OPERATING AGREEMENT

                                       OF

                                GEL TECH, L.L.C.

<PAGE>
                                TABLE OF CONTENTS

ARTICLE I:  FORMATION, NAME, PURPOSES, DEFINITIONS.............................1
         1.1        FORMATION..................................................1
         1.2        TREATMENT AS PARTNERSHIP...................................1
         1.3        NAME.......................................................1
         1.4        REGISTERED OFFICE..........................................1
         1.5        PURPOSE AND POWERS.........................................1
         1.6        AGENT FOR SERVICE OF PROCESS...............................1
         1.7        TERM.......................................................2
         1.8        DEFINITIONS................................................2

ARTICLE II:  CAPITAL CONTRIBUTIONS.............................................4
         2.1        INITIAL CAPITAL CONTRIBUTION...............................4
         2.2        ADDITIONAL CAPITAL CONTRIBUTIONS...........................4
         2.3        MEMBER LOANS...............................................4
         2.4        USE OF CAPITAL CONTRIBUTIONS...............................5
         2.5        WITHDRAWAL OF CONTRIBUTIONS................................5
         2.6        INCLUSION OF AN ASSIGNEE...................................5

ARTICLE III:  MANAGEMENT.......................................................5
         3.1        MANAGEMENT BY MANAGERS.....................................5
         3.2        INITIAL MANAGERS, NUMBER, TENURE. AND QUALIFICATIONS.......5
         3.3        AUTHORITY TO BIND THE COMPANY..............................5
         3.4        MANAGEMENT POWERS AND RESPONSIBILITIES.....................6
         3.5        CERTAIN ACTIONS REQUIRING UNANIMOUS MANAGER CONSENT........7
         3.6        AFFIRMATIVE MANAGER RESPONSIBILITIES.......................8
         3.7        MANAGERS HAVE NO EXCLUSIVE DUTY TO COMPANY.................8
         3.8        EXCULPATION OF A MANAGER...................................9
         3.9        INDEMNIFICATION OF MANAGERS; INSURANCE.....................9
         3.10       RESIGNATION................................................9
         3.11       REMOVAL....................................................9
         3.12       VACANCIES..................................................9
         3.13       SALARY AND EXPENSES........................................9
         3.14       RECORDS....................................................9
         3.15       FISCAL YEAR AND ACCOUNTING.   ............................10
         3.16       FINANCIAL STATEMENTS......................................10
         3.17       PREPARATION OF INCOME TAX RETURNS.........................11
`        3.18       TAX ELECTIONS.............................................11
         3.19       TAX CONTROVERSIES.........................................11
         3.20       AUDIT.....................................................11

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ARTICLE IV: RIGHTS AND OBLIGATIONS OF MEMBERS.................................12
         4.1        LIMITATION OF LIABILITY...................................12
         4.2        REIMBURSEMENTS. ..........................................12
         4.3        ACCESS TO COMPANY RECORDS.................................12
         4.4        LIMITATION ON BANKRUPTCY PROCEEDINGS......................12
         4.5        PROHIBITION ON CREATION OF SECURITY INTEREST..............12
         4.6        NON - COMPETE COVENANT ...................................12
         4.7        OPERATIONAL FUNCTIONS.....................................12
         4.8        REASONABLE COMPENSATION...................................12

ARTICLE V:  MEETINGS OF MEMBERS...............................................12
         5.1        REGULAR MEETINGS..........................................12
         5.2        SPECIAL MEETINGS..........................................12
         5.3        PLACE OF MEETINGS.........................................13
         5.4        MEETINGS BY TELEPHONE.....................................13
         5.5        NOTICE OF MEETINGS OF MEMBERS.............................13

ARTICLE VI:  DISTRIBUTIONS PRIOR TO LIQUIDATION...............................13
         6.1        DISTRIBUTIONS OF NET AVAILABLE CASH FLOW..................13
         6.2        DISTRIBUTIONS IN LIQUIDATION..............................13
         6.3        AMOUNTS WITHHELD..........................................14
         6.4        INCLUSION OF AN ASSIGNEE..................................14

ARTICLE VII:  ALLOCATION OF PROFITS AND LOSSES................................14
         7.1        PROFITS AND LOSSES........................................14
         7.2        TAX ALLOCATIONS...........................................14
         7.3        INCLUSION OF AN ASSIGNEE..................................15

ARTICLE VIII:  ADMISSIONS AND WITHDRAWALS.....................................15
         8.1        ADMISSION OF MEMBER.......................................15
         8.2        EXPULSION OF MEMBER.......................................15
         8.3        RIGHT TO WITHDRAW.........................................15
         8.4        RIGHTS OF WITHDRAWN MEMBER................................15
         8.5        DISTRIBUTION UPON WITHDRAWAL..............................16

ARTICLE IX:  RESTRICTIONS ON TRANSFERABILITY..................................17
         9.1        RESTRICTION ON TRANSFERS..................................17
         9.2        GUM TECH'S OPTION TO ACQUIRE BDT'S INTEREST. .............17
         9.3        RIGHTS OF ASSIGNEE........................................17

ARTICLE X:  DISSOLUTION AND TERMINATION.......................................18
         10.1       DISSOLUTION...............................................18
         10.2       NOTICE OF WINDING UP......................................18
         10.3       LIQUIDATION, WINDING UP AND DISTRIBUTION OF ASSETS........18

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         10.4       DEFICIT CAPITAL ACCOUNTS..................................19
         10.5       ARTICLES OF TERMINATION...................................19
         10.6       RETURN OF CONTRIBUTION NON-RECOURSE TO OTHER MEMBERS......19
         10.7       IN KIND DISTRIBUTIONS.....................................19
         10.8       INCLUSION OF AN ASSIGNEE..................................20

ARTICLE XI:   ARBITRATION.....................................................20
         11.1       BINDING ARBITRATION.......................................20
         11.2       ARBITRATION PANEL.........................................20
         11.3       SERVICE OF PROCESS........................................20
         11.4       FORM OF AWARD.............................................20
         11.5       ATTORNEYS' FEES AND COSTS.................................20
         11.6       ENTRY AND REVIEW OF AWARD.................................20

ARTICLE XII:  MISCELLANEOUS PROVISIONS........................................20
         12.1       NOTICES...................................................20
         12.2       APPLICATION OF ARIZONA LAW................................21
         12.3       WAIVER OF ACTION FOR PARTITION............................21
         12.4       AMENDMENTS................................................21
         12.5       EXECUTION OF ADDITIONAL INSTRUMENTS.......................21
         12.6       HEADINGS..................................................21
         12.7       SEVERABILITY..............................................21
         12.8       CREDITORS AND OTHER THIRD PARTIES.........................21
         12.9       COUNTERPARTS. ............................................21
         12.10      ENTIRE AGREEMENT..........................................21

EXHIBIT A.....................................................................23

EXHIBIT B.....................................................................24

EXHIBIT C.....................................................................25

EXHIBIT D.....................................................................26

EXHIBIT E.....................................................................27

EXHIBIT F.....................................................................28

APPENDIX A

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                               OPERATING AGREEMENT
                                       OF
                                GEL TECH, L.L.C.

          THIS OPERATING  AGREEMENT (this  "Agreement") is made and entered into
as of May 6, 1999 and will be effective as of the  Effective  Date, by and among
the  "Managers"  as  identified  in  Exhibit  A to this  Agreement  and Gum Tech
International   Inc.  ("Gum  Tech"),   a  Utah   corporation,   and  BioDelivery
Technologies, Inc. ("BDT"), a California corporation (Gum Tech and BDT together,
the "Members").

          For the consideration of their mutual covenants hereinafter set forth,
the parties hereto hereby agree as follows:

                ARTICLE I: FORMATION, NAME, PURPOSES, DEFINITIONS

          1.1  FORMATION.  The Members  hereby  have formed a limited  liability
company (the "Company")  pursuant to the Arizona Limited  Liability  Company Act
(the "Act") that will be effective as of the Effective  Date.  The Members agree
to execute and acknowledge any and all  certificates  and instruments and do all
filing,  recording,  and other  acts as may be  appropriate  to comply  with the
requirements of the Act relating to the operation and maintenance of the Company
in accordance with the terms of this Agreement.

          1.2 TREATMENT AS PARTNERSHIP. The Members intend that the Company will
be operated in a manner  consistent  with its  treatment  as a  partnership  for
federal  and  state  income  tax  purposes.  No  Member  shall  take any  action
inconsistent with the express intent of the parties hereto.

          1.3 NAME. The name of the Company is "Gel Tech, L.L.C."

          1.4 REGISTERED OFFICE. The Company's registered office will be located
at 246 E. Watkins Street, Phoenix, Arizona 85004, for the purpose of maintaining
the records  required to be maintained  under the Act, or at such other location
as a Majority of the Managers shall determine.

          1.5  PURPOSE  AND  POWERS.  The  general  purpose of the Company is to
develop,  market,  and sell cold remedies  utilizing  zinc-based  nasal gels and
other cold remedies based on nasal gels. In addition, the general purpose of the
Company includes the developing,  marketing,  and selling of other nasal gels as
may be  agreed  upon  by the  Members.  The  Company  may  exercise  all  powers
reasonable  or necessary to pursue this general  purpose.  The Company will have
all of the powers permitted by law.

          1.6 AGENT FOR SERVICE OF PROCESS. The name and business address of the
Company's initial agent for service of process is CT Corporation System, 3225 N.
Central  Avenue,  Phoenix,  Arizona 85012. A Majority of the Managers may remove
and replace the Company's agent for service of process at any time.

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          1.7 TERM.  The Company shall  commence upon the filing of its Articles
of  Organization  and shall expire on December 31, 2024 or such other later date
established  by  amendment to the  Company's  Articles of  Organization,  unless
sooner terminated under the provisions of Article X hereof or in accordance with
the Act.

          1.8  DEFINITIONS.  Appendix  A hereof  sets forth the  definitions  of
certain terms  relating to the  maintenance  of Capital  Accounts and accounting
rules. The following terms, which are used generally  throughout this Agreement,
shall have the following meanings:

                 "ACT" means the Arizona Limited  Liability Company Act, Chapter
4 of Title 29, Arizona Revised Statutes.

                 "AGGREGATE  DISTRIBUTIONS"  means the sum of all  distributions
received by each Member in the current and all prior Fiscal Years.

                 "AGREEMENT"  means this  agreement  including  all exhibits and
appendixes attached hereto, as amended from time to time.

                 "CAPITAL  ACCOUNT"  has the meaning set forth in Section A.1 of
Appendix A hereto.

                 "CAPITAL CONTRIBUTION" means the contribution to the capital of
the Company in cash,  property,  or services by a Member whenever made. "INITIAL
CAPITAL  CONTRIBUTION"  means the  initial  contributions  to the capital of the
Company  made  pursuant to Section 2.1 of this  Agreement.  "ADDITIONAL  CAPITAL
CONTRIBUTIONS"  means the  contributions  made  pursuant  to Section 2.2 of this
Agreement.

                 "CODE" means the Internal Revenue Code of 1986, as amended from
time to time.

                 "COMPANY"  means "Gel Tech,  L.L.C." or any other name selected
by the Members.

                 "EFFECTIVE  DATE" means January 27, 1999,  the day the Articles
of  Organization  for the  Company  were  filed  with  the  Arizona  Corporation
Commission.

                 "FISCAL YEAR" means the Company's  fiscal year, which will be a
calendar year.

                 "INTEREST" in the Company means the economic rights of a Member
(and  his,  her  or  its  permitted   assignees  and  successors)  to  share  in
distributions  of cash and other  property from the Company  pursuant to the Act
and this  Agreement,  together  with his, her or its  distributive  share of the
Company's net income or loss for federal and state income taxes.

                 "MAJORITY-IN-INTEREST"  means  Members  owning in the aggregate
more than half of the combined Percentage Interests held by all the Members.

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                 "MAJORITY  OF  THE  MANAGERS"  means  more  than  half  of  the
Managers.

                 "MANAGER"  means the  Persons as set forth in Exhibit A to this
Agreement or any other Person that becomes a manager pursuant to this Agreement.

                 "MEMBER" means each Person identified in the first paragraph of
this  Agreement as a Member and any other Person who acquires an Interest in the
Company and executes a  counterpart  of this  Agreement  as a Member  unless and
until that Person becomes a Withdrawn Member.

                 "NET AVAILABLE CASH FLOW" means, for any period,  the Company's
gross cash receipts derived from any source including, but not limited to, gross
receipts from sales and licensing of the Products  (excluding  only the proceeds
from the Sale of all or  substantially  all of the Company's  assets),  less the
portion  thereof  used to pay or establish  reasonable  reserves for all Company
expenses, debt and interest payments, asset acquisitions,  capital improvements,
expansions,  repairs,  replacements,  contingencies,  and any other  proper cash
expenditure  of the  Company  as  reasonably  determined  by a  Majority  of the
Managers.  "Net  Available  Cash  Flow"  will not be  reduced  by  depreciation,
amortization,  cost recovery  deductions or similar  allowances.  "Net Available
Cash  Flow" may not  exceed  the amount by which the fair value of the assets of
the Company  exceeds all  liabilities  of the  Company,  other than  interest or
principal due with respect to member loans,  to be determined in accordance with
Section 29-706 of the Act.

                 "OFFICER" means those Persons as set forth in Exhibit F to this
Agreement or any other Person who becomes an officer pursuant to this Agreement.

                 "PERCENTAGE  INTEREST"  means the  percentage  interests in the
Profits and Losses of the  Company.  The initial  Percentage  Interests  of each
Member are set forth on Exhibit B attached hereto.

                 "PERSON" means any individual and any legal entity.

                 "PRIME  RATE"  means the prime rate of  interest  in the "money
rate" section of the Wall Street Journal from time to time.

                 "PRODUCTS"  mean the cold remedy known as "Zicam" and any other
cold  remedies  based on nasal gels as set forth and  described  in Section 2.1,
together  with other  health  related  products  which the Company  subsequently
develops or licenses, as may be agreed upon by the Members.

                 "PROFITS  AND LOSSES" have the meaning set forth in Section A.1
of Appendix A hereto, except as otherwise provided in this Agreement.

                 "REIMBURSABLE  EXPENSES"  mean direct,  out-of-pocket  expenses
incurred  and paid by the  Members,  net of any  revenue or  advances  received,
before the date of this Agreement, in

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connection with the development of any Product up to the date of this Agreement,
as set forth in Exhibit D.

                 "REGULATIONS"  mean  the  Treasury  Regulations  issued  by the
Treasury Department under the Code.

                 "SALE" means the transfer,  exchange,  or other  disposition of
any assets (excluding the sale of inventory in the normal course of business) of
the Company to any Person who is not a Member.

                 "WITHDRAWAL EVENT" means those events and circumstances  listed
in Section 29-733 of the Act.

                 "WITHDRAWN MEMBER" means a Member following the occurrence of a
Withdrawal Event with respect to that Member.


                        ARTICLE II: CAPITAL CONTRIBUTIONS

          2.1 INITIAL CAPITAL CONTRIBUTION.  Gum Tech will contribute $3,500,000
in cash to the  Company  within five  business  days of the closing of a private
placement by Gum Tech of at least $5,000,000 in gross proceeds.  In addition, as
of the date of this  Agreement,  both Gum Tech and BDT shall  contribute  to the
Company all  intellectual  property  rights in cold remedies based on nasal gels
associated  with the  patent  applications  listed in  Exhibit  C, in the United
States and all foreign countries,  together with the right of priority under the
International   Convention   for  the   Protection   of   Industrial   Property,
Inter-American  Convention  Relating to Patents,  Designs and Industrial Models,
and any other international  agreements to which the United States adheres,  and
shall include a like interest in and to any  improvements  and  applications for
patents  based  thereon,  growing out of or relating to cold  remedies  based on
nasal gels,  and Gum Tech and BDT shall provide all  reasonable  assistance  and
execute  any  relevant  papers for the full  protection  and title in and to the
technology hereby  transferred.  Both Gum Tech and BDT shall also contribute all
rights that they may own with respect to the trademarks and service marks listed
in  Exhibit C and  applications  for  registration  thereof,  together  with the
goodwill of the business  symbolized  by said  trademarks  and service marks and
said applications to register said trademarks and service marks, to the Company.

          2.2 ADDITIONAL  CAPITAL  CONTRIBUTIONS.  If a Majority of the Managers
including at least one Manager designated by Gum Tech and one Manager designated
by Bio Delivery Technologies  reasonably determines at any time that the Company
requires  additional  Capital  Contributions in order to pay the obligations and
expenses of the Company or otherwise to accomplish the Company's  purposes,  the
Managers  shall give written  notice to each of the Members of the amount(s) and
date(s)  on which such  additional  contributions  are  required.  The  Members'
respective shares of each additional  contribution  required in such notice will
be in  proportion  to their  relative  Percentage  Interests on the date of such
notice unless otherwise unanimously agreed to by the Managers.  Unless otherwise
unanimously agreed to by the Managers,  the relative Percentage Interests of the
Members as of the

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date of this Agreement will not be changed as a result of any additional Capital
Contributions  jointly made by the Members. On or before each due date specified
in such notice,  each Member shall  contribute to the capital of the Company its
relative share of the total amount to be contributed on
that date.

          2.3 MEMBER  LOANS.  Subject to the  restrictions  provided  in Section
3.4(b),  the  Company  may borrow  additional  funds from any  Member.  Unless a
Majority of the Managers  not  designated  by the Member  making the loan agrees
otherwise,  the interest  rate payable with respect to such loans may not exceed
the Prime Rate plus one (1) percentage  point and the terms of such loan may not
be less than one year.

          2.4 USE OF CAPITAL  CONTRIBUTIONS.  All Capital  Contributions must be
spent in furtherance of the business of the Company.  Pending the use of Capital
Contributions in Company operations, Capital Contributions may not be commingled
with the  funds of any  other  Person or  entity,  except  that the funds may be
deposited  in an  account  in the  name of the  Company  in such  bank or  other
financial institution as a Majority of the Managers may deem appropriate.

          2.5 WITHDRAWAL OF CONTRIBUTIONS.  No Member may withdraw or demand the
return of all or any part of his,  her or its  Capital  Contributions  except as
agreed in writing by a Majority of the  Managers  not  designated  by the Member
attempting to withdraw or demanding the return of all or any part of its Capital
Contribution.

          2.6  INCLUSION  OF AN  ASSIGNEE.  For purposes of this Article II, the
term "Member" shall include an assignee.


                             ARTICLE III: MANAGEMENT

          3.1  MANAGEMENT  BY MANAGERS.  The business and affairs of the Company
will be managed  exclusively  by its  designated  Managers.  The  Managers  will
direct,  manage,  and control  the  business of the Company to the best of their
abilities and have full and complete  authority,  power,  and discretion to make
any and all  decisions and to do any and all things that the Managers deem to be
reasonably  required to accomplish the business and objectives of the Company in
performing  their duties  under this  Agreement.  The Managers  must act in good
faith and in a manner  that the  Managers  reasonably  believe to be in the best
interests of the Company and its Members.

          3.2 INITIAL MANAGERS, NUMBER, TENURE. AND QUALIFICATIONS.  The initial
Managers  shall consist of four  Persons,  two of whom will be designated by Gum
Tech in its sole  discretion,  and two of whom will be  designated by BDT in its
sole  discretion.  One  additional  Manager  will be  selected  by and  with the
unanimous  consent  of the  initial  Managers  within 30 days from the date this
Agreement is signed and executed. The names of the Managers initially designated
by the Members are set forth in Exhibit A. The Company will have five  Managers,
unless  all of the  Managers  unanimously  consent  to  increase  the  number of
Managers, or unless a Manager dies, resigns, or is

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removed.  Each Manager  will hold office  until the earlier of his,  her, or its
death,  resignation,  or removal. A Manager may be removed only with the consent
of the Member or  Members  that  designated  such  person as a  Manager.  If any
Manager  dies,  resigns,  or is  removed,  resulting  in a vacancy  of a Manager
position,  such vacancy will be filled  pursuant to Section 3.12.  Managers need
not be residents of the State of Arizona or be Members of the Company.

          3.3 AUTHORITY TO BIND THE COMPANY.  Unless authorized in writing to do
so by this  Agreement  or by a Majority of the Managers or such other vote as is
expressly  provided  by this  Agreement,  no Member,  agent,  or employee of the
Company  shall have any power or  authority  to bind the  Company in any way, to
pledge its credit or to render it liable for any purpose.

          3.4  MANAGEMENT  POWERS AND  RESPONSIBILITIES.  Without  limiting  the
generality of Section 3.1 hereof,  and subject to the  provisions of Section 3.5
and any other provision in this Agreement, upon the consent of a Majority of the
Managers, the Managers shall have power and authority, on behalf of the Company:

                 (a) To open  accounts in the name of the Company with banks and
other  financial  institutions  and  designate  and remove from time to time, at
their discretion, all signatories on such bank accounts;

                 (b) To borrow money from banks, other lending institutions, the
Members,  or  affiliates  of the  Members  on such  terms as a  Majority  of the
Managers  deems  appropriate,   and  in  connection  therewith  to  hypothecate,
encumber,  and grant  security  interests in the assets of the Company to secure
repayment of the borrowed  sums,  PROVIDED that any  borrowing  will require the
consent of at least one Manager  designated by Gum Tech and at least one Manager
designated  by BDT. No debt or other  obligation  may be contracted or liability
incurred by or on behalf of the Company except by the Managers;

                 (c) To purchase  policies of  comprehensive  general  liability
insurance  and to purchase  such other  insurance  coverage as a Majority of the
Managers  shall  determine to be necessary or desirable to insure the Members or
to protect the Company's assets;

                 (d) To acquire,  own or lease real and/or personal  property in
the name of the Company;

                 (e) To invest any Company funds  temporarily  in time deposits,
short-term governmental obligations, or commercial paper;

                 (f) To execute on behalf of the  Company  all  instruments  and
documents  including,  without  limitation,  checks,  drafts,  notes  and  other
negotiable  instruments,  mortgages  or deeds  of  trust,  security  agreements,
financing  statements,  documents  providing  for the  acquisition,  mortgage or
disposition  of the  Company's  property,  assignments,  bills of sale,  leases,
partnership agreements,

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and any other instruments or documents  necessary,  in the opinion of a Majority
of the Managers, to the business of the Company;

                 (g) To employ accountants,  managing agents or other experts to
perform services for the Company and to compensate them from Company funds;

                 (h) To employ employees to perform services for the Company;

                 (i) To enter into any and all other agreements on behalf of the
Company,  unless otherwise  prohibited by this Agreement,  with any other Person
for any  reason  related to the  purpose of the  Company as set forth in Section
1.5, in such form and on such terms as a Majority of the  Managers  may approve;
and

                 (j) To conduct any clinical trials with respect to the Products
including,  without  limitation,  the  approval  of  protocols  and  individuals
selected to conduct such clinical  trials,  provided that any such approval will
require the consent of at least one Manager  designated by Gum Tech and at least
one Manager designated by BDT.

          3.5   CERTAIN   ACTIONS    REQUIRING    UNANIMOUS   MANAGER   CONSENT.
Notwithstanding  any other provision or provisions of this Agreement relating to
the  authority of the Managers,  the following  actions may not be taken without
the unanimous consent of all Managers:

                 (a)  Performing any act that is unrelated to the purpose of the
Company as provided in Section 1.5 or that otherwise  contravenes  any provision
of this Agreement;

                 (b) Making an  assignment  for the benefit of  creditors of the
Company, filing a voluntary petition in bankruptcy, or appointing a receiver for
the Company;

                 (c)  Permitting  a Member to create a  security  interest  in a
Member's Interest or otherwise encumbering a Member's Interest;

                 (d) Paying any Member or affiliate of a Member any commissions,
fees or remuneration,  other than reasonable compensation for services rendered,
unless expressly permitted by the terms of this Agreement;

                 (e) Increasing the number of Managers of the Company;

                 (f) Admitting any Person as a Member;

                 (g) Amending this Agreement in any respect;

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                 (h) Merging the Company with or consolidating  the Company with
any other  entity,  or selling,  leasing,  or otherwise  disposing of any of the
assets with the  exception of the sale of  inventory  in the ordinary  course of
business;

                 (i) Making any  investment  in any other  entity or  individual
excluding  the  investment  of  Company  funds  temporarily  in  time  deposits,
short-tem governmental obligations, or commercial paper;

                 (j) Establishing the overall marketing and advertising strategy
relating to the Products;

                 (k)  Taking  any  actions  on behalf of the  Company  involving
significant  legal  matters  related to the  Products,  except  that  day-to-day
decisions  implementing  the  agreed  upon  legal  strategy  may be decided by a
Majority of the Managers;

                 (l)  Making  any   distributions   to  the  Members  under  the
provisions  of  Article  VI  and  Article  X  of  this  Agreement,   except  for
distributions  for the purpose of making  payments  for  applicable  federal and
state income tax liabilities pursuant to Section 6.1;

                 (m) Appointing,  removing and  determining the  compensation of
Officers of the Company  (the  initial  Officers of the Company are set forth in
Exhibit F);

                 (n) Making any expenditure  individually,  or in the aggregate,
that is more than  $25,000  greater  than an  amount  authorized  in the  Budget
approved under Section 3.6(h); and

                 (o)  Making  any single  expenditure  more than  $10,000 in the
absence of the approval of a Budget under Section 3.6(h).


          3.6 AFFIRMATIVE  MANAGER  RESPONSIBILITIES.  Notwithstanding any other
provision or provisions  in this  Agreement,  the Managers  shall be required to
perform the following functions:

                 (a) Maintain adequate records and books of account;

                 (b) Maintain  sufficient  insurance customary to the operations
carried on by the Company;

                 (c) Comply  with all  applicable  laws and  obtain all  permits
necessary to conduct the Company's business;

                 (d) Comply with the terms of all  material  agreements  entered
into by the Company;

                 (e)  Maintain  the  Company's   physical   facilities  in  good
condition and repair;

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                 (f)  Obtain   proprietary   information   and   confidentiality
agreements from each employee;

                 (g) Protect the Company's intellectual property rights; and

                 (h)  Prepare  and  approve  a monthly  operating  budget of the
Company with monthly  breakdowns of revenues and expenses by category,  for each
Fiscal  Year or  quarter  (the  "Budget"),  including  an income  statement  and
statement  of cash  flows.  The Budget  must be  approved  by a Majority  of the
Managers including at least one Manager designated by Gum Tech. Any expenditures
that  materially  deviate  from the Budget must be approved by a Majority of the
Managers  including at least one Manager  designated by Gum Tech and one manager
designated by BDT.

          3.7 MANAGERS HAVE NO EXCLUSIVE DUTY TO COMPANY. No Manager is required
to manage the Company as his,  her or its sole and  exclusive  function  and may
have other  business  interests  and engage in other  activities  in addition to
those relating to the Company, provided such functions and business interests do
not compete with the Company in violation of the non-compete  covenant  provided
in Section 4.6.

          3.8 EXCULPATION OF A MANAGER.  Any act or the failure to do any act by
any Manager or any  stockholder,  officer,  director or employee of any Manager,
the effect of which results in loss or damage to the Company, will not give rise
to any  liability  to the  Company or  another  Manager if done in good faith to
promote  the best  interest  of the  Company  or if done  pursuant  to advice of
independent  legal counsel,  accountants or other experts  selected,  engaged or
retained by the Company with  reasonable  care. The preceding  sentence will not
relieve any person of liability for gross negligence,  bad faith,  dishonesty or
misappropriation of Company assets.

          3.9 INDEMNIFICATION OF MANAGERS AND OFFICERS;  INSURANCE.  The Company
will fully  indemnify  any  Manager or  Officer to the same and  fullest  extent
permitted  by  applicable  law in effect on the date hereof and to such  greater
extent as applicable law may hereinafter  from time to time permit.  The Company
will also have the  power to  purchase  and  maintain  insurance  on behalf of a
Manager or Officer against any liability  asserted  against a Manager or Officer
and incurred by a Manager or Officer in any such capacity or arising out of his,
her or its status as a Manager or Officer, whether or not the Company would have
the power to indemnify any Manager or Officer  against such liability  under the
provisions of this Section 3.9 or applicable law.

          3.10 RESIGNATION. Any or all of the Managers may resign at any time by
giving  written  notice to the Members.  The  resignation of a Manager will take
effect upon receipt of notice  thereof or at such later time as may be specified
in such notice; and, unless otherwise specified therein,  the acceptance of such
resignation  will not be necessary to make it effective.  In the event a Manager
is also a Member,  such  resignation  will not affect such Manager's  rights and
liabilities as a Member.

          3.11  REMOVAL.  Any or all of the Managers may be removed at any time,
with or without cause, with the unanimous consent of all the Members. Any or all
of the Managers designated by a

                                        9
<PAGE>
Member may be removed by such Member at any time, with or without cause, without
the consent of any other Member.

          3.12  VACANCIES.  Subject to the  requirements  in Section  3.2,  if a
Manager designated by Gum Tech vacates his, her, or its Manager position for any
reason,  Gum Tech will  designate  a new  Manager  to fill the  vacated  Manager
position.  If a Manager  designated  by BDT  vacates  his,  her,  or its Manager
position for any reason,  BDT shall  designate a new Manager to fill the vacated
Manager position.  In the event a Manager designated jointly by Gum Tech and BDT
vacates  his,  her,  or its  Manager  position,  Gum Tech and BDT shall  jointly
designate  a new  Manager  to fill  the  vacated  Manager  position.  A  Manager
designated to fill a position shall hold office until the earlier of his, her or
its death, resignation or removal.

          3.13  SALARY AND  EXPENSES.  Any  Manager(s)  may  receive  reasonable
compensation for services rendered as determined by the Majority of the Managers
which shall include at least one Manager designated by Gum Tech and at least one
Manager  designated  by BDT.  Managers also will be entitled to have the Company
pay, or be reimbursed by the Company for, reasonable and necessary out-of-pocket
expenses incurred by any Manager on behalf of the Company.

          3.14  RECORDS.  At the expense of the Company,  Gum Tech's  accounting
personnel  will  maintain  the  following  records at the  Company's  registered
office:

                 (a) A current  list of the full name and last  known  business,
residence, or mailing address of each Member, both past and present;

                 (b) A copy of the Articles of  Organization  of the Company and
all amendments thereto,  together with executed copies of any powers of attorney
pursuant to which any amendment has been executed;

                 (c)  Copies  of  the  Company's   currently  effective  written
Operating  Agreement  and all  amendments  thereto,  copies of any prior written
Operating Agreement no longer in effect, and copies of any writings permitted or
required with respect to a Member's obligation to contribute cash, property,  or
services;

                 (d) Copies of the Company's  federal,  state,  and local income
tax returns and reports for the three most recent years;

                 (e) Copies of financial  statements of the Company, if any, for
the three most recent years;

                 (f) Minutes of every annual, special, and court-ordered meeting
of the Members; and

                 (g) Any  written  consents  obtained  from  Members for actions
taken by Members without a meeting.

                                       10
<PAGE>
          3.15 FISCAL YEAR AND  ACCOUNTING.  The Fiscal Year of the Company will
be the calendar  year.  All amounts  computed for the purposes of this Agreement
and all applicable questions concerning the rights of Members will be determined
using  generally  accepted  accounting  principles.  All  decisions  as to other
accounting matters, except as specifically provided to the contrary herein, will
be as recommended by the independent public accountant as set forth in Exhibit E
as determined in their  reasonable  discretion with the consent of a Majority of
the Managers  including at least one Manager designated by Gum Tech and at least
one Manager designated by BDT.

          3.16 FINANCIAL STATEMENTS.

                 (A) ANNUAL REPORTS.  Within ninety (90) days after the close of
each Fiscal Year, the Company will cause to be furnished to the Members  reports
containing financial statements of the Company for the Fiscal Year, presented in
accordance with generally accepted  accounting  principles,  including a balance
sheet, a statement of income,  a statement of Members' equity and a statement of
cash flows,  which financial  statements  shall be audited at the expense of the
Company by an independent  public accountant to be selected by a Majority of the
Mangers  including at least one Manager  designated by Gum Tech and at least one
Manager  designated  by  BDT.  Until  otherwise  changed  by  the  Members,  the
independent  public accountant agreed upon by the parties to audit the financial
statements  for each  Fiscal  Year  will be as  provided  in  Exhibit  E to this
Agreement.

                 (B) QUARTERLY  REPORTS.  Within  forty-five (45) days after the
close of each  quarter,  the Company  will cause to be  furnished to the Members
reports  containing  financial  statements  of the  Company  for  the  preceding
quarter,  presented in accordance with generally accepted accounting principles,
including a balance sheet, a statement of income, a statement of Members' equity
and a statement of cash flows.

                 (C) MONTHLY REPORTS. Within thirty (30) days after the close of
each  month,  the Company  will cause to be  furnished  to the  Members  reports
containing  financial  statements  of  the  Company  for  the  preceding  month,
presented in accordance with generally accepted accounting principles, including
a balance  sheet,  a statement of income,  a statement of Members'  equity and a
statement of cash flows.

          3.17 PREPARATION OF INCOME TAX RETURNS.  The Company shall arrange for
the  preparation  and timely  filing of all  returns of Company  income,  gains,
deductions,  losses and other items  necessary  for federal and state income tax
purposes  and shall cause to be  furnished  to the  Members the tax  information
reasonably  required for federal and state income tax  reporting  purposes.  The
classification,   realization  and  recognition  of  income,  gain,  losses  and
deductions  and other items,  for federal  income tax purposes,  will be on that
method of accounting as recommended by the independent  public accountant as set
forth in  Exhibit  F, as  determined  in their  reasonable  discretion  with the
consent of a Majority of the Managers  including at least one Manager designated
by Gum Tech and at least one Manager designated by BDT.

                                       11
<PAGE>
          3.18  TAX  ELECTIONS.  The  Majority  of the  Managers  may  in  their
reasonable discretion determine whether to make any available elections pursuant
to the Code.

          3.19 TAX CONTROVERSIES.  Subject to the provisions hereof, Gum Tech is
designated the "tax matters  partner" (within the meaning of Section 6231 of the
Code),  and is  authorized  and required to represent  the Company in connection
with all  examinations of the Company's  affairs by tax  authorities,  including
resulting  administrative and judicial proceedings,  and to expend Company funds
for professional funds for professional services and costs associated therewith.
The Members agree to cooperate with the tax matters partner and to do or refrain
from doing any or all things  reasonably  required by the tax matters partner to
conduct those proceedings. The tax matters partner agrees to promptly notify the
Members upon the receipt of any correspondence from any federal,  state or local
tax authorities  relating to any examination of the Company's  affairs.  The tax
matters  partner  shall be  prohibited  from  entering  into any  settlement  or
arrangement on behalf of the Company with respect to any federal, state or local
tax  authorities  without  the  express  written  approval  of a Majority of the
Managers, which shall include the approval of at least one Manager designated by
Gum Tech and at least one Manager designated by BDT.

          3.20 AUDIT.  Any Manager  may, at his,  her or its option and expense,
cause an audit to be performed of the Company.


                  ARTICLE IV: RIGHTS AND OBLIGATIONS OF MEMBERS

          4.1 LIMITATION OF LIABILITY. Each Member's liability for the debts and
obligations  of the Company  shall be limited as set forth in Section  29-651 of
the Act and other applicable law.

          4.2  REIMBURSEMENTS.  Each Member shall be reimbursed its Reimbursable
Expenses as set forth in Exhibit D.

          4.3 ACCESS TO COMPANY RECORDS. Upon written request, each Member shall
have  the  right,  during  ordinary  business  hours,  to  inspect  and copy the
Company's records required to be maintained by Section 3.14 of this Agreement.

          4.4  LIMITATION  ON  BANKRUPTCY  PROCEEDINGS.  No Member,  without the
consent  of all the  Members,  shall  file or cause to be filed  any  action  in
bankruptcy involving the Company.

          4.5  PROHIBITION  ON CREATION OF SECURITY  INTEREST.  No Member  shall
grant a security  interest in the Member's  Interest or  otherwise  encumber the
Member's Interest in any manner except with the unanimous written consent of all
the Managers.

          4.6  NON -  COMPETE  COVENANT.  Neither  the  Members  nor  any of the
Managers nor any of their affiliates may develop,  market, or sell cold remedies
that utilize  zinc-based  nasal gels or other cold remedies  based on nasal gels
other than on behalf and for the benefit of the Company.

                                       12
<PAGE>
          4.7  OPERATIONAL  FUNCTIONS.  Except  as  otherwise  provided  in  the
Agreement,  all Members agree that any Member or an affiliate may be retained to
provide  services to the Company in exchange for reasonable  compensation as set
forth in Section 4.8.

          4.8  REASONABLE  COMPENSATION.  Upon the approval of a Majority of the
Managers, which shall include the approval of at least one Manager designated by
Gum Tech and at least one  Manager  designated  by BDT,  any Member may  receive
reasonable  compensation for services rendered to the Company in connection with
the services described in Section 4.7.


                         ARTICLE V: MEETINGS OF MEMBERS

          5.1  REGULAR  MEETINGS.  There  shall be no  regular  meetings  of the
Members.

          5.2 SPECIAL MEETINGS. Special meetings of the Members, for any purpose
or purposes, unless otherwise prescribed by statute, may be called by a Majority
of the Managers or a  Majority-In-  Interest of the Members.  The Managers shall
prescribe  procedural  standards  governing  matters  relating to such meetings,
including the requisite  notices for such meetings and the necessary quorums for
such meetings.

          5.3  PLACE OF  MEETINGS.  Special  meetings  will be held at the place
designated in the notice of the meeting. If no designation is made, the place of
the  meeting  shall be the  principal  office or  location of the Company in the
State of Arizona.

          5.4 MEETINGS BY  TELEPHONE.  Any Member may  participate  in a Special
Meeting by means of a conference telephone or similar communication equipment.

          5.5 NOTICE OF MEETINGS OF MEMBERS.  Written  notice stating the place,
day,  and hour of the Special  Meeting and the purpose or purposes for which the
meeting is called must be delivered not less than five nor more than thirty days
before  the date of the  meeting,  either  personally  or by mail,  by or at the
direction of a Majority of the Managers or a Majority-In-Interest of the Members
calling the meeting, to each Member entitled to vote at such meeting. Any Member
may waive notice of any meeting. The attendance of a Member at any meeting shall
constitute  a waiver of notice of such meeting  except where a Member  attends a
meeting for the express  purpose of objecting to the transaction of any business
on the grounds that the meeting is not lawfully called or convened.


                 ARTICLE VI: DISTRIBUTIONS PRIOR TO LIQUIDATION

          6.1  DISTRIBUTIONS  OF NET AVAILABLE CASH FLOW. Upon the approval of a
Majority of the Managers,  the Company shall make minimum  distributions  of the
Company's  Net  Available  Cash Flow in the amount of 40% of  estimated  taxable
income, at such times as are required to pay the

                                       13
<PAGE>
Members' income tax liabilities and estimated  taxes, if any,  arising by virtue
of their  ownership  of the  Interests.  Except as  otherwise  provided  in this
Section 6.1, prior to the dissolution of the Company and the commencement of the
liquidation  of its assets and  winding up of its  affairs,  upon the  unanimous
consent of all Managers,  within 90 days  following the end of each fiscal year,
the Managers  shall  determine and  distribute  the Company's Net Available Cash
Flow 60% to Gum Tech and 40% to BDT.  In the  event  Gum Tech  fails to make its
Initial  Capital  Contribution of $3,500,000 in cash to the Company as set forth
in Section 2.1, the Managers  shall  determine and  distribute the Company's Net
Available Cash Flow 50% to Gum Tech and 50% to BDT.

          6.2  DISTRIBUTIONS  IN  LIQUIDATION.  Following the dissolution of the
Company and the  commencement  of winding up and the  liquidation of its assets,
all distributions to the Members shall be governed by Article X hereof.

          6.3 AMOUNTS WITHHELD. All amounts withheld pursuant to the Code or any
provisions of state or local tax law with respect to any payment or distribution
to the  Members  and  assignees  from the  Company  shall be  treated as amounts
distributed to the relevant Member(s) or assignee(s) pursuant to this Section.

          6.4  INCLUSION  OF AN  ASSIGNEE.  For purposes of this Article VI, the
term "Member" shall include an assignee.


                  ARTICLE VII: ALLOCATION OF PROFITS AND LOSSES

          7.1 PROFITS AND LOSSES.  After making any special allocations required
under  Sections  A.2 or A.3 of Appendix A hereof,  the Profits and Losses of the
Company for each Fiscal Year shall be allocated  among the Members in proportion
to their Percentage Interests.

          7.2 TAX ALLOCATIONS.

                 (a) Except as otherwise  provided in Section 7.2(b) hereof, for
income tax purposes,  all items of income,  gain, loss,  deduction and credit of
the  Company  for any tax  period  shall  be  allocated  among  the  Members  in
accordance  with the  allocations of Profit and Loss  prescribed in this Article
VII and Appendix A hereto.

                 (b) 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 federal income tax
purposes,  be allocated among the Members in accordance with Regulations Section
1.704-3(b) unless another method set forth in Regulations  Section 1.704.3(c) or
(d) is elected by all the Members to take account of any  variation  between the
adjusted  basis of such property to the Company for federal  income tax purposes
and its initial Book Value.  In the event the Book Value of any Company asset is
adjusted pursuant to subsection (b) of the definition of "Book Value" in Section
A.1 of Appendix A hereto, subsequent allocations of income, gain, loss

                                       14
<PAGE>
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
Book 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 a Majority of the Managers,  which shall include at least one Manager
designated by Gum Tech and at least one Manager designated by BDT, in any manner
that   reasonably   reflects  the  purpose  and  intention  of  this  Agreement.
Allocations  pursuant to this Section 7.2(b) are solely for purposes of federal,
state and local taxes and shall not affect,  or in any way be taken into account
in computing,  any Member's Capital Account or share of Profits, Losses or other
items or distributions pursuant to any provision of this Agreement.

                 (c) The Members are aware of the income tax consequences of the
allocations  made by this  Article VII and Appendix A hereto and hereby agree to
be bound  by the  provisions  of this  Article  VII and  Appendix  A  hereto  in
reporting their distributive shares of the Company's taxable income and loss for
income tax purposes.

          7.3  INCLUSION OF AN  ASSIGNEE.  For purposes of this Article VII, the
term "Member" shall include an assignee.


                    ARTICLE VIII: ADMISSIONS AND WITHDRAWALS

          8.1  ADMISSION OF MEMBER.  A Person may be admitted as a Member of the
Company after the date of formation of the Company with the unanimous consent of
all the Managers. Upon admission, the Member shall execute a counterpart of this
Agreement.  Upon the  admission of a new Member,  Gum Tech and BDT's  respective
Percentage  Interests  shall remain in proportion to their  relative  Percentage
Interests as of the date of this Agreement,  unless otherwise unanimously agreed
to by all the Managers.

          8.2 EXPULSION OF MEMBER. Upon any material breach by any Member of any
of his, her or its obligations under the terms of this Agreement,  which remains
uncured for a period of 90 days after written  notice  thereof from the Company,
the Member may be expelled  effective  upon the  delivery,  prior to the cure of
such  breach,  of  written  notice  of  expulsion  signed by a  Majority  of the
Managers.

          8.3 RIGHT TO WITHDRAW.  A Member may withdraw  from the Company at any
time by  mailing  or  delivering  a written  notice of  withdrawal  to the other
Members at their  last known  address  set forth in the list  maintained  by the
Company.  However,  if a  Member  withdraws  prior  to the  termination  of this
Agreement,  the withdrawal  will be considered to be a breach of this Agreement.
The  Company  may  recover  damages  for the breach  and may offset the  damages
against any amount otherwise distributable to the withdrawn Member.

          8.4 RIGHTS OF WITHDRAWN  MEMBER.  Following the death,  expulsion,  or
withdrawal  of a Member,  the Member (and his,  her or its  successor,  personal
representatives and assigns) shall

                                       15
<PAGE>
cease  to have  any  rights  of a  Member  except  only  the  right  to  receive
distributions to the same extent as an assignee of the Member's  Interest in the
Company in accordance with the terms of this  Agreement,  until such time as the
Company is wound up and terminated or a withdrawal distribution
is paid pursuant to Section 8.5 hereof.

          8.5 DISTRIBUTION UPON WITHDRAWAL. If, following a Withdrawal Event not
involving a transfer or assignment  subject to Article IX hereof, an election is
made to continue the Company pursuant to Section 10.1(f) hereof, the Interest of
a Withdrawn Member in the Company may be liquidated and redeemed in exchange for
a withdrawal  distribution that has been agreed upon by the Withdrawn Member and
a Majority of the Managers. If the amount of the withdrawal distribution has not
been agreed upon within 90 days after the Withdrawal Event,  then, at the option
of the  Company,  the  Interest of the  Withdrawn  Member may be  liquidated  by
payment of a withdrawal  distribution  equal to the Withdrawn  Member's positive
Capital  Account  Balance  as of the date of  liquidation,  payable in ten equal
annual installments or principal, plus interest calculated at the Prime Rate per
annum,  the first such  installment to be paid on the date of  liquidation.  The
amount of such  withdrawal  distribution  shall be reduced by an amount equal to
the damages  suffered or likely to be suffered by the Company over the remaining
term of the  Agreement  specified  in Section 1.7 hereof or in any then  current
amendment to the  Company's  Articles of  Organization  in any case in which the
withdrawing  member  voluntarily  withdraws  in breach of this  Agreement  or is
expelled  pursuant to Section 8.2 hereof.  The Members  recognize  that , if any
Member  voluntarily  withdraws from the Company in breach of this Agreement,  it
will be  impossible  to compute with  reasonable  accuracy the damages that will
result over the remaining term of this Agreement to the Company and to the other
Members.  Consequently,  if any Member voluntarily withdraws from the Company in
breach  of this  Agreement,  in lieu of any  other  remedies  and as  liquidated
damages,  such withdrawing Member's withdrawal  distribution shall be reduced by
the  following  percentage of his or her Capital  Account  balance as liquidated
damages:

                 (a) If the  remaining  term  of this  Agreement  set  forth  in
Section 1.7 hereof or in any then current amendment to the Company's Articles of
Organization exceeds 30 years, the amount of the reduction shall be 50%.

                 (b) If the  remaining  term  of this  Agreement  set  forth  in
Section 1.7 hereof or in any then current amendment to the Company's Articles of
Organization exceeds 20 years, the amount of reduction shall be 45%; and

                 (c) If  subparagraph  (a) or (b) does not apply,  the amount of
reduction shall be 30%.

          Effective  upon the receipt of the first  installment  of a withdrawal
distribution on the date of liquidation, the withdrawn Member shall cease to own
any Interest in the Company or to be entitled
to any rights under Section 8.4 hereof.

                                       16
<PAGE>
                   ARTICLE IX: RESTRICTIONS ON TRANSFERABILITY

          9.1 RESTRICTION ON TRANSFERS.  Each Member agrees and covenants not to
sell, pledge, encumber or otherwise transfer or dispose of, and not to permit to
be sold,  encumbered,  attached,  or otherwise disposed of or transferred in any
manner, either voluntarily or by operation of law (individually and collectively
referred to herein as a "Transfer"), all or any portion of the Member's Interest
now owned or hereafter  acquired by such Member,  except in accordance  with and
subject to the terms of this Agreement.

          9.2 GUM TECH'S OPTION TO ACQUIRE BDT'S INTEREST.  Notwithstanding  any
other  provision  in this  Agreement,  Gum Tech will have an option to  purchase
BDT's Interest in the Company at Gum Tech's discretion at any time after (i) two
years  from  the  Effective  Date of this  Agreement,  or (ii) the date on which
cumulative  sales of the Company's  Products have exceeded  $50,000,000.  If Gum
Tech  exercises  its  option,  Gum Tech  shall  issue  Gum Tech  stock to BDT in
exchange for BDT's Interest in the Company.  The fair market value of the shares
of Gum Tech stock to be issued to BDT shall equal the fair market value of BDT's
Interest in the  Company at the time Gum Tech  exercises  its  option.  Prior to
exercising  its option under Section 9.2(i) or (ii), Gum Tech shall issue to BDT
at least  ninety (90) days  written  notice of its  intention  to  exercise  its
option.  In order to  determine  the fair market value of BDT's  Interest,  each
Member shall  appoint a qualified  appraiser and such  appraisers  shall jointly
appoint a third appraiser.  Each appraiser shall determine the fair market value
of BDT's Interest. In order to determine the fair market value of BDT's Interest
in the Company, the value assigned by each appraiser shall be added together and
the sum  shall  be  divided  by  three  to  arrive  at an  average  value.  This
determination  of the value of BDT's Interest shall be conclusive and binding on
the  parties.  Notwithstanding  this  Section  9.2,  if after two years from the
Effective  Date of this  Agreement,  sales of the  Company's  Products  have not
exceeded  $50,000,000  and Gum Tech  desires to purchase  BDT's  Interest in the
Company,  then both Members shall agree to the fair market value of the Company.
Each Member  shall be liable for 100% of the costs  incurred  for the  appraisal
conducted  by the  qualified  appraiser  appointed by that Member and 50% of the
costs incurred by the third qualified appraiser.  The value of the shares of Gum
Tech stock to be issued to BDT in consideration  for acquiring BDT's Interest in
the Company  shall be  determined  by the  average of the closing  prices of Gum
Tech's stock for the ten (10) day period ending on the fifth  calendar day prior
to the date of the notice given pursuant to Section 9.2(i) or (ii), whichever is
applicable.  In no event shall BDT have an option to acquire Gum Tech's Interest
in the Company under this Section 9.2.

          9.3  RIGHTS  OF  ASSIGNEE.  The  purchaser  or other  transferee  of a
Member's  Interest  in the  Company  shall  have only the right to  receive  the
distributions  and  allocations  of  taxable  income or loss to which the Member
would have been entitled under this  Agreement  with respect to the  transferred
Interest and shall not have or enjoy any right to  participate in the management
of the  Company,  or to exercise any voting  rights  hereunder or to receive any
financial  information or reports relating to the Company or any other rights of
a Member  under the Act or this  Agreement,  unless and until the  purchaser  or
transferee is admitted as a Member pursuant to Section 8.1 hereof.

                                       17
<PAGE>
                     ARTICLE X: DISSOLUTION AND TERMINATION

          10.1  DISSOLUTION.  The Company  shall be dissolved  upon the first to
occur of any of the following events:

                 (a) The  unanimous  written  agreement  of all  Managers at any
time;

                 (b) The entry of a decree of judicial dissolution under Section
29-785 of the Act;

                 (c) An  administrative  dissolution under section 29-786 of the
Act;

                 (d) The  expiration  of the term of the  Company  set  forth in
Section 1.7 herein or such later date set forth in any then current amendment to
the Company's Articles of Organization;

                 (e) the sale or  disposition  of all or  substantially  all the
assets of the Company not in the  ordinary  course of business to any Person who
is not a Member; and

                 (f) Any  Withdrawal  Event with  respect to any Member,  unless
within 90 days following such Withdrawal Event, all of the remaining Members and
all the Managers  consent in writing to the  continuation of the business of the
Company.

Other than as provided in this Section  10.1,  the Company shall not dissolve in
the event of a Withdrawal Event.

          10.2 NOTICE OF WINDING UP.  Promptly  following the dissolution of the
Company,  unless the Company's  business is to be continued  pursuant to Section
10.1(f)  hereof,  the Managers (or such other Person  designated by the Members)
shall  cause a Notice of  Winding Up to be filed  with the  Arizona  Corporation
Commission in accordance with the Act.

          10.3  LIQUIDATION,  WINDING UP AND DISTRIBUTION OF ASSETS.  Unless the
business of the Company is to be continued  pursuant to Section  10.1(f) hereof,
upon the  unanimous  consent of all the  Managers,  the  Managers (or such other
Person  designated  by the Members)  shall  proceed to liquidate  the  Company's
assets and  properties,  discharge  the Company's  obligations,  and wind up the
Company's  business and affairs as promptly as is consistent  with obtaining the
fair value thereof.  The proceeds of liquidation of the Company's assets, to the
extent sufficient therefor, shall be applied and distributed as follows:

                 (a) First, to the payment and discharge of all of the Company's
debts and liabilities  except those owing to Members or to the  establishment of
any reasonable reserves for contingent or unliquidated debts and liabilities;

                                       18
<PAGE>
                 (b) Second, to the payment of any accrued interest owing on any
debts and liabilities owing to Members in proportion to the amount due and owing
to each Member;

                 (c) Third, to the payment of outstanding principal amount owing
on any debts and  liabilities  owing to Members in  proportion to the amount due
and owing to each Member;

                 (d) Fourth, any remaining proceeds up to $3,500,000 to Gum Tech
less any cumulative distributions received by Gum Tech under Section 6.1; and

                 (e) Fifth,  any remaining  proceeds shall be distributed 60% to
Gum Tech and 40% to BDT, subject to the restrictions in this Section 10.3(e). In
the event Gum Tech fails to make its Initial Capital  Contribution of $3,500,000
in cash to the Company as set forth in Section 2.1, any remaining proceeds under
this Section 10.3(e) shall be distributed 50% to Gum Tech and 50% to BDT.

          10.4 DEFICIT CAPITAL ACCOUNTS.  No Member shall have any obligation to
contribute  or advance  any funds or other  property to the Company by reason of
any negative or deficit balance in such Member's  Capital Account during or upon
completion of winding up or at any other time.

          10.5 ARTICLES OF TERMINATION.  When all of the remaining  property and
assets have been applied and distributed in accordance with Section 10.3 hereof,
the  Managers  (or such other  Person  designated  by the  Members)  shall cause
Articles of  Termination  to be executed and filed with the Arizona  Corporation
Commission in accordance with the Act.

          10.6 RETURN OF CONTRIBUTION  NON-RECOURSE TO OTHER MEMBERS.  Except as
provided by law, upon  dissolution,  each Member shall look solely to the assets
of the Company for the return of his, her or its Capital  Contributions.  If the
Company  property  remaining  after the  payment or  discharge  of the debts and
liabilities of the Company is  insufficient to return the cash or other property
contribution  of one or more Members or assignees,  such Member(s) shall have no
recourse against any other Member.

          10.7 IN KIND DISTRIBUTIONS. A Member shall have no right to demand and
receive any distribution from the Company in any form other than cash.  However,
a Member may be  compelled to accept a  distribution  of an asset in kind if the
Company is unable to dispose of all of its assets for cash.

          10.8  INCLUSION  OF AN  ASSIGNEE.  For purposes of this Article X, the
term "Member" shall include an assignee.

                                       19
<PAGE>
                             ARTICLE XI: ARBITRATION

          11.1 BINDING ARBITRATION. The Members agree that all controversies and
claims of any nature  arising  directly or indirectly out of this Agreement must
be arbitrated under the Commercial Arbitration Rules of the American Arbitration
Association.  For all  controversies  and  claims  brought  by Gum Tech  arising
directly or indirectly out of this Agreement,  the arbitration will occur in the
City of Los  Angeles,  Los Angeles  County,  California  pursuant to the Federal
Arbitration Act, 9 U.S.C.  Section 1, ET. SEQ. For all  controversies and claims
brought  by BDT  arising  directly  or  indirectly  out of this  Agreement,  the
arbitration will occur in the City of Phoenix, Maricopa County, Arizona pursuant
to the  Federal  Arbitration  Act, 9 U.S.C.  Section 1 ET.  SEQ.  As provided in
Section  12.2,  the  substantive  law of the State of Arizona  shall  govern the
resolution of disputes and the enforcement of rights pursuant to this Agreement.

          11.2  ARBITRATION  PANEL. A single  arbitrator shall have the power to
render a maximum  award of  $50,000.  When any party  files a claim in excess of
this amount,  the  arbitration  decision  shall be made by the majority  vote of
three arbitrators. No arbitrator shall have the power to restrain any act of any
party.  No arbitrator may grant any relief that would not be available  pursuant
to Arizona law.

          11.3  SERVICE OF PROCESS  Service of process  may be made by any means
authorized by applicable law and arbitration rules.

          11.4 FORM OF AWARD. Any award by the arbitrator(s)  shall be supported
by  written  findings  of  fact,  conclusions  of law and a  calculation  of how
damages,  if any, were calculated.  Any award not so supported shall be null and
void.

          11.5  ATTORNEYS'  FEES  AND  COSTS.   The  prevailing   party  in  any
arbitration  or court action arising  hereunder  shall be awarded its reasonable
attorneys' fees, expenses including expert witness fees, and costs, such amounts
to be determined by the arbitrator(s).

          11.6 ENTRY AND REVIEW OF AWARD.  Judgment  may be entered on any award
made by the  arbitrator(s)  by the United  States  District  Court,  District of
Arizona,  or, in the event that court lacks  jurisdiction  to do so by any other
court of competent jurisdiction.  Upon review by the applicable court, the award
may be vacated, remanded,  modified or corrected where (i) the award is contrary
to the terms of this Agreement,  (ii) the award is otherwise contrary to Arizona
law,  (iii) the award is contrary to the  authority  granted to the  arbitrators
under this  Article XI, or (iv) on such terms as are provided for in the Federal
Arbitration Act.


                      ARTICLE XII: MISCELLANEOUS PROVISIONS

          12.1 NOTICES. Except as otherwise provided herein, any notice, demand,
or communication  required or permitted to be given to a Member by any provision
of this Agreement shall be deemed to have been sufficiently  given or served for
all  purposes  if (i)  delivered  personally  to the  Member or to an  executive
officer of the Member to whom the same is directed or (ii) sent by registered or

                                       20
<PAGE>
certified mail,  postage and charges prepaid,  addressed to the Member's address
which is set forth in this Agreement.  Except as otherwise  provided herein, any
such  notice  shall be deemed to be given on the date which is two days from the
date the same was deposited in a regularly maintained receptacle for the deposit
of United States mail, addressed and sent as aforesaid.

          12.2 APPLICATION OF ARIZONA LAW. This Agreement shall be construed and
enforced in accordance with the laws of the State of Arizona.

          12.3 WAIVER OF ACTION FOR PARTITION.  Each Member  irrevocably  waives
during the term of the Company any right that it may have to maintain any action
for partition with respect to the property of the Company.

          12.4  AMENDMENTS.  This  Agreement may not be amended  except with the
unanimous written consent of all Managers.

          12.5 EXECUTION OF ADDITIONAL INSTRUMENTS. Each Member hereby agrees to
execute  such  other  and  further   statements   of  interest   and   holdings,
designations,  powers of attorney, and other instruments necessary to effectuate
the terms of this Agreement or to comply with any laws, rules, or regulations.

          12.6  HEADINGS.  The  headings  in this  Agreement  are  inserted  for
convenience only and are in no way intended to describe,  interpret,  define, or
limit the scope, extent, or intent of this Agreement or any provision hereof.

          12.7  SEVERABILITY.   If  any  provision  of  this  Agreement  or  the
application thereof to any Person or circumstance shall be invalid,  illegal, or
unenforceable to any extent, the remainder of this Agreement and the application
thereof  shall not be affected and shall be  enforceable  to the fullest  extent
permitted by law.

          12.8 CREDITORS AND OTHER THIRD PARTIES. None of the provisions of this
Agreement  shall be for the benefit of or  enforceable  by any  creditors of the
Company or by other third parties.

          12.9 COUNTERPARTS. This Agreement may be executed in counterparts.

          12.10 ENTIRE  AGREEMENT.  This  Agreement  contains all the agreements
between  the  parties  hereto  and  supersedes  any  and all  prior  agreements,
arrangements,  or  understandings  between the  parties  relating to the subject
matter hereof. No oral  understandings,  oral statements,  oral promises or oral
inducements  exist.  No  representations,  warranties,  covenants or conditions,
express or  implied,  whether by statute or  otherwise,  other than as set forth
herein, have been made by the parties hereto.

                                       21
<PAGE>
          Executed as of the date first above written.

                                   GUM TECH INTERNATIONAL INC., a Utah
                                   corporation

                                   By:_______________________________________
                                   Its:  President


                                   BIO DELIVERY TECHNOLOGIES, INC., a
                                   California corporation


                                   By:_______________________________________
                                   Its: CEO

                                       22
<PAGE>
                                    EXHIBIT A

                              SCHEDULE OF MANAGERS



MANAGERS DESIGNATED BY GUM TECH


         1)   Walter Brown Russell, III

         2)   William J. Hemelt



MANAGERS DESIGNATED BY BDT

         1)   R. Steven Davidson

         2)   Charles B. Hensley


                                       23
<PAGE>
                                    EXHIBIT B

                               SCHEDULE OF MEMBERS




    Member                 Address                 Initial Percentage Interest
--------------------------------------------------------------------------------
Gum Tech           246 E. Watkins Street                       60%
                   Phoenix, Arizona 85004
--------------------------------------------------------------------------------
BDT                6430 Variel Avenue                          40%
                   Suite 102B
                   Woodland Hills, CA, 91367
--------------------------------------------------------------------------------

                                       24
<PAGE>
                                    EXHIBIT C

                    DESCRIPTION OF THE INTELLECTUAL PROPERTY





PATENT APPLICATIONS

U.S. Patent  Application No.  09/145,042,  filed September 1, 1998, by Robert S.
Davidson,  Gary S. Kehoe,  and Lawrence S. Kaye, for Method and  Composition for
Delivering Zinc to the Nasal Membrane

TRADEMARKS AND SERVICE MARKS

GELTECH

ZICAM

ZINULLOSE

                                       25
<PAGE>
                                    EXHIBIT D

                              REIMBURSABLE EXPENSES



Gum Tech shall be reimbursed $370,848 and BDT shall be reimbursed $183,037,  for
Reimbursable Expenses incurred prior to March 31, 1999. In addition, each member
will be reimbursed for expenses incurred  subsequent to March 31, 1999 and prior
to the date of execution of this Agreement. Any amounts to be reimbursed will be
subject to audit and approval by a Majority of the Managers,  which must include
the  approval  of at least one Manager  designated  by Gum Tech and at least one
Manager designated by BDT.

                                       26
<PAGE>
                                    EXHIBIT E

           INDEPENDENT PUBLIC ACCOUNTANT TO AUDIT FINANCIAL STATEMENTS
                                 FOR FISCAL YEAR


The  independent  public  accountant  agreed  upon by the  parties  to audit the
financial statements for each fiscal year shall be Angell & Deering, LLP.

                                       27
<PAGE>
                                    EXHIBIT F

                         INITIAL OFFICERS OF THE COMPANY


As of the date of this  Agreement,  the  initial  Officers of the Company are as
follows:


POSITION                                              NAME
--------                                              ----

Chief Executive Officer                          R. Steven Davidson

President                                        Hank Landau

Chief Operating Officer                          Larry Kaye

Executive Vice President and
Chief of Research and Scientific
Affairs                                          Charles B. Hensley


                                       28
<PAGE>
                                   APPENDIX A


                  A.1 ACCOUNTING  DEFINITIONS.  The following  terms,  which are
used  predominantly  in this Appendix A, shall have the meanings set forth below
for all purposes under this Agreement:

                            "ADJUSTED   CAPITAL  ACCOUNT  BALANCE"  means,  with
respect to any Member,  the balance of such Member's  Capital  Account as of the
end  of  the  relevant  Fiscal  Year,  after  giving  effect  to  the  following
adjustments:

                                    (a)  Credit  to  such  Capital  Account  any
                  amounts which such Member is obligated to restore  pursuant to
                  this  Agreement  or  as  determined  pursuant  to  Regulations
                  Section 1.704-1(b)(2)(ii)(C),  or is deemed to be obligated to
                  restore  pursuant to the penultimate  sentences of Regulations
                  Sections 1.704-2(g)(1) and 1.704-2(i)(5); and

                                    (b) Debit to such Capital  Account the items
                  described   in   clauses   (4),   (5)  and   (6)  of   Section
                  1.704-1(b)(2)(ii)(D) of the Regulations.

The foregoing  definition  of Adjusted  Capital  Account  Balance is intended to
comply with the provisions of Section  1.704-1(b)(2)(ii)(D)  of the  Regulations
and shall be interpreted consistently therewith.

                  "BOOK VALUE"  means,  with  respect to any asset,  the asset's
adjusted basis for Federal income tax purposes, except as follows:

                                    (a) The  initial  Book  Value  for any asset
                  (other  than  money)  contributed  by a Member to the  Company
                  shall be the gross fair market value of such asset,  as agreed
                  upon by the Manager at the time of such contribution;

                                    (b) The  Book  Value of all  Company  assets
                  shall be adjusted to equal their  respective gross fair market
                  values,  as  reasonably  determined  by the  Manager 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 cash or  property as  consideration  for an
                  Interest  in  the  Company,   if  (in  any  such  event)  such
                  adjustment  is necessary  or  appropriate,  in the  reasonable
                  judgment  of the  Manager,  to reflect the  relative  economic
                  interests  of  the  Members  in  the  Company;  or  (iii)  the
                  liquidation  of the Company for  Federal  income tax  purposes
                  pursuant   to   Regulations   section    1.704-1(b)(2)(ii)(G);
                  PROVIDED,  however,  that, if a Member, or former Member whose
                  Interest in the Company is being  purchased or liquidated does
                  not accept

                                       29
<PAGE>
                  the  proposed  adjustment  to the Book  Value of any  asset or
                  assets,  then  such  adjustment  shall  be  determined  by the
                  following procedure: the disagreeing Members shall each select
                  a qualified appraiser. Unless the same person is selected, the
                  two appraisers  shall then jointly  nominate a third,  neutral
                  qualified  appraiser,  who  shall  determine  the  appropriate
                  adjustment  and  whose   determination   shall  be  final  and
                  conclusive on the parties;

                                    (c) The  Book  Value  of any  Company  asset
                  distributed to any Member shall be adjusted to equal its gross
                  fair market value on the date of distribution;

                                    (d) The Book Values of the Company's  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),  but only to the extent  that
                  such adjustments are taken into account in determining Capital
                  Accounts pursuant to Regulation  Section  1.704-1(b)(2)(iv)(M)
                  and Section A.2(g) hereof; provided, however, that Book Values
                  shall not be adjusted  pursuant to this  subsection (d) to the
                  extent that an adjustment  pursuant to subsection  (b) of this
                  definition is necessary or  appropriate  in connection  with a
                  transaction  that  would  otherwise  result  in an  adjustment
                  pursuant to this subsection (d); and

                                    (e) If the Book  Value of an asset  has been
                  determined or adjusted  pursuant to subsection (a), (b) or (d)
                  above,  such Book Value  shall  thereafter  be adjusted by the
                  Depreciation taken into account from time to time with respect
                  to such asset for purposes of computing Profits and Losses.

                  "CAPITAL  ACCOUNT" means,  with respect to any Member or other
owner of an Interest in the Company,  the Capital  Account  maintained  for such
Person in accordance with the following provisions:

                                    (a) To each such  Person's  Capital  Account
                  there shall be credited such Person's  Capital  Contributions,
                  such Person's  distributive  share of Profits and any items in
                  the  nature of income  or gain  that are  specially  allocated
                  pursuant to Sections A.2 and A.3 hereof, and the amount of any
                  Company  liabilities assumed by such Person (excluding assumed
                  liabilities that have been taken into account in computing the
                  Net Asset Value of any Company  property  distributed  to such
                  Person);

                                    (b) To each such  Person's  Capital  Account
                  there  shall be  debited  the amount of cash and the Net Asset
                  Value  of any  Company  property  distributed  to such  Person
                  pursuant to any  provision of this  Agreement,  such  Person's
                  distributive  share of Losses,  and any items in the nature of
                  expenses or losses that are  specially  allocated  pursuant to
                  Sections A.2 and A.3 hereof, and the

                                       30
<PAGE>
                  amount  of any  liabilities  of  such  Person  assumed  by the
                  Company  (excluding  assumed  liabilities that were taken into
                  account  in  computing  the Net  Asset  Value of any  property
                  contributed by such Person to the Company);

                                    (c) In the event any Interest in the Company
                  is transferred in accordance with the terms of this Agreement,
                  the  transferee  shall  succeed to the Capital  Account of the
                  transferor  to  the  extent  it  relates  to  the  transferred
                  interest;

                                    (d)  Section  752(c)  of the  Code  shall be
                  applied in  determining  the amount of any  liabilities  taken
                  into  account  for  purposes  of this  definition  of "Capital
                  Account"; and

                                    (e) The foregoing  provisions  and the other
                  provisions of this  Agreement  relating to the  maintenance of
                  Capital   Accounts  are  intended  to  comply  with   Sections
                  1.704-1(b)  and  1.704-2  of  the  Regulations  and  shall  be
                  interpreted  and  applied  in a manner  consistent  with  such
                  Regulations.  The Manager  may modify the manner of  computing
                  the  Capital   Accounts  or  any  debits  or  credits  thereto
                  (including  debits or credits relating to liabilities that are
                  secured by  contributed  or  distributed  property or that are
                  assumed by the  Company or any Member) in order to comply with
                  such  Regulations,  provided that any such modification is not
                  likely to have a material effect on the amounts  distributable
                  to any  Member  pursuant  to  Section  10.3  hereof  upon  the
                  dissolution of the Company. Without limiting the generality of
                  the preceding sentence, the Manager shall make any adjustments
                  that are necessary or appropriate to maintain equality between
                  the  aggregate  sum of the Capital  Accounts and the amount of
                  capital  reflected  on the balance  sheet of the  Company,  as
                  determined  for  book  purposes  in  accordance  with  Section
                  1.704-1(b)(2)(iv)(G)  of the  Regulations.  The Manager  shall
                  also  make  any  appropriate  modifications  if  unanticipated
                  events  (for  example,  the  availability  of  investment  tax
                  credits)  might  otherwise  cause this Agreement not to comply
                  with Regulations Section 1.704-1(b).

                  "COMPANY  MINIMUM  GAIN"  has the  same  meaning  as the  term
"partnership   minimum  gain"  under  Regulations   Section  1.704-2(d)  of  the
Regulations.

                  "DEPRECIATION" means, for each Fiscal Year or other period, an
amount equal to the depreciation,  amortization or other cost recovery deduction
allowable with respect to an asset for such year or other period, except that if
the Book Value of an asset  differs from its adjusted  basis for Federal  income
tax purposes at the beginning of such year or other period,  Depreciation  shall
be an amount  that  bears the same  ratio to such  beginning  Book  Value as the
Federal income tax depreciation,  amortization or other cost recovery  deduction
for such  year or other  period  bears to such  beginning  adjusted  tax  basis;
provided,  however,  that if  such  depreciation,  amortization  or  other  cost
recovery  deductions  with  respect  to any such  asset for  Federal  income tax
purposes is zero for any Fiscal  Year,  Depreciation  shall be  determined  with
reference to the

                                       31
<PAGE>
asset's  Book Value at the  beginning of such year using any  reasonable  method
selected by the Manager.

                  "MEMBER  NONRECOURSE  DEBT" has the same  meaning  as the term
"partner nonrecourse debt" under Section 1.704-2(b)(4) of the Regulations.

                  "MEMBER NONRECOURSE DEBT MINIMUM GAIN" has the same meaning as
the term "partner nonrecourse debt minimum gain" under Section  1.704-2(i)(2) of
the Regulations and shall be determined in accordance with Section 1.704-2(i)(3)
of the Regulations.

                  "MEMBER  NONRECOURSE  DEDUCTIONS"  has the same meaning as the
term "partner nonrecourse  deductions" under Regulations Section  1.704-2(i)(1).
The amount of Member Nonrecourse Deductions with respect to a Member Nonrecourse
Debt for each Fiscal  Year of the Company  equals the excess (if any) of the net
increase  (if  any) in the  amount  of  Member  Nonrecourse  Debt  Minimum  Gain
attributable  to such Member  Nonrecourse  Debt during such Fiscal Year over the
aggregate amount of any distributions during such Fiscal Year to the Member that
bears the economic risk of loss for such Member  Nonrecourse  Debt to the extent
that such  distributions  are from the proceeds of such Member  Nonrecourse Debt
which are  allocable  to an increase in Member  Nonrecourse  Debt  Minimum  Gain
attributable  to such Member  Nonrecourse  Debt,  determined in accordance  with
Section 1.704-2(i)(2) of the Regulations.

                  "NET ASSET VALUE" means, with respect to any asset (other than
money)  contributed  by a Member to the Company's  capital or distributed by the
Company to any Member,  the amount by which the gross fair market  value of such
asset,  as  determined  by the  Members  at the  time  of such  contribution  or
distribution,  exceeds the total monetary obligations then secured by such asset
or  otherwise  assumed by the  transferee  at the time of such  contribution  or
distribution.  In the case of contributed  services, if any, the Net Asset Value
shall be equal to the value  thereof as determined by the Members at the time of
the contribution.

                  "NONRECOURSE  DEBT" or  "NONRECOURSE  LIABILITY"  has the same
meaning as the term "nonrecourse  liability" under Section  1.704-2(b)(3) of the
Regulations.

                  "NONRECOURSE  DEDUCTIONS" has the meaning set forth in Section
1.704-2(b)(1)  of the  Regulations.  The amount of Nonrecourse  Deductions for a
Company  Fiscal Year equals the excess (if any) of the net  increase (if any) in
the amount of Company  Minimum  Gain during that Fiscal Year over the  aggregate
amount of any distributions during that Fiscal Year of proceeds of a Nonrecourse
Debt that are  allocable  to an increase  in Company  Minimum  Gain,  determined
according to the provisions of Section 1.704-2(c) of the Regulations.

                  "PROFITS"  or  "LOSSES"  means,  for each Fiscal Year or other
period,  the taxable  income or taxable loss of the Company as determined  under
Code Section 703(a) (including in

                                       32
<PAGE>
such taxable income or taxable loss all items of income, gain, loss or deduction
required to be stated separately pursuant to Section 703(a)(1) of the Code) with
the following adjustments:

                            (a) All  items  of gain or loss  resulting  from any
                  disposition of the Company's property shall be determined upon
                  the basis of the Book Value of such  property  rather than the
                  adjusted tax basis thereof;

                            (b) Any income of the  Company  that is exempt  from
                  Federal  income tax shall be added to such  taxable  income or
                  loss;

                            (c)  Any   expenditures  of  the  Company  that  are
                  described  in Code  Section  705(a)(2)(B),  or treated as such
                  pursuant to Regulations Section 1.704-1(b)(2)(iv)(I), and that
                  are not  otherwise  taken into account in the  computation  of
                  taxable  income or loss of the  Company,  shall be deducted in
                  the determination of Profits or Losses;

                            (d) If  the  Book  Value  of any  Company  asset  is
                  adjusted  pursuant to subsection  (b) or (c) of the definition
                  of "Book  Value" set forth in this  Appendix  A, the amount of
                  such  adjustment  shall be taken into  account as gain or loss
                  from the  disposition  of such asset for purposes of computing
                  Profits  or  Losses  unless  such  gain or  loss is  specially
                  allocated pursuant to Section A.2 hereof;

                            (e) In lieu of the depreciation,  amortization,  and
                  other  cost   recovery   deductions   taken  into  account  in
                  determining  such  taxable  income  or  loss,  there  shall be
                  deducted   Depreciation,   computed  in  accordance  with  the
                  definition of such term in this Appendix A; and

                            (f) Notwithstanding any of the foregoing provisions,
                  any items that are specially allocated pursuant to Section A.2
                  or A.3  hereof  shall not be taken into  account in  computing
                  Profits or Losses.

                  A.2 SPECIAL ALLOCATIONS.  The allocation of Profits and Losses
for each Fiscal Year shall be subject to the following  special  allocations  in
the order set forth below

                            (a) MEMBER  MINIMUM GAIN  CHARGEBACK.  If there is a
                  net decrease in Company Minimum Gain for any Fiscal Year, each
                  Member shall be specially  allocated  items of income and gain
                  for such year (and, if necessary,  for subsequent years) in an
                  amount  equal to such  Member's  share of the net  decrease in
                  Company   Minimum  Gain  during  such  year,   determined   in
                  accordance with Regulations Section 1.704-2(g)(2). Allocations
                  pursuant  to the  preceding  sentence  shall be made among the
                  Members in proportion to the respective amounts required to be
                  allocated  to each of them  pursuant to such  Regulation.  The
                  items to be so allocated  shall be  determined  in  accordance
                  with Regulations Section

                                       33
<PAGE>
                  1.704-2(f)(6).  Any  special  allocation  of items of  Company
                  income and gain pursuant to this Section  A.2(a) shall be made
                  before any other  allocation  of items under this  Appendix A.
                  This  Section  A.2(a) is intended to comply with the  "minimum
                  gain chargeback" requirement in Regulations Section 1.704-2(f)
                  and shall be interpreted consistently therewith.

                            (b) MEMBER NONRECOURSE DEBT MINIMUM GAIN CHARGEBACK.
                  If there is a net decrease  during a Fiscal Year in the Member
                  Nonrecourse  Debt  Minimum  Gain   attributable  to  a  Member
                  Nonrecourse  Debt, then each Member with a share of the Member
                  Nonrecourse  Debt  Minimum  Gain  attributable  to such  debt,
                  determined   in   accordance    with    Regulations    Section
                  1.704-2(i)(5),  shall be specially  allocated  items of income
                  and gain for such year (and, if necessary,  subsequent  years)
                  an amount equal to such Member's  share of the net decrease in
                  the Member  Nonrecourse Debt Minimum Gain attributable to such
                  Member   Nonrecourse  Debt,   determined  in  accordance  with
                  Regulations Section 1.704-2(i)(4). Allocations pursuant to the
                  preceding   sentence  shall  be  made  among  the  Members  in
                  proportion to the  respective  amounts to be allocated to each
                  of them pursuant to such Regulation. Any special allocation of
                  items of income and gain pursuant to this Section A.2(b) for a
                  Fiscal  Year  shall be made  before  any other  allocation  of
                  Partnership  items  under this  Appendix  A,  except  only for
                  special allocations  required under Section A.2(a) hereof. The
                  items to be so allocated  shall be  determined  in  accordance
                  with Regulations Section 1.704-2(i)(4). This Section A.2(b) is
                  intended to comply with the provisions of Regulations  Section
                  1.704-2(i)(4) and shall be interpreted consistently therewith.

                            (c) QUALIFIED INCOME OFFSET.  If any Member receives
                  any adjustments,  allocations,  or distributions  described in
                  clauses   (4),   (5)   or   (6)   of    Regulations    Section
                  1.704-1(b)(2)(ii)(D),  items  of  income  and  gain  shall  be
                  specially  allocated  to each such  Member  in an  amount  and
                  manner sufficient to eliminate as quickly as possible,  to the
                  extent  required  by  such  Regulation,  any  deficit  in such
                  Member's Adjusted Capital Account Balance,  such balance to be
                  determined after all other allocations provided for under this
                  Appendix  A have  been  tentatively  made as if  this  Section
                  A.2(c) were not in this Agreement.

                            (d) GROSS INCOME ALLOCATION. In the event any Member
                  has a deficit  Capital  Account at the end of any Fiscal  Year
                  which is in excess of the sum of (i) the  amount (if any) such
                  Member is  obligated to restore  pursuant to any  provision of
                  this  Agreement,  and (ii) the amount such Member is deemed to
                  be obligated to restore pursuant to the penultimate  sentences
                  of   Sections   1.704-2(g)(1)   and  1.704-   2(i)(5)  of  the
                  Regulations,  each such Member  shall be  specially  allocated
                  items of  income  and gain in the  amount  of such  excess  as
                  quickly as possible,  provided that an allocation  pursuant to
                  this  Section  A.2(d)  shall be made only if and to the extent
                  that such  Member  would  have a deficit  Capital  Account  in
                  excess of such

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                  sum after all other allocations  provided for in this Appendix
                  A have been made as if Section  A.2(c) hereof and this Section
                  A.2(d) were not in the Agreement.

                            (e) NONRECOURSE  DEDUCTIONS.  Nonrecourse Deductions
                  for any  Fiscal  Year  or  other  period  shall  be  specially
                  allocated  to the Members in  proportion  to their  Percentage
                  Interests.

                            (f)   MEMBER    NONRECOURSE    DEDUCTIONS.    Member
                  Nonrecourse  Deductions  for any Fiscal  Year or other  period
                  shall be specially  allocated,  in accordance with Regulations
                  Section  1.704-2(i)(1),  to the Member or Members who bear the
                  economic risk of loss for the Member Nonrecourse Debt to which
                  such deductions are attributable.

                            (g) CODE SECTION 754  ADJUSTMENTS.  To the extent an
                  adjustment  to the  adjusted  tax basis of any  Company  asset
                  under Code  Section  734(b) or 743(b) is  required to be taken
                  into  account in  determining  Capital  Accounts  pursuant  to
                  Regulations Section  1.704-1(b)(2)(iv)(M),  the amount of such
                  adjustment to the Capital Accounts shall be treated as an item
                  of gain (if the  adjustment  increases the basis of the asset)
                  or loss (if the  adjustment  decreases  such basis),  and such
                  gain or loss shall be specially  allocated to the Members in a
                  manner  consistent  with the  manner  in which  their  Capital
                  Accounts are required to be adjusted  pursuant to such section
                  of the Regulations.

                  A.3  CURATIVE  ALLOCATIONS.   The  allocations  set  forth  in
subsections (a) through (g) of Section A.2 hereof ("Regulatory Allocations") are
intended to comply with certain  requirements of Regulations Sections 1.704-1(b)
and 1.704-2. Notwithstanding any other provisions of this Appendix A (other than
the Regulatory Allocations and the next two following sentences), the Regulatory
Allocations shall be taken into account in allocating other Profits,  Losses and
items of income,  gain,  loss and  deduction  among the Members so that,  to the
extent possible, the net amount of such allocations of other Profits, Losses and
other items and the Regulatory  Allocations to each Member shall be equal to the
net amount that would have been  allocated to each such Member if the Regulatory
Allocations had not occurred.  For purposes of applying the preceding  sentence,
Regulatory   Allocations  of  Nonrecourse   Deductions  and  Member  Nonrecourse
Deductions shall be offset by subsequent allocations of items of income and gain
pursuant  to this  Section A.3 only if and to the extent  that:  (a) the Manager
reasonably  determines  that such  Regulatory  Allocations  are not likely to be
offset by subsequent  allocations under Section A.2(a) or Section A.2(b) hereof,
and (b) there has been a net  decrease in Company  Minimum  Gain (in the case of
allocations to offset prior Nonrecourse  Deductions) or a net decrease in Member
Nonrecourse Debt Minimum Gain attributable to a Member  Nonrecourse Debt (in the
case of allocations to offset prior Member Nonrecourse Deductions).  The Manager
shall apply the provisions of this Section A.3, and shall divide the allocations
hereunder  among the  Members,  in such  manner as will  minimize  the  economic
distortions  upon the  distributions  to the Members that might otherwise result
from the Regulatory Allocations.

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<PAGE>
                  A.4       GENERAL ALLOCATION RULES.

                            (a) Generally,  all Profits and Losses  allocated to
                  the Members  shall be allocated  among them in  proportion  to
                  their Percentage Interests,  except as otherwise  specifically
                  provided  under  the  terms of this  Agreement.  In the  event
                  Members are admitted to the Company pursuant to this Agreement
                  on different  dates  during any Fiscal  Year,  the Profits (or
                  Losses)  allocated  to the  Members  for each such Fiscal Year
                  shall be  allocated  among the  Members in  proportion  to the
                  Percentage  Interests that each Member holds from time to time
                  during such Fiscal Year in  accordance  with Code Section 706,
                  using any  convention  permitted  by law and  selected  by the
                  Managing Member.

                            (b) For purposes of determining the Profits,  Losses
                  or any other items  allocable to any period,  Profits,  Losses
                  and any  such  other  items  shall be  determined  on a daily,
                  monthly or other basis, as determined by the Manager using any
                  method  permissible under Code Section 706 and the Regulations
                  thereunder.

                            (c)  For  purposes  of   determining   the  Members'
                  proportionate  shares of the "excess nonrecourse  liabilities"
                  of the  Company  within  the  meaning of  Regulations  Section
                  1.752-3(a)(3),  their  respective  interests in Member Profits
                  shall  be  in  the  same   proportions  as  their   Percentage
                  Interests.

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