<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 26, 1996.
REGISTRATION NO. 333-03355
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
PRE-EFFECTIVE
AMENDMENT
NO. 2 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
PHOENIX INTERNATIONAL LTD., INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
FLORIDA 7372 59-3171810
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
900 WINDERLEY PLACE, SUITE 140, MAITLAND, FLORIDA 32751
(407) 667-0033
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
BAHRAM YUSEFZADEH
CHIEF EXECUTIVE OFFICER
PHOENIX INTERNATIONAL LTD., INC.
900 WINDERLEY PLACE, SUITE 140
MAITLAND, FLORIDA 32751
(407) 667-0033
(407) 667-0133 (FAX)
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
COPIES TO:
<TABLE>
<S> <C>
GLENN W. STURM, ESQ. M. HILL JEFFRIES, ESQ.
TERRESA R. TARPLEY, ESQ. W. THOMAS CARTER III, ESQ.
NELSON MULLINS RILEY & SCARBOROUGH, L.L.P. ALSTON & BIRD
400 COLONY SQUARE ONE ATLANTIC CENTER
1201 PEACHTREE STREET 1201 WEST PEACHTREE STREET
ATLANTA, GEORGIA 30361 ATLANTA, GEORGIA 30309-3424
(404) 817-6000 (404) 881-7000
(404) 817-6050 (FAX) (404) 881-7777 (FAX)
</TABLE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
---------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE
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<S> <C> <C> <C> <C>
Common Stock, $0.01 par value...... 1,239,125 $13.00 $16,108,625 $5,555
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</TABLE>
(1) Includes 161,625 shares which the Underwriters have the option to purchase
from certain Selling Shareholders to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(a) under the Securities Act of 1933.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION LOCATION OF CAPTION IN PROSPECTUS
- ------------------------------------------------- -------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front and Outside Back Cover Pages
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges............. Prospectus Summary; Risk Factors
4. Use of Proceeds............................ Prospectus Summary; Use of Proceeds
5. Determination of Offering Price............ Outside Front Cover Page; Underwriting
6. Dilution................................... Risk Factors; Dilution
7. Selling Security Holders................... Principal and Selling Shareholders
8. Plan of Distribution....................... Outside Front Cover Page; Underwriting
9. Description of Securities to be
Registered............................... Prospectus Summary; Capitalization;
Description of Capital Stock
10. Interests of Named Experts and Counsel..... Legal Matters
11. Information with Respect to the
Registrant............................... Prospectus Summary; Risk Factors; Use of
Proceeds; Divided Policy; Capitalization;
Dilution; Selected Consolidated Financial
Data; Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Business;
Management; Certain Transactions;
Principal and Selling Shareholders;
Description of Capital Stock; Shares
Eligible for Future Sale; Consolidated
Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Not Applicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 26, 1996
PROSPECTUS
1,077,500 SHARES
[PHOENIX INTERNATIONAL 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 $158,000 through the estimated 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. It is currently anticipated that the initial public
offering price will be between $11.00 and $13.00 per share. See "Underwriting"
for the factors to be 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 57.6% 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>
<CAPTION>
====================================================================================================
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDERS
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<S> <C> <C> <C> <C>
Per Share......................... $ $ $ $
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Total............................. $ $ $ $
====================================================================================================
</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
$ , the total Underwriting Discount will be $ , the total
Proceeds to the Company will be $ and the total Proceeds to
Selling Shareholders will be $ . 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 , 1996.
---------------------
J.C. BRADFORD & CO. ADVEST, INC.
, 1996
<PAGE> 4
[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> 5
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 25
ongoing contracts with banks or bank holding companies for installation of the
Phoenix System supporting 26 United States and 8 international financial
institutions. As of May 31, 1996, the Phoenix System has been fully implemented
and is operating in 18 of these 34 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.
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
3
<PAGE> 6
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
4
<PAGE> 7
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.......................... 3,706,388 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 580,545 shares of Common Stock issuable upon exercise of stock
options outstanding as of May 31, 1996, at exercise prices ranging from
$1.08 to $6.46 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> 8
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)
----------- ------------ ----------- --------------
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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 an assumed 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."
6
<PAGE> 9
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 May 31, 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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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."
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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 all of its
executive and senior management, and 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 protection. Phoenix presently has no
patents or patent applications pending. Despite the Company's efforts to
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<PAGE> 13
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."
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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 2,272,790 shares
(approximately 57.6%) 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 219,048 shares of Common Stock, at exercise prices ranging
from $4.30 to $6.46 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 296,365 shares of non-voting
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common stock pursuant to the Company's rights offering in 1994 and to exercise
options to acquire 18,585 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 Board of Directors will file with the Florida
Secretary of State Amended and Restated Articles of Incorporation (as 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 (as
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 will be determined solely by
negotiations among the Company, the Selling Shareholders and the representatives
of 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 to be 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
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results and prospects from time to time 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 2,525,000 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 1,075,992 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 assuming an 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."
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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 $6,550,000, after
deducting underwriting discounts and commissions and estimated offering expenses
and assuming an 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 $158,000 through the estimated 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 $101,000 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 any sums
outstanding as of the Closing Date on 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 May 31, 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. No amounts are owed by the Company to Barnett
Bank under the Line of Credit as of the date of this Prospectus, and the Company
anticipates that not more than $500,000 will be outstanding under the Line of
Credit as of the Closing Date. The Line of Credit bears interest at an annual
rate equal to Barnett Bank's prime rate plus 1.75% (10.00% at May 31, 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." Any funds borrowed under the
Line of Credit will be used for working capital and general corporate purposes.
The Company will also use approximately $45,073 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> 18
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 an assumed 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) Excludes (i) 580,545 shares of Common Stock issuable upon exercise of stock
options outstanding as of May 31, 1996, at exercise prices ranging from
$1.08 to $6.46 per share and (ii) 282,544 shares of Common Stock reserved
for grant of future options or direct issuances as of May 31, 1996 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> 19
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 an assumed 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>
Assumed 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> 20
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>
- ---------------
(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 an assumed 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."
18
<PAGE> 21
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 eleven months ended December 31, 1995
as "Fiscal 1995." Dollar amounts are rounded.
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."
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 May 31, 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> 22
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> 23
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> 24
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> 25
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.
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
23
<PAGE> 26
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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<PAGE> 27
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.
Since its formation in January 1993, the Company has entered into 25
ongoing contracts with banks or bank holding companies for installation of the
Phoenix System supporting 26 United States and 8 international financial
institutions. As of May 31, 1996, the Phoenix System has been fully implemented
and is operating in 18 of these 34 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 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
25
<PAGE> 28
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.
26
<PAGE> 29
STRATEGY
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. 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 three people
serving the United States market, one person serving the international
market and an administrative staff of two people as of May 31, 1996. The
Company currently does not have an office outside the United States;
however, it plans to open an international sales office in early 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 May 31, 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
27
<PAGE> 30
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
28
<PAGE> 31
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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<PAGE> 32
- "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 release of 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
25 ongoing contracts with banks and bank holding companies for installation of
the Phoenix System supporting 26 United States and 8 international financial
institutions. As of May 31, 1996, the Phoenix System has been fully implemented
and is operating in 18 of these 34 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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<PAGE> 34
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)
[Graphic which sets forth the number of commercial banks
and savings institutions in the U.S. market.]
- ---------------
(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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<PAGE> 35
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 early 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 May
31, 1996, the Company's sales and marketing department, including administrative
staff, consisted of three 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, PUG meetings 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 May
31, 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 May 31, 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> 37
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 May 31,
1996, the product development group consisted of 34 individuals in addition to
10 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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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
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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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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 May 31, 1996, Phoenix had a total of 91 employees and contractors, of
which 44 were engaged in product development and support, 29 were in
implementation and training, six were in sales and marketing, nine were in
finance and administration and three were in executive management. All of the
Company's senior and executive officers who were employed by the Company on May
31, 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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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 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 Employee
Ruthann M. Rackawack.............. 39 -- Treasurer
</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.
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 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.
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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 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.
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).
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<PAGE> 43
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 Employee
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.
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 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. 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.
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<PAGE> 44
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> 45
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.
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<PAGE> 46
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 an assumed 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 April 30, 1996, Mr. Fenton did not own any
options to purchase capital stock of the Company.
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> 47
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. 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. As of May 31, 1996, Bank of
the Sierra held outstanding options to purchase 9,292 shares of Class E Common
Stock at an exercise price of $4.30 per share. These options were granted to Mr.
Holly for his service as a director of the Company during Fiscal 1995. 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 April 30, 1996, Mr. Holly did not own any
options to purchase capital stock of 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 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 May 31, 1996, Mr. Yusefzadeh and the
Yusefzadeh Partnership owed $1,421,188 and $45,824 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> 48
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 78,985 shares of Common Stock at an exercise
price of $4.74 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 May 31, 1996, the Company owed $45,073 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> 49
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 an employment agreement
with Mr. Boughton (collectively, the "Other Agreements"). 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.
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<PAGE> 50
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. As of May 31, 1996, options to purchase a total of
580,545 shares of Common Stock were outstanding with exercise prices ranging
from $1.08 to $6.46. As of the Closing Date, options to acquire 126,211 shares
of Common Stock will be exercised or expire in accordance with their terms.
Accordingly, at the Closing Date, the Company will have outstanding options to
purchase 454,334 shares of Common Stock at prices ranging from $4.30 to $6.46
per share and authorized but unissued options to purchase 282,544 shares of
Common Stock. At such time, 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 May 31, 1996, options to acquire
495,333 shares had been issued under the March 1995 Plan, and options to acquire
392,827 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 May 31, 1996,
options to acquire 61,507 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
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<PAGE> 51
of grant and shall expire five years after the date of grant, unless cancelled
sooner as a result of termination of service or death, or unless such option is
fully exercised prior to the end of the option period. As of June 12, 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.
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<PAGE> 52
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 125,448 shares of Common Stock. 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> 53
PRINCIPAL AND SELLING SHAREHOLDERS
The table below sets forth certain information regarding beneficial
ownership of the Common Stock, as of May 31, 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)............................. 1,740,188 56.8% 167,500 1,075,992 28.8%
Yusefzadeh Family Limited Partnership(4)......... 361,861 11.9 125,000 236,861 6.4
Ronald E. Fenton(5).............................. 246,030 8.1 -- 246,030 6.6
BancSecurity Corporation(6)...................... 221,252 7.3 -- 221,252 6.0
Michael R. Newes(7).............................. 199,586 6.5 55,000 144,586 3.8
James C. Holly(8)................................ 197,120 6.5 -- 197,120 5.3
Bank of the Sierra(9)............................ 186,058 6.1 -- 186,058 5.0
William E. Hess(10).............................. 151,004 5.0 -- 151,004 4.1
William M. Toole(11)............................. 127,612 4.2 60,000 67,612 1.8
Ralph H. Reichard(12)............................ 122,829 4.0 -- 122,829 3.3
O. Jay Tomson(13)................................ 117,813 3.9 -- 117,813 3.2
Community Grain Corporation(14).................. 102,555 3.4 -- 102,555 2.8
Paul A. Jones(15)................................ 67,943 2.2 -- 67,943 1.8
First Citizens Financial Corp.(16)............... 46,462 1.5 -- 46,462 1.3
Kanabec Credit Corporation(17)................... 46,462 1.5 -- 46,462 1.3
W. J. Young & Co.(18)............................ 46,462 1.5 -- 46,462 1.3
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)............................ 31,859 1.0 -- 31,859 *
Gerald P. Nissen(22)............................. 21,204 * -- 21,204 *
Glenn W. Sturm................................... 11,616 * -- 11,616 *
Karen J. Gallagher(23)........................... 5,770 * -- 5,770 *
Todd W. Baum(24)................................. 5,431 * -- 5,431 *
Action Acres, Inc.(25)........................... 4,646 * -- 4,646 *
Greg A. Maakestad(26)............................ 2,323 * -- 2,323 *
Catherine J. Rottinghaus(27)..................... 1,859 * -- 1,859 *
Sharol J. McCoy(28).............................. 1,742 * -- 1,742 *
Sara L. Gray(29)................................. 1,162 * -- 1,162 *
Kimberly K. Knoke(30)............................ 1,162 * -- 1,162 *
Sue E. Pump(31).................................. 1,162 * -- 1,162 *
Martha Tomson Rodamaker(32)...................... 1,162 * -- 1,162 *
Kristin E. Schultz(33)........................... 1,162 * -- 1,162 *
All directors and executive officers as a group
(13 persons)................................... 2,852,600 87.0% 2,272,790 57.6%
</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 May 31, 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> 54
(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; and (v) 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; and (iii) 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. An
aggregate of 24,778 additional shares are beneficially owned by Mr. Fenton.
BancSecurity Corporation disclaims beneficial ownership with respect to Mr.
Fenton's shares.
(7) Includes (i) 26,019 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 57,412 shares of Common Stock held by him which
are currently exercisable at exercise prices ranging from $1.08 to $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; and (ii) 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. An aggregate of 11,062 additional shares are beneficially
owned by Mr. Holly. 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) 102,555 shares held in the name of
Community Grain Corporation, of which he is secretary and treasurer; (v)
2,950 shares held in the name of Dallas Investment Company, of which he is
president and director; (vi) 2,950 shares held in the name of Perry
Investment Company, of which he is president, director and chairman; and
(vii) 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 (iv)-(vii) above.
(11) Includes (i) 2,323 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 Closing Date); and
(iii) options to acquire 9,134 shares of Common Stock held by him which are
currently exercisable at exercise prices ranging from $1.08 to $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
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<PAGE> 55
an exercise price of $4.30 per share; and (iv) 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) 46,462 shares
held in the name of First Citizens Financial Corporation; (iii) 46,462
shares held in the name of Kanabec Credit Corporation; and (iv) 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 of Common Stock held by Mr.
Jones which are currently exercisable at an exercise price of $4.30 per
share and (ii) 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) 18,585 shares held in Mr. Murphy's name and (ii) options to
acquire 13,274 shares of Common Stock held by him which are currently
exercisable at an exercise price of $4.30 per share.
(22) Includes (i) 2,323 shares held in Mr. Nissen's name and (ii) options to
acquire 18,701 shares of Common Stock held by him which are currently
exercisable at exercise prices ranging from $4.30 to $6.46 per share.
(23) Includes (i) 232 shares held in Ms. Gallagher's name and (ii) options to
acquire 5,538 shares that are currently exercisable at exercise prices
ranging from $1.08 to $4.30 per share. Also, includes 232 shares which will
be sold by Ms. Gallagher if the Underwriters exercise their over-allotment
option.
(24) Includes (i) 451 shares held in Mr. Baum's name and (ii) options to acquire
4,980 shares of Common Stock held in his name which are currently
exercisable at exercise prices ranging from $1.08 and $4.30 per share.
Also, includes 451 shares which will be sold if the Underwriters exercise
their over-allotment option.
(25) Such shares will be sold by Action Acres, Inc. if the Underwriters exercise
their over-allotment option.
(26) Includes 581 shares which will be sold by Mr. Maakestad if the Underwriters
exercise their over-allotment option.
(27) Includes 465 shares which will be sold by Ms. Rottinghaus if the
Underwriters exercise their over-allotment option.
(28) Includes 1,045 shares which will be sold by Ms. McCoy if the Underwriters
exercise their over-allotment option.
(29) Such shares will be sold by Ms. Gray if the Underwriters exercise their
over-allotment option.
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<PAGE> 56
(30) Includes 697 shares which will be sold by Ms. Knoke if the Underwriters
exercise their over-allotment option.
(31) Includes 465 shares which will be sold by Ms. Pump if the Underwriters
exercise their over-allotment option.
(32) Such shares will be sold by Ms. Rodamaker if the Underwriters exercise
their over-allotment option.
(33) Such shares will be sold by Ms. Shultz if the Underwriters exercise their
over-allotment option.
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<PAGE> 57
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.
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.
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<PAGE> 58
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
56
<PAGE> 59
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.
57
<PAGE> 60
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
3,706,388 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 2,628,888 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 473,000 shares will be eligible for sale in
the public market without restriction pursuant to Rule 144(k) 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 317,000 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 (i.e., between January
1, 1997 and July 1, 1998).
In addition to the restricted shares described in the preceding paragraph,
all of the approximately 213,000 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 (37,063 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> 61
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> 62
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.
60
<PAGE> 63
UNDERWRITING
Pursuant to the Underwriting Agreement, and subject to the terms and
conditions thereof, the Underwriters named below, acting through J.C. Bradford &
Co. and Advest, Inc., as representatives of the several Underwriters (the
"Representatives"), 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. ..........................................................
Advest, Inc. .................................................................
---------
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
Representatives 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 $ per share. The Underwriters may allow, and such dealers
may reallow, a concession not in excess of $ per share to certain other
dealers. After the initial public offering, the public offering price and such
concessions may be changed. The Representatives 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
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<PAGE> 64
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.
Prior to this Offering, there has been no public market for the Common
Stock. The offering price has been determined by negotiation among the Company,
the Selling Shareholders and the Representatives. 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 Representatives 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 11,616 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.
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<PAGE> 65
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 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.
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<PAGE> 66
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> 67
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> 68
PHOENIX INTERNATIONAL LTD., INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
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> 69
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> 70
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> 71
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> 72
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> 73
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> 74
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> 75
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> 76
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> 77
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> 78
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> 79
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> 80
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> 81
[Insert Artwork To Be Determined]
Grapic comparing a non-integrated legacy system with the Company's highly
adaptable integrated enterprise-wide client/server application software system.
<PAGE> 82
- ------------------------------------------------------
- ------------------------------------------------------
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 , 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............................... 63
Additional Information................ 63
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
1,077,500 SHARES
[LOGO]PHOENIX INTERNATIONAL INC.
COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
J.C. BRADFORD & CO.
ADVEST, INC.
, 1996
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 83
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the approximate amount of fees and
expenses (other than underwriting discounts and commissions) payable by the
Registrant in connection with the issuance and distribution of the securities
registered hereby. No portion of such expenses will be borne by the Selling
Shareholders.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............................... $ 5,555
NASD filing fee................................................................... 2,112
Nasdaq National Market issuance fee............................................... 12,000
Printing and engraving............................................................ 125,000
Accountants' fees and expenses.................................................... 200,000
Blue sky fees and expenses........................................................ 10,000
Counsel fees and expenses......................................................... 400,000
Transfer Agent's fees............................................................. 5,000
Directors' and Officers' Insurance................................................ 132,000
Miscellaneous..................................................................... 35,333
--------
Total................................................................... $927,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article 607.0850 of the Florida Business Corporation Act (the "Florida
Act") and Article 9 of the Company's Amended and Restated Bylaws (the "Bylaws")
permit the Company to indemnify a present or former director of the Company for
liabilities, including legal expenses, arising by reason of service in such
capacity if such person shall have acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, and in any criminal proceeding if such person had no reasonable cause
to believe his conduct was unlawful. However, no indemnification may be made
with respect to any matter as to which the actions of such director shall have
been adjudged to constitute: (i) a violation of criminal law, unless the
individual had reasonable cause to believe his conduct was lawful or had no
reason to believe his conduct was unlawful; (ii) a transaction from which the
individual derived an improper personal benefit; (iii) a circumstance under
which the liability provisions of Section 607.0834 of the Florida Act, which
relates to unlawful distribution of Company assets, are applicable; or (iv)
willful misconduct or conscious disregard of the best interests of the Company
in a proceeding by or in the right of the Company to procure a judgment in its
favor or in a proceeding by or in the right of a shareholder. Moreover, in the
case of actions brought by or in the right of the Company, indemnification may
be made if the person acted in good faith, and in a manner that such person
reasonably believed to be in, or not opposed to, the best interests of the
Company; provided, however, that no indemnification may be made for any claim,
issue or matter as to which such person shall have been adjudged to be liable,
unless, and only to the extent that, the court in which the judgment was made or
another court of competent jurisdiction determines that such person is entitled
to indemnification.
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 joint interests of the Company in a
derivative or shareholder
II-1
<PAGE> 84
action; (b) for liability under Section 16(b) of the Securities Exchange Act of
1934 (the "Exchange Act"); or (c) if a final decision by a court having
jurisdiction in the matter determines that indemnification is not lawful.
The Company intends to purchase a standard policy of directors' and
officers' liability insurance covering directors and officers of the Company
with respect to liabilities incurred as a result of their service in such
capacities and has purchased a rider to that policy covering liabilities under
federal and state securities laws.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The share numbers presented below are provided with respect to the shares
of Class A Common, Class B Common, Class C Common, Class D Common and Class E
Common which are subject to the recapitalization on a share for share basis into
Common Stock, and reflect the 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.
Class A Common Stock
In April 1993, the Company issued a total of 1,393,859 shares of Class A
Common Stock to five officers of the Company at $0.0043 per share. The Company
recorded a compensation expense of $6,000.
Class B Common Stock
Pursuant to a Private Placement Memorandum, dated April 5, 1993, the
Company offered 929,240 and sold 511,082 shares of Class B Common Stock to
investors for $1.08 per share. The aggregate consideration paid to the Company
for these shares of Class B Common was $550,000. Each of the investors was
either an accredited investor or known personally by officers of the Company
prior to the transaction. By its terms, this offering expired in October 1993.
Class C Common Stock and Class D Common Stock
Pursuant to a Private Placement Memorandum, dated August 31, 1993, the
Company offered 464,620 shares of Class C Common Stock and 116,155 shares of
Class D Common Stock for sale to investors. The offering prices were $2.15 per
share of Class C Common Stock and $4.30 per share of Class D Common Stock. The
investors purchased 185,848 shares of Class C Common Stock and 23,231 shares of
Class D Common Stock. The aggregate consideration paid to the Company was
$400,000 for shares of Class C Common Stock and $100,000 for shares of Class D
Common Stock. All purchasers of the Class C Common Stock were banks as defined
by the Securities Act. Each of the investors was either an accredited investor
or known personally by officers of the Company prior to the transaction. This
offering expired in February 1994.
Class E Common Stock
From February 1994 through May 31, 1996, the Company sold a total of
293,758 shares of Class E Common Stock to employees, officers, directors and
service providers of the Company. These sales were made pursuant to the exercise
of options granted by the Company under its Stock Option Plans to these
employees, officers, directors and service providers. The option exercise prices
range from $1.08 per share to $4.74 per share. The aggregate consideration
received by the Company for these shares of Class E Common Stock was $748,434.
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 of the Company at a price of $4.30 per share pursuant to
a rights offering and certain preemptive rights associated therewith. Each of
the investors was either an accredited investor or known personally by officers
of the Company prior to the transaction. The aggregate consideration paid by the
investors for these shares of Class E Common Stock was $2,111,930.
Each issuance of securities described above was made in reliance on one or
more of the exemptions from registration provided by Sections 3(a)(11), 4(2) and
4(6) of the Securities Act, Regulation D and Rule 701, as promulgated by the SEC
pursuant to the Securities Act. Recipients of securities in these transactions
II-2
<PAGE> 85
represented their intention to acquire the securities for investment purposes
only and not with a view to or for the sale in connection with any distribution
thereof, and appropriate legends were affixed to the share certificates issued
in such transactions. All recipients of these securities had adequate access,
through their relationships with the Company, to information about the Company.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<C> <C> <S>
1.1 -- Form of Underwriting Agreement by and among the Company, J.C. Bradford & Co. and
Advest, Inc.**
3.1 -- Amended and Restated Articles of Incorporation.**
3.2 -- Amended and Restated Bylaws.**
3.3 -- Amendment to Amended and Restated Articles of Incorporation, filed with the Florida
Secretary of State on May 9, 1996.**
3.4 -- Form of Amended and Restated Articles of Incorporation to be filed with the Florida
Secretary of State on the Closing Date.**
3.5 -- Form of Amended and Restated Bylaws to be effective on the Closing Date.**
3.6 -- Amendment to Amended and Restated Articles of Incorporation, to be filed with the
Florida Secretary of State on June 26, 1996.**
4.1 -- See Exhibits 3.1 through 3.6 for provisions of the Amended and Restated Articles of
Incorporation and Amended and Restated Bylaws defining the rights of the holders of
Common Stock of the Registrant.
4.2 -- Specimen Common Stock Certificate (hard copy to be filed separately).**
4.3 -- Amended and Restated Phoenix International Ltd., Inc. Stockholders Agreement, dated
as of August 31, 1993, among Company, Bahram Yusefzadeh, Michael Newes, Terry
Soifer, George Taylor, William Toole and other shareholders, as amended.**
4.4 -- Form of Investment Intent and Non-Distribution Letter.**
4.5 -- Form of registration rights letter.**
5.1 -- Opinion of Nelson Mullins Riley & Scarborough, L.L.P., counsel to the Registrant, as
to the legality of the shares being registered.
9.1 -- Voting Trust Agreement, dated April 4, 1993.**
10.1 -- Phoenix International Ltd., Inc. Incentive Stock Option Plan No. 1, effective as of
February 19, 1994.**
10.2 -- Phoenix International Ltd., Inc. Incentive Stock Option Plan No. 2, effective as of
February 19, 1994.**
10.3 -- Phoenix International Ltd., Inc. Incentive Stock Option Plan No. 3, effective as of
February 19, 1994.**
10.4 -- Phoenix International Ltd., Inc. Incentive Stock Option Plan No. 4, effective as of
February 19, 1994.**
10.5 -- Phoenix International Ltd., Inc. Incentive Stock Option Plan No. 5, effective as of
February 19, 1994.**
10.6 -- Phoenix International Ltd., Inc. Incentive Stock Option Plan No. 6, effective as of
September 1, 1994.**
10.7 -- Phoenix International Ltd., Inc. Incentive Stock Option Plan No. 7, effective as of
September 1, 1994.**
10.8 -- Phoenix International Ltd., Inc. Incentive Stock Option Plan No. 8, effective as of
September 1, 1994.**
10.9 -- Phoenix International Ltd., Inc. Incentive Stock Option Plan No. 10, effective as of
October 31, 1994.**
10.10 -- Phoenix International Ltd., Inc. Incentive Stock Option Plan No. 11, effective as of
September 1, 1994.**
10.11 -- Phoenix International Ltd., Inc. Incentive Stock Option Plan No. 12, effective as of
February 19, 1994.**
</TABLE>
II-3
<PAGE> 86
<TABLE>
<C> <C> <S>
10.12 -- Phoenix International Ltd., Inc. 1995 Employee Stock Option Plan, effective as of
March 18, 1995.**
10.13 -- Phoenix International Ltd., Inc. 1995 Employee Stock Option Plan, effective as of
October 21, 1995.**
10.14 -- Employment Agreement by and between Company and Bahram Yusefzadeh, dated December
28, 1995.**
10.15 -- First Amendment to Employment Agreement by and between Company and Bahram
Yusefzadeh, dated May 22, 1996.**
10.16 -- Employment Agreement by and between Company and Ralph Reichard, dated December 28,
1995.**
10.17 -- First Amendment to Employment Agreement by and between Company and Ralph Reichard,
dated May 22, 1996.**
10.18 -- Employment Agreement by and between Company and Clay E. Scarborough, dated May 23,
1996.**
10.19 -- Employment Agreement by and between Company and Michael R. Newes, dated April 12,
1996.**
10.20 -- Employment Agreement by and between Company and Gerald P. Nissen, dated April 12,
1996.**
10.21 -- Employment Agreement by and between Company and Twanna C. Soifer, dated April 12,
1996.**
10.22 -- Form of Employee Confidentiality Agreement.**
10.23 -- Promissory Note, dated November 17, 1994, from Bahram Yusefzadeh to Company in the
amount of $40,854.**
10.24 -- Promissory Note, dated December 19, 1994, from the Yusefzadeh Family Limited
Partnership to Company in the amount of $932,910.**
10.25 -- Promissory Note, dated January 30, 1995, from the Yusefzadeh Family Limited
Partnership to Company in the amount of $344,760.**
10.26 -- OEM Software License Agreement, dated June 30, 1995, between Company and Gupta
Corporation.+**
10.27 -- Value Added Remarketer Agreement, dated October 13, 1993, between Company and
Sybase, Inc.+
10.28 -- Software License Agreement between Unisys Corporation and Company, dated March 16,
1996.+
10.29 -- General Agreement for Strategic Relationship between Company and Hewlett-Packard
Company, dated April 30, 1993.+**
10.30 -- Form of Software License Agreement.+
10.31 -- Form of International Software License Agreement.+
10.32 -- Form of Disaster Recovery Service Agreement.+**
10.33 -- Form of Software Deposit Agreement.+**
10.34 -- Form of Confidentiality and Non-Disclosure Agreement.**
10.35 -- Form of Confidentiality Agreement.**
10.36 -- Form of Mutual Non-Disclosure Agreement.**
10.37 -- Form of Confidentiality/Non-Disclosure Agreement Remitting Access to System
Documentation and Data Files for Data Conversion.**
10.38 -- Form of Phoenix International Ltd., Inc. Confidentiality Agreement.**
10.39 -- Standard Commercial Lease, dated December 8, 1993, between Company and ABR Spectrum,
Ltd. with respect to Suite 140, 900 Winderley Place, Maitland, Florida premises, as
modified January 24, 1994.**
10.40 -- Sublease Agreement, dated September 28, 1995, between Company and CCS Technology
Group, Inc. with respect to Suite 120, 900 Winderley Place, Maitland, Florida
premises.**
10.41 -- The Principal Financial Group Prototype for Savings Plans (401k), as amended, and
the Group Annuity Contract for the Company.**
10.42 -- Remarketing Agreement and Support Authorization, dated as of April 22, 1996, between
the Company and Computer Systems Associates (Nigeria) Limited.+**
</TABLE>
II-4
<PAGE> 87
<TABLE>
<C> <C> <S>
10.43 -- Amendment, dated May 24, 1996, to the Phoenix International Ltd., Inc. Stock Option
Plan, effective as of March 18, 1995.**
10.44 -- Amendment, dated May 24, 1996, to the Phoenix International Ltd., Inc. Stock Option
Plan, effective as of October 21, 1995.**
10.45 -- Revised Form of Stock Option Agreement for the Phoenix International Ltd., Inc.
Stock Option Plan, effective as of October 21, 1995.**
10.46 -- Phoenix International Ltd., Inc. 1996 Director Stock Option Plan.**
10.47 -- Form of the Company's Director Indemnity Agreement.**
10.48 -- Promissory Note, dated May 14, 1996, from the Company to Barnett Bank of Central
Florida, N.A. ("Barnett Bank").**
10.49 -- Business Loan Agreement, dated May 14, 1996, between the Company and Barnett Bank.**
10.50 -- Commercial Security Agreement, dated May 14, 1996, between the Company and Barnett
Bank.**
10.51 -- Continuing Unlimited Commercial Guarantee, dated May 14, 1995, made by Bahram
Yusefzadeh for the benefit of Barnett Bank.**
10.52 -- Commitment letter dated May 1, 1996 from Barnett Bank to Company.**
10.53 -- Master Note Modification Agreement, dated as of May 22, 1996, by and among Bahram
Yusefzadeh, the Yusefzadeh Family Limited Partnership and the Company.**
10.54 -- Form of Promissory Note for employee loans from the Company.**
10.55 -- Form of Stock Pledge and Security Agreement for employee loans from Company.**
11.1 -- Statement re: Computation of Per Share Earnings.**
21.1 -- Subsidiary Schedule.**
23.1 -- Consent of Ernst & Young LLP.
23.2 -- Consent of Nelson Mullins Riley & Scarborough, L.L.P. (included as part of Exhibit
5.1).
24.1 -- Powers of Attorney for the following individuals: Clay E. Scarborough, Michael R.
Newes, Ronald E. Fenton, William E. Hess, James C. Holly, Paul Jones, J. Michael
Murphy and O. Jay Tomson.**
24.2 -- Power of Attorney for Glenn W. Sturm.**
27.1 -- Article 5 Financial Data Schedule.**
</TABLE>
- ---------------
+ Confidential treatment requested.
* To be filed by amendment.
** Previously filed.
(B) FINANCIAL STATEMENT SCHEDULES. All information required by the
financial statement schedules is included in the Consolidated Financial
Statements and the accompanying Notes.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the
Representatives at the closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required by
the Representatives to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-5
<PAGE> 88
The undersigned Registrant hereby undertakes that,
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1)
or (4 ) or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE> 89
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Atlanta, State of
Georgia, on June 26, 1996.
PHOENIX INTERNATIONAL LTD., INC.
By: /s/ BAHRAM YUSEFZADEH
------------------------------------
Bahram Yusefzadeh
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- --------------------------------------------- -------------------------------- --------------
<C> <S> <C>
/s/ BAHRAM YUSEFZADEH Chairman of the Board and Chief June 26, 1996
- --------------------------------------------- Executive Officer (principal
Bahram Yusefzadeh executive officer)
* Chief Operating Officer, June 26, 1996
- --------------------------------------------- President and Director
Ralph H. Reichard
* Chief Financial Officer June 26, 1996
- --------------------------------------------- (principal financial and
Clay E. Scarborough accounting officer)
* Senior Vice President, Director June 26, 1996
- ---------------------------------------------
Michael R. Newes
* Director June 26, 1996
- ---------------------------------------------
Ronald E. Fenton
* Director June 26, 1996
- ---------------------------------------------
William E. Hess
* Director June 26, 1996
- ---------------------------------------------
James C. Holly
* Director June 26, 1996
- ---------------------------------------------
Paul Jones
* Director June 26, 1996
- ---------------------------------------------
J. Michael Murphy
* Director June 26, 1996
- ---------------------------------------------
Glenn W. Sturm
* Director June 26, 1996
- ---------------------------------------------
O. Jay Tomson
*By: /s/ BAHRAM YUSEFZADEH
---------------------------------
Bahram Yusefzadeh
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 90
EXHIBIT INDEX
<TABLE>
<CAPTION>
LOCATION OF
EXHIBIT IN
SEQUENTIAL
EXHIBIT NUMBERING
NUMBER DESCRIPTION OF DOCUMENT SYSTEM
- ------ -------------------------------------------------------------------------- -----------
<C> <C> <S> <C>
1.1 -- Form of Underwriting Agreement by and among the Company, J.C. Bradford &
Co. and Advest, Inc.**....................................................
3.1 -- Amended and Restated Articles of Incorporation**..........................
3.2 -- Amended and Restated Bylaws**.............................................
3.3 -- Amendment to Amended and Restated Articles of Incorporation, filed with
the Florida Secretary of State on May 9, 1996**...........................
3.4 -- Form of Amended and Restated Articles of Incorporation to be filed with
the Florida Secretary of State on the Closing Date**......................
3.5 -- Form of Amended and Restated Bylaws to be effective on the Closing
Date**....................................................................
3.6 -- Amendment to Amended and Restated Articles of Incorporation, to be filed
with the Florida Secretary of State on June 26, 1996.**...................
4.1 -- See Exhibits 3.1 through 3.6 for provisions of the Amended and Restated
Articles of Incorporation and Amended and Restated Bylaws defining the
rights of the holders of Common Stock of the Registrant...................
4.2 -- Specimen of Common Stock Certificate (hard copy to be filed
separately)**.............................................................
4.3 -- Amended and Restated Phoenix International Ltd., Inc. Stockholders
Agreement, dated as of August 31, 1993, among Company, Bahram Yusefzadeh,
Michael Newes, Terry Soifer, George Taylor, William Toole and other
shareholders, as amended**................................................
4.4 -- Form of Investment Intent and Non-Distribution Letter**...................
4.5 -- Form of registration rights letter**......................................
5.1 -- Opinion of Nelson Mullins Riley & Scarborough, L.L.P., counsel to the
Registrant, as to the legality of the shares being registered.............
9.1 -- Voting Trust Agreement, dated April 4, 1993**.............................
10.1 -- Phoenix International Ltd., Inc. Incentive Stock Option Plan No. 1,
effective as of February 19, 1994**.......................................
10.2 -- Phoenix International Ltd., Inc. Incentive Stock Option Plan No. 2,
effective as of February 19, 1994**.......................................
10.3 -- Phoenix International Ltd., Inc. Incentive Stock Option Plan No. 3,
effective as of February 19, 1994**.......................................
10.4 -- Phoenix International Ltd., Inc. Incentive Stock Option Plan No. 4,
effective as of February 19, 1994**.......................................
10.5 -- Phoenix International Ltd., Inc. Incentive Stock Option Plan No. 5,
effective as of February 19, 1994**.......................................
10.6 -- Phoenix International Ltd., Inc. Incentive Stock Option Plan No. 6,
effective as of September 1, 1994**.......................................
10.7 -- Phoenix International Ltd., Inc. Incentive Stock Option Plan No. 7,
effective as of September 1, 1994**.......................................
10.8 -- Phoenix International Ltd., Inc. Incentive Stock Option Plan No. 8,
effective as of September 1, 1994**.......................................
10.9 -- Phoenix International Ltd., Inc. Incentive Stock Option Plan No. 10,
effective as of October 31, 1994**........................................
10.10 -- Phoenix International Ltd., Inc. Incentive Stock Option Plan No. 11,
effective as of September 1, 1994**.......................................
10.11 -- Phoenix International Ltd., Inc. Incentive Stock Option Plan No. 12,
effective as of February 19, 1994**.......................................
10.12 -- Phoenix International Ltd., Inc. 1995 Employee Stock Option Plan,
effective as of March 18, 1995**..........................................
</TABLE>
<PAGE> 91
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10.13 -- Phoenix International Ltd., Inc. 1995 Employee Stock Option Plan,
effective as of October 21, 1995**........................................
10.14 -- Employment Agreement by and between Company and Bahram Yusefzadeh, dated
December 28, 1995**.......................................................
10.15 -- First Amendment to Employment Agreement by and between Company and Bahram
Yusefzadeh, dated May 22, 1996**..........................................
10.16 -- Employment Agreement by and between Company and Ralph Reichard, dated
December 28, 1995**.......................................................
10.17 -- First Amendment to Employment Agreement by and between Company and Ralph
Reichard, dated May 22, 1996**............................................
10.18 -- Employment Agreement by and between Company and Clay E. Scarborough, dated
May 23, 1996**............................................................
10.19 -- Employment Agreement by and between Company and Michael R. Newes, dated
April 12, 1996**..........................................................
10.20 -- Employment Agreement by and between Company and Gerald P. Nissen, dated
April 12, 1996**..........................................................
10.21 -- Employment Agreement by and between Company and Twanna C. Soifer, dated
April 12, 1996**..........................................................
10.22 -- Form of Employee Confidentiality Agreement**..............................
10.23 -- Promissory Note, dated November 17, 1994, from Bahram Yusefzadeh to
Company in the amount of $40,854**........................................
10.24 -- Promissory Note, dated December 19, 1994, from the Yusefzadeh Family
Limited Partnership to Company in the amount of $932,910**................
10.25 -- Promissory Note, dated January 30, 1995, from the Yusefzadeh Family
Limited Partnership to Company in the amount of $344,760**................
10.26 -- OEM Software License Agreement, dated June 30, 1995, between Company and
Gupta Corporation+**......................................................
10.27 -- Value Added Remarketer Agreement, dated October 13, 1993, between Company
and Sybase, Inc.+.........................................................
10.28 -- Software License Agreement between Unisys Corporation and Company, dated
March 16, 1996+...........................................................
10.29 -- General Agreement for Strategic Relationship between Company and
Hewlett-Packard Company, dated April 30, 1993+**..........................
10.30 -- Form of Software License Agreement+.......................................
10.31 -- Form of International Software License Agreement+.........................
10.32 -- Form of Disaster Recovery Service Agreement+**............................
10.33 -- Form of Software Deposit Agreement+**.....................................
10.34 -- Form of Confidentiality and Non-Disclosure Agreement**....................
10.35 -- Form of Confidentiality Agreement**.......................................
10.36 -- Form of Mutual Non-Disclosure Agreement**.................................
10.37 -- Form of Confidentiality/Non-Disclosure Agreement Remitting Access to
System Documentation and Data Files for Data Conversion**.................
10.38 -- Form of Phoenix International Ltd., Inc. Confidentiality Agreement**......
10.39 -- Standard Commercial Lease, dated December 8, 1993, between Company and ABR
Spectrum, Ltd. with respect to Suite 140, 900 Winderley Place, Maitland,
Florida premises, as modified January 24, 1994**..........................
10.40 -- Sublease Agreement, dated September 28, 1995, between Company and CCS
Technology Group, Inc. with respect to Suite 120, 900 Winderley Place,
Maitland, Florida premises**..............................................
</TABLE>
<PAGE> 92
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10.41 -- The Principal Financial Group Prototype for Savings Plans (401k), as
amended, and the Group Annuity Contract for the Company**.................
10.42 -- Remarketing Agreement and Support Authorization, dated as of April 22,
1996, between the Company and Computer Systems Associates (Nigeria)
Limited.+**...............................................................
10.43 -- Amendment, dated May 24, 1996, to the Phoenix International Ltd., Inc.
Stock Option Plan, effective as of March 18, 1995.**......................
10.44 -- Amendment, dated May 24, 1996, to the Phoenix International Ltd., Inc.
Stock Option Plan, effective as of October 21, 1995.**....................
10.45 -- Revised Form of Stock Option Agreement for the Phoenix International Ltd.,
Inc. Stock Option Plan, effective as of October 21, 1995.**...............
10.46 -- Phoenix International Ltd., Inc. 1996 Director Stock Option Plan.**.......
10.47 -- Form of the Company's Director Indemnity Agreement.**.....................
10.48 -- Promissory Note, dated May 14, 1996, from the Company to Barnett Bank of
Central Florida, N.A. ("Barnett Bank").**.................................
10.49 -- Business Loan Agreement, dated May 14, 1996, between the Company and
Barnett Bank.**...........................................................
10.50 -- Commercial Security Agreement, dated May 14, 1996, between the Company and
Barnett Bank.**...........................................................
10.51 -- Continuing Unlimited Commercial Guarantee, dated May 14, 1995, made by
Bahram Yusefzadeh for the benefit of Barnett Bank.**......................
10.52 -- Commitment letter dated May 1, 1996 from Barnett Bank to Company**........
10.53 -- Master Note Modification Agreement, dated as of May 22, 1996, by and among
Bahram Yusefzadeh, the Yusefzadeh Family Limited Partnership and
the Company**.............................................................
10.54 -- Form of Promissory Note for employee loans from Company**.................
10.55 -- Form of Stock Pledge and Security Agreement for employee loans from
Company**.................................................................
11.1 -- Statement re: Computation of Per Share Earnings**.........................
21.1 -- Subsidiary Schedule**.....................................................
23.1 -- Consent of Ernst & Young LLP..............................................
23.2 -- Consent of Nelson Mullins Riley & Scarborough, L.L.P. (included as part of
Exhibit 5.1)..............................................................
24.1 -- Powers of Attorney for the following individuals: Clay E. Scarborough,
Michael R. Newes, Ronald E. Fenton, William E. Hess, James C. Holly, Paul
Jones, J. Michael Murphy and O. Jay Tomson.**.............................
24.2 -- Power of Attorney for Glenn W. Sturm.**...................................
27.1 -- Article 5 Financial Data Schedule (for SEC use only).**...................
</TABLE>
- ---------------
+ Confidential treatment requested.
* To be filed by amendment.
** Previously filed.
<PAGE> 1
EXHIBIT 5.1
LAW OFFICES
NELSON MULLINS RILEY & SCARBOROUGH, L.L.P.
A REGISTERED LIMITED LIABILITY PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
400 COLONY SQUARE OTHER OFFICES:
SUITE 2200 Charleston, South Carolina
1201 PEACHTREE STREET, N.E. Charlotte, North Carolina
ATLANTA, GEORGIA 30361 Columbia, South Carolina
TELEPHONE (404) 817-6000 Florence, South Carolina
TELECOPIER (404) 817-6050 Greenville, South Carolina
Myrtle Beach, South Carolina
June 26, 1996
Phoenix International Ltd., Inc.
900 Winderley Place
Suite 140
Maitland, Florida 32751
Gentlemen:
We have acted as counsel to Phoenix International Ltd., Inc. (the
"Company") in connection with the filing of a Registration Statement on Form
S-1 (Reg. No. 333-03355) (the "Registration Statement") under the Securities
Act of 1933, covering the offering of up to 1,239,125 shares (the "Shares") of
the Company's Common Stock, $.01 par value per share. In connection therewith,
we have examined such corporate records, certificates of public officials and
other documents and records as we have considered necessary or proper for the
purpose of this opinion.
This opinion is limited by and is in accordance with, the January 1,
1992, edition of the Interpretive Standards applicable to Legal Opinions to
Third Parties in Corporate Transactions adopted by the Legal Opinion Committee
of the Corporate and Banking Law Section of the State Bar of Georgia.
Based on the foregoing, and having regard to legal considerations
which we deem relevant, we are of the opinion that the Shares, when issued and
delivered as described in the Registration Statement, will be legally issued,
fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption
"Legal Matters" in the Prospectus contained in the Registration Statement.
Very truly yours,
/s/ Nelson Mullins Riley & Scarborough, L.L.P.
NELSON MULLINS RILEY & SCARBOROUGH, L.L.P.
<PAGE> 1
EXHIBIT 10.27
VALUE ADDED REMARKETER AGREEMENT
This VALUE ADDED REMARKETER AGREEMENT is made as of the 13th day of October,
1993, between SYBASE, INC. ("Sybase"), a corporation with offices at 6475
Christie Avenue, Emeryville, California, 94608 and Phoenix International Ltd.
Inc. ("VAR"), a Florida Company with offices at 475 Montgomery Place, Altamonte
Springs, FL 32714.
Sybase is the owner of or has rights to distribute certain computer
software. VAR desires to acquire a license to embed such software in certain
software to be developed and distributed by VAR.
NOW, THEREFORE, in consideration of the mutual promises and covenants.
contained herein, Sybase and VAR agree as follows:
I. DEFINITIONS.
1. 1. "AGREEMENT" shall mean this Value Added Remarketer Agreement,
together with the Exhibits and any Addenda attached hereto, and each
supplemental Exhibit A signed by both parties and each Purchase Order, as the
same may be amended from time to time in accordance with Section 13.12 below.
1.2. "DERIVATIVE PRODUCT" shall mean the software program(s) described in
Exhibit B that has/have been or will be developed by VAR for commercial
distribution to more than one third party and which (a) incorporate(s) only an
Embedded Run-Time Version of the Program, (b) contain(s) significant added
functionality over that of the Program as described in Exhibit B, (c) shall
not be usable as a commercially acceptable substitute for the Program or be
competitive with general database products, and (d) operate (s) on the same
hardware and operating system software for which VAR has acquired a Development
or Porting License pursuant to Section 2.1 below.
1.3. "DISTRIBUTOR" shall mean VAR's duly appointed distributors listed on
Exhibit B, and such other distributors as may be appointed hereafter by VAR
(with Sybase's prior written consent which shall not be unreasonably withheld)
to license the Derivative Product under the terms of this Agreement.
1.4. "EMBEDDED RUN-TIME VERSION" shall mean a version of the Program
linked to or embedded in VAR's application code in such a way that structurally
or by license restrictions, it (a) precludes use of the Program to modify
applications except as permitted in clause c of this paragraph; (b) precludes
use of the Program to develop applications, except for report writing and
decision support solely in conjunction with the Derivative Product; (c)
precludes general purpose access to command verbs in the Program except that
the End User may, within the scope of and under control of the Derivative
Product, create or alter tables, columns or rows and add fields to existing
tables, as necessary to implement, operate and administer the Derivative
Product; (d) precludes use of any command verbs in the Program to create new
schemas or databases; and (e) precludes use of the Program or third party
application development tools to modify or enhance existing screens or forms
delivered as part of the Derivative Product, or to create new forms, except as
necessary to implement and operate the Derivative Product.
1.5. "END USER" shall mean a third party who is granted a license to
the Derivative Product either by VAR or by a Distributor, and who shall have no
right to sublicense the Derivative Product further. The term shall include a
Distributor in situations where the Distributor will use the Derivative Product
for internal purposes.
1
<PAGE> 2
XXX = Confidential Treatment Requested
1.6. "HARDWARE SYSTEM" shall mean the central Processing unit (CPU)
and the operating system software listed in the Exhibit A or Purchase Order
applicable to the relevant copy Of the Program.
1.7. "PRICE LIST" shall mean Sybase's XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Program, is to be Used. All prices and policies stated in the Price List are
subject to change without notice, provided that no such change shall become
effective until sixty (60) days after notice to VAR.
1.8. "PRIMARY COPY" shall mean the copy of the Program provided by
Sybase, which may have been provided initially as a trial copy.
1.9. "PROGRAM" shall mean a machine executable copy of the object code
of the Sybase software product(s) listed in Exhibit A, or in a supplemental
Exhibit A signed by both parties, or in a Purchase Order, together with all
data files placed with the copy of such software product(s).
1.10. "PURCHASE ORDER" shall mean a purchase order or other purchase
authorizing document issued by VAR for the Programs and or services and
accepted by Sybase, as confirmed in a Sybase invoice or confirming document.
1.11. "RESTRICTED RELEASE" shall mean any version of the Program
marked alpha, beta or otherwise designated as a Restricted Release.
1.12. "SECONDARY COPY" shall mean a copy of the Program reproduced by
VAR from the Primary Copy.
1.13. "USE" shall mean to load, execute, employ, utilize, store or
display the Program.
2. DEVELOPMENT AND PORTING LICENSES.
2.1. GENERALLY. For the sole purpose of developing, marketing
and supporting the Derivative Product, Sybase grants to VAR a non-exclusive,
nontransferable license (without right to sublicense) to (a) Use each Primary
Copy shown on an Exhibit A or Purchase Order on the Hardware System at the site
specified on the applicable Exhibit A or Purchase Order; (b) make and Use
Secondary Copies (to the extent specified on the applicable Exhibit A or
Purchase Order) on the Hardware System at the site specified on the applicable
Exhibit A or Purchase Order; and (c) make up to two (2) copies of the Primary
Copy exclusively for inactive back-up or archival purposes. In the case of
Development Licenses (as defined below), the Copies may not be used by more
than the number of permissible concurrent users (unique logins) specified on
the applicable Exhibit A or Purchase Order and corresponding to the license
fees paid by VAR for such Copies. In the case of Porting Licenses (as defined
below), use of the Copies shall not be subject to restrictious on the number of
permissible concurrent users. The Program may only be transferred to another
site or to computer hardware other than the Hardware System in accordance with
the fourth paragraph of Section 2.2. Notwithstanding anything to the contrary
in this Section 2.1, development licenses for the Microsoft SQL Server for OS/2
are governed by the "Microsoft License Agreement" enclosed with such Program.
VAR at minimum must license in accordance with the preceding paragraph a
Primary Copy of each Program to be embedded in a Derivative Product, such
Primary Copy to be licensed on the hardware platform on which the Derivative
Product will be developed and for XXXXXXXXXXXXXXX concurrent users
(the "Development Licenses"). VAR shall receive XXXXXXXXXXXXXXXXXXXXXXXXXXXX
for the Development Licenses as set forth in the Price List. If the
Derivative Product will be ported to run on hardware platforms in
addition to the hardware platform(s) on which the Derivative Product
2
<PAGE> 3
XXX = Confidential Treatment Requested
was or is to be developed, VAR shall license XXXXXXXXXXXXXXXXX of each Program
for each such additional hardware paltform (the "Porting Licenses"). VAR shall
pay a license fee for the Porting Licenses XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXX regardless of the hardware class or the number of
users for which the copy was licensed. VAR may not use Development Licenses
or Porting Licenses for general internal use; if VAR wishes to license any
Sybase products for general internal use, prices for such products may be
obtained from the local Sybase sales office.
2.2 SUPPORT OF DEVELOPMENT AND PORTING LICENSES. VAR is required to
purchase telephone support and Program updates for the first year for all
licenses acquired under Section 2.1 above. Support commences on the date the
relevant Primary Copy of the Program is shipped to VAR or the date a license for
the relevant Secondary Copies is invoiced ("the Support Date"). Fees for
support and updates shall be paid in advance annually and are due as set forth
in Section 2.4 below. No maintenance or enhancement releases of the Program
will be provided to VAR for the Primary Copy and no copies of such release may
be made by VAR to update Secondary Copies, unless the applicable support fees,
including charges for support contacts and for maintenance enhancement releases
(collectively "Support Fees") for such Copies have been paid. Subject to
payment of such fees, the license granted to VAR under Section 2.1 shall extend
to each maintenance and enhancement release received by Sybase. Notwithstand-
ing anything to the contrary in this Section 2.2, support of development
licenses for Microsoft SQL Server for OS/2 are governed by the "Support
Agreement for Microsoft SQL Server" enclosed with such Program.
Support will be extended for one year periods on the anniversay of each
Support Date, unless VAR gives at least thirty (30) calendar days prior written
notice of cancellation. The Support Fees for the renewal year shall be as
specified in the Price List. VAR may reinstate lapsed support for any Program
by paying all Support Fees in arrears and all costs invoiced by Sybase on a
time and materials basis for updating VAR's Program to the current version.
Provided VAR has paid the applicable Support Fees, Sybase shall support
the Program in Accordance with this Section 2.2. VAR shall designate two VAR
employees or such greater number of support contact persons for Sybase support
as may be specified (and subject to the additional charges indicated) on the
applicable Exhibit A or Purchase Order. Each contact person may telephone for
problem resolution during the support hours corresponding to the level of
support fees paid by VAR (or during extended hours if VAR has contracted with
Sybase for extended support) at Sybase customer support centers. Upon receipt
from a contact person of notice of a Program problem (which problem can be
reproduced at a Sybase support facility or via remote access to VAR's
facility), Sybase shall use reasonable efforts efforts to correct or curcumvent
the problem. Any corrections to the Program will be made to the most current
generally available release. For twelve (12) months after the introduction of
a new generally available release of a new Program, Sybase will use reasonable
efforts to support the previously released version of such Program.
A Program may be transferred to another site or to computer hardware
other than the Hardware System only with the prior written consent of Sybase
and subject to Sybase's transfer policies and fees then in effect, except that
the Program may be transferred temporarily to a backup computer if the Hardware
System is inoperative.
Sybase shall have no obligation to support the Program (a) for Use on
any computer system other than the Hardware System, or (b) if VAR modifies the
Program in breach of this Agreement. VAR acknowledges that only those versions
of different cooperating Programs specified by Sybase will execute correctly
together on a single CPU or in a network. Sybase has no obligation to modify
outdated versions of the Program to run with new versions of the Hardware
System. If VAR purchases support from Sybase for any Programs in Use on a
specific Hardware System or in a specific network, VAR must purchase support
from Sybase for all products provided by Sybase in Use on such Hardware System
or network.
3
<PAGE> 4
XXX = Confidential Treatment Requested
2.3. CONSULTING. Since it is in both Sybase's and VAR's best
interests that the development of the Derivative Product be successful, VAR
shall order XXXXXXXXXXXXXXXXXXXXXX of consulting services from Sybase at the
price set forth in the Price List. VAR may also order, subject to Sybase's
acceptance, additional consulting services from Sybase. All consulting
services will be provided under the terms and conditions of this Agreement
unless otherwise agreed by both parties in writing. Monies paid to Sybase by
VAR for XXXXXXXXXXXXXXXXXXX of consulting work in connection with development
of the Derivative Product shall be counted as Prepaid Royalties to the extent
such consulting work is ordered on the EXHIBIT A dated concurrently with this
Agreement.
2.4. PAYMENT OF FEES. All fees for Primary Copies of the Program and
related support shall be due and payable XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. All other fees (including fees for
Secondary Copies) shall be due and payable XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXX. With respect to the licenses and services provided hereunder,
VAR shall pay all applicable shipping charges and sales, use, personal property
or similar taxes, tariffs or governmental charges, exclusive of Sybase's income
and corporate franchise taxes.
2.5. DELIVERY/INSTALLATION. As soon as practicable after signing
of this Agreement and Sybase's receipt of VAR's Purchase Order, Sybase shall
cause the Program and one set of user manuals (which term shall include
installation instructions and other related documentation) to be delivered to
VAR's site address specified in the applicable Exhibit A or Purchase Order.
VAR, at its own expense, shall be responsible for installing the Program and
all updates thereof on the Hardware System and for complying with environmental
requirements specified by the Hardware System manufacturer.
2.6. DOCUMENTATION. One set of user manuals will be provided with
each Primary Copy. Additional copies may be purchased for internal use at XXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. Except as set forth in
Section 3.3(b), VAR shall not copy all or any part of the user manuals
provided.
2.7. TRAINING. License and/or support fees include Sybase
education only where specified in the Price List. No credit is given for
courses not taken. Additional training may be purchased at XXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. In order to ensure that VAR
has a solid technical understanding of Sybase. VAR shall send at least one
employee to each of the following Sybase training classes within six (6) months
of the date of this Agreement (a) Fast Track to Sybase; (b) Relational Database
Design; and (c) Fundamentals of System and Database Administration (or such
other substitute classes to which Sybase and VAR may agree). VAR shall not
copy all or any part of the training materials provided.
2.8. RESTRICTED RELEASE. If VAR is selected for participation and
elects to participate in a Restricted Release program, VAR shall only receive a
later version or a production version of the Restricted Release if support and
any applicable license fees for the Restricted Release have been paid. With
respect to each Restricted Release, and notwithstanding any other provision of
this Agreement, VAR agrees: (a) neither Sybase nor its licensors shall have any
obligation to correct errors in or deliver updates to the Restricted Release;
(b) neither Sybase nor its licensors shall have any obligation to otherwise
support the Restricted Release once a production version or a later Restricted
Release of the Program is delivered to VAR (or has been made generally
available to customers but VAR has declined to pay the applicable support and
license fees to obtain such version); (c) VAR shall provide Sybase (or its
licensors if Sybase so instructs VAR) with appropriate test data for the
Restricted Release if necessary to resolve problems in the Restricted Release
encountered by VAR and will promptly report any error condition discovered by
VAR in the Restricted Release; (d) the Restricted Release is experimental, may
contain problems and errors and is being provided to VAR on an as-is basis with
no warranty of any kind, express or implied; (e) neither party will be
responsible or liable to the other for any losses, claims or damages of
whatever nature, arising out of or in connection with the Performance or
nonperformance of the Restricted Release; (f) VAR will not Use such release in
production
4
<PAGE> 5
applications without the prior written approval of Sybase; (g) VAR shall pay
the license fees for such Restricted Release specified in the applicable
Exhibit A or Purchase Order, and (h) VAR shall promptly install each later
version and any production version of the Restricted Release upon such receipt
and shall stop Use of the prior version.
3. SUBLICENSING.
3.1. SUBLICENSING BY VAR. Sybase hereby grants to VAR a non-
exclusive license to market, promote and sublicense only to End Users (except
as set out in Section 3.2 below) in those Approved Countries (as set forth on
Exhibit G) in which support for the Derivative Product is available, Embedded
Run-Time Versions of the Program but only to the extent incorporated in the
Derivative Product. Such sublicenses shall be (a) in object code form only,
(b) solely in accordance with the terms and conditions of the Agreement,and (c)
each copy of the Derivative Product may be Used only on it single Hardware
System at a single site. (No right is granted to VAR to use the Derivative
Product internally unless royalties are paid by VAR pursuant to Section 3.4
below for each copy of the Derivative Product used by VAR internally.)
Additional countries may be included in the list of Approved Countries by the
parties amending this Agreement (including amendment of Exhibit C with respect
to such additional countries, if Sybase determines an amendment to Exhibit C
necessary). Sybase will agree to amend this Agreement to include a country if
either (a) Sybase has previously determined that the laws of such country
provide effectively the same protection to Sybase's proprietary rights in the
Program as the protection provided in any of the Approved Countries or (b) VAR
provides Sybase with a legal opinion of an attorney acceptable to Sybase who is
either licensed to practice in such country or is knowledgeable about the laws
of such country to the effect that the laws of such country provide effectively
the same protection to Sybase's proprietary rights in the Program as the
protection provided in any of the Approved Countries. VAR shall create and
support the Derivative Product such that it performs in all material respects
in accordance with VAR's user manuals for the Derivative Product. VAR agrees
to actively promote the Derivative Product in VAR's marketplace in such
countries.
3.2. SUBLICENSING BY DISTRIBUTORS. Sybase hereby grants to VAR a
non-exclusive license to designate Distributors to market, promote and
sublicense to End Users in those Approved Countries in which support for the
Derivative Product is available, Embedded Run-Time Versions of the Program,
but only to the extent incorporated in the Derivative Product. Such sublicenses
shall be (a) in object code form only, (b) solely in accordance with the
terms and conditions of this Agreement, and (c) if the VAR participates in
Program 1 (as outlined in Exhibit D-1) each copy of the Derivative Product may
only be used on a single Hardware System at a single site. Distributors shall
not be permitted to make copies of the Derivative Product but shall order all
copies for sublicensing from VAR. If a Distributor desires to make any
modifications to the Derivative Product, it should contact the local Sybase
sales office to acquire a development license. Each Distributor shall agree in
writing with VAR to market, promote and sublicense the Derivative Product only
in accordance with the provisions of this Agreement, shall grant Sybase
the audit rights set forth in Section 4 below, and shall acknowledge that
Sybase is an interested third party beneficiary of such Agreement between VAR
and such Distributor and that Sybase may enforce the Amendent directly against
such Distributor, provided that Sybase shall have no liability to any such
Distributor. VAR shall, upon request by Sybase, enforce its rights under its
agreement with the Distributor. No such agreement between VAR and any
Distributor outside the United States, Canada or the European Economic
Community will become effective until Sybase has expressly approved and
accepted the agreement and communicated such approval and acceptance to VAR and
Distributor. VAR agrees to use its best efforts to enforce the terms of its
Distributor agreements and to inform Sybase immediately of any known breach
of such terms.
3.3. SUBLICENSING GENERALLY. In marketing the Derivative Product,
VAR and Distributors shall comply with all applicable laws and regulations,
and none shall engage in any deceptive or misleading practices or make any
representations, warranties or guarantees to any End Users or other third
parties concerning the Program that are inconsistent with or in addition to
5
<PAGE> 6
XXX = Confidential Treatment Requested
those made by Sybase (or with respect to a Program which is not owned by
Sybase, inconsistent with or in addition to those made by Sybase's licensor).
Each license of the Derivative Product granted by VAR or any of its
Distributors must be in the form of a written agreement signed by an authorized
representative of VAR or its Disbributor and by the End User and must include
in substance all of the terms and conditions set forth in Exhibit C. Upon
Sybase's request from time to time, VAR shall provide Sybase with a copy of the
then current version of VAR's and its Distributors' standard agreements used in
licensing the Derivative Product. VAR agrees to use its best efforts to
enforce the terms of such license agreements and to inform Sybase immediately
of any known breach of such terms. Subject to the terms and conditions of this
Agreement, VAR is authorized to copy the Program as incorporated into the
Derivative Product for distribution to End Users and Distributors.
3.4 DERIVATIVE PRODUCT SUBLICENSE AND SUBLICENSE SUPPORT FEES.
For each copy of a Derivative Product Used internally by VAR or licensed by VAR,
whether to an End User or a Distributor, VAR agrees to pay Sybase the Program
royalties set forth in Exhibit D, based on the amount of VAR's initial payment
to Sybase under this Agreement. The total amount of such initial payment is
specified in the Exhibit A entered into concurrently with this Agreement. In
addition to payment of the royalties, a support fee in the XXXXXXXXXXXXXXXX
XXXXXXXXXXXX shall be paid (on a one-time basis) by VAR to Sybase in respect of
each copy of the Derivative Product licensed by VAR if VAR desires to
incorporate into such copy any future maintenance or enhancement releases of
the embedded Program (the "Runtime Support Fee"). If the Derivative Product is
transferred to a machine in a higher class as shown in the Price List than the
machine for which the license of the copy of the Derivative Product was
initially granted ("Transfer"), VAR shall pay Sybase the transfer fees that are
outlined in the Price List Payment of royalties, sublicense support fees and
transfer fees due to Sybase shall be made no later than thirty (30) days after
the end of the calendar month in which VAR ships the copy of the Derivative
Product (in respect of which such fees are owing), or no later than thirty (30)
days after the end of the calendar month in which a Transfer occurs. The
prepaid royalties shown in Exhibit A shall be non-refundable and may only be
applied against Derivative Product royalties owing under this section 3.4;
they may not be applied against the Runtime Support Fees or any other products
or Services.
3.5. VAR SUBLICENSE REPORTS. VAR shall maintain an accurate list
of End Users, including name, address, Derivative Product copies licensed, and
the make, model and number of the machine on which the Derivative Products are
licensed for use. Within thirty (30) days after the end of each calendar month,
VAR shall complete and submit to Sybase a licensing report in the form of
Exhibit E for all copies of the Derivative Product licensed by VAR to
Distributors and End Users, all copies of the Derivative Product installed for
evaluation purposes at a customer or prospect site pursuant to Section 3.9
below, all copies of the Derivative Product made for demonstration or support
purposes pursuant to Section 3.10 below and all Transfers of copies of the
Derivative Product during such month.
3.6. COMMISSION TO VAR UPON SALE OF FULL USE LICENSES OF A
SYBASE PROGRAM. Other than with respect to the Microsoft SQL Server for OS/2
and other products for which Sybase would owe a royalty to a third party, in
the event (a) an End User of the Derivative Product requests that Sybase
upgrade its sublicense of any copy of the Program incorporated into the
Derivative Product to a full use license of the Program, or (b) a full use
license of a Program is licensed by Sybase concurrently with VAR's licensing
of a Derivative Product and if in either of the above cases (i) the End User
which is acquiring the licenses is not then a customer of Sybase or a
prospect of Sybase identified within a "funnel" or other forecasting report,
(ii) VAR files an application in the form of Exhibit F with respect to such
Program prior to the sale of the licenses by Sybase to the End User and
(iii) the End User has not been identified by Sybase in writing to VAR as a
"House Account" prior to Sybase's receipt of Exhibit F (a "Qualified Order"),
then Sybase shall pay VAR a commission equal XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX in connection with the Qualified Order
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
connection with the Qualified Order. As used herein, Net License Fees
shall mean (i) the net initial upgrade license fee or (ii) the license fee
received by Sybase, as applicable. (Exhibit F is the application to be used
by VAR
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XXX = Confidential Treatment Requested
in seeking such commission and must be submitted to Sybase prior to the
licensing of the upgrade or the full use license.) Such commission shall be
granted only in respect of the license fees for those full use licenses for
Primary and Secondary Copies of the Program ordered by the End User at the time
of the initial upgrade or license of the Derivative Product and shall not apply
to subsequently ordered Secondary Copies, or any other additional, throw-on,
temporary or trial licenses, or to fees received by Sybase as a result of an
upgrade to a higher class of hardware. The commission shall be calculated
based solely on license, excluding fees for support, training, consulting or
other materials or services. (VAR shall not be able to itself sublicense an
upgrade or sell a full use license.) Notwithstanding the foregoing, no more
than one commission to a third party need be paid by Sybase in respect of any
single license or upgrade, and if Sybase determines that even though the
conditions set forth above have been met by VAR, another third party was in
fact substantially responsible for the licenses or upgrades, Sybase in its
discretion shall determine how the commission with respect to such End User
shall be shared by VAR and the responsible third parties; Sybase's
determination in this regard shall be conclusive. In no event will any
commission XXXXXXXXXXXXXXXXXXXX be paid to VAR in respect of any one End User.
Sybase shall indicate its agreement that a commission is owing to VAR with
respect to a particular license or upgrade by causing the Application (EXHIBIT
F) for respect such order to be executed by the Sybase District Manager of the
territory in which the End User's division is located and by the Sybase
District Manager and Business Partner Sales Manager. Any commission owing
hereunder shall be paid within thirty (30) days of Sybase's receipt of the Net
License Fees from the End User.
3.7. LICENSE OF DERIVATIVE PRODUCT TO END USERS WITH FULL USE
LICENSE. If VAR licenses its Derivative Product to an End User who already has
an unlimited user full use license for some or all of the Programs that are
embedded in VAR's Derivative Product (the "Existing Full Use Programs") and
such full use license is on the specific CPU on which the Derivative Product is
licensed, then VAR will not owe, royalties to Sybase for the Existing Full Use
Programs embedded in the Derivative Product but will owe royalties for other
Programs embedded within the Derivative Product as computed in EXHIBIT D. Each
Derivative Product licensed shall be reported on the VAR Sublicense Reports
contemplated by Section 3.5 even if End User already has licensed on the CPU on
which such Derivative Product is licensed an unlimited user full use license
for all of the Programs that are embedded in the Derivative Product.
3.8. DOCUMENTATION, UPDATES, SUPPORT, AND TRAINING. VAR shall be
responsible for providing documentation, updates, technical support and
training to End Users in accordance with the terms of the license agreement
between VAR or its Distributor and the End User. VAR is authorized to copy,
modify and/or incorporate into the documentation for the Derivative Prduct,
portions of the documentation for the Program provided by Sybase to VAR to the
extent such portions are necessary to implement the Program in the Derivative
Product. Copies of Sybase's documentation for the Program may be purchased for
resale at XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. If
requested by Sybase, VAR shall deliver to Sybase, at no charge, one set of the
user manuals for the Derivative Product.
3.9. EVALUATION COPIES. VAR and its Distributors may deliver
copies of the Derivative Product to a prospective End User on a trial basis for
evaluation purposes only (an "Evaluation Copy") after such prospective End
User has signed a trial license with at a minimum the provisions contained in
EXHIBIT C (except that back-up and/or archival copies may not be made and upon
termination of the trial license, all copies of the Derivative Product must be
returned to VAR or Distributor (i.e., certification of destruction will not be
enough]). All such Evaluation Copies of the Derivative Product licensed shall
be reported in the VAR Sublicense Reports contemplated by Section 3.5 and
shall be removed by VAR or Distributor from the End User's site upon
completion of the evaluation period or ninety (90) days from such delivery,
whichever occurs first. Any Evaluation Copies not removed and returned to VAR
or Distributor at the end of such period are deemed to be perpetually
licensed, and royalties and sublicense support fees in respect thereof shall
be due to Sybase.
3.10 DEMONSTRATION AND SUPPORT LICENSES. VAR and its Distributors
shall have the right to use copies of the Derivative Product without incurring
any obligation to pay royalties to
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Sybase in respect thereof, for purposes of (a) demonstrating Derivative Product
on VAR's and/or Distributor's premises, (b) demonstrating Derivative Product at
a prospective End User's site provided that all copies of the Derivative
Product are removed within five (5) days of when they are installed and
provided further that VAR shall be responsible for protecting the
confidentiality of the Program while on the prospective End User's site, and
(c) providing technical support of the Derivative Product. VAR shall report in
the VAR Sublicense Reports contemplated by Section 3.5 the number of copies of
Derivative Product made for the above purposes in any given month. Use of the
Derivative Product pursuant to this Section shall not include VAR's or
Distributor's internal use of the Derivative Product, including but not limited
to the processing of VAR's or Distributor's customer data or internal
administrative data, but rather shall be limited to the processing of test data
pertinent to VAR's or Distributor's demonstration and support of the Derivative
Product.
3.11. TITLE. The Program (including such portions of the
Program that may be incorporated in the Derivative Product) and all related
documentation shall remain at all times the property of Sybase and its
licensors, and neither VAR, its Distributors or their End Users shall have any
right, title or interest therein, except as expressly set forth in this
Agreement. VAR shall not translate any portion of the Program or associated
documentation into any other language without the prior written consent of
Sybase. VAR confirms that Sybase shall be the sole owner of all translations
made by VAR of the Program or any documentation relating to the Program (the
"Materials") and of all copyright or other intellectual property rights
created by such translations, and VAR hereby transfers to Sybase any copyright,
including the right to make adaptations, in such translations which VAR may
acquire by creating or obtaining the translations. All translated Materials
must state in a prominent manner that they were prepared by VAR and that VAR
assumes all responsibility for the accuracy of matters discussed therein.
Regardless of any rights to the Materials which VAR may possess or acquire
(including moral rights), as a result of such translations, VAR agrees that (a)
Sybase and its licensees may make any modifications they desire to the
Materials, (b) Sybase and its licensees may without royalty distribute the
Materials, and any derivative works thereof, whether or not they incorporate
any modifications or developments made by VAR, using the product name and the
indications of copyright ownership and authorship, if any, which Sybase or its
respective licensee or sublicensee desires, and (c) to the extent that VAR
contains a copyright or any other intellectual property right in any portion of
or modification to any of the Materials, VAR hereby expressly transfers and
assigns such copyright or other right, including the right to make adaptations,
to Sybase. Nothing herein shall give Sybase copyright ownership in any
documentation relating to the Derivative Product which is not a translation,
modification or derivative work of the Materials. At Sybase's request, VAR
will cause the execution of any instruments that may be appropriate to perfect
Sybase's or its licensors' exclusive ownership rights in the Materials and all
translations thereof. No copying or Use of the Program other than that
expressly authorized by this Agreement is permitted. Neither VAR nor its
Distributors shall modify, reverse engineer, reverse assemble or reverse
compile any Program or part thereof, except that they may modify the data file
portions of the Program to the extent and in the manner described in the user
manuals for the Program. Neither VAR nor its distributors shall have any
right to sublicense or otherwise distribute, rent, lease or transfer the
Program except Embedded Run-Time Versions of the Program incorporated into the
Derivative Product. No right is granted to VAR, its Distributors or End Users,
to use the Derivative Product within a service bureau or time-sharing
arrangement. No rights are granted to VAR or its Distributors with respect to
any Program source code.
4. AUDIT RIGHTS. Sybase shall have the right to direct a recognized
independent accounting firm to conduct, during normal business hours, an audit
of (and to copy) the appropriate records of VAR and its Distributors to verify
(a) the number of copies of the Program in Use by VAR, the computer systems on
which such copies are installed, the number of processors in such computer
systems, and in the case of limited user licenses, the number of users Using
such copies, (b) the accuracy of VAR's sublicense reports and (c) VAR's
compliance with this Agreement. Representatives of the auditing firm shall
protect the confidentiality of VAR's Confidential Information and abide by
VAR's reasonable security regulations while on VAR's premises. If (i) the
number of copies or users is found to be greater than that contracted for, (ii)
the computer system on which the Program is in use differs from the Hardware
System specified,
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XXX = Confidential Treatment Requested
or (iii) the royalties owing are greater than that reported by VAR, VAR will be
invoiced for the additional copies, users or computer systems at the prices
quoted in the then current Price List and for the underreported royalties; the
additional license and royalties shall be payable within thirty (30) days of
such invoice. If the resulting adjustments to the license/royalties owing by
VAR are XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX reported by VAR, VAR will pay
the reasonable expenses associated with such audit, in addition to the fee
adjustment.
5. TERM AND TERMINATION.
5.1. INITIAL TERM. This Agreement shall become effective on
the date set forth at the top of the first page of this Agreement and shall be
valid for a period of three (3) years unless terminated previously as provided
below. This Agreement may be renewed after expiration by mutual written
agreement of the parties.
5.2. TERMINATION OF AGREEMENT. Either party may at its option
terminate this Agreement by written notice (a) should the other party file a
petition in bankruptcy, or have filed against it an involuntary petition in
bankruptcy not dismissed within sixty (60) calendar days after filing, or apply
for or consent to the appointment of a receiver, custodian, trustee or
liquidator, or make a general assignment for the benefit of its creditors; or
(b) upon the failure of the other party to make a payment hereunder within
fifteen (15) days after written notice that such payment is past due; or (c)
upon any other breach of this Agreement by the other party, which if remediable,
has not been corrected within sixty (60) calendar days after written notice.
6. EFFECT OF TERMINATION OR EXPIRATION.
6.1. GENERALLY. On termination of this Agreement, all licenses
granted by Sybase to VAR hereunder shall terminate, VAR shall cease Using the
Program and user manuals, whether or not modified or incorporated into other
materials, and VAR shall certify in writing to Sybase that all copies (in any
form or media) of the Program and user manuals, whether or not modified or
incorporated into other materials, have been destroyed or returned to Sybase,
provided that (a) all licenses of Derivative Product made prior to the
termination or expiration of this Agreement shall continue in effect until the
termination or expiration of the license agreement under which the Derivative
Product was licensed, (b) should this Agreement be terminated or expire for any
reason other than a breach by VAR of Sybase's proprietary rights in the Program
or of the provisions of this Agreement pertaining to sublicensing and
exportation of the Program, VAR may continue using one copy of the most recent
release of the Program then in VAR's possession on a single Hardware System,
subject to all the restrictions of this Agreement, solely for the purpose of
continuing customer service for licenses of the Derivative Product granted
prior to termination and (c) all rights granted in this Agreement respecting
use, marketing, promotion and sublicensing of the Program shall cease,
excepting as specifically set forth above. If this Agreement is terminated or
expires and VAR is permitted under this Section to continue using a copy of
the Program for purposes of continuing customer service, then provided that
VAR continues to pay support fees as required by Section 2.2 above, Sybase
shall continue to provide VAR with the same maintenance and enhancement
releases of the Program as provided prior to the termination or expiration of
this Agreement, and VAR may continue to provide such maintenance and
enhancement releases of End Users with respect to all copies of the Derivative
Product licensed prior to the termination or expiration of this Agreement.
6.2. LIMIT OF LIABILITY ON ACCOUNT OF TERMINATION. Should this
Agreement expire or be terminated for any reason, neither party will be liable
to the other because of such expiration or termination for compensation,
reimbursement or damages on account of the loss of prospective profits,
anticipated sales, goodwill or on account of expenditures, investments, leases
or commitments in connection with the business of Sybase or VAR, or for any
other reason whatsoever flowing from such termination or expiration. However,
termination or expiration of
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this Agreement shall not release VAR from its liability to pay to Sybase any
fees accruing prior to such termination and shall not limit either party from
pursuing any other remedies available to it.
6.3 RETURN OF CONFIDENTIAL INFORMATION. Upon termination or
expiration of this Agreement, at the written request of the disclosing party,
and subject to Section 6.1(b) above, the other party shall return within ten
(10) business days all originals and copies of Confidential Information (as
defined below) received from the disclosing party, or shall deliver to the
disclosing party within ten (10) business days a certificate signed by an
officer of the receiving party certifying the destruction of all such
Confidential Information.
7. INDEMNIFICATION. VAR agrees to indemnify Sybase and to hold
Sybase and its directors, employees and agents harmless from all costs, loss,
liability and expense (including court costs, disbursements, and reasonable
fees of attorneys and expert witnesses) incurred (a) as a result of any breach
by End Users of any Derivative Product license agreement or any breach by its
Distributors of a distributorship agreement to the extent liability would have
been prevented or limited by VAR's use of best efforts to enforce, in a timely
manner the terms of such license or distributor agreement, or (b) as a result
of any claims or demands brought against Sybase or its directors, employees or
agents by a third party and arising from or in connection with (i) any breach
by VAR or any of its Distributors of the terms of this Agreement or any
Derivative Product license agreement, (ii) the use of the Derivative Products
by VAR's or its Distributor's licensees or any other third party, if liability
on any such claim would have been avoided by the exclusive use of the embedded
Program, or (iii) any use by VAR, its Distributors or its customers of any
product not licensed by Sybase but used in conjunction with the
Sybase-furnished products, if liability on any such claim would have been
avoided by the exclusive use of the Sybase-furnished products. This Section 7
shall survive any termination or expiration of this Agreement.
8. COPYRIGHT AND OTHER NOTICES. VAR acknowledges that the Program
and related user manuals licensed by Sybase to VAR hereunder are proprietary
and protected by copyright and/or trade secret laws. VAR agrees to include
without alteration in all copies and reproductions of the Program, Derivative
Product and packages and containers for the Derivative Product reproductions of
Sybase's restricted rights notices, copyright notices and other proprietary
legends. A copyright notice in a Program does not, by itself, constitute
evidence of publication or public disclosure.
9. CONFIDENTIALITY; PUBLICITY.
9.1. CONFIDENTIAL INFORMATION. "Confidential Information"
shall mean the Program, the Derivative Product, the terms of this Agreement and
any other information of a party which is designated proprietary or
confidential, including but not limited to information regarding the disclosing
party's customers, prospects, unannounced products or prices and financial
information. All Confidential Information shall remain the sole property of
the disclosing party.
9.2. NO DISCLOSURE. Each party shall hold the Confidential
Information received from the other in strict confidence, will not make any
disclosures (including methods or concepts utilized in the Confidential
Information) without the prior express written consent of the other, except to
employees or consultants (for purposes relating solely to the receiving
party's internal business and data processing needs) who have agreed in writing
to maintain the confidentiality of all Confidential Information in a manner
consistent with this Agreement.
9.3. EXCLUSIONS FROM CONFIDENTIAL INFORMATION DEFINITION.
Items will not be considered to be Confidential Information if (a) already
published or available to the public other than by a breach of this Agreement;
(b) rightfully received from a third party not in breach of any obligation of
confidentiality; (c) independently developed by personnel or agents of one
party
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without access to the Confidential Information of the other; (d) proven to be
already known to the recipient at the time of disclosure; or (e) produced in
compliance with applicable law or a court and provided the receiving party
first gives the disclosing party reasonable notice of such law or order and
gives the disclosing party an opportunity to object to and/or attempt to limit
such production.
9.4 PERMITTED DISCLOSURES. Both parties may disclose to third
parties that VAR is a participant in the Sybase Value Added Remarketer Program,
that VAR is developing a value added software product incorporating Sybase
software programs, and the date such Derivative Product is scheduled by VAR to
be generally available to End Users (unless VAR notifies Sybase in writing that
such availability date is to be treated as Confidential Information). VAR shall
not release the results or any benchmark or other evaluation of the Program to
any third party without the prior written approval of Sybase for each such
release. Neither party shall use one other party's name or refer to the other in
any press release, advertising or marketing literature, without the prior
written approval of the other, except as provided in this Section 9.4.
9.5. EFFECT OF TERMINATION OR EXPIRATION. This Section 9
shall survive any termination or expiration of this Agreement.
10. INFRINGEMENT INDEMNITY.
10.1 SYBASE'S OBLIGATIONS. Subject to the limitations set
forth below, Sybase at its own expense shall (a) defend, or at its option
settle, any claim, suit, or proceeding against VAR on the basis of infringement
of any United States patent, trademark, copyright or trade secret by the Program
or Use thereof, and (b) pay any final judgment entered against VAR on such issue
in any such suit or proceeding defended by Sybase.
10.2. VAR's OBLIGATIONS. The obligations of Sybase under
Section 10.1 above are subject to (a) Sybase having sole control of the defense
and/or settlement of any such claim, suit or proceeding, (b) VAR notifying
Sybase promptly in writing of each such claim, suit or proceeding and giving
Sybase authority to proceed as stated in Section 10.1; and (c) VAR, at Sybase's
request, giving Sybase all information known to VAR relating to such claim, suit
or proceeding and cooperating with Sybase to settle and/or defend any such
claim, suit or proceeding, provided that Sybase shall reimburse VAR for all
reasonable out-of-pocket expenses incurred by VAR in providing such information
and cooperating with Sybase.
10.3 SYBASE'S OPTIONS. If all or any part of the Program is,
or in the opinion of Sybase may become, the subject of any claim, suit or
proceeding for infringement of any United States patent, trademark, copyright
or trade secret, Sybase may, and in the event of any adjudication that the
Program or any part thereof infringes any United States patent, trademark,
copyright or trade secret, or if the licensing or Use of the Program or any
part thereof is enjoined, Sybase shall, at its expense do one of the following
things: (a) procure for VAR the right under such patent, trademark, copyright
or trade secret to Use or sublicense, as appropriate, the Program or the
affected part therof; (b) replace the Program or affected part thereof with
other suitable programs or portions of a program; (c) suitably modify the
Program or affected part thereof to make it non-infringing; or (d) if none of
the foregoing remedies are commercially feasible, refund the aggregate payments
paid by VAR for the Program or the affected part thereof, less reasonable
depreciation for Use.
10.4 LIMITATIONS ON LIABILITY. Sybase shall not be liable for
any costs or expenses incurred by VAR with respect to any infringement claim
without Sybase's prior written authorization. Sybase shall have no obligations
under this Section 10 with respect to any claim to the extent it is based upon
(a) the use of any version of the Program other than a current, unaltered
release of the Program, if such infringement would have been avoided by the use
of a current, unaltered release; or (b) the combination, operation or use of
the Program with software which was not provided by Sybase, if such
infringement would have been avoided in the absence of such
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combination, operation or use; or (c) the use of the Program on or in
connection with a computer system other than the Hardware System without
Sybase's prior written approval.
10.5 EXCLUSIVE REMEDY. This Section 10 states the entire
liability and obligation of Sybase and the exclusive remedy of VAR with respect
to any alleged infringement of a patent, copyright, trademark or trade secret
by the Program or any part thereof.
11. WARRANTY/LIMITATIONS ON LIABILITY.
11.1 WARRANTY. Sybase warrants that it has the right to license
the Program to VAR and that each production version of the Program licensed to
VAR, as updated and when properly used, will operate substantially in conformity
with Sybase published specifications for such version for a period of one (1)
year from the date of shipment of the Primary Copy of such version ? VAR.
Sybase warrants the media on which the Program is delivered to be free of
defects in material and workmanship for a period of ninety (90) calendar days
following the date shipment.
11.2. NO OTHER WARRANTIES. EXCEPT AS EXPRESSLY PROVIDED IN
SECTION 11.1, NO EXPRESS OR IMPLIED WARRANTY IS MADE WITH RESPECT TO THE PROGRAM
OR GOODS OR SERVICES TO BE SUPPLIED BY SYBASE OR ITS SUBSIDIARIES, INCLUDING
WITHOUT LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. NEITHER SYBASE OR ANY OF ITS SUBSIDIARIES WARRANTS THE
RESULTS OF ANY PROGRAM OR SERVICES OR THAT ALL ERRORS IN THE PROGRAM WILL BE
CORRECTED, OR THAT THE FUNCTIONALITY CONTAINED IN THE PROGRAM WILL MEET VAR'S
REQUIREMENTS.
11.3. LIMITATION ON LIABILITY. EXCEPT AS EXPRESSLY PROVIDED
IN SECTION 10, THE TOTAL LIABILITY, IF ANY, OF SYBASE AND ITS SUBSIDIARIES,
INCLUDING BUT NOT LIMITED TO LIABILITY ARISING OUT OF CONTRACT, TORT, BREACH OF
WARRANTY, INFRINGEMENT OR OTHERWISE SHALL NOT IN ANY EVENT EXCEED THE LICENSE
FEES PAID BY VAR FOR THE AFFECTED PROGRAM(S) OR $1,000,000, WHICHEVER IS LESS.
IN NO EVENT SHALL SYBASE OR ITS LICENSORS BE LIABLE FOR LOSS OF PROFITS, LOSS
OR INACCURACY OF DATA, OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL
DAMAGES, EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THIS
SECTION 11.3 SHALL SURVIVE TERMINATION OF THIS AGREEMENT.
12. MARKS.
12.1. OWNERSHIP. All trademarks, service marks, trade names,
logos or other words or symbols identifying the Programs or Sybase's business
(the "Marks") are and will remain the exclusive property of Sybase or its
licensors. VAR will not take any action that jeopardizes Sybase's or its
licensors' proprietary rights or acquire any right in the Marks except as
specifically set forth in Section 12.2 below. VAR will not register, directly
or indirectly, any trademark, service mark, trade name, copyright, company name
or other proprietary or commercial right which is identical or confusingly
similar to the Marks or which constitute a translation into other languages.
Upon Sybase's request, VAR will execute the instruments that may be appropriate
to register, maintain or renew the registration of the Marks in Sybase's or its
licensor's name within countries in which VAR licenses the Derivative Product.
12.2. USE. VAR will use the Marks exclusively to identify the
portions of the Derivative Product licensed from Sybase and shall not use the
Marks in combination with any trademarks, service marks, or logos of VAR. Any
such use of the Marks will clearly identify Sybase or, if applicable, its
licensors as the owner of the Marks, conform to Sybase's then current trademark
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and logo guidelines, and otherwise comply with any local notice or marking
requirement contemplated under the laws of the country in which VAR licenses
the Derivative Product. Before publishing or disseminating any advertisement or
promotional materials bearing a Mark, VAR will deliver a sample of the
advertisement or promotional materials to Sybase for prior approval. If Sybase
notifies VAR that the use of the Mark is inappropriate, VAR will not publish or
otherwise disseminate the advertisement or promotional materials until they
have been modified to Sybase's satisfaction.
12.3. INFRINGEMENT. VAR will immediately notify Sybase if VAR
learns (a) of any potential infringement of the Marks by a third party, or (b)
that the use of the Marks may infringe the proprietary rights of a third party.
Sybase will determine the steps to be taken under these circumstances. In
connection with any such potential infringement of or by the Marks, VAR will (i)
provide Sybase with the assistance that Sybase may reasonably request and (ii)
not take steps on its own without Sybase's prior approval.
13. GENERAL PROVISIONS.
13.1. RELATIONSHIP BETWEEN THE PARTIES. VAR will in all
matters relating to this Agreement act as an independent contractor. Nothing in
this Agreement shall be deemed to constitute VAR as a partner, joint venturer,
franchisee, agent or employee of Sybase. Neither party will represent that it
has any authority to assume or create any obligation, express or implied, on
behalf of the other party, or to represent the other party. VAR shall be
responsible for all expenses incurred by VAR in the course of exercising any
rights or responsibilities accepted by VAR under this Agreement.
13.2. CALIFORNIA LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED UNDER THE LAWS OF THE STATE OF CALIFORNIA, EXCLUDING ITS CONFLICT OF
LAWS RULES. IT SHALL NOT BE GOVERNED BY THE UNITED NATIONS CONVENTION ON THE
INTERNATIONAL SALE OF GOODS, THE APPLICATION OF WHICH IS EXPRESSLY EXCLUDED.
VAR SUBMITS TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED WITHIN
THE COUNTY OF ALAMEDA OR SAN FRANCISCO WITHIN THE STATE OF CALIFORNIA. SERVICE
OF PROCESS COMMENCING ANY SUIT RELATING TO THIS AGREEMENT IN SUCH COURTS MAY BE
MADE ON EITHER PARTY IN THE MANNER SPECIFIED IN SECTION 13.4 BELOW FOR NOTICE.
13.3. SEVERABILITY. If any provision of this Agreement is
held by a court of competent jurisdiction to be unenforceable, such
unenforceability shall not affect the enforceability of the remaining provisions
of this Agreement, and the parties shall substitute for the affected provision
an enforceable provision which approximates the intent and economic effect of
the affected provision as closely as possible.
13.4 NOTICES. All notices relating to this Agreement shall be
in writing and delivered by courier or hand or sent to the other party by first
class certified prepaid mail with return receipt requested to the address of
such party specified on the first page of this Agreement (addressed in the case
of Sybase to the attention of its General Counsel) or such other address as may
be provided by such other party in accordance with this Section, and shall be
deemed given upon receipt.
13.5 NON-ASSIGNMENT. This Agreement may not be assigned,
sublicensed or otherwise transferred by VAR, whether by operation of law or
otherwise, without Sybase's prior written consent, provided that VAR may assign
this Agreement upon notice to Sybase in instances in which such assignment is
to an entity which acquires all or substantially all of the business of VAR,
whether by merger, consolidation, or acquisition of assets, provided further
that such assignee is not directly or indirectly controlled by a competitor of
Sybase (i.e. a vendor of database
13
<PAGE> 14
management software). VAR shall give Sybase written notice of any assignment or
transfer not requiring Sybase's consent.
13.6. WAIVER. A waiver of a breach or default under this
Agreement shall not be a waiver of any other default. Failure or delay by
either party to enforce compliance with any term or condition of this Agreement
shall not constitute a waiver of such term or condition.
13.7. PAST DUE AMOUNTS; ATTORNEYS' FEES. Past due amounts
owing from VAR shall bear interest at a rate equal to 1% per month or the
maximum rate permissible under applicable law, whichever is less. In the event
of any undertaking to collect fees owing hereunder or any claim, suit or other
legal proceeding arising under or related to this Agreement, the prevailing
party shall be entitled to recover from the other party its reasonable costs
incurred in such proceeding including attorneys' fees and disbursements). For
purposes of this section, the term "prevailing party" shall mean the party who
obtains substantially the relief sought by such party in such claim, suit or
other legal proceeding, whether by settlement, summary judgment, judgment
or otherwise.
13.8. INJUNCTION RELIEF. VAR acknowledges that its obligations
under Sections 2, 3, 6, 8, 9 and 12 of this Agreement are of a unique character
and agrees that any breach of such provisions will result in irreparable and
continuing damage to Sybase for which there will be no adequate remedy in
damages and in the event of such breach, Sybase will be entitled to injunctive
relief and/or a decree for specific performance and such further relief as may
be proper.
13.9. UNITED STATES EXPORT REGULATIONS. VAR agrees that it
will comply in all respects with any governmental laws, orders or other
restrictions on the export of the Program and the Derivative Product (and
related information and documentation) which may be imposed from time to time
by the governments of the United States, Canada and the country to which the
program is shipped by Sybase ("Export Requirements"). VAR will take all
actions which may be reasonably necessary to assure that no End User or
Distributor contravenes the Export Requirements. This Section shall survive
the expiration or termination of this Agreement.
13.10. RESTRICTED RIGHTS. If any license described herein is
acquired under a U.S. Government contract, Use, duplication or disclosure by
the U.S. Government is subject to restrictions as set forth in subparagraphs
(b)(3)(ii) and (c)(1)(ii) of 252.227-7013 for Department of Defense contracts
as set forth in 52.227-19 (a)-(d) for civilian agency contracts. All technical
data relating to the Program is subject to limited rights so long as this
Agreement is in effect. Sybase reserves all rights under the copyright laws of
the United States.
13.11. FORCE MAJEURE. No delay, failure or default in
performance of any obligation of either party hereunder, excepting all
obligations to make payments hereunder, shall constitute a breach of this
Agreement to the extent caused by force majeure.
13.12. ENTIRE AGREEMENT. This Agreement, together with the
Exhibits and any Addenda hereto, and all supplemental Exhibits As signed by
both parties and Purchase Orders constitute the entire agreement of the parties
and supersede all previous communications, representations, understandings or
agreements with respect to the subject matter hereof. A facsimile of a signed
copy of this Agreement received by Sybase may be relied upon as an original and
in the event of any inconsistency between such facsimile and a subsequently
received hard copy, the facsimile shall prevail. This Agreement may be
modified only by written agreement. In the event of any inconsistency between
this Agreement and a Purchase Order issued hereunder, this Agreement shall
prevail unless expressly otherwise agreed upon by the parties in writing.
Purchase Orders shall be binding upon Sybase only with respect to quantities
ordered, support, training, consulting and other fees stated, site for
installation and delivery dates. The printed terms on any such Purchase Order
shall be void and of no effect.
14
<PAGE> 15
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by the respective authorized representatives. This Agreement may
be executed in counterparts, each which shall be deemed an original, but all of
which together shall constitute one and the same agreement.
SYBASE, INC. VAR:
By /s/ Daniel R. Carl By /s/ Michael R. Newes
------------------------------- ------------------------------
(Authorized Signatory) (Authorized Signatory)
Name Daniel R. Carl Name Michael R. Newes
--------------------------- ---------------------------
Title ASST. SECRETARY Title Executive Vice President
--------------------------- ---------------------------
Date Date 10/13/93
--------------------------- ---------------------------
<PAGE> 16
ADDENDUM TO VALUE ADDED REMARKETER AGREEMENT
This Addendum ("Addendum") entered into on 10/13, 1993, supplements and
amends the terms of the Value Added Remarketer Agreement ("Agreement") of even
date herewith between Sybase, Inc. ("Sybase") and Phoenix International LTD,
Inc. ("VAR"). Capitalized terms not otherwise defined herein shall have the
meaning set forth in the Agreement. In the event of a conflict between this
Addendum and the Agreement, the terms and conditions of this Addendum shall
prevail.
VAR and Sybase agree as follows:
1. The first sentence of Section 2.3 is deleted.
Except as amended above, the Agreement shall remain in full force and
effect.
SYBASE, INC.
INC.
By: /s/ Daniel R. Carl By: /s/ Michael R. Newes
--------------------------- -----------------------------
Name: Daniel R. Carl Name: Michael R. Newes
------------------------- ---------------------------
Title: ASST. SECRETARY Title: Executive Vice President
------------------------ --------------------------
Date: Date: 10/13/93
------------------------ --------------------------
<PAGE> 17
Schedule of Exhibits
Exhibit A - Value Added Remarketer Licensed Programs
Exhibit B - Description of Derivative Product and List of Distributors
Exhibit C - Mandatory Terms of End User License
Exhibit D - Royalty Schedule
Exhibit E - Monthly Sublicense Fee (Royalty) Report
Exhibit F - Commission Application
Exhibit G - Approved Countries For Sublicensing
<PAGE> 18
XXX = Confidential Treatment Requested
Contract Date:
---------------------------------
EXHIBIT A VALUE ADDED REMARKETER - LICENSED PROGRAMS
<TABLE>
<CAPTION>
Hardware Make & Model HP 9000/8xx Name of VAR: Phoenix International Contact: XXXXXXXXXXXXXXXXX
----------------- --------------------------------- ---------------------
Serial # HP UX Site Address: 475 Montgomery Place Phone: (919) 791-9200
----------------- ------------------------------ ---------------------
or Hardwware not yet delivered to VAR Allamonte Springs, FL 32714 Contact: XXXXXXXXXXX
(VAR agrees to send Serial # to Sybase ------------------------------------------- ---------------------
once delivered) ------------------------------------------- Phone: (919) 791-9200
Operating System Software Corp. Contact: Mike Newes ---------------------
----------------- ----------------------------- (Place Contact information on
(407) 869-1442 additional sheet as needed)
-----------------------------
In exchange for the Program licenses and services listed below, including
Restricted licenses, VAR agrees t pay to Sybase the following fees, due net
thirty (30) days from the date of shipment for Primary Copy license and support
fees, and due net thirgy (30) days form the date of Sybase's invoice for
Secondary Copy license and support fees, and for all other fees. All licenses
(other than for Microsoft SQL Server) shall be subject to the terms of the
Sortware License Agreement referenced above.
Program Quantity If Server or Primary or Maximum List Price Discounted First Year Additional
Product# Gateway, no. Secondary Number License Fees** License Fees Support Fees Consulting
& Product Name* of Processors Copy of Users (including Fees **** (Specify pre-
in Hardware ("P" or "S") applicable paid Value)
on which Access Fees)
Program will
run**
<S> <C> <C> <C> <C> <C> <C> <C> <C>
17200 SQL Server 1 P XXX $ 11,880.00 XXXXXXXXX
- ----------------- ---------- ----------- -------- ------- ----------- ----------- ----------- ----------
17230 Open Client 1 P XXX $ 1,490.00 XXXXXXXXX
- ----------------- ---------- ----------- -------- ------- ----------- ----------- ----------- ----------
98111 Support 2 contacts XXXXXXXXX
- ----------------- ---------- ----------- -------- ------- ----------- ----------- ----------- ----------
Consulting 1 week
- ----------------- ---------- ----------- -------- ------- ----------- ----------- ----------- ----------
Education
- ----------------- ---------- ----------- -------- ------- ----------- ----------- ----------- ----------
- ----------------- ---------- ----------- -------- ------- ----------- ----------- ----------- ----------
- ----------------- ---------- ----------- -------- ------- ----------- ----------- ----------- ----------
- ----------------- ---------- ----------- -------- ------- ----------- ----------- ----------- ----------
- ----------------- ---------- ----------- -------- ------- ----------- ----------- ----------- ----------
- ----------------- ---------- ----------- -------- ------- ----------- ----------- ----------- ----------
- ----------------- ---------- ----------- -------- ------- ----------- ----------- ----------- ----------
- ----------------- ---------- ----------- -------- ------- ----------- ----------- ----------- ----------
Program Additional Additional Restricted
Product# Education Documentation Release?
& Product Name* (Specify (Specify pre- (Y of N)
pre-paid paid Value)
Value)
17200 SQL Server
- ----------------- ---------- ----------- -------- ------- ----------- ----------- ----------- ----------
17230 Open Client
- ----------------- ---------- ----------- -------- ------- ----------- ----------- ----------- ----------
98111 Support
- ----------------- ---------- ----------- -------- ------- ----------- ----------- ----------- ----------
Consulting
- ----------------- ---------- ----------- -------- ------- ----------- ----------- ----------- ----------
Education XXXXXXXXX
- ----------------- ---------- ----------- -------- ------- ----------- ----------- ----------- ----------
- ----------------- ---------- ----------- -------- ------- ----------- ----------- ----------- ----------
- ----------------- ---------- ----------- -------- ------- ----------- ----------- ----------- ----------
- ----------------- ---------- ----------- -------- ------- ----------- ----------- ----------- ----------
- ----------------- ---------- ----------- -------- ------- ----------- ----------- ----------- ----------
- ----------------- ---------- ----------- -------- ------- ----------- ----------- ----------- ----------
- ----------------- ---------- ----------- -------- ------- ----------- ----------- ----------- ----------
- ----------------- ---------- ----------- -------- ------- ----------- ----------- ----------- ----------
</TABLE>
*If any Microsoft SQL Server products are included on this Exhibit A, they will
be licensed subject to the license agreement printed on the envelope or
accompanying the package in which they are shipped. VAR acknowledges that
license and support fees paid by VAR for the Microsoft SQL Server Program do not
entitle VAR to receive maintenance or new feature releases of such Program.
**VAR only has the right to Use SQL Server, Open Server and/or Net Gateway on
one processor of a multiprocessor CPU unless applicable SMP Access Fees are paid
for additional processors.
***If Education, Specify prepaid value of training.
EXHIBIT A CONTINUED ON NEXT PAGE Value Added Remarketer
Agreement Rev. 3096
Exhibits
<PAGE> 19
XXX = Confidential Treatment Requested
Contract No:
-----------------------------
Contract Date: 10/13/93
-----------------------------
(CONTINUATION OF EXHIBIT A)
<TABLE>
<S> <C> <C>
TOTAL DEVELOPMENT LICENSE FEES (List Price)* XXXXXXXXXX
----------
LESS 40% DEVELOPMENT DISCOUNT XXXXXXXXXXX
----------
SUBTOTAL (DISCOUNTED OR NET XXXXXXXXXXXXX
DEVELOPMENT LICENSE FEES) ----------
NET EDUCATION FEES* XXXXXXXXXXXXX
----------
NET CONSULTING FEES* Up to ten (10) days of consulting fees if ordered on the
----------(C) Exhibit A dated concurrently with the VAR Agreement will
also be counted as Prepaid Royalties)
NET DOCUMENTATION FEES $ XXXX(D)
----------
FIRST YEAR SUPPORT FEES* XXXXXXXXXX(E)
----------
SUBTOTAL (TOTAL DEVELOPMENT PACKAGE): XXXXXXXXXX(F) (A+B+C+D+E)
----------
CASH PREPAID ROYALTIES (G)
----------
TOTAL INITIAL PAYMENT (Net 30) XXXXXXXXXX(H) (F+G, this amount must be equal the amount shown on
---------- Purchase Order)
TOTAL PREPAID ROYALTIES (G PLUS THAT PORTION OF C WHICH MAY BE COUNTED AS PREPAID ROYALTIES $
---------------
</TABLE>
NOTES: A one-time support fee equal to XXXXXXXXXXXXXXXXXXXXXXXXXXXXX shall be
paid to Sybase upon each copy of the Derivative Product licensed if VAR desires
to incorporate into such copy any future maintenance or enhancement releases of
the embedded Program; and (2) the (Total Prepaid royalties" can only be applied
against Derivative Product royalties owing under Section 3.4, and not against
first year support fees or Runtime Support Fees, Development Porting License
fees, training fees, consulting fees or any other fees owning under this
Agreement.
SYBASE, INC.: Name of VAR Phoenix International Limited
------------------------------------------
By /s/ Daniel R. Carl By /s/ Michael R. Newes
----------------------- ------------------------------------------
(Authorized Signature) (Authorized Signature)
Name DANIEL R. CARL Name Michael R. Newes
----------------------- ------------------------------------------
Title ASST. SECRETARY Title Executive Vice President
----------------------- ------------------------------------------
Date of this Exhibit 10/13/93
------------------------------------------
Value Added Remarkerter Agreement Rev.3096
Exhibits
<PAGE> 20
Exhibit B
DESCRIPTION OF DERIVATIVE PRODUCT AND LIST OF DISTRIBUTORS
Name of VAR: Phoenix International, Ltd.
--------------------------------------------------------------------
VAR's Mailing Address: 475 Montgomery Place #200
----------------------------------------------------------
Altamonte Springs, FL 32714
----------------------------------------------------------
Primary Contact: Mike Newes
----------------------------------------------------------------
Address: Same
----------------------------------------------------------------
----------------------------------------------------------------
Sales/Marketing Contact:
---------------------------------------------------------
Same
---------------------------------------------------------
---------------------------------------------------------
Financial Contact: Tracy Toole
--------------------------------------------------------------
Same
--------------------------------------------------------------
--------------------------------------------------------------
Name and Description of Derivative Product(s) Embedding Programs (Be specific,
e.g., Client/Server Financial Accounting Package: integrated general ledger,
accounts payable and accounts receivable):
Product 1: Integrated Client/Server Banking Software Package, including
-----------------------------------------------------------------
Relationship Information Management, loans & deposits,
-----------------------------------------------------------------
transaction processing, and Executive Information System
-----------------------------------------------------------------
-----------------------------------------------------------------
Product 2:
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
Product 3:
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
Product 4:
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
Product 5:
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
(If more than five products, attach additional sheets).
<PAGE> 21
(CONTINUATION OF EXHIBIT B)
<TABLE>
<CAPTION>
List of VAR's Distributors: All Sales direct at this time
<S> <C>
Company____________________________ Company__________________________
Contact Name_______________________ Contact Name_____________________
Address____________________________ Address__________________________
City_______________________________ City_____________________________
Phone______________________________ Phone____________________________
Territory__________________________ Territory________________________
Company____________________________ Company__________________________
Contact Name_______________________ Contact Name_____________________
Address____________________________ Address__________________________
City_______________________________ City_____________________________
Phone______________________________ Phone____________________________
Territory__________________________ Territory________________________
Sybase Channels Approval:_______
SYBASE, INC: VAR:
By /s/ Daniel R. Carl By /s/ Michael R. Newes
--------------------------------- -----------------------------
(Authorized Signatory) (Authorized Signatory)
Name Daniel R. Carl Name Michael R. Newes
-------------------------------- ----------------------------
Title Assistant Secretary Title Executive Vice President
------------------------------ --------------------------
Date Date 10/13/93
------------------------------- ----------------------------
</TABLE>
<PAGE> 22
EXHIBIT C
Mandatory Terms of End User Licenses
All license agreements for the sublicensing of the Derivative Product
(the "Licensed Copy") all include substantially the following provisions:
(1) Only a non-exclusive, nontransferable right to use each Licensed
Copy is granted to an end User (and if VAR is under Program 1 then such right
is granted only on a single computer system which is designed by serial number
or equivalent). No right to use other than an Embedded Run-Time version of the
Sybase Programs is granted; an "Embedded Run-Time Version" shall mean a
version of the Sybase Programs linked to or embedded in VAR's application code
in such a way that structually by license restrictions, it (a) precludes use of
the Program to modify applications except as permitted by clause c of this
paragraph; (b) precludes use of the Program to develop applications, except for
support writing and decision support solely in conjunction with the Derivative
Product; (c) precludes general purpose access to command verbs in the Program
except that the End User may, within the scope of and under control of the
Derivative Product, create or alter tables, columns or rows and add fields to
existing tables, as necessary to implement, operate and administer the
Derivative Product; (d) precludes use of any command verbs in the Program to
create new schemas or databases; and (e) precludes use of the Program or third
party application development tools to modify or enhance listing screens or
forms delivered as part of the Derivative Product, or to create new forms,
except as necessary to implement and operate the Derivative Product.
(2) VAR and/or its licensors retain all title to the Licensed Copy,
and all copies thereof, and no title to the Licensed Copy, or any intellectual
property therein, is transferred to the licensee;
(3) The licensee may not copy the Licensed Copy, except for backup and
archival purposes only, and the licensee shall include on all copies of the
Licensed Copy all copyright and other monetary notices or legends included on
the Licensed Copy when it was shipped to such licensee;
(4) The licensee agrees not to reverse assemble, decompile or
otherwise attempt to derive source code from the Licensed Copy;
(5) The licensee agrees to comply with all export and re-export
restrictions and regulations ("Export Restrictions") imposed by the
governments of the United States or the country to which the Licensed Copy is
shipped to licensee. Licensee will not commit any act or omission which will
result in a breach of any such Export Requirements; the licensee agrees that it
will comply in all respects with any governmental laws, orders or other
restrictions on the export of the Sybase Program and the Licensed Copy (and
related information and documentation) which may be imposed from time to time
by the governments of the United States and Canada or the country to which the
Sybase Program is shipped by Sybase ("Export Requirements"). This Section
shall survive the expiration or termination of the Licensed Copy license
agreement.
(6) Although copyrighted, the Licensed Copy is unpublished and
contains proprietary and confidential information of VAR and its licensors and
is considered by VAR and its licensors to constitute valuable trade secrets.
The licensee will hold the Licensed Copy in confidence and shall protect the
Licensed Copy with at least the same degree of care with which the licensee
protects its own similar confidential information;
(7) VAR's licensors of software included in the Licensed Copy are
direct and intended third party beneficiaries of the license agreement and may
enforce it directly against the licensee; provided however that none of such
licensors shall be liable to the licensee for any general, special, direct,
indirect, consequential, incidental or other damages arising out of or related
to the Licensed Copy; and
(8) Upon termination of the license for the Licensed Copy, the
licensee shall return to VAR all copies of the Licensed Copy, or certify to VAR
that the licensee has destroyed all such copies.
<PAGE> 23
Exhibit E
PROGRAM 1
Monthly Sublicense Fee (Royalty) Report
Month of ______________, 199_
<TABLE>
<CAPTION>
Sybase Hardware Sybase/ Sybase
Customer Name and Embedded & Operating Machine Class Derivative List Price of
Address Programs** System & Users Products Programs
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Acme SQL Server IBM RS/6000 C 16-32 Acme GL $46,910
San Francisco, CA Open Client AIX C 16-32 $18,760
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
Total List Price: 1)
- ------------------------ ----------------
By: Subtract VAR Discount ___% 2)( )
--------------------- (See Exhibit D-1) ----------------
Sublicense Fees Due: 3)
----------------
- ------------------------
(Signature) Beginning Prepay Balance: 4)
----------------
- ------------------------
(Please Print) Sublicense Fees Against Prepay: 5)
----------------
- ------------------------ Ending Prepay Balance: 6)
----------------
No:
--------------------- Net Sublicense Fees Due: 7)
(line 3 - 5) ----------------
Must report monthly from start date of VAR Agreement,
whether or not shipment has occurred. One-time Runtime Support Fee: 8)
(___% of line 3) ----------------
[Unreadable text] any Evaluation Copies that have
Distributed or Full-Use Leveraged Copies. TOTAL PAYMENT DUE*** 9)
There is no charge for these copies (line 7 + 8) ----------------
</TABLE>
<PAGE> 24
Exhibit F
COMMISSION APPLICATION
FOR END USER FULL DEVELOPMENT
UPGRADE OR SALE
Name of VAR ____________________________________________
VAR Contact Name ____________________________________________
End User ____________________________________________
End User Address ____________________________________________
____________________________________________
End User Telephone ____________________________________________
End User Contact Name ____________________________________________
Fees Situation (i.e., why____________________________________________
does VAR believe it is
Entitled to a commission)____________________________________________
____________________________________________
____________________________________________
Derivative Product installed at customer site prior to or concurrently with
upgrade or sale?
Yes ______
No ______
Was Derivative Product reason for upgrade or sale? Yes ______
No ______
Net revenue to Sybase or full development sale or upgrade $__________
Commission $________
SIGNATURES
VAR Applicant __________________________________________
Sybase Territory DM __________________________________________
Sybase Business Partner
Sales Manager __________________________________________
Please complete application and return to your Sybase Representative. In order
for VAR to claim a commission, this application must be submitted to Sybase
prior to the licensing of the upgrade or full sublicense.
<PAGE> 25
EXHIBIT G
LIST OF APPROVED COUNTRIES FOR SUBLICENSING
Abu Dhabi Kuwait
Argentina Luxembourg*
Australia Malaysia
Austria Mexico
Belgium* Netherlands*
Bolivia New Zealand
Brazil Norway
Canada Panama
Chile Paraguay
Colombia Peru
Costa Rica Philippines
Denmark* Portugal*
Equador Saudi Arabia
Greenland Singapore
France* South Africa
Germany* Spain*
Greece* Sweden
Hong Kong Switzerland
India Taiwan
Indonesia Turkey
Ireland* United Kingdom
Israel United States
Italy* Uruguay
Japan Venezuela
Korea (South)
* Members of the European Community
<PAGE> 1
EXHIBIT 10.28
UNISYS CORPORATION
SOFTWARE LICENSE AGREEMENT
WITH
PHOENIX INTERNATIONAL LTD, INC.
<PAGE> 2
SOFTWARE LICENSE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1 - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2 - GRANT OF LICENSE; UNDERTAKING TO
PROMOTE AND MARKET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3 - EXCLUSIVITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 4 - NO COMPETING PRODUCTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 5 - TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6 - PAYMENT/INVOICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 7 - DELIVERABLES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 8 - CHANGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 9 - SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 10 - NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 11 - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
11.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
11.3 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 12 - TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 13 - CONFIDENTIAL INFORMATION AND DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 14 - POWER AND AUTHORITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 15 - LIMITED WARRANTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 16 - DISCLAIMER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 17 - LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 18 - TITLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 19 - OTHER INTELLECTUAL PROPERTY MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 20 - SOURCE CODE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 21 - FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 22 - ASSIGNMENT, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 23 - GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
23.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
23.2 Captions/Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
23.3 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
23.4 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
23.5 Independent Contractors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
23.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
23.7 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
23.8 Risk of Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
23.9 Entire Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
23.10 Notice of Delay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
23.11 Compliance with Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
23.12 Access to Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 24 - ADDENDA/ATTACHMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 25 - SURVIVAL OF PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 26 - ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
</TABLE>
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<PAGE> 3
ADDENDUM A PACKAGE AND DOCUMENTATION
ADDENDUM B SCHEDULE FOR ROYALTIES AND PARTICIPATION FEES
ADDENDUM C TERRITORY
ADDENDUM D THIRD-PARTY MATERIALS
ADDENDUM E EXCEPTIONS TO EXCLUSIVITY
ADDENDUM F TRAINING OBJECTIVES
ADDENDUM G DESCRIPTION OF SUPPORT/MAINTENANCE
ii
<PAGE> 4
SOFTWARE LICENSE AGREEMENT
This Agreement is entered into as of this _________ day of
_____________, 19__ (hereinafter the "Effective Date") by and between Unisys
Corporation (hereinafter referred to as "Unisys"), with offices at 7700 West
Camino Real, Boca Raton, Florida 33433-5543; and Phoenix International Ltd,
Inc. (hereinafter referred to as "Phoenix"), with offices at 900 Winderley
Place, Suite 140, Maitland, Florida 32751.
WITNESSETH THAT:
WHEREAS, Phoenix owns or (subject to Section 18.1 below) has the right
to license computer software programs and the documentation related thereto;
and
WHEREAS, Unisys desires to obtain certain rights, as hereinafter
described, in said programs and their related documentation; and
WHEREAS, Phoenix is willing to grant said rights to said programs and
their related documentation to Unisys;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto, intending to be legally bound by the provisions
hereof, hereby agree as follows:
SECTION 1 - DEFINITIONS
Words shall have their normally accepted meanings as employed in this
Agreement. The terms "herein" and "hereof", unless specifically limited, shall
have reference to the entire Agreement. The word "shall" is mandatory, the
word "may" is permissive, and the words "includes" and "including" are not
limiting. The following terms shall have the described meaning:
1.1 "Affiliate" shall mean any corporation, partnership or other entity
that is in or under the direct or indirect control of or with a party
(but only so long as it remains under the direct or indirect control
of such party), and "control" shall exist whenever there is an
ownership, profits, voting or similar interest representing at least
50% of the total interests of the pertinent entity then outstanding.
1.2 "Changes" shall mean (1) localizations, translations (including
Portuguese translations, if and when produced), nationalizations for
foreign countries with respect to a referenced work (i.e., Package or
Documentation, as applicable), (2) revisions to a referenced work
(i.e., Package
1
<PAGE> 5
or Documentation, as applicable), including Corrections, Enhancements,
Improvements, Updates or Upgrades, and (3) any other derivative work
or collective work which, in whole or in part, is based upon or
contains the referenced work (i.e., Package or Documentation, as
applicable).
1.3 "Confidential Information" shall mean any competitively sensitive or
secret business, marketing or technical information of a Disclosing
Party. (References to the "Disclosing Party" and the "Recipient" are
defined in Section 13). The Disclosing Party shall take reasonable
steps to call the Recipient's attention to the confidentiality of its
Confidential Information at the time of disclosure, including by
legending as "Confidential" documentation and media containing
Confidential Information, and summarizing in writing oral disclosures
of Confidential Information so the summaries are provided following
disclosure as evidence of the Confidential Information that has been
imparted. In all cases, however, Phoenix's Confidential Information
shall include the Package (in Object Code and Source Code form) and
Documentation, including all Changes. Confidential Information shall
not include, however, information which (i) is generally known to the
public or readily ascertainable from public sources (other than as a
result of a breach of confidentiality by the Recipient or any person
or entity associated with the Recipient), (ii) is independently
developed without reference to or reliance on any Confidential
Information of the Disclosing Party, as demonstrated by written
records in the Recipient's possession (which shall be provided to the
Disclosing Party at the Disclosing Party's request), or (iii) is
obtained from an independent third party who created or acquired such
information without reference to or reliance on Confidential
Information of the Disclosing Party, as demonstrated by written
records in the Recipient's possession (which shall be provided to the
Disclosing Party at the Disclosing Party's request).
1.4 "Conversion" shall mean conversion and formatting of an End User's
existing data for use with the Package.
1.5 "Correction" shall mean a change made in the Package to correct errors
or defects in the Package or to make the Package conform to Phoenix's
then current technical specifications.
1.6 "Documentation" shall mean the technical and operating documentation
relating to the Package provided to Unisys by Phoenix for purposes of
this Agreement. References to the Documentation include all Changes
provided to Unisys by Phoenix or provided to End Users by Unisys or
otherwise made or obtained by or for Unisys or any End Users.
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<PAGE> 6
1.7 "End User" shall mean a banking, lending or finance company organized
and doing business primarily in the Territory who has executed a
License Agreement.
1.8 "Equipment" shall mean equipment (as will be mutually identified, but
initially to be 4 personal computers) required by Phoenix to support
Unisys' designated platform (exclusive of Hewlett-Packard equipment),
plus any further components or devices reasonably requested by Phoenix
in the future to support Upgrades.
1.9 "Enhancement" shall mean a new function or feature for any portion of
the Package which provides a new capability which the previous
releases or versions of the Package did not have and which may be
incorporated into the Package by modification to the then existing
programs or by development of new programs.
1.10 "Foreign Branches" shall mean banking, lending or finance companies
which operate in the Territory but are owned or controlled by banks
which have headquarters or principal operations outside the Territory.
1.11 "Gross Proceeds" shall mean all payments made by an End User in the
nature of license or branch fees, and support or maintenance fees
(regardless of whether so denominated). For purposes of calculating
royalties and participations due Phoenix based on Gross Proceeds from
any source, such payments shall be reduced by (a) excise, property,
VAT, sales, use and other similar taxes collected from an End User and
paid by Unisys (or, as applicable, an Affiliate, subcontractor, agent
or distributor acting under Unisys' authority to the extent permitted
under Section 22 hereof), and (b) customs, import or export, duties,
levies, tariffs, or other similar charges imposed by any jurisdiction
outside the United States of America incurred by Unisys (or, as
applicable, an Affiliate, subcontractor, agent or distributor acting
under Unisys' authority to the extent permitted under Section 22
hereof) for the licenses, deliveries or services to which such fees
relate, all of which shall be the sole responsibility of Unisys or the
applicable End User.
1.12 "Hold-Out Accounts" shall mean the existing and prospective customers
listed in Part III of Appendix E hereto. If a Hold-Out Account is
referred by Phoenix to Unisys in accordance with Section 3.2 hereof,
then the Hold-Out Account shall become a Pre-Qualified End User.
1.13 "Improvement" shall mean an addition or change to any portion of the
Package which is intended to or which does improve the performance of
the Package or any portion thereof or which is a replacement for any
such portion.
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<PAGE> 7
1.14 "License Agreement" shall mean an agreement directly between an End
User and Unisys (or an Affiliate, subcontractor, agent or distributor
acting under Unisys' authority to the extent permitted under Section
22 hereof) containing terms and conditions acceptable to Phoenix for
the sublicense and use of the Package by such End User. Phoenix and
Unisys shall periodically agree on the standard form of the License
Agreement. The License Agreement shall provide that Unisys has sole
authority for establishing and collecting fees and charges thereunder
and shall provide that Unisys has sole responsibility for providing
Support Services, except for those limited functions for which Phoenix
agrees to be responsible hereunder. The License Agreement shall in
all cases contain provisions acceptable to Phoenix regarding
confidentiality, ownership by Phoenix and protection of all applicable
intellectual property rights, limitation of liability, and provisions
permitting the End User to use the Package only for its own internal
banking, lending and finance operations (the "Essential Provisions").
The License Agreement shall also specify, as a further Essential
Provision, unless Unisys concludes on a case-by-case basis that such
provision is not permitted by laws governing the License Agreement
(and it so advises Phoenix prior to executing the applicable License
Agreement), that the End User's right to possess and use the Package
and Documentation shall automatically cease if the End User ceases to
obtain or pay for Support Services from a provider thereof authorized
by Phoenix. The License Agreement may provide for a sale, lease, or
other transaction between Unisys and each applicable End User, so long
as the Essential Provisions are applicable and effective. References
herein to the sale, lease, or sublicense of the Package or
Documentation shall be collectively construed to mean the transaction
effected by the License Agreement, including such Essential
Provisions. Unisys shall obtain Phoenix's written consent before
including terms in the License Agreement which permit use of the
Package and Documentation by branches and affiliates of an End User
located outside the Territory.
1.15 "Object Code" shall mean the machine executable form of the Package
which results from the compilation and/or assembly of Source Code.
1.16 "Offshore Banks" shall mean banking, lending or finance companies
doing business primarily in English and U.S. dollars, typically
chartered under the laws of a country different from the country where
accounts originate, and having a general purpose of permitting
deposits to be held or invested outside the country where the accounts
originate.
1.17 "Package" shall mean the most current version of Phoenix's Retail
Banking System, as described more specifically in Addendum A hereto.
Except for provisions regarding title, confidentiality, ownership
rights, or protection of applicable
4
<PAGE> 8
intellectual property, and unless otherwise expressly stated herein,
references to the Package shall include only the Object Code (machine
readable) version of the Package. References to the Package include
all Changes provided by Phoenix to Unisys pursuant to Sections 8 or 9
hereof (subject to the fees or other charges that apply for such
Changes, as stated in such provisions), or provided by Unisys to End
Users, or otherwise made or obtained by or for Unisys or any End
Users.
1.18 "Personnel" shall mean individuals who are employees of the referenced
party or its Affiliates or are under contract to provide services
under the direction and control of the referenced party or its
Affiliates which services are of a kind which are generally performed
by employees of the referenced party or its Affiliates. Professional
consultants and individuals engaged to perform design or development
services for the benefit of any person or entity other than the
referenced party and its Affiliates (including services performed for
such individuals' own account) are not included as Personnel.
1.19 "Pre-Qualified End Users" shall mean the prospective End Users
identified in Part II of Addendum E hereto.
1.20 "SFB Product" means (1) the mainframe-based software owned by Unisys
and licensed by Unisys in the Territory on the Effective Date,
including any future version of that software so long as it continues
to be specifically mainframe-based (as opposed to a distributed
application system, or client-server system) and contains
substantially the code and provides substantially the features present
in the SFB Product as it exists on the Effective Date, and (2) with
respect to Section 4.2(2) only, which applies in cases where new
versions of the SFB Product may be provided by Unisys to current users
of the SFB Product, and Section 4.2(5) only, which applies to certain
excepted customers where significant prior marketing efforts are
already completed, Unix version(s) of such software owned and licensed
by Unisys.
1.21 "Source Code" shall mean the version of the Package in symbolic
programming language(s) employed by Phoenix to develop the Package
which when compiled and/or assembled is transformed into an Object
Code form of the Package.
1.22 "Support Agreement" shall mean each agreement between Unisys (or any
Affiliate, subcontractor, agent or distributor acting under Unisys'
authority to the extent permitted under Section 22 hereof) and an End
User providing for the delivery of Support Services.
1.23 "Support Services" shall mean the services that Unisys (or an
Affiliate, subcontractor, agent or distributor acting under Unisys'
authority to the extent permitted under Section 22
5
<PAGE> 9
hereof) is authorized to provide in support of an End User's use of
the Package and Documentation under the terms of a License Agreement
-- for example, installation, conversion, training, hotline support,
troubleshooting, and production of customized "Changes." The Support
Services may be provided pursuant to a License Agreement, one or more
Support Agreements, or a combination thereof.
1.24 "Territory" shall mean the countries situated in Latin America and the
Caribbean, as identified in Addendum C.
1.25 "Update" shall mean a release of the Package subsequent to the initial
delivery in which Phoenix has incorporated (i) accumulated
Corrections, (ii) Upgrades, (iii) Improvements, or (iv) Enhancements,
together with new or revised Documentation which properly describes
the updated Package.
1.26 "Upgrade" shall mean changes (if any) made in the Package to permit
the Package to be used and to operate properly with versions of
operating system that are marketed by Unisys and supported by Phoenix.
SECTION 2 - GRANT OF LICENSE; UNDERTAKING TO PROMOTE AND MARKET
2.1 Phoenix hereby grants to Unisys, and Unisys accepts from Phoenix,
under all of Phoenix's USA and foreign patents and copyrights, as well
as any know-how or trade secrets related to the Package and
Documentation, a right and license within the Territory to:
1. Demonstrate and promote the Package to prospective End Users
pursuant to the terms herein. The Package and Documentation
may not be provided to any prospective End User except
pursuant to a License Agreement, provided that limited copies
of the Package and Documentation may, as necessary, be
provided to prospective End Users for evaluation or trial use
pursuant to a form of agreement containing provisions for
confidentiality, ownership and protection of intellectual
property rights, limitation of liability, restrictions on use,
and provisions for term and termination which are acceptable
to Phoenix. Unisys may engage and use subcontractors, agents
or distributors to assist with promotion and marketing of the
Package to prospective End Users, subject to Section 22.2
hereof.
2. Grant End Users sublicenses to the Package and Documentation
pursuant to License Agreements. To the extent so provided in
the applicable License Agreements, such sublicenses may extend
after termination of this Agreement, notwithstanding the
limited term of this Agreement. The License Agreement may
include a Source Code option only on the terms and for the
fees which may be separately agreed to by Phoenix; except as
provided
6
<PAGE> 10
pursuant to such a Source Code option, the End User shall not
be permitted to receive access to or delivery of Source Code
for the Package.
3. Make Changes to the Package and Documentation, including by
use of the Source Code version of the Package provided subject
to Section 22 hereof, for the sole purpose of providing such
Changes as part of the Package and Documentation to End Users
pursuant to a License Agreement.
4. Contract with End Users for Support Services to be provided by
Unisys to the extent so provided herein.
5. Make copies of the Package and Documentation as necessary to
give effect to the foregoing Items (1) through (4).
6. Authorize one or more Affiliates (so long as they remain
Affiliates) to do one or more of the foregoing Items (1)
through (5), subject to Section 20.3 hereof.
2.2 Except as otherwise expressly stated in this Agreement, the right and
license granted to Unisys is limited to the term and shall cease upon
termination of this Agreement.
2.3 Unisys agrees to devote its reasonable efforts to promote and market
the Package to End Users in the Territory during the term of this
Agreement, and to devote a reasonable level of management and
resources to the promotion, marketing and support of the Package.
Unisys agrees to provide Phoenix at least once each year with
information regarding its marketing plans and forecasts; such plans
and forecasts shall be non-binding and subject to change, and may be
delivered formally or informally, and orally or in writing, but shall
be sufficient to demonstrate that the effort and resources being
devoted by Unisys.
SECTION 3 - EXCLUSIVITY
3.1 Subject to Section 3.2, the right and license granted to Unisys
pursuant to Section 2 to market and sublicense the Package to End
Users and to provide Support Services to End Users shall be exclusive
in all countries in the Territory during the term of this Agreement.
Such exclusivity is contingent on Unisys meeting the minimum sales
criteria set forth in Section 3.3 hereof.
3.2 As exceptions to such exclusivity, Phoenix reserves the right (either
directly or in association with other distributors, subcontractors or
marketing agents, and without obligation to Unisys):
7
<PAGE> 11
XXX = Confidential Treatment Requested
(1) to do business at any time with Offshore Banks or Foreign
Branches; and
(2) to continue to act on those business opportunities identified
in Part I and with those Hold-Out Accounts identified in Part
III of Addendum E hereto.
With regard to the Offshore Banks and Foreign Branches not already
licensed by Phoenix, Phoenix agrees to refer each End User to Unisys
and give Unisys the opportunity to license the Package to such End
User and/or provide installation, support or other services pursuant
to this Agreement before Phoenix does so itself; provided, however,
that Phoenix shall be free of such obligation if the End User is
unwilling to do business with Unisys because of contracts or
commitments with Phoenix or other vendors outside the Territory or if
the size and nature of the proposed transaction make it unlikely that
the End User will pay the fees and charges set forth in Addendum B for
the implementation in the Territory. Except as approved in advance by
Phoenix, Unisys agrees not to offer or provide licensing,
installations or service to any of the Hold-Out Accounts. XXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXX shall be due Unisys from Phoenix for licensing,
installation and/or service previously or hereafter provided by
Phoenix with regard to the foregoing exceptions.
3.3 At the end of each one (1) year period during which Unisys has held
the exclusivity described in Section 3.1 hereof, such exclusivity
shall automatically renew for an additional one (1) year period so
long as the term of this Agreement continues and Unisys sublicenses a
XXXXXXXXXXXXXXXXXXXXXXXXXX of the Package in the first year following
execution of the Agreement, and XXXXXXXXXXXXXXX in each of years two
(2) and three (3). The minimum number of copies of the Package
required to be sublicensed in order for Unisys to maintain exclusivity
in subsequent renewal years shall be determined in accordance with
Section 5.2 hereof. It is further understood by the parties that the
number of sublicensed copies necessary to retain exclusivity is
cumulative in the first three (3) years: thus, for example, in the
event that Unisys XXXXXXXXXXXXXXXXXXXXXXXXXXX in the first year then
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX for the second year XXXXXXX
XXXXXXXXXX.
For purposes of the exclusivity criteria set forth in this paragraph,
a "sublicense of a copy" of the Package is intended to mean execution
of a License Agreement that provides for payment to Unisys of license
fees in accordance with Section 6.2 hereto sufficient to meet the per
copy and branch minimum royalty requirements established for the
Package as set forth in Addendum B hereto. Unless otherwise agreed by
Phoenix with express reference to this Section 3.3, if terms are
included in the License Agreement permitting cancellation at the End
User's option in the event delivery or implementation of the Package
is incomplete, delayed or unacceptable or for any
8
<PAGE> 12
other reason, or providing for payment of half or more of the initial
license fees to occur longer than six (6) months after the execution
date for such license Agreement, the transaction will not count as a
sublicense of a copy for purposes of this paragraph until the
cancellation right lapses and payment of at least half of the initial
license fees is received.
Sublicenses granted to Off-Shore Banks, Pre-Qualified End Users, or
any other End User that does not agree to pay license and branch fees
sufficient for Phoenix to receive at least the minimum royalties set
forth in Addendum B hereto shall not be counted as sublicenses of a
copy of the Package for purposes of the exclusivity criteria set forth
in this paragraph, unless otherwise agreed by Phoenix in writing in
advance.
SECTION 4 - NO COMPETING PRODUCTS
4.1 In consideration of the exclusivity, Unisys agrees not to market,
employing any resources of Unisys in the Territory, any software
product that is competitive with the Package unless Unisys first
provides Phoenix with written notice at least one hundred and twenty
(120) days in advance of such marketing, whereupon Phoenix may elect,
at its sole option and in its discretion, to terminate this Agreement,
convert this Agreement to a non-exclusive arrangement, propose
stricter measures for protection of Phoenix's intellectual property
rights as an alternative to termination, or any combination of the
foregoing.
4.2 Notwithstanding Section 4.1 hereof, the parties agree that Unisys may
market the SFB Product under the following circumstances:
(1) The customer requires a mainframe-based application
such as the SFB Product; or
(2) The customer is a current user of the SFB Product
(i.e., licensed to use the SFB Product on the
Effective Date) and desires to continue to use and
license the SFB Product (including, for purposes of
this Section 4.2(2) only, versions of the SFB Product
operating in a UNIX environment); or
(3) The customer indicates that the Package is priced
outside of the upper limits of the customer's
budgetary envelope (which the SFB Product would
otherwise satisfy); or
(4) The parties hereto mutually determine that the
Package cannot support the number of branches
requested by the End User (and for such purpose, it
is mutually acknowledged that a single
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XXX = Confidential Treatment Requested
implementation of the Package would not support more
than 75 branches, although the parties hereto may
hereafter determine that a greater or lesser number
should apply in view of practical experience and
plans, including Changes made or proposed from time
to time); or
(5) The customer is one of up to 10 prospective customers
of Unisys for which Unisys has already provided
significant marketing effort, as identified on a list
to be provided to Phoenix by March 22, 1996.
In no event, however, without Phoenix's prior written consent, (a) may
the Package or Documentation be provided to an End User to be used
concurrently with a competitive software product, including the SFB
Product, unless the Package is being used concurrently with a
competitive software product on a temporary basis while the Package is
being implemented as a replacement for such competitive software
product and, or (b) may the Package or Documentation be merged or
integrated, in whole or in part, with any competitive software
product, including the SFB Product or related SFB documentation.
SECTION 5 - TERM
5.1 The term of this Agreement shall commence on the Effective Date and
shall continue for an initial period of three (3) years.
5.2 Beginning six (6) months before expiration of the initial term and
each applicable renewal term (which, unless otherwise agreed, shall be
for three (3) years each), the parties agree to commence discussion
and negotiation of the minimum number of copies of the Package that
have to be sublicensed during each year of the ensuing renewal term in
order for Unisys to maintain exclusivity (it being agreed that Phoenix
will not require such number to be greater than XXXXXXXX per year),
the minimum license fees set for each copy of the Package sublicensed
to an End User, and other terms applicable for renewal of this
Agreement. Unless otherwise agreed, exclusivity criteria shall be
applied on a cumulative basis within each renewal term, but Unisys
shall not receive credit in any renewal term for exceeding the
exclusivity criteria in any prior term. Subject to agreement on such
additional terms, and provided that each party is otherwise in
compliance with the terms of this Agreement, this Agreement shall
automatically renew for a further period of three (3) years upon
expiration of the initial term and each renewal term.
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<PAGE> 14
XXX = Confidential Treatment Requested
SECTION 6 - PAYMENT/INVOICES
6.1 For delivery of a copy of the Package and Documentation to Unisys upon
execution of this Agreement, and in consideration of the license
granted to Unisys in Section 2.1, Unisys agrees to pay Phoenix an
initial royalty for the Package and Documentation, in its existing
form, equal to XXXXXXXX, payable XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXX, plus XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX each payable on
the first day of each month from XXXXXXXXXXXXX through and including
XXXXXXXXXXXXXX. Phoenix's right to retain such initial license fees
are subject to the provisions of Section 7.3 hereof. Such initial
license fees shall be applied on a dollar-for-dollar basis as a
credit for additional royalties payable under Section 6.2 hereof.
6.2 In addition to the initial royalty payable under Section 6.1 hereof,
additional royalties shall be due Phoenix on license and branch fees
paid by each End User for the sublicense of each production copy of
the Package sublicensed to an End User as set forth in Part I of
Addendum B. Such royalties are based on the expectation that the End
User will pay XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX upon execution of
a License Agreement, the remainder to be payable XXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXX, with the balance payable XXXXXXXXXXXXXXXXXXXX
XXXXXX after the execution of the applicable License Agreement or
XXXXXXXXXXXXXXXX after delivery of the Package, whichever is later.
Unisys agrees to consult with Phoenix before agreeing to any further
deferral in payment as part of the terms of the applicable License
Agreement.
6.3 Phoenix shall also receive the participation in maintenance/support
fees and other service fees and charges paid by End Users as provided
in Parts II and III of Addendum B.
6.4 Payment by Unisys to Phoenix of all royalties under Section 6.2
hereof, and all participation fees for maintenance and support or
other services under Section 6.3 hereof shall occur within thirty (30)
days after receipt of the corresponding license or branch fees or
maintenance/support fees from the End User. For purposes of this
Agreement, unless otherwise expressly stated, references to licensee
or branch fees or maintenance/support fees shall mean all Gross
Proceeds paid by an End User, regardless of whether received by
Unisys, its Affiliates, or a subcontractor, distributor or agent, and
references to the receipt of any fees means first receipt of such fees
by Unisys, its Affiliates, or a subcontractor, distributor or agent.
Each payment shall be accompanied by a statement showing the aggregate
amounts received from the End User, the date of receipt, the
calculation of applicable Gross Proceeds after deduction of the items
referred to in the
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<PAGE> 15
definition of "Gross Proceeds" herein, and the calculation of amounts
owing to Phoenix.
6.5 No license fee shall be due to Phoenix for use of the Package and
Documentation by Unisys for purposes of demonstration, promotion,
training, making Changes, or providing Support Services to the extent
otherwise authorized by this Agreement.
6.6 When requested by either party, both parties agree to review the
royalties payable by Unisys when mutual benefit may be achieved in
response to special marketing situations.
6.7 Charges for other services rendered by Phoenix may be invoiced
periodically, in advance, or upon completion, as agreed to in
connection with the particular services, but if not otherwise agreed,
such charges may be invoiced following the end of each month in which
the services are rendered.
6.8 Invoices for reimbursement of travel and living expenses, or other
costs incurred by Phoenix at Unisys' request, shall be submitted to
Unisys when and as such expenses are incurred. If extraordinary
expenses are to be incurred at Unisys' request, Phoenix reserves the
right to require Unisys to pay such expenses directly or advance
Phoenix payment for such expenses.
6.9 Unless otherwise agreed, all invoices shall be paid within thirty (30)
days after receipt by Unisys. If charges are disputed for any reason,
Unisys agrees to pay the undisputed portion of the charges on time and
to act with reasonable speed to notify Phoenix of the amounts in
question.
6.10 All payments to Phoenix shall be made by Unisys in U.S. Dollars. Any
payment received by Unisys in foreign currency shall be converted in
United States Dollars for payment to Phoenix at the exchange rate
published in the Wall Street Journal on the date Unisys receives
payment from the End User.
SECTION 7 - DELIVERABLES
7.1 Upon the Effective Date, Phoenix shall make available or deliver to
Unisys, in reproducible form, a current copy of the items listed in
Addendum A hereto and mutually agreed hardware, software and personnel
to assist Unisys to perform to-be-determined benchmark testing.
7.2 Delivery of Updates shall be in the same form as the initial delivery
of the item being updated unless otherwise mutually agreed.
7.3 Unisys shall have a period of thirty (30) days to evaluate the Package
at Phoenix's premises situated in Maitland, Florida, in order to
determine whether the Package (as used on the
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<PAGE> 16
XXX = Confidential Treatment Requested
Hewlett-Packard platform, consistent with prior use in the U.S.) meets
Unisys' reasonable requirements. During that thirty (30) day period,
Unisys shall conduct its evaluation in consultation with phoenix. If,
prior to March 28, 1996, Unisys gives Phoenix written notice (sent by
telecopy, with confirmation by overnight courier) that the Package and
Documentation do not meet Unisys requirements based on material,
concrete factors specified in such notice, then, unless the parties
reach mutually agreeable terms for resolution of the issue, Unisys may
elect to cancel this Agreement and receive a return of any amounts
paid pursuant to Section 6.1 hereof, XXXXXXXXXXXXX for the work
performed by phoenix in conjunction with Unisys during the evaluation
of the package. If such notice is not received by March 28, 1996, the
amount paid pursuant to Section 6.1 hereof shall be considered
unconditionally earned and non-refundable.
7.4 Unisys shall deliver to Phoenix the Equipment when and as the parties
mutually determine to be appropriate. In the event that the Package
is to be licensed by Unisys for use on platforms other than
Hewlett-Packard platforms supported by Phoenix, Unisys agrees to
provide Phoenix with Equipment consisting of the server(s) for the
platforms to which the Package will be ported. Such Equipment is
provided on a "loaned" basis for use in connection with this
Agreement. Phoenix shall follow ordinary and prudent measures for the
safekeeping of such Equipment. Upon termination of this Agreement,
Phoenix agrees to return the Equipment in its original condition,
reasonable wear and tear excepted, or to pay Unisys the reasonable
value for such Equipment determined on the basis of straight-line
depreciation over a three (3) year period. Unisys shall, without
charge, maintain the Equipment and repair or replace worn, defective
or malfunctioning parts.
SECTION 8 - CHANGES
8.1 Phoenix agrees to provide Unisys with such Changes to the Package (in
Object Code and Source Code) and/or Documentation as Phoenix may make
or obtain from time to time and authorize for general release as a
patch, new release or new version of the Package and/or Documentation
for use by customers who are the same as or similar to actual or
prospective End Users.
If the Changes introduce substantial new functionality or technology
so as to constitute a new product that ordinarily commands a separate
or higher charge, such Changes shall be considered included in the
references to the Package for purposes of the exclusivity provisions
of Section 3, but Phoenix reserves the right to condition availability
of such Changes on an adjustment of the royalty schedule that
equitably reflects the differences.
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XXX = Confidential Treatment Requested
Phoenix shall keep Unisys generally advised with regard to Changes
that are available or that Phoenix has announced are planned, to the
extent such Changes are or may be provided under this Section 8.1.
The undertaking of Phoenix in the preceding sentence shall continue in
effect following termination of this Agreement for so long as Unisys
continues to be directly obligated to End Users to provide support and
maintenance under Support Agreements, as contemplated by Section 11.2.
8.2 Phoenix shall deliver to Unisys Updates, each of which contains an
accumulation of Corrections on the same periodic basis as Phoenix
follows for general release of such Corrections to the same or
similarly situated banking, lending or finance customers. Such
Updates shall be provided not less frequently than twice per year
unless the cumulative Corrections are so insubstantial that less
frequent delivery is reasonable.
The undertaking of Phoenix in the preceding sentence shall continue in
effect following termination of this Agreement for so long as Unisys
continues to be directly obligated to End Users to provide support and
maintenance under Support Agreements, as contemplated by Section 11.2.
8.3 Subject to agreement on mutually acceptable specifications, Phoenix
agrees to provide XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX required to
create a XXXXXXXXXXXXXXXXXXX of the Package, on the following basis.
The first XXXXXXXXXXXXXX devoted by Phoenix for creation of such
XXXXXXXXXXXXXXXXXXX of the Package shall be provided without charge by
Phoenix; the next XXXXXXXXXXX shall be provided at XXXXXXXXXXX; and
any futher hours shall be provided at XXXXXXXXXXX. Unless otherwise
agreed, such work will be performed at Phoenix's facilities in
Maitland, Florida. If Unisys is able to charge either or both of the
first two End Users who license a XXXXXXXXXXXXXXXXXXX of the Package
for customization or development services associated with the creation
of the XXXXXXXXXXXXXXXXXXX of the Package, Unisys shall be entitled to
retain such customization or development charges without paying any
participation to Phoenix with respect thereto under Addendum B, Part
III.
8.4 Except as provided in Section 8.3 regarding the Latinized version of
the Package, or in Section 15.2 with regard to Changes resulting from
specific services for which specific compensation is provided, Phoenix
shall not be required to make Changes specifically for Unisys or any
End Users without prior agreement between Phoenix and Unisys on
applicable charges.
8.5 It is understood and agreed that all right, title and interest in and
to all Changes, including all inventions, copyrights, trade secrets
and all other associated intellectual property
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XXX = Confidential Treatment Requested
rights throughout the world, shall be the exclusive property of
Phoenix. To the extent that such Changes, including all associated
intellectual property rights, are not owned in their entirety by
Phoenix immediately upon their creation, Unisys agrees to assign (and
hereby automatically assigns) and shall cause all other persons and
entities who create or contribute to any Changes made under authority
of, or in association or collaboration with Unisys, to assign, all
right, title and interest therein to Phoenix, to be effective
immediately without the necessity of consideration or further
documentation. Unisys agrees to deliver to Phoenix copies of all
Changes (including object code and source code versions of all
programs) periodically or when otherwise requested by Phoenix. Unisys
agrees to take such further action and execute such further
documentation as Phoenix may reasonable request to give effect to this
Section 8.5.
SECTION 9 - SERVICES
9.1 Phoenix shall provide training and technical assistance to Unisys with
respect to the installation, support and marketing of the Package, on
a basis to be mutually determined in connection with the marketing,
licensing and implementation of initial End Users. Such training and
technical assistance will be in the form of a combination of formal
classroom training and on-the-job training during actual
implementation of sublicensed End Users. Training objectives are
described in Addendum F hereto. As consideration for such training
and technical assistance, Phoenix shall receive XXXXXXXXXXXXXXXXXXXXX
paid by the XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX,
including custom code, country-specific code, custom interfaces, etc.,
plus the other charges shown in Addendum B, XXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXX per Section 8.3 hereof.
9.2 Additional periodic training (including training appropriate to
address Changes) shall be made available as provided in Part IV of
Addendum B hereto.
9.3 Phoenix shall, upon Unisys' reasonable request, and subject to
reasonable advance notice, provide reasonable assistance to Unisys
with respect to the marketing and promotion of the Package, including
by providing demonstrations and participating in trade shows, user
conferences, etc., and providing pre-sales marketing support. The
assignment of XXXXXXXXXX as described in Section 9.4 is intended to
serve that objective; other marketing assistance may be provided at
mutually agreed times and locations, and for mutually agreed charges.
9.4 For a period of up to one (1) year, Phoenix will assign XXXXXXXXXX, on
an "as needed, as available" basis, without charge (except for travel
and living expenses as provided in Section 9.7 hereof) to provide
marketing assistance to Unisys. If
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XXX = Confidential Treatment Requested
Mike Newes is not available, Phoenix agrees to provide other
personnel, also without charge (except for travel and living expenses
as provided in Section 9.7 hereof), for pre-sales marketing support
with respect to the first two (2) End Users licensed by Unisys. Such
service is provided by Phoenix as general support for sales and
marketing efforts pursued under this Agreement.
9.5 Phoenix shall provide Level 2 maintenance assistance as described in
Addendum G. The consideration for Phoenix's assistance shall be
Phoenix's participation in support/maintenance fees as set forth in
Part III of Addendum B.
Unisys shall be responsible for all Level 1 maintenance as described
in Addendum G, in accordance with the terms of each License Agreement
and Support Agreement, as applicable. If Phoenix is required to
provide any Level 1 maintenance services (other than the
training/technical assistance which Phoenix agrees to provide with
respect to the first two (2) installations), Phoenix shall be entitled
to the consideration set forth in Part IV of Addendum B.
9.6 In the event that Unisys requests services from Phoenix which are
beyond the scope of Phoenix's commitments in this Agreement, Phoenix
will attempt to accommodate Unisys' request by providing such services
on such basis as Phoenix can practically offer, or recommend
appropriate outside consultants. Phoenix's charges for such services
are shown in Part IV of Addendum B.
9.7 Except for the assignment of XXXXXXXXXX (or replacement personnel) as
provided in Section 9.4 hereof, it is acknowledged that Phoenix shall
not be required to travel to the Territory except when Phoenix agrees
to do so. Travel and living expenses for XXXXXXXXXX and any other
on-site assistance shall be paid or (in the case of End User
reimbursement) provided for by Unisys.
SECTION 10 - NOTICES
All notices or other communications to be given hereunder (except payment
instructions and invoices, which shall be transmitted in accordance with normal
business practices and procedures) shall be in writing and delivered
personally, by telecopy (confirmation by air mail), or by commercial overnight
courier (second day courier, in the case of international dispatch), courier
charges prepaid, and, in any such case, addressed to the appropriate party as
set forth below.
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10.1 If to Unisys:
Law Department
Unisys Corporation
Latin America & Caribbean Division
7700 West Camino Real
Boca Raton, Florida 33433-5543
Telecopy: 407/750-7851
10.2 If to Phoenix:
Phoenix International Ltd, Inc.
900 Winderly Place
Maitland, Florida 32751
FOR IMMEDIATE ATTENTION -- Deliver to President
Telecopy: 407/667-0133
With a copy to:
Nelson Mullins Riley & Scarborough, L.L.P.
400 Colony Square, Suite 2200
Atlanta, Georgia 30361
Attention: Peter C. Quittmeyer, Esq.
Telecopy: 404/817-6050
Any notice delivered personally shall be effective upon delivery; any notice
delivered by telecopy or courier shall be effective when it reaches the
specified destination address.
SECTION 11 - TERMINATION
11.1 Termination
1. This Agreement may be terminated by Unisys without cause as
provided in Section 7.1 and Section 21. This Agreement may be
terminated by Unisys for cause, in the event that (i) Phoenix
substantially fails to perform any of its material obligations
hereunder (including, but without limitation, the support
obligations set forth herein) and said cause is not corrected
within thirty (30) days after delivery of a written
termination notice from Unisys specifying such cause or (ii)
Phoenix files, or has filed against it, a voluntary or
involuntary petition under Chapter 3 of Title 11 of the United
States Code, 11 U.S.C. & 301, et seq. (the "Bankruptcy Code"),
upon delivery of a written cancellation notice to Phoenix.
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2. This Agreement may be terminated by Phoenix without cause as
provided in Section 21. This Agreement may be terminated by
Phoenix for cause, as determined by Phoenix at its option and
in its discretion, in the event that:
(i) Unisys fails in any material respect to
perform its obligations hereunder, and such
failure is not corrected within thirty (30)
days after Phoenix gives Unisys written
notice of such failure;
(ii) Unisys fails to make (in full) on the date
due any payment required to be made to
Phoenix, and fails to cure the delinquency
within five (5) business days after Phoenix
gives Unisys written notice of such
delinquency;
(iii) Unisys ceases to do business, makes a
composition or assignment for the
benefit of its creditors, makes a general
arrangement with its creditors concerning any
extension or forgiveness of any of its
secured debt, becomes bankrupt or insolvent,
suffers or seeks the appointment of a
receiver to the whole or any material part of
its business, takes any action to liquidate
or wind up the whole or any material part of
its business, is found subject to any
provisions of any bankruptcy code concerning
involuntary bankruptcy or similar proceeding,
or suffers a material adverse change in its
financial position such that payments to
Phoenix may be affected or delayed by a
creditor or administrator of the business of
Unisys;
(iv) Unisys becomes a subsidiary of, or controlled
as to its management policy by, any
government instrumentality; or
(v) Unisys is required by laws in the Territory
to offer or permit the use or exercise (with
or without payment to Unisys) of the Package
to any person or entity other than an End
User (provided that, if only this Item (v) is
the cause, Phoenix's remedies shall be
limited to termination of Unisys' rights in
the applicable country or countries).
3. If the cause is not corrected within the applicable cure
period specified above, termination shall become effective
immediately upon receipt, by the party failing to correct the
cause, of a written termination notice from the other party.
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11.2 Effect of Termination
1. Termination of this Agreement shall not terminate any License
Agreement or Support Agreement that has previously been signed
by Unisys and an End User pursuant to this Agreement.
2. Following termination of this Agreement, this Agreement shall
continue in effect as necessary for Unisys to carry out its
obligations under the License Agreements and Support
Agreements existing at the time of such termination.
However, if the termination is by Phoenix for cause
pursuant to Section 11.1(2) or if Unisys thereafter defaults
on its obligations hereunder under circumstances that would
materially prejudice Phoenix if Unisys continued to have sole
responsibility for obligations under then existing License
Agreements or Support Agreements (such as if Unisys is in
continual default of payment obligations or fails to provide
Level 1 support and maintenance as required by this
Agreement), then, subject to the consent of applicable End
Users (which Unisys shall cooperate with Phoenix to obtain),
Unisys shall, if and when so requested by Phoenix, assign to
Phoenix or Phoenix's designee all rights and obligations of
Unisys under such then existing License Agreements and Support
Agreements. Furthermore, in such event, to assure a
reasonable transition with respect to any Support Services
that Unisys has agreed to provide to End Users, Unisys agrees,
for a minimum period of the lesser of two (2) years following
termination, or eight (8) months after Phoenix contracts with
a replacement vendor who has authority to provide Support
Services to End Users, to sublicense the Package to End Users,
or both (in no event, however, shall Unisys, without the
consent of Phoenix and the applicable End User, be relieved of
responsibility for providing Support Services for the
remaining term of Support Agreements in effect at the time of
termination, if longer), if and to the extent so requested by
Phoenix, to continue to perform its obligations under some or
all of the License Agreements and Support Agreements in effect
at the time of termination, including any normal continuation
or renewal of such License Agreements and Support Agreements.
In that regard, Phoenix may instruct Unisys to continue to
provide Support Services directly to such End Users, or as a
subcontractor to Phoenix, or a combination thereof, provided
that the fees that Unisys receives for such services shall be
substantially equivalent to the fees Unisys was entitled to
receive for substantially the same services immediately prior
to termination.
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Following termination of this Agreement, Phoenix shall have
the right to contact End Users directly, In addition, in each
case where Phoenix, in its reasonable judgment, determines
that Unisys is taking any action inconsistent with the
long-term continuation of the End Users' use and licensing of
the Package and associated Support Services, Phoenix also
reserves the right to contract directly with those End Users
to license them new or different versions of the Package or
other software programs, and to provide Support Services or
arrange for Support Services to be provided by other sources,
without obligation to Unisys for any resulting reduction in
business Unisys may experience as a result of such activities.
4. Upon and following termination of this Agreement, Unisys
agrees that it shall be entitled to no compensation from
Phoenix or any End User in connection with, or following,
termination of this Agreement, except for license fees that
are earned and unconditionally payable under License
Agreements then in effect, fees for Support Services actually
rendered, and (subject to the possibility of assignment to
Phoenix as provided above) fees received pursuant to any
future operation of the License Agreements and Service
Agreements.
5. Upon termination of this Agreement, Unisys shall deliver to
Phoenix, at Unisys' own expense, when and as requested by
Phoenix, all copies of the Package (including Source Code),
Documentation, and any other materials related to the Package
or Documentation in the possession of or previously delivered
to Unisys by Phoenix, except to the extent Unisys still
requires such materials to perform further Support Services as
authorized by this Section.
11.3 General
No termination or cancellation of this Agreement shall affect the
obligation of Unisys to make payments for royalties and participations
which are or become due hereunder, including royalties and
partipations due in connection with License Agreements and Support
Agreements that remain in effect after the date of termination. The
parties' rights to terminate or cancel this Agreement in accordance
with this Section are in addition to and shall not limit or prejudice
any other right or remedy available under this Agreement, or at law or
in equity under U.S. laws, except as provided herein.
SECTION 12 - TAXES
12.1 For a variety of reasons, including that the Package is licensed
hereunder to Unisys in the United States, that the license is
principally to authorize Unisys to grant
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sublicenses to End Users, and other circumstances, it is expected that
the payments, deliveries and services associated with the transactions
contemplated by this Agreement shall be free of any excise, property,
VAT, sales, use and other similar taxes for which Phoenix could be
responsible. However, if any such tax should be imposed on Phoenix by
any jurisdiction (whether in the United States or in the Territory),
Unisys shall either bear such tax by a direct payment to the taxing
authority or shall reimburse Phoenix for such tax (except that, if
property taxes are imposed on Phoenix as a result of the deliveries
made by Phoenix hereunder, Unisys' responsibility for such propert
taxes shall not exceed $5,000 per year). A list of Unisys'
appropriate sales and use tax exemption certificate numbers shall be
furnished upon request by Phoenix. In the event it shall ever be
determined that any such tax was not required to be paid, Phoenix
agrees to notify Unisys and, if such tax was reimbursed to Phoenix, to
make prompt application for the refund thereof, to take all proper
steps to procure the same, and when received, to pay the same to
Unisys.
12.2 It is contemplated that the license granted by Phoenix to Unisys
hereunder, the deliveries made by Phoenix to Unisys hereunder, and the
services rendered by Phoenix to Unisys hereunder are to be transacted
solely in the United States of America, and therefore Phoenix should
not be subject to income, royalty, service, impost, or similar taxes
or deductions, or any withholding requirement in addition to or in
lieu thereof, imposed by any jurisdiction outside the United States of
America relating to any payments, deliveries, or services, or any
other business or activities whatsoever, associated with the
transactions contemplated by this Agreement. Phoenix reserves the
right to renegotiate royalties, participation in support and
maintenance fees, or service charges if any course of action under
this Agreement results in Phoenix becoming subject to such foreign
taxes or if the amounts received by Phoenix are reduced as a result of
the deduction or withholding of such foreign taxes.
SECTION 13 - CONFIDENTIAL INFORMATION AND DISCLOSURE
13.1 Each party, as recipient ("Recipient") of Confidential Information
obtained directly or indirectly from the other party (the "Disclosing
Party"), agrees to the following confidentiality obligations:
13.2 Unisys, as Recipient, agrees at all times to protect and preserve the
confidentiality of the Package, Documentation, and all other
Confidential Information of Phoenix, as Disclosing Party. Unisys
agrees not to permit or authorize access to, or disclosure of, the
Package, Documentation, and all other Confidential Information of
Phoenix to any person or entity other than (i) End Users who have
entered into
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confidentiality agreements approved by Phoenix, to the extent
necessary such End Users are evaluating the Package in advance of
entering into a License Agreement, (ii) End Users who have entered
into License Agreements, to the extent necessary for such End Users to
exercise their rights under applicable License Agreements, and (iii)
Personnel of Unisys who have a "need to know" such information in
order to enable Unisys to perform Unisys' obligations under this
Agreement and applicable License Agreements and Support Agreements.
Unisys may disclose necessary portions of the Package, Documentation,
or other Confidential Information of Phoenix to governmental
regulatory authorities if such disclosure is required for compliance
with applicable laws, but Unisys shall notify Phoenix of the
applicable legal requirements before such disclosure occurs and Unisys
shall use its best efforts to help Phoenix obtain protection as may be
available to preserve the confidentiality of such information
following disclosure.
13.3 Phoenix, as Recipient, agrees at all times to protect and preserve the
confidentiality of the Confidential Information of Unisys, as
Disclosing Party. Phoenix, as Recipient, agrees at all times to
protect and preserve the confidentiality of all Confidential
Information of Unisys, as Disclosing Party. Phoenix agrees not to
permit or authorize access to, or disclosure of, the Confidential
Information of Unisys to any person or entity other than Personnel of
Phoenix who have a "need to know" such information in order to enable
Phoenix to perform Phoenix's obligations under this Agreement and
applicable License Agreements and Support Agreements. Phoenix may
disclose necessary portions of the Confidential Information of Unisys
to governmental regulatory authorities if such disclosure is required
for compliance with applicable laws, but Phoenix shall notify Unisys
of the applicable legal requirements before such disclosure occurs and
Phoenix shall use its best efforts to help Unisys obtain protection as
may be available to preserve the confidentiality of such information
following disclosure.
13.4 Prior to disposal of any media or materials that contain any part of
the Confidential Information of the Disclosing Party, the Recipient
shall obliterate or otherwise destroy all code, instructions,
commentary, or further evidence of Confidential Information, for
example, by erasing, incinerating, or shredding such materials.
13.5 The restrictions in this Section 13 are in addition to any other
restrictions on use and disclosure set forth elsewhere in this
Agreement (for example, additional restrictions are set forth in
Section 2.1(1) regarding limited disclosure of the Package to
prospective End Users for evaluation purposes; and Section 20 contains
additional restrictions relating to Source Code). The provisions of
this Section 13 shall continue to bind each Recipient, notwithstanding
any termination of this Agreement, until five (5) years after both
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this Agreement has terminated and all materials and media containing
Confidential Information of the other party have been returned or
destroyed.
SECTION 14 - POWER AND AUTHORITY
14.1 Each party hereby represents and warrants to the other party hereto
that it has full power and authority to enter into and perform under
the terms of this Agreement, and the person executing this Agreement
on behalf of such party has been properly authorized and empowered to
so execute this Agreement.
14.2 Each party hereby represents and warrants to the other party hereto
that this Agreement is enforceable against such party under all
applicable laws in accordance with its terms.
SECTION 15 - LIMITED WARRANTY
15.1 Phoenix warrants that the media containing the Package are free from
defects in workmanship or materials, and, when delivered to Unisys by
Phoenix, shall not contain any program routine or device included by
Phoenix having the purpose or effect of deactivating, disabling, or
interfering with use of the Package.
15.2 The sole remedy for Unisys in the event of discovery of any error or
malfunction in the Package or Documentation shall be to obtain
maintenance/support from Phoenix as provided in Section 9 hereof.
SECTION 16 - DISCLAIMER
16.1 EXCEPT AS PROVIDED IN SECTIONS 7.3 OR 15 HEREOF, PHOENIX MAKES AND
UNISYS RECEIVES NO WARRANTIES, EXPRESS, IMPLIED, STATUTORY OR
OTHERWISE, WHETHER IN ANY PROVISION OF THIS AGREEMENT OR ANY OTHER
COMMUNICATION OR OTHERWISE, AND PHOENIX SPECIFICALLY DISCLAIMS ANY
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
16.2 IT IS MUTUALLY ACKNOWLEDGED THAT NEITHER PARTY HAS GIVEN ANY ASSURANCE
TO THE OTHER CONCERNING THE RESULTS, PROFITABILITY OR SUCCESS OF ANY
MARKETING EFFORT WHICH UNISYS MAY UNDERTAKE.
SECTION 17 - LIMITATION OF LIABILITY
17.1 EXCEPT FOR AS NECESSARY TO REMEDY INFRINGEMENT OR MISAPPROPRIATION OF
INTELLECTUAL PROPERTY RIGHTS OWNED BY THE OTHER PARTY (INCLUDING
RIGHTS IN CHANGES REQUIRED TO BE CONVEYED TO THE OTHER PARTY
HEREUNDER), AND EXCEPT AS NECESSARY TO GIVE EFFECT TO THE EXPRESS
INDEMNIFICATION
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PROVISIONS IN THIS AGREEMENT, NEITHER PARTY SHALL BE LIABLE FOR ANY
INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING, BUT
NOT LIMITED TO, LOST PROFITS (EXCEPT LOST PROFITS THAT ARE DIRECT
DAMAGES RESULTING FROM NON-PAYMENT OF FEES AND CHARGES DUE HEREUNDER),
EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
17.2 The cumulative liability of Phoenix to Unisys for all claims made by
or attributable to each End User relating to the any product or
service provided by Phoenix, or any other obligation of Phoenix
hereunder, in contract, tort or otherwise, shall not exceed the total
amount of fees received by Phoenix for such product, service or
obligation with respect to that individual End User. In the event of
any claims not made by or attributable to an End User, the cumulative
liability of Phoenix for all claims by Unisys, in contract, tort or
otherwise, which are not made by or attributable to End Users shall
not exceed the total amount of fees received by Phoenix from Unisys
excluding fees attributable to products, services or obligations with
respect to End Users. This limitation of liability shall not apply to
the indemnification provided in Section 18 below. The foregoing
limitation of liability and exclusion of certain damages shall apply
regardless of the success or effectiveness of other remedies.
SECTION 18 - TITLE
18.1 The Package and/or Documentation may include or require
commercially available programming or materials obtained by Phoenix
under contract from third-party licensors, sellers or distributors
(collectively, "Third- Party Materials"). The Third-Party Materials
may be subject to restrictions, payment obligations or procurement
responsibilities that are different from or in addition to the
restrictions and charges applicable to the Package and Documentation
hereunder and, if so, Unisys and/or each End User shall be responsible
for separate compliance with such restrictions, payment obligations or
procurement responsibilities. Addendum D hereto lists the
Third-Party Materials that are pertinent on the date of execution of
this Agreement and summarizes restrictions, payment obligations and
procurement responsibilities currently applicable thereto. Phoenix
reserves the right to change the Exhibit at any time upon written
notice to Unisys. Phoenix will cooperate with Unisys to process
warranty claims, maintenance requests, or indemnification rights, to
the extent available from the original licensor or supplier of such
Third-Party Materials. Notwithstanding any provision in this
Agreement to the contrary, Phoenix shall have no obligation, express
or implied, with respect to such Third-Party Materials, except for
maintenance and service obligations generally applicable to the
Package as a whole under Section 9 hereof as described in Addendum G.
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18.2 If a third party claims that the Package infringes any patent,
copyright, trade secret, or similar intellectual property rights of
that third party, Phoenix shall defend Unisys and applicable End Users
against that claim at Phoenix's expense and pay all damages awarded by
a court in a final judgment, provided that Unisys promptly notifies
Phoenix in writing of any such claim, and allows Phoenix to control,
and cooperates with Phoenix in, the defense and disposition of such
claim, including any related settlement negotiations.
If such a claim is made or appears possible, Phoenix may, at its
option, secure for Unisys and any End Users the right to continue to
use the Package, or modify or replace the Package so it is
non-infringing.
Phoenix has no obligation hereunder for any claim based on a modified
version of the Package which has not been prepared solely by Phoenix
insofar as the modifications are potentially relevant to the claim, or
for any combination, operation or use of the Package with any product,
data or apparatus not approved in writing by Phoenix insofar as the
combination, operation or use of the Package with such other item(s)
is potentially relevant to the claim. Phoenix also shall have no
obligation hereunder for any claim resulting from any involuntary
confiscation or expropriation of rights that may hereafter occur
pursuant to action of government or law in any non-U.S. jurisdiction.
THIS SECTION STATES PHOENIX'S ENTIRE OBLIGATION TO UNISYS WITH RESPECT
TO MATTERS OF TITLE OR ANY CLAIM OF INFRINGEMENT THEREOF.
SECTION 19 - OTHER INTELLECTUAL PROPERTY MATTERS
19.1 The Package and Documentation are copyrighted works under U.S. and
international copyright laws, treaties and conventions. Unisys shall
include in all copies of the Package and Documentation the legends and
notices required by Phoenix.
19.2 Unisys may not use, distribute, sell, sublease, assign, give, or
transfer in any way the original or any copies of the Package or
Documentation except as provided in this Agreement. Unisys may not
modify, reverse engineer, decompile, or translate the Package or
Documentation, except to make Changes as provided in Section 2.1(3)
hereof. Unless Phoenix agrees otherwise and the parties agree on
applicable royalties payable to Phoenix, Unisys may not operate a
"service bureau" or provide "outsourcing services" by engaging in the
business of processing accounts or records, or generating output data,
for the direct benefit of any business entity or organization.
19.3 Unisys shall assist Phoenix, at Phoenix's request, in perfecting and
maintaining Phoenix's rights under copyright law in each country in
the Territory.
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19.4 Unisys shall have the right, but not the obligation, to identify the
Package according to the Package's applicable brand name, to identify
Unisys as an independent business which has been authorized by Phoenix
to market the Package and provide Support Services to End Users, and
to use and display Phoenix's trade name, trademarks, service marks and
logos for purposes of promotion and marketing of the Package intended
for End Users. All such action shall be subject to reasonable
advertising and usage guidelines provided by Phoenix. In all other
respects, this Agreement confers no right or license with regard to
Phoenix's trade name, trademarks, service marks, logos, or packaging,
or any related goodwill, all of which shall be the exclusive property
of Phoenix. Phoenix reserves the right to add to, change, or withdraw
trade names, trademarks, service marks or logos at any time in any
country or countries. Unisys shall assist Phoenix, at Phoenix's
request, in perfecting and maintaining Phoenix's rights under
trademark and similar laws in each country in the Territory.
19.5 Unisys shall notify Phoenix in the event that it discovers any
infringement of Phoenix's rights in the Package or any violation of
the terms of a License Agreement, and shall cooperate with Phoenix and
assist in the prosecution of Phoenix's claims. Phoenix shall be
entitled to retain any proceeds from such claims, including settlement
amounts, for purposes of funding Phoenix's worldwide intellectual
property protection programs.
19.6 Phoenix shall have the right to enter the premises of Unisys (or, as
applicable, its Affiliates, subcontractors, agents or distributors) at
any time upon reasonable request during regular business hours in a
non-disruptive manner, for the purpose of inspecting the location and
use of the Package and Documentation and the standard procedures of
Unisys regarding retention, safekeeping, and disposal of all media and
materials pertaining thereto.
19.7 Phoenix shall have the right to conduct an audit of any software
product developed in whole or in part by Unisys (or, as applicable,
its Affiliates, subcontractors, agents or distributors) to determine
whether the development of such product has occurred without use of,
reliance on, or reference to the Package or Documentation, or any
Confidential Information or other intellectual property rights of
Phoenix.
SECTION 20 - SOURCE CODE
In addition to the other provisions in this Agreement concerning Unisys'
protection of Confidential Information of Phoenix, Unisys shall at all times
comply with the following precautions with respect to the use and handling of
any Source Code for the Packages:
26
<PAGE> 30
20.1 Unisys may give access to the Source Code only to Personnel of Unisys
who have a "need to know" such information in order to enable Unisys
to perform Unisys' obligations under this Agreement and applicable
License Agreements and Support Agreements. For this purpose,
subcontractors, agents and distributors are excluded unless they are
individuals included in the definition of "Personnel" herein.
20.2 Each individual who Unisys permits to receive access to the Source
Code shall enter into an agreement with Unisys whereby such individual
agrees to give effect to Section 8.4 (regarding ownership of Changes),
and Section 13 hereof (applied as if such individual is an integral
constituent of Unisys for such purpose).
20.3 Each individual who Unisys permits to receive access to the Source
Code shall be prohibited from participating in any design, development
or programming activities relating to any software product or
programming that is competitive with the Package, with the sole
exceptions of (1) the SFB Product (to the extent allowed under Section
4.2 hereof) and (2) such other software product or programming as
Phoenix may approve in the future with express reference to this
Section 20.3 after receiving the notice required by Section 4.1
hereof.
20.4 Unisys shall report to Phoenix, when and as requested by Phoenix, but
in any event at least once per year, the number, location and use of
all copies of the Source Code made or received by Unisys, including
any copies provided or authorized to be made by Unisys. Unisys shall
also notify Phoenix, whether or not requested by Phoenix at the time,
each time the Source Code is delivered to any new operating center,
organization or country.
SECTION 21 - FORCE MAJEURE
Neither Unisys nor Phoenix shall be liable to the other for delays in the
performance of or completion of this Agreement if notice of such delays is
provided as required in Section 23.10 hereof, and if such delay is caused by
strikes, riots, wars, government regulations, acts of God, fire, flood or other
similar causes beyond its control; provided, however, if such delay exceeds
ninety (90) days, the other party shall have the option, exercisable by written
notice, to cancel the Agreement pursuant to Section 11.1 hereof. In no event,
however, shall Unisys' payment obligations hereunder, the conditions for
maintaining exclusivity as set forth herein, or Unisys' obligations with
respect to protection of Phoenix's ownership of intellectual property rights
associated with the Package and Documentation be excused or delayed.
27
<PAGE> 31
SECTION 22 - ASSIGNMENT, ETC.
22.1 This Agreement may not be assigned by Unisys, nor may Unisys delegate
or subcontract any obligation incurred hereunder or under any
applicable License Agreement or Support Agreement, except as provided
in Sections 22.2, 22.3 and 22.4 hereof.
22.2 Unisys may appoint subcontractors, agents, or distributors to help
Unisys market the Package to prospective End Users, and to provide
Support Services to End Users who enter into License Agreements,
subject to the following limitations:
1. Each such subcontractor, agent or distributor shall enter into
an agreement with Unisys whereby such subcontractor, agent or
distributor agrees to give effect to Section 8.4, Section 13,
and Section 19 (applied as if such subcontractor, agent or
distributor is an integral constituent of Unisys for such
purpose).
2. Unisys shall be strictly liable for compliance of each
subcontractor, agent and distributor with the foregoing
provisions of this Agreement.
3. No subcontractor, agent or distributor may be given access to
the Source Code for the Package or any Confidential
Information obtained by Unisys derived from such Source Code.
22.3 In undertaking and performing this Agreement, each party shall be
entitled to act through, in concert with, or for the benefit of its
Affiliates (so long as they remain Affiliates), and all references to
either party accordingly shall be construed to mean its Affiliates,
provided that the full resources of each party remain available and
committed for purposes of performance of such party's obligations
hereunder, and provided further that such party is strictly liable for
compliance with all provisions of this Agreement (applied as if such
Affiliate is an integral constituent of such party for such purpose).
22.4 Either party may assign this Agreement to a successor to all or
substantially all of its business and assets. In such event, this
Agreement shall inure to the benefit of, and shall be binding upon,
the parties hereto, their successors and assigns.
22.5 Unisys agrees to give Phoenix prompt notice of any change (by virtue
of one transaction or any series of transactions) in control (as
defined in Section 22.3 above) or principal management of Unisys.
Notwithstanding Section 22.4 above, Phoenix may terminate this
Agreement in connection with such a change in ownership or management,
unless Phoenix is provided assurance satisfactory to Phoenix that
Unisys will be
28
<PAGE> 32
able to perform its obligations hereunder at least as effectively as
Unisys previously was able to provide.
SECTION 23 - GENERAL PROVISIONS
23.1 Governing Law
This Agreement shall be construed, governed and interpreted in
accordance with the laws, but not the rules relating to the choice of
law, of the State of Delaware.
23.2 Captions/Headings
The captions and headings of the Sections, clauses and paragraphs
contained herein have been inserted for the convenience of the parties
and shall not be construed as a part of or modifying any provisions of
this Agreement.
23.3 Waiver
The failure of either party to insist, in any one or more instances,
upon the performance of any of the terms, covenants or conditions of
this Agreement or to exercise any right hereunder, shall not be
construed as a waiver of the future performance of any such term,
covenant or condition or the future exercise of such right.
23.4 Severability
If any court should find any particular provision of this Agreement
void, illegal, or unenforceable, then that provision shall be regarded
as stricken from this Agreement and the remainder of this Agreement
shall remain in full force and effect.
23.5 Independent Contractors
1. It is agreed that the relationship between the parties is that
of independent contractors, and nothing contained in this
Agreement shall be construed or implied to create the
relationship of partners, joint venturers, agent and
principal, employer and employee, or any relationship other
than that of independent contractors. At no time shall either
party make any commitments or incur any charges or expenses
for or in the name of the other party.
2. Unisys agrees to indemnify and hold Phoenix harmless from and
against all commitments, undertakings and liabilities incurred
by or on behalf of Unisys, in dealing with subcontractors,
agents and distributors, and prospective or licensed End
Users, insofar as such commitments, undertakings and
liabilities are in addition to, or
29
<PAGE> 33
different from, the obligations expressly assumed by Phoenix
hereunder, unless Unisys is authorized hereunder to incur
such commitments, undertakings or liabilities.
23.6 Counterparts
This Agreement may be executed in any number of counterparts, each of
which together shall constitute one and the same instrument.
23.7 Publicity
Neither party shall, except as may be required by law or federal
regulation, or except with the prior written permission of the other
party, publicly advertise this Agreement or disclose its contents.
23.8 Risk of Loss
Until such time as deliverable items included in the Package or
Documentation are in Unisys' possession, all risk of loss shall be
Phoenix's.
23.9 Entire Compensation
Except as may be specifically provided otherwise in this Agreement,
each party's performance of the work and fulfillment of its other
obligations under this Agreement and the granting and conveyance of
licenses and rights to the other as provided herein shall be at no
cost or charge to other party.
23.10 Notice of Delay
Whenever any occurrence (e.g., an event of Force Majeure or a filing
under a bankruptcy law) is delaying or threatens to delay either
party's timely performance under this Agreement, that party shall
promptly give notice thereof, including all relevant information with
respect thereto, to the other party.
23.11 Compliance with Law
1. The parties shall in the performance of this Agreement comply
with all applicable laws, executive orders, regulations,
ordinances, rules, proclamations, demands and requisitions of
national governments or of any state, local or other
governmental authority which may now or hereafter govern
performance hereunder.
2. This Agreement is entered into in the United States of
America, all funds shall be paid to Phoenix in U.S. dollars in
the United States of America, and nothing herein shall be
construed to require Phoenix to do
30
<PAGE> 34
XXX = Confidential Treatment Requested
business or maintain any office of business establishment
outside the United States of America.
3. Unisys shall, at its own expense, comply with all laws
relating to the marketing, distribution or licensing of the
Package in the Territory, and shall procure all licenses and
pay all fees and other charges required thereby.
4. Notwithstanding anything in this Agreement to the contrary, it
is acknowledged and agreed that neither Phoenix nor Unisys may
ship, export or re-export the Package or Documentation, or any
other information, process, product or service obtained
directly or indirectly from Phoenix, to any country or entity
which is the subject of any prohibition imposed by the U.S.
Export Administration Act of 1979, U.S. Executive Orders, the
U.S. Department of Commerce, and the North Atlantic Treaty
Organization. Without limiting the foregoing, Unisys is
advised that U.S. export laws may currently prohibit the
export of the Package, Documentation, and other technical
information to Cuba. Unisys understands that, if such a
prohibition applies and an export license cannot be obtained
with reasonable effort, the disclosure or delivery of the
Package, Documentation and other technical information may not
occur. If unusual costs are involved in obtaining export
licenses, Phoenix may require Unisys to accept responsibility
for some or all of those costs.
23.12 Access to Books
Through a representative selected by Phoenix for such purpose, Phoenix
shall have reasonable access to the sufficient books and records of
Unisys once every twelve (12) months for the sole purpose of
determining the amounts due hereunder, at Phoenix's own cost;
provided, however, that such auditor agrees to be bound by the
provisions of Section 13. Unisys shall be responsible for the
reasonable costs of such audit if Unisys is found to have understated
or underpaid its royalty or other payment obligations XXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXX.
SECTION 24 - ADDENDA/ATTACHMENTS
All Addenda, attachments and exhibits referred to as accompanying this
Agreement are hereby incorporated in and made part of this Agreement.
31
<PAGE> 35
SECTION 25 - SURVIVAL OF PROVISIONS
In addition to the rights and obligations which survive as expressly provided
for elsewhere in this Agreement, the Sections and Addenda which by their nature
should survive (including, without limitation, Sections 1, 5, 6, 8, 9 (except
9.3 and 9.4), and 10 through 26) shall survive and continue after any
termination or cancellation of this Agreement.
SECTION 26 - ENTIRE AGREEMENT
This Agreement, constitutes the entire agreement between the parties with
respect to the subject matter hereof and shall supersede all previous
proposals, negotiations, representations, commitments, writings, agreements and
other communications, both oral and written, between the parties. This
Agreement may not be released, discharged, changed or modified except by an
instrument in writing signed by a duly authorized representative of each of the
parties.
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto, as of the Effective Date.
Phoenix International Ltd, Inc. Unisys Corporation
By: /s/ Ralph Reichard By: /s/ Jack A. Blaine
--------------------- ---------------------
Ralph Reichard Jack A. Blaine
--------------------- ---------------------
(Printed Name) (Printed Name)
Title: President Title: President
--------------- ---------------
Date: Date: 3-16-96
-------------------- --------------------
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<PAGE> 36
SOFTWARE LICENSE AGREEMENT
ADDENDUM A
PACKAGE AND DOCUMENTATION
The following software/data will be delivered on a DDS 90mm DAT tape cartridge.
This cartridge will be recorded using Novaback Backup/Restore Program, Version
4.58.
Current release level source code files for:
- - All Gupta SQL Windows applications (the Phoenix System's "Front End").
- - All Sybase stored procedures (the Phoenix System's ("Back End").
- - All SQR statement generation routines.
Current Release level:
- - File layouts for all system reports.
- - All UNIX scripts used to provide administrative support for Phoenix
database server operations.
- - Files that may be necessary to accommodate various components of the
Phoenix software.
Current release level documentation:
- - One full set of user documentation, online help source code
documentation and graphics documentation.
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XXX = Confidential Treatment Requested
SOFTWARE LICENSE AGREEMENT
ADDENDUM B
SCHEDULE FOR ROYALTIES AND PARTICIPATION FEES
I. PACKAGE
Unisys shall pay to Phoenix royalties with respect to Gross Proceeds
from license and branch fees paid by each End User for each sublicense
of the Package based upon the following schedule:
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX from license and branch
fees paid by the End User for each sublicense of the Package for the
first four License Agreements executed after the Effective Date, not
counting Pre-Qualified End Users.
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX from license and branch
fees paid by each Pre-Qualified End User for each sublicense of the
Package, XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX from license and branch
fees on all other License Agreements.
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX shall be paid by
Unisys to Phoenix, through the receipt of above mentioned royalties.
Such level is to be mutually determined by the parties once the
appropriate and necessary market information is available and the
parties shall then have the opportunity to review such level on a
quarterly basis.
If Unisys makes and completes on its own XXXXXXXXXXXXXXXXXXXXXX
Package and Documentation XXXXXXXXXXXXXXX, then Phoenix's share of
royalties for sublicenses of XXXXXXXXXXXXXXXXXXXXXX of the Package
(when the principal version of the Package used by the End User is
XXXXXXXXXX) shall be reduced by XX.
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<PAGE> 38
XXX = Confidential Treatment Requested
The foregoing division of royalties will apply if Gross Proceeds from
license and branch fees equal or exceed the following amounts:
1. BASE LICENSE AND BRANCH FEES:
A. PACKAGE WITH PHOENIX TELLER SYSTEM
<TABLE>
<CAPTION>
BRANCHES BASE FEES PER BRANCH FEE, OVER BASE FEE
-------- --------- -----------------------------
(IN GROSS PROCEEDS) (IN GROSS PROCEEDS)
------------------- -------------------
<S> <C> <C>
XXXXXXX XXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXX XXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXX
</TABLE>
B. PACKAGE WITHOUT PHOENIX TELLER SYSTEM
<TABLE>
<S> <C> <C>
BRANCHES BASE FEES PER BRANCH FEE, OVER BASE FEE
-------- --------- -----------------------------
(IN GROSS PROCEEDS) (IN GROSS PROCEEDS)
------------------- -------------------
XXXXX XXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXX
XXXXXXXX XXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXX
</TABLE>
C. ADJUSTMENTS
Unisys may, if it so desires, authorize its country managers (or
equivalent) to discount the foregoing base fees on a case-by-case
basis by XXXXXXXX (as calculated and determined by type of fee by
individual End User). With that sole exception, and unless otherwise
agreed in writing by Phoenix, if the Gross Proceeds from license fees
or branch fees paid by an End User are less than the foregoing
amounts, then Phoenix's share of the Gross Proceeds will be
correspondingly increased to equal the amount Phoenix would receive if
Gross Proceeds from such fees were equal to the foregoing base fees.
On the other hand, if the Gross Proceeds from license fees or branch
fees paid by and End User are in excess of the foregoing amounts, then
Unisys' share of the portion of the Gross Proceeds in excess of the
foregoing amounts shall be XXXXXXXXXX than the split it would
otherwise have (e.g., if Package with a Phoenix Teller System for XX
branches should carry a license fee of XXXXXXXX and branch fees of
XXXXXXXX for a total of XXXXXXXX, and if Gross Proceeds actually
received for license fees and branch fees from a particular End User
for XX branches is XXXXXXXX rather than XXXXXXXX, then if Unisys would
otherwise be entitled to XXX of the Gross Proceeds, Unisys will
instead be entitled to XXX of the Gross Proceeds on the incrmental
XXXXXXXX).
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<PAGE> 39
XXX = Confidential Treatment Requested
II. PARTICIPATION IN SUPPORT/MAINTENANCE FEES
Unisys shall pay to Phoenix XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXX from support and/or maintenance fees paid by each End User in
connection with a sublicense of the Package based upon the following
schedule:
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX from support and/or
maintenance fees paid by all End Users in connection with each
sublicense of the Package -- for all payments due or received from any
or all End Users (regardless of when the sublicense is executed) until
1 year after the First Conversion Date. (For such purpose, the "First
Conversion Date" shall mean the date on which Conversion and
implementation have been completed for the first End User sublicensed
by Unisys.)
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX from support and/or
maintenance fees paid by all End Users in connection with each
sublicense of the Package -- for all payments due or received for all
payments due or received from any or all End Users (regardless of when
the sublicense is executed) between 1 year and 2 years after the First
Conversion Date.
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX from support and/or
maintenance fees paid by all End User in connection with each
sublicense of the Package -- for all payments due or received for all
payments due or received from any or all End Users (regardless of when
the sublicense is executed) after 3 years after the First Conversion
Date.
The foregoing division of royalties will apply if Gross Proceeds from
support/maintenance fees received from each End User each year are
XXXXXXXXXXXXXXXXXXXXXXXXXXXX of the base license and branch fees such
End User would pay under Part I. If the Gross Proceeds from
support/maintenance fees paid by an End User are less than the
foregoing amounts, then unless otherwise agreed by Phoenix in writing,
Phoenix's share of the Gross Proceeds will be correspondingly
increased to equal the amount Phoenix would receive if Gross Proceeds
from such fees were equal to the foregoing base fees. On the other
hand, if the Gross Proceeds from support/maintenance fees paid by and
End User are in excess of the foregoing amounts, then Unisys' share of
the portion of the Gross Proceeds in excess of the foregoing amounts
shall be XXXXXXXXXX than the split it would otherwise have (e.g., if
Package with a Phoenix Teller System for XX branches should carry a
license fee of XXXXXXXX and branch fees of XXXXXXX, so that the base
support/maintenance fees should be XXXXXXXX per year, and if the Gross
Proceeds from support/maintenance fees are instead XXXXXXXX per year,
then, if Unisys would otherwise be entitled to XXX of the Gross
Proceeds on support/maintenance fees, Unisys will
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<PAGE> 40
XXX = Confidential Treatment Requested
instead be entitled to XXXXXXXXXXXXXXXXXXXXXXXXX on the incremental
XXXXXXXXX
III. PARTICIPATION IN IMPLEMENTATION/CONVERSION CHARGES.
Unisys shall pay to Phoenix a participation with respect to the Gross
Proceeds from all service fees or charges other than fixed annual
support/maintenance fees. Such other service fees or charges for
which such participation is paid shall include (without limitation)
all charges for professional services and all implementation and
conversion charges paid by each End User in connection with each
sublicense of the Package based upon the following schedule:
XXXXXXXXXXXXXXXXXXXXXXXX on service fees or charges in connection with
the XXXXXXXXXXXXXX License Agreements executed after the Effective
Date; XXXXXXXXXXXXXXXXXXXXXXXX on service fees or charges in
connection with all other License Agreements.
IV. OTHER.
After initial training (time, materials and reasonable travel & living
expenses):
[Note: amounts are stated as net amount of Gross Proceeds to be paid
to Phoenix. Not intended to cover creation or development of
"Latinized version" of the Package as provided in Section 8.3 hereof.]
<TABLE>
<CAPTION>
On-site* Orlando*
<S> <C> <C> <C>
1. Sales and Marketing Assistance -- [as mutually agreed] --
2. Training
Additional Training
(End-User or Unisys) XXXXXXXXX XXXXXX(1)
- Technical
- User Training
- Other
3. Implementation Assistance XXXXXX(2) XXXXXX(2)
4. Technical Assistance XXXXXX(2) XXXXXX(2)
- Country-Specific
Requirement
- Custom Code
- Custom Interfaces
</TABLE>
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XXX = Confidential Treatment Requested
<TABLE>
<S> <C> <C> <C>
5. Support N/A XXXX per
hour (w/2
hr. min.)
</TABLE>
* For Off-Site Services, Unisys shall be responsible for transportation
and living costs. For both On-Site and Off-Site Services, Unisys
shall be responsible for shipping charges, costs of media, and other
out-of-pocket expenses, except that Phoenix shall be entitled to
reimbursement of XXXXXXXX of communications charges (unless such
charges are recovered from End Users, in which case Phoenix shall be
entitled to XXXX reimbursement). Phoenix and Unisys agree to
cooperate in efforts to minimize communications charges to be incurred
by Phoenix.
(1) Up to 3 Students for System Administrator Training and up to 8
Students for End User Training
(2) Per 8 hour work period.
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<PAGE> 42
XXX =
SOFTWARE LICENSE AGREEMENT
ADDENDUM C
TERRITORY
Argentina
Brazil
Chile
Colombia
Costa Rica
Mexico
Peru
Puerto Rico
Venezuela
Uruguay
Bahamas
Barbados
Belize
Bermuda
Bolivia
El Salvador
Grand Cayman Island
Netherlands Antilles
Republica Dominicana
Ecuador
Guatemala
Honduras
Jamaica
Panama
Trinidad
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<PAGE> 43
SOFTWARE LICENSE AGREEMENT
ADDENDUM D
THIRD-PARTY MATERIALS
Sybase run-time modules are currently included in the Package. Phoenix does
not presently have authorization from Sybase to sublicense such modules in some
or all of the Territory. Unisys is responsible for obtaining authorization
from Sybase to copy and sublicense such modules in the Territory as part of the
Package. Unisys shall be responsible for paying all fees and complying with
all restrictions imposed by Sybase.
Gupta software
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<PAGE> 44
XXX = Confidential Treatment Requested
SOFTWARE LICENSE AGREEMENT
ADDENDUM E
EXCEPTIONS TO EXCLUSIVITY
[NOTE: ADDRESSES AND CONTACT NAMES, WHERE PROVIDED, ARE NOT INTENDED TO BE
LIMITING. REFERENCES TO AN EXCEPTED ORGANIZATION INCLUDE, UNLESS OTHERWISE
STATED, ALL PRESENT AND FUTURE AFFILIATES OF THE LISTED EXCEPTION.]
Part I: Existing business with other business organizations:
1. Phoenix is a party to a Global Solutions Partner Agreement with AT&T
Global Information Solutions ("AT&T"), dated May 1, 1994, and a Business
Framework Exhibit having an End Date of May 1, 1996 (the "AT&T Agreement").
The marketing relationship between AT&T and Phoenix is non-exclusive in the
Territory, and there is currently no activity or effort by either party in
furtherance of the AT&T Agreement. Phoenix's marketing activities under the
AT&T Agreement are limited to defined Prospects who are the subject of an
exclusive or non-exclusive referral. AT&T and Phoenix each have the right to
decline a referral from the other, and to decline joint marketing opportunities
that may be presented. There are no referrals pending or in effect at this
time.
Phoenix has decided, independent of its discussions with Unisys, to terminate
the AT&T Agreement on May 1, 1996. Notice of termination has already been
issued by Phoenix to AT&T. Nonetheless, if any business opportunity exists or
arises in the Territory prior to May 1, 1996 which AT&T or Phoenix desires to
pursue in collaboration with one another pursuant to the AT&T Agreement,
Phoenix reserves the right to do so without obligation to Unisys.
2. Phoenix has a marketing relationship currently in effect with XXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX Pursuant to that marketing
relationship, Phoenix will continue to call on and determine the role of Unisys
(provided that Unisys agrees to perform such role, on terms and conditions
mutually acceptable to Unisys and Phoenix) in installation, conversion and
professional services for the following End Users:
XXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXX
[NOTE: THE FOREGOING XXXXXXXXXXXX SHALL CONSTITUTE HOLD-OUT ACCOUNTS,
INCLUDED IN PART III OF THIS ADDENDUM.]
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<PAGE> 45
XXX = Confidential Treatment Requested
XXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXX
[NOTE: THE FOREGOING XXXXXXXXXX SHALL CONSTITUTE A PRE-QUALIFIED END
USER, INCLUDED IN PART II OF THIS ADDENDUM.]
3. Phoenix is a party to a General Agreement for Strategic Relationship
with Hewlett-Packard Company, dated April 30, 1993 (the "H-P Agreement").
Pursuant to the H-P Agreement, Phoenix is precluded from development, porting,
marketing, or selling activities in conjunction with non-HP platforms (the
"exclusivity obligation"). The exclusivity obligation is binding only on
Phoenix by its terms and applies only for markets in the United States and
Canada. Accordingly, the exclusivity obligation is not necessarily binding on
an independent distributor or licensee of the Package. Furthermore, Phoenix
believes there may be legal considerations that would apply to limit its
ability to require end users to procure and use an HP Platform as a condition
for licensing the package. Nonetheless, to avoid question with regard to
Phoenix's compliance with the H-P Agreement, Unisys acknowledges that Phoenix
shall have no obligation to develop, port, market or sell the Package for use
with non-HP platforms in the United States and Canada. Subject to Phoenix's
prior written consent, Unisys may license the Package to Customers in the part
of the Territory overlapping with the United States (i.e., Puerto Rico) only if
(1) the Customer declines to use the Package on an HP platform, or (2) the HP
platform is subject to performance limiting features so that use of the Package
by a Customer on an HP platform is not realistically feasible.
Unisys agrees to cooperate with Phoenix to assure that the Package is marketed
and distributed for use on the HP Products in Puerto Rico. If Phoenix, in its
reasonable judgment, determines that Unisys is unable to provide that
assurance, Phoenix reserves the right to conduct or manage its own marketing
and distribution in those areas as necessary to comply with the terms of the
H-P Agreement.
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<PAGE> 46
XXX = Confidential Treatment Requested
Part II: Pre-Qualified End Users
XXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXX
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XXX = Confidential Treatment Requested
Part III. Hold-Out Accounts
1. Existing End Users:
XXXXXXXXXXXXXXXXXXXXX
XXXXXX
XXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXX
2. Marketing Already Substantially in Progress
XXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXX
XXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXX
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XXX = Confidential Treatment Requested
Part IV. For the benefit of understanding, the following prospective
End Users have been the subject of marketing efforts by
Phoenix, but may be pursued by Unisys without being treated as
Pre-Qualified End Users or Hold-Out Accounts.
XXXXXXXXXXXXX
XXXXXXXXXXX
XXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXX
XXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXX
XXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXX
XXXXXXXXXXXXXXXXXXXXX
XXXXXXXX
XXXXXX
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XXX = Confidential Treatment Requested
SOFTWARE LICENSE AGREEMENT
ADDENDUM F
TRAINING OBJECTIVES
<TABLE>
<CAPTION>
Functional Area Objective
- --------------- ---------
<S> <C> <C>
1. Marketing - XXXXXXXXXXXXXXXXXXXXXXXXXXX
- Presentation/ XXXXXXXXXXXXXXXXXXXXXXXXXX
Demonstration XXXXXXXXXXXXXXXXXXXXX
- Collateral XXXXXXXXXXXXXXXXXXXXXXXXX
- Tools XXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXX
- XXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXX
- XXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXX
2. Implementation XXXXXXXXXXXXXXXXXXXXXXXXXXXXX
- Methodology XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
- PBS XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
- Third Party XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Software XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
- Network and XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
System XXXXXXXXXXXXXXX
Certification
3. Conversion - XXXXXXXXXXXXXXXXXXXXXXXXX
- Methodology XXXXXXXXXXXXXXXXXX
- Data Mapping - XXXXXXXXXXXXXXXXXXXXXXXX
- Conversion XXXXXXXXXXXXXXXXXXXXX
- Reconciliation/ XXXXXXX
Balancing - XXXXXXXXXXXXXXXXXXXXXXXXX
- Use of Automated XXXXXXXXXXXXXXXXXXXXXXXXXXXX
Tools XXXXXXXXXXXXXXXXXXXX
</TABLE>
46
<PAGE> 50
XXX = Confidential Treatment Requested
<TABLE>
<S> <C> <C>
4. Training (End User - Understand and be able to train the
and Unisys Support trainers of end users in the areas
Personnel): of: initial system set-up, system
a. Methodology capabilities and processing,
b. Systems day-to-day operations, nightly
Administration processing and controls, including
security administration and report
Bank Controls configuration.
R/M Controls
Deposit Controls
Loan Controls
Financial Controls
c. Implementation
Training
Account Processing
Batch Processing
Report Management
Teller Operations
Back Office
Operations
EIS and Budgeting
5. Technical - XXXXXXXXXXXXXXXXXXXXXXXXXX
a. Architectural XXXXXXXXXXXXXXXXXXXXXXX
Methodology XXXXXXXXXXXXXXXXXXXXXXXXXX
Network XXXXXXXXXXXXXXXXXXX
PBS System XXXXXXXXXXXXXXXXXXXXXXXXXXX
Interfaces - Provide appropriate understanding
of methodology of Phoenix for
making Changes at source code level.
Unless otherwise agreed, such
methodology shall provide for
Phoenix to maintain Source Code and
provide Level 2 support with respect
to the basic XXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXX of the Package for individual
countries supporting Changes necessary for
use in such countries, but not necessarily
"customer-specific" Changes which may be
subject to separate support terms and/or
separate support charges.
- Differentiate between network,
third party, Unix, and PBS
b. Tools problems, including Level 1
versus level 2.
</TABLE>
47
<PAGE> 51
<TABLE>
<S> <C> <C>
- Effectively configure, price,
implement, and certify PBS
compliant networks (hardware,
software, etc.).
6. Support - Differentiate between Level 1
- Technical and Level 2 support calls.
- User - Answer end user questions
- Tools regarding feature/
functionality problems.
- Record and track open system
issues and documentation.
- Record and track user request
for enhancements.
</TABLE>
48
<PAGE> 52
SOFTWARE LICENSE AGREEMENT
ADDENDUM G
DESCRIPTION OF SUPPORT/MAINTENANCE
LEVEL 1 -- SUPPORT/MAINTENANCE TO BE PROVIDED BY UNISYS
Level 1 is to serve as the point of contact for each End User.
In Level 1, support specialists will be provided as the experts on how to use
the system. The support specialists will be responsible for receiving calls
from End Users and log the calls into the automated call tracking system,
Bugsy. Approximately 80 - 85% of all calls coming into Level 1 should be
resolved by the Level 1 support specialist.
A typical call might be a question about how to use a specific feature of the
Package. In such an instance, the support specialist would log this call into
Bugsy, answer the question and close the incident.
Level 1 also covers reports of those system problems, i.e., the APY is
incorrect on a statement. In such an instance, the support specialist would
log this call into Bugsy and then make sure that all parameters that may affect
APY are set up correctly in the End User's system. If the problem cannot be
identified and resolved by the Level 1 support specialist, the problem is
passed to Level 2.
LEVEL 2
Level 2 is a technical resource available if Level 1 support specialist are
unable to diagnose or resolve problems with the Package.
Once a problem is properly referred from Level 1 to Level 2, the Level 2
technician should direct problem diagnosis and correction. Level 1 support
experts will provide assistance, as requested, if the Level 2 technician needs
to contact the End User for additional information or perform remote tasks.
Problem resolution may involve changing code on the system or fixing a data
field on an End User's files. If the Level 2 technician determines the Package
operates per specifications but the End User would like changes made, the
request is be treated as a request for modifications outside the scope of Level
2 support.
Once the Level 2 technician has completed any necessary "fix" and the "fix" has
been tested by the Q/A department, as applicable, the Level 2 technician would
notify Level 1 personnel that the "fix" is available. Level 1 notifies the End
User of the fix and coordinates delivery and implementation of the "fix" with
the End User. After the End User has verified that the "fix" in fact corrects
the problem, the Level 1 support specialist closes the incident in Bugsy.
49
<PAGE> 53
Level 2 shall include troubleshooting (to the extent within Phoenix's means)
and coordination with licensors or providers of Third-Party Materials to
identify and correct errors in Third-Party Materials. Phoenix shall also
provide technical support for the integration of such Third-Party Materials as
part of the Package.
50
<PAGE> 1
EXHIBIT 10.30
Agreement No. ______
PHOENIX INTERNATIONAL LTD., INC.
SOFTWARE LICENSE AGREEMENT
PARTIES:
BANK'S NAME
AND
PHOENIX INTERNATIONAL LTD., INC., A FLORIDA CORPORATION
PHOENIX FSC, INC.
DATED: MAY 2, 1996
<PAGE> 2
CONTENTS
Section 1. Definitions
Section 2. License Grant
Section 3. Term
Section 4. Title
Section 5. Payments and Terms
Section 6. Warranties
Section 7. Patent and Copyright Indemnity
Section 8. Confidentiality
Section 9. Customer and Software Support Services
Section 10. Implementation, Conversion and Installation
Section 11. Termination
Section 12. Client Obligations
Section 13. Source Code Escrow
Section 14. General
EXHIBIT LIST
Exhibit A Fees and Software Description
Exhibit B Designated and Remote Locations
Exhibit C Contact Person
Exhibit D Third Party Hardware and Licensed Software Configurations
<PAGE> 3
PHOENIX INTERNATIONAL LTD., INC.
SOFTWARE LICENSE AGREEMENT
AGREEMENT NO. ______________________ EFFECTIVE DATE: ________________
PARTIES: (Hereinafter referred to as "Customer")
Phoenix International Ltd., Inc. (Hereinafter referred to as "Phoenix")
Phoenix FSC, Inc.
900 Winderley Place
Suite 140
Maitland, Florida 32751
The parties hereby agree as follows:
1.0 DEFINITIONS
1.1 "Conversion" shall mean conversion and formatting of Customer's existing
data for use with the Software.
1.2 "Customer Network" shall mean the local and wide area network
communication system, server, remote PC's and Software based on the
machine and technical specifications as set forth in Exhibit D.
1.3 "De-Conversion" shall mean the regeneration of the Customer's existing
data utilized by the Software into a generic format.
1.4 "Designated Location" is the street address of the server as specified on
Exhibit B., as modified from time to time by written notice from Customer,
plus remote PC's connected to the server by local or wide area network.
1.5 "Installation" shall mean the installation in an executable format of the
Software on the Customer System at the Designated Location and all Remote
Locations.
1.6 "Implementation" shall mean the Installation and Conversion of the
Customer data for use by the Software.
1.7 "Implementation Date" shall be the last day of the month in which Phoenix
provides Customer with notice that the Software is installed and the
Conversion is complete.
License Agreement
May 2, 1996.0
Page 1
<PAGE> 4
1.8 "Implementation Period" shall be the period from the Effective Date until
the earlier of (i) the Implementation Date or (ii) the date one hundred
eighty (180) days after the Effective Date.
1.9 "Documentation" shall mean all documentation generally provided to
Phoenix's customers with the Software.
1.10 "Licensed Products" shall mean collectively the Software and
Documentation.
1.11 "Software" shall mean Phoenix's Retail Banking System software and Third
Party software, as described in Exhibit A, in object code form and all
updates, modifications, enhancements or revisions supplied by Phoenix, as
part of Customer and Software Support services.
1.12 "Remote Locations" shall mean the street addresses listed in Exhibit B as
may be modified from time to time by written notice from Customer to
Phoenix, where PCs/workstations are connected to the Software through the
Customer's local and wide area networks.
1.13 "Use" shall mean the reading into memory of the Software and the
execution of such Software, in whole or in part, by the Customer Network
for the Customer's own data processing. Use of the Software shall be
confined to the United States of America, unless otherwise agreed in
writing by Phoenix. Commencement and effectiveness of Customer's license
of the Licensed Products is not delayed or contingent based on the
delivery or completion of any related or other services, including
Implementation, and Customer Software Support.
1.14 "Related Expenses" shall mean reasonable travel and other reasonable
out-of-pocket expenses incurred in Implementation and/or Customer and
Software Support, including (without limitation) file conversion costs;
optional products, services, or hardware requested or authorized by
Customer; shipping charges; courier or delivery charges; tape, cartridge
or diskette costs; or non-voice telephone or communication costs not
already covered as part of Customer and Software Support.
2.0 LICENSE GRANT
2.1 Phoenix hereby grants to Customer a non-exclusive non-transferable
license to Use Software on the Customer Network and to use the
Documentation in support of the Software during the term and pursuant to
the terms and conditions of this Agreement. Phoenix will provide one copy
of the Software and Documentation.
2.2 Customer may copy the Software and the Documentation provided to Customer
in machine readable form into machine readable or printed form to provide
sufficient copies to support the Customer's Use of the Software as
authorized under this Agreement. Customer shall not make any other copies
of the Software, except for testing, backup, or archive purposes.
Customer may make unlimited copies of the Documentation, subject to the
provisions of Section 4.0 and 9.0. Customer shall maintain a record of
the number and location of all copies of the Software and Documentation;
and a copy of that record will be provided to Phoenix upon request.
2.3 Customer may transfer the Software to: (a) A backup machine when the
Customer's server or any associated machine elements required for Use of
the Software are temporarily inoperable or unusable; or (b) Another
machine for disaster recovery testing (which may occur concurrent with
normal Use of the Software to process Customer's data on Customer
Network), or another machine for actual disaster recovery and processing
in the event the Customer Network is non-functional due to the occurrence
of disaster.
License Agreement
May 2, 1996.0
Page 2
<PAGE> 5
2.4 The License herein granted is subject to the following restrictions and
limitations:
2.4.1 Customer may Use the software to process only its own data or the
data of the Customer Group. For such purpose, the "Customer Group"
means a subsidiary or affiliate of Customer, the parent corporation of
Customer, and any holding company of which Customer is a subsidiary
(collectively the "Customer Group"), except that Customer may process
the data only of such members of the Customer Group for which Customer
paid or pays, prior to commencement of processing for such members of
the Customer Group, License Fees at all times sufficient for their
aggregate asset size calculated in combination with the asset size of
Customer. For the purpose of this subsection, an affiliate will mean a
corporation that is more than fifty percent (50%) owned directly or
indirectly by the parent corporation of a Customer, a subsidiary shall
be a corporation of which Customer directly or indirectly owns more than
fifty percent (50%), and a parent corporation shall be a corporation
that directly or indirectly owns more than fifty percent (50%) of
Customer, but only so long as such entities continue to qualify as such
an affiliate, subsidiary or parent corporation.
2.4.2 Customer shall not translate, reverse engineer, de-compile,
interpret or disassemble the Software. Customer shall not transfer,
distribute, sell, lease, or assign the Licensed Products except as
expressly authorized in this Agreement. Customer shall not make any
modifications or additions to the Software or Documentation without the
prior written consent of Phoenix.
3.0 TERM
This Agreement and the license granted herein shall be for an initial
term commencing on the Effective Date and continuing for a period of
five (5) year from the last day of the Implementation Period (the
"Initial Term"). This Agreement shall be automatically renewed for an
additional one (1) year periods unless either party notifies the other
of its desire to not renew this Agreement more than six (6) months prior
to the last day of the Initial Term or any renewal period.
4.0 TITLE
Phoenix represents and warrants to Customer that it owns all right,
title and interest in or has sufficient rights to license all of the
Software. Customer acknowledges that the Licensed Products are either
owned or licensed by Phoenix, that neither legal nor equitable title to
the Licensed Products passes to Customer pursuant to this Agreement, and
that the Licensed Products contains trade secrets of Phoenix. Customer
shall ensure that copyright notices or other legends contained in or on
any copies of the Licensed Products remain in or on the original and any
copies reproduced by Customer. All copies, modifications and additions
made by Customer of or to the Software and Documentation shall become
the property of Phoenix.
5.0 PAYMENTS AND TERMS.
5.1 The fees and charges for products and services to be provided under this
Agreement are set forth in Exhibit A. All amounts due shall be paid in
U.S. dollars.
1) An initial one-time License Fee for the license of the Software is
due upon execution of this Agreement by Customer. The License Fee is
for the delivery by Phoenix of the Software in its unmodified form. The
License Fee is calculated based upon asset size of Customer and
License Agreement
May 2, 1996.0
Page 3
<PAGE> 6
XXX = Confidential Treatment Requested
any included Customer Group, according to the schedule set forth in
Exhibit A. Each time Customer and the Customer Group, or any of them,
merges, adds affiliates or otherwise grows beyond the aggregate asset
size for which Customer has paid a License Fee, Customer agrees to pay an
upgrade fee equal to the then current difference in tiers.
2) An initial one-time Implementation Fee for Phoenix's Implementation
services is due upon execution of this Agreement by Customer. Phoenix
shall be entitled to additional Implementation Fees, to be paid in
advance, if Implementation is required whenever Customer or the Customer
Group merges, adds affiliates, etc.
3) A Customer and Software Support Fee is due on the Implementation Date
and each anniversary thereof for so long as the license to the Software
is in effect or Customer continues to use the Software.
4) Customer agrees, in addition, to pay Related Expenses upon receipt of
Phoenix's invoice.
5.2 All invoices shall be due and payable not later than fifteen (15) days
following the date of invoice. Sums overdue shall bear interest at the
lesser of (i) 1 1/2% per month, or (ii) the highest rate allowed under
applicable law.
5.3 Amounts payable to Phoenix hereunder are payable in full without
deduction, or set off, and shall be in addition to all sales, use or
other taxes or duties, which Customer shall also be responsible for
paying. Customer shall duly and timely pay all taxes and duties, however
designated, levied or based upon amounts payable to Phoenix hereunder
(exclusive of United States Federal, state or local taxes based upon the
net income of Phoenix) or the license, use or possession of the Licensed
Products. Customer agrees to indemnify and hold Phoenix harmless from
any such taxes or duties which any federal, state or local taxing
authority requires Phoenix to pay. Customer may challenge the
applicability of any such tax only after paying the tax or giving
Phoenix other satisfactory assurances of compliance.
5.4 Phoenix reserves the right to adjust its prices at any time subject to 30
days advanced notice. Such changes shall have no retroactive effect on
Customer. The Customer and Software Support Fee shall not be increased
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.
6.0 WARRANTIES
6.1 Phoenix warrants, for a period of six (6) months after delivery, the
original unmodified version of the Software shall conform in all
material respects with any program descriptions included in
corresponding Documentation provided by Phoenix. Phoenix does not
warrant that the Licensed Products will operate without interruption or
be error-free. In the event Customer discovers any defect or error
covered by the warranty, Customer agrees to provide Phoenix sufficient
detail to enable Phoenix to recreate the defect or error. Phoenix
agrees, as its exclusive obligation (except as covered outside the
foregoing warranty as part of Customer and Software Support) for such
defect or error, to correct the defect or error through all reasonable
efforts. Phoenix shall not be responsible for unreported error or
errors caused by negligence or nonconformance with the Phoenix Hardware
and Network Services Guide. Customer shall be limited to the warranties
provided by third-party licensors or manufacturers with respect to
third-party software or equipment that may be provided by
Phoenix.
License Agreement
May 2, 1996.0
Page 4
<PAGE> 7
6.2 Phoenix's total liability to Customer or any member of the Customer Group
under any provision of this Agreement (except 7.0) or for any and all
claims, losses or damages relating to the Licensed Products (whether based
on tort, contract, or any other theory) shall be limited to the amount
actually paid by Customer to Phoenix for the Licensed Products giving rise
to the liability. The parties acknowledge that each of them relied upon
the inclusion of this limitation in consideration of entering into this
Agreement.
6.3 EXCEPT AS PROVIDED IN SECTION 6.1 ABOVE, PHOENIX SPECIFICALLY DISCLAIMS
ANY OTHER WARRANTIES OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY,
INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF FITNESS FOR A PARTICULAR
PURPOSE.
6.4 IN NO EVENT SHALL PHOENIX OR ITS LICENSORS BE LIABLE FOR ANY SPECIAL,
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES RESULTING FROM THE USE, OR
INABILITY TO USE, THE LICENSED PRODUCTS OR ARISING OUT OF ANY OTHER
CIRCUMSTANCES ASSOCIATED WITH THE SUBJECT MATTER OF THIS AGREEMENT, AND
IN SUCH RESPECT CUSTOMER AND CUSTOMER GROUP SHALL NOT BE ENTITLED TO
DAMAGES BASED ON LOSS OF PROFIT, LOSS OR INTERRUPTION OF DATA OR COMPUTER
TIME, ALTERATION OR ERRONEOUS TRANSMISSION OF DATA, EVEN IF PHOENIX IS
ADVISED IN ADVANCE OF THE POSSIBILITY OF SUCH DAMAGES.
7.0 PATENT AND COPYRIGHT INDEMNITY
Phoenix, at its own expense, shall defend, indemnify, and hold harmless
Customer and any members of the Customer Group from any legal action based
upon a claim that any of the Licensed Products infringes the patent,
copyright, license or other proprietary right of a third party, provided
that Phoenix is notified promptly of such claim when it is first
anticipated, threatened or asserted. Phoenix shall have the sole right to
control the defense and disposition of any such claim or action. Phoenix
shall have no obligation to defend Customer or to pay costs, damages or
attorney's fees for any claim based upon use of other than a current
unaltered version of the Licensed Product to the extent that such
infringement would have been avoided thereby. Recourse for infringement
involving software or equipment supplied to Phoenix by third-party
licensors or manufacturers shall be limited to indemnification provided by
those third parties. This Section 7 states Phoenix's sole obligation with
respect to title and infringement matters.
8.0 CONFIDENTIALITY
8.1 Customer understands and agrees that the Licensed Products and any
related information ("Confidential Information"), contains valuable
intellectual property and trade secrets of Phoenix and embody substantial
creative efforts and confidential information, ideas and expressions
belonging to Phoenix. Where required by the circumstances, such
Confidential Information may include software, documentation or
information provided to Phoenix by third parties subject to obligations of
confidentiality.
8.2 Phoenix understands and agrees that in the performance of its duties
under this Agreement, Phoenix may gain access to certain materials and
data relating to Customer's business ("Confidential Information").
8.3 Both parties shall at all times observe reasonable care in maintaining
complete confidentiality of the other party's Confidential Information,
and shall not permit or authorize access to or disclosure of the other
party's Confidential Information to any person or entity other than (i)
employees, (ii) accountants for auditing purposes, (iii) independent
License Agreement
May 2, 1996.0
Page 5
<PAGE> 8
contractors, provided that Phoenix shall have the right to approve
(approval not to be unreasonably withheld) in advance all contractors who
are given access to the Software or any Phoenix Confidential Information
and (iv) governmental regulatory authorities, to the extent required for
compliance with applicable laws, and subject to such protective measures
as may be available to preserve the confidentiality of such information
following disclosure. For purposes of this Agreement, "reasonable care"
shall mean a standard no less than the standard of care each party
exercises in protecting its own confidential property. Each party shall
promptly notify the other in writing of the existence of any unauthorized
knowledge, possession or use of the Confidential Information by any person
or entity.
8.4 Confidential Information shall not include information which (i) is in
the public domain, (ii) is obtained from a third party who acquired such
confidential information independently, without reliance on other
Confidential Information, and free of any obligation to the other party or
(iii) is independently developed by either party without reference to
Confidential Information of the other party, as demonstrated by written
documentation.
9.0 CUSTOMER AND SOFTWARE SUPPORT SERVICES
9.1 Effective immediately after the Implementation Date, Phoenix shall
provide certain software maintenance, software operation and use services
and system enhancements ("Customer and Software Support") for the fee
hereinafter set forth, which services:
9.1.1 Include enhancements to the Software and updates to Documentation
generally made available to all of Phoenix's Customers. Ensure that the
Licensed Software complies with the minimum regulatory requirements of
U.S. Federal Agencies having jurisdiction over the operation of Customer.
Enhancements include modifications or additions made to improve upon
existing features and operations performed by the Software.
9.1.2 Include reasonable maintenance and telephone consultation related to
the Licensed Products. Phoenix will correct or replace software and/or
provide services necessary to remedy any critical or non-critical
programming error that is attributable to Phoenix. Such correction,
replacement, or services will be promptly undertaken by Phoenix after the
Customer has identified and notified Phoenix of any such error, which
notice shall be in accordance with Phoenix reporting procedures. Phoenix
will use reasonable commercial efforts to telephonically diagnose (i) any
errors or malfunctions in the system, or (ii) malfunctions in the system
caused by operator error, and advise Customer of possible corrective
measures that the Customer may take. Phoenix will also clarify operating
instructions contained in the Documentation delivered with the programs.
9.1.3 Include direct first line support of third party software and
coordination of all other support with the third party licensor on behalf
of Customer.
9.1.4 Include telephonic support 24 hours per day, 365 days per year via
beeper access to support personnel. Normal office hours are Monday
through Friday, 8:00 AM to 5:00 PM Eastern Standard Time.
9.2 If Phoenix, after using its best telephonic diagnostic efforts, shall
determine that it requires documentation of problems, errors or
malfunctions in writing, Customer agrees to provide assistance in
identifying and detecting problems, errors or malfunctions in sufficient
detail and with sufficient supporting documentation and information to
enable Phoenix to recreate the problem, error or malfunction
License Agreement
May 2, 1996.0
Page 6
<PAGE> 9
9.3 Customer and Software Support is limited to Hardware and Customer Network
configurations supported by Phoenix as stated in the Phoenix Network and
Configuration Standards Guide. Phoenix agrees to give Customer at least
six (6) months' advance notice if an applicable configuration will no
longer be supported.
10.0 IMPLEMENTATION
10.1 Phoenix shall conduct an implementation planning session at a location,
date and time mutually agreed to by both parties (the "Implementation
Planning Session") to develop a mutually acceptable Implementation
Schedule. Customer shall make available up to five (5) of its appropriate
personnel for the Implementation Planning Session.
10.2 Phoenix will make all reasonable efforts to effect the Implementation of
the Software in accordance with the Implementation Schedule; but, Phoenix
shall not be liable to the Customer or any other person for any damages,
in the event Implementation is not completed within such time.
11.0 TERMINATION
11.1 Termination by Customer. Customer may terminate the License at any time
after the Initial Term or any renewal term upon three months advance
written notice to Phoenix.
11.2 Termination by Phoenix. Phoenix shall have the right to terminate the
License upon the occurrence of any of the following events:
11.2.1 Customer breaching or failing to perform any provision of this
Agreement and the same is not cured within ten (10) days after
Customer's receipt of notice in writing from Phoenix specifying such
breach or failure; or
11.2.2 Customer not implementing the most recent version of the
Licensed Products within ninety (90) days of the date such version is
made available to Customer; or
11.2.3 Customer failing to pay the annual Customer and Software Support
Fee.
11.3 Effect of Termination
11.3.1 Except for breaches of Paragraphs 2.4, 4.0 or 8 by Customer,
Phoenix shall allow Customer up to one hundred eighty (180) days to
continue to Use the Licensed Products; provided that Customer has paid
and continues to pay all amounts due. At the end of such period of
time (and in all other instances immediately upon termination) Customer
shall return or destroy all copies of the Licensed Products; if Phoenix
so requests, Customer shall certify it has completed such action.
Customer grants Phoenix the right to enter Customer's business premises
during regular business hours to retrieve all Licensed Products or
verify the destruction of the same by Customer's personnel.
11.3.2 No monies shall be refundable upon termination of the License,
whether such termination is by Customer or Phoenix.
11.3.3 Phoenix agrees to provide reasonable De-Conversion Assistance
for which Customer agrees to pay in advance to Phoenix a de-conversion
fee equal to one half (1/2) the then applicable annual Customer and
Software Support Fee ("De-Conversion Fee").
License Agreement
May 2, 1996.0
Page 7
<PAGE> 10
11.3.4 All obligations of confidentiality and payment of monies due
shall survive termination.
11.4 The rights and remedies of Phoenix included in this Section shall not be
exclusive and are in addition to any other rights and remedies provided by
law or equity.
12.0 CUSTOMER OBLIGATIONS
12.1 Customer shall appoint a Contact Person, on Exhibit "C", to service as
the focal point of communication between Phoenix and Customer. Customer
may change the Contact Person upon written notice to Phoenix.
12.2 Customer agrees to acquire and maintain Customer Network at the
Designated Location by the required dates in the Implementation Schedule.
Customer shall provide an on-line telecommunications link with a telephone
modem in order to provide digital communication with Phoenix's systems.
12.3 Customer shall add all corrections or enhancements ("System Release")
provided by Phoenix for the Licensed Products within twenty-five (25) days
of availability.
12.4 Customer shall keep its personnel trained in the operation of the
Licensed Products and Customer Network.
12.5 Customer shall pay the annual Customer and Software Support Fee for so
long as Customer continues to hold or use the Licensed Products.
13.0 SOURCE CODE ESCROW
13.1 Phoenix will deposit the most current version of the source code for the
Phoenix Banking System with an independent escrow agent. In the event
that Phoenix, or its successor, shall cease to provide Customer and
Software Support, and Customer has paid its Customer and Software Support
Fee, Customer shall have the right to obtain, for its own sole and
exclusive use, with no right of transfer, a single copy of such source
code from the escrow agent, subject to the License Agreement.
14.0 GENERAL
14.1 Notices shall be deemed given as of the date deposited in the U.S. mail
(with provision for confirmation of receipt, if outside U.S.). Either
party may change its address by written notice to the other.
14.2 This Agreement shall not be assignable or transferable by Customer. This
Agreement may be assigned or conveyed by Phoenix without any prior consent
or approval, pursuant to a sale or merger of the company or a major
division. Subject to the foregoing, this Agreement shall inure to the
benefit of and be binding upon the parties, their successors and
authorized assigns.
14.3 The failure of either party to enforce any term of this Agreement shall
not constitute a waiver of either party's right to enforce each and every
term of this Agreement.
License Agreement
May 2, 1996.0
Page 8
<PAGE> 11
14.4 If either party brings an action under this Agreement (including appeal),
the prevailing party shall be entitled to recover reasonable attorneys'
fees and costs. Should any provision of this Agreement be held by a court
of competent jurisdiction to be unenforceable, the remaining provisions of
this Agreement shall not be affected or impaired thereby. This Agreement
shall be governed by the laws of Florida.
14.5 Neither party shall be in default by reason of any failure in the
performance of this Agreement (other than a failure to make payment when
due or to comply with restrictions upon the Use of the Licensed Products)
if such failure arises out of any act, event or circumstance beyond the
reasonable control of such party, whether or not otherwise foreseeable.
The party so affected will resume performance as soon as reasonably
possible.
14.6 The captions appearing in this Agreement are inserted only as a matter of
convenience and in no way limit the scope or affect the meaning of any
section.
14.7 This Agreement constitutes the entire agreement between the parties and
supersedes all prior understandings and agreements between them regarding
the Licensed Products, and may not be modified except in writing signed by
authorized representatives of both parties.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the dates indicated.
PHOENIX INTERNATIONAL LTD., INC.
PHOENIX FSC., INC.
By: By:
------------------------------ ------------------------------------
Print Name:
----------------------------
Title:
---------------------------------
Date: Date:
---------------------------- ----------------------------------
EXECUTION BY PHOENIX: this Agreement shall not be binding until the same
has been executed by an Executive Officer of Phoenix.
License Agreement
May 2, 1996.0
Page 9
<PAGE> 12
XXX = Confidential Treatment Requested
EXHIBIT A
FEES* AND SOFTWARE DESCRIPTION
<TABLE>
<S> <C> <C>
1. LICENSE FEES:
A. This license fee is based upon the asset size of the
customer.
TOTAL INITIAL LICENSE FEES: $
======
2. IMPLEMENTATION FEES
(PLUS OUT-OF-POCKET EXPENSES)
ICI $
Basic Training Charges $XXXXXX
(Including the following classes):
SYSTEM ADMINISTRATION (9 days for 3 people)
- Bank Controls
- RIM Controls
- Deposit Controls
- Loan Controls
- Financial Controls
- Teller Controls
ADDITIONAL PEOPLE ATTENDING - XXXXXX each
ACCOUNT PROCESSING (10 Training Days in Bank)
- Account Processing (6 days)
- RIM
- Deposits
- Loans
- Nightly Processing (2 days)
- Back Office Processing (1 day)
- G/L Processing (1 day)
OPTIONAL TRAINING
- Teller Processing (2 days) - XXXXXX
- EIS (2 days) - XXXXXX
- Budgeting (1 day) - XXXXXX
- Report Writing (2 days) - XXXXXX
ADDITIONAL CLASSES - XXXXXX/day/Instructor
TOTAL INITIAL IMPLEMENTATION FEES $
======
</TABLE>
License Agreement
May 2, 1996.0
Page 10
<PAGE> 13
<TABLE>
<S> <C> <C>
3. ANNUAL CUSTOMER AND SOFTWARE SUPPORT FEE $
===
TOTAL INITIAL ANNUAL CUSTOMER AND SOFTWARE
SUPPORT FEES $ /YEAR
===
</TABLE>
4. THE COMPONENTS OF THE LICENSED SOFTWARE AND THE LICENSED
DOCUMENTATION:
Customer & Product Controls
Administrative Controls
Customer Processing
Deposit Processing
Loan Processing
Teller Processing
Nightly Processing
*- ALL FEES OTHER THAN IMPLEMENTATION FEES ARE SUBJECT TO
INCREASE BASED ON AGGREGATE SIZE OF CUSTOMER GROUP
General Ledger Administration & Maintenance
Executive Information System
Data Dictionary: Deposits
Data Dictionary: Loans
Data Dictionary: Customer Information
Report Dictionary
Budgeting
THE LICENSED PROGRAM DESCRIPTIONS ARE LOCATED IN THE LICENSED
DOCUMENTATION.
Interfaces: All necessary interfaces should be identified at the
Implementation Planning Session. Additional fees, if any, will be
presented to the bank subsequent to the Implementation Planning Session.
5. THIRD PARTY SOFTWARE
The following software programs are licensed under this Agreement, but
owned by third parties. Initial calls for support should be made to
Phoenix unless the program is marked with an asterisk.
Sybase
License Agreement
May 2, 1996.0
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<PAGE> 14
EXHIBIT B
DESIGNATED AND REMOTE LOCATION(S):
DESIGNATED LOCATION(S):
1.________________________________
__________________________________
__________________________________
__________________________________PHONE
__________________________________FAX
2.________________________________
__________________________________
__________________________________PHONE
__________________________________FAX
REMOTE LOCATION(S):
1.________________________________
__________________________________
__________________________________PHONE
__________________________________FAX
2.________________________________
__________________________________
__________________________________PHONE
__________________________________FAX
License Agreement
May 2, 1996.0
Page 12
<PAGE> 15
EXHIBIT C
CONTACT PERSON
CONTACT PERSON: ________________________________________
ADDRESS: ________________________________________
________________________________________
PHONE: ________________________________________
FACSIMILE: ________________________________________
License Agreement
May 2, 1996.0
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<PAGE> 16
EXHIBIT D
PRELIMINARY HARDWARE AND LICENSED SOFTWARE CONFIGURATIONS
1. UNIX SERVER REQUIREMENTS
Customer agrees to provide and maintain a Hewlett-Packard 9000 Series
server at a size recommended by Phoenix, or greater.
1 Sybase CPU Class B SQL Server Runtime License Version 10.0.2 and
higher. PHOENIX WILL ORDER FOR YOU AND INVOICE YOU DIRECTLY UPON THE
FIRST DAY OF TRAINING OR THE FIRST DAY SYBASE IS INSTALLED ON YOUR SERVER.
PRICES ARE PUBLISHED BY SYBASE PERIODICALLY. THESE PRICES WERE PUBLISHED
SEPTEMBER 30, 1994. AMOUNT INVOICED TO YOU AT THE TIME OF YOUR
INSTALLATION MAY VARY, DEPENDING UPON ANY CHANGES SYBASE MAKES TO ITS
PRICING IN THE INTERIM. Cost is based upon the total number of users on
the server, which you will have to tell us.
<TABLE>
<CAPTION>
Number International Latin Am. Asian Canada U.S.
of Users Price Price Price Price Price
-------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Single $ 4,700 $ 3,600 $ 4,300 $ 5,200 $ 3,600
2-8 12,500 9,600 11,500 13,900 9,600
9-16 23,800 18,300 22,000 26,500 18,340
17-32 37,800 29,100 34,900 42,200 29,100
33-48 51,900 39,900 47,900 57,900 39,900
49-64 65,800 50,600 60,700 73,400 50,600
65-96 93,200 71,700 86,000 104,000 71,700
Unlimited 116,900 89,900 107,900 130,400 89,900
</TABLE>
PLEASE NOTE: ALL SYBASE LICENSES PURCHASED PURSUANT TO THIS AGREEMENT ARE
SUBJECT TO RESTRICTIONS AS FOLLOWS: You are purchasing "End User
Licenses", terms of which are mandated in our License with Sybase, and are
reproduced and incorporated herein. You will not receive support,
manuals, or information from Sybase. "Derivative Product" is the copy of
Sybase licensed by Phoenix and sublicensed to you. "End User" and
"licensee" is you. "VAR" is Phoenix.
License Agreement
May 2, 1996.0
Page 14
<PAGE> 17
ADDITIONAL TERMS APPLICABLE TO SYBASE PRODUCT
(1) Only a non-exclusive, nontransferable right to use each
Licensed Copy is granted to an End User. No right to use other than
an Embedded Run-Time version of the Sybase Programs is granted; an
"Embedded Run-Time Version" shall mean a version of the Sybase
Programs linked to or embedded in Phoenix's application code in such
a way that structurally or by license restrictions, it (a) precludes
use of the Program to develop applications, except for clause c of
this paragraph; (b) precludes use of the Program to develop
applications, except for report writing and decision support solely
in conjunction with the Derivative Product; (c) precludes general
purpose access to command verbs in the Program except that the End
User may, within the scope of and under control of the Derivative
Product, create or alter tables, columns or rows and add fields to
existing tables, as necessary to implement, operate and administer
the Derivative Product; (d) precludes use of any command verbs in
the Program to create new schemas or databases; and (e) precludes
use of the Program or third party application development tools to
modify or enhance existing screens or forms delivered as part of the
Derivative Product, or to create new forms, except as necessary to
implement and operate the Derivative Product.
(2) Phoenix and/or its licensors retain all title to the
Licensed Copy, and all copies thereof, and no title to the Licensed
Copy, or any intellectual property therein, is transferred to the
licensee.
(3) The licensee may not copy the Licensed Copy, except for
backup and archival purposes only, and the licensee shall include on
all copies of the Licensed Copy all copyright and other proprietary
notices or legends included on the Licensed Copy which was shipped
to such licensee.
(4) The licensee agrees not to reverse assemble, decompile, or
otherwise attempt to derive source code from the Licensed Copy;
(5) The licensee agrees to comply with all export and
re-export restrictions and regulations ("Export Restrictions")
imposed by the governments of the United States or the country to
which the Licensed Copy is shipped to licensee. Licensee will not
commit any act or omission which will result in a breach of any such
Export Requirements; the licensee agrees that it will comply in all
respects with any governmental laws, orders, or other restrictions
on the export of the Sybase Program and the Licensed Copy (and the
related information and documentation) which may be imposed from
time to time by the governments of the United States and Canada or
the country to which the Sybase Program is shipped by Sybase
("Export Requirements"). This Section shall survive the expiration
or termination of the Licensed Copy license agreement.
(6) Although copyrighted, the Licensed Copy is unpublished and
contains proprietary and confidential information of Phoenix and its
licensors and is considered by Phoenix and its licensors to
constitute valuable trade secrets. The licensee will hold the
Licensed Copy in confidence and shall protect the Licensed copy with
at least the same degree of care with which the licensee protects
its own similar confidential information;
License Agreement
May 2, 1996.0
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<PAGE> 18
(7) VAR's licensors of software included in the Licensed
Copy are direct and intended third party beneficiaries of the
license agreement and may enforce it directly against the
licensee; provided, however, that none of such licensors shall be
liable to the licensee for any general, special, direct, indirect,
consequential, incidental or other damages arising out of or
related to the Licensed Copy; and
(8) Upon termination of the license for the Licensed Copy,
the licensee shall return to VAR all copies of the Licensed Copy,
or certify to VAR that the licensee has destroyed all such copies.
2. Network Requirements
Customer agrees to provide and maintain a network in accordance with the
standards set forth in the Phoenix Hardware and Network Services Guide, as
amended from time to time.
License Agreement
May 7, 1996.0
Page 16
<PAGE> 1
EXHIBIT 10.31
Agreement No. ______
PHOENIX INTERNATIONAL LTD., INC.
INTERNATIONAL SOFTWARE LICENSE AGREEMENT
PARTIES:
BANK'S NAME
AND
PHOENIX INTERNATIONAL LTD., INC., A FLORIDA CORPORATION
PHOENIX FSC, INC.
DATED: May 2, 1996
<PAGE> 2
CONTENTS
Section 1. Definitions
Section 2. License Grant
Section 3. Term
Section 4. Title
Section 5. Payments and Terms
Section 6. Warranties
Section 7. Patent and Copyright Indemnity
Section 8. Confidentiality
Section 9. Customer and Software Support
Section 10. Implementation
Section 11. Termination
Section 12. Client Obligations
Section 13. Source Code Escrow
Section 14. Arbitration
Section 15. Export Controls
Section 16. Foreign Corrupt Practices Act of 1977
Section 17. General
EXHIBIT LIST
Exhibit A Fees and Software Description
Exhibit B Designated Location and Remote Branches
Exhibit C Contact Person
Exhibit D Third Party Hardware and Software Configurations
<PAGE> 3
PHOENIX INTERNATIONAL LTD., INC.
SOFTWARE LICENSE AGREEMENT
AGREEMENT NO. EFFECTIVE DATE:
-------------- --------------
PARTIES: List Customer Name (Hereinafter referred to as "Customer")
Phoenix International Ltd., Inc. (Hereinafter referred to as "Phoenix")
Phoenix FSC, Inc.
900 Winderley Place
Suite 140
Maitland, Florida 32751
The parties hereby agree as follows:
1.0 DEFINITIONS
1.1 "Additional Branch" shall mean a Remote Branch not listed in Exhibit B
which is connected to the Customer network after the Effective Date,
whether as a result of changes in operations, growth, acquisition, or
otherwise.
1.2 "Acquired Financial Institution" shall mean any financial institution in
which Customer acquires a greater than 50% interest or which merges with
or into the Customer.
1.3 "Changes" shall mean corrections, updates, upgrades, translations,
additions and modifications to the Software and Documentation, and any
other new or additional works based in whole or in part on the Software
or Documentation.
1.4 "Client Devices" shall mean workstations, personal computers and
terminals connected to the Customer Network which, subject to control of
the authorized Server, have access to and Use the Software to input,
read, and interpret Customer's data.
1.5 "Conversion" shall mean conversion and formatting of Customer's existing
data for use with the Software.
1.6 "Customer Network" shall mean the local and wide area network system of
the Customer, including one (1) Server at the Designated Location, the
Client Devices connected thereto located at the Designated Location and
the Remote Branches, and the Software. Customer shall be responsible
International Agreement
May 2, 1996.0
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<PAGE> 4
for assuring that the Customer Network is in compliance with the Phoenix
Network and Configuaration Standards Guide (as provided by Phoenix).
1.7 "Customer and Software Support" shall have the meanings set forth in
Section 9.
1.8 "De-Conversion" shall mean the regeneration of the Customer's then
existing data utilized by the Software into a generic format.
1.9 "Designated Location" shall mean the street address of the location of
the Server as specified on Exhibit B. customer may replace the location
of the Server by providing Phoenix with written notice of the change,
whereupon Exhibit B hereto will be deemed automatically amended to
reflect the replacement.
1.10 "Documentation" shall mean the technical and operating documentation
relating to the Software provided to Customer by or on behalf of Phoenix,
and all Changes thereto provided to Customer by or on behalf of Phoenix
or otherwise made or obtained by or for Customer.
1.11 "Installation" shall mean the installation in an executable format of the
Software on the Customer Network at the Designated Location and selected
Remote Branches.
1.12 "Implementation" shall mean the Installation and Conversion.
1.13 "Implementation Date" shall be the last day of the month in which Phoenix
provides Customer with notice that Implementation is complete.
1.14 "Implementation Period" shall mean the period from the Effective Date
until the earlier of (i) the Implementation Date or (ii) the date one
hundred eighty (180) days after the Effective Date.
1.15 "Licensed Products" shall mean collectively the Software and
Documentation.
1.16 "Server" shall mean a network file server serving as the Sybase data base
for the Software.
1.17 "Software" shall mean Phoenix's Retail Banking System software and Third
Party software, as described in Exhibit A, in object code form and all
updates, modifications, enhancements or revisions supplied by Phoenix as
part of Customer and Software Support.
1.18 "Related Expenses" shall mean reasonable travel and other reasonable
out-of-pocket expenses incurred in connection with Implementation and/or
Customer and Software Support, including (without limitation) file
conversion costs; the cost of optional products, services, or hardware
requested or authorized by Customer; shipping charges; courier or delivery
charges; tape, cartridge or diskette costs; or non-voice telephone or
communication costs not already covered as part of Customer and Software
Support.
1.19 "Remote Branches" shall mean the street addresses listed in Exhibit B
where Client Devices reside which are connected to the Customer Network.
The Remote Branches will include Additional Branches at such time as
Phoenix receives written notice from Customer that such Additional
Branches have been connected to the Customer Network, whereupon Exhibit B
hereto will be deemed automatically amended to include such Additional
Branches.
1.20 "Territory" shall mean the countries or territories set forth in Exhibit
G.
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May 2, 1996.0
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<PAGE> 5
1.21 "Use" (used as a noun or verb) shall mean the reading into memory of the
Software and the access to and/or execution of such Software, in whole or
in part, on the Customer Network. Use of the Software is permitted only
for Customer's and its Affiliates' own internal data processing needs and
shall be confined to the Territory, unless otherwise agreed in writing by
Phoenix.
2.0 LICENSE GRANT
2.1 Subject to the restrictions and limitations of this Agreement, Phoenix
grants to Customer a non-exclusive, non-transferable license to Use the
Software on the Customer Network (on one (1) Server only) at the
Designated Location and Remote Branches, during the Term, pursuant to the
terms and conditions of this Agreement. Pursuant to such license,
Customer may:
(a) load and execute the Software on the Customer Network;
(b) transfer the Software to a backup machine when the Server or any
associated machine elements required for Use of the Software are
temporarily inoperable or unusable, or to another machine for disaster
recovery testing (which may occur concurrent with normal Use of the
Software to process Customer's data on Customer Network), or for actual
disaster recovery and processing in the event the Customer Network is
non-functional due to the occurrence of disaster;
(c) make a reasonable number of additional copies of the Software for
testing, backup, and archival purposes in support of its ordinary User of
the Software.
2.2 Subject to the restrictions and limitations of this Agreement, Phoenix
grants to Customer a non-exclusive, non-transferable license to use the
Documentation in support of its Use of the Software, during the Term,
pursuant to the terms and conditions of this Agreement. Pursuant to such
license, Customer may make a reasonable number of additional copies of the
Documentation as required in support of its Use of the Software.
2.3 Phoenix will (if it has not done so already) immediately deliver to
Customer one (1) copy of the current version of the Software in object
code form, and one (1) copy of the current version of the Documentation.
The licenses granted to Customer under Sections 2.1 and 2.2 hereof shall
become immediately effective upon delivery of such items, and shall not
delayed or contingent based on installation, operation, or the delivery or
completion of any services.
2.4 The Software is provided to Customer in object code form only. Customer
agrees not to translate, reverse engineer, de-compile, interpret or
disassemble the Software without the prior written consent of Phoenix.
Customer agrees not to transfer, distribute, sell, lease, or assign the
Licensed Products without the prior written consent of Phoenix. Customer
agrees not to make any Changes to the Licensed Products without the prior
written consent of Phoenix.
2.5 Customer may not use the Software or Documentation to process accounts
or records, or to generate output data, for the direct benefit of, or for
purposes of rendering services to, any business entity or organization
other than Customer and its Affiliates.
2.6 Customer agrees to maintain a record of the number and location of all
of the Licensed Products in its possession. Customer agrees to provide
Phoenix with a copy of that record will upon Phoenix's request.
International Agreement
May 2, 1996.0
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<PAGE> 6
3.0 TERM
This Agreement and the license granted herein shall be for an initial term
commencing on the Effective Date and continuing for a period of five (5)
year from the last day of the Implementation Period (the "Initial Term").
Thereafter, his Agreement shall automatically renew for additional one (1)
year periods unless either party notifies the other in writing of its
desire not to renew this Agreement at least six (6) months prior to the
last day of the Initial Term or any subsequent renewal period.
4.0 TITLE
4.1 The Software and Documentation are copyrighted works protected by
copyright laws, treaties and conventions applicable in the United States
and the Territory. The Software and Documentation are protected under
applicable law as trade secrets and Confidential Information of Phoenix.
Phoenix retains all right, title, and interest in and to the Software,
Documentation, and all intellectual property rights contained therein,
subject only to the limited license granted to Customer in Section 2
hereof.
4.2 All output reports and formats (e.g., ad hoc reports, SQL queries, etc.)
first created by Customer shall be subject to joint ownership of Phoenix
and Customer, as applicable (except that, to the extent such output
reports derive from or contain any part of the Software or Documentation,
the restrictions applicable to the Software and Documentation shall apply
to any use thereof).
4.3 Customer agrees that all Changes made or obtained by Phoenix or Customer,
or their respective employees or agents acting alone or in collaboration
with each other, shall, together with all intellectual property rights
associated therewith, be the exclusive property of Phoenix. To the extent
that such Changes, including all associated intellectual property rights,
are not owned in their entirety by Phoenix immediately upon their
creation, Customer agrees to assign (and hereby automatically assigns) all
right, title and interest therein to Phoenix, without any requirement of
consideration or further documentation. Customer agrees to take such
further action and execute such further documentation as Phoenix may
reasonable request to give effect to this Section 6.3.
4.4 Customer shall notify Phoenix in the event that it discovers any
infringement of Phoenix's rights in the Licensed Products or any violation
of the terms of a License Agreement, and shall cooperate with Phoenix and
assist in the prosecution of Phoenix's claims, provided that Phoenix
retains financial responsibility for costs of assistance and prosecution.
Phoenix shall be entitled to retain any proceeds from such claims,
including settlement amounts, for purposes of funding Phoenix's worldwide
intellectual property protection programs.
4.5 Phoenix or its designee shall have the right to enter the premises of
Customer at any time upon reasonable request during regular business hours
in a non-disruptive manner, for the purpose of inspecting the location and
use of the Software and Documentation, compliance with the provisions of
this Agreement, and the standard procedures of Customer regarding
retention, safekeeping, and disposal of all media and materials pertaining
thereto.
5.0 PAYMENTS AND TERMS.
5.1 The fees and charges for products and services to be provided under this
Agreement are set forth in Exhibit A hereto. All amounts due shall be
paid in U.S. dollars by wire transfer to the bank account designated by
Phoenix.
International Agreement
May 2, 1996.0
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<PAGE> 7
1) Upon execution of this Agreement by Customer, Customer shall pay
Phoenix the License Fee shown in Exhibit A hereto, which is an initial
one-time fee for the delivery of the current version of the Software in
unmodified form and the grant of the license thereto pursuant to this
Agreement. The License Fee is based on the total number of Remote
Branches, including Additional Branches, which are included on the
Customer Network from time to time. Whenever the total number of Remote
Branches included on the Customer Network increases to the next tier,
Customer shall pay Phoenix an upgrade fee equal to the difference between
the License Fee for the new tier and the aggregate License Fees
previously paid for previous tiers. The License Fee is fully earned by
Phoenix, regardless of whether Customer has or adds the maximum number of
Remote Branches permitted for the tier for which the License Fee is paid.
2) In addition to the License Fee, an initial one-time Branch Fee is due
upon execution of this Agreement for each Remote Branch, including each
Additional Branch, which is included on the Customer Network from time to
time. The current Branch Fees are shown in Exhibit A hereto. Customer
shall pay Phoenix a Branch Fee each time a Remote Branch is installed or
added on the Customer Network.
3) For Customer's convenience, upgrade fees under items (1) and (2)
above resulting from tier changes involving the License Fee and extra
Branch Fees for Additional Branches may be paid by Customer within thirty
(30) days after the end of each calendar quarter (through the end of
March, June, September and December) in which the change or addition
occurred. Customer agrees to certify annually (and at other times, if so
requested by Phoenix) the total number of Remote Branches included on the
Customer Network.
4) An initial one-time Implementation Fee is due upon execution of this
Agreement for Phoenix's assistance with the Implementation of the
Software. The Implementation Fee is shown in Exhibit A hereto. Phoenix
shall be entitled to additional Implementation Fees, to be paid in
advance, if Implementation is required when Customer adds an Acquired
Financial Institution or other Additional Branches.
5) A Customer and Software Support Fee for Customer and Software Support
is due on the Implementation Date and each anniversary thereof for so
long as the license to the Software is in effect or Customer continues to
use the Software.
6) Customer agrees, in addition, to pay Related Expenses upon receipt of
Phoenix's invoice.
5.2 All invoices shall be due and payable on the date specified herein or, if
a date is not specified, not later than fifteen (15) days following the
date of invoice. Sums overdue shall bear interest at the lesser of 1-1/2%
per month, or the highest rate allowed under applicable law.
5.3 Amounts payable to Phoenix hereunder are payable in full without
deduction or set off. In addition, Customer shall pay on a timely basis
all sales, use, import, export or other taxes, tariffs, or duties arising
out the transactions contemplated herein, however designated, based or
levied by any federal, state, municipal or local taxing authority of
United States or the Territory, (exclusive of United States Federal, state
or local taxes based upon the net income of Phoenix) ("Taxes"). Customer
shall indemnify and hold Phoenix harmless from Taxes which Phoenix is
required by any taxing authority to pay. Customer may challenge the
applicability of any Tax only after paying the Tax or giving Phoenix other
satisfactory assurances of compliance.
5.4 Phoenix reserves the right to adjust its prices at any time subject to 30
days advanced notice. Such changes shall have no retroactive effect on
Customer. The Customer and Software Support Fee
International Agreement
May 2, 1996.0
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<PAGE> 8
XXX = Confidential Treatment Requested
shall not be increased XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXX.
5.5 Time is of the essence with respect to all payments due from Customer
hereunder. Customer may not suspend or set-off any payment due Phoenix
hereunder on any basis whatsoever.
6.0 WARRANTIES
6.1 Phoenix warrants that, for a period of six (6) months after delivery, the
original unmodified version of the Software shall conform in all material
respects with any program descriptions included in corresponding
Documentation provided by Phoenix. Phoenix does not warrant that the
Licensed Products will operate without interruption or be error-free. In
the event Customer discovers any defect or error covered by the warranty,
Customer agrees to provide Phoenix notice of such defect or error in
sufficient detail to enable Phoenix to recreate the defect or error.
Phoenix agrees, as its exclusive obligation (except as covered outside the
foregoing warranty as part of Customer and Software Support) for any
non-compliance with the foregoing warranty, to use its best reasonable
efforts to correct reported defects and errors. Phoenix shall not be
responsible for unreported error or errors caused by negligence of a party
other than Phoenix or non-conformance with the Phoenix Hardware and
Network Services Guide. Customer shall be limited to the warranties
provided by third-party licensors or manufacturers with respect to
third-party software or equipment that may be provided by Phoenix.
6.2 Phoenix's total liability to Customer under any provision of this
Agreement (except 7.0) or for any and all claims, losses or damages
relating to the Licensed Products (whether based on tort, contract, or any
other theory) shall be limited to the amount actually paid by Customer to
Phoenix for the Licensed Products giving rise to the liability. The
parties acknowledge that each of them relied upon the inclusion of this
limitation in consideration of entering into this Agreement.
6.3 EXCEPT AS PROVIDED IN SECTION 6.1 ABOVE, PHOENIX SPECIFICALLY DISCLAIMS
ANY OTHER WARRANTIES OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY,
INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
6.4 IN NO EVENT SHALL PHOENIX OR ITS LICENSORS BE LIABLE FOR ANY SPECIAL,
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES RESULTING FROM THE USE, OR
INABILITY TO USE, THE LICENSED PRODUCTS OR ARISING OUT OF ANY OTHER
CIRCUMSTANCES ASSOCIATED WITH THE SUBJECT MATTER OF THIS AGREEMENT,
INCLUDING WITHOUT LIMITATION DAMAGES BASED ON LOSS OF PROFIT, LOSS OR
INTERRUPTION OF DATA OR COMPUTER TIME, ALTERATION OR ERRONEOUS
TRANSMISSION OF DATA, EVEN IF PHOENIX IS ADVISED IN ADVANCE OF THE
POSSIBILITY OF SUCH DAMAGES.
7.0 PATENT AND COPYRIGHT INDEMNITY
7.1 If a third party claims that the Software infringes any patent,
copyright, trade secret, or similar intellectual property rights of a
third party Phoenix shall (as long as Customer is not in default under
this Agreement or any other agreement with Phoenix) defend Customer
against that claim at Phoenix's expense and pay all damages awarded by a
court in a final judgment, provided that Customer promptly notifies
Phoenix in writing of any such claim, and allows Phoenix to control, and
cooperates with Phoenix in, the defense and disposition of such claim,
including any related settlement negotiations.
International Agreement
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<PAGE> 9
7.2 If such a claim is made or appears possible, Phoenix may, at its option,
secure for Customer the right to continue to use the Software, modify or
replace the Software so it is non-infringing, or refund all license fees
paid for the infringing material less a reasonable deduction for prior
use. Phoenix has no obligation hereunder for any claim based on a
modified version of the Software which has not been prepared solely by
Phoenix, or for any combination, operation or use of the Software with any
product, data or apparatus not approved in writing by Phoenix. Phoenix
also shall have no obligation hereunder for any claim based on theories of
law that are not substantially equivalent to laws, treaties and
conventions applicable to U.S. patents, copyrights, trade secrets, and
similar intellectual property rights. THIS SECTION 7.0 STATES PHOENIX'S
ENTIRE OBLIGATION TO CUSTOMER WITH RESPECT TO MATTERS OF TITLE OR ANY
CLAIM OF INFRINGEMENT THEREOF.
8.0 CONFIDENTIALITY
8.1 Customer acknowledges that the Software and Documentation contain
Confidential Information of Phoenix, as defined in Section 8.5 hereof.
8.2 Customer agrees at all times to maintain the complete confidentiality of
the Software, Documentation, and all other Confidential Information of
Phoenix.
8.3 Customer agrees not to permit or authorize access to, or disclosure of,
the Software, Documentation, and all other Confidential Information of
Phoenix to any person or entity other employees of Customer who have a
"need to know" such information in order to enable Customer to exercise
its rights under this Agreement. The Software and Documentation, and all
other Confidential Information of Phoenix may not be disclosed or provided
to any independent contractors or consultants working for or with
Customer, unless Phoenix gives its prior written approval. Customer may
disclose necessary portions of the Software, Documentation, or other
Confidential Information of Phoenix to governmental regulatory authorities
if such disclosure is required for compliance with applicable laws, but
Customer shall notify Phoenix of the applicable legal requirements before
such disclosure occurs and Customer shall use its best efforts to help
Phoenix obtain protection as may be available to preserve the
confidentiality of such information following disclosure.
8.4 Prior to disposal of any media or materials that contain any part of the
Software, Documentation or other Confidential Information of Phoenix,
Customer shall obliterate or otherwise destroy all code, instructions,
commentary, or further evidence of Confidential Information, for example,
by erasing, incinerating, or shredding such materials.
8.5 For purposes of this Agreement, "Confidential Information" shall mean any
competitively sensitive or secret business, marketing or technical
information of Phoenix. In all cases, Phoenix's Confidential Information
shall include the Software and Documentation, including all Changes.
Confidential Information shall not include, however, information which (i)
is generally known to the public or readily ascertainable from public
sources (other than as a result of a breach of confidentiality by Customer
or any person or entity associated with Customer), (ii) is independently
developed without reference to or reliance on any Confidential Information
of Phoenix, as demonstrated by written records in Customer's possession
(which shall be provided to Phoenix at Phoenix's request), or (iii) is
obtained from an independent third party who created or acquired such
information without reference to or reliance on Confidential Information
of Phoenix, as demonstrated by written records in Customer's possession
(which shall be provided to Phoenix at Phoenix's request).
International Agreement
May 2, 1996.0
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<PAGE> 10
9.0 CUSTOMER AND SOFTWARE SUPPORT
9.1 Commencing upon the Implementation Date, Phoenix shall provide certain
software support, operation and use services and system enhancements
("Customer and Software Support"). Such services shall include the
following:
1) Enhancements to the Software and updates to Documentation generally
made available to all of Phoenix's Customers.
2) Reasonable software support and telephone consultation related to the
Licensed Products. Support means Phoenix will correct or replace
software and/or provide services necessary to remedy any critical or
non-critical programming error that is attributable to Phoenix. Such
correction, replacement, or services will be promptly undertaken by
Phoenix after the Customer has identified and notified Phoenix of any
such error, which notice shall be in accordance with Phoenix reporting
procedures. Phoenix will use reasonable commercial efforts to
telephonically diagnose (i) any errors or malfunctions in the system, or
(ii) malfunctions in the system caused by operator error, and advise
Customer of possible corrective measures that the Customer may take.
Phoenix will also clarify operating instructions contained in the
Documentation delivered with the programs.
3) Direct first line support of third party software and coordination of
all other support with third party licensors on behalf of Customer.
4) Telephonic support 24 hours per day, 365 days per year via pager
access to support personnel. Normal office hours are Monday through
Friday, 8:00 AM to 5:00 PM Atlanta, Georgia Time.
9.2 If Phoenix, after using its best telephonic diagnostic efforts,
determines that it requires documentation of problems, errors or
malfunctions in writing, Customer agrees to provide assistance in
identifying and detecting problems, errors or malfunctions in sufficient
detail and with sufficient supporting documentation and information to
enable Phoenix to recreate the problem, error or malfunction
9.3 Customer and Software Support is limited to Hardware and Customer Network
configurations supported by Phoenix as stated in the Phoenix Network and
Configuration Standards Guide. Phoenix agrees to give Customer at least
six (6) months' advance notice if an applicable configuration will no
longer be supported.
10.0 IMPLEMENTATION
10.1 Phoenix shall conduct an implementation planning session at a location,
date and time mutually agreed to by both parties (the "Implementation
Planning Session") to develop a mutually acceptable implementation
schedule. Customer shall make available up to five (5) of its appropriate
personnel for the Implementation Planning Session.
10.2 Phoenix will make all reasonable efforts to effect the Implementation of
the Software in accordance with the implementation schedule including the
provision of adequate personnel resources; provided, however, that Phoenix
shall not be liable to the Customer or any other person for any damages in
the event Implementation is not completed within such time, other than an
abatement of the Implementation Fee reasonably related to the delay.
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<PAGE> 11
11.0 TERMINATION
11.1 Customer may terminate the license granted hereunder by electing not to
renew this Agreement in accordance with Section 3.
11.2 Phoenix shall have the right to terminate the License upon the occurrence
of any of the following events:
1) Customer's breach of any provision of this Agreement if the breach is
not cured within ten (10) days after Customer's receipt of notice in
writing from Phoenix of such breach; or
2) Customer's failure to implement the most recent version of the
Licensed Products within thirty (30) days of the date such version is
received by Customer; or
3) Customer's failure to obtain and pay for Support Services; or
4) Customer ceases to do business, makes a composition or assignment for
the benefit of its creditors, makes a general arrangement with its
creditors concerning any extension or forgiveness of any of its secured
debt, becomes bankrupt or insolvent, suffers or seeks the appointment of
a receiver to the whole or any material part of its business, takes any
action to liquidate or wind up the whole or any material part of its
business, is found subject to any provisions of any bankruptcy code
concerning involuntary bankruptcy or similar proceeding, or suffers a
material adverse change in its financial position such that payments to
Phoenix may be affected or delayed by a creditor or administrator of the
business of Customer; or
5) Customer becomes a subsidiary of, or controlled as to its management
policy by, any government instrumentality; or
6) Customer is required by laws in the Territory to offer or permit the
use or exercise (with or without payment to Phoenix) of the Customer to
any other person or entity.
11.3 Phoenix shall also have the right to terminate this Agreement in the
event of the acquisition of more than 50% of the voting stock of Customer,
or of the acquisition of all or substantially all the business and assets
of Customer, or of the merger of Customer with or into another entity,
which entity is the surviving entity; provided, however, that, so long as
all other provisions of this Agreement are duly honored, the Agreement may
be continued in effect and the surviving entity may continue under the
license granted hereby if the surviving entity signs a new license
agreement with Phoenix containing terms and conditions reasonably
requested by Phoenix, and pays additional license fees for use of the
Licensed Products in respect of the new or different Remote Branches
resulting out of the transaction.
11.4 In the event that this Agreement terminates as a result of a breach by
Customer, Customer's license to Use the Software shall immediately cease.
In all other cases, Customer may continue to Use the Software in
accordance with this Agreement for up to one hundred eighty (180) days
following termination, provided that Customer has paid and continues to
pay all amounts due as if this Agreement were still in effect. Upon
expiration of such period (and immediately, in the event of termination as
a result of a breach by Customer), Customer shall return or destroy all
copies of the Licensed Products; if Phoenix so requests, Customer shall
certify it has completed such action.
11.5 No payments shall be refundable upon termination of the License, whether
such termination is by Customer or Phoenix.
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<PAGE> 12
XXX = Confidential Treatment Requested
11.6 All obligations with respect to confidentiality, ownership, and
protection of intellectual property rights, and all obligations for
payment of amounts due shall survive termination.
11.7 The rights and remedies of Phoenix included in this Section 11.0 shall
not be exclusive and are in addition to any other rights and remedies
provided by law or equity.
11.8 Phoenix agrees to provide reasonable De-Conversion assistance for which
Customer agrees to pay in advance to Phoenix a de-conversion fee equal to
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXX.
12.0 CUSTOMER OBLIGATIONS
12.1 Customer shall appoint a Contact Person, listed on Exhibit C, to service
as the focal point of communication between Phoenix and Customer.
Customer may change the Contact Person at any time upon written notice to
Phoenix.
12.2 Customer agrees to acquire and maintain Customer Network at the
Designated Location by the required dates in the Implementation Schedule.
Customer shall provide at its cost an on-line telecommunications link with
a telephone modem in order to provide digital communication with Phoenix's
systems.
12.3 Customer shall install all corrections or enhancements ("System Release")
provided by Phoenix for the Licensed Products within thirty (30) days
after receipt.
12.4 Customer shall keep its personnel trained in the operation of the
Licensed Products and Customer Network.
12.5 Customer shall pay the annual Customer and Software Support Fee for so
long as Customer continues to hold or use the Licensed Products.
13.0 SOURCE CODE ESCROW
13.1 Phoenix will deposit the most current version of the source code for the
Phoenix Banking System with an independent escrow agent. In the event
that Phoenix, or its successor, shall cease to provide Customer and
Software Support, and Customer has paid its Customer and Software Support
Fee, Customer shall have the right to obtain, for its own sole and
exclusive use, with no right of transfer, a single copy of such source
code from the escrow agent, subject to the License Agreement.
14.0 ARBITRATION
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<PAGE> 13
In the event a claim, controversy or dispute between Phoenix and Customer
arises out of or in connection with this Agreement or the transactions
and business contemplated hereby, including the validity, construction or
enforcement thereof, either party may demand that such matter be
submitted to final and binding arbitration before a single arbitrator
selected by the parties in accordance with the then-existing rules of the
Internal Chamber of Commerce. The situs of all arbitration proceedings
shall be Atlanta, Georgia, unless Phoenix and Customer agree in writing
to another situs. All arbitration proceedings and records shall be in
English. Issuance of an arbitration demand shall suspend the effect of
any default entailed by such claim, controversy or dispute and any
judicial or administrative proceedings instituted in connection
therewith, for the duration of the arbitration proceedings. If Phoenix
and Customer cannot agree on the identity of a single arbitrator within
five (5) days of receipt of the arbitration demand, each of them shall
appoint one (1) arbitrator and the party-appointed arbitrators shall
appoint a third arbitrator within five (5) days of their appointment.
The arbitrator or arbitrators shall determine whether a default has
occurred, and shall deliver its or their decision within ninety (90) days
of the date of receipt of the arbitration demand, specifying such remedy
(including money damages) as shall (a) fully implement the intent and
purposes of this Agreement and (b) indemnify and hold harmless the
non-breaching party from all losses, costs and expenses (including costs
of arbitration and reasonable attorneys' fees) resulting from the
default. Termination or limitation of Phoenix's rights in the Software,
the Documentation, or any associated intellectual property rights may not
be awarded under any circumstances. The right to demand arbitration and
to receive damages and obtain other available remedies as provided
hereunder shall be the exclusive remedy in the event an arbitration
demand is made, except that Phoenix shall be entitled to obtain equitable
relief, such as injunctive relief, from any court of competent
jurisdiction in order to protect its rights in the Software, the
Documentation, or any associated intellectual property rights while such
proceeding is pending or in support of any award made pursuant to such
arbitration. Phoenix and Customer hereby consent to the enforcement in
the courts of each country in the Territory and the United States of any
arbitral judgment or award rendered pursuant to this Section.
15.0 COMPLIANCE WITH LAWS
15.1 Customer shall, at its own expense, comply with all laws relating to the
licensing and use of the Licensed Products, and shall procure all licenses
and pay all fees and other charges required thereby.
15.2 Notwithstanding anything in this Agreement to the contrary, it is
acknowledged and agreed that neither Phoenix nor Customer may ship, export
or re-export the Software or Documentation, or any other information,
process, product or service obtained directly or indirectly from Phoenix,
to any country or entity which is the subject of any prohibition imposed
by the U.S. Export Administration Act of 1979, U.S. Executive Orders, the
U.S. Department of Commerce, and the North Atlantic Treaty Organization.
Customer understands that, if such a prohibition applies and an export
license cannot be obtained with reasonable effort, the disclosure or
delivery of the Software and Documentation may not occur.
15.3 Customer hereby agrees that Customer and its directors, officers,
employees, and agents will comply with the Foreign Corrupt Practices Act
of 1977, as amended (the "Act") with respect to the subject matter of this
Agreement. In this regard, neither Customer nor any of its directors,
officers, employees, or agents will make, offer to make, or accept any
payment or gift directly or indirectly to any employee, officer, or
representative of any governmental entity or instrumentality or to any
foreign political party, any official of a foreign political party, or
candidate, where such payment would constitute a bribe, kickback, or
illegal payment under U.S. or applicable foreign laws.
International Agreement
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<PAGE> 14
16.0 DISABLING PROCEDURES
THE LICENSED PRODUCTS MAY CONTAIN DISABLING PROCEDURES. IF THERE OCCURS
ANY UNAUTHORIZED USE OF THE LICENSED PRODUCTS OR ANY OTHER MATERIAL,
CONTINUING BREACH OF THIS AGREEMENT, SUCH DISABLING PROCEDURES MAY LIMIT
ACCESS TO THE LICENSED PRODUCTS AND ANY ASSOCIATED PRODUCTS OR DATA. The
function of such disabling procedures is documented in Phoenix's
specifications for the Software. Insofar as date-sensitive Software
Protection Codes are issued, they will have an expiration consistent with
the payment terms for fees and charges hereunder or will have a one (1)
year expiration, as applicable. On or before the expiration date,
Phoenix will reissue the Software Protection Codes with extended
expiration dates so long as Customer continues to comply with the payment
terms and other material obligations of this Agreement. Phoenix warrants
that all disabling procedures will only prevent access to the Licensed
Products and will not destroy or corrupt any of Customer's programs or
data. Further, if the disabling codes are enabled when there is no
unauthorized use or other material breach by Customer, Phoenix will, on a
highest priority basis, assist Customer in returning to normal operations
at no cost to Customer.
17.0 GENERAL
17.1 Notices shall be deemed given as of the date deposited with an
international courier service (such as FedEx) or the mail of the United
States or any country within the Territory (with provision for
confirmation of receipt, if using the mail outside of the United states).
Either party may change its address by written notice to the other.
17.2 Except as expressly permitted by this Agreement, Customer may not assign,
transfer or delegate its rights or obligations hereunder without Phoenix's
prior written consent. Subject to the foregoing, this Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
authorized successors and assigns.
17.3 The failure of either party to enforce any term of this Agreement shall
not constitute a waiver of either party's right to enforce each and every
term of this Agreement.
17.4 If either party brings an action under this Agreement (including appeal),
the prevailing party shall be entitled to recover reasonable attorneys'
fees and costs. Should any provision of this Agreement be held by a court
of competent jurisdiction or arbitration authority to be unenforceable,
the remaining provisions of this Agreement shall not be affected or
impaired thereby.
17.5 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTURED UNDER THE LAWS OF THE
UNITED STATES OF AMERICA AND THE STATE OF FLORIDA, EXCLUDING ITS CONFLICT
OF LAWS RULES. IT SHALL NOT BE GOVERNED BY THE UNITED NATIONS CONVENTION
ON THE INTERNATIONAL SALE OF GOODS, THE APPLICATION OF WHICH IS EXPRESSLY
EXCLUDED.
17.5 Neither party shall be in default by reason of any failure in the
performance of this Agreement (other than a failure to make payment when
due or to comply with restrictions upon the Use of the Licensed Products)
if such failure arises out of any act, event or circumstance beyond the
reasonable control of such party, whether or not otherwise foreseeable.
The party so affected will resume performance as soon as reasonably
possible.
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<PAGE> 15
17.6 The captions appearing in this Agreement are inserted only as a matter of
convenience and in no way limit the scope or affect the meaning of any
section.
17.7 This Agreement constitutes the entire agreement between the parties and
supersedes all prior understandings and agreements between them regarding
the Licensed Products, and may not be modified except in writing signed by
authorized representatives of both parties.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the dates indicated.
PHOENIX INTERNATIONAL LTD., INC.
PHOENIX FSC., INC.
- ------------------------------- --------------------------------
Signature Signature
- ------------------------------- -------------------------------
Name (print) Name (print)
- ------------------------------ -------------------------------
Title Title
EXECUTION BY PHOENIX: this Agreement shall not be binding until the same
has been executed by an Executive Officer of Phoenix.
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<PAGE> 16
XXX = Confidential Treatment Requested
EXHIBIT A
FEES AND SOFTWARE DESCRIPTION
1. LICENSE FEES:
A. Initial Financial Institution
(one Server) $
---------------
B. Remote Branch Fees $ XXXXX each
TOTAL INITIAL LICENSE FEES: $
===============
2. ADDITIONAL LICENSE FEES:
A. Acquired Financial
Institution Fee $ each
-----------
B. Additional Branch Fee $ each
-----------
3. IMPLEMENTATION, CONVERSION AND INSTALLATION FEES
(PLUS OUT-OF-POCKET EXPENSES)
A. Initial Financial Institution and
Initial Remote Branches of Initial
Financial Institution $
-----------
B. Implementation for ____ initial Remote Branches of initial
Financial Institution are included in the above figure. Efforts
made by Phoenix to implement any initial Remote Branches in excess
will be invoiced to Customer at XXXXXX per day plus out of pocket
expenses.
C. Additional Branches of Pricing will be based on level of
Existing Financial Institution effort at XXXXXX per day, plus
out of pocket expenses.
D. Acquired Financial Institutions Pricing will be based on level of
effort at XXXXXX per day, plus
out of pocket expenses.
4. ANNUAL CUSTOMER AND SOFTWARE SUPPORT FEES:
(PLUS OUT-OF-POCKET EXPENSES)
A. Initial Financial Institutions: $_____/year
B. Initial Remote Branches of Initial
Financial Institution XXXXXX/year
Customer has _____ initial Remote Branches. Actual initial Remote
Branches (estimated to be _____) implemented at the Implementation Date
of CUSTOMER will be invoiced. As the balance of the initial Remote
Branches is implemented, Customer and Software Support Fees will be
invoiced in accordance with Implementation Date of that Branch.
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May 7, 1996.0
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<PAGE> 17
XXX = Confidential Treatment Requested
C. Additional Branches of
Existing Financial Institution XXXXXX/branch/year
D. Acquired Financial Institutions Phoenix's then current
price.
TOTAL INITIAL ANNUAL CUSTOMER AND SOFTWARE
SUPPORT FEES (PLUS OUT-OF-POCKET EXPENSES) $
=============
4. THE COMPONENTS OF THE SOFTWARE AND DOCUMENTATION
Customer & Product Controls
Administrative Controls
Customer Processing
Deposit Processing
Loan Processing
Teller Processing
Nightly Processing
General Ledger Administration & Maintenance
Executive Information System
Data Dictionary: Deposits
Data Dictionary: Loans
Data Dictionary: Customer Information
Report Dictionary
Budgeting
THE SOFTWARE SPECIFICATIONS ARE LOCATED IN THE LICENSED DOCUMENTATION.
5. PAYMENT SCHEDULE
DESCRIPTION DATE AMOUNT
----------- ---- ------
License Fees Execution of License Agreement
-------
Implementation Related Fees Execution of License Agreement $ (*)
-------
Annual Customer and CUSTOMER Implementation Date $ (**)
-------
Software Support
Annual Customer and Quarterly upon invoice 4 (**)
-------
Software Support
(**) Adjusted to reflect actual number of branches implemented with CUSTOMER.
(***) Adjusted in accordance with Exhibit E and to reflect increased number of
branches implemented.
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<PAGE> 18
XXX = Confidential Treatment Requested
EXHIBIT B
3RD PARTY HARDWARE AND SOFTWARE CONFIGURATIONS
SUBJECT TO REVISION AT ANY TIME
UNIX SERVER REQUIREMENTS
CENTRAL UNIX DATABASE SERVER:
NOTE: CUSTOMER WILL BE ORDERING ATT EQUIPMENT, CONFIGURATION OF WHICH IS TO
BE DETERMINED BY GRUPO-TECNETRON. FOLLOWING IS A TYPICAL HP SOLUTION.
(1) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
operating system, 8GB DAT tape backup, battery backup and mirroring. Your
specific configuration will be determined by your HP sales representative,
and your price will vary accordingly, but for planning purposes, you may use
the following amounts:
<TABLE>
<CAPTION>
Machine Approximate
Size Cost
---- ----
<S> <C>
E45 $35,000
G30 38,000
G50 55,000
G60 75,000
</TABLE>
1 Sybase CPU Class B SQL Server Runtime License Version 10.0.2 and higher.
NOTE: CUSTOMER IS CONSIDERING ORDERING A SYBASE DEVELOPMENT LICENSE DIRECTLY
FROM SYBASE. CUSTOMER MUST PROVIDE PHOENIX WITH THE NAME AND TELEPHONE
NUMBER OF CUSTOMER'S SYBASE CONTACT. PHOENIX MUST PROVIDE PROOF TO
PHOENIX'S SYBASE CONTACT THAT CUSTOMER PURCHASED SYBASE DIRECTLY, OR
PHOENIX MUST CHARGE CUSTOMER FOR THE FOLLOWING LICENSE.
PHOENIX WILL ORDER FOR YOU AND INVOICE YOU DIRECTLY UPON THE FIRST DAY OF
TRAINING OR THE FIRST DAY SYBASE IS INSTALLED ON YOUR SERVER. PRICES ARE
PUBLISHED BY SYBASE PERIODICALLY. THESE PRICES WERE PUBLISHED SEPTEMBER 30,
1994. AMOUNT INVOICED TO YOU AT THE TIME OF YOUR INSTALLATION MAY VARY,
DEPENDING UPON ANY CHANGES SYBASE MAKES TO ITS PRICING IN THE INTERIM. COST IS
BASED UPON THE TOTAL NUMBER OF USERS ON THE SERVER, WHICH YOU WILL HAVE TO TELL
US.
<TABLE>
<CAPTION>
Number International Latin Am. Asian Canada U.S.
of Users Price Price Price Price Price
-------- ----- ------- ----- ------ -----
<S> <C> <C> <C> <C> <C>
Single $ 4,700 $ 3,600 $ 4,300 $ 5,200 $ 3,600
2-8 12,500 9,600 11,500 13,900 9,600
9-16 23,800 18,300 22,000 26,500 18,340
17-32 37,800 29,100 34,900 42,200 29,100
33-48 51,900 39,900 47,900 57,900 39,900
49-64 65,800 50,600 60,700 73,400 50,600
</TABLE>
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XXX = Confidential Treatment Requested
<TABLE>
<S> <C> <C> <C> <C> <C>
65-96 93,200 71,700 86,000 104,000 71,700
Unlimited 116,900 89,900 107,900 130,400 89,900
</TABLE>
PLEASE NOTE: ALL SYBASE LICENSES PURCHASED PURSUANT TO THIS AGREEMENT ARE
SUBJECT TO RESTRICTIONS AS FOLLOWS: You are purchasing "End User
Licenses", terms of which are mandated in our License with Sybase, and are
reproduced and incorporated herein. You will not receive support,
manuals, or information from Sybase. "Derivative Product" is the copy of
Sybase licensed by Phoenix and sublicensed to you. "End User" and
"licensee" is you. "VAR" is Phoenix.
International Agreement
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<PAGE> 20
TERMS OF EXHIBIT C FROM SYBASE LICENSE AGREEMENT:
MANDATORY TERMS OF END USER LICENSES
All license agreements for the sublicensing of the Derivative
Product (the "Licensed Copy") shall include substantially the
following provisions:
(1) Only a non-exclusive, nontransferable right to use each
Licensed Copy is granted to an End User (and if VAR is under
Program 1 then such right is granted only on a single computer
system which is designated by serial number or equivalent). No
right to use other than an Embedded Run-Time version of the Sybase
Programs is granted; an "Embedded Run-Time Version" shall mean a
version of the Sybase Programs linked to or embedded in VAR's
application code in such a way that structurally or by license
restrictions, it (a) precludes use of the Program to develop
applications, except for clause c of this paragraph; (b) precludes
use of the Program to develop applications, except for report
writing and decision support solely in conjunction with the
Derivative Product; (c) precludes general purpose access to
command verbs in the Program except that the End User may, within
the scope of and under control of the Derivative Product, create
or alter tables, columns or rows and add fields to existing
tables, as necessary to implement, operate and administer the
Derivative Product; (d) precludes use of any command verbs in the
Program to create new schemas or databases; and (e) precludes use
of the Program or third party application development tools to
modify or enhance existing screens or forms delivered as part of
the Derivative Product, or to create new forms, except as
necessary to implement and operate the Derivative Product.
(2) VAR and/or its licensors retain all title to the
Licensed Copy, and all copies thereof, and no title to the
Licensed Copy, or any intellectual property therein, is
transferred to the licensee.
(3) The licensee may not copy the Licensed Copy, except for
backup and archival purposes only, and the licensee shall include
on all copies of the Licensed Copy all copyright and other
proprietary notices or legends included on the Licensed Copy which
was shipped to such licensee.
(4) The licensee agrees not to reverse assemble, decompile,
or otherwise attempt to derive source code from the Licensed Copy;
(5) The licensee agrees to comply with all export and
re-export restrictions and regulations ('Export Restrictions")
imposed by the governments of the United States or the country to
which the Licensed Copy is shipped to licensee. Licensee will not
commit any act or omission which will result in a breach of any
such Export Requirements; the licensee agrees that it will comply
in all respects with any governmental laws, orders, or other
restrictions on the export of the Sybase Program and the Licensed
Copy (and the related information and documentation) which may be
imposed from time to time by the governments of the United States
and Canada or the country to which the Sybase Program is shipped
by Sybase ("Export Requirements"). This Section shall survive the
expiration or termination of the Licensed Copy license agreement.
International Agreement
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<PAGE> 21
(6) Although copyrighted, the Licensed Copy is unpublished
and contains proprietary and confidential information of VAR and
its licensors and is considered by VAR and its licensors to
constitute valuable trade secrets. The licensee will hold the
Licensed Copy in confidence and shall protect the Licensed copy
with at least the same degree of care with which the licensee
protects its own similar confidential information;
(7) VAR's licensors of software included in the Licensed
Copy are direct and intended third party beneficiaries of the
license agreement and may enforce it directly against the
licensee; provided, however, that none of such licensors shall be
liable to the licensee for any general, special, direct, indirect,
consequential, incidental or other damages arising out of or
related to the Licensed Copy; and
(8) Upon termination of the license for the Licensed Copy,
the licensee shall return to VAR all copies of the Licensed Copy,
or certify to VAR that the licensee has destroyed all such copies.
International Agreement
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<PAGE> 22
XXX = Confidential Treatment Requested
REQUIREMENTS PER END-USER PC
- MINIMUM CONFIGURATION: 1 Microsoft Windows compatible PC using a
486/DX2 XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX available hard disk
space, SVGA (800X600 resolution) monitor, Ethernet Network Interface
Card, MS-DOS 6.22 or higher, Microsoft Windows or Windows for Workgroups
version 3.11 or higher. RECOMMENDED CONFIGURATION: XXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXX and 15 inch SVGA monitor, Ethernet Network
Interface Card, MS-DOS 6.22, Windows for Workgroups 3.11, Microsoft
Office Version 4.3 (including Word, Excel and e-mail). Gateway offers a
machine that meets or exceeds these requirements. As of November 4,
1994, price for 486 is $2,348 shipped; Pentium is $2,648 shipped.
Gateway's number is 1-800-846-2042.
- 1 Gupta QuestReporter License Version 3.0 per end-user wishing to
develop customized queries/reports. As of October 28, 1994, price is
$250 per PC, or a QuestReporter 50 pack is available for $5,000. Gupta
may be reached by calling 1-800-444-8782 (1-800-44-GUPTA).
REQUIREMENTS PER TELLER
- MINIMUM CONFIGURATION: 1 Microsoft Windows compatible PC using a
486/DX2 50 MHz processor, 12MB RAM, 50MB available hard disk space, SVGA
(800X600 resolution) monitor, Ethernet Network Interface Card, MS-DOS
6.22 or higher, Microsoft Windows or Windows for Workgroups version 3.11
or higher. RECOMMENDED CONFIGURATION: Pentium 60 MHz PC, 16MB memory,
340MB disk, and 15 inch SVGA monitor, Ethernet Network Interface Card,
MS-DOS 6.22, Windows for Workgroups 3.11, Microsoft Office Version 4.3
(including Word, Excel and e-mail). Gateway offers a machine that meets
or exceeds these requirements. As of November 4, 1994, price for 486 is
$2,348 shipped; Pentium is $2,648 shipped. Gateway's number is
1-800-846-2042.
- OPTIONAL (IF OFF-LINE OPERATION FEATURE IS USED): 1 Gupta SQLBase
Novell Netware NLM Version 5.2 per Novell file server with teller PC's
attached (one per branch), one licensed user per teller PC. As of
October 28, 1994, prices through Gupta, 1-800-444-8782 (1-800-44-GUPTA)
are:
<TABLE>
<CAPTION>
Number U.S.
of Users Price
-------- -----
<S> <C>
5 $ 995
10 1,995
20 3,995
50 6,995
Unlimited 9,995
</TABLE>
- Choice of the following printers:
OLIVETTI 5327 VALIDATION PRINTER. This is a single line validation
printer useful for basic receipt printing and check validation. As of
October 27, 1994, price is approximately $600; pricing and other
information is available from Olivetti at 1-800-633-9909.
OLIVETTI 46-S GENERAL PURPOSE PRINTER. Multi-line receipt printer
that also may be used to print documents such as checks and money
orders. As of October 27, 1994, price is approximately $900; pricing
and other information is available from Olivetti at 1-800-633-9909.
OLIVETTI PR 50 GENERAL PURPOSE PRINTER. Passbook, receipt and full
size form printer. As of October 27, 1994, price is approximately
$1,950; pricing and other information is available from Olivetti at
1-800-633-9909.
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<PAGE> 23
XXX = Confidential Treatment Requested
NEXUS DH 4771 PRINTER. This is a multi-line receipt printer with
an integrated journal roll. As of October 27, 1994, list price is $850
(plus $12 for a ten foot cord). Phoenix customer price is $698 (plus
$12 for a ten foot cord). Pricing and other information is available
from Pat Padden at Nexus, 818-246-9107.
NETWORK REQUIREMENTS
- EACH NOVELL FILE SERVER: A Minimum of 1 Novell Netware compatible PC
per branch with sufficient disk space for the Novell Netware software,
MS-DOS, the Phoenix executables (60MB), the Phoenix print queues
(depends on account volume), and other applications residing on the
server. RECOMMENDED CONFIGURATION: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXX (more may be needed depending upon your volume),
Ethernet Network Interface Card, MS-DOS 6.22 license, 15 inch SVGA
monitor, and tape backup. Gateway offers a machine that meets or
exceeds these requirements. As of November 4, 1994, price is $3,127
shipped. Gateway's number is 1-800-846-2042. RECOMMENDED CONFIGURATION
IF OPTIONAL OFF-LINE-TELLER OPERATION FEATURE IS USED: XXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX (more may be needed depending
upon your volume), Ethernet Network Interface Card, MS-DOS 6.22 license,
15 inch SVGA monitor, and tape backup. Gateway offers a machine that
meets or exceeds these requirements. Gateway's number is
1-800-846-2042.
- EACH NOVELL FILE SERVER: 1 Novell Netware 3.12 server software. Price
is based on number of users. As of October 28, 1994, prices through
National Data Products, Orlando Florida 407-296-0393, fax 407-296-2193,
are as follows:
<TABLE>
<CAPTION>
Number U.S.
of Users Price
-------- -----
<S> <C>
5 $ 690
10 1,465
25 2,125
50 2,625
100 4,225
250 6,125
</TABLE>
- EACH NOVELL FILE SERVER (REQUIRED IF E-MAIL IS USED): 1 Microsoft
Mail Server License Version 3.2b. As of October 28, 1994, price through
National Data Products, Orlando Florida 407-296-0393, fax 407-296-2193,
is $410 for a 10 user license pack .
- EACH NOVELL NETWORK PRINTER: 1 80286 or better PC, 640K RAM and 20MB
disk, Ethernet Network Interface Card, MS-DOS 6.22 license. Gateway
offers a machine that meets or exceeds these requirements. As of
November 4, 1994, price for is $1,473 shipped. Gateway's number is
1-800-846-2042.
- EACH NOVELL NETWORK SERVER LOCATION: 1 Ethernet 10BaseT hub with
enough ports for each user, and a few extras for the print servers, etc.
Price is based on number of ports. If you want a managed hub, you must
get the SNMP module, for $415 (unit no. 61914812). For HP Advancestack
Hub, as of October 28, 1994, prices through National Data Products,
Orlando Florida 407-296-0393, fax 407-296-2193, are as follows:
<TABLE>
<Caption
Number U.S.
of Ports Price
-------- -----
<S> <C>
12 530
24 920
48 1,710
</TABLE>
International Agreement
May 7, 1996.0
Page 21
<PAGE> 24
XXX = Confidential Treatment Requested
OTHER HARDWARE AND SOFTWARE REQUIREMENTS
PHOENIX SYSTEM CONSOLE: Used to run nightly processing, process
external files, and manage Phoenix software installation and support.
MINIMUM CONFIGURATION: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXX 15 inch SVGA monitor, Ethernet Network Interface Card,
Serial Port, MS-DOS 6.22 license, and Windows for Workgroup`s 3.11
license. Gateway offers a machine that meets or exceeds these
requirements. As of November 4, 1994, price is $3,013 shipped.
Gateway's number is 1-800-846-2042.
- PER PHOENIX SYSTEM CONSOLE: 1 Sybase SQR Execute License Version 2.5
for an Intel PC with Windows for the Phoenix System Console for printing
statements. PHOENIX WILL ORDER FOR YOU AND INVOICE YOU DIRECTLY UPON
THE FIRST DAY OF TRAINING OR THE FIRST DAY SYBASE IS INSTALLED ON YOUR
SERVER. PRICES ARE PUBLISHED BY SYBASE PERIODICALLY. THESE PRICES WERE
PUBLISHED SEPTEMBER 30, 1994. AMOUNT INVOICED TO YOU AT THE TIME OF
YOUR INSTALLATION MAY VARY, DEPENDING UPON ANY CHANGES SYBASE MAKES TO
ITS PRICING IN THE INTERIM. License subject to restrictions noted
above.
<TABLE>
<CAPTION>
Price International Latin Am. Asian Canada U.S.
Per User Price Price Price Price Price
-------- ------------- --------- ----- ------ -----
<S> <C> <C> <C> <C> <C>
$ 320 245 295 355 245
</TABLE>
- PRINTERS: NOTE: ALL PHOENIX REPORTS, NOTICES, CHECKS, AND STATEMENTS
ARE DESIGNED FOR LASER PAGE PRINTERS. 1 HP Laser Jet 4M Plus (12 PPM),
4si (15 PPM), or C30 (30 PPM) printer, depending on print volumes.
Multiple printers or combinations may be more effective or required
depending on volumes. Cost, through National Data Products, Orlando
Florida 407-296-0393, fax 407-296-2193, as of October 28, 1994, is
$1,915 for 4M Plus (item no. 6330068) and $2,895 for 4si (item no.
6330073). Cost for C30, through Hewlett-Packard, on November 2, 1994,
is $16,734.
NOVELL NETWARE DOS CLIENT KIT: Novell part number 00662644013411.
The DOS Client Kit includes (among other things) the TCP/IP protocol
driver that is installed on each client PC to provide connectivity to
the HP database server. According to a Novell Client Service
representative, as of November 16, 1994 the price is $99 and licensing
is per-company. This means that each bank only needs to purchase one
copy of the DOS Client Kit and the necessary client software can be
installed on every PC in the bank, including Phoenix users, Teller PC's,
and the Phoenix Console PC.
- IMAGE CAPTURE: As necessary, but at least 1 Logitech Fotoman plus PC
Version digital camera and 1 Logitech Scanman 32 Win/Om digital hand
scanner for capturing images and signature cards. As of October 28,
1994, cost is $550 per camera (item no. 68015999) and $90 per scanner
(item no. 63810674) from National Data Products, Orlando Florida
407-296-0393, fax 407-296-2193.
- REMOTE PHOENIX TECHNICAL SUPPORT: 1 Shiva LANrover network bridge. As
of October 28, 1994, cost is $2,395 for a 4 port unit (item no.
65327931) from National Data Products, Orlando Florida 407-296-0393,
fax 407-296-2193. As of October 28, 1994, cost is $2,599 for a 4 port
unit (item no. DMD1180) from Data Comm Warehouse 1-800-328-2261.
- REMOTE PHOENIX AND HP TECHNICAL SUPPORT: 2 Zoom V.32 analog modems.
As of October 28, 1994, cost is $125 per external modem (item no.
66012867) from National Data Products, Orlando Florida 407-296-0393,
fax 407-296-2193.
International Agreement
May 7, 1996.0
Page 22
<PAGE> 25
- PHOENIX EXECUTIVE INFORMATION SYSTEM: As necessary for EIS users that
do not have Microsoft Office installed on their PC, Microsoft Excel
Version 5.0. As of October 27, 1994, cost is $285 per standalone
license or $114 for an upgrade license from National Data Products,
Orlando Florida 407-296-0393, fax 407-296-2193.
International Agreement
May 7, 1996.0
Page 23
<PAGE> 26
EXHIBIT C
IMPLEMENTATION PLAN
TO BE DETERMINED.
International Agreement
May 7, 1996.0
Page 24
<PAGE> 27
EXHIBIT D
MAINTENANCE AND SUPPORT SERVICES
During the term of this Agreement, Phoenix will correct or replace
software and/or provide services necessary to remedy any critical or
non-critical programming error that is attributable to Phoenix. Such
correction, replacement, or services will be promptly undertaken by
Phoenix after the Customer has identified and notified Phoenix of any
such error, which notice shall be in accordance with Phoenix reporting
procedures. The support services to be provided by Phoenix are those
set forth in the Agreement, and will include the following
tele-maintenance support services, to wit:
A. Support Services:
Phoenix will use its best efforts to telephonically diagnose (i) any
errors or malfunctions in the system, or (ii) malfunctions in the system
caused by operator error, and advise Customer of possible corrective
measures that the Customer may take. Phoenix will also use its best
effort to clarify operating instructions contained in the documentation
delivered with the programs. Under no circumstances shall Phoenix be
required to actually perform or implement the corrective measures
recommended to Customer to correct malfunctions in the system caused by
operator error.
B. Availability of Support Services:
Phoenix's office hours are Monday through Friday during the hours of 8
a.m. and 5 p.m. eastern standard time. However, Phoenix will provide
Customer with telephonic support 24 hours per day, 365 days per year.
To enable Phoenix to provide support services, the Customer agrees to
install all current releases to the system within twenty-five (25) days
after receipt, or as otherwise provided by this Agreement, and all
updates and revisions thereto as the same become available from time to
time during the term of this Agreement. Additionally, the Customer
agrees to cooperate with Phoenix in connection with the foregoing
maintenance and support services, which cooperation will include,
without limitation, the provision of dumps, as requested, and the
provision of sufficient support and test time in the Customer's computer
system to duplicate the problem, certify that the problem is
attributable to Phoenix's software, and to certify that the problem has
been corrected.
International Agreement
May 7, 1996.0
Page 25
<PAGE> 28
XXX = Confidential Treatment Requested
EXHIBIT E
CUSTOMER AND SOFTWARE SUPPORT FEE ADJUSTMENTS
Phoenix shall have the option to increase the rate of the Customer
and Software Support Fee ("CSS"), effective XXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. The fee shall not be
increased XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXX. The new CSS shall be calculated using the
following formula: XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXX. The numerator will be the XXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXX following the Implementation Date. For year 3 of support,
the denominator will be XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX following
the Implementation Date. The numerator will be XXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXX following the Implementation Date. For year 4 of support
the denominator will be the XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
the Implementation Date. The numerator will be the CPI published for
XXXXXXXXXXXXXX following the Implementation Date. For year 5 of
support, the denominator will be XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
following the Implementation Date. The numerator will be XXXXXXX
XXXXXXXXXXXXXXXXXXXXXX month following the Implementation Date.
This progression will continue for any successive renewal periods.
International Agreement
May 7, 1996.0
Page 26
<PAGE> 29
EXHIBIT F
(DESIGNATED CONTACTS)
FOR TECHNICAL ISSUES
International Agreement
May 7, 1996.0
Page 27
<PAGE> 30
EXHIBIT G
(DESIGNATED AND REMOTE LOCATIONS)
International Agreement
May 7, 1996.0
Page 28
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Consolidated Financial and Operating Data" and "Experts" and to the use of our
report dated March 1, 1996, except for Note 12, as to which the date is May 8,
1996, in Amendment No. 2 to the Registration Statement on Form S-1 and related
Prospectus of Phoenix International Ltd., Inc. for the registration of 1,239,125
shares of its common stock.
ERNST & YOUNG LLP
Atlanta, Georgia
June 25, 1996
