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 MARCH 31, 2000.
Or
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
TO , 19 .
--------------- ------------ -----
Commission file number : 0-20937
Phoenix International Ltd., Inc.
(Exact name of registrant as specified in its charter)
Florida 59-3171810
(State or other jurisdiction
of incorporation or organization) (I.R.S. Employer Identification 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 May 11, 2000
Common Stock, $0.01 par value 9,410,172
--------------
(No. of Shares)
<PAGE>
<TABLE>
<CAPTION>
PHOENIX INTERNATIONAL LTD., INC.
INDEX TO FORM 10-Q
PAGE
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) 3
Condensed Consolidated Balance Sheets as of
March 31, 2000 and December 31, 1999 3
Condensed Consolidated Statements of Operations for the Three
Months Ended March 31, 2000 and 1999
4
Condensed Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosure on Market Risk 13
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 14
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
EXHIBIT INDEX 17
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PHOENIX INTERNATIONAL LTD., INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----- ----
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 5,229,593 $2,484,977
Accounts receivable, net of allowance for doubtful accounts
of $843,000 and $655,000 at March 31, 2000, and
December 31, 1999, respectively 8,096,922 8,313,598
Unbilled accounts receivable 3,846,586 2,918,867
Prepaid expenses and other current assets 788,154 971,023
---------------- --------------
Total current assets 17,961,255 14,688,465
Long term investments 6,591,027 8,964,771
Property and equipment:
Computer equipment and purchased software 5,251,550 5,087,369
Furniture, office equipment and leasehold improvements 2,492,830 2,481,248
Accumulated depreciation and amortization (4,372,801) (3,964,923)
---------------- -------------
Total property and equipment 3,371,579 3,603,694
Capitalized software development costs, net of accumulated
Amortization of $5,418,000 and $4,655,000 at March 31, 2000,
and December 31, 1999, respectively 14,535,446 13,292,313
Purchased software, net of accumulated amortization of $54,000
and $14,000 at March 31, 2000, and December 31, 1999,
respectively 1,207,867 1,248,467
Goodwill and other intangible assets, net of accumulated
amortization 1,158,220 1,210,268
Equity investments and other assets 1,415,564 1,515,826
---------------- -------------
Total assets $46,240,958 $ 44,523,804
================ =============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 2,000,616 $ 908,556
Accrued expense 3,074,007 3,929,234
Current portion of capital lease 158,702 155,222
Deferred revenue 4,741,195 4,576,341
---------------- ---------------
Total current liabilities 9,974,520 9,569,354
Capital leases 158,372 199,870
Minority interests 198,463 272,647
---------------- ---------------
Total long term liabilities 356,835 472,518
---------------- ---------------
Total liabilities 10,331,356 10,041,871
Shareholders' equity:
Common stock, $0.01 par value
50,000,000 shares authorized, 9,410,172 and 8,526,942 issued
and outstanding at March 31, 2000, and December 31,1999
respectively 94,102 85,269
Additional paid-in capital 50,905,230 46,331,394
Unrealized loss on investments available for sale (674,422) (557,283)
Retained earnings (deficit) (14,415,307) (11,377,447)
---------------- ---------------
Total shareholders' equity 35,909,603 34,481,933
---------------- ---------------
Total liabilities and shareholders' equity $ 46,240,958 $ 44,523,804
================ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
balance sheets.
3
<PAGE>
PHOENIX INTERNATIONAL LTD., INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
---------------------------------
2000 1999
---- ----
Revenues:
<S> <C> <C>
License fees and other $ 2,076,177 $ 2,311,445
Implementation, customer and software
support and other service fees 3,736,343 3,223,310
--------- ---------
Total revenues 5,812,520 5,534,755
Expenses:
Cost of license fees and other 1,045,367 593,413
Cost of implementation, customer and
software support and other service fees 2,018,169 2,229,841
Sales and marketing 1,217,139 1,298,673
General and administrative 1,975,305 1,146,779
Product development 2,774,704 2,556,904
--------- ---------
Total expenses 9,030,684 7,825,611
Other income (expense):
Loss on foreign currency (6,399) (19,221)
Interest income 150,924 305,443
Interest expense (9,702) (7,814)
Minority interest 74,184 -
Amortization of goodwill (15,930) -
---------- ---------
Loss before income taxes (3,025,087) (2,012,449)
Income tax expense (benefit) 12,772 (704,357)
----------- ---------
Net loss $(3,037,860) $(1,308,092)
=========== ===========
Net loss per share - basic $ (0.34) $ (0.15)
=========== ===========
Net loss per share - diluted $ (0.34) $ (0.15)
=========== ===========
Weighted average shares outstanding - basic 8,979,120 8,504,949
=========== ===========
Weighted average shares outstanding - diluted 8,979,120 8,504,949
=========== ===========
</TABLE>
The accompanying notes are an integral part of these condensed statements of
operations.
4
<PAGE>
PHOENIX INTERNATIONAL LTD., INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------------------------
2000 1999
---- -----
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (3,037,860) $ (1,308,092)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization 1,276,723 872,804
Provisions against accounts receivable 592,400 110,000
Deferred taxes - (739,397)
Minority interest (74,184) -
Changes in operating assets and liabilities:
Accounts receivable 28,676 (1,979,449)
Unbilled accounts receivable (1,332,119) 651,131
Prepaid expenses and other current assets 182,869 (111,843)
Accounts payable 1,092,060 256,770
Accrued expenses (855,227) (138,011)
Deferred revenue 164,854 126,058
----------------- ----------------
Net cash used in operating activities (1,961,808) (2,260,029)
----------------- ----------------
Cash flows from investing activities:
Purchases of property and equipment (175,763) (300,180)
Sale of investments, available for sale 2,380,813 4,749,244
Purchases of investments, available for sale - (2,330,462)
Capitalized software costs (2,019,330) (2,191,486)
Purchase of other assets (23,946) -
----------------- -----------------
Net cash provided by (used in) investing activities 161,774 (72,884)
----------------- -----------------
Cash flows from financing activities:
Payments of capital lease obligations (38,019) (23,625)
Net proceeds from issuance of common stock 4,582,669 77,399
----------------- -----------------
Net cash provided by financing activities 4,544,650 53,774
----------------- -----------------
Net decrease in cash and cash equivalents 2,744,616 (2,279,139)
Cash and cash equivalents at beginning of the period 2,484,977 3,795,962
----------------- -----------------
Cash and cash equivalents at end of the period $ 5,229,593 $ 1,516,823
================= ================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements of cash flows.
5
<PAGE>
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
Phoenix 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,
"Selected Financial and Operating Data," and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included in Phoenix's
1999 Annual Report on Form 10-K.
2. Net Income (Loss) Per Share
Net income (loss) per share is calculated and presented in accordance
with Statement of Financial Accounting Standards No. 128, Earnings per Share.
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 dilutive 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 March 31,
2000 1999
---------------------- ------------------
<S> <C> <C>
Numerator - net loss available to common shareholders $(3,037,860) $(1,308,092)
Denominator for basic net loss per share -
weighted average shares outstanding 8,979,120 8,504,949
Effect of dilutive securities - employee stock options 0 0
---------------------- ------------------
Denominator for diluted net loss per share -
adjusted weighted average shares outstanding
and assumed conversion of dilutive securities 8,979,120 8,504,949
====================== ==================
Net loss per share - basic $ (0.34) $ (0.15)
====================== ==================
Net loss per share - diluted $ (0.34) $ (0.15)
====================== ==================
</TABLE>
Pursuant to Statement of Financial Accounting Standards No. 128 the
denominators for basic and diluted net income per share are identical for the
three month periods ended March
6
<PAGE>
31, 2000 and 1999, due to Phoenix's net losses. According to the statement, the
exercise of any outstanding options or warrants for a company with a net loss is
considered antidilutive.
3. Capitalized Software Costs
We capitalize certain software development costs in accordance with
Statement of Financial Accounting Standards No. 86, Accounting for the Costs of
Computer Software to Be Sold, Leased, or Otherwise Marketed. Costs incurred
internally to develop a computer software product are charged to product
development expense when incurred until technological feasibility has been
established for the product. Thereafter, all software production costs are
capitalized and recorded at the lower of unamortized cost or net realizable
value. Capitalization ceases upon general release to customers. After general
release, capitalized costs are amortized using the straight-line method over the
estimated useful life of the related product (currently five years).
Amortization of capitalized software development costs, included in costs of
license fees and other, was $776,000 for the three months ended March 31, 2000,
compared to $454,000 for the three months ended March 31, 1999.
4. Comprehensive Loss
Phoenix adopted Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income as of January 1, 1998. This statement establishes
new rules for the reporting and display of comprehensive income and its
components. Comprehensive loss for the three months ended March 31, 2000 and
1999, is comprised of the following:
<TABLE>
<CAPTION>
Three Months Ended March 31,
2000 1999
------------------- ------------------
<S> <C> <C>
Net loss as reported $ (3,037,860) $ (1,308,092)
Other comprehensive income:
Unrealized loss on investments
available for sale (net of tax effect in 1999) (117,139) (121,861)
------------------- ------------------
Comprehensive loss $ (3,154,999) $ (1,429,953)
=================== ==================
</TABLE>
5. Staff Accounting Bulletin No. 101
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial
Statements was released by the Securities and Exchange Commission in December
1999. This bulletin provides the SEC staff's views in applying generally
accepted accounting principles to selected revenue recognition issues. We are
presently studying the implications of the guidance set forth in this bulletin,
and will adopt the bulletin and apply any applicable provisions to our financial
statements beginning in the second quarter. We cannot at this time quantify the
impact of any such changes, but it could have a material effect on our revenue
recognition policies, and therefore on our financial position and results of
operations.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Disclosure Regarding Forward Looking Statements
This 10-Q contains statements which constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of 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 our
intent, belief, current expectations, and those of our management with respect
to, among other things:
o our financing plans;
o trends affecting our financial condition or results of operations;
o our growth strategy and operating strategy (including, but not limited
to, the development and implementation of the Phoenix
System and our other products);
o sales performance and prospects; and
o the possible impact on our operations and financial performance of
market conditions and other factors that have hindered us in the past,
such as currently-pending litigation and the slowdown in purchases of
software during 1999.
The words "may," "would," "could," "continue," "will," "expect,"
"estimate," "anticipate," "goal," "strategy," "believe," "intend," "plan," and
similar expressions and variations thereof are intended to identify
forward-looking statements. Such forward-looking statements are not guarantees
of future performance and involve risks and uncertainties, many of which are
beyond our ability to control. Actual results may differ materially from those
projected in the forward-looking statements as a result of various factors.
Among the key risks, assumptions and factors that may adversely affect our
operating results, performance, and financial condition are:
o whether the market conditions and other factors which hindered our
success in 1999, such as negative publicity and litigation against us,
will continue to affect our efforts in the future;
o unanticipated delays in developing new products and enhancements or in
deploying our products and services through our ASCs;
o whether the market accepts our new products and services, including
those under development and the e-commerce operating environment and
services we offer;
o our reliance on significant new customers to reach or exceed market
expectations for our performance;
o the timing of customer contracts slipping from one quarter to later
quarters of fiscal periods;
o our ability to leverage our sales force, marketing relationships and
other distribution channels worldwide to generate new customers;
o negative rumors created and/or spread by competitors, including untrue
rumors about our immediate viability;
8
<PAGE>
o the distraction of management's time and attention, increased legal and
other costs, and other adverse impacts of pending litigation, negative
publicity and negative rumors by competitors;
o our ability to grow and manage our growth despite adverse market and
other factors described above; and
o competitive conditions and other factors discussed in detail in our
prior press releases and filings with the Securities Exchange
Commission, including our Annual Report on Form 10-K and the "Risk
Factors" section in our Registration Statement on Form S-1
(Registration No. 333-31415), as declared effective by the Securities
and Exchange commission on August 13, 1997.
We derive our revenues from two primary sources: (i) license fees for
software products, principally the Phoenix System, and commissions from the sale
of third party software and hardware; and (ii) fees for services, which include
implementation services, custom programming, training, interface development for
third party products, ongoing software support, and Internet/Intranet consulting
services.
Our quarterly operating results have varied significantly in the past
and may vary significantly in the future. Factors that may cause our future
operating results to vary include, but are not limited to:
o the size and timing of significant orders;
o the mix of direct and indirect sales; the mix and timing of U.S. and
foreign sales; the timing of new product announcements;
o changes in our pricing policies and those of our competitors;
o the timing of the development, implementation, and release of our
products and enhancements;
o changes in our strategy and operating expenses; and
o competition and general economic factors.
Product revenues are difficult to forecast because the market for
client/server application software products is evolving and affected by many
different factors, including general considerations beyond our control such as
the recent slowdown attributable to Year 2000 concerns. Additionally, our sales
cycle varies substantially from customer to customer and exceeds 12 months in
many cases. We do not believe that quarter-to-quarter comparisons of our results
of operations should be relied upon as indications of our future performance.
Due to all of the foregoing factors, it is likely that in future
quarters our operating results will be below the expectations of securities
analysts and investors. In such an event, the price of our common stock would
likely be materially adversely affected.
Year 2000 Issues
We discussed in our reports filed in 1998 and 1999 the nature and
progress of our plans to become Year 2000 ready. In late 1999, we completed the
remediation and testing of our systems. As a result of those planning and
implementation efforts, we experienced no significant disruptions in
mission-critical information technology and non-information
9
<PAGE>
technology systems due to the Year 2000, and believe our systems successfully
responded to the Year 2000 date change. We are not aware of any material
problems resulting from Year 2000 issues, either with our products, our internal
systems, or the products and services of third parties used in our operations.
We will continue to monitor our mission critical computer applications and those
of our suppliers and vendors throughout the Year 2000 to help ensure that we
promptly address any latent Year 2000 matters that may arise.
Results of Operations
The following table sets forth the percentage of total revenues
represented by certain line items in Phoenix's statements of operations for the
periods indicated.
Three Months Ended March 31,
2000 1999
-------- --------
Revenues:
License fees and other 36% 42%
Implementation, customer and software
support and other service fees 64% 58%
-------- --------
Total revenues 100% 100%
Expenses:
Cost of license fees and other 18% 11%
Cost of implementation, customer and
software support and other service fees 35% 40%
Sales and marketing 21% 23%
General and administrative 34% 21%
Product development 48% 46%
-------- --------
Total expenses 155% 141%
Other income (expense):
Loss on foreign currency 0% 0%
Interest income 3% 6%
Interest expense 0% 0%
Minority interest 1% 0%
Amortization of goodwill 0% 0%
-------- --------
Loss before incomes taxes (51%) (35%)
Income tax expense (benefit) 0% (13%)
-------- --------
Net income (loss) (51%) (22%)
======== ========
<PAGE>
Three Months Ended March 31, 2000, Compared to Three Months Ended March 31, 1999
Revenues. Total revenues increased by 5.0% to $5.8 million in the three
months ended March 31, 2000, from $5.5 million in the three months ended March
31, 1999. Revenues from license fees decreased 10.2% to $2.1 million in the
three months ended March 31, 2000, from $2.3 million in the three months ended
March 31, 1999. This decrease was primarily due to a decrease in the number of
license fee contract signings from U.S. and international customers. Revenues
from implementation, customer and software support, and other service fees
increased 15.9% to $3.7 million in the three months ended March 31, 2000, from
$3.2 million in the three months ended March 31, 1999. This increase was
primarily attributable to an increase in professional service revenues for
software development.
Expenses. Cost of license fees increased 76.2% to $1.0 million in the
three months ended March 31, 2000, from $0.6 million in the three months ended
March 31, 1999. These costs increased mainly as a result of higher amortization
of capitalized software development costs and costs of third party licenses.
Cost of implementation, customer and software support and other service
fees decreased 9.5% to $2.0 million in the three months ended March 31, 2000,
from $2.2 million in the three months ended March 31, 1999, primarily as a
result of decreased employee headcount.
Sales and marketing expenses decreased 6.3% to $1.2 million in the
three months ended March 31, 2000, from $1.3 million in the three months ended
March 31, 1999, primarily as a result of decreased sales commissions, travel,
and advertising expenses.
General and administrative expenses increased 72.2% to $2.0 million in
the three months ended March 31, 2000, from $1.1 million in the three months
ended March 31, 1999. These costs increased primarily as the result of increased
provisions and credits against accounts receivable, which rose by $0.5 million,
and by higher depreciation and personnel-related costs.
Product development expenses increased 8.5% to $2.8 million in the
three months ended March 31, 2000, from $2.6 million in the three months ended
March 31, 1999. Product development expenses increased in the 2000 period
primarily as a result of increased personnel-related costs to expand and enhance
our product line, including expenses for contract labor costs incurred at the
Sydney, Australia product development center.
Total Other Income (Expense). Interest income was $151,000 in the three
months ended March 31, 2000 compared to $305,000 in the three months ended March
31, 1999. Interest income decreased primarily due to a decrease in interest
yielding investments. The minority interest of $74,000 for the three months
ended March 31, 2000 is the net loss attributed to minority shareholders of
Phoenix International New York (formerly Servers On-Line, Inc.). Phoenix
acquired 54% of Servers On-Line in October 1999.
Income Tax Expense (Benefit). The income tax expense was $12,800 for
the three
11
<PAGE>
months ended March 31, 2000, compared with a benefit of $704,000 for the three
months ended March 31, 1999. This is due to the fact that we no longer recognize
the income tax benefits of net operating loss carryforwards.
Net Income (Loss). Phoenix incurred a net loss of $3.0 million in the
three months ended March 31, 2000, compared to net loss of $1.3 million in the
three months ended March 31, 1999, primarily as a result of a decrease in
license fee revenue, increase in general and administrative costs, increase in
costs of license fees, decrease in interest income, and non-recognition of the
tax benefits of net operating losses.
Liquidity and Capital Resources
We fund our cash needs through existing cash and investment balances,
sales of capital stock, interest on investments and, to a lesser extent, through
cash flow from operations. We do not rely on lines of credit or other borrowings
to fund operations. At March 31, 2000, we had cash and cash equivalents of $5.2
million, and long term investments of $6.6 million. Long term investments
consist primarily of U.S. Treasury securities. For the three months ended March
31, 2000, our operations used net cash of $2.0 million, primarily due to our net
loss and an increase in unbilled receivables.
For the three months ended March 31, 2000, investing activities
provided net cash of $0.2 million, which included $2.4 million from the sale of
investments, reduced primarily by $2.0 million invested in capitalized software
development costs and $0.2 million in purchase of property and equipment.
Financing activities provided $4.5 million of cash, primarily from the
sale of 861,623 shares of common stock to London Bridge Software Holdings plc
for $5.0 million, less issuance costs. Working capital was $8.4 million as of
March 31, 2000.
We believe our cash balances, investments, and cash flow from
operations will be sufficient to meet working capital, capital expenditure, and
software development requirements at least through 2000. Cash flows from
operating activities are dependent on continued advance payments from customers,
and we cannot be sure that we will continue to receive these payments or that we
will continue to receive these payments in advance of contract performance on
the same terms as we have in the past. We anticipate that operating and
investing activities may use cash in the future, due primarily to growth in
operations and development activities. Consequently, future growth, including
acquisitions, may require additional equity or debt financing. These statements
are "forward looking" statements which are subject to risks and uncertainties as
previously discussed.
12
<PAGE>
Item 3. Quantitative and Qualitative Disclosure on Market Risk
Phoenix does not use derivative financial instruments in its operations
or investments. While we have significant international operations, our
contracts provide for all payments to be made in U.S. Dollars. We therefore do
not believe that fluctuations in foreign currency exchange rates will have a
material impact on our results or operations. We have experienced foreign
exchange losses from the operations of two of our foreign subsidiaries, but
believe these losses have been immaterial in amount. Foreign exchange risks in
the future could, however, have a material adverse impact on our results of
operations. Phoenix's short term and long term investments are deposited
principally in a single financial institution with significant assets and
consist of U.S. Treasury bills and notes with maturities of less than three
years. We do not consider the interest rate risk for these investments to be
material. We do not have any material credit facilities and, therefore, do not
have a significant risk due to potential fluctuations in interest rates for
loans at this time. Changes in interest rates could decrease our interest
income, could make it more costly to borrow money in the future, and may impede
Phoenix's future acquisition and growth strategies if management determines that
the costs associated with borrowing funds are too high to implement these
strategies.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
For a discussion of legal proceedings, please see our Annual Report on
Form 10-K for 1999, which includes a summary of a lawsuit filed in the District
Court for the Middle District of Florida as a purported class action initiated
by George Taylor, a former Phoenix employee. The defendants in the suit include
Phoenix and its chief executive officer. The lawsuit alleges, among other
things, violations of Section 10(b) of the Securities Exchange Act of 1934. On
May 5, 2000, the plaintiffs filed an Amended Complaint which, among other
things, (1) adds four additional investors as named plaintiffs and proposed
class representatives; (2) expands the purported class period to the period from
May 5, 1997 to April 15, 1999; and (3) adds Phoenix's president as an additional
named defendant. As previously stated in the Form 10-K for 1999, Phoenix intends
to vigorously defend the case.
Item 2. Changes in Securities
In February 2000, London Bridge Software Holdings plc purchased 861,623
shares of Phoenix common stock for $5,000,000, representing a 9.16% equity
interest in Phoenix as of the transaction date. In connection with this
purchase, Phoenix entered into an agreement with London Bridge to market one of
its products called "Vectus." Also in connection with this transaction, Phoenix
paid a total of $150,000 in advisory fees and for a fairness opinion.
This transaction was not registered with the SEC. To complete this
transaction, Phoenix relied upon the exemptions provided by Section 4(2) of the
Securities Act of 1933, and Regulation D promulgated under the Act. The
transaction was an isolated sale to a single overseas entity. No other persons
were solicited or contacted to participate in this sale. A Form D was timely
filed with the Securities and Exchange Commission in connection with this
transaction.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
On May 11, 2000, we initiated a reorganization of the company by
eliminating open positions and terminating approximately 15% of our existing
workforce. The cost of salaries and employee benefits for the terminated
employees was approximately $3.5 million on an annualized basis. We expect to
incur severance-related expenses in connection with these terminations of
approximately $200,000.
14
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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 our
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 Marketing Agreement between London Bridge Software Limited and
Phoenix International Ltd., Inc.*
27.1 Financial Data Schedule for the three months ended March 31, 2000
(for SEC use only).
- -------------------------
* Confidential treatment has been requested for certain confidential portions of
this exhibit pursuant to Rule 24(b)(2) under the Exchange Act. In accordance
with Rule 24(b)(2), these confidential portions have been omitted from this
exhibit and filed separately with the Commission.
b) Reports on Form 8-K
None.
15
<PAGE>
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.
/s/Bahram Yusefzadeh
-------------------------------------------------
May 12, 2000 Bahram Yusefzadeh
Chairman of the Board and Chief Executive Officer
(principal executive officer)
/s/Theodore C. Burns
--------------------------------------------------
May 12, 2000 Theodore C. Burns
Senior Vice President and Chief Financial Officer
(principal financial and accounting officer)
<PAGE>
EXHIBIT INDEX
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 Marketing Agreement between London Bridge Software Limited and
Phoenix International Ltd., Inc.*
27.1 Financial Data Schedule for the three months ended September 30, 1999
(for SEC use only).
- -------------------------
* Confidential treatment has been requested for certain confidential portions of
this exhibit pursuant to Rule 24(b)(2) under the Exchange Act. In accordance
with Rule 24(b)(2), these confidential portions have been omitted from this
exhibit and filed separately with the Commission.
17
Exhibit 10.1
Confidential Treatment Requested
- --------------------------------------------------------------------------------
Memorandum of Agreement
between
London Bridge Software Limited
&
Phoenix International Ltd, Inc.
<PAGE>
Confidential Treatment Requested
Marketing Agreement
This Marketing Agreement (the "Agreement") executed by and between London
Bridge Software Limited ("LBS"), whose registered office is situate at 16th
Floor, New London Bridge House, 25 London Bridge Street, London SE1 9SG and
Phoenix International Ltd, Inc. ("Phoenix"), whose principal place of
business is 500 International Parkway, Heathrow, Florida 32746 USA.
STATEMENT OF PURPOSE
WHEREAS, LBS is in the business of developing, inter alia, customer
relationship management software applications and integration services.
WHEREAS Phoenix wishes to market, distribute, resell, display, demonstrate
and /or solicit orders for the Software to current and prospective
customers of Phoenix.
AGREEMENT
In consideration for the mutual promises set forth below and for other
valuable consideration, the sufficiency of which is hereby acknowledged,
the parties agree as follows:
1. Definitions. The following terms are incorporated herein by
reference:
1.1 End-User - An existing or prospective customer of Phoenix to whom
Phoenix distributes the Software for use in the regular course of
such customer's business, but specifically not for the purpose of
sublicensing. An existing customer of Phoenix means a third party,
its Affiliates and its successors and assign that has entered into
a written licence and/or service agreement with Phoenix for the
use of Phoenix's products and/or services.
1.2 End-User License Agreement- The form of agreement whereby LBS
grants the End-User the right and license to use the Software and
establishes the terms for such use.
1.3 Maintenance - The telephone and facsimile support, remote
diagnostics, and updates and upgrades to the Software, which are
provided to the End-User for an annual subscription fee.
1.4 Software - Are LBS Software which consist of one or more of the
products listed in Schedule B which may be updated periodically,
as well as the associated documentation created for use with said
Software such as reference guides, user manuals, and on-line help.
Software shall also include all updates and upgrades to those
items listed in Schedule B, as well as future products which LBS
chooses to make available to Phoenix.
1.5 Payments - Monies due to LBS from Phoenix.
1.6 Proprietary Information- Any written information marked as
confidential at the time of disclosure, or any other information
of either party which, under the circumstances, reasonably ought
to be considered confidential and
Proprietary, including but not limited to all business and
marketing plans, customer lists, Products, software, technical
specifications and technical and user documentation. Proprietary
Information shall not include information which (i) is lawfully in
the other party's possession prior to the disclosure; (ii) is
lawfully disclosed to such party by a third party without
restrictions on its disclosure; (iii) is independently developed
by such party; or (iv) became known to such party from a source
other than the other party other than by the breach of an
obligation of confidentiality owed to the other party.
2. Grant of Rights
<PAGE>
Confidential Treatment Requested
2.1 Grant of Distribution: Subject to the terms and conditions of this
Agreement, LBS hereby grants to Phoenix a non-exclusive,
non-transferable licence for the term of this Agreement to use and
market the Software (in their unmodified form) to End-Users only
for use in association with the Phoenix System ("Phoenix System")
of Phoenix. This clause shall in no way limit the ability of LBS
to market, license, and support the Software, either directly or
indirectly to whomsoever it chooses.
Where Phoenix identifies a prospective user of the Software for
use not in association with Phoenix System, Phoenix shall seek the
permission of LBS to sell the Software to this named client. The
granting or refusal of permission shall be in the absolute
discretion of LBS.
2.2 Ownership: All right, title, and interest in and to the Software
and all copyrights, patents, trademarks, or other intellectual
property or proprietary rights contained therein shall remain
exclusively with LBS. This clause 2.2 shall survive termination of
this Agreement.
2.3 Copies: Phoenix may copy and use the Software as reasonably
necessary to demonstrate, market and support the Software to
End-Users and otherwise fulfill its marketing obligations under
this Agreement
3. Licensing of Products
3.1 Licensing terms. All End-User License Agreements and Maintenance
agreements must be executed by LBS and the End-User. Where Phoenix
is to provide level 1 initial diagnostic support to End-Users it
may enter into Maintenance agreements directly with the End-Users.
Such Maintenance agreements entered into by Phoenix shall be for a
term no greater than five (5) years.
4. Order/Software Procedures
4.1 Order Procedure. Upon execution of an End-User Licence Agreement
Phoenix shall submit written purchase orders to LBS. LBS shall
ship the Software to the End User. Any purchase order must include
as a minimum, name of Software, number of licenses of each
Software, the price and any agreed upon discounts, End-User name
and billing address, number of users and accounts, and such other
information which LBS may request from time to time.
4.2 Updated Versions. LBS shall deliver master copies of any updated
versions of the Software, including fixes, enhancements, and new
releases, promptly upon their availability, in the same media as
Phoenix received the prior version. LBS shall also deliver to
Phoenix any other materials necessary for Phoenix to incorporate
such updates in existing Software or to supersede prior versions.
4.3 Discontinuance: LBS reserves the right to discontinue developing,
producing, licensing, or distributing any of the LBS Software and
to modify, replace or add to the LBS Software, at its sole
discretion, at any time.
5. Obligations of Phoenix and LBS
5.1 Phoenix Obligations
5.1.1 Phoenix shall use its reasonable efforts to market,
advertise and otherwise promote the Software to its
existing and prospective customer base where in Phoenix's
reasonable opinion it is the best solution for such
existing or prospective customers' needs.
5.1.2 Phoenix agrees to acquire and maintain throughout the
term of this Agreement, at its own expense, all
permissions, consents and licenses necessary to enable
Phoenix to distribute and market the Software and which
are necessary for the full and legal operation of this
Agreement. Phoenix agrees to indemnify and hold LBS
harmless from any and all claims and damages resulting
from Phoenix's
<PAGE>
Confidential Treatment Requested
failure to fulfill its obligations under this clause.
This clause 5.1.2 shall survive termination of this
Agreement.
5.1.3 Phoenix shall comply with all applicable local laws and
regulations relating to the marketing and distribution of
the LBS Software, including any export regulations of the
United States of America. Phoenix shall indemnify and
hold LBS harmless from any claims and damages resulting
from Phoenix's failure to comply with the provisions of
this clause. This clause 5.1.3 shall survive termination
of this Agreement.
5.1.4 Phoenix shall not attempt to disassemble, de-compile, or
reverse engineer the Software object code.
5.1.5 Phoenix agrees to execute any and all documents
reasonably necessary to protect LBS's Proprietary
Information, as defined in clause 8 of this Agreement,
prior to providing such Proprietary Information to any
third party.
5.1.6 Phoenix may not distribute LBS Software to any third
party where Phoenix knows that the third party is
licensing the LBS Software for resale or re-licensing or
where the third party is reasonably considered to be a
competitor of LBS. Phoenix may not use agents for resale
or re-licensing of LBS Software without the written and
explicit permission of LBS.
5.1.7 Phoenix shall not register, or attempt to register, in
any country in the world, any trademarks of LBS, or any
other marks deemed by LBS, at its sole discretion, to be
confusingly similar to existing LBS trademarks. Phoenix
further agrees to cooperate and assist LBS (at LBS's
request and expense) with any trademark registration
efforts. The provisions of this clause 5.1.7 shall
survive termination of this Agreement.
5.1.8 After training by LBS, Phoenix shall provide level 1
initial diagnostic support to End-Users and shall report
problems arising out of or in connection with the
software to LBS for error resolution in accordance with
the procedures attached as Schedule A These procedures
may be amended from time to time.
5.1.9 Phoenix shall be responsible for configuring the
equipment purchased by the End-User for operation of the
Software, for recommending that the End-User acquires
equipment that is then a currently supported platform for
the Software and for coordinating the installation of the
equipment and Software. Such functions shall be under
Phoenix's agreement and Phoenix shall keep all fees for
such services.
5.2 LBS Obligations
5.2.1 LBS agrees to deliver to Phoenix one (1) copy of the most
recent version of the Software, in object code version
only within five (5) business days following execution of
this Agreement for use in accordance with the terms and
conditions of this Agreement.
5.2.2 Maintenance or other support services for the Software
provided by LBS to End-Users shall be performed in
conjunction with the provisions of Schedule A attached
hereto. LBS shall provide such services only if the
Software are installed in a hardware and software
environment that LBS then currently supports for its
End-Users.
5.2.3 LBS shall use reasonable efforts to provide Phoenix with
analysis, problem investigation and correction of errors
pertaining to the Software, in accordance with the terms
and conditions of this Agreement.
5.2.4 LBS will provide up to a maximum of fifteen (15) days
training regarding the use of the Software and the
provision of Maintenance upon terms to be agreed between
the parties. Such training shall take place at the
headquarters of LBS or Phoenix, or such other location
deemed suitable by LBS. Phoenix
<PAGE>
Confidential Treatment Requested
shall be responsible for the travel and living costs of
its technical personnel who undertake such training.
Phoenix may purchase additional training at the then
current rates of LBS.
5.2.5 LBS agrees to acquire and maintain throughout the term of
this Agreement, at its own expense, all permissions,
consents and licenses necessary for the full and legal
operation of this Agreement. LBS agrees to indemnify
subject to the restriction on liability at clause 10.1
hereof and hold Phoenix harmless from any and all claims
and damages resulting from LBS's failure to fulfill its
obligations under this clause. This clause 5.2.5 shall
survive termination of this Agreement.
5.2.6 LBS agrees to execute any and all documents reasonably
necessary to protect Phoenix's Proprietary Information,
as defined in clause 8 of this Agreement, prior to
providing such Proprietary Information to any third
party.
5.2.7 LBS shall provide all level 2 and higher support for
End-Users Maintenance agreements.
5.2.8 At the request of Phoenix, LBS and Phoenix shall work
together to install the Software that an End-User
licenses under the arrangements outlined in this
Agreement. LBS and Phoenix personnel shall work together
on such installation s and LBS shall charge Phoenix at
its then standard rate and its then standard payment
terms for all assistance provided in respect of these
installations.
5.2.9 Interface Development. Upon payment or upon the agreement
of payment by an End-User, the parties shall jointly
develop a communications protocol and functional and
technical specification for an interface between the
Phoenix System and the Software. Each party shall then
develop its portion of the software required for the
interface in accordance with such specification. Each
party will own the portion of the interface it has
developed.
6 Product Shipment, Payment, and Invoice Terms
6.1 Product Shipment. After receiving Phoenix's order for the Software
in accordance with Section 4 of this Agreement, LBS shall ship the
Software to End-Users.
6.2 Payments to LBS:
6.2.1 Licence Fees. Upon shipment of the Software under the
provisions of paragraph 6.1 above, LBS shall invoice Phoenix for
all licence fees due to LBS by Phoenix under the provisions of
Schedule B attached hereto. Unless previously agreed with LBS in
writing Phoenix shall pay LBS at least**** per cent (****) of all
such licence fees upon execution of the relevant End-User
Agreement within the remainder being paid within one hundred and
eighty (180) days of execution of the relevant End-User Agreement
regardless of whether Phoenix receives payment from the End-User.
Where Phoenix receives payment of licence fees in a greater
percentage or a shorter time frame than appears above payment to
LBS by Phoenix shall mirror the payments received by Phoenix from
the End-User.
6.2.2 Maintenance Fees. For Phoenix's current customers who become
End-Users, Phoenix shall pay LBS the annual Maintenance fees under
the provisions of Schedule B on the same schedule on which
Maintenance fees are currently due from each End-User, which may
be annually, quarterly, or monthly in advance. Phoenix will, upon
license of the Software to each such End-User, notify LBS of such
End-User's Maintenance fee payment schedule. For all new End-Users
which are not currently Phoenix customers, Phoenix shall pay LBS
the Maintenance fee annually in advance. Except as set forth
above, LBS shall not be subject to any payment terms offered to
End-User by Phoenix unless prior agreement with LBS in writing,
and in any case Phoenix shall pay LBS for all Maintenance fees
regardless of whether Phoenix receives payment from End-Users.
6.3 End-User Payment. Phoenix shall have responsibility for
establishing prices and collecting fees from End- Users for
Software licensed under any End-User License Agreement
**** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission
<PAGE>
Confidential Treatment Requested
6.3 Delinquent Payments. If any payment due to LBS hereunder shall
remain unpaid for thirty (30) days following the date due, LBS may
impose interest thereon at 5.0% per year over the base rate from
time to time of the Royal Bank of Scotland.
6.4 Tender and Payment. All amounts to be paid under this Agreement
are payable in US Dollars and all payments due hereunder shall be
made payable to LBS and forwarded to LBS at its registered office
or other location designated by LBS. LBS reserves the right to
halt shipment of any of the Software, in whole or in part, in the
event of any delinquency in payment for any prior order or
shipment.
6.5 Price Adjustments. LBS reserves the right to adjust the pricing of
its Software and Maintenance services upon written notification to
Phoenix, provided that such notification is at least Ninety (90)
days prior to any such changes. Phoenix will make Payments based
upon the revised LBS list price for any licenses of the Software
subsequently distributed to End-Users. The revised price list will
not contain prices greater than the prices contained in the price
list offered to prospective LBS customers.
6.6 Taxes. Phoenix shall collect, report, and pay to the relevant
taxing authority, any property, customs excise, sales and/or use,
or similar taxes (other than taxes on LBS's income generally) that
arise under this Agreement. Phoenix agrees to indemnify and hold
LBS harmless from any claims or damages resulting from Phoenix's
failure to comply with this paragraph. This clause 6.6 shall
survive termination of this Agreement.
7. Marketing
7.1 Publicity and Advertisement. The parties may elect to issue a
joint press release announcing their relationship under this
Agreement. No such announcements or advertising will be made by
either party without the written consent of the other.
7.2 Trademarks. LBS grants to Phoenix limited permission to use both
LBS's trademarks and registered trademarks solely to identify
Software licensed from LBS under this Agreement. Phoenix shall use
LBS's trademarks and registered trademarks only for purposes of
advertisement, promotion, and distribution of the corresponding
Software and for no other purposes. Phoenix shall use such
trademarks and registered trademarks in accordance with the
guidelines established by LBS from time to time and shall not use
such marks in any manner likely to confuse or mislead the public,
or to be adverse to the best interests of LBS. No advertising or
promotional literature shall use either the name of LBS its
trademarks or registered trademarks or any combination of them
without the prior written consent of LBS and such consent will not
be unreasonably withheld.
8. Confidentiality
8.1 Agreement. Phoenix shall not disclose the terms of this Agreement
to anyone other than (i) its employees who reasonably acquire such
knowledge in the ordinary course and scope of their employment;
(ii) its agents or representatives whose assigned duties
reasonably require such disclosure; or (iii) End-Users, to the
extent necessary to distribute the Software. Phoenix shall take
all reasonable steps to ensure that the terms of this Agreement
are not disclosed further by its employees, agents or
representatives or by any End-User, its employees, agents or
representatives.
8.2 Software. Phoenix agrees that the Software, together with all
materials and knowledge related thereto, obtained by Phoenix
pursuant to this Agreement shall be held in confidence and shall
not be made available in any form for the use or benefit of any
person or entity other than Phoenix and/or End-Users without the
prior written consent of LBS. Notwithstanding the foregoing, LBS
agrees that Phoenix and/or End-Users shall be permitted to
disclose relevant aspects of the Software to their employees and
agents to the extent reasonably necessary for Phoenix or End-User
use of Software; provided that Phoenix and/or End-User shall take
all reasonable steps to ensure that Software are not further
disclosed or duplicated. Neither
<PAGE>
Confidential Treatment Requested
Phoenix nor End-Users shall allow any attachment, levy, or
execution upon or against the Software, and each shall immediately
notify LBS in writing regarding any such attempt.
8.3 Other LBS Information. Phoenix agrees to hold materials and
knowledge regarding other LBS Software it is evaluating or
reviewing for inclusion in this Agreement, or for general
knowledge, as well as all other LBS Proprietary Information,
confidential to the same degree as Software. LBS reserves the
right to designate in writing, which of its Proprietary
Information may be disclosed by Phoenix under the provisions of
this Agreement.
8.4 Phoenix Information. LBS and its employees, agents or
representatives shall not use, duplicate, or disclose to any third
party such Proprietary Information of Phoenix without Phoenix's
prior consent, except to the extent reasonably necessary for the
performance of LBS obligations under this Agreement. LBS shall
take all reasonable steps to ensure Phoenix's Proprietary
Information hereunder is not used, duplicated, or disclosed in
contravention of this Agreement.
8.5 Disclosure Required by Law. Nothing in this Section shall restrict
disclosure by either party required by any applicable law, or
regulation, by the order of any court or administrative agency
having jurisdiction regarding such matters, or in conjunction with
legal due diligence for a pending merger, acquisition or public
financing event. However, either party shall promptly upon
receiving notice of any required disclosure, notify the other in
writing, providing all information and assistance for such party
to defend its rights hereunder. LBS acknowledges that Phoenix is a
publicly traded corporation and may be required to file this
Agreement with the U.S. Securities and Exchange Commission under
the disclosure rules and regulations.
8.6 Injunctive Relief. In the event of a breach of the provisions of
this clause 8, each party shall be entitled to obtain injunctive
or other equitable relief from a court of competent jurisdiction
to restrain the use or disclosure of its Proprietary Information.
Such remedy shall be in addition to, and not in lieu of, any other
remedies provided for in this Agreement.
8.7 Material Breach. Failure to adhere to the provisions of this
clause 8 shall be considered a material breach of the Agreement.
8.8 Survival. The confidentiality obligations of this Agreement shall
survive its termination.
9. Warranties
9.1 Express Warranties
9.1.1 LBS warrants that it is the lawful owner or licensee of the
Software and has the full right and authority to grant the
licenses hereunder.
9.1.2 LBS warrants the for a period of ninety (90) days from the
date it is delivered, the media on which the Software is furnished
will be free from any material defect in workmanship or material.
9.1.3 LBS warrants that the Software will perform substantially in
accordance with the specifications set forth in the Documentation
for a period of ninety (90) days from the date it is delivered.
This warranty does not cover, however, any copy of the Software,
which has been altered or changed in any way, provided such
alteration, or change gave rise to the breach of warranty claim.
9.1.4 LBS warrants that the Software provided under this Agreement
shall be "Year 2000 compliant". Specifically, LBS warrants that
the Software will manage and manipulate data involving dates,
including single-century formulas and multi-century formulas, and
will not cause an abnormally ending scenario within the
application or result in the generation of incorrect values
involving such dates.
9.1.5 LBS does not warrant that the functions contained in the
Software will meet the requirements of
<PAGE>
Confidential Treatment Requested
Phoenix or any other party or that the operation of the Software
will be uninterrupted or error-free. LBS is not responsible for
problems caused by changes in, or modifications to, the operating
characteristics of any computer hardware or operating system for
which the Software is procured, nor is LBS responsible for
problems which result from the use of the Software in conjunction
with software of Phoenix or third parties or with hardware which
is incompatible with the operating system for which the Software
is being procured.
9.1.6 Only an authorized officer of LBS may grant additional
warranties, which may be binding on LBS. Such additional
warranties must be in writing.
9.1.7 Disclaimer of warranties. Phoenix expressly agrees and
acknowledges that the foregoing warranties are in lieu of any and
all other LBS warranties express or implied. LBS, on behalf of
itself and its suppliers, disclaims any and all other
representations or warranties of any kind whatsoever, either
express or implied, including, but not limited to, any implied
warranty of merchantability or fitness for a particular purpose.
Phoenix agrees that the disclaimer is reasonable and that phoenix
has had adequate prior opportunity to assess fully the operation
and performance of the software. Phoenix shall not take any
contrary or inconsistent position.
9.2 The terms of this 9 shall survive termination of this Agreement.
10 Remedies/Limitation of Liability
10.1 Limitation of LBS Liability. To the maximum extent permissible
under applicable law, Phoenix agrees that the cumulative liability
of LBS and its suppliers for any damages arising from or related
to this Agreement, including but not limited to claims for breach
of contract, breach of warranty, negligence, or tort, shall not
exceed any amount paid by Phoenix to LBS for the Software which
gave rise to said claim.
10.2 Liability Disclaimer. To the maximum extent permissible under
applicable law, LBS, on behalf of itself and its suppliers,
disclaims any and all liability for special, incidental or
consequential damages (including loss of profits) arising from or
related to this Agreement or with respect to the installation,
implementation, customization, use, operation or support of the
Software even if LBS or its suppliers have been apprised of the
possibility of such damages.
10.3 Time Limitation. Any legal proceeding based upon this Agreement
must be instituted within two (2) years of the date the cause of
action first accrued.
10.4 Allocation of Risk. Both parties acknowledge that the allocation
of risk contained in this 10 is reflected in the price for the
Software and is also a reasonable recognition of the fact that the
Software cannot be tested in every possible combination and it is
not within LBS's control how and for what purpose the Software are
used by Phoenix or End-Users.
10.5 Survival. The terms of this clause 10 shall survive termination of
this Agreement.
11 Term/Termination
11.1 Term. This Agreement shall continue until terminated pursuant to
this clause 11, or by the mutual written agreement of the parties.
Any expiration or termination of the term will be final and
absolute. Phoenix waives any right, either express or implied by
applicable law or otherwise, to renewal of this Agreement or to
any damages or compensation for the expiration or termination of
the term in accordance with this clause 11. Each of the parties
has considered the possibility of such expiration or termination
and the possibility of loss and damage resulting therefrom in
making expenditures pursuant to the performance of this
<PAGE>
Confidential Treatment Requested
Agreement. It is the express intent and agreement of the parties
that neither will be liable to the other for damages or otherwise
by reason of the expiration or termination of the term as provided
for herein.
11.2 Insolvency, Bankruptcy, etc. If either party becomes insolvent,
fails to pay, or admits in writing its inability to pay, debts as
they become due; or if either party applies for, consents to, or
acquiesces in the appointment of a trustee, receiver or other
custodian for such party or for a substantial part of such party's
property; or makes a general assignment for the benefit of
creditors; or, if a trustee, receiver or other custodian is
appointed for such party or for a substantial part of such party's
property and is not discharged within sixty (60) days; or if any
bankruptcy, reorganization, debt arrangement or other proceeding
under any bankruptcy law, or any dissolution or liquidation
proceeding is commenced by, consented to, or acquiesced in by such
party and remains for sixty (60) days undismissed; or, if either
party ceases to conduct its business in the normal course, this
Agreement may be terminated by the other party immediately upon
written notice without penalty of any kind.
11.3 Breach of Agreement. In the event either party fails to perform
any of its material obligations hereunder, the other may notify
the non-complying party in writing of the breach. If the
non-complying party fails to remedy the breach within thirty (30)
days from receipt of such notice, or, if the breach is not
remediable within such period and the party in breach has not
undertaken and thereafter diligently and successfully pursued
significant efforts to cure the breach, the non-breaching party
may immediately terminate this Agreement upon written notice to
the non-complying party. This right to terminate shall be in
addition to, and shall in no way limit the non-breaching party
from pursuing other relief, except as otherwise limited herein.
11.4 Notice. Either party may terminate this Agreement at any stage by
giving the other three months notice in writing of its intention
to terminate. Notwithstanding termination by LBS under this clause
11.4 or clause 11.1 Phoenix may continue to pursue any potential
customer to whom Phoenix has an outstanding proposal for an
End-User licence for a period of six (6) months following the
termination notice. At the expiration of the aforementioned period
Phoenix shall transfer details of the potential customer to LBS.
Phoenix will provide a list of all outstanding proposals upon
receipt of the termination notice
11.5 Effect of Termination. Termination of this Agreement for any
reason shall immediately terminate Phoenix's licence and rights
under this Agreement and Phoenix shall return to LBS all
proprietary materials, and other materials developed by or
belonging to LBS which have been received by Phoenix pursuant to
this Agreement. Termination of this Agreement shall not relieve
either party of its obligations to make immediate and full payment
to the other for any amounts then due and/or payable.
11.6 Maintenance. In the event of termination by LBS under clauses
11.2, 11.3, 11.7, and/or 11.8 Phoenix shall assign all rights and
obligations under any agreement for Maintenance which cover the
Software including the right to be paid and collect Maintenance
fees for the Software. If Phoenix cannot for contractual reasons
assign such rights and obligations to LBS, Phoenix will
sub-contract such rights to LBS and Phoenix shall pay LBS all
Maintenance fees in respect of the Software in the prime contract.
For the avoidance of doubt the provisions of clause 11.5 apply in
the event of Maintenance rights being sub-contracted.
In the event of termination by LBS under clause 11.4 Phoenix may
retain the Software as necessary to fulfill its obligations under
the remaining term of any End-User agreement for Maintenance, such
agreements may not be extended.
11.7 Takeover/Merger. If Phoenix is the subject of a takeover or merger
LBS may in its sole discretion terminate this Agreement
immediately.
<PAGE>
Confidential Treatment Requested
12 Indemnification
12.1 Indemnification of Phoenix. LBS will defend or settle, at its own
expense but under its sole direction and contingent on Phoenix's
total cooperation, any claim alleging that any Software in its
unmodified form infringes any patent, trademark or copyright. If
any LBS Software becomes the subject of such a claim, LBS reserves
the right, at its sole option, to either (i) modify or replace the
affected parts so the LBS Software become non-infringing, (ii)
obtain for Phoenix and any End-Users the right to continue to use
the Software, or (iii) terminate this Agreement immediately if
options (i) and (ii) listed above are commercially impracticable.
LBS will indemnify and hold Phoenix harmless against any award of
costs and/or damages brought against Phoenix arising out of LBS's
failure to comply with its obligations to provide level 2 and
higher maintenance support.
In no event shall Phoenix settle any such claim, lawsuit, or
proceeding without LBS's prior approval in writing, and LBS shall
have no liability for any such unapproved settlement so made. This
clause states the entire liability of LBS for any infringement
involving the LBS Software.
12.2 Indemnification of LBS. Phoenix, on behalf of itself and its
agents, will indemnify and hold harmless any award of costs and
damages brought against LBS to the extent that it is (i) based on
a claim regarding the installation or configuration of Software by
Phoenix or its agents; or (ii) based on a claim regarding
modification, translation, customization or localization to the
Software by Phoenix or its agents. Phoenix shall have the right to
control the defence of all such claims, lawsuits, and other
proceedings. In no event shall LBS settle any such claim, lawsuit,
or proceeding without Phoenix's prior approval, and Phoenix shall
have no liability for any such unapproved settlement so made.
12.3 Survival. The provisions of this clause 12 shall survive
termination of the Agreement for any reason.
13 Dispute Resolution/Arbitration
13.1 Dispute Resolution/Arbitration Procedures. If a dispute arises out
of or relates to this Agreement or a breach thereof, and if said
dispute cannot be settled through direct discussions, the parties
agree to first endeavour to settle the dispute in an amicable
manner by mediation. Thereafter, any unresolved claim arising out
of or relating to this Agreement, or a breach thereof, shall be
referred to a sole arbitrator ("the Arbitrator")
(i) The arbitration shall be held in London.
(ii) The Arbitrator shall be appointed by the parties or failing
agreement, by the President for the time being of the Chartered
Institute of Arbitrators.
(iii) The procedure shall be agreed by the parties, or failing
agreement, determined by the Arbitrator.
(iv) If either party fails to comply with any procedural order
made by the Arbitrator, the Arbitrator shall have the power to
proceed in the absence of that party and deliver the award
(v) Neither party shall request or be awarded punitive or
exemplary damages of any kind.
This 13 shall survive termination of this Agreement.
14 Miscellaneous General Provisions
14.1 Personnel. Personnel of LBS and Phoenix are not, nor shall they be
deemed to be, employees of the other. Each party shall be and
remain an independent contractor and nothing herein shall be
deemed to constitute the parties as partners. Neither party shall
have any authority to act, or attempt to act, or represent itself
directly or by implication, as an agent or in any manner assume or
create any obligation on behalf of or in the name of the other,
nor shall either be deemed the agent or employee of the other.
Phoenix shall have no authority to appoint any other dealer or
re-marketer of the LBS Software. Each party will be solely
<PAGE>
Confidential Treatment Requested
responsible for payment of all compensation, employment-related
taxes, and insurance regarding its respective personnel. Each
party shall be solely liable for any claims made by its personnel
for injuries to persons or property damage during the performance
of services hereunder. Each party agrees for the term of this
Agreement and for two years after termination not to hire, solicit
for employment or otherwise encourage any personnel or
sub-contractor of the other to leave their employment.
14.2.1 Force Majeure. Neither party shall be liable for delays in
its performance hereunder due to causes beyond its reasonable
control, including but not limited to, acts of God, acts of public
enemy, acts of government or courts of law or equity, civil war,
insurrection or riots, fires, floods, explosions, earthquakes or
other casualties, strikes or other labour troubles.
14.3 Notice. All notices given to either party, shall be by certified
mail or by regular overnight delivery service, addressed as
follows:
For Phoenix: For LBS:
Phoenix International Limited Inc London Bridge Software Limited,
500 International Parkway 16th Floor, New London
Bridge House
Heathrow 25 London Bridge Street
Florida London
32746 SE1 9SG
USA Marked for the attention of
Eric Watkins, Company Solicitor
14.4 Successors. No assignment or transfer of this Agreement or any
right or privilege granted hereunder, including any assignment by
operation of law pursuant to a merger, liquidation, foreclosure,
or involuntary sale in bankruptcy, shall be permitted of Phoenix
or shall be effective or binding on LBS without LBS's prior
written consent. Subject to the foregoing limitation, this
Agreement shall inure to the benefit of and be binding upon the
parties hereto, their successors, and assigns.
14.5 Validity of Agreement. If any provision of this Agreement shall be
held illegal, unenforceable, or in conflict with any law of a
federal, state, or local government having jurisdiction over this
Agreement, the validity of the remaining portions or provisions
hereof shall not be affected thereby.
14.6 Governing Law. This Agreement shall be construed in accordance
with and governed by the law of England and Wales and each party
agree to submit to the non-exclusive jurisdiction of the courts of
England and Wales. Headings have been included for convenience
only and shall not be used in construing any provision in this
Agreement.
14.7 Amendments in Writing. No amendment, modification, or waiver of
any provision of this Agreement shall be effective unless it is
set forth in a writing that refers to this Agreement (must include
Agreement Number) and the provisions so affected and is executed
by an authorized representative of both parties. No failure or
delay by either party in exercising any right, power, or remedy
will operate as a waiver of any such right, power, or remedy.
14.8 Expiration. This Agreement shall be valid only if executed by both
parties within thirty (30) days of first execution.
14.9 Entire Agreement. This Agreement and its attached Schedules
constitute the entire agreement between the parties regarding the
subject matter; superseding all previous communications,
representations or agreements, either written or oral, with
respect to the subject matter.
14.10 Survival. The terms of this 14 shall survive termination of this
Agreement.
15 Schedule
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Confidential Treatment Requested
15.1 The following Schedules are incorporated by reference:
Schedule A Runtime and ADE Service Description.
Schedule B Software Price list.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date below.
Phoenix: LBS:
BY:/s/ Raju M. Shivdasani BY: /s/
NAME: Raju M. Shivdasani NAME:
------------------
TITLE: President and COO TITLE:
------------------
DATE: 2/14/2000 DATE:
------------------
<PAGE>
Confidential Treatment Requested
Pricing to Phoenix
------------------
SOFTWARE PRICING:
During the term of this Agreement Phoenix may order Software from LBS in
accordance with the terms and conditions of this Agreement at a price of
****% of the retail price list as established by LBS from time to time.
MAINTENANCE PRICE LIST:
LBS's standard rate for Maintenance services is a percentage of the list
(non-discounted) price of the Software and appears at hereafter.
Maintenance fees for any Software acquired during an existing Maintenance
Period are prorated so as to be co-terminus with the then existing
Maintenance period. Maintenance for the first year for any End-User is
mandatory.
Prior to Phoenix's provision of first level support as described at clause
5.1.9 hereof LBS will provide all Maintenance Service to End-Users and LBS
shall receive **** per cent (****%) of the applicable Maintenance fees.
Once Phoenix has contracted directly with the End-User for the provision
of maintenance service and is providing first line maintenance service
direct to the End-User Phoenix may retain **** per cent (****%) of the
Maintenance fee and shall pay to LBS within thirty (30) days from the date
of commencement of the maintenance service to the End-User **** percent
(****%) of the maintenance fees which the End-User owes for the applicable
maintenance period. All maintenance fees are payable annually in advance.
The parties shall as soon as reasonably possible agree on mutually
acceptable terms and conditions, including payment terms, for the use of
the Software by Phoenix in a service bureau capacity in Phoenix's U.S.
application service centers.
**** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission
<PAGE>
Confidential Treatment Requested
Schedule A
Runtime Licensee
Standard Support
Service Description
<PAGE>
Confidential Treatment Requested
Contents
Contents...........................................................14
Vectus Runtime Licensee Standard Support Service Description.......15
Customer Support..........................................15
Incident Logging..........................................15
Excluded elements................................15
Classification of incidents......................15
Response times...................................16
Remote access.............................................16
On-site support...........................................16
Escalation................................................16
Customer responsibilities.................................17
Documentation....................................17
Co-operation.....................................17
Single point of contact..........................17
Cover Periods.............................................17
Christmas and New Year period.. .................17
New Versions, Intermediate Upgrades and Maintenance
Releases.........................................17
New Versions.....................................17
Intermediate Upgrades............................18
Maintenance Releases.............................18
Web Site..................................................18
<PAGE>
Confidential Treatment Requested
Vectus Runtime Licensee Standard Support Service Description
London Bridge Software Holdings plc (LBSH) provide Customer Support as described
in this document for the Customer's accredited users of the Vectus(R) Runtime
for the purpose of such accredited users running Vectus Applications internally
or in support of the Vectus Runtime sold to end Customers.
Support is provided for the Vectus Runtime, and not for the Vectus ADE or Vectus
Applications, which are subject to separate support arrangements. Nothing in
this document shall require LBSS to support directly or indirectly any end
Customer.
LBSH has a policy of ongoing development and reserves the right to amend this
document from time to time.
Customer Support
----------------
Customer Support is the first point of contact with LBSH to resolve any
incidents. In addition to the incident logging and resolution procedures
outlined below, Customer Support can provide general advice and guidance on
functionality. Advice and guidance offered is confined to aspects, which may
reasonably be discussed in a telephone conversation of up to 15 minutes.
Incident Logging
----------------
Incidents are logged with Customer Support explaining the incident and providing
examples. This can be done by telephone using the dedicated support line, by
e-mail, fax, post or LBSH web site. Use of the dedicated support line should be
reserved for high priority incidents, with other methods being preferable for
lower priority incidents.
Details to be reported include:
Customer contact name, company and telephone number User Name, company
and telephone number (if different from above) Version number in use
(including build and patch, where applicable)
Priority
Incident description including:
GUI (i.e. Toolbook or VB)
Case RDBMS
Operating System
Expected behaviour
Actual behaviour
Error messages displayed
User action prior to the incident
User action after experiencing the incident
Number of users experiencing the incident
Customer Support may not be able to log the incident if any of the above
information is not provided.
Excluded elements
Incidents occurring in the following situations are outside the scope of the
service:
When intermediate upgrades or maintenance releases have not been
applied
Malicious intent
Inappropriate use of Vectus
Where Vectus is integrated with third party components and those
components are changed without an appropriate Vectus change having been
implemented, for example, changing versions of the Word Processor used
Problems caused by faults in third party components, for example, hard
disks, printers or databases
Problems with or assistance on third-party components (unless specified
when ordering the Support Service)
Classification of incidents
Incidents are classified with one of the following priorities:
Section 1 Priority A
Inoperable or service so reduced as to be unusable
Time critical job stopped
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Confidential Treatment Requested
Data corruption problems that cannot be contained and could lead to a
significant loss of data with no feasible work-around
Section 2 Priority B
Important job stopped, or time-critical job at risk Important component
unusable Data corruption problems that cannot be contained Malfunction
having frequent and major impact
Section 3 Priority C
Non urgent or intermittent incident causing inconvenience
An incident which has no current impact, or for which a locally
identified cure or circumvention is available, that is passed on for
information only to ensure registration of the incident and clearance
as appropriate
Response times
Target times are in working days except where stated otherwise:
<TABLE>
<CAPTION>
- ------------------------------------------------ -------------------- --------------------- --------------------
Priority
- ------------------------------------------------ -------------------- --------------------- --------------------
Action A B C
- ------------------------------------------------ -------------------- --------------------- --------------------
<S> <C> <C> <C>
Start investigation + 15 mins + 1 hour + 2 days
- ------------------------------------------------ -------------------- --------------------- --------------------
Initial response / request for information + 1 hour + 3 hours + 3 days
- ------------------------------------------------ -------------------- --------------------- --------------------
Work around / temporary avoidance + 2 hours + 5 hours + 4 days
- ------------------------------------------------ -------------------- --------------------- --------------------
Outline plan of action + 4 hours + 8 hours + 4 days
- ------------------------------------------------ -------------------- --------------------- --------------------
Intermediate progress report / request for + 8 hours + 1 day + 6 days
further information
- ------------------------------------------------ -------------------- --------------------- --------------------
Despatch On-site Support (if req'd) + 1 days + 2 days N/A
- ------------------------------------------------ -------------------- --------------------- --------------------
Advise full solution + 2 days + 4 days + 10 days
- ------------------------------------------------ -------------------- --------------------- --------------------
Ongoing progress reports Daily Weekly Weekly
- ------------------------------------------------ -------------------- --------------------- --------------------
Provide full solution + 3 days Next Maintenance Next Intermediate
Release Upgrade
- ------------------------------------------------ -------------------- --------------------- --------------------
Follow up + 5 days N/A N/A
- ------------------------------------------------ -------------------- --------------------- --------------------
</TABLE>
Times relate to the Cover Period. For example, a Priority A incident logged at
14:30 on a Friday afternoon is due for an outline plan of action by 10:00 on the
following Monday.
Remote access
-------------
In the course of incident investigation, it may be necessary for Customer
Support to access the Customer's system directly. The Customer shall make
available a modem connection into a PC connected to the Customer's network to
allow remote access and file transfer. The communications package used for this
must be agreed with Customer Support, to ensure compatibility. The cost of the
hardware and software for the modem link is not included in the Support Service.
When access is required, Customer Support agrees this with the Customer prior to
the link being established. The link is then made available to Customer Support.
Failure to provide remote access may make it impossible for Customer Support to
achieve the above response times.
On-site support
---------------
If it becomes apparent that an incident cannot be resolved over the telephone or
by remote access, Customer Support will, where possible, provide a software
patch. If this fails to resolve the problem, or this course of action is deemed
inappropriate, then LBSH may agree to provide on-site support within Great
Britain.
Escalation
----------
At any stage during the life of an incident, enquiries may be made on the
current status of an incident. Use of the dedicated support line should be
reserved for high priority incidents, with other methods being preferable
for lower priority incidents.
If the Customer finds that an incident is more serious than originally agreed,
the incident may be escalated to the appropriate priority by agreement with
Customer Support.
<PAGE>
Confidential Treatment Requested
If an incident is not resolved within the target time scale, it is escalated to
the next highest priority, unless an extension is agreed with the Customer.
If an incident is or becomes Priority A, then the Support Services Manager is
informed to monitor progress on a daily basis.
If a Priority A incident is not resolved within the target time scale, a
LBSH Director is informed to monitor progress to final resolution.
Customer responsibilities
-------------------------
Documentation
In order that incidents are resolved as quickly as possible the Customer shall
supply accurate documentation covering:
System and configuration details including hardware specification,
basic systems and software set-up and versions
Details on modem access and security
System Change management procedures that advise Customer Support of
any proposed changes to the system such as software version changes,
hardware upgrades etc.
Co-operation
Co-operate with Customer Support by taking reasonable actions in accordance with
requests for the purpose of:
Ensuring that incidents have been caused by an error in Vectus
Reporting all such incidents to Customer Support
Extracting and supplying information, in electronic or hardcopy format,
which Customer Support require to progress incidents
Ensuring that all intermediate upgrades and maintenance releases are
applied
Informing Customer Support when corrective actions have been tested
successfully
Single point of contact
The Customer will:
Provide a single point of contact where Customer Support can progress
incidents and deliver releases
Be able to extract and supply electronically diagnostic information
which Customer Support may require in order to help resolve incidents
Own and control Customer responsibilities for incident progression
e.g. service management, modem access etc.
Be an accredited Vectus user for Runtime and Support & Administration
purposes
Cover Periods
-------------
Cover is during normal office hours:
Monday - Friday 09:00 - 17:30
Christmas and New Year period
The main LBSH office closes from Christmas Day to New Years day inclusive.
During this period, a priority service is available:
Section 4 Christmas, Boxing and New Years Day
Customer Support is closed.
Section 5 Weekdays between Boxing Day and New Years Day
Customer Support is open from 9am to 5pm when incidents may be logged.
Any Priority A incidents are progressed in line with the above response
times. All other incidents are progressed from 2nd January or the next
working day.
New Versions, Intermediate Upgrades and Maintenance Releases
-----------------------------------------------------------
New Versions
New versions are released, from time to time, at intervals of approximately 12 -
24 months. These versions are usually designated by a whole number increment in
the version number (e.g. Version 4 changes to Version 5).
From Version 3 onwards, existing Customers can upgrade to a new version for a
percentage of the then current list price of such new version, when the new
version comes under the terms of the existing Support Service. Linear upgrade
paths are provided for at least two such versions (e.g. from Version 3 to
Version 4 and from Version 4 to Version 5). Customer Support is available on the
current version and the two previous versions (e.g. Version 5, Version 4 and
Version 3).
<PAGE>
Confidential Treatment Requested
New versions contain new functionality and existing applications may require
modification to take advantage of such functionality.
Moving from Version 2 to Version 3 requires application re-engineering, which
LBSH can undertake by agreement.
Intermediate Upgrades
Intermediate upgrades are released at intervals of approximately 3 to 6 months.
These upgrades may introduce new functionality and / or fix notified problems.
Such upgrades are designated by incrementing the decimal number (e.g. from
Version 4.1 to Version 4.2). Upgrade paths are supplied for each intermediate
release, although existing applications may need modification to take advantage
of new functionality.
Provision of intermediate upgrades is included in the Standard Support Service.
Maintenance Releases
Maintenance releases are designated by incrementing the second decimal in the
version number (e.g. from Version 4.1.2 to Version 4.1.3). Maintenance releases
are made outside the normal release programme to correct any notified faults.
Provision of maintenance releases is included in the Standard Support Service.
New releases are supplied by Customer Support, who assume control of such
releases, including agreeing how and when they are delivered. Such releases are
delivered, together with appropriate release documentation, on magnetic medium
or by modem.
Release documentation includes, inter alia, the following: Changes and / or
fixes in this release Any changes to the environment required
Installation instructions Known bug list
Subsequent releases assume that all previous releases have been correctly
installed.
Web Site
--------
The release schedule, the planned contents of the next release and a list of
known faults are held the Vectus web site, which can also be used for logging
incidents. Fixes for Priority A faults are also made available via the web site.
Access is granted to the nominated contact by means of Passwords issued by
Customer Support.
<PAGE>
Confidential Treatment Requested
GRAHIC OMITTED
ADE Licensee
Standard Support
Service Description
<PAGE>
Confidential Treatment Requested
Contents
Contents................................................................20
Vectus ADE Licensee Standard Support Service Description................21
Customer Support...............................................21
Incident Logging...............................................21
Excluded elements.....................................21
Classification of incidents...........................21
Response times........................................22
Remote access..................................................22
On-site support................................................22
Escalation.....................................................22
Customer responsibilities......................................23
Documentation.........................................23
Co-operation..........................................23
Single point of contact...............................23
Cover Periods..................................................23
Christmas and New Year period.........................23
New Versions, Intermediate Upgrades and Maintenance Releases...23
New Versions..........................................23
Intermediate Upgrades.................................24
Maintenance Releases..................................24
Web Site.......................................................24
<PAGE>
Confidential Treatment Requested
Vectus ADE Licensee Standard Support Service Description
London Bridge Software Holdings (LBSH) provide Customer Support as described in
this document for the Customer's accredited users of the Vectus(R) Application
Development Environment (ADE) for the purpose of such accredited users
developing Vectus Applications for internal use or Applications for onward sale
to end Customers.
Support is provided for the Vectus ADE, and not for the Vectus Runtime or for
Vectus Applications developed under it which are subject to separate support
arrangements. Nothing in this document shall require LBSH to support directly or
indirectly any end Customer.
LBSH has a policy of ongoing development and reserves the right to amend this
document from time to time.
Customer Support
----------------
Customer Support is the first point of contact with LBSH to resolve any
incidents. In addition to the incident logging and resolution procedures
outlined below, Customer Support can provide general advice and guidance on
functionality. Advice and guidance offered is confined to aspects that may
reasonably be discussed in a telephone conversation of up to 15 minutes.
Incident Logging
----------------
Incidents are logged with Customer Support explaining the incident and providing
examples. This can be done by telephone using the dedicated support line, by
e-mail, fax, post or LBSH web site. Use of the dedicated support line should be
reserved for high priority incidents, with other methods being preferable for
lower priority incidents.
Details to be reported include:
Customer contact name, company and telephone number User name, company
and telephone number (where different from above) Version number in use
(including build and patch, where applicable) Priority Incident
description including:
GUI (i.e. Toolbook or VB)
Case RDBMS
Operating System
Flow components necessary to reproduce the incident
(e.g. Function, In Tray)
Expected behaviour
Actual behaviour
Error messages displayed
Customer Support may not be able to log the incident if any of the above
information is not provided.
Excluded elements
Incidents occurring in the following situations are outside the scope of the
service: When intermediate upgrades or maintenance releases have not
been applied
Malicious intent
Inappropriate use of Vectus
Where Vectus is integrated with third party components and those
components are changed without an appropriate Vectus change having been
implemented, for example, changing versions of the Word Processor used
Problems caused by faults in third party components, for example, hard
disks, printers or databases
Problems with or assistance on third-party components (unless specified
when ordering the Support Service)
Classification of incidents
Incidents are classified with one of the following priorities:
Section 6 Priority A
Inoperable, or so reduced as to be unusable, and an important, time
critical project stopped
Data corruption problems that cannot be contained and could lead to
a significant loss of data with no feasible work-around
Section 7 Priority B
Important or time critical project at risk
Important component unusable
Data corruption problems that cannot be contained
<PAGE>
Confidential Treatment Requested
Malfunction having frequent and major impact
Section 8 Priority C
Non urgent or intermittent incident causing inconvenience
An incident which has no current impact, or for which a locally
identified cure or circumvention is available, that is passed on for
information only to ensure registration of the incident and clearance
as appropriate
Response times
<TABLE>
<CAPTION>
Target times are in working days except where stated otherwise:
Priority
- ------------------------------------------------ -------------------- --------------------- --------------------
<S> <C> <C> <C>
Action A B C
- ------------------------------------------------ -------------------- --------------------- --------------------
Start investigation + 30 mins + 3 hours + 2 days
- ------------------------------------------------ -------------------- --------------------- --------------------
Initial response / request for information + 1 hours + 6 hours + 3 days
- ------------------------------------------------ -------------------- --------------------- --------------------
Work around / temporary avoidance + 4 hours + 1 day + 4 days
- ------------------------------------------------ -------------------- --------------------- --------------------
Outline plan of action + 6 hours + 1 day + 4 days
- ------------------------------------------------ -------------------- --------------------- --------------------
Involve Technical Support (if req'd) + 7 hours + 2 days + 5 days
- ------------------------------------------------ -------------------- --------------------- --------------------
Intermediate progress report / request for + 1 day + 3 days + 6 days
further information
- ------------------------------------------------ -------------------- --------------------- --------------------
Despatch On-site Support (if req'd) + 2 days + 4 days N/A
- ------------------------------------------------ -------------------- --------------------- --------------------
Advise full solution + 3 days + 6 days + 10 days
- ------------------------------------------------ -------------------- --------------------- --------------------
Ongoing progress reports Daily Weekly Weekly
- ------------------------------------------------ -------------------- --------------------- --------------------
Provide full solution + 5 days Next Maintenance Next Intermediate
Release Upgrade
- ------------------------------------------------ -------------------- --------------------- --------------------
Follow up + 7 days N/A N/A
- ------------------------------------------------ -------------------- --------------------- --------------------
</TABLE>
Times relate to the Cover Period. For example, a Priority A incident logged at
14:30 on a Friday afternoon is due for an outline plan of action by 10:00 on the
following Monday.
Remote access
-------------
In the course of incident investigation, it may be necessary for Customer
Support to access the Customer's system directly. The Customer shall make
available a modem connection into a PC connected to the Customer's network to
allow remote access and file transfer. The communications package used for this
must be agreed with Customer Support, to ensure compatibility. The cost of the
hardware and software for the modem link is not included in the Support Service.
When access is required, Customer Support agrees this with the Customer prior to
the link being established. The link is then made available to Customer Support.
Failure to provide remote access may make it impossible for Customer Support to
achieve the above response times.
On-site support
----------------
If it becomes apparent that an incident cannot be resolved over the
telephone or by remote access, Customer Support will, where appropriate,
provide a software patch. If this fails to resolve the problem, or this
course of action is deemed inappropriate, then LBSH may agree to provide
on-site support within Great Britain.
Escalation
----------
At any stage during the life of an incident, inquiries may be made on the
current status of an incident. Use of the dedicated support line should be
reserved for high priority incidents, with other methods being preferable
for lower priority incidents.
If the Customer finds that an incident is more serious than originally agreed,
the incident may be escalated to the appropriate priority by agreement with
Customer Support.
If an incident is not resolved within the target time scale, it is escalated to
the next highest priority, unless an extension is agreed with the Customer.
<PAGE>
Confidential Treatment Requested
If an incident is or becomes Priority A, then the Support Services Manager is
informed to monitor progress on a daily basis.
If a Priority A incident is not resolved within the target time scale, a
LBSH Director is informed to monitor progress to final resolution.
Customer responsibilities
-------------------------
Documentation
In order that incidents are resolved as quickly as possible the Customer shall
supply accurate and up to date documentation covering:
System and configuration details including hardware specification,
basic systems and software set-up and versions
Details on modem access and security
System Change management procedures that advise Customer
Support of any proposed changes to the system such as software version
changes, hardware upgrades etc.
Co-operation
Co-operate with Customer Support by taking reasonable actions in accordance with
requests for the purpose of:
Ensuring that incidents have been caused by an error in Vectus
Reporting all such incidents to Customer Support
Extracting and supplying information, in electronic or hardcopy format,
which Customer Support require to progress incidents
Ensuring that all intermediate upgrades and maintenance releases are
applied
Informing Customer Support when corrective actions have been tested
successfully
Single point of contact
The Customer will:
Provide a single point of contact where Customer Support can progress
incidents and deliver releases
Be able to extract and supply electronically diagnostic information
which Customer Support may require in order to help resolve incidents
Own and control Customer responsibilities for incident progression
e.g. service management, modem access etc.
Be an accredited Vectus user for Application Development and Support &
Administration purposes
Cover Periods
- --------------
Cover is during normal office hours:
Monday - Friday 09:00 - 17:00
Christmas and New Year period
The main LBSH office closes from Christmas Day to New Years day inclusive.
During this period, a priority service is available:
Section 9
Christmas, Boxing and New Years Day
Customer Support is closed.
Section 10
Weekdays between Boxing Day and New Years Day
Customer Support is open from 9am to 5pm when incidents may be logged.
Any Priority A incidents are progressed in line with the above response
times. All other incidents are progressed from 2nd January or the next
working weekday.
New Versions, Intermediate Upgrades and Maintenance Releases
------------------------------------------------------------
New Versions
New versions are released, from time to time, at intervals of approximately 12 -
24 months. These versions are usually designated by a whole number increment in
the version number (e.g. Version 4 changes to Version 5).
From Version 3 onwards, existing Customers can upgrade to a new version for a
percentage of the then current list price of such new version, when the new
version comes under the terms of the existing Support Service. Linear upgrade
paths are provided for at least two such versions (e.g. from Version 3 to
Version 4 and from Version 4 to Version 5). Customer Support is available on the
current version and the two previous versions (e.g. Version 5, Version 4 and
Version 3).
New versions contain new functionality and existing applications may require
modification to take advantage of such functionality.
Moving from Version 2 to Version 3 requires application re-engineering, which
LBSH can undertake by agreement.
<PAGE>
Confidential Treatment Requested
Intermediate Upgrades
Intermediate upgrades are released at intervals of approximately 3 to 6 months.
These upgrades may introduce new functionality and / or fix notified problems.
Such upgrades are designated by incrementing the decimal number (e.g. from
Version 4.1 to Version 4.2). Upgrade paths are supplied for each intermediate
release, although existing applications may need modification to take advantage
of new functionality.
Provision of intermediate upgrades is included in the Standard Support Service.
Maintenance Releases
Maintenance releases are designated by incrementing the second decimal in the
version number (e.g. from Version 4.1.2 to Version 4.1.3). Maintenance releases
are made outside the normal release programme to correct notified faults.
Provision of maintenance releases is included in the Standard Support Service.
New releases are supplied by Customer Support, who assume control of such
releases, including agreeing how and when they are delivered. Such releases are
delivered, together with appropriate release documentation, on magnetic medium
or by modem.
Release documentation includes, inter alia, the following: Changes and / or
fixes included in this release Any changes to the environment required
Installation instructions Known bug list
Subsequent releases assume that all previous releases have been correctly
installed.
Web Site
--------
The release schedule, the planned contents of the next release and a list of
known faults are held on the Vectus web site, which can also be used for logging
incidents. Fixes for Priority A faults are also made available via the web site.
Access is granted to the nominated contact by means of Passwords issued by
Customer Support.
<PAGE>
Confidential Treatment Requested
Schedule B
The structure of this price list is now fixed, unless someone comes up with a
show-stopping reason why it cannot work. However, the amounts could be subject
to change if people have experience/knowledge which means they should be
changed. This is particularly true in the areas of "Modules based on Web access"
and "Developers" licenses.
Vectus Engine
Single App Additional Apps Full-Use
First 20 users $ **** $ **** $ **** ****%
20 - 100 users $ **** $ **** $ **** ****%
101 - 200 users $ **** $ **** $ **** ****%
200 + $ **** $ **** $ **** ****%
In order to get value based pricing on the engine we need to take into account
"case" volumes.
if they buy 20 usersthat allows them to process 400,000 cases/annum :-
50 users 1,000,000
100 users 2,000,000
200 users 4,000,000
If they need to process more than their number of users allows they can be
licensed to process additional case volume, in blocks of 100,000 cases, at the
following rates:-
between 400k and 1,000,000 $ **** per 100,000 cases
between 1,000,000 and 4,000,000 $ ****
beyond 4,000,000 $ ****
This gives them a license to use the Vectus engine for a number of named users
and to process a number of cases for one or more applications, with desktop
access. Also included is a license to use:-
C-API interface
Corba interface
Com interface
VB run-time interface
**** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission
<PAGE>
Confidential Treatment Requested
Web access for Vectus Engine
Where people want web access to the engine we will charge a one-off fee of
$**** plus an additional $**** per processor for each processor accessing
the engine
Batch access for Vectus Engine
Where people want access to the engine we will charge a one-off fee of ****
for the Vectus Batch Service Manager
**** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission
<PAGE>
Confidential Treatment Requested
Modules based on Engine license
The following modules will be priced at the same user level as the engine. So,
for instance, if the engine is licensed for the equivalent of 100 users these
modules will be charged at 100 users :
20 21-100 101-200 201+
Database-Link (first database) $**** $**** $**** $ ****
Database-Link (subsequent d/b's) $**** $**** $**** $ ****
CTI-Link (first) $**** $**** $**** $ ****
CTI-Link (subsequent) $**** $**** $**** $ ****
Image-Link (first) $**** $**** $**** $ ****
Image-Link (subsequent) $**** $**** $**** $ ****
Bureaux-Link (first bureau) $**** $**** $**** $ ****
Bureaux-Link (subsequent bureau) $**** $**** $**** $ ****
where additional case volume has been licensed for the engine an additional
charge will be added of $**** per 100,000 cases.
Decision Master $**** $**** $**** $ ****
where additional case volume has been licensed for the engine an additional
charge will added of $ per 100,000 cases
Outlook plug-in run-time interface $**** $**** $**** $ ****
Modules based on Web access license
The following modules will be priced at the same level as the web access
license. So, for instance, if the engine is licensed for three processors these
modules will be charged at the same level:-
**** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission
<PAGE>
Confidential Treatment Requested
1st proc 2-9 procs 10+
Java Interface $**** $**** $****
Vectus ASP/HTML Interface $**** $**** $****
Vectus-X $**** $**** $****
Vectus Applets $**** $**** $****
Vectus Call Centre $**** $**** $****
**** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission
<PAGE>
Confidential Treatment Requested
Developers Licenses
ADE $**** 16 user license
$**** 4 user license
Vectus X $**** per developer
Vectus Applets $**** per developer
Vectus ASP/HTML $**** per developer
Bureaux-Link $**** per developer
CTI-Link $**** per developer
Image-Link $**** per developer
Decision Master $**** per developer
Functions pack $*** per developer
[No support offered on this product]
Rains
QAS
GB
Bank Wizard
**** Omitted pursuant to a request for confidential treatment and filed
separately with the Commission
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FROM FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 2000 (FOR SEC USE
ONLY) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001013687
<NAME> Phoenix International Ltd., Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 5,229,593
<SECURITIES> 6,591,027
<RECEIVABLES> 12,786,275
<ALLOWANCES> (842,767)
<INVENTORY> 0
<CURRENT-ASSETS> 17,961,255
<PP&E> 7,744,380
<DEPRECIATION> (4,372,801)
<TOTAL-ASSETS> 46,240,958
<CURRENT-LIABILITIES> 9,974,520
<BONDS> 0
0
0
<COMMON> 94,102
<OTHER-SE> 35,815,501
<TOTAL-LIABILITY-AND-EQUITY> 46,240,958
<SALES> 0
<TOTAL-REVENUES> 5,812,520
<CGS> 0
<TOTAL-COSTS> 9,030,684
<OTHER-EXPENSES> 202,779
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (9,702)
<INCOME-PRETAX> (3,025,087)
<INCOME-TAX> 12,772
<INCOME-CONTINUING> (3,037,860)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,037,860)
<EPS-BASIC> (0.34)
<EPS-DILUTED> (0.34)
</TABLE>
