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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1996
Commission File Number 0-16288
HALIS, INC.
(Exact name of Registrant as specified in its charter)
Georgia 58-1366235
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
9040 Roswell Road, Suite 470
Atlanta, Georgia 30350
(770) 641-5555
(Address of principal executive offices,
including zip code, and telephone number, including area code)
Securities registered pursuant to section 12(b) of the Act: None
Securities registered pursuant to section 12(g) of the Act: Common Stock, $.01
par value
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 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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Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained herein, and no disclosure will be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
Revenues for the fiscal year ended December 31, 1996: $1,925,412
The aggregate market value of the Common Stock of the Registrant held
by nonaffiliates of the Registrant (approximately 12,208,221 shares) on April 7,
1997 was approximately $22,463,000. The aggregate market value was computed by
reference to the average of the bid and asked prices of the Common Stock the
Nasdaq Bulletin Board on April 7, 1997. For the purposes of this response,
officers, directors and holders of 5% or more of the Registrant's Common Stock
are considered to be affiliates of the Registrant at that date.
The number of shares outstanding of the Registrant's Common Stock as of
April 7, 1997 was 29,943,021 shares.
DOCUMENTS INCORPORATED BY REFERENCE
None
Transitional Small Business Disclosure Format (check one):
Yes No X
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PART I
ITEM 1. BUSINESS
GENERAL
HALIS, Inc. ("HALIS" or the "Company"), based in Atlanta, Georgia, is a
publicly traded company and supplier of information technology and services,
focusing on the healthcare industry. HALIS currently is implementing a corporate
strategy which combines external acquisitions and internal sales growth,
including the development of business partner relationships.
HALIS has offices in Atlanta and Chicago and intends to expand its
geographic presence to Florida, Texas, California and the Northeast. The Atlanta
operation includes sales, service, and consulting functions, and currently
serves as the HALIS national Customer Service Center. The Chicago facility
performs healthcare technology-driven services and may serve as the Company's
outsourcing center for customers who wish to take advantage of the HALIS
technology, but do not wish to operate their own internal systems.
Utilizing advanced healthcare models and information technology not
previously available to the marketplace, HALIS has developed a single program
for the healthcare industry. This Healthcare Enterprise System integrates all of
the major functions needed by the eight major markets into which HALIS competes.
Subsets of or all of the Healthcare Enterprise System can be used by each of
these markets and can be combined to provide a complete solution for Integrated
Healthcare Delivery Networks. These Networks are being formed by hospitals,
clinics, payers, practice management companies, individual practices, and other
entities which are involved in the delivery and management of healthcare
services.
The Company's systems business will be targeted to healthcare industry
participants such as physician practices, HMO's, home healthcare providers and
hospitals. The Company expects to capitalize on the healthcare industry's demand
for more software variety, updates, convenience, lower pricing, and better
support services. In addition, the Company will provide information management
systems to management companies to help manage their point-of-care systems
information. For example, in the healthcare industry, the Company will provide
an information management system to managed care organizations that will aid in
managing the networks of medical practices.
COMPANY BACKGROUND
The Company was organized in 1979 by Larry Fisher to provide vertical
software applications for potential business users of IBM minicomputers. The
initial applications provided by the Company consisted principally of business
management software directed at a variety of different businesses, including
pharmacies, supermarkets and general retail, as well as restaurants. Spurred by
the introduction of the IBM Personal Computer, or "PC," the Company developed
its own proprietary PC-based business applications software in 1984. At the same
time, the Company's previously diffuse marketing approach was restructured to
focus on its most successful market niche - the restaurant industry.
Due to a downturn in its business in 1994, the Company was unable to
commit sufficient resources to continue research and development of its products
to keep pace in the hospitality market place. As a result, the market was not
receptive to its products because the Company's competitors were
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able to provide enhancements that were being demanded by hospitality customers.
In 1995, the Company's Board of Directors concluded that the Company needed a
significant shift in its strategic plan to continue in operation. As a
consequence, the Company developed a strategy to grow its business through the
acquisition of select software companies in the hospitality and healthcare
markets. See "--Company Strategy." Pursuant to this strategy, the Company merged
with AUBIS Hospitality Systems, Inc. ("AHS"), AUBIS Systems Integration, Inc.
("ASI") and HALIS Software, Inc. ("HSI") in November 1996. The Company made
three additional acquisitions in January 1997. See "--Recent Acquisitions."
INDUSTRY BACKGROUND
The healthcare industry is undergoing change at an unprecedented rate.
As a user of healthcare services, most of its people have direct experience with
some of these changes. Hospitals are buying physician practices; individual
practices are combining their efforts and forming independent practice
Associations; Physician Practice Management companies are either buying or
managing groups of practices and clinics; and insurance companies are entering
many of these markets.
The implications of these changes are numerous, but one of the key
factors in the success of each of these organizations is the availability of
information throughout the organization, beginning at the point of service. It
is estimated that as many as 90 manual steps are required to service a patient
and process a claim generated by an office visit. The process is fraught with
error; the physician often does not know all of the patient's history, and if
and how much he or she will be paid for the performance of a given service due
to the complexities in the benefit plans and management contracts under which
the practice operates.
As a result of the new healthcare environment, management expects
significant increases in spending on healthcare technology and related services
over the next several years. Historically, the industry has spent approximately
two to three percent of its revenues on information technology and services,
compared to six to ten percent of revenues for companies in other industries,
according to published research reports. Management believes that, over the next
several years, spending on healthcare technology and related services will
approach the levels experienced by other industries. This trend, combined with
the overall growth of the health care industry, is expected by management to
yield significant opportunities for companies who deliver information technology
products and services to the healthcare market.
Healthcare delivery costs have increased dramatically in recent years.
The growing influence of managed care has resulted in increasing pressure on
participants in the healthcare system to contain costs. Accordingly, healthcare
systems are migrating toward more managed care reimbursement, including
discounted fee for service and capitation. Under capitation, providers are paid
a predetermined fee per individual to provide all healthcare services, thereby
assuming the potential financial risks of escalating healthcare costs.
To deliver care in a more cost-effective manner, providers are forming
integrated health delivery networks that may include acute-care hospitals,
physicians' offices, outpatient clinics, homecare and long-term care facilities.
The success of these comprehensive delivery networks is dependent on, among
other things, effectively managing and delivering information to caregivers and
managers across multiple points of care.
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Traditionally, the hospital information systems market has been the
largest segment of healthcare information services. According to industry
analysts, in 1995 the healthcare industry spent approximately $10 billion for
products and services to support automated information systems, and the growth
rate is expected to continue to rise, reaching an expected $28 billion by the
year 2000.
The current market of healthcare and related businesses in the United
States is estimated to be more than $1 trillion. International markets provide
even greater opportunity. The immediate domestic market potential for the
Company's software products and technology services is estimated to be a
universe of 3.4 million businesses representing more than $15 billion in annual
revenue.
In addition to this expanding market opportunity, the demand for
healthcare information systems is also increasing as hospitals and other
providers come under increased pressure to quantify and control their costs. As
a result, many providers are spending more on systems which enable them to
access such information. According to the 1995 Annual HIMSS/HP Leadership
Survey, an industry survey conducted by Hewlett Packard at the Healthcare
Information and Management Systems Society conference, 75% of the respondents
stated that their information system investments will increase at a rate of 20%
or more over the next two years.
Healthcare information systems are evolving to meet the needs of a
changing marketplace. Initially, these systems were financially oriented,
focusing on the ability to capture charges and generate patient bills. However,
as reimbursement has shifted more toward risk sharing and capitation, providers
and payers are seeking to better manage risk by controlling costs, demonstrating
quality, measuring outcomes and influencing utilization. Each of these goals
requires the collection, analysis and interpretation of clinical and financial
information related to the delivery of healthcare.
Management believes that the availability of a complete, timely and
cost-effective patient focused information system is essential to controlling
costs while providing high quality patient care. Source of patient information
usually includes a number of different sites. Therefore, current and historical
paper records must be made available by computer to all points-of-care. All
participants in the delivery network need information systems that can capture
data at the point-of-care, communicate data across the continuum of care and
process and store large volumes of data necessary for the development of the
computer-based longitudinal patient record.
Information technology in healthcare has historically had a "bottom up"
approach. Software applications such as billing, admissions, claims processing,
patient registration, medical records, contract management, and others were
developed individually using rigid programming techniques. Over time, many of
these systems were "interfaced" to each other in order to provide a more
complete solution. The piecing together of these disparate applications,
however, has caused significant problems in the development, implementation, and
enhancement of any or all of these systems. Each time a change is made to one
area of the system, many other different programs, normally written by different
groups of people, have to be changed to match each other. This process results
in long lead times and high cost of both acquisition and on-going utilization
and upgrading of the system.
It is not uncommon for a hospital to have more than 10 different
application systems (up to 50 different systems in larger hospitals) installed
to perform the functions of admissions, billing, patient registration, insurance
processing, internal reporting, laboratory information, pharmacy records,
contract management, and eligibility, as well as up to 20 additional
applications. A typical software application can cost in excess of $200,000, and
the total expenditure for the hospital can be over $5.0 million for
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software alone. Annual software support can run as much as $600,000 or more, and
changes to the software programs create additional charges to the hospital.
Physician practices have the same situation on a smaller cost scale, and can
spend up to $10,000 or more for the initial software license fees, plus support
and customization.
There are estimated to be approximately 120 million combinations of
computer instructions required to perform today's healthcare industry and
enterprise-wide applications. Using traditional "hard coding" of computer
instructions, this simply cannot practically be done. Therefore, most systems in
the market today have difficulty producing the total solution that the changing
healthcare environment demands. Traditional programming techniques do not offer
a quality, cost effective path to the future for today's customers.
THE HALIS HEALTHCARE ENTERPRISE SYSTEM
HALIS has developed an advanced and modern healthcare information model
and a single program for the healthcare industry, the HALIS Healthcare
Enterprise System. Using superior healthcare information models and advanced
database techniques, HALIS offers a totally integrated, not interfaced, top down
approach to healthcare information systems. The HALIS Healthcare Enterprise
System can be used in its entirety for an Integrated Healthcare Delivery
Network, or subsets can be used for clinics, hospitals, practices, payers, long
term care facilities, laboratories, pharmacies, and home healthcare.
In addition, HALIS' system is telemedicine-ready for remote
capabilities. HALIS has eliminated more than 90% of the programming effort and
duplicity that other systems have required by placing most of the program logic
into its multi-media object database. Instead of literally thousands of
"if/then" programming statements for each healthcare event, which require
significant personnel and computer time to execute, the HALIS system directly
locates the relevant mathematical and decision operations and relationships in
the database. In addition, the HALIS system is designed to allow the user to
update most items in the database directly, virtually eliminating the user's
dependence on the software supplier to make such changes. In addition, the
single HALIS system eliminates the need for redundant data found in all other
systems. It is estimated that more than half, and possibly up to 80% of the
information used by each individual software application is the same as required
by every other application in the system. The HALIS philosophy utilizes the
relational data-base concept to eliminate this redundancy and streamlines the
development, enhancement and operational process dramatically.
The HALIS technology provides a new level of economies in the
production and maintenance of healthcare systems. HALIS systems are being sold
at over 50% less than competitive systems, with a huge corresponding reduction
in maintenance and support costs. HALIS' cost to continue to provide new
features and functions to its system will be substantially below today's market
costs, since there is only one system to modify, not up to 10 or more disparate
systems. HALIS will use state-of-the-art technology such as videoconferencing
and the Internet to deliver training and product support sales support and
customer service. Each of these techniques is designed to improve user
satisfaction while lowering cost.
In 1997, HALIS will focus on four of the eight primary markets it
expects to penetrate: physician practices, including individual, group and
combinations; hospitals; clinics; and payers. The HALIS Practice Management
System is installed in the field, and is being sold today to practices, practice
management organizations, clinics and hospitals. The HALIS Payer System is
installed in a pilot site and is expected to be ready for general release before
the end of 1997. The HALIS Hospital and Clinic Systems are both currently being
sold as pilots and are expected to be ready for general release by the
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end of 1997. A pilot site is a customer who acknowledges that while the
particular HALIS system being offered is theoretically complete, it must be
field tested in an operational environment, where additional features may be
added to further enhance its usability.
The HALIS Healthcare Enterprise System was developed by the Company
through the healthcare prototype licensed from Paul Harrison Enterprises, Inc.
("PHE"). In November 1996, the Company entered into a perpetual, non-exclusive
transferable license to utilize proprietary technology known as MERAD ("MERAD")
owned by PHE for a license fee of 10% of gross revenues generated from MERAD and
any derivatives thereof by the Company or any of its affiliates. In July 1995,
PHE acquired from Paul Harrison, the Chairman of the Board and Chief Executive
Officer of the Company, certain algorithms and concepts for the creation of an
advanced artificially intelligent software tool called "MERAD." MERAD is a tool
that is utilized to develop application software. Through the use of artificial
intelligence, MERAD can substantially decrease the development time necessary to
create and debug application software. The Company uses MERAD to develop its
medical practice software.
HALIS MEDICAL PRACTICE SYSTEM
The HALIS Medical Practice System is multimedia-ready and open database
compliant (ODBC-SQL Relational), which enables users to add day-to-day changes
in patient data, billing criteria, and quality management in one system. The
principal benefits of the medical practice system include (i) centralization of
patient data, (ii) coverage verification, and (iii) increased collections and
lower billing costs. Applications provided include registration, medical
records, patient encounters, billing, managed care, reports and system support.
HEALTHCARE ENTERPRISE SYSTEM
The Company's Healthcare Enterprise System ("HES") uses a fifth
generation database system that manages data through its integrated
multimedia-object and SQL-relational databases. The HES technology platform
consists of five major integrated parts: the graphical end-user interface; the
program object processor; the multimedia object database; the SQL relational and
open database driver; and the communications network manager.
HES provides a direct connection between the consumer or end-user and
the ready-to-use database driven system. Program data and instruction can be
added in an automated manner without traditional programming knowledge.
Currently, competing software technology and the healthcare industry requires
technical expertise to connect data and processing instructions to a running
program.
HES's ability to respond to conditions and changes makes it appealing
to healthcare industry participants. HES can handle over 100 million conditions
on a single computer workstation by processing database instructions through
reusable formulas. Programmer coded instructions or computer generated coded
instructions often exceed the computer workstation capacity. Therefore, in
industries such as healthcare, many of the conditions and processing needs are
not included in the currently available commercial systems, and most of the
processing is inaccurate and must be handled manually. Alternatively, HES can
handle all the processing conditions and needs of healthcare and other database
information intensive industries.
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COMPANY STRATEGY
The Company has focused on the point-of-service system business in the
healthcare industry (physician practices, MSO's and other managed care
organizations) and is expanding to larger markets such as hospitals. Management
believes that the Company is well positioned to produce new software products
for special segments of the healthcare market using HES and its industry
knowledge obtained from HSI personnel. Management believes that the cost to
produce and support all of the Company's products will be less than other
companies in the marketplace due to the flexibility of the Company's technology
and the fact that the Company has no "legacy" systems to maintain, enhance, or
otherwise invest in. Management believes that the flexibility of the Company's
healthcare software will allow the Company to keep up with the user's demands
for updates to health plan changes, management contract revisions, availability
of new pharmaceutical products, and changes in managed care-driven plans and
practices.
The Company's strategy is to use its software technology to produce
lower cost applications software without compromising margins, to provide full
service to augment its software products, and to build superior distribution
channels, consolidating healthcare information systems distribution and service
companies into the Company as independent business units, and through supplying
distribution companies with the Company's superior healthcare software products.
The Company will manage its operations through its corporate headquarters in
Atlanta, Georgia and strategically located regional offices that can be managed
as profit and loss centers and that can focus on sales and service in different
geographical areas.
The Company's strategic plan is a significant shift in the Company's
past business direction. As a result of the acquisitions of AHS, ASI and HSI in
November 1996 (see "--Recent Acquisitions"), the Company anticipates positioning
itself to capture a portion of the healthcare information systems network and
integration markets. There can be no assurance, however, that the Company will
be successful in this endeavor or that it will be able to achieve or sustain
profitability in the future.
The Company offers current and prospective customers a complete
solution to their healthcare information needs. The Company will be able to
deliver integrated software to virtually every healthcare market segment
including medical practices, home health agencies, hospitals, clinics, long-term
care, labs, pharmacies and payers.
The Company will be able to offer a wide array of healthcare software
through its advanced database technology. The advanced database technology of
HES will enable the Company to market new software by adding a new
market-specific healthcare database to the reusable advanced database
technology. Most companies have had to build or buy each system separately for
each market segment, which has created a mass of fragmented systems for the
healthcare industry.
The Company will address the healthcare systems industry's needs by
automating the production and maintenance of software for all healthcare market
segments through its own version of an automated factory based on the advanced
database technology. Several competitors have attempted to create one technology
to build software for multiple healthcare segments but have had limited success.
The Company believes that the advanced database technology will be instrumental
in automating and integrating the healthcare industry's information cycle.
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In addition to providing a set of integrated software products, the
Company will deliver a complete solution to healthcare organizations through its
ability to implement customized computer hardware, networks, and other
complimentary services through its systems integration and outsourcing groups.
The Company believes that it will have an advantage over its
competitors because its products' "engines" -- the integrated health software
products and its information technology core -- are expected to be effective in
keeping pace with the ongoing changes in healthcare. Many competitors currently
have fragmented, inflexible healthcare software. The Company believes that a
systems integration project can succeed only if the core software foundation
meets the needs of the healthcare customer and the ongoing market changes. The
Company believes that the advanced database technology addresses the information
needs of healthcare companies.
In addition to providing an improved healthcare systems solution, the
Company plans to use an aggressive acquisition strategy. The Company generally
focuses on acquisitions that expand its distribution and service capabilities,
and will be able to market internally generated software products based on one
common advanced database technology. This strategy will assist the Company in
delivering integrated systems to the healthcare markets.
HALIS will utilize business partners, in addition to its acquired
independent business units, to facilitate entry into certain markets and to
increase its geographic presence in key areas of the United States. Presently,
HALIS is pursuing a business relationship with a "big six" accounting firm,
which has conducted a preliminary review of the HALIS products and is currently
recommending HALIS to certain of its healthcare clients that are reviewing
software systems. In addition, through its acquisition of The Compass Group,
Inc., an Atlanta based consulting firm, HALIS is a Global Alliance Partner with
Geac (formerly Dun & Bradstreet Software). HALIS is currently pursuing the
expansion of its relationship with Geac at a corporate and regional level. The
Company has recently been selected as a Geac global alliance partner for
healthcare, and is working with Geac sales and marketing management to identify
Geac customers who are prospects for the Company's software and services. The
Company is also negotiating with other prospective HALIS business partners.
HALIS acquisitions will typically be healthcare technology service
companies (as opposed to product producing companies). HALIS will convert the
"service only" oriented companies to technology-driven companies to increase
market share and value. These companies must project a positive cash flow
within the first year following acquisition in order to be candidates for
acquisition. HALIS intends to use its stock for these acquisitions and infuse
cash only when growing the companies. This model has been followed for the
initial acquisitions. HALIS typically pays between one and two times annual
revenues for an acquisition, deducting from the purchase price any debt.
The acquired companies will be operated as independent business units
("IBU"), with HALIS serving as the managing entity and providing its HALIS
software for sale by each IBU. Each IBU will continue to pursue its current
business interests, while integrating the HALIS products and services to augment
its revenue and profit stream. In addition, certain IBU's may be focused on a
specific market segment, which will provide leverage for HALIS' entry into that
segment in a more timely manner.
HALIS will endeavor to keep its corporate overhead costs low, while
maintaining sufficient staff to implement the business plan and manage holding
company activities such as research and development and customer services. It is
currently planned that each IBU will contribute a very small percentage of
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its revenues to HALIS in exchange for the HALIS management services, and HALIS
will have its own corporate sales force to supplement IBU's and business
partners, which will focus on the larger sales and business development
transactions. During 1997, HALIS intends to implement several pilot sites for
its Hospital, Clinic, and Payer systems, while selling its Practice Management
System product to individual and group practices, practice management companies,
hospital, clinics, and other entities which own or manage practices. Each IBU
will receive training on the HALIS products and services and begin to integrate
them into its own operations.
While the Company believes the strategic plan that it is undertaking
will be successful and in the best interest of the Company, no assurances can be
given that the Company indeed will be successful and that shareholder value will
be enhanced. Risk factors include, among others, (i) timely completion of
modifications and enhancements of the Company's healthcare products, (ii)
continued working capital availability while such products are being developed,
(iii) continued availability of Messrs. Fisher and Harrison (each is subject to
a three year employment agreement), (iv) acceptance of the Company's products by
customers in the healthcare market, and (v) availability of capital for working
capital and acquisitions over the next 12 to 24 months.
RECENT ACQUISITIONS
In November 1996, the Company merged AUBIS Hospitality Systems, Inc.
("AHS") and AUBIS Systems Integration, Inc. ("ASI"), each a wholly-owned
subsidiary of AUBIS, L.L.C. ("AUBIS"), with and into two wholly-owned
subsidiaries of the Company. In connection therewith, AUBIS received 10,000,000
shares of Common Stock of the Company. AHS and ASI are suppliers of network
integration products and services to the healthcare and a variety of other
industries.
ASI has provided value added computer services, network solutions,
connectivity solutions and system integration, principally to Atlanta area
businesses, since 1985. Its trained technical staff has experience in computer
system integration, network configuration and network implementation. ASI has
certified network engineers on staff for LAN and WAN network services. ASI
sells, services and supports many major brands of computers, peripherals and
networks. ASI support services include onsite hardware maintenance as well as
network support programs. ASI offers a local area network design and
installation, wide area network design and installation, cable plant design,
installation and management, network management systems and network trouble
shooting, protocol debugging and performance analysis.
In November 1996, the Company also acquired HALIS Software, Inc.
("HSI"), a wholly-owned subsidiary of HALIS, L.L.C. In connection therewith,
HALIS, L.L.C. received 5,000,000 shares of Common Stock of the Company. HSI is a
supplier of healthcare systems to managed healthcare markets and to medical
practices and related point of service markets. HSI represents an alternative
information system for today's dynamic healthcare environment. The HSI
application software provides a comprehensive system solution to two primary
groups, medical practices and managed care organizations
In January 1997, the Company acquired The Compass Group, Inc., a
software consulting company ("Compass"). In connection therewith, Debra York,
the sole shareholder of Compass, was issued an aggregate of 350,000 shares of
the Company's Common Stock and Compass became a wholly-owned subsidiary of the
Company (the "Compass Subsidiary"). In addition, the Merger Agreement provides
for the issuance of additional shares of the Company's Common Stock at a future
date if certain financial targets are achieved for the year ending December 31,
1997.
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In connection with the Compass merger, the Compass Subsidiary entered
into an employment agreement with Ms. York providing for the employment of Ms.
York as President of the Compass Subsidiary for a term of two years at an annual
base salary of $120,000. In addition, in connection with the consummation of the
Merger, the Company granted to Ms. York non-qualified options to purchase 85,000
shares of the Company's Common Stock at an option price of $2.00 per share. The
options granted to Ms. York are fully exercisable and expire January 10, 2007.
In January 1997, the Company also acquired Software Manufacturing
Group, Inc., a developer and seller of practice management systems for
orthodontists ("SMG"). In connection therewith, the SMG shareholders were issued
an aggregate of 3,072,000 shares of Common Stock and SMG became a wholly-owned
subsidiary of the Company (the "SMG Subsidiary"). In addition, the Merger
Agreement provides for the issuance of additional shares of Common Stock at a
future date if certain financial targets are achieved for the year ending
December 31, 1997.
In connection with the SMG merger, the SMG Subsidiary entered into an
employment agreement with Charles Cone, Jr. providing for the employment of Mr.
Cone as President of the SMG Subsidiary for a term of two years at an annual
base salary of $192,000 plus incentive compensation determined in accordance
with the provisions of his Employment Agreement.
In January 1997, the Company also acquired American Benefit
Administrative Services, Inc. ("ABAS") and Third Party Administrators, Inc.
("TPA"), which provide third party administrative services for healthcare plans
of large and small companies throughout the United States. In connection
therewith, the ABAS and TPA shareholders were issued an aggregate of 1,875,000
shares of Common Stock and ABAS and TPA became a wholly-owned subsidiary of the
Company (the "ABAS/TPA Subsidiary").
Upon consummation of the ABAS and TPA mergers, the ABAS/TPA Subsidiary
entered into an Employment Agreement with Philip E. Spicer providing for the
employment of Mr. Spicer as President and a director of the ABAS/TPA Subsidiary
for a term of three years following the consummation of the mergers (subject to
extension in accordance with the terms of the Employment Agreement). The
Employment Agreement provides for Mr. Spicer to receive an annual base salary of
$200,000 plus incentive compensation determined in accordance with the terms of
Mr. Spicer's Employment Agreement. In addition, Mr. Spicer will receive a
$100,000 signing bonus, payable in two installments with $50,000 due upon
execution of his Employment Agreement and the remainder due on or before July 1,
1997. In addition, the Company granted to Mr. Spicer non-qualified options to
purchase 1,250,000 shares of common stock at an option price of $2.00 per share.
The options granted to Mr. Spicer are fully exercisable and expire on the tenth
anniversary of the date of issuance. Mr. Spicer's Employment Agreement also
provides for certain payments to be made to Mr. Spicer in the event he is
terminated without cause or in the event of a change in control of the ABAS/TPA
Subsidiary.
Upon consummation of the ABAS and TPA mergers, the ABAS/TPA Subsidiary
also entered into an Employment Agreement with Patricia M. Toledano providing
for the employment of Ms. Toledano as Vice President and a director of the
ABAS/TPA Subsidiary for a term of three years following the consummation of the
mergers (subject to extension in accordance with the terms of the Employment
Agreement). The Employment Agreement provides for Ms. Toledano to receive an
annual base salary of $77,000 plus incentive compensation determined in
accordance with the terms of Ms. Toledano's Employment Agreement. In addition,
the Company granted to Ms. Toledano non-qualified options to purchase 100,000
shares of common stock at an option price of $2.00 per share. The options
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granted to Ms. Toledano are fully exercisable and expire on the tenth
anniversary of the date of issuance. Ms. Toledano's Employment Agreement also
provides for certain payments to be made to Ms. Toledano in the event she is
terminated without cause or in the event of a change in control of the ABAS/TPA
Subsidiary.
CUSTOMERS
The Company's customers are expected to include numerous healthcare
industry participants located throughout the United States, including provider
groups and managed care organizations.
COMPETITION
The Company believes that the principal competitive factors in the
healthcare information market are the breadth and quality of system and product
offerings, access to proprietary data, the proprietary nature of methodologies
and technical resources, price and the effectiveness of marketing and sales
efforts. In addition, the Company believes that the speed with which information
companies anticipate and respond to the evolving healthcare industry structure
and identify unmet information needs is an important competitive factor. The
Company believes that, with adequate capital, it will be able to compete
favorably with respect to each of these factors.
The market for healthcare information products and services is
intensely competitive. Competitors vary in size and in the scope and breadth of
products and services offered, and the Company competes with different companies
in each of its target markets. Many of the Company's competitors, such as HBO &
Company, have significantly greater financial, technical, product development
and marketing resources than the Company.
The Company's potential competitors include specialty healthcare
information companies, healthcare information system and software vendors and
large data processing and information companies. Many of these competitors have
substantial installed customer bases in the healthcare industry and the ability
to fund significant product development and acquisition efforts.
PROPRIETARY RIGHTS
The Company's success and ability to compete is dependent in part upon
its proprietary technology, including its software source code. To protect its
proprietary technology, the Company relies on a combination of trade secret,
nondisclosure and copyright law, which may afford only limited protection. In
addition, effective copyright and trade secret protection may be unavailable or
limited in certain foreign countries. Although the Company relies on the limited
protection afforded by such intellectual property laws, it also believes that
factors such as the technological and creative skills of its personnel, new
product developments, frequent product enhancements, name recognition and
reliable maintenance are essential to establishing and maintaining a technology
leadership position. The source code for the Company's proprietary software is
protected both as a trade secret and as a copyrighted work. The Company
generally enters into confidentiality or license agreements with its employees,
consultants and customers and generally controls access to and distribution of
its software, documentation and other proprietary information. Although the
Company restricts the use by the customer of the Company's software and does not
permit the re-sale, sublicense or other transfer of such software, there can be
no assurance that unauthorized use of the Company's technology will not occur.
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Despite the measures taken by the Company to protect its proprietary
rights, unauthorized parties may attempt to reverse engineer or copy aspects of
the Company's products or to obtain and use information that the Company regards
as proprietary. Policing unauthorized use of the Company's products is
difficult. In addition, litigation may be necessary in the future to enforce the
Company's intellectual property rights, to protect the Company's trade secrets,
to determine the validity and scope of the proprietary rights of others, or to
defend against claims of infringement or invalidity. Such litigation could
result in substantial costs and diversion of resources and could have a material
adverse effect on the Company's business, operating results and financial
condition.
Certain technology used in conjunction with the Company's products is
licensed from third parties, generally on a non-exclusive basis. These licenses
usually require the Company to pay royalties and fulfill confidentiality
obligations. The termination of any such licenses, or the failure of the
third-party licensors to adequately maintain or update their products, could
result in delay in the Company's ability to ship certain products while it seeks
to implement technology offered by alternative sources. Any required replacement
licenses could prove costly. Also, any such delay, to the extent it becomes
extended or occurs at or near the end of a fiscal quarter, could result in a
material adverse effect on the Company's results of operations. While it may be
necessary or desirable in the future to obtain other licenses relating to one or
more of the Company's products or relating to current or future technologies,
there can be no assurance that the Company will be able to do so on commercially
reasonable terms or at all.
In the future, the Company may receive notices claiming that it is
infringing on the proprietary rights of third parties, and there can be no
assurance that the Company will not become the subject of infringement claims or
legal proceedings by third parties with respect to current or future products.
In addition, the Company may initiate claims or litigation against third parties
for infringement of the Company's proprietary rights or to establish the
validity of the Company's proprietary rights. Any such claim could be time
consuming, result in costly litigation, cause product shipment delays or force
the Company to enter into royalty or license agreements rather than dispute the
merits of such claims. Moreover, an adverse outcome in litigation or similar
adversarial proceedings could subject the Company to significant liabilities to
third parties, require the expenditure of significant resources to develop
non-infringing technology, require disputed rights to be licensed from others or
require the Company to cease the marketing or use of certain products, any of
which could have a material adverse effect on the Company's business, operating
results and financial condition. To the extent the Company desires or is
required to obtain licenses to patents or proprietary rights of others, there
can be no assurance that any such licenses will be made available on terms
acceptable to the Company, if at all. As the number of software products in the
industry increases and the functionality of these products further overlaps, the
Company believes that software developers may become increasingly subject to
infringement claims. Any such claims against the Company, with or without merit,
as well as claims initiated by the Company against third parties, can be time
consuming and expensive to defend, prosecute or resolve.
EMPLOYEES
As of April 1, 1997, the Company had approximately 82 full-time
employees, including two in senior management. The Company also utilizes
contract personnel for support services, installations of Company systems and
programming. None of the Company's employees is subject to a collective
bargaining agreement, and the Company considers its employee relations to be
good.
The Company's future operating results depend in significant part upon
the continued service of its key technical, consulting and senior management
personnel and its continuing ability to attract and
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retain highly qualified technical and managerial personnel. Competition for such
personnel is intense, and there can be no assurance that the Company will retain
its key managerial or technical personnel or attract such personnel in the
future. The Company has at times experienced difficulty recruiting qualified
personnel, and there can be no assurance that the Company will not experience
such difficulties in the future. The Company actively recruits qualified product
development, consulting and sales and marketing personnel. If the Company is
unable to hire and retain qualified personnel in the future, such inability
could have a material adverse effect on the Company's business, operating
results and financial condition.
FORWARD-LOOKING STATEMENTS
This Report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
and Exchange Act of 1934, as amended, which are intended to be covered by the
safe harbors created thereby. These statements include the plans and objectives
of the Company for future operations. The forward-looking statements included
herein are based on current expectations that involve numerous risks and
uncertainties. The Company's plans and objectives are based on the assumption
that the Company's entry into the healthcare industry will be successful, that
competitive conditions within the healthcare industry will not change materially
or adversely and that there will be no material adverse change in the Company's
operations or business. Assumptions relating to the foregoing involve judgments
with respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of the
Company. Although the Company believes that the assumptions underlying the
forward-looking statements included herein are reasonable, the inclusion of such
information should not be regarded as a representation by the Company, or any
other person, that the objectives and plans of the Company will be achieved.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company's headquarters is located in 4,000 square feet of office
space at 9040 Roswell Road, Atlanta, Georgia. This facility is leased pursuant
to a 55-month lease at a monthly rental of $6,223. The Company also leases
additional space in the greater Atlanta area (approximately 15,000 square feet
in four separate offices) and in Chicago (approximately 10,000 square feet).
ITEM 3. LEGAL PROCEEDINGS.
In February 1997, a complaint styled Advanced Custom Computer
Solutions, Inc., Wayne W. Surman and Charlotte Surman v. Fisher Business
Systems, Inc., HALIS, Inc., Larry Fisher, Paul W. Harrison and Nathan I. Lipson,
was filed in the State Court of Fulton County, Georgia. The complaint alleges,
among other things, breach of contract in connection with the termination by the
Company of its merger agreement with Advanced Custom Computer Solutions, Inc.
("ACCS"), which the Company advised ACCS was terminated in November 1996 due to
the impossibility of ACCS's fulfilling certain conditions to closing therein. In
addition, the complaint alleges that the defendants made false and misleading
statements to the plaintiffs for the purpose of inducing plaintiffs to lend
money to the Company. The complaint seeks damages in the amount of at least $2.0
million (the exact amount of such damages to be proved at trial), additional
damages to be determined by the jury at trial and punitive damages. On March 6,
1997, the defendants filed an answer denying liability and a counterclaim
against Wayne and Charlotte Surman alleging that they made intentional
misrepresentations and concealed material facts for the purpose of inducing the
Company to pursue a merger with ACCS. On March 6, 1997, HALIS Software, Inc.,
moved the Court for permission to intervene in the case to assert a
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counterclaim against ACCS. That motion was granted on March 26, 1997, and on
March 28, 1997, HALIS Software, Inc., filed a counterclaim alleging that ACCS
breached the terms of its Marketing and Licensing Agreement with HALIS Software,
Inc. There can be no assurance that the Company will be successful in its
defense of this lawsuit or that the resolution of this matter will not have a
material adverse effect on the financial condition or results of operation of
the Company.
In August 1995, the Company entered into a Finder's Fee Agreement with
Penny Sellers, pursuant to which the Company agreed to pay Ms. Sellers a
commission equal to 10% of the amount of any equity investments in the Company
or software licensing fees paid to the Company in respect of transactions
introduced to the Company by Ms. Sellers. The compensation payable to Ms.
Sellers pursuant to the Finder's Fee Agreement is limited to $500,000. In late
August 1995, Ms. Sellers introduced the Company to the principals of AUBIS,
L.L.C. ("AUBIS"). To date, the Company has paid $19,350 to Ms. Sellers, which
represents 10% of the investment made by the principals of AUBIS in a private
placement of convertible notes (in which private placement other investors
besides the AUBIS principals participated) and 10% of the amounts received by
the Company from the sale of Fisher Restaurant Management Systems by AUBIS.
Ms. Sellers has claimed that the entirety of a convertible notes
offering completed in 1996 (in which an aggregate of $1,470,000 was raised by
the Company) would not have been successful but for her introduction of the
AUBIS principals to the Company. As a result, Ms. Sellers has made a claim for
10% of all amounts raised in the notes offering. Ms. Sellers has also made a
claim, based on the same rationale, to 10% of all future capital funding raised
by the Company (up to the $500,000 maximum compensation). In this regard, the
Company has recently completed a private placement which raised gross proceeds
of approximately $2.0 million. Finally, Ms. Sellers has made a claim for 10% of
the value of AHS, ASI and HSI, which were acquired by the Company in November
1996. Ms. Sellers has not filed suit with respect to these claims. Management of
the Company believes that these claims are outside the scope of the Finder's Fee
Agreement and intends vigorously to contest them. There can be no assurance,
however, that the Company will be successful in its defense or that the
resolution of this matter will not have a material adverse effect on the
financial condition or results of operation of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On November 18, 1996, the Company held its 1996 Annual Meeting of
Shareholders. At the meeting, the Company's shareholders approved an amendment
to the Articles of Incorporation of the Company to increase the number of
authorized shares of Common Stock from 10,000,000 shares to 100,000,000 shares.
The number of votes cast in favor of the amendment was 5,956,457 shares and the
number of those cast against the amendment was 40 shares. There were no
abstentions.
In addition, the Company's shareholders approved a proposal to ratify
the merger of AUBIS Hospitality Systems, Inc. and AUBIS Systems Integration,
Inc. with and into two wholly owned subsidiaries of the Company; the acquisition
of HALIS Software, Inc.; and the merger of Advanced Custom Computer Solutions,
Inc. with and into a wholly owned subsidiary of the Company. The number of votes
cast in favor of the ratification of these transactions was 5,956,497 shares.
There were no votes cast against the ratification of these transactions and no
abstentions.
The following persons were elected to serve on the Company's Board of
Directors: Paul W. Harrison, Larry Fisher, Jeffrey C. Brenner and Nate Lipson.
The number of votes cast for the election
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of each of the directors was 5,956,497 shares. There were no votes cast against
any of the directors and no abstentions.
Also, the Company's shareholders approved the adoption of the 1996
Stock Option Plan of the Company. The number of votes cast in favor of the Plan
was 5,956,057 shares. There were no votes cast against the Plan. There were 440
abstentions.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
On October 30, 1992, the Company's Common Stock ceased quotation on the
Nasdaq Small Cap Market. Price information on the Company's Common Stock is now
available on the Nasdaq "Bulletin Board." The trading symbol for the Common
Stock is "HLIS."
As of March 17, 1997, there were approximately 188 holders of record of
the Company's Common Stock; however, the Company believes that there are more
than 300 beneficial owners of its Common Stock.
The Company has not paid any dividends and does not expect to do so in
the foreseeable future. Although the payment of dividends rests with the
discretion of the Board of Directors, the Company intends to employ its
earnings, if any, to finance its ongoing operations and to further develop its
business.
Recent Sales of Unregistered Securities. From February 15, 1996 to
September 5, 1996, the Company issued an aggregate of $1,506,000 of 7.0%
Convertible Promissory Notes due January 15, 1998 (the "Notes"). Of this amount,
$36,000 of Notes were issued as consideration for finders fees. Interest on the
Notes is payable quarterly by the Company and the principal thereof (plus any
accrued interest) may, at the option of the holder, be converted into shares of
Common Stock of the Company at a conversion price of $1.00 per share. Any such
conversion must be made on or before January 15, 1998.
On November 19, 1996, the Company issued 10,000,000 shares of Common
Stock to AUBIS, L.L.C. in connection with the merger of AHS and ASI with and
into two wholly-owned subsidiaries of the Company.
On November 19, 1996, the Company also issued 5,000,000 shares of
Common Stock to Healthcare Technology Investments, L.L.C. (formerly, HALIS,
L.L.C.) in connection with the acquisition by the Company of HSI.
On November 19, 1996 and on December 31, 1996, the Company issued an
aggregate of 1,516,975 shares of Common Stock and 657,356 Warrants, resulting in
proceeds of $1,820,370. Each Warrant entitles the holder to purchase one share
of Common Stock at a price of $1.75 per share. Warrants are exercisable for a
period expiring on December 31, 1999. The securities were sold on behalf of the
Company by Attkisson, Carter & Akers Incorporated (the "Placement Agent"), who
received a commission of 8.0% of the sales price of each share sold in the
offering, plus one Warrant to purchase
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shares of Common Stock for each ten (10) shares of Common Stock sold in the
offering. Commissions totaling $145,630 were paid to the Placement Agent and
warrants to purchase 151,698 shares of Common Stock were issued to the Placement
Agent in 1996.
The issuance of securities described above were made in reliance on the
exemption from registration provided by Section 3(b) and/or 4(2) of the
Securities Act of 1933 as transactions by an issuer not involving a public
offering. All of the securities were acquired by the recipients thereof for
investment and with no view toward the resale or distribution thereof. In each
instance, the offers and sales were made without any public solicitation, the
certificates bear restrictive legends and appropriate stop transfer instructions
have been or will be given to the transfer agent. Except as described above, no
underwriter was involved in the transactions and no commissions were paid.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion should be read in conjunction with the
consolidated financial statements of HALIS, Inc. and subsidiaries contained
elsewhere herein. As a result of the acquisitions of AHS, ASI and HSI in
November 1996, which acquisitions were accounted for as a "reverse acquisition,"
the financial statements of the Company are the financial statements of the
"accounting entity," consisting of AHS, ASI and HSI. Accordingly, the financial
statements of the Company are the financial statements of the "accounting
entity" adjusted for the assumed acquisition of the net assets of the Company in
exchange for the issuance of Company common stock outstanding before the
transaction. As a result, the Company's results of operations for the years
ended December 31, 1996 and 1995 consist of the operations of AHS, ASI and HSI
for the entire years and the operations of HALIS, Inc. from November 19, 1996 to
December 31, 1996.
FINANCIAL CONDITION
Total assets increased $492,521 or 76% during the year ended December
31, 1996, due primarily to an increase in cash of $591,338. The increase in cash
results from proceeds of a private placement of Common Stock and Warrants in the
fourth quarter of 1996, and the sale of convertible promissory notes earlier in
the year. See "- Liquidity and Capital Resources."
Total liabilities increased $1,748,101, due primarily to the issuance
of $1,506,000 in convertible promissory notes. At December 31, 1996, the Company
had a working capital deficit of $925,614. The Company's current liabilities
include accounts payable and accrued expenses of $984,444, including accrued
severance payable to a former officer of HSI ($138,000),and notes payable
totalling $354,000, the proceeds of which were utilized to fund operations, and
payroll and sales tax payable of $366,405. Payroll and sales taxes payable at
December 31, 1996, consisted primarily of sales and use taxes for the State of
Georgia. The Company is in the process of negotiating an agreement with the
Georgia Department of Revenue which will call for regular monthly payments. In
January 1997, the Company paid all trust fund taxes owed relative to its
federal payroll tax liability.
As a result of the Company's working capital deficit, coupled with the
fact that the Company has sustained losses from operations since inception, the
Company's independent certified public accountants have included a paragraph in
their audit report accompanying the Company's financial statements regarding the
uncertainties surrounding the Company's ability to continue as a going concern.
Until such time as the Company's healthcare software is accepted in the
marketplace and generates revenues sufficient to support the operations of the
Company, operations will be financed, in
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part, from outside sources. See "- Liquidity and Capital Resources." The Company
also intends to implement certain cost containment measures.
RESULTS OF OPERATIONS
Revenues, which consist of system sales and services, declined 53.7%
from $3,582,896 for the year ended December 31, 1995 ("fiscal 1995") to
$1,925,412 for the year ended December 31, 1996 ("fiscal 1996"), primarily due
to the termination on December 31, 1995 of a distribution agreement with a
significant supplier of AHS and the subsequent withdrawal by AHS from the
hospitality business. This business line accounted for approximately $1.75
million, or 48.8%, of the Company's revenue for fiscal 1995. To offset this
anticipated loss of revenue, AHS had attempted to increase its sales efforts
with respect to selling its other product lines in the fast food segment of the
market and attempted during the first quarter of 1996 to sell the Fisher
Restaurant Management System(R) in the fine dining segment of the market. In
March 1996, AHS made a strategic decision to discontinue the resale of third
party products by AHS in the hospitality market, and the related support
services provided by AHS to the customers thereof. This line of business
accounted for approximately $1.9 million of the Company's revenues in 1995, or
53.0% of total revenues.
During fiscal 1996, AHS experienced a severe cash drain caused by the
loss of its previously referenced product line and slower than expected sales of
its other products. This caused management to reevaluate the focus of AHS'
business, which has been primarily directed to small independent restaurant
operators that require a substantial staff to provide support services. In the
second quarter of 1996, management redirected the focus of AHS and, in
anticipation of the merger of AHS into the Company, decided to direct its
resources to providing software and systems integration services to the
healthcare market through ASI and its relationships with the Company and HSI.
In addition, during fiscal 1996, revenues from HSI decreased by
$263,616, primarily as a result of its decision to terminate the Partners in
Prevention Program and the Managed Care Guide. HSI's major customer for the
Partners In Prevention(TM) program had been Prudential Health Care Systems of
Georgia ("Prudential"). Prudential notified HSI in mid-1996 that it did not
intend to honor the balance of its contract, which had two years remaining.
Prudential is not honoring the balance of its contract for two reasons. First,
the Partners in Prevention Program was inadequate to meet Prudential's needs.
Second, Prudential has decided to cancel the project that utilizes Partners in
Prevention. Lost revenues to HSI as a result of the termination of the contract
by Prudential is approximately $270,000.
The major client for the Managed Care Guide(TM) has been Hoechst Marion
Roussel ("HMR"), an international pharmaceutical company. A contract is
currently in force with HMR that provides HMR a right of first refusal to
distribute the Managed Care Guide(TM) in all major markets in the United States.
The impact upon HSI of HMR's right of first refusal concerning the Managed Care
Guide on a historical basis has been immaterial. HSI has not focused on the
Managed Care Guide as a product in itself and only plans to incorporate the
generic information used to produce the Guide. HSI did not expect to generate
revenues from the Managed Care Guide as a separate product.
The projected impact HMR will have on HSI in general is negligible
because HSI does not plan to market the Managed Care Guide as a product in
itself. HSI plans to only use generic information (public domain type of
information) available to incorporate in the HALIS Healthcare Enterprise System.
In addition, HSI believes that HMR will not exercise its right of first refusal
and would allow HSI to
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distribute (if HSI chose to do so) the Managed Care Guide through other
organizations. If HMR does exercise its right of first refusal, HSI will receive
revenues it would otherwise not generate on its own.
No other contracts contain unilateral customer cancellation features.
The Company's management has been encouraged by the initial marketplace
response to its HES product, as evidenced by four executed contracts for pilot
sales during the first quarter of 1997. Sales of the HES product accounted for
revenues of only $67,615 in fiscal 1996, as it was still in the development
stage for most of 1996. The Company will follow a strategy of carefully
selecting a limited number of pilot sites and subjecting the software to
extensive field use in selected markets prior to officially launching the
product. For that reason, revenues recognized from the HES product in 1997 will
be minimal, but are expected to be more significant in 1998 and beyond.
Selling, general and administrative expenses increased 15.3% from
$1,249,790 in fiscal 1995 to $1,441,572 in fiscal 1996. Although the Company
reduced operating expenses in the ASI and AHS operating units to compensate for
the loss of business addressed above, significant financial resources were
invested in the development of the HALIS Healthcare Enterprise System
($561,694), and the staffing of a senior corporate management team ($295,676).
Additionally, the Company made the decision to merge ProHealth Solutions into
HSI in March of 1996. ProHealth Solutions had developed a database program
called Partners in Prevention, as well as the Managed Care Guide. Management
decided in early 1996 that neither product had marketplace viability as
stand-alone offerings. ProHealth's operating expenses for 1996, prior to being
merged into HSI, were $129,109.
Other expenses in fiscal 1996 include interest expense of $67,613
related to the Company's convertible promissory notes and other notes payable,
as well as interest on the Company's sales and use tax liabilities. Other
expenses also include merger costs of $378,588 incurred primarily in connection
with the reverse acquisition of the Company by AHS, ASI and HSI during the year.
As a consequence of the decrease in revenues during fiscal 1996,
coupled with the increase in selling, general and administrative and other
expenses during the year (both in absolute terms and as a percentage of
revenue), the Company incurred a net loss of $1,989,824 or $0.12 per share for
fiscal 1996. This compares to a net loss of $372,938 for fiscal 1995.
Management believes that the January 1997 acquisitions of Compass, SMG
and ABAS/TPA (see "Business - Recent Acquisitions"), help to position the
Company to capitalize on the HES product as it is introduced into the various
healthcare marketplaces during 1997 and 1998. ABAS, for example, will utilize
the HES product in its current healthcare administration business, and will
serve what the Company believes will be a substantial market of clients who wish
to take advantage of this new technology, but would prefer a transaction fee
arrangement, rather than in-house implementation. SMG will continue to market
its existing software product to the orthodontics market, and will utilize its
sales force to introduce the HES product into the southeastern region of the
U.S. Compass will continue to provide technical electronic data processing
consulting to a variety of businesses and will, in addition, assist in the
development of Business Partner relationships for the marketing of the HES
product. Management's acquisition strategy is to grow the business by adding
independent business units which will project a positive cash-flow within the
first year following acquisition. See "Business - Company Strategy."
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LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1996, operating activities used $1,998,807 in cash,
primarily due to a net loss of $1,989,696 for the year. The net loss stemmed
primarily from the development expenses associated with the HES product
($687,948 of which were charged to expense and $160,995 of which were
capitalized), the revenue decline at AHS and HSI discussed in "- Results of
Operations" and costs associated with the merger with AHS, ASI and HSI in
November 1996.
During fiscal 1996, investing activities provided $1,157,514, primarily
from advances from the Company to AHS, ASI and HSI prior to November 1996 and
the Company's cash on hand at the time of closing the AHS, ASI and HSI
acquisitions. The source of this cash was the proceeds of $1,506,000 in
convertible promissory notes issued in 1996. See discussion below.
Financing activities during fiscal 1996 provided $1,431,631, primarily
the result of $1,398,819 in proceeds from the issuance of stock in the fourth
quarter of 1996.
In September 1996, the Company completed an offering of $1,506,000 of
7.0% Convertible Promissory Notes due January 15, 1998 (the "Notes"). Interest
on the Notes is payable quarterly by the Company and the principal thereof (plus
any accrued interest) may, at the option of the holder, be converted into shares
of Common Stock at a conversion price of $1.00 per share. Any such conversion
must be made on or before January 15, 1998. Approximately $1,165,007 of the
proceeds of this offering were advanced to AHS, ASI and HSI to support their
operations (which advances were accounted for as notes receivable from
affiliates), while the balance of the proceeds from the sale of the Notes were
utilized to expand the Company's sales and marketing capabilities. The advances
to AHS, ASI and HSI were converted to equity upon the acquisition of these
companies in November 1996.
In January 1997, the Company completed a private placement of 1,684,975
shares of Common Stock and 730,156 Warrants, resulting in net proceeds to the
Company of approximately $1.8 million. The net proceeds of the offering were
utilized by the Company to expand its sales and marketing efforts, enhance its
software products, support the growth of its administrative infrastructure, to
fund expenses related to the acquisition of selected healthcare software,
service and system integration companies and for general corporate purposes.
Until such time as the Company's healthcare software is accepted in the
marketplace and generates revenues sufficient to support the operations of the
Company, operations will be financed, in part, from outside sources. The Company
has engaged Attkisson, Carter & Akers Incorporated, a licensed broker-dealer
(the "Placement Agent"), to offer and sell, on a best-efforts basis, up to
2,000,000 shares of Common Stock at a price of $1.50 per share. For each three
(3) shares of Common Stock sold in the offering, the Company will also issue a
warrant to purchase one share of Common Stock (up to a maximum of 666,667
warrants), exercisable at a price of $1.75 per share. Proceeds from the offering
will be utilized by the Company to expand the Company's sales and marketing
efforts, expand the Company's services infrastructure, fund expenses related to
the acquisition of selected healthcare software, service and systems
integration companies and for general corporate purposes. As of April 11, 1997,
the Company had issued 600,000 shares of Common Stock and 260,001 Warrants in
the offering (including 60,000 Warrants issued to the Placement Agent),
resulting in net proceeds to the Company of approximately $810,000.
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The Company will likely require additional capital or other financing
after the completion of this offering to finance its operations and continued
growth, particularly if less than all of the shares offered thereby are sold.
There can be no assurance that the Company will be able to obtain such financing
if and when needed, or that if obtained, it will be sufficient or on terms and
conditions acceptable to the Company.
The Company is in negotiations with a former employee of HSI with
respect to the amount of severence owed by HSI pursuant to the employee's
employment contract. The parties have reached a preliminary agreement on a
settlement of $138,000 (which amount had been accrued by the Company at
December 31, 1996), with $50,000 payable in installments through July 1997 and
a lump sum payment of $88,000 due August 1, 1997. The lump sum amount may,
under certain conditions, be paid in stock of the Company. There can be no
assurrance, however, that a settlement of this matter will be obtained or, if
obtained, will be on the terms described above.
No provision has been made in the financial statements for any
settlements or judgments relating to either of the matters discussed in "Item 3.
Legal Proceedings." In the event of a material judgment or settlement resulting
from either of these matters, the Company would experience an adverse effect on
its liquidity. Additionally, all agreements to date for the HES product have
been for pilot sites and have contingencies. In the event that the pilot testing
identifies substantive modifications to the product which are mandatory for
marketplace feasibility, additional development costs and/or delays in launching
the product could have a material adverse effect on liquidity.
INFLATION
The Company is affected by inflation through increased personnel costs
and other selling, general and administrative expenses. Hardware costs have
generally declined, and this trend is expected to continue.
ITEM 7. FINANCIAL STATEMENTS.
The following financial statements and reports thereon are filed with this
report:
Report of Independent Certified Public Accountants
Consolidated Balance Sheet - December 31, 1996
Consolidated Statement of Operations for the year ended December 31,
1996 and Combined Statement of Operations of the Predecessor for the
year ended December 31, 1995
Consolidated Statement of Stockholders' Deficit for the year ended
December 31, 1996 and Combined Statement of Stockholders' Deficit of
the Predecessor for the year ended December 31, 1995
Consolidated Statement of Cash Flows for the year ended December 31,
1996 and Combined Statement of Cash Flows of the Predecessor for the
year ended December 31, 1995
Notes to Consolidated and Combined Financial Statements
-19-
<PAGE> 21
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
of HALIS, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of HALIS, Inc. and
Subsidiaries as of December 31, 1996, and the related consolidated statements of
operations, stockholders' deficit and cash flows for the year ended December 31,
1996. We have also audited the combined statements of operations, stockholders'
deficit and cash flows of AUBIS Hospitality Systems, Inc. and Subsidiaries,
AUBIS Systems Integration, Inc., HALIS Software, Inc., and ProHealth Solutions,
Inc., [collectively, the Predecessor], for the year ended December 31, 1995.
These consolidated financial statements and combined financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and combined financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements and the
combined financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements and combined financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of HALIS, Inc. and Subsidiaries as
of December 31, 1996 and the Predecessor as of December 31, 1995 and the results
of their operations and their cash flows for the years ended December 31, 1996
and 1995 in conformity with generally accepted accounting principles.
As discussed in Note A to the consolidated financial statements, HALIS, Inc. was
involved in a business combination with the Predecessor that has been accounted
for as a reverse acquisition in which the Predecessor is treated as the acquirer
for accounting purposes; accordingly, the financial statements for periods prior
to November 19, 1996 are the combined financial statements of the Predecessor.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note C to the
consolidated financial statements, the Company has had recurring losses, a
working capital deficit and a capital deficit. These conditions raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note C. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Habif, Arogeti & Wynne, P.C.
Atlanta, Georgia
March 7, 1997, except for Notes C and J, as to which the date is March 31, 1997
-20-
<PAGE> 22
HALIS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
ASSETS
<TABLE>
<S> <C>
Current assets
- --------------
Cash $ 719,989
Receivables, less allowance for possible losses
of $39,027 45,003
Current portion of receivables - related party 13,285
Inventories 10,178
Other current assets 9,886
----------
Total current assets 798,341
----------
Property and equipment, at cost
- ----------------------
Computer equipment 101,777
Office furniture and fixtures 45,349
----------
147,126
Less accumulated depreciation (86,972)
----------
60,154
----------
Other assets
- ------------
Deposits 16,434
Receivables - related party, net of current portion 48,458
Deferred merger costs 32,659
Loan origination fees, net of accumulated
amortization of $18,000 18,000
Capitalized software development costs, net of
accumulated amortization of $-0- 160,995
Other intangible assets, net of accumulated amortization
of $2,059 3,088
----------
279,634
----------
$1,138,129
==========
</TABLE>
See auditors' report and accompanying notes
-21-
<PAGE> 23
HALIS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996
LIABILITIES AND STOCKHOLDERS' DEFICIT
<TABLE>
<S> <C>
Current liabilities
- -------------------
Accounts payable and accrued expenses $ 908,660
Accounts payable and accrued expenses - related party 75,784
Deferred revenue and customer deposits 19,106
Notes payable 210,000
Notes payable - related party 144,000
Payroll and sales tax payable 366,405
------------
Total current liabilities 1,723,955
------------
Long-term debt, net of current portion
- --------------------------------------
Convertible notes payable 1,506,000
------------
Commitments and contingencies (Note G)
- --------------------------------------
Stockholders' deficit
- ---------------------
Common stock $.01 par value, 100,000,000
authorized; 23,972,621 issued and outstanding 239,726
Additional paid-in capital 10,881,151
Stock subscription receivable (240,000)
Accumulated deficit (12,965,953)
Treasury stock (6,750)
------------
(2,091,826)
------------
$ 1,138,129
============
</TABLE>
See auditors' report and accompanying notes
-22-
<PAGE> 24
HALIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
COMBINED STATEMENTS OF OPERATIONS
OF THE PREDECESSOR
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
[Predecessor]
1996 1995
------------ ------------
<S> <C> <C>
Systems sales and services $ 1,925,412 $ 3,582,896
------------ ------------
Costs and expenses
- ------------------
Cost of goods sold 1,656,113 2,613,259
Selling, general, and administrative 1,441,572 1,249,790
Research and development 400,699 -0-
------------ ------------
3,498,384 3,863,049
------------ ------------
Operating loss (1,572,972) (280,153)
- -------------- ------------ ------------
Other income (expense)
- ----------------------
Gain (loss) on asset disposal (8,228) 6,385
Rental income 27,600 21,350
Interest expense (67,613) (22,798)
Interest income 546 1,394
Other income 9,559 315
Merger costs (378,588) -0-
Loss from misappropriation -0- (97,123)
------------ ------------
(416,724) (90,477)
------------ ------------
Loss before income taxes (1,989,696) (370,630)
Income taxes -0- 2,308
- ------------ ------------ ------------
Net loss $ (1,989,696) $ (372,938)
============ ============
Net loss per common share $ (0.12) --
============
Weighted average shares outstanding 15,956,824 --
============
</TABLE>
See auditors' report and accompanying notes
-23-
<PAGE> 25
HALIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
COMBINED STATEMENT OF STOCKHOLDERS' DEFICIT
OF THE PREDECESSOR
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Common Stock Stock Total
------------ Paid-in Subscription Accumulated Treasury Stockholders'
Predecessor Company Shares Amount Capital Receivable Deficit Stock Deficit
- -------------------------------- ---------- -------- ----------- ------------ ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1994 -0- $ -0- $ 375,787 $ -0- $ (1,048,842) $ -0- $ (673,055)
Additional capital contribution -0- -0- 210,500 -0- -0- -0- 210,500
Net loss -0- -0- -0- -0- (372,938) -0- (372,938)
---------- -------- ----------- --------- ------------ ------- -----------
Balances, December 31, 1995 -0- -0- 586,287 -0- (1,421,780) -0- (835,493)
HALIS, Inc.
- --------------------------------
Net loss -0- -0- -0- -0- (1,989,696) -0- (1,989,696)
Additional capital contributed -0- -0- 199,678 -0- -0- -0- 199,678
Assumed purchase of net assets
of Fisher at Predecessor cost 7,455,646 74,556 8,621,537 -0- (9,554,477) (6,750) (865,134)
Issuance of shares in reverse acquisition
of Fisher by HALIS, Inc. 15,000,000 150,000 (150,000) -0- -0- -0- -0-
Issuance of common stock 1,516,975 15,170 1,623,649 (240,000) -0- -0- 1,398,819
---------- -------- ----------- --------- ------------ ------- -----------
Balances, December 31, 1996 23,972,621 $239,726 $10,881,151 $(240,000) $(12,965,953) $(6,750) $(2,091,826)
========== ======== =========== ========= ============ ======= ===========
</TABLE>
See auditors' report and accompanying notes
-24-
<PAGE> 26
HALIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
COMBINED STATEMENT OF CASH FLOWS
OF THE PREDECESSOR
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
[Predecessor]
1996 1995
----------- ---------
<S> <C> <C>
Cash flow from operating activities
- -----------------------------------
Net loss $(1,989,696) $(372,938)
----------- ---------
Adjustments to reconcile net loss to
net cash used by operating activities
Depreciation 15,100 18,896
Amortization 3,279 1,030
Assumption of expenses by parent 32,000 -0-
Allowance for loss on account receivable (40,000) 18,000
Loss (Gain) on disposal of assets 8,228 (6,385)
Changes in assets and liabilities
Decrease (Increase) in accounts receivable 140,031 22,841
Decrease (Increase) in receivables - related party 21,813 (8,048)
Decrease (Increase) in inventories 45,669 (6,196)
Decrease (Increase) in other current assets 71 (5,716)
Increase in intangible assets -0- (5,147)
Increase in deposits (4,230) (8,609)
Increase (Decrease) in accounts payable
and accrued expenses (255,061) 162,902
Increase in accounts payable and
accrued expenses - related party 37,599 88,468
Increase (Decrease) in income tax payable (6,908) 6,908
Increase (Decrease) in deferred revenue
and customer deposits (96,219) 48,266
Increase in payroll and sales taxes payable 90,517 150,569
----------- ---------
Total adjustments (8,111) 477,779
----------- ---------
Net cash provided [used] by
operating activities (1,997,807) 104,841
----------- ---------
Cash flows from investing activities
- ------------------------------------
Purchase of property equipment (16,424) (52,498)
Increase in software development costs (160,995) -0-
Net decrease (increase) in deferred merger costs 137,049 (169,708)
Net proceeds from sale of property and equipment 10,651 -0-
Advances from Fisher and cash received in acquisition 1,187,233 -0-
Insurance recovery from equipment loss -0- 30,677
----------- ---------
Net cash provided [used] by investing activities 1,157,514 (191,529)
----------- ---------
Cash flows from financing activities
- ------------------------------------
Proceeds from issuance of common stock 1,398,819 -0-
Proceeds from additional capital contributions -0- 210,000
Net payments on note payable and line-of-credit (16,088) (17,912)
Proceeds from issuance of notes payable - related party 100,000 11,020
Repayments on notes payable - related party (51,100) -0-
----------- ---------
Net cash provided by financing activities 1,431,631 203,108
----------- ---------
Net increase in cash 591,338 116,420
Cash, beginning of year 128,651 12,231
----------- ---------
Cash, end of year $ 719,989 $ 128,651
=========== =========
</TABLE>
See auditors' report and accompanying notes
-25-
<PAGE> 27
HALIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND THE
COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
FOR THE YEAR ENDED DECEMBER 31, 1995
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of the Company and Basis of Presentation:
HALIS, Inc. (HALIS) and Subsidiaries (collectively, the Company) is a
developer and supplier of healthcare software systems to managed
healthcare markets and to medical practices and related point of
service markets. The Company also provides value added computer
services, network solutions, and connectivity solutions and systems
integration principally to Atlanta area businesses. Additionally, the
Company provides services support, including onsite hardware
maintenance, as well as network support programs.
On November 19, 1996, HALIS, Inc. (f/k/a Fisher Business Systems, Inc.)
issued 15,000,000 shares (66.8%) of its common stock in exchange for
100% of the capital stock of AUBIS Hospitality Systems, Inc. and
Subsidiaries (AHS), AUBIS Systems Integration, Inc. (ASI), and HALIS
Software, Inc. (HSI), which included ProHealth Solutions, Inc. (see
Note B).
The acquisitions set out in the preceding paragraph are being accounted
for as the reverse acquisition of HALIS, Inc. by an "accounting entity"
consisting of AHS, ASI, and HSI (collectively, the Predecessor) because
following the transaction, the former shareholders of AHS, ASI, and HSI
are in control of the Company. Accordingly, the financial statements of
the Company are the financial statements of the "accounting entity"
adjusted for the assumed acquisition of the net assets of HALIS, Inc.
in exchange for the issuance of HALIS, Inc. common stock outstanding
before the transaction. The net assets of the Predecessor are accounted
for at their historical cost.
In accordance with purchase accounting principles pursuant to
Accounting Principles Board Statement No. 16, Business Combinations
(APB 16), the Company accounted for the net assets of HALIS, Inc.
acquired at the fair value of such net assets as of November 19, 1996.
Because of the transactions noted above, the Company's results of
operations for the year ended December 31, 1996 consists of the
operations of AHS, ASI, and HSI for the entire year and the operations
of HALIS, Inc. from November 19, 1996 to December 31, 1996.
Principles of Consolidation:
The consolidated financial statements include the accounts of HALIS,
Inc. and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.
The combined financial statements of the Predecessor include the
accounts of AUBIS Hospitality Systems, Inc. and Subsidiaries, AUBIS
Systems Integration, Inc., HALIS Software, Inc. and ProHealth
Solutions, Inc. All significant intercompany accounts and transactions
have been eliminated.
-26-
<PAGE> 28
HALIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND THE
COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
FOR THE YEAR ENDED DECEMBER 31, 1995
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: [Continued]
Revenue Recognition:
Revenue consists primarily of licensing fees, sales of related computer
hardware, and post contract customer support. The Company accounts for
such revenue in accordance with the American Institute of Certified
Public Accountants' (AICPA) Statement of Position 91-1, Software
Revenue Recognition, as follows:
License Revenue - Revenue from the sales of
software licenses is
recognized after shipment of
the product and fulfillment of
acceptance terms, provided no
significant obligations remain
and collection of resulting
receivable is deemed probable.
Support contract - Ratably over the life of the
contract from the effective
date
Installation, training and education - When the services are provided
Hardware - Upon shipment of computer
equipment to the customer,
provided no significant
obligations remain and
collection of resulting
receivable is deemed probable.
Inventory:
Inventory is recorded on the first-in, first-out method at the
lower-of-cost or market.
Property and Equipment:
Property and equipment is carried at cost. Depreciation is computed
using the straight-line method based on estimated useful lives of the
assets, generally three to seven years. For income tax purposes,
depreciation is calculated on accelerated methods.
Software Development Costs:
In accordance with Statement of Financial Accounting Standards No. 86,
Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed, research and development costs incurred prior to
the attainment of technological and marketing feasibility of products
are charged to operations. Thereafter, the Company capitalizes the
direct costs and associated allocated overhead incurred in the
development of products, until the point of market release of such
products, wherein costs incurred are again charged to operations.
-27-
<PAGE> 29
HALIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND THE
COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
FOR THE YEAR ENDED DECEMBER 31, 1995
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: [Continued]
Software Development Costs: [Continued]
Capitalized costs are amortized over a period of five years on a
straight-line basis, and amortization commences when the product is
available for market release. Unamortized costs are carried at the
lower of book value or net realizable value.
Deferred Merger Costs:
Deferred merger costs will be capitalized as part of the merger
agreements subsequently commenced. (Note M). Deferred merger costs
associated with mergers which were consummated during 1996 (Note B)
were charged to operations in 1996 because the assets balances of
HALIS, Inc. were considered to be at fair value.
Income Taxes:
Income taxes are based on loss for financial reporting purposes and
reflect a current liability (asset) for the estimated taxes payable
(recoverable) in the current year tax return and changes in deferred
taxes. Deferred tax liabilities and assets are recognized for the
estimated tax effects of temporary differences between financial
reporting and taxable income (loss) for the loss carryforwards based on
enacted tax laws and rates. A valuation allowance is used to reduce
deferred tax assets to the amount that is more likely than not to be
realized.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of certain assets,
liabilities, and disclosures including the allowance for doubtful
accounts, inventory reserve, useful lives and recoverability of
long-term assets such as capitalized software development costs. Actual
amounts could differ from those estimates. Any adjustments applied to
estimated amounts are recognized in the year in which such adjustments
are determined.
Reclassifications:
Certain 1995 amounts have been reclassified to conform to 1996
presentation.
B. MERGER AND REORGANIZATION:
On March 7, 1996, ProHealth Solutions, Inc. merged with and into HSI.
HSI continued as the surviving corporation and ProHealth Solutions,
Inc. was the nonsurviving corporation.
-28-
<PAGE> 30
HALIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND THE
COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
FOR THE YEAR ENDED DECEMBER 31, 1995
B. MERGER AND REORGANIZATION: [Continued]
On November 19, 1996, HALIS, Inc., consummated the acquisition of AHS
and ASI, pursuant to the Amended and Restated Agreement and Plan of
Merger and Reorganization, dated December 13, 1995 and amended and
restated as of March 29, 1996, and as further amended on September 27,
1996. On November 19, 1996, AHS and ASI were merged into two
wholly-owned subsidiaries of HALIS, Inc. In connection therewith,
AUBIS, L.L.C., the parent company of AHS and ASI, received 10,000,000
shares of HALIS, Inc. common stock.
On November 19, 1996, HALIS, Inc., consummated the acquisition of HSI
pursuant to the Amended and Restated Agreement and Plan of Merger and
Reorganization, as of March 29, 1996 and amended on September 27, 1996.
On November 19, 1996, HSI was merged into a wholly-owned subsidiary of
HALIS, Inc. In connection therewith, HALIS, L.L.C., the parent company
of HSI, received 5,000,000 shares of HALIS, Inc. common stock.
Following consummation of the AUBIS and HALIS transactions, the
Company's corporate name was changed from Fisher Business Systems, Inc.
to HALIS, Inc.
C. REALIZATION OF ASSETS:
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate the
continuation of the Company as a going concern. However, the Company
has sustained losses from operations since inception and such losses
are expected to continue through the coming period. Additionally, the
Company has used, rather than provided, cash in its operating
activities during the current period. The Company had a working capital
and capital deficiency as of December 31, 1996.
In view of the matters described in the preceding paragraph,
recoverability of the recorded assets and satisfaction of the
liabilities reflected in the accompanying balance sheet is dependent
upon continued operation of the Company, which is in turn dependent
upon the Company's ability to meet its financing requirements on a
continuing basis and to succeed in its future operations. The financial
statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts
and classification of liabilities that might be necessary should the
Company be unable to continue in existence.
Management plans to take the following steps to improve its operating
results and financial position, which it believes to be sufficient to
provide the Company with the ability to continue in existence during
the ensuing twelve month period.
The Company is presently raising capital in a private placement which
provides for up to $3,000,000 of capital infusion. Management believes
that the net proceeds contemplated by this offering will be sufficient
to fund both the Company's operations and acquisitions over the next
twelve months. To date, the Company has raised net proceeds of $681,122
in this offering (Note J).
-29-
<PAGE> 31
HALIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND THE
COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
FOR THE YEAR ENDED DECEMBER 31, 1995
C. REALIZATION OF ASSETS: [Continued]
As discussed in Note M to these financial statements, the Company
completed three acquisitions in January 1997 which it believes
substantially strengthen the Company's operations and complement the
existing business units. These acquisitions were effected through the
issuance of an aggregate of 5,297,000 shares of the Company's common
stock and an aggregate of 1,535,000 of common stock options rather than
utilizing working capital. The Company contemplates future acquisitions
will be effected in a similar manner, in order to preserve working
capital for operations.
Additionally, the Company expects to increase sales volumes of existing
products as a result of increased marketing and advertising efforts.
During 1996, the Company's development of its software product entered
the "pilot" stage, and the Company commenced selling pilot systems in
1997. Management represents that sales to date under such pilot
contracts have been promising, and expects the trend to continue during
the coming period. Additionally, the Company will implement certain
cost containment measures which should benefit future operations.
Management plans to seek sources of financing in order to continue as a
going concern.
D. SOFTWARE DEVELOPMENT COSTS:
<TABLE>
<CAPTION>
Years ended December 31, 1996 1995
-------- -----
<S> <C> <C>
Balances, beginning of year $ -0- $ -0-
Amounts capitalized 160,995 -0-
Amortization -0- -0-
-------- -----
Balances end of year $160,995 $ -0-
======== =====
Research and development costs incurred $561,694 $ -0-
Less amounts capitalized 160,995 -0-
-------- -----
Research and development charged to expense $400,699 $ -0-
======== =====
</TABLE>
No amortization of capitalized software development costs was
recognized during 1996 as market release had not occurred for the
product.
-30-
<PAGE> 32
HALIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND THE
COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
FOR THE YEAR ENDED DECEMBER 31, 1995
E. NOTES PAYABLE:
The Companies have the following notes payables as of December 31,
1996:
<TABLE>
<S> <C>
Bank-note payable, interest of 8.25% per annum,
payable at maturity, due January 10, 1997.
Secured by shareholders' certificate of deposit. $105,000
Bank-note payable, interest of 8.25% per annum,
payable at maturity, due January 29, 1997.
Secured by shareholders' certificate of deposit. 105,000
--------
$210,000
========
</TABLE>
Both of the $105,000 notes were subsequently renewed on their maturity
dates, mature on April 14, 1997 and April 29, 1997, and are now secured
by a certificates of deposit owned by HALIS, Inc. Both certificates of
deposit are in the amount of $105,000 and mature on April 14, 1997 and
April 29, 1997, respectively.
Convertible Notes Payable - 7% convertible promissory notes were issued
in a private placement by the acquired company, HALIS, Inc., in early
1996 and mature January 15, 1998. The notes are convertible into common
stock of the Company at any time until their maturity date at $1 per
share. Forty-three notes were issued by the Company in amounts ranging
from $10,000 to $80,000 generating $1,470,000 in proceeds.
Additionally, $36,000 of notes were issued in consideration for
services rendered to HALIS, Inc. $455,000 of these notes were issued to
related parties at terms identical to the terms of notes issued to
third parties. Interest expense on these notes recognized from November
19 through December 31, 1996 (period of inclusion) totaled $14,334.
F. NOTES PAYABLE - RELATED PARTIES:
The Companies have the following unsecured notes payable to shareholder
directors as of December 31, 1996:
<TABLE>
<S> <C>
Shareholder/Director - note payable with interest of 8.75%
payable on demand; due on demand. This note is unsecured $ 70,000
Shareholder/Director - note payable with interest payable
of 12% per annum; due on demand. This note is unsecured 65,000
Shareholder/Director - note payable non-interest
bearing; due on demand. This note is unsecured 9,000
--------
$144,000
========
</TABLE>
-31-
<PAGE> 33
HALIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND THE
COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
FOR THE YEAR ENDED DECEMBER 31, 1995
G. COMMITMENTS AND CONTINGENCIES:
Concentrations of Credit Risk:
The Companies do not have a secured interest in their accounts
receivable; however, they do have legal recourse for defaulted amounts.
The Company maintains the majority of its cash deposits at one
financial depository institution. The amount of the accounting loss due
to credit risk the Company would incur if the financial depository
institution failed would be the cash deposits in excess of the $100,000
amount per depositor that is federally insured. The amount at risk
totaled approximately $585,000 at December 31, 1996.
Payroll and Sales Taxes:
The Company is delinquent in paying certain federal and state payroll
taxes and sales taxes. The Internal Revenue Service has written the
Companies indicating that it may file a Notice of Federal Tax Lien or
levy the Companies' assets if past due payroll taxes are not paid. The
Company made a payment of $27,446 related to this liability to the
Internal Revenue Service in January 1997.
Operating Leases:
The Companies lease office space and equipment under several operating
lease agreements. Rent expense for the office space and equipment
totaled $156,553 and $95,714 for the years ended December 31, 1996 and
1995, respectively.
At December 31, 1996, future minimum lease payments under
non-cancelable leases having remaining terms in excess of one year are
as follows:
<TABLE>
<CAPTION>
December 31, Amount
------------ ------
<S> <C>
1997 $153,613
1998 104,432
1999 86,160
2000 83,972
2001 59,535
--------
Totals $487,712
========
</TABLE>
Employee Benefit Plan:
The Company sponsors a 401(k) retirement savings plan for all employees
who meet certain eligibility requirements. Employees may contribute to
the plan up to 20% of their salary or the maximum allowed by the IRS.
The Company may elect to make matching and/or discretionary
contributions. Employee contributions are immediately 100% vested while
Company contributions are subject to a six-year vesting schedule. The
Company made no contributions to the plan during any of the previous
two fiscal years.
Significant Customers:
For the year ended December 31, 1996, sales to two customers, Atlanta
Jewish Federation and Canada Life, totaled approximately $852,000, and
accounted for 44% of the Company's sales.
-32-
<PAGE> 34
HALIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND THE
COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
FOR THE YEAR ENDED DECEMBER 31, 1995
G. COMMITMENTS AND CONTINGENCIES: [Continued]
Economic Dependency:
For the year ended December 31, 1996, purchases from one vendor,
Merisal, totaled approximately $589,000 and accounted for 49% of the
Company's purchases from suppliers. Unpaid invoices included in
accounts payable at December 31, 1996 totaled $73,519.
During 1995, AHS purchased a significant portion of its products from
Sulcus, also know as Sulcus Hospitality Group, Sulcus Computer
Corporation, and Squirrel Companies, Inc. (Sulcus). Sales generated
from Sulcus products and services were approximately $1,750,000.
Effective January 1, 1996, AHS was no longer an authorized Sulcus
dealer.
Employment Agreements:
The Company has entered into an employment agreement with Paul W.
Harrison which expires December 31, 1999. The agreement provides for a
annual base salary of $200,000 (to be increased upon the attainment of
certain annual revenue targets) plus certain incentive bonus payments
and certain qualified and non-qualified stock options to purchase
shares of common stock of the Company at the discretion of the Board of
Directors.
The Company also entered into an employment agreement with Larry Fisher
which expires December 31, 1999. The agreement provides for an annual
salary of $175,000 (to be increased upon the attainment of certain
annual revenue targets) plus incentive bonus payments. In addition, the
employment agreement provides for certain qualified and non-qualified
options to purchase shares of common stock of the Company at the
discretion of the Board of Directors.
In connection with mergers which occurred subsequent to year end, the
Company entered into employment agreements with certain members of
management (Note M).
Litigation:
The Company and its directors have been named as defendants in a claim
relating to an acquisition target which was aborted. The plaintiff,
Advanced Customer Computer Solutions, Inc. (ACCS), alleges breach of
contract in connection with the termination by the Company of its
merger agreement. In addition, the complaint alleges that the
defendants made false and misleading statements to the plaintiffs for
the purpose of inducing plaintiffs to lend money to the Company; the
Company has a convertible note payable to one of the plaintiffs in the
amount of $60,000. The complaint seeks damages in the amount of at
least $2 million plus damages. The Company intends to deny the
allegations of liability in the complaint and to vigorously contest and
defend against the lawsuit. Additionally, the Company has filed a
counterclaim against certain parties related to ACCS alleging that
those parties made intentional misrepresentations and concealed
material facts for the purpose of inducing the Company to pursue a
merger with ACCS. Additionally, the HSI subsidiary filed a counterclaim
against ACCS alleging that ACCS breached the terms of its marketing and
licensing agreement with HSI. Due to uncertainties in the settlement
process, management and its legal counsel do not express an opinion
with respect to the likelihood of an unfavorable outcome in this
matter.
-33-
<PAGE> 35
HALIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND THE
COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
FOR THE YEAR ENDED DECEMBER 31, 1995
G. COMMITMENTS AND CONTINGENCIES: [Continued]
Litigation: [Continued]
The Company entered into a finder's fee agreement with Penny Sellers in
which the Company agreed to pay a 10% commission up to $500,000 on
investments made by investors introduced by Ms. Sellers. Ms. Sellers
introduced HALIS, Inc. (then Fisher) to the principals of AUBIS L.L.C.
and contends that all money raised by the Company could not have been
possible if not for her introduction. She has made a claim for 10% of
private placements of approximately $3,470,000 and 10% of the value of
ASI, AHS, and HSI. Management believes that these claims are outside
the scope of the finder's fee agreement and intends to contest them
vigorously. Management and legal counsel express no opinion as to the
likely outcome of this matter.
No provision has been made in these financial statements regarding
these two items due to the uncertainty of their ultimate resolution.
H. INCOME TAXES:
The sources of temporary differences and their effect on the net
deferred taxes are as follows:
<TABLE>
<S> <C>
Deferred tax asset resulting from
net operating loss carryforwards $ 3,800,000
Other temporary differences 17,632
Less valuation allowances (3,817,632)
-----------
$ -0-
===========
</TABLE>
The valuation allowance fully reserves the net deferred tax asset which
arose from the tax loss carryforwards and temporary differences
generated.
At December 31, 1996, the Company had available for carryforward a net
operating loss of approximately $10,000,000. On November 19, 1996, the
Company had a significant change in ownership (Note A). As a result of
the ownership change, and in accordance with Section 382 of the
Internal Revenue Code, the Company's net operating loss is limited in
total and each year. The net operating loss available for the year
ending December 31, 1996 is $840,997. For each year thereafter, the net
operating loss will be limited to approximately $840,997 plus any
unused loss from the prior year (1996 and forward). In addition to the
limitation from Section 382 of the Internal Revenue Code, the losses
are limited to a fifteen-year carryforward, with losses from 1984
beginning to expire in the year 1999.
I. STOCK OPTION PLAN:
During 1996, the Company adopted the 1996 Stock Option Plan which
provides for the issuance of both qualified and nonqualified stock
options to employees and non-employee directors pursuant to Section 422
of the Internal Revenue Code. The number of shares reserved for the
plan are 3,000,000. Additional non-qualified options may be granted
outside of the plan with approval of the board of directors.
-34-
<PAGE> 36
HALIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND THE
COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
FOR THE YEAR ENDED DECEMBER 31, 1995
I. STOCK OPTION PLAN: [Continued]
Options issued to participants are granted with an exercise price of
the mean between the high "bid" and low "ask" price (average market
price) as of the close of business on the date of grant, and are
exercisable up to ten years from date of grant. Incentive stock options
issued to persons who directly or indirectly own more than ten percent
of the outstanding stock of the Company shall have an exercise price of
110 percent of the average market price on the date of grant and are
exercisable up to five years from date of grant. The aggregate fair
market value of the shares with respect to which incentive stock
options are exercisable for the first time by a holder during any
calendar year under all plans shall not exceed $100,000.
The Company's previous incentive stock option plan, the 1986 incentive
Stock Option Plan, expired on January 29, 1996. The 1988 Non-qualified
Stock Option Plan was terminated by the Company on April 24, 1996.
Activity related to these plans is as follows:
<TABLE>
<CAPTION>
1986 and
1988 Plans Weighted Avg 1996 Plan Weighted Avg
Number of Exercise Number of Exercise
Options Price Options Price
---------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Outstanding,
December 31, 1994 120,340 $ .7279 -- --
Awarded 753,200 .3682 -- --
Expired (3,200) .7279 -- --
------- -------
Outstanding,
December 31, 1995 870,340 0.4166 -- --
Awarded -- -- 1,760,000 $1.5926
Exercised (5,600) 0.5000 -- --
------- ------- --------- -------
Outstanding,
December 31, 1996 864,740 $0.4160 1,760,000 $1.5926
======= ======= ========= =======
Vested Options 864,740 1,260,000
======= =========
</TABLE>
There were 6,200,000 options granted during 1996 outside of the 1996
Plan, of which 4,800,000 were terminated subsequent to year end. The
remaining 1,400,000 options were vested at year end, have an exercise
price of $1.125 per share and a remaining life of 9.5 years.
Exercise prices for options outstanding as of December 31, 1996 under
the 1986 and 1988 Plan ranged from $.25 to $20.00 per share. The
weighted average remaining life of these options was approximately 5
years.
-35-
<PAGE> 37
HALIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND THE
COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
FOR THE YEAR ENDED DECEMBER 31, 1995
I. STOCK OPTION PLAN: (Continued)
Exercise prices for options outstanding as of December 31, 1996 granted
under the 1996 Plan ranged from $1.125 to $2.00 per share. The weighted
average remaining life of these options was approximately 10 years.
The Company has elected to follow Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees (APB 25) and related
interpretations in accounting for its employee stock options because,
as discussed below, the alternative fair value accounting provided for
under Financial Accounting Standards Board Statement No. 123,
Accounting for Stock-Based Compensation, (FAS 123) requires use of
option valuation models that were not developed for use in valuing
employee stock options. Under APB 25, if the exercise price of the
underlying stock equals fair market value on the date of grant, no
compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company
had accounted for its employee stock options under the fair value
method of that Statement. The fair value for these options was
estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions for 1996
respectively: risk-free interest rates of 6.1%, no dividend yield,
volatility factors of the expected market price of the Company's common
stock of .30 and a weighted-average expected life of the option of 3
years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of
traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion,
the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Company's pro forma net loss if compensation expense had been
recognized for the options issued would have been $2,944,622. Loss per
share on a primary basis would have been $.18.
No information as to the compensation expense, effect upon operations,
and net loss per share as computed under the guidelines of FAS 123 is
provided for periods prior to 1996 as the financial information
included in this report for prior periods is for the Predecessor
whereas options issued in prior periods relate to the acquired company
(Note B). Applying compensation expense as determined under FAS 123 to
options of the acquired company to the historical operations of the
Predecessor would be misleading.
-36-
<PAGE> 38
HALIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND THE
COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
FOR THE YEARS ENDED DECEMBER 31, 1995
J. PRIVATE PLACEMENT OF COMMON STOCK:
During 1996, the Company effected a private placement of shares of
common stock in accordance with Regulation D of the Securities and
Exchange Commission. The shares were sold at $1.20 per share. For every
three shares of stock sold, one common stock warrant was issued to the
purchaser, which represents the right to purchase an additional share
at $1.75 per share. In aggregate, 1,516,975 shares of common stock and
657,356 warrants were issued, which included an additional 151,698
warrants issued to the placement agent. All warrants expire December
31, 1999. The Company raised $1,638,818 in capital after payment of
issuance costs and related fees as of December 31, 1996. An additional
$183,000 was raised by the Company in this offering in January 1997.
Subsequent to year end, the Company initiated an additional private
placement of common stock which provides for the issuance of up to
2,000,000 shares of stock at a price of $1.50 per share. For every
three shares of stock sold, one common stock warrant was issued to the
purchaser, which represents the right to purchase an additional share
at $1.75 per share. As of March 28, 1997, the Company had issued
500,000 shares of common stock and 216,667 common stock purchase
warrants (including 50,000 warrants issued to the placement agent) for
proceeds of $681,122, which are net of certain placement costs of
$68,878.
K. RELATED PARTY TRANSACTIONS:
HSI has software development and license agreements with OneTree
Corporation, which is controlled by the majority shareholder of the
Company. The agreement is dated September 15, 1996 and shall terminate
when development services are completed. The development fee is $30,000
per month plus out of pocket costs, payable bi-weekly. Included in
capitalized or expensed research and development costs for the year
ended December 31, 1996 is $244,915 of these fees. Included in related
party accounts payable is $15,750 which had not been paid to OneTree as
of December 31, 1996.
HSI has also entered into a software development and license agreement
with MERAD Corporation, which is controlled by the majority shareholder
of the Company. The agreement is dated August 15, 1996 and shall
terminate after the enhancements to the HALIS software are delivered
and accepted by the Company. The development fee is $15,000 per month,
payable bi-weekly. Included in capitalized or expensed research and
development are $90,000 which was paid to MERAD Corporation. Accounts
receivable of $13,285 were due from MERAD for reimbursement of the
purchase of certain equipment.
-37-
<PAGE> 39
HALIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND THE
COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
FOR THE YEAR ENDED DECEMBER 31, 1995
K. RELATED PARTY TRANSACTIONS: [Continued]
HSI has entered into an agreement with Paul Harrison Enterprises, Inc.
(PHE), which is controlled by the majority shareholder of the Company.
The agreement was entered into on July 1, 1996. HSI shall pay PHE
$15,000 upon completion of the software according to specifications. On
November 18, 1996, the Company entered into a license to a proprietary
technology asset (PHE Technology) from PHE. The Company is obligated to
pay a license fee of 10% of the gross revenues generated from the PHE
Technology and any derivations thereof by the Company or any of its
affiliates. Included in selling, general and administrative expenses is
$7,259 in royalties which were paid to PHE which represent the 10%
royalty on sales of this software.
The Company paid management fees to AUBIS L.L.C. in the amount of
$85,100 and $76,979, for the years ended December 31, 1996 and 1995,
respectively. Included in related party accounts payable are $39,247 of
these fees which were not paid as of December 31, 1996.
Interest expense to related parties for the years ended December 31,
1996 and 1995 were $16,155 and $21,332, respectively. Included in
related party accrued expenses are $20,787 of those expenses which were
not paid as of December 31, 1996.
Additionally, in 1996, a 10% commission of $7,259 on sales of software
was paid to Paul Harrison, the majority shareholder, and is included in
selling, general and administrative expenses.
L. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Supplemental information required by Statement of Financial Accounting
Standards No. 95, relative to the statement of cash flows, is as
follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Taxes paid $6,908 $ -0-
Interest paid 6,585 6,145
</TABLE>
The following non-cash transaction occurred for the year ended December
31, 1996:
AUBIS L.L.C. contributed capital by satisfying a note payable - related
party of $150,000 and related accrued interest of $17,678.
Common stock and additional paid-in capital totaling $240,000 was
issued by issuing a stock subscription receivable.
The following non-cash transactions occurred for the year ended
December 31, 1995:
Employee advances were increased by transferring fixed assets valued at
$11,500 to those employees.
Capital was contributed to HSI by issuing a receivable from the parent
in the amount of $500.
-38-
<PAGE> 40
HALIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND THE
COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
FOR THE YEAR ENDED DECEMBER 31, 1995
M. SUBSEQUENT EVENTS:
Merger Agreements:
During January 1997, the Company effected three merger agreements with
companies that will be accounted for as purchases under APB 16 by the
Company. It is the opinion of management and legal counsel that these
transactions qualify as tax-free reorganizations within the meaning of
Section 368(a) of the Internal Revenue Code of 1986. Management of all
companies represent they have no plans or intentions which would
adversely affect the operations of any of the companies.
The Compass Group, Inc. (Compass) was purchased for 350,000 shares of
the Company's common stock in exchange for all outstanding shares of
Compass. The agreement also provides for contingent merger
consideration, paid in the form of the Company's common stock, based
upon certain, specified operating results of the year ended December
31, 1997.
In addition, the Compass merger agreement provided for an employment
agreement with the managing director of Compass which expires in
January 1999 and provides for a base salary of $120,000 which may be
increased after twelve months at the discretion of the board of
directors. The Company also awarded to the managing director options to
purchase 85,000 shares of the Company's common stock at $2.00 per
share, exercisable for ten years from the closing date.
The Software Manufacturing Group, Inc. (SMG) was purchased for
3,072,000 shares of common stock of the Company in consideration for
all outstanding shares of SMG. The agreement also provides for
contingent merger consideration, paid in the form of the Company's
common stock based upon certain, specified operating results of the
period ended December 31, 1997.
In addition, the SMG merger agreement included an employment agreement
with the president of SMG which expires in January 1999 and provides
for a base salary of $192,000 plus certain variable incentive
compensation. Options to purchase a total of 100,000 shares of HALIS
common stock at $2.00 per share were granted to three employees of SMG.
American Benefit Administrative Services, Inc. and Third Party
Administrators, Inc., (ABAS/TPA) were purchased for 1,875,000 shares of
the Company's common stock in consideration for all outstanding shares
of ABAS/TPA. Additionally, the merger agreement included noncompetition
agreements between the Company and the president and vice-president of
ABAS/TPA.
The purchase agreement also provides that the president of ABAS/TPA may
repay a loan from ABAS/TPA, which had a balance of $558,500 at October
31, 1996, in the form of the Company's common stock commencing at the
end of 1997, if certain specified conditions are met.
-39-
<PAGE> 41
HALIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND THE
COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
FOR THE YEAR ENDED DECEMBER 31, 1995
M. SUBSEQUENT EVENTS: [Continued]
Merger Agreements: [Continued]
In addition, the ABAS/TPA merger agreement provided for an employment
agreement with the president which expires in January, 2000 and
provides for a base salary of $200,000 plus certain variable incentive
compensation, a $100,000 signing bonus payable in two $50,000
installments: one installment upon signing the employment agreement and
one installment on or before July 1, 1997. The merger agreement also
provides for an employment agreement with the vice-president which
provides for a base salary of $77,000. Both employment agreements
provide for incentive compensation and guaranteed payments in the event
of termination or in the event of change in control of the ABAS/TPA
subsidiary. Additionally, the Company executed agreements with both of
these parties which provide for the issuance of an aggregate of
1,350,000 fully-vested common stock options of the Company's stock,
exercisable at $2.00 per share for a period of ten years from the date
of the agreement.
N. UNAUDITED PRO FORMA INFORMATION:
The following unaudited pro forma consolidated statement of operations
of HALIS, Inc. gives retroactive effect to the following transactions
as if they had occurred on January 1, 1995.
The unaudited pro forma consolidated statement of operations was
prepared by HALIS, Inc.'s management based on, and should be read in
conjunction with, the historical statement of operations appearing
elsewhere herein. This statement may not be indicative of the results
of operations that would actually have been achieved had the
transactions taken place at the date indicated and should not be
construed as indicative of HALIS, Inc.'s results of operations for any
future period.
<TABLE>
<CAPTION>
Year ended December 31, 1996
As reported Adjustments Pro Forma
----------- ----------- ---------
<S> <C> <C> <C>
Systems sales and services $ 1,925,412 $ 333,855 $ 2,259,267
=========== ========= ===========
Net loss $(1,989,696) $(564,256) $(2,553,952)
=========== ========= ===========
Net loss per common share (0.12) (0.12)
=========== ===========
Weighted average shares outstanding 15,956,824 22,194,634
=========== ===========
</TABLE>
-40-
<PAGE> 42
HALIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND THE
COMBINED FINANCIAL STATEMENTS OF THE PREDECESSOR
FOR THE YEAR ENDED DECEMBER 31, 1995
N. UNAUDITED PRO FORMA INFORMATION: [Continued]
<TABLE>
<CAPTION>
Year ended December 31, 1995
As reported Adjustments Pro Forma
----------- ----------- ---------
<S> <C> <C> <C>
System sales and services $ 3,582,896 $ 732,549 $ 4,315,445
=========== ========= ============
Net loss (372,938) (408,037) (780,975)
=========== ========= ============
Net loss per common share $ -- $ -- $ (.03)
=========== ========= ============
Weighted average shares outstanding -- -- 21,849,254
=========== ========= ============
</TABLE>
-41-
<PAGE> 43
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
There has been no occurrence requiring a response to this Item.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE OFFICE
- ---- --- ------
<S> <C> <C>
Paul W. Harrison 42 Chairman of the Board and
Chief Executive Officer
Larry Fisher 53 President, Chief Operating
Officer, Secretary, Treasurer
and Director
Nathan Lipson 69 Director
</TABLE>
In addition, three additional directors will be appointed by the Board
of Directors of the Company, one nominee to be selected by Mr. Harrison and two
nominees to be mutually agreed upon by Messrs. Fisher and Harrison.
Paul W. Harrison has served as Chairman of the Board and Chief
Executive Officer of the Company since November 1996. In addition, Mr. Harrison
has been the managing member of AUBIS since February 1995, Chief Executive
Officer and a director of AHS since June 1994 and Chief Executive Officer and a
director of ASI since January 1995. Mr. Harrison has over 20 years of
professional experience in the United States and internationally in investments,
management consulting, and information technology. Mr. Harrison has created and
sold various software technology companies over his career that specialized in
the healthcare and information technology markets. In 1994, he acquired Wiporwil
Systems and Peripheral Design to form AUBIS, L.L.C. Prior to founding AUBIS,
L.L.C. Mr. Harrison started and later sold Biven Software Incorporated, a
technology company, to HBO & Company. Mr. Harrison served as an executive of and
advisor to HBO & Company through the end of 1994. Prior to Biven Software
Incorporated, Mr. Harrison owned and operated several technology development
companies. Mr. Harrison is also active in private investment funds and is a well
known supporter of health related charities.
Larry Fisher has served as President, Chief Operating Officer,
Secretary and Treasurer of the Company since November 1996. The founder of the
Company, Mr. Fisher, has served as a director since its organization in 1979, as
President, Chief Executive officer, and Treasurer from 1979 to 1992 and, from
December 1992 to November 1996, as Chairman of the Board. He led the development
of the first generation of the Company's products for the hospitality
marketplace and is a recognized leader in the industry. Under his management,
the Company developed the first integrated point-of-sale and
-42-
<PAGE> 44
back office system for the food service industry. He directed the Company's
efforts in the development of its second generation touch screen system. Prior
to 1979, Mr. Fisher was employed by IBM for 11 years in several executive sales
and marketing positions. In his last such position, Mr. Fisher was responsible
for creating, implementing and monitoring national marketing programs for the
retail and hospitality industries.
Nathan Lipson has served as a director of the Company since November
1996. Mr. Lipson is a member of AUBIS and has served as a director of AHS and
ASI since December 1995. Mr. Lipson is currently a private investor, and has had
various ownership and management interests in companies doing business in the
hospitality and carpet industries.
There are no family relationships between any director or executive
officer or any other director or executive officer of the Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers and persons who own more than 10% of the
outstanding Common Stock of the Company, to file with the Securities and
Exchange Commission reports of changes in ownership of the Common Stock of the
Company held by such persons. Officers, directors and greater than 10%
shareholders are also required to furnish the Company with copies of all forms
they file under this regulation. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company and
representations that no other reports were required, during the fiscal year
ended December 31, 1996, all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10% shareholders were complied with, except
as follows: Paul W. Harrison (failed to file on a timely basis one report
relating to a total of two transactions); Larry Fisher (failed to file on a
timely basis two reports relating to a total of eight transactions); and
Jeffrey C. Brenner, James F. Lyon and James Whitmire, former directors of the
Company (each failed to file on a timely basis one report relating to a total
of one transaction).
Although it is not the Company's obligation to make filings pursuant to
Section 16 of the Securities Exchange Act of 1934, the Company has recently
adopted a policy requiring all Section 16 reporting persons to report monthly to
the Vice President - Finance of the Company as to whether any transactions in
the Company's Common Stock occurred during the previous month.
-43-
<PAGE> 45
ITEM 10. EXECUTIVE COMPENSATION.
The following table sets forth certain summary information concerning
compensation paid, accrued or deferred by the Company for the fiscal year ended
December 31, 1996 and for the fiscal years ended January 31, 1996 and 1995 to or
on behalf of the Company's Chief Executive Officer and the other executive
officer of the Company whose total annual salary and bonus exceeded $100,000
during the fiscal year ended December 31, 1996 (hereinafter referred to as the
"Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
OTHER
NAME AND FISCAL ANNUAL STOCK
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS
- ------------------ ---- ------ ----- ------------ -------
<S> <C> <C> <C> <C> <C>
Paul W. Harrison............. 1996(1) $ 33,000 $ 8,000 (5) 4,750,000(2)
Chairman of the
Board and Chief
Executive Officer
Larry Fisher................. 1996(3) $182,882 $ 5,000 (5) 2,650,000(4)
President and 1996 150,000 18,000 (5) 650,000
Chief Operating 1995 150,000 -- (5) --
Officer
</TABLE>
- ---------------------------
(1) Mr. Harrison joined the Company on November 19, 1996 upon consummation
of the acquisitions of AHS, ASI and HSI. Accordingly, cash compensation
is for the period from November 19, 1996 to December 31, 1996.
(2) Of this amount, options to purchase 3,000,000 shares of Common Stock
were subsequently terminated without being exercised. This amount also
includes options to purchase 1,400,000 shares of Common Stock granted
to Mr. Harrison prior to his employment with the Company. See "- Stock
Options."
(3) Represents compensation for the twelve month period ended
December 31, 1996.
(4) Of this amount, options to purchase 1,800,000 shares of Common Stock
were subsequently terminated without being exercised.
(5) The Company pays for an automobile allowance for Messrs. Harrison and
Fisher, as well as certain other perquisites. The aggregate amounts of
these benefits do not exceed the lesser of $50,000 or 10% of the total
annual salary and bonus during the past fiscal year for the Named
Executive Officers.
DIRECTOR'S FEES
The Company does not presently pay any fees to directors but does
reimburse directors for reasonable out-of-pocket expenses incurred in connection
with attendance of meetings of the Board of Directors. The Company has granted
certain non-qualified stock options to its non-employee directors
-44-
<PAGE> 46
and in April 1996, the Board of Directors of the Company adopted a 1996 Stock
Option Plan pursuant to which each of the Company's outside directors will
receive an automatic annual grant of options to purchase 10,000 shares of
Common Stock on the second Tuesday in June of each year during the term of the
Plan. The 1996 Stock Option Plan was approved by the shareholders of the Company
on November 18, 1996.
EMPLOYMENT AGREEMENTS
Effective November 18, 1996, the Company entered into an Employment
Agreement with Paul W. Harrison, pursuant to which Mr. Harrison serves as
Chairman of the Board and Chief Executive Officer of the Company. The Employment
Agreement is for a term of three years, expiring on December 31, 1999, and
provides for an annual base salary of $200,000 (to be increased upon the
attainment of certain annual revenue targets) plus incentive bonus payments. In
addition, the Employment Agreement provides for Mr. Harrison to receive options
to purchase shares of Common Stock of the Company in the discretion of the Board
of Directors. The Employment Agreement provides for certain severance payments
to be paid to Mr. Harrison in the event of a change in control of the Company or
a significant change in Mr. Harrison's operational duties. In the event of a
change in control, Mr. Harrison will be entitled to terminate his employment
with the Company and to receive three times the sum of his annual base salary
and the cost for one year of all additional benefits provided to Mr. Harrison
under the Employment Agreement. In addition, in the event Mr. Harrison
terminates his employment under certain stated conditions or is terminated by
the Company without cause, he will receive the greater of one year's annual base
salary or an amount equal to the base salary which would otherwise be payable to
Mr. Harrison for the remaining term of his Employment Agreement. Any such
severance payment may, at the option of the Company, be paid to Mr. Harrison in
equal monthly installments or in a lump sum at a discounted present value. The
Employment Agreement contains non-compete and non-solicitation provisions,
effective through the actual date of termination of the Employment Agreement and
for a period of two years thereafter.
Effective November 18, 1996, the Company also entered into an
Employment Agreement with Larry Fisher, pursuant to which Mr. Fisher serves as
President and Chief Operating Officer of the Company. The Employment Agreement
is for a term of three years, expiring on December 31, 1999, and provides for an
annual base salary of $175,000 (to be increased upon the attainment of certain
annual revenue targets) plus incentive bonus payments. In addition, the
Employment Agreement provides for Mr. Fisher to receive options to purchase
shares of Common Stock of the Company in the discretion of the Board of
Directors. The Employment Agreement provides for certain severance payments to
be paid to Mr. Fisher in the event of a change in control of the Company or a
significant change in Mr. Fisher's operational duties. In the event of a change
in control, Mr. Fisher will be entitled to terminate his employment with the
Company and to receive two times his annual base salary plus twice the cost for
one year of all additional benefits provided to Mr. Fisher under the Employment
Agreement. In addition, in the event Mr. Fisher terminates his employment under
certain stated conditions or is terminated by the Company without cause, he will
receive the greater of one year's annual base salary or an amount equal to the
base salary which would otherwise be payable to Mr. Fisher for the remaining
term of his Employment Agreement. Any such severance payments may, at the option
of the Company, be paid to Mr. Fisher in equal monthly installments or in a lump
sum at a discounted present value. The Employment Agreement contains non-compete
and non-solicitation provisions, effective through the actual date of
termination of the Employment Agreement and for a period of two years
thereafter.
-45-
<PAGE> 47
STOCK OPTIONS
On November 18, 1996, the Company's shareholders adopted the 1996 Stock
Option Plan (the "Plan") for employees who are contributing significantly to the
business of the Company or its subsidiaries as determined by the Company's Board
of Directors or the committee administering the Plan. The Plan currently
provides for the grant of incentive and non-qualified stock options to purchase
up to 3,000,000 shares of Common Stock at the discretion of the Board of
Directors of the Company or a committee designated by the Board of Directors to
administer the Plan. The option exercise price of incentive stock options must
be at least 100.0% (110.0% in the case of a holder of 10.0% or more of the
Common Stock) of the fair market value of the stock on the date the option is
granted and the options are exercisable by the holder thereof in full at any
time prior to their expiration in accordance with the terms of the Plan.
Incentive stock options granted pursuant to the Plan will expire on or before
(1) the date which is the tenth anniversary of the date the option is granted,
or (2) the date which is the fifth anniversary of the date the option is granted
in the event that the option is granted to a key employee who owns more than 10%
of the total combined voting power of all classes of stock of the Company or any
subsidiary of the Company. Options granted under the Plan typically vest over a
period of four to five years.
In consideration of services rendered by Paul Harrison to the Company
in anticipation of the consummation of the mergers with AHS, ASI and HSI, the
Company on June 7, 1996 granted to Mr. Harrison an option to purchase 1,400,000
shares of Common Stock, which options became exercisable upon consummation of
the HSI merger. The option terminates on June 7, 2006 and is exercisable
at a price of $1.125 per share (which represents the fair market value of the
Common Stock on the date of grant).
On December 6, 1996, the Company granted options to purchase up to
3,350,000 shares of Common Stock to Mr. Harrison, and options to purchase up to
1,850,000 shares of Common Stock to Mr. Fisher, exercisable at a price of $2.00
per share. Of this amount, options to purchase 3,000,000 shares of Common Stock
granted to Mr. Harrison and options to purchase 1,800,000 shares of Common Stock
granted to Mr. Fisher were subsequently terminated without being exercised. The
remaining stock options granted to Messrs. Harrison and Fisher are exercisable
immediately.
As of April 10, 1997, options to purchase 5.5 million shares of Common
Stock of the Company were outstanding.
-46-
<PAGE> 48
The following table provides certain information concerning individual
grants of stock options made during the fiscal year ended December 31, 1996 to
the Named Executive Officers:
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-----------------------------------
% OF TOTAL OPTIONS
OPTIONS GRANTED TO EXERCISE OR
GRANTED EMPLOYEES IN FISCAL BASE PRICE EXPIRATION
NAME (#) YEAR ($PER SHARE) DATE
---- ------- ------------------- ------------ ----------
<S> <C> <C> <C> <C>
Paul W. Harrison........................ 1,400,000(1) 24.4% $1.125 06/07/2006
350,000(2) 6.1% $ 2.00 12/06/2006
3,000,000(3) 52.4% $ 2.00 N/A
Larry Fisher............................ 800,000(2) 14.0% $1.125 06/07/2006
50,000(2) 0.9% $ 2.00 12/06/2006
1,800,000(3) 31.4% $ 2.00 N/A
</TABLE>
- -------------------------
(1) Options were granted to Mr. Harrison in consideration of his providing
of services in anticipation of the acquisition by the Company of HSI.
Options became fully exercisable from the acquisition of HSI by the
Company in November 1996.
(2) Options are fully exercisable.
(3) Options were terminated by mutual agreement of the parties in March
1997 without any such options being exercised.
The following table provides certain information concerning the value
of unexercised options held by the Named Executive Officers as of December 31,
1996. No stock options were exercised by the Named Executive Officers during
fiscal 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT YEAR-END AT YEAR-END
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
---- ------------------------- ----------------------------
<S> <C> <C>
Paul W. Harrison(2)..................... 1,750,000/0 $ 875,000/$0
Larry Fisher(2)......................... 1,600,000/0 $1,600,000/$0
</TABLE>
- -----------------------------
(1) Dollar values calculated by determining the difference between the fair
market value of the Company's Common Stock at December 31, 1996 ($1.75)
and the exercise price of such options.
(2) Excludes options to purchase 3,000,000 shares of Common Stock granted
to Mr. Harrison and options to purchase 1,800,000 shares of Common
Stock granted to Mr. Fisher during fiscal 1996, which options were
subsequently terminated.
-48-
<PAGE> 49
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth information regarding the beneficial
ownership of the Company Common Stock of the Company, as of April 10, 1997, by
(i) those persons or entities known by management of the Company to own
beneficially more than 5% of the Company Common Stock, (ii) each of the
directors of the Company, and (iii) all directors and executive officers of the
Company as a group. Unless otherwise indicated in the footnotes to the table,
the persons or entities listed below have sole voting and investment power with
respect to the shares of the Company Common Stock shown as beneficially owned by
them.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
NAME OF BENEFICIALLY PERCENT
BENEFICIAL OWNER OWNED (1) OF CLASS
- ---------------- --------- --------
<S> <C> <C>
Paul W. Harrison ............................... 16,840,000(2) 53.0%
Larry Fisher ................................... 2,250,500(3) 7.1%
Nathan Lipson .................................. 100,000(4) *
Charles Cone, Jr.(5) ........................... 1,509,300 5.0%
Philip E. Spicer ............................... 1,875,000(6) 6.0%
AUBIS, L.L.C (7) ............................... 10,000,000 33.4%
Healthcare Technology
Investments, L.L.C (7) ....................... 5,000,000 16.7%
Jeffrey C. Brenner ............................. 1,935,800(8) 6.4%
Directors and executive officers
as a group (3 persons) ....................... 19,190,500 57.1%
</TABLE>
* Less than 1% of outstanding shares.
- ------------------------------
(1) "Beneficial Ownership" includes shares for which an individual,
directly or indirectly, has or shares voting or investment power or
both and also includes options which are exercisable within sixty days
of the date of this Memorandum. All of the listed persons have sole
voting and investment power over the shares listed opposite their names
unless otherwise indicated in the notes below. Beneficial ownership as
reported in the above table has been determined in accordance with Rule
13d-3 of the Securities Exchange Act of 1934. The percentages are based
upon 29,943,021 shares outstanding, except for certain parties who hold
presently exercisable options and convertible securities to purchase
shares. The percentages for those parties who hold
-49-
<PAGE> 50
presently exercisable options or convertible securities are based upon
the sum of 29,943,021 shares plus the number of shares subject to
presently exercisable options or convertible securities held by them,
as indicated in the following notes.
(2) Includes 1,750,000 shares of Common Stock subject to presently
exercisable stock options, 50,000 shares of Common Stock issuable upon
the conversion of outstanding convertible promissory notes held by Mr.
Harrison individually and 40,000 shares of Common Stock issuable upon
the conversion of outstanding convertible promissory notes held by a
corporation controlled by Mr. Harrison. Also includes 10,000,000 shares
owned by AUBIS, L.L.C. and 5,000,000 shares owned by Healthcare
Technology Investments, L.L.C., which Mr. Harrison has the power to
vote by virtue of his position as the President and managing member of
these two entities. Mr. Harrison's business address is 9040 Roswell
Road, Suite 470, Atlanta, Georgia 30350.
(3) Includes 1,600,000 shares of Common Stock subject to presently
exercisable stock options and 50,000 shares of Common Stock issuable
upon the conversion of outstanding convertible promissory notes. Mr.
Fisher's business address is 9040 Roswell Road, Suite 470, Atlanta,
Georgia 30350.
(4) Includes 10,000 shares of Common Stock subject to presently exercisable
stock options and 90,000 shares of Common Stock issuable upon the
conversion of outstanding convertible promissory notes.
(5) Mr. Cone's business address is 7840 Roswell Road, Suite 304, Atlanta,
Georgia 30350.
(6) Includes 1,250,000 shares of Common Stock subject to presently
exercisable stock options. Mr. Spicer's business address is 1733 Park
Street, Suite 300, Naperville, Illinois 60544.
(7) The business address of AUBIS, L.L.C. and Healthcare Technology
Investments, L.L.C. is 3390 Peachtree Road, N.E., Suite 1000, Lenox
Towers, Atlanta, Georgia 30326.
(8) Includes 110,800 shares subject to presently exercisable stock options.
Mr. Brenner's address is 3581 Sarasota Golf Club Boulevard, Sarasota,
Florida 34240.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In connection with the acquisition of ASI, AHS and HSI on November 19,
1996, the Company issued 10,000,000 shares of Common Stock to AUBIS, L.L.C. and
5,000,000 shares of Common Stock to Healthcare Technology Investments, L.L.C.
(formerly HALIS, L.L.C.). Paul W. Harrison, a director of the Company, serves as
the managing member of both AUBIS, L.L.C. and Healthcare Technology Investments,
L.L.C. and beneficially owns approximately 25% and 54% respectively, of these
two companies.
On November 18, 1996, the Company entered into a license to a
proprietary technology asset ("MERAD") from Paul Harrison Enterprises, Inc.
("PHE"). The Company is obligated to pay a license fee 10% of the gross revenues
generated from MERAD and any derivations thereof by the Company or any of its
affiliates. Mr. Harrison serves as the President of PHE and beneficially owns
53.3% of this company. PHE acquired MERAD from Paul Harrison in July 1995. The
Company paid $7,259 to PHE in 1996 pursuant to this license agreement.
-50-
<PAGE> 51
When PHE acquired rights in MERAD from Mr. Harrison, Mr. Harrison
retained a perpetual royalty free license to MERAD and any enhancements and
derivatives thereof (excluding any application software developed utilizing
MERAD). On October 1, 1995, PHE licensed MERAD, in its then partially completed
state, to HALIS, L.L.C. (who, in turn, licensed MERAD to HSI, which was acquired
by the Company in November 1996) in order for HSI to develop proprietary
healthcare software (the "License"). As part of the License, HSI agreed to
continue developing MERAD and to be a beta site to test MERAD's capabilities and
functionality. HSI agreed that any enhancements and modifications to MERAD
become the sole and exclusive proprietary property of PHE, subject to HSI's
rights to use the same under its License. With the exception of certain licenses
to use MERAD, PHE has exclusive ownership rights to MERAD. HSI has agreed to pay
an additional $15,000 upon completion of the software according to
specifications. In addition, HSI paid sales commissions of $7,259 to Mr.
Harrison in 1996.
As a result of its acquisition of HSI in November 1996, the Company
assumed software development and license agreements with OneTree Corporation and
MERAD Corporation, both of which are controlled by Paul W. Harrison. Mr.
Harrison serves as a director and is an 80% shareholder of OneTree Corporation,
and serves as President and is a 21% shareholder of MERAD Corporation. During
1996, $244,915 was paid to OneTree Corporation and $90,000 was paid to MERAD
Corporation under these license agreements. The agreement with OneTree
Corporation was terminated in January 1997. The development fee payable to MERAD
Corporation is $15,000 per month. The MERAD agreement will terminate after the
enhancements to the HALIS software are completed, which is expected to occur in
1997.
In February 1996, the Company entered into a Management Agreement with
AUBIS, L.L.C. pursuant to which Mr. Harrison provided management services to the
Company in an effort to begin the process of effecting an orderly transition of
ASI and AHS to the Company. The Management Agreement was terminated on June 1,
1996. Management fees totaling $50,000 were paid by the Company to AUBIS, L.L.C.
pursuant to this agreement. Separately, AHS, ASI and HSI paid management fees to
AUBIS, L.L.C. of $85,100 and $76,979 in 1996 and 1995, respectively.
In February 1996, the Company entered into a Marketing Agreement with
AHS pursuant to which AHS distributed the Fisher Restaurant Management
System(TM). Pursuant to this agreement, the Company advanced AHS $80,000, which
indebtedness was cancelled upon the acquisition of AHS by the Company in
November 1996. AHS was previously a wholly-owned subsidiary of AUBIS, L.L.C.
which is controlled by Mr. Harrison.
In 1996, the Company conducted a private placement of 7.0% Convertible
Promissory Notes due January 15, 1998 (the "Notes"), some of which were
purchased by directors of the Company as follows: Paul W. Harrison and affiliate
- - $90,000, Larry Fisher - $50,000; and Nathan Lipson - $90,000. Interest paid on
these Notes for 1996 totalled $3,938, $2,747 and $3,631 to Messrs. Harrison,
Fisher and Lipson, respectively.
In addition, as of December 31, 1996, the Company owed $135,000 to
Nathan Lipson, a director of the Company. These notes bear interest at rates
ranging from 8.75% to 12.0% per year and are due on demand. During 1995 and
1996, $3,222 and $1,200 of interest was paid to Mr. Lipson on these notes. As
of December 31, 1996 accrued and unpaid interest on these notes totalled
$20,787.
-50-
<PAGE> 52
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
The following exhibits are filed with or incorporated by reference into
this report. The exhibits which are denominated by an asterisk (*) were
previously filed as a part of, and are hereby incorporated by reference from
either (i) a Registration Statement on Form S-18 under the Securities Act of
1933 for the Registrant, Registration No. 33-14114-A, initially filed with the
Securities and Exchange Commission on May 7, 1987, as amended ("S-18"); (ii) the
Annual Report on Form 10-K for the year ended January 31, 1991 ("1991 10-K");
(iii) the Annual Report on Form 10-K for the year ended January 31, 1993 ("1993
10-K"); (iv) the Annual Report on Form 10-K for the year ended January 31, 1995
("1995 10- K"); (v) the Annual Report on Form 10-KSB for the year ended January
31, 1996 ("1996 10-KSB"); or (vi) the Current Report on Form 8-K dated November
19, 1996 ("8-K").
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
<S> <C>
* 2.2 Amended and Restated Agreement and Plan of Merger and
Reorganization, dated as of December 13, 1995 and amended and
restated as of March 29, 1996, and as further amended on
September 27, 1996, among Fisher Business Systems, Inc.,
AUBIS, L.L.C., AUBIS Hospitality Systems, Inc., AUBIS Systems
Integration, Inc. and certain persons and affiliates of AUBIS,
L.L.C. (8-K, Exhibit 2.1)
* 3.1.1 Articles of Incorporation, as amended (S-18, Exhibit 3.1)
* 3.1.2 Articles of Amendment filed December 1, 1992 (1993 10-K,
Exhibit 3.1.2)
* 3.1.3 Articles of Amendment filed June 30, 1995 (1995 10-K)
3.1.4 Articles of Amendment filed November 18, 1996
3.1.5 Articles of Amendment filed November 26, 1996
* 3.2 By-laws, as amended (S-18, Exhibit 3.2)
* 4.1 Form of Common Stock Certificate (S-18, Exhibit 4.1)
10.1 Employment Agreement dated November 18, 1996, as amended on
January 3, 1997, by and between the Registrant HALIS and Paul
W. Harrison
10.2 Employment Agreement dated November 18, 1996, as amended on
January 3, 1997, by and between the Registrant and Larry
Fisher
10.3 Sublease dated January 10, 1997 by and between VeriFone, Inc.
and the Registrant for lease of office space in Atlanta,
Georgia
</TABLE>
-52-
<PAGE> 53
<TABLE>
<S> <C>
10.4 Warrant Agreement, dated November 19, 1996, by and between the
Registrant and SunTrust Bank, Atlanta
*10.5 Form of Employee Trade Secret Agreement (S-18, Exhibit 10.19)
10.6 License Agreement, dated November 18, 1996, by and between
Paul Harrison Enterprises, Inc. and the Registrant
*10.14 401(k) Plan of Registrant adopted January 1, 1991 (1991 10-K,
Exhibit 10.16)
*10.19 Stock Purchase Agreement, dated as of March 29, 1996 and
amended as of September 27, 1996, between Fisher Business
Systems, Inc., HALIS, L.L.C., Paul W. Harrison and James
Askew. (8-K, Exhibit 2.2)
*10.20 1996 Stock Option Plan of the Company (1996 10-KSB)
21.1 Subsidiaries of the Registrant
23.1 Consent of Habif, Arogeti & Wynne, P.C.
27.1 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K.
The following report on Form 8-K was filed during the fourth quarter of
the fiscal year ended December 31, 1996: Current Report on Form 8-K dated
November 19, 1996.
-53-
<PAGE> 54
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
HALIS, INC.
Date: April 11, 1997 By: /s/ Larry Fisher
-----------------------------------------
Larry Fisher, President and
Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Date
--------- ----
<S> <C>
/s/ Paul W. Harrison April 11, 1997
- ------------------------------
Paul W. Harrison
Chairman of the Board and Chief
Executive Officer (Principal Executive and Financial Officer)
/s/ Larry Fisher April 11, 1997
- ------------------------------
Larry Fisher
President and Chief Operating
Officer
/s/ Philip Hinson April 11, 1997
- ------------------------------
Philip Hinson
Vice President - Finance (Principal
Accounting Officer)
/s/ Nate Lipson April 11, 1997
- ------------------------------
Nate Lipson
Director
</TABLE>
<PAGE> 55
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page Number
- ------- ------------------------------------------------- -----------
<S> <C> <C>
3.1.4 Articles of Amendment filed November 18, 1996
3.1.5 Articles of Amendment filed November 26, 1996
10.1 Employment Agreement dated November 18, 1996, as amended on
January 3, 1997, by and between the Registrant HALIS and Paul
W. Harrison
10.2 Employment Agreement dated November 18, 1996, as amended on
January 3, 1997, by and between the Registrant and Larry
Fisher
10.3 Sublease dated January 10, 1997 by and between VeriFone, Inc.
and the Registrant for lease of office space in Atlanta,
Georgia
10.4 Agreement, dated November 19, 1996, by and between the
Registrant and SunTrust Bank, Atlanta
10.6 License Agreement, dated November 18, 1996, by and between
Paul Harrison Enterprises, Inc. and the Registrant
21.1 Subsidiaries of the Registrant
23.1 Consent of Habif, Arogeti & Wynne, P.C.
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 3.1.4
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
FISHER BUSINESS SYSTEMS, INC.
1.
The name of the Corporation is FISHER BUSINESS SYSTEMS, INC.
2.
The Articles of Incorporation of the Corporation shall be amended by
deleting the first paragraph of Article V thereof in its entirety and
substituting the following in lieu of that first paragraph of Article V:
"V.
The authorized capital stock of the Corporation shall be
$1,500,000, which shall consist of 100,000,000 shares of
Common Stock with a par value of $.01 per share and 5,000,000
shares of preferred stock with a par value of $.10 per share."
3.
The amendment set forth in Article 2 of these Articles of Amendment was
adopted on November 18, 1996.
4.
These Articles of Amendment were duly approved by action of the
Corporation's shareholders in accordance with the provisions of O.C.G.A. Section
14-2-1003.
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be executed by a duly authorized officer of the Corporation, on
this 18th day of November, 1996.
FISHER BUSINESS SYSTEMS, INC.
By: /s/ Larry Fisher
-----------------------------------------
Larry Fisher
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 3.1.5
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
FISHER BUSINESS SYSTEMS, INC.
1.
The name of the Corporation is FISHER BUSINESS SYSTEMS, INC.
2.
The Articles of Incorporation of the Corporation shall be amended by
deleting Article I thereof in its entirety and substituting the following in
lieu of Article I:
"I.
The name of the Corporation is HALIS, Inc."
3.
The amendment set forth in Article 2 of these Articles of Amendment was
adopted on November 14, 1996.
4.
These Articles of Amendment were adopted by action of the Corporation's
Board of Directors. Shareholder approval of these Articles of Amendment was not
required.
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment to be executed by a duly authorized officer of the Corporation, on
this 18th day of November, 1996.
FISHER BUSINESS SYSTEMS, INC.
By: /s/ Larry Fisher
-----------------------------------------
Larry Fisher
President and Chief Executive Officer
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of the 18th day of November, 1996, by and between Fisher Business Systems, Inc.,
a Georgia corporation (the "Company"), and Paul W. Harrison (hereinafter
"Executive");
WHEREAS, this Agreement is entered into in contemplation with the
consummation of that certain Agreement and Plan of Merger and Reorganization,
dated as of December 13, 1995, among the Company and AUBIS, L.L.C. and its
affiliates ("AUBIS") providing for the acquisition by the Company of two
wholly-owned subsidiaries of AUBIS (the "AUBIS Transaction");
WHEREAS, the Company, recognizing the experience and knowledge of
Executive in the healthcare information software industry, and the importance of
Executive in the development and future direction of the Company, desires to
retain the valuable services and business counsel of Executive, it being in the
best interests of the Company to arrange terms of employment for Executive so as
to reasonably induce Executive to be employed by the Company for the term hereof
and to consummate the AUBIS transactions; and
WHEREAS, Executive is willing to accept such employment with the
Company, in accordance with the terms and conditions hereinafter set forth;
NOW, THEREFORE, for and in consideration of the mutual premises and
covenants herein contained, the parties hereto agree as follows:
1. EMPLOYMENT. For the Term of Employment, as hereinafter defined, the
Company agrees to employ Executive and Executive agrees to accept such
employment and to perform such duties and functions as the Boards of Directors
of the Company may assign to Executive from time to time, but only
administrative and managerial functions commensurate with Executive's past
experience and performance level. Unless otherwise agreed to by Executive, he
shall perform such duties primarily from the Company's offices in Atlanta,
Georgia. Executive agrees to devote his full time and energy to the business of
the Company, and shall perform his duties in a trustworthy and businesslike
manner, all for the purpose of advancing the interests of the Company. It is
hereby expressly agreed among the parties hereto that primary responsibility for
the supervision of Executive shall rest with the Board of Directors of the
Company, which shall review Executive's performance annually, make upward
adjustments to Executive's compensation and award such other bonuses and
employee benefits as it shall deem appropriate.
2. TITLE. Executive shall serve as Chairman of the Board of Directors
and Chief Executive Officer of the Company.
3. TERM OF EMPLOYMENT. The "Term of Employment" referred to in Section
1 hereof and hereinafter shall commence on the date hereof and expire on
December 31, 1999, unless otherwise terminated prior thereto in accordance with
the terms of this Agreement.
<PAGE> 2
4. COMPENSATION.
4.1 Base Salary. During the Term of Employment, Executive shall be paid
an annual base salary (hereinafter "Base Salary"), which shall be paid in
installments in accordance with the Company's normal pay practices, but not less
frequently than monthly. Executive's initial annual Base Salary for the Term of
this Agreement shall be $200,000. Executive's annualized Base Salary shall be
increased during the Term to $280,000 upon the Company achieving gross revenues
for book purposes during any calendar year equal to or greater than $10 million
(whether such revenues are internally generated or consolidated revenues
reflected as a result of an acquisition). Executive's annualized Base Salary
shall again be increased during the term to $360,000 upon the Company achieving
gross revenues for book purposes during any calendar year equal to or greater
than $15 million and the Company achieving positive Earnings Before Interest and
Taxes. Any increase in Base Salary shall commence effective the first day of the
month following the successful achievement of the respective targets. The Board
of Directors of the Company shall review Executive's Base Salary annually and
may increase, but not decrease, such Base Salary for the remainder of the Term
of Employment above and beyond as provided for in this Agreement.
4.2 Incentive Compensation. During the Term of Employment, and in
addition to Executive's Base Salary, Executive shall be eligible to receive an
annual bonus determined in accordance with the procedure set forth in Exhibit A.
Each year the Board of Directors shall establish reasonable objectives for the
operations of the Company ("Objectives"). Executive shall receive an annual
bonus based on the Company's attainment of the Objectives during the immediately
preceding fiscal year in accordance with the terms of Exhibit A.
4.3 Stock Options. In addition to any additional benefits as provided
in Section 4.4 hereof, as an incentive for successful management of the Company
by Executive, the Board of Directors may, in its discretion, grant to Executive
the right to purchase shares of the common stock of the Company at a price
determined by the Board of Directors on the date of grant. Such options shall be
issued on such terms and conditions as are determined reasonable by the Board of
Directors of the Company.
4.4 Additional Benefits. During the Term of Employment, Executive shall
have the right to participate in any and all employee benefit programs
established and maintained by the Company from time to time including, without
limitation, such medical or dental plans as may be established from time to time
by the Company. Executive shall be entitled to participate in any qualified or
unqualified stock option, pension, profit sharing or other employee benefit plan
adopted by the Company or its affiliates hereinafter and covering officers of
the Company generally. Throughout the Term of Employment, Executive shall also
be entitled to reimbursement for reasonable business expenses incurred by him in
the performance of his duties hereunder. In addition, the Company shall provide
Executive, at the Company's expense, (i) medical insurance coverage for
Executive and his family, and (ii) a monthly automobile allowance plus
reasonable expenses related thereto.
4.5 Vacation. Executive shall be entitled to six (6) weeks annual
vacation leave, with pay but with no accrual of vacation time from year to year.
Vacation shall be scheduled at reasonable times not in conflict with Executive's
duties hereunder.
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5. ILLNESS, INCAPACITY OR DEATH DURING EMPLOYMENT.
(a) If by reason of illness or incapacity, Executive is unable
to perform his services or discharge his duties hereunder for sixty (60) or more
consecutive days or ninety (90) days in the aggregate during any twelve (12)
month period, Executive and the Company agree that Executive shall have
demonstrated an inability to perform an essential function of his job
responsibilities. Accordingly, upon ten (10) days' prior notice, the Company
may, in its sole discretion, either suspend Executive without pay of any kind,
salary or bonus, until Executive is able to perform his services and discharge
his duties hereunder or terminate the employment of Executive, and thereupon,
Executive shall be paid his Base Salary from the date of termination through the
10-day notice period.
(b) In the event of Executive's death, all obligations of the
Company under this Agreement shall terminate other than the payment of that
portion of the Base Salary and incentive compensation, if any, earned by
Executive to the date of death.
6. TERMINATION.
6.1 For Cause. This Agreement may be terminated by the Board of
Directors of the Company immediately and without further obligation than for
monies already paid or accrued through the effective date of such termination,
for any of the following reasons:
(a) inattention to or substandard performance of the services
required of Executive hereunder;
(b) failure of Executive to follow reasonable written
instructions or policies of the Boards of Directors;
(c) gross negligence or willful misconduct of Executive
materially damaging to the business of the Company during the Term of
Employment, or at any time while he was employed by the Company prior to the
Term of Employment as defined herein, if not disclosed to the Company prior to
the commencement of the Term of Employment;
(d) conviction of Executive during the Term of Employment of a
crime involving breach of trust or moral turpitude; or
(e) engaging in any act or activity prohibited under the terms
of this Agreement.
In the event that the Company discharges Executive alleging "cause"
under this Section 6.1 and it is subsequently determined judicially that the
termination was "without cause," then such discharge shall be deemed a discharge
without cause subject to the provisions of Section 6.2 hereof. In the event that
the Company discharges Executive alleging "cause" under this Section 6.1, such
notice of discharge shall be accompanied by a written and specific description
of the circumstances alleging such "cause."
6.2 Without Cause. The Company may, upon thirty (30) days' written
notice to Executive, terminate this Agreement without cause at any time during
the Term of Employment. In such event, the Company shall pay Executive, as
liquidated damages in lieu of all other claims, the greater of one
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year's annual Base Salary of Executive on the date of termination or an amount
equal to the Base Salary which would otherwise be payable to Executive for the
remaining Term of Employment plus the cost for one year of all additional
benefits provided to Executive pursuant to Section 4.4 hereof. The amount of
such payment shall be subject to adjustment as provided in Section 6.4 hereof.
Any such payment shall, at the option of the Company, be made either in equal
monthly installments over the greater of twelve months or the remaining Term of
Employment or in a lump sum cash payment on the date of termination at a
discounted present value of 8% per year.
6.3 By Executive. Executive may, upon thirty (30) days' written notice
to the Company, terminate this Agreement if, at any time during the Term of
Employment, the duties, responsibilities and powers of Executive shall be
significantly reduced or diminished in such a way as to be inconsistent with the
status of Executive as an executive officer of the Company and a recognized
leader in the healthcare information software industry. In such event, the
Company shall pay Executive, as liquidated damages in lieu of all other claims,
the greater of one year's annual Base Salary of Executive on the date of
termination or an amount equal to the Base Salary which would otherwise be
payable to Executive for the remaining Term of Employment plus the cost for one
year of all additional benefits provided to Executive pursuant to Section 4.4
hereof. The amount of such payment shall be subject to adjustment as provided in
Section 6.4 hereof. Any such payment shall, at the option of the Company, be
made either in equal monthly installments over the greater of twelve months or
the remaining Term of Employment or in a lump sum cash payment on the date of
termination at a discounted present value of 8% per year.
6.4 Change in Control.
(a) In the event of a "change in control" of the Company,
Executive shall be entitled, for a period of one (1) year from the date of
closing of the transaction effecting such change in control and at his election,
to give written notice to the Company of termination of this Agreement and to
receive an amount equal to three times the annual Base Salary of Executive on
the date of termination, plus the cost for one year of all additional benefits
provided to Executive pursuant to Section 4.4 hereof. Any such payment shall, at
the option of the Company, be made either in equal monthly installments over
three years or in a lump sum cash payment on the date of termination at a
discounted present value of 8% per year.
(b) For purposes of this Section 6.4, "change in control" of
the Company shall mean:
(i) Any transaction occurring after the closing of
the AUBIS Transaction and the acquisition of HALIS
Software, Inc., whether by merger, consolidation,
asset sale, tender offer, reverse stock split or
otherwise, which results in the acquisition or
beneficial ownership (as such term is defined under
rules and regulations promulgated under the
Securities Exchange Act of 1934, as amended) by any
person or entity or any group of persons or entities
acting in concert, of 25% or more of the outstanding
shares of the common stock of the Company;
(ii) The sale of all or substantially all of the
assets of the Company; or
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(iii) The liquidation of the Company, other than in
respect to a proceeding under federal bankruptcy or
insolvency laws.
6.5 Executive's Obligations Upon Termination. Upon the termination of
his employment hereunder for whatever reason, Executive shall:
(a) Forthwith tender his resignation from any office
he may hold in the Company; and
(b) Not at any time represent himself still to be
connected or to have any connection with the Company.
6.6 Effect of Termination. The provisions contained in Sections 7 and 8
of this Agreement shall survive the termination of this Agreement and the
termination of Executive's employment with the Company to the extent required to
give full effect to the covenants and agreements contained herein.
7. CONFIDENTIALITY.
(a) Subject to Section 7(b) below, Executive agrees
that, during the term of this Agreement, Executive will hold in a fiduciary
capacity for the benefit of the Company, and after the termination of this
Agreement, Executive shall not directly or indirectly use or disclose, except as
authorized by the Company in connection with the performance of Executive's
duties, any Confidential Information, as defined hereinafter, that Executive may
have or acquire (whether or not developed or compiled by Executive and whether
or not Executive has been authorized to have access to such Confidential
Information) during the term of this Agreement. The term "Confidential
Information" as used in this Agreement shall mean and include any information,
data and know-how relating to the business of the Company or its affiliates that
is disclosed to Executive by the Company or its affiliates or known by him as a
result of his relationship with the Company and not generally within the public
domain (whether constituting a trade secret or not), including without
limitation, the following information:
(i) financial information, such as the Company's or its
affiliates' earnings, assets, debts, prices, fee structure,
volumes of purchases or sales or other financial data, whether
relating to the Company or their affiliates generally, or to
particular products, services, geographic areas or time
periods;
(ii) supply and service information, such as information
concerning the goods and services utilized or purchased by the
Company or its affiliates, the names or addresses of
suppliers, terms of supply or service contracts, or of
particular transactions, or related information about
potential suppliers, to the extent that such information is
not generally known to the public, and to the extent that the
combination of suppliers or use of a particular supplier,
though generally known or available, yields advantages to the
Company or its affiliates the details of which are not
generally known;
(iii) marketing information, such as details about ongoing or
proposed marketing programs or agreements by or on behalf of
the Company or its affiliates, marketing forecasts or results
of marketing efforts or information about impending
transactions;
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<PAGE> 6
(iv) personnel information relating to the Company or its
affiliates, such as employees' personal or medical histories,
compensation or other terms of employment, actual or proposed
promotions, hiring, resignations, disciplinary actions,
terminations or reasons therefor, training methods,
performance or other employee information;
(v) customer information relating to the Company or its
affiliates, such as any compilation of past, existing or
prospective customers, customer proposals or agreements
between customers and the Company or its affiliates, status of
customer accounts or credit, or related information about
actual or prospective customers; and
(vi) information with respect to any corporate affairs that
the Company or its affiliates agreed to treat as confidential.
The term "Confidential Information" does not include information that has become
generally available to the public by the act of one who has the right to
disclose such information without violating any right of the Company or the
client to which such information pertains.
(b) The covenants contained in this Section 7 shall survive
the termination of Executive's employment with the Company for any reason for a
period of two (2) years; provided, however, that with respect to those items of
Confidential Information which constitute trade secrets under applicable law,
Executive's obligations of confidentiality and non-disclosure as set forth in
this Section 7 shall continue to survive after said two (2) year period to the
greatest extent permitted by applicable law. These rights of the Company are in
addition to those rights the Company has under the common law or applicable
statutes for the protection of trade secrets.
8. NON-COMPETITION.
(a) Executive acknowledges that he will perform services
hereunder which directly affect the Company's business presently conducted
within the territory comprised of any area located within the continental United
States (the "Territory"). Accordingly, the parties hereto deem it necessary to
enter into the protective agreement set forth below, the terms and conditions of
which have been negotiated by and between the parties hereto.
(b) Executive agrees with the Company that for so long as he
is employed by the Company hereunder, and for a period of one (1) year after the
termination date of his employment hereunder (provided that the reason for such
termination is for cause, because of voluntary termination by him or because of
the expiration of this Agreement), Executive shall not, without the prior
written consent of the Company, within the geographical limits of the Territory,
either directly or indirectly engage in, or perform managerial or executive
services of the same type performed or to be performed by Executive pursuant to
this Agreement for, any business or organization that engages in the sale or
distribution of healthcare information software or services of the type offered
or provided by the Company if the Company or its affiliates or successors are
then engaged in the business of the sale or distribution of healthcare
information software or services in the Territory; provided, however, that
nothing contained in this Section 8(b) shall prohibit Executive following the
termination of this Agreement from performing sales functions or sales
responsibilities of a non-managerial or executive nature for a business or
organization that engages in the sale or distribution of healthcare information
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<PAGE> 7
software or services of the type offered or provided by the Company, so long as
Executive does not thereby breach his obligations under Section 8(c) of this
Agreement.
(c) Executive agrees that he will not take any customer lists
of the Company after leaving his employ and that he will, for so long as he is
employed by the Company hereunder, and for a period of one (1) year after the
termination date of his employment hereunder (provided that the reason for such
termination is for cause, because of voluntary termination by him other than
pursuant to Section 6.3 hereof or because of the expiration of this Agreement),
refrain from soliciting or attempting to solicit directly or indirectly or by
assisting others, any business from any of the Company's customers, including
actively sought prospective customers, with whom Executive had material contact
during his employment for purposes of providing products or services that are
similar to or competitive with those provided by the Company, namely healthcare
information systems and support services of the type offered or provided by the
Company.
(d) Executive agrees with the Company that for so long as he
is employed by the Company hereunder, and for a period of one (1) year after the
termination date of his employment hereunder (provided that the reason for such
termination is for cause, because of voluntary termination by him because of the
expiration of this Agreement), refrain from recruiting or hiring, or attempting
to recruit or hire, directly or by assisting others, any employee of the Company
who is employed by the Company or any successor or affiliates of the Company if
the Company or its successor or affiliates is then engaged in the business of
the sale and distribution of healthcare information systems and support services
of the type offered or provided by the Company.
(e) The covenants of Executive set forth in this Section 8 are
separate and independent covenants for which valuable consideration has been
paid, the receipt, adequacy and sufficiency of which are acknowledged by
Executive, and have also been made by Executive to induce the Company to enter
into this Agreement. The aforesaid covenants may be availed of or relied upon by
the Company in any court of competent jurisdiction, and shall form the basis of
injunctive relief and damages including expenses of litigation (including but
not limited to reasonable attorney's fees) suffered by the Company arising out
of any breach of the aforesaid covenants by Executive. The covenants of
Executive set forth in this Section 8 are cumulative to all other covenants of
Executive in favor of the Company contained in this Agreement and shall survive
the termination of this Agreement for the purposes intended. Should any
covenant, term or condition contained in this Section 8 become or be declared
invalid or unenforceable by a court of competent jurisdiction, then the parties
request that such court judicially modify such unenforceable provision
consistent with the intent of Section 8 so that it shall be enforceable as
modified, and in any event the invalidity of any provision of Section 8 shall
not affect the validity of any other provision in Section 8 or elsewhere in this
Agreement.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto regarding employment of Executive, and supersedes and
replaces any prior agreement relating thereto.
10. ASSIGNMENT. Neither of the parties hereto may assign this Agreement
without the prior written consent of the other party hereto.
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<PAGE> 8
11. SEVERABILITY. Each section and subsection of this Agreement
constitutes a separate and distinct understanding, covenant and provision
hereof. In the event that any provision of this Agreement shall finally be
determined to be unlawful, such provision shall be deemed to be severed from
this Agreement, but every other provision of this Agreement shall remain in full
force and effect.
12. GOVERNING LAW. This Agreement shall in all respects be interpreted,
construed and governed by and in accordance with the laws of the State of
Georgia.
13. RIGHTS OF THIRD PARTIES. Nothing herein, expressed or implied, is
intended to or shall be construed to confer upon or give to any person, firm or
other entity, other than the parties hereto and their permitted assigns, any
rights or remedies under or by reason of this Agreement.
14. AMENDMENT. This Agreement may not be amended orally but only by an
instrument in writing duly executed by the parties hereto.
15. NOTICES. Any notice or other document or communication permitted or
required to be given to Executive pursuant to the terms hereof shall be deemed
given if personally delivered to Executive or sent to him, postage prepaid, by
registered or certified mail, at P.O. Box 53454, Atlanta, Georgia 30355, or any
such other address as Executive shall have notified the Company in writing. Any
notice or other document or other communication permitted or required to be
given to the Company pursuant to the terms hereof shall be deemed given if
personally delivered or sent to the Company, postage prepaid, by registered or
certified mail, at 1950 Spectrum Circle, Suite 400, Marietta, Georgia 30067, or
at such other address as the Company shall have notified Executive in writing.
16. WAIVER. The waiver by either party hereto of a breach of any
provision of this Agreement by the other shall not operate or be construed as a
waiver of any subsequent breach of the same or any other provision of this
Agreement by the breaching party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
FISHER BUSINESS SYSTEMS, INC.
By: /s/ Larry Fisher
-----------------------------------------
Larry Fisher, President
EXECUTIVE
/s/ Paul W. Harrison (SEAL)
--------------------------------------
PAUL W. HARRISON
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<PAGE> 9
EXHIBIT A
INCENTIVE COMPENSATION
(To be mutually agreed upon by Executive and Company and approved by the
Company's Board of Directors within 30 days after the date hereof or this
Agreement shall, at the option of Executive, be void ab initio)
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<PAGE> 10
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") is made and
entered into as of the 3rd day of January, 1997, by and between HALIS, Inc.
(f/k/a Fisher Business Systems, Inc.), a Georgia corporation (the "Company"),
and Paul W. Harrison ("Executive").
WHEREAS, the Company and Executive have heretofore entered into that
certain Employment Agreement, dated as of November 18, 1996 (the "Employment
Agreement"); and
WHEREAS, the Company and Executive desire to amend the Employment
Agreement as hereinafter provided;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
1. Amendment to Section 4.1. Section 4.1 of the Employment Agreement is
hereby amended by deleting the words "$15 million" in the fourth sentence
thereof and inserting in their place the following: $25 million.
2. Employment Agreement to Remain in Effect. Except as expressly
amended hereby, the Employment Agreement shall continue in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have caused the Amendment to be
duly executed and delivered as of the day and year first above written.
HALIS, Inc.
By: /s/ Larry Fisher
-----------------------------------------
Larry Fisher, President
EXECUTIVE:
/s/ Paul W. Harrison (SEAL)
--------------------------------------------
Paul W. Harrison
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of the 18th day of November, 1996, by and between Fisher Business Systems, Inc.,
a Georgia corporation (the "Company"), and Larry Fisher (hereinafter
"Executive");
WHEREAS, in contemplation of the consummation of that certain Agreement
and Plan of Merger and Reorganization dated December 13, 1995 among the Company
and AUBIS, L.L.C. and its affiliates ("AUBIS") providing for the acquisition by
the Company of two wholly-owned subsidiaries of AUBIS (the "AUBIS Transaction"),
this Agreement amends and restates that certain employment agreement entered
into as of February 7, 1996 by and between the Company and Executive;
WHEREAS, the Company, recognizing the importance of Executive in
preserving and maintaining the goodwill of the Company, desires to retain the
valuable services and business counsel of Executive, it being in the best
interests of the Company to arrange terms of employment for Executive so as to
reasonably induce Executive to remain in his capacities with the Company for the
term hereof; and
WHEREAS, Executive is willing to accept such employment with the
Company, in accordance with the terms and conditions hereinafter set forth;
NOW, THEREFORE, for and in consideration of the mutual premises and
covenants herein contained, the parties hereto agree as follows:
1. EMPLOYMENT. For the Term of Employment, as hereinafter defined, the
Company agrees to employ Executive and Executive agrees to accept such
employment and to perform such duties and functions as the Chief Executive
Officer or Board of Directors of the Company may assign to Executive from time
to time, but only administrative and managerial functions reasonably
commensurate with Executive's past experience and performance level. Unless
otherwise agreed to by Executive, he shall perform such duties primarily from
the Company's offices in Atlanta, Georgia. Executive agrees to devote his full
time and energy to the business of the Company, and shall perform his duties in
a trustworthy and businesslike manner, all for the purpose of advancing the
interests of the Company. It is hereby expressly agreed among the parties hereto
that primary responsibility for the supervision of Executive shall rest with the
Chief Executive Officer or Board of Directors of the Company, which shall review
Executive's performance annually, make upward adjustments to Executive's
compensation and award such other bonuses and employee benefits as it shall deem
appropriate.
2. TITLE. Executive shall serve as the President and Chief Operating
Officer of the Company.
3. TERM OF EMPLOYMENT. The "Term of Employment" referred to in Section
1 hereof and hereinafter shall commence on the date hereof and expire on
December 31, 1999 unless otherwise terminated prior thereto in accordance with
the terms of this Agreement.
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<PAGE> 2
4. COMPENSATION.
4.1 Base Salary. During the Term of Employment, Executive shall be paid
an annual base salary (hereinafter "Base Salary"), which shall be paid in
installments in accordance with the Company's normal pay practices, but not less
frequently than monthly. Executive's initial annual Base Salary for the Term of
this Agreement shall be $175,000. Executive's annualized Base Salary shall be
increased during the Term to $210,000 upon the Company achieving gross revenues
for book purposes during any calendar year equal to or greater than $10 million
(whether such revenues are internally generated or consolidated revenues
reflected as a result of an acquisition). Executive's annualized Base Salary
shall again be increased during the Term to $240,000 upon the Company achieving
gross revenues for book purposes during any calendar year equal to or greater
than $15 million and the Company achieving positive Earnings Before Interest and
Taxes. An increase in Base Salary shall commence effective the first day of the
month following the successful achievement of the respective targets. The Board
of Directors of the Company shall review Executive's Base Salary annually and
may adjust the Base Salary above and beyond as provided for in this Agreement.
4.2 Incentive Compensation. During the Term of Employment, and in
addition to Executive's Base Salary, Executive shall be eligible to receive an
annual bonus determined in accordance with the procedure set forth in Exhibit A.
Each year the Board of Directors shall establish reasonable objectives for the
operations of the Company ("Objectives"). Executive shall receive an annual
bonus based on the Company's attainment of the Objectives during the immediately
preceding fiscal year in accordance with the terms of Exhibit A.
4.3 Stock Options. In addition to any additional benefits as provided
in Section 4.4 hereof, as an incentive for successful management of the Company
by Executive, the Board of Directors may, in its discretion, grant to Executive
the right to purchase shares of the common stock of the Company at a price
determined by the Board of Directors on the date of grant. Such options shall be
issued on such terms and conditions as are determined reasonable by the Board of
Directors of the Company.
4.4 Additional Benefits. During the Term of Employment, Executive shall
have the right to participate in any and all employee benefit programs
established and maintained by the Company from time to time including, without
limitation, such medical or dental plans as may be established from time to time
by the Company. Executive shall be entitled to participate in any qualified or
unqualified stock option, pension, profit sharing or other employee benefit plan
adopted by the Company or its affiliates hereinafter and covering officers of
the Company generally. Throughout the Term of Employment, Executive shall also
be entitled to reimbursement for reasonable business expenses incurred by him in
the performance of his duties hereunder. In addition, the Company shall provide
Executive, at the Company's expense, (i) medical insurance coverage for
Executive and his family, and (ii) a monthly automobile allowance plus
reasonable expenses related thereto.
4.5 Vacation. Executive shall be entitled to six (6) weeks annual
vacation leave, with pay but with no accrual of vacation time from year to year.
Vacation shall be scheduled at reasonable times not in conflict with Executive's
duties hereunder.
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<PAGE> 3
5. ILLNESS, INCAPACITY OR DEATH DURING EMPLOYMENT.
(a) If by reason of illness or incapacity, Executive is unable
to perform his services or discharge his duties hereunder for sixty (60) or more
consecutive days or ninety (90) days in the aggregate during any twelve (12)
month period, Executive and the Company agree that Executive shall have
demonstrated an inability to perform an essential function of his job
responsibilities. Accordingly, upon ten (10) days' prior notice, the Company
may, in its sole discretion, either suspend Executive without pay of any kind,
salary or bonus, until Executive is able to perform his services and discharge
his duties hereunder or terminate the employment of Executive, and thereupon,
Executive shall be paid his Base Salary from the date of termination through the
10-day notice period.
(b) In the event of Executive's death, all obligations of the
Company under this Agreement shall terminate other than the payment of that
portion of the Base Salary and incentive compensation, if any, earned by
Executive to the date of death.
6. TERMINATION.
6.1 For Cause. This Agreement may be terminated by the Board of
Directors of the Company immediately and without further obligation than for
monies already paid or accrued through the effective date of such termination,
for any of the following reasons:
(a) inattention to or substandard performance of the services
required of Executive hereunder;
(b) failure of Executive to follow reasonable written
instructions or policies of the Boards of Directors;
(c) gross negligence or willful misconduct of Executive
materially damaging to the business of the Company during the Term of
Employment, or at any time while he was employed by the Company prior to the
Term of Employment as defined herein, if not disclosed to the Company prior to
the commencement of the Term of Employment;
(d) conviction of Executive during the Term of Employment of a
crime involving breach of trust or moral turpitude; or
(e) engaging in any act or activity prohibited under the terms
of this Agreement.
In the event that the Company discharges Executive alleging "cause"
under this Section 6.1 and it is subsequently determined judicially that the
termination was "without cause," then such discharge shall be deemed a discharge
without cause subject to the provisions of Section 6.2 hereof. In the event that
the Company discharges Executive alleging "cause" under this Section 6.1, such
notice of discharge shall be accompanied by a written and specific description
of the circumstances alleging such "cause."
6.2 Without Cause. The Company may, upon thirty (30) days' written
notice to Executive, terminate this Agreement without cause at any time during
the Term of Employment. In such event, the Company shall pay Executive, as
liquidated damages in lieu of all other claims, the greater of one
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year's annual Base Salary of Executive on the date of termination or an amount
equal to the Base Salary which would otherwise be payable to Executive for the
remaining Term of Employment, plus the cost for one year of all additional
benefits provided to Executive pursuant to Section 4.4 hereof. Any such payment
shall, at the option of the Company, be made either in equal monthly
installments over the greater of twelve months or the remaining Term of
Employment or in a lump sum cash payment on the date of termination at a
discounted present value of 8% per year.
6.3 By Executive. Executive may, upon thirty (30) days' written notice
to the Company, terminate this Agreement if, at any time during the Term of
Employment, the duties, responsibilities and powers of Executive shall be
significantly reduced or diminished in such a way as to be inconsistent with the
status of Executive as a founder and executive officer of the Company and a
recognized leader in the software industry. In such event, the Company shall pay
Executive, as liquidated damages in lieu of all other claims, the greater of one
year's annual Base Salary of Executive on the date of termination or an amount
equal to the Base Salary which would otherwise be payable to Executive for the
remaining Term of Employment, plus the cost for one year of all additional
benefits provided to Executive pursuant to Section 4.4 hereof. Any such payment
shall, at the option of the Company, be made either in equal monthly
installments over the greater of twelve months or the remaining Term of
Employment or in a lump sum cash payment on the date of termination at a
discounted present value of 8% per year.
6.4 Change in Control.
(a) In the event of a "change in control" of the Company,
Executive shall be entitled, for a period of one (1) year from the date of
closing of the transaction effecting such change in control and at his election,
to give written notice to the Company of termination of this Agreement and to
receive an amount equal to two times the annual Base Salary of Executive on the
date of termination, plus the cost for one year of all additional benefits
provided to Executive pursuant to Section 4.4 hereof. Any such payment shall, at
the option of the Company, be made either in equal monthly installments over two
years or in a lump sum cash payment on the date of termination at a discounted
present value of 8% per year.
(b) For purposes of this Section 6.4, "change in control" of
the Company shall mean:
(i) Any transaction occurring after the closing of
the AUBIS Transaction and the acquisition of HALIS
Software, Inc., whether by merger, consolidation,
asset sale, tender offer, reverse stock split or
otherwise, which results in the acquisition or
beneficial ownership (as such term is defined under
rules and regulations promulgated under the
Securities Exchange Act of 1934, as amended) by any
person or entity or any group of persons or entities
acting in concert, of 25% or more of the outstanding
shares of the common stock of the Company;
(ii) The sale of all or substantially all of the
assets of the Company; or
(iii) The liquidation of the Company, other than in
respect to a proceeding under federal bankruptcy or
insolvency laws.
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6.5 Executive's Obligations Upon Termination. Upon the termination of
his employment hereunder for whatever reason, Executive shall:
(a) Forthwith tender his resignation from any office he may
hold in the Company; and
(b) Not at any time represent himself still to be connected or
to have any connection with the Company.
6.6 Effect of Termination. The provisions contained in Section 7 and 8
of this Agreement shall survive the termination of this Agreement and the
termination of Executive's employment with the Company to the extent required to
give full effect to the covenants and agreements contained herein.
7. CONFIDENTIALITY.
(a) Subject to Section 7(b) below, Executive agrees that,
during the term of this Agreement, Executive will hold in a fiduciary capacity
for the benefit of the Company, and after the termination of this Agreement,
Executive shall not directly or indirectly use or disclose, except as authorized
by the Company in connection with the performance of Executive's duties, any
Confidential Information, as defined hereinafter, that Executive may have or
acquire (whether or not developed or compiled by Executive and whether or not
Executive has been authorized to have access to such Confidential Information)
during the term of this Agreement. The term "Confidential Information" as used
in this Agreement shall mean and include any information, data and know-how
relating to the business of the Company or its affiliates that is disclosed to
Executive by the Company or its affiliates or known by him as a result of his
relationship with the Company and not generally within the public domain
(whether constituting a trade secret or not), including without limitation, the
following information:
(i) financial information, such as the Company's or its
affiliates' earnings, assets, debts, prices, fee structure,
volumes of purchases or sales or other financial data, whether
relating to the Company or their affiliates generally, or to
particular products, services, geographic areas or time
periods;
(ii) supply and service information, such as information
concerning the goods and services utilized or purchased by the
Company or its affiliates, the names or addresses of
suppliers, terms of supply or service contracts, or of
particular transactions, or related information about
potential suppliers, to the extent that such information is
not generally known to the public, and to the extent that the
combination of suppliers or use of a particular supplier,
though generally known or available, yields advantages to the
Company or its affiliates the details of which are not
generally known;
(iii) marketing information, such as details about ongoing or
proposed marketing programs or agreements by or on behalf of
the Company or its affiliates, marketing forecasts or results
of marketing efforts or information about impending
transactions;
(iv) personnel information relating to the Company or its
affiliates, such as employees' personal or medical histories,
compensation or other terms of employment, actual or
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<PAGE> 6
proposed promotions, hiring, resignations, disciplinary
actions, terminations or reasons therefor, training methods,
performance or other employee information;
(v) customer information relating to the Company or its
affiliates, such as any compilation of past, existing or
prospective customers, customer proposals or agreements
between customers and the Company or its affiliates, status of
customer accounts or credit, or related information about
actual or prospective customers; and
(vi) information with respect to any corporate affairs that
the Company or its affiliates agreed to treat as confidential.
The term "Confidential Information" does not include information that has become
generally available to the public by the act of one who has the right to
disclose such information without violating any right of the Company or the
client to which such information pertains.
(b) The covenants contained in this Section 7 shall survive
the termination of Executive's employment with the Company for any reason for a
period of two (2) years; provided, however, that with respect to those items of
Confidential Information which constitute trade secrets under applicable law,
Executive's obligations of confidentiality and non-disclosure as set forth in
this Section 7 shall continue to survive after said two (2) year period to the
greatest extent permitted by applicable law. These rights of the Company are in
addition to those rights the Company has under the common law or applicable
statutes for the protection of trade secrets.
8. NON-COMPETITION.
(a) Executive acknowledges that he will perform services
hereunder which directly affect the Company's business presently conducted
within the territory comprised of any area located within the continental United
States (the "Territory"). Accordingly, the parties hereto deem it necessary to
enter into the protective agreement set forth below, the terms and conditions of
which have been negotiated by and between the parties hereto.
(b) Executive agrees with the Company that for so long as he
is employed by the Company hereunder, and for a period of one (1) year after the
termination date of his employment hereunder (provided that the reason for such
termination is for cause, because of voluntary termination by him or because of
the expiration of this Agreement), Executive shall not, without the prior
written consent of the Company, within the geographical limits of the Territory,
either directly or indirectly engage in, or perform managerial or executive
services of the same type performed or to be performed by Executive pursuant to
this Agreement for, any business or organization that engages in the sale or
distribution of healthcare information software or services of the type offered
or provided by the Company if the Company or its affiliates or successors are
then engaged in the business of the sale or distribution of healthcare
information software or services in the Territory; provided, however, that
nothing contained in this Section 8(b) shall prohibit Executive following the
termination of this Agreement from performing sales functions or sales
responsibilities of a non-managerial or executive nature for a business or
organization that engages in the sale or distribution of healthcare information
software or services of the type offered or provided by the Company, so long as
Executive does not thereby breach his obligations under Section 8(c) of this
Agreement.
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<PAGE> 7
(c) Executive agrees that he will not take any customer lists
of the Company after leaving his employ and that he will, for so long as he is
employed by the Company hereunder, and for a period of one (1) year after the
termination date of his employment hereunder (provided that the reason for such
termination is for cause, because of voluntary termination by him other than
pursuant to Section 6.3 hereof or because of the expiration of this Agreement),
refrain from soliciting or attempting to solicit directly or indirectly or by
assisting others, any business from any of the Company's customers, including
actively sought prospective customers, with whom Executive had material contact
during his employment for purposes of providing products or services that are
similar to or competitive with those provided by the Company, namely healthcare
information systems and support services of the type offered or provided by the
Company.
(d) Executive agrees with the Company that for so long as he
is employed by the Company hereunder, and for a period of one (1) year after the
termination date of his employment hereunder (provided that the reason for such
termination is for cause, because of voluntary termination by him or because of
the expiration of this Agreement), refrain from recruiting or hiring, or
attempting to recruit or hire, directly or by assisting others, any employee of
the Company who is employed by the Company or any successor or affiliates of the
Company if the Company or its successor or affiliates is then engaged in the
business of the sale and distribution of healthcare information systems and
support services of the type offered or provided by the Company.
(e) The covenants of Executive set forth in this Section 8 are
separate and independent covenants for which valuable consideration has been
paid, the receipt, adequacy and sufficiency of which are acknowledged by
Executive, and have also been made by Executive to induce the Company to enter
into this Agreement. The aforesaid covenants may be availed of or relied upon by
the Company in any court of competent jurisdiction, and shall form the basis of
injunctive relief and damages including expenses of litigation (including but
not limited to reasonable attorney's fees) suffered by the Company arising out
of any breach of the aforesaid covenants by Executive. The covenants of
Executive set forth in this Section 8 are cumulative to all other covenants of
Executive in favor of the Company contained in this Agreement and shall survive
the termination of this Agreement for the purposes intended. Should any
covenant, term or condition contained in this Section 8 become or be declared
invalid or unenforceable by a court of competent jurisdiction, then the parties
request that such court judicially modify such unenforceable provision
consistent with the intent of Section 8 so that it shall be enforceable as
modified, and in any event the invalidity of any provision of Section 8 shall
not affect the validity of any other provision in Section 8 or elsewhere in this
Agreement.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto regarding employment of Executive, and supersedes and
replaces any prior agreement relating thereto, including that certain Employment
Agreement dated as of May 8, 1995 by and between the Company and Executive.
10. ASSIGNMENT. Neither of the parties hereto may assign this Agreement
without the prior written consent of the other party hereto.
11. SEVERABILITY. Each section and subsection of this Agreement
constitutes a separate and distinct understanding, covenant and provision
hereof. In the event that any provision of this
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<PAGE> 8
Agreement shall finally be determined to be unlawful, such provision shall be
deemed to be severed from this Agreement, but every other provision of this
Agreement shall remain in full force and effect.
12. GOVERNING LAW. This Agreement shall in all respects be interpreted,
construed and governed by and in accordance with the laws of the State of
Georgia.
13. RIGHTS OF THIRD PARTIES. Nothing herein, expressed or implied, is
intended to or shall be construed to confer upon or give to any person, firm or
other entity, other than the parties hereto and their permitted assigns, any
rights or remedies under or by reason of this Agreement.
14. AMENDMENT. This Agreement may not be amended orally but only by an
instrument in writing duly executed by the parties hereto.
15. NOTICES. Any notice or other document or communication permitted or
required to be given to Executive pursuant to the terms hereof shall be deemed
given if personally delivered to Executive or sent to him, postage prepaid, by
registered or certified mail, at 1304 Hatton Walk, Marietta, Georgia 30068, or
any such other address as Executive shall have notified the Company in writing.
Any notice or other document or other communication permitted or required to be
given to the Company pursuant to the terms hereof shall be deemed given if
personally delivered or sent to the Company, postage prepaid, by registered or
certified mail, at 1950 Spectrum Circle, Suite 400, Marietta, Georgia 30067, or
at such other address as the Company shall have notified Executive in writing.
16. WAIVER. The waiver by either party hereto of a breach of any
provision of this Agreement by the other shall not operate or be construed as a
waiver of any subsequent breach of the same or any other provision of this
Agreement by the breaching party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
FISHER BUSINESS SYSTEMS, INC.
By: /s/ Paul W. Harrison
-----------------------------------------
Paul Harrison, Chairman
EXECUTIVE:
/s/ Larry Fisher (SEAL)
--------------------------------------
LARRY FISHER
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<PAGE> 9
EXHIBIT A
EXECUTIVE COMPENSATION
(To be mutually agreed upon by Executive and Company and approved by the
Company's Board of Directors within 30 days after the date hereof or this
Agreement shall, at the option of Executive, be void ab initio.)
A-1
<PAGE> 10
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") is made and
entered into as of the 3rd day of January, 1997, by and between HALIS, Inc.
(f/k/a Fisher Business Systems, Inc.), a Georgia corporation (the "Company"),
and Larry Fisher ("Executive").
WHEREAS, the Company and Executive have heretofore entered into that
certain Employment Agreement, dated as of November 18, 1996 (the "Employment
Agreement"); and
WHEREAS, the Company and Executive desire to amend the Employment
Agreement as hereinafter provided;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
1. Amendment to Section 4.1. Section 4.1 of the Employment Agreement is
hereby amended by deleting the words "$15 million" in the fourth sentence
thereof and inserting in their place the following: $25 million.
2. Employment Agreement to Remain in Effect. Except as expressly
amended hereby, the Employment Agreement shall continue in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have caused the Amendment to be
duly executed and delivered as of the day and year first above written.
HALIS, Inc.
By: /s/ Paul W. Harrison
-----------------------------------------
Paul W. Harrison, Chairman
EXECUTIVE:
/s/ Larry Fisher (SEAL)
--------------------------------------
Larry Fisher
<PAGE> 1
EXHIBIT 10.3
SUBLEASE
This Sublease is entered into this 10th day of January, 1997 by and
between VeriFone, Inc., a Delaware corporation ("Sublessor"), and HALIS, Inc.,
a Georgia corporation ("Sublessee"). Terms not specifically defined herein are
as defined in the Master Lease.
A. Sublessor, as Tenant, is leasing from DOA 87 Limited Partnership
("Master Lessor") those certain premises located at River Ridge, 9040 Roswell
Road, Atlanta, Georgia ("Premises") pursuant to that certain undated Lease
having a commencement date of August 1, 1987, as amended by that certain
Amendment of Office Lease dated September 14, 1987, that certain Second
Amendment of Lease dated __________, 1989, that certain Third Amendment of Lease
dated October 1, 1991, that certain Fourth Amendment of Lease dated June 2, 1995
and that certain Fifth Amendment of Lease dated January 18, 1996 (collectively,
the "Master Lease"). Sublessee acknowledges having reviewed a copy of the Master
Lease, which is attached hereto as Exhibit A.
B. Sublessor desires to lease to Sublessee and Sublessee desires to
lease from Sublessor the Sublease Premises (as defined below) on the terms and
conditions set forth in this Sublease.
1. SUBLEASE PREMISES
a. Sublessor leases to Sublessee and Sublessee hires from Sublessor the
following described premises together with the appurtenances thereto, situated
in the City of Atlanta, State of Georgia, commonly known as River Ridge, 9040
Roswell Road, Atlanta, Georgia, consisting of approximately 3,983 rentable
square feet and located on the fourth floor and commonly known as Suite 470 (the
"Sublease Premises"). The Sublease Premises are shown on the site plan attached
hereto as Exhibit B.
b. Sublessee will be taking possession of the Sublease Premises "as
is," in its condition existing on the date of delivery of the Sublease Premises
to Sublessee. Sublessee acknowledges that Sublessee is leasing the Sublease
Premises based on its own inspection of the Sublease Premises and those of its
agents, and is not relying on any representations or warranties of the Sublessor
regarding the physical condition of the Sublease Premises. Sublessee
acknowledges that as of the date of delivery of the Sublease Premises to
Sublessee, the Sublease Premises will contain wiring from Sublessee's security
system (but not the software or hardware for such system) and a paging system
(collectively, "Equipment"). Sublessor expressly does not warrant the working
condition of the Equipment or its usefulness for Sublessee's purposes and
Sublessor shall not be responsible for any damages incurred by Sublessee or any
third party related to such Equipment. Sublessee's taking of possession of the
Sublease Premises shall constitute conclusive evidence that the Sublease
Premises were, as of that date, in good, clean and tenantable condition.
Sublessee acknowledges that the square footage of the Sublease Premises as
specified in Subparagraph l.a is an estimate and that Sublessor does not warrant
the exact square footage of the Sublease Premises. By taking possession of the
Sublease Premises, Sublessee accepts the square footage of the Sublease Premises
as that specified in Subparagraph l.a above. Sublessee shall not be entitled to
any tenant improvement allowance for the Sublease Premises.
2. INCORPORATION OF MASTER LEASE
This Sublease is subject to all of the terms and conditions of the
Master Lease and Sublessee hereby accepts, assumes and agrees to perform all of
the rights and obligations of Sublessor as Sublessee under the Master Lease to
the extent such rights and obligations are applicable to the Sublease Premises
<PAGE> 2
and all of the terms and conditions of the Master Lease are incorporated herein
as terms and conditions of this Sublease (with each reference therein to
Landlord, Tenant and Premises to be deemed to refer to Sublessor, Sublessee, and
Sublease Premises respectively). Notwithstanding the foregoing, Sublessee shall
not have any rights of renewal, expansion or early cancellation which may be
provided to Tenant under the Master Lease.
3. TERM
a. The term of this Sublease shall be for a period of approximately
fifty-five (55) months, commencing on March 1, 1997 ("Commencement Date"), and
ending on September 30, 2001, unless terminated earlier pursuant to the
provisions of this Sublease.
b. In the event of the termination for any reason of Sublessor's
interest as tenant under the Master Lease, then this Sublease shall terminate
therewith without any liability of Sublessor to Sublessee; provided, however,
that Sublessor may be liable to Sublessee for any termination of the Sublease
that results from Sublessor's breach of the Master Lease, so long as such breach
is not caused by Sublessee.
c. In the event Sublessor is unable to deliver possession of the
Sublease Premises to Sublessee by March 1, 1997 for any reason, then Sublessor
shall not be liable for any damage caused thereby, nor shall this Sublease be
void or voidable nor shall the term hereof be extended by such delay; provided,
however, that Sublessee shall not be liable for rent until possession of the
Sublease Premises has been delivered to Sublessee. If Sublessor has not
delivered possession of the Sublease Premises to Sublessee by March 1, 1997, and
such delay is not caused in whole or in part by Sublessee, Sublessor shall
reimburse Sublessee for the cost of Sublessee's holdover rent at its existing
locations which is in excess of its scheduled base rent for such period
commencing March 1, 1997 and ending on the delivery of possession of the
Sublease Premises to Sublessee, not to exceed an aggregate of $6,000 per month
and for no longer than a two (2) month period. If Sublessor has not delivered
possession of the Sublease Premises to Sublessee within sixty (60) days after
March 1, 1997 and such delay is not caused in whole or in part by Sublessee,
Sublessee may, at Sublessee's option, by notice in writing to Sublessor within
ten (10) days thereafter, cancel this Sublease, in which event the parties shall
be discharged from all obligations under this Sublease, and Sublessor shall
return to Sublessee any prepaid rent.
4. USE
a. Sublessee shall use the Sublease Premises solely for general office
use and for no other purpose without the consent of Sublessor. Sublessee agrees
that its use shall comply with all applicable governmental laws and ordinances,
and that it shall not use or permit the Sublease Premises to be used for any
purposes other than those described above. Sublessee shall not commit or permit
to be committed on the Sublease Premises any act or omission which shall violate
any term or condition of the Master Lease.
b. Sublessee shall be responsible for the installation and cost of any
and all improvements, alterations or other work on or to the Sublease Premises
or to any other portion of the property and/or building of which the Sublease
Premises are a part, required by applicable governmental laws, rules, orders and
ordinances because of the particular use to which the Sublease Premises are put
by Sublessee, including any improvements, alterations or other work required
under the Americans With Disabilities
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<PAGE> 3
Act of 1990 due to Sublessee's particular use of the Sublease Premises or due to
changes or alterations to the Sublease Premises made or proposed to be made by
Sublessee.
5. RENTAL
a. Sublessee shall pay Rent to Sublessor for the Sublease Premises as
follows, without offset or deduction, in advance, on the first day of each month
of the term of this Sublease (which month may or may not commence on the first
day of a calendar month), without prior written notice or demand from the
Commencement Date in lawful money of the United States. Rent for any partial
month shall be prorated on the basis of a thirty (30) day month.
i. Base Rent per annum of $74,681.25 ($18.75 per rentable
square foot) payable in equal monthly installments of $6,223.44;
ii. One hundred percent (100%) of Sublessee's after hours HVAC
usage.
iii. Sublessee's pro rata share of increases in annual
Operating Costs above the amount of Operating Costs incurred by Landlord during
the 1997 calendar year as pro rated for the number of months in 1997 commencing
with the Commencement Date. Sublessee's pro rata share shall be 2.24%.
b. Upon execution of this Sublease, Sublessee shall deliver to
Sublessor the sum of $6,223.44, in the form of a cashier's check made payable to
Sublessor, to be applied against Base Rent for the first month of the Sublease
term.
6. ALTERATIONS
Sublessee shall make no alterations, additions or improvements in or to
the Sublease Premises without the prior written consent of Sublessor and Master
Lessor. Any such approved alterations, additions or improvements shall be
installed in accordance with the terms of the Master Lease. Notwithstanding the
foregoing, and subject to the approval of Master Lessor, Sublessor hereby
approves of Sublessee's installation of an interior wall to divide conference
room number 403 in the Sublease Premises, as shown in Exhibit D, provided the
installation is performed in accordance with the terms of the Master Lease.
Sublessee shall restore the Premises at the expiration or earlier termination of
the Sublease Term to its condition existing as of the Commencement Date and
shall remove any installations installed by Sublessee, reasonable wear and tear
excepted.
7. SECURITY DEPOSIT
Concurrently with Sublessee's execution of this Sublease, Sublessee
shall deposit with Sublessor, by cashier's check made payable to Sublessor, the
sum of Thirty-Seven Thousand Three Hundred Forty Dollars and Sixty Three Cents
($37,340.63) as a non-interest bearing security deposit for Sublessee's
performance under this Sublease. Commencing on March l, 1998, and on March 1 of
each subsequent year of the Sublease term thereafter, Six Thousand Two Hundred
Twenty-Three Dollars and Forty-Four Cents ($6,223.44) of the security deposit
shall be utilized for the payment of Base Rent for such month, and the security
deposit shall be accordingly reduced by the amount of Six Thousand Two Hundred
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<PAGE> 4
Twenty-Three Dollars and Forty-Four Cents ($6,223.44). In the event Sublessee
has performed all of the terms and conditions of this Sublease throughout the
term, the balance of the security deposit shall be returned to Sublessee within
14 days after Sublessee's vacating the Sublease Premises, after first deducting
any sums owing to Sublessor. In the event Sublessee breaches this Sublease,
Sublessor will be entitled but not obligated to use or retain some or all of
this security deposit to compensate for any loss or expense associated with the
breach, all without seeking judicial relief. In the event of such recourse to
the security deposit, Sublessor is entitled to require Sublessee to replenish
the security deposit funds on thirty days written notice. In no event will
Sublessee be entitled to have access to or require any portion of Sublessor's
deposit with the Master Lessor.
8. NOTICES
All notices and demands of any kind required to be given by Sublessor
or Sublessee hereunder shall be in writing and effective twenty-four (24) hours
after depositing in the United States mail, by certified mail, postage prepaid,
or by nationally recognized overnight courier, and addressed to Sublessor or
Sublessee, as the case may be, at the address set forth below their respective
signatures or at such other address as they may designate from time to time. All
rent and other payments due under this Sublease or the Master Lease shall be
made to Sublessor at the same address.
9. FURNITURE
Sublessee shall have the right to purchase from Sublessor the office
furniture (desks, desk chairs and credenzas) currently in the Sublease Premises
which Sublessor elects not to relocate to its other facilities ("Eligible
Furniture"), at the purchase price of 25% of its original cost (purchase price
plus original sales tax), plus resale tax, if applicable. Prior to January 15,
1997, Sublessor shall provide Sublessee with a list of the Eligible Furniture,
along with the original cost for each item, and a calculation of 25% of such
cost. On or prior to January 31, 1997, Sublessee shall provide Sublessor with
notice of the Eligible Furniture which Sublessee desires to purchase, which
notice shall be accompanied by a cashier's check made payable to Sublessor in
the required amount for the purchase price of such Eligible Furniture (or any
other payment arrangement mutually acceptable to Sublessor and Sublessee), time
being strictly of the essence. Eligible Furniture purchased by Sublessee shall
be accepted by Sublessee in its "as is" condition, and Sublessor makes no
representations or warranties regarding the condition of such Eligible
Furniture.
10. HAZARDOUS MATERIALS
Sublessor represents that to the best of Sublessor's knowledge, without
independent investigation, Sublessor is not aware of any Hazardous Materials in
the Sublease Premises. Sublessee will indemnify, defend and hold Sublessor
harmless from any judgment, damages, losses, claims, actions, attorneys' fees,
consultant's fees, costs or expenses which result from Sublessee's or any of
Sublessee's agents (including employees, contractors and visitors) use, storage,
or disposal of Hazardous Materials in or about the Sublease Premises. As used
herein the term "Hazardous Materials" will mean and include asbestos, petroleum
products and any and all toxic or hazardous substances, materials or wastes
listed in the United States Department of Transportation Table (49 CFR 172.101)
or by the Environmental Protection Agency as hazardous substances (40 CFR 302)
and in any and all amendments to such lists or such
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<PAGE> 5
substances, materials or wastes otherwise regulated under applicable local,
state or federal law. The provisions of this Paragraph shall survive the
expiration or termination of the Sublease.
11. DEFAULT
The monetary and non-monetary default provisions are articulated in the
Master Lease. In addition, in the event of Sublessee's failure to pay Base Rent
under this Sublease, which failure is not cured within ten (10) days after
Sublessor delivers a written notice to Sublessee stating the nature and amount
of such past due base rent, then Sublessor shall have no continuing obligation
to Sublessee to maintain the Master Lease for Sublessee's benefit.
12. PROVISIONS OF MASTER LEASE
Notwithstanding anything to the contrary contained in this Sublease:
a. Sublessee shall indemnify and hold both Sublessor and Master Lessor
harmless pursuant to the indemnity provision of the Master Lease;
b. The obligations of Master Lessor under the Master Lease to repair or
replace the Premises shall remain the obligation of Master Lessor and shall not
be assumed by Sublessor;
c. The right of entry of Master Lessor under the Master Lease shall be
the right of each of Master Lessor and Sublessor;
d. Sublessee shall pay Sublessor a late charge, as provided in the
Master Lease, if rent is not received by Sublessor when due, and
e. Any assignment or subletting by Sublessee of the Sublease or the
Sublease Premises shall be governed by the Master Lease, and the term "Landlord"
in Article 16 of the Third Amendment of Lease shall mean each of Master Lessor
and Sublessor.
13. PEST CONTROL
Sublessee agrees that any interior pest control of the Sublease
Premises undertaken by Sublessee will be done using an Integrated Pest
Management (IPM) method. In the event Sublessee undertakes to perform such pest
control, Sublessee agrees to notify Sublessor of Sublessee's choice of a pest
control vendor. Sublessee shall obtain Sublessor's prior written consent to the
treatment procedures and the treatment plan recommended by Sublessee's pest
control vendor. If Sublessee's pest control vendor recommends the use of
chemicals for additional action, Sublessee shall utilize only safe, nontoxic
organic chemicals. In no event shall Sublessee permit its pest control vendor to
spray toxic chemicals (including herbicides) in or around the Sublease Premises
without obtaining Sublessor's prior written consent. If Sublessee violates this
Paragraph 13, Sublessee shall be required to completely abate residue of any
disallowed chemicals to the satisfaction of Sublessor, at Sublessee's cost.
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<PAGE> 6
14. MISCELLANEOUS
a. Sublessee represents and warrants that it has not had dealings with
any real estate broker, finder or other person who could claim a commission or
finder's fee from Sublessor with respect to this Sublease, except for Stephanie
Marino of Icon Interests. Sublessee shall hold Sublessor harmless from all
damages resulting from Sublessee's breach of the foregoing representation and
warranty. Sublessor will be responsible for the payment of a brokerage
commission on this transaction to Icon Interests, a licensed real estate
brokerage company, in an amount equal to (i) a procurement fee of the first full
month's Base Rent due hereunder, plus (ii) four percent (4%) of the balance of
the Base Rent payments for the term of this Sublease less the procurement fee.
The commission shall be payable one-half (1/2) when this Sublease has been
executed by Sublessor and Sublessee and consented to by Master Lessor, and
one-half (1/2) upon Sublessee's occupancy.
b. This Sublease is subject to Master Lessor approval pursuant to a
written letter of consent substantially in the form attached to this Sublease as
Exhibit C (the "Sublease Consent"). Sublessor shall use all reasonable efforts
to obtain Master Lessor's approval of this Sublease pursuant to such form, or
such other form as is acceptable to Sublessee, as soon as possible following
execution of this Sublease, but in no event later than twenty-one (21) days
after such execution. In the event that Master Lessor's approval as stated
herein is not obtained within said twenty-one (21) day period, then either party
may, by written notice to the other within ten (10) days of the expiration of
the twenty-one (21) day period, terminate this Sublease, and each party shall be
relieved of any further obligation to the other with respect to this Sublease.
15. REPRESENTATIONS AND WARRANTIES.
Sublessor hereby warrants and represents that (i) it is not in default
under the Master Lease, and to the best of Sublessor's knowledge, the Master
Lease is in full force and effect (ii) that all rent and other amounts due
Master Lessor under the Master Lease have been paid; and (iii) Sublessor is not
aware of any facts that may result in any default under the Master Lease. The
representations and warranties shall survive the termination of this Sublease.
16. SURRENDER AND HOLDOVER
Upon the expiration or earlier termination of this Sublease, Sublessee
shall promptly quit and surrender to Sublessor the Sublease Premises broom
clean, in the same condition as received, ordinary wear and tear and loss by
fire and other casualty excepted. Sublessee shall removal all of its movable
furniture and other effects. If Sublessee fails to so vacate the Sublease
Premises on a timely basis as required, Sublessee shall be responsible to
Sublessor and to Master Lessor for all costs, expenses, attorneys fees and
damages (including but not limited to any amounts required to be paid to third
parties who were to have occupied the Sublease Premises) incurred by Sublessor
and/or Master Lessor as a result of such failure to vacate, plus interest
thereon at the rate of the lesser of 18% per annum or the maximum rate allowed
by law, on all amounts not paid by Sublessee within ten (10) days of demand.
Should Sublessee hold over after the termination of this Sublease, with
Sublessor's and Master Lessor's express written consent, Sublesse shall be
deemed a holdover tenant at will. During such holdover period, Sublessee shall
be liable for all damages incurred by Sublessor and/or Master Lessor
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<PAGE> 7
as a result of Sublessee's holding over in the Sublease Premises. During such
holding over, Sublessee shall become a Sublessee from month to month upon each
and all of the terms herein provided as are applicable to such month to month
tenancy and during such holding over, Sublessee shall pay monthly Base Rent and
additional Rent to Sublessor at the rate of two hundred percent (200%) of the
Base Rent and additional Rent payable by Sublessee for the last month of the
Sublease Term. Such tenancy shall continue until terminated by Sublessor, as
provided by law, or until either party shall have given to the other at least
thirty (30) days written notice.
"SUBLESSOR" "SUBLESSEE"
VeriFone, Inc. HALIS, Inc.
a Delaware corporation a Georgia corporation
By: /s/ Joseph M. Zaelit By: /s/ Larry Fisher
------------------------------- -------------------------------------
Title: Senior Vice President/CFO Title: President
---------------------------- ----------------------------------
Three Lagoon Drive, Suite 400
Redwood City, CA 94065 ---------------------------------
Attn: Legal Department
---------------------------------
Attn:
----------------------------
Date Executed: 1/17/97 Date Executed: 1/10/97
-------------------- ---------------------------
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EXHIBITS TO BE ATTACHED TO SUBLEASE
Exhibit A Master Lease
Exhibit B Site Plan of Sublease Premises
Exhibit C Sublease Consent
Exhibit D Space Plan of Alteration
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<PAGE> 1
EXHIBIT 10.4
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of November 19, 1996, between HALIS, Inc.
(formerly Fisher Business Systems, Inc.), a Georgia corporation (the "Company"),
and SunTrust Bank, Atlanta, a Georgia banking corporation, as warrant agent (the
"Warrant Agent").
WITNESSETH:
WHEREAS, the Company proposes to issue up to 2,166,667 Common Stock
Purchase Warrants (the "Warrants"); and
WHEREAS, the Warrants are being offered in a private placement to
accredited investors without registration under the Securities Act of 1933, as
amended (the "Act") or the securities laws of any state, in reliance upon
Regulation D promulgated by the Securities and Exchange Commission under the Act
and on similar exemptions under applicable state laws; and
WHEREAS, the Warrants will be evidenced by separate warrant
certificates. Each definitive Warrant will provide that the registered holder
thereof may exercise that Warrant, in whole or in part in the manner set forth
herein, to purchase, at the Exercise Price per share (as defined in Section 6
hereof), the number of shares of common stock set forth in the Warrant (both the
number of the shares and the Exercise Price subject to adjustment as set forth
in Section 11 hereof); and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, transfer, exchange, replacement and exercise of warrant certificates
and other matters as provided herein;
NOW, THEREFORE, in consideration of the premises and mutual agreements
herein set forth, and intending to be legally bound, the parties hereto agree as
follows:
Section 1. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with the
instructions set forth hereinafter in this Agreement and the Warrant Agent
hereby accepts that appointment.
Section 2. Form of Warrants. The definitive Warrants to be delivered
pursuant to this Agreement shall be substantially in the form set forth in
Exhibit A attached hereto.
Section 3. Execution of Warrants. (a) The Warrants in definitive form
shall be signed on behalf of the Company, manually or by facsimile signature, by
its Chairman of the Board or President under its corporate seal, and shall be
manually countersigned by the Warrant Agent. A Warrant signed on behalf of the
Company as aforesaid by an incumbent in office at the time of signature shall be
valid, and may be countersigned and issued by the Warrant Agent, notwithstanding
the fact that at the time of countersignature and issuance by the Warrant Agent
such signatory shall have ceased to be the incumbent in such office. The seal of
the Company may be in the form of a facsimile thereof and may be impressed,
affixed, imprinted or otherwise reproduced on the Warrants. No Warrant shall be
valid for any purpose unless countersigned manually by the Warrant Agent.
(b) Warrants shall be dated the date of countersignature by
the Warrant Agent.
<PAGE> 2
Section 4. Registered Owners. The Company and the Warrant Agent may
deem and treat the registered holder of a Warrant as the absolute owner thereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone), for the purpose of any exercise thereof and any distribution to the
holder thereof and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary.
Section 5. Registration of Warrants; Transfers and Exchanges. (a) The
Warrant Agent shall register the transfer, split-up, combination or exchange of
any outstanding Warrant upon the records to be maintained by it for that
purpose, upon surrender thereof accompanied by a written instrument or
instruments of transfer in form satisfactory to the Warrant Agent, duly executed
by the registered holder or holders thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney. Upon any registration
of transfer, a new Warrant shall be issued to the transferee and the surrendered
Warrant shall be cancelled by the Warrant Agent. Cancelled Warrants shall
thereafter be disposed of in a manner satisfactory to the Company.
(b) Any Warrant may be split up, combined or otherwise
exchanged at the option of the holder thereof, upon surrender to the Warrant
Agent at its office or agency maintained for the purpose of exchanging,
transferring, exercising or converting the Warrants in Atlanta, Georgia (each
office being referred to herein as a "Warrant Agent Office"), for another
Warrant or other Warrants of like tenor and for the purchase, in the aggregate,
of a like number of Shares. Warrants so surrendered shall be cancelled by the
Warrant Agent. Cancelled Warrants shall then be disposed of by the Warrant Agent
in a manner satisfactory to the Company.
(c) The Warrant Agent is hereby authorized to countersign, in
accordance with the provisions of Section 3 hereof, and deliver any new Warrants
required pursuant to the provisions of this Section 5.
Section 6. Duration and Exercise of Warrants. (a) The Warrants shall
expire at 5:00 p.m. E.S.T. on December 31, 1999 (the "Expiration Date"). The
Company may, in its sole discretion, extend the Expiration Date upon notice
thereof to the Warrant Agent. Each Warrant may be exercised on any business day
prior to the close of business on the Expiration Date by delivery of the Warrant
to the Warrant Agent no later than the Expiration Date and by satisfaction of
the other terms and conditions as set forth herein.
(b) No fractional shares shall be issued upon surrender of a
Warrant for exercise but, in lieu of fractional shares, the Company shall pay to
the registered holder of a surrendered Warrant, as soon as practicable after the
date of surrender, an amount in cash obtained by multiplying the current market
value of a share by the fraction of the share to which such Warrant relates. The
current market value of a share shall be (i) if the common stock is listed on a
national securities exchange or admitted to unlisted trading privileges on such
an exchange, the last reported sale price of a share of common stock on such
exchange on the last business day prior to the date of the exercise of the
Warrant or if no such sale is made on such day, the average of the closing bid
and asked prices of a share on such exchange; (ii) if the common stock is
included on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ"), the last sale price reported by NASDAQ on the last business
day prior to the date of exercise of the Warrant or if last sale prices of the
common stock are not so reported, the average of the closing bid and asked
prices of a share for such day reported by NASDAQ; (iii) if the common stock is
not listed or admitted to unlisted trading privileges on an exchange, or
included on NASDAQ, the average of the highest reported bid and lowest reported
asked prices of a share as furnished by the National Quotation Bureau on the
last business day prior to the date of exercise of the
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<PAGE> 3
Warrant; or (iv) in all other cases, an amount determined in such reasonable
manner as may be prescribed by the Board of Directors of the Company.
(c) Subject to the provisions of this Agreement, including
Sections 6(e) and 11 hereof, the holder of a Warrant shall have the right to
purchase from the Company (and the Company shall issue and sell to that holder)
the number of fully paid and nonassessable shares set forth in the Warrant at
the exercise price of $1.75 per share (the "Exercise Price") (the number of
shares and Exercise Price being subject to adjustment as provided in this
Section 6(c) and in Section 11 hereof) upon the surrender of that Warrant to the
Warrant Agent on any business day prior to the close of business on the
Expiration Date, at the Warrant Agent's Office described in paragraph 16, with
the form of election to purchase on the reverse thereof duly filled in and
signed, and payment of the Exercise Price in lawful money of the United States
of America by certified check payable to the Company. The Warrants shall be so
exercisable at any time prior to the close of business on the Expiration Date,
at the election of the registered holder thereof, either as an entirety or from
time to time in part. In the event that fewer than all the shares purchasable
upon the exercise of a Warrant are purchased at any time prior to the close of
business on the Expiration Date, a new Warrant will be issued for the remaining
number of shares purchasable upon the exercise of the Warrant so surrendered. No
adjustments shall be made for any cash dividends on shares issuable on the
exercise of a Warrant.
The Company may in its sole discretion, reduce the Exercise Price upon
notice thereof to the Warrant Agent.
(d) Subject to Section 7 hereof, upon surrender of a Warrant
and receipt of payment of the Exercise Price, the Warrant Agent shall
requisition from the transfer agent for the common stock, for issuance and
delivery to or upon the written order of the registered holder of that Warrant
and in such name or names as the registered holder may designate, the shares
issuable upon exercise. Shares shall be deemed to have been issued and any
person so designated to be named therein shall be deemed to have become the
holder of record of those shares as of the date of the surrender of a Warrant
and payment of the appropriate Exercise Price. The Warrant Agent is hereby
authorized to countersign and deliver, in accordance with the provisions of
Section 3 hereof, any Warrant required pursuant to the provisions of this
Section 6.
(e) The Company represents and warrants to the Warrant Agent
that it has agreed to register with the Securities and Exchange Commission (the
"SEC"), at its sole expense, the shares of Common Stock issuable upon the
exercise of the Warrants. The Company agrees that, from and after the
Registration Date (A) so long as any unexpired Warrants remain outstanding the
Company will (i) file such post-effective amendments to the Registration
Statement, and provide such supplements to the Prospectus included in the
Registration Statement, as may be necessary to keep the Registration Statement
in effect and to permit it to deliver to each person exercising a Warrant a
Prospectus meeting the requirements of Section 10(a) of the Act and otherwise
complying therewith, and will deliver such a Prospectus to each such person, and
(ii) take such other action in each state in which the Warrants were publicly
offered for sale by the Company as from time to time may be required under the
securities laws of such state to permit the Shares issuable upon exercise of the
Warrants to be lawfully issued and sold in such state upon exercise of the
Warrants; and (B) it will furnish to the Warrant Agent, upon request, an opinion
of counsel to the effect that the Registration Statement is then in effect and
that the Prospectus complies as to form in all material respects (except as to
financial statements as to which such counsel need express no opinion) with the
requirements of the Act and the rules and regulations of the SEC thereunder. The
Company may authorize the Warrant Agent to suspend the exercise of any of the
Warrants during such period as is necessary to obtain or keep effective any
registration, qualification, or other governmental approval under federal and
applicable state securities laws required in connection
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<PAGE> 4
with the exercise of the Warrants. The exercise of any Warrant for which an
election exercise is received by the Warrant Agent prior to the Expiration Date
during the period of such a suspension shall be effective immediately upon
notice to he Warrant Agent of the removal of such suspension, notwithstanding
that the removal of the suspension occurs after the Effective Date.
Section 7. Payment of Taxes. The Company will pay all documentary stamp
taxes attributable to the initial issuance of shares upon the exercise of a
Warrant prior to the close of business on the Expiration Date; provided,
however, that the Company shall not be required to pay any tax or taxes which
may be payable in respect of any transfer involved in the issue of any Warrant
or any certificates for shares in a name other than that of the registered
holder of the Warrant surrendered upon the exercise of a Warrant, and neither
the Company nor the Warrant Agent shall be required to issue or deliver such
Warrant or stock certificates unless or until the person or persons requesting
the issuance thereof shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company that such tax has been
paid.
Section 8. Mutilated or Missing Warrant Certificates. In case a Warrant
shall be mutilated, lost, stolen or destroyed, the Company shall issue, and the
Warrant Agent shall countersign and deliver, in exchange and substitution for
and upon cancellation of the mutilated Warrant, or in lieu of and substitution
for the Warrant lost, stolen or destroyed, a new Warrant of like tenor and for
the purchase of a like number of shares, but only upon receipt of evidence
satisfactory to the Company and the Warrant Agent of loss, theft or destruction
of that Warrant, and an indemnity bond, if requested, satisfactory to the
Company and the Warrant Agent, the expense of which shall be borne by the
Warrant holder. A Warrant holder requesting a substitute Warrant shall also
comply with all other reasonable regulations and pay all other reasonable
charges as the Company or the Warrant Agent may prescribe.
Section 9. Reservation of Shares. (a) The Company will at all times
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued common stock, for the purpose of enabling it to
satisfy any obligation to issue shares upon exercise of Warrants, through the
close of business on the Expiration Date, the number of shares deliverable upon
the exercise of all outstanding Warrants, and the transfer agent for the common
stock is hereby irrevocably authorized and directed at all times to reserve that
number of authorized and unissued shares of common stock as shall be required
for that purpose. The Company will keep a copy of this Agreement on file with
that transfer agent. The Warrant Agent is hereby irrevocably authorized to
requisition from time to time from the transfer agent certificates for shares
issuable upon exercise of outstanding Warrants, and the Company will supply such
transfer agent with duly executed stock certificates for such purpose.
(b) Before taking any action which would cause an adjustment
pursuant to Section 11 hereof reducing the Exercise Price below the then par
value (if any) of the shares issuable upon exercise of the Warrants, the Company
will take any corporate action which may, in the opinion of its counsel (which
may be counsel employed by the Company), be necessary in order that the Company
may validly and legally issue fully paid and nonassessable shares at the
Exercise Price as so adjusted.
(c) The Company covenants that all shares issued upon exercise
of the Warrants will, upon issuance in accordance with the terms of this
Agreement, be fully paid and nonassessable and free from all liens, charges and
security interests created by the Company with respect to the issuance thereof.
Section 10. Obtaining of Governmental Approvals. The Company from time
to time will use its best efforts to obtain and keep effective any and all
permits, consents and approvals of governmental agencies and authorities and to
make securities acts filings under federal and state laws,
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<PAGE> 5
which may be or become requisite in connection with the issuance, sale,
transfer, delivery or exercise of the Warrants.
Section 11. Adjustment of Exercise Price and Number of Shares
Purchasable Hereunder. The Exercise Price and the number of Warrant shares
purchasable upon the exercise of the Warrants are subject to adjustment from
time to time upon the occurrence of the events enumerated in this Section 11.
(a) In case the Company shall at any time after the date of
this Agreement (i) declare a dividend on its capital stock payable in shares of
its capital stock (whether shares of common stock or of capital stock of any
other class), (ii) subdivide the outstanding common stock, (iii) combine the
outstanding common stock into a smaller number of shares, or (iv) engage in any
other recapitalization, the Exercise Price in effect at the time of the record
date for such dividend or of the effective date of such subdivision,
combination, reclassification or recapitalization, shall be proportionately
adjusted so that the holder of the Warrant exercised after such time shall be
entitled to receive the aggregate number and kind of shares of capital stock
which, if such Warrant had been exercised immediately prior to such date, he
would have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination, reclassification or recapitalization.
Such adjustment shall be made successively whenever any event listed above shall
occur and notice of same shall be promptly provided by the Company to the
Warrant Agent accompanied by the appropriately converted numbers of Warrants and
Shares.
(b) In case the Company shall fix a record date for the making
of a distribution to all holders of common stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of evidences of indebtedness or assets
(other than cash dividends or cash distributions payable out of consolidated
earnings or earned surplus or dividends payable in common stock) or subscription
rights or warrants, the Exercise Price to be in effect after such record date
shall be determined by multiplying the Exercise Price in effect immediately
prior to such record date by a fraction, of which (i) the numerator shall be the
current market price per share of common stock (as defined in Section 11(c)), on
such record date, less the fair market value (as determined by the Board of
Directors of the Company, whose determination shall be conclusive) of the
portion of the assets or evidences of indebtedness so to be distributed or of
such subscription rights or warrants applicable to one share of common stock,
and of which (ii) the denominator shall be such current market price per share
of common stock. Such adjustment shall be made successively whenever such a
record date is fixed; and in the event that such distribution is not so made,
the Exercise Price shall again be adjusted to be the Exercise Price which would
then be in effect if such record date had not been fixed, but such subsequent
adjustment shall not affect the number of Warrant shares issued upon any
exercise of a Warrant prior to the date such adjustment is made.
(c) For the purpose of any computation under Section 11(b) the
current market price per share of common stock on any date shall be deemed to be
the average of the daily closing prices for the 30 consecutive trading days
immediately preceding the date of determination. The closing price for each day
shall be the last sale price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way, on
the principal national securities exchange on which the common stock is listed
or admitted to trading, or if the common stock is not listed or admitted to
trading on any national securities exchange, the average of the highest reported
bid and lowest reported asked prices as furnished by the National Association of
Securities Dealers ("NASD") or similar organization if the NASD is no longer
reporting such information, or, if not so available, the fair market price as
determined by the Board of Directors of the Company.
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<PAGE> 6
(d) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least five
cents ($.05) in such price; provided, however, that any adjustments which by
reason of this Section 11(d) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Section 11 shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be.
(e) In the event that at any time, as a result of an
adjustment made pursuant to Section 11(a) the holder of the Warrant thereafter
exercised shall become entitled to receive any shares of capital stock of the
Company other than shares of common stock, thereafter the number of such other
shares so receivable upon exercise of the Warrant shall be subject to adjustment
from time to time in a manner and on terms as nearly equivalent as practicable
to the provisions with respect to the common stock purchasable pursuant to this
Warrant as determined by the Company.
(f) Upon each adjustment of the Exercise Price as a result of
the calculations made in Section 11(a) or (b), the Warrant outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Exercise Price, that number of Warrant shares
(calculated to the nearest hundredth) obtained by (i) multiplying the number of
Warrant shares purchasable upon exercise of the Warrant immediately prior to
such adjustment of the number of Warrant shares by the Exercise Price in effect
immediately prior to such adjustment of the Exercise Price and (ii) dividing the
product so obtained by the Exercise Price in effect immediately after such
adjustment of the Exercise Price.
(g) In case of any capital reorganization of the Company, or
of any reclassification of the common stock (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of subdivision or combination), or in case of the consolidation of the
Company with or the merger of the Company with any other corporation or
association (other than a consolidation or merger in which (i) the Company is
the continuing corporation and (ii) the holders of the Company's common stock
immediately prior to such merger or consolidation continue as holders of common
stock after such merger or consolidation) or of the sale of the properties and
assets of the Company as, or substantially as, an entirety to any other
corporation or association, the Warrant shall after such reorganization,
reclassification, consolidation, merger or sale be exercisable, upon the terms
and conditions specified in this Agreement, for the number of shares of stock or
other securities or property to which a holder of the number of Warrant shares
purchasable (at the time of such reorganization, reclassification,
consolidation, merger or sale) upon exercise of such Warrant would have been
entitled upon such reorganization, reclassification, consolidation, merger or
sale; and in any such case, if necessary, the provisions set forth in this
Section 11 with respect to the rights and interests thereafter of the holder of
the Warrant shall be appropriately adjusted by the Company so as to be
applicable, as nearly as may reasonably be, to any shares of stock or other
securities or property thereafter deliverable on the exercise of the Warrant.
The subdivision or combination of shares of common stock at any time outstanding
into a greater or lesser number of shares shall not be deemed to be a
reclassification of the common stock for the purposes of this Section 11(g). The
Company shall not effect any such consolidation, merger or sale, unless prior to
or simultaneously with the consummation thereof the successor corporation or
association (if other than the Company) resulting from such consolidation or
merger or the entity purchasing such assets or other appropriate entity shall
assume, by written instrument executed and delivered to the Company, the
obligation to deliver to the holder of the Warrant such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to purchase and the other obligations under this
Agreement.
Section 12. Merger, Consolidation or Change of Name of Warrant Agent.
Any corporation or entity into which the Warrant Agent may be merged or
converted or with which it may be
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<PAGE> 7
consolidated, or any corporation or entity resulting from any merger, conversion
or consolidation to which the Warrant Agent shall be a party, or any corporation
or entity succeeding to the corporate trust business of the Warrant Agent, shall
be the successor to the Warrant Agent hereunder without the execution or filing
of any paper or any further action on the part of any of the parties hereto,
provided that such corporation or entity would be eligible for appointment as a
successor Warrant Agent under the provisions of Section 15 hereof. In case at
the time the successor to the Warrant Agent shall succeed under this Agreement
any Warrants shall have been countersigned but not delivered, the successor to
the Warrant Agent may adopt the countersignature of the original Warrant Agent,
and in case at that time any Warrants shall not have been countersigned, any
successor to the Warrant Agent may countersign such Warrants either in the name
of the predecessor Warrant Agent or in the name of the successor Warrant Agent;
and in all the foregoing cases Warrants shall have the full force provided in
the Warrant certificates and in this Agreement.
In case at any time the name of the Warrant Agent shall be changed and
at such time any of the Warrants shall have been countersigned but not
delivered, the Warrant Agent whose name has changed may adopt the
countersignature under its prior name, and in case at that time any Warrants
shall not have been countersigned, the Warrant Agent may countersign such
Warrants either in its prior name or in its changed name, and in all such cases
such Warrants shall have the full force provided in the Warrants and in this
Agreement.
Section 13. Warrant Agent. The Warrant Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the holders of Warrants, by their acceptance
thereof, shall be bound:
(a) the statements contained herein and in the Warrants shall
be taken as statements of the Company and the Warrant Agent assumes no
responsibility for the correctness of any of the same except such as described
the Warrant Agent or action taken or to be taken by it. The Warrant Agent
assumes no responsibility with respect to the execution, delivery or
distribution of the Warrants except as herein otherwise provided.
(b) The Warrant Agent shall not be responsible for any failure
of the Company to comply with any of the covenants contained in this Agreement
or in the Warrants to be complied with by the Company nor shall it at any time
be under any duty or responsibility to any holder of a Warrant to make or cause
to be made any adjustment in the Exercise Price or in the number of shares
issuable (except as instructed in writing by the Company), or to determine
whether any facts exist which may require any adjustments, or with respect to
the nature or extent of or method employed in making any adjustments when made,
or to verify the accuracy of any representation made to it by the Company as to
a change in the Exercise Price or the amount of shares which may be purchased
with a warrant.
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company or an employee of the
Warrant Agent) and the Warrant Agent shall incur no liability or responsibility
to the Company or to any holder of any Warrant in respect of any action taken,
suffered or omitted by it hereunder in good faith and in accordance with the
opinion or the advice of such counsel.
(d) The Warrant Agent shall incur no liability or
responsibility to the Company or to any Warrant holder for any action taken in
reliance on any notice, resolution, waiver, consent, order, certificate or other
paper, document or instrument believed by it to be genuine and to have been
signed, sent or presented by the proper party or parties.
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<PAGE> 8
(e) The Company shall pay to the Warrant Agent for its
services under this Agreement such compensation as they shall agree upon, to
reimburse the Warrant Agent upon demand for all expenses, taxes and governmental
charges and other charges of any kind and nature incurred by the Warrant Agent
in the execution of its duties under this Agreement and to indemnify the Warrant
Agent and hold it harmless against any and all losses, liability and expenses,
including, but not limited to any judgments, costs and counsel fees, or anything
done or omitted by the Warrant Agent arising out of or in connection with this
Agreement except as a result of its gross negligence or bad faith.
(f) The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceedings or to take any other action
likely to involve expenses unless the Company or one or more registered holders
of Warrants shall furnish the Warrant Agent with reasonable security and
indemnify the Warrant Agent for any costs and expenses which may be incurred and
promptly pay such costs as they are incurred. All rights of action under this
Agreement or under any of the Warrants may be enforced by the Warrant Agent
without the possession of any Warrants or the production thereof at any trial or
other proceeding relative thereto, and any action, suit or proceeding instituted
by the Warrant Agent shall be brought in its name as Warrant Agent, and any
recovery of judgment shall be for the ratable benefit of the registered holders
of the Warrants, as their respective rights or interests may appear.
(g) The Warrant Agent, and any stockholder, director, officer
or employee thereof, may buy, sell or deal in any of the Warrants or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as thought it were not Warrant
Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from
acting in any other capacity for the Company or for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent for
the Company, and its duties shall be determined solely by the provisions hereof.
The Warrant Agent shall not be liable for anything which it may do or refrain
from doing in connection with this Agreement except for its own gross negligence
or bad faith.
(i) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all further and other acts, instruments and assurances as may
reasonably be required by the Warrant Agent for the carrying out or performing
of the provisions of this Agreement.
(j) The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Warrant Agent) or in respect of the
validity or execution of any Warrant (except its countersignature thereof); nor
shall the Warrant Agent by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of the Shares
to be issued pursuant to this Agreement or any Warrant or as to whether the
Shares will when issued be validly issued, fully paid and nonassessable or as to
the Exercise Price or the number of Shares issuable upon the exercise of any
Warrant.
(k) The Warrant Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
the Chairman of the Board, the President, the Secretary or an Assistant
Secretary of the Company, and to apply to those officers for advice or
instructions in connection with its duties, and shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instruments of any of those officers or in good faith reliance upon any
statement signed by any one of those officers of the Company with respect to any
fact or matter
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(unless other evidence in respect thereof is herein specifically prescribed)
which may be deemed to be conclusively proved and established by such signed
statement.
Section 14. Disposition of Proceeds from Exercise of Warrants. The
Warrant Agent shall account promptly to the Company with respect to Warrants
exercised and concurrently pay to the Company all moneys received by the Warrant
Agent on the purchase of the Shares through the exercise of Warrants.
Section 15. Change of Warrant Agent. If the Warrant Agent shall resign
(such resignation to become effective not earlier than 30 days after the giving
of written notice thereof to the Company and the registered holders of Warrant
certificates) or shall become incapable of acting as Warrant Agent, the Company
shall appoint a successor. If the Company shall fail to make that appointment
within a period of 30 days after it has been so notified in writing by the
Warrant Agent or by the registered holder of a Warrant (in the case of
incapacity), then the registered holder of any Warrant may apply to any court of
competent jurisdiction for the appointment of a successor to the Warrant Agent.
Pending appointment of a successor to the Warrant Agent, either by the Company
or by such a court, the duties of Warrant Agent shall be carried out by the
Company. Any successor Warrant Agent whether appointed by the Company or by a
court, shall be a bank or trust company, in good standing, incorporated under
the laws of the State of Georgia or of the United States of America, and must
have at the time of its appointment as Warrant Agent a net worth of at least $25
million. After appointment, the successor Warrant Agent shall be vested with the
same powers, right, duties and responsibilities as if it had been originally
named as Warrant Agent without further act or deed; but the former Warrant Agent
shall deliver and transfer to the successor Warrant Agent any property at the
time held by it hereunder and execute and deliver, at the expense of the
Company, any further assurance, conveyance, act or deed necessary for the
purpose. Failure to give any notice provided for in this Section 15, however, or
any defect therein shall not affect the legality or validity of the removal of
the Warrant Agent or the appointment of a successor Warrant Agent as the case
may be.
Section 16. Notices to Company and Warrant Agent. Any notice or demand
authorized by this Agreement to be given or made by the Warrant Agent or by the
registered holder of any Warrant to or on the Company shall be sufficiently
given or made if sent by mail, first class or registered, postage prepaid,
addressed (until another address is filed in writing by the Company with the
Warrant Agent) as follows:
HALIS, Inc.
1950 Spectrum Circle, Suite 400
Marietta, Georgia, 30067
Attention: Larry Fisher
President
Copy to: Smith, Gambrell & Russell, LLP
3343 Peachtree Road, N.E.
Suite 1800
Atlanta, Georgia 30326
Attention: William L. Meyer, Esquire
In case the Company shall fail to maintain that office or agency or
shall fail to give notice of the location or of any change in the location
thereof, presentations may be made and notices and demands may be served at the
Warrant Agent's Office.
-9-
<PAGE> 10
Any notice pursuant to this Agreement to be given by the Company or by
the registered holder of any Warrant to the Warrant Agent shall be sufficiently
given if sent by first class mail, postage prepaid, addressed (until another
address is filed in writing by the Warrant Agent with the Company) to the
Warrant Agent as follows:
SunTrust Bank, Atlanta
Corporate Trust Department
58 Edgewood Avenue
Atlanta, Georgia 30303
Section 17. Supplements and Amendments. The Company and the Warrant
Agent may from time to time supplement or amend this Agreement without the
consent or concurrence of any holders of Warrants in order to cure the
ambiguity, manifest error or other mistake in this Agreement, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Warrant Agent may deem necessary or desirable and which shall
not adversely affect, alter or change the interest of the holders of Warrants.
Section 18. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company and of the Warrant Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 19. Termination. This Agreement shall terminate at the close of
business within a reasonable time, after the Expiration Date. Notwithstanding
the foregoing, this Agreement will terminate on any earlier date if all Warrants
have been exercised. The provisions of Section 13 hereof shall survive the
termination.
Section 20. Governing Law. This Agreement and each Warrant issued
hereunder shall be deemed to be a contract made under the laws of the State of
Georgia and for all purposes shall be construed in accordance with the laws of
said State.
Section 21. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
Warrant Agent and the registered holders of the Warrants any legal or equitable
right, remedy or claim under this Agreement; but this Agreement shall be for the
sole and exclusive benefit of the Company, the Warrant Agent and the registered
holders of the Warrants.
Section 22. Counterparts. This Agreement may be executed in any number
of counterparts and each of the counterparts shall for all purposes be deemed to
be an original, and all the counterparts shall together constitute but one and
the same instrument.
-10-
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
HALIS, INC.
By: /s/ Larry Fisher
-----------------------------------------
Larry Fisher, President
SUNTRUST BANK, ATLANTA
By: /s/ Letitia A. Radford
-----------------------------------------
Title: Vice President
--------------------------------------
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<PAGE> 12
WARRANT TO PURCHASE COMMON STOCK OF
NO. W-__________ HALIS, INC. __________ WARRANTS
THIS CERTIFIES that _________________, or registered assigns, is the owner of
the number of Warrants set forth above, each represents the right to purchase
from HALIS, Inc., a Georgia corporation (herein called the "Corporation") at a
purchase price of $1.75 per share, subject to adjustment upon the occurrence of
certain events, at any time on or after November 19, 1996 and on or before 5:00
P.M. local time on December 31, 1999 in the City of Atlanta, Georgia, one share
of the Common Stock, $.01 par value, of the Corporation (such shares purchasable
upon exercise of the Warrants being herein called "Shares of Common Stock"), by
surrendering this Warrant Certificate, with the Purchase Form attached hereto
duly executed, at the principal office of SunTrust Bank, Atlanta or its
successor, as warrant agent, in the City of Atlanta, Georgia (any such warrant
agent being herein called the "Warrant Agent") and by paying in full, in lawful
money of the United States of America, the purchase price for the Shares of
Common Stock as to which this Warrant Certificate is exercised, and upon
compliance with and subject to the conditions set forth herein and in Warrant
Agreement referred to herein (the "Warrant Agreement").
This Warrant Certificate is transferable by the registered holder
hereof, upon surrender of this Warrant Certificate for registration of transfer
at the principal office of the Warrant Agent in the City of Atlanta, Georgia
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Corporation duly executed by, the registered holder or his
attorney duly authorized in writing and thereupon one or more new Warrant
Certificates for a like aggregate number of Shares of Common Stock will be
issued to the designated transferee or transferees.
The Warrant Certificates are issued only as registered Warrant
Certificates. This Warrant Certificate is issued under the Warrant Agreement and
is subject to the terms and provisions contained in the Warrant Agreement.
Copies of the Warrant Agreement are on file at the principal office of the
Warrant Agent in the City of Atlanta, Georgia and may be obtained by writing to
the Warrant Agent.
In certain events provided for in the Warrant Agreement, the number of
Shares of Common Stock purchasable upon such exercise, or the purchase price
thereof, are required to be adjusted. No fractional shares will be issued upon
the exercise of rights to purchase hereunder, but in lieu thereof, there shall
be paid to the registered holder of surrendered Warrant Certificates an amount
of cash determined as provided in the Warrant Agreement.
This Warrant Certificate shall not entitle the registered holder hereof
to any of the rights of a holder of a share of Common Stock of the Corporation,
including without limitation, the right to vote, to receive dividends and other
distributions, to exercise any pre-emptive right, or to receive any notice of,
or to attend, meetings of holders of Common Stock or any other proceedings of
the Corporation.
This Warrant Certificate shall be void and all rights represented
hereby shall cease unless exercised on or before 5:00 P.M. local time in the
City of Atlanta, Georgia on December 31, 1999.
Reference is made to the further provisions of the Warrants set forth
herein, which shall have the same effect as though fully set forth on the face
hereof.
The holder hereof has certain registration rights, pursuant to which
the shares of Common Stock issuable upon exercise of this Warrant shall be
registered at the expense of the Corporation.
This Warrant Certificate shall not be valid for any purpose until it
shall have been countersigned by the Warrant Agent.
<PAGE> 13
WITNESS the facsimile seal of the Corporation and the facsimile
signature of its duly authorized officer.
Dated: November 19, 1996 HALIS, INC.
Countersigned:
-----------------------------
Larry Fisher, President
[CORPORATE SEAL]
SUNTRUST BANK, ATLANTA
as Warrant Agent
By:
---------------------------
Authorized Signature
The securities evidenced hereby were issued and sold without registration under
the Federal Securities Act of 1933, as amended (the "Federal Act"), or the
securities laws of any state, in reliance upon certain exemptive provisions of
said acts. Said securities cannot be sold or transferred except if, in the
opinion of counsel reasonably acceptable to the issuer, any such sale or
transfer would be: (1) pursuant to an effective registration statement under the
Federal Act or pursuant to an exemption from such registration; and (2) in a
transaction which is exempt under applicable state securities laws or pursuant
to an effective registration statement under such laws, or in a transaction
which is otherwise in compliance with such laws.
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<PAGE> 14
HALIS, INC.
This Warrant is part of a duly authorized issue of Warrants expiring on
December 31, 1999 (the "Expiration Date"), to purchase, in the aggregate, up to
the number of Shares of Common Stock $.01 par value, of HALIS, Inc. (formerly
known as Fisher Business Systems, Inc.), a Georgia corporation (the
"Corporation"), shown on the face hereof, and is issued pursuant to a Warrant
Agreement dated as of November 19, 1996 (the "Warrant Agreement") between the
Corporation and SunTrust Bank, Atlanta as Warrant Agent (the "Warrant Agent"),
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Warrant Agent, the Corporation and the holders (the words "holders" or "holder"
meaning the registered holders or registered holder) of the Warrants.
The Warrant evidenced by this Warrant Certificate may be exercised to
purchase Shares of Common Stock from the Corporation on and after November 19,
1996 and on or before the close of business on the Expiration Date, at the
Exercise Price per share set forth on the face hereof, subject to adjustment in
the Exercise Price and the number of Shares of Common Stock purchasable
hereunder as hereinafter referred to, by surrendering this Warrant Certificate,
with the form of election to purchase set forth hereon properly completed and
executed, together with payment of the Exercise Price by cash or certified check
at the principal office of the Warrant Agent in Atlanta, Georgia (the "Warrant
Agent Office"). In the event that upon any exercise of this Warrant the number
of Shares of Common Stock purchased hereunder shall be fewer than the total
number of Shares of Common Stock purchasable upon the exercise hereof there
shall be issued to the holder hereof or his assignee a new Warrant Certificate
evidencing the number of Warrants that have not been exercised. No adjustment
shall be made for any cash dividend on any Shares of Common Stock issuable upon
exercise of this Warrant.
The Warrant Agreement provides that, upon the occurrence of certain
events, the Exercise Price set forth herein may, subject to specified
conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that, under certain circumstances, the number of Shares of
Common Stock purchasable upon exercise of this Warrant shall be proportionately
adjusted.
This Warrant shall not be exercisable by a registered holder in any
state where such exercise would be unlawful.
The Corporation shall not be required to issue fractions of Shares of
Common Stock or any certificates which evidence fractional Shares of Common
Stock. In lieu of fractional Share of Common Stock there shall be paid to the
registered holder of a Warrant with regard to which the fractional Share of
Common Stock would otherwise be issuable an amount in cash equal to the same
fraction of the current market value (as determined pursuant to the Warrant
Agreement) of a share of Common Stock.
Warrant Certificates, when surrendered at the Warrant Agent Office by
the registered holder thereof in person or by legal representative or by
attorney duly authorized in writing, may be combined, split-up or otherwise
exchanged, in the manner and subject to the limitations provided in the Warrant
Agreement, but without payment of any service charge, for another Warrant
Certificate or Warrant Certificates of like tenor evidencing in the aggregate a
like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the Warrant Agent Office, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate the right to purchase
a like number of Shares of Common Stock shall be issued to the transferee in
exchange for this Warrant, subject to the limitations provided in the Warrant
Agreement, without charge except for any tax or other governmental charge
imposed in connection therewith.
The Corporation and the Warrant Agent may deem and treat the registered
holder hereof as the absolute owner of this Warrant (notwithstanding any
notation of ownership or other writing thereon made by anyone) for the purpose
of any exercise hereof and any distribution to the holder hereof and for all
other purposes, and neither the Corporation nor the Warrant Agent shall be
affected by any notice to the contrary.
<PAGE> 15
ELECTION TO EXERCISE
(To be executed upon exercise of Warrant
prior to the close of business on the Expiration Date)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase ______ Shares of Common
Stock and herewith tenders payment for the Shares of Common Stock in the amount
of $________ in accordance with the terms hereof. The undersigned requests that
a certificate representing the Shares of Common Stock be registered in the name
of ______________________________________________ and that the certificate be
delivered to whose address is _________________________________. If said number
of Shares of Common Stock is fewer than all the Shares of Common Stock
purchasable hereunder, the undersigned requests that a new Warrant Certificate
evidencing the right to purchase the balance of the Shares of Common Stock be
registered in the name of whose address is _____________________________________
and that such Warrant Certificate be delivered to_______________________________
whose address is _____________________________________________________.
Any cash payments to be paid in lieu of a fractional Share of Common
Stock should be made to ____________________________________ whose address is .
The check representing payment thereof should be delivered to whose address is
_________________________________________________. Dated this _____ day of
________________, 19____
Name of Registered Holder of Warrant Certificate: ______________________________
Address: __________________________________________________________
_______________________________________________
Social Security Number
Signature: ____________________________________
Signature Guaranteed:
Note: The above signature must correspond with the name as written on the face
of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever and if the Warrant Certificate representing
the right to purchase any Shares of Common Stock to which this Warrant is not
being exercised is to be registered in the name other than that in which this
Warrant Certificate is registered, the signature of the holder hereof must be
guaranteed.
<PAGE> 16
ASSIGNMENT FORM
For value received ___________________ hereby sells, assigns and
transfers unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF
REGISTERED ASSIGNEE
___________________________________
________________________________________________________________________________
(Please print name and address including zip code of assignee)
________________________________________________________________________________
________________________________________________________________________________
the within Warrant Certificate together with all right, title and interest in
the Warrant evidenced thereby, and does hereby irrevocably constitute and
appoint ______________________________ attorney, to transfer Warrant Certificate
number ______ of HALIS, Inc., on the books of HALIS, Inc. with full power of
substitution in the premises. Dated this ____ day of ______________, 19__
Signature:_____________________________________ Signature Guaranteed:
Note: The above signature must correspond with the name as written upon the face
of this Warrant Certificate in every particular, without alteration or
enlargement or any change whatsoever.
<PAGE> 1
EXHIBIT 10.6
LICENSE AGREEMENT
THIS AGREEMENT (the "Agreement"), made and entered into as of
the 18th day of November, 1996, by and between PAUL HARRISON ENTERPRISES, INC.,
a Georgia corporation ("Licensor") and FISHER BUSINESS SYSTEMS, INC., a Georgia
corporation ("Licensee").
WITNESSETH:
WHEREAS, Licensor owns all right, title and interest in and to
a certain computer architecture concepts, algorithms and processes for the
building of computer systems, which computer architecture, concepts, algorithms
and processes is presently known as MERAD, as more fully described on Exhibit
"A" attached hereto ("MERAD"),
WHEREAS, Licensee desires to obtain from Licensor a perpetual
non-exclusive, transferable license to use MERAD and Licensor desires to grant
Licensee such a license subject to the terms and conditions contained herein;
NOW, THEREFORE, in consideration of the premises and the
mutual promises and covenants contained herein and of other good and valuable
consideration, the receipt, adequacy and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. GRANT OF LICENSE.
(a) Licensor hereby grants to Licensee, and Licensee hereby
accepts, a non-exclusive, transferable right and license to use MERAD and any
supporting Documentation (as hereinafter defined) for any purpose whatsoever,
subject to the restrictions herein noted below and under applicable law.
(b) For purposes of this Agreement, "Documentation" shall
refer to such materials, in either written, audio, video or machine readable
form, created by Licensor which are intended to describe the use or
characteristics of MERAD.
(c) Licensee hereby agrees and acknowledges that Licensee
shall not have the right or privilege to sub-license MERAD to any third party or
to otherwise copy, decompile, disassemble, reverse engineer, transfer, assign,
rent or sell the MERAD or Documentation in any manner whatsoever except as may
be permitted by this Agreement.
2. USE OF LICENSOR'S TRADEMARKS, COPYRIGHTED MATERIAL AND
PATENTS. Licensee acknowledges that MERAD, including the Documentation, and the
name MERAD (hereinafter the "Mark"), may be protected under the laws of the
State of Georgia and/or the laws of the United States by one or more registered
or unregistered trademarks and/or copyrights in favor of Licensor. Licensee
further acknowledges that MERAD may be subject to one or more patent
applications filed by Licensor with the United States Patent and Trademark
Office (the "Patents"). Licensor agrees that Licensee shall have the right to
use the Mark, MERAD and Documentation in connection with the rights licensed
hereby for so long as this Agreement is in force and effect. Licensee
acknowledges that all rights in and to the Mark, MERAD, the Patents and
Documentation are and shall remain the sole and exclusive property of Licensor
and that Licensee shall have no ownership rights or other rights in the Mark,
<PAGE> 2
MERAD, Patents or Documentation other than the right to use the same on the
conditions stated in this Agreement. The Mark, or any mark confusingly similar
to the same, shall not be used by Licensee in conjunction with any other use or
product, other than as expressly permitted herein or with the prior written
consent of Licensor. Licensee specifically agrees that it shall not at any time,
contest Licensor's proprietary rights in or title to the Mark, MERAD, Patents or
Documentation.
3. ROYALTY. (a) Licensee agrees that for the license granted
herein, Licensee shall be, and hereby is from this date forward, obligated to
pay to Licensor a royalty payment equal to ten percent (10%) of the gross
revenues (less only ordinary and customary discounts and allowances for returns)
recognized by Licensee, in accordance with generally accepted accounting
principles, on any software products that directly or indirectly incorporate
MERAD or any derivative thereof, or otherwise utilize MERAD or any derivative in
any manner whatsoever (the "Royalty Payment"). Each Royalty Payment shall be due
and payable thirty (30) days after the end of each calendar quarter commencing
with the calendar quarter ending December 1996. Notwithstanding the amounts that
may come due hereunder, Licensee shall be entitled to a credit against the
Royalty Payment otherwise due hereunder in the amount of $_____ representing
funds Licensee has previously provided to Licensor.
(b) Licensee shall provide to Licensor, with each Royalty
Payment, an accounting of such Royalty Payment in such detail as reasonably
acceptable to Licensor, and a certificate of Licensee's chief financial officer
certifying that such accounting is complete and accurate to the best of such
officer's knowledge and belief and is based upon generally accepted accounting
principles consistently applied.
(c) Licensee shall maintain adequate books and records
relating to the sale of any software products incorporating MERAD or any
derivative, and Licensee agrees to provide Licensor and its authorized
representatives and agents access to all of such books and records as are
reasonably requested by Licensor or its agents and representatives in order to
verify the information provided in the accounting and the calculation of the
Royalty Payment. Licensor agrees to keep any information derived from such
examination in confidence except as may be necessary to protect Licensor's
rights hereunder.
(d) In the event that the Licensor disagrees with the
accounting or the calculation of the Royalty Payment, Licensor shall have the
right, during the ninety (90) day period after any calendar year, to have a firm
of certified public accountants audit and inspect the books and records relating
to gross revenues derived from MERAD or any derivative, and to verify the
Royalty Payments paid to Licensor during such year. The audit shall be conducted
during reasonable business hours and on reasonable notice to Licensee., and
Licensee shall cooperate fully and completely in the performance of such audit
and inspection. If any such audit discloses a deficiency in the amount of any
Royalty Payment made during the period examined, then Licensee shall be
responsible for the payment of such deficiency, and the costs and expenses of
such audit shall be paid by Licensee if a deficiency of five percent (5%) or
greater is determined to exist, and the costs and expenses of the audit shall be
paid by Licensor if a deficiency less than five percent (5%) is determined to
exist.
4. RIGHTS RESERVED. The license granted hereby shall in no way
prevent or otherwise limit Licensor from continuing to license, sell or use the
Mark, MERAD or Documentation
-2-
<PAGE> 3
in any manner whatsoever or to prevent Licensor from enhancing or modifying
MERAD or Documentation in any manner or to any degree. Licensor shall be under
no obligation to provide any enhancements to MERAD to Licensee unless a separate
maintenance and support agreement is entered with Licensor that would require
the provision of any such updates or modifications.
5. TERM OF THE AGREEMENT. The parties hereto agree that the
term of this Agreement and the license granted hereby shall be of perpetual
duration, and Licensee shall be entitled to use the MERAD, Documentation and
Mark, as provided for herein, for so long as Licensee is not in breach of any
provision in this Agreement or any other agreement between the parties hereto.
6. DELIVERY OF MERAD; TRAINING; COPIES.
(a) Upon the execution of this agreement, Licensor shall
deliver to Licensee one copy of MERAD and one copy of the Documentation
necessary to fully operate MERAD.
(b) Licensor shall provide training material and 2 days of
group training for Licensee's personnel at Licensee's premises during normal
working hours. Licensor is not obligated to provide any other training or
support services to Licensee unless Licensee enters into a Maintenance and
Support Agreement and/or a Consulting Services Agreement, copies of which have
been made available to Licensee for review.
(c) Licensee shall be entitled to create one backup copy of
MERAD for its own internal use and benefit, as an archive copy only, and shall
not be permitted to make any additional copies, or any copies of the
Documentation for any other purposes without the express written permission of
Licensor.
7. REPRESENTATION AND WARRANTIES OF LICENSOR.
(a) Licensor hereby represents and warrants to Licensee that
Licensor is the sole and exclusive owner of all rights in and to MERAD, the
Documentation and the Mark; that it has the full right and power to grant the
license contemplated by this Agreement; and that such license will not violate
the rights of any other person or entity or any other agreement to which
Licensor is a party. OTHER THAN THESE EXPRESS WARRANTIES, LICENSOR MAKES NO
OTHER EXPRESS OR IMPLIED WARRANTIES OF ANY KIND WHATSOEVER TO LICENSEE,
INCLUDING ANY AND ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
OR INTENDED PURPOSE. LICENSOR EXPRESSLY DISCLAIMS ANY WARRANTY THAT MERAD WILL
MEET ANY PARTICULAR REQUIREMENT OR BUSINESS NEED OF LICENSEE, EVEN IF LICENSEE
HAS BEEN ADVISED OF SUCH REQUIREMENT OR NEED. BY ACCEPTING THIS LICENSE,
LICENSEE SPECIFICALLY ACKNOWLEDGES THAT LICENSEE IS AWARE THAT MERAD IS IN ITS
EARLY PHASES OF DEVELOPMENT AND THAT FUTURE VERSIONS OF MERAD MAY BE NECESSARY
TO FULLY IMPLEMENT THE DESIRED FEATURES OF MERAD OR TO DEBUG ANY PROBLEMS THAT
MAY ARISE.
-3-
<PAGE> 4
(b) As Licensee's sole remedy for a breach of the warranties
contained herein, Licensor agrees to defend and indemnify Licensee with respect
to any action brought against Licensee to the extent that such action is based
upon a claim that the Agreement constitutes direct infringement of any
proprietary right or copyright in the United States and will pay all damages and
costs attributable to such claim which may be finally awarded against Licensee
in any such action; provided, however, that Licensor shall be promptly informed
by Licensee in writing of any such claim and furnished a copy of all
communications or other documents relating thereto, shall be given by Licensee
all requisite assistance and information necessary to defend or settle such
claim, and shall have the absolute right and authority to defend or settle such
claim.
(c) EXCEPT AS EXPRESSLY STATED ABOVE, IN NO EVENT SHALL
LICENSOR BE LIABLE TO LICENSEE FOR ANY LOST PROFITS, LOST SAVINGS OR OTHER
INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO, DAMAGES
ARISING FROM OR AS A RESULT OF THE USE OR THE INABILITY TO USE MERAD,
DOCUMENTATION OR THE MARK FOR ANY REASON WHATSOEVER, OR THE LOSS OF DATA OR
OTHER PROPRIETARY INFORMATION OF LICENSEE OR DAMAGE TO ANY OF LICENSEE'S
SOFTWARE, HARDWARE OR ANY OTHER PERIPHERAL COMPUTER EQUIPMENT, LICENSEE
SPECIFICALLY ACKNOWLEDGES THAT MERAD IS IN ITS DEVELOPMENT STAGE AND MAY NOT BE
FULLY OPERATIONAL.
8. REPRESENTATION AND WARRANTIES OF LICENSEE. Licensee
represents and warrants that it has full power and authority to execute and
deliver this Agreement and to perform its obligations hereunder, and
acknowledges that it has the sole and exclusive responsibility for the
supervision, management and control of its use of MERAD.
9. TERMINATION AND DUTIES UPON TERMINATION.
(a) Notwithstanding the provisions of Paragraph 5 hereinabove,
this Agreement may be terminated by Licensor upon the breach of any provision of
this Agreement by Licensee, which breach continues after Licensee receives
written notice from Licensor of such claim of breach and the failure and refusal
of Licensee to immediately correct or refrain from the activity constituting the
breach.
(b) In the event of termination of this Agreement for any
reason, Licensee agrees to immediately discontinue and refrain from any further
use of MERAD, the Documentation or Mark and shall immediately return to Licensor
the original and any copies of MERAD and the Documentation that it may have in
its possession or under its control, or arrange for the return of any copies not
under its control within ten (10) days after the termination of the Agreement.
Upon termination of the Agreement for any reason whatsoever, Licensee shall be
entitled to retain all of the Royalty Payments that have been previously paid by
Licensee and shall not be obligated to return any part thereof to Licensee; the
parties hereby expressly agreeing that such Royalties will have been fully
earned by Licensor as of the date any gross revenues from any products
containing MERAD or derived by MERAD are recognized by Licensee.
-4-
<PAGE> 5
(c) Notwithstanding the termination of this Agreement, for any
reason, the restrictions provided for in paragraph 10 below, governing
confidentiality, shall survive this Agreement and the termination of the license
granted hereby and shall continue to be binding upon Licensee as provided
therein. Nothing herein shall be construed as limiting any remedy that Licensor
may have against Licensee, at law or in equity, as a result of Licensee's breach
of any part of this Agreement.
10. CONFIDENTIALITY. Licensee acknowledges that MERAD and the
Documentation are proprietary and confidential to Licensor and may constitute
trade secrets and know-how of Licensor. Licensee shall not use or disclose any
information received from Licensor under this Agreement or that it learns from
its use of MERAD or the Documentation for any purpose other than the use
intended and authorized by this Agreement. Licensee agrees that such disclosure
to or use by any party other than employees of Licensee to whom disclosure must
be made in order for Licensee to perform its ordinary business services using
MERAD and the Documentation, or threatened disclosure or use, will be a material
breach of this Agreement and Licensor shall be entitled to injunctive or other
equitable relief to prevent unauthorized use or disclosure. The foregoing
restrictions on disclosure of information shall apply so long as the information
has not properly come into the public domain through such disclosure by Licensor
or otherwise. Licensee further agrees that Licensee shall not itself, or permit
others to copy, disclose, recreate or modify MERAD or any of the Documentation
without the prior written permission of Licensor, except to the extent permitted
by this Agreement.
11. MISCELLANEOUS.
(a) RELATIONSHIP OF THE PARTIES. At all times hereunder, with
respect to this Agreement, the relationship of Licensor to Licensee shall be
that of a licensor and licensee and shall not be construed to constitute the
relationship between Licensor and Licensee as that of partners, joint venturers,
principal and agent or employer and employee.
(b) NO ENHANCEMENT PERMITTED: NEW VERSIONS. Licensee hereby
agrees and acknowledges that it shall not be permitted to enhance or otherwise
modify MERAD without the express written permission of Licensor. Licensee and
Licensor further agree that Licensor shall not be obligated to provide Licensee
with any enhanced or updated versions of MERAD or the Documentation thereto or
to modify or conform MERAD to any specific business application of Licensee
unless Licensee and Licensor enter the Maintenance and Support Agreement and/or
the Consulting Services Agreement, as appropriate.
(c) NO TRANSFER OR ASSIGNMENT OF LICENSE.
(i) This Agreement and the rights and obligations
granted and assumed herein may not be transferred or assigned by
Licensee by sale, merger, acquisition or otherwise, without the prior
written consent of Licensor which consent shall not be unreasonably
withheld; provided that Licensee shall be entitled to assign this
Agreement to an affiliate that is under the control of, controlled by,
or under common control with Licensee without obtaining the consent of
Licensor (provided prior notice of such assignment is provided to
Licensor before such assignment shall
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<PAGE> 6
become effective); and provided further that with respect to any
authorized transfer hereunder Licensee remains obligated for any
amounts due or to become due hereunder or for any breach hereof by such
assignee. Notwithstanding anything herein to the contrary, any
authorized assignee shall be bound to the terms and provisions hereof
as the same as if such assignee were the Licensee hereunder. This
Agreement may be automatically and immediately terminated, at the
option of Licensor, upon any unapproved or attempted assignment or
transfer of the license granted herein, MERAD, the Documentation or any
copy thereof. Notwithstanding the foregoing, Licensor expressly
acknowledges that Licensee shall be entitled to utilize or incorporate
MERAD into other software products; provided, however, Licensee shall
not be authorized to sell or distribute MERAD as a stand alone product
or to disclose the confidential and proprietary information or code
that comprises MERAD to any third party whatsoever.
(ii) Licensor shall have the unrestricted right to
transfer or assign this Agreement without the prior consent of
Licensee.
(d) BINDING EFFECT. Subject to subparagraph (c) hereinabove,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors, assigns and legal representatives.
(e) ENTIRE AGREEMENT. Except as may be modified by the
Maintenance and Support Agreement or the Consulting Services Agreement entered
subsequent to or concurrently herewith, this Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior negotiations, representations or agreements, whether
written or oral. Any modification of this Agreement shall be in writing,
executed with the same formality as this Agreement and signed by a duly
authorized representative of each of the parties hereto.
(f) SEVERABILITY. Should any part or provision of this
Agreement be held unenforceable or in conflict with the laws of any
jurisdiction, then such part or provision shall be completely severable from
this Agreement and the validity of the remaining parts or provisions shall not
be affected by such holding.
(g) GOVERNING LAW. This Agreement is being entered into and
shall be governed by and construed in accordance with the laws of the State of
Georgia, and the parties agree that the appropriate courts in the State of
Georgia shall be the proper venue for the resolution of any disputes arising
hereunder.
(h) NOTICES. All notices required or permitted to be given
hereunder shall be in writing and deemed duly given if hand delivered or sent by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
-6-
<PAGE> 7
If to Licensor:
Paul Harrison Enterprises, Inc.
3390 Peachtree Road, N.E.
Suite 1000
Atlanta, Georgia 30326
Attention: President
If to Licensee:
Fisher Business Systems, Inc.
1950 Spectrum Circle
Suite 400
Marietta, Georgia 30067
Attention: President
(i) WAIVER OF DEFAULT. The waiver of any default or breach
under this Agreement by either party shall not constitute a waiver of any rights
for any subsequent default or breach.
(j) SECTION HEADINGS. The section headings in this Agreement
are for reference purposes only and shall not affect the interpretation of this
Agreement.
(k) TIME IS OF THE ESSENCE. Time is of the essence of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
PAUL HARRISON ENTERPRISES, INC.
BY: /s/ PAUL W. HARRISON
-----------------------------------------
PAUL W. HARRISON, PRESIDENT
FISHER BUSINESS SYSTEMS, INC.
By: /s/ LARRY FISHER
-----------------------------------------
LARRY FISHER, PRESIDENT
-7-
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of the Registrant
HALIS Software, Inc, a Georgia corporation
HALIS Systems Integration, Inc., a Georgia corporation
HALIS Hospitality Systems, Inc., a Georgia corporation
The Compass Group, Inc., a Georgia corporation
Software Manufacturing Group, Inc., a Georgia corporation
American Benefit and Administrative Services, Inc., a Georgia corporation
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
HALIS, Inc.
Atlanta, Georgia
We hereby consent to the incorporation by reference in Registration
Statement No. 33-22588 on Form S-8 dated June 16, 1988, No. 33-22591 on Form S-8
dated June 16, 1988, No. 33-38257 on Form S-8 dated December 19, 1990, No.
33-38258 on Form S-8 dated December 19, 1990, No. 33-53702 on Form S-8 dated
October 20, 1992, and No. 33-53704 on Form S-8 dated October 20, 1992, of our
report dated March 7, 1997, relating to the financial statements of HALIS, Inc.
appearing in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996.
/s/ HABIF, AROGETI & WYNNE, P.C.
Atlanta, Georgia
April 10, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF HALIS, INC. FOR THE YEAR ENDED DECEMBER 31, 1996, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 719,989
<SECURITIES> 0
<RECEIVABLES> 84,030
<ALLOWANCES> (39,027)
<INVENTORY> 10,178
<CURRENT-ASSETS> 798,341
<PP&E> 147,126
<DEPRECIATION> (86,972)
<TOTAL-ASSETS> 1,138,129
<CURRENT-LIABILITIES> 1,723,955
<BONDS> 0
0
0
<COMMON> 239,726
<OTHER-SE> (2,331,552)
<TOTAL-LIABILITY-AND-EQUITY> 1,138,129
<SALES> 1,925,412
<TOTAL-REVENUES> 1,925,412
<CGS> 1,656,113
<TOTAL-COSTS> 1,656,113
<OTHER-EXPENSES> 2,258,995
<LOSS-PROVISION> 74,298
<INTEREST-EXPENSE> 67,613
<INCOME-PRETAX> (1,989,696)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,989,696)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,989,696)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> 0
</TABLE>
