<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X Quarterly Report pursuant to Section 13 or 15 (d) of the Securities
- ------- Exchange Act of 1934 for the quarterly period ended June 30, 1996.
or
Transition Report pursuant to Section 13 or 15 (d) of the Securities
- ------- Exchange Act of 1934 for the transition period
from to .
----------------------- -----------------------
Commission file number 0-27056
Healthdyne Information Enterprises, Inc.
----------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-2112366
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1850 Parkway Place, Suite 1100, Marietta, Georgia 30067
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(Address of principal executive offices) (Zip Code)
(770) 423-8450
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(Registrant's telephone number, including area code)
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
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The number of shares outstanding of the issuer's only class of Common Stock,
$.01 par value, as of July 31, 1996 was 17,274,669.
Exhibit Index is on Page 18 herein.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Healthdyne Information Enterprises, Inc. and Subsidiaries
Consolidated Condensed Balance Sheets
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
6/30/96 12/31/95
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ASSETS (Unaudited)
<S> <C> <C>
Cash and cash equivalents $2,812 $4,013
Trade accounts receivable, less an allowance of $68 at
June 30, 1996 and $85 at December 31, 1995 4,158 2,966
Other current assets, net 601 1,020
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Total current assets 7,571 7,999
Purchased software, net of accumulated amortization of
$378 and $150 at June 30, 1996 and
December 31, 1995, respectively 3,120 2,494
Capitalized software development costs, net of
accumulated amortization of $11 at June 30, 1996 434 --
Property and equipment, net of accumulated depreciation
of $317 and $354 at June 30, 1996 and
December 31, 1995, respectively 1,226 1,136
Excess of cost over net assets of businesses acquired, less
accumulated amortization of $1,104 and $758 at
June 30, 1996 and December 31, 1995, respectively 9,369 9,614
Other assets 448 491
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Total assets $22,168 $21,734
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current installments of long-term debt and obligations under
capital leases $1,734 $2,652
Accounts payable 793 547
Accrued liabilities 750 760
Deferred service revenue 1,796 1,297
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Total current liabilities 5,073 5,256
Long-term debt and obligations under capital leases,
excluding current installments 5,306 5,382
Other long-term obligations 167 167
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Total liabilities 10,546 10,805
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Shareholders' equity:
Series A cumulative preferred stock, without par value.
Authorized 20,000 shares; designated 500 shares;
issued none -- --
Common stock, $.01 par value. Authorized 50,000 shares;
issued and outstanding 17,186 and 16,503 shares at
June 30, 1996 and December 31, 1995, respectively 172 165
Additional paid-in capital 22,332 22,012
Accumulated deficit (10,882) (11,248)
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Total shareholders' equity 11,622 10,929
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Total liabilities and shareholders' equity $22,168 $21,734
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</TABLE>
See accompanying notes to consolidated condensed financial statements.
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Healthdyne Information Enterprises, Inc. and Subsidiaries
Consolidated Condensed Statements of Operations
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- --------------------
1996 1995 1996 1995
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenue:
Software $1,434 $1,128 $3,152 $2,146
Services 2,303 756 4,115 1,607
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Total revenue 3,737 1,884 7,267 3,753
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Cost of revenue:
Software 76 43 312 151
Services 1,216 501 2,223 793
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Total cost of revenue 1,292 544 2,535 944
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Gross profit 2,445 1,340 4,732 2,809
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Operating expenses:
Sales and marketing 868 901 1,681 1,478
Research and development 282 436 605 828
General and administrative 917 882 1,845 1,814
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Total operating expenses 2,067 2,219 4,131 4,120
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Operating earnings (loss) 378 (879) 601 (1,311)
Losses of affiliate -- (255) -- (468)
Minority interest -- 79 -- 20
Interest expense, net (122) (52) (235) (85)
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Earnings (loss) before taxes 256 (1,107) 366 (1,844)
Income tax (expense) benefit -- 25 -- (45)
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Net earnings (loss) $256 $(1,082) $366 $(1,889)
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Earnings (loss) per common share
and common share equivalent:
Primary $0.01 $(0.07) $0.02 $(0.12)
Fully diluted $0.01 $(0.07) $0.02 $(0.12)
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Weighted average number of common
shares and common share equivalents:
Primary 18,903 15,500 18,689 15,500
Fully diluted 18,903 15,500 18,689 15,500
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</TABLE>
See accompanying notes to consolidated condensed financial statements.
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Healthdyne Information Enterprises, Inc. and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
1996 1995
-------- --------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $366 $(1,889)
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Losses of affiliate -- 468
Minority interest in net loss of subsidiary -- (20)
Depreciation and amortization 728 432
Increase in trade accounts receivable (1,225) (735)
(Increase) decrease in other current assets 222 (300)
Increase (decrease) in current liabilities other than
current installments of long-term debt and
capital lease obligations 867 (234)
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Net cash provided by (used in) operating activities 958 (2,278)
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Cash flows from investing activities:
Purchased software (854) (507)
Capitalized internally developed software (445) --
Capital expenditures (159) (406)
Acquisition of business, net of cash acquired -- (565)
(Increase) decrease in other noncurrent assets, net 172 (225)
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Net cash used in investing activities (1,286) (1,703)
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Cash flows before financing activities (328) (3,981)
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Cash flows from financing activities:
Principal payments of long-term debt (1,200) (44)
Proceeds from the issuance of common stock 327 --
Proceeds from capital contributions -- 5,342
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Net cash provided by (used in) financing activities (873) 5,298
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Net increase (decrease) in cash (1,201) 1,317
Cash at the beginning of the period 4,013 41
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Cash at the end of the period $2,812 $1,358
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</TABLE>
See accompanying notes to consolidated condensed financial statements.
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Healthdyne Information Enterprises, Inc. and Subsidiaries
Notes to Consolidated Condensed Financial Statements
(Unaudited)
1. General:
The consolidated condensed financial statements as of June 30, 1996 and for the
three and six months ended June 30, 1996 and 1995 are unaudited. In the
opinion of management, all adjustments, consisting of normal recurring
accruals, necessary for the fair presentation of the consolidated financial
position and results of operations and cash flows for the periods presented
have been included. Results for the interim periods are not necessarily
indicative of results that may be expected for the full year.
These consolidated condensed financial statements should be read in conjunction
with the consolidated financial statements and notes included in the Annual
Report on Form 10-K of Healthdyne Information Enterprises, Inc. ("HIE" or
the "Company") for the year ended December 31, 1995.
2. Major Customers:
One customer accounted for 22% and 23% of the Company's revenue for the three
and six-month periods ended June 30, 1996, respectively. In addition, one
distributor provided customers to the Company that accounted for approximately
12% and 11% of the Company's revenue for the three and six-month periods ended
June 30, 1996.
3. Earnings (Loss) Per Share of Common Stock:
Earnings per share of common stock for the three and six-month periods ended
June 30, 1996 are based on the weighted average shares of common stock
outstanding and dilutive outstanding stock options computed using the treasury
stock method for primary and fully diluted calculation purposes. Loss per
share for both primary and fully diluted calculation purposes is based on the
weighted average shares of common stock outstanding without regard to the
antidilutive effect of outstanding stock options.
4. Investment in affiliate:
On June 12, 1996, HIE and a former majority-owned subsidiary, DataView Imaging
International, Inc. ("DataView"), entered into an agreement (the "Agreement")
providing for a restructuring of the relationship between the parties effective
as of April 1, 1996. The Agreement provides, among other things, for (i) a
modification of the existing funding agreement between the parties to limit the
Company's lending commitment to DataView to a maximum of $2,042,000 (the
balance due under such funding agreement as of March 31, 1996); (ii) the
repayment by DataView of certain advances totaling at least $93,000 made by HIE
subsequent to December 31, 1995; (iii) a reduction in HIE's equity interest in
DataView from 61.5% to 19.5% through a stock repurchase by DataView financed by
HIE; (iv) certain rights for HIE to use DataView's clinical image management
technology in HIE's service business, as well as non-exclusive product
distribution rights; and (v) a
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reduction in HIE's representation on the DataView Board of Directors and a
termination of HIE's executive management responsibilities with respect to
DataView.
5. Subsequent Event:
The Company and Massey Burch Capital Corp. ("Massey Burch") currently each hold
less than 1% of the common stock of an HIE affiliate Criterion Health
Strategies, Inc. ("CHS") and an 8% convertible debenture which is convertible
into 32% of the CHS common stock on a fully diluted basis. On July 30, 1996,
the Company and Massey Burch entered into an agreement in principle which
contemplates the purchase by the Company of an option to acquire Massey Burch's
investment in CHS. The option as currently proposed would be exercisable at
any time during the period from December 31, 1996 through June 30, 1997, with
the option exercise price to be payable through the issuance of the greater of
416,666 shares of the Company's Common Stock or the equivalent number of shares
having a fair market value of $2 million at the time the option is exercised.
The agreement in principle contemplates that, as consideration for the grant of
this option, the Company will issue to Massey Burch a warrant to purchase
50,000 shares of the Company's common stock at fair market value as of the date
of grant. The agreement further contemplates that Massey Burch will be granted
registration rights with respect to both the shares of common stock underlying
the warrant and the shares issuable upon the Company's exercise of the proposed
option. Massey Burch will continue to be subject to its commitment to fund CHS
up to a maximum of $2 million of which Massey Burch has funded $1.1 million as
of July 31, 1996. The transactions contemplated by the agreement in principle
are subject to negotiation and execution of definitive agreements and other
customary conditions. There can be no assurance that definitive agreements
will be entered into or, even if entered into, that the transaction will be
consummated as described above or that the Company would exercise an option to
acquire Massey Burch's interest in CHS.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
Healthdyne Information Enterprises, Inc. ("HIE" or the "Company") was
incorporated in Georgia on June 15, 1994 and was a wholly-owned subsidiary of
Healthdyne, Inc. (the "Former Parent") until November 6, 1995 at which time the
Former Parent distributed all of the outstanding shares of HIE to the Former
Parent's shareholders (the "Spin-Off"). HIE's common stock is publicly traded
on the NASDAQ SmallCap Market under the HDIE trading symbol. In conjunction
with its subsidiaries Healthcare Communications, Inc. ("HCI") and Integrated
Healthcare Solutions, Inc. ("IHS") and its affiliate Criterion Health
Strategies, Inc. ("CHS"), the Company is a leading provider of enterprise-wide
clinical information management solutions for emerging integrated healthcare
delivery networks ("IDNs"). Each subsidiary and the affiliate are referred to
by the Company as an Entrepreneurial Business Unit ("EBU").
The Company generates revenue from licensing clinical information
software tools and products and providing related system design, integration,
implementation, support, education and consulting services as shown below.
HCI. HCI presently contributes the majority of HIE's revenue through
Cloverleaf TM integration engine software license fees and related
implementation, maintenance and education fees. Software licenses are granted
on a perpetual basis for a one-time, upfront fee. Implementation fees are
based on actual hours of implementation service at standard hourly rates.
Software maintenance agreements are generally one-year renewable service
contracts for a prepaid standard fee. HCI charges a standard per-student
amount for its education classes.
IHS. IHS' revenue contribution to HIE has rapidly increased since its
formation in early 1995. IHS provides clinical and other information solutions
through the use of both proprietary and third-party software tools and by
providing related system design, integration and consulting services. Software
licenses and sublicenses are generally granted on a perpetual basis for a
one-time, upfront fee. Services are generally provided for a fixed fee based
on estimated hours of service to be provided at standard hourly rates.
CHS. CHS provides enterprise management and other decision support
products through the use of both proprietary and third-party software tools.
The Company does not currently consolidate the operating results of CHS.
However, on July 30, 1996, the Company entered into an agreement in principle
with Massey Burch Capital Corp. ("Massey Burch") which enables the Company to
acquire a majority interest in CHS. See Note 5 of Notes to Consolidated
Condensed Financial Statements included in Item 1 herein.
On June 12, 1996, the Company entered into an agreement effective
April 1, 1996, with a former majority-owned subsidiary DataView Imaging
International, Inc. ("DataView") providing for a restructuring of the
relationship between HIE and DataView as discussed in
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Note 4 of Notes to Consolidated Condensed Financial Statements included in Item
1 herein. Subsequent to March 31, 1996, DataView's financial position, results
of operations and cash flows are no longer included in HIE's consolidated
financial statements.
The Company expects the following external factors to affect the
market for healthcare information systems tools, products and services in
future years: (1) the continued and accelerated emergence of IDNs; (2) the
shift from the traditional fee-for-service reimbursement system to the
capitated (fixed fee) payment system for healthcare services; (3) the growing
importance of comprehensive clinical information in the managed patient care
environment; (4) the introduction of cost accounting to the healthcare delivery
system; and (5) the growing world-wide need to control the cost of quality
healthcare.
Software revenue is generally recognized upon shipment in accordance
with Statement of Position 91-1, "Software Revenue Recognition". Service
revenue is recognized as the work is performed or, in the case of a fixed fee
contract, on the percentage of completion basis, even though some services are
prepaid.
The Company's consolidated balance sheets include assets designated
purchased software and capitalized software development costs. Purchased
software originates from purchases by HIE of proprietary software tools
developed by third parties and prepaid license fees for software tools to be
distributed by HIE on a non-exclusive basis. Certain costs of HIE proprietary
software developed internally are capitalized in accordance with generally
accepted accounting principles. The costs of individual software tools or
products are being amortized ratably based on the projected revenue associated
with the related software or on a straight-line basis over five years,
whichever method results in a higher level of amortization.
The excess of cost over net assets of acquired businesses (goodwill)
is being amortized over a period of fifteen years. At each balance sheet date,
the Company assesses the recoverability of this intangible asset by determining
whether the amortization of the goodwill balance over its remaining life can be
recovered through undiscounted future operating cash flows of the acquired
operation. The amount of goodwill impairment, if any, is measured based on
projected discounted future operating cash flows using a discount rate
reflecting the Company's average cost of funds.
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Results of Operations
The following table sets forth for the periods indicated: (1) the relative
significance of each EBU to the Company as a whole and (2) the percentage of
total revenue for each component included in the Company's Consolidated
Condensed Statements of Operations:
<TABLE>
<CAPTION>
Percent of Revenue (unless otherwise indicated)
--------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------- ------------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total revenue (000's omitted) $3,737 $1,884 $7,267 $3,753
--------------------------------------------------------------------
HCI 57% 81% 56% 84%
IHS 43 12 42 7
DataView -- 7 2 9
--------------------------------------------------------------------
Total revenue 100% 100% 100% 100%
--------------------------------------------------------------------
Revenue:
Software 38% 60% 43% 57%
Services 62 40 57 43
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Total revenue 100 100 100 100
--------------------------------------------------------------------
Cost of revenue:
Software 5 4 10 7
Services 53 66 54 49
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Total cost of revenue 35 29 35 25
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Gross profit 65 71 65 75
--------------------------------------------------------------------
Operating expenses:
Sales and marketing 23 48 23 40
Research and development 8 23 9 22
General and administrative 24 47 25 48
--------------------------------------------------------------------
Total operating expenses 55 118 57 110
--------------------------------------------------------------------
Operating earnings (loss) 10 (47) 8 (35)
Losses of affiliate -- (13) -- (13)
Minority interest -- 4 -- 1
Interest expense, net (3) (2) (3) (2)
--------------------------------------------------------------------
Earnings (loss) before taxes 7 (58) 5 (49)
Income tax (expense) benefit -- 1 -- (1)
--------------------------------------------------------------------
Net earnings (loss) 7% (57)% 5% (50)%
-------------------------------------------------------------------
</TABLE>
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Comparison of Three Months Ended June 30, 1996 and June 30, 1995
Revenue. Total revenue was $3.7 million for the three months ended
June 30, 1996 compared to $1.9 million for the three months ended June 30,
1995, an increase of 98% even though DataView's revenue is no longer included
in the Company's consolidated revenue effective April 1, 1996 as discussed
above. During the second quarter of 1995, 81% of the Company's revenue was
attributable to software license fees for the integration engine software tool
and related services as compared to 57% for the second quarter of 1996. The
Company completed development of or acquired and began marketing additional
software tools, acquired distribution rights to other software tools and
expanded the system design and integration services capability of IHS during
1995. While revenue from integration engine license fees and related services
increased, the general availability of these new software tools and the growth
of IHS to meet the demand by IDNs for clinical information solutions are
primarily responsible for the Company's increased revenue.
Cost of revenue. Cost of revenue includes, among other things,
compensation of service personnel, travel and software royalties and
amortization. The cost of revenue was $1.3 million for the three months ended
June 30, 1996 compared to $544,000 for the three months ended June 30, 1995, an
increase of 138%. The increase in cost of revenue from 29% of revenue to 35%
of revenue between the second quarter of 1995 and the second quarter of 1996 is
primarily due to the shift in revenue mix toward service, which typically has a
higher cost of revenue than software. This increase was somewhat offset by the
improved productivity of the IHS service organization.
Gross profit. The Company's gross profit was $2.4 million for the
three months ended June 30, 1996 compared to $1.3 million for the three months
ended June 30, 1995, an increase of 82%, but gross profit as a percent of
revenue decreased from 71% for the second quarter of 1995 to 65% for the second
quarter of 1996. The revenue mix shifted from 60% software and 40% services
for the second quarter of 1995 to 38% software and 62% services for the second
quarter of 1996. The main reason for the shift was the increase in system
design and integration services provided by IHS. While software revenue, which
has relatively high gross profit margins, increased from $1.1 million for the
three months ended June 30, 1995 to $1.4 million for the three months ended
June 30, 1996, a 27% increase, services revenue, which normally has lower gross
profit margins than software, increased from $756,000 for the three months
ended June 30, 1995 to $2.3 million for the three months ended June 30, 1996,
an increase of 205%. The Company expects its revenue mix to approximate 50%
software and 50% services in the foreseeable future.
Sales and marketing. Sales and marketing expense includes, among
other things, compensation of sales and marketing personnel, sales commissions,
travel and advertising. Sales and marketing expense was $868,000 for the three
months ended June 30, 1996 compared to $901,000 for the three months ended June
30, 1995, a decrease of 4%, due primarily to the exclusion of DataView from the
Company's consolidated operating results for the second quarter of 1996 as
discussed above. Sales and marketing expense as a percent of revenue decreased
from 48% for the second
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quarter of 1995 to 23% for the second quarter of 1996, reflecting the increased
productivity of the Company's internal sales force and its distributors.
Research and development. Research and development expense includes,
among other things, compensation of research and development personnel,
depreciation and lease expense of research and development equipment and
travel. Research and development expense was $282,000 for the three months
ended June 30, 1996 compared to $436,000 for the three months ended June 30,
1995, a decrease of 35%, due primarily to the capitalization of internally
developed software costs totaling $231,000 in the second quarter of 1996 and
secondarily to the exclusion of DataView from the Company's consolidated
operating results for the second quarter of 1996 as discussed above. No such
costs qualified for capitalization under generally accepted accounting
principles in the second quarter of 1995.
General and administrative. General and administrative expense
includes, among other things, compensation of finance, accounting and
administrative personnel, goodwill amortization, office rent and insurance.
General and administrative expense was $917,000 for the three months ended June
30, 1996 compared to $882,000 for the three months ended June 30, 1995, an
increase of 4%, due primarily to the net effect of (1) increased goodwill
amortization related primarily to the step acquisition of HCI during 1995; (2)
identifiable expenses of being a new public company; (3) increased IHS
administrative staffing costs to support IHS' current and projected growth; (4)
decreased staffing, outside service expense and other administrative costs at
HCI resulting from cost control measures initiated during the fourth quarter of
1995 and the first quarter of 1996; and (5) the exclusion of DataView from the
Company's consolidated operating results for the second quarter of 1996 as
discussed above.
Losses of affiliate. Losses of affiliate, which resulted from the
Company's commitment to fund CHS, totaled $255,000 in the second quarter of
1995. The December 1995 transaction with Massey Burch which provided for a
sharing of the Company's funding commitment to CHS had the additional result of
relieving the Company of the requirement to report a loss from CHS during 1996.
Minority interest. The minority interest in net loss of subsidiary
totaling $79,000 in the second quarter of 1995 related to HCI, and such
minority interest is no longer applicable as a result of HIE's increased
ownership interest in HCI to 100% effective December 31, 1995. HIE acquired
100% ownership interest in HCI through a three-step acquisition of a 44%
interest in October 1994, an additional 13% interest in May 1995 and the
remaining 43% interest effective December 31, 1995.
Interest expense, net. Net interest expense was $122,000 for the
three months ended June 30, 1996 compared to $52,000 for the three months ended
June 30, 1995, an increase of 135%, due primarily to the net effect of (1)
increased interest associated with financing the increased HCI ownership
interest referred to above; (2) increased interest expense related to
additional HCI debt incurred to finance a prepaid exclusive reseller's license
for screen scraping technology during May 1995 and (3) reduced HCI interest
expense under a financing agreement renegotiated at a lower interest rate
effective January 1, 1996.
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Income tax (expense) benefit. The Company has no provision for income
taxes for the three months ended June 30, 1996 due to the utilization of
available net operating loss carryforward benefits. The income tax benefit of
$25,000 for the three months ended June 30, 1995 relates to HCI, which filed a
separate income tax return prior to HIE increasing its ownership interest in
HCI to 100% effective December 31, 1995.
Comparison of Six Months Ended June 30, 1996 and June 30, 1995
Revenue. Total revenue was $7.3 million for the six months ended June
30, 1996 compared to $3.8 million for the six months ended June 30, 1995, an
increase of 94% even though DataView's revenue is no longer included in the
Company's consolidated revenue effective April 1, 1996 as discussed above.
During the first half of 1995, 84% of the Company's revenue was attributable to
software license fees for the integration engine software tool and related
services as compared to 56% for the second half of 1996. The Company completed
development of or acquired and began marketing additional software tools,
acquired distribution rights to other software tools and expanded the system
design and integration services capability of IHS during 1995. While revenue
from integration engine license fees and related services increased, the
general availability of these new software tools and the growth of IHS to meet
the demand by IDNs for clinical information solutions are primarily responsible
for the Company's increased revenue.
Cost of revenue. The cost of revenue was $2.5 million for the six
months ended June 30, 1996 compared to $944,000 for the six months ended June
30, 1995, an increase of 169%. The increase in cost of revenue from 25% of
revenue to 35% of revenue between the first half of 1995 and the first half of
1996 is primarily attributable to the shift in revenue mix toward service,
which typically has a higher cost of revenue than software, and the normal cost
inefficiencies associated with the rapid growth of IHS' service organization to
handle the increased demand for its system design and integration services.
Gross profit. The Company's gross profit was $4.7 million for the six
months ended June 30, 1996 compared to $2.8 million for the six months ended
June 30, 1995, an increase of 68%, but gross profit as a percent of revenue
decreased from 75% for the first half of 1995 to 65% for the first half of
1996. The revenue mix shifted from 57% software and 43% services for the first
half of 1995 to 43% software and 57% services for the first half of 1996. The
main reason for the shift was the increase in system design and integration
services provided by IHS. While software revenue, which has relatively high
gross profit margins, increased from $2.1 million for the six months ended June
30, 1995 to $3.2 million for the six months ended June 30, 1996, a 47%
increase, services revenue, which normally has lower gross profit margins than
software, increased from $1.6 million for the six months ended June 30, 1995 to
$4.1 million for the six months ended June 30, 1996, an increase of 156%.
Sales and marketing. Sales and marketing expense was $1.7 million for
the six months ended June 30, 1996 compared to $1.5 million for the six months
ended June 30, 1995, an increase of 14%, due primarily to the net effect of
increased sales personnel costs, sales commissions and travel expenses
associated with increased sales staffing
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and the increase in revenue, offset somewhat by the exclusion of DataView from
the Company's consolidated operating results for the second quarter of 1996 as
discussed above. Sales and marketing expense as a percent of revenue decreased
from 40% for the first half of 1995 to 23% for the first half of 1996,
reflecting the increased productivity of the Company's internal sales force and
its distributors.
Research and development. Research and development expense was
$605,000 for the six months ended June 30, 1996 compared to $828,000 for the
six months ended June 30, 1995, a decrease of 27%, due primarily to the
capitalization of internally developed software costs totaling $445,000 in the
first half of 1996 and secondarily to the exclusion of DataView from the
Company's consolidated operating results for the second quarter of 1996 as
discussed above. No such costs qualified for capitalization under generally
accepted accounting principles in the first half of 1995.
General and administrative. General and administrative expense was
approximately $1.8 million for both the six months ended June 30, 1996 and
1995. The slight increase of $31,000 between the two periods was primarily due
to the same factors which accounted for the increase in general and
administrative expense between the three months ended June 30, 1995 compared to
the three months ended June 30, 1996.
Losses of affiliate. Losses of affiliate, which resulted from the
Company's commitment to fund CHS, totaled $468,000 in the first half of 1995.
The December 1995 transaction with Massey Burch which provided for a sharing of
the Company's funding commitment to CHS had the additional result of relieving
the Company of the requirement to report a loss from CHS during 1996.
Minority interest. The minority interest in net loss of subsidiary
totaling $20,000 in the first half of 1995 related to HCI, and such minority
interest is no longer applicable as a result of HIE's increased ownership
interest in HCI to 100% effective December 31, 1995.
Interest expense, net. Net interest expense was $235,000 for the six
months ended June 30, 1996 compared to $85,000 for the six months ended June
30, 1995, an increase of 176%, due primarily to the same factors which
accounted for the increase in net interest expense between the three months
ended June 30, 1995 compared to the three months ended June 30, 1996.
Income tax (expense) benefit. The Company has no provision for income
taxes for the six months ended June 30, 1996 due to the utilization of
available net operating loss carryforward benefits. The income tax expense of
$45,000 for the six months ended June 30, 1995 relates to HCI, which filed a
separate income tax return prior to HIE increasing its ownership interest in
HCI to 100% effective December 31, 1995.
Liquidity and Capital Resources
The Company has historically financed both its operations since
inception and its investments in EBUs primarily through equity investments by
the Former Parent, which totaled $22 million. Following the Spin-Off, the
Former Parent has no obligation or intention to make additional advances or
equity infusions in the Company. The
13
<PAGE> 14
Company's plans for future working capital and other capital requirements are
discussed below.
The Company has working capital of $2.5 million at June 30, 1996
compared to $2.7 million at December 31, 1995. Cash decreased $1.2 million
during the first half of 1996 compared to a $1.3 million increase during the
first half of 1995 for the reasons discussed below.
Net cash provided by operating activities totaled $958,000 for the
first half of 1996 compared to net cash used in operating activities of $2.3
million for the first half of 1995. The $3.2 million total variance between
the two periods reflects increased cash flow from the net earnings recorded in
the first half of 1996 compared to the net loss in the first half of 1995 and
various changes in the components of working capital, most notably increases in
deferred revenue and accounts payable offset somewhat by increased trade
accounts receivable due to increased revenue and higher days revenue in
accounts receivable.
Net cash used in investing activities was $1.3 million for the first
half of 1996 compared to $1.7 million for the first half of 1995. During the
first half of 1996, the Company made a higher level of payments for a
third-party developed software tool and prepaid licenses for other software
tools. As previously discussed, the Company capitalized $445,000 of internally
developed software costs during the first half of 1996. The decrease in
capital expenditures reflects the Company's current preference for leasing,
versus purchasing, computer equipment. The acquisition of business in the first
half of 1995 relates to HCI as previously discussed.
Net cash used in financing activities was $873,000 during the first
half of 1996 compared to net cash provided by financing activities of $5.3
million during the first half of 1995. Prior to the Spin-Off, the Former
Parent funded HIE's operations and investments as reflected in the $5.3 million
capital contribution during the first half of 1995. The long-term debt
payments shown in the first half of 1996 primarily relate to the payoff of the
$1.1 million note payable associated with the HCI step-acquisition effective
December 31, 1995. The proceeds from the issuance of common stock relate to
the exercise of stock options held by employees of the Former Parent.
The Company has $1.7 million of debt financing maturing over the next
twelve months, of which $1.1 million could be satisfied with HCI's products
and/or services at the lender's option. During May 1996, HCI renewed its $1.0
million line of credit with a bank on essentially the same terms and conditions
as the expiring line of credit with said bank. The Company is currently
pursuing, but has no commitment to receive, at least a $2 million line of
credit from a bank or a financial institution for unanticipated working capital
needs. Potential future sources of long-term financing include a public
offering by the Company or a public offering by one or more EBUs, depending on
the Company's or EBU's actual and planned performance and the conditions in the
equity market at the time. However, there can be no assurance that such a
public offering could be consummated on terms acceptable to the Company, if at
all. Nonetheless, based on its current business plan, the Company believes
that current available cash and anticipated cash flow from operating activities
will be sufficient to meet the Company's capital requirements, including
14
<PAGE> 15
the payment of all maturing debt in cash and its remaining funding commitment
to CHS, for at least the next twelve months.
Except for the historical information contained herein, this report
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from those discussed herein.
Factors that could cause or contribute to such differences include, but are not
limited to, the Company's limited operating history and lack of profitability
in prior periods, limitations and potential costs inherent in the EBU
operational structure, market acceptance of new products and services offered
by the Company, limited capital resources, and competitive factors, such as new
technologies and pricing pressures, as well as factors discussed or identified
from time to time in the Company's filings with the Securities and Exchange
Commission, including, but not limited to, the Company's annual report on Form
10-K for the fiscal year ended December 31, 1995.
15
<PAGE> 16
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's annual meeting of shareholders was held on May 21, 1996.
At the annual meeting, the Company's shareholders voted on (1) the election of
eight directors and (2) the approval of the Company's Employee Stock Purchase
Plan. The results of the voting were as follows:
(1) Election of Directors
<TABLE>
<CAPTION>
For Vote Withheld
--- -------------
<S> <C> <C>
Parker H. Petit 13,954,862 351,433
H. Darrell Young 13,943,721 362,574
J. Terry Dewberry 13,954,921 351,374
William J. Gresham, Jr. 13,950,721 355,574
Charles R. Hatcher, Jr., M.D. 13,951,241 355,054
John W. Lawless 13,953,021 353,274
Carl E. Sanders 13,932,031 374,264
Donald W. Weber 13,948,221 358,074
</TABLE>
(2) Approval of the Employee Stock Purchase Plan
<TABLE>
<S> <C>
For: 12,265,140
Against: 773,569
Abstentions 246,774
</TABLE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
2 - Agreement dated as of April 1, 1996, between the Company,
DataView, Kurt Farhy, John Ernissee and Richard Bigelow.
10 - Healthdyne Information Enterprises, Inc. 1996 EBU Tandem
Stock Option Plan.
11 - Statements of Computation of Per Share Earnings (Loss).
27 - Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
During the quarter ended June 30, 1996, the Company did not file
any reports on Form 8-K.
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Healthdyne Information Enterprises, Inc.
August 12, 1996 By: /s/ Joseph G. Bleser
--------------------------------------
Joseph G. Bleser
Vice President -Finance,
Chief Financial Officer, Treasurer
and Secretary
(duly authorized and principal
financial officer)
17
<PAGE> 18
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------ ---------------------------------------------
<S> <C>
2 Agreement dated as of April 1, 1996 between
the Company, DataView, Kurt Farhy, John
Ernissee and Richard Bigelow
10 Healthdyne Information Enterprises, Inc. 1996
EBU Tandem Stock Option Plan
11 Statements of Computation of Per Share
Earnings (Loss)
27 Financial Data Schedule (for SEC use only)
</TABLE>
18
<PAGE> 1
EXHIBIT 2
AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into as of April 1, 1996,
by and among HEALTHDYNE INFORMATION ENTERPRISES, INC., a Georgia corporation
("HIE"); DATAVIEW IMAGING INTERNATIONAL, INC., a Georgia corporation
("DataView"); KURT FARHY, a resident of Georgia ("Farhy"); JOHN ERNISSEE, a
resident of Georgia ("Ernissee"); and RICHARD BIGELOW, a resident of Georgia
("Bigelow"; Farhy, Ernissee and Bigelow are hereinafter collectively referred to
as the "Shareholders").
RECITALS:
WHEREAS, HIE, by assignment from Healthdyne, Inc., a Georgia
corporation ("Healthdyne"), DataView and the Shareholders are parties to both
that certain Funding Agreement dated July 22, 1994 (the "Funding Agreement") and
that certain Shareholders Agreement dated July 22, 1994 (the "Shareholders
Agreement");
WHEREAS, the Shareholders and HIE, by assignment from Healthdyne, are
parties to that certain Option Agreement dated July 22, 1994 (the "Option
Agreement"); and
WHEREAS, in consideration of the restructuring of the relationship
among HIE, DataView and the Shareholders, and the agreement of DataView and the
Shareholders to certain other matters, all as more fully set forth herein,
DataView and HIE desire to amend the Funding Agreement and that certain
Promissory Note of DataView dated July 22, 1994, in the maximum principal amount
of $2,450,000.00 (the "Principal Note");
NOW, THEREFORE, in consideration of the premises, the mutual promises
and covenants set forth herein, $10.00 in hand paid, and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
1. DEFINITIONS. Unless otherwise defined, capitalized terms used in this
Agreement shall have the respective meanings set forth below:
1.1 "CONFIDENTIAL INFORMATION" means with respect to each of the
parties, all valuable, proprietary and confidential information belonging to or
pertaining to that party that does not constitute a "Trade Secret" (as defined
in Section 1.20) of the party and that is not generally known by or available to
the party's competitors but is generally known only to that party and those of
its employees, independent contractors, clients or agents to whom such
information must be confided for internal business purposes.
1.2 "DATAVIEW OBLIGATIONS" shall mean DataView's obligations to HIE
for repayment of borrowed money arising pursuant to the Funding Agreement, the
Principal Note, the Purchase Price Note or this Agreement.
1.3 "DATAVIEW SHARES" shall have the meaning set forth in Section
3.1 hereof.
<PAGE> 2
1.4 "DATAVIEW TECHNOLOGY" means any and all ideas, designs,
inventions, concepts, techniques, discoveries, improvements, know-how, technical
information, systems designs, drawings, computer software (in object code and
Source Code formats) and any similar information now or hereafter owned by, or
licensed to, DataView.
1.5 "ENHANCEMENT" shall mean any incremental improvement in the
structure, function or performance of any DataView Technology.
1.6 "EQUITY SECURITIES" shall have the meaning set forth in Section
4.1(a).
1.7 "FUNDING AGREEMENT" shall have the meaning set forth in the
recitals hereto.
1.8 "GUARANTEED PAYMENT PERIOD" shall have the meaning set forth in
Section 10.1(a).
1.9 "HIE OPTION SHARES" shall have the meaning set forth in Section
14 hereof.
1.10 "IHS" means Integrated Healthcare Solutions, Inc.
1.11 "NORTHLAKE EQUIPMENT" means that certain medical imaging and
computer equipment identified on Schedule 1.11 attached hereto and which is
currently installed at Northlake Regional Medical Center in Tucker, Georgia.
1.12 "OFFERING" shall have the meaning set forth in Section 4.1
hereof.
1.13 "OPTION" shall have the meaning set forth in Section 4.1
hereof.
1.14 "OPTION AGREEMENT" shall have the meaning set forth in the
recitals hereto.
1.15 "PRINCIPAL NOTE" shall have the meaning set forth in the
recitals hereto.
1.16 "PURCHASE PRICE NOTE" shall have the meaning set forth in
Section 3 hereof.
1.17 "REGISTRATION STATEMENT" shall have the meaning set forth in
Section 4.4 hereof.
1.18 "SHAREHOLDERS" means Farhy, Ernissee and Bigelow, collectively.
1.19 "SHAREHOLDERS AGREEMENT" shall have the meaning set forth in
the recitals hereto.
1.20 "SOURCE CODE" shall mean the human readable computer source
code corresponding to any of the DataView Technology, plus any pertinent
commentary or explanation that may be necessary to render the Source Code
understandable and usable by a trained computer programmer.
1.21 "TRADE SECRETS" means information (including, but not limited
to, Confidential Information, technical or non-technical data, formulas,
patterns, compilations, programs, devices, methods, techniques, drawings,
processes, financial data, financial plans, product plans, lists of actual or
potential customers or suppliers, and the terms of this Agreement and any
associated agreements between the parties) that: (a) derives economic value,
actual or potential, from not being generally known
-2-
<PAGE> 3
to, and not being readily ascertainable by proper means by, other persons who
can obtain economic value from its disclosure or use; and (b) is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy. The
"Trade Secrets" of one of the parties (the "First Party") shall not include
information that (i) has become generally known by or available to the public or
the First Party's competitors through no wrongful act or omission of the other
Party (the "Second Party"); (ii) has been furnished to the Second Party by a
party other than the First Party; (iii) has been disclosed by the First Party on
a non-confidential basis, or has not been consistently treated by the First
Party as proprietary and confidential; or (iv) has been developed independently
by the Second Party.
2. MODIFICATION OF FUNDING AGREEMENT.
2.1 Decrease of Commitment. The parties agree to amend the Funding
Agreement such that the "Commitment" (as such term is defined in Section 1
therein) is hereby reduced from $2,450,000.00 to $2,041,658.71. DataView hereby
acknowledges and agrees that HIE has as of the date hereof advanced DataView
funds in the amount of $2,041,658.71.
2.2 Repayment of 1996 Advances. DataView acknowledges and agrees
that since December 31, 1995, HIE has made advances to DataView under the
Principal Note which, together with accrued but unpaid interest, total
$93,139.95 (the "ADVANCES"). As partial consideration for HIE's agreement to
enter into this Agreement and notwithstanding the repayment terms set forth in
the Funding Agreement and Principal Note, DataView agrees to repay to HIE the
full amount of the Advances not later than March 31, 1997.
2.3 Sale Of Northlake Equipment. Dataview agrees to use its best
efforts to sell the Northlake Equipment within six (6) months of the date
hereof. DataView shall pay to HIE from the sale of all or any part of the
Northlake Equipment, regardless of the ultimate purchaser(s), an aggregate
amount equal to the lesser of (i) the proceeds of DataView's sale of the
Northlake Equipment; and (ii) $72,653.20, which equals the original purchase
price of such equipment. Any proceeds paid to HIE under this Section 2.3 shall
be applied to DataView's repayment obligation under Section 2.2 hereof, with any
amount in excess of the amount of the Advances applied to the repayment of the
guaranteed payments to DataView described in Section 10(a) hereof.
2.4 Deferral of Interest Payments; Amendment of Principal Note. HIE
agrees to defer DataView's obligation to make monthly interest payments to HIE
as required under the Principal Note for the months of April, 1996, through and
including June, 1997 (the "Deferral Period"). In order to effect such deferral,
the Principal Note is hereby amended such that the aggregate amount of interest
accrued during the Deferral Period (the "Deferred Interest") shall be payable in
the same manner and at the same time as the principal. Notwithstanding any of
the foregoing, on July 1, 1997, DataView's obligation to make interest payments
accruing under the Principal Note shall resume thereunder in accordance with its
terms.
3. REDEMPTION OF DATAVIEW SHARES.
3.1 Purchase Price. Concurrently with the execution of this
Agreement, DataView agrees to redeem, and HIE agrees to sell, two thousand three
hundred forty-eight (2,348) shares of DataView common stock held by HIE (the
"DATAVIEW SHARES") at a per share price of $452.00, for an aggregate sale price
of $1,061,296.00 plus any interest which may accrue under the Purchase Price
Note (the
-3-
<PAGE> 4
"PURCHASE PRICE"). Such sale shall result in the reduction of HIE's ownership of
outstanding DataView common stock from 61.5% to 19.5%.
3.2 Method of Payment. (a) As consideration for the purchase of the
DataView Shares, and upon HIE's delivery of the share certificate(s) evidencing
the DataView Shares either endorsed in blank or accompanied by a valid stock
power, DataView shall issue in favor of HIE a promissory note in the amount of
the Purchase Price and in the form of Exhibit A attached hereto (the "PURCHASE
PRICE NOTE"). Notwithstanding any provision in the Purchase Price Note, HIE
agrees to defer DataView's obligation to make monthly interest payments to HIE
as required under the Purchase Price Note for the Deferral Period.
Notwithstanding any of the foregoing, on July 1, 1997, DataView's obligation to
make interest payments accruing under the Purchase Price Note shall resume
thereunder in accordance with its terms.
3.3 Financial Disclosures by DataView. Until DataView repays or
otherwise satisfies all of the DataView Obligations, DataView agrees to promptly
furnish to HIE unaudited quarterly financial statements within thirty (30) days
after the end of each DataView fiscal quarter. Upon no less than five business
days' prior written notice, DataView shall permit an HIE employee or HIE's
designated agent to examine DataView's books and records for the sole purpose of
verifying the accuracy of such unaudited financial statements at HIE's sole cost
and expense and during the normal business hours of DataView.
3.4 Pledge of Purchased Shares. The repayment obligations of
DataView under the Purchase Price Note shall be secured by DataView's obligation
to reissue the DataView Shares to HIE and a pledge of the DataView Shares
purchased from HIE pursuant to Section 3.1 hereof and evidenced by a Stock
Pledge Agreement in the form attached hereto as Exhibit B (the "Stock Pledge
Agreement"). HIE agrees to consider any reasonable request by DataView that HIE
modify or surrender its rights under the Stock Pledge Agreement in connection
with a proposed financing transaction between DataView and a lender or third
party investor. Upon any such request, HIE will consider whether the proposed
transaction will be in the long-term best interests of DataView and would
facilitate DataView's ability to repay the DataView Obligations. Nothing herein
shall, however, be construed to require HIE to modify or waive any of its rights
under the Stock Pledge Agreement.
3.5 Waiver of Rights of First Refusal. Each Shareholder hereby
waives any and all rights of first refusal granted him in Article 3 of the
Shareholders Agreement with respect to the redemption and transfer of the
DataView Shares hereunder and consents to such redemption and transfer in all
respects.
4. ANTI-DILUTION RIGHTS.
4.1 Option to Acquire DataView Equity Securities. (a) With respect
to any initial public offering or other sale or issuance of any equity
securities of DataView which have, or which are convertible into other equity
securities which have, any voting rights (collectively, "EQUITY SECURITIES")
pursuant to a firm commitment underwriting, each private placement offering, and
any other issuance of Equity Securities (each, an "OFFERING") occurring during
the Option Term (as defined in Section 4.3 hereof), HIE shall have an option
(each an "OPTION") to purchase up to that number of shares of such Equity
Securities which shall result in HIE owning, on a fully diluted basis and after
giving effect to the exercise of all options and other outstanding rights to
acquire Equity Securities, including, without limitation, the particular Option,
a percentage of all such Equity Securities issued and outstanding immediately
following the date of any such Offering equal to the percentage of all issued
and outstanding
-4-
<PAGE> 5
Equity Securities held by HIE immediately prior to its exercise of such Option.
Upon exercise of any Option, HIE shall pay for such Equity Securities at a per
share price equal to the per share price offered to the general public,
qualified purchasers, or third party purchasers, as the case may be. With
respect to any acquisition by HIE of Equity Securities in connection with a
DataView private placement offering or other issuance and except as otherwise
expressly provided in this Article 4, HIE shall acquire such Equity Securities
subject to the same terms and conditions as any other purchaser of such Equity
Securities, including, without limitation, registration rights and preemptive
right with respect to subsequent issuances of Equity Securities.
(b) In the case of the issuance of Equity Securities for a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined by agreement between HIE and
DataView or, in the absence of such an agreement, by an independent investment
banking firm or an independent appraiser engaged by DataView and reasonably
acceptable to HIE (in either case the cost of which shall be borne by DataView).
In the case of the issuance of Equity Securities upon the exercise of any
warrants, options or other rights or the conversion or exchange of any
convertible or exchangeable Equity Securities, the aggregate consideration
received by DataView upon such issuance shall be deemed to include the
consideration, if any, received by DataView as consideration for the issuance of
such warrants, options or rights or such convertible or exchangeable Equity
Securities (excluding any cash received on account of accrued interest or
accrued dividends) and, in the case of any conversion or exchange of Equity
Securities, shall not include any amount attributable to the converted or
exchanged securities. If any warrant, option, or right to purchase or subscribe
for any Equity Securities are convertible securities as issued in connection
with the issuance or sale of other securities issued by DataView, together
comprising one integrated transaction in which no specific consideration was
allocated to such warrant, option or right, such warrant, option or right shall
be deemed to have been issued for no consideration.
4.2 Exercise of Option. DataView shall notify HIE in writing no
less than 30 days prior to the anticipated date of any Offering, which notice
shall specify (a) the anticipated number of shares of Equity Securities which
HIE may acquire; (b) HIE's anticipated per share purchase price for such shares;
and (c) the date of the Offering. HIE shall use its best efforts to notify
DataView in writing whether and to what extent HIE shall exercise the Option no
later than 5 days prior to the effective date of any registered Offering and no
later than the closing date with respect to a private placement or other
issuance. If HIE elects to exercise an Option, HIE shall have seven days from
the date of the Offering to consummate the purchase of any Equity Securities.
4.3 Term of Option Rights. For purposes of this Article 4, "Option
Term" shall mean that period commencing on the date of this Agreement and
continuing until such date as all of the DataView Obligations have been
satisfied.
4.4 Registration Rights. If DataView files a registration statement
(a "REGISTRATION STATEMENT") under the Securities Act of 1933, as amended (the
"SECURITIES ACT") with respect to any initial issuance of any Equity Securities
described in Section 4.1, such registration statement shall also cover the
Equity Securities to be offered to HIE pursuant to this Article 4.
4.5 Incidental Offering. If, at any time during the Option Term
DataView proposes to register any of its Equity Securities for sale, whether or
not for its own account, pursuant to an offering (other than a registration
relating either to (a) a dividend reinvestment, employee stock option, stock
purchase or similar plan, (b) a transaction pursuant to Rule 145 under the
Securities Act, or (c) a merger,
-5-
<PAGE> 6
consolidation or reorganization), DataView shall each such time give written
notice (the "DATAVIEW NOTICE"), at its expense, to HIE (provided HIE then holds
Equity Securities not registered with the SEC) of its intention to effect such
registration at least 20 days prior to the filing of a Registration Statement
with respect to such registration with the SEC. If HIE desires to dispose of all
or part of its Equity Securities (including those owned as of the date hereof)
in connection therewith, it shall deliver to DataView within 10 days after
receipt of the DataView Notice, written notice of such desire (the "HIE NOTICE")
stating the number of shares of Equity Securities to be disposed of by HIE.
DataView shall cause all shares of Equity Securities specified in the HIE Notice
to be included in the offering so as to permit the sale by HIE of all of the
shares of Equity Securities referred to in such HIE Notice, subject, however, to
the limitations set forth in Section 4.6 hereof.
4.6 Limitations on Inclusion in Incidental Offering.
(a) DataView shall have the right to limit the aggregate
size of any offering under Section 4.5 or the number of shares to be
included therein by stockholders of DataView if, in the opinion of the
managing underwriter with respect to such public offering, the sale of
shares in excess of such limit would materially and adversely affect
the offering.
(b) Whenever the number of Equity Securities which may be
offered pursuant to Section 4.5 is limited by the provisions of Section
4.6(a) above, (i) any such reduction shall apply on a proportional
basis to the Equity Securities which HIE shall have requested to have
included and all other securities that DataView shall have requested,
pursuant to contractual registration rights or otherwise, to include in
the offering other than those to be offered for DataView 's own account
and (ii) DataView shall have priority as to sales over HIE and HIE
hereby agrees that it shall withdraw its Equity Securities from such
offering to the extent necessary to allow DataView to include all the
shares which DataView desires to sell for its own account to be
included within such offering.
(c) DataView may, for any reason and without the consent
of HIE, determine at any time not to proceed with any registration
which is the subject of a HIE Notice and abandon the proposed offering,
whereupon DataView shall be relieved of any further obligation
hereunder to proceed with such registration or offering.
(d) DataView agrees that, during the Option Term, it will
not grant any registration rights to any other person that are superior
to HIE's registration rights hereunder, without the prior written
consent of HIE.
4.7 Registration Procedures. In connection with the registration
of Equity Securities pursuant to Sections 4.4 and 4.5, DataView shall:
(a) prepare and file with the SEC a Registration Statement
with respect to such securities on such form as DataView deems
appropriate and use all reasonable efforts to cause such Registration
Statement to become and remain effective as provided herein; provided
that, in the case of any registration pursuant to Section 4.5, such
preparation and filing may be delayed in the sole discretion of
DataView, without prejudice to the rights of HIE pursuant to Section
4.4 hereof;
-6-
<PAGE> 7
(b) prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectuses used in
connection therewith as may be necessary to keep such Registration
Statement effective and current and to comply with the provisions of
the Securities Act with respect to the sale or other disposition of all
Equity Securities covered by such Registration Statement, until two
years after the effective date of such Registration Statement;
(c) notify HIE and confirm such advice in writing, (i)
when such Registration Statement becomes effective, and (ii) of the
entry of any stop order suspending the effectiveness of such
registration statement or the initiation of any proceedings for that
purpose, and, if such stop order shall be entered, DataView shall use
its reasonable efforts promptly to obtain the lifting thereof;
(d) furnish to HIE at least 5 business days' prior to the
filing thereof with the SEC a copy of the Registration Statement in the
form in which DataView proposes to file the same; not later than one
day prior to the filing thereof, a copy of any amendment (including any
post-effective amendment) to such Registration Statement; and promptly
following the effectiveness thereof, a conformed copy of the
Registration Statement as declared effective by the SEC and of each
post-effective amendment thereto, including financial statements and
all exhibits and reports incorporated therein by reference;
(e) furnish to HIE such number of copies of each
prospectus, including preliminary prospectuses, in conformity with the
requirements of the Securities Act, and such other documents, as HIE
may reasonably request in order to facilitate the public sale or other
disposition of the Equity Securities owned by it;
(f) use all reasonable efforts, at HIE's expense, to
register or qualify the shares covered by such Registration Statement
under such other securities or Blue Sky or other applicable laws of
such jurisdictions as HIE shall reasonably request to enable it to
consummate the public sale or other disposition of the Equity
Securities owned by it; provided that DataView shall not be required in
connection therewith or as an election thereto to qualify to do
business or to file a general consent to service of process in any such
jurisdiction, or to maintain the effectiveness of any such registration
or qualification for any period during which it is not required to
maintain the effectiveness of the related Registration Statement under
the Securities Act as set forth in Section 4.7(b);
(g) use all reasonable efforts to cause all such Equity
Securities to be listed on each securities exchange or other securities
trading market on which Equity Securities issued by DataView are then
listed;
(h) enter into such customary agreements (including an
underwriting agreement with respect to underwritten offerings) in form
and substance reasonably acceptable to DataView and take such other
customary actions as HIE may reasonably request in order to expedite or
facilitate the disposition of such Equity Securities; and
(i) make reasonably available for inspection by HIE, any
underwriter participating in any disposition of Equity Securities, and
any attorney, accountant or other agent retained by any such seller or
underwriter, all financial and other records, pertinent corporate
documents and properties of DataView , and use all reasonable efforts
to cause DataView 's officers, directors
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<PAGE> 8
and employees to supply all information reasonably requested by HIE,
any underwriter, attorneys, accountant or agent in connection with the
registration contemplated by Sections 4.4 or 4.5 above, in each case as
and to the extent necessary to permit HIE to conduct a reasonable
investigation within the meaning of the Securities Act.
HIE shall furnish to DataView such information regarding HIE and the
distribution of the Equity Securities as DataView may from time to time
reasonably request in writing and as shall be required by law or by the SEC in
connection therewith.
4.8 Non-U.S. Offering. In the event HIE acquires pursuant to this
Article 4 any Equity Securities which are issued outside of the United States of
America, DataView shall promptly take such actions and make such filings as HIE
may reasonably request so as to cause such Equity Securities to be transferable
by HIE without restriction in the country in which such Equity Securities were
issued.
4.9 Assignment of Option Rights. HIE shall be permitted to assign
its rights under this Article 4 to any affiliate of HIE not in direct
competition with DataView in the clinical image management products market at
the time of such assignment.
5. OPTION AGREEMENT. The parties agree that the Option Agreement is not
modified or amended in any way by this Agreement; provided, however, that HIE
agrees to consider any reasonable request by DataView that HIE modify or
surrender its option rights under the Option Agreement in connection with a
proposed financing transaction between DataView and a lender or third party
investor. Upon any such request, HIE will consider whether the proposed
transaction will be in the long-term best interests of DataView and would
facilitate DataView's ability to repay the DataView Obligations. Nothing herein
shall, however, be construed to require HIE to modify or waive any of its rights
under the Option Agreement.
6. INTELLECTUAL PROPERTY MATTERS.
6.1 Ownership of DataView Technology. DataView represents and
warrants to HIE that DataView is the owner of the DataView Technology and that
except as provided herein only DataView has the right to modify same and to
grant a license for its use. HIE hereby acknowledges, that as between DataView
and HIE, DataView is the owner of the DataView Technology.
6.2 License of DataView Technology. DataView hereby grants HIE a
perpetual royalty-free, non-exclusive, worldwide right, and license (with the
right to sublicense) to use, execute, reproduce, display, perform, distribute,
modify and prepare derivative works based on DataView Technology and to
interface and package the same with other software in connection with the
development of customized clinical image capture, index, storage, retrieval and
transfer solutions for the medical industry. The DataView Technology is to be
used only in HIE's service business or as specified in the Distribution
Agreement between DataView and HIE. Such license shall include the right to
sublicense the DataView Technology to IHS and to subcontractors, agents of HIE
and IHS engaged in performing services on behalf of HIE or IHS, and to their end
users.
6.3 HIE Enhancements. In the event HIE develops Enhancements to the
DataView Technology as a result of the license granted in Section 6.2 above,
proprietary rights in such Enhancements shall be owned by HIE. HIE hereby grants
DataView a fully paid-up, non-exclusive, worldwide royalty-free right and
license to use, execute, reproduce, display, perform, distribute, modify
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<PAGE> 9
and prepare derivative works based on such Enhancements. Notwithstanding any
other provision in this Agreement, DataView's use of any HIE-developed
Enhancements in any DataView product shall not be construed under any provision
of this Agreement to restrict or limit HIE's use of such Enhancement in any
manner whatsoever, so long as all DataView Technology is specifically limited to
use in accordance with the terms of this Agreement and the Distribution
Agreement.
6.4 Prohibited Uses of DataView Technology. The license hereby
granted is limited to the uses set forth in Section 6.2 above. HIE, any HIE
related entity, successor in interest or permitted assignee of HIE is strictly
prohibited from using such DataView Technology to compete with DataView, either
directly or indirectly, in the product business. Any marketing, selling,
reproducing or distributing of products based on DataView Technology shall be
exclusively governed by the Distribution Agreement. HIE further covenants and
warrants that HIE will take no action to interfere with or jeopardize DataView's
FDA Certifications and will assume responsibility for complying with FDA
regulations in HIE's use of the DataView Technology in accordance with the terms
hereof.
6.5 Assignment of License. The license hereby granted shall not be
assigned, sub-licensed or otherwise conveyed or transferred by HIE except as
allowed by this Agreement to any other person, firm or organization, without the
prior written consent of DataView.
6.6 Transfer of DataView Technology. DataView agrees to keep HIE
fully apprised of any and all existing and newly developed DataView Technology
and provide the same to HIE upon request (subject to the non-disclosure
provisions of Section 17 hereof). To the extent that DataView holds licenses to
a third party's technology, DataView is bound and restricted by the licensing
agreements between DataView and any such third party. To the extent each
individual licensing agreement with a third party permits DataView to
sub-license or DataView can obtain consent of the third party, DataView agrees
to provide the third-party technology to HIE, provided that HIE agrees to be
bound by the terms and conditions of DataView's licensing agreement with such
third party. DataView shall use its best efforts to obtain each such third party
consent. If such licensing agreement requires the payment of a sub-license fee,
HIE shall be solely responsible for paying such sub-license fee. In the event
that DataView sub-licenses a third-party's technology, pursuant to the foregoing
restrictions, DataView shall be entitled to charge HIE a handling fee to be
mutually agreed upon by DataView and HIE for DataView's service of tracking and
accounting for the required licensing fees to such third-parties. HIE agrees to
reimburse DataView for all reasonable out-of-pocket costs incurred by DataView
in connection with DataView's performance of its obligations under this Section
6.6. Such reimbursable costs shall include, but are not limited to, embedded
third party software license fees, diskettes, and direct labor expenses.
6.7 Training of HIE Personnel. In connection with the license grant
to HIE described in Section 6.2 hereof, DataView agrees to provide HIE personnel
free of charge reasonable personnel training services, to the extent that such
training services can be provided by current employees of DataView, in the use
of DataView Technology in HIE's service business. Such training shall be
provided at DataView's corporate offices, or at a location mutually agreed to by
HIE, DataView, and third party trainers and for such HIE personnel as is
mutually agreed upon by HIE and DataView. Such training shall be held quarterly
and may be held in conjunction with training of members of HIE's sales force,
marketing support and client consultant personnel in accordance with section
7.3.1 of the Distribution Agreement. HIE shall pay all costs of sending it own
employees to obtain such support and shall reimburse DataView for all reasonable
out-of-pocket expenses incurred by DataView in providing such services except
for costs of third party trainers. Nothing contained in this subsection shall be
construed
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<PAGE> 10
to require DataView to hire additional employees, until it is in the best
interests of DataView to do so, to conduct any training sessions.
6.8 Non-disclosure and Agreement with Employees. HIE acknowledges
that DataView represents that the DataView Technology is the result of the
development over a long period of time and such expertise affords DataView a
commercial advantage over its competitors. Loss of this competitive advantage
due to unauthorized disclosure or use of such Confidential Information and Trade
Secrets and confidential business information other than under the terms of this
Agreement could cause great injury and harm to DataView. HIE acknowledges that
DataView Technology constitutes a TRADE SECRET, Confidential Information and
confidential business information disclosed to HIE on the basis of the
confidential relationship between HIE and DataView established by this
Agreement, to be used only as may be expressly permitted by the terms and
conditions of this Agreement. The restrictions imposed upon HIE by this Section
6.8 are necessary to protect the confidentiality of such secrets and information
and prevent the occurrence of injury and harm to DataView. HIE covenants that
it will not, without the prior consent of DataView, disclose, divulge, publish
to others or employ to its own advantage, other than herein provided, the
DataView Technology or any information relating thereto and that it shall reveal
the same only to those of its employees and contractors who require it for the
purpose of use in HIE's service business. HIE acknowledges that such employees
are subject to the same use and disclosure restrictions as those assumed by HIE
hereunder. HIE shall take responsible action, by instruction, agreement or
otherwise, with respect to HIE's employees and other persons who have not
executed this Agreement to prevent the unauthorized disclosure or use of the
DataView Technology. HIE further agrees to notify DataView immediately of the
possession, use of knowledge or all or any part of DataView Technology or
related documentation by any person or entity not authorized by this Agreement
to have such possession, use or knowledge.
6.9 Nondisclosure Survives the Termination of Agreement. The
obligations of HIE set forth in Section 6.8 hereto remain operative and in full
force and effect, as set forth by law, even after the termination of this
Agreement as to all such information.
6.10 Effect of Breach. In the event of a breach by HIE of any terms
set forth in Section 6.8 of this Agreement which breach has not been cured by
HIE (or if the breach is of such a nature that its cure would take a longer
period, commenced to diligently cure such breach) within 30 days of its receipt
of written notice from DataView specifying such breach, the license granted to
HIE shall terminate immediately, whereupon HIE shall return to DataView any and
all DataView Technology and any and all information regarding to DataView
Technology in whatever form, whether provided by DataView or generated by HIE;
provided however that for a period of 12 months thereafter, HIE and its
sublicensees shall be permitted to retain that DataView Technology reasonably
necessary for HIE and such sublicensees to maintain any software incorporating
DataView Technology then licensed by them to third parties, but only for the
purpose of maintaining such licensed software. HIE shall indemnify DataView for
damages suffered due to the breach(s) of Section 6.8 by any of HIE employees,
agents, successors-in-interest or such other persons. HIE acknowledges that
DataView will not have an adequate remedy in money or damages with respect to
continuing breach(s) of Section 6.8, and accordingly, shall be entitled to an
injunction against such breach(s) without any requirement to post bond as a
condition to such relief, in addition to any other available or legal or
equitable remedies.
6.11 Force Majeure. Performance by DataView or HIE under Section 6
shall be excused for the duration that such performance is prevented by strikes,
riots, floods, fires, acts of God, or any other calamity or cause beyond
DataView or HIE's control, provided that the party affected gives prompt notice
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<PAGE> 11
thereof to the other party, uses its best efforts to avoid or remove such causes
and continues performance hereunder with all due diligence whenever such causes
are removed or settled.
7. DISTRIBUTION AGREEMENT. Concurrently with the execution of this
Agreement, DataView and HIE shall enter into a DataView products distribution
agreement in the form attached hereto as Exhibit C (the "Distribution
Agreement"). In the event that any terms, conditions, rights or licenses set
forth or granted in this Agreement conflict with the terms, conditions, rights
or licenses set forth in the Distributor Agreement, the parties agree that the
terms of this Agreement shall govern.
8. NAPLES AND ST. ELIZABETH CONTRACTS. HIE agrees that with respect to the
draft contracts currently under negotiation between HIE and each of Naples
Hospital and St. Elizabeth's Hospital, HIE and DataView will negotiate in good
faith mutually agreeable terms and conditions of a subcontract pursuant to which
DataView will deliver the clinical image management solution described therein.
9. AMENDMENT OF SHAREHOLDERS AGREEMENT. The parties hereby amend the
terms of Section 4.2 of the Shareholders Agreement such that until such time as
HIE owns less than 10% of the issued and outstanding voting capital stock of
DataView, HIE is authorized to designate 20% of all of the members of the Board
(but in no event less than one member), without regard to whether such
designated individual is an employee of HIE or an HIE affiliate. Accordingly,
Farhy, Ernissee and Bigelow will vote their shares of DataView common stock and
take such other action reasonably necessary to elect the individual(s)
designated by HIE to serve as a member of the Board in accordance with the
provisions of this Section 9.
10. HIE COVENANTS. As consideration for the cancellation of the employment
agreements between DataView and each of Farhy and Bigelow pursuant to Section 13
hereof and the consulting services Farhy and Bigelow shall provide to HIE
pursuant to Section 11 hereof, HIE covenants to DataView, Farhy and Bigelow, as
follows:
(a) To the extent necessary in order to meet DataView's
reasonable monthly cash flow requirements as agreed by HIE and
DataView, HIE shall pay DataView certain payments up to a guaranteed
maximum amount. Such payments, if any, shall be provided during the
period from April 1, 1996 through September 30, 1996 (the "GUARANTEED
PAYMENT PERIOD"). The schedule and maximum amount of such payments are
as set forth on Schedule 10(a) attached hereto. Such payments shall be
funded by any or a combination of the following:
(i) direct payments by HIE;
(ii) a portion of the proceeds of the sale of the
Northlake Equipment;
(iii) HIE customer payments in connection with
services for which HIE or IHS subcontracts
DataView to work with HIE and/or IHS with
respect to the delivery of solutions
requiring DataView's clinical imaging
management technology expertise.
(b) HIE shall offer DataView a right of first refusal to
subcontract for the standard and specialty clinical image management
hardware components of HIE's and IHS's customer contracts, if DataView
elects to provide such hardware;
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<PAGE> 12
(c) After September 30, 1996, HIE agrees to give first
preference to DataView with respect to contracts for implementation
services necessary to assist HIE and IHS in fulfilling customer
contracts requiring clinical imaging management expertise. The terms
and conditions for such services shall be as mutually agreed by the
parties; and
(d) HIE shall provide each of Bigelow and Farhy with
options to acquire up to 10,000 shares of HIE Common Stock as further
described in Section 14 below.
11. CONSULTING SERVICES OF FARHY AND BIGELOW. Each of Farhy and Bigelow
agree that during the Guaranteed Payment Period, Farhy and Bigelow shall
consult on a first priority basis with employees and customers of HIE in order
to assist HIE and/or IHS in the fulfillment of contractual obligations
involving clinical image management technology and expertise. After the
Guaranteed Payment Period and for as long as Farhy and Bigelow have options to
acquire the Option Shares pursuant to Section 14, Farhy and Bigelow shall
consult on an as-available basis with employees and customers of HIE in order
to assist HIE and/or IHS in the fulfillment of contractual obligations
involving clinical image management technology and expertise. The foregoing
obligations of Farhy and Bigelow set forth in this Section 11 shall be subject
to (a) Farhy's and Bigelow's obligations to provide services to third parties
under any DataView contracts existing on or prior to the date of HIE's or IHS's
request for such services; and (b) HIE's performance of its obligations
hereunder.
12. DATAVIEW PRODUCT STRATEGY. Other than through its representation on the
Board, HIE shall not seek to impose restrictions upon or otherwise influence
DataView's present or future clinical image management product strategy. None of
the foregoing shall in any event be construed to limit or restrict HIE's
development of HIE services or products, provided that such products do not
violate the terms of the license granted HIE in Section 6.1 hereof and the
Distributor Agreement.
13. TERMINATION OF EMPLOYMENT AGREEMENTS. In consideration of the covenants
of HIE set forth in Section 10 hereof:
(a) DataView and Farhy hereby acknowledge and agree that
the Employment Agreement and all attachments thereto between Farhy and
DataView dated July 22, 1994 is hereby terminated and each provision
therein is null, void and of no further force or effect.
(b) DataView and Bigelow hereby acknowledge and agree
that the Employment Agreement and all attachments thereto between
DataView and Bigelow dated July 22, 1994 is hereby terminated and each
provision therein is null, void and of no further force or effect.
14. HIE OPTIONS. In consideration of the consulting services provided by
Farhy and Bigelow as described in Section 11 hereof, concurrently with the
execution of this Agreement, HIE and each of Bigelow and Farhy shall have
entered into Option Agreements substantially in the form of Exhibit D attached
hereto, pursuant to which each shall have been granted options to acquire up to
10,000 shares of HIE registered common stock (the "OPTION SHARES").
15. REPRESENTATIONS AND WARRANTIES.
15.1 By Dataview. DataView and the Shareholders individually and
jointly represent and warrant to HIE that:
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<PAGE> 13
(a) Ownership of Shares. Schedule 15.1(a), attached
hereto, contains a complete and accurate list of the number of shares
of capital stock of DataView owned of record and beneficially by each
shareholder of DataView, including the Shareholders. Except as
disclosed on Schedule 15.1(a), (A) no person, firm or corporation,
other than HIE, has any option, warrant or other right of any kind to
subscribe for or to purchase shares or other securities of DataView
from either DataView or any shareholder thereof, (B) there are no
existing or outstanding securities of any kind convertible into or
exchangeable for shares of capital stock of DataView, and (C) there are
no outstanding obligations of DataView to repurchase, redeem or
otherwise acquire any shares of the capital stock of DataView.
(b) Organization, Standing and Authorization. DataView is
a corporation duly organized, validly existing and in good standing
under the laws of the State of Georgia with the requisite corporate
power and authority to own or lease its property, to carry on its
business as it is now being conducted and proposed to be conducted, to
enter into this Agreement and to carry out the transactions
contemplated hereunder. The execution, delivery and consummation of
this Agreement by DataView and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of DataView. This Agreement and the
Purchase Price Note constitute valid and legally binding obligations of
DataView enforceable in accordance with their respective terms, except
as the enforceability of this Agreement may be affected by bankruptcy
or of other loans affecting generally the enforcement of creditors
rights or by judicial discretion in connection with the applications of
equitable remedies.
(c) Liens. Except as set forth in Schedule 15.1(c)
attached hereto, neither DataView nor any Shareholder has mortgaged,
pledged or otherwise hypothecated any of the property or assets of
DataView as security for the payment of any obligation. Except with
respect to interest payments owed under the Principal Note, there
exists no default, or event which with the passage of time or notice of
both would constitute a default, with respect to any such indebtedness,
mortgage, pledge or other hypothecation of any such guarantee.
(d) Financial Statements. To the best of their knowledge
and except as set forth on Schedule 15.1(d) hereto, the balance sheet
of DataView as of March 31, 1996, lists or describes all liabilities,
fixed or contingent, of DataView, including, without limitation, all
indebtedness for borrowed money, capitalized leases, guarantees of the
debts or obligations of others, back wages and contract or other
payments which were due and owing as of such date and since such date
and, except for DataView's lease obligation with respect to its current
office space, no such obligations other than routine business
obligations incurred in the ordinary course of business (and in any
event not in excess of $10,000.00 in the aggregate) have been incurred
or are due and owing.
(e) Title to and Condition of Property. Except as set
forth in Schedule 15.1(e) attached hereto, DataView owns outright or
has the right to use without the payment of any royalty or similar fee
to a third party all copyrights, patents, trademarks, trade names,
processes, computer programs and program rights, trade secrets, permits
and other similar intangible property rights and interests, used or
useful in the conduct of its business free and clear of all claims,
liens, mortgages, encumbrances and other restrictions whatsoever.
DataView has delivered to HIE true and complete copies of all documents
establishing any patents, licenses, or other authority to use the above
referenced intellectual property, including any and all
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<PAGE> 14
amendments and other modifications thereto. The above referenced
property is not subject to any restrictions or conditions which would
limit its utilization by DataView in its business as now conducted or
as it may be conducted in the future.
(f) Filing of Tax Returns. To the best of their knowledge,
DataView has paid or made adequate provision for the payment of all
taxes due, including income, social security, withholding, sales and
use, excise, and employment insurance taxes, to the local, state and
federal governments to date and has filed all tax returns relating
thereto which are required to be filed by them to date.
(g) Northlake Equipment. Schedule 1.11 is a true and
correct list of all medical imaging and computer equipment owned by
DataView and currently installed at Northlake Medical Regional Center.
(h) Incurrence of Additional Indebtedness. Without the
prior written consent of HIE, except for trade payables arising in the
ordinary course of DataView's business, DataView shall not incur,
assume, or suffer to exist any liabilities, obligations, or
indebtedness of any kind whatsoever.
(i) Disclosure. No representation or warranty made by
DataView in this Agreement, and no statement made in any schedule,
exhibit, certificate or other document furnished by DataView pursuant
to this Agreement, contains any untrue statement of a material fact or
omits to state any material fact necessary to make such representation
or warranty or any such statement not misleading.
When used in this Section 15.1, the phrase "to the best of their
knowledge" with respect to a Shareholder refers to the actual knowledge of such
Shareholder after reasonable inquiry, and with respect to DataView, refers to
the actual knowledge of the officers of DataView after reasonable inquiry.
15.2 By Farhy and Bigelow. Each of Farhy and Bigelow hereby
represents and warrants to HIE that such Shareholder has received a copy of
HIE's Final Prospectus dated October 31, 1995, as supplemented on November 6,
1995, Annual Report on Form 10-K for year ended December 31, 1995, Form 10-Q for
the quarter ended March 31, 1996, proxy statement for the 1996 annual meeting of
stockholders, and applicable press releases and all other information requested
by such Shareholder from HIE and considered necessary or appropriate in
connection with the HIE Option Shares;
15.3 By HIE. HIE hereby represents and warrants to the Shareholders
and DataView that:
(a) HIE is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Georgia.
(b) The execution and delivery of this Agreement and the
other agreements contemplated hereby to which HIE is a party and the
performance of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of HIE,
including the requisite approval of the Board of Directors of HIE. No
consent from any third party, including, without limitation, any
governmental entity, is required in order for HIE to consummate this
Agreement or the transactions contemplated hereby, and consummation of
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<PAGE> 15
the transactions contemplated by this Agreement will not constitute a
default under any agreement to which HIE is a party or by which it is
bound.
15.4 The provisions of this Section 15 shall survive the closing of
the transactions described in this Agreement.
16. INDEMNIFICATION.
16.1 Indemnification by DataView. DataView agrees to fully
indemnify, defend and hold harmless HIE, its officers, directors, employees and
agents from and against any and all losses, costs, claims, causes of action,
damages, and other liabilities of whatsoever kind or nature arising from or in
connection with (a) any third party claim that any of the DataView Technology
licensed to HIE hereunder infringes upon any patent, copyright, trade secret or
other intellectual property right of such party; and (b) any breach by DataView
of its obligations, representations or warranties under this Agreement or any
agreement referenced herein and attached as an exhibit hereto.
16.2 Indemnification by HIE. HIE agrees to fully indemnify, defend
and hold harmless DataView, its officers, directors, employees and agents from
and against any and all losses, costs, claims, causes of action, damages, and
other liabilities of whatsoever kind or nature arising from or in connection
with any claim by a creditor of DataView relating to any DataView indebtedness
existing on April 1, 1996, that any of the transactions between DataView and HIE
as described herein are prohibited by law; provided, however, that HIE's
aggregate liability under this Section 16.2 shall in no event exceed the sum of
all payments received by HIE under the Purchase Price Note and from the sale of
the Northlake Equipment as described in Section 2.3.
17. NON-DISCLOSURE.
17.1 Each party (a "Receiving Party") through exercise of its rights
under this Agreement may be exposed to the Trade Secrets and Confidential
Information of another party (a "Disclosing Party"). A Receiving Party
acknowledges and agrees that a Disclosing Party's Trade Secrets and Confidential
Information represent a substantial investment by a Disclosing Party. A
Receiving Party also acknowledges and agrees that its disclosure or use of any
of the Disclosing Party's Trade Secrets or Confidential Information, except as
otherwise authorized, would be wrongful and could cause immediate and
irreparable injury to the Disclosing Party.
17.2 Except as expressly permitted under this Agreement, neither a
Receiving Party nor any of a Receiving Party's employees or other personnel,
agents or consultants shall, without the Disclosing Party's express prior
written consent, redistribute, market, publish, disclose or divulge to any other
person, firm or corporation, or use or modify for use, directly or indirectly in
any way for any person or entity: (i) any of the Disclosing Party's Confidential
Information during the term of this Agreement and for a period of two (2) years
after the termination of this Agreement; and (ii) any of the Disclosing Party's
Trade Secrets at any time during which such information shall constitute a Trade
Secret.
18. NOTICES. Any notice or other communication by any party to any other
shall be in writing and shall be given, and be deemed to have been given, if
either deliver personally, by overnight delivery service or mailed, postage
prepaid, registered or certified mail, return receipt requested, addressed as
follows:
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<PAGE> 16
If to HIE:
Healthdyne Information Enterprises, Inc.
1850 Parkway Place - 11th Floor
Marietta, Georgia 30067
Attention: President and Chief Executive Officer
With a copy to:
Troutman Sanders LLP
600 Peachtree Street
Suite 5200
Atlanta, Georgia 30308-2216
Attention: James L. Smith, III, Esq.
If to DataView:
DataView Imaging International, Inc.
5555 Oakbrook Parkway
Suite 530
Norcross, Georgia 30093
Attention: President and Chief Executive Officer
If to Farhy:
Kurt T. Farhy
1591 Annapolis Way
Grayson, Georgia 30221
If to Bigelow:
Richard Bigelow
1490 Sever Woods Court
Lawrenceville, Georgia 30243
If to Ernissee:
John Ernissee
3040 Callie Still Road
Lawrenceville, Georgia 30245
A party may change the address for notice by notifying the other party, in
writing, of the new address.
19. TERMINATION AND SURVIVAL. This Agreement shall terminate when all of
the DataView Obligations have been satisfied; provided however that the
provisions of Sections 4, 6, 15, 16, 17 and 19 shall survive the closing of the
transactions contemplated hereunder.
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20. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in
accordance with the law of the State of Georgia.
(b) Neither party may assign this Agreement to a third
party without the prior written consent of the other party, which
shall not be unreasonably withheld; provided that HIE may assign this
Agreement or any of its rights hereunder to any affiliate of HIE not
in direct competition with DataView in the clinical image management
products market at the time of such assignment.
(c) This Agreement shall be binding upon, and shall inure
to the benefit of, the respective successors and permitted assigns of
the Shareholders, HIE and DataView.
(d) Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provision hereof or affecting the
validity or enforceability of such provision in any other
jurisdiction.
(e) This Agreement, including all Exhibits and Schedules
attached hereto (which are incorporated herein by this reference),
contains the entire agreement and understanding concerning the subject
matter hereof between the parties hereto.
(f) This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute the same Agreement. Any signature
page of any such counterpart, or any electronic facsimile thereof, may
be attached or appended to any other counterpart to complete a fully
executed counterpart of this Agreement, and any telecopy or other
facsimile transmission of any signature shall be deemed an original
and shall bind such party.
(g) Each party has reviewed, and participated in drafting
and revising, this Agreement in the normal rule of construction that
any ambiguity is to be resolved against the drafting party shall not
be employed in the interpretation of this Agreement.
(h) Any reference in this Agreement or in any certificate
delivered pursuant hereto to Shareholder's "knowledge" whether to the
"best of Shareholder's knowledge" (or other similar expressions
relating to the knowledge or awareness of a Shareholder) shall include
all matters which a Shareholder actually knew or should have known
after reasonable inquiry.
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IN WITNESS WHEREOF, this Agreement has been duly executed on the day
and year first above written.
HEALTHDYNE INFORMATION
ENTERPRISES, INC.
By:/s/ Joseph G. Bleser
-------------------------------
Title: Chief Financial Officer
DATAVIEW IMAGING INTERNATIONAL, INC.
By:/s/ Kurt Farhy
-------------------------------
Title: President
/s/ Kurt Farhy
----------------------------------
Kurt Farhy
/s/ Richard Bigelow
----------------------------------
Richard Bigelow
/s/ John Ernissee
----------------------------------
John Ernissee
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<PAGE> 19
SCHEDULES AND EXHIBITS
TO THE AGREEMENT DATED
APRIL 1, 1996, BETWEEN
HIE, DATAVIEW, KURT FARHY, JOHN ERNISSEE AND RICHARD BIGELOW
<TABLE>
<CAPTION>
DOCUMENT DESCRIPTION
-------- -----------
<S> <C>
Exhibit A Non-recourse Promissory Note
Exhibit B Stock Pledge Agreement
Exhibit C Distribution Agreement
Attachment A Fee Schedule
Attachment B Territory Location
Attachment C Location of Distributor
Attachment D License Agreement
Attachment E DataView End User Form
Attachment F Mini-PACS Minimum Pricing
Attachment G Monthly Report Form
Attachment H DataView Special Terms and Conditions
Exhibit D Option Agreement
Schedule 1.11 Description of Northlake Equipment
Schedule 10(a) Maximum Guaranteed Payments
Schedule 15.1(a) Ownership of Shares
Schedule 15.1(b) Authorization
Schedule 15(c) Liens
Schedule 15(d) Financial Statements
Schedule 15(e) Title to and Condition of Property
Schedule 15.2 Press Releases
</TABLE>
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The Company agrees to furnish supplementally a copy of any omitted schedule to
the Commission upon request.
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<PAGE> 1
EXHIBIT 10
HEALTHDYNE INFORMATION ENTERPRISES, INC.
1996 EBU TANDEM STOCK OPTION PLAN
---------------------------------
ARTICLE I
PURPOSE
-------
1.1 The HEALTHDYNE INFORMATION ENTERPRISES, INC. 1996 EBU Tandem
Stock Option Plan is intended to advance the interests of Healthdyne Information
Enterprises, Inc., its shareholders and its subsidiaries by attracting,
retaining and stimulating the performance of officers, key employees,
consultants and advisors of the Company's Entrepreneurial Business Units ("EBU")
of high caliber and potential upon whose judgment, initiative and effort
Healthdyne Information Enterprises, Inc. is largely dependent for the successful
conduct of its business, and to encourage and enable such officers, key
employees, consultants and advisors to acquire and retain a proprietary interest
in Healthdyne Information Enterprises, Inc. and its EBU's by ownership of their
respective stock. Options granted may, if so intended by the Committee (as
hereafter defined), be designed to meet the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended.
ARTICLE II
DEFINITIONS
2.1 "Board" means the Board of Directors of the Company.
2.2 "Code" means the Internal Revenue Code of 1986, as amended.
2.3 "Common Stock" means the Company's Common Stock, par value
$.01 per share.
2.4 "Committee" means the Stock Option Committee appointed by the
Board in accordance with Section 4.1.
2.5 "Company" means Healthdyne Information Enterprises, Inc.
2.6 "Date of Grant" means the date on which an Option is granted
under the Plan.
2.7 "Fair Market Value" shall be the mean between the highest and
the lowest quoted selling prices at which the Common Stock is sold in the
regular way on the National Association of Securities Dealers Automated
Quotation System (NASDAQ) or on any similar securities
<PAGE> 2
exchange on the day an Option is granted hereunder or, in the absence of any
reported sales on such day, the first preceding day on which there were such
sales. If the Common Stock is not listed on NASDAQ or any similar exchange for
the public trading of securities, the Committee shall determine on a semi-annual
basis the Fair Market Value in whatever way it considers appropriate under the
circumstances taking into account the financial condition of the Company as
reflected in its financial statements and available independent third party
(such as analysts) estimates of such Fair Market Value. Any such determination
of Fair Market Value shall remain effective until the next semi-annual
determination.
2.8 "Incentive Stock Option" means a stock option granted under the
Plan which is intended to meet the requirements of Section 422 of the Code or
any similar provision thereto.
2.9 "1934 Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
2.10 "Nonqualified Stock Option" means a stock option granted under
the Plan which is not an Incentive Stock Option.
2.11 "Option" means a Nonqualified Stock Option or an Incentive
Stock Option granted under the Plan.
2.12 "Optionee" means a person to whom an Option, which has not
expired, has been granted under the Plan.
2.13 "Parent" means any corporation which qualifies as a parent of the
Company under the definition of "parent corporation" in Section 424(e) of the
Code.
2.14 "Plan" means this Healthdyne Information Enterprises, Inc. 1996
EBU Tandem Stock Option Plan.
2.15 "Stock Option Agreement" means an agreement between the Company
and an Optionee under which the Optionee may purchase Common Stock thereunder.
2.16 "Subsidiary" or "Subsidiaries" means a subsidiary corporation
or corporations of the Company as defined in Section 424(f) of the Code or,
solely for purposes of granting Nonqualified Stock Options hereunder, any
partnership or joint venture in which the Company is a partner with at least a
50 percent ownership interest.
2
<PAGE> 3
ARTICLE III
PARTICIPANTS
Options may be granted under the Plan to any person who is or who
agrees to become an officer or key employee of the Company or any of its
Subsidiaries, or a consultant, advisor or other person providing services to the
Company or its EBU's. An employee may be a member of the Board of Directors of
the Company or of any Subsidiary, but no member of the Board of Directors shall
be considered an employee solely by reason of his membership on such Board of
Directors. The Committee may grant options to such persons in accordance with
such determinations as the Committee from time to time in its sole discretion
may make. A member of the Committee shall not act on any determination to grant
an Option to such member and any such determination shall be made by the other
member or members of the Committee.
ARTICLE IV
ADMINISTRATION
4.1 Committee. The Plan shall be administered by a Committee
comprised of three persons (or such lessor or greater number of persons as may
be required or permitted from time to time by Rule 16b-3 under the 1934 Act)
selected by the Board. Each Committee member shall be ineligible, and shall have
been ineligible for the one-year period prior to appointment thereto, for
selection as a person to whom stock of the Company may be allocated or to whom
Options, performance units, or restricted stock may be granted pursuant to this
Plan or, solely to the extent necessary to be deemed a "disinterested person"
within the meaning of Rule 16b-3 under the 1934 Act (or any successor rule of
similar import), in any other similar plan of the Company or any affiliate.
Subject to the express provisions of the Plan, the Committee shall have sole
discretion and authority to determine from among eligible officers, key
employees, advisors, consultants and other persons providing services to the
Company, those to whom and the time or times at which Options may be granted and
the number of shares of Common Stock to be subject to each Option. Subject to
the express provisions of the Plan, the Committee shall also have complete
authority to interpret the Plan, to prescribe, amend, and rescind rules and
regulations relating to it, to determine the details and provisions of each
Stock Option Agreement, and to make all the determinations necessary or
advisable in the administration of the Plan. All such actions and determinations
by the Committee shall be conclusive and binding for all purposes and upon all
persons.
4.2 Majority Rule. A majority of the members of the Committee (or,
if less than three, all of the members) shall constitute a quorum, and any
action taken by a majority present
3
<PAGE> 4
at a meeting at which a quorum is present or any action taken without a meeting
evidenced by a writing executed by a majority of the whole Committee shall
constitute the action of the Committee.
4.3 Company Assistance. The Company shall supply full and timely
information to the Committee on all matters relating to eligible officers,
employees, consultants and advisors, their employment or engagement, death,
retirement, disability or other termination of employment or engagement, and
such other pertinent facts as the Committee may require. The Company shall
furnish the Committee with such clerical and other assistance as is necessary in
the performance of its duties.
ARTICLE V
SHARES OF STOCK SUBJECT TO PLAN
5.1 Limitations. Subject to adjustment pursuant to the provisions
of Section 5.3 hereof, the number of shares of Common Stock which may be issued
and sold hereunder shall be Nine Hundred Fifty-Seven Thousand Five Hundred
(957,500) shares of Common Stock. Such shares may be either authorized but
unissued shares, shares issued and reacquired by the Company or shares bought on
the market for the purposes of the Plan.
5.2 Options Granted Under the Plan. Options to purchase up to an
aggregate of 295,000 shares of Common Stock which were granted by the Company to
Phil Guy and James Morrison on February 15, 1996 and April 23, 1996 shall be
deemed to have been granted under this Plan. Shares of Common Stock with respect
to which an Option granted hereunder shall have been exercised shall not again
be available for the grant of an Option hereunder. If an Option granted
hereunder shall terminate for any reason (including, without limitation, the
surrender of the Option by the Optionee in connection with the grant of a new
Option on the same or different terms or the expiration of the Option for any
reason) without being wholly exercised, the number of shares to which such
Option termination relates shall again be available for grant hereunder.
5.3 Antidilution. In the event that the outstanding shares of
Common Stock hereafter are changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another corporation by
reason of merger, consolidation, other reorganization, recapitalization,
reclassification, combination of shares, stock split-up or stock dividend, or in
the event that there should be any other stock splits, stock dividends or other
relevant changes in capitalization occurring after the effective date of this
Plan:
(a) The aggregate number and kind of shares subject to
Options which may be granted hereunder shall be adjusted appropriately;
4
<PAGE> 5
(b) Rights under outstanding Options granted hereunder,
both as to the number of subject shares and the Option price per share, shall be
adjusted appropriately; and
(c) Where dissolution or liquidation of the Company or any
merger or combination in which the Company is not a surviving corporation is
involved, each outstanding Option granted hereunder shall terminate, but the
Optionee shall have the right, immediately prior to such dissolution,
liquidation, merger, or combination, to exercise his Option in whole or in part,
to the extent that it shall not have been exercised, without regard to any
vesting or installment exercise provisions.
The foregoing adjustments and the manner of application of the
foregoing provisions shall be determined solely by the Committee, in accordance
with Treasury Regulation Section 1.425-1(a) or its successor regulation or
ruling such that the adjustment shall not cause a reissuance of the Option, and
any such adjustment may provide for the elimination of fractional share
interests.
ARTICLE VI
OPTIONS
6.1 Option Grant and Agreement. Each Option granted hereunder shall
be evidenced by minutes of a meeting or the written consent of the Committee and
by a written Stock Option Agreement dated as of the Date of Grant and executed
by the Company and the Optionee. Each Option granted by the Committee shall be
designated by the Committee as an Incentive Stock Option or a Nonqualified Stock
Option and, once granted, may not be amended to be the other kind of Option
unless such amendment shall cause the provisions of the Option to conform to the
requirements of this Plan in respect to the other kind of Option. The Stock
Option Agreement shall set forth such terms and conditions as may be determined
by the Committee to be consistent with the Plan, but may include additional
provisions and restrictions, provided that they are not inconsistent with the
Plan. Nothing in this Plan shall preclude the Committee from issuing or agreeing
to issue new Options to any holder upon the condition that all or any portion of
such holder's then outstanding Options be surrendered for cancellation
regardless of whether the exercise price of such new Options is higher or lower
than, or the other terms different from, the surrendered Options.
6.2 Option Price. The per share Option price of the Common Stock
subject to each Option shall be determined by the Committee, provided that the
per share price shall not be less than the Fair Market Value of the Common Stock
on the date the Option is granted.
6.3 Tandem Stock Options. Each Optionee shall be entitled to
receive a stock option (the "Tandem Options") issued under a Stock Option Plan
of one or more of the EBU's (the "EBU Plans") providing for the right to
purchase shares of common stock of the EBU in such
5
<PAGE> 6
amounts and at such prices as shall be determined by the Committee. The exercise
of an Option, in whole or in part, shall result in the simultaneous expiration
(without the issuance of any EBU common stock) of the proportionate amount
(based on the rate established at the Date of Grant) of shares under the EBU
Option relating to the number of shares of Common Stock exercised under the
Option. Conversely, the exercise of an EBU Option, in whole or in part, shall
result in the simultaneous expiration of the proportionate amount (based on the
rate established at the Date of Grant) of the Company Option. In the event of
the termination or expiration of an Option granted under the Plan, the Tandem
Option shall automatically terminate.
6.4 Option Period. Each Option granted hereunder may be granted at
any time after the effective date of the Plan and prior to the termination of
the Plan, provided that no Incentive Stock Option may be granted at any time
more than ten years after the earlier of the date this Plan is adopted by the
Board or approved by the shareholders of the Company. The period for the
exercise of each Option shall be determined by the Committee, provided, however,
that (i) except as otherwise expressly provided in this Plan, the Committee may,
in its discretion, terminate outstanding Options or accelerate the exercise
dates thereunder, upon sixty (60) days' written notice given to the Optionee and
(ii) the period during which each Nonqualified or Incentive Stock Option may be
exercised shall not be later than ten years from the date such Nonqualified or
Incentive Stock Option is granted, provided that Incentive Stock Options granted
to a "10-percent owner" (as defined in Article VII) must be exercised within
five years from the date thereof.
6.5 Option Exercise. Except as provided in Section 6.4, an
Incentive Stock Option may not be exercised at any time unless the holder
thereof is then an employee of the Company, its Parent (if any) or any
Subsidiary. Options may be exercised in whole at any time, or in part from time
to time, with respect to whole shares only, within the period permitted for the
exercise thereof, and shall be exercised by written notice of intent to exercise
the Option with respect to a specified number of shares delivered to the Company
at its principal office, and payment in full to the Company at said office of
the amount of the Option price for the number of shares of the Common Stock with
respect to which the Option is then being exercised. In addition to and at the
time of payment of the Option price, Optionee shall pay to the Company or any
Subsidiary in cash or in Common Stock of the Company, the full amount, if any,
that the Company or any Subsidiary is required to withhold or pay under federal
or state law with respect to the exercise of the Option. Alternatively, the
number of shares delivered by the Company upon exercise of the Option shall be
appropriately reduced to reimburse the Company or the Subsidiary for such
payment.
6.6 Payment. The purchase price for shares of Common Stock
purchased upon exercise of Options shall be paid in cash, in shares of Common
Stock of the Company (not subject to limitations on transfer) valued at the Fair
Market Value of such shares on the trading day immediately preceding the date of
purchase, or a combination of cash and such Common Stock; provided that any
shares of Common Stock tendered for payment shall have been owned for a period
of six (6) months or such other period as in the opinion of the Committee shall
be
6
<PAGE> 7
sufficient for such shares to be considered "mature" shares for purposes of
accounting for the transaction.
6.7 Nontransferability of Option. No Option shall be transferred by
an Optionee otherwise than by will or the laws of descent and distribution.
During the lifetime of an Optionee the Option shall be exercisable only by him,
or, in the case of an Optionee who is mentally incapacitated, the Option shall
be exercisable by his guardian or legal representative.
6.8 Effect of Death or Other Termination of Employment or
Engagement.
(a) Except as otherwise provided in this Section 6.8, if,
prior to a date thirty (30) days from the Date of Grant of an Option (or such
longer time as may be established by the Committee), an Optionee's employment
with the Company or a Subsidiary or engagement by the Company or a Subsidiary as
a consultant or advisor shall be terminated for any reason, or by the act of the
Optionee, the Optionee's right to exercise such Option shall terminate and all
rights thereunder shall cease.
(b) If, on or after thirty (30) days from the date an
Option shall have been granted (or such longer time as may be established by the
Committee), an Optionee's employment with or engagement as a consultant or
advisor by the Company or its Subsidiaries shall be terminated for any reason
other than death, permanent and total disability, for cause, or, in the event of
a Nonqualified Stock Option, retirement, the Optionee shall have the right,
during the period ending sixty (60) days (or such longer time as may be
established by the Committee at the Date of Grant or afterwards) after such
termination, to exercise such Option to the extent that it was exercisable at
the date of such termination of employment or engagement and shall not have been
exercised.
(c) If an Optionee shall die at any time after the Date of
Grant and while in the employ or engagement of the Company or its Subsidiaries
or within 60 days (or such length of time as may be established by the Committee
after the Date of Grant or afterwards) after termination of such employment or
engagement, the executor or administrator of the estate of the decedent or the
person or persons to whom an Option granted hereunder shall have been validly
transferred by the executor or the administrator pursuant to will or the laws of
descent and distribution shall have the right, during the period ending one year
after the date of the Optionee's death, to exercise the Optionee's Option to the
extent that it was exercisable at the date of termination of employment by death
or otherwise and shall not have been exercised; provided, however, such time
period may be shortened in accordance with the provisions of Section 6.3 if a
shortened exercise period is applied to Optionee in general.
(d) If an Optionee shall become permanently and totally
disabled or, with respect to a Nonqualified Stock Option, shall retire at any
time after the Date of Grant, the Optionee (or in the case of an Optionee who is
mentally incapacitated, his guardian or legal representative) shall have the
right, during a period ending one year after such retirement or
7
<PAGE> 8
disability, to exercise such Option to the extent that it was exercisable at the
date of termination of employment or engagement by retirement or disability and
shall not have been exercised; provided, however, such time period may be
shortened in accordance with the provisions of Section 6.3 if a shortened
exercise period is applied to Optionee in general.
(e) If an Optionee's employment with or engagement by the
Company or its Subsidiaries shall be terminated by the Company or any Subsidiary
for serious misconduct, the Optionee's right to exercise such Option shall
immediately terminate and all rights thereunder shall cease. For purposes of
this Plan, the term "serious misconduct" shall include, but not be limited to,
embezzlement or misappropriation of corporate funds, other acts of dishonesty,
significant activities harmful to the reputation of the Company or the
Subsidiaries, a significant violation of Company or Subsidiary policy, willful
refusal to perform, or substantial disregard of, the duties properly assigned to
the Optionee, or a significant violation of any contractual, statutory or common
law duty of loyalty to the Company or the Subsidiaries.
(f) No transfer of an Option by the Optionee by will or by
laws or descent and distribution shall be effective to bind the Company unless
the Company shall have been furnished with written notice thereof and an
authenticated copy of the will and/or such other evidence as the Committee may
deem necessary to establish the validity of the transfer and the acceptance by
the transferees or transferees of the terms and conditions of such Option.
6.9 Rights as Shareholder. An Optionee or a transferee of an Option
shall have no rights as a shareholder with respect to any shares subject to such
Option prior to the purchase of such shares by exercise of such Options as
provided herein. Nothing contained herein or in the Stock Option Agreement shall
create an obligation on the part of the Company to repurchase any shares of
Common Stock purchased hereunder.
6.10 Dividend or Distribution Equivalents. An Optionee, whether or
not his Options are exercisable, shall, in the sole discretion of the Committee,
if specifically approved by the Committee at the Date of Grant or at any time
thereafter, be entitled to receive a payment in cash, stock, rights, warrants,
assets or other securities from the Company, as and when cash dividends or other
distributions of stock, rights, warrants, assets or other securities are payable
or distributed to the holders of the Common Stock of the Company, in the amount
equal to the cash dividend or distribution which would be paid to said Optionee
in respect of all shares subject to such Options were such Optionee the holder
of such shares on the record date for such cash dividend or distribution.
6.11 Notice of Disqualifying Disposition. Each Incentive Stock
Option granted under the Plan shall provide that the employee receiving such
Incentive Stock Option shall notify the Company, in writing, to the attention of
the Chief Financial Officer, in the event that, prior to the later of two years
after the Date of Grant of such Incentive Stock Option or one year after the
transfer of any share to him pursuant to such Option, he shall dispose of such
share, such notice
8
<PAGE> 9
to state the date of disposition, the nature of the disposition and the price,
if any, received for the share.
ARTICLE VII
TEN PERCENT OWNERS
Notwithstanding any other provisions of this Plan, the following terms
and conditions shall apply to Incentive Stock Options granted hereunder to a
"10-percent owner." For this purpose, a "10-percent owner" shall mean an
Optionee who, at the time the Incentive Stock Option is granted, owns stock
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company or of any Parent or Subsidiary. With respect to
a 10-percent owner:
(a) the price at which shares of stock may be purchased
under an Incentive Stock Option granted pursuant to this Plan shall not be less
than 110 percent of the Fair Market Value thereof, said Fair Market Value being
determined in the manner described in Section 2.7, above; and
(b) the period during which any such Incentive Stock
Option may be exercised, to be fixed by the Committee in the manner described
in Section 6.5 above, shall expire not later than five (5) years from the date
the Incentive Stock Option is granted.
ARTICLE VIII
ANNUAL LIMITS
In no event shall the aggregate fair market value (determined as of the
time an Incentive Stock Option is granted) of shares with respect to which an
Incentive Stock Option is initially exercisable by the holder thereof, in any
calendar year (under all Incentive Stock Options granted under all plans of the
Company, its Parent (if any), or its Subsidiaries) exceed $100,000.
ARTICLE IX
OTHER TERMS AND CONDITIONS
Any Incentive Stock Options granted hereunder shall contain such and
additional terms, not inconsistent with the terms of this Plan, which are deemed
necessary or desirable by the Committee, which terms, together with the terms of
this Plan, shall constitute such Incentive Stock Option as an "Incentive Stock
Option" within the meaning of Section 422 of the Code and lawful regulations
thereunder.
9
<PAGE> 10
ARTICLE X
STOCK CERTIFICATES
10.1 Conditions. The Company shall not be required to issue or
deliver any certificate for shares of Common Stock purchased upon the exercise
of any Option granted hereunder or any portion thereof prior to fulfillment of
all of the following conditions:
(a) The completion of any registration or other
qualification of such shares under any federal or state law or under the rulings
or regulations of the Securities and Exchange Commission or any other
governmental regulatory body, or the receipt of a written representation that
the shares to be acquired upon such exercise are to be acquired for investment
and not for resale or with a view to the distribution thereof, which the
Committee shall in its sole discretion deem necessary or advisable;
(b) The obtaining of any approval or other clearance from
any federal or state governmental agency which the Committee shall in its sole
discretion determine to be necessary or advisable;
(c) The lapse of such reasonable period of time following
the exercise of the Option as the Committee from time to time may establish for
reasons of administrative convenience; and
(d) Satisfaction by the Optionee of all applicable
withholding taxes or other withholding liabilities.
10.2 Legends. The Company reserves the right to legend any
certificate for shares of Common Stock, conditioning sales of such shares upon
compliance with applicable federal and state securities laws and regulations.
ARTICLE XI
TERMINATION, AMENDMENT, AND MODIFICATION OF PLAN
The Board may at any time, upon recommendation of the Committee,
terminate, and may at any time and from time to time and in any respect, amend
or modify the Plan; provided, however, that no such action shall impair the
rights of any holder of an Option theretofore granted; and further provided,
that (unless and until such time as shareholder approval is no longer required
under the 1934 Act, applicable exchange listing requirements or NASDAQ
10
<PAGE> 11
requirements and applicable corporate law) no such action of the Board without
approval of the shareholders of the Company may:
(a) Increase the total number of shares of Common Stock
subject to the Plan, except as contemplated in Section 5.3 hereof;
(b) Change the manner of determining the Option price; or
(c) Change the class of people who may become participants
in the Plan; provided, further, that no termination, amendment, or modification
of the Plan shall in any manner affect any option theretofore granted under the
Plan without the consent of the Optionee or transferee of the Option, shall
extend the maximum period during which Options may be exercised, or withdraw the
administration of the Plan from the Committee or the Board.
ARTICLE XII
MISCELLANEOUS
12.1 Employment or Engagement. Nothing in the Plan or in any Option
granted hereunder or in any Stock Option Agreement relating thereto shall confer
upon any director, officer, employee, advisor or consultant the right to
continue as such with the Company or any Subsidiary.
12.2 Other Compensation Plans. The adoption of the Plan shall not
affect any other stock option or incentive or other compensation plans in effect
for the Company or any Subsidiary, nor shall the Plan preclude the Company from
establishing any other forms of incentive or other compensation for employees of
the Company or any Subsidiary.
12.3 Plan Binding on Successors. The Plan shall be binding upon the
Company, its successors and assigns, and the Optionee, his executor,
administrator and permitted transferees.
12.4 Singular, Plural; Gender. Whenever used herein, nouns in the
singular shall include the plural, and the masculine pronoun shall include the
feminine gender.
12.5 Headings, etc., Not Part of Plan. Headings of Articles and
Sections hereof are inserted for convenience and reference; they constitute no
part of the Plan.
12.6 Compliance With Laws. The Plan, the grant and exercise of
Options hereunder, and the obligation of the Company to sell and deliver shares
under such Options, shall be subject to all applicable laws, rules, and
regulations, including, but not limited to, those of the United States and its
states, and to such approvals by any government or regulatory agency as may be
required.
11
<PAGE> 12
12.7 Governing Law. This Plan shall be construed and interpreted in
accordance with and governed by Georgia law, to the extent such construction and
interpretation does not adversely affect the treatment of any Option as an
Incentive Stock Option under the Code.
12
<PAGE> 1
Exhibit 11
Healthdyne Information Enterprises, Inc. and Subsidiaries
Statements of Computation of Per Share Earnings (Loss)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- --------------------------
1996 1995 1996 1995
---- ---- ---- ----
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net earnings (loss) $256 $(1,082) $366 $(1,889)
----- ------- ---- -------
Primary shares:
Weighted average number of
common stares outstanding 17,029 15,500 16,815 15,500
Additional shares issuable from
assumed exercise of options 1,874 --(1) 1,874 --(1)
----- ------- ------ -------
18,903 15,500 18,689 15,500
------ ------- ------ -------
Earnings (loss) per common share
and common share equivalent $0.01 $(0.07) $0.02 $(0.12)
----- ------- ----- -------
Fully diluted shares:
Weighted average number of
common shares outstanding 17,029 15,500 16,815 15,500
Additional shares issuable from
assumed exercise of options 1,874 --(1) 1,874 --(1)
------ ------- ------ -------
18,903 15,500 18,689 15,500
------ ------- ------ ------
Earnings (loss) per common share
and common share equivalent $0.01 $(0.07) $0.02 $(0.12)
----- ------- ----- -------
</TABLE>
Note (1): Since stock options are antidilutive to the loss per common share
calculations, they are not considered in such calculations.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM THE HEALTHDYNE
INFORMATION ENTERPRISES, INC. CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR
THE SIX MONTHS ENDED JUNE 30, 1996 AND THE HEALTHDYNE INFORMATION ENTERPRISES,
INC. CONSOLIDATED CONDENSED BALANCE SHEET AS OF JUNE 30, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,812
<SECURITIES> 0
<RECEIVABLES> 4,226
<ALLOWANCES> 68
<INVENTORY> 0
<CURRENT-ASSETS> 7,571
<PP&E> 1,543
<DEPRECIATION> 317
<TOTAL-ASSETS> 22,168
<CURRENT-LIABILITIES> 5,073
<BONDS> 5,306
0
0
<COMMON> 172
<OTHER-SE> 11,450
<TOTAL-LIABILITY-AND-EQUITY> 22,168
<SALES> 0
<TOTAL-REVENUES> 7,267
<CGS> 0
<TOTAL-COSTS> 2,535
<OTHER-EXPENSES> 4,131
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 235
<INCOME-PRETAX> 366
<INCOME-TAX> 0
<INCOME-CONTINUING> 366
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 366
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
