EXHIBIT 10.8


                                HEALTHWATCH, INC.
                                 2445 CADES WAY
                                 VISTA, CA 92083

July 14, 1998


Larry Fisher, Executive Vice President
HALIS, Inc.
9040 Roswell Road, Suite 470
Atlanta, GA 30350

Dear Larry:

         HealthWatch is pleased to submit this letter of intent for the
acquisition of HALIS, Inc., ("HALIS") by HealthWatch, Inc. ("HealthWatch"),
pursuant to a merger of HALIS into a wholly-owned subsidiary of HealthWatch (the
"Merger"). The Merger will be made in accordance with the terms of a mutually
acceptable definitive merger agreement between HALIS and HealthWatch (the
"Merger Agreement").

         1. MERGER CONSIDERATION. It is expected that at the closing, which is
anticipated to be within 120 days of the execution of this Agreement, or on an
alternative mutually agreeable date, HALIS will be merged into a subsidiary of
HealthWatch, and HealthWatch will issue sufficient shares of its common and
preferred stock to equal the "Fair Market Value" of 100% of HALIS' issued and
outstanding shares of common stock. Fair Market Value of both the HALIS and
HealthWatch stock shall be calculated by averaging the closing bid price of each
company's common stock for the period beginning May 26, 1998 and ending July 13,
1998.

The exact form of the transaction will be determined before closing based on
advice from the appropriate legal and financial parties of both HALIS and
HealthWatch, however it is anticipated that HealthWatch will issue a combination
of common and preferred shares to HALIS according to the following formula:

         (a)      Based on the share prices above, the relative value of each
                  HealthWatch share to each HALIS share is calculated to be 3.4
                  to 1. Therefore, for every 3.4 shares of HALIS stock
                  exchanged, the HALIS shareholder will receive one share of
                  HealthWatch stock.

         (b)      33 1/3 % of the total number of HealthWatch shares to be
                  issued will be issued as common shares and 66 2/3 % of the
                  total number of HealthWatch shares to be issued will be issued
                  as preferred shares. Said preferred shares shall be
                  convertible into common shares according to mutually agreed
                  terms and conditions.

         2. CERTAIN CONDITIONS. The closing of the proposed transaction will be
conditioned upon:

         (a)      HealthWatch having the full authority to issue sufficient
                  shares of its common stock and preferred stock to meet its
                  obligations set forth in the Merger Agreement;

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         (b)      Paul W. Harrison, Chairman of the Board of Directors of
                  HealthWatch, being the Chairman of the Board of Directors and
                  CEO of HealthWatch following the Merger. The remaining
                  management of both companies will be determined by the Board
                  of Directors of HealthWatch following the Merger;

         (c)      key senior management, if requested, entering into two-year
                  employment contracts with appropriate non-competition,
                  non-solicitation and confidentiality provisions;

         (d)      the HealthWatch Board of Directors following the Merger being
                  the current HealthWatch board members plus one HALIS nominee;

         (e)      HALIS' revenues for the period January 1, 1998 through July 1,
                  1998 being approximately $4,000,000 or more;

         (f)      HALIS' EBITDA being in a positive trend for the period July
                  1,1 998 through December 31, 1998;

         (g)      HealthWatch being satisfied with the financial condition of
                  HALIS and upon there having been, from the date of this
                  Agreement until the date of closing, no material adverse
                  change in the condition, financial or otherwise of HealthWatch
                  and its business;

         (h)      HALIS being satisfied with the financial condition of
                  HealthWatch and upon there having been, from the date of this
                  Agreement until the date of closing, no material adverse
                  change in the condition, financial or otherwise of HealthWatch
                  and its business;

         (i)      HealthWatch being satisfied with the results of its due
                  diligence investigation of the business of HALIS;

         (j)      HALIS being satisfied with the result of its due diligence
                  investigation of the business of HealthWatch; and

         (k)      the approval of the Merger Agreement by the shareholders of
                  HealthWatch and HALIS.

         3. INVESTMENT; BUSINESS COLLABORATION. So long as the parties are
working to complete the Merger, HealthWatch shall loan to HALIS up to a total of
$250,000, such loan to be pursuant to the form of Debenture attached hereto as
Exhibit A, $50,000 of such loan to be made upon HALIS' acceptance of this
proposal, with the balance to be made as mutually agreed, which is expected to
be at the rate of approximately $50,000 per month. Further, HALIS shall provide
services to HealthWatch to further develop the "integration engine" which
HealthWatch and PHE have under development and to provide an interface for
HealthWatch's Life Sciences products and HALIS' Healthcare Enterprise System
("HES") and to assist HealthWatch in marketing HALIS' HES product to
HealthWatch's customer base. For these services, HealthWatch shall pay HALIS
$25,000 per month. HALIS shall provide monthly invoices to HealthWatch
documenting the services provided.

         4. INSPECTION PERIOD. After the acceptance of this proposal by HALIS,
each company will on request make available to the other and their respective
Representatives (as defined in paragraph 8 (d) below), and permit a physical
inspection by the other and their respective Representatives of, all aspects of
the other company's business, including the assets,

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agreements, financial condition and books and records which relate to its
business. Each company will initiate its due diligence investigation and audit
of the other within thirty (30) business days after HALIS' acceptance of this
proposal and, once initiated, will proceed diligently to complete the same as
soon as practicable.

         5. OPERATION OF THE BUSINESS.It shall be a condition to HealthWatch's
obligation to close the Merger that HALIS operate its business in the normal
course from the date hereof through the earlier to occur of the termination of
the obligations under this proposal or the Merger Agreement, as the case may be,
or the date of closing, and not make any material change therein or enter into
any material agreements, incur any material liabilities, sell any material
assets other than inventory in the normal course of business, issue, redeem, or
otherwise sell or purchase any shares of its capital stock or options or rights
to purchase or acquire its capital stock, or distribute to its shareholders any
assets, including cash or cash equivalents, by dividend or otherwise, without
the prior written consent of HealthWatch, which consent shall not be
unreasonably withheld.

         6. OTHER PROVISIONS. The Merger Agreement will contain usual and
customary representations, warranties, covenants and other agreements on behalf
of HealthWatch and HALIS and the closing will be subject to usual and customary
conditions, including:

         (a)      obtaining all necessary consents or approvals of governmental
                  bodies, lessors and other third parties;

         (b)      absence or disclosure of pending or threatened material
                  litigation; and

         (c)      delivery of customary legal opinions, closing certificates,
                  and other documentation.

         7. COST AND EXPENSE. HealthWatch shall bear the costs and expenses
incurred by it and its shareholders in connection with the transactions
contemplated herein and HALIS shall bear the costs and expenses incurred by it
and its shareholders in connection with the transactions contemplated herein,
including any and all finder's fees, selling agent fees, etc.

         8. CONFIDENTIALITY.

         (a)      Each company acknowledges that it and its Representatives
                  shall from time to time have access to and be provided with
                  confidential, secret and proprietary information regarding the
                  business of the other, which may include technical, financial,
                  and other information. Subject to the provisions of
                  subparagraph (c) below, any fact or information (whether
                  furnished or obtained orally or in writing) concerning any
                  aspect of the business of the other heretofore or hereafter
                  disclosed to the other or any of the other's directors,
                  officers, employees, attorneys, accountants, financial
                  advisors or other agents or obtained as a result of each
                  company's inspection of the other and its premises or records
                  shall be deemed to be and hereafter will be referred to as the
                  "Evaluation Material." The Evaluation Material shall be
                  contractually subject to protection pursuant to the provisions
                  of this Agreement, whether or not it would otherwise be
                  regarded or legally considered "confidential," and without
                  regard to whether such information constitutes a trade secret
                  and is also protectable at law or in equity as a trade secret.

         (b)      Each company is to (i) hold the Evaluation Material in strict
                  confidence and secrecy, (ii) limit access to the Evaluation
                  Material to those of its Representatives (as defined below)
                  who need to know the same for the sole purpose of evaluation


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                  the Merger, and (iii) not use the Evaluation Material for any
                  purposes other than the discussions with the other regarding
                  the Merger, or disclose the Evaluation Material to any
                  individual, firm or entity (a "Person") other than as
                  expressly set forth below with respect to each company's
                  Representatives, without the prior written consent of the
                  other.

         (c)      Notwithstanding the provisions of (a) and (b) above, the
                  Evaluation Material does not include the following: (i) any
                  information that either company can demonstrate as being in
                  its possession prior to the time of disclosure by the other;
                  (ii) any information which was in the public domain prior to
                  disclosure to the other or that comes into the public domain
                  through no fault of the other; (iii) any information which is
                  disclosed on a non-confidential basis by a third party with
                  rightful possession of such information; and (iv) any
                  information, now or hereafter, independently developed without
                  any reliance on any information disclosed by the other or its
                  Representatives, or obtained as a result of inspection of the
                  premises or books and records of the other. Information that
                  does not constitute a trade secret under applicable law shall
                  not be considered Evaluation Material for purposes of this
                  Agreement after two (2) years from the date of this Agreement.
                  Each company agrees that the other will advise and cause its
                  employees, directors, officers, accountants, attorneys,
                  investment bankers, representatives and agents
                  ("Representatives") who will have access to the Evaluation
                  Material not to use any Evaluation Material for any purposes
                  other than in connection with discussions regarding the Merger
                  or to disclose any Evaluation Material to any Person other
                  than to its other Representatives permitted to have access to
                  the Evaluation Material provided above, and any such use or
                  disclosure shall be at all times and in all events on the
                  terms of and in compliance with the restrictions of this
                  Agreement. Each company is responsible for the compliance by
                  its Representatives with this Agreement.

         (d)      Each company shall advise and cause its employees, directors,
                  officers, accountants, attorneys, investment bankers,
                  representatives and agents ("Representatives") who will have
                  access to the Evaluation Material not to use any Evaluation
                  Material for any purposes other than in connection with
                  discussions regarding the Merger or to disclose any Evaluation
                  Material to any Person other than to its other Representatives
                  permitted to have access to the Evaluation Material provided
                  above, and any such use or disclosure shall be at all times
                  and in all vents on the terms of and in compliance with the
                  restrictions of this Agreement. Each company agrees to be
                  responsible for the compliance by its Representatives with
                  this Agreement.

         (e)      Each company agrees that if for any reason the Merger is not
                  consummated, it will not for a period of one (1) year from the
                  date hereof directly or indirectly for its account or for the
                  account of any other Person hire any employee of the other
                  with whom it had contact or who was specifically identified as
                  part of the due diligence investigation of the other in
                  connection with the Merger, without the prior written consent
                  of the other.

         9. EXCLUSIVITY. HALIS agrees that from the date of the acceptance of
this proposal until its termination in accordance herewith, neither it nor any
of its Representatives will hold or participate in any discussions with any
other person or entity concerning the direct or indirect sale of its stock or
assets, nor will HALIS or any of its Representatives entertain any offers with
respect thereto for a period of 120 days from the acceptance of this proposal.
Unless earlier terminated as hereinafter provided, this Agreement shall
terminate on the date which is 60 days after the last signature below is
obtained, should a Definitive Agreement not be entered into by


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such date. Except with respect to the provisions of paragraphs 7 and 8, either
party hereto may terminate this letter by advising the other party in writing,
and thereafter this Agreement shall have no further force and effect.

         10. PUBLICITY. Neither party shall publicly announce or disclose the
contents of this Agreement without the prior consent of the other party, which
consent shall not be unreasonably withheld.

         11. BINDING EFFECT. This proposal, if accepted, shall be deemed only an
expression of interest and, except for the provisions of paragraphs 7,8, 9 and
10 above, it is meant only to address the intentions of the parties with respect
to the matters set forth herein. Although HALIS and HealthWatch intend to
proceed promptly and in good faith to achieve the consummation of the Merger,
this proposal does not constitute an offer by HALIS to sell, nor an offer by
HealthWatch to purchase, and is not a binding agreement, except for the
foregoing enumerated provisions, which shall be binding on the parties hereto
and their respective successors and assigns, notwithstanding the failure of the
parties to execute and deliver the Merger Agreement. Notwithstanding any of the
foregoing to the contrary, the provisions of paragraphs 7 and 8 shall survive
the termination of this letter of intent.

         If HALIS accepts this proposal as a basis for negotiating a definitive
written agreement, please so indicate by signing the enclosed copy of this
letter and returning it no later than July 14, 1998. If HALIS accepts this
proposal, please be assured that HealthWatch will negotiate with HALIS in a
positive and constructive manner, with the objective of reaching a mutually
satisfactory definitive written agreement at the earliest possible date, and
then proceeding promptly with completion of the Merger.

Sincerely,                             Accepted By:

HEALTHWATCH, INC.                      HALIS



By /s/ Paul Harrison                   By /s/ Larry Fisher
   ----------------------------------     --------------------------------------
   Paul Harrison, Chairman                Larry Fisher, Executive Vice President

Date: July 14, 1998.                   Date: July 14, 1998


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                                    EXHIBIT A
                                    DEBENTURE

THIS DEBENTURE AND THE COMMON STOCK ("SHARES") ISSUABLE UPON CONVERSION OF THIS
DEBENTURE (COLLECTIVELY THE "SECURITIES") HAVE NOT BEEN REGISTERED WITH THE
UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE "SEC") UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES COMMISSION OF
ANY STATE UNDER ANY STATE SECURITIES LAW. THE SECURITIES MAY ONLY BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED IF THESE SECURITIES ARE REGISTERED UNDER THE ACT
AND APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS ARE
MADE PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THOSE LAWS.


Debenture Certificate No. M-                               U.S. $_______________
Date: _______________, 1998


                                   HALIS, INC.
                 6% CONVERTIBLE DEBENTURE DUE FEBRUARY 25, 2000

    FOR VALUE RECEIVED, HALIS, Inc., a Georgia corporation (the "Company"),
promises to pay HealthWatch, Inc. ("Purchaser"), or any subsequent registered
holder hereof (the "Holder"), the principal sum of ______________________ U.S.
Dollars (U.S. $______________), together with interest on the principal sum
outstanding at the rate of six (6%) percent per annum, payable in U.S. Dollars,
under the terms and conditions set forth below. Accrual of interest on this
Debenture shall commence on the date hereof and shall continue to accrue until
the Maturity Date or if earlier, the Conversion Date or Redemption Date, as the
case may be. This Debenture is being issued pursuant to the Letter of Intent
dated July ___, 1998, between the Purchaser and the Company ("Subscription
Agreement"), and this Debenture is subject to all of the terms and conditions
thereof, all of which are hereby incorporated by reference.

SECTION 1. PAYMENT OF DEBENTURE. Subject to all of the terms and conditions
hereof, the Company shall pay to the Holder the entire outstanding amount of
principal and interest hereof, on February 25, 2000 or such earlier date as the
Debenture shall become due and payable pursuant to Section 9 hereof (the
"Maturity Date"). All interest or principal shall be paid to the person and at
the address in whose name this Debenture is registered on the records of the
Company on the applicable payment date. As provided herein, the principal and
interest due hereunder may be converted into or redeemed for shares of Common
Stock, par value of $.01 per share, of the Company ("Shares"), and such Shares
shall be in the name of and forwarded to the person and at the address in whose
name this Debenture is registered on the issuance date.

SECTION 2. SALE, TRANSFER OR EXCHANGE. This Debenture may be transferred,
exchanged or converted only in compliance with the Act and any applicable state
securities laws. Any Holder of this Debenture, by acceptance hereof, agrees to
the representations, warranties and covenants herein and in the Subscription
Agreement. Prior to due

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presentment to the Company for transfer of this Debenture, the Company and any
agent of the Company may treat the person in whose name this Debenture is duly
recorded on the Company's records as the owner hereof for the purpose of
receiving payment as herein provided and for all other purposes.

SECTION 3. HOLDER CONVERSION.

A. Right to Convert; Conversion Rate. The Holder of this Debenture shall be
entitled to convert the entire principal amount and accrued but unpaid interest
of this Debenture at any time on or before the Maturity Date into that number of
Shares calculated in accordance with the following formula:

    Number of Shares issued upon Conversion = Principal (+ Interest, if
applicable)/Conversion Price, where

                   Principal = The Principal amount of the Debenture,
                   Interest = accrued but unpaid interest hereunder

    Conversion Price: the Conversion Price shall be the lesser of (i) $.156 per
share if the Merger described in the Subscription Agreement is not consummated
due to the Company's decision not to proceed, unless such decision was based on
the Purchaser's failure to comply with any of its obligations contained in
either the Subscription Agreement or the Merger Agreement referred to therein,
(the "Fixed Conversion Price"); or (ii) 65% of the average Closing Bid Price, as
that term is defined below, of the Shares for the ten (10) trading days
immediately preceding the day prior to the Conversion Date (the "Variable
Conversion Price"). In the event that provision (i) above is applicable,
Purchaser shall have the right to demand the immediate registration under the
Act of the shares of the Company's common stock issuable upon conversion of this
Debenture.

For purposes hereof, the term "Closing Bid Price" shall mean the closing bid
price on the market as reported by the OTC Bulletin Board or NASDAQ's National
Market System or Small Capitalization System ("NASDAQ") or American Exchange
Emerging Company Marketplace or if then traded on a different national
securities exchange, the closing sales price on the principal national
securities exchange on which it is so traded and, if not available, the mean of
the daily high and low sales prices on such securities exchange on which it is
traded.

B. Mechanics of Conversion. In order to convert the Debenture into Shares, the
Holder shall (i) fax a copy of an executed notice of conversion ("Notice of
Conversion") to the Company at the office of the Company, which notice shall
specify that the Debenture shall be converted and shall contain a calculation of
the number of Shares to be issued in connection with the conversion, and (ii)
surrender the original Debenture to a common courier for delivery to the office
of the Company within three (3) business days of the Notice of Conversion;
provided, however, that the Company shall not be obligated to issue certificates
evidencing the Shares issuable upon such conversion unless either the original
Debenture is delivered to the Company or the Holder notifies the Company that
such Debenture has been lost, stolen or destroyed and the Holder has complied
with Section 3.C. below. Upon receipt by the Company of a facsimile copy of a
Notice of Conversion, the Company shall immediately send, via facsimile,
confirmation of receipt of the Notice of Conversion to Holder which shall
specify that the Notice of Conversion has been received and the name of a
contact person at the Company whom the Holder should contact regarding
information related to the conversion. In the case of a dispute as to the
calculation of the Conversion Price or any other issues related thereto, the
Company shall promptly issue the number of Shares that are not disputed. The
Company shall submit the disputed calculations to its independent auditors
within two (2) business days of receipt of Holder's Notice of Conversion. The
Company shall cause the auditors to perform the calculations and notify the
Company and Holder of the results no later


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than five (5) business days from the time such accountant receives the disputed
calculations. The auditor's calculation shall be deemed conclusive absent
manifest error.

C. Lost or Stolen Debentures. Upon receipt by the Company of evidence of the
loss, theft, destruction or mutilation of this Debenture, and (in case of loss,
theft or destruction) indemnity or security reasonably satisfactory to the
Company, and upon surrender and cancellation of the Debenture, if mutilated, the
Company shall execute and deliver a new Debenture of like tenor and date without
charge to Holder.

D. Delivery of Shares upon Conversion. The transfer agent or the Company (as
applicable) shall, no later than the close of business on the tenth (10th)
business day after delivery to the Company of the Debenture to be converted (or
after provision for security or indemnification, if required), issue a
certificate for the number of Shares to which the Holder shall be entitled as
aforesaid and surrender such original certificate to a common courier for
overnight delivery to the Holder at the address of the Holder on the books of
the Company.

E. No Fractional Shares. No fractional Shares shall be issued upon conversion of
this Debenture. If any conversion of the Debenture would create a fractional
share or a right to acquire a fractional share, such fractional shares, on an
aggregate basis, shall be disregarded and the number of Shares issuable upon
conversion shall be, on an aggregate basis, the next lower number of whole
shares.

F. Date of Conversion. The date on which conversion occurs (the "Conversion
Date") shall be deemed to be the date (utilizing Atlanta, Georgia time) the
Notice of Conversion is faxed to the Company, and, provided, that the original
Debenture is surrendered by depositing such Debenture with a common courier, as
provided above, and received by the Company within three (3) business days from
the Conversion Date. The person or persons entitled to receive the Shares
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such Shares on the Conversion Date. If the original
Debenture is not received by the Company within three (3) business days after
the Conversion Date, the Notice of Conversion, at the Company's option, may be
declared null and void.

SECTION 4. RESERVATION OF SHARES ISSUABLE UPON CONVERSION. The Company shall at
all times reserve and keep available out of its unissued Shares, solely for the
purpose of effecting the conversion or redemption of the entire principal amount
of this Debenture, such number of its Shares as shall from time to time be
sufficient to effect the conversion of this Debenture.

SECTION 5. ADJUSTMENT TO CONVERSION PRICE.

A. Adjustment to Conversion Price Due to Stock Split, Stock Dividend, Etc. If at
any time when the Debenture is issued and outstanding, the number of outstanding
Shares is increased by a stock split, stock dividend, or other similar event,
the Conversion Price shall be proportionately reduced, or if the number of
outstanding Shares is decreased by a combination or reclassification of shares,
or other similar event, the Conversion Price shall be proportionately increased.

B. Adjustment Due to Merger, Consolidation. Etc. If at any time when the
Debenture is issued, there shall be any merger, consolidation, exchange of
shares, recapitalization, reorganization, or other similar event, as a result of
which Shares shall be changed into the same or a different number of shares of
another class or classes of stock or securities of the Company or another entity
or there is a sale of all or substantially all the Company's assets, then the
Holder shall thereafter have the right to receive upon conversion or redemption
of the Debenture, upon the basis and upon the terms and conditions specified
herein and in lieu of the Shares immediately theretofore issuable upon


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conversion or redemption, such Common Stock, securities and/or other assets
which the Holder would have been entitled to receive in such transaction had the
Debenture been converted and redeemed immediately prior to such transaction, and
in such case appropriate provisions shall be made with respect to the rights and
interests of the Holders to the end that the provisions hereof (including,
without limitation provisions for adjustment of the Conversion Price and of the
number of Shares issuable upon conversion of the Debenture) shall thereafter be
applicable, as nearly as may be practicable in relation to any securities
thereafter deliverable upon the exercise hereof. The Company shall not effect
any transaction described in this subsection 5.B unless it first gives not less
than fifteen (15) days prior notice of such merger, consolidation, exchange of
shares, recapitalization, reorganization, or other similar event (during which
time the Holder shall be entitled to convert its Debentures into Shares).

SECTION 6. EXERCISE. The Holder hereof acknowledges that neither the Debenture
nor the Shares have been registered under the Act or under any state securities
law. In addition, the certificates representing the Shares shall contain such
legends, or restrictive legends, or be subject to such stop transfer
instructions, as shall be required by applicable Federal or state securities
laws, or as shall be reasonably required by the Company or its transfer agent.

SECTION 7. NO VOTING RIGHTS. Except as specifically provided herein, this
Debenture shall not entitle the Holder hereof to any of the rights of a
stockholder of the Company, including without limitation, the right to vote, to
receive dividends and other distributions, or to receive any notice of, or to
attend, meetings of stockholders or any other proceedings of the Company.

SECTION 8. STATUS OF CONVERTED DEBENTURES. Upon the Conversion Date, this
Debenture shall no longer be deemed to be outstanding and all rights hereof,
shall forthwith terminate as of such date except only the right of the Holder
hereof to receive Shares in exchange for such Debenture and, if applicable, a
cash payment of any accrued interest.

SECTION 9. EVENTS OF DEFAULT. Upon the occurrence of and during the continuation
of an Event of Default (as defined below), the Company shall, at Holder's
request, pay to the Holder an amount equal to the sum of (x) the unpaid
principal amount of this Debenture plus (y) the accrued and unpaid interest on
the unpaid principal amount of this Debenture to the date of payment, and such
amounts shall immediately become due and payable, all without demand,
presentment or notice, all of which hereby are expressly waived, together with
all costs, including, without limitation, reasonable legal fees and expenses of
collection, and the Holder shall be entitled to exercise all other rights and
remedies available at law or equity.

The Company shall be required promptly upon its knowledge of an Event of Default
hereunder to give notice of such Event of Default to the Holder hereof.

An "Event of Default" shall mean the following:

A. Conversion. If the Company fails to issue Shares to Holder upon conversion of
this Debenture by the Holder in accordance with the terms of this Debenture,
fails to transfer any certificate for Shares issued to the Holder upon
conversion of this Debenture and when required by this Debenture, or fails to
remove any restrictive legend on any certificate or any stop transfer order on
any Shares issued to the Holder upon conversion of this Debenture as and when
required in accordance with applicable law and by this Debenture or any
Subscription Agreement by and between Company and Holder, and any such failure
shall continue uncured for five (5) business days;


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B. Breach of Covenant. If the Company fails to pay when due amounts owed
hereunder (including principal and interest) or breaches any material term or
condition of this Debenture (other than as specifically provided in subsection
9A. hereof), or any Subscription Agreement by and between Company and Holder
(including, subject to Section 4 hereof, the failure to have enough Shares
available for issuance upon conversion), the breach of which would have a
material adverse effect on the Company or the prospects of the Company or a
material adverse effect on the Holder or the rights of the Holder with respect
to this Debenture or the Shares issuable upon conversion of this Debenture, and
such breach continues for a period of five (5) business days after written
notice thereof to the Company from the Holder;

C. Breach of Representation. Any representation or warranty of the Company made
herein or in any agreement, statement or certificate given in writing pursuant
hereto or in connection herewith (including, without limitation, any
Subscription Agreement by and between Company and Holder), shall be false or
misleading in any material respect when made and the breach of which would have
a material adverse effect on the Company or the prospects of the Company or a
material adverse effect on the Holder or the rights of the Holder with respect
to this Debenture or the Shares issuable upon conversion of this Debenture;

D. Failure to Pay Obligations. In the event that (i) a garnishment, summons or
writ of attachment is issued against or served upon any of the Company's lenders
for the attachment of any property of the Company or any indebtedness owing to
the Company and such garnishment, summons, or writ of attachment has not been
released within 30 days, (ii) the Company shall (a) be or become insolvent
(however defined under applicable law), (b) voluntarily file or have filed
against it involuntarily, a petition under the United States Bankruptcy Code, or
(c) suffer the appointment of a receiver, custodian, trustee, or liquidator,
voluntarily or involuntarily, for all or any portion of its assets or property,
(iii) the Company shall suffer the appointment of a receiver, custodian,
trustee, or liquidator, voluntarily or involuntarily, for the Company or be
dissolved or liquidated, (iv) a judgment, decree or order for the payment of
money is outstanding against the Company and has been outstanding for more than
30 days from the date of its entry and has not been discharged in full or
stayed, or (v) the Company at any time suffers a material adverse change in its
financial, operating or business condition, properties or assets.

SECTION 10. GOVERNING LAW. This Debenture shall be governed by and construed in
accordance with the laws of the United States and the State of Georgia without
giving effect to the principles of conflicts of laws.

SECTION 11. BUSINESS DAY DEFINITION. For purposes hereof, the term "business
day" shall mean any day on which banks are generally open for business in the
State of Georgia, USA excluding any Saturday and Sunday.

SECTION 12. NOTICES. Any notices or other communication required or permitted to
be given hereunder shall be given as provided herein or delivered against
receipt, if to (i) the Company at 9040 Roswell Road, Suite 470, Atlanta, Georgia
30350, Attn.: Paul W. Harrison, Chief Executive Officer, Telephone No. (770)
641-5555, Telecopy No. (770) 641-5558; or (ii) the Holder of this Debenture, to
such holder at 2445 Cades Way, Vista, California 92083 (or to such at other
address as the party shall have furnished in writing as its new address in
accordance with the provisions of this Section 12). Any notice or other
communication may be made by facsimile and delivery shall be deemed given,
except as otherwise required herein, at the time of transmission of said
facsimile. Any notice given on a day that is not a business day shall be
effective upon the next business day.

SECTION 13. WAIVER OF ANY BREACH TO BE IN WRITING. Any waiver by the Company or
the Holder hereof of a breach of any provision of the Debenture shall not
operate as, or be construed to be, a waiver of any breach of such


                                      -5-

<PAGE>


provision or any breach of any other provision of the Debenture. The failure of
the Company or the Holder hereof to insist upon strict adherence to any term of
the Debenture on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any term of the Debenture. Any waiver must be in writing.

SECTION 14. UNENFORCEABLE PROVISIONS. If any provision of this Debenture is
invalid, illegal or unenforceable, the balance of this Debenture shall remain in
effect, and if any provision is applicable to any person or circumstance, it
shall nevertheless remain applicable to all other persons and circumstances.

SECTION 15. INCIDENTAL REGISTRATION.

If, at any time after July 1, 1998 the Company proposes to register any of its
equity securities under the Act, whether or not for sale for its own account, on
a form and in a manner which would permit registration of the Common Shares for
sale to the public under the Act, it will give prompt written notice to Holder
of its intention to do so, describing such securities and specifying the form
and manner and the other relevant facts involved in such proposed registration
(including the date by which Holder must give notice hereunder of your intention
to exercise your right to include Shares in any such registration), and upon the
written request of Holder delivered to the Company within five business days
after the giving of any such notice (which request shall specify the Shares
intended to be disposed of by Holder and the intended method or methods of
disposition thereof), the Company will use its reasonable efforts to effect the
registration under the Act of all Shares which Holder has so requested to be
registered to the extent requisite to permit the disposition (in accordance with
the intended methods thereof as aforesaid) of the Shares so to be registered,
provided that:

(i) if, at any time after giving such written notice of Holder's intention to
register any of Holder's securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register such securities, the Company may,
at its election, give written notice of such determination to Holder and
thereupon shall be relieved of its obligation to register any Shares in
connection with such registration; provided, to the extent Holder has exercised
its conversion rights hereunder in response to notice of the Company's proposal
to register equity securities under the 1933 Act and the Company later
determines that no such registration shall not occur, Holder may rescind such
exercise, return the shares received upon such conversion, and regain its rights
under this Debenture as if no such conversion had taken place; provided further,
that Holder gives the Company written notice within five business days of
Holder's receipt of notice from the Company that no such registration will
occur.

(ii) if (A) the registration so proposed by the Company involves an underwritten
offering of the securities so being registered, whether or not for sale for the
account of the Company, to be distributed by or through one or more underwriters
of recognized standing under underwriting terms appropriate for such a
transaction (to which Holder will also be bound), (B) the Company proposes that
the securities to be registered in such underwritten offering will include all
of the Shares requested to be so included, and (C) the managing underwriter of
such underwritten offering shall advise the Company in writing that, in its
opinion, the distribution of all or a specified portion of such Shares
concurrently with the securities being distributed by such underwriters will
materially and adversely affect the distribution of such securities by such
underwriters (such opinion to state the reasons therefor), then the Company will
promptly furnish Holder with a copy of such opinion and may require, by written
notice to Holder accompanying such opinion, that all or a specified portion of
such Shares be excluded from such distribution, provided that no other shares


                                      -6-

<PAGE>


of the Company's Common Stock shall be included in such registration for the
benefit of any person other than the Company; and

(iii) The Company shall not be obligated to effect any registration of Shares
under this Section 15 incidental to the registration of any of its securities in
connection with mergers, acquisitions, exchange offers, dividend reinvestment
plans or stock option or other employee benefit plans or incidental to the
registration of any non-equity securities convertible into equity securities.

    IN WITNESS WHEREOF, the Company has caused this Debenture to be duly
executed by an officer hereunto duly authorized.

                                     HALIS, INC.


                                     By:
                                         ------------------------------
                                     Title:
                                            ---------------------------


Dated:
       --------------------------


                                      -7-