EX-10.10 6 fcs_operating-agreement.txt OPERATING AGREEMENT WITH FIRST COMPUTER SERVICES OPERATING AGREEMENT OF FIRST COMPUTER SERVICES, LLC THE INTERESTS IN THIS COMPANY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THAT ACT AND THE APPLICABLE STATE SECURITIES LAWS, OR THE COMPANY SHALL HAVE RECEIVED AN OPINION OF COUNSEL (WHICH COUNSEL AND OPINION SHALL BE SATISFACTORY TO THE COMPANY'S COUNSEL) THAT REGISTRATION OF SUCH SECURITIES UNDER THAT ACT AND UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED. THE INTERESTS IN THIS COMPANY ARE SUBJECT TO THE RESTRICTIONS AND PROVISIONS OF THIS OPERATING AGREEMENT AND MAY ONLY BE DISPOSED OF OR ENCUMBERED IN COMPLIANCE HEREWITH. OPERATING AGREEMENT OF FIRST COMPUTER SERVICES, LLC THIS OPERATING AGREEMENT ("Agreement") is made and entered into as of the 1st day of December, 2001 by and among FIRST COMPUTER SERVICES, LLC, a Kansas limited liability company (the "Company"); FIRST AMERICAN CAPITAL CORP. (the Manager"); and the persons executing this Agreement as "Members" (as set forth on Schedule A attached hereto) (the "Members"). WHEREAS, on June 20, 2001, the Company was formed by the filing of Articles of Organization with the Kansas Secretary of State under the Kansas Revised Limited Liability Company Act (the "Act"). NOW, THEREFORE, the Members and the Manager hereby adopt this Agreement as the "operating agreement" of the Company under the Act to set forth the rules, regulations and provisions regarding the management and business of the Company, the governance of the Company, the conduct of its business, and the rights and privileges of its Members, and in consideration of the premises and the mutual agreements contained herein, the parties hereto agree as follows: ARTICLE I BUSINESS PURPOSES AND OFFICES 1.1 Business Purpose. The business purpose of the Company shall be to hold a license to use and to operate a data processing system, all in accordance with this Agreement. The Company shall be an association among the Members only for such specifically authorized business purpose and shall not be deemed to create any association among the Members with respect to any other activities whatsoever other than the activities within such business purpose described herein. The Company shall not engage in any other business without the unanimous written consent of its Members. 1.2 Principal Office. The principal business office of the Company shall be located at 1303 SW First American Place, Topeka, KS 66604 or at such other place(s) as the Manager may determine from time to time. 1.3 Registered Office and Resident Agent. The location of the registered office and the name of the resident agent of the Company in the State of Kansas shall be as stated in the Articles (defined below), or as shall be determined from time to time by the Manager and appropriately filed with the Kansas Secretary of State as required by the Act. ARTICLE II DEFINITIONS 2.1 Terms Defined Herein. Certain terms used in this Agreement are defined in the Tax Exhibit (defined below). As used herein, the following terms shall have the following meanings, unless the context otherwise specifies: "Act" means the Kansas Revised Limited Liability Company Act, as amended from time to time. "Agreed Value" means the aggregate value of the Company as last agreed upon in writing from time to time by all Members. Such writing shall bear its effective date. Any writing executed by the Members setting forth the Agreed Value shall be effective until the earlier of the execution of a new writing signed by the Members setting forth the Agreed Value or twenty-four (24) months. The Members may at any time execute a new writing setting forth the Agreed Value, which shall automatically replace all prior writings with respect to Agreed Value, and in no event shall any but the last writing setting forth the Agreed Value be effective. Such writings setting forth the Agreed Value may be in the form or substantially in the form of Schedule D attached hereto. "Agreement" means this Operating Agreement of the Company, as amended from time to time. "Articles" means the Articles of Organization of the Company filed with the Kansas Secretary of State, as amended from time to time. "Available Cash" means the aggregate amount of cash on hand or in bank, money market or similar accounts of the Company at any given time derived from any source (other than Capital Contributions and liquidation transactions) which the Manager determines is available for distribution to the Members in accordance with the Act any applicable contractual covenants after all current debt service obligations of the Company are satisfied, after any Required Distributions and after taking into account any amount required or appropriate to maintain a reasonable amount of Reserves. "Bankruptcy," with respect to any Person, means the entry of an order for relief against such Person under the United States Bankruptcy Code, the insolvency of such Person under any state insolvency act or any other event of "bankruptcy" with respect to such Person as described in the Act. "Business" means the business to be conducted by the Company with respect to the license and operation of the data processing system in accordance with this Agreement. "Capital Account" means the separate bookkeeping account established and maintained for each Member by the Company pursuant to Section 3.3. "Capital Contribution," with respect to a Member, means the total amount of cash and the net Fair Value of property contributed by such Member (or his predecessor in interest) to the capital of the Company. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or corresponding provisions of future laws. "Company" means First Computer Services, LLC, a Kansas limited liability company. "Defaulting Member" has the meaning set forth in Section 3.2(b). "Designated Representatives" has the meaning set forth in Section 5.3. "Distributions" means any distributions by the Company to the Members of Available Cash, Required Distributions or Liquidation Proceeds. "Fair Value" of an asset or property means its fair market value. "Interest" refers to all of a Member's rights and interests in the Company in its capacity as a Member, all as provided in the Articles, this Agreement and the Act. "Interest" does not include a Member's rights as a lender to or creditor of the Company, as an independent contractor of the Company, or in any other similar capacity. "Liquidation Proceeds" means all Property at the time of liquidation of the Company and all proceeds thereof. "License Agreement" means the Agreement for USSI Licensed Programs dated May 11, 2001. "Licensed Programs" means that certain Individual Life and Health Administration System which is licensed to the Company by United Systems and Software, Inc. from time to time. "Manager" means the Person(s) serving as the manager(s) of the company from time to time, as determined under Section 6.1 below. The initial Manager is First American Capital Corp. "Majority in Interest" means any Member or group of Members holding an aggregate of more than 50% of the Percentage Interests held by all Members. Whenever this Agreement provides that a Majority in Interest is to be determined by excluding a Member(s) or is to be determined out of only certain Members, then a Majority in Interest means any Member or group of Members holding an aggregate of more than 50% of the Percentage Interests held by all of the non-excluded Members. "Members" means those Persons executing this Agreement as members of the Company, or otherwise becoming bound by this Agreement as members of the Company as provided in this Agreement, including any Substitute Members, in each such Person's capacity as a member of the Company. The Members are set forth on Schedule A attached hereto. Schedule A shall be updated from time to time by the Members to reflect the then current Members of the Company. "Percentage Interest," with respect to a Member, means such Member's percentage interest in certain items or matters relating to the Company. The Percentage Interests of the Members are set forth on Schedule A attached hereto. The Percentage Interests of the Members shall be subject to adjustment from time to time as provided by this Agreement. Schedule A attached hereto shall be updated from time to time by the Members to reflect the then current Percentage Interest of each Member. "Person" means any natural person, partnership, limited liability company, corporation, association, cooperative, trust, estate, custodian, nominee or other individual or entity in its own or representative capacity. "Prime Rate" means the annual rate of interest reported from time to time in The Wall Street Journal under the column "Money Rates" (or any successor column) as being the "Prime Rate." "Property" means all properties and assets that the Company may own or otherwise have an interest in (to the extent of such interest) from time to time. "Required Distribution" means, with respect to each taxable year of the Company, an amount equal to the net income of the Company for Federal income tax purposes multiplied by _____%. "Reserves" means amounts set aside from time to time by the Manager pursuant to Section 4.8. "Substitute Member" has the meaning set forth in Section 9.3 below. "Tax Exhibit" means the additional definitions and provisions that are contained in Schedule B attached hereto. "Transfer" means (i) when used as a verb, to give, sell, exchange, assign, transfer, pledge, hypothecate, bequeath, devise or otherwise dispose of or encumber, and (ii) when used as a noun, the nouns corresponding to such verbs, in either case voluntarily or involuntarily, by operation of law or otherwise, including, without limitation, upon Bankruptcy, death, divorce, marriage dissolution or otherwise. "Treasury Regulations" means the regulations promulgated by the Treasury Department with respect to the Code, as such regulations are amended from time to time, or corresponding provisions of future regulations. 2.2 Other Definitional Provisions. (a) As used in this Agreement, accounting terms not defined in this Agreement, and accounting terms partly defined to the extent not defined, shall have the respective meanings given to them under tax accounting principles. (b) The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and section, subsection, schedule and exhibit references are to this Agreement unless otherwise specified. (c) Words of the masculine gender shall be deemed to include the feminine or neuter genders, and vice versa, where applicable. Words of the singular number shall be deemed to include the plural number, and vice versa, where applicable. ARTICLE III CAPITAL CONTRIBUTIONS AND LOANS 3.1 Initial Capital Contributions. The Members have made or will make promptly the initial Capital Contributions to the Company in cash as set forth on Schedule A. 3.2 Additional Capital Contributions; Defaulting Members. (a) The Members recognize that the Company may require capital from time to time, in addition to that contributed pursuant to Section 3.1, in order to accomplish the purpose and business for which it is formed. The Members as a group shall be required to make one or more additional Capital Contributions to the Company from time to time in any amount upon the determination by the Manager in good faith that such additional capital contributions are necessary for the Company. Upon any such determination, the Manager shall, by written notice, call for any such additional contributions to be made by the Members to the capital of the Company. Within 20 days following the issuance of such a capital call, each Member shall contribute, in cash, to the capital of the Company an amount (the "Additional Contribution") equal to such Member's Percentage Interest multiplied by the aggregate additional Capital Contribution to be made by all Members. (b) If any Member fails or refuses for any reason to make in a timely manner any part or all of an Additional Contribution (the "Unpaid Additional Contribution"), such Member shall be in default hereunder and shall be deemed to be a "Defaulting Member" and the following shall apply: (i) The Unpaid Additional Contribution shall constitute an obligation of such Defaulting Member to the Company and shall bear interest from the date of such Defaulting Member's default at a floating annual rate of interest equal to the lesser of (A) three percent (2%) (200 basis points) over the Prime Rate in effect from time to time, or (B) the maximum rate permitted by law. Interest shall be compounded monthly and be payable on demand. The Company may, upon the decision of a Majority in Interest (determined by excluding the Defaulting Member), institute suit in any court of competent jurisdiction to enforce such obligation of the Defaulting Member. In addition, the Company shall be entitled to recover in such suit all costs and expenses, including, but not limited to, court costs and reasonable attorneys' fees, thereby incurred by the Company and any damages (except incidental or consequential damages) sustained by the Company as a result of the default by the Defaulting Member. (ii) By becoming a Member, each Member shall be deemed to have granted to the Company a first priority lien and security interest upon such Member's Interest as security for the payment of all Additional Contributions and other obligations of such Member to the Company. This Agreement shall be deemed to be a security agreement with respect to such security interest and collateral and each Member shall promptly execute and deliver to the Company any financing statements or other instruments that the Company, or any other Member, may request for purposes of perfecting or continuing such security interest. Upon the failure of a Member to execute and deliver such financing statements or other instruments, the other Members, and each of them, as attorney-in- fact for such Member, may execute and deliver such financing statements or other instruments for, in the name and on behalf of such Member. With respect to a Defaulting Member, the Company, acting upon the decisions of a Majority in Interest (determined by excluding the Defaulting Member), shall have all of the rights and remedies of a secured party under the Uniform Commercial Code, including, without limitation, and in addition to the rights under such law, the right to sell, effective as of the first day of the fiscal quarter in which the default occurs or such subsequent date as the Company may determine, by public or private sale upon 10 days advance notice to the Defaulting Member, the Defaulting Member's Interest or any part thereof and to cause the acquirer to become a Substitute Member in lieu of the Defaulting Member with respect to the Interest so acquired upon compliance with Section 9.3 (other than subsections (b) and (e) thereof). In addition, the Company shall have the right to retain and set- off against the Unpaid Additional Contribution of a Defaulting Member and any accrued interest thereon all amounts becoming otherwise distributable or payable to such Defaulting Member by the Company. Any amount so retained and set- off by the Company shall be deemed to be a constructive cash distribution to the Defaulting Member and a constructive cash payment by it to the Company. Any payment, whether constructive or actual, shall be applied first against any unpaid accrued interest on the Defaulting Member's Unpaid Additional Contribution and the remainder shall be applied against its Unpaid Additional Contribution. (iii) Upon the dissolution and termination of the Company, that part of an Additional Contribution contributed by a non-defaulting Member that corresponds proportionately to the then Unpaid Additional Contribution of a Defaulting Member shall be deemed to be a loan to the Company by the non-defaulting Member for purposes of the distribution priorities set forth in Section 4.2 below. (c) So long as a Member remains a Defaulting Member, such Member shall have no voting rights with respect to decisions of the Company and only the votes of the non-Defaulting Members shall be taken into account for all such purposes. The Defaulting Members and their Percentage Interests shall be disregarded completely for all purposes of determining whether the requisite votes have been obtained from a Majority in Interest, or all of the Members, as the case may be, and such requisite votes shall only be required out of the non-Defaulting Members. In addition, so long as a Member remains a Defaulting Member, such Member shall not be entitled to use of the Licensed Programs. 3.3 Capital Accounts. A separate Capital Account shall be maintained for each Member in accordance with the Tax Exhibit. 3.4 Capital Withdrawal Rights, Interest and Priority. Except as otherwise expressly provided in this Agreement, (i) no Member shall be entitled to withdraw, receive any return of or reduce such Member's Capital Contribution or Capital Account or to receive any distributions from the Company, (ii) no Member shall be entitled to demand or receive property other than cash in return for its Capital Contribution or as part of any Distribution, (iii) no Member shall be entitled to receive or be credited with any interest on any Capital Contribution or the balance in such Member's Capital Account at any time, and (iv) no Member shall have any priority over any other Member as to the return of the Capital Contribution of such Member or the balance in such Member's Capital Account. 3.5 Loans From Members. Any Member may make (but shall not be obligated to make) a loan to the Company in such amounts, at such times and on such terms and conditions as may be approved in good faith by the Manager. Loans by any Member to the Company shall not be considered as contributions to the capital of the Company. Except as provided in Section 3.6, no Member shall be obligated to guarantee or cause any other Person to guarantee personally or provide any personal collateral to secure the obligations of the Company. 3.6 Additional Provisions Regarding Guarantees. (a) If required by an institutional lender or lessor that is not related to or affiliated with a Member, each Member and its principal owner(s) and their respective spouse(s) (each, a "Guarantor" and collectively, the "Guarantors") shall guarantee the Member's Percentage Interest of such loan or lease. In the event any claim is made upon the Guarantors, or any of them, under such guarantees or with respect to any personal collateral pledged to secure such guarantees, each Member agrees to pay (subject to the maximum obligation of each Member under its guarantee) that portion of the payment to be made or of the expenses (including reasonable attorneys' fees) incurred in defending against such claim which is the Member's Percentage Interest in the Company. (b) The Members agree to coordinate and cooperate with each other in defending against any claim by any such creditor. Each Member agrees to indemnify and hold every other Member and its Guarantors harmless from and against any and all loss, liability, cost, damage or expense (including reasonable attorney's fees) resulting from the indemnifying party's default in his or its obligation set forth in this Section. The indemnification provisions of this Section are for the sole use and benefit of the Members and the Guarantors and may not be relied upon by any creditor of the Company, any creditor of the Members or any other third party. (c) The Company agrees to promptly pay, when due and payable, all principal, interest, and other amounts on, or in connection with such guaranteed loan and lease obligations. The Company farther agrees, subject to the provisions of the guarantees and the documents evidencing and securing such loan or lease, to indemnify and hold the Guarantors, and each of them, harmless from and against any and all loss, liability, damage, cost or expense (including reasonable attorneys' fees) which they, or any of them, may incur as a result of any claim made by the creditor under the guarantees as a result of the Company's default on the guaranteed obligations. 3.7 No Personal Liability. Except as otherwise expressly provided in this Agreement, no Member shall be personally liable for the return of any Capital Contributions of, or loans made by, the Members or any portion thereof and the return of Capital Contributions and repayment of loans shall be made solely from the Company's assets. The Members shall not be personally liable for the payment or performance of the debts and other obligations of the Company. 3.8 No Liability for Restoration of Negative Capital Account. Notwithstanding anything in this Agreement to the contrary, no Member shall have an obligation to contribute additional capital to the Company to restore a negative Capital Account balance to zero. ARTICLE IV ALLOCATIONS AND DISTRIBUTIONS 4.1 Non-Liquidation Cash Distributions. (a) Subject to any applicable contractual restrictions and the availability of cash, the Company shall make quarterly distributions to the Members in accordance with their respective Percentage Interests in an aggregate amount with respect to each taxable year of the Company equal to the Required Distribution. Such quarterly installments shall be estimated for the first three quarters of the year and shall be made within 20 days after the end of each such quarter, and the final quarterly installment shall be made within 60 days after the end of the year. If the Distributions made by the Company under this subsection (a) for any taxable year exceed the Required Distribution for such year, the next scheduled distribution(s) to the Members under this subsection (a) shall be reduced by the amount of such excess until such excess has been fully recovered by the Company. (b) The amount, if any, of Available Cash shall be determined by the Manager from time to time and shall be distributed to the Members in accordance with their respective Percentage Interests. 4.2 Liquidation Distributions. Liquidation Proceeds shall be distributed in the following order of priority: (a) To the payment of debts and liabilities of the Company (including to Members to the extent otherwise permitted by law) and the expenses of liquidation; then (b) To the setting up of such reserves as the Person required or authorized by law to wind up the Company's affairs may reasonably deem necessary or appropriate for any disputed, contingent or unforeseen liabilities or obligations of the Company, provided that any such reserves shall be paid over by such Person to an independent escrow agent, to be held by such agent or its successor for such period as such Person shall deem advisable for the purpose of applying such reserves to the payment of such liabilities or obligations and, at the expiration of such period, the balance of such reserves, if any, shall be distributed as hereinafter provided; then (c) The remainder to the Members in accordance with and to the extent of their respective positive Capital Account balances after taking into account the allocation of all Income or Loss pursuant to this Agreement for the taxable year(s) in which the Company is liquidated. 4.3 Profits, Losses and Distributive Shares of Tax Items. The Company's net income or net loss, as the case may be, for each taxable year of the Company, as determined in accordance with such method of accounting as may be adopted for the Company pursuant to Article VIII hereof, shall be allocated to the Members for both financial accounting and income tax purposes as set forth in this Article IV, except as otherwise provided for herein or unless all Members agree otherwise. 4.4 Allocation of Income, Loss and Credits. (a) Income or Loss (other than Income or Loss from liquidation transactions) and Credits (as those capitalized terms are defined in the Tax Exhibit) for each taxable year shall be allocated among the Members in accordance with their respective Percentage Interests. To the extent there is a change in the respective Percentage Interests of the Members during the year, Income, Loss and Credits shall be allocated among the pre-adjustment and post-adjustment periods as provided in the Tax Exhibit. (b) Income from liquidation transactions shall be allocated among the Members in the following order of priority: (i) To those Members, if any, with negative Capital Account balances (determined prior to taking into account any distributions pursuant to Section 4.2) in the ratio that such negative balances bear to each other until all such Members' Capital Account balances equal zero; then (ii) The remainder to the Members in accordance with their respective Percentage Interests. (c) Loss from liquidation transactions shall be allocated among the Members in the following order of priority: (i) To those Members, if any, with positive Capital Account balances (determined prior to taking into account any distributions pursuant to Section 4.2) in the ratio that such positive balances bear to each other until all such Members' Capital Account balances equal zero; then (ii) The remainder to the Members in accordance with their respective Percentage Interests. 4.5 Special Tax Rules. The special tax rules set forth in the Tax Exhibit shall override any other provision of this Article IV. 4.6 No Priority. Except as may be otherwise expressly provided in this Agreement, no Member shall have priority over any other Member as to Company income, gain, loss, credits and deductions or distributions. 4.7 Tax Withholding. Notwithstanding any other provision of this Agreement, the Manager is authorized to take any action that it determines to be necessary or appropriate to cause the Company to comply with any withholding requirements established under any federal, state or local tax law, including, without limitation, withholding on any distribution to any Member. For all purposes of this Article IV, any amount withheld on any distribution and paid over to the appropriate governmental body shall be treated as if such amount had in fact been distributed to the Member. 4.8 Reserves. The Manager shall have the right to establish, maintain and expend reasonable Reserves to provide for working capital, for debt service, for expected operating deficits, for facility expansions or replacements, and for such other purposes as the Manager may deem necessary or advisable. ARTICLE V MEMBERS' MEETINGS 5.1 Meetings of Members; Place of Meetings. If required by the Act, an annual meeting of the Members shall be held on the second __________ in __________ of each year or on such other date as the Members shall determine. Regular monthly, quarterly or other periodic meetings may be held upon the determination of the Manager or a Majority in Interest to hold such meetings. Special meetings may be called at any time by the Manager or any Member. Meetings (whether annual, regular or special meetings) of the Members may be held for any purpose or purposes, unless otherwise prohibited by statute. All meetings of the Members shall be held at such place within the Greater Topeka area as shall be stated in the notice of the meeting or at any other location agreed upon by the Manager and all of the Members. The Manager and Members of the Company may participate in a meeting by means of conference telephone or similar communication equipment whereby the Manager and all the Members participating in the meeting can hear each other, and participation in a meeting in this manner shall constitute presence in person at the meeting. 5.2 Quorum; Voting Requirement. The presence, in person or by valid proxy, of a Majority in Interest shall constitute a quorum for the transaction of business by the Members. The affirmative vote of a Majority in Interest shall constitute a valid decision of the Members, except where a unanimous vote is required by the Act, the Articles or this Agreement. 5.3 Designated Representatives; Proxies. (a) Each Member that an entity shall designate in writing to the Company and the other Members the names of up to two officers, directors, partners, members, employees or other affiliates of the Member who are to serve as the "Designated Representatives" of the Member at all meetings and in all votes, consents and approvals of the Members. The designated individual(s) shall be the official Designated Representative(s) of the designating Member. One of such Designated Representatives shall be the primary voting representative of the Member and the other (if any) shall be the alternative voting representative. Both Designated Representatives of a Member may attend meetings but only one Designated Representative shall cast the Member's official vote on any matter. The initial Designated Representatives of the entity Members are as shown on Schedule A and are hereby accepted by the other Members. If neither Designated Representative of a Member is able to attend a particular meeting, the Member may designate in writing another officer, director, partner, member, employee or affiliate of the Member to have voting privileges for that specific meeting. A Member may change either or both of its Designated Representatives at any time by giving written notice thereof to the Company and the other Members. No compensation shall be paid by the Company to any Designated Representative for his or her services in such capacity. (b) At any meeting of the Members, every Member (acting through a Designated Representative if applicable) having the right to vote shall be entitled to vote in person or by written proxy signed by such Member appointing another Member to vote for such Member. No proxy may be given to any Person other than another Member. 5.4 Notice. Written notice stating the place, day and hour of each meeting and, in the case of a special meeting, the purpose for which the meeting is called shall be delivered not less than ten days nor more than 60 days before the date of the meeting, either personally or by mail, by or at the direction of the person calling the meeting, to each Member entitled to vote at such meeting. Notice to Members, if mailed, shall be deemed delivered as to any Member when deposited in the United States mail, addressed to the Member at its usual place of business or last known address, with postage prepaid. 5.5 Waiver of Notice. When any notice is required to be given to any Member, a waiver thereof in writing signed by the Member, whether before, at, or after the time stated therein, or any attendance of the Member at the meeting (other than at the beginning of the meeting to object to the holding of the meeting), shall be equivalent to the giving of such notice. 5.6 Action Without Meeting. The Members agree that a meeting of the Members shall not be required for the Members to make any decision or to take any action to be made or taken by the Members by a Majority in Interest, or unanimously. Any decision or action required or permitted to be taken by the Members may be taken without a meeting if the action is evidenced by one or more written consents or documents constituting or describing the action to be taken, signed by a Member or Members having the requisite aggregate Percentage Interests. ARTICLE VI MANAGEMENT 6.1 The Manager. (a) The business and affairs of the Company shall be managed by and under the direction of the Manager. The Manager may execute on behalf of the Company all instruments, documents and contracts, exercise all of the powers of the Company, and do all such lawful acts and things, that are not by law, the Articles or this Agreement directed or required to be exercised or done by the Members. Any decision or act of the Manager within the scope of its power and authority granted hereunder shall control and shall bind the Company. No Member, in such capacity, shall have any authority to bind the Company. (b) The Manager is First American Capital Corp. The Manager may resign from such position at any time upon giving 30 days' prior written notice to the Members. Upon the death, mental incapacity or resignation of a Manager, a Majority in Interest shall appoint or elect a replacement Manager. 6.2 Authority of the Manager. In addition to the rights and authority given to the Manager elsewhere in this Agreement, but subject to the limitations set forth in Sections 6.3 and 6.4, the Manager shall have the right, power and authority from time to time to make such decisions and take such actions for and on behalf of the Company as the Manager deems necessary or appropriate to operate the Business and, not in limitation of the foregoing, to make the following decisions and take the following actions on behalf of the Company, all subject to any limitations set forth in this Agreement or in the Act: (a) Install the Licensed Programs on a work station located at the premises of the Manager; (b) Cause United Systems and Software, Inc. to maintain and service the Licensed Programs in accordance with the License Agreement; (c) Make all decisions relating to the use of the Licensed Programs; (d) Exercise all rights and perform all obligations as the Licensee under the License Agreement, including the execution of any and all amendments to the License Agreement; (e) Execute any sublicenses relating to the Licensed Programs; (f) Acquisition of insurance coverages for the protection or benefit of the Company or the Property; (g) Temporary investment of funds of the Company in short term investments where there is appropriate safety of principal; (h) To: (1) bring or defend, pay, collect, compromise, arbitrate, resort to legal action or otherwise adjust claims or demands of or against the Company; (2) make or revoke any election available to the Company under any tax law; (3) enforce the Company's rights and perform its obligations under all agreements to which the Company is a party; (4) carry out the decisions of the Members made pursuant to this Agreement; (5) prepare, execute, and file any documents required to be filed with any government authority; and (6) expend Company funds necessary or appropriate to effect any of the foregoing; (i) Negotiation and execution of all documents and agreements, and the exercise of all rights and remedies, of the Company in connection with the foregoing. The Company, through any Member, Majority in Interest, or otherwise, shall not make any changes or additions to the Licensed Programs without the consent and approval of the Manager. 6.3 Limitations on Authority. (a) The Manager may take an action or execute an agreement, instrument or document for any transaction not "in the ordinary course of business or affairs" in accordance with the power and authority set forth in this Agreement, subject to the limitations set forth in this Agreement. Whenever the consent or approval of the Members is required in this Agreement for any transaction or act of the Company, such consent or approval shall be required of Members holding the applicable aggregate Percentage Interests as stated in this Agreement and there shall be no requirement that the majority of the Members, by number, approve or consent to any transaction or act. For purposes of this Agreement, actions and/or transactions "in the ordinary course of business or affairs" or "in the usual way of the business or affairs" shall include, but not be limited to, the exercise by the Manager of its authority as specified in Section 6.2, except as prohibited or limited by Section 6.3(b), (c) or (d) or elsewhere in this Agreement, and the Members hereby approve of such actions and/or transactions and agree that they may be taken by the Manager without obtaining any further approval of the Members. (b) The Company, through the Manager, Majority in Interest or otherwise, shall not take any of the following actions unless approved or authorized by all Members: (i) Any action required by any provision of this Agreement or by law to be approved or authorized by all Members; (ii) Terminate the License Agreement; (iii) Cause the Company to file for bankruptcy; (iv) Cause the Company to merge or consolidate with any other entity. (c) The Company, through the Manager, Majority in Interest or otherwise, shall not (i) acquire any assets from any Member or affiliate of a Member unless the assets are required by the Company for the Business and the acquisition terms are at least as favorable to the Company as would be available from nonaffiliated third parties or (ii) sell any assets to any Member or affiliate of a Member unless the terms of such sale are at least as favorable to the Company as would be available from nonaffiliated third parties. 6.4 Acknowledgement of Members. The Members acknowledge and agree as follows: (a) the License Programs shall be installed on a workstation or server located at the premises of the Manager; (b) each Member shall have access to the License Programs, but each Member will assume sole responsibility for selection, operation, maintenance and support for its hardware, operating system and internet connection needed to access the License Programs; and (c) the Manager and the Company shall not be liable for any delays or malfunctions that occur with respect to each Member's hardware, operating system and/or internet connection, including, without limitations, any outages, interruptions of service or down time occasioned thereby. 6.5 Compensation; Reimbursements. (a) Except as provided in subsection (b) below or as approved by a Majority in Interest, no Member shall be entitled to compensation for any services it may render to or for the Company. Except as otherwise expressly provided in this Agreement, the Manager and each Member shall be entitled to reimbursement from the Company for all reasonable direct out-of-pocket expenses incurred at the request or direction of the Manager on behalf of the Company as contemplated in this Agreement. (b) The provisions of this Section 6.5 shall not prohibit the Company from entering into an agreement with a Member, the Manager or an officer, director, employee, owner or other affiliate of a Member for such Person to render specific services to the Company and to receive reasonable compensation for such services as approved in good faith by a Majority in Interest. (c) The Manager shall be entitled to and shall receive reasonable compensation for hosting and servicing the Licensed Programs as determined from time to time by the Members. (d) Any compensation paid to a Member or Manager for its services shall be treated as a "guaranteed payment" under Section 707(c) of the Code. 6.6 Other Business Ventures; Competition; Confidentiality. (a) Subject to subsection (b) below, any Member or Manager and its affiliates may engage in or possess an interest in other real property or business ventures of every nature and description, independently or with others, whether or not similar to or in competition with the business of the Company, and neither the Company, the Manager nor the Members shall have, by virtue of this Agreement or any law, any right in or to such other real property or business ventures or to any ownership or other interest in or the income or profits derived therefrom. No Manager or Member shall be obligated to present any particular investment or business opportunity to the Company even if such opportunity is of a character which, if presented to the Company, could be taken by the Company, and each Manager and Member shall have the right to take for its own account and with others or to recommend to others any such opportunity. (b) All non-public information regarding the Company, the Manager and the Members shall be treated with confidentiality by the Company, the Manager and the Members, and shall not be disclosed by the Company, the Manager or the Members to third parties (other than as necessary in the ordinary course of and to further the Business) without the prior written consent of all of the Members; provided, however, the Company, the Manager and the Members may disclose such information to their respective attorneys, accountants and other professional advisors who have a need for such information provided that such persons are informed of the confidential nature of the information and are directed to maintain the confidentiality thereof. The confidentiality obligations of the Members shall survive any termination of the membership of any Member in the Company. The confidentiality obligations of the Manager shall survive any termination of such status. (c) The Manager shall not be required to devote all of its time and business efforts to the affairs of the Company, but the Manager shall devote so much of its time and attention as is reasonably necessary and advisable to manage the affairs of the Company to the best advantage of the Company. 6.7 Officers. (a) Required Officers. The officers of the Company shall be elected or appointed from time to time by the Manager and shall include a President and Secretary. The Members may also elect or appoint a Treasurer and/or one or more Vice Presidents, Assistant Secretaries and Assistant Treasurers. Any number of offices may be held by the same person, unless this Agreement otherwise provides. (b) Election of Officers. A Majority in Interest may elect, appoint and remove the officers from such positions from time to time. Until further action by a Majority in Interest, the officers of the Company shall be: Rick Meyer President Mike Donnelly Secretary, Treasurer Mike Fink Vice President (c) Compensation of Officers. The salaries and compensation of all officers and agents shall be fixed by the Board of Managers. (d) Duties of President. The President shall be the chief executive officer and chief operating officer of the Company with all duties normally associated with such positions, and shall preside at all meetings of the Members. The President shall have general management of the day to day operations of the Company and shall cause all decisions of the Members to be carried into effect. (e) Duties of Vice President. In the absence of the President or in the event of the President's inability or refusal to act, the Vice President, if any (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the Members, or in the absence of any designation, then in the order of their election or appointed), shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. The Vice Presidents shall perform such other duties and have such other powers as may be prescribed by the Members or the President. (f) Duties of Secretary. The Secretary shall attend all meetings of the Members and record all the proceedings of the meetings of the Members in a book to be kept for that purpose. The Secretary shall perform such other duties as may be prescribed by the Members or the President. (g) Duties of Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Company and shall be responsible for preparing all financial statements. ARTICLE VII LIABILITY AND INDEMNIFICATION 7.1 Limitation of Liability. To the extent permitted by law, a Member, the Manager and their respective officers, directors, partners, trustees, members, employees and agents shall not be liable for damages or otherwise to the Company or any Member for any act, omission or error in judgment performed, omitted or made by it or them in good faith and in a manner reasonably believed by it or them to be within the scope of authority granted to it or them by this Agreement and in the best interests of the Company, provided that such act, omission or error in judgment does not constitute bad faith, fraud, gross negligence, willful misconduct or breach of fiduciary duty. 7.2 Indemnification. The Company may indemnify each Member, the Manager and their respective officers, directors, partners, trustees, members, employees and agents to the fullest extent permitted by the Act, but such indemnity shall not extend to any conduct by the party seeking indemnification that is determined by a court of competent jurisdiction to constitute bad faith, fraud, gross negligence, willful misconduct or breach of fiduciary duty. Any indemnity under this Section 7.2 shall be paid from, and only to the extent of, Company assets and no Member shall have any personal liability on account thereof. 7.3 No Application to Independent Contractor Status. This provision of this Article VII shall not apply to any services or acts of a Member or Manager as an independent contractor of the Company. ARTICLE VIII ACCOUNTING AND BANK ACCOUNTS 8.1 Fiscal Year and Accounting Method. The fiscal year and taxable year of the Company shall be as designated by the Manager in accordance with the Code. The Manager shall determine the accounting method to be used by the Company. 8.2 Books and Records. The books and records of the Company shall be maintained at the principal office of the Company. Each Member (or such Member's designated agent or representative) shall have the right during ordinary business hours and upon reasonable notice to inspect and copy (at such Member's own expense) all books and records of the Company (other than those containing trade secrets or similar confidential information) for any purpose reasonably related to the Member's Interest. 8.3 Financial Reports. Within 90 days after the end of each fiscal year of the Company, the Company shall cause to be prepared and delivered to each Member financial statements for the Company as of the end of such period. 8.4 Taxation as Partnership. The Company shall be treated as a "partnership" for Federal and state income tax purposes. All provisions of this Agreement and the Articles shall be construed and applied so as to preserve that tax status. 8.5 Tax Returns and Elections; Tax Matters Partner. (a) The Company shall cause to be prepared and timely filed all federal, state and local income tax returns or other returns or statements required by applicable law. The Company shall claim all deductions and make such elections for federal or state income tax purposes which the Manager reasonably believes will produce the most favorable tax results for the Members. (b) First American Capital Corp. is hereby designated as, and hereby accepts the position of, the Company's "Tax Matters Partner," as defined in the Code. In such capacity, the Tax Matters Partner is hereby authorized and empowered to act for and represent the Company and each of the Members before the Internal Revenue Service in any audit or examination of any Company tax return and before any court selected by the Tax Matters Partner for judicial review of any adjustment assessed by the Service. Each of the Members consents to and agrees to become bound by all actions of the Tax Matters Partner, including any contest, settlement or other action or position which the Tax Matters Partner may deem proper under the circumstances. The Members specifically acknowledge, without limiting the general applicability of this Section, that the Tax Matters Partner shall not be liable, responsible or accountable in damages or otherwise to the Company or any Member with respect to any action taken by it in its capacity as a "Tax Matters Partner," except for gross negligence or willful misconduct. All reasonable out- of-pocket expenses incurred by the Tax Matters Partner in such capacity shall be considered expenses of the Company for which the Tax Matters Partner shall be entitled to full reimbursement. 8.6 Section 754 Election. In the event a distribution of Company assets occurs which satisfies the provisions of Section 734 of the Code or in the event a transfer of an Interest occurs which satisfies the provisions of Section 743 of the Code, upon the determination of the Manager, the Company may elect, pursuant to Section 754 of the Code, to adjust the basis of the Company's property to the extent allowed by such Section 734 or 743 and shall cause such adjustments to be made and maintained. Any additional accounting expenses incurred by the Company in connection with making or maintaining any such basis adjustment shall be reimbursed to the Company from time to time by the distributee or transferee who benefits from the making and maintenance of such basis adjustment. Each Member shall provide the Company with such information and such other cooperation as may be necessary to receive from such Member in order for such election to be made and effected. 8.7 Bank Accounts. All funds of the Company shall be deposited in a separate bank, money market or similar account(s) approved by the Manager and in the Company's name. Withdrawals (by check or otherwise) therefrom shall be made only by the signature of persons authorized to do so by the Manager. ARTICLE IX TRANSFERS OF INTERESTS 9.1 General Restrictions. No Member may Transfer all or any part of such Member's Interest (including any Distribution rights associated with such Interest), except (i) as otherwise expressly permitted in this Agreement, or (ii) with the unanimous written consent of all Members. Any purported Transfer of all or any part of an Interest in violation of the terms of this Agreement shall be null and void and of no effect. A permitted Transfer shall be effective as of the date specified in the instruments relating thereto. Any assignee desiring to make a further Transfer shall be subject to all of the provisions of this Article IX to the same extent and in the same manner as any other Member desiring to make any Transfer. 9.2 Permitted Economic Transfers. Each Member shall have the right to Transfer all or part of the Distribution rights or other economic interests (but not to substitute the assignee as a Substitute Member in his place, except in accordance with Section 9.3 below), by a written instrument, provided that: (a) the Transfer would not result in the "termination" of the Company pursuant to Section 708 of the Code; (b) a Majority in Interest (determined by excluding the Member making the Transfer) has consented in writing to such Transfer and assignee; (c) no permitted Transfer to a minor or incompetent shall be made other than in trust for the benefit of such person or in custodianship under the Uniform Transfers to Minors Act or similar legislation; (d) the assignee agrees in writing that the assigned rights remain subject to all of the terms and conditions of this Agreement and may not be further Transferred except in compliance with this Agreement; and (e) If required by the Company, the Company receives an opinion of counsel (which counsel and opinion shall be satisfactory to the Company's counsel) to the effect that registration of the security being Transferred is not required under the federal and applicable state securities laws in connection with such Transfer. Notwithstanding the foregoing, the following Transfers shall not require the consent of a Majority in Interest under clause (b) as long as the Transfers comply with clauses (a), (c), (d) and (e) above: (i) Transfers pursuant to Section 3.2(b); (ii) Transfers in compliance with Sections 9.7(d) or 9.8; (iii) Transfers described in Section 10.1(c)(B). 9.3 Substitute Members. No assignee of all or part of a Member's Interest shall become a Substitute Member in place of the assignor unless and until: (a) The Transfer complies with the provisions of Section 9.2. (b) Except for Transfers under Section 3.2(b), Section 9.7(d), and Section 9.8, the assignor Member (if living) has stated such intention in the instrument of assignment; (c) The assignee has executed an instrument accepting and adopting the terms and provisions of this Agreement as a Member; (d) The assignor or assignee has paid all reasonable expenses of the Company in connection with the admission of the assignee as a Substitute Member; and (e) Except for Transfers under Section 3.2(b), Section 9.7(d) and Section 9.8, all of the other Members have consented in writing to such assignee becoming a Substitute Member, which consent may be withheld for any or no reason. Upon satisfaction of all of the foregoing conditions with respect to a particular assignee, the Manager shall cause this Agreement (including Schedule A) and, if necessary, the Articles to be duly amended to reflect the admission of the assignee as a Substitute Member. 9.4 Effect of Admission as a Substitute Member. Unless and until admitted as a Substitute Member pursuant to Section 9.3, a permitted assignee of all or a part of a Member's Interest shall not be entitled to exercise any of the governance or other rights or powers of a Member in the Company (all of which shall remain with the assignor Member), including, without limitation, the right to vote, grant approvals or give consents with respect to such Interest, the right to require any information or accounting of the Company's business or the right to inspect the Company's books and records. Such permitted assignee shall only be entitled to receive, to the extent of the Interest transferred to him, the Distributions to which the assignor would be entitled. A permitted assignee who has become a Substitute Member has, to the extent of the Interest transferred to him, all the rights and powers of the Person for whom he is substituted as the Member and is subject to the restrictions and liabilities of a Member under this Agreement and the Act. Upon admission of a permitted assignee as a Substitute Member, the assignor of the Interest so acquired by the Substitute Member shall cease to be a Member of the Company to the extent of such Interest. A Person shall not cease to be a Member upon assignment of all of such Member's Interest unless and until the assignee(s) becomes a Substitute Member. 9.5 Additional Members. Additional Members (as distinguished from Substitute Members) may be admitted to the Company only by the unanimous agreement of the Members. Upon any such admission, the Manager shall determine in good faith (i) the Fair Value of the Capital Contribution being made by the additional Member in relation to the then Fair Value of the Company, and (ii) the Percentage Interest to be held by the new Member on a prospective basis, and shall proportionately adjust the Percentage Interests and, if applicable, the Capital Accounts of all of the then existing Members on a prospective basis. 9.6 Withdrawal, Retirement or Resignation of a Member. No Member shall have the right or power, and no Member shall attempt, to withdraw, resign or retire from the Company. Any act or purported act of a Member in violation of this Section shall be null and void and of no effect. 9.7 Right of First Refusal. If at any time a Member (the "Selling Member") desires to Transfer all (but not less than all) of the Distribution rights associated with its Interest (the "Subject Interest") to a third party pursuant to a bona fide offer to purchase for cash, or cash and notes, the following shall apply: (a) The Selling Member shall give to each other Member(s) (collectively the "Other Members") a written offer describing the Subject Interest, the name of the proposed purchaser, the price and payment terms and other terms and conditions offered by the proposed purchaser (the "Offer"). (b) The Other Members shall have 30 days from the receipt of the Offer to accept the terms and conditions set forth in the Offer, as buyer, by giving written notice thereof to the Selling Member. Subject to subsection (c) below, each Other Member shall have the right to purchase a portion of the Subject Interest equal to (i) a fraction the numerator which is the Percentage Interest of the Other Member and the denominator of which is the sum of the Percentage Interests of all of the Other Members who desire to purchase part of the Subject Interest or (ii) such other portion as shall be agreed upon by all such Other Members who desire to so purchase. (c) If some or all of the Other Members agree to purchase all (but not less than all) of the Subject Interest, then the Selling Member and the Other Members who are purchasing shall close the purchase upon the terms and conditions of the Offer within 60 days after the Offer is made (or if later the closing date set forth in the Offer). If the purchase price set forth in the Offer includes any secured notes, a pledge of the Subject Interest as collateral by the purchasing Other Members shall be deemed equivalent to the collateral described in the Offer. (d) If the Other Members fail to agree to purchase all of the Subject Interest within the time period set out above, the Selling Member shall have the right (subject to compliance with the provisions of Section 9.2 (excluding subsection (b) thereof) and if the purchaser is to become a Substitute Member, subject to Section 9.3 (excluding subsection (e) thereof)) to consummate the sale or conveyance of all of the Subject Interest so long as (i) the purchaser is the proposed purchaser named in the Offer, (ii) the price, payment and other terms are at least as favorable to the Selling Member as those set forth in the Offer, (iii) the closing occurs on or before the date set forth in the Offer (but no more than 120 days after the date of the Offer). (e) Any purchaser of a Subject Interest under subsection (d) above desiring to make a further sale or conveyance of any part of the Subject Interest shall be subject to this Section. 9.8 Option to Purchase Upon Change in Control of Member. (a) Upon a Change in Control (defined below) of any Member (the "Transferring Member"), the Company (or its assigns) may exercise an option to purchase all (but not less than all) of such Transferring Member's Interest. The Company (or its assigns) may exercise the option granted to it herein at any time within sixty (60) days after the Company's receipt of written notice of the Change in Control by delivering written notice of the election to exercise the option to the Transferring Member within such sixty (60) day period. If the option granted to the Company is not timely exercised, the Transferring Member shall remain a Member subject to this Agreement. (b) The purchase price for the purchase of the Transferring Member's Interest upon the exercise of the option by the Company under this Section 9.8 shall be the Agreed Value of the Company at the time of the exercise of the option multiplied by the Percentage Interest of the Transferring Member. In the event there is no effective Agreed Value at the time of exercise of the option, the purchase price shall be the Book Value of the Company at the time of the exercise of the option multiplied by the Percentage Interest of the Transferring Member. (c) The closing of such purchase and sale described in this Section 9.8 shall take place at the office of the Company at a date designated by the Manager, within ten (10) days of the expiration of the option granted to the Company in Section 9.7(a). At the closing, the Transferring Member shall execute and deliver to the Company (or its assigns) any and all instruments as shall be reasonably required by the Company (or its assigns) to effect the transfer of the Transferring Member's Interest, free and clear of all liens, claims and encumbrances. (d) The purchase price shall be paid in cash or its equivalent at the closing by the Company (or its assigns) to the Transferring Member. (e) For purposes of this Agreement, a "Change in Control" shall mean (i) the sale of all or substantially all of the assets of the Member, (ii) any merger, consolidation or business combination pursuant to which the owners of the Member immediately prior to such transaction no longer own securities of the Member or the surviving entity possessing 51% or more of the total voting power, or (iii) a transfer, either involuntary or voluntary, in more that 50% of the ownership interest of such Member to any Person other than an existing owner of such Member. (f) Upon the purchase of the Transferring Member's Interest in accordance with this Section, the Company shall cause any guaranty given by or collateral pledged by the Transferring Member or its affiliates to secure obligations of the Company to be released by the secured party and shall repay any loans made by the Transferring Member and its affiliates to the Company. ARTICLE X DISSOLUTION AND TERMINATION 10.1 Events Causing Dissolution. The Company shall be dissolved upon the first to occur of the following events: (a) The expiration of the period (if any) fixed for the duration of the Company, as set forth in the Articles, unless extended by the unanimous written consent of the Members. (b) The written agreement of a Majority in Interest to dissolve. (c) Any other event causing a dissolution of the Company under the provisions of the Act, except that (i) a vote of the Members to dissolve shall cause a dissolution only if it satisfies clause (b) above or the next sentence, and (ii) the death, withdrawal, retirement, resignation, Bankruptcy or dissolution of a Member or the occurrence of any other event that terminates the continued membership of a Member or an event of withdrawal of a Member shall not cause the Company to be dissolved or its affairs to be wound up. Upon the occurrence of any such event, the Company shall be continued without dissolution, unless within 90 days following the occurrence of such event, the other Members unanimously agree in writing to dissolve the Company. If the Company is not so dissolved, the business of the Company shall continue (A) with the affected Member, if living, remaining as a Member, or (B) if such Interest is transferred to a successor holder by operation of law, with such assignee being a permitted assignee of the Distribution rights associated with such Interest, but such assignee shall become a Substitute Member only in accordance with Section 9.3 above. 10.2 Effect of Dissolution. Except as otherwise provided in this Agreement, upon the dissolution of the Company, the Members shall take such actions as may be required pursuant to the Act and shall proceed to wind up, liquidate and terminate the business and affairs of the Company. In connection with such winding up, a Majority in Interest shall have the authority to liquidate and reduce to cash (to the extent necessary or appropriate) the assets of the Company as promptly as is consistent with obtaining a fair and reasonable value therefor, to apply and distribute the proceeds of such liquidation and any remaining assets in accordance with the provisions of Section 10.3 below, and to do any and all acts and things authorized by, and in accordance with, the Act and other applicable laws for the purpose of winding up and liquidation. 10.3 Application of Proceeds. Upon dissolution and liquidation of the Company, the assets of the Company shall be applied and distributed in the order of priority set forth in Section 4.2. ARTICLE XI MISCELLANEOUS 11.1 Title to Assets. Title to the Property and all other assets acquired by the Company shall be held in the name of the Company. No Member shall individually have any ownership interest or rights in the Property or any other assets of the Company, except indirectly by virtue of such Member's ownership of an Interest. No Member shall have any right to seek or obtain a partition of the Property or other assets of the Company, nor shall any Member have the right to any specific assets of the Company upon the liquidation of or any distribution from the Company. 11.2 Nature of Interest in the Company. A Member's Interest shall be personal property for all purposes. 11.3 Organizational Expenses. With the approval of the Manager, the Company shall directly pay or reimburse the Members or give them credit toward their initial Capital Contributions for the direct out-of-pocket expenses incurred by them on behalf of the Company in connection with the creation and formation of the Company (including, without limitation, the preparation of the Articles and this Agreement). 11.4 Powers of Attorney. Each power of attorney granted by each Member under this Agreement is a durable power of attorney, is coupled with an interest, is irrevocable, and shall survive the death, incapacity, dissolution, termination or bankruptcy of the Member and/or the Transfer by the Member of all or part of such Member's Interest. 11.5 Notices. Except for the notices required by Section 5.4 which shall be governed by that section, any notice, demand, request, call, offer or other communication required or permitted to be given by this Agreement or by the Act shall be sufficient if in writing and if hand delivered or sent by mail to the address of the Member as it appears on the records of the Company. All mailed notices shall be deemed to be given when deposited in the United States mail, postage prepaid. 11.6 Waiver of Default. No consent or waiver, express or implied, by the Company or a Member with respect to any breach or default by another Member hereunder shall be deemed or construed to be a consent or waiver with respect to any other breach or default by such Member of the same provision or any other provision of this Agreement. Failure on the part of the Company or a Member to complain of any act or failure to act of another Member or to declare such other Member in default shall not be deemed or constitute a waiver by the Company or the Member of any rights hereunder. 11.7 No Third Party Rights. None of the provisions contained in this Agreement shall be for the benefit of or enforceable by any third parties, including, without limitation, creditors of the Company. 11.8 Set-Off. Without limiting any other right the Company may have, the Company, in its sole discretion, may set off against any amounts due a Member from the Company any and all liquidated amounts then or thereafter owed to the Company by the Member in any capacity, whether or not such amount or the obligations to pay such amount owed by the Member is then due. 11.9 Entire Agreement; Amendment. This Agreement (together with the Articles and any other agreements referenced herein) contains the entire agreement between the Members, in such capacity, and the Manager, in such capacity, relative to the formation, operation and continuation of the Company. Except as otherwise expressly provided elsewhere in this Agreement, this Agreement shall not be altered, modified or changed except by a written document duly executed by all Members at the time of such alteration, modification or change. 11.10 Severability. In the event any provision of this Agreement is held to be illegal, invalid or unenforceable to any extent, the legality, validity and enforceability of the remainder of this Agreement shall not be affected thereby and shall remain in full force and effect and shall be enforced to the greatest extent permitted by law. 11.11 Binding Agreement. Subject to the restrictions on the disposition of Interests herein contained, the provisions of this Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective heirs, personal representatives, successors and permitted assigns. 11.12 Headings. The headings of the articles and sections of this Agreement are for convenience only and shall not be considered in construing or interpreting any of the terms or provisions hereof. 11.13 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which shall constitute one agreement that is binding upon all of the parties hereto, notwithstanding that all parties are not signatories to the same counterpart. This Agreement may be delivered by facsimile transmission. This Agreement shall be considered to have been executed by a person if there exists a photocopy, facsimile copy, or a photocopy of a facsimile copy of an original hereof or of a counterpart hereof which has been signed by such person. Any photocopy, facsimile copy, or photocopy of facsimile copy of this Agreement or a counterpart hereof shall be admissible into evidence in any proceeding as though the same were an original. 11.14 Representations. Each Member hereby represents to the Company and each other Member that: (i) if an entity, the Member is duly organized, validly existing and in good standing under the laws of its state of formation, (ii) the execution, delivery and performance of this Agreement has been duly authorized by all necessary and appropriate action, (iii) this Agreement constitutes a valid and binding obligation of the Member, enforceable against it in accordance with the terms hereof, and (iv) the Interest is being acquired by the Member (A) solely for investment for the Member's own account and not as nominee or agent or otherwise on behalf of any other Person., and (B) not with a view to or with any present intention to reoffer, resell, fractionalize, assign, grant any participation interest in, or otherwise distribute the Interest. (a) Each Member agrees to indemnify and hold harmless the Company and each of the other Members from and against any and all damage, loss, liability, cost and expense (including reasonable attorneys' fees) which any of them may incur as a result of the failure of any representation by the indemnifying Member to be accurate. 11.15 Agreement Supersedes Act. The provisions of this Agreement shall supersede and control over any and all provisions of the Act to the contrary, to the maximum extent permitted by the Act. 11.16 Dispute Resolution. To the extent feasible, the parties desire to resolve any controversies or claims arising out of or relating to this Agreement through discussions and negotiations between each other. All parties agree to attempt to resolve any disputes, controversies or claims arising out of or relating to this Agreement by face-to-face negotiation with the other party. In the event that, after good faith discussions, such controversies or claims cannot be resolved solely between the parties, the parties may agree upon any type of formal or informal dispute resolution that is feasible under the circumstances, including referral of any such dispute, controversy or claim to any third party for resolution. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above. THE COMPANY: FIRST COMPUTER SERVICES, LLC By: /s/ Rick Meyer Rick Meyer, President THE MANAGER: FIRST AMERICAN CAPITAL CORP. By: /s/ Rick Meyer Rick Meyer Its: President THE MEMBERS: FIRST AMERICAN CAPITAL CORP. By: /s/ Rick Meyer Rick Meyer Its: President FIRST ALLIANCE CORPORATION By: /s/ Mike Fink Mike Fink Its: President SCHEDULE A LIST OF MEMBERS (12/01/2001) E.I.N. 43-1933433 Name and Address Designated Representative(s) Percentage Interest Initial Capital Contribution First American Capital Corp. 1303 SW First American Place Topeka, KS 66604 Tax I.D. # 48-1187574 Rick Meyer (Primary) Mike Donnelly (Alternate) 50.00% First Alliance Corporation 2285 Executive Dr., Suite 308 Lexington, KY 40505 Tax I.D. # 61-1242009 Mike Fink (Primary) Tom Evans (Alternate) 50.00% SCHEDULE B TAX EXHIBIT 1. As used in this Schedule, the following terms shall have the following meanings, unless the context otherwise specifies: "Adjusted Capital Account Deficit" means, with respect to any Member, the deficit balance, if any, in such Member's Capital Account as of the end of the relevant fiscal year, after giving effect to the following adjustments: (i) increased for any amounts such Member is unconditionally obligated to restore and the amount of such Member's share of Company Minimum Gain and Member Minimum Gain after taking into account any changes during such year; and (ii) reduced by the items described in Treasury Regulation sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6). "Company Minimum Gain" shall have the same meaning as partnership minimum gain set forth in Treasury Regulation section 1.704-2(d). Company Minimum Gain shall be determined, first, by computing for each Nonrecourse Liability any gain which the Company would realize if the Company disposed of the property subject to that liability for no consideration other than full satisfaction of such liability and, then, aggregating the separately computed gains. For purposes of computing gain, the Company shall use the basis of such property which is used for purposes of maintaining Capital Accounts under Section 3.3 hereof. In any taxable year in which a Revaluation occurs, the net increase or decrease in Company Minimum Gain for such taxable year shall be determined by: (1) calculating the net decrease or increase in Company Minimum Gain using the current year's book value and the prior year's amount of Company Minimum Gain, and (2) adding back any decrease in Company Minimum Gain arising solely from the Revaluation. "Credits" means all investment and other tax credits allowed by the Code with respect to activities of the Company or the Property. "Income" and "Loss" mean, respectively, 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 Code Section 703(a), except that for this purpose (i) all items of income, gain, deduction or loss required to be separately stated by Code Section 703(a)(1) shall be included in taxable income or loss; (ii) tax exempt income shall be added to taxable income or loss; (iii) any expenditures described in Code Section 705(a)(2)(B) (or treated as Code Section 705(a)(2)(B) expenditures pursuant to Treasury Regulation section 1.704-1(b)(2)(iv)(i)) and not otherwise taken into account in computing taxable income or loss shall be subtracted; and (iv) taxable income or loss shall be adjusted to reflect any item of income or loss specifically allocated in Article IV. "Member Minimum Gain" shall have the same meaning as partner nonrecourse debt minimum gain as set forth in Treasury Regulation section l.704-2(i)(3). With respect to each Member Nonrecourse Debt, Member Minimum Gain shall be determined by computing for each Member Nonrecourse Debt any gain which the Company would realize if the Company disposed of the property subject to that liability for no consideration other than full satisfaction of such liability. For purposes of computing gain, the Company shall use the basis of such property which is used for purposes of maintaining Capital Accounts. In any taxable year in which a Revaluation occurs, the net increase or decrease in Member Minimum Gain for such taxable year shall be determined by: (1) calculating the net decrease or increase in Member Minimum Gain using the current year's book value and the prior year's amount of Member Minimum Gain, and (2) adding back any decrease in Member Minimum gain arising solely from the Revaluation. "Member Nonrecourse Debt" shall have the same meaning as partner nonrecourse debt set forth in Treasury Regulation section 1.704-2(b)(4). "Member Nonrecourse Deductions" shall have the same meaning as partner nonrecourse deductions set forth in Treasury Regulation section 1.704-2(i)(2). Generally, the amount of Member Nonrecourse Deductions with respect to a Member Nonrecourse Debt for a fiscal year equals the net increase during the year in the amount of Member Minimum Gain (determined in accordance with Treasury Regulation section 1.704-2(i)) reduced (but not below zero) by the aggregate distributions made during the year of proceeds of a Member Nonrecourse Debt and allocable to the increase in Member Minimum Gain, determined according to the provisions of Treasury Regulation section 1.704-2(i). "Nonrecourse Deduction" shall have the same meaning as nonrecourse deductions set forth in Treasury Regulation section 1.704-2(b)(1). Generally, the amount of Nonrecourse Deductions for a fiscal year equals the net increase in the amount of Company Minimum Gain (determined in accordance with Treasury Regulation section 1.704-2(d)) during such year reduced (but not below zero) by the aggregate distributions made during the year of proceeds of a Nonrecourse Liability that are allocable to an increase in Company Minimum Gain, determined according to the provisions of Treasury Regulation section 1.704-2(c) and (h). "Nonrecourse Liability" means a Company liability with respect to which no Member bears the economic risk of loss as determined under Treasury Regulation section 1.752-1(a)(2). "Revaluation" means the occurrence of an event described in clause (x), (y) or (z) of Section 2 below in which the book basis of Property is adjusted to its Fair Value. 2. Capital Accounts. Each Member's Capital Account shall be (a) increased by (i) the amount of money contributed by such Member, (ii) the Fair Value of property contributed by such Member (net of liabilities secured by such contributed property that the Company is considered to assume or take subject to under Code Section 752), (iii) allocations to such Member, pursuant to Article IV, of Company income and gain (or items thereof), and (iv) to the extent not already netted out under clause (b)(ii) below, the amount of any Company liabilities assumed by the Member or which are secured by any property distributed to such Member; and (b) decreased by (i) the amount of money distributed to such Member, (ii) the Fair Value of property distributed to such Member (net of liabilities secured by such distributed property that such Member is considered to assume or take subject to under Code Section 752), (iii) allocations to such Member, pursuant to Article IV, of Company loss and deduction (or items thereof), and (iv) to the extent not already netted out under clause (a)(ii) above, the amount of any liabilities of the Member assumed by the Company or which are secured by any property contributed by such Member to the Company. In the event any interest in the Company is transferred in accordance with the terms of this Agreement, the assignee shall succeed to the Capital Account of the assignor to the extent it relates to the transferred interest, except as otherwise provided in the written transfer agreement between the assignor and assignee. In the event of (x) an additional capital contribution by an existing or an additional Member of more than a de minimis amount or a distribution of property which results in a shift in Percentage Interests, (y) the distribution by the Company to a Member of more than a de minimis amount of property (other than cash) or (z) the liquidation of the Company within the meaning of Treasury Regulation section 1.704-1(b)(2)(ii)(g), the book basis of the Company Property shall be adjusted to Fair Value and the Capital Accounts of all the Members shall be adjusted simultaneously to reflect the aggregate net adjustment to book basis as if the Company recognized gain and loss equal to the amount of such aggregate net adjustment. The foregoing provisions of this Section 2 and the other provisions of this Agreement relating to the maintenance of capital accounts are intended to comply with Treasury Regulation section 1.704-1(b) and Treasury Regulation section 1.704-2, and shall be interpreted and applied in a manner consistent with such Treasury Regulations. To the extent necessary to comply with Treasury Regulation section 1.704-1(b)(2)(ii)(d), a Member's Capital Account shall be reduced for the adjustments and allocations set forth in Treasury Regulation section 1.704-1(b)(2)(ii)(d)(4), (5) and (6). In the event a Majority in Interest determines that it is prudent or advisable to modify the manner in which the Capital Accounts, or any increases or decreases thereto, are computed in order to comply with such Treasury Regulations, such Majority in Interest may cause such modification to be made without the consent of all the Members, provided that it is not likely to have a material effect on the amounts distributable to any Member upon the dissolution of the Company. In addition, a Majority in Interest may amend this Agreement in order to comply with such Treasury Regulations as provided in Section 3(j) below. 3. Special Rules Regarding Allocation of Tax Items. Notwithstanding the provisions of Article IV, the following special rules shall apply in allocating the net income or net loss of the Company: (a) Section 704(c) and Revaluation Allocations. In accordance with Code Section 704(c) and the Treasury Regulations thereunder, and notwithstanding any subsequent repeal or modification thereof, 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 Fair Value at the time of contribution. In the event of the occurrence of a Revaluation, subsequent allocations of income, gain, loss and deduction with respect to such property shall take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its Fair Value immediately after the adjustment in the same manner as under Code Section 704(c) and the Treasury Regulations thereunder. Allocations pursuant to this Section 3(a) are solely for income tax purposes and shall not affect, or in any way be taken into account in computing, any Member's Capital Account, distributions or share of income or loss, pursuant to any provision of this Agreement. (b) Minimum Gain Chargeback. Notwithstanding any other provision of Article IV, if there is a net decrease in Company Minimum Gain during a Company taxable year, each Member shall be allocated items of income and gain for such year (and, if necessary, for subsequent years) in an amount equal to that Member's share of the net decrease in Company Minimum Gain during such year (hereinafter referred to as the "Minimum Gain Chargeback Requirement"). A Member's share of the net decrease in Company Minimum Gain is the amount of the total decrease multiplied by the Member's percentage share of the Company Minimum Gain at the end of the immediately preceding taxable year. A Member is not subject to the Minimum Gain Chargeback Requirement to the extent: (1) the Member's share of the net decrease in Company Minimum Gain is caused by a guarantee, refinancing or other change in the debt instrument causing it to become partially or wholly recourse debt or a Member Nonrecourse Liability, and the Member bears the economic risk of loss for the newly guaranteed, refinanced or otherwise changed liability; (2) the Member contributes capital to the Company that is used to repay the Nonrecourse Liability and the Member's share of the net decrease in Company Minimum Gain results from the repayment; or (3) the Minimum Gain Chargeback Requirement would cause a distortion and the Commissioner of the Internal Revenue Service waives such requirement. A Member's share of Company Minimum Gain shall be computed in accordance with Treasury Regulation section 1.704-2(g) and as of the end of any Company taxable year shall equal: (1) the sum of the nonrecourse deductions allocated to that Member up to that time and the distributions made to that Member up to that time of proceeds of a Nonrecourse Liability allocable to an increase of Company Minimum Gain, minus (2) the sum of that Member's aggregate share of net decrease in Company Minimum Gain plus his aggregate share of decreases resulting from revaluations of Company Property subject to Nonrecourse Liabilities. In addition, a Member's share of Company Minimum Gain shall be adjusted for the conversion of recourse and Member Nonrecourse Liabilities into Nonrecourse Liabilities in accordance with Treasury Regulation section 1.704-2(g)(3). In computing the above, amounts allocated or distributed to the Member's predecessor in interest shall be taken into account. (c) Member Minimum Gain Chargeback. Notwithstanding any other provision of Article IV, if there is a net decrease in Member Minimum Gain during a Company taxable year, any Member with a share of that Member Minimum Gain (determined under Treasury Regulation section 1.704-2(i)(5)) as of the beginning of the year shall be allocated items of income and gain for such year (and, if necessary, for subsequent years) equal to that Member's share of the net decrease in Member Minimum Gain. In accordance with Treasury Regulation section 1.704-2(i)(4), a Member is not subject to the Member Minimum Gain Chargeback requirement to the extent the net decrease in Member Minimum Gain arises because the liability ceases to be Member Nonrecourse Debt due to a conversion, refinancing or other change in the debt instrument that causes it to be partially or wholly a nonrecourse debt. The amount that would otherwise be subject to the Member Minimum Gain Chargeback requirement is added to the Member's share of Company Minimum Gain. (d) Qualified Income Offset. In the event any Member unexpectedly receives an adjustment, allocation or distribution described in Treasury Regulation section 1.704.1(b)(2)(ii)(d)(4), (5) or (6), which causes or increases such Member's Adjusted Capital Account Deficit, items of Company income and gain (consisting of a pro rata portion of each item of Company income, including gross income, and gain for such year) shall be specially allocated to such Member in an amount and manner sufficient to eliminate such Adjusted Capital Account Deficit as quickly as possible, provided that an allocation under this Section 3(d) shall be made if and only to the extent such Member would have an Adjusted Capital Account Deficit after all other allocations under Article IV have been made. (e) Nonrecourse Deductions. Nonrecourse Deductions for any taxable year or other period shall be allocated to the Members in proportion to their Percentage Interests. (f) Member Nonrecourse Deductions. Any Member Nonrecourse Deduction shall be allocated to the Member who bears the risk of loss with respect to the loan to which such Member Nonrecourse Deductions are attributable in accordance with Treasury Regulation section 1.704-2(i). (g) Curative Allocations. Any special allocations of items of income, gain, deduction or loss pursuant to Sections 3(b), (c), (d), (e) and (f) shall be taken into account in computing subsequent allocations of income and gain pursuant to Article IV, so that the net amount of any items so allocated and all other items allocated to each Member pursuant to Article IV shall, to the extent possible, be equal to the net amount that would have been allocated to each such Member pursuant to the provisions of Article IV if such adjustments, allocations or distributions had not occurred. (h) Loss Allocation Limitation. Notwithstanding the other provisions of Article IV, unless otherwise agreed to by all of the Members, no Member shall be allocated Loss in any taxable year which would cause or increase an Adjusted Capital Account Deficit as of the end of such taxable year. (i) Share of Nonrecourse Liabilities. Solely for purposes of determining a Member's proportionate share of the "excess nonrecourse liabilities" of the Company within the meaning of Treasury Regulation section 1.752-3(a)(3), each Member's interest in Company profits is equal to its respective Percentage Interest. (j) Compliance with Treasury Regulations. The foregoing provisions of this Section 3 are intended to comply with Treasury Regulation sections 1.704-1, 1.704-2 and 1.752-1 through 1.752-5, and shall be interpreted and applied in a manner consistent with such Treasury Regulations. In the event it is determined by a Majority in Interest that it is prudent or advisable to so amend this Agreement in order to comply with such Treasury Regulations, such Majority in Interest is empowered to amend or modify this Agreement without the consent of all the Members, notwithstanding any other provision of this Agreement. (k) General Allocation Provisions. Except as otherwise provided in this Agreement, all items that are components of Income or Loss shall be divided among the Members in the same proportions as they share such net income or net loss, as the case may be, for the year. For purposes of determining the Income, Loss or any other items for any period, Income, Loss or any such other items shall be determined on a daily, monthly or other basis, as determined by the Members using any permissible method under Code Section 706 and the Treasury Regulations thereunder. Schedule D Agreed Value of the Company The undersigned, being all of the Members of First Computer Services, LLC (the "Company"), hereby determine that the Agreed Value of the Company, as defined in the Operating Agreement dated ______________, 2001, as may be amended, is $___________. Dated as of: 12-20-01 THE MEMBERS: FIRST AMERICAN CAPITAL CORP. By: /s/ Rick Meyer Rick Meyer Its: President FIRST ALLIANCE CORPORATION By: /s/ Mike Fink Mike Fink Its: President D-1 NEW / NEW NERAC 157224 2 A-1 B-8 D-2