risk of forfeiture. In 1996, Messrs. Toole and
Newes will be paid a salary, benefits and a bonus and/or commission (subject to
certain performance criteria).

As an incentive to provide initial capital for the Company pursuant to the
April PPM and the August PPM, the Company agreed to give certain pricing
discounts to the U.S. Bank Partners on their initial contract with the Company
if they licensed the Phoenix System for use in their banks (the "U.S. Bank
Partners' Discount Program"). Pursuant to the U.S. Bank Partners' Discount
Program, the Company agreed to provide two types of discounts: (i) a credit
against the initial license fee equal to the amount of each U.S. Bank Partner's
investment in Class B Common Stock and Class C Common Stock and (ii) a 15%
credit on the first five years of customer and software support fees. The
Company has offered discounts on license fees totalling $855,000 in connection
with U.S. Bank Partner's investment in Class B Common Stock and Class C Common
Stock since its inception. As of May 31, 1996, the U.S. Bank Partners had used
such discounts totaling $300,000 in Fiscal 1995 and $100,000 from January 31 to
May 31, 1996, and the Company had signed contracts in backlog with the U.S. Bank
Partners with discounts totalling $350,000. See Note 6 of Notes to Consolidated
Financial Statements. The following are a list of transactions where discounts
have been given pursuant to the U.S. Bank Partners' Discount Program. See
"Management -- Compensation Committee Interlocks and Insider Participation" for
a discussion of the transactions with BancSecurity and Bank of the Sierra. Two
additional U.S. Bank Partners' are eligible for the U.S. Bank Partners' Discount
Program.

In February 1994, the Company licensed the Phoenix System to First Citizens
Financial Corporation ("FCFC"). Pursuant to the U.S. Bank Partners' Discount
Program and because FCFC agreed for one of its banks to serve as the first
commercial installation site of the Phoenix System, FCFC was given pricing
concessions on license fees, implementation fees and customer and software
support fees with an aggregate value of approximately $477,000. Mr. O. Jay
Tomson, the chairman of the board and chief executive officer of First Citizens
National Bank, is a director of the Company. In January 1995, the Company
licensed the Phoenix System to Glenview State Bank. Pursuant to the U.S. Bank
Partners' Discount Program, Glenview State Bank was given a discount on the
initial license fee with an aggregate value of approximately $164,000. Mr. Paul
A. Jones, the president of Glenview State Bank, is a director of the Company. In
December 1995, the Company licensed the Phoenix System to Iowa Savings Bank.
Pursuant to the U.S. Bank Partners' Discount Program, Iowa Savings Bank was
given a discount on the initial license fee with an aggregate value of
approximately $123,000. Mr. William Hess, the president of Iowa Savings Bank, is
a director of the Company.

The transactions under the U.S. Bank Partners' Discount Program are on
terms more favorable to officers, directors and principal shareholders of the
Company than they could obtain in a transaction with an unaffiliated third
party. Each of the transactions under the U.S. Bank Partners' Discount Program
was approved by a majority of the independent directors of the Company, and any
additional contracts under that program will be approved by a majority of the
independent directors of the Company. All future transactions, except for
contracts pursuant to the U.S. Bank Partners' Discount Program, between the
Company and its officers, directors, principal shareholders and their affiliates
will be approved by a majority of independent directors of the Company and will
be on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.

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<PAGE> 51

PRINCIPAL AND SELLING SHAREHOLDERS

The table below sets forth certain information regarding beneficial
ownership of the Common Stock, as of June 30, 1996, and as adjusted to reflect
the sale of shares offered hereby by (i) each person known to the Company to own
beneficially more than 5% of the Common Stock, (ii) each director and Named
Executive Officer, (iii) all directors and executive officers of the Company as
a group and (iv) each Selling Shareholder. Unless otherwise indicated, the
persons listed below have sole voting and investment power over the shares of
Common Stock indicated.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1) OFFERING(1)(2)
------------------- SHARES -------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------------------------------- --------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
Bahram Yusefzadeh(3)............................. 1,742,188 54.6% 167,500 1,077,992 27.9%
Yusefzadeh Family Limited Partnership(4)......... 361,861 11.4 125,000 236,861 6.2
Ronald E. Fenton(5).............................. 248,030 7.8 -- 248,030 6.5
BancSecurity Corporation(6)...................... 221,252 7.0 -- 221,252 5.8
Michael R. Newes(7).............................. 199,586 6.3 55,000 144,586 3.8
James C. Holly(8)................................ 199,120 6.3 -- 199,120 5.2
Bank of the Sierra(9)............................ 186,058 5.9 -- 186,058 4.9
William E. Hess(10).............................. 153,004 4.8 -- 153,004 4.0
William M. Toole(11)............................. 127,612 4.0 60,000 67,612 1.8
Ralph H. Reichard(12)............................ 124,829 3.9 -- 124,829 3.2
O. Jay Tomson(13)................................ 119,813 3.8 -- 119,813 3.1
Community Grain Corporation(14).................. 102,555 3.2 -- 102,555 2.7
Paul A. Jones(15)................................ 69,943 2.2 -- 69,943 1.8
First Citizens Financial Corp.(16)............... 46,462 1.5 -- 46,462 1.2
Kanabec Credit Corporation(17)................... 46,462 1.5 -- 46,462 1.2
W. J. Young & Co.(18)............................ 46,462 1.5 -- 46,462 1.2
Robert L. Ownby, Trustee(19)..................... 34,847 1.1 -- 34,847 *
Thomas J. Ownby(20).............................. 34,847 1.1 -- 34,847 *
J. Michael Murphy(21)............................ 33,859 1.1 -- 33,859 *
Gerald P. Nissen(22)............................. 21,024 * -- 21,024 *
Glenn W. Sturm(23)............................... 13,616 * -- 13,616 *
Karen J. Gallagher(24)........................... 5,770 * -- 5,770 *
Todd W. Baum(25)................................. 5,431 * -- 5,431 *
Action Acres, Inc.(26)........................... 4,646 * -- 4,646 *
Greg A. Maakestad(27)............................ 2,323 * -- 2,323 *
Catherine J. Rottinghaus(28)..................... 1,859 * -- 1,859 *
Sharol J. McCoy(29).............................. 1,742 * -- 1,742 *
Sara L. Gray(30)................................. 1,162 * -- 1,162 *
Kimberly K. Knoke(31)............................ 1,162 * -- 1,162 *
Sue E. Pump(32).................................. 1,162 * -- 1,162 *
Martha Tomson Rodamaker(33)...................... 1,162 * -- 1,162 *
Kristin E. Schultz(34)........................... 1,162 * -- 1,162 *
All directors and executive officers as a group
(13 persons)(35)............................... 2,882,045 85.7% 347,500 2,302,235 57.1%
</TABLE>

- ---------------

* Less than 1%
(1) For purposes of this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares that such person or group has the
right to acquire within 60 days after June 30, 1996 or with respect to
which such person otherwise has or shares voting or investment power. For
purposes of computing the percentages of outstanding shares held by each
person or group of persons on a given date, shares which such person or
group has the right to acquire within 60 days after such date are deemed to
be outstanding for purposes of computing the percentage for such person or
group but are not deemed to be outstanding for the purpose of computing the
percentage of any other person or group.
(2) Assumes no exercise of the Underwriters' over-allotment option.

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<PAGE> 52

(3) Mr. Yusefzadeh's address is Phoenix International Ltd., Inc., 900 Winderley
Place, Suite 140, Maitland, Florida 32751. Includes (i) 979,684 shares held
in his name; (ii) 361,861 shares held by the Yusefzadeh Family Limited
Partnership of which Mr. Yusefzadeh is the general partner; (iii) 371,696
shares for which Mr. Yusefzadeh, in his capacity as trustee, holds legal
title pursuant to the Voting Trust Agreement (as defined below); (iv)
options to acquire 26,715 shares that are currently exercisable at an
exercise price of $4.74 per share; (v) options to acquire 2,000 shares at
an exercise price of $12.00 per share that are vested but not currently
exercisable; and (vi) 232 shares held by his daughter. Pursuant to a Voting
Trust Agreement, dated April 4, 1993 (the "Voting Trust Agreement"), among
Bahram Yusefzadeh, as trustee, and certain holders of Class A Common Stock,
Mr. Yusefzadeh holds legal title to an additional 371,696 shares of Class A
Common Stock with the power to vote such shares of Class A Common Stock in
his discretion in the best interests of the Company. The Voting Trust
Agreement provides that (i) the shareholders will not sell or otherwise
transfer their Class A Common Stock before March 1, 2003 and (ii) the
agreement will terminate on the earlier of March 1, 2003 or the effective
date of a public offering. Upon the termination of the Voting Trust
Agreement, legal title to the shares held subject to the trust will be
transferred from the trustee to the respective shareholders.
(4) The Yusefzadeh Partnership's address is c/o Bahram Yusefzadeh, Phoenix
International Ltd., Inc., 900 Winderley Place, Suite 140, Maitland, Florida
32751. Mr. Yusefzadeh is the general partner of the Yusefzadeh Partnership.
The Yusefzadeh Partnership disclaims beneficial ownership with respect to
all shares beneficially owned by Mr. Yusefzadeh other than through the
Yusefzadeh Partnership.
(5) Mr. Fenton's address is c/o Security Bank, 11 North First Avenue,
Marshalltown, Iowa 50158. Includes (i) 20,940 shares held in his name; (ii)
3,838 shares held by his individual retirement account; (iii) options to
acquire 2,000 shares at an exercise price of $12.00 per share that are
vested but not currently exercisable; (iv) 221,252 shares held in the name
of BancSecurity Corporation. Mr. Fenton is the president, chief executive
officer and a director of BancSecurity Corporation. Mr. Fenton disclaims
beneficial ownership of the shares of Common Stock held by BancSecurity
Corporation.
(6) BancSecurity Corporation's address is 11 North First Avenue, Marshalltown,
Iowa 50158. Includes 16,959 shares which will be sold by BancSecurity
Corporation if the Underwriters exercise their over-allotment option.
BancSecurity Corporation disclaims beneficial ownership with respect to Mr.
Fenton's shares.
(7) Includes (i) 71,816 shares held in Mr. Newes' name; (ii) 116,155 shares
held for Mr. Newes' benefit pursuant to the Voting Trust Agreement (of
which shares he will become the beneficial owner on the Closing Date); and
(iii) options to acquire 11,615 shares of Common Stock held by him which
are currently exercisable at an exercise price of $4.30 per share. See Note
(3) above.
(8) Mr. Holly's address is 86 North Main Street, Porterville, California 93258.
Includes (i) 11,062 shares held in his name; (ii) options to acquire 2,000
shares at an exercise price of $12.00 per share that are vested but not
currently exercisable; and (iii) 186,058 shares held in the name of Bank of
the Sierra. Mr. Holly is the president, chief executive officer and
director of Bank of the Sierra. Mr. Holly disclaims beneficial ownership of
the shares of Common Stock held by Bank of the Sierra.
(9) Bank of the Sierra's address is 86 North Main Street, Porterville,
California 93258. Bank of the Sierra disclaims beneficial ownership with
respect to Mr. Holly's shares.
(10) Includes (i) 25,196 shares held in Mr. Hess's name; (ii) 5,111 shares held
by his individual retirement account; (iii) options to acquire 9,292 shares
of Common Stock held in his name which are currently exercisable at an
exercise price of $4.30 per share; (iv) options to acquire 2,000 shares at
an exercise price of $12.00 per share that are vested but not currently
exercisable; (v) 102,555 shares held in the name of Community Grain
Corporation, of which he is secretary and treasurer; (vi) 2,950 shares held
in the name of Dallas Investment Company, of which he is president and
director; (vii) 2,950 shares held in the name of Perry Investment Company,
of which he is president, director and chairman; and (viii) 2,950 shares
held in the name of Sac City Limited, of which he is director, president,
secretary and treasurer. Mr. Hess is the president of Iowa Savings Bank and
chairman of the board of Sac City State Bank. Mr. Hess disclaims beneficial
ownership of the shares of Common Stock described in clauses (v)-(viii)
above.
(11) Includes (i) 9,293 shares held in Mr. Toole's name; (ii) 116,155 shares
held for Mr. Toole's benefit pursuant to the Voting Trust Agreement (of
which shares he will become the beneficial owner on the

52
<PAGE> 53

Closing Date); and (iii) options to acquire 2,164 shares held by him which
are currently exercisable at an exercise price of $4.30 per share. See Note
(3) above.
(12) Includes (i) 6,969 shares held in Mr. Reichard's name; (ii) 16,262 shares
held by his individual retirement account; (iii) options to acquire 70,273
shares held by him which are currently exercisable at an exercise price of
$4.30 per share; (iv) options to acquire 2,000 shares at an exercise price
of $12.00 per share that are vested but not currently exercisable; and (v)
29,325 shares held by his wife. Mr. Reichard disclaims any beneficial
ownership with respect to his wife's shares.
(13) Includes (i) 20,243 shares held in Mr. Tomson's name; (ii) options to
acquire 2,000 shares at an exercise price of $12.00 per share that are
vested but not currently exercisable; (iii) 46,462 shares held in the name
of First Citizens Financial Corporation; (iv) 46,462 shares held in the
name of Kanabec Credit Corporation; and (v) 4,646 shares held in the name
of Action Acres, Inc. Mr. Tomson is chairman of the board of and owns
controlling interest in First Citizens Financial Corporation. In addition,
Mr. Tomson owns controlling interest in Kanabec Credit Corporation and
Action Acres, Inc. Mr. Tomson disclaims beneficial ownership of the shares
of Common Stock held by each these entities. Includes 3,982 shares which
will be sold by Mr. Tomson if the Underwriters exercise their over-
allotment option.
(14) Includes 18,269 shares which will be sold by Community Grain Corporation if
the Underwriters exercise their over-allotment option.
(15) Includes (i) options to acquire 9,292 shares held by Mr. Jones which are
currently exercisable at an exercise price of $4.30 per share; (ii) options
to acquire 2,000 shares at an exercise price of $12.00 per share that are
vested but not currently exercisable; and (iii) 58,651 shares held in the
name of Cummins-American Corporation. Mr. Jones is the president, chief
executive officer and a director of Glenview State Bank. He is also a
director of Cummins-American Corporation, and he and his immediate family
control 94% of the voting stock of Cummins-American Corporation. Mr. Jones
disclaims beneficial ownership of the shares of Common Stock held by
Cummins-American Corporation.
(16) Includes 27,877 shares which will be sold by First Citizens Financial
Corporation if the Underwriters exercise their over-allotment option.
(17) Includes 27,877 shares which will be sold by Kanabec Credit Corporation if
the Underwriters exercise their over-allotment option.
(18) Includes 23,231 shares which will be sold by W.J. Young & Co. if the
Underwriters exercise their over-allotment option.
(19) Includes 13,939 shares which will be sold by Robert Ownby, Trustee if the
Underwriters exercise their over-allotment option.
(20) Includes 17,423 shares which will be sold by Mr. Ownby if the Underwriters
exercise their over-allotment option.
(21) Includes (i) 22,567 shares held in Mr. Murphy's name; (ii) options to
acquire 9,292 shares held by him which are currently exercisable at an
exercise price of $4.30 per share; and (iii) options to acquire 2,000
shares at an exercise price of $12.00 per share that are vested but not
currently exercisable.
(22) Includes (i) 2,323 shares held in Mr. Nissen's name and (ii) options to
acquire 18,701 shares held by him which are currently exercisable at
exercise prices ranging from $4.30 to $6.46 per share.
(23) Includes (i) 11,616 shares held in his name and (ii) options to acquire
2,000 shares at an exercise price of $12.00 per share that are vested but
not currently exercisable.
(24) Includes (i) 4,878 shares held in Ms. Gallagher's name and (ii) options to
acquire 892 shares that are currently exercisable at an exercise price of
$4.30 per share. Also, includes 232 shares which will be sold by Ms.
Gallagher if the Underwriters exercise their over-allotment option.
(25) Includes (i) 4,646 shares held in Mr. Baum's name and (ii) options to
acquire 785 shares of Common Stock held in his name which are currently
exercisable at an exercise price of $4.30 per share. Also, includes 451
shares which will be sold if the Underwriters exercise their over-allotment
option.
(26) Such shares will be sold by Action Acres, Inc. if the Underwriters exercise
their over-allotment option.
(27) Includes 581 shares which will be sold by Mr. Maakestad if the Underwriters
exercise their over-allotment option.

53
<PAGE> 54

(28) Includes 465 shares which will be sold by Ms. Rottinghaus if the
Underwriters exercise their over-allotment option.
(29) Includes 1,045 shares which will be sold by Ms. McCoy if the Underwriters
exercise their over-allotment option.
(30) Such shares will be sold by Ms. Gray if the Underwriters exercise their
over-allotment option.
(31) Includes 697 shares which will be sold by Ms. Knoke if the Underwriters
exercise their over-allotment option.
(32) Includes 465 shares which will be sold by Ms. Pump if the Underwriters
exercise their over-allotment option.
(33) Such shares will be sold by Ms. Rodamaker if the Underwriters exercise
their over-allotment option.
(34) Such shares will be sold by Ms. Shultz if the Underwriters exercise their
over-allotment option.
(35) Does not include options to acquire 14,500 shares of Common Stock held by
Mr. Raju M. Shivdasani which will vest upon the first day of his employment
which is currently anticipated to be July 15, 1996.

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<PAGE> 55

DESCRIPTION OF CAPITAL STOCK

The following description of the capital stock of the Company is only a
summary and is subject to the provisions of the Articles of Incorporation and
Bylaws, which are included as exhibits to the Registration Statement of which
this Prospectus forms a part, and the provisions of applicable law.

AUTHORIZED AND OUTSTANDING CAPITAL STOCK

The Company's capital stock currently is divided into five classes of
common stock (A, B, C, D and E). In addition, the Company is authorized to issue
preferred stock, with such rights and preferences as the Board of Directors
shall determine; however, no preferred stock has been issued. All shares of
Class A Common Stock, Class B Common Stock, Class C Common Stock, Class D Common
Stock and Class E Common Stock currently issued and outstanding by their terms
will be converted automatically on a one-for-one basis into shares of Common
Stock on the Closing Date. Accordingly, no information regarding the currently
outstanding shares of such classes of capital stock is set forth below. As of
June 30, 1996, there were 3,162,599 shares of capital stock of the Company
outstanding, held of record by approximately 107 shareholders.

On the Closing Date, officers of the Company will cause to be filed and to
take effect in Florida the Articles of Incorporation. Under the Articles of
Incorporation, the Board of Directors will have authority to issue 20,000,000
shares of Common Stock, par value $0.01 per share, and 10,000,000 shares of
preferred stock, par value $1.00 per share, in one or more classes or series
and, within certain limitations, to determine the voting rights (including the
right to vote as a series on particular matters), preferences as to dividends
and in liquidation, and conversion and other rights of such series. The Company
has no current plans to issue any shares of preferred stock. The rights of the
holders of the Common Stock discussed below are subject to such rights as the
Board of Directors may hereafter confer on the holders of preferred stock;
accordingly, such rights conferred on holders of preferred stock that may be
issued in the future under the Articles of Incorporation may adversely affect
the rights of holders of the Common Stock.

COMMON STOCK

Under the Articles of Incorporation, holders of Common Stock are entitled
to receive such dividends as may be legally declared by the Board of Directors.
Each shareholder is entitled to one vote per share on all matters to be voted
upon and will not be entitled to cumulate votes for the election of directors.
Holders of Common Stock will not have preemptive, redemption or conversion
rights and, upon liquidation, dissolution or winding up of the Company, will be
entitled to share ratably in the net assets of the Company available for
distribution to common shareholders. All outstanding shares prior to the
Offering will be, and all shares to be outstanding upon completion of the
Offering will be, validly issued, fully paid and non-assessable. The rights,
preferences and privileges of holders of Common Stock will be subject to any
classes or series of preferred stock that the Company may issue in the future.

PREFERRED STOCK

The Articles of Incorporation will provide that the Board of Directors
shall be authorized, without further action by the holders of the Common Stock,
to provide for the issuance of shares of the preferred stock in one or more
classes or series and to fix the designations, powers, preferences and relative,
participating, optional and other rights, qualifications, limitations and
restrictions thereof, including the dividend rate, conversion rights, voting
rights, redemption price and liquidation preference, and to fix the number of
shares to be included in any such classes or series. Any preferred stock so
issued may rank senior to the Common Stock with respect to the payment of
dividends or amounts upon liquidation, dissolution or winding-up, or both. In
addition, any such shares of preferred stock may have class or series voting
rights. Upon completion of the Offering, the Company will not have any shares of
preferred stock outstanding. Issuances of preferred stock, while providing the
Company with flexibility in connection with general corporate purposes, may,
among other things, have an adverse effect on the rights of holders of Common
Stock and, in certain circumstances, could have the effect of making it more
difficult for a third party to acquire a majority of the outstanding voting
stock of the Company or the effect of decreasing the market price of the Common
Stock. The Company has no present plan to issue any shares of preferred stock.

55
<PAGE> 56

CLASSIFIED BOARD OF DIRECTORS

The Articles of Incorporation will divide the Board of Directors into three
classes of directors serving staggered three-year terms. As a result,
approximately one-third of the Board of Directors will be elected at each annual
meeting of shareholders. The classification of directors, together with other
provisions in the Articles of Incorporation and Bylaws that limit the ability of
shareholders to remove directors and that permit the remaining directors to fill
any vacancies on the Board of Directors, will have the effect of making it more
difficult for shareholders to change the composition of the Board of Directors.
As a result, at least two annual meetings of shareholders may be required for
the shareholders to change a majority of the directors, whether or not such a
change in the Board of Directors would be beneficial to the Company and its
shareholders and whether or not a majority of the Company's shareholders
believes that such a change would be desirable. Currently, the terms of Class I
directors expire in 1997, the terms of Class II directors expire in 1998 and the
terms of Class III directors expire in 1999.

REMOVAL OF DIRECTORS AND FILLING VACANCIES

The Articles of Incorporation will provide that a director may be removed
by shareholders only for cause. The Articles of Incorporation will provide that
this removal requires the approval of the holders of 66.67% of the total voting
power of all outstanding securities of the Company then entitled to vote
generally in all matters submitted to shareholders (the "Voting Stock"), voting
together as a single class, subject to the rights of the holders of any class of
preferred stock then outstanding to remove directors elected by such holders
under specified circumstances or to vote separately as a class. Moreover, the
Florida Act and the Articles of Incorporation will also provide that, subject to
any rights of holders of any class of preferred stock then outstanding, all
vacancies on the Board of Directors, including those resulting from an increase
in the number of directors, may be filled solely by a majority of the remaining
directors, even if they do not constitute a quorum. When a director resigns from
the Board of Directors effective at a future date, a majority of directors then
in office, including the directors who are to resign, may vote on filling the
vacancy.

ADVANCE NOTICE PROVISIONS FOR SHAREHOLDER NOMINATIONS AND SHAREHOLDER PROPOSALS

The Bylaws establish an advance notice procedure for shareholders to make
nominations of candidates for election as directors or to bring other business
before any meeting of shareholders of the Company. Any shareholder nomination or
proposal for action at an upcoming shareholder meeting must be delivered to the
Company no later than the deadline for submitting shareholder proposals pursuant
to Rule 14a-8 under the Exchange Act. The presiding officer at any shareholder
meeting is not required to recognize any proposal or nomination which did not
comply with such deadline.

The purpose of requiring shareholders to give the Company advance notice of
nominations and other business is to afford the Board of Directors a meaningful
opportunity to consider the qualifications of the proposed nominees or the
advisability of the other proposed business and, to the extent deemed necessary
or desirable by the Board of Directors, to inform shareholders and make
recommendations about such qualifications or business, as well as to provide a
more orderly procedure for conducting meetings of shareholders. Although the
Bylaws do not give the Board of Directors any power to disapprove timely
shareholder nominations for the election of directors or proposals for action,
they may have the effect of precluding a contest for the election of directors
or the consideration of shareholder proposals if the proper procedures are not
followed and of discouraging or deterring a third party from conducting a
solicitation of proxies to elect its own slate of directors or to approve its
own proposal.

ANTI-TAKEOVER PROVISIONS UNDER THE FLORIDA ACT

The Company is subject to several anti-takeover provisions under the
Florida Act that apply to a public corporation organized under the Florida Act
unless the corporation has elected to opt out of such provisions in its articles
of incorporation or (depending on the provision in question) its bylaws. The
Company has not elected to opt out of these provisions. The Florida Act contains
a provision that prohibits the voting of shares in a publicly-held Florida
corporation which are acquired in a "control share acquisition" unless the
holders of a majority of the corporation's voting shares (exclusive of shares
held by officers of the corporation, inside directors or the acquiring party)
approve the granting of voting rights as to the shares acquired in the control

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<PAGE> 57

share acquisition. A "control share acquisition" is defined as an acquisition
that immediately thereafter entitles the acquiring party to vote in the election
of directors within each of the following ranges of voting power: (i) one-fifth
or more but less than one-third of such voting power, (ii) one-third or more but
less than a majority of such voting power and (iii) more than a majority of such
voting power.

The Florida Act also contains an "affiliated transaction" provision that
prohibits a publicly-held Florida corporation from engaging in a broad range of
business combinations or other extraordinary corporate transactions with an
"interested shareholder" unless: (i) the transaction is approved by a majority
of disinterested directors before the person becomes an interested shareholder,
(ii) the interested shareholder has owned at least 80% of the corporation's
outstanding voting shares for at least five years, or (iii) the transaction is
approved by the holders of two-thirds of the corporation's voting shares other
than those owned by the interested shareholder. An "interested shareholder" is
defined as a person who, together with affiliates and associates, beneficially
owns more than 10% of the corporation's outstanding voting shares.

LIMITATION OF LIABILITY; INDEMNIFICATION MATTERS

Article 9 of the Bylaws requires the Company, to the fullest extent
permitted or required by the Florida Act, to (i) indemnify its directors against
any and all liabilities and (ii) advance any and all reasonable expenses,
incurred in any proceeding to which any such director is a party or in which
such director is deposed or called to testify as a witness because he or she is
or was a director of the Company. Generally, the Florida Act permits
indemnification of a director upon a determination that he or she acted in good
faith and in a manner he or she reasonably believed to be in, or not opposed to,
the best interests of the corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The right to indemnification granted in the Bylaws is not exclusive of
any other rights to indemnification against liabilities or the advancement of
expenses to which a director may be entitled under any written agreement, Board
resolution, vote of shareholders, the Florida Act or otherwise.

The Company has entered into agreements with each of its current directors
and intends to enter into agreements with its current executive officers
pursuant to which it is obligated to indemnify those persons to the fullest
extent authorized by law and to advance payments to cover defense costs against
an unsecured obligation to repay such advances if it is ultimately determined
that the recipient of the advance is not entitled to indemnification. The
indemnification agreements provide that no indemnification or advancement of
expenses shall be made (a) if a final adjudication establishes that his actions
or omissions to act were material to the cause of action so adjudicated and
constitute: (i) a violation of criminal law (unless the indemnitee had
reasonable cause to believe that his actions were lawful); (ii) a transaction
from which the indemnitee derived an improper personal benefit; (iii) an
unlawful distribution or dividend under the Florida Act; or (iv) willful
misconduct or a conscious disregard for the just interests of the Company in a
derivative or shareholder action; (b) for liability under Section 16(b) of the
Exchange Act, or (c) if a final decision by a court having jurisdiction in the
matter determines that indemnification is not lawful.

At present, the Company is not aware of any pending or threatened
litigation or proceeding involving a director, officer, employee or agent of the
Company in which indemnification would be required or permitted under the Bylaws
or the Florida Act.

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<PAGE> 58

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have outstanding
3,832,599 shares of Common Stock. Of these shares, the 1,077,500 (1,239,125
shares if the Underwriters' over-allotment option is exercised in full) shares
sold in the Offering will be freely tradeable without restriction or further
registration under the Securities Act, except for shares purchased by
"affiliates" of the Company as that term is defined in Rule 144 under the
Securities Act (which may generally be sold only in compliance with Rule 144).

The remaining 2,755,099 shares of Common Stock are deemed "restricted
shares" under Rule 144 in that they were originally issued and sold by the
Company in private transactions in reliance upon exemptions from the
registration provisions of the Securities Act. Upon the expiration of the
Lock-up Agreements described below, to which substantially all of the restricted
shares are subject, approximately 543,000 shares will be eligible for sale in
the public market without restriction pursuant to Rule 144(k) or Rule 701 as
promulgated under the Securities Act. Approximately 1,839,000 additional
restricted shares will be eligible for sale in the public market subject to the
volume limitations and other conditions of Rule 144 upon the expiration of the
Lock-up Agreements. The holders of approximately 373,000 additional restricted
shares will not be eligible to sell such shares pursuant to Rule 144 until the
expiration of two years from the date such restricted shares were acquired.

In addition to the restricted shares described in the preceding paragraph,
substantially all of the approximately 170,000 shares of Common Stock which may
be acquired upon the exercise of vested stock options within 180 days following
the date of this Prospectus (collectively, the "Option Shares") are subject to
the Lock-up Agreements but may be eligible for resale following the expiration
of the Lock-up Agreements (subject, in the case of affiliates, to certain
limitations) pursuant to Rule 701 under the Securities Act or a Form S-8
registration statement to be filed by the Company under the Securities Act. See
"Management -- Stock Option Plans." Additional options will continue to vest and
may be exercised and sold from time to time by option holders following the
expiration of the Lock-up Agreements.

Substantially all of the Company's officers, directors, shareholders and
optionholders have agreed to enter into Lock-up Agreements generally providing
that for a period of 180 days after the date of this Prospectus, they will not,
except in connection with the Offering, directly or indirectly, offer, sell,
loan, pledge or otherwise dispose of, or grant any options or other rights with
respect to, any shares of Common Stock or any securities that are convertible
into or exchangeable or exercisable for Common Stock owned by them without the
prior written consent of J.C. Bradford & Co. Similarly, the Company has agreed
generally that, for a period of 180 days after the date of this Prospectus, it
will not, directly or indirectly, issue, offer, sell, grant options to purchase
or otherwise dispose of any of its equity securities or any other securities
convertible into or exchangeable or exercisable for its Common Stock or any
other equity security, except that the Company may grant stock options under the
Stock Option Plans and issue shares of Common Stock upon the exercise of options
previously granted. J.C. Bradford & Co. does not presently intend to waive the
Lock-up Agreements. If a shareholder should request J.C. Bradford & Co. to waive
the 180-day lock-up period, J.C. Bradford & Co., consistent with past practice
with regard to other issuing companies, would take into consideration the number
of shares as to which such request relates, the identity of the requesting
shareholder, the relative demand for additional shares of Common Stock in the
market, the period of time since the completion of the Offering, and the average
trading volume and price performance of the Common Stock during such period.

In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including persons deemed to be affiliates, whose
restricted shares have been fully paid for and held for at least two years
(currently proposed by the Securities and Exchange Commission (the "Commission")
to be reduced to one year) from the date of issuance by the Company may sell
such securities in brokers' transactions or directly to market makers, provided
the number of shares sold in any three-month period does not exceed the greater
of 1% of the then outstanding shares of Common Stock (38,326 shares based on the
number of shares to be outstanding after the Offering) or the average weekly
trading volume of the Common Stock in the public market during the four calendar
weeks preceding the filing of the seller's Form 144. Sales under Rule 144 are
also subject to the availability of current public information concerning the
Company. After three years (currently proposed by the Commission to be reduced
two years) have elapsed from the date

58
<PAGE> 59

of issuance of restricted shares by the Company, such shares generally may be
sold without limitation by persons who have not been affiliates of the Company
for at least three months. Rule 144 also provides that affiliates who are
selling restricted shares which they have fully paid for and held for at least
two years must nonetheless comply with the above restrictions applicable to
restricted shares with the exception of the two year holding period requirement.

The Company intends to file one or more registration statements on Form S-8
to register all shares of Common Stock issuable under the Company's stock
options plans, as well as certain of the shares of Common Stock previously
issued under the plans. These registration statements are expected to be filed
as soon as practicable after the date of this Prospectus and are expected to
become effective immediately upon filing. Shares covered by these registration
statements will be eligible for sale in the public market after the effective
date of such registration statement and following the expiration of the Lock-up
Agreements, subject to Rule 144 limitations applicable to affiliates of the
Company. See "Management -- Stock Option Plans."

Prior to the Offering, there has been no established trading market for the
Common Stock, and no predictions can be made as to the effect that sales of
Common Stock under Rule 144, pursuant to a registration statement or otherwise,
or the availability of shares of Common Stock for sale, will have on the market
price prevailing from time to time. Sales of substantial amounts of Common Stock
in the public market, or the perception that such sales could occur, could
depress the prevailing market price. Such sales may also make it more difficult
for the Company to sell equity securities or equity-related securities in the
future at a time and price that it deems appropriate.

REGISTRATION RIGHTS

Under the Yusefzadeh Agreement, upon the termination of Mr. Yusefzadeh's
employment or in the event he is no longer a director of the Company for any
reason, he may request registration for sale under the Securities Act of all or
part of the Common Stock then held by him. However, the Company shall not be
required to effect a demand registration under the Securities Act if: (i) the
aggregate market value of the shares of Common Stock proposed to be registered
does not equal or exceed $12,000,000 prior to an initial public offering or
$2,000,000 after an initial public offering; (ii) within 12 months prior to any
such request for registration, a registration of securities of the Company has
been effected in which Mr. Yusefzadeh had the right to participate; (iii) the
Company receives such request for registration within 180 days preceding the
anticipated effective date of a proposed underwritten public offering of
securities of the Company approved by the Board of Directors prior to the
Company's receipt of such request; or (iv) the Board of Directors reasonably
determines in good faith that effecting such a demand registration at such time
would have a material adverse effect upon a proposed sale of all (or
substantially all) of the assets of the Company, or a merger, reorganization,
recapitalization, or similar transaction materially affecting the capital
structure or equity ownership of the Company which is actively being negotiated
with another party whose identity is disclosed to Mr. Yusefzadeh; provided,
however, that the Company may only delay a demand registration for a period not
exceeding six months (or until such earlier time as such transaction is
consummated or no longer proposed).

In addition, under the Yusefzadeh Agreement, Mr. Yusefzadeh has unlimited
piggyback registration rights if the Company proposes to make a registered
public offering, including an initial public offering, of any of its securities
under the Securities Act, other than an offering pursuant to a demand
registration or an offering registered on Form S-8, Form S-4 or comparable
forms. At the written request of Mr. Yusefzadeh, the Company shall include in
such registration and offering, and in any underwriting of such offering, all
shares of Common Stock as may have been designated at his request.

Mr. Yusefzadeh's registration rights are subject to reduction in certain
circumstances and after reasonable negotiations among the managing underwriters,
the Company and Mr. Yusefzadeh. Mr. Yusefzadeh is required to pay all transfer
taxes, if any relating to the sale of his shares, the fees and expenses of his
own counsel and his pro rata portion of any underwriting discount, fee or
commission or the equivalent thereof. All other expenses shall be borne by the
Company. The Company is also obligated to

59
<PAGE> 60

indemnify Mr. Yusefzadeh in any of the Company's registrations against certain
losses and liabilities, including liabilities under the Securities Act and state
securities laws.

On June 12, 1996, the Company granted to each of Mr. Toole and Mr. Newes
registration rights with respect to 116,155 shares of Common Stock. For so long
as the shares are subject to resale restrictions, each shareholder shall have
the right to one demand registration of such shares under the Securities Act on
Form S-8, provided the shareholder is employed at the time of his request and
subject to other limitations such as any such registration not being adverse to
the Company's interests. In addition, each shareholder has the right to one
piggyback registration of the shares subject to certain limitations, including
the right of the managing underwriters to object to inclusion of the shares in
any such offering. The shareholders will pay their own expenses incurred in
connection with such registration.

In connection with the Bradford Warrants (as defined herein), the Company
granted to J.C. Bradford & Co. registration rights with respect to the shares of
Common Stock issuable upon exercise of the Bradford Warrants ( 1/2 of 1% of the
shares of Common Stock outstanding on the Closing Date, not to exceed 19,000
shares). Between the first and fifth anniversaries of the date of this
Prospectus, the holders of at least 50% of then-outstanding shares subject to
the Bradford Warrants shall have the right to one demand registration of such
shares under the Securities Act. In addition, between the first and seventh
anniversaries of the date of this Prospectus, the holders of the Bradford
Warrants have the right to piggyback registration in any new registration
statement filed by the Company, subject to certain limitations, including the
right of the managing underwriters to object to the inclusion of the shares in
any such offering. The Company shall pay the expenses of any such registration,
and the Company is obligated to indemnify the holders of the Bradford Warrants,
their officers and directors and persons who control such holder in any of the
Company's registrations against certain losses and liabilities, including
liabilities under the Securities Act. See "Underwriting."

60
<PAGE> 61

UNDERWRITING

Pursuant to the Underwriting Agreement, and subject to the terms and
conditions thereof, the Underwriters named below have agreed, severally, to
purchase from the Company and the Selling Shareholders the number of shares of
Common Stock set forth below opposite their respective names.

<TABLE>
<CAPTION>
NUMBER OF
NAME OF UNDERWRITER SHARES
------------------------------------------------------------------------------ ---------
<S> <C>
J.C. Bradford & Co. .......................................................... 538,750
Advest, Inc. ................................................................. 538,750
---------
Total............................................................... 1,077,500
========
</TABLE>

In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all shares of Common Stock
offered hereby if any of such shares are purchased.

The Company and the Selling Shareholders have been advised by the
Underwriters that the Underwriters propose initially to offer the shares of
Common Stock to the public at the public offering price set forth on the cover
page of this Prospectus and to certain dealers at such price less a concession
not in excess of $0.50 per share. The Underwriters may allow, and such dealers
may reallow, a concession not in excess of $0.10 per share to certain other
dealers. After the initial public offering, the public offering price and such
concessions may be changed. The Underwriters have informed the Company that the
Underwriters do not intend to confirm sales to accounts over which they exercise
discretionary authority.

The offering of the shares of Common Stock is made for delivery when, as
and if accepted by the Underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offer without notice. The Underwriters
reserve the right to reject any offer for the purchase of shares.

Certain of the Selling Shareholders have granted the Underwriters an
option, exercisable not later than 30 days from the date of this Prospectus, to
purchase up to an aggregate of additional 161,625 shares of Common Stock from
the Selling Shareholders to cover over-allotments, if any. To the extent the
Underwriters exercise the option, each of the Underwriters will have a firm
commitment to purchase approximately the same percentage thereof which the
number of shares of Common Stock to be purchased by it shown in the table above
bears to the total number of shares in such table, and the Selling Shareholders
will be obligated, pursuant to the option, to sell such shares to the
Underwriters. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of the shares of Common Stock
offered hereby. If purchased, the Underwriters will sell these additional shares
on the same terms as those on which the 1,077,500 shares are being offered.

Upon the purchase by the Underwriters of the shares being offered hereby,
the Company has agreed to sell to J.C. Bradford & Co., for an aggregate of $500,
warrants (the "Bradford Warrants") to purchase up to 1/2 of 1% of the shares of
Common Stock outstanding on the Closing Date (not to exceed 19,000 shares) at an
exercise price per share equal to 120% of the initial public offering price. The
warrant exercise price has been determined by negotiation between the Company
and J.C. Bradford & Co. as to be within the Conduct Rules of the National
Association of Securities Dealers, Inc. and various state authorities. The
Bradford Warrants may not be sold, transferred, assigned, hypothecated or
otherwise disposed of for a period of three years from the date of this
Prospectus, except to the officers and partners of J.C. Bradford & Co., and are
exercisable during the four-year period commencing one year from the date of
this Prospectus (the "Warrant Exercise Term") or, at the holders' option, are
exchangeable for their value in Common Stock at its then market price. During
the Warrant Exercise Term, J.C. Bradford & Co. is given, at nominal cost, the
opportunity to profit from a rise in the market price of the Company's Common
Stock. To the extent that the Bradford Warrants are exercised, dilution to the
interests of the Company's shareholders will occur. Further, the terms upon
which the Company will be able to obtain additional equity capital may be
adversely affected since J.C. Bradford & Co. can be expected to exercise or
exchange them at a time when the Company would, in all likelihood, be able to
obtain any needed capital on terms more favorable to the Company than those
provided in the Bradford Warrants. Any profit realized by J.C. Bradford & Co. on
the sale of the Bradford Warrants or the underlying shares of Common Stock may
be deemed additional underwriting compensation. The

61
<PAGE> 62

Company has also granted to the holders of the Bradford Warrants certain
registration rights. See "Shares Eligible for Future Sale -- Registration
Rights."

Prior to this Offering, there has been no public market for the Common
Stock. The offering price was determined by negotiation among the Company, the
Selling Shareholders and the Underwriters. In determining such price,
consideration was given to, among other things, the financial and operating
history and trends of the Company, the experience of its management, the
position of the Company in its industry, the Company's prospects and the
Company's financial results. Additionally, consideration was given to the status
of the securities markets, market conditions for new offerings of securities and
the prices of similar securities of comparable companies. J.C. Bradford & Co.
and Advest, Inc. intend to act as market makers with regard to the Common Stock.

Substantially all of the Company's officers and directors, shareholders and
optionholders have agreed with the Underwriters not to offer, sell, loan, pledge
or otherwise dispose of or grant any options or other rights with respect to,
any shares of Common Stock or any securities that are convertible into or
exchangeable or exercisable for Common Stock owned by them prior to the
expiration of a period of 180 days following the date of this Prospectus,
without the prior written consent of J.C. Bradford & Co. Similarly, the Company
has agreed generally that, for a period of 180 days after the date of this
Prospectus, it will not, directly or indirectly, issue, offer, sell, grant
options to purchase or otherwise dispose of any of its equity securities or any
other securities convertible into or exchangeable or exercisable for its Common
Stock or any other equity security, except that the Company may grant stock
options under the Stock Option Plans and issue shares of Common Stock upon the
exercise of options previously granted. J.C. Bradford & Co. does not presently
intend to waive the Lock-up Agreements. If a shareholder should request J.C.
Bradford & Co. to waive the 180-day lock-up period, J.C. Bradford & Co.,
consistent with past practice with regard to other issuing companies, would take
into consideration the number of shares as to which such request relates, the
identity of the requesting shareholder, the relative demand for additional
shares of Common Stock in the market, the period of time since the completion of
the Offering, and the average trading volume and price performance of the Common
Stock during such period. After such 180-day period, such persons will be
entitled to sell, distribute or otherwise dispose of the Common Stock or options
to acquire Common Stock, subject to the provisions of applicable securities
laws. See "Shares Eligible for Future Sale."

The Underwriting Agreement provides that the Company and the Selling
Shareholders will indemnify the Underwriters and controlling persons, if any,
against certain civil liabilities, including labilities under the Securities
Act, or will contribute to payments that the Underwriters or any such
controlling persons may be required to make in respect thereof.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Nelson Mullins Riley & Scarborough, L.L.P., Atlanta, Georgia. Glenn
W. Sturm, a partner of Nelson Mullins Riley & Scarborough, L.L.P., beneficially
owns 13,616 shares of Common Stock and serves as Secretary and a director of the
Company. Certain legal matters in connection with the Offering will be passed
upon for the Underwriters by Alston & Bird, Atlanta, Georgia.

EXPERTS

The Consolidated Financial Statements of the Company at January 31, 1995,
December 31, 1995 and for the years ended January 31, 1994 and 1995 and the
eleven months ended December 31, 1995, appearing in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 (the "Registration Statement") under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus

62
<PAGE> 63

does not contain all of the information set forth in the Registration Statement
and the exhibits and schedules to the Registration Statement. For further
information with respect to the Company and such Common Stock offered hereby,
reference is made to the Registration Statement and the exhibits and schedules
filed as a part of the Registration Statement. Statements contained in this
Prospectus concerning the contents of any contract or any other document
referred to are only summaries; reference is made in each instance to the copy
of such contract or document filed as an exhibit to the Registration Statement.
Each such statement is qualified in all respects by such reference to such
exhibit. The Registration Statement, including exhibits and schedules thereto,
may be inspected without charge at the public reference facility maintained by
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices located at
Seven World Trade Center, New York, New York 10048, and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material may also be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.

63
<PAGE> 64

PHOENIX INTERNATIONAL LTD., INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors........................................................ F-2
Consolidated Balance Sheets as of January 31, 1995, December 31, 1995 and March 31,
1996 (Unaudited).................................................................... F-3
Consolidated Statements of Operations for Years Ended January 31, 1994 and 1995,
Eleven Months Ended December 31, 1995 and the Unaudited Three-Month Periods Ended
March 31, 1995 and 1996............................................................. F-4
Consolidated Statements of Shareholders' Deficit for Years Ended January 31, 1994 and
1995, Eleven Months Ended December 31, 1995 and Unaudited Three-Month Period Ended
March 31, 1996...................................................................... F-5
Consolidated Statements of Cash Flows for Years Ended January 31, 1994 and 1995,
Eleven Months Ended December 31, 1995 and the Unaudited Three-Month Periods Ended
March 31, 1995 and 1996............................................................. F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>

F-1
<PAGE> 65

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
Phoenix International Ltd., Inc.

We have audited the accompanying consolidated balance sheets of Phoenix
International Ltd., Inc. as of January 31, 1995 and December 31, 1995, and the
related consolidated statements of operations, shareholders' deficit and cash
flows for each of the two years in the period ended January 31, 1995 and the
eleven months ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Phoenix International Ltd., Inc. at January 31, 1995 and December 31, 1995, and
the consolidated results of its operations and its cash flows for each of the
two years in the period ended January 31, 1995 and the eleven months ended
December 31, 1995 in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Atlanta, Georgia
March 1, 1996, except for Note 12,
as to which the date is May 8, 1996

F-2
<PAGE> 66

PHOENIX INTERNATIONAL LTD., INC.

CONSOLIDATED BALANCE SHEETS

JANUARY 31, DECEMBER 31, MARCH 31,
1995 1995 1996
----------- ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................... $ 615,290 $ 425,931 $ 350,981
Accounts receivable, net of allowance for doubtful accounts of
$10,000 at December 31, 1995 and March 31, 1996.............. 260,530 328,693 466,996
Unbilled accounts receivable................................... 8,412 108,320 146,881
Interest receivable, related party............................. 9,444 105,001 131,009
Prepaid expenses and other current assets...................... 94,989 174,339 199,908
Deferred tax asset............................................. 200,444 390,769 237,769
---------- ---------- ----------
Total current assets.................................... 1,189,109 1,533,053 1,533,544
Property and equipment:
Computer equipment and purchased software...................... 325,764 522,571 584,924
Furniture, office equipment and leasehold improvements......... 189,566 245,762 245,762
---------- ---------- ----------
515,330 768,333 830,686
Accumulated depreciation and amortization...................... (70,929) (191,826) (235,435)
---------- ---------- ----------
444,401 576,507 595,251
Capitalized software development costs, net of accumulated
amortization of $107,647 and $172,809 at December 31, 1995 and
March 31, 1996, respectively................................... 93,001 1,118,729 1,366,846
---------- ---------- ----------
Total assets............................................ $ 1,726,511 $ 3,228,289 $ 3,495,641
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable............................................... $ 136,661 $ 264,274 $ 389,129
Accrued expenses............................................... 222,789 279,521 355,959
Note payable................................................... 250,000 -- --
Note payable, related party.................................... 35,203 35,203 35,203
Payable to vendor.............................................. 200,000 140,000 140,000
Deferred revenue............................................... 2,501,270 3,077,393 2,951,926
---------- ---------- ----------
Total current liabilities............................... 3,345,923 3,796,391 3,872,217
Shareholders' deficit:
Preferred stock, $1.00 par value:
10,000,000 shares authorized, none issued and outstanding.... -- -- --
Class A common stock, $0.0043 par value:
1,500,000 shares authorized, 1,393,859 shares issued and
outstanding................................................ 6,000 6,000 6,000
Class B common stock, $0.43 par value:
10,000,000 shares authorized, 511,082 shares issued and
outstanding................................................ 220,000 220,000 220,000
Class C common stock, $2.15 par value:
200,000 shares authorized, 185,848 shares issued and
outstanding................................................ 400,000 400,000 400,000
Class D, non-voting common stock, $4.30 par value:
50,000 shares authorized, 23,231 shares issued and
outstanding at December 31, 1995 and March 31, 1996........ -- 100,000 100,000
Class E, non-voting common stock, $1.08 par value:
1,000,000 shares authorized, 790,894, 878,310 and 889,926
shares issued and outstanding at January 31, 1995, December
31, 1995 and March 31, 1996, respectively.................. 851,117 945,190 957,690
Additional paid-in capital..................................... 2,097,502 2,368,470 2,405,970
Stock subscriptions receivable................................. (1,350,524) (1,318,524) (1,318,524)
Accumulated deficit............................................ (3,843,507) (3,289,238) (3,147,712)
---------- ---------- ----------
Total shareholders' deficit............................. (1,619,412) (568,102) (376,576)
---------- ---------- ----------
Total liabilities and shareholders' deficit............. $ 1,726,511 $ 3,228,289 $ 3,495,641
========== ========== ==========
</TABLE>

See accompanying notes.

F-3
<PAGE> 67

PHOENIX INTERNATIONAL LTD., INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
ELEVEN
MONTHS ENDED THREE MONTHS ENDED
YEAR ENDED JANUARY 31, DECEMBER 31, MARCH 31,
------------------------- ------------ ----------------------
1994 1995 1995 1995 1996
----------- ----------- ------------ --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
License fees and other................ $ 30,000 $ 57,776 $3,467,547 $ -- $1,127,607
Implementation, customer and software
support and other service fees..... -- 369,711 1,556,164 90,745 653,723
----------- ----------- ------------ --------- ----------
Total revenues................ 30,000 427,487 5,023,711 90,745 1,781,330
Expenses:
Costs of license fees and other....... -- -- 375,783 -- 131,029
Costs of implementation, customer and
software support and other service
fees............................... 104,818 637,427 1,246,886 222,822 457,196
Sales and marketing................... 96,911 358,948 983,290 224,839 268,818
General and administrative............ 225,458 981,930 1,058,190 287,072 358,260
Product development................... 621,373 1,362,780 654,797 60,272 299,067
----------- ----------- ------------ --------- ----------
Total expenses................ 1,048,560 3,341,085 4,318,946 795,005 1,514,370
Other income (expense):
Interest income....................... 3,603 26,610 121,815 29,607 28,647
Interest expense...................... -- (19,366) (12,060) (6,590) (1,081)
Other income (expense)................ 1,815 75,989 (4,252) 75,270 --
----------- ----------- ------------ --------- ----------
Income (loss) before income taxes....... (1,013,142) (2,830,365) 810,268 (605,973) 294,526
Income tax expense...................... -- -- 255,999 -- 153,000
----------- ----------- ------------ --------- ----------
Net income (loss)....................... $(1,013,142) $(2,830,365) $ 554,269 $(605,973) $ 141,526
========== ========== ========== ========= =========
Net income (loss) per share............. $ (0.51) $ (1.11) $ 0.17 $ (0.20) $ 0.04
========== ========== ========== ========= =========
Weighted average shares outstanding..... 1,971,573 2,560,151 3,235,532 3,076,813 3,298,444
========== ========== ========== ========= =========
</TABLE>

See accompanying notes.

F-4
<PAGE> 68

PHOENIX INTERNATIONAL LTD., INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT

<TABLE>
<CAPTION>
COMMON STOCK,
ALL CLASSES ADDITIONAL STOCK TOTAL
----------------------- PAID-IN SUBSCRIPTION ACCUMULATED SHAREHOLDERS'
SHARES AMOUNT CAPITAL RECEIVABLE DEFICIT DEFICIT
---------- ---------- ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at inception...................... -- $ -- $ -- $ -- $ -- $ --
Issuance of 1,393,859 shares of Class A
common stock as compensation for
services.............................. 1,393,859 6,000 -- -- -- 6,000
Issuance of 511,082 shares of Class B
common stock, net of issuance costs of
$44,314............................... 511,082 220,000 285,686 -- -- 505,686
Issuance of 46,462 shares of Class C
common stock.......................... 46,462 100,000 -- -- -- 100,000
Issuance of 185,848 shares of Class E
common stock.......................... 185,848 200,000 -- (25,000) -- 175,000
Net loss................................ -- -- -- -- (1,013,142) (1,013,142)
---------- ---------- ---------- ------------ ----------- -------------
Balance, January 31, 1994................. 2,137,251 526,000 285,686 (25,000) (1,013,142) (226,456)
Issuance of 139,386 shares of Class C
common stock.......................... 139,386 300,000 -- -- -- 300,000
Issuance of 605,046 shares of Class E
common stock, net of issuance costs of
$6,000................................ 605,046 651,117 1,478,566 (1,350,524) -- 779,159
Payment on stock subscription
receivable............................ -- -- -- 25,000 -- 25,000
Issuance of stock and stock options as
compensation for services............. -- -- 333,250 -- -- 333,250
Net loss................................ -- -- -- -- (2,830,365) (2,830,365)
---------- ---------- ---------- ------------ ----------- -------------
Balance, January 31, 1995................. 2,881,683 1,477,117 2,097,502 (1,350,524) (3,843,507) (1,619,412)
Issuance of 23,231 shares of Class D
common stock.......................... 23,231 100,000 -- -- -- 100,000
Issuance of 87,416 shares of Class E
common stock.......................... 87,416 94,073 270,968 -- -- 365,041
Payment on stock subscription
receivable............................ -- -- -- 32,000 -- 32,000
Net income.............................. -- -- -- -- 554,269 554,269
---------- ---------- ---------- ------------ ----------- -------------
Balance, December 31, 1995................ 2,992,330 1,671,190 2,368,470 (1,318,524) (3,289,238) (568,102)
Issuance of 11,616 shares of Class E
common stock (Unaudited).............. 11,616 12,500 37,500 -- -- 50,000
Net income (Unaudited).................. -- -- -- -- 141,526 141,526
---------- ---------- ---------- ------------ ----------- -------------
Balance, March 31, 1996 (Unaudited)....... 3,003,946 $1,683,690 $2,405,970 $(1,318,524) $(3,147,712) $ (376,576)
========= ========= ========= =========== =========== ============
</TABLE>

See accompanying notes.

F-5
<PAGE> 69

PHOENIX INTERNATIONAL LTD., INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
ELEVEN THREE
MONTHS ENDED MONTHS ENDED
YEAR ENDED JANUARY 31, DECEMBER 31, MARCH 31,
------------------------- ------------- ----------------------
1994 1995 1995 1995 1996
----------- ----------- ------------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).......................... $(1,013,142) $(2,830,365) $ 554,269 $(605,973) $ 141,526
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization.......... 6,397 64,534 228,544 24,875 108,360
Stock and stock options issued for
compensation......................... 6,000 333,250 -- -- --
Provision for doubtful accounts........ -- -- 10,000 -- --
Deferred taxes......................... -- (200,444) (190,325) -- 153,000
Changes in operating assets and
liabilities:
Accounts receivable.................. -- (260,530) (78,163) 98,903 (138,303)
Unbilled accounts receivable......... (1,815) (6,597) (99,908) (781,564) (38,561)
Interest receivable, related party... -- (9,444) (95,557) (23,504) (26,008)
Prepaid expenses and other current
assets............................ (13,417) (81,572) (79,350) (186,207) (25,569)
Accounts payable..................... 91,157 45,504 127,613 300,612 124,855
Accrued expenses..................... 103,238 119,552 56,732 46,641 76,438
Deferred revenue..................... 149,435 2,351,833 576,123 949,686 (125,467)
----------- ----------- ------------- --------- ----------
Net cash provided by (used in) operating
activities............................... (672,147) (474,279) 1,009,978 (176,531) 250,271
INVESTING ACTIVITIES
Purchases of property and equipment........ (173,283) (342,047) (253,003) (110,673) (61,943)
Capitalized software development costs..... -- (93,001) (1,133,375) (304,663) (313,278)
----------- ----------- ------------- --------- ----------
Net cash used in investing activities...... (173,283) (435,048) (1,386,378) (415,336) (375,221)
FINANCING ACTIVITIES
Proceeds from short-term debt.............. 193,949 291,254 -- -- --
Net proceeds from issuance of common
stock.................................... 780,685 1,079,159 465,041 97,510 50,000
Payment on short-term debt................. -- -- (310,000) -- --
Cash payments for stock subscription
receivable............................... -- 25,000 32,000 31,290 --
----------- ----------- ------------- --------- ----------
Net cash provided by financing
activities............................... 974,634 1,395,413 187,041 128,800 50,000
Net increase (decrease) in cash and cash
equivalents.............................. 129,204 486,086 (189,359) (463,067) (74,950)
Cash and cash equivalents at beginning of
period................................... -- 129,204 615,290 605,309 425,931
----------- ----------- ------------- --------- ----------
Cash and cash equivalents at end of
period................................... $ 129,204 $ 615,290 $ 425,931 $ 142,242 $ 350,981
============ ============ ============= ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest................................. $ -- $ 14,942 $ 12,060 $ 6,590 $ 1,081
============ ============ ============= ========== ==========
Income taxes............................. $ -- $ 200,444 $ 313,984 $ 200,444 $ --
============ ============ ============= ========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Equipment provided by vendor............... $ -- $ 78,644 $ -- $ -- $ --
============ ============ ============= ========== ==========
Stock subscription receivable from sale of
Class E stock............................ $ 25,000 $ 1,350,524 $ -- $ -- $ --
============ ============ ============= ========== ==========
</TABLE>

See accompanying notes.

F-6
<PAGE> 70

PHOENIX INTERNATIONAL LTD., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Phoenix International Ltd., Inc. (the Company), formed on January 11, 1993,
designs, develops, markets and supports highly adaptable, enterprise-wide
client/server application software for the financial services industry, with a
primary focus on middle market banks. The Company has one wholly-owned
subsidiary that is a foreign sales corporation. There was no activity in the
period January 11, 1993 to January 31, 1993.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary. All significant intercompany balances and
transactions have been eliminated.

FISCAL YEAR

Fiscal 1993, fiscal 1994, and fiscal 1995 correspond with the years ended
January 31, 1994 and 1995, and the eleven months ended December 31, 1995,
respectively.

During 1995 the Company changed its fiscal year end from January 31 to
December 31. Accordingly, the financial statements for the period ended December
31, 1995 include only eleven months of operations.

Comparative unaudited results of operations for the eleven months ended
December 31, 1994 are as follows:

<TABLE>
<S> <C>
License fees and other.................................................. $ 57,475
Implementation, customer and software support and other service fees.... 363,377
-----------
Total revenues................................................ 420,852
Costs of license fees and other......................................... --
Costs of implementation, customer and software support and other service
fees.................................................................. 569,651
Sales and marketing..................................................... 341,915
General and administrative.............................................. 881,471
Product development..................................................... 1,325,506
-----------
Total expenses................................................ 3,118,543
Interest income......................................................... 17,266
Interest expense........................................................ (17,096)
Other income (expense).................................................. --
-----------
Net loss before income taxes............................................ (2,697,521)
Income tax expense...................................................... --
-----------
Net loss...................................................... $(2,697,521)
==========
</TABLE>

USE OF ESTIMATES

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results inevitably will differ from those estimates,
and such differences may be material to the financial statements.

F-7
<PAGE> 71

PHOENIX INTERNATIONAL LTD., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NET INCOME (LOSS) PER SHARE

Net income (loss) per share is based on the weighted average number of
common shares outstanding and dilutive common stock equivalents outstanding
during the periods presented. Pursuant to Securities and Exchange Commission
Staff Accounting Bulletin No. 83, common stock issued for consideration below
the public offering price and stock options issued with exercise prices below
the public offering price during the twelve-month period preceding the initial
filing of the Registration Statement have been included in the calculation of
weighted average shares outstanding, using the treasury stock method, as if they
were outstanding for all periods presented.

REVENUE RECOGNITION

Revenues are recorded in accordance with AICPA Statement of Position 91-1,
"Software Revenue Recognition." Revenue is derived principally from the
licensing of internally produced software and implementation and support
services. When the Company receives payment in advance of delivering the
products or providing services, these payments are deferred until earned.
Software license revenue is recognized upon delivery and when no significant
obligations remain as to the software system requirements. Implementation
service revenue is recognized as earned over the service period. Support
services are prebilled in advance, and revenue is recognized ratably over the
related prepayment period.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, less accumulated depreciation
and amortization. Depreciation is computed using the straight-line method over
the estimated useful lives of the assets (generally five years for computer
equipment and purchased software and four to seven years for furniture and
office equipment). Leasehold improvements are amortized over the related lease
term.

CAPITALIZED SOFTWARE DEVELOPMENT COSTS

The Company capitalizes certain software development costs in accordance
with Statement of Financial Accounting Standards No. 86, "Accounting for the
Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed." Costs
incurred internally to develop a computer software product are charged to
product development expense when incurred until technological feasibility
(determined by the establishment of a detailed program design, or in the absence
of such, a working model) has been established for the product. Thereafter, all
software production costs are capitalized and recorded at the lower of
unamortized cost or net realizable value. Capitalization ceases upon general
release to customers. After general release, capitalized costs are amortized
using the greater of the amount computed using a) the ratio that current gross
revenues for a product bear to the total of current and anticipated revenues for
that product or b) the straight-line method over the estimated useful life of
the related product (currently five years). Amortization for fiscal 1995 was
$107,647 and is included in costs of license fees and other.

Technological feasibility of the Phoenix System was established in December
1994. The Phoenix System was available for general release in June 1995.

ADVERTISING EXPENSE

Advertising costs are expensed as incurred. The Company incurred $10,477,
$12,625, and $116,196 in advertising costs during fiscal 1993, 1994 and 1995,
respectively.

F-8
<PAGE> 72

PHOENIX INTERNATIONAL LTD., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

STOCK BASED COMPENSATION

The Company grants stock options generally for a fixed number of shares to
certain employees with an exercise price equal to or greater than the fair value
of the shares at the date of grant. The Company accounts for stock option grants
in accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and, accordingly, recognizes no compensation expense for stock
option grants for which the terms are fixed. Compensation expense is recognized
for increases in the estimated fair value of common stock for stock options with
variable terms. In October 1995, the FASB issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation," which
provides an alternative to APB Opinion No. 25 in accounting for stock-based
compensation issued to employees. However, the Company plans to continue to
account for stock-based compensation in accordance with APB Opinion No. 25.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In March 1995, the FASB issued Statement of Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," which requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less that
the assets' carrying amount. Statement 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The Company will adopt
Statement 121 in the first quarter of 1996 and, based on current circumstances,
does not believe the effect of adoption will be material.

UNAUDITED INTERIM FINANCIAL STATEMENTS

The unaudited interim financial statements include all adjustments,
consisting only of normal recurring accruals, which the Company considers
necessary for a fair presentation of the financial position of the Company as of
March 31, 1996 and the results of operations for the quarters ended March 31,
1995 and 1996, as presented in the accompanying unaudited interim financial
statements.

2. FINANCIAL INSTRUMENTS

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash equivalents
and trade accounts receivable.

The Company's cash and cash equivalents at December 31, 1995 are deposited
in two separate financial institutions in the amounts of $370,330 and $55,301.
Credit risk is subject to the financial security of each institution.

Accounts receivable related to license fees are unsecured, due under stated
terms, and for relatively large amounts from a small number of customers, all of
which are in the banking business. Credit risk with respect to trade accounts
receivable is limited due to the license agreements generally requiring
substantial prepayments. The remaining receivables are short-term in nature and
are generally related to implementation and support fees and reimbursable
expenses. There have been no accounts receivable written off to date.

F-9
<PAGE> 73

PHOENIX INTERNATIONAL LTD., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FAIR VALUE

The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments.

Cash and Cash Equivalents

The carrying amount reported in the balance sheet approximates the fair
value of cash and cash equivalents.

Accounts Receivable and Accounts Payable

The carrying amounts reported in the balance sheet for accounts receivable
and accounts payable approximate their fair value.

Short-Term Debt

The carrying amounts of the Company's borrowings are payable within the
next fiscal year and approximate their fair value.

3. SHORT-TERM OBLIGATIONS

<TABLE>
<CAPTION>
JANUARY 31, DECEMBER 31,
1995 1995
----------- ------------
<S> <C> <C>
Note payable -- Commercial loan agreement with a bank, collateralized
by equipment, with interest payable monthly at 9% per annum, paid in
May of 1995......................................................... $ 250,000 $ --
Note Payable, related party -- Note payable to a shareholder,
collateralized by certain office equipment, due on demand with
interest payable at 12% per annum................................... 35,203 35,203
Payable to vendor -- Payable to vendor represents non-interest bearing
funds received from a major hardware manufacturer. Repayment of
$100,000 of the funds received is to be made in $10,000 installments
as the Company sells the Phoenix System to customers for use on the
manufacturer's hardware. Six installments were paid in fiscal 1995.
Repayment of the additional $100,000 of funds received is due on
demand.............................................................. 200,000 140,000
</TABLE>

4. LEASE COMMITMENTS

The Company leases office space, equipment and furniture under
noncancellable operating leases. Total rent expense for all operating leases was
$33,736, $143,468 and $181,868 in fiscal 1993, 1994, and 1995, respectively.
Future minimum lease payments under noncancellable operating leases with terms
of one year or more consisted of the following at December 31, 1995:

<TABLE>
<S> <C>
Years ending December 31,
1996...................................................... $169,066
1997...................................................... 162,952
1998...................................................... 13,282
--------
$345,300
========
</TABLE>

A major shareholder in the Company has signed a personal guaranty of
approximately $62,000 related to the lease of the Company's primary office.

F-10
<PAGE> 74

PHOENIX INTERNATIONAL LTD., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. CAPITALIZATION

Under the Company's Articles of Incorporation, amended October 21, 1995,
each holder of Class A common stock is entitled to ten votes per share. Each
holder of Class B and Class C common stock is entitled to one vote per share,
and holders of Class D and Class E common stock have no voting rights. All
classes of common stock share ratably in dividends and other distributions,
including distributions upon liquidation. Each share of Class C, Class D, and
Class E common stock is convertible into one share of Class B common stock on
the effective date of a firm commitment initial public offering where the
proceeds total at least $12,000,000. See Note 12. Prior to an initial public
offering, as defined, each holder of Class A, Class B, and Class C common stock
has preemptive rights to purchase shares of any class of shares which the
Company may issue.

In addition, prior to an initial public offering, the holders of Class A
common stock have the right to elect five members of the board of directors. The
remaining four directors are elected by the holders of Class B and Class C
common stock. Upon the completion of an initial public offering, the directors
shall be elected by the holders of Class A and Class B common stock voting as a
single class.

All shareholders of the Company are subject to an agreement which
stipulates the terms under which their shares can be sold, transferred or
pledged. Terms include, but are not limited to, a call option in favor of the
chief executive officer ("CEO") to purchase all outstanding shares of Class B,
Class C, Class D and Class E common stock if the Board of Directors should vote
in favor to liquidate the Company or sell substantially all of its assets.

The employment agreements for certain key founding employees include a
provision whereby the Company issued to them an aggregate of 255,541 shares of
Class A common stock in consideration of each employee's agreement to provide
his services to the Company for a period of five years. Such shares issued to
these employees are forfeited if the employee terminates employment for any
reason within five years and prior to any public offering of the Company's
common stock prior to March 1, 1998. One of these employees was terminated in
fiscal 1994, and upon majority vote by the Board of Directors, the Company
allowed the employee to retain ownership of the shares, subject to the voting
trust described below. The Company recognized $124,500 of compensation expense
related to the change in measurement date for this restricted stock as a result
of the Board's action and the increase in the estimated fair value of the
Company's common stock since the prior measurement date. There are 371,696
shares that were issued to employers and a consultant held in a Voting Trust,
with the Company's CEO as trustee, for a period of ten years or until any public
offering of the Company's stock.

The Board of Directors is authorized to issue up to 10,000,000 shares of
preferred stock, par value $1.00 per share. The terms of preferred stock have
not been designated and no shares have been issued.

The Company has reserved 3,960,699 shares of Class B common stock for
future issuance upon conversion of Class C, Class D and Class E common stock
into Class B common stock and conversion of outstanding options into options to
purchase Class B common stock. The Company has reserved 2,873,310 shares of
Class E common stock for future issuance upon exercise of options to purchase
Class E common stock.

STOCK OPTIONS

The Company has various stock option plans which authorize the Board of
Directors to grant employees, officers, and directors qualified and unqualified
options to purchase shares of the non-voting Class E common stock. Exercise
prices of stock options are determined by the Board of Directors and have been
the estimated fair market value at the date of the grant for options granted to
employees and 110% of estimated fair market value for options granted to the
CEO.

F-11
<PAGE> 75

PHOENIX INTERNATIONAL LTD., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of option activity from inception to December 31, 1995 is as
follows:

<TABLE>
<CAPTION>
PRICE PER
OPTIONS SHARE
-------- --------------
<S> <C> <C> <C>
Outstanding at February 1, 1994............................ -- --
Granted.................................................. 660,921 $1.08 - $4.30
Exercised................................................ (162,284) $1.08 - $4.30
Canceled................................................. (360,078) $1.08
--------
Outstanding at January 31, 1995............................ 138,559 $1.08 - $4.30
Granted.................................................. 563,233 $4.30 - $4.74
Exercised................................................ (86,835) $1.08 - $4.30
Canceled................................................. (15,564) $1.08 - $4.30
--------
Outstanding at December 31, 1995........................... 599,393 $1.08 - $4.74
========
</TABLE>

At December 31, 1995, of the 599,393 options outstanding, options to
purchase 350,882 shares are exercisable at prices ranging from $1.08 to $4.74
per share. The remaining 248,511 options outstanding vest over periods ranging
from four to five years from the date of grant. At December 31, 1995, the
Company had 2,273,917 shares available for future grant under the Company's
stock option plans.

6. RELATED PARTY TRANSACTIONS

The CEO has outstanding promissory notes due him of $35,203. (See Note 3).
Accrued interest on these notes totaled $83, $4,242 and $8,110 at January 31,
1994 and 1995, and December 31, 1995, respectively. The $1,318,524 stock
subscriptions receivable are due from the CEO and relate to the issuance of
319,382 shares of non-voting Class E common stock. Interest of $9,444 and
$105,001 is receivable on these stock subscriptions at January 31, 1995 and
December 31, 1995, respectively.

To encourage certain bank shareholders' initial investment in the Company,
the Company offered a discount, equal to the shareholders' initial investment,
to be applied toward the license fee if and when the shareholders licensed the
Phoenix System for use in their normal course of operations. Discounts offered
since inception total $855,000. Discounts of $300,000 were used in fiscal 1995,
leaving a balance of $555,000 of available discounts at December 31, 1995.
License fee revenue of $326,700, net of discounts used, was recorded in fiscal
1995 under license agreements with shareholders. Implementation and support
revenues of $116,300 and $254,200 recorded in fiscal 1994 and 1995,
respectively, were from shareholder banks.

7. INCOME TAXES

Significant components of the provision for income taxes are as follows:

<TABLE>
<CAPTION>
FISCAL FISCAL FISCAL
1993 1994 1995
-------- --------- ---------
<S> <C> <C> <C>
Current foreign expense.............................. $ -- $ 200,444 $ 446,324
Deferred foreign benefit............................. -- (200,444) (190,325)
-------- --------- ---------
Total taxes.......................................... $ -- $ -- $ 255,999
======== ========= =========
</TABLE>

F-12
<PAGE> 76

PHOENIX INTERNATIONAL LTD., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred income taxes reflect the net effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred income tax assets and liabilities as of January 31, 1995
and December 31, 1995 are as follows:

<TABLE>
<CAPTION>
JANUARY 31, DECEMBER 31,
1995 1995
----------- ------------
<S> <C> <C>
Deferred income tax liabilities:
Tax over book depreciation................................ $ (18,348) $ (1,664)
Capitalized software...................................... (36,177) (435,186)
----------- ------------
Total tax liabilities............................. (54,525) (436,850)
Deferred income tax assets:
Deferred revenue.......................................... 846,906 801,744
Foreign tax credit carryforwards.......................... 200,444 514,428
Research and development credit carryforwards............. 78,759 111,346
Net operating loss carryforwards.......................... 765,021 1,058,461
Other..................................................... 1,324 4,772
----------- ------------
Total tax assets.................................. 1,892,454 2,490,751
Valuation allowance for deferred income tax assets.......... (1,637,485) (1,663,132)
----------- ------------
Net deferred income tax assets.............................. $ 200,444 $ 390,769
========== ==========
</TABLE>

The net deferred income tax assets at January 31, 1995 and December 31,
1995 represent foreign withholding taxes paid upon remittance of cash by the
Company's customers but prior to recognition of revenue by the Company and
therefore relate to deferred revenue.

The reconciliation of income tax computed at the United States federal
statutory tax rates to income tax expense is:

<TABLE>
<CAPTION>
FISCAL 1993 FISCAL 1994 FISCAL 1995
----------- ----------- -----------
<S> <C> <C> <C>
Tax at United States statutory rates................ $ (344,468) $ (962,324) $ 275,491
Foreign withholding taxes........................... -- -- 255,999
State taxes......................................... (39,513) (110,384) 31,600
Tax credits......................................... (15,800) (263,402) (346,571)
Non-deductible compensation expense................. -- 129,634 --
Other............................................... (9,168) (22,060) 13,833
Change in valuation allowance....................... 408,949 1,228,536 25,647
----------- ----------- -----------
Total tax expense......................... $ -- $ -- $ 255,999
========= ========= =========
</TABLE>

At December 31, 1995, the Company has net operating loss carryforwards of
approximately $2,800,000 for income tax purposes that expire in years 2008
through 2010. The Company also has research and development tax credit
carryforwards of approximately $111,000 that expire in years 2008 through 2010
and foreign tax credit carryforwards of approximately $514,000 that expire in
years 2000 through 2001. Due to uncertainties related to the Company's ability
to generate sufficient taxable income in the future to realize the benefit of
net deferred income tax assets related principally to these carryforward items,
the Company has recorded a valuation allowance against deferred tax assets based
on management's belief that it is more likely than not that the deferred tax
assets for which the valuation allowance has been recorded will not be realized.
The annual utilization of net operating loss carryforwards to offset future
taxable income may be limited due to changes in the ownership of the Company.

F-13
<PAGE> 77

PHOENIX INTERNATIONAL LTD., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. EMPLOYEE BENEFITS

The Company maintains a 401(k) plan that covers substantially all
employees. The Company may, at its discretion, contribute by matching employee
deferrals. Defined contributions are limited to the maximum amount deductible
under the Internal Revenue Code. The Company did not make contributions to the
plan in fiscal 1993, 1994 or 1995.

9. MAJOR CUSTOMERS AND EXPORT SALES

Sales to major customers, as a percentage of total revenues, are as
follows:

<TABLE>
<CAPTION>
FISCAL 1993 FISCAL 1994 FISCAL 1995
----------- ----------- -----------
<S> <C> <C> <C>
Customer A............................................ -- 16% --
Customer B............................................ -- 15% --
Customer C............................................ -- -- 43%
Customer D............................................ -- -- 19%
</TABLE>

Export sales from the United States, as a percentage of total revenues,
were 33% in fiscal 1994, of which 27% represents sales to Latin and South
America and 7% to the Pacific Rim, and 70% in fiscal 1995, of which 63%
represents sales to Latin and South America and 7% was to the Pacific Rim.

10. EMPLOYMENT AGREEMENTS

On December 28, 1995, the Company entered into employment agreements with
its CEO and President. Each agreement commits the Company, for three years, to
various obligations if the employee is terminated without cause or if there is a
change in the control of the Company. The major obligations are for salaries and
bonus, healthcare premiums and the vesting of previously granted stock options.
In addition, the CEO has certain demand and piggyback registration rights
related to common stock of the Company.

11. BACKLOG

At December 31, 1995 the backlog of committed revenues under existing
contracts consisted of $1,788,000 for software license fees, $1,250,000 for
implementation, and $4,218,000 for five-year customer support service
agreements.

12. SUBSEQUENT EVENTS

On March 21, 1996, the Company entered into a marketing agreement with a
leading banking hardware and software vendor. Under this agreement, the vendor
will receive exclusive rights to market the Phoenix System in Central and South
America, Mexico, the Caribbean and Bermuda for a period of three years. As
consideration for the exclusive agreement, the Company will receive $400,000 of
nonrefundable payments due $200,000 upon entering into the agreement and
$200,000 due in four equal monthly installments of $50,000. Such payments shall
be applied on a dollar-for-dollar basis as a credit for future royalties
payable. The Company will receive royalties from the sublicensing of the Phoenix
System by the vendor and 2% of the vendor's professional service fees related to
installation and implementation of the Phoenix System. The agreement is
cancellable after 12 months if specified annual unit sales levels are not
achieved by the vendor. Nonrefundable payments received will be recognized as
revenue as Phoenix systems are sublicensed by the vendor or when it becomes
probable that minimum unit sales levels will not be achieved.

On May 6, 1996, the board of directors approved a 2.3231-for-1 share split
of the Company's common stock. In addition, the Company amended its articles of
incorporation effective May 8, 1996 to reduce the par value of each of the
Company's five classes of common stock (Classes A through E) in accordance with
the

F-14
<PAGE> 78

PHOENIX INTERNATIONAL LTD., INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

stock split and to increase the authorized shares of Class A common stock to
1,500,000. All share and per share amounts related to common stock have been
retroactively restated to reflect the stock split for all periods presented.

Also, on May 6, 1996, the board of directors approved a recapitalization
plan in which all outstanding shares of the Company's five classes of common
stock (Classes A through E) will be converted into Common Stock on a share for
share basis upon the effective date of the Offering. This recapitalization will
not change total stockholders' deficit and is not reflected in the accompanying
financial statements.

F-15
<PAGE> 79

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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING CONTAINED HEREIN, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING SHAREHOLDERS OR ANY UNDERWRITER. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE
SHARES OF COMMON STOCK OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
COMMON STOCK ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

UNTIL JULY 26, 1996 (FOR 25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

---------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Use of Proceeds....................... 15
Dividend Policy....................... 15
Capitalization........................ 16
Dilution.............................. 17
Selected Consolidated Financial and
Operating Data...................... 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 19
Business.............................. 25
Management............................ 39
Certain Transactions.................. 50
Principal and Selling Shareholders.... 51
Description of Capital Stock.......... 55
Shares Eligible for Future Sale....... 58
Underwriting.......................... 61
Legal Matters......................... 62
Experts............................... 62
Additional Information................ 62
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

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1,077,500 SHARES

[PHOENIX
INTERNATIONAL
LOGO]

COMMON STOCK

-------------------------
PROSPECTUS
-------------------------

J.C. BRADFORD
& CO.

ADVEST, INC.
July 1, 1996

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