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
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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.
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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.
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(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
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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;
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(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"
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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;
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(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
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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
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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
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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.
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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.
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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.
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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.
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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.
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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.
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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;
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(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,
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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;
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(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