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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998.
Or
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM TO , 19 .
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Commission file number : 0-20937
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PHOENIX INTERNATIONAL LTD., INC.
(Exact name of registrant as specified in its charter)
Florida 59-3171810
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
500 International Parkway, Heathrow, Florida 32746
(Address of principal executive offices)
(407) 548-5100
(Registrant's telephone number including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at July 30, 1998
Common Stock, $0.01 par value 8,390,163
---------------
(No. of Shares)
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PHOENIX INTERNATIONAL LTD., INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements 3
Condensed Consolidated Balance Sheets as of
June 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Operations for
the Three Months and Six Months ended June 30, 1998
and 1997 4
Condensed Consolidated Statements of Cash Flows for the Six
Months ended June 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
</TABLE>
SIGNATURES
EXHIBIT INDEX
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PHOENIX INTERNATIONAL LTD., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $11,571,883 $13,034,491
Investments, available for sale 4,905,700 7,705,000
Accounts receivable, net of allowance for doubtful accounts of $341,200
and $155,000 at June 30, 1998 and December 31, 1997, respectively 3,283,236 4,578,485
Unbilled accounts receivable 5,630,085 3,766,322
Deferred tax asset 2,052,863 2,229,000
Prepaid expenses and other current assets 734,335 592,274
----------- -----------
Total current assets 28,178,102 31,905,572
Long term investments, available for sale 14,960,185 13,088,014
Property and equipment:
Computer equipment and purchased software 3,348,033 2,217,366
Furniture, office equipment and leasehold improvements 1,492,696 1,100,275
----------- -----------
4,840,729 3,317,641
Accumulated depreciation and amortization (1,480,025) (972,616)
----------- -----------
Total property and equipment 3,360,704 2,345,025
Capitalized software costs, net of accumulated
amortization of $1,574,316 and $1,078,749 at June 30, 1998 and
December 31, 1997, respectively 5,306,812 3,522,484
Other assets 1,596,400 1,296,400
=========== ===========
Total assets $53,402,203 $52,157,495
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 281,061 $ 624,924
Accrued expenses 1,739,946 1,810,662
Capital lease, current portion 135,890 129,997
Deferred revenue 2,253,915 1,851,960
----------- -----------
Total current liabilities 4,410,812 4,417,543
Deferred revenue under economic development grant 95,000 95,000
Deferred tax liability 1,292,133 1,309,000
Capital lease, long term portion 430,148 500,821
----------- -----------
Total long term liabilities 1,817,281 1,904,821
----------- -----------
Total liabilities 6,228,093 6,322,364
Shareholders' equity:
Common stock, $0.01 par value
50,000,000 shares authorized, 8,370,326 and 8,153,127 issued and
outstanding at June 30, 1998 and December 31, 1997 respectively 83,703 81,531
Additional paid-in capital 44,663,451 43,900,249
Stock subscription receivables -- (13,360)
Retained earnings 2,426,956 1,866,711
----------- -----------
Total shareholders' equity 47,174,110 45,835,131
=========== ===========
Total liabilities and shareholders' equity $53,402,203 $52,157,495
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
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PHOENIX INTERNATIONAL LTD., INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues:
<S> <C> <C> <C> <C>
License fees and other $ 3,679,940 $3,421,037 $ 6,711,150 $5,689,443
Implementation, customer and software
support and other service fees 1,986,763 1,285,071 3,553,997 2,730,389
----------- ---------- ----------- ----------
Total revenues 5,666,703 4,706,108 10,265,147 8,419,832
Expenses:
Cost of license fees and other 473,309 455,600 1,017,675 675,337
Cost of implementation, customer and
software support and other service fees 1,460,840 1,003,156 2,683,364 1,834,789
Sales and marketing 986,624 696,667 1,958,249 1,257,664
General and administrative 988,215 891,294 2,072,539 1,327,901
Product development 1,396,388 802,438 2,553,850 1,355,578
----------- ---------- ----------- ----------
Total expenses 5,305,376 3,849,155 10,285,677 6,451,269
Other income (expense):
Interest income 406,816 53,689 854,150 128,477
Interest expense (13,150) (16,048) (27,076) (21,437)
Other income 10,645 -- 13,130 --
----------- ---------- ----------- ----------
Income before income taxes 765,638 894,594 819,674 2,075,603
Income tax expense 267,973 130,920 286,886 298,633
----------- ---------- ----------- ----------
Net income $ 497,665 $ 763,674 532,788 $1,776,970
=========== ========== =========== ==========
Net income per share - basic $ 0.06 $ 0.13 $ 0.06 $ 0.30
=========== ========== =========== ==========
Net income per share - diluted $ 0.06 $ 0.12 $ 0.06 $ 0.27
=========== ========== =========== ==========
Weighted average shares outstanding - basic 8,366,344 5,917,110 8,299,024 5,845,078
=========== ========== =========== ==========
Weighted average shares outstanding - diluted 8,928,034 6,568,083 8,826,832 6,499,022
=========== ========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements of operations.
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PHOENIX INTERNATIONAL LTD., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------------
1998 1997
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 532,788 $ 1,776,970
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 1,002,976 523,538
Provision for doubtful accounts 186,200 50,000
Deferred taxes 159,270 --
Changes in operating assets and liabilities:
Accounts receivable 1,109,049 (1,652,646)
Unbilled accounts receivable (1,863,763) (2,081,270)
Prepaid expenses and other current assets (142,061) (39,098)
Accounts payable (343,863) 11,386
Accrued expenses (70,716) 130,508
Deferred revenue 401,955 169,785
------------ ------------
Net cash provided by (used in) operating activities 971,835 (1,110,827)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (1,523,088) (919,951)
Sale of short term investments 2,799,300 2,730,825
Purchase of long term investments, net of unrealized gain (1,844,714) (466,400)
Capitalized software costs (2,279,895) (1,096,818)
Purchase of other assets (300,000) --
------------ ------------
Net cash provided by (used in) investing activities (3,148,397) 247,656
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of capital lease obligations (64,780) (39,062)
Net proceeds from issuance of common stock 765,374 176,698
Cash payments for stock subscription receivable 13,360 34,149
------------ ------------
Net cash provided by financing activities 713,954 171,785
------------ ------------
Net decrease in cash and cash equivalents (1,462,608) (691,386)
Cash and cash equivalents at beginning of the period 13,034,491 3,770,889
------------ ------------
Cash and cash equivalents at end of the period $ 11,571,883 $ 3,079,503
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements of cash flows.
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PHOENIX INTERNATIONAL LTD., INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
include all adjustments, consisting only of normal recurring accruals, which
the Company considers necessary for a fair presentation of the financial
position and the results of operations for the interim periods presented. The
condensed consolidated financial statements have been prepared in accordance
with the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and footnote disclosures usually found in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and "Selected Financial and Operating Data" included in the
Company's annual report on Form 10-K for the year ended December 31, 1997.
2. NET INCOME PER SHARE
Net income per share is calculated and presented in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS 128"). Basic earnings per share is computed using the average number of
common shares outstanding. Diluted earnings per share is computed on the basis
of the average number of common shares outstanding plus the effect of
outstanding stock options using the "treasury stock" method based on average
stock price for the period.
The following table sets forth the computation of basic and diluted earnings
per share.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30
------------------ ----------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Numerator - net income available
to common shareholders $ 497,665 $ 763,674 $ 532,788 $1,776,970
============ ========== ========== ==========
Denominator for basic net income per
share - weighted average shares outstanding 8,366,344 5,917,110 8,299,024 5,845,078
Effect of dilutive securities -
employee stock options 561,690 650,973 527,808 653,944
------------ ---------- ---------- ----------
Denominator for diluted net income per
share - adjusted weighted average shares
outstanding and assumed conversion of
dilutive securities 8,928,034 6,568,083 8,826,832 6,499,022
============ ========== ========== ==========
Net income per share - basic $ 0.06 $ 0.13 $ 0.06 $ 0.30
============ ========== ========== ==========
Net income per share - diluted $ 0.06 $ 0.12 $ 0.06 $ 0.27
============ ========== ========== ==========
</TABLE>
6
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Stock Split
The Company effected a three-for-two stock split in the form of a 50%
stock dividend, distributed on May 18, 1998 to stockholders of record on May
11, 1998. Accordingly, all share and per share amounts have been adjusted to
reflect this split.
3. CAPITALIZED SOFTWARE 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."
These costs include costs incurred internally after technological feasibility
has been established to develop and enhance computer software products and
include certain purchased software costs. Capitalized software costs include
purchased software costs of $761,000, and $311,000 at June 30, 1998 and December
31, 1997, respectively.
4. COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted SFAS 130, Reporting
Comprehensive Income ("FAS 130"). FAS 130 establishes new rules for the
reporting and display of comprehensive income and its components. Comprehensive
income for the three months ended June 30, 1998 and 1997 is comprised of the
following:
<TABLE>
<CAPTION>
Three months ended June 30,
1998 1997
------------------------------
<S> <C> <C>
Net income as reported $497,665 $763,674
Other comprehensive income:
Unrealized gain on investments available
for sale 27,457 --
-------- --------
Comprehensive income: $525,122 $763,674
======== ========
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
OVERVIEW
The following discussion 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 Quarterly Report and
include all statements that are not historical statements of fact regarding the
intent, anticipation, 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 (including, but not limited to, the Company's development
and implementation of the Phoenix System and its other products); and (iv) the
declaration and payment of dividends. The words "may," "would," "could,"
"will," "expect," "estimate," "anticipate," "believe," "intends," "plans," and
similar expressions and variations thereof are intended to identify
forward-looking statements. Investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
risks and uncertainties, many of which are beyond the Company's ability to
control, and that actual results may differ materially from those projected in
the
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forward-looking statements.
Actual results may differ materially from these forward-looking
statements as a result of many factors, including the inability to obtain,
continue and manage growth or execute agreements with new customers; market
acceptance of new products and enhancements; growth in the Company's customers;
increased competition; dependence on new products; rapid changes in technology,
and the other factors discussed in the Company's registration statement on Form
S-1 as declared effective on August 13, 1997, including the "Risk Factors"
section contained therein.
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.
Revenues were recorded in accordance with the American Institute of
Certified Public Accountants ("AICPA") Statement of Position 91-1 "Software
Revenue Recognition" ("SOP 91-1") for the three months and six months ended
June 30, 1997. Fees for the Company's software products are charged separately
from fees for the Company's services and are recognized upon delivery, when no
significant vendor obligations remain and collection of the resulting
receivables is deemed probable. 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.
In October 1997, the AICPA issued a new Statement of Position 97-2
("SOP 97-2"), "Software Revenue Recognition." SOP 97-2 supersedes SOP 91-1, and
was adopted by the Company effective January 1, 1998. The Company has applied
SOP 97-2 to all contracts signed during 1998. While some principles remain the
same, there are several key differences between the two pronouncements,
including accounting for multiple element arrangements.
The Company currently believes, based on its reading and
interpretation of SOP 97-2, that future license and service agreements that
require modifications to the software may require contract accounting for both
the license fees and services and result in a deferral of license revenue
compared to revenue recognition under SOP 91-1 for some agreements. If this
historical trend continues there will be a material adverse effect on the
Company's recognition of revenues and earnings in 1998 during the
implementation of SOP 97-2, but the Company anticipates this effect will be
reduced in future periods as the revenues are recognized over the service
period. In addition, the percent of total revenue recognized from international
sales could be reduced in 1998 as a result of implementation of SOP 97-2.
During March 1998, the AICPA issued Statement of Position 98-4, "Deferral of
the Effective Date of a Provision of SOP 97-2, Software Revenue Recognition"
("SOP 98-4"). SOP 98-4 defers until December 15, 1998 the requirement of
vendor-specific objective evidence of the fair value of the various elements in
a multiple-element arrangement as a condition to recognize revenue for elements
delivered early in the arrangement.
The Company's quarterly operating results have varied significantly in
the past and may
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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,
the Company 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 Company's common stock would likely be materially
adversely affected.
The Company has determined that it will not need to modify or replace
significant portions of its software so that its computer systems will function
properly with respect to dates in the Year 2000 and beyond. However, while the
Company believes its products, computer systems and applications currently in
use are Year 2000 compliant, the Company has not made an assessment as to
whether any of its customers, suppliers or service providers have resolved
their Year 2000 issues. The Company has developed a plan and is testing its
software, suppliers, and service providers for Year 2000 compliance. Failure of
the Company's software or that of its customers, suppliers or service providers
to be Year 2000 compliant could have a material adverse impact on the Company's
business, financial condition and result of operations.
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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>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues
<S> <C> <C> <C> <C>
License fees and other 64.9 % 72.7 % 65.4 % 67.6 %
Implementation, customer and
software support and other service fees 35.1 % 27.3 % 34.6 % 32.4 %
------ ------ ------ ------
Total revenues 100.0 % 100.0 % 100.0 % 100.0 %
Expenses
Cost of license fees and other 8.4 % 9.7 % 9.9 % 8.0 %
Cost of implementation, customer and
software support and other service fees 25.8 % 21.3 % 26.1 % 21.8 %
Sales and marketing 17.4 % 14.8 % 19.1 % 14.9 %
General and administrative 17.4 % 18.9 % 20.2 % 15.8 %
Product development 24.6 % 17.1 % 24.9 % 16.1 %
------ ------ ------ ------
Total expenses 93.6 % 81.8 % 100.2 % 76.6 %
Other income (expense)
Interest income 7.2 % 1.1 % 8.5 % 1.5 %
Interest expense (0.2)% (0.3)% (0.3)% (0.3)%
Other income 0.1 % 0.0 % 0.1 % 0.0 %
Income before taxes 13.5 % 19.0 % 8.0 % 24.6 %
Income tax expense 4.7 % 2.8 % 2.8 % 3.5 %
------ ------ ----- ------
Net income 8.8 % 16.2 % 5.2 % 21.1 %
====== ====== ===== ======
</TABLE>
Three Months Ended June 30, 1998 Compared to Three Months Ended June 30, 1997
Revenues. Total revenues increased $1.0 million, or 20.4%, to $5.7
million in the three months ended June 30, 1998 from $4.7 million for the three
months ended June 30, 1997. Revenues from license fees and other increased
$259,000, or 7.6%, to $3.7 million for the three months ended June 30, 1998
from $3.4 million in the three months ended June 30, 1997 due to increased
number of customers and increased U.S. prices. Revenues from implementation,
customer and software support and other service fees increased $702,000, or
54.6%, to $2.0 million in the three months ended June 30, 1998 from $1.3
million in the three months ended June 30, 1997 due to the increased number of
customer installations and increased U.S. prices.
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Expenses. Cost of license fees and other was $473,000 and $456,000 in
the three months ended June 30, 1998 and 1997, respectively. These costs
increased as a result of higher amortization of capitalized software
development costs and higher third party software royalties.
Cost of implementation, customer and software support and other
service fees consists primarily of personnel related costs incurred in
providing implementation, conversion and installation services, training and
customer support. Cost of implementation, customer and software support and
other service fees increased $458,000, or 45.6%, to $1.5 million in the three
months ended June 30, 1998 from $1.0 million in the three months ended June 30,
1997 as a result of additional personnel and travel costs related to increased
Phoenix System implementation activity.
Sales and marketing expenses increased $290,000, or 41.6%, to $987,000
in the three months ended June 30, 1998 from $697,000 in the three months ended
June 30, 1997 as a result of additional expenses incurred in connection with
increased staffing, travel and personnel related costs.
General and administration expenses increased $97,000, or 10.9%, to
$990,000 in the three months ended June 30, 1998 from $891,000 in the three
months ended June 30, 1997 primarily as the result of increased professional
services fees, rent, personnel related costs and bad debt expense.
Product development expenses increased $594,000, or 74.0%, to $1.4
million in the three months ended June 30, 1998 from $802,000 in the three
months ended June 30, 1997. Product development expenses increased primarily as
a result of increased contract labor and personnel related costs.
Other Income (Expense). Interest income was $407,000 and $54,000 in
the three months ended June 30, 1998 and 1997, respectively. Interest income
increased primarily due to the increase in interest-bearing funds resulting
from the investment of the proceeds from the public offering of the Company's
common stock in August 1997.
Income Tax Expense. Income tax expense was $268,000 and $131,000 in
the three months ended June 30, 1998 and 1997, respectively. The Company's
effective tax rate in the three months ended June 30, 1998 was 35% based on the
estimated 1998 effective annual income tax rate. In the three months ended June
30, 1997, income tax expense represents withholding taxes which relate to the
license of the Company's products to foreign customers and which are
contractually payable by those customers and alternative minimum tax.
Net Income. Net income decreased $266,000 to $498,000 in the three
months ended June 30, 1998 from net income of $764,000 in the three months
ended June 30, 1997 as a result of increased operating expenses.
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<PAGE> 12
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
Revenues. Total revenues increased $1.9 million, or 21.9%, to $10.3
million in the six months ended June 30, 1998 from $8.4 million for the six
months ended June 30, 1997. Revenues from license fees and other increased $1.0
million, or 18.0%, to $6.7 million for the six months ended June 30, 1998 from
$5.7 million in the six months ended June 30, 1997 due to increased number of
customers and increased U.S. prices. Revenues from implementation, customer and
software support and other service fees increased $824,000, or 30.2%, to $3.6
million in the six months ended June 30, 1998 from $2.7 million in the six
months ended June 30, 1997 due to increased number of customer installations
and increased U.S. prices.
Expenses. Cost of license fees and other was $1.0 million and $675,000
in the six months ended June 30, 1998 and 1997, respectively. These costs
increased as a result of higher amortization of capitalized software
development costs and higher third party software royalties.
Cost of implementation, customer and software support and other
service fees consists primarily of personnel related costs incurred in
providing implementation, conversion and installation services, training and
customer support. Cost of implementation, customer and software support and
other service fees increased $849,000, or 46.2%, to $2.7 million in the six
months ended June 30, 1998 from $1.8 million in the six months ended June 30,
1997 as a result of additional personnel costs related to increased Phoenix
System implementation activity.
Sales and marketing expenses increased $701,000, or 55.7%, to $2.0
million in the six months ended June 30, 1998 from $1.3 million in the six
months ended June 30, 1997 as a result of additional expenses incurred in
connection with increased staffing, travel and personnel related costs.
General and administration expenses increased $745,000, or 56.1%, to
$2.1 million in the six months ended June 30, 1998 from $1.3 million in the six
months ended June 30, 1997 primarily as the result of increased professional
services fees, rent, personnel related costs and bad debt expense.
Product development expenses increased $1.2 million, or 88.4%, to $2.6
million in the six months ended June 30, 1998 from $1.4 million in the six
months ended June 30, 1997. Product development expenses increased as a result
of increased contract labor and personnel related costs.
Other Income (Expense). Interest income was $854,000 and $128,000 in
the six months ended June 30, 1998 and 1997, respectively. Interest income
increased primarily due to the increase in interest-bearing funds resulting
from the investment of the proceeds from the public offering of the Company's
common stock in August 1997.
Income Tax Expense. Income tax expense was $287,000 and $299,000 in
the six months ended June 30, 1998 and 1997, respectively. The Company's
effective tax rate in the six months ended June 30, 1998 was 35% based on the
estimated 1998 effective annual income tax rate. In the six months ended June
30, 1997, income tax expense represents withholding taxes which relate to the
license of the Company's products to foreign customers and which are
contractually payable by those customers and alternative minimum tax.
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<PAGE> 13
Net Income. Net income decreased $1.2 million to $533,000 in the six
months ended June 30, 1998 from $1.8 million in the six months ended June 30,
1997 as a result of increased operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $11.6 million at June 30, 1998. For the
six months ended June 30, 1998, cash provided by operations was $1.0 million. A
decrease in trade accounts receivable of $1.0 million and an increase in
deferred revenue of $400,000 provided cash in the Company's operating
activities. Cash used by investing activities was $3.1 million for the six
months ended June 30, 1998, including $1.5 million for purchases of property
and equipment, $450,000 for purchased software to be used to further develop
the Phoenix System, and $1.8 million for capitalized software development
costs. Purchase of long term investments used $1.8 million of cash and the sale
of short term investments provided $2.8 million in cash for the six months
ended June 30, 1998. Financing activities provided $713,000 of cash for the six
months ended June 30, 1998, including $765,000 from the issuance of common
stock pursuant to the exercise of stock options. Capital lease payments
represented a use of cash of $65,000 for the six months ended June 30, 1998.
Working capital was $23.8 million at June 30, 1998.
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 through at least June 1999.
Cash flows from operating activities are dependent on continued advance
payments from customers, and there is no assurance that the Company will
continue to receive these payments from customers or that it will continue to
receive these payments in advance on the same terms as it has in the past. The
Company anticipates that its operating and investing activities may use cash in
the future, particularly from growth in operations and development activities.
Consequently, any such future growth may require the Company to obtain
additional equity or debt financing.
13
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 1. 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 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of the Shareholders of the Company was held on May
8, 1998 for the following purposes:
1. to elect three Class II directors to serve for three-year terms
and to elect one Class III director to serve for a one-year term
2. to consider and act upon the proposal to amend the Company's 1995
Stock Option Plan, effective as of October 21, 1995, to increase
the shares reserved for issuance thereunder from 500,000 to
700,000
3. to consider and act upon the proposal to amend the Company's 1996
Director Stock Option Plan to increase the shares reserved for
issuance thereunder from 99,000 to 150,000
4. to consider and act upon the proposal to adopt the Company's 1998
Employee Stock Purchase Plan
Only shareholders of record at the close of business on March 16, 1998
were entitled to vote at the Annual Meeting. Proxies for the meeting were
solicited pursuant to the Florida Business Corporation Act, and there was no
solicitation in opposition to management's solicitations.
Proxies and ballots were received from the holders of 4,682,328 shares
of the Company's common stock, representing 84.2% of the outstanding shares of
common stock.
The results were as follows:
1. The three individuals nominated to serve as Class II directors
and the one individual nominated to serve as a Class III director
were elected with the number of votes for and withheld as
indicated below:
<TABLE>
<CAPTION>
Nominee For Withheld
------- --- --------
<S> <C> <C>
Paul A. Jones 4,649,642 32,686
J. Michael Murphy 4,655,638 26,690
Glenn W. Sturm 4,655,638 26,690
Raju M. Shivdasani 4,655,638 26,690
</TABLE>
Also, the shareholders approved the following matters with the
number of votes for,
14
<PAGE> 15
against and withheld as indicated below:
<TABLE>
<CAPTION>
For Against Withheld
--- ------- --------
<S> <C> <C> <C>
2. The proposal to amend the Company's 2,765,895 12,276 990,346
1995 Stock Option Plan
3. The proposal to amend the Company's 2,732,738 12,586 1,023,193
1996 Director Stock Option Plan
4. The proposal to adopt the Company's 2,737,316 10,306 20,815
1998 Employee Stock Option Plan
</TABLE>
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
Exhibit
No. Description
3.1 Amended and Restated Articles of Incorporation, as amended by the
Articles of Amendment to Amended and Restated articles of
Incorporation as filed with the Secretary of the State of Florida on
May 28, 1997 (incorporated by reference to Exhibit 3.1 of the
Company's Registration Statement on Form S-1 (No. 333-31415) as
declared effective by the SEC on August 13, 1997. (the "Registration
Statement").
3.2 Amended and Restated Bylaws, effective July 8, 1996, (incorporated
by reference to Exhibit 3.2 of the Company's Form 10-Q, dated August
14, 1996, File No. 0-20937)
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
(incorporated by reference to Exhibit 4.1 of Registration
Statement).
10.1 Form of Domestic Software License Agreement.
10.2 Form of International Software License Agreement.
27.1 Financial Data Schedule for the three months ended June 30, 1998
(for SEC use only)
b) Reports on Form 8-K
None.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934,the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
PHOENIX INTERNATIONAL LTD., INC.
July 31, 1998 /s/ Bahram Yusefzadeh
------------------------------------------
Date Bahram Yusefzadeh
Chairman of the Board and Chief Executive
Officer
(principal executive officer)
/s/ Anthony R. Obrzut
------------------------------------------
Anthony R. Obrzut
Acting Chief Financial Officer
(principal financial and accounting officer)
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Page
--- ----------- ----
<S> <C> <C>
3.1 Amended and Restated Articles of Incorporation, as amended by the
Articles of Amendment to Amended and Restated articles of
Incorporation as filed with the Secretary of the State of Florida on
May 28, 1997 (incorporated by reference to Exhibit 3.1 of the
Company's Registration Statement on Form S-1 (No. 333-31415) as
declared effective by the SEC on August 13, 1997. (the "Registration
Statement").
3.2 Amended and Restated Bylaws, effective July 8, 1996, (incorporated
by reference to Exhibit 3.2 of the Company's Form 10-Q, dated August
14, 1996, File No. 0-20937)
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
(incorporated by reference to Exhibit 4.1 of Registration
Statement).
10.1 Form of Domestic Software License Agreement.
10.2 Form of International Software License Agreement.
27.1 Financial Data Schedule for the three months ended June 30, 1998
(for SEC use only)
c) Reports on Form 8-K
None.
</TABLE>
17
<PAGE> 1
CONFIDENTIAL
EXHIBIT 10.1
PHOENIX INTERNATIONAL LTD., INC.
500 International Parkway
Heathrow, Florida 32746
Telephone: (407) 548-5100
Fax: (407) 548-5299
DOMESTIC SOFTWARE LICENSE AGREEMENT
<TABLE>
<S> <C>
- --------------------------------------------------- -------------------------------------------------
Name of Customer: Effective Date (Day/Month/Year):
- --------------------------------------------------- -------------------------------------------------
Type of entity: State of formation:
- --------------------------------------------------- -------------------------------------------------
Mailing Address: Business Address (if different from mailing
address):
- --------------------------------------------------- -------------------------------------------------
City, State, Postal Code: City, State, Postal Code:
- --------------------------------------------------- -------------------------------------------------
Phone Number: Fax Number:
- --------------------------------------------------- -------------------------------------------------
</TABLE>
Phoenix International Ltd., Inc. ("Phoenix") has developed a retail banking
system which the party identified as Customer above ("Customer") wishes to
license. In consideration of the obligations of the and agreements of the
parties as set forth below, the parties hereby agree as follows:
1 DEFINITIONS
1.1 "Affiliate" shall mean a parent company owning a majority of the Customer,
and majority owned subsidiaries of the Customer.
1.2 "Changes" shall mean corrections, updates, upgrades, translations,
additions and modifications to the Software and Documentation, and any other
new or additional works based in whole or in part on the Software or
Documentation.
1.3 "Client Devices" shall mean workstations, personal computers, terminals and
other devices connected to the Server through the Customer Network which access
and Use the Software to input, read, interpret, manipulate, or display
Customer's data.
1.4 "Confidential Information" shall mean any competitively sensitive or secret
business, marketing, or technical information of Phoenix or Customer, including
the terms of this Agreement and all other Agreements and communications between
Phoenix and Customer. Phoenix's Confidential Information shall include, but not
limited to, the Software and Documentation, including all Changes. Customer's
Confidential Information shall include, but not limited to, all information
concerning Customer's customers and their accounts. Confidential Information
shall not include information which is (i) generally known to the public or
readily ascertainable from public sources (other than as a result of a breach
of confidentiality hereunder), (ii) independently developed by the receiving
party without reference to or reliance on any Confidential Information of the
disclosing party, as demonstrated by written records of the receiving party, or
(iii) obtained from an independent third party who created or acquired such
information without reference to or reliance on Confidential Information.
1.5 "Customer and Software Support" shall have the meaning set forth in Section
8.
1.6 "Customer Network" shall mean the Server and the Client Devices at the
Designated Location and the Remote Branches for which license fees have been
paid hereunder.
1.7 "Designated Location" shall mean the street address of the location of the
Server as specified on Exhibit D. Customer shall notify Phoenix prior to any
change in the
<PAGE> 2
CONFIDENTIAL
location of the Server. Upon such notice, Exhibit D will be deemed
automatically amended to reflect the change.
1.8 "Documentation" shall mean the user documentation relating to the Software
provided to Customer by or on behalf of Phoenix.
1.9 "Effective Date" means the date first set forth above as the date of this
Agreement.
1.10 "Implementation Date" shall mean the date upon which the Software is ready
for live processing of Customer's data.
1.11 "Licensed Products" shall mean collectively the Software and
Documentation.
1.12 "Related Expenses" shall mean reasonable travel and other out-of-pocket
expenses incurred by Phoenix in the performance of its obligations hereunder,
including (without limitation) airfare, travel costs, lodging costs, and meals;
shipping charges, courier and delivery charges; tape, cartridge, CD and
diskette cost; and voice and data telecommunications expenses. To the extent
reasonably possible, Phoenix will obtain the approval of Customer prior to
incurring substantial Related Expenses, and Customer will not unreasonably
withhold such approval. Phoenix travel expenses shall be in conformance with
the Phoenix Travel and Entertainment Policy as in effect from time to time, a
copy of which shall be provided to Customer upon request.
1.13 "Remote Branches" shall mean the street addresses listed in Exhibit D
where Client Devices reside.
1.14 "Server" shall mean the network file server on which the relational
database for the Software resides.
1.15 "Software" shall mean the object code version of the Phoenix software
listed in Exhibit A, along with all Changes provided to Customer or authorized
by Phoenix hereunder.
1.16 "Term" shall have the meaning set forth in Section 4 below.
1.17 "Third Party Software" shall mean any third party software to be used in
conjunction with the Phoenix Software.
1.18 "Use" (used as a noun or verb) shall mean the reading into computer memory
of the Software for the purpose of access and/or execution, in whole or in
part.
2 LICENSE GRANT
2.1 License. Subject to the restrictions and limitations of this Agreement and
to payment of the fees set forth herein, Phoenix hereby grants to Customer a
non-exclusive, non-transferable license during the term of this Agreement
within the United States to:
(1)Use the Software on the Customer Network;
(2)transfer the Software to a backup machine when the primary 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;
(3)make a reasonable number of additional copies of the Software for testing,
backup, and archival purposes in support of its ordinary Use of the Software;
(4)use the Documentation in support of Customer's Use of the Software;
(5)make a reasonable number of additional copies of the Documentation or
portions thereof as required to support the Use of the Software.
2.2 Restrictions. The Software may only be used for Customer's and its
Affiliates' own internal data processing needs. Customer may not, without the
prior written consent of Phoenix:
(1)translate, reverse engineer, de-compile, interpret or disassemble the
Software;
(2)transfer, distribute, sell, lease, or assign the Licensed Products;
(3)use the Licensed Products 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, provided Customer shall not be prevented from processing its
customer's accounts; or
(4)make any Changes to the Software.
2.3 Delivery. Phoenix will deliver to Customer one copy of the current
unmodified version of the Software (as listed in Exhibit A) in object code
form, and one copy of the current version of the Documentation. The licenses
granted to Customer under Section 2.1 shall become immediately effective, and
shall not be delayed or contingent based on installation, operation, or the
delivery or completion of any services.
2.4 Records. Customer agrees to maintain a record of the number and location of
all copies of the Licensed Products in its possession. Customer shall provide
Phoenix with a copy of such record upon Phoenix's written request. Following
prior written notice, Phoenix or its designee shall have the right to enter
Customer's premises during regular business hours in a non-disruptive manner
for the purpose of inspecting the location and use of the Software and
Documentation, the compliance of Customer with the provisions of this
Agreement, and the standard procedures of Customer regarding retention,
safekeeping, and disposal of all media and materials pertaining thereto
2
<PAGE> 3
CONFIDENTIAL
3 PAYMENTS AND TERMS.
3.1 Fees. The fees and charges for products and services to be provided under
this Agreement are set forth in Exhibit B. All amounts shall be paid in U.S.
dollars by wire transfer to the bank account designated by Phoenix in
accordance with the payment terms set forth in Exhibit B, or as otherwise
agreed between Phoenix and Customer. Additionally, Customer shall pay all
Related Expenses incurred by Phoenix.
3.2 Payment Terms. All invoices shall be due and payable on the date specified
in Exhibit B, or, if a date is not specified, not later than 30 days following
the date of invoice. Overdue amounts shall incur interest at the lesser of 1
1/2% per month or the highest rate allowed under applicable law. Time is of the
essence with respect to all payments due from Customer hereunder.
3.3 Taxes. Customer shall pay on a timely basis all sales, use and other taxes
arising out the transactions contemplated herein, however designated, based or
levied by any federal, state, municipal or local taxing authority (but shall
not include United States Federal, state or local taxes based upon the net
income of Phoenix) ("Taxes"). Customer shall promptly reimburse and shall
indemnify Phoenix for all Taxes which Phoenix is required by any taxing
authority to pay. Customer shall, as soon as practicable, forward to Phoenix
documentation evidencing payment of all such taxes. Customer may challenge the
applicability of any Tax only after paying the Tax or giving Phoenix
satisfactory assurance of compliance.
3.4 Fee Adjustments. Phoenix reserves the right to adjust its prices once per
year subject to 30 days advanced written notice. The Customer and Software
Support Fee shall not be increased by more than the greater of 6% or the
increase in the U.S. Consumer Price Index for the previous 12 month period.
4 TERM AND TERMINATION
4.1 Term. This Agreement and the license granted herein shall have an initial
term commencing on the Effective Date and continuing for a period of 5 years
from the Implementation Date (the "Initial Term"). Thereafter, this Agreement
shall automatically renew for additional 1 year periods unless and until either
party notifies the other in writing of its desire not to renew this Agreement
at least 90 days prior to the last day of the Initial Term or any subsequent
renewal period.
4.2 Termination by Phoenix. Phoenix shall have the right to terminate this
Agreement upon the occurrence of any of the following events:
(1)Customer's material breach of any provision of this Agreement if Customer
has not initiated adequate steps to cure such breach within 20 days following
written notice of such breach to Customer; or
(2)Customer's failure to obtain and pay for Customer and Software Support; or
(3)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, and any such event affects or delays payments to Phoenix hereunder;
or
4.3 Result of Termination by Phoenix. In the event that this Agreement is
terminated under Section 4.2(1) above, 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 180 days following
termination, provided that Customer has paid and continues to pay all amounts
due as if this Agreement were still in effect. Upon expiration of such period
(and immediately, in the event of termination under Section 4.2(1)), Customer
shall either return to Phoenix or destroy all copies of the Licensed Products.
Upon Phoenix's request, Customer shall certify that it has completed such
action.
4.4 Termination by Customer. Customer may terminate this Agreement upon the
occurrence of any of the following:
(1) Phoenix's material breach of any provision of this Agreement if Phoenix
has not initiated adequate steps to cure such breach within 20 days following
written notice of such breach to Phoenix; or
(2)Phoenix 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, and any such event materially affects Phoenix's ability to meet its
obligations hereunder.
4.5 Result of Termination by Customer. In the event that this Agreement is
terminated by Customer under Section 4.4, or by Phoenix after the Initial Term,
Customer may continue to Use the Software in accordance with this Agreement
until the later of nine months following such termination or the end of the
Initial Term. Upon expiration of such period, Customer shall either return to
Phoenix or
3
<PAGE> 4
CONFIDENTIAL
destroy all copies of the Licensed Products. Upon Phoenix's request, Customer
shall certify that it has completed such action.
4.6 Survival. All obligations with respect to restrictions on use of the
Licensed Products, confidentiality, payment of fees, ownership, and protection
of intellectual property rights shall survive any termination of this
Agreement.
4.7 Non-exclusive Remedy. The rights and remedies of the parties are not
exclusive and are in addition to any other rights and remedies provided by law
or equity.
4.8 De-Conversion. Upon Customer's request, following the termination or
expiration of Customer's right to Use the Software, Phoenix shall assist
Customer with the conversion of its data from its then current format into a
generic format. Customer shall pay Phoenix on a time and materials basis for
such assistance at its then current published rates for the Territory, plus
Related Expenses.
4.9 Source Code. Phoenix will deposit the most current version of the source
code for the Software with an independent escrow agent. In the event that
Phoenix, or any successor, shall cease to provide Customer and Software
Support, Customer's license for the use of the Software hereunder is still in
effect, and Customer has paid its Customer and Software Support Fee and all
other fees due hereunder, Customer shall have the right to obtain, for its own
sole and exclusive use for the sole purpose of maintaining and supporting the
Software, with no right of transfer, a single copy of such source code from the
escrow agent, subject to the terms of this Agreement.
5 TITLE
5.1 Ownership. The Software and Documentation are (i) copyrighted works
protected by copyright laws, treaties and conventions of the United States and
the Territory and (ii) contain trade secrets and Confidential Information of
Phoenix protected under applicable law of the United States and the Territory.
Phoenix retains all right, title, and interest in and to the Software,
Documentation, and all copyright, trade secret, patent and other intellectual
property rights contained therein, subject only to the limited license granted
to Customer in Section 2 hereof. Phoenix shall also exclusively own all Changes
to the Licensed Products, whether made by or on behalf of Phoenix, Customer, or
their employees, agents or otherwise, provided, however, that Customer shall
own any additions to the Software which are not based on the Software or other
Phoenix code and which are produced by Customer without significant assistance
from Phoenix. To the extent that Changes, including all associated intellectual
property rights, are not owned in their entirety by Phoenix immediately upon
their creation, Customer agrees to assign (and hereby automatically assigns)
all right, title and interest therein to Phoenix, without any requirement of
consideration or further documentation. Customer agrees to take such further
action and execute such further documentation as Phoenix may reasonably request
to give effect to this Section 5.1.
5.2 Infringement. Customer shall immediately 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, at Phoenix's
expense, cooperate with Phoenix and assist in the prosecution of Phoenix's
claim.
6 INSTALLATION
Phoenix shall provide the implementation services set forth in Exhibit C for
the fees set forth in Exhibit B.
7 CUSTOMER OBLIGATIONS
7.1 Customer Contact. Each of Phoenix and Customer shall appoint a Contact
Person, listed on Exhibit D, to serve as the focal point of communication
between Phoenix and Customer. Each party shall direct all communications
concerning this Agreement and their obligations hereunder (other than routine
support related communications) to the Customer Contact. Each party may change
the Contact Person at any time upon written notice to the other party.
7.2 Hardware and Software Requirements. Prior to Installation of the Software,
Customer shall license and obtain (i) the Third Party Software and (ii) the
Customer Network. The Customer Network must be in compliance with the Phoenix
Network and Configuration Standards Guide as provided by Phoenix to Customer,
and the other requirements set forth in Exhibit C. The Software will not work
properly if the Customer Network is not in compliance with such standards.
Alternative hardware and software configurations will be evaluated for use with
the Software by Phoenix upon Customer's reasonable request, provided that
Customer pays all of Phoenix's costs in connection with such evaluation.
Customer shall provide at its cost an on-line telecommunications link with a
telephone modem in accordance with the Phoenix Network and Configuration
Standards Guide in order to provide Phoenix access to the Customer Network.
Phoenix shall not use such access for any reason other than to provide Customer
and Software Support hereunder and to monitor the size, configuration, and
performance of the Customer Network.
7.3 Personnel. Customer shall keep its personnel trained in the operation of
the Licensed Products and the Customer Network.
8 CUSTOMER AND SOFTWARE SUPPORT
8.1 Customer and Software Support. Following delivery of the Software to
Customer, and subject to payment by Customer of the Customer and Software
Support Fees set forth in Exhibit B, Phoenix shall provide Customer with
Customer and Software Support, which shall consist of the following:
(1)Phoenix shall provide Customer with updates, patches, bug fixes and new
releases of the Software and
4
<PAGE> 5
CONFIDENTIAL
Documentation which Phoenix provides to its customers generally;
(2)Phoenix will provide remote telephonic support for the Licensed Products
Monday through Friday, 8:00 AM to 5:00 PM eastern standard time and emergency
telephonic support via pager access 24 hours a day, 365 days per year.
Telephone support shall include (i) diagnosing errors or malfunctions in the
Software and malfunctions caused by operator error, (ii) advising Customer of
corrective measures, and (iii) clarifying operating instructions contained in
the Documentation; and
(3)Phoenix shall insure that the Software operates in conformance with the
Documentation. If the Software fails to operate in conformance with the
Documentation, and the problem cannot be remedied thorough telephonic
support, Phoenix shall use all reasonable efforts to correct or replace the
Software or portions thereof or provide a temporary work-around for such
problem within a reasonable period of time based upon the impact of the
problem on Customer's ability to operate.
8.2 Customer Obligations. Customer shall promptly notify Phoenix of all
problems with the Software, and shall, if applicable, provide assistance in
identifying and detecting problems, errors, and malfunctions. As requested by
Phoenix, Customer shall provide data and information regarding all errors in
sufficient detail and with sufficient supporting documentation to enable
Phoenix to diagnose, and if necessary, recreate the problem, error, or
malfunction.
8.3 Limitation. Customer and Software Support shall not cover malfunctions and
errors caused by (i) misuse or abuse of the Software, (ii) by use of the
Software with hardware or software other than that approved by Phoenix for use
with the Software, or (iii) Changes made other than by or with the express
written consent of Phoenix. Customer and Software Support shall only be
provided for the most current release of the Software provided to Customer,
and, for a period of 90 days after delivery of the most current release, of the
previous release of the Software. Support may be provided for previous releases
after such 90 day period at Phoenix's option at Phoenix's then current time and
materials rates for such services for the Territory, plus Related Expenses.
8.4 Subsequent Releases. Customer shall install all corrections, enhancements,
and subsequent releases of the Software within 90 days after receipt from
Phoenix. Customer shall not be required to implement any release which is found
to contain significant errors or which, if implemented, would materially impair
Customer's ability to use the Software as used by Customer prior to such
release.
8.5 Support Guidelines. Phoenix shall use best efforts to respond to and
resolve Customer's requests for support hereunder within the time periods set
forth in the Phoenix Response and Resolution Guidelines, the current version of
which are attached hereto as Exhibit E.
9 WARRANTIES
9.1 Warranty. Phoenix warrants that, for a period of 90 days after delivery,
the original unmodified version of the Software shall conform in all material
respects with any program descriptions included in the Documentation. Phoenix
does not warrant that the Licensed Products will operate without interruption
or be error-free. Phoenix warrants that the Software will operate in accordance
with this Agreement on dates occurring on and after January 1, 2000, to the
same extent that it operates prior to such date and that the Software will be
capable of properly processing data having dates falling on and after January
1, 2000. In the event Customer discovers any non-conformance by the Software
with the above warranty (a "defect"), Customer agrees to provide Phoenix notice
of such defect, and shall, upon Phoenix's request, provide such data and
information regarding the defect as Phoenix may require to recreate the defect.
Phoenix agrees, as its exclusive obligation for any breach of such warranty, to
use its best reasonable efforts to correct reported defects. Phoenix shall not
be responsible for (i) unreported defects, (ii) defects caused by misuse or
abuse of the Software, (iii) defects caused by use of the Software with
hardware or software other than that approved by Phoenix for use with the
Software, or for (iv) Changes made other than by or with the express written
authority of Phoenix. Customer shall be limited to the warranties provided by
third-party licensors or manufacturers with respect to third-party software or
equipment that may be provided by Phoenix.
9.2 DISCLAIMER. EXCEPT AS PROVIDED IN SECTION 6.1 ABOVE, PHOENIX SPECIFICALLY
DISCLAIMS ANY OTHER WARRANTIES OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY,
INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE.
9.3 LIMITATION OF LIABILITY. IN NO EVENT SHALL PHOENIX BE LIABLE FOR ANY
SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES RESULTING FROM THE USE,
OR INABILITY TO USE, THE LICENSED PRODUCTS OR ARISING OUT OF ANY OTHER
CIRCUMSTANCES ASSOCIATED WITH THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING
WITHOUT LIMITATION DAMAGES BASED ON LOSS OF PROFIT, LOSS OR INTERRUPTION OF
DATA OR COMPUTER TIME, ALTERATION OR ERRONEOUS TRANSMISSION OF DATA, EVEN IF
PHOENIX IS ADVISED IN ADVANCE OF THE POSSIBILITY OF SUCH DAMAGES. Phoenix's
total liability to Customer under any provision of this Agreement (other than
indemnification under Section 10) or for any and all claims, losses or damages
relating to the Licensed Products (whether based on tort, contract, or any
other theory), other
5
<PAGE> 6
CONFIDENTIAL
than claims based upon the gross negligence or willful misconduct of Phoenix,
shall be limited to the amount actually paid by Customer to Phoenix for the
Licensed Products giving rise to the liability. The parties acknowledge that
each of them relied upon the inclusion of this limitation in consideration of
entering into this Agreement.
10 PATENT AND COPYRIGHT INDEMNITY
10.1 Infringement Claims. If a third party claims that the Software infringes
any patent, copyright, trade secret, or similar intellectual property right of
any third party, and such claim would impair Customer's right to use the
Software hereunder, 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 (i) promptly notifies Phoenix in writing
of any such claim, (ii) allows Phoenix to control the defense and disposition
of such claim, including any related settlement negotiations, and (iii)
cooperates with Phoenix, at Phoenix's expense, in the defense of such claim.
10.2 Remedies. If such a claim is made or appears possible, Phoenix may, at its
option, either (i) secure for Customer the right to continue to use the
Software, (ii) modify or replace the Software so it is non-infringing, or (iii)
refund a pro-rata portion of the license fees paid for the infringing material
based on a five year straight line useful period. 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 hardware or software 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 10 STATES PHOENIX'S ENTIRE
OBLIGATION TO CUSTOMER WITH RESPECT TO MATTERS OF TITLE OR ANY CLAIM OF
INFRINGEMENT THEREOF.
11 CONFIDENTIALITY
11.1 Confidentiality. Each Party agrees at all times to maintain the complete
confidentiality of the Confidential Information of the other. Each Party shall
not permit or authorize access to, or disclosure of, the Confidential
Information of the other to any person or entity other than employees or
advisors who have a "need to know" such information in order to enable the
receiving party to exercise its rights or perform its obligations under this
Agreement. Neither party shall disclose or supply the Confidential Information
of the other to any non-employee third party without the prior written approval
of the other party, which approval shall not be unreasonably withheld, provided
the requesting party can demonstrate a need for such disclosure in order to
comply with its obligations hereunder. Either party may disclose portions of
the Confidential Information of the other to governmental regulatory
authorities if such disclosure is required by applicable laws, provided the
party required to make such disclosure notifies the other party of the
applicable legal requirements before such disclosure occurs and assists the
other party to obtain such protection as may be available to preserve the
confidentiality of such information.
11.2 Disposal. Prior to disposal of any media or materials that contain any
part of the Software, Documentation or other Confidential Information of
Phoenix, Customer shall obliterate or otherwise destroy all code, instructions,
commentary, or further evidence of Confidential Information, for example, by
erasing, incinerating, or shredding such materials.
12 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. All arbitration proceedings shall be held in
Atlanta, Georgia, unless Phoenix and Customer agree in writing to another
location. 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 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 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
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Customer hereby consent to the enforcement of any arbitral judgment or award
rendered pursuant to this Section in the courts of each state where Customer or
Phoenix have offices or significant assets.
13 EXPORT
13.1 Export Restrictions. Customer shall not ship or export the Licensed
Products outside of the United States without the express written consent of
Phoenix.
14 GENERAL
14.1 Notice. Notices shall be deemed given upon receipt if transmitted by fax,
registered mail, or overnight courier service if properly addressed as first
set forth above, or to such other address as may be requested by written notice
in compliance with this Section.
14.2 Assignment. 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 permitted successors and assigns. For purposes of this
Section, the acquisition of more than 50% of the voting stock of Customer, the
acquisition of all or substantially all the business and assets of Customer, or
the merger of Customer with or into another entity shall constitute an
unauthorized assignment, unless all other provisions of this Agreement are duly
honored, the surviving entity signs a new license agreement with Phoenix
containing terms and conditions reasonably acceptable to Phoenix, and the
surviving entity pays additional license fees for use of the Licensed Products
as necessary for the asset size of the entity resulting out of the transaction
which will use the Software.
14.3 Waiver. The failure of either party to enforce any term of this Agreement
shall not constitute a waiver of either party's right to enforce every term of
this Agreement.
14.4 Enforcement. If either party brings an action under this Agreement
(including appeal), the prevailing party shall be entitled to recover
reasonable attorneys' fees and costs.
14.5 Should any provision of this Agreement be held by a court of competent
jurisdiction or arbitration authority to be unenforceable, the remaining
provisions of this Agreement shall not be affected or impaired thereby.
14.6 CHOICE OF LAW. 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. WITH RESPECT TO ANY CLAIM OF EITHER PARTY WITH RESPECT
TO OWNERSHIP OF THE LICENSED PRODUCTS, THE PROTECTION OF INTELLECTUAL PROPERTY
OR CONFIDENTIAL INFORMATION OF PHOENIX, OR THE PAYMENT OF AMOUNTS DUE PHOENIX
HEREUNDER, CUSTOMER HEREBY CONSENTS TO BE SUBJECT TO THE JURISDICTION OF THE
FEDERAL AND STATE COURTS OF THE STATE OF FLORIDA.
14.7 Force Majeure. Neither party shall be in default by reason of any failure
in the performance of this Agreement other than a failure to make payment when
due or to comply with restrictions upon the Use of the Licensed Products) if
such failure arises out of any act, event or circumstance beyond the reasonable
control of such party, whether or not otherwise foreseeable. The party so
affected will resume performance as soon as reasonably possible.
14.8 Headings and Captions. The headings and captions appearing in this
Agreement are inserted only as a matter of convenience and in no way limit the
scope or affect the meaning of any section.
14.9 Employees. Neither party shall hire or solicit for hire any employee of
the other without the express written consent of the other party.
14.10 Prior Agreements, Amendment. 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 or amended except in writing signed by authorized representatives of
both parties.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed
as of the Effective Date.
PHOENIX INTERNATIONAL LTD., INC. CUSTOMER:
- -------------------------------- --------------------------------
Signature Signature
- -------------------------------- --------------------------------
Print Name Print Name
- -------------------------------- --------------------------------
Print Title Print Title
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EXHIBIT A
SOFTWARE
PHOENIX SOFTWARE:
8
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CONFIDENTIAL
EXHIBIT B
FEES
1. INITIAL LICENSE FEES
BASED ON ASSET SIZE OF CUSTOMER
CURRENT LICENSE FEE FOR UP TO $ _____ MILLION IN ASSETS
Phoenix Retail Banking System (________ Version) $
--------------------
Internet Module $
--------------------
Etc. $
--------------------
TOTAL LICENSE FEES $
====================
2. ADDITIONAL LICENSE FEES:
Asset Size Upgrade Fee $
--------------------
3. IMPLEMENTATION FEES $
--------------------
4. ANNUAL CUSTOMER AND SOFTWARE SUPPORT FEES:
$
====================
5. PAYMENT TERMS
5.1 All License Fees shall be billable upon execution of this Agreement.
The License Fees are one-time initial license fees for the delivery of the
current version of the Software, and are fully earned and non-refundable
upon shipment of the Software to Customer. All modifications and
enhancements for the Software requested by Customer shall be the subject of
a separate agreement with separate consideration and license fees to be
paid therefore.
5.2 Customer shall pay to Phoenix Additional License Fees as set forth
above each time that its total assets exceed the pricing tier for which
license fees have already been paid, whether such growth is internal, or
through merger or acquisition. Phoenix upgrade tiers and Additional License
Fees are set forth above.
5.3 Customer shall pay Phoenix an Implementation Fee as set forth above for
implementation services. Such fee is due 50% upon execution of this
Agreement, 25% upon mock conversion, and 25% upon live conversion for the
first location of the Customer.
5.4 Each year during the term of this Agreement, for a minimum of five
years, Customer shall pay Phoenix a Customer and Software Support Fee as
set forth above. The Customer and Software Support Fee shall increase by
20% of any license upgrade fees which Customer is obligated to pay. If
upgrade license fees are due prior to the next due date of the Customer and
Software Support Fee, Customer shall pay Phoenix a prorated portion of the
increase in the Customer and Software Support Fee for the remaining part of
the year at the time that the license upgrade fee is paid. The Customer and
Software Support Fee is billable on the date the Software is installed at
Customer's first location and each on each anniversary thereof during the
term of this Agreement, and for so long as Customer continues to use the
Software.
5.5 No fees due hereunder shall be reduced or delayed due to any delay of
implementation at the request of the Customer.
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CONFIDENTIAL
EXHIBIT C
IMPLEMENTATION, CONFIGURATIONS AND THIRD PARTY SOFTWARE
IMPLEMENTATION
NETWORK REQUIREMENTS
1. Network Requirements
Customer agrees to provide and maintain a network in accordance with the
standards set forth in the Phoenix Hardware and Network Services Guide, as
provided by Phoenix and amended from time to time.
2. UNIX on NT Server Requirements
Customer agrees to provide and maintain a _______________________ server at
a size recommended by Phoenix, or greater.
3. Sybase or MicroSoft Sequel Server Software Requirements
THIRD PARTY SOFTWARE
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EXHIBIT D
CUSTOMER CONTACT, DESIGNATED LOCATION AND REMOTE BRANCHES
CUSTOMER CONTACT:
DESIGNATED LOCATION:
REMOTE LOCATIONS:
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EXHIBIT E
RESPONSE AND RESOLUTION GUIDELINES
PROBLEM SEVERITY LEVELS
Every call is assigned a severity level during its setup within the call log.
This severity level controls both the manner and speed with which the Customer
Support specialist responds back to the caller, as well as the timetable within
which the support group works to resolve the problem. All references to time
and business days refer to time and business days Eastern Standard Time.
Standard severity levels are as follows:
Critical Highest priority classification. Assigned to problems that
prevent the bank from conducting normal business, typically
problems involving core processing failures, recurring
application crashes, and serious calculative errors.
High Second highest priority classification. Assigned to problems
that have a serious impact on the bank's operations, but do not
prevent the bank from conducting business. Examples of
high-priority problems include nightly processing errors that
cause the bank to go out of balance, reports with incorrect
information, and inaccurate display screen calculations.
Medium Third highest priority classification. Assigned to problems that
inconvenience the bank but do necessarily represent calculative
errors or other software failures. Typical medium-priority
problems include print routines that take longer than desired,
account setup routines that require redundant data entry, and
window options that do not properly reflect bank-defined default
values.
Low Lowest priority classification. Assigned to problems that are
primarily cosmetic in nature (typographical errors, alignment
problems, etc.). Low-priority problems detract from the system's
elegance and polish, but not from its core functionality.
RESPONSE GUIDELINES
Following are the target response times for each level of problem severity:
Critical A return call will be made within 45 minutes.
High A return call will be made to the bank within 3 hours, but never
later than the end of that business day, unless calls come in
within 1 hour of the end of the business day, in which case a
return call must be made within the first 2 hours of the next
business day.
Medium A return call will be made to the bank during the same business
day, or if the call comes within 3 hours of the end of the
business day, a return call must be made by the end of the next
business day.
Low A return call will be made by the end of the next business day.
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CONFIDENTIAL
RESOLUTION GUIDELINES
Following are the target resolution timeframes for each classification. Phoenix
will use its reasonable commercial efforts to provide a code fix or a work
around for all reported problems within the following time frames. If a work
around is provided, Phoenix will provide a code fix at a later time or with the
next release of the software, if necessary. Given the uncertain nature of
troubleshooting technical software problems, however, Phoenix cannot guarantee
such time frames.
Critical For calls logged either during or after normal support hours,
the problem should be resolved within 5 hours. Phoenix shall
involve such resources as necessary to remedy critical errors as
soon as possible, including escalating the problem to the Senior
Vice President in charge of Client Services within 1 hour.
High For calls logged either during or after normal support hours,
the problem should be resolved within 24 hours.
Medium Based on consultation with the bank, the problem should be
resolved either during the next scheduled software release
(preferred) or, at the bank's explicit request, within 5
business days.
Low The problem should be resolved according to a mutually agreed
schedule.
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CONFIDENTIAL
EXHIBIT 10.2
PHOENIX INTERNATIONAL LTD., INC.
500 International Parkway
Heathrow, Florida 32746
Telephone: (407) 548-5100
Fax: (407) 548-5299
INTERNATIONAL SOFTWARE LICENSE AGREEMENT
<TABLE>
<S> <C>
- --------------------------------------------------- -------------------------------------------------
Name of Customer: Effective Date (Day/Month/Year):
- --------------------------------------------------- -------------------------------------------------
Type of entity: Country of formation:
- --------------------------------------------------- -------------------------------------------------
Mailing Address: Business Address (if different from mailing
address):
- --------------------------------------------------- -------------------------------------------------
City, State, Country, Postal Code: City, State, Country, Postal Code:
- --------------------------------------------------- -------------------------------------------------
Phone Number (including country and city code): Fax Number (including country and city code):
- --------------------------------------------------- -------------------------------------------------
</TABLE>
Whereby Phoenix has developed a retail banking system which Customer wishes to
license, in consideration of the obligations of the parties as set forth below,
the parties hereby agree as follows:
1 DEFINITIONS
1.1 "Additional Branch" shall mean a Remote Branch not listed in Exhibit D
which is connected to the Customer Network after the Effective Date, whether as
a result of changes in operations, growth, acquisition, or otherwise.
1.2 "Acquired Financial Institution" shall mean any financial institution in
which Customer acquires a greater than 50% interest or which merges with or
into the Customer.
1.3 "Affiliate" shall mean a parent company owning a majority of the Customer,
and majority owned subsidiaries of the Customer.
1.4 "Changes" shall mean corrections, updates, upgrades, translations,
additions and modifications to the Software and Documentation, and any other
new or additional works based in whole or in part on the Software or
Documentation.
1.5 "Client Devices" shall mean workstations, personal computers, terminals and
other devices connected to the Server through the Customer Network which access
and Use the Software to input, read, interpret, manipulate, or display
Customer's data.
1.6 "Confidential Information" shall mean any competitively sensitive or secret
business, marketing, or technical information of Phoenix or Customer, including
the terms of this Agreement and all other Agreements and communications between
Phoenix and Customer. Phoenix's Confidential Information shall include, but not
limited to, the Software and Documentation, including all Changes. Customer's
Confidential Information shall include, but not limited to, all information
concerning Customer's customers and their accounts. Confidential Information
shall not include information which is (i) generally known to the public or
readily ascertainable from public sources (other than as a result of a breach
of confidentiality hereunder), (ii) independently developed by the receiving
party without reference to or reliance on any Confidential Information of the
disclosing party, as demonstrated by written records of the receiving party, or
(iii) obtained from an independent third party who created or acquired such
information without reference to or reliance on Confidential Information.
1.7 "Customer and Software Support" shall have the meaning set forth in Section
8.
1.8 "Customer Network" shall mean the Server and the Client Devices at the
Designated Location and the Remote Branches for which license fees have been
paid hereunder.
<PAGE> 2
CONFIDENTIAL
1.9 "Designated Location" shall mean the street address of the location of the
Server as specified on Exhibit D. Customer shall notify Phoenix prior to any
change in the location of the Server. Upon such notice, Exhibit D will be
deemed automatically amended to reflect the change.
1.10 "Implementation Date" shall mean the date upon which the Software is ready
for live processing of Customer's data.
1.11 "Documentation" shall mean the user documentation relating to the Software
provided to Customer by or on behalf of Phoenix.
1.12 "Effective Date" means the date first set forth above as the date of this
Agreement.
1.13 "Licensed Products" shall mean collectively the Software and
Documentation.
1.14 "Related Expenses" shall mean reasonable travel and other out-of-pocket
expenses incurred by Phoenix in the performance of its obligations hereunder,
including (without limitation) airfare, travel costs, lodging costs, and meals;
shipping charges, courier and delivery charges; tape, cartridge, CD and
diskette cost; and voice and data telecommunications expenses. To the extent
reasonably possible, Phoenix will obtain the approval of Customer prior to
incurring substantial Related Expenses, and Customer will not unreasonably
withhold such approval. Phoenix travel expenses shall be in conformance with
the Phoenix Travel and Entertainment Policy as in effect from time to time, a
copy of which shall be provided to Customer upon request.
1.15 "Remote Branches" shall mean the street addresses listed in Exhibit D
where Client Devices reside. The Remote Branches will include Additional
Branches only after the proper license fees for such Additional Branches have
been paid to Phoenix. At such time, Exhibit D will be deemed automatically
amended to include such Additional Branches.
1.16 "Server" shall mean the network file server where the relational database
for the Software resides.
1.17 "Software" shall mean the object code version of the Phoenix software
listed in Exhibit A, along with all Changes provided to Customer or authorized
by Phoenix hereunder.
1.18 "Term" shall have the meaning set forth in Section 4 below.
1.19 "Territory" shall mean the countries or territories set forth in Exhibit
E.
1.20 "Third Party Software" shall mean software required to be used in
conjunction with the Phoenix Software, as more particularly described in
Exhibit C attached hereto.
1.21 "Use" (used as a noun or verb) shall mean the reading into computer memory
of the Software for the purpose of access and/or execution, in whole or in
part.
2 LICENSE GRANT
2.1 License. Subject to the restrictions and limitations of this Agreement and
to payment of the fees set forth herein, Phoenix hereby grants to Customer a
non-exclusive, non-transferable license during the term of this Agreement and
within the Territory to:
(1)Use the Software on the Customer Network;
(2)transfer the Software to a backup machine when the primary 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;
(3)make a reasonable number of additional copies of the Software for testing,
backup, and archival purposes in support of its ordinary Use of the Software;
(4)use the Documentation in support of Customer's Use of the Software;
(5)make a reasonable number of additional copies of the Documentation or
portions thereof as required to support the Use of the Software.
2.2 Restrictions. The Software may only be used for Customer's and its
Affiliates' own internal data processing needs. Customer may not, without the
prior written consent of Phoenix:
(1)translate, reverse engineer, de-compile, interpret or disassemble the
Software;
(2)transfer, distribute, sell, lease, or assign the Licensed Products;
(3)use the Licensed Products 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, provided Customer shall not be prevented from processing its
customer's accounts; or
(4)make any Changes to the Software.
2.3 Delivery. Phoenix will deliver to Customer one copy of the current
unmodified version of the Software (as listed in Exhibit A) in object code
form, and one copy of the current version of the Documentation. The licenses
granted to Customer under Section 2.1 shall become immediately effective, and
shall not be delayed or contingent based on installation, operation, or the
delivery or completion of any services.
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CONFIDENTIAL
2.4 Records. Customer agrees to maintain a record of the number and location of
all copies of the Licensed Products in its possession. Customer shall provide
Phoenix with a copy of such record upon Phoenix's written request. Following
prior written notice, Phoenix or its designee shall have the right to enter
Customer's premises during regular business hours in a non-disruptive manner
for the purpose of inspecting the location and use of the Software and
Documentation, the compliance of Customer with the provisions of this
Agreement, and the standard procedures of Customer regarding retention,
safekeeping, and disposal of all media and materials pertaining thereto
3 PAYMENTS AND TERMS.
3.1 Fees. Customer agrees to pay all fees and charges for products and services
to be provided under this Agreement are set forth in Exhibit B, including
without limitation, fees for the Software, installation, training, and a
minimum of 5 years of Customer and Software Support. All amounts shall be paid
in U.S. dollars by wire transfer to the bank account designated by Phoenix in
accordance with the payment terms set forth in Exhibit B, or as otherwise
agreed between Phoenix and Customer. Additionally, Customer shall pay all
Related Expenses incurred by Phoenix.
3.2 Payment Terms. All amounts are due and payable on the date specified in
Exhibit B, or, if a date is not specified, not later than 30 days following the
date of invoice. Overdue amounts shall incur interest at the lesser of 1 1/2%
per month or the highest rate allowed under applicable law. Time is of the
essence with respect to all payments due from Customer hereunder.
3.3 Taxes. Customer shall pay on a timely basis all sales, use, import, export,
VAT and other taxes, tariffs, and duties arising out the transactions
contemplated herein, however designated, based or levied by any federal, state,
municipal or local taxing authority of United States or the Territory (but
shall not include United States Federal, state or local taxes based upon the
net income of Phoenix) ("Taxes"). Customer shall promptly reimburse and shall
indemnify Phoenix for all Taxes which Phoenix is required by any taxing
authority to pay. All fees due shall be grossed up to cover all withholding
taxes, so that Phoenix receives the full amount of the fees set forth in
Exhibit B. Customer shall, as soon as practicable, forward to Phoenix
documentation evidencing payment of all such taxes. Customer may challenge the
applicability of any Tax only after paying the Tax or giving Phoenix
satisfactory assurance of compliance.
3.4 Fee Adjustments. Phoenix reserves the right to adjust its prices once per
year subject to 30 days advanced written notice. The Customer and Software
Support Fee shall not be increased in any calendar year by more than 10% plus
the increase in the U.S. Consumer Price Index for the previous calendar year.
4 TERM AND TERMINATION
4.1 Term. This Agreement and the license granted herein shall have an initial
term commencing on the Effective Date and continuing for a period of 5 years
from the Effective Date (the "Initial Term"). Thereafter, this Agreement shall
automatically renew for additional 1 year periods unless and until either party
notifies the other in writing of its desire not to renew this Agreement at
least 90 days prior to the last day of the Initial Term or any subsequent
renewal period.
4.2 Termination by Phoenix. Phoenix shall have the right to terminate this
Agreement upon the occurrence of any of the following events:
(1)Customer's material breach of any provision of this Agreement if Customer
has not initiated adequate steps to cure such breach within 20 days following
written notice of such breach to Customer; or
(2)Customer's failure to obtain and pay for Customer and Software Support; or
(3)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, and any such event affects or delays payments to Phoenix hereunder;
or
(4)Customer becomes a subsidiary of, or controlled as to its management
policy by, any government instrumentality; or (5)Customer is required by laws
in the Territory to offer or permit the use or exercise (with or without
payment to Phoenix) of the Software to any other person or entity.
4.3 Result of Termination by Phoenix. In the event that this Agreement is
terminated under Section 4.2(1) above, 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 180 days following
termination, provided that Customer has paid and continues to pay all amounts
due as if this Agreement were still in effect. Upon expiration of such period
(and immediately, in the event of termination under Section 4.2(1)), Customer
shall either return to Phoenix or destroy all copies of the Licensed Products.
Upon Phoenix's request, Customer shall certify that it has completed such
action.
4.4 Termination by Customer. Customer may terminate this Agreement upon the
occurrence of any of the following:
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CONFIDENTIAL
(1) Phoenix's material breach of any provision of this Agreement if Phoenix
has not initiated adequate steps to cure such breach within 20 days following
written notice of such breach to Phoenix; or
(2)Phoenix 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, and any such event materially affects Phoenix's ability to meet its
obligations hereunder.
4.5 Result of Termination by Customer. In the event that this Agreement is
terminated by Customer under Section 4.4, or by Phoenix after the Initial Term,
Customer may continue to Use the Software in accordance with this Agreement
until the later of nine months following such termination or the end of the
Initial Term. Upon expiration of such period, Customer shall either return to
Phoenix or destroy all copies of the Licensed Products. Upon Phoenix's request,
Customer shall certify that it has completed such action.
4.6 No Refund. No payments shall be refundable upon termination of this
Agreement, whether such termination is by Customer or Phoenix.
4.7 Survival. All obligations with respect to restrictions on use of the
Licensed Products, confidentiality, payment of fees, ownership, and protection
of intellectual property rights shall survive any termination of this
Agreement.
4.8 Non-exclusive Remedy. The rights and remedies of the parties are not
exclusive and are in addition to any other rights and remedies provided by law
or equity.
4.9 De-Conversion. Upon Customer's request, following the termination or
expiration of Customer's right to Use the Software, Phoenix shall assist
Customer with the conversion of its data from its then current format into a
generic format. Customer shall pay Phoenix on a time and materials basis for
such assistance at its then current published rates for the Territory, plus
Related Expenses.
4.10 Source Code. Phoenix will deposit the most current version of the source
code for the Software with an independent escrow agent. In the event that
Phoenix, or any successor, shall cease to provide Customer and Software
Support, Customer's license for the use of the Software hereunder is still in
effect, and Customer has paid its Customer and Software Support Fee and all
other fees due hereunder, Customer shall have the right to obtain, for its own
sole and exclusive use for the sole purpose of maintaining and supporting the
Software, with no right of transfer, a single copy of such source code from the
escrow agent, subject to the terms of this Agreement.
5 TITLE
5.1 Ownership. The Software and Documentation are (i) copyrighted works
protected by copyright laws, treaties and conventions of the United States and
the Territory and (ii) contain trade secrets and Confidential Information of
Phoenix protected under applicable law of the United States and the Territory.
Phoenix retains all right, title, and interest in and to the Software,
Documentation, and all copyright, trade secret, patent and other intellectual
property rights contained therein, subject only to the limited license granted
to Customer in Section 2 hereof. Phoenix shall also exclusively own all Changes
to the Licensed Products, whether made by or on behalf of Phoenix, Customer, or
their employees, agents or otherwise, [PROVIDED, HOWEVER, THAT CUSTOMER SHALL
OWN ANY ADDITIONS TO THE SOFTWARE WHICH ARE NOT BASED ON THE SOFTWARE OR OTHER
PHOENIX CODE AND WHICH ARE PRODUCED BY CUSTOMER WITHOUT SIGNIFICANT ASSISTANCE
FROM PHOENIX]. To the extent that Changes, including all associated
intellectual property rights, are not owned in their entirety by Phoenix
immediately upon their creation, Customer agrees to assign (and hereby
automatically assigns) all right, title and interest therein to Phoenix,
without any requirement of consideration or further documentation. Customer
agrees to take such further action and execute such further documentation as
Phoenix may reasonably request to give effect to this Section 5.1.
5.2 Report Formats. All output and report formats (e.g., ad hoc reports, SQL
queries, etc.) created by Customer shall be jointly owned by Phoenix and
Customer, and Phoenix shall have the right to license such output and report
formats to other users of the Software without payment of any fee to Customer.
Likewise, Customer shall have the benefit of output and report formats created
by other end users. 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.
5.3 Infringement. Customer shall immediately 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, at Phoenix's
expense, cooperate with Phoenix and assist in the prosecution of Phoenix's
claim.
6 INSTALLATION
Phoenix shall provide the implementation services set forth in Exhibit C for
the fees set forth in Exhibit B.
7 CUSTOMER OBLIGATIONS
7.1 Customer Contact. Each of Phoenix and Customer shall appoint a Contact
Person, listed on Exhibit D, to serve as the focal point of communication
between Phoenix and
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CONFIDENTIAL
Customer. Each party shall direct all communications concerning this Agreement
and their obligations hereunder (other than routine support related
communications) to the Customer Contact. Each party may change the Contact
Person at any time upon written notice to the other party.
7.2 Hardware and Software Requirements. Prior to Installation of the Software,
Customer shall license and obtain (i) the Third Party Software and (ii) the
Customer Network. The Customer Network must be in compliance with the Phoenix
Network and Configuration Standards Guide as provided by Phoenix to Customer,
and the other requirements set forth in Exhibit C. The Software will not work
properly if the Customer Network is not in compliance with such standards.
Alternative hardware and software configurations will be evaluated for use with
the Software by Phoenix upon Customer's reasonable request, provided that
Customer pays all of Phoenix's costs in connection with such evaluation.
Customer shall provide at its cost an on-line telecommunications link with a
telephone modem in accordance with the Phoenix Network and Configuration
Standards Guide in order to provide Phoenix access to the Customer Network.
Phoenix shall not use such access for any reason other than to provide Customer
and Software Support hereunder and to monitor the size, configuration, and
performance of the Customer Network.
7.3 Personnel. Customer shall keep its personnel trained in the operation of
the Licensed Products and the Customer Network.
8 CUSTOMER AND SOFTWARE SUPPORT
8.1 Customer and Software Support. Following delivery of the Software to
Customer, and subject to payment by Customer of the Customer and Software
Support Fees set forth in Exhibit B, Phoenix shall provide Customer with
Customer and Software Support, which shall consist of the following:
(1)Phoenix shall provide Customer with updates, patches, bug fixes and new
releases of the Software and Documentation which Phoenix provides to its
customers generally;
(2)Phoenix will provide remote telephonic support for the Licensed Products
Monday through Friday, 8:00 AM to 5:00 PM eastern standard time and emergency
telephonic support via pager access 24 hours a day, 365 days per year.
Telephone support shall include (i) diagnosing errors or malfunctions in the
Software and malfunctions caused by operator error, (ii) advising Customer of
corrective measures, and (iii) clarifying operating instructions contained in
the Documentation; and
(3)Phoenix shall insure that the Software operates in conformance with the
Documentation. If the Software fails to operate in conformance with the
Documentation, and the problem cannot be remedied thorough telephonic
support, Phoenix shall use all reasonable efforts to correct or replace the
Software or portions thereof or provide a temporary work-around for such
problem within a reasonable period of time based upon the impact of the
problem on Customer's ability to operate.
8.2 Customer Obligations. Customer shall promptly notify Phoenix of all
problems with the Software, and shall, if applicable, provide assistance in
identifying and detecting problems, errors, and malfunctions. As requested by
Phoenix, Customer shall provide data and information regarding all errors in
sufficient detail and with sufficient supporting documentation to enable
Phoenix to diagnose, and if necessary, recreate the problem, error, or
malfunction.
8.3 Limitation. Customer and Software Support shall not cover malfunctions and
errors caused by (i) unreported defects, (ii) misuse or abuse of the Software,
(iii) by use of the Software with hardware or software other than that approved
by Phoenix for use with the Software, or (iv) Changes made other than by or
with the express written authority of Phoenix. Customer and Software Support
shall only be provided for the most current release of the Software provided to
Customer, and, for a period of 90 days after delivery of the most current
release, of the previous release of the Software. Support may be provided for
previous releases after such 90 day period at Phoenix's option at Phoenix's
then current time and materials rates for such services for the Territory, plus
Related Expenses. Customer shall not be required to implement any release which
is found to contain significant errors or which, if implemented, would
materially impair Customer's ability to use the Software as used by Customer
prior to such release.
8.4 Subsequent Releases. Customer shall install all corrections, enhancements,
and subsequent releases of the Software within 90 days after receipt from
Phoenix.
8.5 Support Guidelines. Phoenix shall use best efforts to respond to and
resolve Customer's requests for support hereunder within the time periods set
forth in the Phoenix Response and Resolution Guidelines, the current version of
which are attached hereto as Exhibit F.
9 WARRANTIES
9.1 Warranty. Phoenix warrants that, for a period of 90 days after delivery,
the original unmodified version of the Software shall conform in all material
respects with any program descriptions included in the Documentation. Phoenix
does not warrant that the Licensed Products will operate without interruption
or be error-free. Phoenix warrants that the Software will operate in accordance
with this Agreement on dates occurring on and after January 1, 2000, to the
same extent that it operates prior to such date and that the Software will be
capable of properly processing data having dates falling on and after January
1, 2000. In the event Customer discovers any non-conformance by the Software
with the above warranty (a "defect"), Customer agrees to provide Phoenix notice
of such defect, and shall, upon Phoenix's request, provide such data and
information
5
<PAGE> 6
CONFIDENTIAL
regarding the defect as Phoenix may require to recreate the defect. Phoenix
agrees, as its exclusive obligation for any breach of such warranty, to use its
best reasonable efforts to correct reported defects. Phoenix shall not be
responsible for (i) unreported defects, (ii) defects caused by misuse or abuse
of the Software, (iii) defects caused by use of the Software with hardware or
software other than that approved by Phoenix for use with the Software, or for
(iv) Changes made other than by or with the express written authority of
Phoenix. Customer shall be limited to the warranties provided by third-party
licensors or manufacturers with respect to third-party software or equipment
that may be provided by Phoenix.
9.2 DISCLAIMER. EXCEPT AS PROVIDED IN SECTION 6.1 ABOVE, PHOENIX SPECIFICALLY
DISCLAIMS ANY OTHER WARRANTIES OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY,
INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR
A PARTICULAR PURPOSE.
9.3 LIMITATION OF LIABILITY. IN NO EVENT SHALL PHOENIX BE LIABLE FOR ANY
SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES RESULTING FROM THE USE,
OR INABILITY TO USE, THE LICENSED PRODUCTS OR ARISING OUT OF ANY OTHER
CIRCUMSTANCES ASSOCIATED WITH THE SUBJECT MATTER OF THIS AGREEMENT, INCLUDING
WITHOUT LIMITATION DAMAGES BASED ON LOSS OF PROFIT, LOSS OR INTERRUPTION OF
DATA OR COMPUTER TIME, ALTERATION OR ERRONEOUS TRANSMISSION OF DATA, EVEN IF
PHOENIX IS ADVISED IN ADVANCE OF THE POSSIBILITY OF SUCH DAMAGES. Phoenix's
total liability to Customer under any provision of this Agreement (other than
indemnification under Section 10) or for any and all claims, losses or damages
relating to the Licensed Products (whether based on tort, contract, or any
other theory), other than claims based upon the gross negligence or willful
misconduct of Phoenix, shall be limited to the amount actually paid by Customer
to Phoenix for the Licensed Products giving rise to the liability. The parties
acknowledge that each of them relied upon the inclusion of this limitation in
consideration of entering into this Agreement.
10 PATENT AND COPYRIGHT INDEMNITY
10.1 Infringement Claims. If a third party claims that the Software infringes
any patent, copyright, trade secret, or similar intellectual property right of
any third party, and such claim would impair Customer's right to use the
Software hereunder, 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 (i) promptly notifies Phoenix in writing
of any such claim, (ii) allows Phoenix to control the defense and disposition
of such claim, including any related settlement negotiations, and (iii)
cooperates with Phoenix, at Phoenix's expense, in the defense of such claim.
10.2 Remedies. If such a claim is made or appears possible, Phoenix may, at its
option, either (i) secure for Customer the right to continue to use the
Software, (ii) modify or replace the Software so it is non-infringing, or (iii)
refund a pro-rata portion of the license fees paid for the infringing material
based on a five year straight line useful period. 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 hardware or software 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 10 STATES PHOENIX'S ENTIRE
OBLIGATION TO CUSTOMER WITH RESPECT TO MATTERS OF TITLE OR ANY CLAIM OF
INFRINGEMENT THEREOF.
11 CONFIDENTIALITY
11.1 Confidentiality. Each Party agrees at all times to maintain the complete
confidentiality of the Confidential Information of the other. Each Party shall
not permit or authorize access to, or disclosure of, the Confidential
Information of the other to any person or entity other than employees or
advisors who have a "need to know" such information in order to enable the
receiving party to exercise its rights or perform its obligations under this
Agreement. Neither party shall disclose or supply the Confidential Information
of the other to any non-employee third party without the prior written approval
of the other party, which approval shall not be unreasonably withheld, provided
the requesting party can demonstrate a need for such disclosure in order to
comply with its obligations hereunder. Either party may disclose portions of
the Confidential Information of the other to governmental regulatory
authorities if such disclosure is required by applicable laws, provided the
party required to make such disclosure notifies the other party of the
applicable legal requirements before such disclosure occurs and assists the
other party to obtain such protection as may be available to preserve the
confidentiality of such information.
11.2 Disposal. Prior to disposal of any media or materials that contain any
part of the Software, Documentation or other Confidential Information of
Phoenix, Customer shall obliterate or otherwise destroy all code, instructions,
commentary, or further evidence of Confidential Information, for example, by
erasing, incinerating, or shredding such materials.
12 ARBITRATION
In the event a claim, controversy or dispute between
6
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CONFIDENTIAL
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 situs of all arbitration
proceedings shall be Atlanta, Georgia, unless Phoenix and Customer agree in
writing to another situs. All arbitration proceedings and records shall be in
English. Issuance of an arbitration demand shall suspend the effect of any
default entailed by such claim, controversy or dispute and any judicial or
administrative proceedings instituted in connection therewith, for the duration
of the arbitration proceedings. Arbitration shall be governed by the commercial
rules of the International Chamber of Commerce (the "ICC"). Arbitration shall
be conducted by one arbitrator who shall be chosen by the ICC 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 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 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.
13 COMPLIANCE WITH LAWS
13.1 Compliance with Laws. 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.
13.2 Export Restrictions. Customer shall not ship or export the Licensed
Products outside of the Territory without the express written consent of
Phoenix.
13.3 Corrupt Practices. 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.
14 GENERAL
14.1 Notice. Notices shall be deemed given upon receipt if transmitted by fax,
registered mail or FedEx, DHL, or other international courier service if
properly addressed as first set forth above, or to such other address as may be
requested by written notice in compliance with this Section.
14.2 Assignment. 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 permitted successors and assigns. For purposes of this
Section, the acquisition of more than 50% of the voting stock of Customer, the
acquisition of all or substantially all the business and assets of Customer, or
the merger of Customer with or into another entity shall constitute an
unauthorized assignment, unless all other provisions of this Agreement are duly
honored, the surviving entity signs a new license agreement with Phoenix
containing terms and conditions reasonably acceptable to Phoenix, and the
surviving entity pays additional license fees for use of the Licensed Products
for the new or different number of Remote and Additional Branches and/or
Acquired Financial Institutions resulting out of the transaction.
14.3 Waiver. The failure of either party to enforce any term of this Agreement
shall not constitute a waiver of either party's right to enforce every term of
this Agreement.
14.4 Enforcement. If either party brings an action under this Agreement
(including appeal), the prevailing party shall be entitled to recover
reasonable attorneys' fees and costs.
14.5 Should any provision of this Agreement be held by a court of competent
jurisdiction or arbitration authority to be unenforceable, the remaining
provisions of this Agreement shall not be affected or impaired thereby.
14.6 CHOICE OF LAW. 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. WITH RESPECT TO ANY CLAIM OF EITHER PARTY WITH RESPECT TO
OWNERSHIP OF THE LICENSED PRODUCTS, OR THE PROTECTION OF INTELLECTUAL PROPERTY
OR CONFIDENTIAL INFORMATION OF PHOENIX, OR THE PAYMENT OF AMOUNTS DUE PHOENIX
HEREUNDER, CUSTOMER HEREBY CONSENTS TO
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CONFIDENTIAL
BE SUBJECT TO THE JURISDICTION OF THE FEDERAL AND STATE COURTS OF THE STATE OF
FLORIDA.
14.7 Force Majeure. Neither party shall be in default by reason of any failure
in the performance of this Agreement other than a failure to make payment when
due or to comply with restrictions upon the Use of the Licensed Products) if
such failure arises out of any act, event or circumstance beyond the reasonable
control of such party, whether or not otherwise foreseeable. The party so
affected will resume performance as soon as reasonably possible.
14.8 Headings and Captions. The headings and captions appearing in this
Agreement are inserted only as a matter of convenience and in no way limit the
scope or affect the meaning of any section.
14.9 Employees. Neither party shall hire or solicit for hire any employee of
the other without the express written consent of the other party.
14.10 Prior Agreements, Amendment. 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 or amended except in writing signed by authorized representatives of
both parties.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed
as of the Effective Date.
PHOENIX INTERNATIONAL LTD., INC.
PHOENIX FSC., INC.
- ----------------------------- ---------------------------------
Signature Witness
- ----------------------------- ---------------------------------
Name (print) Name (print)
- ----------------------------- ---------------------------------
Title (print) Witness
(SEAL)
---------------------------------
Name (print)
CUSTOMER:
- ----------------------------- ---------------------------------
Signature Witness
- ----------------------------- ---------------------------------
Name (print) Name (print)
- ----------------------------- ---------------------------------
Title (print) Witness
(SEAL)
---------------------------------
Name (print)
8
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CONFIDENTIAL
EXHIBIT A
SOFTWARE
PHOENIX SOFTWARE:
9
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CONFIDENTIAL
EXHIBIT B
FEES
1. INITIAL LICENSE FEES:
A. Initial Financial Institution (one Server) $
--------------------
B. Remote Branch Fees
1-2 No Charge
3-5 $ each
------
6-10 $ each
-------
11-25 $ each
-------
26-50 $ each
-------
51-100 $ each
-------
101 or more $ each
-------
TOTAL INITIAL LICENSE FEES: $
====================
2. ADDITIONAL LICENSE FEES:
A. Acquired Financial Institution Fee $ each
--------
B. Additional Branch Fee $ each
--------
3. INSTALLATION FEES $
--------------------
4. ANNUAL CUSTOMER AND SOFTWARE SUPPORT FEES:
A. Initial Financial Institutions $ /year
--------
B. Remote Branches of Initial Financial Institution $ /year
--------
TOTAL INITIAL ANNUAL CUSTOMER AND SOFTWARE
SUPPORT FEES $
====================
5. PAYMENT TERMS
5.1 All License Fees shall be billable 50% upon execution of this Agreement
and 50% upon delivery of the Software. The License Fees are one-time
initial license fees for the delivery of the current version of the
Software, and are fully earned and non-refundable upon shipment of the
Software to Customer. All modifications and enhancements for the Software
requested by Customer shall be the subject of a separate agreement with
separate consideration and license fees to be paid therefore.
5.2 Customer shall notify Phoenix immediately in the event it wishes to
install the Software at any location not currently identified on Exhibit D,
and shall pay to Phoenix Additional Branch Fees or Acquired Financial
Institution Fees, as applicable, for such locations prior to their
installation.
5.3 An initial one-time Installation Fee is due upon execution of this
Agreement for Phoenix's assistance with the Installation of the Software.
Phoenix shall be entitled to additional Implementation Fees, to be paid in
advance, if Implementation is required when Customer adds an Acquired
Financial Institution or other Additional Branches. Fees for implementation
at Additional Branches and Acquired Financial Institutions shall be at
Phoenix's then current rates for such services plus Related Expenses.
5.4 The Customer and Software Support Fee is due and billable for Customer
and Software Support on the Installation Date and on each annual
anniversary thereof for so long as the license for the Software is in
effect or Customer continues to use the Software.
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CONFIDENTIAL
6. WITHHOLDING TAX
Customer will pay the appropriate government authority within the
Territory all required withholding and other taxes on the transactions set
forth in this Agreement, which the parties estimate to be
$__________________.
11
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CONFIDENTIAL
EXHIBIT C
IMPLEMENTATION, CONFIGURATIONS AND THIRD PARTY SOFTWARE
IMPLEMENTATION
NETWORK REQUIREMENTS
THIRD PARTY SOFTWARE
12
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CONFIDENTIAL
EXHIBIT D
CUSTOMER CONTACT, DESIGNATED LOCATION AND REMOTE BRANCHES
CUSTOMER CONTACT:
DESIGNATED LOCATION:
REMOTE LOCATIONS:
13
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CONFIDENTIAL
EXHIBIT E
TERRITORY
14
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CONFIDENTIAL
EXHIBIT F
RESPONSE AND RESOLUTION GUIDELINES
PROBLEM SEVERITY LEVELS
Every call is assigned a severity level during its setup within the call log.
This severity level controls both the manner and speed with which the Customer
Support specialist responds back to the caller, as well as the timetable within
which the support group works to resolve the problem. Standard severity levels
are as follows:
Critical Highest priority classification. Assigned to problems that
prevent the bank from conducting normal business, typically
problems involving core processing failures, recurring
application crashes, and serious calculative errors.
High Second highest priority classification. Assigned to problems
that have a serious impact on the bank's operations, but do not
prevent the bank from conducting business. Examples of
high-priority problems include nightly processing errors that
cause the bank to go out of balance, reports with incorrect
information, and inaccurate display screen calculations.
Medium Third highest priority classification. Assigned to problems that
inconvenience the bank but do necessarily represent calculative
errors or other software failures. Typical medium-priority
problems include print routines that take longer than desired,
account setup routines that require redundant data entry, and
window options that do not properly reflect bank-defined default
values.
Low Lowest priority classification. Assigned to problems that are
primarily cosmetic in nature (typographical errors, alignment
problems, etc.). Low-priority problems detract from the system's
elegance and polish, but not from its core functionality.
RESPONSE GUIDELINES
Following are the target response times for each level of problem severity:
Critical A return call must be made within 45 minutes.
High A return call must be made to the bank within 3 hours, but never
later than the end of that business day, unless calls come in
within 1 hour of the end of the business day, in which case a
return call must be made within the first 2 hours of the next
business day.
Medium A return call must be made to the bank during the same business
day, or if the call comes within 3 hours of the end of the
business day, a return call must be made by the end of the next
business day.
Low A return call must be made by the end of the next business day.
15
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CONFIDENTIAL
RESOLUTION GUIDELINES
Following are the target resolution timeframes for each classification. Given
the uncertain nature of troubleshooting technical software problems, however,
Phoenix will use best efforts to meet these guidelines, but cannot guarantee
such time frames.
Critical For calls logged either during or after normal support hours,
the problem should be resolved within 5 hours. Phoenix shall
involve such resources as necessary to remedy critical errors as
soon as possible, including escalating the problem to the Senior
Vice President in charge of Client Services within 1 hour.
High For calls logged either during or after normal support hours,
the problem should be resolved within 24 hours.
Medium Based on consultation with the bank, the problem should be
resolved either during the next scheduled software release
(preferred) or, at the bank's explicit request, within 5
business days.
Low The problem should be resolved according to a mutually agreed
schedule.
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FROM FORM 10-Q FOR THE SIX MONTHS ENDED JUNE 30, 1998 (FOR SEC USE
ONLY) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 11,571,883
<SECURITIES> 20,165,885
<RECEIVABLES> 9,254,521
<ALLOWANCES> (341,200)
<INVENTORY> 0
<CURRENT-ASSETS> 28,478,102
<PP&E> 4,840,729
<DEPRECIATION> (1,480,025)
<TOTAL-ASSETS> 53,402,203
<CURRENT-LIABILITIES> 4,410,813
<BONDS> 0
0
0
<COMMON> 83,703
<OTHER-SE> 47,090,407
<TOTAL-LIABILITY-AND-EQUITY> 53,402,203
<SALES> 0
<TOTAL-REVENUES> 10,265,147
<CGS> 0
<TOTAL-COSTS> 3,701,039
<OTHER-EXPENSES> 6,584,638
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (27,076)
<INCOME-PRETAX> 819,674
<INCOME-TAX> 286,886
<INCOME-CONTINUING> 532,788
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 532,788
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
