<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Fiscal Year ended December 31, 1996
or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
-------- --------
COMMISSION FILE NUMBER: 0-20937
PHOENIX INTERNATIONAL LTD., INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
Florida 59-3171810
(State of other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
500 International Parkway, Heathrow, Florida 32746
(Address of principal executive offices) (Zip Code)
</TABLE>
(Registrant's telephone number including area code): (407) 548-5100
Securities registered pursuant to Section 12(b) of the Act:
None None
(Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.01 Per Share
(Title of class)
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports); and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The estimated aggregate market value of the voting stock held by non-affiliates
of the Registrant, based upon the closing sale price of Common Stock on March
18, 1997, as reported on the Nasdaq Stock Market's National Market, was
approximately $49,516,000. As of March 18, 1997, the Registrant had
outstanding 3,862,721 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1996 Annual Report to Shareholders of the Registrant are
incorporated by reference in Part II of this Form 10-K, and portions of the
Proxy Statement for the Registrant's 1997 Annual Meeting of Shareholders to be
held on May 16, 1997 are incorporated by reference in Part III of this Form
10-K.
<PAGE> 2
INDEX OF FORM 10-K
<TABLE>
<CAPTION>
Page
----
PART I
<S> <C> <C>
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . 16
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . 16
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . 16
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . . 20
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
-2-
<PAGE> 3
PART I
ITEM 1. BUSINESS
This Report contains statements which constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and the Securities Exchange Act of 1934, as amended. These statements
appear in a number of places in this Report and include all statements
regarding the intent, belief or current expectations of the Company, its
directors or its officers with respect to, among other things: (i) the
Company's financing plans; (ii) trends affecting the Company's financial
condition or results of operations; (iii) the Company's growth strategy and
operating strategy; and (iv) the declaration and payment of dividends.
Investors are cautioned that any such forward- looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those projected in the
forward-looking statements as a result of various factors discussed herein and
those factors discussed in detail in the Company's filings with the Securities
and Exchange Commission, including the "Risk Factors" section of the Company's
Registration Statement on Form S-1 (Registration Number 333-03355), as
declared effective by the Securities and Exchange Commission on July 1, 1996.
GENERAL
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 financial institutions. Phoenix designed and developed an
innovative new banking system by combining its management's extensive
experience with banking and banking software systems, input from a consortium
of financial institutions (the "U.S. Bank Partners") concerning bank
operational and flexibility needs and the most recent advances in client/server
technology. The Phoenix Retail Banking System (the "Phoenix System"), through
its client/server technology, addresses many of the deficiencies of the
mainframe- and mid-range computer-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
four critical areas: (i) customer relationship management; (ii) management
decision support; (iii) financial product development; and (iv) Internet and
Intranet services. Phoenix combines its technological expertise with specific
knowledge of the financial services industry to provide informational solutions
to complex banking issues, such as total data integration, customer management,
customer profitability analysis and management information requirements.
The Company was incorporated in Florida in January 1993. The
Company's principal and executive offices are located at 500 International
Parkway, Heathrow, Florida 32746. Its telephone number is (407) 548-5100.
INDUSTRY BACKGROUND
The Company's primary market consists of middle market financial
institutions, which the Company defines as commercial banks and savings
institutions both domestically and internationally with asset sizes ranging
between $100 million and $1 billion. These institutions are highly regulated,
and they historically have provided a limited range of products and faced
limited competition. These institutions 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 institutions. As a
result, these institutions now face an increased need for detailed information
about their institutions and customers in order to develop and market
profitable new products and services more effectively 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
-3-
<PAGE> 4
provide increased 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
financial institutions 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 processing
tasks 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 allocation, 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 financial
institutions 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
applications currently available to such institutions.
THE PHOENIX SOLUTION
The Phoenix System allows financial institutions to integrate data
into a comprehensive management information network that is readily accessible
throughout the entire 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, personal
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 financial institution to provide higher quality customer
service with reduced operating and training costs. 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 an
institution to pursue a more personalized and profitable approach to its
products and services. 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
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 expenses in a unified file.
- Extensive Customer Relationship Tracking. To facilitate
marketing and management decision-making, based not only on an
institution'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.
-4-
<PAGE> 5
- 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.
- Third Party Information. The Company anticipates that in late
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 with existing RIM information.
Management Decision Support. Through its Executive Information System
("EIS"), the Phoenix System allows senior executives to track performance and
model the effect of business strategies and changes in market conditions on
their financial institution. 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 an institution's 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.
Financial Product Development. The Phoenix System provides the
capability to quickly develop, deliver and process financial products and
services that can be as simple or as sophisticated as an institution's
customers and competition demand. Because all financial product development is
parameter-driven, institutions can design products and services by simply
selecting product features from a variety of options. New financial products
can be developed rapidly and do not require programming or the support of
technical personnel. Some of the Phoenix System's tools for financial product
creation and support include:
- Parameter-driven Customization Controls. The Phoenix System
reflects an appreciation for the continuously changing demand
for financial products and services. Its parameter-driven
design gives banks the ability to respond by enabling bankers
to create new financial products and services quickly and
easily.
- "What If" Analysis. The Phoenix System provides a unique
"what if" analysis feature that enables institutions to
perform complex calculations by simply entering a few fields
of information. This facility can be used to model the
effects on an institution'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 an institution 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
institutions 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 institutions to create an unlimited number of rate
indices and maintains a life-to-
-5-
<PAGE> 6
date on-line history of all rate changes for all rate indices.
It also permits institutions 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.
- "Year 2000" Support. The Phoenix System stores all dates with
four digit years, and all calculations are done to four
digits. In addition, all system code, both front-end code
written in SQL Windows from Centura Software Corporation and
back-end code written in Sybase stored procedures, has four
digit year support for dates.
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 financial institutions 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
-6-
<PAGE> 7
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 servers from Hewlett-Packard Company
("Hewlett-Packard"), International Business Machines Corp. ("IBM"), NCR
Corporation ("NCR"), Sun Microsystems, Inc. ("Sun"), Unisys Corporation
("Unisys") and all other UNIX compliant hardware. In addition, the Phoenix
System will run on any Intel-based NT machine that supports Sybase, such as
Hewlett-Packard, IBM, Compaq and DEC machines.
Focus on Middle Market Institutions. The Company intends to continue
its marketing focus both in the United States and internationally on middle
market institutions. The Company believes that most middle market institutions
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 institutions 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 view 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 December 1996, the Company opened a
sales and marketing office in London, England. The Company intends to continue
to expand international sales in 1997 and subsequent periods, by hiring
additional sales and implementation personnel and recruiting 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 pursuing additional strategic
alliances.
- Direct Sales and Implementation. Phoenix generates a majority
of its revenues through its direct sales force which, as of
February 28, 1997, consisted of 13 people serving the United
States, Europe, the Middle East, Africa and Australia. See
"--Sales and Marketing." As of February 28, 1997, the Company
had 42 implementation and training personnel. Phoenix intends
to increase the number of sales staff and implementation staff
in 1997. Competition for sales and implementation 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.
- Strategic Alliances. Phoenix has established and intends to
continue expanding alternate channels of distribution through
value added resellers ("VARs") and agents. In 1996, the
Company entered into two strategic marketing alliances in the
United States market and three alliances in the international
market. See "--Sales and Marketing." 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
-7-
<PAGE> 8
is a separate five-year contract which has an initial implementation fee and
annual service fees, and the Company's Internet Consulting Service is an
added-cost service which allows Phoenix to generate additional recurring
revenues through monthly access and maintenance 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 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. The Company
currently 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 the first quarter of 1997, the Company completed
the development of a product which operates on the Microsoft Windows NT platform
(the "NT Version"). The Company anticipates that the NT Version will be more
attractive to institutions with assets of less than $100 million, but also may
be similarly attractive to some larger 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 attractive because these
institutions will incur lower overall acquisition costs related to operating in
a Microsoft Windows NT environment rather than a Unix operating system platform.
Pursue Complementary Acquisitions. Phoenix intends to leverage its
position as a provider of client/server technology to financial institutions by
pursuing strategic acquisitions of or investments in providers of complementary
technologies, products and services. 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 and to enhance the
functionality and products offered by the Phoenix System by acquiring interests
in companies with complimentary technology or license rights to such companies'
products. 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 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; potential negative
effect on Phoenix's earnings; and impairments of relationships with employees
and subscribers of the acquired business as a result of changes in management.
TECHNOLOGY
Phoenix has partnered with leading hardware manufacturers, tools
manufacturers and relational database vendors in the client/server community,
such as Hewlett-Packard, Centura Software Corporation, formerly known as Gupta
Corporation ("Centura"), 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.
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 10.0 as its SQL database.
The Phoenix System can run on hardware platforms from Hewlett-Packard, IBM,
NCR, Sun, Unisys and all others which are UNIX compliant. System 11.0 has been
integrated into the NT Version and the Company currently expects to have
completed the integration of Sybase's System 11.0 into the UNIX Phoenix System
by the end of 1997.
An advantage of the Phoenix System as compared to a 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 many 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 the tables and data. The Company has adapted the
Phoenix System for Microsoft Corporation's SQL Server 6.5 on Microsoft Windows
NT to create the NT Version. The NT Version was released in the first quarter
of 1997.
-8-
<PAGE> 9
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 Centura's SQLBase for either Novell
NetWare or Microsoft 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.
The Company expects to introduce this technology into the Phoenix System during
the latter part of 1997.
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
February 28, 1997, the Company's sales and marketing department, including
administrative staff, consisted of: eight individuals located at the Company's
offices in Florida; four sales persons located in Oklahoma City, Oklahoma, Des
Moines, Iowa, Philadelphia, Pennsylvania, and Los Angeles, California; and one
sales person located in London, England. In addition, the Company has launched
marketing relationships in Russia, Turkey, Ireland, the Middle East and the
Asia-Pacific region. The Company's direct sales personnel are experienced in
the sales process for banking software products. The Company's marketing
personnel and consultants 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 and consultants
also assist in the sales process by providing sales support literature and
ongoing customer communications.
The Company's direct sales and marketing force is complemented,
particularly in the international market, 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 continue 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 the United States market, Phoenix has established marketing agency
agreements with both The Netcomm Group, Inc. ("Netcomm") and ISC Financial
Services, Inc. ("ISC") pursuant to which both Netcomm and ISC market the
Phoenix System to certain financial institutions within their respective
territories. Both Netcomm and ISC have guaranteed a certain minimum number of
sales to retain exclusive marketing rights to the Phoenix System within part of
their territories, which in the aggregate include Indiana, Kentucky, Michigan,
Ohio, western Pennsylvania and West Virginia. In the international market,
Phoenix and Unisys entered into a software license agreement, whereby Unisys
exclusively markets the Phoenix System to banks 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. Additionally
in 1996, Phoenix and Computer Systems Associates (Nigeria) Limited ("CSA")
entered into a remarketing 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. CSA has
guaranteed a minimum number of sales to retain its exclusive right in the
territory.
-9-
<PAGE> 10
TARGET MARKETS
The United States Market. Phoenix currently divides commercial banks
and savings institutions in the United States market into three groups based on
asset-size: (i) institutions with assets less than $100 million (approximately
7,600 institutions); (ii) institutions with assets between $100 million to $1
billion (approximately 3,800 institutions) and (iii) institutions with assets
over $1 billion (approximately 600 institutions).
The Company primarily focuses its marketing and sales efforts on
middle market financial institutions with asset sizes 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 institutions 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 institutions 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 markets the Phoenix System on an opportunistic basis to
financial institutions with assets greater than $1 billion. The Company
believes that more larger institutions will become target institutions for the
Phoenix System in the future as new product features and enhancements increase
the Phoenix System's functionality for larger institutions. As another
strategy to increase its target market, the Company completed the development
of its NT Version in the first quarter of 1997. The Company believes that the
NT Version will be more attractive to institutions with assets of less than
$100 million. The Company also 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 unit of
a church.
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, Europe, the Middle
East, Asia and Africa. The Company believes that there are approximately 4,000
financial institutions in these regions that are potential prospects for the
Phoenix System. In December 1996, the Company opened an international sales and
marketing office in London, England with one sales person serving Europe, the
Middle East and Africa. The Company is currently exploring such strategic
relationships with agents to cover the Asian Pacific and Eastern European
regions.
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 is open, powerful and economical. The Company also believes that these
institutions are looking for technology solutions that will last at least 10 to
15 years. 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.
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, programming services, conversion training and installation
services, interface services for tying the Phoenix System to third-party
applications, customer and software support services, disaster recovery
services and Internet/Intranet consulting services. License fees are
-10-
<PAGE> 11
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 earned over the life of the license 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 not increased the price of its products since
the end of 1995 in domestic markets, but has increased prices for certain
international markets during 1996.
In the United States, license fees are based on the asset size of the
institution. Internationally, each institution 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 generally 20% of the
base license fees and branch fees. As the asset size of the institution
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.
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
February 28, 1997, the Company had 42 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 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/Development Services. 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, including customer specified programming
features, reports or regulatory requirements.
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
-11-
<PAGE> 12
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 February 28, 1997, the Company had 16 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 ISC, Netcomm, Unisys and CSA and will train
personnel of additional VARs who in the future agree to market the Phoenix
System so that these VARs will be able to provide certain levels of service and
support to customers.
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 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.
Internet/Intranet Services. Phoenix also offers Internet Consulting
Service ("ICS"), which provides both Internet and Intranet services to client
institutions. ICS allows client institutions to establish a presence on the
World Wide Web through home pages and web sites. ICS can also provide client
institutions with the services to create an internal web environment, known as
an Intranet. Through client/server technology and the Company's software, the
client institution receives the benefit of an Intranet which enables the
institution to improve and increase productivity without additional hardware or
infrastructure cost.
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
current United States bank regulatory obligations 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.
At the end of 1997, the Company expects to add a feature to SupportNet called
"knowledge base" which will provide a first level of resolution for
troubleshooting issues with the Phoenix System.
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 December 31, 1996, product development expenditures
(the total of product development expense and capitalized software development
costs) represented approximately 43% of the Company's aggregate revenues.
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. The U.S. Bank Partners continue to contribute to plans for new
products and enhancements through the Phoenix User Group ("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, acquire or integrate and introduce new products and features
that will keep pace with technological advances and satisfy evolving customer
requirements. As of February 28, 1997, the product development group consisted
of 54 individuals in addition to 16 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) developments
within the technology arena.
-12-
<PAGE> 13
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 and from specific requests from new
customers. 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
approximately twice a year with the Company to offer recommendations and to help
prioritized 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
cycles. Enhancements developed in client/server environments 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 was used to implement a Spanish version
of the Phoenix System which the Company released in the third
quarter of 1996.
- Multi-currency enhancements. Phoenix has designed and plans
to release its multi-currency enhancement in the second
quarter of 1997. With the multi-currency enhancement, the
Phoenix System will support the world currencies formatted in
accordance with the 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 and accounting for non-accrual
loans. Phoenix believes that such enhancements will broaden the
appeal of the Phoenix System for larger institutions, and the
Company plans to release such enhancements by mid-1997.
- NT Version of the Phoenix System. The NT Version employs
Microsoft Windows NT as the network operating system and
Microsoft SQL Server as the RDBMS and supports both Microsoft
Windows 95 and Windows NT on the client. The Company
completed the development of its NT Version in the first
quarter of 1997. This enhancement will improve the
cost-competitiveness of the Phoenix System.
- Internet banking enhancement. During 1997, 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 an Internet banking capability will give the Phoenix System
a competitive advantage over existing products. The Company
intends to charge an additional fee for this enhancement.
- ATM enhancement. Phoenix signed a Software License and
Development Agreement with Multisoft, an Ecuadorian company
that gives Phoenix worldwide rights to license and use
MultiSoft's NT based client/server ATM system. During 1997,
the Company
-13-
<PAGE> 14
plans to deliver a fully integrated, private label version of
the Multisoft ATM system. This system will allow the Company's
customers to support their own ATM network and to connect to
regional and national ATM networks, if desired.
- Cash management enhancement. Phoenix has acquired exclusive
rights to a cash management system that was originally
developed by Ixe Banco, in Mexico City. Phoenix plans to
deliver a tightly integrated version of this cash management
system which will allow the Company's customers to provide
online cash management services to their retail and commercial
customers.
- Loan pricing and credit scoring. Phoenix has formed a
relationship (including a minimal equity ownership interest by
Phoenix) with Integrated Financial Services, Inc., an
Atlanta-based software and services company, whereby Phoenix
acquired non-exclusive marketing rights to CreditPak, an
NT-based commercial credit analysis, loan pricing software
package that enables lenders to consider the total financial
relationship of the borrower and the bank. The Company plans
to deliver an interfaced version of CreditPak in 1997.
These potential new enhancements and products are subject to
significant technical risks, including delays in the development, introduction
or production of the new enhancements or products, failure to achieve market
acceptance and undetected errors or failures.
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 in the
U.S. from a number of sources, including FiServ, Inc., Bisys, Inc., Marshall &
Isley Corp., EastPoint Technology, Inc., a division of Marshall & Isley Corp.,
Electronic Data Systems Corp., Jack Henry & Associates, Inc., ALLTEL
Information Services, Inc., The Kirchman Corporation and Open Solutions, Inc.,
which all offer core retail software systems or outsourcing alternatives to the
financial institutions industry. In the international arena, the Company
competes with several global players, including FiServ, Inc., Midas-Kapiti
International, Inc., Kindle Banking Systems, Sanchez Computer Associates, Inc.
and Financial Network Services. In addition, there are smaller, regional
competitors in each country in which the Company targets internationally. Most
of the Company's international competitor's products contain wholesale banking
functionality running on closed, proprietary platforms under older design and
systems environments.
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 mid-range computer 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
-14-
<PAGE> 15
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.
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 infringe 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
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.
EMPLOYEES
As of February 28, 1997, Phoenix had a total of 142 employees, of
which 70 were engaged in product development and support, 42 were in
implementation and training, 13 were in sales and marketing, 14 were in finance
and administration and 3 were in executive management. All of the Company's
senior and executive officers who were employed by the Company on February 28,
1997 have entered into employment agreements with the Company. 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
The Company recently moved its principal administrative, sales,
marketing, support and product development facility to a commercial building in
Heathrow, Florida. The Company currently leases approximately 37,000 square
feet of space in this building and has exercised an option to lease
approximately 11,000 square feet of additional space commencing in October
1997. The lease for this property is for a term of ten years and expires on
April 1, 2007. The Company believes that its new facilities will be adequate
for its current requirements.
ITEM 2. PROPERTIES
See the information provided in Item 1 above entitled "Business --
Facilities" for information with respect to the Company's facilities.
-15-
<PAGE> 16
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to, nor is any of its property subject to,
any material legal proceedings, other than routine litigation incidental to its
business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's security holders
during the fourth quarter of the year ended December 31, 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The information required in Item 5 is incorporated herein by reference
from the Company's 1996 Annual Report to Shareholders, included in this Form
10-K as Exhibit 13.1 (the "Annual Report").
ITEM 6. SELECTED FINANCIAL DATA
The information required in Item 6 is incorporated herein by reference
from the Annual Report included in this Form 10-K as Exhibit 13.1.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required in Item 7 is incorporated herein by reference
from the Annual Report included in this Form 10-K as Exhibit 13.1.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required in Item 8 is incorporated herein by reference
from the Annual Report included in this Form 10-K as Exhibit 13.1.
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS IN ACCOUNTING AND FINANCIAL
DISCLOSURES
The Company had no disagreements on accounting or financial disclosure
matters with its accountants, nor did it change accountants, during the two
fiscal years ended December 31, 1996.
PART III
Certain information required by Part III is omitted from this Report
in that the Registrant will file a definitive Proxy Statement pursuant to
Regulation 14A (the "Proxy Statement") not later than 120 days after the end of
the financial year covered by this Report, and certain information included
therein is incorporated herein by reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their ages as
of December 31, 1996 are as follows:
-16-
<PAGE> 17
<TABLE>
<CAPTION>
NAME AGE CLASS(1) POSITION
---- --- -------- --------
<S> <C> <C> <C>
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 . . . 42 Senior Vice President and Chief Financial Officer
Raju M. Shivdasani . . . . 45 Senior Vice President and Division President of International Sales
Michael R. Newes . . . . . 50 Senior Vice President of Worldwide Marketing
Harold C. Boughton . . . . 45 Senior Vice President of National Sales
Gerald P. Nissen . . . . . 48 Senior Vice President of Technology Services
Twanna C. Soifer . . . . . 48 Senior Vice President of Implementation Services
Ronald E. Fenton(2)(3) . . 67 III Director
William C. Hess . . . . . 59 I Director
James C. Holly(2)(3) . . . 56 III Director
Paul A. Jones . . . . . . 42 II Director
J. Michael Murphy(3) . . . 56 II Director
Glenn W. Sturm(3) . . . . 43 II Director
O. Jay Tomson . . . . . . 60 I Director
Jack A. Blaine . . . . . . 52 I Director
Ruann F. Ernst . . . . . . 50 I Director
- ----------
</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.
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.
-17-
<PAGE> 18
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.
Raju M. Shivdasani. Mr. Shivdasani joined the Company in July 1996 as
a Senior Vice President and as Division President of International Sales. From
1990 to 1996, he worked for FiServ, Inc. where he served as group executive
vice president of the bank services sector and president of CBS Worldwide, a
banking software division. Mr. Shivdasani has over 15 years of experience
working for companies in the banking software, service bureau and data center
services industries.
Michael R. Newes. Mr. Newes joined the Company in 1993 and serves as
Senior Vice President of Worldwide Marketing. 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.
-18-
<PAGE> 19
William C. 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. Since 1977, he has served as
president, chief executive officer and director of Bank of the Sierra. He is
also the current president of the California Independent Bankers Association.
Mr. Holly holds an M.B.A. from the University of Wisconsin and was a
commissioned officer in the United States Army (Armor).
Paul A. Jones. Mr. Jones has been director of the Company since 1995.
He is the president, chief executive officer and a director of Glenview State
Bank and was the president of such bank from 1986 to 1996. Mr. Jones is a
director of Cummins-American Corp. and Cummins-Allison Corp.
J. Michael Murphy. Mr. Murphy has been a director of Phoenix since
1993 and currently serves as a member of the Audit Committee. 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 and currently serves as a member of the Audit Committee. 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 Board
of Directors of the Federal Reserve Bank of Chicago from 1980 to 1986. He is a
former director and president of Shazam.
Jack A. Blaine. Mr. Blaine has been a director of the Company since
1996. Since 1996, he has served as Corporate Senior Vice President and
President, Pacific Asia Americas Group for Unisys. Mr. Blaine has been with
Unisys since 1983 and was elected a corporate vice president and named vice
president of human resources in 1988. In 1990, he became vice president and
general manager of Unisys' Latin America and Caribbean Group which eventually
became a part of the Pacific Asia Americas Group.
Ruann F. Ernst. Ms. Ernst has been a director of the Company since
1996. Since 1995, she has served as General Manager of the Financial Services
Business Unit of Hewlett-Packard's Computer Systems Organization. Ms. Ernst
has worked for Hewlett-Packard from 1979 to 1983 and from 1988
-19-
<PAGE> 20
to the present. From 1991 to 1993, she served as Director of Strategic
Business for Hewlett-Packard's multiuser Unix product line. In 1993, Ms. Ernst
assumed the position of Marketing Manager for Hewlett-Packard for the financial
industry worldwide as well as U.S. responsibility for the process, retail and
oil and gas industries.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference from the
Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated by reference from the
Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by reference from the
Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The consolidated financial statements of the Company as of December 31, 1996
and 1995 and for each of the years in the three-year period ending December 31,
1996, together with the report of Ernst & Young LLP, dated January 31, 1997,
appearing in the Company's 1996 Annual Report to Shareholders, included as
Exhibit 13.1 to this Form 10-K, are incorporated herein by reference.
(a)(2) Financial Statement Schedules
Financial statement schedules are omitted because they are either: (i) not
applicable or not required; or (ii) the information required is contained in
the consolidated financial statements or the notes thereto.
-20-
<PAGE> 21
(b) Exhibits
3.1 Amended and Restated Articles of Incorporation (incorporated by
reference to Exhibit 3.1 of the Company's Form 10-Q, dated August
14, 1996, File No. 0-2937 (the "Second Quarter 10-Q")).
3.2 Amended and Restated Bylaws (incorporated by reference to Exhibit
3.2 of the Second Quarter 10-Q).
4.1 See Exhibits 3.1 and 3.2 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
Company.
10.1 Phoenix International Ltd., Inc. 1995 Employee Stock Option Plan,
effective as of March 18, 1995 (incorporated by reference to
Exhibit 10.12 of the Company's Registration Statement on Form S-1
(Registration No. 333-03355), as declared effective by the
Securities and Exchange Commission on July 1, 1996 (the
"Registration Statement")).*
10.2 Amendment, dated May 24, 1996, to the Phoenix International Ltd.,
Inc. 1995 Employee Stock Option Plan, effective March 18, 1995
(incorporated by reference to Exhibit 10.43 of the Registration
Statement).*
10.3 Phoenix International Ltd., Inc. 1995 Employee Stock Option Plan,
effective as of October 21, 1995 (incorporated by reference to
Exhibit 10.13 of the Registration Statement).*
10.4 Amendment, dated May 24, 1996, to the Phoenix International Ltd.,
Inc. 1995 Employee Stock Option Plan, effective October 21, 1995
(incorporated by reference to Exhibit 10.44 of the Registration
Statement).*
10.5 Revised Form of Stock Option Agreement for the Phoenix
International Ltd., Inc. 1995 Employee Stock Option Plan,
effective October 21, 1995 (incorporated by reference to Exhibit
10.45 of the Registration Statement).*
10.6 Phoenix International Ltd., Inc. 1996 Director Stock Option Plan
(incorporated by reference to Exhibit 10.46 of the Registration
Statement).*
10.7 Form of Stock Option Agreement under the Phoenix International
Ltd., Inc. 1996 Director Stock Option Plan (incorporated by
reference to Exhibit 4.7 of the Company's Registration Statement
on Form S-8, as filed with the Securities and Exchange
Commission on December 31, 1996).*
10.8 Form of the Company's Director Indemnity Agreement (incorporated
by reference to Exhibit 10.47 of the Registration Statement).
10.9 Employment Agreement by and between the Company and Bahram
Yusefzadeh, dated December 28, 1995 (incorporated by reference to
Exhibit 10.14 of the Registration Statement).*
-21-
<PAGE> 22
10.10 First Amendment to Employment Agreement by and between the
Company and Bahram Yusefzadeh, dated May 22, 1996 (incorporated
by reference to Exhibit 10.15 of the Registration Statement).*
10.11 Employment Agreement by and between the Company and Ralph
Reichard, dated December 18, 1995 (incorporated by reference to
Exhibit 10.16 of the Registration Statement).*
10.12 First Amendment to Employment Agreement by and between the
Company and Ralph Reichard, dated May 22, 1996 (incorporated by
reference to Exhibit 10.17 of the Registration Statement).*
10.13 Employment Agreement by and between the Company and Clay E.
Scarborough, dated May 23, 1996 (incorporated by reference to
Exhibit 10.18 of the Registration Statement).*
10.14 Employment Agreement by and between the Company and Michael R.
Newes, dated April 12, 1996 (incorporated by reference to Exhibit
10.19 of the Registration Statement).*
10.15 Employment Agreement by and between the Company and Gerald P.
Nissen, dated April 12, 1996 (incorporated by reference to
Exhibit 10.20 of the Registration Statement).*
10.16 Employment Agreement by and between the Company and Twanna C.
Soifer, dated April 12, 1996 (incorporated by reference to
Exhibit 10.21 of the Registration Statement).*
10.17 Employment Agreement by and between the Company and Harold C.
Boughton, dated June 3, 1996 (incorporated by reference to
Exhibit 10.1 of the Second Quarter 10-Q).*
10.18 Employment Agreement by and between the Company and Raju M.
Shivdasani, dated July 15, 1996 (incorporated by reference to
Exhibit 10.2 of the Second Quarter 10-Q).*
10.19 Form of Employee Confidentiality Agreement.
10.20 Form of Promissory Note for employee loans from the Company
(incorporated by reference to Exhibit 10.54 of the Registration
Statement).
10.21 Form of Stock Pledge and Security Agreement for employee loans
from the Company (incorporated by reference to Exhibit 10.55 of
the Registration Statement).
10.22 OEM Software License Agreement, dated June 30, 1995, between the
Company and Gupta Corporation (incorporated by reference to
Exhibit 10.26 of the Registration Statement).+
10.23 Value Added Remarketer Agreement, dated October 13, 1993, between
the Company and Sybase, Inc. (incorporated by reference to
Exhibit 10.27 of the Registration Statement).+
-22-
<PAGE> 23
10.24 Software License Agreement between the Company and Unisys
Corporation, dated March 16, 1996 (incorporated by reference to
Exhibit 10.28 of the Registration Statement).+
10.25 First Amendment to Software License Agreement between the Company
and Unisys Corporation, dated December 27, 1996.++
10.26 General Agreement for Strategic Relationship between the Company
and Hewlett-Packard Company, dated April 30, 1993 (incorporated
by reference to Exhibit 10.29 of the Registration Statement).+
10.27 Form of Software License Agreement (incorporated by reference to
Exhibit 10.30 of the Registration Statement).+
10.28 Form of International Software License Agreement (incorporated by
reference to Exhibit 10.31 of the Registration Statement).+
10.29 Form of Disaster Recovery Service Agreement (incorporated by
reference to Exhibit 10.32 of the Registration Statement).+
10.30 Form of Software Deposit Agreement (incorporated by reference to
Exhibit 10.33 of the Registration Statement).+
10.31 Form of Confidentiality and Non-Disclosure Agreement
(incorporated by reference to Exhibit 10.34 of the Registration
Statement).
10.32 Form of Confidentiality Agreement (incorporated by reference to
Exhibit 10.35 of the Registration Statement).
10.33 Form of Mutual Non-Disclosure Agreement (incorporated by
reference to Exhibit 10.36 of the Registration Statement).
10.34 Form of Confidentiality/Non-Disclosure Agreement Remitting Access
to System Documentation and Data Files for Data Conversion
(incorporated by reference to Exhibit 10.37 of the Registration
Statement).
10.35 Form of Phoenix International Ltd., Inc. Confidentiality
Agreement (incorporated by reference to Exhibit 10.38 of the
Registration Statement).
10.36 Standard Commercial Lease, dated December 8, 1993, between the
Company and ABR Spectrum, Ltd. with respect to Suite 140, 900
Winderley Place, Maitland, Florida premises, as modified January
24, 1994 (incorporated by reference to Exhibit 10.39 of the
Registration Statement).
10.37 Lease Termination Agreement, dated February 12, 1997, between the
Company and ABR Spectrum, Ltd.
10.38 Sublease Agreement, dated September 28, 1995, between the Company
and CCS Technology Group, Inc. with respect to Suite 120, 900
Winderley Place, Maitland,
-23-
<PAGE> 24
Florida premises (incorporated by reference to Exhibit 10.40 of
the Registration Statement).
10.39 The Principal Financial Group Prototype for Savings Plans (401k),
as amended, and the Group Annuity Contract for the Company
(incorporated by reference to Exhibit 10.41 of the Registration
Statement).*
10.40 Remarketing Agreement and Support Authorization, dated as of
April 22, 1996, between the Company and Computer Systems
Associates (Nigeria) Limited (incorporated by reference to
Exhibit 10.42 of the Registration Statement) (the "CSA
Agreement").+
10.41 Lease Agreement, dated September 11, 1996, between the Company
and 500 International Parkway Development Company (incorporated
by reference to Exhibit 10.1 of the Company's Form 10-Q, dated
November 5, 1996, File No. 0-2937).
10.42 Cooperative Marketing Agreement, dated September 5, 1996, between
the Company and The Netcomm Group, Inc.++
10.43 Cooperative Marketing Agreement, dated October 2, 1996, between
the Company and ISC Financial Systems, Inc.++
10.44 Stock Purchase Agreement, dated March 5, 1997, between the
Company and Dyad Corporation.++
10.45 License and Distribution Agreement, dated March 5, 1997, between
the Company and Dyad Corporation.++
10.46 License and Marketing Agreement, dated November 26, 1996, between
the Company and Integrated Financial Services, Inc.++
10.47 Form of Software License Agreement used in connection with the
CSA Agreement.
11.1 Statement re: Computation of Per Share Earnings.
13.1 Registrant's 1996 Annual Report to Shareholders. Except for
portions of said Annual Report incorporated herein by reference,
the Annual Report is furnished for the information of the
Commission and is not deemed filed herewith.
21.1 Subsidiaries of the Company.
23.1 Consent of Ernst & Young LLP.
24.1 Power of Attorney (contained on the signature page of this
filing).
-24-
<PAGE> 25
27.1 Financial Data Schedule (for Commission purposes only).
_______________
+ Confidential treatment previously granted.
++ Confidential treatment requested.
* This agreement is a compensatory plan or arrangement required to
be filed as an exhibit to this Form 10-K pursuant to Item 14(c).
-25-
<PAGE> 26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereto duly authorized.
Phoenix International Ltd., Inc.
March 24, 1997 By: /s/ Bahram Yusefzadeh
- -------------------------- -----------------------------------------------
Date Bahram Yusefzadeh
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW BY ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints jointly and severally, Bahram Yusefzadeh
and Ralph Reichard, and each one of them, his attorneys-in-fact, each with the
power of substitution, for him in any and all capacities, to sign any and all
amendments to this Annual Report (Form 10-K) and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each said attorneys-in-fact, or his substitute or substitutes, may do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchanges Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ Bahram Yusefzadeh Chairman of the Board and Chief March 24, 1997
- ------------------------------------------------ Executive Officer (principal
Bahram Yusefzadeh executive officer)
/s/ Ralph H. Reichard Chief Operating Officer, March 24, 1997
- ------------------------------------------------- President and Director
Ralph H. Reichard
/s/ Clay E. Scarborough Chief Financial Officer March 24, 1997
- ------------------------------------------------- (principal financial and
Clay E. Scarborough accounting officer)
/s/ Ruann F. Ernst Director March 24, 1997
- ------------------------------------------------
Ruann F. Ernst
/s/ Jack A. Blaine Director March 24, 1997
- ------------------------------------------------
Jack A. Blaine
/s/ Ronald E. Fenton Director March 24, 1997
- ------------------------------------------------
Ronald E. Fenton
</TABLE>
<PAGE> 27
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ William C. Hess Director March 24, 1997
- ------------------------------------------------
William C. Hess
/s/ James C. Holly Director March 24, 1997
- ------------------------------------------------
James C. Holly
/s/ Paul A. Jones Director March 24, 1997
- ------------------------------------------------
Paul A. Jones
/s/ J. Michael Murphy Director March 24, 1997
- ------------------------------------------------
J. Michael Murphy
/s/ Glenn W. Sturm Secretary and Director March 24, 1997
- ------------------------------------------------
Glenn W. Sturm
/s/ O. Jay Tomson Director March 24, 1997
- ------------------------------------------------
O. Jay Tomson
</TABLE>
<PAGE> 28
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
<S> <C> <C>
3.1 Amended and Restated Articles of Incorporation (incorporated by
reference to Exhibit 3.1 of the Company's Form 10-Q, dated August
14, 1996, File No. 0-2937 (the "Second Quarter 10-Q")).
3.2 Amended and Restated Bylaws (incorporated by reference to Exhibit
3.2 of the Second Quarter 10-Q).
4.1 See Exhibits 3.1 and 3.2 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
Company.
10.1 Phoenix International Ltd., Inc. 1995 Employee Stock Option Plan,
effective as of March 18, 1995 (incorporated by reference to
Exhibit 10.12 of the Company's Registration Statement on Form S-1
(Registration No. 333-03355), as declared effective by the
Securities and Exchange Commission on July 1, 1996 (the
"Registration Statement")).*
10.2 Amendment, dated May 24, 1996, to the Phoenix International Ltd.,
Inc. 1995 Employee Stock Option Plan, effective March 18, 1995
(incorporated by reference to Exhibit 10.43 of the Registration
Statement).*
10.3 Phoenix International Ltd., Inc. 1995 Employee Stock Option Plan,
effective as of October 21, 1995 (incorporated by reference to
Exhibit 10.13 of the Registration Statement).*
10.4 Amendment, dated May 24, 1996, to the Phoenix International Ltd.,
Inc. 1995 Employee Stock Option Plan, effective October 21, 1995
(incorporated by reference to Exhibit 10.44 of the Registration
Statement).*
10.5 Revised Form of Stock Option Agreement for the Phoenix
International Ltd., Inc. 1995 Employee Stock Option Plan,
effective October 21, 1995 (incorporated by reference to Exhibit
10.45 of the Registration Statement).*
10.6 Phoenix International Ltd., Inc. 1996 Director Stock Option Plan
(incorporated by reference to Exhibit 10.46 of the Registration
Statement).*
10.7 Form of Stock Option Agreement under the Phoenix International
Ltd., Inc. 1996 Director Stock Option Plan (incorporated by
reference to Exhibit 4.7 of the Company's Registration Statement
on Form S-8, as filed with the Securities and Exchange
Commission on December 31, 1996).*
10.8 Form of the Company's Director Indemnity Agreement (incorporated
by reference to Exhibit 10.47 of the Registration Statement).
</TABLE>
<PAGE> 29
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
<S> <C> <C>
10.9 Employment Agreement by and between the Company and Bahram
Yusefzadeh, dated December 28, 1995 (incorporated by reference to
Exhibit 10.14 of the Registration Statement).*
10.10 First Amendment to Employment Agreement by and between the
Company and Bahram Yusefzadeh, dated May 22, 1996 (incorporated
by reference to Exhibit 10.15 of the Registration Statement).*
10.11 Employment Agreement by and between the Company and Ralph
Reichard, dated December 18, 1995 (incorporated by reference to
Exhibit 10.16 of the Registration Statement).*
10.12 First Amendment to Employment Agreement by and between the
Company and Ralph Reichard, dated May 22, 1996 (incorporated by
reference to Exhibit 10.17 of the Registration Statement).*
10.13 Employment Agreement by and between the Company and Clay E.
Scarborough, dated May 23, 1996 (incorporated by reference to
Exhibit 10.18 of the Registration Statement).*
10.14 Employment Agreement by and between the Company and Michael R.
Newes, dated April 12, 1996 (incorporated by reference to Exhibit
10.19 of the Registration Statement).*
10.15 Employment Agreement by and between the Company and Gerald P.
Nissen, dated April 12, 1996 (incorporated by reference to
Exhibit 10.20 of the Registration Statement).*
10.16 Employment Agreement by and between the Company and Twanna C.
Soifer, dated April 12, 1996 (incorporated by reference to
Exhibit 10.21 of the Registration Statement).*
10.17 Employment Agreement by and between the Company and Harold C.
Boughton, dated June 3, 1996 (incorporated by reference to
Exhibit 10.1 of the Second Quarter 10-Q).*
10.18 Employment Agreement by and between the Company and Raju M.
Shivdasani, dated July 15, 1996 (incorporated by reference to
Exhibit 10.2 of the Second Quarter 10-Q).*
10.19 Form of Employee Confidentiality Agreement.
10.20 Form of Promissory Note for employee loans from the Company
(incorporated by reference to Exhibit 10.54 of the Registration
Statement).
10.21 Form of Stock Pledge and Security Agreement for employee loans
from the Company (incorporated by reference to Exhibit 10.55 of
the Registration Statement).
</TABLE>
<PAGE> 30
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
<S> <C> <C>
10.22 OEM Software License Agreement, dated June 30, 1995, between the
Company and Gupta Corporation (incorporated by reference to
Exhibit 10.26 of the Registration Statement).+
10.23 Value Added Remarketer Agreement, dated October 13, 1993, between
the Company and Sybase, Inc. (incorporated by reference to
Exhibit 10.27 of the Registration Statement).+
10.24 Software License Agreement between the Company and Unisys
Corporation, dated March 16, 1996 (incorporated by reference to
Exhibit 10.28 of the Registration Statement).+
10.25 First Amendment to Software License Agreement between the Company
and Unisys Corporation, dated December 27, 1996.++
10.26 General Agreement for Strategic Relationship between the Company
and Hewlett- Packard Company, dated April 30, 1993 (incorporated
by reference to Exhibit 10.29 of the Registration Statement).+
10.27 Form of Software License Agreement (incorporated by reference to
Exhibit 10.30 of the Registration Statement).+
10.28 Form of International Software License Agreement (incorporated by
reference to Exhibit 10.31 of the Registration Statement).+
10.29 Form of Disaster Recovery Service Agreement (incorporated by
reference to Exhibit 10.32 of the Registration Statement).+
10.30 Form of Software Deposit Agreement (incorporated by reference to
Exhibit 10.33 of the Registration Statement).+
10.31 Form of Confidentiality and Non-Disclosure Agreement
(incorporated by reference to Exhibit 10.34 of the Registration
Statement).
10.32 Form of Confidentiality Agreement (incorporated by reference to
Exhibit 10.35 of the Registration Statement).
10.33 Form of Mutual Non-Disclosure Agreement (incorporated by
reference to Exhibit 10.36 of the Registration Statement).
10.34 Form of Confidentiality/Non-Disclosure Agreement Remitting Access
to System Documentation and Data Files for Data Conversion
(incorporated by reference to Exhibit 10.37 of the Registration
Statement).
10.35 Form of Phoenix International Ltd., Inc. Confidentiality
Agreement (incorporated by reference to Exhibit 10.38 of the
Registration Statement).
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
<S> <C> <C>
10.36 Standard Commercial Lease, dated December 8, 1993, between the
Company and ABR Spectrum, Ltd. with respect to Suite 140, 900
Winderley Place, Maitland, Florida premises, as modified January
24, 1994 (incorporated by reference to Exhibit 10.39 of the
Registration Statement).
10.37 Lease Termination Agreement, dated February 12, 1997, between the
Company and ABR Spectrum, Ltd.
10.38 Sublease Agreement, dated September 28, 1995, between the Company
and CCS Technology Group, Inc. with respect to Suite 120, 900
Winderley Place, Maitland, Florida premises (incorporated by
reference to Exhibit 10.40 of the Registration Statement).
10.39 The Principal Financial Group Prototype for Savings Plans (401k),
as amended, and the Group Annuity Contract for the Company
(incorporated by reference to Exhibit 10.41 of the Registration
Statement).*
10.40 Remarketing Agreement and Support Authorization, dated as of
April 22, 1996, between the Company and Computer Systems
Associates (Nigeria) Limited (incorporated by reference to
Exhibit 10.42 of the Registration Statement) (the "CSA
Agreement").+
10.41 Lease Agreement, dated September 11, 1996, between the Company
and 500 International Parkway Development Company (incorporated
by reference to Exhibit 10.1 of the Company's Form 10-Q, dated
November 5, 1996, File No. 0-2937).
10.42 Cooperative Marketing Agreement, dated September 5, 1996, between
the Company and The Netcomm Group, Inc.++
10.43 Cooperative Marketing Agreement, dated October 2, 1996, between
the Company and ISC Financial Systems, Inc.++
10.44 Stock Purchase Agreement, dated March 5, 1997, between the
Company and Dyad Corporation.++
10.45 License and Distribution Agreement, dated March 5, 1997, between
the Company and Dyad Corporation.++
10.46 License and Marketing Agreement, dated November 26, 1996, between
the Company and Integrated Financial Services, Inc.++
10.47 Form of Software License Agreement used in connection with the
CSA Agreement.
11.1 Statement re: Computation of Per Share Earnings.
</TABLE>
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
<S> <C> <C>
13.1 Registrant's 1996 Annual Report to Shareholders. Except for
portions of said Annual Report incorporated herein by reference,
the Annual Report is furnished for the information of the
Commission and is not deemed filed herewith.
21.1 Subsidiaries of the Company.
23.1 Consent of Ernst & Young LLP.
24.1 Power of Attorney (contained on the signature page of this
filing).
27.1 Financial Data Schedule (for Commission purposes only).
</TABLE>
_______________
+ Confidential treatment previously granted.
++ Confidential treatment requested.
* This agreement is a compensatory plan or arrangement required to
be filed as an exhibit to this Form 10-K pursuant to Item 14(c).
<PAGE> 1
EXHIBIT 10.19
EMPLOYEE CONFIDENTIALITY AGREEMENT
I, ____________________________, in consideration for my future employment by
Phoenix International Ltd., Inc., or its subsidiaries or successors
(hereinafter called "Phoenix") and the payment of future wages as compensation
for services rendered in the course of my employment, hereby agree as follows:
1. That during the course of such employment I will not act as an
employee, agent or representative of any other company and will devote
my full time to representing Phoenix in a manner consistent with
established Phoenix policies and management directives.
2. That I will not disclose to Phoenix any proprietary information of any
other party previously disclosed to me in confidence, and declare that
I am not bound by any prior agreement which prohibits my employment by
Phoenix or the assignment of any newly created intellectual property
right to Phoenix.
3. That I recognize and acknowledge that in the course of my employment
by Phoenix I may have access to and gain knowledge of proprietary or
confidential information relating to Phoenix's products, processes,
services or business operations, including information relating to
development, marketing, strategy, customers, suppliers, finances,
forecasts and other employees. I understand that Phoenix's
confidential information shall include information of its customers
which Phoenix is under obligation to maintain as confidential. I
agree not to disclose to anyone outside of Phoenix or to use for any
purposes other than Phoenix's business purposes, any of Phoenix's
proprietary or confidential information, either during the term or
after my employment by Phoenix.
4. That I will assign, and do hereby assign, to Phoenix, all my rights to
intellectual property which I make or conceive, in the course of my
employment by Phoenix or with the use of Phoenix's time, materials,
facilities, or relating to any subject matter with which Phoenix is
concerned, and I further agree, without charge to Phoenix, but at its
expense, to execute, acknowledge and to aid in preparation of all
documentation as may be necessary to obtain registration of patents or
copyrights in any and all countries and to vest title thereto in
Phoenix. This paragraph shall not apply to an invention for which no
equipment, supplies, facilities, or proprietary information of Phoenix
was used and which was developed entirely on my own time, unless (a)
the invention relates: (1) to the business of Phoenix, or (2) to
Phoenix's actual or demonstrably anticipated research or development;
or (b) the invention results from any work performed by me for
Phoenix. I further agree that upon termination of my
<PAGE> 2
employment I will disclose to Phoenix all details of any computer
program or other project on which I have worked during my employment,
which has not been disclosed fully before my termination, and will
deliver up to Phoenix all memoranda, notes, records, manuals,
drawings, electronic media, and any other documents obtained from
Phoenix or produced by me during my employment.
5. That I will disclose promptly to Phoenix any and all ideas,
discoveries, inventions, which I may make or conceive either solely or
jointly with others, during the twelve-month period immediately
following termination of employment by Phoenix, which relate to the
work performed by me while in the employ of Phoenix. I further agree
to assign and do hereby assign to Phoenix all my rights and interests
in any and all such inventions and further agree, without charge to
Phoenix but at its expense, to execute, to acknowledge and to aid in
the preparation of all such further papers, including applications for
patents or copyrights, as may be necessary to obtain patent or
copyright registrations on said inventions in any and all countries
and to vest title thereto to Phoenix.
6. That for a period of twelve months after termination of my employment
for any reason, I will not directly or indirectly solicit, divert or
take away, or attempt to solicit, divert or take away any customers,
employees, licensees or third party alliance candidates negotiating
with Phoenix at the time of termination within any region or territory
in which I was employed by Phoenix; nor will I accept employment at or
perform services for any potential customer, licensee or third party
alliance candidate negotiating with Phoenix at the time of my
termination within any region or territory in which I was employed by
Phoenix. I hereby acknowledge that Phoenix is justified in obtaining
the restrictions contained above in that it has a legitimate business
interest to protect, specifically, but not limited to, its trade
secrets and confidential information and its substantial relationships
with prospective or existing customers. I further acknowledge that
the restrictions contained above are reasonably necessary to protect
and preserve the legitimate business interests of Phoenix.
7. That in the event any part of the confidential information recited by
this Agreement becomes generally known to the public through
legitimate origins (other than by breach of this Agreement), that part
of the confidential information shall no longer be deemed confidential
information for the purposes of this Agreement, but I shall continue
to be bound by the terms of this Agreement as to all other
confidential information.
8. That if any phrase, clause or provision of this Agreement is declared
invalid or unequal by a court of competent jurisdiction, such phrase,
clause or provision shall be deemed
2
<PAGE> 3
severed from this Agreement, but will not affect any other provision
of this Agreement, which shall otherwise remain in full force and
effect. If any restriction or limitation in this Agreement is deemed
to be unreasonable, onerous and unduly restrictive by a court of
competent jurisdiction, it shall not be stricken in its entirety and
held totally void and unenforceable, but shall remain effective to the
maximum extent permissible within reasonable bounds.
9. That I stipulate and agree that breach of this Agreement will result
in immediate and irreparable harm to the business and goodwill of
Phoenix and that damages, if any, and remedies at law for such breach
would be inadequate. Phoenix shall therefore be entitled to apply for
and receive from any court of competent jurisdiction, an injunction to
restrain any violation of this Agreement and for such further relief
as the court may deem just and proper.
10. That this Agreement is a condition of my employment by Phoenix but in
no way operates as a guarantee of continued employment. I understand
that Phoenix is an at-will employer.
Signature of Employee: _________________________ Date: ___________
Witness: _______________________________________ Date: __________
3
<PAGE> 1
EXHIBIT 10.25
CONFIDENTIAL TREATMENT REQUESTED
FIRST AMENDMENT TO THE
SOFTWARE LICENSE AGREEMENT
BETWEEN
UNISYS CORPORATION
AND
PHOENIX INTERNATIONAL LTD, INC.
This First Amendment to the Software License Agreement (this
"Agreement") is entered into as of this 27th day of December, 1996 (the
"Effective Date") by and between Unisys Corporation ("Unisys"), with offices at
7000 West Palmetto Park Road, Suite 201, Boca Raton, Florida 33433; and Phoenix
International Ltd, Inc. ("Phoenix"), with offices at 900 Winderley Place, Suite
140, Maitland, Florida 32751.
WITNESSETH THAT:
WHEREAS, Phoenix and Unisys entered into that certain Software License
Agreement earlier in 1996 (the "Original Agreement"; the Original Agreement as
amended by this Amendment is referred to as the "Agreement"); and
WHEREAS, the parties wish to make certain changes to the Original
Agreement by this Amendment;
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:
I. Section 2.1(2) shall be replaced in its entirety with the following,
so as to stipulate the license fee to be paid by each End User that is provided
with Source Code for the Package, and to enumerate the restrictions applicable
to such End User's use of the Source Code:
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. License Agreements may
include a license for, or an option to license, Source Code
obtainable or exercisable upon payment of a Source Code
license fee in an
First Amendment to Software License Agreement
between Unisys Corporation and Phoenix International Ltd., Inc.
<PAGE> 2
XXX-CONFIDENTIAL TREATMENT REQUESTED
amount XXXXXXXXXXXXXXXXXXXXXXXX (or, if the price or other
terms for the Source Code license prove to XXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX as the parties may
mutually agree on a case-by-case basis). Each Source Code
license must contain restrictions on use and disclosure,
provisions for ownership and protection of intellectual
property rights, and provisions for term and termination
before such Source Code license is granted or exercised. The
Source Code license fee shall be shared by the parties as
provided in Part I of Addendum B. Except as provided pursuant
to such a Source Code option or license, the End User shall
not be permitted to receive access to or delivery of Source
Code for the Package.
II. Section 3.3 shall be replaced in its entirety with the following, so
as to amend the minimum sublicensing criteria that Unisys must satisfy in order
to maintain exclusivity otherwise provided in Section 3.1 hereof:
3.3 The exclusivity described in Section 3.1 applicable in the
Territory shall continue until December 31, 1998 and
thereafter shall automatically renew for additional periods of
one (1) year each so long as the term of this Agreement
continues and Unisys sublicenses XXXXXXXXXXXX:
XXXXXXXXXXXXXX by December 31, 1998
XXXXXXXXXXXXXX by December 31, 1999
The minimum number of copies of the Package required to be
sublicensed in order for Unisys to maintain exclusivity in
renewal years extending on or after January 1, 2000 shall be
determined in accordance with Section 5.2 hereof.
For purposes of this paragraph, a "sublicense" means the
execution by the End User of a License Agreement for the
Package that provides for payment to Unisys of license fees in
accordance with Section 6.2 hereof sufficient to meet the per
copy and branch minimum royalty requirements established for
the Package as set forth in Addendum B hereto.
Sublicenses granted to Off-Shore Banks 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
First Amendment to Software License Agreement
between Unisys Corporation and Phoenix International Ltd., Inc.
2
<PAGE> 3
XXX-CONFIDENTIAL TREATMENT REQUESTED
Phoenix in writing in advance.
If the Territory is hereafter expanded, the provisions under
which Unisys may obtain and maintain exclusivity (if
applicable) in additional areas shall be as agreed to by the
parties in the amendment providing for such expansion.
III. Section 4.2 shall be replaced in its entirety with the following, so
as to modify the conditions under which Unisys may market software products
which may be competitive with the Package:
4.2 Notwithstanding Section 4.1 hereof, the parties agree that
Unisys may market the SFB Product (or other software product
which may be competitive with the Package, with the
concurrence of Phoenix, such concurrence not to be withheld
absent compelling competitive reasons) under the following
circumstances:
(1) The customer requires a mainframe-based
application; 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 or another competitive software
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 implementation of the Package
would not support more than XX 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
First Amendment to Software License Agreement
between Unisys Corporation and Phoenix International Ltd., Inc.
3
<PAGE> 4
XXX-CONFIDENTIAL TREATMENT REQUESTED
(5) The customer is one of XXXXXXXX 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 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.
IV. Sections 5.1 and 5.2 shall be replaced in their entirety with the
following, so as to modify the expiration date of the initial term and change
the minimum sublicensing criteria that Unisys must satisfy in order to maintain
exclusivity otherwise provided in Section 3.1 hereof:
5.1 The initial term of this Agreement shall commence on the
Effective Date and shall continue for an initial period ending
on December 31, 2000.
5.2 Beginning six (6) months before expiration of the initial term
and each applicable renewal term (which, unless otherwise
agreed, shall be for terms of three (3) years each), the
parties agree to commence discussion and negotiation of the
minimum number of sublicenses of the Package that have to be
generated 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
sublicense, 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, and Unisys shall 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 and that Unisys has continuously satisfied the
criteria necessary to maintain exclusivity otherwise provided
in Section 3.1 hereof, this Agreement shall automatically
renew for a further period of three (3) years upon expiration
of the initial term and each renewal term.
First Amendment to Software License Agreement
between Unisys Corporation and Phoenix International Ltd., Inc.
4
<PAGE> 5
XXX-CONFIDENTIAL TREATMENT REQUESTED
V. Section 6.1 shall be replaced in its entirety with the following, so
as to modify the amount, terms of payment, and credit terms for the initial
royalties applicable for the Package and Documentation and certain other
deliverables:
1. For delivery of a copy of the Package and Documentation in its
then-existing form (Delivery #1) to Unisys upon execution of
the Agreement, and in consideration of the license granted to
Unisys in Section 2.1 with respect thereto, Unisys agrees to
pay Phoenix an initial royalty for the Package and
Documentation, in its existing form, XXXXXXXXXXXXXX, which the
parties acknowledge has been paid in full.
2. For delivery of Unisys Release 1.3.7 of the Package (Delivery
#2), scheduled to occur within fifteen (15) days after
execution of this Amendment, and in consideration of the
license granted to Unisys in Section 2.1 with respect thereto,
Unisys agrees to pay Phoenix the sum of XXXXXXXXXX.
3. For delivery of Unisys Release 2.0 of the Package, (Delivery
#3), scheduled to occur by March 15, 1997, and in
consideration of the license granted to Unisys in Section 2.1
with respect thereto, Unisys agrees to pay Phoenix the sum of
XXXXXX.
Payment of the foregoing amounts shall be made as follows:
<TABLE>
<CAPTION>
Amount Payment Date
------ ------------
<S> <C> <C>
Delivery 2 XXXXXXX XXXXXXXXXXXXXXXXXXXXX
XXXXXXX XXXXXXXXXXXXXXXXXXXXX
XXXXXXX XXXXXXXXXXXXXXXXXXXXX
XXXXXXX XXXXXXXXXXXXXXXXXXXXX
XXXXXXX XXXXXXXXXXXXXXXXXXXXX
XXXXXXX XXXXXXXXXXXXXXXXXXXXX
XXXXXXX XXXXXXXXXXXXXXXXXXXXX
XXXXXXX XXXXXXXXXXXXXXXXXXXXX
XXXXXXX XXXXXXXXXXXXXXXXXXXXX
XXXXXXX XXXXXXXXXXXXXXXXXXXXX
Delivery 3 XXXXXXX XXXXXXXXXXXXXXXXXXXXX
XXXXXXX XXXXXXXXXXXXXXXXXXXXX
XXXXXXX XXXXXXXXXXXXXXXXXXXXX
XXXXXXX XXXXXXXXXXXXXXXXXXXXX
XXXXXXX XXXXXXXXXXXXXXXXXXXXX
</TABLE>
First Amendment to Software License Agreement
between Unisys Corporation and Phoenix International Ltd., Inc.
5
<PAGE> 6
XXX-CONFIDENTIAL TREATMENT REQUESTED
Upon delivery of each Delivery (#1 - #3), the corresponding payment
shall be fully earned, unconditionally payable on the schedule
provided above and nonrefundable; each Delivery (#1 - #3) is distinct
and executable without the necessity of subsequent Deliveries.
Such initial royalties, to the extent paid, shall be applied on
XXXXXXXXXXXXX basis as a credit for additional royalties payable under
Section 6.2 hereof, up to a limit of XXXXXXXX per sublicense, but may
not be applied to implementation, customization, or other service
charges.
To the extent royalties are actually paid by Unisys under Section 6.2
hereof (and not merely credited under Section 6.2 as provided in the
immediately preceding paragraph of this Section 6.1), then to the
extent of any outstanding balance of initial royalties payable under
this Section 6.1, the royalties paid under Section 6.2 shall be
applied on a XXXXXXXXXXXXXX basis as a credit against the outstanding
balance of initial royalties payable under this Section 6.1, up to a
limit of XXXXXXXX per sublicense, XXXXXXXXXXXXXXXXXXXXXXXXXX.
VI. New paragraphs 8.6 and 8.7 shall be added to the Agreement, to clarify
Phoenix's obligation to maintain the competitive position of the Package, as
follows:
8.6 No later than XXXXXXXXXXXXXXXXX, Phoenix shall demonstrate, to
the reasonable satisfaction of Unisys, that Changes have been
made to the Package such that it will be capable to support an
installation of at least XXXXXXXXXXXXXXXXXXXXXXX with
satisfactory performance, including such parameters as product
stability, response time, daily reconciliation, etc. If
Phoenix fails to achieve this objective by XXXXXXXXXXXXXXXXX,
Unisys shall be entitled to pay XXX XXXXXXXXXXXXXXX otherwise
payable to Phoenix in XXXX, up to an amount which does not
exceed the initial royalties paid under Section 6.1 offset by
any royalties paid to Phoenix under Section 6.2 as of
XXXXXXXXXXXXXXXXX, into an escrow account until Phoenix meets
the objective, at which time the balance will be paid to
Phoenix; provided, however, that if the objective is not met
by XXXXXXXXXXXXXXXXX, Unisys shall be entitled to retain the
proceeds of the escrow account without further obligation to
Phoenix hereunder.
8.7 No later than XXXXXXXXXXXXXXXXX, Phoenix shall demonstrate, to
the reasonable satisfaction of Unisys, that Changes have been
made to
First Amendment to Software License Agreement
between Unisys Corporation and Phoenix International Ltd., Inc.
6
<PAGE> 7
XXX-CONFIDENTIAL TREATMENT REQUESTED
the Package such that it will be capable to support an
installation of at least XXXXXXXXXXXXXXXXXX with satisfactory
performance, including such parameters as product stability,
response time, daily reconciliation, etc. If Phoenix fails to
achieve this objective by XXXXXXXXXXXXXXXXX, there will be a
revision of Part I of Addendum B hereof, such that the Gross
Proceeds from license and branch fees on all License
Agreements entered into after XXXXXXX XXXX shall be paid
XXXXXXXXXX.
VII. Section 20.3 shall be replaced in its entirety with the following:
20.3 Each individual who Unisys permits to receive access to the
Source Code shall be prohibited from simultaneously
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), (2) such other software product or programming as
Phoenix may approve under Section 4.2 hereof, and (3) such
other product or programming as Phoenix may approve in the
future after receiving the notice required by Section 4.1
hereof.
VIII. The third and fourth paragraphs of Part I of Addendum B shall be
replaced with the following:
XXXXXXXXXXXXXXXXXXXXXXXXX from license and branch fees on all other
License Agreements.
XXXXXXXXXXXXXXXXXXXXXXXXX from the Source Code license fees paid by
End-Users prior to XXXXXXXXXXXXXX, and XXXXXXXXXXXXXXXXXXXX from the
Source Code license fees paid by End-Users after XXXXXXXXXXXXXX.
VI. The second, third and fourth paragraphs of Part II of Addendum B shall be
replaced in their entirety with the following:
XXXXXXXXXXXXXXXXXX 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,
First Amendment to Software License Agreement
between Unisys Corporation and Phoenix International Ltd., Inc.
7
<PAGE> 8
XXX-CONFIDENTIAL TREATMENT REQUESTED
the "First Conversion Date" shall mean the date on which Conversion
and implementation have been completed for the first End User
sublicensed by Unisys.)
XXXXXXXXXXXXXXXXXXXXXX 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.
XXXXXXXXXXXXXXXXXXXXX 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 2
years after the First Conversion Date.
IX. Parts II and III of Addendum E shall be replaced in their entirety
with the new Parts II and III of Addendum E attached to this Amendment, so as
to delete the list of Pre-Qualified End Users and revise the list of Hold-Out
Accounts.
X. Capitalized terms used herein and not otherwise defined shall have the
meaning provided in the Original Agreement. Except as expressly provided
otherwise in this Amendment, the provisions of the Original Agreement shall
remain in full force and effect.
First Amendment to Software License Agreement
between Unisys Corporation and Phoenix International Ltd., Inc.
8
<PAGE> 9
IN WITNESS WHEREOF, this Amendment has been duly executed by the parties
hereto, as of the date shown above.
Phoenix International Ltd, Inc. Unisys Corporation
By: /s/ Bahram Yusefzadeh By: /s/ Jack A Blaine
------------------------------- -------------------------------
Bahram Yusefzadeh Jack A. Blaine
- ----------------------------------- ------------------------------------
(Printed Name) (Printed Name)
Title: Chairman & CEO Title: President
--------------------------- ----------------------------
Date: 12-27-96 Date: 12-27-96
---------------------------- -----------------------------
First Amendment to Software License Agreement
between Unisys Corporation and Phoenix International Ltd., Inc.
9
<PAGE> 10
Parts II and III of Addendum E (New)
Part II: Pre-Qualified End Users
Deleted.
First Amendment to Software License Agreement
between Unisys Corporation and Phoenix International Ltd., Inc.
10
<PAGE> 11
XXX-CONFIDENTIAL TREATMENT REQUESTED
Part III. Hold-Out Accounts
Existing End Users:
XXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXX
First Amendment to Software License Agreement
between Unisys Corporation and Phoenix International Ltd., Inc.
11
<PAGE> 1
EXHIBIT 10.37
LEASE TERMINATION AGREEMENT
THIS LEASE TERMINATION AGREEMENT ("Agreement"), is made on February
12, 1997 between ABR SPECTRUM, LTD. ("Landlord"), whose address is 900
Winderley Place, Suite 100, Maitland, Florida and PHOENIX INTERNATIONAL, LTD.
INC. ("Tenant"), whose address is 900 Winderley Place, Suite 140, Maitland,
Florida.
RECITALS
This Agreement is based upon the following recitals:
A. Landlord and Tenant entered into a certain Standard Commercial Lease
("Lease"), dated December 8, 1993, covering the premises known as Suite 140
("Suite 140") in the 900 Winderley Place Building ("Building").
B. The Lease has been amended by: (1) a Modification and Ratification of
Lease Addendum II dated January 24, 1994 ("Modification I") to extend the term
of the Lease through January 31, 1998, (2) a Modification and Ratification of
Lease dated July 25, 1996 ("Modification II") to lease Suite 145 of the
Building on a month-to-month basis, and (3) a Second Modification and
Ratification of Lease dated September 23, 1996 ("Modification III") to provide
a termination date of March 15, 1997 for Suite 145 (collectively, the Lease,
Modification I, Modification II, and Modification III are referred to herein as
"Lease Agreement," and collectively, Suite 140 and Suite 145 are referred to
herein as "Leased Premises").
C. Tenant has also, with Landlord's consent, subleased Suite 120 of the
Building ("Suite 120") from CCS Technology Group, Inc. pursuant to that certain
Sublease Agreement dated September 28, 1995, which sublease has expired so that
the premises are currently held by Tenant under a month-to-month tenancy.
Tenant has also, with Landlord's consent, subleased Suite 116 of the Building
("Suite 116") from Davis Financial Services pursuant to that certain Sublease
Agreement dated April 3, 1995, which sublease shall expire on March 31, 1997,
(collectively, Suite 120 and Suite 116 are referred to herein as the "Subleased
Premises").
D. Landlord intends to enter into a new lease for portions of the Leased
Premises and Suite 116 with Paysys International, Inc.
E. Landlord and Tenant desire to terminate the Lease Agreement pursuant
to Section 9.03(1) of the Lease Agreement on the terms and conditions stated in
this Agreement.
AGREEMENT
NOW THEREFORE, for sufficient consideration received and acknowledged
by each party, Landlord and Tenant agree to terminate the Lease Agreement as
follows:
1. RECITALS. The Recitals are fully incorporated by reference.
<PAGE> 2
2. TERMINATION DATE. The Lease Agreement shall terminate at
midnight on March 31, 1997 ("Termination Date").
3. CONTINUING OBLIGATIONS. Landlord's consent to terminate the
Lease Agreement shall not relieve Tenant of any monetary or non-monetary
obligations arising under the Lease Agreement prior to the Termination Date
with the understanding that the only monetary sums due to Landlord are the
rental for the month of March 1997, plus after hours HVAC charges, if any.
Except as may be modified below, from the date of this Agreement through the
Termination Date, Tenant shall continue to make those payments due to Landlord
under the Lease Agreement. Tenant shall also continue to make the payments due
to CCS Technology Group, Inc. and to Davis Financial Services for the Subleased
Premises.
4. RENTS AND OTHER CHARGES DUE LANDLORD. Tenant shall pay
Landlord under the Lease Agreement the following amounts:
(A) Except for certain HVAC charges set forth in
Subsection 4(B) below, Tenant agrees that the following itemized amounts
represent the "Total Monies Due" to Landlord by Tenant under the Lease
Agreement through the Termination Date:
(a) Base Rental Suite 140 $12,530.42
(b) Sales Tax Suite 140 $ 751.83
(c) Base Rental Suite 145 $ 910.67
(d) Sales Tax Suite 145 $ 54.64
(e) Other Additional Rent $ 0
TOTAL MONIES DUE $14,247.56
The Total Monies Due shall be paid within 10 days after the Date of Landlord's
invoice.
(B) Additional HVAC charges shall be invoiced after the
Termination Date and Tenant shall remit payment within ten (10) days after the
Date of Landlord's invoice.
5. VACATING PREMISES. Tenant agrees to fully and finally vacate
and surrender the Leased Premises to Landlord on the Termination Date broom
clean and in good repair and tenantable condition, ordinary wear and tear
excepted. After the Termination Date, Tenant grants Landlord the unconditional
right to enter and repossess the Leased Premises, without notice to Tenant.
6. HOLDOVER STATUS. Regardless of any contrary provision in the
Lease Agreement, if Tenant has not vacated the Leased Premises by the
Termination Date, Tenant shall become a Tenant at sufferance, on a daily basis,
and shall be liable to Landlord for 150% of the base rental rate due under the
Lease Agreement plus all other rents and charges due, calculated on a daily
basis.
7. TRANSFER OF INTEREST. Each party represents that it has not
assigned, subleased, transferred, conveyed, or otherwise disposed of (A) the
Lease Agreement or any
-2-
<PAGE> 3
interest in the Lease Agreement, or (B) any claim, demand, obligation,
liability, action, or cause of action arising from the Lease Agreement.
8. RELEASE. (A) Landlord and Tenant shall be unconditionally and
mutually released from any and all further obligations under the Lease
Agreement as of the Termination Date, provided, however, that as to Tenant said
release shall become effective only after all payment of the amounts set forth
in Section 4(A). Tenant shall also be unconditionally and mutually released
from all further obligations owed to Landlord with regard to the Subleased
Premises from and after the Termination Date.
(B) Provided Tenant has paid all amounts set forth in
Section 4(A) and further provided that Tenant has fully vacated the Leased
Premises and the Subleased Premises as of the Termination Date, this Agreement
shall fully and finally settle all demands, charges, claims, accounts, and
causes of action of any nature, including, without limitation, both known and
unknown claims and causes of action arising out of or in connection with the
Lease Agreement or the Subleased Premises, except for any amounts due under
Section 4(B) of this Agreement, and any amounts due to CCS Technology Group,
Inc. and to Davis Financial Services for the Subleased Premises up to the
Termination Date.
9. CONFLICTING PROVISIONS. To the extent this Agreement
conflicts with the Lease Agreement, then the provisions of this Agreement shall
govern.
10. PERSONS BOUND. This Agreement shall bind and benefit Landlord
and Tenant, and their representatives, successors, and assigns and heirs.
13. AUTHORITY. The signatories hereto represent and warrant that
each has the authority to execute, deliver and perform this Agreement on behalf
of the party for whom such signatory is executing this Agreement.
-3-
<PAGE> 4
AFFIRMING THE ABOVE, the parties have executed this LEASE TERMINATION
AGREEMENT as of the date first stated.
LANDLORD:
ABR SPECTRUM, LTD.
/s/ Sandra Bakke By: /s/
- --------------------------------- -----------------------------
Witness Its: General Partner
-----------------------------
/s/
- ---------------------------------
Witness (SEAL)
TENANT:
PHOENIX INTERNATIONAL LTD., INC
/s/ Clay Scarborough By: /s/ Bahram Yusefzadeh
- --------------------------------- -----------------------------
Witness Its: Chairman & CEO
-----------------------------
/s/ Janet Smith
- ---------------------------------
Witness (SEAL)
-4-
<PAGE> 5
[DIAGRAM]
FIRST FLOOR PLAN
THE SPECTRUM OFFICE BUILDING
VANTAGE
COMPANIES
-5-
<PAGE> 1
EXHIBIT 10.42
CONFIDENTIAL TREATMENT REQUESTED
PHOENIX INTERNATIONAL LTD., INC.
COOPERATIVE MARKETING AGREEMENT
Marketing Agent: The Netcomm Group, Inc. Date: Sept. 5, 1996
-------------------------------- -------------
(X) Corporation ( ) Partnership
( ) Limited Partnership ( ) Limited Liability Company
State of Organization: Indiana
---------------------------
Address: 15266 Herriman Blvd
----------------------------------
Noblesville, Indiana 46060
----------------------------------
----------------------------------
Attention: XXXX
----------------------
Fax: XXXXXX
----------------------------
This COOPERATIVE AGREEMENT (this "Agreement") is entered into as of
the date first set forth above by and between Phoenix International Ltd., Inc.,
a Florida corporation ("Phoenix"), and the party first identified above as the
Marketing Agent ("Marketing Agent"). The parties hereto, intending to be
legally bound, agree as follows:
1 APPOINTMENT
Subject to the terms and conditions of this Agreement, the Marketing Agent
hereby agrees to enter into a cooperative marketing relationship with Phoenix
as set forth in the relationship addendum(s) attached hereto and listed below
(the "Relationship Addendum(s)"):
SERVICES ADDENDUM
TRAINING AND IMPLEMENTATION ADDENDUM
RELATIONSHIP ADDENDUM
SERVICE BUREAU ADDENDUM
<PAGE> 2
2 DEFINITIONS
As used in this Agreement, capitalized terms shall have the following meanings:
2.1 Confidential Information means any business, technical or other
information furnished by Phoenix to the Marketing Agent or disclosed to the
Marketing Agent as a result of examination or inspection of Phoenix's
facilities or product prototypes. Confidential Information shall in all cases
include all source code, development level documentation, and similar technical
information regarding the Software and all marketing and product development
information provided by Phoenix. Information which is disclosed orally will
be deemed to be Confidential Information provided that it is identified as
confidential at the time of disclosure and that the disclosing party, within
twenty-one (21) days after such disclosure, provides such information to the
receiving party in writing designated as confidential.
2.2 Documentation means the documentation associated with the Software as
produced and provided by Phoenix to the Marketing Agent and its customers
generally.
2.3 Eligible Prospect means a retail bank organized and doing business
exclusively in the Territory, and as more particularly described in Exhibit B
attached hereto.
2.4 End Users means customers presented to Phoenix by the Marketing Agent
and approved by Phoenix in accordance with Section 5.1 hereof, who license the
Software under an End User License.
2.5 End User License means the form of agreement or agreements applicable
to the license of the Software as provided by Phoenix to the Marketing Agent
from time to time.
2.6 Intellectual Property Rights means all copyright, design rights,
whether registered or unregistered, patents or patent application, know-how,
trade secrets, and Confidential Information related to or arising in the
Software or Documentation, including all applicable architecture, designs,
modules, routines, programming, command structures, interfaces, and any
Modifications thereto.
2.7 Maintenance means making Modifications to the Software to correct
verifiable and reproducible errors reported to Phoenix and includes all error
correction, maintenance and emergency releases and other modifications required
as a result of changes made by Phoenix which directly affect any of the
Software.
2.8 Modification means a work which is based upon one or more preexisting
works, such as a revision, modification, translation, abridgment, condensation,
expansion, or any other form in which such preexisting works may be recast,
transformed, or adapted, and shall include any work that incorporates or is
combined with such a preexisting work or any portion thereof.
2
<PAGE> 3
2.9 Modify means, with respect to any of the Software, to make a
Modification.
2.10 New Release means a new release of any of the Software to introduce
changes or additions to the Software for purposes of error correction and minor
enhancement of functionality and features.
2.11 New Version means a new release of any of the Software which adds
significant new features or functions, or significant improvement in
performance and for which Phoenix may make extra charges to its customers
generally.
2.12 Prime Rate means the prime rate (or base rate) reported in the "Money
Rates" column or section of The Wall Street Journal as being the base rate on
corporate loans at larger U.S. Money Center banks on the first date on which
The Wall Street Journal is published in each month.
2.13 Trademarks means the trademarks, service marks and trade names used by
Phoenix in connection with its software, products and services, whether
registered or unregistered.
2.14 Support means the provision of relevant assistance in the form of
telephone assistance and consultation, personnel and materials for the
implementation and continued use of the Software, including any Modification
which Phoenix offers as an addition to, replacement for, or option with such
Software under this Agreement.
2.15 Software means the technology, software, documentation, equipment,
communications and other items as indicated on Exhibit A attached hereto, as
such Exhibit may be amended from time to time in writing.
2.16 Territory means the regions set forth on Exhibit B, as such regions
exist as of the date of this Agreement.
3 LICENSE
Subject to the terms of this Agreement, and only as appropriate under the
applicable Relationship Addendum(s), Phoenix hereby grants to the Marketing
Agent the following non-exclusive, revocable rights and licenses with respect
to the Software within the Territory:
3.1 To use the Software as reasonably required to fulfill its obligations
and exercise its rights under this Agreement and in accordance with the
Relationship Addendum(s). The Marketing Agent may not provide the Software to
any third party except pursuant to a fully executed End User License, and may
not use the Software in production for the benefit of any third party, except
as otherwise allowed in a Relationship Addendum attached hereto or as otherwise
provided by written agreement signed by both parties. The Marketing Agent may
not use, rely
3
<PAGE> 4
on, or refer to the Software for purposes of developing or supporting any other
software.
3.2 Subject to completion of sufficient training as applicable and as
required by Phoenix from time to time, to use the Software for back up,
demonstrations, and evaluations involving End Users.
3.3 To use the Trademarks relating to the Software, provided, however,
that such use shall be subject to reasonable advertising and promotion
guidelines which Phoenix may provide from time to time. Phoenix reserves the
right to disallow any use of the Trademarks which would in any way, in
Phoenix's opinion, harm the validity or value of the Trademarks.
3.4 The Marketing Agent shall not copy, adapt, modify or reproduce the
Software in any manner whatsoever except as reasonably necessary for
demonstration, marketing, backup and archival purposes. All copies of the
software to be provided to End Users shall be supplied to the Marketing Agent
by Phoenix.
4 TERM AND REVIEW
4.1 This Agreement shall become effective on the date first set forth
above and shall continue for an initial period of two (2) years. This
Agreement shall automatically renew thereafter from year to year, unless and
until terminated by either party, in its discretion, by at least thirty (30)
days' prior written notice to the other party. In addition, Phoenix reserves
the right to terminate this Agreement at any time on at least thirty (30) days'
prior written notice if the Marketing Agent defaults on its obligations, incurs
a conflict of interest of significant impact, or fails to devote reasonable
effort to the license of the Software to End Users.
4.2 Notwithstanding the termination of this Agreement, Phoenix shall
continue to be entitled to the fees earned under this Agreement after such
termination. So long as the Marketing Agent continues to satisfy its
obligations to End Users under this maintenance and support agreements,
notwithstanding a termination of this Agreement, the Marketing Agent may
continue to provide such maintenance and support.
4.3 Either party may request a review of this Agreement and the royalty
payments applicable to the Software, such review to take place in advance of
each anniversary of the commencement of this Agreement while the Agreement
remains in force.
4.4 Survival. Notwithstanding termination of this Agreement for any
reason (including, without limitation, by notice pursuant to Section 3.1),
Sections 10 (Title to Intellectual Property), 11 (Confidentiality) and 14
(General) shall continue to have effect as shall any other provisions which by
their nature or necessary implication ought or were intended to continue to
have effect, and End User Licenses of customers already granted prior to the
date of such termination shall continue to be valid.
4
<PAGE> 5
4.5 Actions Upon Termination. Upon termination the Marketing Agent shall:
a. promptly cease to use, license, market or promote the
Software;
b. return all copies of the Software in the possession of the
Marketing Agent to Phoenix and shall cease using the same for any
purpose whatsoever except to fulfill its obligations under maintenance
and support agreements;
c. for a period of six (6) months following termination, refer to
Phoenix all prospective customers and all inquiries received by it
relating to the Software;
d. return and deliver or cause to be returned and delivered to
Phoenix all memoranda, notes, reports, documents or media relating to
or containing Confidential Information, including any copies or
extracts thereof.
The Marketing Agent shall certify its compliance with this Section upon the
written request of Phoenix.
5 OBLIGATIONS OF THE MARKETING AGENT
5.1 End User Approval. The Marketing Agent shall notify Phoenix of
potential customers for the Software. Phoenix shall notify the Marketing Agent
of marketing conflicts with Phoenix's marketing efforts to such potential
customers. In case of conflict, the senior sales managers of Phoenix and the
Marketing Agent shall determine whose sales force shall market to the customer.
If no resolution can be reached, the decision of Phoenix as to such customer
shall be final.
5.2 Customer Contacts. During the term of this Agreement, the Marketing
Agent will work exclusively with Phoenix with respect to any business
opportunity presented to the Marketing Agent by Phoenix or obtained by the
Marketing Agent as a result of the working relationship of the Marketing Agent
with Phoenix.
5.3 Development of Competing Software. The Marketing Agent shall not use
the Software or Documentation or any Confidential Information (as defined
herein) that it may acquire in connection with this Agreement to develop, have
developed, or support or invest in, directly or indirectly, the development of
any product which has, entirely or partially, the same functions as any of the
Software or which would be in direct or indirect competition with any of the
Software, or to sell competing products or services.
5.4 Qualified Personnel. The Marketing Agent shall employ suitably
qualified and trained personnel in order to perform its obligations hereunder,
and under any End User License or other agreement with an End User related to
the implementation, use or support of the Software.
5
<PAGE> 6
5.5 End User Compliance. The Marketing Agent shall inform Phoenix of all
known breaches by End Users of their agreements with Phoenix.
5.6 Notices, Logos and Marks. The Marketing Agent shall not alter, erase
or obscure any notices, legends, or trademarks or alter any indications of
ownership such as copyright, serial number or any other designations or
security provisions featured on copies of the Software and Documentation, and
shall include all such features on all copies of the Software and Documentation
made by the Marketing Agent.
5.7 Copies of Materials. The Marketing Agent shall send to Phoenix copies
of all advertising, marketing and product material related to the Software
created or to be used by the Marketing Agent.
6 PHOENIX'S OBLIGATIONS
6.1 Copies of the Software. Phoenix shall provide the Marketing Agent
with a reasonable number of copies of the Software and Documentation as
necessary for the Marketing Agent to fulfill its obligations and exercise its
rights hereunder. All Documentation shall be provided in English.
6.2 Maintenance and Support. Phoenix shall provide a description of the
specific hardware and software environment required by the Software. Upon
request, Phoenix will review alternative hardware and software configurations
proposed by the Marketing Agent and may, in its sole discretion, approve such
configurations. Phoenix shall provide the following maintenance and support
for Software operating in approved hardware and software environments during
the term of this Agreement:
a. Support. Phoenix shall provide Support and Maintenance to the
Marketing Agent for the then-current version and the immediately
preceding version of the Software. In order to assist in the
provision of Maintenance, the Marketing Agent shall notify Phoenix
promptly following the discovery of any defect. Further, upon
discovery of a defect, if requested by Phoenix, the Marketing Agent
shall submit to Phoenix a listing of output and any other data that
Phoenix may require in order to reproduce the error and the operating
conditions under which the error occurred or was discovered.
b. Upgrades. Phoenix shall provide the Marketing Agent with a
copy of each New Release and each New Version of the Software as
Phoenix may from time to time issue to its customers generally.
Phoenix shall provide reasonable telephone support to assist in the
installation and operation of each New Release and New Version. For
any particular New Release or New Version to operate properly, the
Marketing Agent must have installed all prior New Releases and New
Versions.
Regulatory Compliance. Phoenix shall ensure the software
complies with minimum regulatory requirements of U.S. Federal Agencies
having jurisdiction over the
6
<PAGE> 7
operation of the End User.
d. Telephone Support. Phoenix shall maintain a telephone support
line during hours to be designated by Phoenix from time to time, which
in any case shall cover at least 8:30 a.m. to 5:30 p.m. Monday through
Friday, Orlando, Florida time. Support in response to questions which
are outside the intended scope of this Agreement may be subject to an
additional charge.
e. Exceptions. The following matters are not covered by
Maintenance or Support under this Agreement:
(1) Any problem resulting from the misuse, improper use,
alteration, or damage of any of the Software;
(2) Any problem caused by the Modifications of any
version of the Software not made or authorized by Phoenix; or
(3) Any problem resulting from the use of the Software
with other programming or with hardware configurations not
approved in writing by Phoenix.
6.3 Expenses for On-Site Support. The Marketing Agent shall pay Phoenix's
normal charges and expenses for time, materials, and other resources and
expenses, including Phoenix's travel costs, required to provide Maintenance or
Support hereunder. In addition, the Marketing Agent is responsible for
procuring, installing, and maintaining all computer and other equipment,
networks, telephone lines, communications interfaces, and other hardware
necessary to operate the Software and to obtain maintenance services from
Phoenix. Phoenix will not be responsible for delays caused by events or
circumstances beyond its reasonable control.
7 TRAINING.
7.1 Initial Training. Phoenix shall provide up to 4 instructor days of
initial training in the functionality, marketing and operation of the Software.
The Marketing Agent shall pay Phoenix's reasonable travel, living, facility and
equipment expenses for such training, but shall not be charged for instructor
time. Phoenix shall provide training materials including "The Value Added Path
Methodology," sales and marketing materials, and an initial stock of sales
collaterals. Additional materials will be provided upon request at a price
equal to Phoenix's cost for such materials.
7.2 Upgrade Training. Phoenix shall provide training on all New Releases
at times and locations determined by Phoenix. The Marketing Agent may send two
representatives to one scheduled training session for each New Release at no
cost. Additional representatives may attend such training for additional fees
as determined by Phoenix. The Marketing Agent shall pay all travel and living
expenses for its representatives.
7
<PAGE> 8
7.3 Additional Training. Phoenix shall provide additional technical
assistance and training to the Marketing Agent in excess of the initial
training as reasonably requested by the Marketing Agent; provided, however,
that the Marketing Agent shall reimburse Phoenix for all expenses incurred by
Phoenix in providing such assistance and training and shall pay all applicable
training and instructor fees related to such services at Phoenix's then current
rates, unless otherwise agreed in writing before such services are provided.
7.4 Classes. Subject to space availability, the Marketing Agent may
enroll its employees in additional or advanced training classes at Phoenix's
then current rates.
8 WARRANTY
8.1 Limited Warranty. Phoenix warrants to the Marketing Agent that the
Software will, for a period of one (1) year after receipt, perform
substantially in conformance with applicable specifications (the "Limited
Warranty"). Phoenix makes no warranty that all nonconformities or defects have
been or can be eliminated from the Software or that operation of the Software
will be uninterrupted or error free. This Limited Warranty shall not apply to
(i) Modifications made to the Software other than those described in the
applicable Documentation or expressly approved by Phoenix, or (ii) to Software
damaged due to accident, abuse or neglect.
8.2 Exclusive Remedy. The Marketing Agent's sole and exclusive remedy for
breach of the above Limited Warranty shall be, at the option of Phoenix, repair
or replacement of the relevant Software. Any replacement Software shall be
covered under the Limited Warranty for the remainder of the original warranty
period, or for thirty (30) days after receipt, whichever is longer.
8.3 DISCLAIMER. EXCEPT FOR THE WARRANTY SET FORTH ABOVE, THE SOFTWARE ARE
LICENSED TO THE MARKETING AGENT "AS IS," AND PHOENIX DISCLAIMS ANY AND ALL
OTHER REPRESENTATIONS AND WARRANTIES, WHETHER ORAL OR WRITTEN, EXPRESS OR
IMPLIED, INCLUDING (WITHOUT LIMITATION) ANY WARRANTY AS TO MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
8.4 LIMITATION OF LIABILITY AND DAMAGES. PHOENIX'S LIABILITY FOR ANY AND
ALL DAMAGES SHALL BE LIMITED TO THE EXCLUSIVE REMEDY SET FORTH ABOVE. NEITHER
PARTY SHALL HAVE ANY LIABILITY FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES WHATSOEVER, INCLUDING, WITHOUT LIMITATION, DAMAGES FOR
LOSS OF PROFITS, INTERRUPTION OF BUSINESS, OR ANY OTHER MONETARY LOSS, ARISING
OUT OF THE USE OR INABILITY TO USE THE SOFTWARE, OR FOR MISSTATEMENTS, MISTAKES
OR OMISSIONS IN THE DOCUMENTATION, EVEN IF SUCH PARTY HAS BEEN APPRISED OF THE
POSSIBILITY OF SUCH DAMAGES.
8.5 Limitation on Actions. No action, regardless of form, arising out of
this Agreement or
8
<PAGE> 9
the transactions contemplated hereunder may be brought more than two (2) years
after the cause of the action has accrued.
8.6 Independent responsibility. Neither party shall be responsible to any
customer or End User for the quality of service or performance of products
furnished by the other party. Each party is solely responsible for
establishing the prices of its own products, services and associated
deliverables.
8.7 Trademark Use. Neither party, without the express prior written
approval of the other shall use the trademarks, service marks, or proprietary
words or symbols of the other. Notwithstanding the foregoing, nothing
contained in this Agreement shall affect either party's rights to use any
trademarks, service marks, or proprietary words or symbols of the other to the
extent otherwise permitted by applicable law or by written agreement between
the parties.
9 INDEMNIFICATION BY PHOENIX.
9.1 Infringement of Intellectual Property Rights. If a third party claims
that the Software infringes any patent, copyright, trade secret, or similar
Intellectual Property Rights, Phoenix shall (as long as the Marketing Agent is
not in default under this Agreement or any other agreement with Phoenix)
indemnify and defend the Marketing Agent against such claim at Phoenix's
expense, provided that the Marketing Agent promptly notifies Phoenix in writing
of any such claim, allows Phoenix to control all negotiations and litigation
related thereto, and cooperates with Phoenix in the defense and disposition of
such claim, including any related settlement negotiations.
9.2 Limitations. If such a claim is made or appears possible, Phoenix
may, at its option, secure for the Marketing Agent the right to continue to use
the Software, or modify or replace the Software so it is non-infringing.
Phoenix has no obligation hereunder for any claim based on a modified version
of the Software which has not been approved by Phoenix, or for any combination,
operation or use of the Software with a non-approved operating environment or
with any program, product, data or apparatus not approved in writing by
Phoenix. Phoenix 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 12 STATES PHOENIX'S ENTIRE
OBLIGATION TO THE Marketing Agent WITH RESPECT TO MATTERS OF TITLE OR ANY CLAIM
OF INFRINGEMENT THEREOF.
10 TITLE TO INTELLECTUAL PROPERTY
All right title and interest in and to all copies of the Software and
Documentation and all Intellectual Property Rights pertaining thereto shall
vest exclusively with Phoenix, including the
9
<PAGE> 10
Intellectual Property Rights in all Modifications and other related works
created by or for Phoenix, the Marketing Agent, or any End User, including
their personnel and permitted agents or contractors. To the extent rights in
Modifications and all Intellectual Property Rights therein do not automatically
and fully vest exclusively in Phoenix, the Marketing Agent agrees to and hereby
does assign to Phoenix all such rights, and shall execute all such other
agreements as Phoenix may require to effect such assignment. To the extent
Modifications are produced by or under the supervision of the Marketing Agent,
Phoenix hereby grants to the Marketing Agent a non-transferable, and royalty
free license to reproduce, license and distribute such Modifications, but only
to the extent they are marketed and licensed or sold to End Users for use
solely with duly licensed versions of the Software pursuant to End User
Licenses in effect with Phoenix.
11 CONFIDENTIALITY
11.1 Non-Disclosure. Except as otherwise provided herein or as allowed by
the prior written consent of Phoenix, for the term of this Agreement and for a
period of three (3) years following the termination of this Agreement, the
Marketing Agent (a) shall receive all Confidential Information in strict
confidence, (b) shall use the same degree of care which it uses to protect its
own confidential information to maintain the confidentiality and secrecy
thereof, (c) shall disclose the Confidential Information, and permit the
Confidential Information to be disclosed, only to employees of the Marketing
Agent who need access to the Confidential Information to carry out the terms
and intent of this Agreement, and (d) shall use the Confidential Information
only in furtherance of its rights and obligations set forth in this Agreement.
Both the parties shall keep confidential the terms and conditions of this
Agreement, but not its existence, and all other information which is designated
in writing as confidential by one party to the other. Notwithstanding the
foregoing, the Marketing Agent may make such disclosures as may be required by
order of a court of competent jurisdiction, administrative agency or other
government body, or by law rule or regulation, provided, however, that to the
extent possible, the Marketing Agent gives Phoenix prior written notice of such
requirement and assists Phoenix in its efforts to oppose such requirement.
11.2 Exclusions. Paragraph 9.2 hereof shall not apply to any Confidential
Information which (a) at the time of disclosure to the Marketing Agent is in
the public domain or thereafter enters the public domain for reasons not
attributable to any act or omission of the Marketing Agent in breach of its
obligations hereunder, (b) which the Marketing Agent can show was in the
possession of the Marketing Agent prior to the disclosure thereof to the
Marketing Agent by Phoenix, or (c) which the Marketing Agent can show is
acquired by the Marketing Agent from a third party who does not thereby breach
an obligation of confidence to Phoenix and who discloses it in good faith.
10
<PAGE> 11
12 EXPORTS
12.1 Territory. The Marketing Agent may not export the Software outside of
the Territory nor contact any prospective End User outside of the Territory
without Phoenix's prior written approval.
13 EMPLOYEES
During the term of this Agreement and for a period of twelve (12) months
thereafter, neither party will directly or indirectly solicit for employment or
employ any employee of the other without the prior written consent of the
other.
14 GENERAL
14.1 No Authority to Bind the Other Party. The parties to this Agreement
are independent contractors and, except as provided in this Agreement or
otherwise in a writing signed by both parties, neither party is authorized to
act on behalf of the other or to bind the other. This Agreement does not
establish any relationship of agency, partnership, or joint venture. Each
party shall bear responsibility for its own employees, including terms of
employment, wages, hours, tax withholding, required insurance, and daily
direction and control. Except as otherwise set forth in an Addendum, the
relationship created hereunder is non-exclusive as to each party.
14.2 Successors and Assigns. Except as otherwise provided in this
Agreement, neither party may assign this Agreement or any rights or obligations
hereunder without the prior written consent of the other party. Any such
attempted assignment without such prior written consent shall be void and of no
force and effect. This Agreement shall inure to the benefit of and shall be
binding upon the permitted successors and assigns of the parties hereto.
14.3 Governing Law. The construction and interpretation of, and the rights
and obligations of the parties pursuant to this Agreement shall be governed by
the laws of the State of Florida.
14.4 Force Majeure. Neither party shall be liable for any failure of or
delay in the performance of this Agreement for the period that such failure or
delay is due to acts of God, public enemy, civil war, strikes or labor
disputes, or any other cause beyond the parties' reasonable control. Each
party agrees to notify the other party promptly of the occurrence of any such
cause and to carry out this Agreement as promptly as practicable after such
cause has terminated.
14.5 Severability. In the event that any part of this Agreement is
declared by any court or other judicial or administrative body to be null, void
or unenforceable, said provision shall
11
<PAGE> 12
survive to the extent if is not so declared, and all of the other provisions of
this Agreement shall remain in full force and effect.
14.6 Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given: (i) on the date of service if served personally on the party to whom
notice is to be given; (ii) on the day of transmission if sent via facsimile
transmission to the facsimile number given below, and telephonic confirmation
of receipt is obtained promptly after completion of transmission; (iii) on the
second day after delivery to Federal Express or similar overnight courier or
the Express Mail service maintained by the United States Postal Service; or
(iv) on the fifth day after mailing, if mailed to the party to whom notice is
to be given, by first class air mail, registered or certified, postage prepaid
and properly addressed, to the party as follows:
If to the Phoenix:
Phoenix International Ltd., Inc.
900 Winderley Place
Suite 140
Maitland, Florida 32751
Attention: Ralph Reichard
Facsimile: (407) 667-0133
If to the Marketing Agent, at the address first set forth above.
Any party may change its address for the purpose of this Section by
giving the other parties written notice of its new address in the manner set
forth above.
14.7 Amendments; Waivers. This Agreement may be amended or modified, and
any of the terms, covenants, representations, warranties or conditions hereof
may be waived, only by a written instrument executed by the parties hereto, or
in the case of a waiver, by the party waiving compliance. Any waiver by any
party of a condition, or of the breach of any provision, term, covenant,
representation or warranty contained in this Agreement, in any one or more
instances, shall not be deemed to be nor construed as furthering or continuing
waiver of any such condition, or of the breach of any other provision, term,
covenant, representation or warranty of this Agreement.
14.8 Public Announcements. Neither party shall make any press release or
public announcement concerning this transaction without the prior written
approval of the other party unless a press release or public amendment is
required by law or by regulations binding upon
12
<PAGE> 13
any of the parties of their affiliates, in which case, the disclosing party
agrees to give the non-disclosing party prior notice and an opportunity to
comment on the proposed disclosure.
14.9 Entire Agreement. This Agreement contains the entire understanding
between the parties hereto with respect to the transactions contemplated hereby
and supersedes and replaces all prior and contemporaneous agreements and
understandings, oral or written, with regard to such transactions. All
schedules and addenda hereto and any documents and instruments delivered
pursuant to any provision hereof are expressly made a part of this Agreement as
fully as though completely set forth herein. The rights of the parties are
only as set forth herein, and there are and shall be no implied rights or
obligations whatsoever.
14.10 Parties in Interest. Nothing in this Agreement is intended to confer
any rights or remedies under this Agreement on any persons other than Phoenix
and the Marketing Agent and their respective successors and permitted assigns.
Nothing in this Agreement is intended to relieve or discharge the obligations
or liability of any third persons to Phoenix or the Marketing Agent.
14.11 Section and Paragraph Headings. The section and paragraph headings in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement.
14.12 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but both of which shall constitute the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first set forth in the Agreement.
Phoenix International Ltd., Inc.: Marketing Agent:
By:/s/ Ralph Reichard By:/s/ Richard Leirer
-------------------------------- -----------------------------
Signature Signature
Ralph Reichard Richard Leirer
- ----------------------------------- --------------------------------
Name (Print) Name (Print)
President President
- ----------------------------------- --------------------------------
Title Title
13
<PAGE> 14
XXX-CONFIDENTIAL TREATMENT REQUESTED
SERVICES ADDENDUM
This Addendum provides additional terms defining the relationship between the
Marketing Agent and Phoenix. The terms and conditions contained herein are in
addition to those contained in the applicable Cooperative Agreement. If any
terms contained herein are inconsistent with the terms of the Cooperative
Agreement, the Cooperative Agreement shall control.
Whereas Phoenix and the Marketing Agent may wish to procure the services of one
another for their own benefit and for the benefit of their customers; and
Whereas Phoenix and the Marketing Agent may prepare budgets and customer
quotations based on the cost of such services, Phoenix and the Marketing Agent
agree to provide services to one another and on each other's behalf on the
following terms:
1 Direct Services. From time to time, Phoenix and the Marketing Agent
may provide services to one another, including without limitation
implementation and integration services and assistance, custom software and
systems development, modification and enhancement, and customer support
assistance. Such services shall be provided at XXXXXXXXXXXXXXXXX for such
services (the "Discounted Rate").
2 Phoenix Customer Services. At the Marketing Agent's request, Phoenix
may provide services to customers of the Marketing Agent or to the Marketing
Agent on the customer's behalf that the Marketing Agent would normally be
obligated to provide under the terms of the relationship between Phoenix and
the Marketing Agent or between the Marketing Agent and its customers. For all
such services which Phoenix agrees to provide, the Marketing Agent shall pay to
Phoenix XXXXXXXXXXXXXX for such services plus XXXXXX by the Marketing Agent to
the customer for such services.
3 Marketing Agent Customer Services. For all services provided by the
Marketing Agent to customers of Phoenix or Phoenix's affiliates and business
and Marketing Agents, the Marketing Agent shall negotiate rates in good faith,
and in all cases such rates shall be at least as favorable as the Marketing
Agent's then current published rates for such services. Such services may be
provided by the Marketing Agent directly to customers or as a subcontractor to
Phoenix or other parties.
4 Most Favorable Terms. All rates referred to herein before shall be at
least as favorable as the rates provided by the applicable party to any of its
other customers, Marketing Agents or consultants.
5 Materials. Materials provided by on party to the other or to the
other's customers (other
14
<PAGE> 15
than the Software and other proprietary software and hardware of either party)
shall be billed at the applicable party's actual cost for such materials.
6 Disclaimer. Notwithstanding the foregoing, neither party shall be
obligated to provide services to the other or to any other party without prior
approval on a case by case basis (other than those services required to be
provided under the terms of this or any other agreement).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first set forth in the Agreement.
Phoenix International Ltd., Inc.: Marketing Agent:
By:/s/ Ralph Reichard By:/s/ Richard Leirer
------------------------------- --------------------------------
Signature Signature
Ralph Reichard Richard Leirer
- ---------------------------------- -----------------------------------
Name (Print) Name (Print)
President President
- ---------------------------------- -----------------------------------
Title Title
15
<PAGE> 16
XXX-CONFIDENTIAL TREATMENT REQUESTED
TRAINING AND IMPLEMENTATION ADDENDUM
This Addendum provides additional terms defining the relationship between the
Marketing Agent and Phoenix. The terms and conditions contained herein are in
addition to those contained in the applicable Cooperative Marketing Agreement.
If any terms contained herein are inconsistent with the terms of the
Cooperative Marketing Agreement, the Cooperative Marketing Agreement shall
control.
1 Training and Certification. Phoenix shall assist the Marketing Agent
in the first XXX installations of the Software for End Users and shall
concurrently train the Marketing Agent's personnel in the implementation of the
Software. Additionally, the Marketing Agent's personnel shall be entitled to
attend the training sessions for the first XXX End Users at no cost. Upon
completion of such training, Phoenix shall certify certain of the Marketing
Agent's personnel to implement the Software. The Marketing Agent shall pay
Phoenix's reasonable travel, living, facility and equipment expenses for such
training, but shall not be charged for instructor time. Up to the limit
established by Phoenix, Phoenix shall provide training materials. Additional
materials will be available for purchase at Phoenix's costs.
2 Right to Implement. Once the Marketing Agent's personnel have
completed the requisite training and have been certified for installation and
implementation of the software by Phoenix, the Marketing Agent may implement
the Software in accordance with this Agreement hereto, but only under the
direction and supervision of certified personnel. All implementations of the
Software shall follow Phoenix's methodology as taught in the training sessions.
3 Additional License. Once the training has been completed, the
Marketing Agent shall have the additional right and license to do the following
with respect to the Software:
3.1 To use the Software for the purpose of installing, maintaining and
marketing the Software for End Users as provided for hereunder.
3.2 To Maintain and Support the Software licensed to End Users, and to
train End Users in the use of the Software and for other educational purposes.
4 Maintenance and Support. Once training has been completed, the
Marketing Agent shall be responsible for all Maintenance and Support of End
Users. The Marketing Agent shall enter into a Maintenance and Support
Agreement with each End User who chooses to accept Maintenance and Support.
The Maintenance and Support Agreement shall be presented to Phoenix prior to
use with End Users, and shall be in a form and contain such terms as are
acceptable to Phoenix. If, at any time, the Marketing Agent materially fails
to provide
16
<PAGE> 17
Maintenance and Support under an agreement with an End User, Phoenix shall
assume the Marketing Agent's responsibilities under such agreement, the
Marketing Agent shall assign the agreement to Phoenix, and the Marketing Agent
shall forward to Phoenix all maintenance and support fees received from such
End User for the period for which Phoenix assumes maintenance and support
obligations, including fees received prior to the assignment for services
provided by Phoenix after the assignment.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first set forth in the Agreement.
Phoenix International Ltd., Inc. Marketing Agent:
By:/s/ Ralph Reichard By:/s/ Richard Leirer
------------------------------- ---------------------------------
Signature Signature
Ralph Reichard Richard Leirer
- ---------------------------------- ------------------------------------
Name (Print) Name (Print)
President President
- ---------------------------------- -------------------------------------
Title Title
17
<PAGE> 18
XXX-CONFIDENTIAL TREATMENT REQUESTED
RELATIONSHIP ADDENDUM
MARKETING AGENT
This Addendum provides additional terms defining the relationship between the
Marketing Agent and Phoenix. The terms and conditions contained herein are in
addition to those contained in the applicable Cooperative Agreement. If any
terms contained herein are inconsistent with the terms of the Cooperative
Agreement, the Cooperative Agreement shall control.
1 Marketing. Phoenix and the Marketing Agent will identify and
introduce prospective customers to each other and will facilitate
communications and the development of business relationships with such parties.
2 End User Licenses. The Marketing Agent shall present an End User
License to each potential Customer and shall cause all customers to execute an
End User License prior to delivery or installation of the software. The
Marketing Agent shall forward each executed End User License to Phoenix for
acceptance and signature.
3 Prices. All License and Maintenance Fees for the Software shall
conform to Phoenix's standard pricing guides, except as expressly agreed in
writing by Phoenix and the Marketing Agent, and shall in all cases be at least
as favorable as the fees charged by Phoenix to its customers directly.
Initially, the license fees for customers of the Marketing Agent shall be as
follows:
<TABLE>
<CAPTION>
Customer Assets Initial License Fee
--------------- -------------------
<S> <C>
DeNovo XXXX
XXX XXXX
XXX XXXX
XXX XXXX
XXX XXXX
XXX XXXX
XXX XXXX
XXX XXXX
</TABLE>
The above license fees may be XXXXXXXXXXXXX for those financial institutions
currently using software of the Marketing Agent who switch to the Phoenix
Software.
18
<PAGE> 19
XXX-CONFIDENTIAL TREATMENT REQUESTED
Annual Maintenance Fees shall be XXXXXXXXX.
4 Fees. The Marketing Agent shall be responsible for the invoice and
collecting all license, implementation, maintenance and other fees paid by End
Users purchasing the Software due to the marketing efforts of the Marketing
Agent.
4.1 License Fees. The Marketing Agent shall forward the following
percentages of all license fees to Phoenix within 30 days of the
execution of the applicable End User License:
1st XXX End Users: XXX
All other End Users: XXX
4.2 Implementation Fees. The Marketing Agent shall forward
XXXXXXX for the first XXXXX End Users to Phoenix within 15 days of
receipt of such fees. Thereafter, the Marketing Agent shall keep
XXXXXXXX for services provided to End Users by the Marketing Agent and
shall forward to Phoenix XXX received for services provided by Phoenix
to End Users.
4.3 Maintenance Fees. The Marketing Agent shall forward to
Phoenix the following percentage of all Maintenance Fees collected
from End Users within 15 days of receipt of such fees by the Marketing
Agent.
Year 1 maintenance fees
for each End User: XXX
Year 2 through 5 maintenance
fees for each End User: XXX
4.4 Other Fees. The Marketing Agent shall keep XXXXXXXXX services
provided to End Users other than as set forth above.
5 Expenses. The Marketing Agent will be responsible for the marketing
expenses of its personnel hereunder and Phoenix shall be responsible for the
expenses of Phoenix personnel.
6 Complementary Products and Services. The Marketing Agent may provide
to End Users complementary products and services as certified by Phoenix for
provision to End Users as such may be approved by Phoenix from time to time.
Such products and services shall be provided pursuant to an agreement between
the End User and the Marketing Agent. Phoenix shall have
19
<PAGE> 20
the right and opportunity to approve all such agreements, which approval shall
not be unreasonably withheld. The Marketing Agent may request that such
products and services be included in the End User License. Phoenix will use
its best efforts to include such products and services in End User Licenses.
Such products and services shall be provided on reasonable terms and conditions
no less favorable than the terms and conditions under which the Marketing Agent
offers similar products and services to its other customers.
7 Implementation. If the Marketing Agent has executed an Implementation
Addendum and complied with the terms therein, then the Marketing Agent may
implement the software sold as a result of the Marketing Agent's efforts. All
Software not implemented by the Marketing Agent shall be implemented by or at
the direction of Phoenix. Phoenix shall supply the Marketing Agent with one
copy of the Software and Documentation on the appropriate electronic media for
implementation for each fully executed End User License presented to Phoenix
along with Phoenix's percentage of the license fees for such End User.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first set forth in the Agreement.
Phoenix International Ltd., Inc. Marketing Agent:
By:/s/ Ralph Reichard By:/s/ Richard Leirer
---------------------------- ---------------------------
Signature Signature
Ralph Reichard Richard Leirer
- ------------------------------- ------------------------------
Name (Print) Name (Print)
President President
- ------------------------------- ------------------------------
Title Title
20
<PAGE> 21
XXX-CONFIDENTIAL TREATMENT REQUESTED
SERVICE BUREAU ADDENDUM
This Addendum provides additional terms defining the relationship between the
Marketing Agent and Phoenix. The terms and conditions contained herein are in
addition to those contained in the applicable Cooperative Agreement. If any
terms contained herein are inconsistent with the terms of the Cooperative
Agreement, the Cooperative Agreement shall control.
1 Service Bureau Arrangement. The Marketing Agent may use the Software
for outsourcing data services to Eligible Prospects within the Territory.
2 Fees. The Marketing Agent shall forward to Phoenix a percentage of
all revenue received from outsourcing activities. The percentages shall be
based on the XXXXXXXXX received by the Marketing Agent from XXXXXXXXXXXXXXXXX
involving the use other Phoenix Software as follows:
<TABLE>
<CAPTION>
Monthly Revenues % Paid to Phoenix
---------------- -----------------
<S> <C>
Less than XXXX XX
XXX to XXXX XX
XXX to XXXX XX
Greater than XXXX XX
</TABLE>
All amounts due Phoenix shall be forwarded to Phoenix within 30 days of the end
of the month in which they are earned by the Marketing Agent. The Marketing
Agent shall be responsible for the collection of all outsourcing revenue due to
its activities. Monthly revenues for each outsourcing client of the Marketing
Agent attributable to use of the Software shall in no case be XXXXXXXXXXXXXXX
of all revenue collected from each client in each month.
21
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first set forth in the Agreement.
Phoenix International Ltd., Inc. Marketing Agent:
By:/s/ Ralph Reichard By:/s/ Richard Leirer
------------------------------- -------------------------------------
Signature Signature
Ralph Reichard Richard Leirer
- ---------------------------------- ----------------------------------------
Name (Print) Name (Print)
President President
- ---------------------------------- ----------------------------------------
Title Title
22
<PAGE> 23
EXHIBIT A
SOFTWARE
Means the software generally referred to as the Phoenix Retail Banking System
23
<PAGE> 24
XXX-CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT B
TERRITORY
The Territory shall be as follows:
1) Indiana
2) Michigan
The Marketing Agent's territory includes only those financial institution,
including commercial banks, savings banks, thrifts with their primary
operations based in the above territory, and with assets XXXXXXXXXXXXX. The
Territory is non-exclusive (except as provided below). Phoenix may approve, in
its sole discretion, marketing to institutions in the Territory with assets
XXXXXXXXXXXXX upon a showing by the Marketing Agent of a prior business
relationship.
The Territory may be modified at any time by mutual written agreement of the
parties.
Indiana shall be the exclusive territory of the Marketing Agent for Eligible
Prospects XXXXXXX in assets as long as the following minimum sales are met by
the Marketing Agent:
Sale of the Software to XX End User within Indiana within XX months of the date
of this Agreement Sale of the Software to XX End User within Indiana within XX
months of the date of this Agreement Sale of the Software to XX End User within
Indiana by the end of calendar year XXX
If the Marketing Agent misses any of the above sales minimums, Indiana shall
remain in the Territory, but shall become automatically non-exclusive.
24
<PAGE> 1
EXHIBIT 10.43
CONFIDENTIAL TREATMENT REQUESTED
PHOENIX INTERNATIONAL LTD., INC.
COOPERATIVE MARKETING AGREEMENT
Marketing Agent: ISC Financial Systems, Inc. Date: Oct. 2, 1996
---------------------------------- ------------
(X) Corporation ( ) Partnership
( ) Limited Partnership ( ) Limited Liability Company
State of Organization: Ohio
----------------------------------------------
Address: 1480 West Lane Avenue
---------------------------------------------------
Columbus, Ohio 43221
---------------------------------------------------
---------------------------------------------------
Attention: XXXXXX
---------------------------------
Fax: XXXXXX
---------------------------------------
This COOPERATIVE AGREEMENT (this "Agreement") is entered into as of
the date first set forth above by and between Phoenix International Ltd., Inc.,
a Florida corporation ("Phoenix"), and the party first identified above as the
Marketing Agent ("Marketing Agent"). The parties hereto, intending to be
legally bound, agree as follows:
1 APPOINTMENT
Subject to the terms and conditions of this Agreement, the Marketing Agent
hereby agrees to enter into a cooperative marketing relationship with Phoenix
as set forth in the relationship addendum(s) attached hereto and listed below
(the "Relationship Addendum(s)"):
SERVICES ADDENDUM
TRAINING, IMPLEMENTATION, AND SUPPORT ADDENDUM
RELATIONSHIP ADDENDUM
SERVICE BUREAU ADDENDUM
<PAGE> 2
2 DEFINITIONS
As used in this Agreement, capitalized terms shall have the following meanings:
2.1 Confidential Information means any business, technical or other
information furnished by one party hereto to the other or disclosed by one
party to the other as a result of examination or inspection of facilities or
product prototypes. Confidential Information shall in all cases include all
source code, development level documentation, and similar technical information
regarding all software and all marketing and product development information.
Information which is disclosed orally will be deemed to be Confidential
Information provided that it is identified as confidential at the time of
disclosure and that the disclosing party, within twenty-one (21) days after
such disclosure, provides such information to the receiving party in writing
designated as confidential.
2.2 Documentation means the documentation associated with the Software as
produced and provided by Phoenix to the Marketing Agent and its customers
generally.
2.3 Eligible Prospect means a retail bank organized and doing business
exclusively in the Territory, and as more particularly described in Exhibit B
attached hereto.
2.4 End Users means customers presented to Phoenix by the Marketing Agent
and approved by Phoenix in accordance with Section 5.1 hereof, who license the
Software under an End User License.
2.5 End User License means the form of agreement or agreements applicable
to the license of the Software as provided by Phoenix to the Marketing Agent
from time to time.
2.6 Intellectual Property Rights means all copyright, design rights,
whether registered or unregistered, patents or patent application, know-how,
trade secrets, and Confidential Information related to or arising in the
software or documentation of either party, including all applicable
architecture, designs, modules, routines, programming, command structures,
interfaces, and any Modifications thereto.
2.7 Maintenance means making Modifications to the Software to correct
verifiable and reproducible errors reported to Phoenix and includes all error
correction, maintenance and emergency releases and other modifications required
as a result of changes made by Phoenix which directly affect any of the
Software.
2.8 Modification means a work which is based upon one or more preexisting
works, such as a revision, modification, translation, abridgment, condensation,
expansion, or any other form in which such preexisting works may be recast,
transformed, or adapted, and shall include any work that incorporates or is
combined with such a preexisting work or any portion thereof.
2.9 Modify means, with respect to any of the Software, to make a
Modification.
2.10 New Release means a new release of any of the Software to introduce
changes or additions to the Software for purposes of error correction and minor
enhancement of functionality and features.
<PAGE> 3
2.11 New Version means a new release of any of the Software which adds
significant new features or functions, or significant improvement in
performance and for which Phoenix may make extra charges to its customers
generally.
2.12 Prime Rate means the prime rate (or base rate) reported in the "Money
Rates" column or section of The Wall Street Journal as being the base rate on
corporate loans at larger U.S. Money Center banks on the first date on which
The Wall Street Journal is published in each month.
2.13 Trademarks means the trademarks, service marks and trade names used by
Phoenix in connection with its software, products and services, whether
registered or unregistered.
2.14 Support means the provision of relevant assistance in the form of
telephone assistance and consultation, personnel and materials for the
implementation and continued use of the Software, including any Modification
which Phoenix offers as an addition to, replacement for, or option with such
Software under this Agreement.
2.15 Software means the technology, software, documentation, equipment,
communications and other items as indicated on Exhibit A attached hereto, as
such Exhibit may be amended from time to time in writing.
2.16 Territory means the regions set forth on Exhibit B, as such regions
exist as of the date of this Agreement.
3 LICENSE
Subject to the terms of this Agreement, and only as appropriate under the
applicable Relationship Addendum(s), Phoenix hereby grants to the Marketing
Agent the following non-exclusive, revocable rights and licenses with respect
to the Software within the Territory:
3.1 To use the Software as reasonably required to fulfill its obligations
and exercise its rights under this Agreement and in accordance with the
Relationship Addendum(s). The Marketing Agent may not provide the Software to
any third party except pursuant to a fully executed End User License, and may
not use the Software in production for the benefit of any third party, except
as otherwise allowed in a Relationship Addendum attached hereto or as otherwise
provided by written agreement signed by both parties. The Marketing Agent may
not use, rely on, or refer to the Software for purposes of developing or
supporting any other software except in support of End Users or as otherwise
allowed in a Relationship Addendum attached hereto or as otherwise provided by
written agreement signed by both parties.
3.2 Subject to completion of sufficient training as applicable and as
required by Phoenix from time to time, to use the Software for back up,
demonstrations, and evaluations involving End Users.
3.3 To use the Trademarks relating to the Software, provided, however,
that such use shall
3
<PAGE> 4
be subject to reasonable advertising and promotion guidelines which Phoenix may
provide from time to time. Phoenix reserves the right to disallow any use of
the Trademarks which would in any way, in Phoenix's opinion, harm the validity
or value of the Trademarks.
3.4 The Marketing Agent shall not copy, adapt, modify or reproduce the
Software in any manner whatsoever except as reasonably necessary for
demonstration, marketing, backup and archival purposes. All copies of the
software to be provided to End Users shall be supplied to the Marketing Agent
by Phoenix.
4 TERM AND REVIEW
4.1 This Agreement shall become effective on the date first set forth
above and shall continue for an initial term of three (3) years. This
Agreement shall automatically renew thereafter for two (2) year periods, unless
and until terminated by either party, in its discretion, by written notice to
the other party at least ninety (90) days prior to the end of the initial term
or any renewal term. In addition, Phoenix reserves the right to terminate this
Agreement at any time on at least ninety (90) days prior written notice if the
Marketing Agent defaults on its obligations, incurs a conflict of interest of
significant impact, or fails to devote reasonable effort to the license of the
Software to End Users and Marketing Agent does not cure such default, conflict
or effort within such 90 day period. Marketing Agent reserves the right to
terminate this Agreement on 90 days prior written notice if Phoenix defaults on
its obligations hereunder and does not cure such default within such 90 day
period.
4.2 Notwithstanding the termination of this Agreement, Phoenix shall
continue to be entitled to the fees earned under this Agreement after such
termination. So long as the Marketing Agent continues to satisfy its
obligations to End Users under this maintenance and support agreements,
notwithstanding a termination of this Agreement, the Marketing Agent may
continue to provide such maintenance and support.
4.3 Either party may request a review of this Agreement and the royalty
payments applicable to the Software, such review to take place in advance of
each anniversary of the commencement of this Agreement while the Agreement
remains in force.
4.4 Survival. Notwithstanding termination of this Agreement for any
reason (including, without limitation, by notice pursuant to Section 4.1),
Sections 10 (Title to Intellectual Property), 11 (Confidentiality) and 14
(General) shall continue to have effect as shall any other provisions which by
their nature or necessary implication ought or were intended to continue to
have effect, and End User Licenses of customers already granted prior to the
date of such termination shall continue to be valid.
4.5 Actions Upon Termination. Upon termination, except as necessary to
fulfill its obligations under maintenance, servicing and support agreements
with End Users, the Marketing Agent shall:
4
<PAGE> 5
a. promptly cease to use, license, market or promote the Software;
b. return all copies of the Software in the possession of the
Marketing Agent to Phoenix and shall cease using the same for any
purpose whatsoever;
return and deliver or cause to be returned and delivered to Phoenix
all memoranda, notes, reports, documents or media relating to or
containing Confidential Information, including any copies or
extracts thereof.
The Marketing Agent shall certify its compliance with this Section upon the
written request of Phoenix.
5 OBLIGATIONS OF THE MARKETING AGENT
5.1 End User Approval. The Marketing Agent shall notify Phoenix of
potential customers for the Software. Phoenix shall notify the Marketing Agent
of marketing conflicts with Phoenix's marketing efforts to such potential
customers. In case of conflict, the senior sales managers of Phoenix and the
Marketing Agent shall determine whose sales force shall market to the customer.
If no resolution can be reached, the decision of Phoenix as to such customer
shall be final. The foregoing provision concerning marketing conflicts shall
be interpreted and applied consistent with the grant of territory and
exclusivity in Exhibit B.
5.2 Customer Contacts. During the term of this Agreement, the Marketing
Agent will work exclusively with Phoenix with respect to any business
opportunity presented to the Marketing Agent by Phoenix or obtained by the
Marketing Agent as a result of the working relationship of the Marketing Agent
with Phoenix.
5.3 Development of Competing Software. The Marketing Agent shall not use
the Software or Documentation or any Confidential Information (as defined
herein) that it may acquire in connection with this Agreement to develop, have
developed, or support or invest in, directly or indirectly, the development of
any product which has, entirely or partially, the same functions as any of the
Software or which would be in direct or indirect competition with any of the
Software, or to sell competing products or services.
Nothing in this agreement shall limit the rights of Marketing Agent to develop,
sell and support Trust and Investment Management Software.
5.4 Qualified Personnel. The Marketing Agent shall employ suitably
qualified and trained personnel in order to perform its obligations hereunder,
and under any End User License or other agreement with an End User related to
the implementation, use or support of the Software.
5.5 End User Compliance. The Marketing Agent shall inform Phoenix of all
known breaches by End Users of their agreements with Phoenix.
5
<PAGE> 6
5.6 Notices, Logos and Marks. The Marketing Agent shall not alter, erase
or obscure any notices, legends, or trademarks or alter any indications of
ownership such as copyright, serial number or any other designations or
security provisions featured on copies of the Software and Documentation, and
shall include all such features on all copies of the Software and Documentation
made by the Marketing Agent.
5.7 Copies of Materials. The Marketing Agent shall send to Phoenix copies
of all advertising, marketing and product material related to the Software
created or to be used by the Marketing Agent.
6 PHOENIX'S OBLIGATIONS
6.1 Copies of the Software. Phoenix shall provide the Marketing Agent
with a reasonable number of copies of the Software and Documentation as
necessary for the Marketing Agent to fulfill its obligations and exercise its
rights hereunder. All Documentation shall be provided in English.
6.2 Maintenance and Support. Phoenix shall provide a description of the
specific hardware and software environment required by the Software. Upon
request, Phoenix will review alternative hardware and software configurations
proposed by the Marketing Agent and may, in its sole discretion, approve such
configurations. Phoenix shall provide the following maintenance and support
for Software operating in approved hardware and software environments during
the term of this Agreement:
a. Support. Phoenix shall provide Support and Maintenance to the
Marketing Agent for the then-current version and the immediately
preceding version of the Software. In order to assist in the
provision of Maintenance, the Marketing Agent shall notify Phoenix
promptly following the discovery of any defect. Further, upon
discovery of a defect, if requested by Phoenix, the Marketing Agent
shall submit to Phoenix a listing of output and any other data that
Phoenix may require in order to reproduce the error and the operating
conditions under which the error occurred or was discovered.
b. Upgrades. Phoenix shall provide the Marketing Agent with a
copy of each New Release and each New Version of the Software as
Phoenix may from time to time issue to its customers generally.
Phoenix shall provide reasonable telephone support to assist in the
installation and operation of each New Release and New Version. For
any particular New Release or New Version to operate properly, the
Marketing Agent must have installed all prior New Releases and New
Versions.
c. Telephone Support. Phoenix shall maintain a telephone support
line during hours to be designated by Phoenix from time to time, which
in any case shall cover at least 8:30 a.m. to 5:30 p.m. Monday through
Friday, Orlando, Florida time. Phoenix will assign a n experienced
support person as the primary contact of Marketing Agent for
6
<PAGE> 7
support questions. Support in response to questions which are outside
the intended scope of this Agreement may be subject to an additional
charge.
d. Exceptions. The following matters are not covered by
Maintenance or Support under this Agreement:
(1) Any problem resulting from the misuse, improper use,
alteration, or damage of any of the Software;
(2) Any problem caused by the Modifications of any
version of the Software not made or authorized by Phoenix; or
(3) Any problem resulting from the use of the Software
with other programming or with hardware configurations not
approved in writing by Phoenix.
6.3 Expenses for On-Site Support The Marketing Agent shall pay Phoenix
75% of Phoenix's standard fee for time and 100% for materials and expenses,
including Phoenix's travel costs, required to provide on-site Maintenance or
Support hereunder. In addition, the Marketing Agent is responsible for
procuring, installing, and maintaining all computer and other equipment,
networks, telephone lines, communications interfaces, and other hardware
necessary to operate the Software and to obtain maintenance services from
Phoenix. Phoenix will not be responsible for delays caused by events or
circumstances beyond its reasonable control.
7 TRAINING.
7.1 Initial Training. Phoenix shall provide up to 4 instructor days of
initial training in the functionality, marketing and operation of the Software.
The Marketing Agent shall pay Phoenix's reasonable travel, living, facility and
equipment expenses for such training, but shall not be charged for instructor
time. Phoenix shall provide training materials including: sales and marketing
materials, and an initial stock of sales collaterals. Additional materials
will be provided upon request at a price equal to Phoenix's cost for such
materials.
7.2 Upgrade Training. Phoenix shall provide training on all New Releases
at times and locations determined by Phoenix. The Marketing Agent may send two
representatives to one scheduled training session for each New Release at no
cost. Additional representatives may attend such training for additional fees
as determined by Phoenix. The Marketing Agent shall pay all travel and living
expenses for its representatives.
7.3 Additional Training. Phoenix shall provide additional technical
assistance and training to the Marketing Agent in excess of the initial
training as reasonably requested by the Marketing Agent; provided, however,
that the Marketing Agent shall reimburse Phoenix for all expenses incurred by
Phoenix in providing such assistance and training and shall pay 75% of the
7
<PAGE> 8
applicable training and instructor fees related to such services at Phoenix's
then current rates, unless otherwise agreed in writing before such services are
provided.
7.4 Classes. Subject to space availability, the Marketing Agent may
enroll its employees in additional or advanced training classes at no cost.
7.5 Observation. Subject to scheduling by Phoenix, Marketing Agent may
send members of its technical or support staff to observe Phoenix employees
performing similar jobs for a combined maximum of 4 days at no cost. The
Marketing Agent shall pay all travel and living expenses for its
representatives.
8 WARRANTY
8.1 Limited Warranty. Phoenix warrants to the Marketing Agent that the
Software will, for a period of one (1) year after receipt, perform
substantially in conformance with applicable specifications (the "Limited
Warranty"). Phoenix makes no warranty that all nonconformities or defects have
been or can be eliminated from the Software or that operation of the Software
will be uninterrupted or error free. This Limited Warranty shall not apply to
(i) Modifications made to the Software other than those described in the
applicable Documentation or expressly approved by Phoenix, or (ii) to Software
damaged due to accident, abuse or neglect.
8.2 Exclusive Remedy. The Marketing Agent's sole and exclusive remedy for
breach of the above Limited Warranty shall be, at the option of Phoenix, repair
or replacement of the relevant Software. Any replacement Software shall be
covered under the Limited Warranty for the remainder of the original warranty
period, or for thirty (30) days after receipt, whichever is longer.
8.3 DISCLAIMER. EXCEPT FOR THE WARRANTY SET FORTH ABOVE, THE SOFTWARE ARE
LICENSED TO THE MARKETING AGENT "AS IS," AND PHOENIX DISCLAIMS ANY AND ALL
OTHER REPRESENTATIONS AND WARRANTIES, WHETHER ORAL OR WRITTEN, EXPRESS OR
IMPLIED, INCLUDING (WITHOUT LIMITATION) ANY WARRANTY AS TO MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
8.4 LIMITATION OF LIABILITY AND DAMAGES. PHOENIX'S LIABILITY FOR ANY AND
ALL DAMAGES SHALL BE LIMITED TO THE EXCLUSIVE REMEDY SET FORTH ABOVE. NEITHER
PARTY SHALL HAVE ANY LIABILITY FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES WHATSOEVER, INCLUDING, WITHOUT LIMITATION, DAMAGES FOR
LOSS OF PROFITS, INTERRUPTION OF BUSINESS, OR ANY OTHER MONETARY LOSS, ARISING
OUT OF THE USE OR INABILITY TO USE THE SOFTWARE, OR FOR MISSTATEMENTS, MISTAKES
OR OMISSIONS IN THE DOCUMENTATION, EVEN IF SUCH PARTY HAS BEEN APPRISED OF THE
POSSIBILITY OF SUCH DAMAGES.
8
<PAGE> 9
8.5 Limitation on Actions. No action, regardless of form, arising out of
this Agreement or the transactions contemplated hereunder may be brought more
than two (2) years after the cause of the action has accrued.
8.6 Independent responsibility. Neither party shall be responsible to any
customer or End User for the quality of service or performance of products
furnished by the other party. Each party is solely responsible for
establishing the prices of its own products, services and associated
deliverables.
8.7 Trademark Use. Neither party, without the express prior written
approval of the other shall use the trademarks, service marks, or proprietary
words or symbols of the other. Notwithstanding the foregoing, nothing
contained in this Agreement shall affect either party's rights to use any
trademarks, service marks, or proprietary words or symbols of the other to the
extent otherwise permitted by applicable law or by written agreement between
the parties.
9 INDEMNIFICATION BY PHOENIX.
9.1 Infringement of Intellectual Property Rights. If a third party claims
that the Software infringes any patent, copyright, trade secret, or similar
Intellectual Property Rights, Phoenix shall (as long as the Marketing Agent is
not in default under this Agreement or any other agreement with Phoenix)
indemnify and defend the Marketing Agent against such claim at Phoenix's
expense, provided that the Marketing Agent promptly notifies Phoenix in writing
of any such claim, allows Phoenix to control all negotiations and litigation
related thereto, and cooperates with Phoenix in the defense and disposition of
such claim, including any related settlement negotiations.
9.2 Limitations. If such a claim is made or appears possible, Phoenix
may, at its option, secure for the Marketing Agent the right to continue to use
the Software, or modify or replace the Software so it is non-infringing.
Phoenix has no obligation hereunder for any claim based on a modified version
of the Software which has not been approved by Phoenix, or for any combination,
operation or use of the Software with a non-approved operating environment or
with any program, product, data or apparatus not approved in writing by
Phoenix. Phoenix 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 9 STATES PHOENIX'S ENTIRE
OBLIGATION TO THE MARKETING AGENT WITH RESPECT TO MATTERS OF TITLE OR ANY CLAIM
OF INFRINGEMENT THEREOF.
10 TITLE TO INTELLECTUAL PROPERTY
9
<PAGE> 10
10.1 All right title and interest in and to all copies of the Software and
Documentation and all Intellectual Property Rights pertaining thereto shall
vest exclusively with Phoenix, including the Intellectual Property Rights in
all Modifications created by or for Phoenix, the Marketing Agent, or any End
User, including their personnel and permitted agents or contractors. To the
extent rights in Modifications and all Intellectual Property Rights therein do
not automatically and fully vest exclusively in Phoenix, the Marketing Agent
agrees to and hereby does assign to Phoenix all such rights, and shall execute
all such other agreements as Phoenix may require to effect such assignment. To
the extent Modifications are produced by or under the supervision of the
Marketing Agent, Phoenix hereby grants to the Marketing Agent a
non-transferable, and royalty free license to reproduce, license and distribute
such Modifications, but only to the extent they are marketed and licensed or
sold to End Users for use solely with duly licensed versions of the Software
pursuant to End User Licenses in effect with Phoenix.
10.2 All right title and interest in and to all software and documentation
and all Intellectual Property Rights therein developed or owned by the
Marketing Agent shall remain the exclusive property of the Marketing Agent, and
Phoenix shall have no rights therein except as otherwise agreed between the
parties.
11 CONFIDENTIALITY
11.1 Non-Disclosure. Except as otherwise provided herein or as allowed by
the prior written consent of the party disclosing any Confidential Information
(the "Disclosing Party"), for the term of this Agreement and for a period of
three (3) years following the termination of this Agreement, the party
receiving Confidential Information (the "Receiving Party") (a) shall receive
all Confidential Information in strict confidence, (b) shall use the same
degree of care which it uses to protect its own confidential information to
maintain the confidentiality and secrecy thereof, (c) shall disclose the
Confidential Information, and permit the Confidential Information to be
disclosed, only to its employees who need access to the Confidential
Information to carry out the terms and intent of this Agreement, and (d) shall
use the Confidential Information only in furtherance of its rights and
obligations set forth in this Agreement or any other Agreement between the
parties. Both parties shall keep confidential the terms and conditions of this
Agreement, but not its existence, and all other information which is designated
in writing as confidential by one party to the other. Notwithstanding the
foregoing, each party may make such disclosures as may be required by order of
a court of competent jurisdiction, administrative agency or other government
body, or by law rule or regulation, provided, however, that to the extent
possible, the Receiving Party required to disclose the information shall give
the Disclosing Party prior written notice of such requirement and shall assist
in its efforts to oppose such requirement. Neither party shall use the
Confidential Information of the other to develop or have developed any product
which has the same functions as the software of the other party or which would
be in direct or indirect competition with the software of the other party,
without express prior written
10
<PAGE> 11
consent.
11.2 Exclusions. Paragraph 9.2 hereof shall not apply to any Confidential
Information which (a) at the time of disclosure is in the public domain or
thereafter enters the public domain for reasons not attributable to any act or
omission of the Receiving Party in breach of its obligations hereunder, (b)
which the Receiving Party can show was in its possession prior to the
disclosure thereof by the Disclosing Party, or (c) which the Receiving Party
can show was acquired by the Receiving Party from a third party who discloses
it in good faith and does not thereby breach an obligation of confidence to the
Disclosing Party.
12 EXPORTS
12.1 Territory. The Marketing Agent may not market or export the Software
outside of the Territory without Phoenix's prior written approval.
13 EMPLOYEES
During the term of this Agreement and for a period of twelve (12) months
thereafter, neither party will directly or indirectly solicit for employment or
employ any employee of the other without the prior written consent of the
other.
14 GENERAL
14.1 No Authority to Bind the Other Party. The parties to this Agreement
are independent contractors and, except as provided in this Agreement or
otherwise in a writing signed by both parties, neither party is authorized to
act on behalf of the other or to bind the other. This Agreement does not
establish any relationship of agency, partnership, or joint venture. Each
party shall bear responsibility for its own employees, including terms of
employment, wages, hours, tax withholding, required insurance, and daily
direction and control. Except as otherwise set forth in an Addendum, the
relationship created hereunder is non-exclusive as to each party.
14.2 Successors and Assigns. Except as otherwise provided in this
Agreement, neither party may assign this Agreement or any rights or obligations
hereunder without the prior written consent of the other party which consent
shall not be unreasonably withheld. Any such attempted assignment without
such prior written consent shall be void and of no force and effect.
Notwithstanding the foregoing, Phoenix may assign this agreement to any
successor to all or substantially all of its business. This Agreement shall
inure to the benefit of and shall be binding upon the permitted successors and
assigns of the parties hereto.
11
<PAGE> 12
14.3 Governing Law; Jurisdiction. The construction and interpretation of,
and the rights and obligations of the parties pursuant to this Agreement shall
be governed by the laws of the State of Florida.
14.4 Force Majeure. Neither party shall be liable for any failure of or
delay in the performance of this Agreement for the period that such failure or
delay is due to acts of God, public enemy, civil war, strikes or labor
disputes, or any other cause beyond the parties' reasonable control. Each
party agrees to notify the other party promptly of the occurrence of any such
cause and to carry out this Agreement as promptly as practicable after such
cause has terminated.
14.5 Severability. In the event that any part of this Agreement is
declared by any court or other judicial or administrative body to be null, void
or unenforceable, said provision shall survive to the extent if is not so
declared, and all of the other provisions of this Agreement shall remain in
full force and effect.
14.6 Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given: (i) on the date of service if served personally on the party to whom
notice is to be given; (ii) on the day of transmission if sent via facsimile
transmission to the facsimile number given below, and telephonic confirmation
of receipt is obtained promptly after completion of transmission; (iii) on the
second day after delivery to Federal Express or similar overnight courier or
the Express Mail service maintained by the United States Postal Service; or
(iv) on the fifth day after mailing, if mailed to the party to whom notice is
to be given, by first class air mail, registered or certified, postage prepaid
and properly addressed, to the party as follows:
If to the Phoenix:
Phoenix International Ltd., Inc.
900 Winderley Place
Suite 140
Maitland, Florida 32751
Attention: Ralph Reichard
Facsimile: (407) 667-0133
If to the Marketing Agent, at the address first set forth above.
Any party may change its address for the purpose of this Section by
giving the other parties written notice of its new address in the manner set
forth above.
14.7 Amendments; Waivers. This Agreement may be amended or modified, and
any of the terms, covenants, representations, warranties or conditions hereof
may be waived, only by a
12
<PAGE> 13
written instrument executed by the parties hereto, or in the case of a waiver,
by the party waiving compliance. Any waiver by any party of a condition, or of
the breach of any provision, term, covenant, representation or warranty
contained in this Agreement, in any one or more instances, shall not be deemed
to be nor construed as furthering or continuing waiver of any such condition,
or of the breach of any other provision, term, covenant, representation or
warranty of this Agreement.
14.8 Public Announcements. Neither party shall make any press release or
public announcement concerning this transaction without the prior written
approval of the other party unless a press release or public announcement is
required by law or by regulations binding upon any of the parties or their
affiliates, in which case, the disclosing party agrees to give the
non-disclosing party prior notice and an opportunity to comment on the proposed
disclosure.
14.9 Entire Agreement. This Agreement contains the entire understanding
between the parties hereto with respect to the transactions contemplated hereby
and supersedes and replaces all prior and contemporaneous agreements and
understandings, oral or written, with regard to such transactions. All
schedules and addenda hereto and any documents and instruments delivered
pursuant to any provision hereof are expressly made a part of this Agreement as
fully as though completely set forth herein. The rights of the parties are
only as set forth herein, and there are and shall be no implied rights or
obligations whatsoever.
14.10 Parties in Interest. Nothing in this Agreement is intended to confer
any rights or remedies under this Agreement on any persons other than Phoenix
and the Marketing Agent and their respective successors and permitted assigns.
Nothing in this Agreement is intended to relieve or discharge the obligations
or liability of any third persons to Phoenix or the Marketing Agent.
14.11 Section and Paragraph Headings. The section and paragraph headings in
this Agreement are for reference purposes only and shall not affect the meaning
or interpretation of this Agreement.
14.12 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but both of which shall constitute the same
instrument.
13
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
Phoenix International Ltd., Inc.: Marketing Agent:
ISC Financial systems, Inc.
By: /s/ Ralph Reichard By:/s/ David Reckseit
------------------------------- ------------------------------------
Signature Signature
Ralph Reichard David Reckseit
- ---------------------------------- ---------------------------------------
Name (Print) Name (Print)
President & COO President
- ---------------------------------- ---------------------------------------
Title Title
14
<PAGE> 15
XXX-CONFIDENTIAL TREATMENT REQUESTED
SERVICES ADDENDUM
This Addendum provides additional terms defining the relationship between the
Marketing Agent and Phoenix. The terms and conditions contained herein are in
addition to those contained in the applicable Cooperative Agreement. If any
terms contained herein are inconsistent with the terms of the Cooperative
Agreement, the Cooperative Agreement shall control.
Whereas Phoenix and the Marketing Agent may wish to procure the services of one
another for their own benefit and for the benefit of their customers; and
Whereas Phoenix and the Marketing Agent may prepare budgets and customer
quotations based on the cost of such services, Phoenix and the Marketing Agent
agree to provide services to one another and on each other's behalf on the
following terms:
1 Direct Services. From time to time, Phoenix and the Marketing Agent
may provide services to one another, including without limitation
implementation and integration services and assistance, custom software and
systems development, modification and enhancement, and customer support
assistance. Such services shall be provided at XXXXXXXXXXXXXX for such
services (the "Discounted Rate").
2 Phoenix Customer Services. At the Marketing Agent's request, Phoenix
may provide services to customers of the Marketing Agent or to the Marketing
Agent on the customer's behalf that the Marketing Agent would normally be
obligated to provide under the terms of the relationship between Phoenix and
the Marketing Agent or between the Marketing Agent and its customers. For all
such services which Phoenix agrees to provide, the Marketing Agent shall pay to
Phoenix XXXXXXX for such services or XXXXXXX by the Marketing Agent to the End
User for such services, whichever is greater.
3 Marketing Agent Customer Services. For all services provided by the
Marketing Agent to customers of Phoenix or Phoenix's affiliates and business
and Marketing Agents, the Marketing Agent shall negotiate rates in good faith,
and in all cases such rates shall be at least as favorable as the Marketing
Agent's then current published rates for such services. Such services may be
provided by the Marketing Agent directly to customers or as a subcontractor to
Phoenix or other parties.
4 Most Favorable Terms. All rates referred to herein before shall be at
least as favorable as the rates provided by the applicable party to any of its
other customers, Marketing Agents or consultants.
5 Materials. Materials provided by one party to the other or to the
other's customers (other than the Software and other proprietary software and
hardware of either party) shall be billed
15
<PAGE> 16
at the applicable party's actual cost for such materials.
6 Disclaimer. Notwithstanding the foregoing, neither party shall be
obligated to provide services to the other or to any other party without prior
approval on a case by case basis (other than those services required to be
provided under the terms of this or any other agreement).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
Phoenix International Ltd., Inc.: Marketing Agent:
ISC Financial systems, Inc.
By: /s/ Ralph Reichard By:/s/ David Reckseit
---------------------------------- ---------------------------------
Signature Signature
Ralph Reichard David Reckseit
- ------------------------------------- ------------------------------------
Name (Print) Name (Print)
President & COO President
- ------------------------------------- ------------------------------------
Title Title
16
<PAGE> 17
XXX-CONFIDENTIAL TREATMENT REQUESTED
TRAINING, IMPLEMENTATION, AND SUPPORT ADDENDUM
This Addendum provides additional terms defining the relationship between the
Marketing Agent and Phoenix. The terms and conditions contained herein are in
addition to those contained in the applicable Cooperative Marketing Agreement.
If any terms contained herein are inconsistent with the terms of the
Cooperative Marketing Agreement, the Cooperative Marketing Agreement shall
control.
1 Training and Certification. Phoenix shall assist the Marketing Agent
in the first XXXX installations of the Software for End Users and shall
concurrently train the Marketing Agent's personnel in the implementation of the
Software. Additionally, the Marketing Agent's personnel shall be entitled to
attend the training sessions for the first XXXX End Users at no cost. In the
event that the first Xx installations are current users of Marketing Agent's
software, the XXX assisted installation will be deferred to the first customer
that is not a current user of Marketing Agent's software. Upon completion of
such training, Phoenix shall certify certain of the Marketing Agent's personnel
to implement the Software. The Marketing Agent shall pay Phoenix's reasonable
travel, living, facility and equipment expenses for such training, but shall
not be charged for instructor time. Up to the limit established by Phoenix,
Phoenix shall provide training materials. Additional materials will be
available for purchase at Phoenix's cost.
2 Right to Implement. Once the Marketing Agent's personnel have
completed the requisite training and have been certified for installation and
implementation of the software by Phoenix, the Marketing Agent may implement
the Software in accordance with this Agreement hereto, but only under the
direction and supervision of certified personnel. All implementations of the
Software shall follow Phoenix's methodology as taught in the training sessions.
Phoenix shall provide written documentation of the implementation methodology
along with training materials and instructors aids.
3 Additional License. Once the training has been completed, the
Marketing Agent shall have the additional right and license to do the following
with respect to the Software:
3.1 To use the Software for the purpose of installing, maintaining and
marketing the Software for End Users as provided for hereunder.
3.2 To Maintain and Support the Software licensed to End Users, and to
train End Users in the use of the Software and for other educational purposes.
17
<PAGE> 18
3.3 To use any conversion programs and methods that Phoenix may posses
that are applicable to Marketing Agents End Users at no cost.
4 Maintenance and Support. Once training has been completed, the
Marketing Agent shall be responsible for all Maintenance and Support of End
Users. The Marketing Agent shall enter into a Maintenance and Support
Agreement with each End User who chooses to accept Maintenance and Support.
The Maintenance and Support Agreement shall be presented to Phoenix prior to
use with End Users, and shall be in a form and contain such terms as are
acceptable to Phoenix. If, at any time, the Marketing Agent materially fails
to provide Maintenance and Support under an agreement with an End User, Phoenix
shall assume the Marketing Agent's responsibilities under such agreement, the
Marketing Agent shall assign the agreement to Phoenix, and the Marketing Agent
shall forward to Phoenix all maintenance and support fees received from such
End User for the period for which Phoenix assumes maintenance and support
obligations, including fees received prior to the assignment for services
provided by Phoenix after the assignment.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
Phoenix Internatinal Ltd., Inc.: Marketing Agent:
ISC Financial systems, Inc.
By: /s/ Ralph Reichard By:/s/ David Reckseit
--------------------------------- --------------------------------
Signature Signature
Ralph Reichard David Reckseit
- ------------------------------------ -----------------------------------
Name (Print) Name (Print)
President & COO President
- ------------------------------------ -----------------------------------
Title Title
18
<PAGE> 19
XXX-CONFIDENTIAL TREATMENT REQUESTED
RELATIONSHIP ADDENDUM
MARKETING AGENT
This Addendum provides additional terms defining the relationship between the
Marketing Agent and Phoenix. The terms and conditions contained herein are in
addition to those contained in the applicable Cooperative Agreement. If any
terms contained herein are inconsistent with the terms of the Cooperative
Agreement, the Cooperative Agreement shall control.
1 Marketing. Phoenix and the Marketing Agent will identify and
introduce prospective customers to each other and will facilitate
communications and the development of business relationships with such parties.
2 End User Licenses. The Marketing Agent shall present an End User
License to each potential Customer and shall cause all customers to execute an
End User License prior to delivery or installation of the Software. The
Marketing Agent shall forward each executed End User License to Phoenix for
acceptance and signature.
3 Prices. All License and Maintenance Fees for the Software shall
conform to Phoenix's standard pricing guides, except as expressly agreed in
writing by Phoenix and the Marketing Agent, and shall in all cases be at least
as favorable as the fees charged by Phoenix to its customers directly.
Initially, the license fees for customers of the Marketing Agent shall be as
follows:
<TABLE>
<CAPTION>
Customer Assets Initial License Fee
--------------- -------------------
<S> <C>
DeNovo XXXX
XXX XXXX
XXX XXXX
XXX XXXX
XXX XXXX
XXX XXXX
XXX XXXX
</TABLE>
Phoenix's fees for those financial institutions currently using the banking
software of the Marketing Agent who switch to the Phoenix Software shall be
based upon the actual fees charged by the Marketing Agent, or XXXXXXXX set
forth above, whichever is greater.
19
<PAGE> 20
XXX-CONFIDENTIAL TREATMENT REQUESTED
Annual Maintenance Fees shall be XXXXXX.
4 Fees. The Marketing Agent shall be responsible for the invoice and
collecting all license, implementation, maintenance and other fees paid by End
Users purchasing the Software due to the marketing efforts of the Marketing
Agent.
4.1 License Fees. The Marketing Agent shall forward the
following percentages of all license fees to Phoenix:
1st XXXX End Users: XX
All other End Users: XX
All amounts due Phoenix shall be paid within 15 days after receipt of
such fees by the Marketing Agent, but in all cases, whether or not fees have
actually been collected by the Marketing Agent, XXXXXXXX to Phoenix for each
End User shall be paid to Phoenix no later than 30 days following execution of
the End User License, XXXXXXX Phoenix for each End User shall be paid to
Phoenix no later than 30 days following the completion of Implementation of the
Software for each End User, and all amounts due Phoenix shall be paid to
Phoenix no later than 90 days following the completion of Implementation for
each End User.
4.2 Implementation Fees. The Marketing Agent shall forward
XXXXXXXXX for the first XXXX End Users to Phoenix within 15 days of
receipt of such fees. Thereafter, the Marketing Agent shall keep all
implementation and training fees for services provided to End Users by
the Marketing Agent and shall forward to Phoenix XXXXXXXXXXXXXX
provided by Phoenix to End Users.
4.3 Maintenance Fees. The Marketing Agent shall forward to
Phoenix the following percentage of all Maintenance Fees collected
from End Users within 15 days of receipt of such fees by the Marketing
Agent.
Year 1 maintenance fees
for each End User: XXX
After Year 1, maintenance
fees for each End User: XXX
4.4 Other Fees. The Marketing Agent shall keep XXXXXXXXXXXX
services provided to End Users other than as set forth above.
20
<PAGE> 21
5 Expenses. The Marketing Agent will be responsible for the marketing
expenses of its personnel hereunder and Phoenix shall be responsible for the
expenses of Phoenix personnel.
6 Complementary Products and Services. The Marketing Agent may provide
to End Users complementary products and services as certified by Phoenix for
provision to End Users as such may be approved by Phoenix from time to time.
Such products and services shall be provided pursuant to an agreement between
the End User and the Marketing Agent. Phoenix shall have the right and
opportunity to approve all such agreements, which approval shall not be
unreasonably withheld. The Marketing Agent may request that such products and
services be included in the End User License. Phoenix will use its best
efforts to include such products and services in End User Licenses. Such
products and services shall be provided on reasonable terms and conditions no
less favorable than the terms and conditions under which the Marketing Agent
offers similar products and services to its other customers.
Any complementary products or services provided to End Users that are not
certified by Phoenix are the sole responsibility of Marketing Agent.
7 Implementation. If the Marketing Agent has executed a Training,
Implementation, and Support Addendum and complied with the terms therein, then
the Marketing Agent may implement the software sold as a result of the
Marketing Agent's efforts. All Software not implemented by the Marketing Agent
shall be implemented by or at the direction of Phoenix. Phoenix shall supply
the Marketing Agent with one copy of the Software and Documentation on the
appropriate electronic media for implementation for each fully executed End
User License presented to Phoenix along with Phoenix's percentage of the
license fees for such End User.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
Phoenix Internatinal Ltd., Inc.: Marketing Agent:
ISC Financial systems, Inc.
By: /s/ Ralph Reichard By:/s/ David Reckseit
------------------------------- ------------------------------------
Signature Signature
Ralph Reichard David Reckseit
- ---------------------------------- ---------------------------------------
Name (Print) Name (Print)
President & COO President
- ---------------------------------- ---------------------------------------
Title Title
21
<PAGE> 22
XXX-CONFIDENTIAL TREATMENT REQUESTED
SERVICE BUREAU ADDENDUM
This Addendum provides additional terms defining the relationship between the
Marketing Agent and Phoenix. The terms and conditions contained herein are in
addition to those contained in the applicable Cooperative Agreement. If any
terms contained herein are inconsistent with the terms of the Cooperative
Agreement, the Cooperative Agreement shall control.
1 Service Bureau Arrangement. The Marketing Agent may use the Software
for outsourcing data services to Eligible Prospects within the Territory.
2 Fees. The Marketing Agent shall forward to Phoenix a percentage of
all revenue (except for direct pass-through) received from outsourcing
activities. The percentages shall be based on the XXXXXXXXXXXXXXXXXXXX
received by the Marketing Agent from XXXXXXXXX involving the use of the Phoenix
Software as follows:
<TABLE>
<CAPTION>
Monthly Revenues % Paid to Phoenix
---------------- -----------------
<S> <C>
Less than XXXX XX
XXX to XXX XX
XXX to XXX XX
Greater thanXXX XX
</TABLE>
All amounts due Phoenix shall be forwarded to Phoenix within 30 days of the end
of the month in which they are earned by the Marketing Agent. The Marketing
Agent shall be responsible for the collection of all outsourcing revenue due to
its activities. For each outsourcing client of Marketing Agent who uses the
Software, the amount of revenue attributable to the Software shall be
XXXXXXXXXXXXXXXXX (excluding direct pass-through) received from the client each
month.
22
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
Phoenix Internatinal Ltd., Inc.: Marketing Agent:
ISC Financial systems, Inc.
By: /s/ Ralph Reichard By:/s/ David Reckseit
-------------------------------- -----------------------------------
Signature Signature
Ralph Reichard David Reckseit
- ----------------------------------- --------------------------------------
Name (Print) Name (Print)
President & COO President
- ----------------------------------- --------------------------------------
Title Title
23
<PAGE> 24
EXHIBIT A
SOFTWARE
Means the software generally referred to as the Phoenix Retail Banking System
24
<PAGE> 25
XXX-CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT B
TERRITORY
The Territory shall be as follows:
1) Ohio
2) Kentucky
Pennsylvania (as far East as Harrisburg)
West Virginia
The Marketing Agent's territory includes only those financial institutions,
including commercial banks, savings banks, thrifts, and credit unions with
their primary operations based in the above territory, and with assets
XXXXXXXXXX. The Territory is non-exclusive (except as provided below).
Phoenix may approve, in its sole discretion, marketing to institutions outside
the Territory or institutions in the Territory with assets XXXXXXXXXXXXXXX upon
written request by the Marketing Agent.
Notwithstanding the foregoing, the Marketing Agent shall have the exclusive
right to market the Software to the following financial institutions:
XXXXXXX
XXXXXXX
XXXXXXX
XXXXXXX
XXXXXXX
XXXXXXX
XXXXXXX
XXXXXXX
XXXXXXX
Ohio shall be the exclusive territory of the Marketing Agent for Eligible
Prospects with XXXXXXX in assets as long as the following minimum sales are met
by the Marketing Agent:
Sale of the Software to XX End User within Ohio within XX months of the date
of this Agreement Sale of the Software to XX End Users within Ohio within XX
months of the date of this Agreement
25
<PAGE> 26
Sale of the Software to XX End Users within the Territory by the end of
calendar year XX
If the Marketing Agent misses any of the above sales minimums, Phoenix may
revoke the exclusivity within 90 days thereof by written notice to the
Marketing Agent. If Phoenix elects to revoke the exclusivity, Ohio shall
remain in the Territory, but shall become non-exclusive.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
Phoenix Internatinal Ltd., Inc.: Marketing Agent:
ISC Financial systems, Inc.
By: /s/ Ralph Reichard By:/s/ David Reckseit
-------------------------------- ---------------------------------
Signature Signature
Ralph Reichard David Reckseit
- ----------------------------------- ------------------------------------
Name (Print) Name (Print)
President & COO President
- ----------------------------------- ------------------------------------
Title Title
26
<PAGE> 1
EXHIBIT 10.44
CONFIDENTIAL TREATMENT REQUESTED
DYAD CORPORATION
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is entered into as of
March 5, 1997, by and among Dyad Corporation, a Georgia corporation ("Dyad"),
and Phoenix International Ltd., Inc., a Florida corporation ("Phoenix").
W I T N E S S E T H
WHEREAS, Dyad was founded for the purpose and is in the process of
developing automated loan and mortgage products (including associated software,
hardware and documentation);
WHEREAS, Phoenix is in the business of developing and licensing
client/server core banking software to the banking industry;
WHEREAS, Phoenix wishes, pursuant to the terms of this Agreement, to
make a capital investment in Dyad and obtain an option to make a further
capital investment in Dyad; and
WHEREAS, Phoenix wishes to market and license Dyad's products to its
current and future customers domestically and to have the exclusive right to
market Dyad's products internationally pursuant to the terms of that certain
License and Distribution Agreement between Dyad and Phoenix of even date
herewith (the "License Agreement");
NOW THEREFORE, in consideration of the premises and the mutual
promises contained in this Agreement, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
SECTION 1.
PURCHASE OF COMMON STOCK
1.1 Sale of Shares. Dyad will issue and sell to Phoenix and
Phoenix will purchase from Dyad XXX newly issued shares (the "Shares") of
Dyad's common stock, no par value per share (the "Common Stock"), at a purchase
price of XXX per share, for a total purchase price of XXXXX (the "Purchase
Price").
1.2 Closing. Contemporaneously with the execution and delivery of
this Agreement by both parties, the following shall occur:
<PAGE> 2
XXX-CONFIDENTIAL TREATMENT REQUESTED
(a) Phoenix shall deliver the Purchase Price to Dyad
either by wire transfer, cashier's check, or in such other form of immediately
available funds as may be agreed by the parties;
(b) Dyad shall deliver to Phoenix a stock certificate
made out in the name of Phoenix International Ltd., Inc. for the Shares; and
(c) Each party shall execute and deliver to the other the
License Agreement in such form as previously agreed by the parties.
SECTION 2.
GRANT OF OPTION
2.1 Option Grant. Subject to the terms and conditions set forth
herein, Dyad hereby grants to Phoenix an irrevocable, non-transferrable and
immediately exercisable option to purchase up to an additional XXXX shares (as
adjusted as set forth herein) of Common Stock (the "Option Shares"), at a
purchase price of XXXX (the "Option Purchase Price") per Option Share (the
"Option"). At any time after April 15, 1997, Dyad may call the Option by
delivering written notice thereof to Phoenix. The Option shall expire and
terminate 90 days after delivery of such notice to Phoenix as to any shares for
which an Exercise Notice has been not delivered prior to the end of such 90 day
period. If no such call notice is delivered by Dyad, the Option shall
automatically and without notice expire and terminate on March 7, 1998 (the
"Expiration Date") as to any Option Shares for which an Exercise Notice has not
been delivered to Dyad prior to the Expiration Date.
2.2 Exercise of Option. Provided that Phoenix is not in material
breach of its obligations or covenants hereunder or under the License
Agreement, Phoenix may exercise the Option as to any or all of the Option
Shares (provided that each exercise of the Option must be for a minimum of 100
Option Shares) at any time and from time to time prior to the Expiration Date
by delivering written notice thereof (an "Exercise Notice") to Dyad specifying
the number of Option Shares as to which Phoenix is exercising the Option.
Following receipt of a proper Exercise Notice, Phoenix and Dyad shall agree
upon a date and place for the closing of the purchase specified in the Exercise
Notice, which date shall be no later than 15 business days following receipt of
the Exercise Notice by Dyad (the "Option Closing Date").
2.3 Closing of Option Exercise. Upon each Option Closing Date the
following shall occur:
(a) Phoenix shall deliver to Dyad an amount equal to the
Option Purchase Price times the number of Option Shares set forth in the
Exercise Notice either by wire transfer, by cashier's check made out to Dyad,
or in such other form of immediately available funds as the parties may agree;
-2-
<PAGE> 3
XXX-CONFIDENTIAL TREATMENT REQUESTED
(b) Phoenix shall surrender this Agreement to Dyad and
the parties shall amend the Agreement to reflect the exercise of the Option for
the number of Option Shares purchased by Phoenix on such Option Closing Date;
(c) Phoenix shall exercise and deliver to Dyad a letter
containing such representations, covenants, and restrictions on transfer of the
Option Shares as may be required by Dyad with the advice of counsel for
compliance with federal and state laws;
(d) Dyad shall deliver to Phoenix a stock certificate
made out in the name of Phoenix International Ltd., Inc. for the number of
Option Shares set forth in the Exercise Notice; and
(e) Dyad shall deliver to Phoenix a certificate signed by
a duly authorized officer to the effect that all of the representations and
warranties of Dyad contained herein are and remain true in all material
respects as of the Option Closing Date.
2.4 Adjustment Upon Changes in Capitalization, etc.
In the event of any change in the number of outstanding shares
of Common Stock by reason of a stock dividend, stock split, split-up, merger,
recapitalization, combination, exchange of shares or similar transaction, the
type and number of shares or securities subject to the Option, and the Option
Purchase Price therefor, shall be adjusted appropriately, and proper provision
shall be made in the agreements governing such transaction so that Phoenix
shall receive upon exercise of the Option the number and class of shares or
other securities or property that Phoenix would have received in respect of
Common Stock if the Option had been exercised immediately prior to such event,
or the record date therefor, as applicable. If any additional shares of Common
Stock are issued after the date of this Agreement for cash or other
consideration with a fair market value less than the Option Purchase Price
(other than pursuant to an event described in the first sentence of this
Section 2.4), the number of shares of Common Stock subject to the Option shall
be increased by XX of the number of additional shares issued multiplied by (the
Option Purchase Price minus the issuance price per share) divided by the
Purchase Price, and the Option Purchase Price shall be adjusted so that the new
Option Purchase Price is equal to the then current Option Purchase Price
multiplied by XXX and divided by the aggregate of (i) the new number of shares
subject to the Option and (ii) the number of shares already purchased by
Phoenix pursuant to the Option (the effect of which should be for the total
price paid or to be paid by Phoenix for all shares under the Option to remain
at XXXXX. The foregoing sentence shall not apply to shares of Common Stock
issued in connection with any acquisition of the stock or assets of another
company, which is approved by Dyad's Board of Directors.
SECTION 3.
REPRESENTATIONS AND WARRANTIES OF DYAD
-3-
<PAGE> 4
Except as set forth in the schedules of exceptions to representations
and warranties attached hereto (the "Disclosure Schedules"), which information
shall be deemed to be representations and warranties as if made hereunder, Dyad
represents and warrants to Phoenix as follows (Dyad refers to both Dyad and its
wholly-owned subsidiary Money Pro Inc.):
3.1 Organization and Standing. Dyad is a corporation duly
organized and existing under, and by virtue of, the laws of the State of
Georgia and is in good standing under such laws. Dyad has requisite corporate
power to own and operate its properties and assets, and to carry on its
business as currently conducted and as proposed to be conducted.
3.2 Corporate Power. Dyad has all requisite legal and corporate
power to execute and deliver this Agreement and the other agreements and
instruments referred to herein (collectively the "Transaction Documents"), to
sell and issue the Shares and to grant the Option hereunder, and to carry out
and perform all of its obligations under this Agreement.
3.3 Subsidiaries. Other than MPAcquisition Corp., a wholly-owned
subsidiary of Dyad, Dyad has no subsidiaries and does not otherwise own or
control, directly or indirectly, any equity interest in any other corporation,
association or business entity.
3.4 Capitalization. The authorized capital stock of Dyad consists
of 1,000,000 shares of Common Stock, of which 9,500 shares are issued and
outstanding (assuming the closing of the merger of MoneyPro, Inc. with and into
MPAcquisition Corp). All issued and outstanding shares of Common Stock have
been duly authorized and validly issued, are fully paid and nonassessable, and
were issued in compliance with all applicable federal and state securities
laws. Other than the Option, there are no outstanding warrants, options, or
other rights to purchase or acquire any shares of Common Stock or other equity
securities of Dyad.
3.5 Authorization. All corporate action on the part of Dyad, its
directors, and its shareholders necessary for the authorization, execution,
delivery and performance of the Transaction Documents by Dyad, the
authorization, sale, issuance and delivery of the Shares, the grant of the
Option and performance thereunder, and the performance of all of Dyad's
obligations hereunder and thereunder has been taken. The Transaction Documents
have been duly executed and delivered by Dyad and constitute the valid and
binding obligations of Dyad enforceable in accordance with their terms, except
as may be limited by principles of public policy, and subject to rules of law
governing specific performance, injunctive relief or other equitable remedies.
The Shares and the Option Shares, when issued in compliance with the provisions
of this Agreement, will be validly issued, will be fully paid and nonassessable
and will be free of any liens or encumbrances.
3.6 Title to Properties and Assets; Liens, etc. Dyad has good and
marketable title to its properties and assets, and has good title to all its
leasehold interests, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than possible minor liens and encumbrances which
do not in any case materially detract from the value of the property subject
thereto or materially impair the operations of Dyad, and which have not arisen
otherwise than in the ordinary course of business. The Disclosure Schedules
contain a list of all patents, computer programs, technologies, and related
documentation, trademarks, trade names, brand
-4-
<PAGE> 5
names and copyrights (in each case, whether or not registration has been
applied for or issued), and all licenses or rights with respect to any of the
foregoing, owned or possessed by Dyad, all of which, to the best knowledge of
Dyad, are in good standing and are 100% owned by Dyad free and clear of all
liens and encumbrances of any nature. To the best knowledge of Dyad, Dyad's
products and technologies do not infringe any patent, copyright, trademark or
the intellectual property rights of any other person. To the best knowledge of
Dyad, all trade secrets, know how, technical processes and procedures developed
and belonging to Dyad which are material to the business of Dyad and which have
not been patented have been kept confidential. To the best knowledge of Dyad,
Dyad has the right to use, free and clear of claims or rights of others, all
trade secrets, customer lists, processes, computer software, patents,
copyrights and trademarks required for, incident to or included in its products
and is not using and has not used any confidential information, trade secrets,
or computer software required for its products of any former employer of any of
its past or present employees.
3.7 Compliance With Other Instruments. Dyad is not in violation
in any material respect of, and the execution, delivery, and performance under
the Transaction Documents will not result in any violation or breach of, any
term of its Articles of Incorporation or Bylaws, as amended and restated to
date, or in any material respect of any term or provision of any indebtedness,
agreement, instrument, judgment, order, statute, or regulation applicable to
Dyad or by which Dyad is bound. The execution, delivery and performance of and
compliance with the Transaction Documents, and the issuance of the Shares and
the Option, have not resulted and will not result in any material violation of,
or conflict with, or constitute a material default under, any indebtedness,
agreement, instrument, judgment, order, statute, or regulation applicable to
Dyad or by which Dyad is bound, or result in the creation of any encumbrance
upon any of the properties or assets of Dyad, and there is no such violation or
default which materially and adversely affects the business of Dyad, or any of
Dyad's properties or assets.
3.8 Undisclosed Liabilities. Except as set forth in the
Disclosure Schedules, at January 1, 1997, Dyad had no material liabilities or
obligations of any nature, whether absolute, accrued, contingent or otherwise,
and whether due or to become due. Since January 1, 1997, Dyad has incurred no
material liabilities other than in the ordinary course of its business.
3.9 Absence of Certain Changes or Events. Except as disclosed in
the Disclosure Schedules, Dyad has not incurred any liability (fixed or
contingent), except trade or business obligations incurred in the ordinary
course of business, none of which are materially adverse; subjected any of its
assets or properties to any lien or other encumbrance; transferred any of its
assets or properties or transferred or granted any rights under or with
respect to any license, agreement, trademark, trade name, copyright, know-how
or technical assistance; made or entered into any contract or commitment; or
declared any dividend or made any payment or distribution to Dyad's
shareholders.
3.10 Books and Records. Except as disclosed in the Disclosure
Schedules, the stock books, minute books, books of account, ledgers of account,
computer data and other financial and corporate records of Dyad are in all
material respects complete and correct and are maintained in accordance with
good business practices. Dyad has not made any questionable, improper or
illegal corporate payments, guarantees or commitments. Except as disclosed in
the
-5-
<PAGE> 6
Disclosure Schedules, the minute books of Dyad contain accurate records of all
meetings and accurately reflect all corporate actions of the shareholders and
directors of Dyad. Dyad's officers, directors, and shareholders are listed in
the Disclosure Schedules.
3.11 Contracts. All contracts to which Dyad is a party or to which
its assets are bound are listed on the Disclosure Schedules.
3.12 Litigation. Dyad has not instituted, and is not a party to,
any proceeding or investigation against any party. Except as disclosed in the
Disclosure Schedules, there are no proceedings or investigations pending
against Dyad or its properties before any court or governmental agency (nor, to
the best of Dyad's and knowledge, is there any reasonable basis therefor or
threat thereof), which, either in any case or in the aggregate, might result in
any material adverse change in the business or financial condition of Dyad or
any of its properties or assets, or in any material impairment of the right or
ability of Dyad to carry on its business, or in any material liability on the
part of Dyad, and none of which questions the validity of this Agreement or any
action taken or to be taken in connection herewith and therewith.
3.13 Employees. To the best of Dyad's knowledge, after reasonable
investigation, no employee or consultant of Dyad is in violation of any term of
any employment contract, intellectual property disclosure agreement, or any
other contract or agreement relating to the relationship of any such person
with Dyad or any other party because of the nature of the business conducted or
proposed to be conducted by Dyad. Dyad does not have any collective bargaining
agreements covering any of its employees. Dyad is not aware of any key
employee of Dyad who has any plans to terminate his or her employment with
Dyad.
3.14 Governmental Consent, Etc. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of Dyad is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of the
Shares, or the consummation of any other transaction contemplated hereby.
3.15 Offering. Subject to the accuracy of Phoenix' representations
in Section 4 hereof, the offer, sale and issuance of the Shares to be issued in
conformity with the terms of this Agreement constitute transactions exempt from
the registration requirements of the Securities Act of 1933 (the "Securities
Act").
3.16 Relationship with Affiliates; No Conflict of Interest. All of
the statements in this Agreement, together with the statements in the
Disclosure Schedules, are true and contain a complete description of Dyad's
relationship with any firm or corporation with which Dyad is affiliated or with
which Dyad has a business relationship, or any firm or corporation which
competes with Dyad. None of Dyad's officers, directors, or shareholders, or
any members of their immediate families are indebted to Dyad or, except as
disclosed in the Disclosure Schedules, have any direct or indirect ownership
interest in any firm or corporation with which Dyad is affiliated or with which
Dyad has a business relationship, or any firm or corporation which competes
with Dyad. None of Dyad's officers, directors or shareholders, or any member
of their immediate families, has any direct or indirect interest in any
material contract with
-6-
<PAGE> 7
Dyad. Dyad is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
3.17 Material Facts. This Agreement, the Disclosure Schedules, and
each other agreement, document, certificate or written statement furnished, or
to be furnished, through the Closing by or on behalf of Dyad in connection with
the transactions contemplated hereby, taken as a whole, does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements contained therein or herein in light of the
circumstances in which they were made not misleading. To the best knowledge of
Dyad, there is no fact which has not been disclosed herein or in the Disclosure
Schedules hereto to Phoenix which may materially adversely affect the business,
properties, assets or condition, financial or otherwise, of Dyad, except for
facts relating to general economic and regulatory conditions which may affect
all companies which are in a similar industry in the same manner.
SECTION 4.
REPRESENTATIONS AND WARRANTIES OF PHOENIX
Phoenix hereby represents and warrants to Dyad as follows:
4.1 Experience. Phoenix is a corporation with total assets as of
the date of this Agreement in excess of $5,000,000, and has experience in
evaluating and investing in private placement transactions and is capable of
evaluating the merits and risks of its investment in Dyad. Furthermore,
Phoenix has evaluated such merits and risks, and on the basis of such
evaluation desires to enter into the transactions contemplated herein. Phoenix
acknowledges that all documents, records, and books pertaining to Dyad have
been made available for inspection by Phoenix and Phoenix understands that the
books and records of Dyad will continue to be made available to Phoenix for
inspection upon reasonable notice, during reasonable business hours, at the
principal place of business of Dyad. Phoenix and its adviser or advisers have
had a reasonable opportunity to ask questions of and receive answers from the
officers of Dyad, or a person or persons acting on their behalf, concerning the
terms and conditions of the offering of the Shares and Option Shares, and to
obtain additional information, to the extent possessed or obtainable without
unreasonable effort or expense by the officers of Dyad. all such questions
have been answered to the full satisfaction of Phoenix.
4.2 Investment. Phoenix is acquiring the Shares for its own
individual account, not as a nominee or agent, and not with the view to, or for
resale in connection with, any distribution thereof. Phoenix understands that
the Shares have not been, and will not be, registered under the Securities Act
or any state securities laws by reason of a specific exemption from the
registration provisions of the Securities Act and the applicable state's
securities laws which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of such Purchaser's representations as
expressed herein.
4.3 Power. Phoenix has all requisite legal power to execute and
deliver this Agreement, to purchase the Shares hereunder, and to carry out and
perform its obligations under the terms of the Transaction Documents.
-7-
<PAGE> 8
4.4 Authorization. This Agreement, when executed and delivered by
Phoenix, shall constitute the valid and binding obligation of Phoenix
enforceable in accordance with its terms, except as may be limited by
principles of public policy, and subject to rules of law governing specific
performance, injunctive relief or other equitable remedies.
SECTION 5.
MISCELLANEOUS
5.1 Restrictive Legends. All certificates for shares of Common
Stock delivered to Phoenix hereunder shall contain the following restrictive
legend and such other restrictive legends as may be required under state or
federal law:
THE SALE OF THE SHARES REPRESENTED BY THIS CERTIFICATE HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR THE
SECURITIES LAWS OF ANY STATE. THE SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO OR FOR RESALE IN CONNECTION WITH THE
DISTRIBUTION THEREOF. NO DISPOSITION OF THE SHARES MAY BE MADE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND
COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL TO THIS CORPORATION TO THE EFFECT THAT SUCH DISPOSITION IS IN
COMPLIANCE WITH THE ACT AND APPLICABLE STATE SECURITIES LAWS.
Such legend shall be removed by delivery of a substitute certificate(s) without
such a legend upon delivery to Dyad of a letter from the staff of the SEC or an
opinion of counsel in form and substance satisfactory to Dyad and its counsel
to the effect that such legend is no longer required under applicable law.
5.2 Termination. Dyad may terminate the Option upon written
notice to Phoenix at any time upon the material breach by Phoenix of its
representations and warranties hereunder or of its obligations or covenants
under this Agreement, the Shareholder Agreement or the License Agreement, which
breach is not cured within 15 days following notice thereof to Phoenix from
Dyad.
5.3 Survival. The representations, warranties, covenants and
agreements made herein shall survive the closing of the transactions
contemplated hereby.
5.4 Entire Agreement; Amendment. This Agreement and the other
documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other party in
any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged
or terminated other than
-8-
<PAGE> 9
XXX-CONFIDENTIAL TREATMENT REQUESTED
by a written instrument signed by the party against whom enforcement of any
such amendment, waiver, discharge or termination is sought.
5.5 Notices, Etc. All notices and other communications required
or permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand, messenger or
telecopy, addressed as follows:
if to Phoenix: Phoenix International Ltd., Inc.
500 International Parkway
Heathrow, Florida 32746
Attn: Bahram Yusefzadeh
if to Dyad: Dyad Corporation
3150 Holcomb Bridge Road
Suite 200
Norcross, GA 30071
Attn: xxx
or at such other address as a party shall have properly notified to the other
parties. Each such notice or other communication shall for all purposes of
this Agreement be effective when delivered or received if delivered personally,
by facsimile, by U.S. mail return receipt requested, or by overnight courier
service such as United Parcel Service or FedEx.
5.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
5.7 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
5.8 Severability. The agreements and undertaking of parties
contained in this agreement shall each be construed as an agreement and
undertaking independent of any other provision of this agreement. The parties
hereby expressly agree that it is not the intention of any party to violate any
public policy, statutory or common law, and that if any sentence, paragraph,
clause or combination of the same is in violation of applicable law, such
sentence, paragraph, clause or combination of the same alone shall be void in
the jurisdiction where it is unlawful, and the remainder of such clause and
this agreement shall remain binding upon the parties hereto. In the event that
any provision hereof is determined to be overly broad or unenforceable, the
parties hereto agree to the modification of such provisions to the minimum
extent required to make them valid and enforceable.
5.9 Parties Bound by Agreement; Successors and Assigns. The
terms, conditions and obligations of this Agreement shall inure to the benefit
of and be binding upon the parties hereto and the respective successors and
assigns thereof. Without the prior written consent of the other
-9-
<PAGE> 10
party, neither party may assign its rights, duties or obligations hereunder or
any part thereof to any other person.
5.10 Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of Georgia, without regard
to laws governing choice of law.
The foregoing Agreement is hereby executed as of the date first
above written.
DYAD CORPORATION
By:/s/ John Collins
--------------------------------
John Collins, Chairman
PHOENIX INTERNATIONAL LTD., INC.
By:/s/ Bahram Yusefzadeh
--------------------------------
Signature
Bahram Yusefzadeh
- -----------------------------------
Print Name
Chairman & CEO
- -----------------------------------
Print Title
-10-
<PAGE> 1
EXHIBIT 10.45
CONFIDENTIAL TREATMENT REQUESTED
DYAD CORPORATION
LICENSE AND DISTRIBUTION AGREEMENT
This License and Distribution Agreement (this "Agreement") is entered
into as of March 5, 1997 by and between Phoenix International Ltd., Inc., a
Florida corporation ("Phoenix"), and Dyad Corporation, a Georgia corporation
("Dyad").
RECITALS
Dyad is in the process of developing certain automated loan, mortgage
and financial services delivery machines for use in the financial services
industry. Phoenix has made a capital investment in Dyad pursuant to the Stock
Purchase Agreement between them of even date herewith, and wishes to promote
and sell Dyad's products domestically in conjunction with its own products and
to have an exclusive right to promote and sell Dyad's products internationally.
NOW, THEREFORE, in consideration and furtherance of the foregoing, the
parties hereto, intending to be legally bound, agree as follows:
1. DEFINITIONS
As used in this Agreement, capitalized terms shall have the following
meanings:
1.1. Confidential Information means any business, technical or
other information furnished by one party hereto to the other
or disclosed to the other as a result of examination or
inspection of the other party's facilities or products,
whether such information is disclosed in writing or orally.
Confidential Information shall in all cases include all source
and object code, development level documentation, and similar
technical information regarding the Products and Phoenix
Software and all marketing, business and product development
information. Confidential Information shall not include
information which (a) at the time of disclosure is in the
public domain or thereafter enters the public domain for
reasons not attributable to any act or omission of the
receiving party in breach of its obligations hereunder, (b)
which the receiving party can show was in its possession prior
to the disclosure thereof by the disclosing party, or (c)
which the receiving party can show it acquired from a third
party who does not thereby breach an obligation of confidence
to the disclosing party and who discloses it in good faith.
1.2. Documentation means the documentation associated with the
Products as produced and provided by Dyad to Phoenix.
<PAGE> 2
1.3. End User means a customer who purchases the Products and/or
licenses the Software from Phoenix.
1.4. End User License means the agreement to be entered into
between Phoenix and each End User pursuant to Section 9.1
granting the End User a license to use the Products and/or the
Software.
1.5. Intellectual Property Rights means all copyrights and design
rights, whether registered or unregistered, patents or patent
applications, know-how, trade secrets, and Confidential
Information related to or arising in the Products, Software or
Documentation, including all applicable architecture, designs,
modules, routines, programming, command structures,
interfaces, and any Modifications thereto.
1.6. Modification means a work which is based upon one or more
preexisting works, such as a revision, modification,
translation, abridgement, condensation, expansion, or any
other form in which such preexisting works may be recast,
transformed, or adapted, and shall include any work that
incorporates or is combined with such a preexisting work or
any portion thereof.
1.7. Modify means to make a Modification.
1.8. Phoenix Customer means a U.S. customer of Phoenix who has
purchased a license for and is using the Phoenix Software.
1.9. Phoenix Marketing Agents means those persons who have been
authorized by Phoenix to sell, market and/or distribute the
Phoenix Software.
1.10. Phoenix Software means the software of Phoenix known as the
Phoenix Retail Banking System.
1.11. Prime Rate means the prime rate (or base rate) reported in the
"Money Rates" column or section of The Wall Street Journal as
being the base rate on corporate loans at larger U.S. money
center banks on the first date on which The Wall Street
Journal is published in each month.
1.12. Products means the current and future versions of the Dyad
products currently referred to by Dyad as the Automatic Loan
Machine and the MoneyPro Video Conferencing Kiosk System, and
the associated Software and Documentation. Additional
products may be added by agreement of the parties as they are
developed or acquired by Dyad.
1.13. Trademarks means the trademarks, service marks and trade names
used by Dyad in connection with the Products, whether
registered or unregistered.
2
<PAGE> 3
XXX-CONFIDENTIAL TREATMENT REQUESTED
1.14. Software means the Software developed and owned by Dyad and
required for operation of the Products, including all
interfaces, additions, and Modifications thereto and new
releases thereof delivered to Phoenix under this Agreement.
2. MARKETING APPOINTMENT
2.1. Domestic
Dyad hereby grants Phoenix the exclusive right to market, sell
and license the Products to Phoenix Customers, and the
non-exclusive right to market the Products to potential
Phoenix Customers and to market, license and sell the Products
to persons who originate loans or mortgages on behalf of
Phoenix' Customers, including by way of example car dealers,
furniture retailers, and real estate agents. Dyad shall not,
and shall not allow any of its other marketing or distribution
persons to market the Products to Phoenix' potential customers
who are actively considering and working with Phoenix
regarding a license for the Phoenix Software. Phoenix shall
provide a list of such potential customers to Dyad from time
to time.
2.2. International
Dyad hereby grants Phoenix the exclusive right to market, sell
and license the Products worldwide outside of the U.S. The
exclusivity of such international marketing right shall be
contingent upon Phoenix meeting the following minimum Net
Revenue (as defined in Section 5.3) from sale or license of
the Products and Software outside of the U.S.:
XXX by XXXXXXXXXXXX
If such target is not met by Phoenix, Phoenix' rights under
this Section 2.2 shall become immediately and automatically
non-exclusive. Additionally, such exclusivity may terminate
as set forth in Section 10.1 below.
2.3. Marketing Agents
Phoenix may sublicense the rights granted in this Section 2 to
any of its subsidiaries or Marketing Agents subject to the
following terms and restrictions: (a) Phoenix may not provide
any Product, or sublicense any rights hereunder, to any
competitor of Dyad or any person developing, marketing or
selling a competitive product; (b) such party is authorized to
and is actively marketing, licensing or distributing the
Phoenix Software; (c) Phoenix shall be responsible for
ensuring compliance by each such party with all applicable
terms and conditions of this Agreement respecting the use and
protection of the Confidential Information and Intellectual
Property Rights of Dyad; and (d) Phoenix shall use
3
<PAGE> 4
the same amount of care and protection in dealing with
each such party with respect to the Products as it provides
and uses with respect to the Phoenix Software.
3. LICENSE
3.1. License Grant
Subject to the terms and conditions of this Agreement, and in
support of the other rights granted hereunder, Dyad hereby
grants Phoenix the following rights and licenses with respect
to the Products:
(a) To make copies of the Software in object code form
only and copies of the Documentation for distribution
to End Users as authorized by paragraph 3.1(b) below
and for use by Phoenix as authorized by paragraphs
3.1(c) and 3.1(d) below;
(b) To distribute copies of the Software to End Users who
have duly executed End User License Agreements
concerning the Products or the Software.
(c) To install and use the Software on Phoenix' own
computer systems and to use the Documentation for
demonstration, training and support of End Users.
(d) To make Modifications to the Software in conjunction
with Dyad as authorized by Section 4 below.
(e) To use the Trademarks relating to the Products,
provided, however, that such use shall be subject to
reasonable advertising and promotion guidelines which
Dyad may provide from time to time. Dyad reserves
the right to disallow any use of the Trademarks which
would in any way, in Dyad's opinion, harm the
validity or value of the Trademarks.
3.2. Restrictions
(a) Phoenix shall not copy, adapt, modify or reproduce
the Software in any manner whatsoever other than as
expressly provided in this Agreement without the
prior written consent of Dyad.
(b) Phoenix may not provide the Software to any third
party except pursuant to a fully executed End User
License or to Phoenix Marketing Agents pursuant to
Section 2.3.
(c) Phoenix may not use the Products in production for
the benefit of any third party, except as otherwise
allowed by written agreement between Dyad and
Phoenix.
4
<PAGE> 5
XXX-CONFIDENTIAL TREATMENT REQUESTED
(d) During the term of this Agreement for the two years
thereafter, Phoenix may not use, rely on, or refer to
the Products, the Software, or any Confidential
Information of Dyad to develop, have developed,
support or invest in, directly or indirectly, the
development of any product which has, entirely or
partially, the same functions as any of the Products
or Software or which would be in direct or indirect
competition with any of the Products, or to sell
competing products or services.
4. MODIFICATIONS
4.1. Product Interface
Dyad and Phoenix shall work in conjunction with one another to
develop an interface between the Products and the Phoenix
Software. Each party shall pay its own costs associated with
the development of such interface. Upon completion, those
parts of the interface which are separable from the Software
and the Phoenix Software shall be jointly owned by Phoenix and
Dyad.
4.2. Localization Modifications
From time to time, Phoenix may request that the Software be
Modified for use in other countries, which Modifications may
include translations into other languages and Modifications
required for compliance by the Products with local rules and
regulations governing financial institutions. Phoenix and
Dyad shall jointly develop the parameters for such
Modifications and a reasonable schedule for completion.
Unless otherwise agreed by the parties, such Modifications
shall be produced by Dyad, and Phoenix shall pay Dyad for such
Modifications at its then current time and material rates plus
travel and lodging expenses related to such Modifications.
5. REPORTING, FEES AND PAYMENT
5.1. Initial License Fee
Contemporaneously with the execution of this Agreement,
Phoenix shall pay Dyad a License Fee in the amount of XXXX for
the license of the Software to XXX of its customers. Such
amount shall be paid by delivering XXX to Dyad in immediately
available funds by either wire transfer or cashier's check, as
agreed by the parties, and by delivering a promissory note in
the amount of XXX, payable on or before XXXXX. No additional
license fee in excess of the continuing royalties below shall
be due for customers in excess of XXX.
5
<PAGE> 6
XXX-CONFIDENTIAL TREATMENT REQUESTED
5.2. Continuing Royalties
For payment of the initial license fee above, Phoenix may keep
the first XXX in Net Revenue (as defined below) from the sale,
license and maintenance of the Products. In addition to the
initial license fee, after the first XXXX in NetRevenue,
Phoenix shall pay to Dyad a percentage of its Net Revenues as
follows: (i) XX of the Net Revenue received by Phoenix from
the XXXXXX of the Products including, without limitation,
XXXXXXXXXXXXX; (ii) XXX of its Net Revenue from XXXXXXXX of
the Products; and (iii) Phoenix and Dyad shall XXXXXXXXX based
on XXXXXXXXXX. It is anticipated that Dyad will assist with
initial implementations and that Phoenix will eventually
handle implementations on its own. Amounts due Dyad hereunder
shall be paid to Dyad by the tenth business day following the
receipt of such revenue by Phoenix, and shall be accompanied
by the name of the End User, their address, and the number of
locations where each End User is using the Products.
5.3. Pricing and Determination of Net Revenue
(a) Phoenix and Dyad shall work together and use their
best efforts to jointly develop pricing terms for the
Products to be offered to End Users (the "Price
List"). Phoenix shall adhere to the Price List in
all sales and licenses of the Products and Software,
or any components thereof. The Price List shall be
reviewed by the parties periodically and revised to
reflect customer requirements, changes in the market,
products costs, and other relevant factors. Dyad
shall not offer pricing for the Products which are
materially better than those contained in the Price
List. Phoenix shall be responsible for the invoice
and collection of all fees owed by End Users.
(b) For purposes of this Agreement, Net Revenues shall be
defined as gross revenue received by Phoenix, minus
hardware and other out-of-pocket expenses reasonably
incurred by Phoenix associated with such revenue.
For the purpose of determining gross revenue, fees
collected by Phoenix shall be deemed to be the higher
of (i) the fees actually collected by Phoenix or (ii)
the fees set forth in the Price List. If the amount
of a particular fee cannot be determined because it
is included in the bulk fees for the Phoenix Software
or otherwise, the Price List fee shall be used to
determine gross revenue.
6
<PAGE> 7
XXX-CONFIDENTIAL TREATMENT REQUESTED
5.4. Other Fees
From time to time Dyad may provide additional programming or
consulting services to Phoenix not otherwise covered by this
Agreement. Such services shall be detailed in a work order
agreed to by both parties setting forth the services to be
provided and the estimated schedule for completion of such
services. Dyad shall bill Phoenix for such services
XXXXXXXXXXXXXXXXXXXXXXXX, plus reimbursement for reasonable
related travel, lodging, meals, and other out-of-pocket
expenses. Phoenix shall pay Dyad all properly invoiced
amounts therefore within ten business days following receipt
of such invoice.
5.5. Expenses
Except as otherwise expressly set forth herein, Phoenix shall
be responsible for all of its own marketing and other expenses
related to the subject matter of this Agreement.
5.6. Taxes
Phoenix shall be responsible for paying all U.S. and foreign
taxes that are imposed due to the transactions contemplated by
this Agreement, including all applicable excise, property,
VAT, sales and use, or similar taxes, any income taxes or
withholding requirement in addition to or in lieu thereof
(exclusive only of United States Federal, state or local taxes
based upon the net income of Dyad), and any customs, import,
export or other duties, levies, tariffs, taxes, or other
similar charges. Phoenix shall indemnify and hold Dyad
harmless from any and all expenses related to Phoenix failure
to pay such taxes, and if Dyad is required to pay any taxes
for which Phoenix is responsible hereunder, Phoenix shall
promptly reimburse Dyad therefore.
6. HARDWARE
Phoenix shall purchase, and shall cause all End Users to purchase, all
hardware required for the Products from Dyad (including the automatic
loan machines and the video kiosks for the mortgage system). Dyad
shall sell such hardware to Phoenix at cost. Upon request, Dyad will
review alternative hardware and software configurations proposed by
Phoenix and may, in its sole discretion, approve such configurations.
7. SOFTWARE INTEGRATION
Certain portions of the Software may be appropriate for use with the
Phoenix Software apart from their applicability to the functionality
of the Products. Dyad and Phoenix shall work together to identify
such components of the Software, and to formulate a plan for
integration of such software components with and into the Phoenix
Software. Phoenix and/or Dyad shall Modify such software components
as may be necessary to
7
<PAGE> 8
enable them to work independently of the Products and in conjunction
with the Phoenix Software. Phoenix and Dyad shall work together to
enter into an agreement setting forth pricing, ownership, license, and
revenue sharing terms for the license of such Software products to
Phoenix' Customers. Such terms shall be no less favorable to Phoenix
than the terms of this Agreement. Phoenix shall bear and/or shall
reimburse Dyad for all costs associated with such Modifications.
8. OBLIGATIONS OF DYAD
8.1. Copies of the Software
Dyad shall provide Phoenix with a reasonable number of copies
of the Software and Documentation as necessary for Phoenix to
fulfill its obligations and exercise its rights hereunder.
All Software and Documentation shall be provided in English
unless otherwise translated as provided in Section 4.2 above.
8.2. Maintenance and Support
Dyad shall provide the following maintenance and support to
Phoenix for the Products:
(a) Dyad shall deliver all future Modifications and new
versions and releases of the Software to Phoenix
which Dyad has prepared for license to its customers.
Such Modifications and new releases shall become part
of the Products and subject to this Agreement upon
delivery.
(b) Dyad shall use its reasonable commercial efforts to
correct or provide work around solutions for material
reproducible errors in the Products reported to Dyad
by Phoenix. Phoenix shall provide all information
required by Dyad to reproduce and correct such
errors. Material errors are those which cause the
Products to operate other than in conformity with
their documentation or which interfere with an End
User's proper use of the Products or Software.
(c) Dyad shall provide telephone support to Phoenix for
the Products and Software to assist Phoenix in the
provision of maintenance and support of the Products
and Software to End Users as required under Section
10.3 below.
8.3. Exceptions
The following matters are not covered by maintenance or
support under this Agreement:
(a) Any problem resulting from the misuse, improper use,
alteration, or damage of any of the Software;
8
<PAGE> 9
XXX-CONFIDENTIAL TREATMENT REQUESTED
(b) Any problem caused by the Modifications of any
version of the Software not made or authorized by
Dyad; or
(c) Any problem resulting from the use of the Software
with other programming or with hardware
configurations not approved in writing by Dyad.
8.4. Training
Dyad shall provide technical assistance and training to
Phoenix as reasonably requested by Phoenix for its own
personnel at no charge; provided, however, that Phoenix shall
reimburse Dyad for all expenses incurred by Dyad (including
travel and lodging expenses) in providing such assistance and
training. Additionally, Dyad personnel shall assist and work
with Phoenix' personnel in the first XXX installations of
Products for End Users.
9. OBLIGATIONS OF PHOENIX
9.1. End User Agreements
Phoenix shall require each End User to enter into an End User
License with Phoenix prior to delivery of any Product to such
End User. Phoenix shall furnish each form of End User License
Phoenix proposes to use to Dyad for its approval. End User
License shall contain appropriate terms regarding ownership of
intellectual property, licensing terms, protection of
confidential information and other terms as may be reasonably
requested by Dyad. Phoenix shall use all reasonable efforts
to enforce the terms of End User Licenses and to ensure
compliance by End Users. Phoenix shall inform Dyad of all
known breaches of End User Licenses.
9.2. End Users
Phoenix shall notify Dyad of potential customers for the
Products. Dyad shall notify Phoenix of marketing conflicts
with Dyad's marketing efforts to such potential customers. In
case of conflict, the senior sales managers of Phoenix and
Dyad shall determine whose sales force shall market to the
customer. If no resolution can be reached, the decision of
Dyad as to such customer shall be final.
9.3. End User Support
Phoenix shall provide all maintenance and support to End
Users. Dyad shall not be responsible for support of any End
User, but shall only provide such assistance to Phoenix'
support staff as they may require from time to time to resolve
End User problems. Phoenix shall maintain a qualified support
staff capable of
9
<PAGE> 10
providing such support and maintenance and shall
maintain a telephone support line during Phoenix regular
business hours for provision of telephone support to End
Users.
9.4. Customer Contacts
Phoenix will work exclusively with Dyad with respect to any
business opportunity presented to Phoenix by Dyad or obtained
by Phoenix as a result of its working relationship with Dyad.
9.5. Notices, Logos and Marks.
Phoenix shall not alter, erase or obscure any notices,
legends, or trademarks or alter any indications of ownership
such as copyright, serial number or any other designations or
security provisions featured on copies of the Software and
Documentation, and shall include all such features on all
copies of the Software and Documentation made by Phoenix.
9.6. Copies of Materials
Prior to use, Phoenix shall send to Dyad for review and
approval copies of all advertising, marketing and product
materials related to the Products or Software proposed to be
used by Phoenix. Such approval by Dyad shall not be
unreasonably withheld.
9.7. Compliance with Laws
(a) Phoenix shall, at its own expense, be responsible for
insuring compliance with all laws relating to the
export and license of the Products by Phoenix
hereunder, and shall procure all licenses and pay all
fees and other charges required thereby.
(b) Phoenix may not ship, export or re-export the
Products or any other information, process, product
or service obtained directly or indirectly from Dyad
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, the North Atlantic Treaty
Organization, or any other U.S. or foreign law.
(c) Phoenix hereby agrees that it and its directors,
officers, employees, and agents will comply with the
Foreign Corrupt Practices Act of 1977, as amended.
10. TERM AND REVIEW
10.1. Term
10
<PAGE> 11
This Agreement shall become effective on the date first set
forth above and shall continue for an initial term of 5 years.
This Agreement shall automatically renew for successive terms
of two years thereafter. After the initial 5 year term,
either party may terminate this Agreement upon 180 days' prior
written notice. Phoenix' exclusivity with respect to the
rights granted under Section 2.2 shall expire at the end of 3
years following the date of this Agreement, unless extended by
mutual agreement of the parties.
10.2. Termination
Either party may terminate this Agreement at any time on at
least thirty (30) days' prior written notice following a
material breach of the terms of this Agreement by the other
party which is not cured within such notice period. Dyad may
terminate this Agreement upon thirty (30) days' prior written
notice if Phoenix either (i) incurs a conflict of interest of
significant impact, or (ii) fails to devote reasonable effort
to the license of the Software to End Users, which failure is
not cured within the notice period. Phoenix may terminate
this Agreement upon 60 days' prior written notice to Dyad.
10.3. Effect of Termination
Notwithstanding the termination of this Agreement, Dyad shall
continue to be entitled to the fees earned under this
Agreement.
10.4. Survival
Notwithstanding termination of this Agreement for any reason
(including, without limitation, by notice pursuant to Section
10.2), Sections 3.2(d), 5.2, 12, (Indemnification by Phoenix),
13 (Title to Intellectual Property), 14 (Confidentiality) and
16 (General) shall continue to have effect as shall any other
provisions which by their nature or necessary implication
ought or were intended to continue to have effect, and End
User Licenses of customers already granted prior to the date
of such termination shall continue to be valid.
10.5. Actions Upon Termination
Upon termination Phoenix shall:
(a) promptly cease to use, license, market or promote
the Products;
(b) return all copies of the Products in the possession
of Phoenix to Dyad and shall cease using the same for
any purpose whatsoever;
(c) for a period of six (6) months following termination,
refer to Dyad all prospective customers and all
inquiries received by it relating to the Products;
11
<PAGE> 12
(d) return and deliver or cause to be returned and
delivered to Dyad all memoranda, notes, reports,
documents or media relating to or containing
Confidential Information, including any copies or
extracts thereof.
(e) if termination is by Dyad due to breach by Phoenix,
and Phoenix fails to provide continuing support to
End Users pursuant to its obligations under End User
License or other maintenance agreements, Phoenix
shall assign all End User Licenses and other such
agreements to Dyad to the extent required for Dyad to
provide support of the Products to End Users.
Phoenix shall certify its compliance with this Section upon
the written request of Dyad. Notwithstanding the foregoing or
the termination of this Agreement, provided Phoenix is current
and continues to make all payments due Dyad hereunder, has not
breached any material term of this Agreement, and continues to
provide maintenance and support to End Users in accordance
with the terms of the agreements Phoenix may have with such
End Users, Phoenix may continue to use the Products solely for
the purposes of providing maintenance and support of the
Products to End Users under continuing End User Licenses,
maintenance agreements, or other written agreement.
11. WARRANTY
11.1. No Warranty
Dyad's maintenance obligations to Phoenix under Section 8.2
above are in lieu of any warranty with respect to the Products
or the Software. DYAD DISCLAIMS ANY AND ALL OTHER
REPRESENTATIONS AND WARRANTIES, WHETHER ORAL OR WRITTEN,
EXPRESS OR IMPLIED, WITH RESPECT TO THE PRODUCTS INCLUDING
(WITHOUT LIMITATION) ANY WARRANTY AS TO MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
11.2. Limitation of Liability and Damages
DYAD'S LIABILITY FOR ANY AND ALL DAMAGES SHALL BE LIMITED TO
THE REMEDIES PROVIDED HEREIN. NEITHER PARTY SHALL HAVE ANY
LIABILITY FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES WHATSOEVER, INCLUDING, WITHOUT
LIMITATION, DAMAGES FOR LOSS OF PROFITS, INTERRUPTION OF
BUSINESS, OR ANY OTHER MONETARY LOSS, ARISING OUT OF THE USE
OR INABILITY TO USE THE PRODUCTS OR THE SOFTWARE, OR FOR
MISSTATEMENTS, MISTAKES OR OMISSIONS IN THE DOCUMENTATION,
EVEN IF SUCH PARTY HAS BEEN APPRISED OF THE POSSIBILITY OF
SUCH DAMAGES. Neither party shall be responsible to any
customer or End User for the quality of service or performance
of
12
<PAGE> 13
products furnished by the other party. Each party is
solely responsible for establishing the prices of its own
products, services and associated deliverables.
12. INDEMNIFICATION BY PHOENIX.
12.1. Infringement of Intellectual Property Rights.
If a third party claims that the Products infringe any patent,
copyright, trade secret, or similar Intellectual Property
Rights, Dyad shall (as long as Phoenix is not in default under
this Agreement or any other agreement with Phoenix) indemnify
and defend Phoenix against such claim at Dyad's expense,
provided that Phoenix promptly notifies Dyad in writing of any
such claim, allows Dyad to control all negotiations and
litigation related thereto, and cooperates with Dyad in the
defense and disposition of such claim, including any related
settlement negotiations.
12.2. Limitations.
If such a claim is made or appears possible, Dyad may, at its
option, secure for Phoenix the right to continue to use the
Products, or modify or replace the infringing Product so it is
non-infringing. Dyad has no obligation hereunder for any
claim based on a modified version of a Product which has not
been approved by Dyad, or for any combination, operation or
use of the Products with a non-approved operating environment
or with any program, product, data or apparatus not approved
in writing by Dyad. Dyad 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 12 STATES
DYAD'S ENTIRE OBLIGATION TO PHOENIX WITH RESPECT TO MATTERS OF
TITLE OR ANY CLAIM OF INFRINGEMENT THEREOF.
13. TITLE TO INTELLECTUAL PROPERTY
All right title and interest in and to all copies of the Products,
Software and Documentation and all Intellectual Property Rights
pertaining thereto shall vest exclusively with Dyad, including the
Intellectual Property Rights in all Modifications and other related
works created by or for Dyad, Phoenix, or any End User, including
their personnel and permitted agents or contractors (except as
otherwise expressly stated herein). To the extent rights in
Modifications and all Intellectual Property Rights therein do not
automatically and fully vest exclusively in Dyad, Phoenix agrees to
and hereby does assign to Dyad all such rights, and shall execute all
such other agreements as Dyad may require to effect such assignment.
To the extent Modifications are produced by or under the supervision
of Dyad, Dyad hereby grants to Phoenix a non-transferrable, and
royalty free license to reproduce, license and distribute such
Modifications, but only to the extent they are marketed and licensed
or sold to End Users for use solely with duly licensed versions of the
Software pursuant to End User Licenses in effect with Phoenix.
13
<PAGE> 14
Neither party, without the express prior written approval of the other
shall use the trademarks, service marks, or proprietary words or
symbols of the other. Notwithstanding the foregoing, nothing
contained in this Agreement shall affect either party's rights to use
any trademarks, service marks, or proprietary words or symbols of the
other to the extent otherwise permitted by applicable law or by
written agreement between the parties.
14. CONFIDENTIALITY
Except as otherwise provided herein or as allowed by the prior written
consent of the other party, for the term of this Agreement and for a
period of three (3) years following the termination of this Agreement
(and for ten (10) years with respect to source code for any Software),
each party hereto (a) shall receive all Confidential Information of
the other in strict confidence, (b) shall use the same degree of care
which it uses to protect its own Confidential information to maintain
the confidentiality and secrecy thereof, (c) shall disclose the
Confidential Information, and permit the Confidential Information to
be disclosed, only to its employees who need access to the
Confidential Information to carry out the terms and intent of this
Agreement, and (d) shall use the Confidential Information only in
furtherance of its rights and obligations set forth in this Agreement.
Both the parties shall keep confidential the terms and conditions of
this Agreement, but not its existence, and all other information which
is designated in writing as confidential by one party to the other.
Notwithstanding the foregoing, a party may make such disclosures as
may be required by order of a court of competent jurisdiction,
administrative agency or other government body, or by law rule or
regulation, provided, however, that to the extent possible, it gives
the other party prior written notice of such requirement and assists
the other party in its efforts to oppose such requirement.
15. EMPLOYEES
During the term of this Agreement and for a period of twelve (12)
months thereafter, neither party will directly or indirectly solicit
for employment or employ any employee of the other without the prior
written consent of the other.
16. GENERAL
16.1. No Authority to Bind the Other Party
The parties to this Agreement are independent contractors and,
except as provided in this Agreement or otherwise in a writing
signed by both parties, neither party is authorized to act on
behalf of the other or to bind the other. This Agreement does
not establish any relationship of agency, partnership, or
joint venture. Each party shall bear responsibility for its
own employees, including terms of employment, wages, hours,
tax withholding, required insurance, and daily direction and
control. Except as otherwise set forth in an Addendum, the
relationship created hereunder is non-exclusive as to each
party.
14
<PAGE> 15
16.2. Successors and Assigns
Except as otherwise provided in this Agreement, neither party
may assign this Agreement or any rights or obligations
hereunder without the prior written consent of the other
party. Any such attempted assignment without such prior
written consent shall be void and of no force and effect.
This Agreement shall inure to the benefit of and shall be
binding upon the permitted successors and assigns of the
parties hereto.
16.3. Governing Law; Jurisdiction
The construction and interpretation of, and the rights and
obligations of the parties pursuant to this Agreement shall be
governed by the laws of the State of Georgia.
16.4. Force Majeure
Neither party shall be liable for any failure of or delay in
the performance of this Agreement for the period that such
failure or delay is due to acts of God, public enemy, civil
war, strikes or labor disputes, or any other cause beyond the
parties' reasonable control. Each party agrees to notify the
other party promptly of the occurrence of any such cause and
to carry out this Agreement as promptly as practicable after
such cause has terminated.
16.5. Severability
In the event that any part of this Agreement is declared by
any court or other judicial or administrative body to be null,
void or unenforceable, said provision shall survive to the
extent if is not so declared, and all of the other provisions
of this Agreement shall remain in full force and effect.
16.6. Notices
All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed to have
been duly given: (i) on the date of service if served
personally on the party to whom notice is to be given; (ii) on
the day of transmission if sent via facsimile transmission to
the facsimile number given below, and telephonic confirmation
of receipt is obtained promptly after completion of
transmission; (iii) on the second day after delivery to
Federal Express or similar overnight courier or the Express
Mail service maintained by the United States Postal Service;
or (iv) on the fifth day after mailing, if mailed to the party
to whom notice is to be given, by first class air mail,
registered or certified, postage prepaid and properly
addressed, to the party as follows:
15
<PAGE> 16
XXX-CONFIDENTIAL TREATMENT REQUESTED
If to Phoenix: Phoenix International Ltd., Inc.
500 International Parkway
Heathrow, Florida 32746
Attention: Ralph Reichard
If to Dyad : Dyad Corporation
3150 Holcomb Bridge Road
Suite 200
Norcross, Georgia 30071
Attention: XXX
Either party may change its address for the purpose of this
Section by giving the other parties written notice of its new
address in the manner set forth above.
16.7. Amendments; Waivers
This Agreement may be amended or modified, and any of the
terms, covenants, representations, warranties or conditions
hereof may be waived, only by a written instrument executed by
the parties hereto, or in the case of a waiver, by the party
waiving compliance. Any waiver by any party of a condition,
or of the breach of any provision, term, covenant,
representation or warranty contained in this Agreement, in any
one or more instances, shall not be deemed to be nor construed
as furthering or continuing waiver of any such condition, or
of the breach of any other provision, term, covenant,
representation or warranty of this Agreement.
16.8. Entire Agreement
This Agreement contains the entire understanding between the
parties hereto with respect to the transactions contemplated
hereby and supersedes and replaces all prior and
contemporaneous agreements and understandings, oral or
written, with regard to such transactions. All schedules and
addenda hereto and any documents and instruments delivered
pursuant to any provision hereof are expressly made a part of
this Agreement as fully as though completely set forth herein.
The rights of the parties are only as set forth herein, and
there are and shall be no implied rights or obligations
whatsoever.
16.9. Parties in Interest
Nothing in this Agreement is intended to confer any rights or
remedies under this Agreement on any persons other than
Phoenix and Dyad and their respective successors and permitted
assigns. Nothing in this Agreement is intended to
16
<PAGE> 17
relieve or discharge the obligations or liability of
any third persons to Phoenix or Dyad.
16.10. Section and Paragraph Headings
The section and paragraph headings in this Agreement are for
reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
16.11. Counterparts
This Agreement may be executed in counterparts, each of which
shall be deemed an original, but both of which shall
constitute the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
Phoenix International Ltd., Inc.: Dyad Corporation:
By:/s/ Bahram Yusefzadeh By:/s/ John Collins
------------------------------- ------------------------------------
Signature Signature
Bahram Yusefzadeh John Collins
- ---------------------------------- ---------------------------------------
Name (Print) Name (Print)
Chairman & CEO Chairman
- ---------------------------------- ---------------------------------------
Title (Print) Title (Print)
17
<PAGE> 1
EXHIBIT 10.46
CONFIDENTIAL TREATMENT REQUESTED
LICENSE AND MARKETING AGREEMENT
BETWEEN
INTEGRATED FINANCIAL SERVICES, INC.
AND
PHOENIX INTERNATIONAL LTD., INC.
This is a License and Marketing Agreement (the "License Agreement")
dated as of November 26, 1996, between Phoenix International Ltd., Inc.
("Phoenix") and Integrated Financial Services, Inc.("IFS").
IFS is the owner of certain computer programs and related
documentation, including the intellectual property rights pertaining thereto,
for the following six products: CreditPak, ConsumerPak, MortgagePak, BranchPak,
FeePak, and A&LPak (collectively, the "Pak Products"). Phoenix desires to
obtain from IFS a right and license to the Pak Products in order to re-market
the Pak Products to certain of its customers. IFS is willing to grant such
rights and licenses under the terms and conditions of this License Agreement.
Certain capitalized terms used in this License Agreement are defined in Section
9.7.
Phoenix and IFS, intending to be legally bound, agree as follows:
1. LICENSE
1.1. GRANT. In consideration for the payments described in Section
3.1, IFS hereby grants to Phoenix a worldwide, irrevocable, nonexclusive,
perpetual right and license to make, use, reproduce, and display, for purposes
of modification in connection with the interface of such Pak Products with
Phoenix's products; to make derivative works of the Pak Products for use as
part of or in connection with Phoenix's products and consistent with the
marketing rights granted herein; and, subject to compliance with Section 1.2,
sublicense, re-market, and distribute copies of each of the Pak Products to
XXXX of its customers or prospective customers. The rights and licenses
granted hereunder shall include the right and license to copy and display all
pictorial, graphic, or audiovisual works created as a result of the execution
of the Pak Products, even if such pictorial, graphic, or audiovisual works are
created by or with other programming or through other means. Title to all Pak
Programs, including an enhancements or modifications, shall at all times remain
solely with IFS.
<PAGE> 2
XXX-CONFIDENTIAL TREATMENT REQUESTED
1.2. SUBLICENSE RESTRICTIONS. The Code portion of the Pak Products
may be sublicensed and distributed only in object code form. Phoenix shall
require each recipient of any product that contains the Pak Products, in whole
or in part, to be subject to the restrictions set forth in this Section 1.2.
Such restrictions shall be set forth in a written agreement signed by the
recipient prior to or upon receipt of the product.
1.2.1. The recipient may (a) make XXXXXXXXXXX portion of the
Pak Products in machine-readable form for nonproductive backup purposes only
and (b) use the Pak Products only for internal purposes and not for service
bureau work, multiple-user licenses, or time-sharing arrangements.
1.2.2. The recipient may not use, copy, modify, or transfer
the Pak Products, or any copy, adaptation, transcription, or merged portion
thereof, except as expressly permitted by IFS and Phoenix. The recipient's
rights are nonexclusive and nonassignable. If the recipient attempts to
transfer possession of any copy, adaptation, transcription, or merged portion
of the Pak Products to any other party (except with the prior written consent
of Phoenix and IFS), the recipient's rights in the Pak Products are
automatically terminated.
1.2.3. IFS shall have the sole and exclusive ownership of
all right, title, and interest in and to the Pak Products, including ownership
of all trade secrets and copyrights pertaining thereto, subject only to the
rights and privileges expressly granted by IFS hereunder.
1.2.4. The recipient is not entitled to receive source code,
and under no circumstances may the recipient reverse-compile or
reverse-assemble the object code.
1.2.5. The recipient must reproduce and include in all
copies of the Pak Products prepared by the recipient, and in all adaptations
thereof, any copyright notices and proprietary legends of IFS and, as
applicable, Phoenix, as they appear in the Pak Products and on the media
containing the Pak Products supplied to the recipient by IFS or Phoenix.
1.2.6. The recipient's obligations shall remain in effect
for as long as the recipient continues to possess or use any of the Pak
Products, and such obligations shall be for the benefit of IFS and shall be
enforceable by IFS.
1.3. SUBSIDIARIES OF PHOENIX. Phoenix may transfer, assign, or
sublicense the rights and licenses granted hereunder to one or more direct or
indirect subsidiaries of Phoenix, and each such subsidiary may correspondingly
transfer, assign, or sublicense such rights and licenses to any other
subsidiaries of Phoenix, provided that no such transfer shall operate to expand
the licenses granted hereunder and provided that in each case such subsidiaries
agree to be bound by the obligations of Phoenix and Phoenix remains bound by
the obligations it assumes under this License Agreement. For purposes hereof,
a subsidiary shall consist of any corporation,
-2-
<PAGE> 3
XXX-CONFIDENTIAL TREATMENT REQUESTED
partnership, joint venture, or other entity in which Phoenix has at least 50%
of the profits or voting rights.
1.4. PATENT RIGHTS. IFS further grants to Phoenix, its successors
and assigns, and any sublicensees and customers a worldwide, perpetual,
royalty-free, irrevocable, and nonexclusive immunity from suit under any
patents owned or licensable by IFS at any time during the term of this License
Agreement, as necessary for Phoenix to exercise any other rights and licenses
granted under this License Agreement.
2. MARKETING RIGHTS AND OBLIGATIONS OF PHOENIX
2.1. LEVEL OF EFFORT. Phoenix hereby undertakes to use its
reasonable commercial efforts to promote the sale, distribution, lease, and/or
sublicensing of the Pak Products to its customers and prospective customers.
2.2. MARKETING, INSTALLATION, AND TRAINING. IFS hereby grants to
Phoenix, for the term of this License Agreement, and Phoenix hereby accepts,
the exclusive right to market and distribute the Pak Products to XXXX of
Phoenix's current or prospective customers. Phoenix will provide IFS with a
list of such customers, updated from time to time and at least quarterly. IFS
agrees to keep such list confidential and not to pursue business development
efforts or enter into other marketing or licensing or sublicensing arrangements
with any entity on this list during the terms of this Agreement. Although
Phoenix will have the option to market the Pak Products and provide training to
its customers using Phoenix personnel, Phoenix and IFS agree to negotiate in
good faith to enter into a separate agreement on terms satisfactory to each
party under which IFS personnel will assist in such marketing and training.
2.3. RIGHT TO OBTAIN ADDITIONAL LICENSE RIGHTS. IFS agrees to
extend this Agreement from time to time or to enter into additional license
agreements with Phoenix providing Phoenix with the right to sublicense the Pak
Products beyond the XX customer limitation herein. Each such extension or new
agreement shall be on terms and conditions acceptable to both parties, except
that IFS also agrees that each such extension or new agreement will be on terms
and conditions no less favorable to Phoenix than IFS has offered or provided to
any other third party.
2.4. BACK-UP LICENSE. Simultaneously with the execution of this
License Agreement, IFS and Phoenix shall enter into a back-up license in form
and substance satisfactory to Phoenix.
3. PAYMENTS
3.1. INITIAL FEE. Phoenix shall pay IFS a one-time initial royalty
fee of XXXXX as follows: (i) upon execution of this Agreement, XXXXX in cash
(to be offset against the expenses payable by IFS under Section 9.6 below), and
(ii) XXXXX no later than XXXX, which may be paid in cash or by cancellation of
indebtedness.
-3-
<PAGE> 4
XXX-CONFIDENTIAL TREATMENT REQUESTED
3.2. RECURRING LICENSE FEES. Subject to compliance with Section
1.2, Phoenix may market and sublicense the Pak Products on terms, including
price, which Phoenix determines to be appropriate, provided that Phoenix agrees
to consult with IFS from time to time regarding such terms. Phoenix shall be
entitled to XXX of the first XXXXXX generated by the marketing and sublicensing
of the Pak Products pursuant to this Agreement. Thereafter, Phoenix shall be
entitled XXXXXXX, and IFS shall be entitled to XXX, of such XXXXXXX. Phoenix
agrees to provide an accounting to IFS quarterly, and at such other times as
may reasonably be requested by IFS, of the revenues it generates and the
sublicense agreements it enters into. Phoenix shall make all payments owing to
IFS pursuant to Section this 3.2 promptly after receipt by Phoenix of such
amounts.
4. MAINTENANCE AND SUPPORT OF PAK PRODUCTS
4.1. MAINTENANCE AND SUPPORT. Upon execution of this License
Agreement, IFS shall modify, at its own expense, the Pak Products as requested
by Phoenix in order to ensure that the Pak Products adequately interface with
the Phoenix system and also to include the enhancements which have been
requested by Phoenix's customers in connection with IFS's demonstrations of the
Pak Products prior to the date of this Agreement. IFS also agrees to provide
maintenance and support for the Pak Products for the term of this License
Agreement.
4.2. DELIVERY OF MAINTENANCE MODIFICATIONS AND BASIC ENHANCEMENTS.
IFS shall deliver to Phoenix, when and as prepared by IFS in the course of its
business, all basic enhancements and maintenance modifications to the Pak
Products arising from time to time, for inclusion in the Code and/or
documentation for the Pak Products. IFS agrees to consider and discuss with
Phoenix any proposal of Phoenix with respect to the preparation of possible
further basic enhancements and maintenance modifications.
5. PROPRIETARY PROTECTION
5.1. ACKNOWLEDGMENT OF CONFIDENTIALITY. Phoenix acknowledges that
the source code (the "Confidential Materials") consists of confidential
information of IFS. Phoenix shall treat the Confidential Materials in
confidence and shall not use, copy, or disclose them, nor permit any of its
personnel to use, copy, or disclose them, for any purpose that is not
specifically contemplated by this License Agreement.
5.2. PROPRIETARY LEGENDS. All Code and documentation shall be
marked with IFS's copyright notice. All products using the Pak Products
offered by Phoenix shall display IFS's copyright notice. However, Phoenix may
mark with its own copyright notice and register any Derivative Works of the
Code and documentation prepared by Phoenix. The parties agree to cooperate in
any such registration and to provide necessary information and prepare and
deliver duly executed documents reasonably required in such regard. In
addition, Phoenix agrees to notify IFS in advance of sublicensing or marketing
the Pak Products to any entity outside the
-4-
<PAGE> 5
XXX-CONFIDENTIAL TREATMENT REQUESTED
United States, so that IFS may take appropriate steps to obtain copyright
protection in such other countries.
6. REPRESENTATIONS AND WARRANTIES
6.1. RIGHT AND AUTHORITY. IFS represents and warrants that (a) it
is the owner of the Pak Products, including the Code and related documentation
and including all intellectual property rights therein under copyright, patent,
trademark, trade secret, and other applicable law; (b) it has the full and
sufficient right and authority to grant the rights and licenses granted herein;
(c) the Code and documentation have not been published under circumstances that
have caused loss of any U.S. copyright therein; and (d) the Code and
documentation, to the best of IFS's knowledge, do not infringe any copyright or
other intellectual property right of any third party.
6.2. WARRANTY. IFS warrants that the Pak Products will perform in
the manner specified in the system user manual, and will properly interface
with Phoenix's system, for a period of 90 days after each delivery of the Pak
Products pursuant to a sublicense in compliance with Section 1.2. IFS will
correct as soon as reasonably possible any Product which is non-conforming
during the term of the warranty period.
7. LIMITATION OF LIABILITY
7.1. EXCLUSION OF CONSEQUENTIAL DAMAGES, ETC. In no event shall
either party be liable to the other for any consequential, indirect, special,
or incidental damages, even if such party has been advised of the possibility
of such potential loss or damage. The foregoing limitations shall not be
construed to diminish the obligations of indemnity set forth in Section 8
hereof.
7.2. LIMITATION OF LIABILITY. In no event shall IFS be liable for
amounts in excess of the direct damages for breach of this License Agreement up
to the total amount actually paid by Phoenix hereunder. In no event shall
Phoenix be liable for amounts in excess of the direct damages for breach of
this License Agreement up to XXXXXXXXXXXXXXXXX exclusive of amounts payable in
accordance with the terms of this License Agreement.
8. INDEMNIFICATION
8.1. SCOPE OF INDEMNIFICATION. IFS hereby indemnifies and holds
harmless Phoenix, its successors, and its assigns, including any customers,
from any loss, liability, claim, or damage regarding the Code or any
documentation supplied hereunder, based on any actual or alleged infringement
of a patent, copyright, trade secret, or other intellectual proprietary right
of any third party. If such a claim arises, or if in IFS's judgment is likely
to arise, Phoenix agrees to allow IFS, at IFS's option, to procure the right
for Phoenix to continue to exercise its
-5-
<PAGE> 6
rights and licenses granted herein or to replace or modify them in a
functionally equivalent manner so they become non-infringing.
8.2. LIMITATIONS. IFS shall have no obligation under Section 8.1
hereof with respect to any claim of infringement of copyright, trade secret, or
other intellectual proprietary right based upon Phoenix's modification of the
Code or documentation or their combination, operation, or use with programs or
equipment not specified by IFS.
8.3. INDEMNIFICATION BY PHOENIX. Except for the matters addressed
in Section 8.1 hereof, Phoenix indemnifies and holds harmless IFS from any and
all loss, liability, claims, and damages based upon or relating to Phoenix's
products or any services offered by Phoenix involving the use of the Code and
related documentation, based on the performance or nonperformance of such
services, or based upon representations or commitments made by Phoenix or its
agents.
8.4. CONDITIONS. The foregoing indemnity obligations shall be
contingent upon the party seeking indemnity (a) giving prompt written notice to
the other party of any claim, demand, or action for which indemnity is sought;
(b) fully cooperating in the defense or settlement of any such claim, demand,
or action; and (c) obtaining the prior written agreement of the indemnifying
party to any settlement or proposal of settlement, which agreement shall not
unreasonably be withheld.
9. MISCELLANEOUS
9.1. TERMS CONFIDENTIAL. IFS and Phoenix shall hold in confidence
the terms of compensation set forth herein, and neither party hereto shall
disclose such terms to any other person or entity without the prior consent of
the other, or as may be required to comply with the Securities and Exchange
Commission reporting requirements.
9.2. FREEDOM OF ACTION. This License Agreement shall not be
construed to limit Phoenix's right to obtain services or software programs from
other sources, nor shall this License Agreement be construed to limit IFS's
right, except as provided in Section 2, to grant others any further
nonexclusive right or license in the Code and documentation. This License
Agreement alone establishes the rights, duties, and obligations of Phoenix and
IFS with respect to the subject matter hereof. Phoenix shall have no right or
interest whatsoever in any product of IFS other than the rights and licenses in
the Code or documentation granted herein, whether such product is conceived or
developed by IFS before, during, or after the course of IFS's performance of
this License Agreement. Nothing in this License Agreement shall be construed
to obligate Phoenix to a specified level of effort in its promotion and
marketing of the Pak Products and/or Phoenix's products incorporating the Pak
Products.
9.3. INDEPENDENT CONTRACTOR. Phoenix shall hold itself out only as
an independent contractor of IFS. or permitted to be given hereunder shall be
made in writing and shall be deemed effective when
-6-
<PAGE> 7
XXX-CONFIDENTIAL TREATMENT REQUESTED
9.4. NOTICES. All notices, authorizations, consents, or other
communications required delivered in person, one day after being sent by
overnight carrier, or three days after being sent by certified mail, as
follows:
IF TO PHOENIX: Phoenix International Ltd., Inc.
900 Winderly Place, Suite 140
Maitland, Florida 32751
IF TO IFS: Integrated Financial Services, Inc.
4025 Pleasantdale Road
Building 100, Suite 120
Atlanta, Georgia 30340
Any party hereto may change its address for purposes hereof by so
notifying the other party.
9.5. MERGER, ETC. This License Agreement contains the whole
understanding of the parties with respect to the subject matter hereof and
supersedes all prior oral or written representations and agreements between the
parties relating thereto. This License Agreement may not be varied except by a
writing duly executed by both parties.
9.6. ATTORNEYS' FEES. IFS shall pay the attorneys' fees and
expenses incurred by Phoenix in connection with the negotiation, preparation,
and execution of this License Agreement and the stock purchase agreement
entered into between Phoenix and IFS concurrently with this License Agreement,
and the related agreements and documents in connection with these transactions.
The parties agree that these fees and expenses will total XXXXX. In addition,
in the event suit is brought or arbitration commenced to enforce or interpret
any part of this License Agreement, the prevailing party shall be entitled to
recover as an element of its cost of suit or arbitration, and not as damages,
reasonable attorneys' fees to be fixed by the court or arbitrator. The
"prevailing party" shall be the party, if any, who is entitled to recover its
costs of suit or arbitration, whether or not the suit or arbitration proceeds
to final judgment. The party not entitled to recover its costs of suit or
arbitration shall not recover attorneys' fees.
9.7. CERTAIN DEFINITIONS. When used in this License Agreement, the
capitalized terms listed below shall have the following meanings:
"CODE" shall mean computer programming code. If not otherwise
specified, Code shall include both object code and source code. Code shall
include maintenance modifications and enhancements thereto if, when, and to the
extent they are delivered to Phoenix by IFS under this License Agreement or
under any other agreement or arrangement between the parties.
-7-
<PAGE> 8
9.8. SUCCESSORS AND ASSIGNS. This License Agreement shall bind and
inure to the benefit of the parties hereto and their respective successors and
assigns. Neither party may assign its obligations hereunder to any other
party.
9.9. COUNTERPARTS. This License Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same License
Agreement, and shall become effective when one or more such counterparts have
been signed by each of the parties and delivered to the other party.
10. TERMINATION
10.1. TERMINATION. IFS may, at its option, terminate this License
Agreement in the event of a failure of Phoenix to pay the fees required
hereunder. Phoenix may, at its option, terminate this License Agreement in the
event of a material breach by IFS. In each case, such termination may be
effected only through a written notice, specifically identifying the breach on
which termination is based. Following receipt of such notice, the party in
breach shall have 90 days to cure such breach, and this License Agreement shall
terminate in the event that such cure is not effected by the end of such
period.
10.2. SURVIVAL. In the event of the termination of this License
Agreement, in whole or in part, the provisions of Sections 5 through 10, as
well as such other provisions of this License Agreement as are addressed in
Section 10.3 hereof, shall survive and continue in effect.
10.3. RIGHTS NOT AFFECTED. The termination of this License
Agreement shall not affect any paid-up right or license theretofore attained by
Phoenix or any sublicensee of Phoenix, nor shall it impair the right or license
of any third party in Pak Products that have been or may yet be sublicensed in
accordance with this License Agreement. Notwithstanding the termination of
this License Agreement, Phoenix may continue to exercise the rights and
licenses granted hereunder as necessary to provide maintenance and support for
existing Pak Products sublicensed in accordance with Section 1.2.
IN WITNESS WHEREOF, the parties hereto have executed this License
Agreement upon the date first written above.
PHOENIX INTERNATIONAL LTD., INC. INTEGRATED FINANCIAL SERVICES, INC.
By: /s/ Bahram Yusefzadeh By: /s/ B. Shane Jones
------------------------------ ---------------------------------
Name: B. Yusefzadeh Name: B. Shane Jones
Title: Chairman & CEO Title: President & CEO
-8-
<PAGE> 1
EXHIBIT 10.47
PHOENIX INTERNATIONAL LTD., INC.
SOFTWARE LICENSE AGREEMENT
AGREEMENT NO.: __________________
EFFECTIVE DATE: __________________
PARTIES: List Customer Name and Address
------------------------------------
------------------------------------
------------------------------------
------------------------------------
(Hereinafter referred to as "Customer")
AND
Phoenix International Ltd., Inc.
Phoenix FSC, Inc.
900 Winderley Place
Suite 140
Maitland, Florida 32751
(Hereinafter referred to as "Phoenix")
Phoenix and Customer, intending to be legally bound, hereby agree as follows:
1.0 DEFINITIONS
A. BASIC LICENSE TERMINOLOGY
"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.
"Documentation" shall mean the technical and operating documentation
relating to the Software provided to Customer by Phoenix or CSA, and all
Changes thereto provided to Customer by Phoenix or CSA or otherwise made or
obtained by or for Customer.
"Licensed Products" shall mean collectively the Software and
Documentation.
"Software" shall mean Phoenix's Retail Banking System software and
Third Party software, as described in Exhibit A hereto, in object code form,
and all Changes thereto
1
<PAGE> 2
provided to Customer by Phoenix or CSA or otherwise made or obtained by or for
Customer.
"Use" (as a noun or a 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.
"Term" shall mean the initial term and any subsequent renewal term of
this Agreement, as provided in Section 9.0 hereof, subject to termination as
provided herein.
B. TECHNICAL ENVIRONMENT
"Additional Branch" shall mean each Remote Branch not listed in
Exhibit B hereto which is connected to the Customer Network after the Effective
Date, whether as a result of changes in operations, growth, acquisition, or
otherwise.
"Affiliate" shall mean the financial institutions in which Customer
owns a greater than 50% interest as listed in Exhibit B hereto, and shall
include each financial institution in which Customer hereafter acquires a
greater than 50% interest or which merges with or into the Customer. A
financial institution shall continue to be an Affiliate only for so long as
Customer maintains a greater than 50% interest therein.
"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.
"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 for assuring
that the Customer Network is in compliance with the Phoenix Network and
Configuration Standards Guide (as provided by Phoenix).
"Designated Location" is the street address of the location of the
Server as specified on Exhibit B hereto. 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.
"Server" shall mean a single network file server serving as the Sybase
data base for the Software.
"Remote Branches" shall mean the street addresses listed in Exhibit B
hereto 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.
2
<PAGE> 3
"Territory" shall mean the countries or territories in which Customer
is located and the Customer Network operates, as set forth in Exhibit B hereto.
C. SERVICES
"CSA" shall mean Computer Systems Associates (Nigeria) Limited, as
well as any successor(s) to its responsibilities hereunder approved by Customer
and Phoenix.
"Related Expenses" shall mean reasonable travel and other reasonable
out-of-pocket expenses incurred in connection with any Services, including
(without limitation), as applicable, 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.
"Software Error" shall mean the failure of the Software in its
original, unmodified form to perform in accordance with standard specifications
maintained by Phoenix, if reported to Phoenix within ninety (90) days after
delivery. Software Errors do not include failures associated with modified
version of the Software, improper installation or conversion, use of equipment,
operating systems or communications networks not supported by the Phoenix
Network and Configuration Standards Guide, operator error or misunderstanding,
or errors in sizing memory, throughput, or load and balance requirements, which
shall be the sole responsibility of Customer.
"Support Services" shall mean Customer's requirements for technical or
user services relating to the Licensed Products, including training,
installation, conversion, implementation, selection or integration of equipment
or communication devices, and so forth.
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.
3
<PAGE> 4
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 be 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. The foregoing shall not prevent Customer from
using the Software or Documentation to provide banking and financial services
to its customers.
2.6 Customer agrees to maintain a record of the number and location of all
copies of the Licensed Products in its possession. Customer agrees to provide
Phoenix with a copy of that record will upon Phoenix's request.
3.0 LICENSE AND BRANCH FEES; PAYMENT TERMS
3.1 Upon execution of this Agreement by Customer, Customer shall pay CSA,
for Phoenix's account, the Software License Fee shown in the CSA Software
License and Support Agreement, 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 fully earned by
Phoenix upon delivery of the current version of the Software in unmodified form.
3.2 In addition to the License Fee, an initial one-time Branch Fee is due
for each Remote Branch which is included on the Customer Network from time to
time. The current Branch Fees are shown in the CSA Software License and
Support Agreement. As set forth in the CSA License Agreement, Customer shall
pay CSA, for Phoenix's account, a Additional Branch Fee each time a Remote
Branch is installed or added on the Customer Network.
3.3 Upgrade fees under Section 3.1 or 3.2 resulting from tier changes and
Branch Fees for Additional Branches shall be paid by Customer as set forth in
the CSA License Agreement, but in no case later than thirty (30) days after the
end of each calendar
4
<PAGE> 5
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.
3.4 Customer shall reimburse Phoenix for all Related Expenses incurred by
Phoenix in making deliveries to or for Customer, responding to inquiries and
requests relating to Customer's implementation and use of the Software by
Customer, or arising out of services provided by Phoenix for Customer.
3.5 To the extent that Customer is responsible for other fees and charges
directly to Phoenix hereunder, such fees and charges shall be due and payable
to Phoenix not later than thirty (30) days following receipt of invoice. Sums
overdue to Phoenix shall bear interest at the lesser of (i) 1 1/2% per month,
or (ii) the highest rate allowed under applicable law.
3.7 Customer shall have sole responsibility for all applicable excise,
property, VAT, sales and use, or similar taxes, any income taxes or withholding
requirement in addition to or in lieu thereof (exclusive only of United States
Federal, state or local taxes based upon the net income of Phoenix), and any
customs, import, export or other duties, levies, tariffs, taxes, or other
similar charges that are imposed with regard to the transactions contemplated
by this Agreement, including the license of the Software by Phoenix.
3.8 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.
3.9 Phoenix reserves the right to adjust its prices (including scheduled
License Fees and Branch Fees) at any time subject to 30 days advanced notice,
provided that no adjustment will affect the License Fee due for the tier
already occupied and paid for by Customer or the Branch Fees due for the number
of Remote Branches already installed and paid for by Customer.
3.10 All payments to Phoenix (including to CSA for Phoenix's account) shall
be made by Customer in U.S. Dollars.
4.0 NEW RELEASES; SUPPORT SERVICES
4.1 Phoenix believes that the Licensed Products cannot be effectively used
without proper access to Support Services. Accordingly, Customer agrees to
obtain and pay for all Support Services from CSA (or another supplier of
Support Services authorized by Phoenix, if available) for a minimum of five (5)
years following the Effective Date. In the event that Customer at any time
ceases to obtain and pay for such Support Services, this Agreement will
terminate as provided in Section 9.2 hereof.
5
<PAGE> 6
4.2 So long as Customer obtains and pays for Support Services, Phoenix
agrees to provide to CSA for delivery to Customer, or to provide to Customer
directly, with such Changes to the Software in object code form and/or
Documentation as Phoenix may authorize for general release as an accumulation
of error corrections (including fixes), new release or new version of the
Software and/or Documentation for use by customers who are the same as or
similar to Customer.
For Changes that introduce substantial new functionality or technology so as to
constitute a new or significantly different product, Phoenix reserves the right
to condition availability of such Changes on additional fees.
4.3 So long as Customer obtains and pays for Support Services, Phoenix
will make available to CSA the Phoenix Remote Support Services for diagnosis
and correction of Software Errors. Such services shall be provided only at
CSA's request after CSA has exhausted its own remedial efforts included in the
Support Services. If Phoenix so requests, Customer agrees to assist in
identifying and verifying the Software Errors in sufficient detail and with
sufficient supporting documentation and information to enable Phoenix to
recreate the Software Error. If Phoenix determines the Software operates per
specifications but that Customer or CSA would like Changes made or other
Support Services performed by Phoenix, Phoenix will consider the request as a
proposal for additional assistance for which additional fees or charges may be
imposed.
4.4 In the event that Customer requests services from Phoenix which are
beyond the scope of Phoenix's commitments in this Agreement, Phoenix will
attempt to accommodate Customer's request, if possible, by providing such
services on such basis as Phoenix may determine for additional fees or charges
as Phoenix considers warranted, or referring Customer to contractors or
consultants who Phoenix authorizes to provide such service, provided that it is
acknowledged that Phoenix shall not be required to travel to the Territory
under any circumstances.
5.0 LIMITED WARRANTIES; LIMITATION OF REMEDIES
5.1 Phoenix warrants that the media containing the Software are free from
defects in workmanship or materials.
5.2 The sole remedy for Customer in the event of discovery of any error or
malfunction in the Software shall be to request Support Services from CSA and,
if CSA is unable to correct the error or malfunction, to request diagnostic and
remedial assistance from Phoenix as provided in Section 4.3 hereof.
5.3 EXCEPT AS PROVIDED IN SECTION 5.3 HEREOF, PHOENIX MAKES AND CUSTOMER
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. IT IS EXPRESSLY AGREED THAT PHOENIX SHALL HAVE NO
LIABILITY WHATSOEVER FOR ANY ACTION OR INACTION OF CSA, INCLUDING (WITHOUT
LIMITATION) WITH REGARD TO ANY SUPPORT SERVICES THAT CSA MAY PROVIDE OR FAIL TO
PROVIDE, WHICH SHALL BE SOLELY THE RESPONSIBILITY OF CUSTOMER AND CSA.
6
<PAGE> 7
5.4 IN NO EVENT SHALL PHOENIX BE LIABLE FOR ANY INCIDENTAL, INDIRECT,
SPECIAL OR CONSEQUENTIAL DAMAGES, INCLUDING (WITHOUT LIMITATION) LOST PROFITS,
INTERRUPTION OF BUSINESS, OR LOSS OR CORRUPTION OF DATA, EVEN IF PHOENIX HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
5.5 The cumulative liability of Phoenix to Customer for all claims
relating to 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 from Customer for such product,
service or obligation. The foregoing limitation of liability and exclusion of
certain damages shall apply regardless of the success or effectiveness of other
remedies.
5.6 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.
6.0 TITLE
6.1 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.
6.2 All output and report 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).
6.3 Customer agrees that all Changes made or obtained by Phoenix, CSA 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
7
<PAGE> 8
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.
6.4 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.
6.5 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.
7.0 CONFIDENTIALITY OBLIGATIONS.
7.1 Customer acknowledges that the Software and Documentation contain
Confidential Information of Phoenix, as defined in Section 7.5 hereof.
7.2 Customer agrees at all times to maintain the complete confidentiality
of the Software, Documentation, and all other Confidential Information of
Phoenix.
7.3 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 than CSA and its employees, or 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 CSA or Customer, unless Phoenix gives its prior written approval. Such
approval shall not be unreasonably withheld for specific contractors or
consultants provided that (i) such persons are not competitors of Phoenix; (ii)
such persons require such information in order to provide services or products
to Customer which Phoenix, CSA, and/or their contractors cannot provide; (iii)
such persons enter into a confidentiality agreement acceptable to Phoenix; and
(iv) Customer is responsible for any breach of such confidentiality agreement.
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.
7.4 Prior to disposal of any media or materials that contain any part of
the Software,
8
<PAGE> 9
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.
7.5 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 CSA or any person or
entity associated with Customer or CSA), (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).
8.0 INDEMNIFICATION
8.1 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.
8.2 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 8.0 STATES PHOENIX'S ENTIRE OBLIGATION TO CUSTOMER WITH RESPECT TO
MATTERS OF TITLE OR ANY CLAIM OF INFRINGEMENT THEREOF.
9.0 TERM AND TERMINATION
9.1 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)
years. Thereafter, this 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 such initial term or any subsequent renewal period.
9
<PAGE> 10
9.2 Customer may terminate the license granted hereunder by electing not
to renew this Agreement in accordance with Section 9.1 hereof.
9.3 Phoenix shall have the right to terminate the License upon the
occurrence of any of the following events:
(a) Customer's breach of any provision of this Agreement if such
breach is material and is not cured within ten (10) days after Customer's
receipt of notice in writing from Phoenix of such breach; or
(b) 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
(c) Customer's failure to obtain and pay for Support Services; or
(d) 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
(e) Customer becomes a subsidiary of, or controlled as to its
management policy by, any government instrumentality; or
(f) 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.
9.4 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.
9.5 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
10
<PAGE> 11
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.
9.6 No payments due under Section 3 of this Agreement shall be refundable
upon termination of the License, whether such termination is by Customer or
Phoenix.
9.7 All obligations with respect to confidentiality, ownership, and
protection of intellectual property rights, and all obligations for payment of
amounts due shall survive termination.
9.8 The rights and remedies of Phoenix included in this Section 9.9 shall
not be exclusive and are in addition to any other rights and remedies provided
by law or equity.
10.0 CUSTOMER OBLIGATIONS
10.1 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.
10.2 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 and/or
CSA's systems.
10.3 Customer shall install all corrections or enhancements ("System
Release") provided by Phoenix for the Licensed Products within thirty (30) days
after receipt.
10.4 Customer shall keep its personnel trained in the operation of the
Licensed Products and Customer Network.
11.0 ARBITRATION
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. The sites of all arbitration proceedings shall
be Atlanta, Georgia, unless Phoenix and Customer agree in writing to another
sites. 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. Arbitration shall be governed by the commercial rules
of the American Arbitration Association (the "AAA"). Arbitration shall be
conducted by one arbitrator who shall be chosen by the AAA within 5 days of
receipt of the arbitration demand. The arbitrator or arbitrators shall
determine whether a default has occurred, and shall deliver its or their
decision within forty five (45) 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
11
<PAGE> 12
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.
12.0 COMPLIANCE WITH LAWS
12.1 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.
12.2 Notwithstanding anything in this Agreement to the contrary, it is
acknowledged and agreed that Customer may not 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 outside of
the Territory without the express written consent of Phoenix. Customer
understands that, if an export or import prohibition applies under applicable
law and an export license cannot be obtained with reasonable effort, the
disclosure or delivery of the Software and Documentation outside of the
Territory will not be allowed.
12.3 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.
13.0 GENERAL
13.1 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.
12
<PAGE> 13
13.2 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. Customer consents to the substitution, at
Phoenix's request, of another authorized provider of Support Services in the
event that CSA for any reason ceases to do business or in the event that the
operative agreement between Phoenix and CSA covering such Support Services
terminates.
13.3 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.
13.4 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 other presiding authority to be
unenforceable, the remaining provisions of this Agreement shall not be affected
or impaired thereby. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED 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.
13.5 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.
13.6 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.
13.7 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.
13
<PAGE> 14
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the dates indicated.
PHOENIX INTERNATIONAL LTD., INC. "CUSTOMER"
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.
14
<PAGE> 15
Exhibit A
Description of Software
15
<PAGE> 16
Exhibit B
Listing of Present Remote Branches (Street Addresses)
Designated Location of Server (Street Address)
Territory
16
<PAGE> 17
Exhibit C
Contact Persons:
17
<PAGE> 1
EXHIBIT 11.1
Phoenix International Ltd.,Inc.
Computation of Earnings (Loss) Per Share
<TABLE>
<CAPTION>
YEAR ELEVEN MONTHS YEAR
ENDED ENDED ENDED
JANUARY 31, DECEMBER 31, DECEMBER 31,
1995 1995 1996
-----------------------------------------------
<S> <C> <C> <C>
PRIMARY
Weighted average common stock outstanding during the
period 2,330,391 2,906,038 3,394,902
Effect of dilutive common stock equivalents outstanding
during the period(1) -- 99,734 308,338
Effect of common stock issued and stock options granted
during the 12-month period preceding July 1, 1996(3) 229,760 229,760 57,440
----------- ---------- ----------
Total common and common equivalent shares 2,560,151 3,235,532 3,760,680
=========== ========== ==========
Net income(loss) $(2,830,365) $ 554,269 $2,218,294
=========== ========== ==========
Primary net income(loss) per share $ (1.11) $ 0.17 $ 0.59
=========== ========== ==========
FULLY DILUTED
Weighted average common stock outstanding during the
period 2,330,391 2,906,038 3,394,902
Effect of dilutive common stock equivalents outstanding
during the period(2) -- 99,734 342,666
Effect of common stock issued and stock options granted
during the 12-month period preceding July 1, 1996(3) 229,760 229,760 57,440
----------- ----------- ----------
Total common and common equivalent shares 2,560,151 3,235,532 3,795,008
=========== =========== ==========
Net income(loss) $(2,830,365) $ 554,269 $2,218,294
=========== =========== ==========
Fully diluted net income(loss) per share $ (1.11) $ 0.17 $ 0.58
=========== =========== ==========
</TABLE>
(1) Based on the treasury stock method using average market price.
(2) Based on the treasury stock method using the higher of the average or
period-end market price.
(3) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, common stock issued and stock options granted at prices below the
initial public offering price per share during the 12-months period
immediately preceding the initial filing date of the company's Registration
Statement for its initial public offering have been included as
outstanding for all periods presented using the treasury stock method.
<PAGE> 1
MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Since its initial public stock offering on July 1, 1996 (at an initial
public offering price of $12.00 per share), the Company's Common Stock has
traded on the Nasdaq Stock Market's National Market (the "Nasdaq National
Market") under the symbol "PHXX." As of March 20, 1997, the Company had
approximately 1,050 beneficial holders of Common Stock. Of that total,
approximately 130 were shareholders of record. The following table sets forth,
on a per share basis for the periods shown, the range of high and low sales
prices of the Company's Common Stock as reported by the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
<S> <C> <C>
1996
Third quarter (from July 1, 1996) . . . . . . . . . . . . $17.50 $12.25
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . 21.50 16.50
</TABLE>
Phoenix has never paid any cash dividends on its Common Stock. The
Company currently intends to retain future earnings for use in its business
and, therefore, does not anticipate paying any cash dividends in the
foreseeable future.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with the
Company's consolidated financial statements and the notes thereto included
elsewhere in this Annual Report. The financial statements for 1996 include the
twelve months of operations ended December 31, 1996. During 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, 1995 as "Fiscal
1994" and the eleven months ended December 31, 1995 as "Fiscal 1995." Dollar
amounts are rounded.
OVERVIEW
The Company derives its revenues 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, programming services, conversion training and installation
services, interface services for tying the Phoenix System to third-party
applications, customer and software support services, disaster recovery
services and Internet/Intranet consulting services. 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
<PAGE> 2
collection of the resulting receivables is deemed probable. Revenues for
implementation, conversion, installation, training, interface and consulting
services are recognized when the services are performed. Service revenues for
ongoing customer and software support and product updates and disaster recovery
services provide recurring revenues as they are recognized ratably over each
year of the license agreement, the term of which is typically five years.
The Company intends to maintain its marketing focus in the United
States and internationally on middle market financial institutions, which the
Company defines as commercial banks and savings institutions with asset sizes
ranging from $100 million to $1 billion. In addition, Phoenix will continue to
expand its presence in the international market, which for 1996 accounted for
approximately 53% of the Company's revenues. 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. 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, particularly in the international
market. Gross margins and composition of revenue and expenses will vary
depending on whether a sale was made directly by the Company or by a value
added reseller 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.
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
financial institutions 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 continue to leverage its current 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. The
Company currently intends to expand the market for the Phoenix System in the
future to include institutions with asset sizes greater than $1 billion by
increasing product functionality and flexibility. Furthermore, in the first
quarter of 1997, the Company completed the development of a product which
operates on the Microsoft Windows NT platform which the Company anticipates
will be more attractive to institutions with assets less than $100 million than
the current product which operates on a Unix operating system platform.
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. 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.
2
<PAGE> 3
RESULTS OF OPERATIONS
The following table sets forth the percentage of total revenues
represented by certain line items in the Company's statement of operations for
the periods indicated.
<TABLE>
<CAPTION>
PERCENT OF TOTAL REVENUES
----------------------------------------------
FISCAL FISCAL
1996 1995(1) 1994
------------- ------------ ----------------
<S> <C> <C> <C>
Revenues:
License fees and other . . . . . . . . . . . . . . . 66% 69% 14%
Implementation, customer and software support and
other service fees . . . . . . . . . . . . . . . 34% 31% 86%
------------- ------------ --------------
Total revenues . . . . . . . . . . . . . . . . 100% 100% 100%
Expenses:
Cost of license fees and other . . . . . . . . . . . 6% 7% 0%
Cost of implementation, customer and software
support and other service fees . . . . . . . . . 22% 25% 149%
Sales and marketing . . . . . . . . . . . . . . . . 13% 20% 84%
General and administrative . . . . . . . . . . . . . 18% 21% 230%
Product development . . . . . . . . . . . . . . . . 17% 13% 319%
------------- ------------ --------------
Total expenses . . . . . . . . . . . . . . . . 76% 86% 782%
Other income (expense):
Interest income . . . . . . . . . . . . . . . . . . 2% 2% 6%
Interest expense . . . . . . . . . . . . . . . . . . 0% 0% (5)%
Other income (expense) . . . . . . . . . . . . . . . 0% 0% 18%
------------- ------------ --------------
Income (loss) before income taxes . . . . . . . . . . . 26% 16% (662)%
Income tax expense . . . . . . . . . . . . . . . . . . 5% 5% 0%
------------- ------------ --------------
Net income (loss) . . . . . . . . . . . . . . . . . . . 21% 11% (662)%
- ------------------------------- ============= ============ ==============
</TABLE>
(1) In 1995, Phoenix changed its fiscal year end from January 31 to
December 31, and the information presented above for Fiscal 1995
consists of eleven months.
Comparison of the Year Ended December 31, 1996 to Fiscal 1995
Revenues. Total revenues increased 107.1% to $10.4 million in the
year ended December 31, 1996 from $5.0 million in Fiscal 1995. License fees
and other revenues increased 96.9% to $6.8 million in the year ended December
31, 1996 from $3.5 million in Fiscal 1995. Revenues during the year ended
December 31, 1996 and Fiscal 1995 include $482,000 and $256,000, respectively,
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 the delivery of software
to an increased number of customers in both the United States and international
markets were major factors in the increase in license fees during the year
ended December 31, 1996 compared to Fiscal 1995. Phoenix has not significantly
increased the price of its products since the conclusion of Fiscal 1995 in
domestic markets, but has increased prices for certain international markets
during 1996.
3
<PAGE> 4
Approximately 16% and 16% of Phoenix's total revenues for the year
ended December 31, 1996 were derived from two international customers, one of
which contributed 19% of Fiscal 1995 total revenues. In Fiscal 1995 another
customer contributed approximately 43% of Phoenix's total revenues. Revenue
from one of these customers during the year ended December 31, 1996 represents
license fees to a reseller which the reseller may apply to future sales of the
Phoenix System. During the year ended December 31, 1996, approximately 53% of
the Company's revenues were derived from its foreign sales activities as
compared to approximately 70% of the Company's revenues in Fiscal 1995.
Management believes that international sales will continue to constitute over
one-half of total annual revenues in the near future.
Implementation, customer and software support and other service fees
increased 129.9% to $3.6 million in the year ended December 31, 1996 from $1.6
million in Fiscal 1995. This growth was primarily due to increased
implementation and development fees and services, which resulted from increased
licensing activity.
Expenses. The Company's operating expenses increased 83.1% to $7.9
million in the year ended December 31, 1996 from $4.3 million in Fiscal 1995.
The growth in expenses was primarily due to increased personnel related costs
resulting from higher staffing levels.
Cost of license fees and other increased 79.4% to $674,000 in the year
ended December 31, 1996 from $376,000 in Fiscal 1995. These costs consisted
primarily of amortization of capitalized software development costs and third
party software royalties which related to software which is sold and installed
with the Company's products. Amortization of software development costs
increased in the year ended December 31, 1996 compared to Fiscal 1995 because:
(i) amortization costs were only first recorded in June 1995 after general
release of the Phoenix System; and (ii) the amount of monthly amortization
increased as the Company capitalized additional software development costs.
Third party royalties increased in the year ended December 31, 1996 from Fiscal
1995 due to higher sales of third party software licenses.
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 services increased 82.3% to $2.3 million in the year ended December 31,
1996 from $1.2 million in Fiscal 1995 because of increased personnel related
costs.
Sales and marketing expenses increased 40.1% to $1.4 million in the
year ended December 31, 1996 from $983,000 in Fiscal 1995. This increase was
primarily due to the expansion of sales and marketing staffing and increased
marketing activities.
General and administrative expenses increased 72.3% to $1.8 million in
the year ended December 31, 1996 from $1.1 million in Fiscal 1995. The
increase was primarily the result of increased personnel costs, professional
services and public company related expenses.
Product development expenses increased 168.9% to $1.8 million in the
year ended December 31, 1996 from $655,000 in Fiscal 1995. This increase was
primarily due to the
4
<PAGE> 5
continued development of the Phoenix System. Capitalized software development
costs increased to $1.2 million in the year ended December 31, 1996 from $1.1
million in Fiscal 1995. The total of product development expenses and
capitalized software development costs ("Product Development Expenditures")
increased to $3.0 million during the year ended December 31, 1996 from $1.8
million during Fiscal 1995. 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 $224,000 and $122,000 in
the year ended December 31, 1996 and Fiscal 1995, respectively. Interest
income increased in the year ended December 31, 1996 as a result of interest
from the investment of funds received by the Company in the third quarter of
1996 from the initial public offering of the Company's Common Stock. Interest
expense increased to $19,000 in the year ended December 31, 1996 from $12,000
in Fiscal 1995 as a result of increased interest from bank equipment and line
of credit loans in the year ended December 31, 1996.
Income tax expense was $482,000 and $256,000 in the year ended
December 31, 1996 and Fiscal 1995, respectively. These income tax expenses
represent withholding taxes which relate to the licensing of the Company's
products to foreign customers and which are contractually payable by those
customers.
As a result of the Company's start-up losses, the Company has a net
operating loss carryforward. At December 31, 1996, Phoenix had available net
operating loss carryforwards of $5.7 million that expire in years 2008 through
2011 to offset future taxable income for federal income tax purposes. In
addition, Phoenix has available research and development tax credit
carryforwards of $198,000 that expire in years 2008 through 2011 and foreign
tax credit carryforwards of $738,000 that expire in years 2000 through 2003.
Utilization of these carryforwards to reduce future income taxes will depend on
the Company's ability to generate sufficient taxable income prior to the
expiration of the carryforwards. Further, the Company's initial public
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 $2.4 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 9 to the notes to consolidated financial
statements.
Net Income. Net income increased $1,664,000 or 300% to $2.2 million
for the year ended December 31, 1996 from $554,000 for Fiscal 1995 primarily as
a result of increased revenues.
5
<PAGE> 6
Comparison of Fiscal 1995 to Fiscal 1994
Revenues. Total revenues were $5.0 million in Fiscal 1995 as compared
to $427,000 in Fiscal 1994. During Fiscal 1995, Phoenix recognized $3.5
million in license fees and other revenues. The completion of a commercially
viable version of the Phoenix System and commencement of licensing of the
Phoenix System in both the United States and international markets were major
factors in the increase in license fees during Fiscal 1995. License fees and
other revenues during 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 recognized $58,000 of revenue
in Fiscal 1994 from commissions earned from the sale and delivery of third
party products. International sales accounted for approximately 70% and 33% of
total revenues in Fiscal 1995 and Fiscal 1994, respectively.
Implementation, customer and software support and other service fees
were $1.6 million in Fiscal 1995 as compared to $370,000 in Fiscal 1994. This
growth was primarily due to increased implementation fees, which resulted from
increased licensing activity.
Expenses. The Company's operating expenses increased 29.3% to $4.3
million in Fiscal 1995 from $3.3 million in Fiscal 1994. The growth in
expenses was 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 increased 95.6% to $1.2 million in Fiscal 1995 from $637,000 in
Fiscal 1994. This increase was due to increased implementation costs related
to the Company's initial installations and the release of its software and
increased personnel related costs.
Sales and marketing expenses increased 174% to $983,000 in Fiscal
1995 from $359,000 in Fiscal 1994. This increase was primarily due to the
expansion of sales and marketing staffing and increased marketing activities.
General and administrative expenses increased 7.8% to $1.1 million in
Fiscal 1995 from $982,000 in Fiscal 1994. The increase was primarily the
result of increased staffing and associated expenses necessary to manage and
support the Company's growth.
Product development expenses decreased 52% to $655,000 in Fiscal 1995
from $1.4 million in Fiscal 1994. Technological feasibility of the Phoenix
System was established during Fiscal 1994, and, therefore, as required by the
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 to $1.1
million in Fiscal 1995 from $93,000 in Fiscal 1994. Product Development
Expenditures increased to $1.8 million in Fiscal
6
<PAGE> 7
1995 from $1.5 million in Fiscal 1994 due to increased staffing required to
expand and enhance the Company's product line.
Other Income (Expense). Interest income increased $95,000 to $122,000
in Fiscal 1995 from $27,000 in Fiscal 1994. 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.
The Company did not recognize income tax expense for federal income
tax in Fiscal 1994 and Fiscal 1995 due to the net operating losses incurred in
the fiscal year ended January 31, 1994 and Fiscal 1994. Income tax expense in
Fiscal 1995 of $256,000 represented foreign withholding taxes related to
revenue from customers in certain foreign countries, which taxes are
contractually payable by those customers.
Net Income. Net income increased $3.4 million to $554,000 for Fiscal
1995 from a loss of $2.8 million for Fiscal 1994 primarily as a result of
increased revenues from the commercial introduction and licensing of the
Phoenix System.
BACKLOG
Backlog, defined as the contract value of executed agreements minus
revenue recognized from these contracts, totaled $6.8 million, $7.1 million and
$3.1 million at the end of the year ended December 31, 1996, Fiscal 1995 and
Fiscal 1994, respectively. At December 31, 1996, backlog totaled $6.8 million
and consisted of $39,000 for software licenses, $1.1 million for implementation
and $5.7 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
On July 8, 1996, the Company received net proceeds of $6.4 million
from the sale of 670,000 shares of Common Stock in its initial public offering.
On July 8, 1996, the Company received approximately $1.3 million plus accrued
interest of approximately $159,000 from its Chairman and Chief Executive
Officer, Mr. Yusefzadeh, from the proceeds of shares sold by Mr. Yusefzadeh in
the initial public offering. The Company used $334,000 of the net proceeds to
repay debt and accrued interest including bank term and line of credit loans,
an equipment note to Mr. Yusefzadeh and funds payable to a vendor.
At December 31, 1996, cash and cash equivalents and investments were
$6.5 million. Cash and cash equivalents include $190,000 which is restricted
securing a letter of credit to a government municipality until such funds are
earned under an economic development grant. For the year ended December 31,
1996, cash used by operations was $165,000. Reduction of
7
<PAGE> 8
deferred revenue and increases in accounts receivable and unbilled accounts
receivable in the year ended December 31, 1996 were a significant use of cash
in operating activities. Deferred revenue balances declined as license fee and
service revenues were recognized during the year ended December 31, 1996.
Investing activities used cash of $4.5 million, including $572,000 for property
and equipment, $1.2 million for capitalized software development costs and $2.7
million for short-term investments. Financing activities provided $8.0 million
in cash, including $6.4 million in net proceeds from the initial public
offering and $1.3 million from the payment of stock subscriptions receivable.
Working capital increased to $6.9 million at December 31, 1996 from a
deficit of $2.3 million at December 31, 1995. Excluding deferred revenue,
which represents advance payments for license fees and services, and related
deferred tax assets, adjusted working capital was $7.9 million at December 31,
1996 and $423,000 at December 31, 1995.
The Company believes its cash balances, investments and cash flow from
operations will be sufficient to meet its working capital, capital expenditure
and capitalized software development requirements for the foreseeable future.
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, including acquisitions, may require the
Company to obtain additional equity or debt financing.
INFLATION
The effects of inflation on the Company's operations were not
significant during the periods presented in the financial statements.
Generally, throughout the periods discussed above, the increases in revenue
have resulted primarily from higher volumes, rather than price increases.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This Annual Report contains statements which constitute
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended.
These statements appear in a number of places in this Annual Report and include
all statements regarding the intent, belief or current expectations of the
Company, its Directors or its Officers with respect to, among other things:
(i) the Company's financing plans; (ii) trends affecting the Company's
financial condition or results of operations; (iii) the Company's growth
strategy and operating strategy; and (iv) the declaration and payment of
dividends. Investors are cautioned that any such forward-looking statements
are not guarantees of future performance and involve risks and uncertainties,
and that actual results may differ materially from those projected in the
forward-looking statements as a result of various factors discussed herein and
those factors discussed in detail in the Company's filings with the Securities
and Exchange Commission, including the "Risk Factors" section of the Company's
Registration Statement on Form S-1 (Registration Number 333-03355), as declared
effective by the Securities and Exchange Commission on July 1, 1996.
8
<PAGE> 9
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 December 31, 1996 and 1995 and the related
consolidated statements of operations, shareholders' equity (deficit) and cash
flows for the year ended December 31, 1996, the eleven months ended December
31, 1995 and the year ended January 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 December 31, 1996 and 1995, and the
consolidated results of its operations and its cash flows for the year ended
December 31, 1996, the eleven months ended December 31, 1995 and the year ended
January 31, 1995 in conformity with generally accepted accounting principles.
Ernst & Young LLP
Atlanta, Georgia
January 31, 1997
<PAGE> 10
PHOENIX INTERNATIONAL LTD., INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................ $ 3,770,889 $ 425,931
Investments.......................................................... 2,730,825 --
Accounts receivable, net of allowance for doubtful accounts of
$15,000 and $10,000 at December 31, 1996 and 1995,
respectively........................................................ 935,736 328,693
Unbilled accounts receivable......................................... 1,188,282 108,320
Interest receivable, related party................................... -- 105,001
Prepaid expenses and other current assets............................ 548,379 174,339
Deferred tax asset................................................... -- 390,769
----------- ------------
Total current assets................................................... 9,174,111 1,533,053
Property and equipment:
Computer equipment and purchased software............................ 1,088,509 522,571
Furniture, office equipment and leasehold improvements............... 252,047 245,762
----------- ------------
1,340,556 768,333
Accumulated depreciation and amortization............................ (447,128) (191,826)
----------- ------------
893,428 576,507
Capitalized software development costs, net of accumulated
amortization of $446,572 and $107,647 at December 31, 1996 and
1995, respectively................................................... 1,985,628 1,118,729
Other assets........................................................... 30,000 --
----------- ------------
Total assets........................................................... $12,083,167 $ 3,228,289
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable..................................................... $ 384,693 $ 264,274
Accrued expenses..................................................... 922,040 279,521
Note payable, related party.......................................... -- 35,203
Payable to vendor.................................................... -- 140,000
Deferred revenue..................................................... 1,002,417 3,077,393
----------- ------------
Total current liabilities.............................................. 2,309,150 3,796,391
Deferred revenue under economic development grant...................... 190,000 --
Shareholders' equity (deficit):
Preferred stock, $1.00 par value:
10,000,000 shares authorized, none issued and outstanding........... -- --
Common stock, $0.01 par value:
20,000,000 shares authorized, 3,838,910 issued and outstanding at
December 31, 1996.................................................. 38,389 --
Class A through E common stock, par values $0.0043 to $4.30:
12,750,000 total shares authorized, 2,992,330 shares issued
and outstanding at December 31, 1995................................ -- 1,671,190
Additional paid-in capital.......................................... 10,727,255 2,368,470
Stock subscription receivables...................................... (110,683) (1,318,524)
Accumulated deficit................................................. (1,070,944) (3,289,238)
----------- ------------
Total shareholders' equity (deficit)................................... 9,584,017 (568,102)
----------- ------------
Total liabilities and shareholders' equity (deficit)................... $12,083,167 $ 3,228,289
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 11
PHOENIX INTERNATIONAL LTD., INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
ELEVEN
YEAR ENDED MONTH ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, JANUARY 31
1996 1995 1995
----------- ----------- ------------
<S> <C> <C> <C>
Revenues:
License fees and other................................. $ 6,827,699 $ 3,467,547 $ 57,776
Implementation, customer and software support and
other service fees.................................... 3,577,848 1,556,164 369,711
----------- ----------- ------------
Total revenues........................................... 10,405,547 5,023,711 427,487
Expenses:
Costs of license fees and other........................ 674,037 375,783 --
Costs of implementation, customer
and software support and other service fees........... 2,272,710 1,246,886 637,427
Sales and marketing.................................... 1,377,353 983,290 358,948
General and administrative............................. 1,822,871 1,058,190 981,930
Product development.................................... 1,760,691 654,797 1,362,780
----------- ----------- ------------
Total expenses........................................... 7,907,662 4,318,946 3,341,085
Other income (expense):
Interest income........................................ 223,548 121,815 26,610
Interest expense....................................... (19,231) (12,060) (19,366)
Other income (expense)................................. (2,242) (4,252) 75,989
----------- ----------- ------------
Income (loss) before income taxes........................ 2,699,960 810,268 (2,830,365)
Income tax expense....................................... 481,666 255,999 --
----------- ----------- ------------
Net income (loss)........................................ $ 2,218,294 $ 554,269 $ (2,830,365)
=========== =========== ============
Net income (loss) per share.............................. $ 0.59 $ 0.17 $ (1.11)
=========== =========== ============
Weighted average shares outstanding...................... 3,760,680 $ 3,235,532 2,560,151
=========== =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 12
PHOENIX INTERNATIONAL LTD., INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
COMMON STOCK, TOTAL
ALL CLASSES ADDITIONAL STOCK SHAREHOLDERS'
---------------------- PAID-IN SUBSCRIPTION ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL RECEIVABLES DEFICIT (DEFICIT)
--------- --------- ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, February 1, 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 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 shares of Class E
common stock from exercise of
stock options....................... 170,269 183,230 137,940 (118,280) -- 202,890
Conversion of Class A, B,C, D
and E common stock into
common stock, $0.01 par value....... -- (1,822,794) 1,822,794 -- -- --
Payment of stock subscription
receivable.......................... -- -- -- 1,318,524 -- 1,318,524
Payment on employee stock
subscription receivable............. -- -- -- 7,597 -- 7,597
Common stock issued in
connection with initial public
offering, net of expenses........... 670,000 6,700 6,367,195 -- -- 6,373,895
Issuance of common stock from
exercise of stock options........... 7,473 75 32,094 -- -- 32,169
Repurchase and retirement of
common stock........................ (1,162) (12) (1,238) (1,250)
Net income........................... -- -- -- -- 2,218,294 2,218,294
--------- --------- ----------- ------------ ------------ -------------
Balance, December 31, 1996............. 3,838,910 $ 38,389 $10,727,255 $ (110,683) $ (1,070,944) $ 9,584,017
========= ========= =========== ============ ============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 13
PHOENIX INTERNATIONAL LTD., INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
ELEVEN
YEAR ENDED MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, JANUARY 31,
1996 1995 1995
----------- ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).......................................... $ 2,218,294 $ 554,269 $ (2,830,365)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization............................ 594,227 228,544 64,534
Satisfaction of payable to vendor........................ (100,000) -- --
Stock options issued for compensation.................... -- -- 333,250
Provision for doubtful accounts.......................... 5,000 10,000 --
Deferred taxes........................................... 390,769 (190,325) (200,444)
Changes in operating assets and liabilities:
Accounts receivable..................................... (612,043) (78,163) (260,530)
Unbilled accounts receivable............................ (1,079,962) (99,908) (6,597)
Interest receivable, related party...................... 105,001 (95,557) (9,444)
Prepaid expenses and other current assets............... (374,040) (79,350) (81,572)
Accounts payable........................................ 120,419 127,613 45,504
Accrued expenses........................................ 642,519 56,732 119,552
Deferred revenue........................................ (2,074,976) 576,123 2,351,833
----------- ----------- ------------
Net cash provided by (used in) operating activities........ (164,792) 1,009,978 (474,279)
INVESTING ACTIVITIES
Purchases of investments................................... (2,730,825) -- --
Purchases of property and equipment........................ (572,223) (253,003) (342,047)
Capitalized software development costs..................... (1,205,824) (1,133,375) (93,001)
Increase in other assets................................... (30,000) -- --
----------- ----------- ------------
Net cash used in investing activities...................... (4,538,872) (1,386,378) (435,048)
FINANCING ACTIVITIES
Proceeds from short-term debt.............................. 247,031 -- 291,254
Payment on short-term debt................................. (322,234) (310,000) --
Economic development grant................................. 190,000 -- --
Net proceeds from issuance of common stock................. 6,607,704 465,041 1,079,159
Cash payments for stock subscription receivables........... 1,326,121 32,000 25,000
----------- ----------- ------------
Net cash provided by financing activities.................. 8,048,622 187,041 1,395,413
Net increase (decrease) in cash and cash equivalents....... 3,344,958 (189,359) 486,086
Cash and cash equivalents at beginning of period........... 425,931 615,290 129,204
----------- ----------- ------------
Cash and cash equivalents at end of period................. $ 3,770,889 $ 425,931 $ 615,290
=========== =========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest.................................................. $ 56,406 $ 12,060 $ 14,942
=========== =========== ============
Income taxes.............................................. $ 481,666 $ 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 $ 118,280 $ -- $ 1,350,524
=========== =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 14
PHOENIX INTERNATIONAL LTD., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
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 financial institutions.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.
FISCAL YEAR
The financial statements for 1996 include the twelve months of operations
ended December 31, 1996. During 1995 the Company changed its fiscal year end
from January 31 to December 31. Fiscal 1995 and fiscal 1994 correspond with
the eleven months ended December 31, 1995 and the twelve months ended January
31, 1995, respectively.
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)
-----------
Net loss before income taxes............................................................. (2,697,521)
Income tax expense....................................................................... -
-----------
Net loss............................................................................... $(2,697,521)
===========
</TABLE>
<PAGE> 15
PHOENIX INTERNATIONAL LTD., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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, "cheap stock", or 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, has been included
in the calculation of weighted average shares outstanding, using the treasury
stock method, as if it had been outstanding for all periods presented through
June 30, 1996.
Historical net income (loss) per share calculated in accordance with APB
Opinion No. 15 (excluding the impact of "cheap stock") is as follows:
<TABLE>
<CAPTION>
FISCAL FISCAL
1996 1995 1994
-----------------------------------------
<S> <C> <C> <C>
Net income (loss) per share $ 0.60 $ 0.18 $ (1.21)
Weighted average shares outstanding 3,715,171 3,029,251 2,330,391
</TABLE>
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 over the related
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. Cash and cash
equivalents as of December 31, 1996 include $190,000 received from a government
municipality under a job growth incentive economic development agreement. The
amount received under this agreement secures a letter of credit. Revenue has
been deferred until the Company completes its obligations under this agreement.
<PAGE> 16
PHOENIX INTERNATIONAL LTD., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 three to 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 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 1996 and fiscal 1995 was $338,925 and
$107,647, respectively, 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 $90,432,
$116,196, and $12,625, and in advertising costs during 1996, fiscal 1995 and
fiscal 1994, respectively.
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.
<PAGE> 17
PHOENIX INTERNATIONAL LTD., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
adoption of Statement 121 in 1996 was not material to the 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,
investments, and trade accounts receivable.
The Company's cash and cash equivalents at December 31, 1996 are deposited
principally in a single financial institution. Investment accounts contain
money market funds and short-term United States Treasury Bills.
Accounts receivable are unsecured and are due under stated terms, from a
small number of customers which are primarily in the banking business and
generally subject to regulatory oversight. Credit risk with respect to trade
accounts receivable is limited due to the license agreements generally
requiring substantial prepayments.
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.
Investments
Investments are classified as available-for-sale and are carried at
amounts approximating their fair value. As of December 31, 1996, investments
were comprised of short-term United States Treasury Bills with no unrealized
gains or losses.
Accounts Receivable And Accounts Payable
The carrying amounts reported in the balance sheet for accounts receivable
and accounts payable approximate their fair value.
<PAGE> 18
PHOENIX INTERNATIONAL LTD., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
2. FINANCIAL INSTRUMENTS (CONTINUED)
FAIR VALUE (CONTINUED)
Short-Term Debt
The carrying amount of the Company's borrowings approximate their fair
value.
3. SHORT-TERM OBLIGATIONS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Note Payable, related party--Note payable to a shareholder, collateralized by
certain office equipment, paid with accrued interest in 1996.................. $ -- $ 35,203
Payable to vendor--Payable to vendor represents non-interest bearing funds
received from a major hardware manufacturer. Repayment of $40,000 was
in cash and repayment of $100,000 was satisfied by completing certain
product development milestones................................................ -- 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, $320,526, $181,868 and $143,468 in 1996, fiscal 1995, and fiscal 1994,
respectively. Future minimum lease payments under noncancellable operating
leases with terms of one year or more consisted of the following at December
31, 1996:
<TABLE>
<S> <C>
Years ending December 31,
1997..................................................................... $ 767,461
1998..................................................................... 980,210
1999..................................................................... 979,864
2000..................................................................... 992,800
2001..................................................................... 1,005,735
Thereafter............................................................... 5,555,796
-----------
$10,281,866
===========
</TABLE>
5. INITIAL PUBLIC OFFERING
On July 1, 1996, the Company's initial public offering of 670,000 shares
of common stock was declared effective by the Securities and Exchange
Commission. On July 8, 1996, the Company completed the initial public offering,
issued the common stock and received net proceeds of approximately $6.4 million
(after deducting underwriting discounts of $0.6 million and offering costs of
$1.1 million). On July 8, 1996, the Company received approximately $1,319,000
plus accrued interest of approximately $159,000 for payment of stock
subscriptions receivable due from the CEO out of proceeds of shares sold by the
CEO in the initial public offering.
<PAGE> 19
PHOENIX INTERNATIONAL LTD., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
6. CAPITALIZATION
On May 6, 1996, the Board of Directors approved a 2.3231-for-one share
split of the Company's capital stock (classes A through E). In addition, the
Company amended its articles of incorporation effective May 8, 1996 to reduce
the par value of each of the Company's capital stock (classes A through E) in
accordance with the stock split and to increase the number of authorized shares
of Class A common stock to 1,500,000 shares. All share and per share amounts
related to common stock have been retroactively restated to reflect the stock
split for all periods presented.
On July 8, 1996, the Company filed amended and restated articles of
incorporation authorizing 20,000,000 shares of common stock, par value $0.01
per share, and all outstanding shares of the Company's capital stock (classes A
through E common stock) converted into common stock, on a share for share basis
as approved on June 12, 1996 by the shareholders of the Company. This
recapitalization did not change total shareholders' equity (deficit). Prior
to the conversion the Company had the following authorized capital:
Class A common stock, voting $0.0043 par value, 1,500,000 shares authorized
Class B common stock, voting $0.43 par value, 10,000,000 shares authorized
Class C common stock, voting $2.15 par value, 200,000 shares authorized
Class D common stock, non-voting $4.30 par value, 50,000 shares authorized
Class E common stock, non-voting, $1.08 par value, 1,000,000 shares
authorized at December 31, 1995 and 1,500,000 shares authorized at May 6,
1996
Differences in voting rights and other preferences of classes A through E
of common stock expired upon the above conversion into a single class of common
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.
7. STOCK OPTIONS AND WARRANTS
The Company has various stock option plans which authorize the Company's
Board of Directors to grant employees, officers, and directors qualified and
unqualified options to purchase shares of the Company's 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
Company's chief executive officer.
Stock option plans effective as of December 31, 1996 are the March 1995
Plan, the October 1995 Plan, and the 1996 Director Plan. Up to 520,000 shares
of the Company's common stock may be issued pursuant to options granted under
the March 1995 Plan; however, the Board does not intend to issue any additional
shares under the March 1995 Plan. The October 1995 Plan authorizes the grant of
options up to 250,000 shares of the Company's common stock, and the 1996
Director Plan authorizes the grant of options up to 99,000 shares of common
stock.
<PAGE> 20
PHOENIX INTERNATIONAL LTD., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
7. STOCK OPTIONS AND WARRANTS (CONTINUED)
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options rather than the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation." Under APB 25, because the exercise
price of the Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by Statement 123, which also requires that the information be
determined as if the Company has accounted for its employee stock options
granted subsequent to December 31, 1994 under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for 1996 and fiscal 1995, respectively; risk-free interest rates of
6.33% and 6.06%; no dividend yield, weighted-average volatility factors of the
expected market place of the Company's common stock of 0.13 and 0.00 and a
weighted-average expected life of the option of 3.50 and 2.77 years. The
volatility factors used are 0.00 for options issued prior to initial public
offering of the Company's stock and 0.56 for options granted after the
Company's initial public offering.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the option's vesting period. The Company's
pro forma information follows:
<TABLE>
<CAPTION>
FISCAL
1996 1995
---------------------------
<S> <C> <C>
Pro forma net income $1,815,927 $430,644
Pro forma net income per share, primary $ 0.48 $ 0.13
</TABLE>
Because Statement 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until 1998.
<PAGE> 21
PHOENIX INTERNATIONAL LTD., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
7. STOCK OPTIONS (CONTINUED)
A summary of the Company's option activity and related information
follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE EXERCISE
OPTIONS PRICE
----------- ----------------
<S> <C> <C>
Outstanding at February 1, 1994............................................ -- --
Granted................................................................... 718,999 $ 1.47
Exercised................................................................. (152,992) $ 1.44
Cancelled................................................................. (360,078) $ 1.08
--------
Outstanding at January 31, 1995............................................ 205,929 $ 2.17
Granted................................................................... 495,865 $ 4.37
Exercised................................................................. (86,835) $ 4.18
Canceled.................................................................. (8,597) $ 2.91
--------
Outstanding at December 31, 1995......................................... 606,362 $ 3.68
Granted.................................................................. 258,931 $11.24
Exercised................................................................ (177,739) $ 1.99
Canceled................................................................. (30,696) $ 4.47
--------
Outstanding at December 31, 1996.......................................... 656,858 $ 7.08
========
</TABLE>
The weighted average fair value of options granted during the year ended
December 31, 1996 and fiscal 1995 was $11.22 and $4.31, respectively.
Exercise prices for options outstanding as of December 31, 1996 range from
$4.30 to $17.50 per share.
The following table as of December 31, 1996 sets forth by group of
exercise price ranges, the number of shares, weighted average exercise price,
and weighted average remaining contractural life of options outstanding, and
the number and weighted average exercise price of options currently
exercisable.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------------------------ ------------------------------------
WEIGHTED
RANGE OF NUMBER WEIGHTED AVERAGE NUMBER WEIGHTED
EXERCISE OF AVERAGE CONTRACTURAL OF AVERAGE
PRICES SHARES EXERCISE PRICE LIFE (Years) SHARES EXERCISE PRICE
- ------------------------------------------------------------------------ ------------------------------------
<S> <C> <C> <C> <C> <C>
$ 4.30 - $ 6.46 450,733 $ 4.63 7.76 236,559 $ 4.48
$12.00 - $17.50 206,125 $12.43 8.76 56,125 $12.52
- ------------------------------------------------------------------------ ------------------------------------
$ 4.30 - $17.50 656,858 $ 7.08 8.08 292,684 $ 6.02
======================================================================== ====================================
</TABLE>
The Company issued warrants to purchase up to 19,000 shares of common
stock at an exercise price of $14.40 per share to the underwriter of its
initial public offering pursuant to the underwriting agreement. The warrants
are exercisable from July 1997 to July 2001.
At December 31, 1996, the Company had 5,127 and 69,000 shares available
for future grant under the October 1995 Plan and 1996 Director Plan,
respectively. The Company has reserved 749,985 shares of common stock for
issuance upon exercise of options and warrants to purchase common stock.
<PAGE> 22
PHOENIX INTERNATIONAL LTD., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
8. RELATED PARTY TRANSACTIONS
The CEO of the Company had outstanding promissory notes (see Note 3) due
him of $35,203 and accrued interest of $8,110 at December 31, 1995. The
$1,318,524 stock subscription receivable at December 31, 1995 was due from the
Company's CEO related to the issuance of 137,481 shares of Class E non-voting
common stock. Interest of $105,001 was receivable on this stock subscription at
December 31, 1995. In July 1996 following the Company's initial public offering
the Company repaid the promissory note and accrued interest payable to the CEO
and the Company received payment of stock subscription receivables and accrued
interest out of proceeds of shares sold by the CEO in the initial public
offering.
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 $450,000 were
used in 1996 and discounts of $300,000 were used in fiscal 1995, leaving a
balance of $105,000 of available discounts at December 31, 1996. License fee
revenue of $744,900, and $326,700, net of discounts used, was recorded in 1996
and fiscal 1995, respectively, under license agreements with shareholder banks.
Implementation, support revenues, and other services of $1,060,000, $254,200 and
$116,300 recorded in 1996, fiscal 1995 and fiscal 1994, respectively, were from
shareholder banks.
9. INCOME TAXES
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
FISCAL FISCAL
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Current foreign expense.................... $ 90,897 $ 446,324 $ 200,444
Deferred foreign expense (benefit)......... 390,769 (190,325) (200,444)
--------- --------- ---------
Total taxes................................ $ 481,666 $ 255,999 $ --
========= ========= =========
</TABLE>
<PAGE> 23
PHOENIX INTERNATIONAL LTD., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
9. INCOME TAXES (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 at December 31,
1996 and 1995 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Deferred income tax liabilities:
Tax over book depreciation....................... $ (52,958) $ (1,664)
Capitalized software............................. (946,126) (435,186)
----------- -----------
Total tax liabilities.......................... (999,084) (436,850)
Deferred income tax assets:
Amortization of capitalized software............. 215,591 --
Deferred revenue................................. -- 801,744
Foreign tax credit carryforwards................. 737,664 514,428
Research and development credit carryforwards.... 198,236 111,346
Net operating loss carryforwards................. 2,224,720 1,058,461
Other............................................ 32,540 4,772
----------- -----------
Total tax assets............................... 3,408,751 2,490,751
Valuation allowance for deferred income tax assets (2,409,667) (1,663,132)
----------- -----------
Net deferred income tax assets.................... $ -- $ 390,769
=========== ===========
</TABLE>
The net deferred income tax assets at 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 U.S. federal statutory
tax rates to income tax expense is:
<TABLE>
<CAPTION>
FISCAL FISCAL
1996 1995 1994
---------- --------- ----------
<S> <C> <C> <C>
Tax at U.S. statutory rates.......... $ 944,986 $ 275,491 $ (962,324)
Foreign withholding taxes............ 90,897 255,999 --
State taxes.......................... 105,298 31,600 (110,384)
Tax credits.......................... (310,127) (346,571) (263,402)
Non-deductible compensation expense.. -- -- 129,634
Restricted stock compensation........ (1,078,362) -- --
Other................................ (17,561) 13,833 (22,060)
Change in valuation allowance........ 746,535 25,647 1,228,536
---------- --------- ----------
Total tax expense................... $ 481,666 $ 255,999 $ --
========== ========= ==========
</TABLE>
<PAGE> 24
PHOENIX INTERNATIONAL LTD., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
9. INCOME TAXES (CONTINUED)
At December 31, 1996, the Company has net operating loss carryforwards of
approximately $5,700,000 for federal income tax purposes that expire
approximately $1,000,000 in 2008, $900,000 in 2009, $1,100,000 in 2010, and
$2,700,000 in 2011. The tax benefit related to approximately $2,800,000 of the
net operating loss carryforwards will result in a credit to shareholders' equity
when realized. The Company also has research and development tax credit
carryforwards of approximately $198,000 that expire in years 2008 through 2011
and foreign tax credit carryforwards of approximately $738,000 that expire in
years 2000 through 2003. 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.
10. 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 1996, fiscal 1995, or fiscal 1994. The Company has a profit sharing
plan covering substantially all employees under which the Company may make
discretionary contributions. Contributions to the profit sharing plan, as
determined by the Board of Directors, were $80,000 related to 1996. The Company
did not make contributions to the profit sharing plan in fiscal 1995 or fiscal
1994.
11. MAJOR CUSTOMERS AND EXPORT SALES
Sales to major customers, as a percentage of total revenues, are as
follows:
<TABLE>
<CAPTION>
1996 FISCAL 1995 FISCAL 1994
---- ----------- -----------
<S> <C> <C> <C>
Customer A............................................ 16% -- --
Customer B............................................ 16% 19% --
Customer C............................................ -- 43% --
Customer D............................................ -- -- 16%
Customer E............................................ -- -- 15%
</TABLE>
Export sales from the United States, as a percentage of total revenues,
were 53% in 1996, of which 42% represents sales to Latin and South America, 7%
to the Pacific Rim and 4% to Africa. Export sales from the United States, as a
percentage of total revenues, were 70% in fiscal 1995, of which 63% represents
sales to Latin and South America and 7% to the Pacific Rim, and 33% in fiscal
1994, of which 26% represents sales to Latin and South America and 7% to the
Pacific Rim.
<PAGE> 25
PHOENIX INTERNATIONAL LTD., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1996 1996 1996 1996 (1)
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Revenues $1,781,330 $2,101,707 $2,885,180 $3,637,330
Gross profit 1,193,105 1,454,133 2,093,132 2,718,430
Operating income 266,960 397,298 746,527 1,087,100
Net income 141,526 351,450 558,567 1,166,751
Net income per share (2) $ 0.04 $ 0.10 $ 0.14 $ 0.28
Weighted average shares outstanding 3,298,444 3,385,939 4,116,868 4,231,869
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1995 (3) 1995 (4) 1995 1995
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CALENDAR 1995 (3)
Revenues $ 90,745 $3,199,852 $ 788,767 $ 950,982
Gross profit (132,077) 2,747,471 311,759 405,365
Operating income (loss) (704,260) 2,055,039 (409,230) (476,385)
Net income (loss) (605,973) 1,826,465 (377,437) (445,322)
Net income (loss) per share (2) $ (0.20) $ 0.57 $ (.012) $ (0.14)
Weighted average shares outstanding 3,076,813 3,231,943 3,146,234 3,262,362
</TABLE>
(1) License fees and other revenue was $2.6 million for the quarter ended
December 31, 1996 which included $1.55 million to a single reseller under
a distribution license agreement.
(2) Due to the use of the treasury stock method in the calculation of average
shares outstanding, the sum of net income per share for the four quarters
of 1996 and calendar 1995 does not equal net income per share for those
respective years.
(3) In 1995, Phoenix changed its fiscal year end from January 31 to December
31. However, the information above for the quarter ended March 31, 1995
consists of three months, including the month of January 1995.
(4) License fee and other revenue 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.
13. EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with its senior
executives. Each agreement commits the Company 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.
<PAGE> 26
Selected Financial and Operating Data
<TABLE>
<CAPTION>
ELEVEN FISCAL YEAR FISCAL YEAR
YEAR ENDED MONTHS ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, JANUARY 31, JANUARY 31,
1996 1995 (1) 1995 1994
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenues:
License fees and other...................... $ 6,827,699 $ 3,467,547 $ 57,776 $ 30,000
Implementation, customer and software
support and other service fees............ 3,577,848 1,556,164 369,711 --
------------ ------------ ----------- -----------
Total revenues............................... 10,405,547 5,023,711 427,487 30,000
Expenses:
Cost of license fees and other............. 674,037 375,783 -- --
Cost of implementation, customer and
software support and other service fees... 2,272,710 1,246,886 637,427 104,818
Sales and marketing........................ 1,377,353 983,290 358,948 96,911
General and administrative................. 1,822,871 1,058,190 981,930 225,458
Product development........................ 1,760,691 654,797 1,362,780 621,373
------------ ------------ ----------- -----------
Total expenses............................... 7,907,662 4,318,946 3,341,085 1,048,560
Other income (expense):
Interest income............................ 223,548 121,815 26,610 3,603
Interest expense........................... (19,231) (12,060) (19,366) --
Other income (expense)..................... (2,242) (4,252) 75,989 1,815
------------ ------------ ----------- -----------
Income (loss) before income taxes............ 2,699,960 810,268 (2,830,365) (1,013,142)
Income tax expense........................... 481,666 255,999 -- --
------------ ------------ ----------- -----------
Net income (loss)............................ $ 2,218,294 $ 554,269 $(2,830,365) $(1,013,142)
============ ============ =========== ===========
Net income (loss) per share(2)............... $ 0.59 $ 0.17 $ (1.11) $ (0.51)
============ ============ =========== ===========
Weighted average shares outstanding(2)....... 3,760,680 3,235,532 2,560,151 1,971,573
============ ============ =========== ===========
OTHER DATA
Total product development expenditures(3).... $ 2,966,515 $ 1,788,172 $ 1,455,781 $ 621,373
Total personnel(4)........................... 124 87 48 23
Implemented customers(5)..................... 27 12 2 --
</TABLE>
<TABLE>
<CAPTION>
AT
----------------------------------------------------------------------
DECEMBER 31, DECEMBER 31, JANUARY 31, JANUARY 31,
1996 1995 (1) 1995 1994
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital (deficit).................... $ 6,864,961 $ (2,263,338) $(2,156,814) $ (393,335)
Total assets................................. 12,083,167 3,228,289 1,726,511 311,322
Long-term obligations........................ -- -- -- --
Accumulated deficit.......................... (1,070,944) (3,289,238) (3,843,507) (1,013,142)
Total shareholders' equity (deficit)......... 9,584,017 (568,102) (1,619,412) (226,456)
</TABLE>
<PAGE> 27
PHOENIX INTERNATIONAL LTD., INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
The Company was formed on January 11, 1993. There was no activity in the
period January 11, 1993 to January 31, 1993.
(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.
(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.
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of the Registrant
Phoenix FSC, Inc., a wholly-owned subsidiary of the Company, was
incorporated on May 9, 1994 with the government of the Virgin Islands of the
United States, St. Thomas.
Phoenix EMEA Limited, a wholly-owned subsidiary of the Company, was
incorporated on December 9, 1996 with the Registrar of Companies for England
and Wales.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Phoenix International Ltd., Inc. and to the incorporation by reference in the
Registration Statement (Form S-8 No. 333-19121) pertaining to the Phoenix
International Ltd., Inc. 1995 Employee Stock Option Plan (March), the Phoenix
International Ltd., Inc. 1995 Employee Stock Option Plan (October), and the
Phoenix International Ltd., Inc. 1996 Director Stock Option Plan of our report
dated January 31, 1997 included in the 1996 Annual Report to Shareholders of
Phoenix International Ltd., Inc.
Ernst & Young LLP
Atlanta, Georgia
March 21, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FROM FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FILING
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 3,770,889
<SECURITIES> 2,703,825
<RECEIVABLES> 950,736
<ALLOWANCES> 15,000
<INVENTORY> 0
<CURRENT-ASSETS> 9,174,111
<PP&E> 1,340,556
<DEPRECIATION> 447,128
<TOTAL-ASSETS> 12,083,167
<CURRENT-LIABILITIES> 2,309,150
<BONDS> 0
0
0
<COMMON> 38,389
<OTHER-SE> 9,584,017
<TOTAL-LIABILITY-AND-EQUITY> 12,083,167
<SALES> 0
<TOTAL-REVENUES> 10,405,547
<CGS> 0
<TOTAL-COSTS> 2,946,747
<OTHER-EXPENSES> 4,960,915
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,231
<INCOME-PRETAX> 2,699,960
<INCOME-TAX> 481,666
<INCOME-CONTINUING> 2,218,294
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,218,294
<EPS-PRIMARY> .59
<EPS-DILUTED> .58
</TABLE>