-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Q4lnvhNwlhgTTGLUe8fe86lSwzjrcOUAWvj47D7TaKJpN44mvOQy7iPUYu9zzroZ kCPO46BN5sDztW0Uo2f9PQ== 0001010549-97-000197.txt : 19970820 0001010549-97-000197.hdr.sgml : 19970820 ACCESSION NUMBER: 0001010549-97-000197 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970819 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MB SOFTWARE CORP CENTRAL INDEX KEY: 0000714256 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT [8700] IRS NUMBER: 592219994 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-11808 FILM NUMBER: 97666147 BUSINESS ADDRESS: STREET 1: 2225 EAST RANDOL MILL RD STREET 2: SUITE 305 CITY: ARLINGTON STATE: TX ZIP: 76011 BUSINESS PHONE: 8177928872 MAIL ADDRESS: STREET 1: 2225 EAST RANDOL MILL RD STREET 2: SUITE 305 CITY: ARLINGTON STATE: TX ZIP: 76011 FORMER COMPANY: FORMER CONFORMED NAME: INAV TRAVEL CORPORATION DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: TWISTEE TREAT CORP DATE OF NAME CHANGE: 19910220 FORMER COMPANY: FORMER CONFORMED NAME: TWISTEE FREEZ CORP DATE OF NAME CHANGE: 19840917 10QSB/A 1 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 1997 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT Commission File No. 0-11808 MB SOFTWARE CORPORATION Colorado 59-2219994 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 2225 E. Randol Mill Road - Suite 305 Arlington, Texas 76011-6306 (817) 633-9400 Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for 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 [ ] Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [ X ] No [ ] As of June 30, 1997, 67,885,000 shares of the Issuer's $.001 par value common stock were outstanding. Transitional Small Business Disclosure Format Yes [ ] No [ X ] MB SOFTWARE CORPORATION Form 10-QSB Quarter Ended June 30, 1997 INDEX PART I - FINANCIAL INFORMATION PAGE NUMBER Item 1 - Financial Statements Consolidated Balance Sheet June 30, 1997 (Unaudited) 3-4 Consolidated Statements of Operations for the Six Months and Three Months ended June 30, 1997 and 1996 (Unaudited) 5 Consolidated Statements of Cash Flows for the Six Months ended June 30, 1997 (Unaudited) 6 Notes to Consolidated Financial Statements 7 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 7-9 PART II - OTHER INFORMATION Item 5 - Other Information 9 Item 6 - Exhibits, Financial Statement Schedules and Reports on Form 8-K 9-10 SIGNATURES 10 MB SOFTWARE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET June 30, 1997 ASSETS JUNE DECEMBER 1997 1996 CURRENT ASSETS Cash $1,119,025 $196,653 Trade accounts receivable 3,136,549 345,452 Less allowance for bad debt ( 80,381) ( 33,487) Notes receivable 129,542 10,000 Commissions receivable 61,452 - Deposits 18,645 18,488 Prepaid expenses 22,155 19,883 ----------- --------- Total current assets 4,406,987 556,989 ----------- --------- PROPERTY AND EQUIPMENT, NET 303,336 63,349 ----------- --------- OTHER ASSETS Goodwill 812,316 850,109 Software development costs 445,199 394,240 ----------- --------- Total other assets 1,257,515 1,244,349 ----------- --------- $5,967,838 $1,864,687 =========== ========= - Continued - MB SOFTWARE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (continued) June 30, 1997 LIABILITIES AND SHAREHOLDERS' EQUITY JUNE DECEMBER 1997 1996 CURRENT LIABILITIES Notes payable $3,863,815 $ 242,029 Accounts payable 286,507 149,741 Accrued liabilities 122,864 101,382 Other liabilities 109,000 179,000 Other 2,452 Deferred revenue 93,472 159,026 ----------- ---------- Total current liabilities 4,478,110 831,178 LONG TERM LIABILITIES Note payable 1,347,866 1,283,808 Other liabilities 40,000 40,000 ----------- ---------- Total long term liabilities 1,387,866 1,323,808 SHAREHOLDERS' EQUITY Common stock .001 par value;100,000,000 shares authorized; 67,885,000 shares issued 67,885 67,885 Additional paid-in capital 810,322 810,322 Retained earnings (deficit) (1,156,467) (1,156,467) Treasury stock, at cost;409,577 (12,039) ( 12,039) Net earnings 392,161 ----------- ---------- Total shareholders' equity (deficit) 101,862 (290,299) ----------- ---------- $5,967,838 $1,864,687 MB SOFTWARE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS June 30, 1997 (UNAUDITED)
REVENUES Service fee & broker income $ 4,983 $ 34,027 $ 12,501 $ 35,843 Consulting fees 30,000 53,610 Software & maintenance sales 384,407 683,599 810,871 1,286,698 Medical Income 838,261 1,543,952 Other income 27 219,992 4,541 250,000 ---------- --------- ---------- ----------- Total revenues 1,257,678 937,618 2,425,476 1,572,541 COST OF REVENUES Cost of service & broker fees 2,548 2,548 Cost of software & maintenance 157,592 82,617 302,042 185,456 Cost of medical services 27,942 37,349 ---------- --------- ---------- ----------- Total cost of revenues 185,534 85,165 339,390 188,004 ---------- --------- ---------- ----------- GROSS PROFIT 1,072,144 852,453 2,086,086 1,384,537 OPERATING EXPENSES Selling, general & administrative 831,334 565,515 1,557,369 995,354 Depreciation and amortization 80,701 4,646 139,928 10,262 ---------- --------- ---------- ----------- Total operating expenses 912,035 570,161 1,697,297 1,005,616 ---------- --------- ---------- ----------- INCOME FROM OPERATIONS 160,109 282,292 388,789 378,921 OTHER INCOME (EXPENSES) Interest income, net ( 631) ( 7,409) ( 3,675) 8,445 Other, net ( 252) ( 13,743) 302 15,954 ---------- --------- --------- ----------- Total other income, net ( 883) ( 21,150) ( 3,372) 24,399 ---------- --------- --------- ----------- NET INCOME BEFORE TAXES 159,225 261,142 392,161 354,522 ---------- --------- --------- ----------- PROVISION FOR INCOME TAXES NET INCOME $ 159,225 261,142 392,161 354,522 ========== ======== ========= =========== Income per weighted-average common share $ 0.002 0.005 0.006 0.007 ========== ======== ========== =========== Weighted-average common shares outstanding 67,885,000 49,485,000 67,885,000 49,485,000 ========== ======== ========== ===========
MB SOFTWARE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS SIX MONTHS ENDED 06/30/97 ENDED 06/30/96 1997 1996 ---------------- ------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net Income(Loss) for the period $ 392,161 $ 354,522 Adjustments to reconcile net income(loss) to net cash used by operating activities: Depreciation 139,928 13,163 Amortization 37,793 Gain on debt extinguis (115,102) Bad debt expense 26,267 Change in allowance for doubtful accounts 46,894 Changes in assets and liabilities: Trade accounts receivable ( 2,824,584) ( 144,283) Advances (1,125) Commissions Receivable (61,452) Prepaid expenses and other (2,273) (4,500) Deposits (157) (700) Accounts payable 136,766 73,086 Accrued liabilities 21,482 (55,371) Other liabilities (70,000) 364,266 Deferred revenues (65,554) 79,283 Other 25,872 (6,812) ---------------- ------------------ Net cash used by operating activities (2,311,958) 671,529 CASH FLOWS FROM INVESTING ACTIVITIES Disposal (Purchase) of property and equipment (239,987) (8,565) Software development costs capitalized (50,959) (71,032) Advances on notes receivable (119,542) (21,052) ---------------- ------------------ Net cash uesd by investing activities (410,489) (100,649) CASH FLOWS FROM FINANCING ACTIVITIES Payments on notes payable (76,134) 764,600 Increase in notes payable 3,720,953 (350,411) Increase (decrease) in cash overdraft 29,616 Purchase of treasury stock 45,000 ---------------- ------------------ Net cash provided by financing activities 3,644,819 488,805 INCREASE / (DECREASE) IN CASH 922,372 82,075 ---------------- ------------------ Cash at beginning of period 196,653 36,535 Cash at end of period $ 1,119,025 $ 118,610 ================ ================== SUPPLEMENTAL INFORMATION Cash paid during the period for interest $ 3,675 $ 8,451 ================ ==================
MB SOFTWARE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1997 (Unaudited) BASIS OF PRESENTATION Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, although management believes the disclosures herein are adequate to make the information presented not misleading. These interim financial statements should be read in conjunction with the most recent financial statements of MB Software Corporation included in the Company's report on Form 10-KSB for the year ended December 31, 1996. The interim financial information included herein is unaudited; however it reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of financial position, results of operations and cash flows for the interim period. The results of operations for the six months and three months ended June 30, 1997 are not necessarily indicative of the results to be expected for the full year. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company MB Software Corporation took a major step forward and unfolded the next phase of its 1997 Strategic Plan by consolidating areas within its three operating companies, thereby positioning them for long term benefits to derive greater economies of scale and improved productivity. The Company's primary focus continued to be the acquisition of companies that provide reciprocal benefit and distribution channels for its software products while currently increasing corporate asset value and developing greater market share and critical mass for specific products and services. Each operating company installed common practice management systems, consolidated workflow processes and reporting mechanisms to facilitate operational control and pinpoint areas where performance correction may be indicated. The Company continued to perform in accordance with it targets for the year; however, for the quarter ended June 30, 1997, a steeper than anticipated expense curve occurred from consolidation of Company functions which softened profit margins, although the quarter still remained profitable. In each operating arm, the Company realigned management, streamlined or downsized staff, reduced fixed cost and explored expansion plans. Santiago SDS, Inc. continued to sharpen its focus within the physician practice management market through restructuring of marketing campaigns to offer a more-defined, yet cost-competitive, state-of-the-art product. Santiago SDS, Inc., in response to evolving market trends, continued to enhance product capability and customer appeal, yet minimize product cost increases. In the quarter ended June 30, 1997, Santiago SDS, Inc. maintained market share within this highly competitive market segment through corporate extension of new markets for its products and services. Strategies for 1997 remained on target with financial and scheduling projections. Color Country Health Express, Inc. continued to exceed expectations and continued to explore expansion of its satellite locations within its market by maximization of existing, yet untapped, capacity without major demands for capital or staff. Anticipated seasonal downturns in revenue were measured and staffing levels adjusted to reduce controllable costs and protect profit margins. Intercoastal Rehabilitation, Inc. achieved positive results after substantial realignment of staff and systems to position it for needed efficiencies and improved productivity. The streamlined entity, with clearer operational focus, continued to ramp up results, albeit after a longer period than planned. Results of Operations This section discusses the results of operations of the Company and its subsidiaries for the quarterly period ended June 30, 1997. In the quarter ended June 30, 1997, revenues from the consolidated entities rose to $1,257,678, an increase of 34% over the $937,618 reported for the same period in 1996. The year to date revenue for 1997 of $2,425,476 represents an increase of 54% over the revenue in the same period in 1996 of $1,572,541. This trend continues to show strong revenue growth and it represents the sixth continued quarter of increased revenues for the Company. Cost of revenues and operating expenses for the quarter ended June 30, 1997 were $185,514 and $912,035 respectively. This is an increase of 118% over the cost of revenues of $85,165 and an increase of 60% over operating expenses of $570,161 for the same period in 1996. Year to date 1997 cost or revenues plus operating expenses approximate 84% of total revenue. This 14% increase over the prior year is primarily due to increased expenses incurred with the restructuring of Santiago SDS, Inc.'s marketing plan, reduced sales while refocusing that marketing campaign, and miscellaneous unanticipated additional expenses related to the Florida acquisition and operational improvements. Total assets increased to $5,967,838. This increase from December 31, 1996 is largely attributable to the increase in receivables via increased revenue in 1997. The nature of revenues generated from the subsidiaries acquired during 1997 lends themselves to larger receivables balances. Additionally, an influx of $1,000,000 of cash occurred near the end of the quarter. This represents a short-term note payable. Total liabilities increased to $5,865,976 from the December 31, 1996 balance of $2,157,986. The escalation of liabilities was largely due to the $1,000,000 short-term note mentioned above, debt assumed with acquisitions, and debt incurred through normal operations. Liquidity and Capital Resources As of June 30, 1997, the Company had total assets of $5,967,838 with current assets of $4,406,987, property and equipment $303,336 and other assets totaling $1,257,515. Total current liabilities at June 30, 1997 were $4,478,110 with total long-term liabilities equaling $1,387,866. Loans to the Company by certain of its officers, directors and shareholders totaled to $2,744,430. Net working capital at the end of the period was ($71,123), an improvement from the quarter ended March 31, 1997 which net working capital equaled ($104,849). The Company is actively engaging in acquisitions of complementary companies, development of software products, and developing greater market share for specific products and services. It is impossible to predict what impact, if any, the above will have on the operating results of the Company. The Company will attempt to enhance cash flows from operations through sales efforts and operating efficiencies and in addition, may attempt to seek financing opportunities to obtain funds in 1997 as necessary to continue the development of the Company, its programs and strategic acquisitions. However, there can be no assurance that the Company will produce additional revenue or profits from these efforts. The Company intends to continue its growth by new acquisitions, adding customers and catering to existing customers as well as aggressively marketing new products and services. PART II - OTHER INFORMATION ITEM 5. OTHER INFORMATION The Company and Imagine, Inc. ("Imagine") announced on August 5, 1997, that they had formed Healthcare Innovations, a limited liability company ("HI") for the purposes of acquiring and operating healthcare businesses. Imagine is a subsidiary of Stone Investments, which in turn is a subsidiary of Stone Capital, a company with over $3 billion in assets. The Company will own a 51% common equity interest in HI and Imagine will own a 49% common equity interest. In addition, each of the Company and Imagine will own preferred interests in HI designed to return their respective investments, plus a 10% return, over a three year period. For its interest, the Company contributed to HI its existing healthcare businesses, consisting of two rehabilitation clinics in Jacksonville, Florida and a Utah-based nurse practitioner business. The Company will also serve as operator of HI, for which it will receive a management fee. For its interest, Imagine contributed to HI the sum of $2,000,000, $900,000 of which was used to repay debt assumed in connection with the purchase of the Jacksonville facilities, and the remainder of which will be used to fund capital requirements of the businesses and future acquisitions. The $900,000 loan repayment was accomplished by a $1,000,000 loan from Imagine, through the Company, to Oak Tree Receivables, Inc., which then repaid the loan with the cash and certain of its receivables. The remaining $100,000 was used to repay obligations of the Jacksonville facilities incurred in the ordinary course of business. Oak Tree Receivables was contributed to HI by the Company, and the $1,000,000 note was contributed to HI by Imagine as part of its $2,000,000 contribution. Also in connection with the formation of HI, Imagine loaned the Company $500,000 for use in its Santiago operations. The loan bears interest at a rate of 10% and is due on August 1, 2000. As security for the loan, the Company pledged all of its stock of Santiago to Imagine and Robert T. Shaw, a shareholder of the Company who had previously acquired a security interest in the Santiago stock, consented to the pledge. In addition, a key part of the relationship between Imagine and the Company is a funding arrangement whereby Imagine and its affiliates will provide capital to HI through loan and equity arrangements in order for HI to purchase healthcare businesses. The terms of such arrangements are to be negotiated. ITEM 6. EXHIBITS, FINANCIAL STATEMENT SHCEDULES AND REPORTS ON FORM 8-K Exhibits 10.1 Operating Agreement dated as of August 1, 1997 for Healthcare Innovations, LLC 10.2 LLC Preorganizational Agreement dated as of August 1, 1997 among the Company, HI and Imagine 10.3 Services Agreement dated as of August 1, 1997 between HI and the Company 10.4 Promissory Note dated as of August 1, 1997 in the principal amount of $500,000 executed by the Company as maker in favor of Imagine 10.5 Amended and Restated Pledge Agreement dated as of August 1, 1997 among the Company, Imagine and Robert T. Shaw Financial Statements - See Item 1 for financial statements filed with this - -------------------- report. Reports on Form 8-K - Original 8-K was filed on February 6, 1997 and an - ------------------- Amendment No. 1 was filed April 4, 1997. EX-10.1 2 OPERATING AGREEMENT OF HEALTHCARE INNOV., INC. OPERATING AGREEMENT OF HEALTHCARE INNOVATIONS, LLC THIS OPERATING AGREEMENT (this "Agreement") of HEALTHCARE INNOVATIONS, LLC (the "Company") entered into the 1st day of August, 1997, by and between IMAGINE INVESTMENTS, INC., a corporation organized and existing under the laws of the State of Delaware ("IMAGINE"), and MB HOLDING CORPORATION, a corporation organized and existing under the laws of the state of Arkansas ("MB") (collectively, the "Initial Members") is effective upon the filing of the Articles of Organization of the Company with the Secretary of State of Arkansas. NOW THEREFORE, for and in consideration of the mutual covenants and agreements herein below contained, the parties agree as follows: ARTICLE I. Section 1.1 Formation of Limited Liability Company. The parties to this Agreement hereby form a limited liability company pursuant to the Small Business Entity Tax Pass Through Act of 1993, Act 1003 of 1993 (Ark. Code Ann. Sect. 4-32-101 et. seq.), as from time to time amended (the "Act"). Section 1.2 Organization Certificates. The parties hereto shall immediately execute, file, record and/or publish Articles of Organization (the "Certificate" as defined in ARTICLE II below) and other documents conforming hereto, and take all other appropriate action, to comply with 1 all legal requirements, for the creation of the Company under the Act and its operation in the State of Arkansas. Section 1.3 Company Name. The business of the Company shall be conducted under the name of HEALTHCARE INNOVATIONS, LLC and under such name or variations thereof as the Members deem appropriate. Section 1.4 Principal Office. Theprincipal place of business and address of the Company shall be as agreed in the Services Agreement contemplated in Section 6.8 hereof. The registered agent for service of process in Arkansas (the "Agent") shall be Ken F. Calhoon, whose address is c/o Hilburn, Calhoon, Harper, Pruniski & Calhoun, Ltd., Eighth Floor - Mercantile Bank Building, One Riverfront Place, North Little Rock, Arkansas 72114. MB shall be the "Tax Matters Partner" within the meaning of Code Section 6231 (a)(7). The Members may, from time to time, by affirmative vote of the Members, change the principal place of business, the Agent or the Tax Matters Partner. However, the Tax Matters Partner must at all times be a Member. In addition, the Managers shall have authority to and shall execute such amendments to filings with governmental agencies as may be required as a result of any change of address or Agent. Section 1.5 Term of Company. The Company shall be effective from the filing of the Certificate and the payment of the filing fee therefor, in the office of the Secretary of State of the State of Arkansas, as required by the Act, and any amendments thereto, and shall remain effective until the earlier to occur of: (a) December 31, 2047, or (b) the date the Company is dissolved pursuant to the Act or any provisions of this Agreement. 2 The period of time between the date the Company becomes effective and the date it ceases to be effective shall be referred to herein as "Company Term". ARTICLE II. Section 2.1 Definitions. Whenever used in this Agreement the terms set forth below shall be defined as follows: (a) "affiliate" means any person who controls, is controlled by, or is under common control with, another person. (b) "affirmative vote of the Members", "determined by the Members," "approval by the Members," "approved by the Members," or when any other language is used herein indicating that a particular matter, decision, or determination requires the consent, approval or other joint action of the Members, the same shall mean that the matter in question must be approved in writing by an affirmative vote of more than fifty percent (50%) of the issued and outstanding Class A Units; provided that for purposes of Section 6.3 the same shall mean that the matter in question must be approved in writing by an affirmative vote of more than sixty-six and two thirds percent (66-2/3%) of the issued and outstanding Class A Units. Each Member shall be entitled to cast one vote for each Class A Unit owned by said Member. (c) "Agreement" means this Operating Agreement, as amended from time to time. Words such as "herein," "hereinafter," "hereto" and "hereunder", refer to this Agreement as a whole, unless the context otherwise requires. (d) "Capital Account" means, with respect to any Member, the Capital Account maintained for such person in accordance with ARTICLE V hereof. 3 (e) "Capital Contributions" means, with respect to any Member, the amount of money and the initial Gross Asset Value of any property (other than money) contributed to the Company with respect to the interest in the Company held by such person. (f) The "Certificate" shall mean the Articles of Organization to be filed on behalf of the Company as required by the Act, all similar certificates required by the Acts of other jurisdictions in which the Company does business, and all amendments thereto and substitutions thereof. (g) "Class A Units" means the units in the Company with features and rights as described in this Agreement as attributable to Class A Units to be acquired by the Members for the sum of $10.00 per Unit, payable in cash or property as agreed to by the Members. The total Class A Units authorized to be issued by the Company shall be 100,000 or such other amount as determined by the Members. Each Member shall be entitled to cast one vote for each Class A Unit owned by said Member. (h) "Class B Units" means the non-voting units in the Company with features and rights as described in this Agreement as attributable to Class B Units to be acquired by the Members for the sum of $10.00 per Unit, payable in cash or property as agreed to by the Members. The total Class B Units authorized to be issued by the Company shall be 151,000, or such other amount as determined by the Members. Members shall not be entitled to vote with respect to Class B Units owned by such Members. (i) "Class C Units" means the non-voting units in the Company with features and rights as described in this Agreement as attributable to Class C Units to be acquired by the Members for the sum of $10.00 per Unit, payable in cash or property as agreed to by the Members. The total 4 Class C Units authorized to be issued by the Company shall be 149,000, or such other amount as determined by the Members. Members shall not be entitled to vote with respect to Class C Units owned by such Members. (j) "Code" means the Internal Revenue Code of 1986, as amended from time to time (or any corresponding provisions of succeeding law). (k) "Depreciation" means, for each fiscal year or other period, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable under the Code with respect to an asset for such year or other period. (l) "Event of Bankruptcy" means, with respect to any Member of the Company, any of the following: (1) filing a voluntary petition in bankruptcy or for reorganization or for the adoption of an arrangement under the Bankruptcy Code as now or in the future amended) or an admission seeking the relief therein provided; (2) making a general assignment for the benefit of creditors; (3) consenting to the appointment of a receiver for all or a substantial part of such Person's property; (4) in the case of the filing of an involuntary petition in bankruptcy, an entry of an order for relief; (5) the entry of a court order appointing a receiver or trustee for all or a substantial part of such Person's property without its consent; or (6) the assumption of custody or sequestration by a court of competent jurisdiction of all or substantially all of such Person's property. (m) "Gross Asset Value" means, with respect to any asset, the asset's adjusted basis for purposes of the Code, except as follows: (1) The initial Gross Asset Value of any asset contributed by a Member to the Company shall be the gross fair market value of such asset, as determined by the contributing Member and the Company; 5 (2) The initial Gross Asset Values of all Company assets shall be adjusted to equal their respective gross fair market values, as determined by the Members, as of the following times: (i) the acquisition of an additional interest in the Company by any new or existing Member in exchange for more than a de minimis Capital Contribution; (ii) the distribution by the Company to a Member of more than a de minimis amount of property as consideration for an interest in the Company; and (iii) the liquidation of the Company within the meaning of Section 1.704-1 (b)(2)(ii)(g) of the Regulations; (3) The Gross Asset Value of any Company asset distributed to any Member shall be the gross fair market value of such asset on the date of distribution; and (4) The Gross Asset Values of Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b). (n) "Managers" shall mean any Person or group of Persons (hereinafter individually or collectively referred to as "Managers") appointed Managers in accordance with the terms hereof. (o) "Minimum Gain Chargeback Regulations" shall have the meaning as set forth in Section 1.704-2 of the Regulations. (p) "Members" shall mean the Initial Members, and any additional Person who may be admitted as a new or Substitute Member pursuant to the terms hereof. (q) "Net Cash" means the gross cash proceeds from Company operations less the portion thereof used to pay or establish reserves for all Company expenses, debt payments, capital improvements, replacements, and contingencies, all as determined by the Members. "Net Cash" 6 shall not be reduced by Depreciation, but shall be increased by any reductions of reserves previously established which are not used for the purpose for which the reserve was established. (r) "Ownership Interest" means a Member's interest in the Company, as determined by the ratio of the number of Units owned by a Member to the total number of Units issued and outstanding. (s) "Person" means any individual, partnership, corporation, trust or other entity. (t) "Profits" and "Losses" mean, for each fiscal year or other period, an amount equal to the Company's taxable income or loss for such year or period, determined in accordance with the Code. (u) "Property" means all real and personal property acquired by the Company and any improvements thereto, and shall include both tangible and intangible property. (v) "Regulations" means the Income Tax Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). (w) "Related To or Affiliated With" shall mean: (1) Any "Owning Person", which shall mean a Person owning directly or indirectly more than 1% of the issued and outstanding capital stock of, or more than a 1% beneficial interest in, any Manager, or any Member; (2) Any "Owned Person", which shall mean a Person more than 1% of the issued and outstanding capital stock of which, or more than 1% beneficial interest in which, is owned directly or indirectly by any Manager, any officer of the Company or any Member; 7 (3) Any "Affiliated Person", which shall mean (1) a Person more than 1% of the issued and outstanding capital stock of which, or more than a 1% beneficial interest in which, is owned by an Owning Person or an Owned Person; and (2) a Person which owns more than 1% of the issued and outstanding capital stock of, or more than a 1% beneficial interest in, any Owning Person or any Owned Person; and (4) Any agent, officer, director, employee, or partner (or any member of the family or any agent, officer, director, employee or partner) of any Manager, any officer of the Company, any Member, any Owning Person, any Owned Person or any Affiliated Person. (x) "Substitute Member" means a Person other than IMAGINE or MB who is admitted as a Member pursuant to this Agreement. (y) "Units" means Class A, Class B and/or Class C Units issued by the Company as defined and described herein. ARTICLE III. Section 3.1 Purposes of the Company. The purpose of the Company shall be (a) to carry on the business of owning, acquiring and operating medically related business operations, (b) to otherwise manage and operate the assets of the Company (c) subject to the provisions of this Agreement, to enter into, from time to time, such financing arrangements as the Members may determine to be necessary, appropriate or advisable to enable the company to accomplish the purposes set forth in clauses (a) and (b) of this sentence, (d) subject to the provisions of this Agreement, to mortgage, pledge, assign, grant a security interest in, or otherwise encumber, lease, exchange or otherwise dispose of, all or a part of the assets of the Company to secure such financing arrangements, and (e) to engage in all activities and to enter into, exercise the rights and enjoy the 8 benefits under, and discharge the obligations of the Company pursuant to, all contracts, agreements and documents that may be necessary, appropriate or advisable to enable the Company to accomplish the purposes set forth in clauses (a), (b), (c) and (d) of this sentence. Section 3.2 Powers of the Company. The purpose of the Company may, in instances where the Members hereunder deem such action appropriate to achieve the purpose of the Company and to the extent Company funds are available therefor, be accomplished by taking any and all other action which is permitted under the Act which is customary or reasonably related to Company operations and activities related thereto. Section 3.3 Acquisitions. If, during the Company Term, any Member or its affiliates proposes, directly or indirectly, to acquire any interest in a business providing medically related services similar in scope and operations to those businesses conducted by the Company and its affiliates then such Member or its affiliate, as the case may be (the "Offeror"), shall give notice thereof to the Company and the other Member, which notice (the "Participation Notice") shall (i) describe in reasonable detail the investment contemplated by the Offeror (including the estimated cost thereof and the material obligations to be undertaken in connection therewith), (ii) describe any required funding needed by the Company and the proposed terms of such funding, and (iii) contain an irrevocable offer to the Members to make the investment through the Company on the same terms and conditions described in the Participation Notice. In order to exercise such right, the other Member shall give notice to the Offeror no later than 30 days after its receipt of the Participation Notice that it wishes to consummate the proposed transaction through the Company and agrees to the proposed financing terms. If the other Member does not exercise such right as aforesaid, the Offeror shall be free to consummate such transaction without the participation therein by the other 9 Member or the Company and free of any rights or claims of the other Member or the Company under this Section. Upon such terms as may be agreed to by Imagine and the Company, Imagine agrees in good faith that it intends to provide to the Company additional acquisition funding in the form of equity or loans from time to time for future medically related business acquisitions on a transaction by transaction basis. Any such funding shall be satisfactorily secured and shall provide a return to Imagine of approximately prime plus four percent (4%) or such other negotiable rates of return as agreed by Imagine and the Company. Each event of funding by Imagine will be strictly conditional upon the parties negotiating and executing formal agreements and documents with respect thereto which are mutually satisfactory to the parties at the time of each future acquisition transaction. Section 3.4 Non-exclusivity. Subject to Section 3.3 hereof, (a) the Members expressly recognize and agree that each Member has the right to purchase, sell, develop, exploit and deal in every manner with properties, assets, transactions and business arrangements that may be similar to, competitive with or adverse to the activities, properties, assets and prospects of the Company, either for its personal account and benefit or in an agency or representative capacity for the account and benefit of any other person and (b) there shall be no duty on the part of any Member to notify the other Member(s) concerning, or to account to the Company or any other member for, any or all of the properties, assets or rights of whatever nature acquired through such activities permitted by this sentence, and the other Member(s) hereby waive and relinquish any and all rights with respect to such Member's involvement in any activities described above. Section 3.5 Consolidation. The parties agree and acknowledge that it is their intent that MB Software Corp., parent corporation of MB ("MBS"), be allowed to consolidate the results of operations of the Company with its own financial records. To the extent that the Securities and 10 Exchange Commission changes its rules such that MBS is not able to consolidate the Company's results of operations, the parties will attempt in good faith to restructure the transaction such that the economic benefit remains the same but MBS is able to consolidate the Company's results of operations with its own. ARTICLE IV. Section 4.1 Admission of Members. No additional Members shall be admitted except by an affirmative vote of all the Members. Section 4.2 Completion of Admission. A person shall become a Member when it shall have completed all of the following: (a) Executed a counterpart of this Agreement or an adoption agreement agreeing to be bound by the terms of this Agreement; (b) Executed any other document, certificate or instrument and taken such other action, as the Members may reasonably request to evidence and perfect such Person's admission as a Member; (c) Shall have been accepted as a new Member by an affirmative vote of the Members. (d) Shall have been accepted as a Substitute Member by an affirmative vote of the Members other than the transferring Member; and (e) The filing of a Certificate with the Secretary of State of the State of Arkansas if so required by the Act. 11 ARTICLE V. Section 5.1 Contributions of the Members. Units in the Company shall be issued to the Members in accordance with the terms of this Agreement in exchange for cash and property. The Initial Members hereby agree to contribute the cash and property at the agreed gross fair market value set forth on Exhibit A attached hereto in exchange for the Units set forth therein. All Units to be purchased to this Agreement are acknowledged to have been offered and sold by the Company without registration under the Securities Act of 1933 or any Blue Sky Law in reliance upon the express representation and warranty by the purchaser thereof that such Units are acquired for purposes of such person's own investment and not for resale or distribution. Section 5.2 Capital Accounts. Each Member shall have a Capital Account which shall be maintained strictly in accordance with Regulation Sect. 1.704-1(b)(2)(iv). The beginning balance of each Member's Capital Account shall be zero and, as of any date, shall be: (a) Increased by (1) the amount of cash contributed by the Member to the Company; (2) the fair market value of property contributed by the Member to the Company (net of liabilities securing such contributed property that the Company is considered to assume or take subject to under Code Section 752); and (3) allocations to the Member of Company Profits and gains (or items thereof) made pursuant to ARTICLE VIII hereof; and (b) Decreased by (1) the amount of cash distributed to the Member by the Company; (2) the fair market value of property distributed to the Member by the Company (net of liabilities securing such distributed property that such Member is considered to assume or take subject to under Code Section 752); and (3) allocations of Company Losses and deductions (or items thereof) made pursuant to ARTICLE VIII hereof. 12 Section 5.3 Determination of Capital Account. The Capital Account of a Member shall be determined after giving effect to all allocations of income, gains, Profits and Losses of the Company for the current year and all distributions for such year in respect of transactions effected prior to the date of which such determination is to be made. A Member shall not be entitled to withdraw any part of his Capital Account or to receive any distribution from the Company, except as specifically provided in this Agreement. Any Member, including any additional or Substitute Member, who shall receive an interest in the Company or whose interest in the Company shall be increased by means of a transfer to him of all or part of the interest of another Member, shall have a Capital Account which reflects such transfer. Loans by any Member to the Company shall not be considered Capital Contributions and shall not increase the Capital Account of the lending Member. Section 5.4 No Deficit Restoration Obligation.Notwithstanding anything herein to the contrary, this Agreement shall not be construed as creating a deficit restoration obligation or otherwise personally obligate any Member to make a Capital Contribution in excess of the Capital Contribution initially made for said Member's Units. ARTICLE VI. Section 6.1 Managers. Subject to the rights, duties and obligations of the Members to make Major Decisions (as hereinafter defined) and subject to other specificz affairs of the Company shall be vested in the Managers who shall be appointed by an affirmative vote of the Members in accordance with the terms of this Agreement. The Managers shall at all times be comprised of a board of four (4) individuals who shall be appointed by the Members, with each Initial Member having the right to appoint two (2) Managers. Managers need not be Members. A majority vote of the Managers shall bind all the Managers; provided that in the event of a tie vote, the affirmative vote of the Managers appointed by MB shall bind all the Managers. The Managers may designate one Manager to execute documents and take such other actions as have been approved or are provided for herein. 13 Section 6.2 Manager Meetings and Procedures. The Managers shall meet at such intervals as may be agreed upon by the Managers, but at least quarterly. The purpose of the meetings shall be to review the operations and needs of the Company and to establish an open line of communication between the Managers and the Members. Any Manager may call a meeting on not less than ten (10) working days written notice given to the other Managers. The Managers meeting shall be held at the principal office of the Company or at such other place as the Managers determine. Three managers shall constitute a quorum for the purpose of transacting business. At all meetings there shall be present a secretary designated by the Managers to keep full and accurate minutes of each meeting. As soon as is reasonably practicable after completion of each meeting, the secretary shall distribute to each Manager copies of the minutes of each meeting. A resolution in writing approved by a majority of the Managers shall have the same effect as a resolution duly adopted at a meeting of the Managers. Such approval may be written, or by telex, telegram, facsimile transmission or other similar means of communication. Unless otherwise provided in this Agreement, any agreement, contract, or document to be signed by the Company in connection with a Major Decision (defined below) must be approved by an affirmative vote of the Members and executed by the Managers. Any other agreement, contract or document to be signed by the Company shall be executed by the Managers or by those persons or that person authorized to execute on behalf of the Managers. 14 Section 6.3 Major Decisions. No act shall be taken, sum expended, decision made or obligation incurred by the Company or the Managers with respect to a matter within the scope of any of the major decisions enumerated below (the "Major Decisions"), unless and until the same has been approved by an affirmative vote of the Members, or expressly delegated by the Members in writing. The Major Decisions shall include: (a) Acquisition of any land or other real property or interest therein; (b) Issuance by the Company of additional Units or any option or other right to acquire a Unit or Units; (c) Acceptance of any additional capital contributions by any party; (d) Borrowing of moneys or entering into any contractual obligations if such borrowings or contractual obligations are in excess of $100,000.00 or such other amount as determined by the Members from time to time; (e) The sale of all or substantially all of the assets of the Company or the sale or disposition of any entity owned directly or indirectly by the Company; (f) Entering into a related party contract as defined and described in Section 6.8 hereof; and (g) Any reorganization, merger or liquidation of the Company. Section 6.4 Officers. The Managers may appoint individuals as officers of the Company which may include, but shall not be limited to (a) CEO; (b) president, (c) Vice-President; (d) Secretary; and (e) Treasurer. Subject to Section 6.3 hereof, such officers shall have the authority to contract or negotiate on behalf of and otherwise represent the interests of the Company as authorized by the Managers; provided, however, that the Managers shall withdraw any such delegation ofmanagement responsibilities to any officer and shalL remove any officer from his responsibilities and office at the direction of the Members after an affirmative vote of the Members has been taken with respect thereto. The initial officers shall be as set forth on Exhibit B hereto. 15 Section 6.5 Prior Authorization. Except as expressly provided herein to the contrary, the Managers shall be authorized to make any expenditure or incur any obligation on behalf of the Company in the ordinary course of business and, notwithstanding anything herein to the contrary, the Managers shall be authorized to make any expenditure in the case of a bona-fide emergency (notice of which shall be promptly given to the Members). The Managers shall not expend more than what the Managers in good faith believe to be the fair and reasonable market value at the time and place of contracting for any goods purchased or services engaged on behalf of the Company. Section 6.6 Rights Not Assignable. The rights and obligations of the Managers under this Agreement shall not be assignable voluntarily or by operation of law. Section 6.7 Compensation. The Members, by an affirmative vote of the Members, may provide for the payment of commercially reasonable arms-length compensation by the Company to the Managers for the services of the Managers. Section 6.8 Contracts with Related Parties. Managers shall not knowingly enter into any agreement or other arrangement for the furnishing to or by the Company of goods or services with any Person Related To or Affiliated With any Manager, any officer of the Company or any Member unless such agreement or arrangement has been approved by the Members after the nature of the relationship or affiliation has been disclosed. Notwithstanding, the Members agree that the Company shall enter into a non-exclusive agreement with MB for the provision of management services for the business operations initially contributed on a cost plus fifteen percent (15%) basis, following final approval of the specific written agreement by all Members. 16 Section 6.9 Indemnification. No Manager shall take any action on behalf of or in the name of the Company, or enter into any commitment or obligation binding upon the Company, except such actions as are expressly provided for in this Agreement. No Manager shall be liable to the Company for any actions taken in such person's capacity as a Manager, unless such conduct is deemed to constitute gross negligence or wilful misconduct on the part of such Manager. The Company does hereby indemnify and hold harmless the Managers and their agents, officers and employees as to third parties against and from any personal loss, liability or damages suffered as a result of any act or omission which the Managers believed, in good faith, to be within the scope of authority conferred by this Agreement, except for willful or fraudulent misconduct, gross negligence or willful breach of fiduciary duties, but not in excess of the capital contributions of all Members. Notwithstanding the foregoing, the Company's indemnification of the Managers and their agents, officers and employees as to a third party is only with respect to such loss, liability or damage which is not otherwise compensated for by insurance carried for the benefit of the Company. Insurance coverage for public liability, and all other insurance deemed necessary or appropriate by the Managers to the business of the Company, shall be carried in such amounts and of such types as shall be determined by the Managers. Section 6.10 Status as Manager. Upon the occurrence of any of the following events to or by a Manager, such Manager shall automatically and without the action or consent of any Member, cease to be a Manager of the Company: (a) makes an assignment for the benefit of creditors; (b) files a voluntary petition in bankruptcy; (c) is adjudicated bankrupt or insolvent; 17 (d) files a petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulation; (e) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against itself in any proceeding of this nature; (f) seeks, consents to, or acquiesces in the appointment of a trustee, receiver, or liquidator of all or any substantial part of its properties, or (g) dissolves. Section 6.11 Election of Managers. The Members shall elect the Managers annually, or may remove or replace the Managers at any time, by an affirmative vote of the Members. In the event a Manager ceases to hold office as a result of the requirements of Section 6.10, resignation or removal in accordance with Section 6.11, the Member that originally nominated such Manager shall have the right to appoint a successor. Section 6.12 Limitations on Managers. The Managers shall be subject to all the restrictions and limitations of managers under the Act. Section 6.13 Company Meetings. Meetings of Members may be called by the Managers at any time. Meetings of Members shall be called by the Managers upon receipt of a written request of Members holding at least ten percent (10%) of the outstanding Class A Units. Notice of a meeting shall be given not less than ten (10) nor more than sixty (60) business days prior to the date of the meeting. The matters to be voted upon at such meeting shall be specified in the notice. The Managers shall call for an annual meeting of the Members during the first calendar quarter for the purpose of election of Managers, a report of Company activity for the year just completed and such other purposes of the Managers may determine. A meeting of the Members shall not be held unless Members owning at least fifty-one percent (51%) of the outstanding Class A Units are present in person or are represented by proxy. At all meetings there shall be a secretary designated by the Members to keep full and accurate minutes of each meeting. As soon as is reasonably practicable after completion of each meeting, the secretary shall distribute to each Member copies of the minutes of each meeting. All acts and approvals of the Members shall require the affirmative vote of the Members. A resolution in writing approved by an affirmative vote of the Members shall have the same effect as a resolution duly adopted at a meeting of the Members. Such approval may be written, or by telex, telegram, facsimile transmission or other similar means of communication. Unless otherwise provided in this Agreement or agreed by the Members, any agreement, 18 contract, or document to be signed by the Company in connection with a Major Decision must be approved by an affirmative vote of the Members and executed by a Manager. Any other agreement, contract or document to be signed by the Company shall be executed by the Managers or by those persons or that person authorized to execute on behalf of the Managers. ARTICLE VII. Section 7.1 Rights and Limitations of Member. A Member shall not be: (a) personally liable for any of the debts of the Company or to a Manager, unless a liability of the Company or a Manager, as the case may be, is (1) founded on some unauthorized activity of such Member or (2) results from the execution of any document providing for personal liability; (b) personally liable for any losses of any other Member; (c) except as provided herein, allowed to take part in the management or control of the Company business, or to sign for or to bind the Company, such power to vest solely and exclusively in the Managers; 19 (d) entitled to be paid any salary or to have a Company drawing account solely because of his, her or its status as a Member; (e) entitled to a partition of any Company Property notwithstanding any other provision of law to the contrary; or (f) allowed to voluntarily withdraw from the Company. Section 7.2 Access to Information. Any Member shall have access to the books and records of the Company and may inspect and copy such information at reasonable request at such Member's expense. The information available to a Member includes: (a) the name and address of all Members; (b) the Articles of Organization and any amendments thereto; (c) the Company's federal, state and local tax returns and reports for the three (3) most recent years; (d) the Operating Agreement then in effect; and (e) financial statements of the Company for the three (3) most recent years. ARTICLE VIII. Section 8.1 Profits and Losses. Except as may be required by Sect. 704(c) of the Code and the Regulations thereunder, Profits and Losses of the Company and each item of income, gain, loss, deduction or credit shall be allocated among the Members based upon the Member's Ownership Interest in the Company as set forth herein. Profits of the Company for any year shall be allocated as follows: (a) first, for any year there shall be allocated and distributed proportionately to the Members owning Class B Units an amount of profits equal to a ten-percent annual return on the original amount of capital contribution ($10.00 per Unit) for such Class B Units from the date of contribution until repurchased and canceled by Company pursuant to Article X. 20 (b) second, for any year there shall be allocated and distributed proportionately to the Members owning Class C Units an amount of profits equal to a ten-percent annual return on the original amount of capital contribution ($10.00 per Unit) for such Class C Units from the date of contribution until repurchased and canceled by Company pursuant to Article X. (c) all remaining profits shall be allocated proportionately to the number Members owning Class A Units. (d) Losses of the Company for any year shall be borne and allocated proportionately to the Members owning Class A Units. Section 8.2 Tax Allocations: Code Section 704(c). In accordance with Code Section 704(c) and the Regulations thereunder, income, gain, loss, and deduction with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its initial Gross Asset Value. Any items allocated pursuant to this Section 8.2 shall neither be charged nor credited to the Capital Accounts. In the event the Gross Asset Value of any Company asset is adjusted, subsequent allocations of income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Gross Asset Value in the same manner as under Code Section 704(c) and the Regulations thereunder. Any elections or other decisions relating to such allocations shall be made by the Managers in any manner that reasonably reflects the purpose and intention of this Agreement. 21 Section 8.3 Qualified Income Offset. The "qualified income offset" provisions of Regulation Sect. 1.704-1(b)(2)(ii)(d) shall apply at all times and in such a manner as to cause all allocations herein to have economic effect. Section 8.4 Cost Recovery and Depreciation. Notwithstanding the provisions of Section 8.3 above, if taxable income to be allocated pursuant to such section includes gain to be treated by the Company as ordinary income for federal income tax purposes because it is attributable to the recapture of Depreciation, such ordinary income shall be allocated to the Members in the same proportion as the deductions for such Depreciation were allocated. Section 8.5 Allocations to Members with Varying Interests. If during any taxable year there is a change in any Member's interest in the Company, each member's distributive share of the Company's tax items shall be determined by (a) allocating such tax items to the appropriate monthly period and (b) allocating the tax items attributable to each such period to the Members in accordance with the provisions of this Article and according to their respective interests in the Company as of the beginning of each such period. Section 8.6 Special Provisions. Notwithstanding the foregoing provisions in this Article: (a) If any Company expenditure treated as a deduction on the Company's federal income tax return is disallowed as a deduction and treated as a distribution pursuant to Code Section 731 (a), there shall be a special allocation of gross income to the Member deemed to have received such distribution equal to the amount of such distribution; (b) If the Company is entitled to a deduction for imputed interest under any provision of the Code on any loan or advance from a Member, such deduction shall be allocated solely to such Member; and 22 (c) The Minimum Gain Chargeback provisions of the Regulations under Code Section 704 shall apply beginning in the first taxable year of the Company in which there are nonrecourse deductions or the Company makes a distribution of proceeds of a nonrecourse liability that are allocable to an increase in Company minimum gain and thereafter throughout the Company Term, and any such nonrecourse deductions shall be allocated in a manner that is reasonably consistent with allocations that have substantial economic effect of some other significant Company item attributable to the property securing the nonrecourse debt. Section 8.7 Fiscal Year and Annual Report. The Company fiscal year end shall be December. The Company books shall be kept on an accounting basis determined by the Managers and in accordance with usual and customary accounting practices. The Managers shall furnish within seventy-five (75) days after the year end, an annual report of operations and statement of financial condition (including such information as is necessary for preparation of federal and state income tax returns) to each Member prepared by such public accounting firm or otherwise or as the Managers may designate. ARTICLE IX. Section 9.1 Distributions. The Members agree to cause the Managers to take such action as may be necessary to proportionately distribute from Net Cash the annual ten percent (10%) return to the Members owning Class B Units first, and then to Members owning Class C Units, pursuant to Sections 8.1 (a) and (b) at the end of each fiscal year of the Company. To the extent Profits are less than the profit distribution required pursuant to Sections 8.1(a) and (b), such entire distribution shall nevertheless be made and the difference between profits for the year and the amount distributed shall be in the form of a guaranteed payment by the Company, deductible by the Company for 23 federal income tax purposes and proportionately charged against the interest of the Member owning Class A Units. Upon the affirmative vote of the Members, a portion or all of the Net Cash, as determined by said vote, shall be distributed proportionately to the Members based upon their Ownership Interest in the Company, (a) first, only to the Members owning Class B Units until such Members have been distributed the full amount of the initial capital contribution with respect to all Class B Units, with such distributions being as a withdrawal of capital and cancellation of such Units; and (b) second, only to the Members owning Class C Units until such Members have been distributed the full amount of the initial capital contribution with respect to all Class C Units, with such distributions being as a withdrawal of capital and cancellation of such Units. The Members agree they will cause the Managers and Company to have fully distributed and repaid the full amount of the initial contributions of capital for Class B and Class C Units to Members owning Class B and Class C Units in cancellation thereof as follows: (a) with respect to all Class B Units, on or before the date ending such Class B Units; and (b) with respect to all Class C Units, on or before the later of (1) the date ending three (3) years following the date of the capital contributions for such Class C Units; or (2) the date when Net Cash is available and all distributions to Members owning Class B Units have been fully distributed and repaid in cancellation of all Class B Units. Only after full distributions in return of capital to the Members owning all Class B and Class C Units pursuant hereto in complete cancellation thereof may any distributions be made to Members 24 with respect to Class A Units, and then only upon an affirmative vote of the Members. Distributions with respect to Class A Units shall not be in cancellation of Class A Units. Section 9.2 Security Interest. To secure the obligations of Company to perform the mandatory distributions with respect to the Class B Units above, the Members and Company agree that the Company hereby grants, bargains, sells, transfers, and pledges to the undersigned Members owning Class B Units a first priority security interest in all of Company's right, title and interest in, to and under the membership interests or tangible property contributed to Company by the Members and described on Exhibit A attached hereto. The Members agree to cause the Company or its subsidiary limited liability companies to promptly deliver such pledge and security agreements, UCC financing statements and such other documents as may be necessary and appropriate to more fully provide a perfected security interest in the collateral described in Exhibit A, and in and to any underlying assets of any entity described on Exhibit A. ARTICLE X Section 10.1 Restrictions on Transfer. No Member shall sell, assign, transfer, pledge or encumber any interest in a Unit except (i) as provided in this Section, (ii) for blanket pledges or encumbrances of all of a Member's or its affiliates' assets or (iii) with the prior written consent of the other Member. Any Member (hereafter, the "Assignor") who receives an offer to purchase all or any portion of such Assignor's Units in the Company from any Person (hereafter, the "Proposed Assignee") and if such Assignor is willing to accept such offer, the Assignor may transfer all or part of Assignor's Units to the Proposed Assignee only after providing the Company and other Members the following rights of first refusal: 25 (a) The Assignor shall notify the Company and each other Member, in writing, of the terms of the offer from the Proposed Assignee, and the identity of the Proposed Assignee. (b) The Company shall have the option to purchase the Units which the Assignor wishes to sell at a price equal to the same price and terms from the Proposed Assignee as those described in the written notice provided by the Assignor to the Company under the terms of (a) above. The Company shall exercise its option by giving written notice to the Assignor of such intention within thirty (30) days of the receipt of the written notification given by the Assignor under the provisions of (a) above. (c) If the Company does not exercise its option to purchase the Units proposed to be sold by the Assignor within the time provided for exercise of such option, any other Member desiring to purchase part or all of the Units proposed to be sold by the Assignor shall notify, in writing, the Assignor of such intention within forty (40) days of the receipt of the written notification required to be given by the Proposed Assignor under the provisions of (a) above, at the same price at which the Company could have purchased such Units if it had exercised its option under the provisions of (b) above. If more than one Member provides notification of intention to exercise the option to purchase the Units Assignor proposes to sell, the Units Assignor proposes to sell will be sold to each such other Members providing notice of intent to exercise the purchase in the same proportion as that other Members' number of Units bears to the aggregate number of Units of all Members giving notice of intent to exercise the option to purchase. The portion of the total purchase price to be paid by each such purchasing Member shall be determined in like fashion. (d) If neither the Company nor the other Members exercise options for the purchase of all the Units, which Assignor proposes to sell, Assignor shall be entitled to sell the Units Assignor 26 has proposed to sell to the Proposed Assignee at a price and upon terms no more favorable to Proposed Assignee than those described in the written notice provided to the Company and other Members under the provisions of (a) above. The sale of Assignor's Units shall be subject to the following limitations unless and until the Proposed Assignee becomes a Member: (1) such assignment entitles the assignee to receive, to the extent assigned, only the distributions to which the Assignor would have been entitled; (2) such assignment does not entitle the assignee to participate in the management and affairs of the Company or to become or exercise any rights of a Member; (3) the assignee has no liability as a Member solely by reason of the assignment; (4) the Assignor of an interest in the Company continues to be a Member and to have all the rights of Members, until the assignee becomes a Member or unless the Assignor is earlier removed. A Member who assigns all of such Member's interest in the Company may be removed as a Member by an affirmative vote of the Members other than the transferring Member. Whether or not the assignee becomes a Member, the Assignor is not released from any liability the Assignor may have to the Company with respect to promised contributions of money, property or services by the Assignor. Section 10.2 Substitute Members. An assignee or successor in interest of any Member's interest in the Company may become a Substitute Member only upon the affirmative vote of the Members other than the Assignor or transferring Member. 27 Section 10.3 Successors in Interest. (a) If any Member who is a natural person dies or is adjudicated incompetent or bankrupt (either voluntarily or involuntarily), the successor in interest of such Member shall not become a Substitute Member except as provided in Section 10.2 above. (b) If any Member which is not a natural person liquidates, dissolves or is adjudicated a bankrupt (either voluntarily or involuntarily), the successor in interest of such Member shall not become a Substitute Member except as provided in Section 10.2 above. ARTICLE XI Section 11.1 Liquidating Events. The Company shall dissolve and commence winding up and liquidating upon the first to occur of any of the following ("Liquidating Event"): (a) December 31, 2047; (b) The sale of all or substantially all of the Property of the Company; (c) The happening of any other event that makes it unlawful, impossible or impractical to carry on the business of the Company; or (d) The death, retirement, resignation, expulsion, Bankruptcy or dissolution of any Member or the occurrence of any other event which terminates the continued membership of a Member in the Company, unless the business of the Company is continued by the affirmative vote of the Members other than the terminated Member within ninety (90) days after the occurrence of such event; (e) Upon the affirmative vote of the Members to liquidate or sell all or substantially all of the Property of the Company. 28 Section 11.2 Winding Up. Upon the occurrence of a Liquidating Event, the Company shall continue solely for the purpose of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Members. No Member shall take any action that is inconsistent with, or not necessary to or appropriate for, the winding up of the Company's business and affairs. The Managers or such person elected by an affirmative vote of the Members shall be responsible for overseeing the winding up and dissolution of the Company and shall take full account of the Company's liabilities and Property and the Company Property shall be liquidated as promptly as is consistent with obtaining the fair value therefor, and the proceeds therefrom, to the extent sufficient therefor, shall be applied and distributed in the following order: (a) First, to the payment of all debts and liabilities of the company, including expenses arising from the liquidation and the repayment of loans or advances from the Members; (b) Second, to the establishment of a reserve to meet any contingencies arising from the occurrence of the liquidation; (c) Third, to all the Members owning outstanding Class B Units in an amount equal to the initial contribution for such outstanding Class B Units, together with the amount of any undistributed annual return provided for in Article VIII. (d) Fourth, to all the Members owning outstanding Class C Units in an amount equal to the initial contribution for such outstanding Class C Units, together with the amount of any undistributed annual return provided for in Article VIII. (e) Fifth, to all the Members in amounts equal to the positive balances, if any, in their respective Capital Accounts or, if the proceeds to be so distributed are less than the total of such positive balances, to all the Members having positive balances in their Capital Accounts pro-rata based upon the ratio of the amount of each such Member's positive balance to all such positive balances. 29 Section 11.3 Distributions in Kind. With respect to assets distributed in kind to the Members in liquidation or otherwise, (a) any unrealized appreciation or unrealized depreciation in the values of such assets shall be deemed to be Profits and Losses realized by the Company immediately prior to the liquidation or other distribution event, and (b) such Profits and Losses shall be allocated to the Members in accordance with ARTICLE VIII hereof, and any Property so distributed shall be treated as a distribution of an amount in cash equal to the excess of such fair market value over the outstanding principal balances of and accrued interest on any debt by which the Property is encumbered. For the purposes of this Section 11.3, "unrealized appreciation" or "unrealized depreciation" shall mean the difference between the fair market value of such assets, taking into account the fair market value of the associated financing but subject to Code Section 7701 (g), and the Company's basis in such assets for book purposes. This Section 11.3 is merely intended to provide a rule for allocating unrealized gains and losses upon liquidation or other distribution event, and nothing contained in this Section 11.3 or elsewhere in this Agreement is intended to treat or cause such distributions to be treated as sales for value. If fair market value cannot be determined by the Members, the Company shall retain an independent appraiser to determine the value of the assets in dispute. The cost of such appraiser shall be borne by the Company. Section 11.4 No Right to Company Property. Except as specifically set forth in this Agreement, no Member shall be entitled to demand or receive Property other than cash in return for his Capital Contribution and, to the maximum extent permissible under applicable law, each Member hereby waives all right to partition any real property that may be acquired by the Company. 30 ARTICLE XII Section 12.1 Notices. Except as otherwise provided herein all notices under this Agreement shall be in writing and shall be given to the parties at the addresses provided by them to the Manager and to the Company at its principal office or at such other address as any of the parties may hereafter specify in the same manner. Section 12.2 Law Governing. This Agreement shall be governed by and construed in accordance with the laws of the State of Arkansas. Section 12.3 Amendments. Amendments to this Operating Agreement must be in writing and approved by all the Members owning Class A Units. Additionally, without the consent of all the Members, no amendment will be effective that would (a) enlarge the obligations of any Member under the Operating Agreement or modify the limited liability of any Member without the consent of such Member; or (b) amend this Section 12.3. Section 12.4 Successors and Assigns. This Agreement, and all the terms and provisions hereof, shall be binding upon and shall inure to the benefit of the Members and their respective legal representatives, heirs, successors and assigns. Section 12.5 Gender and Number. Whenever required by the context, as used in this Agreement, the singular number shall include the plural, and the masculine gender shall include the feminine or the neuter. Section 12.6 Severability. This Agreement is intended to be performed in accordance with, and only to the extent permitted by, all applicable laws, ordinances, rules and regulations of the jurisdictions in which the Company does business. If any provision of this Agreement, or the application thereof to any person or circumstance shall, for any reason and to any extent, be invalid or unenforceable, the remainder of this Agreement and the application of such provision to other persons or circumstances shall not be affected thereby, but rather shall be enforced to the greatest extent permitted by law. 31 Section 12.7 Integrated Agreement. This Agreement, the Services Agreement contemplated herein and the LLC Preorganization Agreement dated of even date herewith constitutes the entire understanding and agreement among the parties hereto with respect to the subject matter hereof. Section 12.8 Construction. Every covenant, term and provision of this Agreement shall be construed simply according to its fair meaning and not strictly for or against any Person. Section 12.9 Headings. Section and other headings contained in this Agreement are for reference purposes only and are not intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision hereof. Section 12.10 Incorporation by Reference. Every exhibit, schedule and other appendix attached to this Agreement and referred to herein is hereby incorporated in this Agreement by reference. Section 12.11 Additional Documents. Each Member and each Manager agrees to perform all further acts and execute, acknowledge and deliver any documents which may be reasonable, necessary, appropriate or desirable to carry out the provisions of this Agreement. Section 12.12 Loans. Any Member may, with the approval of the Manager, lend or advance money to the Company. If any Member shall make any loan or loans to the Company or advance money on its behalf, the amount of any such loan or advance shall not be treated as a contribution to the capital of the Company but shall be a debt due from the Company. The amount of any such loan or advance by a lending Member shall be repayable out of the Company's cash and shall bear interest at the rate agreed between the Company and the lending Member. No Member shall be obligated to make any loan or advance to the Company pursuant to this Agreement. 32 Section 12.13 Counterparts. This Agreement may be executed in two or more counterparts each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. It shall not be necessary in making proof of this Agreement to produce or account for more than one counterpart. Section 12.14 Third Party Beneficiaries. This Agreement shall not create any rights for the benefit of any third party. Section 12.15 Proxies. Any Member may delegate by written proxy his ability to vote on any matter hereunder. Section 12.16 No Partnership Intended for Non-tax Purposes. The Members have formed the Company under the Act, and expressly do not intend hereby to form a partnership under either the Arkansas Uniform Partnership Act nor the Arkansas Revised Limited Partnership Act of 1991. The Members do not intend to be partners one to another, or partners as to any third party. IN WITNESS WHEREOF, the Members have set their hands effective as of the date set forth above. Members: MB HOLDING CORPORATION By: Title: IMAGINE INVESTMENTS, INC. By: Title: 33 EXHIBIT A Ownership Interest in Members' Names the Company and Addresses Contribution @) $10 per Unit -------------- ------------ --------------- IMAGINE Cash in the amount of 49,000 Class A Units INVESTMENTS, INC. $1,000,000 and a Promissory 151,000 Class B Units Note in the amount of $1,000,000 executed by MB Software Corporation as Maker and assigned to and assumed by Oak Tree Receivables, Inc., which is the predecessor in interest to Oak Tree Receivables, LLC MB HOLDING Membership interests in the 51,000 Class A Units CORPORATION following limited liability 149,000 Class C Units companies in the agreed fair market value amount of $2,000,000: Intercoastal Rehabilitation, LLC; N.F.P.M., LLC; Oak Tree Receivables, LLC; and C.C.H.E., LLC EXHIBIT B OFFICERS NAME OFFICE ---- ------ Scott A. Haire CEO, President Gilbert Valdez Vice President Tom Wilkins Treasurer Lucy J. Singleton Secretary EX-10.2 3 LLC PREOGANIZATIONAL AGREEMENT LLC PREORGANIZATIONAL AGREEMENT This LLC Preorganizational Agreement (this"Agreement") is dated as of August 1, 1997, and is among MB Holding Corp., a Nevada corporation ("Holding") , MB Software Corporation, a Colorado corporation ("Shareholder"), Imagine Investments, Inc., a Delaware corporation ("Imagine") and Healthcare Innovations, LLC, an Arkansas limited liability company (the"Company"). WITNESSETH: WHEREAS, Holding, a wholly owned subsidiary of Shareholder, and Imagine have formed and organized the Company as of the date hereof subject to the terms of that certain Operating Agreement dated of even date herewith; and WHEREAS, Shareholder has transferred its stock of Oak Tree Receivables, Inc., Intercoastal Rehabilitation, Inc., and C.C. Acquisition Corp. to Holding, and Holding has by statutory mergers converted such entities to limited liability companies and has contributed its membership interests in the following Arkansas limited liability companies to the Company: Oak Tree Receivables, LLC, N.F.P.M., LLC, Intercoastal Rehabilitation, LLC, and C.C.H.E., LLC (collectively, the "Subsidiaries"), and Imagine has contributed One Million and No/100 Dollars ($1,000,000.00) and a Promissory Note in the principal amount of One Million and No/100 Dollars ($1,000,000) executed by Oak Tree Receivables, Inc. as maker in favor of Imagine (the "Note") to the Company; and WHEREAS, Shareholder has previously granted a security interest in stock of said subsidiary corporations securing indebtedness owing by its subsidiary, Oak Tree Receivables, Inc., by assumption, to Imagine and has transferred such stock subject to a Stock Pledge Agreement dated June 30, 1997, to Holding; and WHEREAS, it is the parties' intent and desire that the security interest in favor of Imagine be terminated in light of the fact that current owner of the Note is also the owner of such subsidiaries (or their successors, as the case may be); and WHEREAS, the parties wish to enter into such other agreements related to or incident to the formation and acquisition of the Company; and WHEREAS, the parties hereto wish to enter into this Agreement to set forth their respective rights and agreements with respect to the matters set forth herein regarding the capitalization and formation of the Company; 1 NOW, THEREFORE, in consideration of the mutual promises and obligations set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I - OAK TREE INDEBTEDNESS With respect to the indebtedness of Oak Tree Receivables, Inc. (and Oak Tree Receivables, LLC, its successsor by merger) pursuant to a Promissory Note, Loan Agreement and Stock Pledge Agreement, all dated June 30, 1997, the obligations of which were assumed by Oak Tree Receivables, Inc. by an Assignment and Assumption Agreement dated July 24, 1997, with Shareholder, the parties agree that the security interest in favor of Imagine pursuant to the Stock Pledge Agreement dated June 30, 1997, is hereby released in all respects. ARTICLE II- PAYMENT OF EXISTING SUBSIDIARIES' INCOME TAX LIABILITIES The parties agree that all income, loss and gain of the Subsidiaries or their predecessors, or attributable to any merger or transfer up to and including the transfer to Company shall be included on the consolidated tax returns of Shareholder and any federal or state income tax liability with respect thereto shall be paid by Shareholder and/or its affiliated corporations, so that the Subsidiaries or Company will have no income tax liability for any period prior to and including the date of transfer to Company. ARTICLE III - OTHER LOANS As soon as practical after formation and capitalization of the Company, Imagine agrees in good faith that it intends to provide a loan to Holding the sum of Five Hundred Thousand and No/100 Dollars ($500,000.00) payable with interest at the rate of prime plus two percent (2%) payable quarterly, with all principal and any unpaid accrued interest due at the end of a three (3) year term. The loan documents shall provide for such collateral, covenants and limitations on additional borrowing as satisfactory to Imagine. Any funding obligation of Imagine hereto is strictly conditional upon the parties negotiating and executing formal agreements and documents with respect thereto which are mutually satisfactory to the parties. ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER Holding and Shareholder represent and warrant to Imagine and the Company as follows as of the date hereof: 4.1 Organization, Power and Qualification of Holding and Shareholder. Each ofHolding and Shareholder is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, has all requisite corporate power and authority to own, lease and operate its properties, to carry on its business as now being conducted, to enter into this Agreement and to perform its obligations hereunder (in the case of Shareholder). Holding and Shareholder havebeen duly qualified to do business in all states in which the character of its property or activities require such qualification under applicable law. At the time of contribution to the Company, Holding owned 100% of the outstanding membership interests of each of the Subsidiaries free from all encumbrances. 2 4.2 Authorization. The execution and delivery of this Agreement, and each other agreement and certificate or other document delivered, or to be delivered, in connection with the transfers contemplated by this Agreement have been duly and validly authorized by all necessary corporate and other action on the part of Holding and Shareholder and this Agreement constitutes, and all other documents and agreements to be delivered by Holding or Shareholder on or before the date of closing, shall constitute valid and legally binding obligations of Holding and to Shareholder enforceable against them in accordance with their terms, subject to the application of bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting the rights of creditors. 4.3 The Subsidiaries. Each of the Subsidiaries is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Arkansas, and has all requisite limited liability company power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Each of the Subsidiaries has been or will be duly qualified to do business in all states which the character of its property or actions require such qualifications under applicable law. 4.4 No Violation. Neither the execution, delivery or performance by Holding and Shareholder of this Agreement or any other agreement delivered, or to be delivered, in connection with the transactions contemplated by this Agreement, nor the execution by Holding of the Operating Agreement, nor compliance with the terms and provisions hereof or thereof, nor the consummation of the transactions contemplated herein or therein, including, without limitation, the transfer to the Company of Holding's right, title and interest in and to the Subsidiaries, (i) will contravene any applicable provision of any law, statute, rule, regulation, order, writ, injunction or decree of any court or governmental instrumentality, (ii) will conflict or be inconsistent with or result in any breach of, any of the terms, covenants, conditions or provisions of any agreement or other instrument to which Shareholder, Holding or any Subsidiary is a party or by which Shareholder, Holding, any Subsidiary or any of their respective properties or assets is bound or subject, or (iii) will violate any provision of the organizational documents of Shareholder, Holding or any Subsidiary. 4.5 Proceedings or Investigations. There is no action, suit or legal, administrative, arbitration or other proceeding or governmental investigation pending or, to the best knowledge of Shareholder, threatened against Shareholder, Holding or any of the Subsidiaries before or by any court, tribunal or Federal, state, municipal or other governmental department, commission, board, bureau, agency, or instrumentality, domestic or foreign, and, to the best knowledge of Shareholder, no such action, suit, or legal, administrative, arbitration or other proceeding or governmental investigation is probable of assertion against Shareholder, Holding or any of the Subsidiaries, which, if adversely determined, could reasonably be expected to have a material adverse effect on the value or operations of any Subsidiary or its assets, or adversely affect or impede the transfer to the Company of all of Holding's right, title and interest in the Subsidiaries. To the best of the knowledge of Shareholder, each of the Subsidiaries is in compliance with all laws, rules, regulations, reporting and licensing requirements and orders applicable to its business or to its employees conducting its business. 3 4.6 Consents. No consents or approvals of any public body or authority or shareholders of Shareholder or Holding, and no consents or waivers from any parties to leases, licenses, franchises, permit, indentures, agreement or other instruments are required for the lawful consummation of the transactions contemplated hereby. 4.7 Financial Statements. The unaudited financial statements of the Subsidiaries for the quarter ended June 30, 1997 (collectively, the "Financial Statements") present fairly the financial position, results of operations and cash flows of each Subsidiary, or its predecessor, at the dates and for the fiscal periods then ended, in accordance with GAAP, and reflect all material claims, debts and liabilities, absolute or contingent, direct or indirect, of each Subsidiary. Holding has delivered true and complete copies of the Financial Statements to Imagine. 4.8 No Adverse Change. Since June 30, 1997, the businesses of Subsidiary has been carried on in the normal course and there has been no material adverse change in the business, financial condition, results of operations, assets or liabilities of the Subsidiaries. 4.9 Taxes. (a) All tax returns required to be filed by or on behalf of the Subsidiaries, or their predecessors, have been timely filed, or requests for extensions have been timely filed, granted and have not expired, for periods ending on or before June 30, 1997, and all such returns filed are complete and accurate in all material respects. (b) There is no audit examination, deficiency or refund litigation or matter that has been raised by a taxing authority with respect to any previously filed tax returns of any of the Subsidiaries (or their predecessors) or any prior tax payments or periods that could reasonably be expected to result in a determination the effect of which would have a material adverse effect. All taxes due with respect to completed and settled examinations or concluded litigation have been paid or adequately reserved for. (c) None of the Subsidiaries (or their predecessors) has executed an extension or waiver of any statute of limitations on the assessment or collection of any tax due that is currently in effect. (d) Adequate provision of any taxes due or to become due for the Subsidiaries (or their predecessors) for any period or periods through and including June 1997, has been made and is reflected on the June 1997 financial statements included in the Financial Statements. Deferred taxes of the Subsidiaries reflected in the Financial Statements are adequate, subject in the case of interim financial statements to normal recurring year end adjustments. 4 (e) Each of the Subsidiaries (or their predecessors) has collected and withheld all taxes which it has been required to collect or withhold and has timely submitted all such collected and withheld amounts to the appropriate authorities. Each of the Subsidiaries is in compliance with the back-up withholding and information reporting requirements under the Internal Revenue Code (the "Code") and any state, local or foreign laws, and the rules and regulations thereunder. (f) None of the Subsidiaries (or their predecessors) has made any payments, is not obligated to make any payments, or is not a party to any contract, agreement or other arrangement that could obligate it to make any payments that would be disallowed as a deduction under Section 280G of the Code. (g) There are no liens with respect to taxes upon any of the assets of the Subsidiaries. (h) To the best of Shareholder's knowledge, there has not been an ownership change, as defined in Code Section 382(g), of any of the Subsidiaries or any of their predecessors that occurred during or after any taxable period in which any Subsidiary or any of its predecessors incurred a net operating loss that carries over to any taxable period ending after December 31, 1996. (i) None of the Subsidiaries has filed a consent under Section 341(f) of the Code concerning collapsible corporations. (j) None of the Subsidiaries has or has had a permanent establishment in any foreign country, as defined in any applicable tax treaty or convention between the United States and such foreign country. 4.10 Properties. Except as disclosed in the Financial Statements and except for claims, liens, pledges or encumbrances ("Liens:), arising in the ordinary course of business after the date hereof, each Subsidiary has good and marketable title, free and clear of all Liens, to all its properties and assets whether tangible or intangible, real, personal or mixed, reflected in the Financial Statements as being owned by the Subsidiaries as of the date hereof, except for such defects in title which individually or in the aggregate would not have a material adverse effect. All buildings, and all fixtures, equipment and other property and assets, held under leases or subleases by the Subsidiaries are held under valid instruments enforceable in accordance with their respective terms except where the failure to have such valid and enforceable instruments would not have a material adverse effect. All equipment of the Subsidiaries in regular use has been well maintained and is in good serviceable condition, reasonable wear and tear excepted, except for such defects which individually or in the aggregate would not have a material adverse effect. N.F.P.M., LLC, one of the Subsidiaries, owns all of the assets set forth on Schedule A hereto, free and clear of all Liens. 4.11 Material Contract Defaults. None of the Subsidiaries is, or has received any notice or has any knowledge that any other party is, in default in any respect under any contract, agreement, commitment, arrangement, lease, insurance policy or other instrument to which a Subsidiary is a party or by which a Subsidiary or the assets, business or operations thereof may be bound or affected 5 or under which it or its assets, business or operations receives benefits, except for those defaults which would not have, individually or in the aggregate, a material adverse effect; and there has not occurred any event that with the lapse of time or the giving of notice or both would constitute such a default, except for those defaults which would not have, individually or in the aggregate, a material adverse effect. 4.12 Benefit Plans. (a) Schedule B-1 hereto lists all existing employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), in which employees or former employees of the Subsidiaries currently participate (the "Plans"). (b) Each Plan is and has been in substantial compliance, in form and operation, in all material respect with all applicable laws and has been administered in all material respects in accordance with its terms. To Shareholder's knowledge, no event has occurred and no condition exists with respect to any Plan which is likely to subject the Company, directly or indirectly (through an indemnification agreement or otherwise), to any material liability (including, without limitation, liability for taxes, breach of fiduciary duty, or for a "prohibited transaction" within the meaning of Section 406 of ERISA or Section 4975 of the Code). There is no action, suit, or claim (other than routine claims for benefits in the ordinary course) with respect to any Plan pending or threatened which is reasonably likely to have a material adverse effect. No Plan is currently under investigation or audit by any governmental agency and, to the knowledge of Shareholder, no such investigation or audit is contemplated or under consideration. Each Plan intended to be a qualified plan under Section 401(a) of the Code is so qualified and a favorable determination letter as to qualification under Section 401(a) of the Code has been issued and the related trust has been determined to be exempt from taxation under Section 501(a) of the Code. (c) All contributions and premium payments required to have been made or accrued under or with respect to any Plan have been timely made or accrued. Except as set forth in Schedule B-1, the consummation of the transactions contemplated hereby will not give rise to any right to severance, separation or similar pay or benefits. 4.13 Environmental Matters. To the knowledge of Shareholder, none of the Subsidiaries, nor any properties owned or operated by a Subsidiary has been or is in violation of or liable under any Environmental Law, except for such violations or liabilities that, individually or in the aggregate, are not reasonably likely to have a material adverse effect., There are no actions, suits or proceedings, or demands, claims, notices or investigations (including, without limitation, notices, demand letter or requests for information from any environmental agency) instituted or pending, or to the knowledge of Shareholder threatened, relating to the liability of any properties owned or operated by any of the Subsidiaries under any Environmental Law, except for liabilities or violations that would not reasonably be expected to have, individually or in the aggregate, a material adverse effect. "Environmental Law" means any federal, state, local or foreign law, statute, ordinance, rule regulation, code, license, permit, authorization, approval, consent, order, judgment, decree, injunction or agreement with any 6 regulatory authority relating to (i) the protection, preservation or restoration of the environment (including, without limitation, air, water vapor, surface water, groundwater, drinking water supply, surface soil, subsurface soil, plant and animal life or any other natural resource), and/or (ii) the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of any substance presently listed, defined, designated or classified as hazardous, toxic, radioactive or dangerous, or otherwise regulation, whether by type or by quantity, including any material containing any such substance as a component. 4.14 Insurance. Attached hereto as Schedule B-2 is an accurate schedule as of the date hereof reflecting the insurance policies maintained with respect to the ownership and operation of the business and assets of the Subsidiaries and their employees, which Schedule reflects the policies, numbers, terms, identity of insurers, amounts of coverage and all claims made on the policies since the effective date of the policies and true and correct copies of all policies of general and professional liability and all endorsements and amendments thereto. All policies set forth on Schedule B-3 are in full force and effect and may be maintained in full force and effect after transfer to the Company. 4.15 Absence of Certain Business Practices. To the best of Shareholder's knowledge, none of the Subsidiaries, nor any of their officers, employees, agents, or affiliates nor any other person acting on their behalf, has, directly or indirectly, during the immediately preceding twenty-four (24) month period given, accepted, or agreed to give or accept any gift or similar benefit to or from any customer, supplier, governmental employee or other person who is or may be in a position to help or hinder the business of any Subsidiary (or assist any Subsidiary in connection with any actual or proposed transaction) that (i) might subject any Subsidiary, their affiliates, or any other person to any damage or penalty in any civil, criminal or governmental litigation or other proceeding, (ii) if not given or accepted in the past, might have had an adverse effect on the assets or operations or the business of any Subsidiary, (iii) if not continued in the future, might adversely affect the assets or the business or might subject any Subsidiary to damages or penalties in any private or governmental litigation or other proceeding. 4.16 Disclosure. To the best of Shareholder's knowledge, no representation or warranty of Shareholder contained in this Agreement or in any statement or certificate furnished or to be furnished to any party pursuant hereto in connection with the transactions contemplated hereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements made herein or therein, in the light of the circumstances under which they were made, not misleading. 4.17 Other Matters. Neither Holding, any Subsidiary nor Shareholder has taken or has agreed to take any action, and has no knowledge of any fact or circumstances, that would materially impede or delay the consummation of the transactions contemplated hereby. 7 4.18 Brokers and Finders. Neither Shareholder, Holding nor any Subsidiary nor any of their respective officers, directors or employees has employed any broker or finder or incurred any liability for any financial advisory fees, brokerage fees, commissions or finder's fees, and no broker or finder has acted directly or indirectly for any of such parties in connection with this Agreement or the transactions contemplated hereby. 4.19 Subsidiaries. For purposes of this Agreement, the term Subsidiaries shall also be deemed to include the predecessor entities of such subsidiaries. ARTICLE V - REPRESENTATIONS AND WARRANTIES OF IMAGINE Imagine represents and warrants to Shareholder and the Company as follows as of the date hereof: 5.1 Organization, Power and Qualification of Imagine. Imagine is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, has all requisite corporate power and authority to own, lease and operate its properties, to carry on its business as now being conducted, to enter this Agreement and the Operating Agreement to perform its obligations hereunder and thereunder. Imagine has been duly qualified to do business in all states in which the character of its property or activities require such qualification under applicable law. Imagine has no subsidiaries. 5.2 Authorization. The execution and delivery of this Agreement, the Operating Agreement and each other agreement and certificate or other document delivered, or to be delivered, in connection with the transactions contemplated by this Agreement have been duly and validly authorized by all necessary corporate and other action on the part of Imagine and this Agreement constitutes, and all other documents and agreements to be delivered by Imagine on or before the date of closing, shall constitute valid and legally binding obligations of Imagine enforceable against it in accordance with its terms, subject to the application of bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting the rights of creditors. 5.3 No Violation. Neither the execution, delivery or performance by Imagine of this Agreement or any other agreement delivered, or to be delivered, in connection with the transfers contemplated by this Agreement, nor compliance with the terms and provisions hereof or thereof, nor the consummation of the transactions contemplated herein or therein, including, (i) will contravene any applicable provision of any law, statute, rule, regulation, order, writ, injunction or decree of any court or governmental instrumentality, (ii) will conflict or be inconsistent with or result in any breach of, any of the terms, covenants, conditions or provisions of any agreement or other instrument to which Imagine is a party or by which Imagine or any of its respective properties or assets is bound or subject, or (iii) will violate any provision of the Articles of Incorporation or By-Laws of Imagine. 5.4 Proceedings or Investigations. There is no action, suit or legal, administrative, arbitration or other proceeding or governmental investigation pending or, to the best knowledge of Imagine, threatened against Imagine before 8 or by any court, tribunal or Federal, state, municipal or other governmental department, commission, board, bureau, agency, or instrumentality, domestic or foreign, and, to the best knowledge of Imagine, no such action, suit, or legal, administrative, arbitration or other proceeding or governmental investigation is probably of assertion against Imagine. 5.5 Consents. No consents or approvals of any public body or authority or shareholders of Imagine and no consents or waivers from any parties to leases, licenses, franchises, permits, indentures, agreements or other instruments are required for the lawful consummation of the transactions contemplated hereby. ARTICLE VI - INDEMNITY 6.1 Indemnity. From and after the Closing Date, Holding and Shareholder shall indemnify and hold harmless Imagine and the Company, its Subsidiaries, and each of its respective directors, officers, employees and agents, and each of the heirs, executors, successors and assigns of any of the foregoing (the "Imagine Indemnified Parties") from and against any and all Losses (as defined below) incurred by or asserted against any of such parties in connection with or arising out of any breach by Holding and Shareholder of any representation or warranty of Holding and Shareholder set forth herein; provided, however, that the Imagine Indemnified Parties shall be entitled to indemnification under this Section 6.1 only if and to the extent its amount of Losses hereunder exceeds $20,000, and then only to the extent of such excess; and provided further, however, that in no event shall Shareholder's liability hereunder exceed $200,000, it being understood that this limitation shall not apply in the event of fraud, nor to any failure by Holding or Shareholder to comply with any covenant or agreement set forth herein. From and after the Closing Date, Imagine shall indemnify and hold harmless Holding and the Company, and any of their directors, shareholders, officers, employees and agents, and each of the heirs, executors, successors and assigns of any of the foregoing (the 'Holding Indemnified Parties') from and against any and all Losses (as defined below) incurred by or asserted against any of such parties in connection with or arising out of any breach by Imagine of any representation or warranty; provided, however, that the Holding Indemnified Parties shall be entitled to indemnification under this Section 6.1 only if and to the extent their aggregate amount of Losses hereunder exceeds $20,000, and then only to the extent of such excess; and provided further, however, that in no event shall Imagine's aggregate liability hereunder exceed $200,000, it being understood that this limitation shall not apply in the event of fraud, nor to any failure by Imagine to comply with any covenant or agreement set forth herein. "Losses" means any and all debts, losses, liabilities, claims, damages, obligations (including those arising out of any action, such as any settlement or compromise thereof or judgment or award therein) and any reasonable out-of-pocket costs and expenses (including reasonable attorneys' fees and expenses incurred in defending any lawsuit or other action). 9 6.2 Claims. (a) The party being indemnified hereunder (the "Indemnified Party") shall give written notice to the party against whom a claim for indemnification is asserted hereunder (the "Indemnifying Party") within the earlier of twenty (20) days of receipt of written notice or forty (40) days from discovery by the Indemnified Party of any matters which may give rise to a claim for indemnification or reimbursement under this Agreement (a "Claim"). The failure to give such notice shall not affect the right of the Indemnified Party to indemnity hereunder unless such failure has materially and adversely affected the rights of the Indemnifying Party. (b) In the event an action by a third party (a'Third-Party Claim') shall be brought or asserted in respect of which indemnity may be sought by an Indemnified Party under this Section 6.2, the Indemnified Party shall notify the Indemnifying Party in writing thereof within such period of time as to not prejudice the defense thereof, but in any case within ten (10) days thereof. Subject to this Section 6.2, the Indemnifying Party shall have the opportunity to defend and/or settle such Third-Party Claim, and employ counsel reasonably satisfactory to the Indemnified Party, and the Indemnifying Party shall pay all expenses related thereto, including without limitation all fees and expenses of counsel. After receipt of such notice, the Indemnifying Party shall notify the Indemnified Party within twenty (20) days (or such shorter period if necessary so as not to prejudice the defense thereof) in writing whether it will assume the defense thereof. (c) Upon receipt of notice by the Indemnified Party from the Indemnifying Party of its election to assume the defense of such an action and approval of the Indemnified Party of counsel to the Indemnifying Party, which approval shall not be unreasonably withheld or delayed, the Indemnifying Party shall not be liable to the Indemnified Party unless (i) the Indemnifying Party agrees in writing to pay such fees and expenses, (ii) the Indemnifying Party fails either to assume the defense of such action or to employ counsel reasonably satisfactory to the Indemnified Party, or (iii) the Indemnified Party shall have been advised by counsel that there may be one or more legal defenses available to the Indemnified Party that are different from or in addition to those available to the Indemnifying Party or that there shall exist some other legal conflict between the interests of the Indemnifying Party and the Indemnified Party. (d) If the Indemnifying Party shall not elect to assume the defense of any Third-Party Claim, or if any of the events specified in clauses (i) through (iii) in the preceding subsection (c) occurs, the Indemnified Party shall have the right to maintain the defense of and to settle such Third- Party Claim, with counsel reasonably satisfactory to the Indemnifying Party; provided, however, that the Indemnifying Party shall retain the right to assume the defense of such Third-Party Claim pursuant to paragraph (c) above, provided that such assumption does not prejudice the defense of such Third-Party Claim. (e) In the event that an offer to settle a Third-Party Claim is received, each of the Indemnified Party and the Indemnifying Party shall notify the other thereof, in writing, and shall consult with one another in considering such offer. Such offer shall be accepted if the Indemnifying Party so directs in writing unless either (A) the Indemnified Party shall agree in writing that any liability arising out of such Third-Party Claim shall not be a Loss covered hereunder, in which casethe Indemnified Party shall have full right to maintain 10 the defense thereof, or (B) the failure to accept such settlement offer is based on the Indemnified Party's reasonable objection to a sanction, restriction, fine, or other penalty that would be imposed in it or its affiliates under the settlement. (f) Notwithstanding anything herein, and whichever party shall have the right to maintain the defense of a Third-Party Claim, each of the Indemnifying Party and the Indemnified Party shall consult with the other with respect thereto, provide each other with such assistance as the other may reasonably require in order to promptly and adequately defend such action, and have the right to participate at its own expense in the defense thereof, with counsel reasonably satisfactory to the other. 6.3 Survival. The representations, warranties, covenants and agreements of each party set forth herein shall survive the date hereof for a period of eighteen (18) months. Neither party hereto shall have any liability (for indemnification or otherwise) with respect to any representation, warranty, covenant or agreement set forth herein, unless on or before the eighteen-month anniversary of the Closing Date the other party shall notify such party of a claim specifying the factual basis of that claim in reasonable detail. ARTICLE VII - MISCELLANEOUS 7.1 Counterparts. For the convenience of the parties, this Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original. 7.2 Survival of Covenants and Representations and Warranties. Any covenant, representation and warranty contained herein shall survive closing of this Agreement and the formation of the Company. 7.3 Agreement Binding. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto, their heirs, successors and permitted assigns, but nothing herein, express or implied, is intended to confer on any other person, any rights, benefits, or remedies by reason of this Agreement. 7.4 Governing Law. This Agreement shall be governed by the laws of the State of Arkansas. 7.5 Non-Assignability. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto. 7.6 Entire Agreement. This Agreement and other documents and agreements referred to herein contain the entire agreement between the parties hereto with respect to the subject matter hereof. 7.7 Covenant to Perform. Each party hereto expressly represents and warrants to each other party hereto to use one's best efforts to carry out the purposes of this Agreement and to execute such additional documents necessary to effect same, and to refrain from taking any action contrary to the provisions of this 11 Agreement and hereby acknowledges that this Agreement, or the breach hereof, is subject to all rights of the parties at law or in equity, and may be specifically enforced in a Court of competent jurisdiction in a proceeding instituted by any of the parties hereto. IN WITNESS WHEREOF, the parties have executed this document as of the date first written above. MB HOLDING CORP. By: ------------------------------- --------------, -------------- MB SOFTWARE CORPORATION By: -------------------------------- Scott A. Haire, President IMAGINE INVESTMENTS, INC. By: -------------------------------- ---------------, --------------- HEALTHCARE INNOVATIONS, LLC By: --------------------------------- --------------, -------------- 12 EX-10.3 4 SERVICES AGREEMENT SERVICES AGREEMENT ------------------ THIS SERVICES AGREEMENT (this "Agreement") is made and entered into as of this 1st day of August, 1997 by and between MB Software Corporation, a Colorado corporation ("MB") whose mailing address is 2225 E. Randol Mill Road, Suite 305, Arlington, Texas 76011, and Healthcare Innovations, LLC, an Arkansas limited liability company ("the Company") whose mailing address, as per the terms of this Agreement, will be the same as MB. W I T N E S S E T H: ------------------- WHEREAS, pursuant to that certain Operating Agreement (the "Operating Agreement") by and between MB Holding Corporation, a wholly owned subsidiary of MB ("Holding") and Imagine Investments, Inc., the parties have organized and formed the Company; and WHEREAS, in connection with the organization and formation of the Company, Holding has contributed certain limited liability companies to the Company (the "Subsidiaries"); and WHEREAS, pursuant to the provisions of the Operating Agreement, MB and the Company now wish to set forth their understandings and agreements with respect to certain matters relating to the business of the Company and the Subsidiaries. NOW, THEREFORE, pursuant to the provisions of the Operating Agreement and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Administrative Services 1.01 Commencing on the date hereof, MB shall provide, or cause to be provided, to the Company and the Subsidiaries certain administrative services described in this Section 1.01 (the "Services"), which Services have heretofore been provided to the Subsidiaries by MB in conjunction with such Subsidiaries' conduct of their businesses. The Services to be provided shall be: Management/Administrative Human Resources Finance and Accounting Systems and Operations Collections - 1 - 1.02 As part of the Services, MB shall allow the Company to use its address as its mailing address; provided that nothing herein shall be deemed to imply that the Company is doing business in the State of Texas. 1.03 The monthly administrative service charge for the Services shall be equal to MB's actual cost of such Services, plus 15% (the "Service Charge"). The Service Charge shall be payable monthly, in arrears, on or before the tenth day of each month following the month during which Services are provided by MB to the Company hereunder. MB will submit at the end of each month during which Services are provided hereunder an invoice for the Service Charges payable by the Company hereunder and an itemized attachment of the Services provided. The Service Charge payable in any month shall be reduced by the amount that MB's costs are reimbursed as a result of a cost-based reimbursement business; provided that MB shall still have the right to receive 15% over the actual cost of services.. 1.04 The parties agree and acknowledge that the scope of the Services to be provided hereunder, as well as the number of persons providing such Services, may change from time to time as mutually agreed upon by the parties. 1.05 The term of this Agreement shall be concurrent with the existence of the Company, unless earlier terminated (i) by the mutual agreement of the parties or (ii) by the Company in the event MB breaches any of its duties hereunder and fails to cure such breach after fifteen days notice thereof. 2. Services With Respect to Third Party Matters 2.01 MB shall cause its subsidiary Color Country Health Express, Inc. ( "CCHE") to provide billing services to the Company's subsidiary Color Country Health Express, LLC as part of the Services provided hereunder for so long as such company shall require such Services. 2.02 MB shall not incur costs or expenses to any third party in providing the Services on behalf of the Company, including, without limitation, the cost of any independent contractors, outside legal counsel or other outside specialists, without the prior consent of the Company. If, with the consent of the Company, such third party is retained, the Company shall reimburse MB for the actual costs and expenses incurred by MB as a result of the retention of such third party. Following the end of each month, MB shall submit to the Company an invoice describing in reasonable detail any such reimbursable costs and expenses incurred by MB during the prior calendar month (and any other such costs and expenses incurred by MB but which were not submitted in a previous invoice), which invoice shall be payable on demand. 3. Standard of Care - 2 - 3.01 MB, or any provider of Services, shall seek to utilize the same degree of care and oversight in providing Services to the Company hereunder as MB, or the provider of such Services, exercises with respect to the administration of its own businesses and in accordance with a standard of reasonable and prudent conduct. 3.02 MB and the Company acknowledge that from time to time MB may retain employees who, without MB's knowledge, may perform their duties with negligence or gross negligence or who may even engage in willful misconduct. MB and the Company expressly agree that it is their intention that MB shall not be liable to the Company for any losses arising from such conduct of MB's employees as long as the retention of such employees did not result from MB's gross negligence or willful misconduct. In view of the foregoing, unless MB has failed to perform its duties hereunder with the degree of care set forth in Section 3.01 and such failure arises from MB's gross negligence or willful misconduct, MB shall not be liable to the Company for any losses or liabilities sustained or incurred by the Company, including, without limitation, such losses or liabilities that arise from MB's negligence (including gross negligence). 4. Miscellaneous 4.01 This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. 4.02 All notices pursuant to this Agreement shall be delivered by hand or sent by registered or certified mail, return receipt requested, postage prepaid, to the party at its address first set forth above or at such other address as such party may, from time to time, give notice of in accordance with this paragraph. All such notices shall be deemed to have been effectively given upon the earlier of. (a) actual receipt thereof by the party receiving such notice; or (b) three (3) days after deposit in the United States mail in the manner set forth hereinabove. 4.03 This Agreement may be executed in any number of counterparts, each of which shall, for all purposes, be deemed to be an original and all of which together shall, for all purposes, be deemed to constitute one and the same document. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the date first above written. MB SOFTWARE CORPORATION By:______________________________ Title:___________________________ HEALTHCARE INNOVATIONS, LLC By:______________________________ Title:___________________________ - 3 - EX-10.4 5 PROMISSORY NOTE PROMISSORY NOTE --------------- $500,000.00 August 1, 1997 FOR VALUE RECEIVED, the undersigned, MB SOFTWARE CORPORATION, a Colorado corporation ("Maker"), promises to pay to the order of IMAGINE INVESTMENTS, INC., a Delaware corporation ("Payee") the principal sum of FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($500,000.00), together with interest accrued thereon (calculated on the basis of a 365- day year) at a rate of 10.0% per annum from the date hereof until this Note is paid in full. In connection with this Note, Maker has executed and delivered to Payee that certain Amended and Restated Stock Pledge Agreement of even date herewith. 1. Payment. -------- Unless otherwise provided herein: (a) interest of this Note shall be due and payable quarterly commencing on October 1, 1997 and due every three (3) months thereafter; and (b) the entire principal balance and all accrued and unpaid interest thereon shall be due and payable in full on August 1, 2000. Payment shall be made to Payee at Imagine Investments, Inc., P.O. Box 729081-229, Dallas, Texas 75372. 2. Optional Prepayment. -------------------- Maker may at its sole option prepay all or any part of the principal of this Note before maturity without penalty or premium. 3. Senior Debt. ----------- The obligation of Maker hereunder shall for all purposes be considered senior indebtedness of Maker. All contractual obligations or indebtedness of Maker and any subsidiary thereof shall be subordinate to the obligation of Maker hereunder. Without the written consent of Payee, in its sole discretion, no payments may be made, directly or indirectly, by Maker or any of its subsidiaries on any loans or indebtedness of Maker or its subsidiaries to Maker's officers, directors or shareholders (other than Payee or his successors and assigns) or their respective affiliates while any portion of the principal balance and/or accrued interest on this Note is outstanding. 4. Events of Default and Remedies. --------------------------------- At the option of Payee, the entire principal balance of, together with all accrued and unpaid interest on, this Note shall at once become due and payable, without further notice or demand, upon the occurrence at any time of any of the following events or default ("Events of Default"): (i) Failure of Maker to make any payment of accumulated interest and principal on this Note as and when the same becomes due and payable in accordance with the terms hereof, and such failure continues for a period of five days thereafter; (ii) Breach of any of the representations or covenants of Payee in the Stock Pledge Agreement; (iii) Failure of Maker to perform any other covenant, agreement, or condition contained herein, and such failure continues for a period of ten (10) days after the receipt by Maker of written notice from Payee of the occurrence of such failure; or PROMISSORY NOTE Page 2 (iv) Maker shall (a) become insolvent, (b) voluntarily seek, consent to, acquiesce in the benefit or benefits of any Debtor Relief Law (as hereinafter defined) or (c) become party to (or be made the subject of) any proceeding provided by any Debtor Relief Law, other than as a creditor or claimant, that could suspend or otherwise adversely affect the rights of Payee granted hereunder (unless in the event such proceeding is involuntary, the petition instituting the same is dismissed within 90 days of the filing of the same). As used herein, the term "Debtor Relief Law" means the Bankruptcy Code of the United States of America and all other applicable liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization or similar debtor relief laws from time to time in effect affecting the rights of creditors generally. In the event any one or more of the Events of Default specified above shall have occurred, the holder of this Note may proceed to protect and enforce its rights either by suit in equity and/or by action at law, or by other appropriate proceedings, whether for the specific performance of any covenant or agreement contained in this Note, or to enforce any other legal and equitable right of the holder of this Note. 5. Waiver. ------ Except as expressly provided herein, Maker, and each surety, endorser, guarantor and other party ever liable for the payment of any sum of money payable on this Note, jointly and severally waive demand, presentment, protest, notice of nonpayment, notice of intention to accelerate, notice of protest and any and all lack of due diligence or delay in collection or the filing of suit hereon which may occur. 6. Cumulative Right. ----------------- No delay on the part of the holder of this Note in the exercise of any power or right under this Note shall operate as a waiver thereof, nor shall a single or partial exercise of any other power or right. Enforcement by the holder of this Note of any security for the payment hereof shall not constitute any election by it of remedies so as to preclude the exercise of any other remedy available to it. 7. Notices. -------- Any notice or demand given hereunder by the holder hereof shall be deemed to have been given and received (i) when actually received by Maker, if delivered in person or by facsimile transmission, or (ii) if mailed, on the earlier of the date actually received or (whether ever received or not) three Business Days (as hereinafter defined) after a letter containing such notice, certified or registered, with postage prepaid, addressed to Maker, is deposited in the United States mail. The address of Maker is 2225 E. Randol Mill Road, Suite 305, Arlington, Texas 76011, or such other address as Maker shall advise the holder hereof by certified or registered letter by this same procedure. "Business Day" means every day which is not a Saturday or legal holiday in Arlington, Texas. 8. Successors and Assigns. ------------------------ This note and all covenants, promises and agreements contained herein shall be binding upon and inure to the benefit of the respective legal representatives, personal representative, devisees, heirs, successors and assigns of Payee and Maker. PROMISSORY NOTE Page 3 9. GOVERNING LAW. --------------- THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. IN CASE ANY ONE OR MORE OF THE PROVISIONS CONTAINED IN THIS NOTE SHALL FOR ANY REASON BE HELD TO BE INVALID, ILLEGAL OR UNENFORCEABLE IN ANY RESPECT, SUCH INVALIDITY, ILLEGALITY OR UNENFORCEABILITY SHALL NOT AFFECT ANY OTHER PROVISION HEREOF. 10. Attorneys' Fees and Costs. --------------------------- In the event an Event of Default shall occur, and in the event that thereafter this Note is placed in the hands of any attorney for collection, or in the event this Note is collected in whole or in part through legal proceedings of any nature, then and in any such case, Maker promises to pay all costs of collection, including, but not limited to, reasonable attorneyS' fees incurred by the holder hereof on account of such collection, whether or not suit is filed. 11. Headings. -------- The headings of the sections of this Note are inserted for convenience only and shall not be deemed to constitute a part hereof. EXECUTED as of the day and year first above written. MB SOFTWARE CORPORATION By:/s/ Scott Hair ---------------------- Scott Haire, President EX-10.5 6 AMENDED AND RESTATED STOCK PLEDGE AGREEMENT AMENDED AND RESTATED STOCK PLEDGE AGREEMENT This Stock Pledge Agreement (this "Agreement") is made and entered into as of the 1st day of August, 1997, by and among MB SOFTWARE CORPORATION, a Colorado corporation ("Pledgor") and IMAGINE INVESTMENTS, INC., a Delaware corporation, and ROBERT T. SHAW (collectively, "Secured Party"). RECITALS WHEREAS, Pledgor is the sole shareholder of 1,000 shares of common stock (the "Pledged Shares") of Santiago SDS, Inc. (the "Company") being 100% of the issued and outstanding stock of the Company; and WHEREAS, Pledgor has, on the date hereof, executed and delivered a Promissory Note to Imagine Investments, Inc. in the principal amount of $500,000.00; and WHEREAS, Pledgor has previously executed and delivered Promissory Notes to Robert T. Shaw as follows: Date Original Principal December 22, 1995 $455,000.00 June 19, 1996 300,000.00 February 3, 1997 300,000.00 and WHEREAS, Pledgor has pledged the Pledged Shares to Robert T. Shaw pursuant to its Stock Pledge Agreements dated February 3, 1997; and WHEREAS, in order to induce Imagine Investments, Inc. to accept its Promissory Note for $500,000.00 and to advance funds thereunder on even date, Pledgor has agreed, to amend and restate its Stock Pledge Agreement in order to cause it to secure all four (4) Promissory Notes described above; NOW, THEREFORE, the parties hereto hereby agree as follows: AGREEMENT 1. Definitions. ----------- As used in this Agreement, the following terms shall have the meaning indicated: AMENDED AND RESTATED STOCK PLEDGE AGREEMENT Page 2 (a)"Event of Default" shall mean an Event of Default hereunder or under any of the Secured Indebtedness. (b) "Secured Indebtedness" means the four (4) Promissory Notes described hereinabove. 2. Grant of Security Interest in the Pledged Shares. ------------------------------------------------- To secure the full and punctual payment of the Secured Indebtedness, in pari passu, and upon and subject to the terms, provisions and conditions of this Agreement, Pledgor does hereby grant to each Secured Party and to its respective heirs, successors and assigns, a security interest (the "Security Interest") in the Pledged Shares. Pledgor hereby agrees that in the event that it and/or its Affiliates (as hereinafter defined) acquire any additional capital stock of the Company, that such additional capital stock shall be deemed to be Pledged Shares and subject to this Agreement. For purposes hereof, an "Affiliate" of Pledgor is a person or entity controlling, controlled by or under common control with Pledgor. 3. Delivery of Share Certificates to Secured Party. ------------------------------------------------ The stock certificate evidencing the Pledged Shares and all other stock certificates and instruments in registered form which may constitute or evidence at any time or from time to time a part of the Pledged Shares shall be delivered to either Secured Party, for the benefit of each Secured Party, and shall be endorsed in blank for transfer or be accompanied by proper instruments of assignment and transfer in blank upon delivery. Until the happening of an Event of Default, all the Pledged Shares shall remain registered in the name of the Pledgor. So long as the Secured Indebtedness, or any part thereof, remains outstanding and unpaid, the certificates representing the Pledged Shares and any other certificates or instruments which may from time to time constitute or evidence a part of the Pledged Shares, delivered to the Secured Party pursuant to this Section 3, shall be held by the Secured Party, and Pledgor shall not have the right to procure the release of any of the Pledged Shares from the lien hereby created except upon and in compliance with the terms and conditions herein set forth. 4. Voting of Pledged Shares. ------------------------ Until the occurrence of an Event of Default, the Pledged Shares shall be treated as shares of the Pledgor and the Pledgor shall be entitled to vote at any meeting of the shareholders of the Company or its successor corporations. Until the occurrence of an Event of Default, no dividends shall be payable to the Secured Party on or with respect to the Pledged Shares. Pledgor hereby grants to the Secured Party, upon the occurrence of an Event of Default, the right to vote the Pledged Shares during the continuance of such Event of Default whether or not the Secured Party seeks any other remedies available to him under this Agreement or any applicable law or in equity. Pledgor agrees that upon the occurrence of an Event of Default and during its continuance thereof, Pledgor will not accept any dividends or distributions on the Pledged Shares. AMENDED AND RESTATED STOCK PLEDGE AGREEMENT Page 3 5. Remedies Upon Default. ---------------------- (a) If any Event of Default shall occur under any of the Secured Indebtedness, either Secured Party may seek any remedies available to him under any applicable law. (b) Except as otherwise provided herein, Pledgor hereby waives notice of an Event of Default, presentment for payment, demand, notice of dishonor and protest. (c) In addition, full power and authority are hereby given to the Secured Party to sell, assign and deliver the whole or any part of the Pledged Shares at any broker's board, or at public or private sales, at the option of the Secured Party, either for cash or on credit or for future delivery without assumption of any credit risk, and without either demand or advertisement of any kind, both of which are hereby waived, and no delay on the part of the Secured Party in exercising any power of sale or any other rights or option hereunder, and no demand, which may be given to or made upon Pledgor by the Secured Party to a power of sale or other right or option hereunder, shall constitute a waiver thereof, or limit or impair the rights hereunder, without demand, or prejudice the rights of the Secured Party as against the Pledgor in any respect. At any sale of the Pledged Shares in accordance with the preceding sentence, the Pledgor may itself purchase the whole or any part of the Pledged Shares sold. In event of any sale or other disposition of any of the Pledged Shares, after deducting all costs or expenses of ever kind for care, safekeeping, collection, sale, delivery or otherwise, the Secured Party shall, after applying the residue of the proceeds of the sales, or other disposition thereof, as hereinabove authorized, return any excess to the Pledgor. The Secured Party shall notify the Pledgor in writing of his intent to exercise his right to sell the Pledged Shares in accordance with this Section 5(c) at least five (5) days prior to any such sale. (d) Because of the Securities Act of 1933, as amended (the "Securities Act"), or any other laws or regulations, there may be legal restrictions or limitations affecting Secured Party in any attempts to dispose of certain portions of the Pledged Shares in the enforcement of his rights and remedies hereunder. For these reasons Secured Party is hereby authorized by Pledgor, but not obligated, upon the occurrence of any Event of Default, to sell, bid upon, and purchase all or any part of the Pledged Shares at a private sales, subject to investment letter or in any other commercially reasonable manner which will not require the Pledged Shares, or any part thereof, to be registered in accordance with the Securities Act, or the rules and AMENDED AND RESTATED STOCK PLEDGE AGREEMENT Page 4 regulations promulgated thereunder, or any other law of regulations. Pledgor acknowledges that Secured Party may in his discretion approach a restricted number of potential purchasers and that a sale under such circumstances may yield a lower price of the Pledged Shares or any part or parts thereof than would otherwise be obtainable if same were registered and sold in the open market. 6. Further Assurances. -------------------- Pledgor agrees to execute such stock powers, endorse such instruments, or execute such additional pledge agreements or other documents as may be reasonable requested by Secured Party in order effectively to grant to Secured Party the Security Interest in (and pledge and assignment of) the Pledged Shares and to enforce and exercise Secured Party's rights regarding same. 7. Assignability by Secured Party. ------------------------------- The rights, powers and interest held by the Secured Party hereunder, together with the Pledged Shares, may be transferred by Secured Party upon the transfer of the underlying Note upon the prior written consent of Pledgor, such consent not to be unreasonably withheld. 8. Return of Pledged Shares. ------------------------- When the Secured Indebtedness has been paid in full or otherwise satisfied, the Secured Party shall deliver the Pledged Shares to Pledgor concurrently with its receipt of such payment or satisfaction and this Agreement shall terminate. 9. Waiver of Default. The acceptance by the Secured Party at any time and from time to time of partial payment of the aggregate amount of the Secured Indebtedness then matured shall not be deemed to be a waiver of any Event of Default then existing. No waiver by the Secured Party of any Event of Default shall be deemed to be a waiver of any subsequent Event of Default, nor shall any such waiver by Secured Party be deemed to be a continuing waiver. No delay or omission by Secured Party in exercising any right or power hereunder, except for the failure by Secured Party to give notice as provided herein shall impair such right or power or be construed as a waiver thereof or any acquiescence therein, nor shall any single or partial exercise of any such right or power preclude other or further exercise of any other right or power of the Secured Party hereunder. 10. Laws Applicable. ---------------- This Agreement and the rights and obligations of the parties hereto shall be governed, construed and enforced in accordance with the laws of the State of Texas. 11. Notices. ------- Any notice, request, instruction or other document to be given hereunder or to any party shall be delivered to the address set forth on Exhibit "A" attached hereto, and shall be deemed to have been given and received (i) when actually by the other party, if delivered in person or by facsimile, or (ii) if mailed, on the earlier of the date actually received or (whether ever received or not) three Business Days (as hereinafter defined) after a letter containing such notice, certified or registered with postage prepaid, addresses to the other party, is deposited in the United States mail. Any party may change its address for the purposes of this section by giving notice to the other parties hereto. AMENDED AND RESTATED STOCK PLEDGE AGREEMENT Page 5 12. Covenant of Assistance. ----------------------- Pledgor agrees to execute all such further documents and take all such further action as may be reasonable be requested by Secured Party in order to better confirm the Security Interest herein granted in the Pledgor Shares. 13. Amendment. ---------- None of the terms or provisions of this Agreement may be waived, modified or amended, except in writing signed by both parties hereto. 14. Binding Effect. --------------- This Agreement shall be binding on Pledgor and Pledgor's successors and assigns and shall inure to the benefit of the Secured Party and his heirs, successors and assigns. 15. Counterparts. ------------- This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument, but only one of which need be produced. 16. Effect on other Collateral. --------------------------- This Amended and Restated Stock Pledge Agreement is delivered in addition to, and not in lieu of, such other stock pledge agreements or other security agreements as may have been pledged, assigned or granted to either Secured Party. EXECUTED as of the day and year first above written. MB SOFTWARE CORPORATION By:/S/ Scott Haire ------------------------------------ Scott Haire, President IMAGINE INVESTMENTS, INC., a Delaware corporation By: Title:_______________________________ ----------------------------------- ROBERT T. SHAW AMENDED AND RESTATED STOCK PLEDGE AGREEMENT Page 6 EXHIBIT "A" MB Software Corporation 2225 E. Randol Mill Road Suite 305 Arlington, Texas 76011 Imagine Investments, Inc. P.O. Box 729081-229 Dallas, Texas 75372 Robert T. Shaw 784 Harrington Lake Drive North Venice, Florida 34293 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MB SOFTWARE CORPORATION Date: August 15, 1997 /s/ Scott A. Haire ---------------------- Scott A. Haire, Chairman of the Board, Chief Executive Officer and President (Principal Financial Officer) EX-27 7 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 0000714256 MB Software Corporation 1 US DOLLARS 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 1 1119025 0 3136549 80381 0 4406987 303336 163349 5967838 4478110 0 0 0 67885 101862 5967838 2354823 2425476 339390 339390 1697297 0 95079 0 0 0 0 0 0 392161 0.006
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