EXHIBIT 3(v)
                               OPERATING AGREEMENT
                                       OF
                         SMOG CENTERS OF CALIFORNIA, LLC
                       an Oregon limited liability company

         This  Operating  Agreement is entered into and shall be effective as of
January 9, 2003 by and among the Company and the persons identified on Exhibit A
of this  Agreement  as Members  who  execute the  counterpart  signatures  pages
attached hereto.

                                    ARTICLE 1
                                    FORMATION

         1.1 NAME. The name of the limited  liability company (the "Company") is
Smog Centers of California, LLC.

         1.2 ARTICLES OF ORGANIZATION. The Articles of Organization ("Articles")
were filed with the Oregon  Secretary  of State on  November  21, 2002 under the
Oregon Limited Liability Company Act ("Act").

         1.3 DURATION.  The duration of the Company  shall be perpetual,  unless
earlier dissolved as provided in this Agreement.

         1.4 NATURE OF BUSINESS..  The Company may engage in any lawful business
permitted by the Act or the laws of any jurisdiction in which the Company may do
business.  The Company  shall have the  authority to do all things  necessary or
convenient to accomplish its purpose and operate its business.

         1.5 REGISTERED  OFFICE AND REGISTERED  AGENT. The principal and initial
registered  office of the Company  shall  initially be at 520 SW Yamhill,  Suite
600, Portland,  Oregon  97204-1329.  The name of its initial registered agent at
such  address  shall be  Robert C.  Laskowski.  The  Members  may  relocate  the
principal office or establish additional offices from time to time.

         1.6 TITLE TO ASSETS.  Title to all  property  and assets of the Company
shall be held in the name of the  Company.  No Member  shall have any  ownership
interest in such  property  in the  Member's  individual  name or right and each
Member's interest in the Company shall be personal property for all purposes.

         1.7 DEFECTS AS TO FORMALITIES.  A failure to observe any formalities or
requirements  of this  Agreement,  the Articles of Organization or the Act shall
not be grounds for imposing personal liability on the Members for liabilities of
the Company.



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         1.8  NO PARTNERSHIP  INTENDED  FOR NONTAX  PURPOSES.  The Members  have
formed the Company  under the Act, and  expressly do not intend hereby to form a
partnership  under  either the  Oregon  Uniform  Partnership  Act nor the Oregon
Uniform  Limited  Partnership  Act or a  corporation  under the Oregon  Business
Corporation  Act.  The Members do not intend to be partners  one to another,  or
partners as to any third party.  No Member shall have any authority,  by word or
action,  to  represent  to another  person that any other Member is a partner or
that the Company is a partnership.

                                    ARTICLE 2
                         MEMBERS; CAPITAL CONTRIBUTIONS

         2.1 MEMBERS; INITIAL CONTRIBUTIONS;  OWNERSHIP INTERESTS. The names and
addresses of the Members of the Company,  the initial cash  contribution  to the
capital of the Company made by each Member (the  "Initial  Contributions"),  and
the percentage ownership interest ("Ownership Interest") of each Member (subject
to  adjustment as provided in this  Agreement)  are as set forth in the attached
Exhibit A.

         2.2  ADDITIONAL  MEMBERS.  Additional  Members  may be  admitted to the
Company only upon the unanimous vote or written consent of all Members  pursuant
to Article 7 of this Agreement.

         2.3 MEMBER LOANS. If any Member  determines  that additional  funds are
necessary to pay ordinary and necessary  operating and capital  expenditures  of
the Company or any debts, liabilities and obligations incurred by the Company in
the ordinary course of its business, ("Ordinary Costs"), and if the Members fail
to agree to make capital  contributions  to pay such Ordinary Costs,  any Member
shall  have the right to loan  funds to the  Company  pay all or a portion  such
Ordinary Costs ( "Member Loan"). Any such Member Loan shall bear interest at the
rate of six percent (6%) per annum.

         2.4 NO INTEREST ON CAPITAL CONTRIBUTIONS.  No interest shall be paid on
the Initial  Contributions or on any subsequent  contributions to capital of the
Company.

         2.5 ADDITIONAL CONTRIBUTIONS. In addition to the Initial Contributions,
the  Company  may  determine  from  time to time that  additional  contributions
("Additional  Contributions")are  needed to enable the Company to  conducts  its
business.  Upon making such a  determination,  the  Company  shall give  written
notice to all  Members  at least ten (10)  business  days prior to the date such
Additional  Contributions are due. Such notice shall set forth the amount of the
Additional  Contributions  needed,  the purpose for which the  contributions are
needed and the date by which the Members should contribute. Each Member shall be
entitled to contribute a proportionate  share of such Additional  Contributions.
No Member  shall be  obligated  to make any  Additional  Contribution  except as
otherwise  required  by law.  In the event any one or more  Members  do not make
their Additional Contribution,  the other Members shall be given the opportunity
to make the contributions not otherwise made.



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         2.6 RETURN OF CONTRIBUTIONS;  NO RIGHT TO WITHDRAW CAPITAL. Each Member
shall look solely to the assets of the  Company for the return of such  Member's
capital  contributions  and, if the assets of the Company  are  insufficient  to
return such capital  contributions,  such Members shall have no recourse against
any other  Member for that  purpose.  Except as  specifically  provided  in this
Agreement, a Member may not withdraw capital from the Company. To the extent any
amount that any Member is entitled to receive  from the Company  pursuant to any
provision of this Agreement constitutes a return of capital, each of the Members
consents to the withdrawal of such capital. A Member shall not have the right to
demand and receive  property other than cash in return for such Member's capital
contribution.

         2.7  MAINTENANCE OF CAPITAL  ACCOUNTS.  The Company shall establish and
maintain a capital account ("Capital Account") with respect to each Member. Each
Capital Account shall be (i) credited with all contributions  made on account of
each Member and Member's distributive share of all profits (including any income
exempt  from  federal  income  tax);  and (ii)  charged  with the  amount of all
distributions made on account of such Member and the Member's distributive share
of losses.  Capital  Accounts  shall be maintained  in  accordance  with federal
income  tax  accounting   principles  as  set  forth  in   Regulations   Section
1.704-1(b)(2)(iv) or any successor provision.

                                    ARTICLE 3
                          ALLOCATIONS AND DISTRIBUTIONS

         3.1  PROFITS  AND  LOSSES.  All items of profits  and  losses  shall be
allocated among the Members  according to their respective  Ownership  Interests
described in the attached Exhibit A.

         3.2 DISTRIBUTIONS IN GENERAL.  Except as otherwise provided in the Act,
the  Articles  and this  Agreement,  no Member  shall have the right or power to
demand or receive distributions in a form other than cash and no Member shall be
compelled to accept a distribution  of any asset in kind, to the extent that the
interest  distributed  would  exceed the Member's pro rata share of operating or
liquidating  distributions.  No distributions  shall be made in violation of ORS
63.229. If any such wrongful  distribution is made, the provisions of ORS 63.235
shall determine the liability and the remedy, if any, thereof.

         3.3 NET CASH FROM OPERATIONS.  Except as otherwise  provided in Article
11 of this Agreement, Net Cash from Operations, if any, shall be distributed not
later  than 30 days after the end of the fiscal  year 100% to the  Members.  For
purposes of this Agreement, "Net Cash from Operations" shall mean the gross cash
proceeds  from  Company  operations  less  the  portion  thereof  used to pay or
establish reserves for all Company expenses, debt payments, capital improvements
and other contingencies, all as determined by the Manager(s) .
         3.4 NET CASH FROM SALES OR REFINANCINGS.  Except as otherwise  provided
in Article 11 of this Agreement,  Net Cash from Sales or  Refinancings  shall be
distributed,  at such times as the Manager(s)  may  determine,  in the following
order and priority:


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        a.  first,  to  the  Members  in  an  amount  equal  to  their  Initial
Contributions  and  Additional  Contributions  as  defined  in Article 2 of this
Agreement;

         b. Second, the balance, if any, 100% to the Members.

For purposes of this Agreement, "Net Cash from Sales or Refinancings" shall mean
the net cash proceeds from all sales and refinancings,  less any portion thereof
use to establish reserves,  all as determined by the Manager(s).  "Net Cash from
Sales or  Refinancings"  shall include all principal and interest  payments with
respect to any note or other  obligation  received by the Company in  connection
with such sale.

         3.5 MINIMUM  DISTRIBUTIONS  FOR TAXES.  Within 90 days after the end of
each fiscal year, the Company shall make a distribution in an amount equal to at
least (a) the Company's net taxable income during the fiscal year  multiplied by
(b) the lesser of (i) 15% or (ii) the sum of the  maximum  federal and state tax
rates of any Member in effect for the  fiscal  year,  less (c) the amount of any
distributions  made during the fiscal year, other than distributions made during
the  fiscal  year that were  required  to be made under  this  Section  3.5 with
respect to a prior fiscal year.

                                    ARTICLE 4
                                     MEMBERS

         4.1  AUTHORITY  TO ACT. No Member  shall have the power or authority to
bind  the  Company  unless  the  Member  is a  Manager  or the  Member  has been
authorized by the Manager to act as an agent of the Company in  accordance  with
this Agreement.

         4.2 LIMITATION OF LIABILITY.  Each Member's  liability shall be limited
as set forth in this Agreement,  the Act and other applicable law. A Member will
not be  personally  liable,  merely as a Member,  for any debts or losses of the
Company beyond the Member's respective Initial  Contributions and any obligation
of the  Member  under  Article  2 to make  Additional  Contributions,  except as
otherwise provided by law.

         4.3 INDEMNIFICATION. The Company shall defend and indemnify each Member
to the fullest  extent  permissible  under Oregon law, as the same exists or may
hereafter be amended, against all liability, loss, and costs (including, without
limitation,  attorney  fees) incurred or suffered by such person by reason of or
arising  from the fact  that  such  person  is or was a Member  of the  Company,
provided  that the person acted in good faith and  reasonably  believed that the
person's  actions or inaction  were in the best  interests of the  Company.  The
indemnification  provided in this  Section  shall not be  exclusive of any other
rights to which any person may be entitled under any statute,  bylaw, agreement,
resolution of Members, contract, or otherwise.

         4.4. MEMBER MANAGEMENT RIGHTS. All Members shall be entitled to vote on
or consent to any matter submitted to a vote or consent of the Members.


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         a. In addition to any other  actions  which,  by virtue of the Act, the
Articles  or this  Agreement  require a certain  consent  of the  Members or the
Managers,  the  following  actions  require  the  consent of a  Majority  of the
Members:

                  (1) Fixing the number of Managers;

                  (2)      Electing the Manager(s);

                  (3)      Setting or adjusting the  compensation or benefits of
                           Manager(s);

                  (4)      Removing any Manager without cause;

                  (5)      Removing any Manager for cause;

                  (6)      Filling  any  vacancy  created  by  the  resignation,
                           removal or death of a Manager;

                  (7)      Filling  any vacancy  created by the  increase in the
                           number of Manager(s);

                  (8)      Approving  any  transaction  involving  an  actual or
                           potential  conflict of interest between a Member or a
                           Manager and the Company;

                  (9)      Determining  the  amount,  if any,  and timing of any
                           guaranteed payments to Members;

                  (10)     Admitting an additional Member;

                  (11)     Amending or restating this Agreement;

                  (12)     Changing the nature of the business of the Company;

                  (13)     Incurring a Company  debt other than in the  ordinary
                           course of business;

                  (14)     Incurring any debt in any single transaction in
                           excess of $5,000.00;

                  (15)     Causing the  Company to make any capital  expenditure
                           in any single transaction in excess of $5,000.00;

                  (16)     Dissolving the Company pursuant to Section 11;

                  (17)     Extending   the  statute  of   limitations   for  the
                           assessment of tax  deficiencies  against Members with
                           respect  to  adjustments  to the  Company's  federal,
                           state, or local tax returns; or


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                  (18)     Taking or approving any action or  transaction  which
                           is reserved to the Members by the Act,  the  Articles
                           or this  Agreement  without any express  statement of
                           the extent of Member action required.

         B. In addition to any other  actions  which,  by virtue of the Act, the
Articles or this Agreement,  require the unanimous consent of the Members or the
Manager(s), the following actions require the unanimous consent of the Members:

                  (1)      Compromising any Initial Contribution obligation;

                  (2)      Amending or restating the Articles;

                  (3)      Approving  any  action  to  sell,  lease,   exchange,
                           mortgage, pledge, or other transfer or disposition of
                           all or  substantially  all of the  Company  Property,
                           other than in the ordinary course of business; or

                  (4)      Merging the Company with another Entity.

         4.5      ACTIONS OF MEMBERS.

         a. ANNUAL  MEETING.  The annual meeting of the Members shall be held on
the third  Tuesday in March or at such other time as shall be  determined by the
Managers, for the purpose of the transaction of such business as may come before
the meeting.

         b. SPECIAL MEETINGS.  Special meetings of the Members,  for any purpose
or  purposes,  unless  otherwise  prescribed  by  statute,  may be called by any
Manager  or by any  Member or  Members  holding  at least  10% of the  Ownership
Interests.

         c. PLACE OF MEETING.  The  Managers  may  designate  any place,  either
within or outside of Oregon, as the location for any meeting of the Members.  If
no designation is made, or if a special meeting be otherwise  called,  the place
of meeting shall be the principal executive office of the Company in Oregon.

         d. NOTICE OF  MEETING.  Except as  provided  in Section  4.5(e)  below,
written notice stating the place, day and hour of the meeting and the purpose or
purposes for which the meeting is called  shall be  delivered  not less than ten
nor more than 50 days before the date of the meeting,  either  personally  or by
mail, by or at the direction of the person calling the meeting,  to each Member.
If mailed,  such notice shall be deemed to be delivered  two calendar days after
being  deposited  in the  United  States  mail,  addressed  to the Member at the
Member's address as it appears on the books of the Company, with postage thereon
prepaid.


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         e. MEETING OF ALL MEMBERS. If all of the Members shall meet at any time
and place,  either within or outside of Oregon,  and consent to the holding of a
meeting at such time and place,  such  meeting  shall be valid  without  call or
notice, and at such meeting lawful action may be taken.

         f.  RECORD  DATE.  For the purpose of  determining  the Members for any
purpose,  the date on which any  required  notice is mailed  shall be the record
date for the determination of the Members.

         g.  QUORUM.  Members,  represented  in  person  or by  proxy,  with  an
aggregate  Ownership Interests in excess of 50% shall constitute a quorum at any
meeting of the  Members.  In the  absence of a quorum at any such  meeting,  the
Members so  represented  may adjourn the meeting  from time to time for a period
not to exceed 60 days without further notice. However, if the adjournment is for
more than 60 days,  or if after the  adjournment  a new record date is fixed for
the adjourned  meeting, a notice of the adjourned meeting shall be given to each
Member of record.  At such adjourned  meeting at which a quorum shall be present
or represented,  any business may be transacted which might have been transacted
at the meeting as originally  noticed.  The Members  present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
departure  during such meeting of Members  whose absence would cause less than a
quorum to remain.  In the event an action  requires the consent of the remaining
Members or some  portion  thereof,  the  foregoing  quorum rules of this Section
4.5(g)  shall be applied  by  substituting  "remaining  Members"  for  "Members"
therein.

         h. MANNER OF ACTING. If a quorum is present,  a Majority of the Members
shall act for the Members,  unless the vote of a different  proportion or number
is  otherwise  required by the Act,  the  Articles,  or this  Agreement.  Unless
otherwise  expressly  provided herein or required under  applicable law, Members
who have an  interest  in the  outcome of any  particular  matter upon which the
Members not vote or consent  may vote or consent  upon any such matter and their
vote or consent,  as the case may be, shall not be counted in the  determination
of whether the  requisite  matter was approved by the  Members.  In the event an
action  requires the consent of the remaining  Members or some portion  thereof,
the  foregoing  rules of this Section  4.5(h)  shall be applied by  substituting
"remaining Members" for "Members" therein.

         i. PROXIES.  At all meetings of the Members a Member may vote in person
or by a  proxy  executed  in  writing  by the  Member  or by a  duly  authorized
attorney-in-fact.  Such proxy shall be filed with the Managers  before or at the
time of the  meeting and may be of any  duration  except that a Member who shall
appear in person at a meeting  shall void any  outstanding  proxy for so long as
such Member is in attendance.

         j. ACTION BY MEMBERS WITHOUT A MEETING. Action required or permitted to
be taken at a meeting of Members may be taken without a meeting if the action is
evidenced by one or more written consents describing the action taken, signed by
Members  sufficient to have approved the actions or  resolutions  at issue had a
duly  called  meeting  been held at which all  Members  were in  attendance  and
delivered to the  Managers  for  inclusion in the minutes or for filing with the
Company records. Action taken under this Section is effective when the necessary
Members  have  signed the  consent,  unless the  consent  specifies  a different
effective date. The record date for determining  Members entitled to take action
without a meeting shall be the date the first Member signs a written consent.


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         k.  WAIVER OF NOTICE.  When any notice is  required  to be given to any
Member,  a waiver  thereof in  writing  signed by the  person  entitled  to such
notice,  whether  before,  at,  or  after  the  time  stated  therein,  shall be
equivalent to the giving of such notice.

         l.  TELEPHONIC  MEETINGS.  With  respect  to a  particular  meeting  or
generally  with respect to future  meetings,  the Managers may permit any or all
Members to  participate  in the  meeting  by, or may  permit the  conduct of the
meeting  through,  use of any  means  of  communication  by  which  all  Members
participating may simultaneously hear each other;  provided the notice of such a
meeting  shall  state that the  Members  may  participate  in such a fashion and
describe  how any Member may notify  the  Company of the  Member's  desire to be
included in the meeting.  A Member  participating in such a meeting is deemed to
be present in person at such meeting.

         4.6 BOOKS, RECORDS, REPORTS AND INFORMATION. Each Member shall have the
right to receive  the reports  and  information  required to be provided by this
Agreement.  Upon  reasonable  request,  each Member,  and the Member's agent and
attorney shall have the right,  during  ordinary  business hours, to inspect and
copy,  at the  requesting  Member's  expense,  the books and  records  which the
Managers are required, by the Act and this Agreement, to keep.

                                    ARTICLE 5
                                    MANAGERS

         5.1      GENERAL

         a. INITIAL  MANAGER.  The Company shall initially have one (1) Manager,
namely:

                                Stephen D. Wilson
                               10345 SW 69th Ave.
                                Tigard, OR 97223

         b. NUMBER.  The number of Managers  shall be fixed from time to time by
the Members, but in no instance shall there be less than one Manager.

         c. QUALIFICATIONS. Managers need not be residents of Oregon or Members.

         d. TERM.  Each Manager shall hold office until the next annual  meeting
of the  Members or until the  Member's  successor  shall have been  elected  and
qualified.

         e. ELECTION.  Except as otherwise  provided  herein,  Managers shall be
elected by the Members.


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

         g.  REMOVAL.  All or any lesser  number of the Managers may be removed,
with or without  cause,  by the Members at a meeting  called  expressly for that
purpose.  The  removal  of a Manager  who is also a Member  shall not affect the
Manager's rights as a Member and shall not constitute a withdrawal of a Member.

         h.  VACANCIES.  Any  vacancy  occurring  for any  reason  other than an
increase in the number of Managers may be filled by the remaining  Managers then
in office,  provided that if there are no remaining  Managers,  the vacancy(ies)
shall be filled by a majority  of the  Members.  Any  Manager's  position  to be
filled by reason of an increase in the number of Managers shall be filled by the
Managers  then in office or by an election at an annual  meeting or at a special
meeting of the  Members  called for that  purpose or by the  Members.  A Manager
elected  to fill a  vacancy  shall  be  elected  for the  unexpired  term of the
Manager's  predecessor  in office and shall hold office until the  expiration of
such term and until the Manager's  successor  shall be elected and shall qualify
or until the Manager's earlier death,  resignation or removal.  A Manager chosen
to fill a position  resulting  from an increase in the number of Managers  shall
hold office until the next annual meeting of the Members and until the Manager's
successor  shall be elected and shall  qualify,  or until the Manager's  earlier
death, resignation or removal.

         5.2 ACTION BY MANAGERS. The rights and powers of the Managers hereunder
shall be exercised  by them in such manner as they may agree.  In the absence of
an agreement among the Managers, the following shall apply:

         a.  MEETINGS.  Meetings of the  Managers,  for any purpose or purposes,
unless otherwise prescribed by statute, may be called by any Manager.

         b. PLACE OF MEETING.  The  Managers  may  designate  any place,  either
within or outside of Oregon, as the location for any meeting of the Managers. If
no designation is made, or if a special meeting be otherwise  called,  the place
of meeting shall be the principal executive office of the Company in Oregon.

         c. NOTICE OF  MEETING.  Except as  provided  in Section  5.2(d)  below,
written notice stating the place, day and hour of the meeting and the purpose or
purposes for which the meeting is called  shall be  delivered  not less than ten
nor more than 50 days before the date of the meeting,  either  personally  or by
mail, by or at the direction of the person calling the meeting, to each Manager.
If mailed,  such notice shall be deemed to be delivered  two calendar days after
being  deposited  in the United  States  mail,  addressed  to the Manager at the
Manager's  address  as it  appears  on the books of the  Company,  with  postage
thereon prepaid.


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         d. MEETING OF ALL  MANAGERS.  If all of the Managers  shall meet at any
time and place,  either within or outside of Oregon,  and consent to the holding
of a meeting at such time and place, such meeting shall be valid without call or
notice, and at such meeting lawful action may be taken.

         e. QUORUM. More than half of the Managers,  represented in person or by
proxy, shall constitute a quorum at any meeting of the Managers.  In the absence
of a quorum at any such  meeting,  the Managers so  represented  may adjourn the
meeting  from time to time for a period  not to exceed 60 days  without  further
notice.  However,  if the  adjournment is for more than 60 days, a notice of the
adjourned  meeting shall be given to each Manager of record.  At such  adjourned
meeting at which a quorum shall be present or  represented,  any business may be
transacted  which  might  have been  transacted  at the  meeting  as  originally
noticed.  The  Managers  present at a duly  organized  meeting  may  continue to
transact business until adjournment,  notwithstanding the withdrawal during such
meeting of that number of Managers whose absence would cause less than a quorum.

         f. MANNER OF ACTING.  If a quorum is present,  the act of a majority of
the  Managers who are  present,  in person or by proxy,  shall be the act of the
Managers,  unless  the vote of a  different  proportion  or number is  otherwise
required by the Act, the Articles, or this Agreement. Unless otherwise expressly
provided herein or required under applicable law,  Managers who have an interest
in the outcome of any particular  matter upon which the Managers vote or consent
may not vote or consent  upon any such matter and their vote or consent,  as the
case may be, shall not be counted in the  determination of whether the requisite
matter was approved by the Managers.

         g.  PROXIES.  At all  meetings of the  Managers,  a Manager may vote in
person or by a proxy executed in writing by the Manager or by a duly  authorized
attorney-in-fact.  Such proxy shall be filed with the Managers  before or at the
time of the meeting and may be of any  duration  except that a Manager who shall
appear in person at a meeting  shall void any  outstanding  proxy for so long as
such Manager is in attendance.

         h. ACTION BY MANAGERS  WITHOUT A MEETING.  Action required or permitted
to be taken at a meeting  of  Managers  may be taken  without  a meeting  if the
action is evidenced by one or more written consents describing the action taken,
signed by Managers  sufficient  to have approved the actions or  resolutions  at
issue  had a duly  called  meeting  been  held at  which  all  Managers  were in
attendance  and  delivered  to the Company for  inclusion  in the minutes or for
filing with the Company  records.  Action  taken under this Section is effective
when the  necessary  Managers  have  signed  the  consent,  unless  the  consent
specifies a different effective date.

         i.  WAIVER OF NOTICE.  When any notice is  required  to be given to any
Manager,  a waiver  thereof in writing  signed by the  person  entitled  to such
notice,  whether  before,  at,  or  after  the  time  stated  therein,  shall be
equivalent to the giving of such notice.


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         j.  TELEPHONIC  MEETINGS.  With  respect  to a  particular  meeting  or
generally  with respect to future  meetings,  the Managers may permit any or all
Managers  to  participate  in the  meeting  by, or may permit the conduct of the
meeting  through,  use of any  means  of  communication  by which  all  Managers
participating  may  simultaneously  hear each other. A Manager  participating in
such a meeting is deemed to be present in person at such meeting.

         5.3  AUTHORITY  OF  THE  MANAGERS.   Subject  to  the  limitations  and
restrictions  set forth in the Act, the Articles and this Agreement  (including,
without limitation,  those set forth in this Article 4), the Managers shall have
the sole and  exclusive  right to manage the  business  of the Company and shall
have all of the rights and powers which may be  possessed by Managers  under the
Act and the Articles  including,  without  limitation,  the right and power,  on
behalf and in the name of the Company to:

         a. Institute,  prosecute, and complaint and defend in all courts in the
Company's name;

         b. Purchase,  take,  receive,  lease or otherwise  acquire,  own, hold,
improve,  use and  otherwise  deal in or with real or  personal  property or any
interest in real or personal property, wherever situated;

         c. Sell,  convey,  mortgage,  pledge,  create a security  interest  in,
lease,  exchange,  transfer  and  otherwise  dispose  of all or any  part of the
Company property;

         d. Purchase,  take, receive,  subscribe for or otherwise acquire,  own,
hold, vote, use, employ, sell, mortgage,  lend, pledge, otherwise dispose of and
otherwise use or deal in or with other  interests in or obligations of any other
Entity;

         e. Make contracts or guarantees, incur liabilities, borrow money, issue
Company notes or other obligations that may be convertible into other securities
of the  Company,  or include  the option to  purchase  other  securities  of the
Company, or secure any of the Company's obligations by mortgage or pledge of any
of the Company property, franchises or income;

         f. Lend  money,  invest or reinvest  Company  funds or receive and hold
real or personal property as security for repayment of funds so loaned, invested
or reinvested,  including,  without limitation, the loans to Managers,  Members,
employees and agents;

         g. Be a  promoter,  incorporator,  general  partner,  limited  partner,
member,  associate or manager of any partnership,  joint venture, trust or other
Entity;

         h. Conduct the Company's business,  locate its offices and exercise the
powers granted by the Act and the Articles within or without Oregon;

         i.  Elect or  appoint  Managers,  employees  or agents of the  Company,
define their duties, fix their compensation and lend them money and credit;

         j. Make and alter this Agreement not inconsistent  with the Articles or
the law of Oregon  for  managing  the  Company's  business  and  regulating  its
affairs;


OPERATING AGREEMENT- Page 11
<PAGE>
         k. Pay pensions and establish  pension plans,  profit sharing plans and
other  benefit  or  incentive  plans  for any and all of its  current  or former
Managers, Members, employees and agents;

         l. Make donations for the public welfare or for charitable,  scientific
or educational purposes;

         m. Transact any lawful business that will aid governmental policy;

         n.  Indemnify  a Member or  Manager  or any other  person as and to the
extent not inconsistent with the provisions of the Act or the Articles; and

        o. Cease the Company's activities and dissolve;

         5.4  RESTRICTIONS  ON AUTHORITY  OF MANAGERS.  In addition to any other
consent requirements contained in the Act, the Articles or this Agreement:

         a. Each Manager  shall not have the  authority  to, and  covenants  and
agrees that it shall not, do any of the  following  acts  without the  unanimous
consent of the Members:

                  (1)      Knowingly  do  any  act  in   contravention  of  this
                           Agreement  or without  the  consent of the Members as
                           required by this Agreement;

                  (2)      Knowingly  do any act which would make it  impossible
                           to carry on the  ordinary  business  of the  Company,
                           except as otherwise provided in this Agreement;

                  (3)      Confess a judgment  against  the Company in an amount
                           in excess of $5,000.00;

                  (4)      Possess  Company   property,   or  assign  rights  in
                           specific Company  property,  for other than a Company
                           purpose;

                  (5)      Knowingly  perform  any act that  would  subject  any
                           Member to personal liability in any jurisdiction; or

                  (6)      Cause the Company to voluntarily take any action that
                           would cause a Bankruptcy of the Company.

OPERATING AGREEMENT- Page 12
<PAGE>
         b. Each Manager  shall not have the  authority  to, and  covenants  and
agrees that it shall not, do any of the following  acts without the consent of a
Majority of the Managers in addition to any required consent of the Members:

                  (1)      Determining  the  amount,  if any,  and timing of any
                           guaranteed payments to Members;

                  (2)      Determining  the Net Cash from Operations and the Net
                           Cash from Sales and  Refinancings  available  for and
                           the timing of distributions;

                  (3)      Expelling a Member;

                  (4)      Incurring any debt in any single transaction in
                           excess of $5,000.00;

                  (5)      Causing the  Company to make any capital  expenditure
                           in any single transaction in excess of $5,000.00; or

                  (6)      Taking or approving any action or  transaction  which
                           is reserved to the Managers by the Act, the Articles,
                           or this  Agreement  without any express  statement of
                           the extent of Manager action required;

         5.5      DUTIES AND OBLIGATIONS OF MANAGERS.  In addition to such other
duties and obligations as Managers may have, Managers shall be responsible for
the following:

         a. The  Managers  shall cause the Company to conduct its  business  and
operations  separate  and apart from that of any Manager or any  affiliate  of a
Manager, including, without limitation:

                  (1)      Segregating Company property and not allowing Company
                           property  to be  commingled  with the  funds or other
                           assets of, held by, or  registered in the name of any
                           Manager or any affiliate of a Manager;

                  (2)      Maintaining   books  and  financial  records  of  the
                           Company separate from the books and financial records
                           of any Manager and any  affiliate  of a Manager,  and
                           observing  all Company  procedures  and  formalities,
                           including, without limitation, maintaining minutes of
                           Company  meetings and acting on behalf of the Company
                           only pursuant to due authorization of the Members;

                  (3)      Causing  the  Company  to pay  its  liabilities  from
                           Company Property; and

                  (4)      Causing  the  Company to conduct  its  dealings  with
                           third  parties in its own name and as a separate  and
                           independent entity.

OPERATING AGREEMENT- Page 13
<PAGE>
         b. The  Managers  shall  take all  actions  which may be  necessary  or
appropriate:

                  (1)      For the continuation of the Company's valid existence
                           as a  limited  liability  company  under  the laws of
                           Oregon and of each other  jurisdiction  in which such
                           existence   is   necessary  to  protect  the  limited
                           liability  of the Members or to enable the Company to
                           conduct the business in which it is engaged; and

                  (2)      For the  accomplishment  of the  Company's  purposes,
                           including the acquisition,  development, maintenance,
                           preservation,  and  operation of Company  Property in
                           accordance  with the provisions of this Agreement and
                           applicable laws and regulations.

         C. The Managers  shall be under a fiduciary  duty to perform the duties
of Managers in good faith, in a manner they reasonably believe to be in the best
interests  of the Company and its Members,  and with such care as an  ordinarily
prudent  person in a like  position  would use under similar  circumstances.  In
discharging  these duties, a Manager shall be fully protected in relying in good
faith upon the records required to be maintained under this Agreement,  and upon
such information,  opinions, reports or statements by any other Manager, Member,
or agent, or by any other person, as to matters the Manager reasonably  believes
are within such other  person's  professional  or expert  competence and who has
been selected  with  reasonable  care by or on behalf of the Company,  including
information,  opinions,  reports or statements as to the value and amount of the
assets,  liabilities,  profits  and  losses of the  Company  or any other  facts
pertinent to the existence and amount of assets from which  distributions to the
Members might properly be paid.

         5.6      RIGHT TO RELY ON MANAGERS.

         a. Any  person  dealing  with the  Company  may rely  (without  duty of
further inquiry) upon a certificate signed by any Manager as to:

                  (1) The identify of any Manager or any Member;

                  (2)      The  existence or  nonexistence  of any fact or facts
                           which  constitute a condition  precedent to acts by a
                           Manager or which are in any other  manner  germane to
                           the affairs of the Company;

                  (3)      The  Persons  who  are   authorized  to  execute  and
                           delivery any  instrument  or document of the Company;
                           or

                  (4)      Any act or failure to act by the Company or any other
                           matter  whatsoever   involving  the  Company  or  any
                           Member.

         b. The signature of any Manager  shall be necessary  and  sufficient to
convey title to any Company Property or to execute any promissory  notes,  trust
deeds, mortgages, or other instruments of hypothecation,  and all of the Members
agree that a copy of this Agreement may be shown to the  appropriate  parties in
order to confirm the same,  and further  agree that the signature of any Manager
shall be  sufficient to execute any  "statement  of company" or other  documents
necessary to effectuate this or any other  provision of this  Agreement.  All of
the Members do hereby appoint the Managers as their  attorney(s)-in-fact for the
execution of any or all of the documents described in this Section 5.6(b).

OPERATING AGREEMENT- Page 14
<PAGE>
         5.7  LIABILITY  AND  INDEMNITY  OF  THE  MANAGERS.  A  Manager  is  not
personally liable for any debt, obligation or liability of the Company merely by
reason of being a Manager  and is not liable to the  Company or its  Members for
monetary damages for conduct as a Manager.  A Manager who performs the duties as
Manager in accordance with this Agreement shall not have any liability by reason
of being or having been a Manager.  The Company shall indemnify the Managers and
make  advances  for  expenses to the  maximum  extent  permitted  under the Act.
However, this provision shall not eliminate or limit a Manager's liability for:

         a. Any breach of a  Manager's  duty of  loyalty  to the  Company or its
Members as described in this Agreement;

         b.  Acts or  omissions  not in good  faith  which  involve  intentional
misconduct or a knowing violation of law;

         c. Any unlawful distribution under the Act; or

         d. Any transaction from which the Manager derives an improper  personal
benefit.

                                    ARTICLE 6
               CONFLICTS OF INTEREST AND CONFIDENTIAL INFORMATION

          6.1 DUTY OF  LOYALTY.  Each  Member and  Manager  shall be entitled to
enter into  transactions  that may be  considered to be  competitive  with, or a
business  opportunity that may be beneficial to, the Company, it being expressly
understood that some of the Members may enter into transactions that are similar
to the  transactions  into which the  Company may enter and the Company and each
Member  waive the right or claim to  participate  therein.  Notwithstanding  the
foregoing,  Members and  Managers  shall  account to the  Company  and hold,  as
trustee  for it,  any  property,  profit or  benefit  derived  by the  Member or
Manager,  without  the consent of the  Members,  in the  formation,  conduct and
winding  up of the  Company  business  or from the use or  appropriation  by the
Member  or  Manager  of any  Company  assets,  including  information  developed
exclusively for the Company and opportunities expressly offered to the Company.

         6.2 OTHER SELF INTEREST. A Member or Manager does not violate a duty or
obligation to the Company  merely  because the conduct  furthers the interest of
the Member or  Manager.  A Member or Manager  may lend money to and  transaction
business with the Company. The rights and obligations of a Member or Manager who
lends money to or transacts business with the Company are the same as those of a
person who is not a Member or  Manager,  subject to other  applicable  laws.  No
transaction  with the  Company  shall be  voidable  solely  because  a Member or
Manager has a direct or indirect or indirect  interest in the transaction if the
transaction is approved or ratified by the Members.

         6.3 CONFIDENTIAL  INFORMATION.  The Members  recognized and acknowledge
that as Members  they will have access to, be provided  with and, in some cases,
will  prepare and create  Confidential  Information.  A Member  shall not use or
disclose or use any Confidential  Information,  either personally or for the use
of others,  other than in connection  with the Member's  activities on behalf of
the Company.  Nor shall a Member  disclose any  Confidential  Information to any
person who is not a Member, not employed by the Company or not authorized by the
Company to receive  such  Confidential  Information,  without the prior  written
consent of the  Company.  Each Member shall use  reasonable  and prudent care to
safeguard and protect and prevent the unauthorized use and


OPERATING AGREEMENT- Page 15
<PAGE>
disclosure  of  Confidential  Information.  The  obligations  contained  in this
Section 6.3 shall survive for long as the Company in its sole judgment considers
certain  information  to be  Confidential  Information.  For  purposes  of  this
Agreement,   "Confidential  Information"  shall  mean  information  or  material
proprietary  to the Company  whether  written or oral,  tangible or  intangible,
which a Member  obtains  knowledge  of  through  or as a result of the  Member's
activities  on behalf of the  Company.  Confidential  Information  may  include,
without limitation,  data, know-how,  trade secrets,  designs,  plans, drawings,
specifications and reports related to the Company's business activities.

                                    ARTICLE 7
                             ACCOUNTING AND R ECORDS

         7.1 BOOKS OF  ACCOUNT.  The  Company's  books and  records,  a register
showing the names,  addresses,  and Ownership Interests of the Members, and this
Agreement shall be maintained by the Members,  and each Member shall have access
thereto at all reasonable  times.  The Members shall keep such books and records
of the  operation  of the Company  that are  appropriate  and  adequate  for the
Company's business and for the carrying out of this Agreement.

         7.2      FISCAL YEAR.  The fiscal year of the Company shall be the
calendar year.

         7.3 ACCOUNTING REPORTS. Within ninety (90) days after the close of each
fiscal year, the Members shall cause each Member to receive an unaudited  report
of the activities of the Company for the preceding fiscal year, including a copy
of a balance  sheet of the Company as of the end of such year and a statement of
income or loss for such year.

         7.4 TAX RETURNS.  The Manager(s) , shall cause all required federal and
state  income tax returns for the Company to be prepared  and timely  filed with
the  appropriate  authorities.  Within  ninety  (90) days  after the end of each
fiscal year, each Member shall be furnished a statement  suitable for use in the
preparation  of the  Member's  income tax  return,  showing  the  amounts of any
distributions,  contributions,  gains, losses,  profits, or credits allocated to
the Member during such fiscal year.

         7.5 ACCESS TO BOOKS AND  RECORDS.  Each Member  shall have the right to
receive copies of the books and records of the Company.  Upon reasonable notice,
each  Member and the  Member's  agent or attorney  shall have the tight,  during
ordinary  business  hours,  to  inspect  and copy,  ay the  requesting  Member's
expense, the books and records which the Company is required by the Act and this
Agreement to keep.

OPERATING AGREEMENT- Page 16
<PAGE>
                                    ARTICLE 8
                               ADDITIONAL MEMBERS

         8.1  ADMISSION.  Persons may be added as additional  Members upon terms
and conditions  approved by the Members. A person shall not become an Additional
Member  until  such  person  becomes  a party to this  Agreement  as a Member by
signing a counterpart  copy of this  Agreement  and executes such  documents and
instruments  as the  Company  may  reasonably  request  as may be  necessary  or
appropriate  to confirm such person as a Member in the Company and such person's
agreement to be bound by the terms and conditions thereof.

         8.2  ACCOUNTING.   No  additional  Member  shall  be  entitled  to  any
retroactive  allocation of losses,  income or expense deduction  incurred by the
Company. The Members may at the time an additional Member is admitted, close the
Company books or make prorata allocations of loss, income and expense deductions
to the additional  Member for that portion of the Company's fiscal year in which
such additional  Member was admitted in accordance with the relevant  provisions
of the  Internal  Revenue  Code of  1986,  as  amended.  The  provisions  of ORS
63.185(4) shall not apply in the event of an admission of an additional Member.

                                    ARTICLE 9
                             TRANSFERS OF INTERESTS

         9.1  RESTRICTION  ON TRANSFERS.  Except as otherwise  permitted by this
Agreement,  no  Member  shall  transfer  all or any  portion  of  such  person's
interests  in the  Company  without  the  express  written  consent of all other
Members. In the event that any Member pledges or otherwise encumbers any of such
person's  interests  in the Company as security  for the payment of a debt,  any
such pledge or hypothecation  shall constitute a transfer and shall only be made
pursuant to a pledge or  hypothecation  agreement  that  requires the pledgee or
secured party to be bound by all of the terms and conditions of this Agreement.

         9.2 PERMITTED TRANSFERS. Subject to the conditions and restrictions set
forth  in  Sections  9.3 and 9.6 of this  Agreement,  a  Member  may at any time
transfer all or any portion of such Member's interest in the Company to:

         (a) any other Member;

         (b) any member of the transferor's family;

         (c) the  transferor's  executor,  administrator,  trustee,  or personal
representative  to whom such interests are transferred at death or involuntarily
by operation of law;

         (d) any purchaser in accordance with Section 9.4 of this Agreement.



OPERATING AGREEMENT- Page 17

<PAGE>
         9.3 CONDITIONS ON PERMITTED TRANSFERS.  A transfer shall not be treated
as a permitted transfer under Section 9.2 of this Agreement unless and until the
following conditions are satisfied:

         a. Except in the case of a transfer of a Member's Ownership Interest at
death or  involuntarily  by operation of law, the  transferor and the transferee
shall execute and deliver to the Company such  documents and  instruments as may
be necessary or appropriate to effect such transfer and to confirm the agreement
of the transferee to be bound by the provisions of this  Agreement.  The Company
shall be  reimbursed  by the  transferor  and/or  transferee  for all  costs and
expenses that it reasonably incurs in connection with such transfer.

         b. Except in the case of a transfer of a Member's Ownership Interest at
death or  involuntarily by operation of law, the transferor shall furnish to the
Company an opinion of counsel  that the  transfer  will not cause the Company to
terminate for federal income tax purposes or under the Act.

         c. The transferor and the transferee shall furnish the Company with all
information  reasonably  necessary  to permit the  Company to file all  required
federal and state tax returns and other legally required information  statements
or  returns.  The  Company  shall  not be  required  to make  any  distributions
otherwise  provided for in this  Agreement with respect to any transfer until it
has received such information.

         d. Except in the case of a transfer of a Member's Ownership Interest at
death or  involuntarily  by  operation  of law,  the  transfer  of the  Member's
Ownership Interests shall be either registered under the Securities Act of 1933,
as  amended,  and any  applicable  state  securities  laws or, in the opinion of
counsel to the Company, such transfer is exempt for such registration.

         9.4 RIGHT OF FIRST REFUSAL.  Except as permitted by Section 9.2 of this
Agreement,  a Member may not  transfer  all or any portion of his/her  Ownership
Interest ("Offered Interest") unless such Member ("Seller") first offers to sell
the Offered Interest pursuant to the terms of this Section 9.4.

         a. LIMITATIONS ON TRANSFERS. No transfer may be made under this Section
9.4 unless the Seller  shall offer all of the  Seller's  Ownership  Interest for
sale to the  Company.  The Company  shall have thirty (30) days to exercise  its
first right to purchase the Offered Interest from the date of receipt of written
notice from the Seller that the Seller desires to sell the Offered Interest.  If
the Company does not exercise its right to purchase the Offered  Interest within
the thirty (30) day  period,  the  remaining  Members  shall have an  additional
thirty (30) days thereafter within which to purchase their  proportionate  share
of the  Offered  Interest.  A  Member's  proportionate  share  is  equal to that
percentage which the Ownership Interest of the Member at such date shall bear to
the total Ownership Interests owned by the other Members. The purchase price and
payment thereof for the Offered Interest  purchased under this Section 9.4 shall
be in accordance with Section 9.4(d) of this  Agreement.  If the Company and the
non-selling  Members do not elect to purchase all of the Offered Interest,  then
the Seller may sell the  Offered  Interest  to any other third party at the same
price and on the same terms and conditions as the original offer to the Company.
Such third party purchaser will be required to execute the  counterpart  copy of
this Agreement, as amended,  pursuant to which such purchaser agrees to be bound
by this Agreement.

OPERATING AGREEMENT- Page 18

<PAGE>
         b.  PURCHASE  PRICE.  The  purchase  price  for  any  Offered  Interest
purchased under this Agreement shall be its book value as of the last day of the
previous  accounting  year  immediately  prior to the year in which the purchase
occurs.  For the  purposes  of this  Agreement,  the book  value of the  Offered
Interest shall be determined by an accountant  employed by Company in accordance
with the generally accepted accounting principles consistently applied. Goodwill
and other intangible property shall be deemed of no value and shall not be taken
into  consideration.  Current accounts  receivable shall be taken at face value,
less an  allowance  for bad  debts.  Federal,  state  and  municipal  taxes  and
assessments  shall be  proportioned  and charged as a liability as of the end of
such year.

         c. PAYMENT OF PURCHASE PRICE. Payment of the purchase price shall be by
cash in a sum equal to ten (10%) percent of the total purchase price,  which sum
shall be payable upon the  determination  of the  purchase  price of the Offered
Interest.  The balance of the purchase  price shall be paid in twelve (12) equal
monthly  installments.  The first monthly  installment shall be paid thirty (30)
days  from  the  date  of  the  original  payment,  and  the  remaining  monthly
installments  shall be paid on the same day of each month thereafter,  until the
purchase price is paid in full. In addition to the above  payments,  the Company
or the  purchasing  Member(s)  shall pay, on the date each of the above payments
are made,  accrued interest on the unpaid balance of the purchase price from the
date of payment. Interest shall commence on the date of the original payment and
shall be paid at a rate of six percent (6%) per annum. All or any portion of the
purchase price may be prepaid at any time, without any prepayment penalty.

         D.  INSURANCE.  The Company may apply for a policy of  insurance on the
life of each Member to enable the Company to purchase any Offered Interest. Each
Member agrees to do everything  necessary to cause a policy of life insurance to
be issued  pursuant to such  application.  The Company shall be the owner of any
policy or  policies  of life  insurance  acquired  pursuant to the terms of this
Agreement.  If any Member  sells all  his/her  Ownership  Interest  during  such
Member's  lifetime or if the Company is  dissolved  as provided in Section 11 of
this Agreement, or if the Member ceases to be a Member pursuant to Section 10 of
this  Agreement,  such  Member  shall have the right to  purchase  any policy or
policies insuring such Member's life that are owned by the Company. The purchase
price  for the life  insurance  policy  or  policies  shall be the  interpolated
terminal  reserve value of such policy or policies as of the date of sale,  less
any existing indebtedness against such policy or policies,  plus that portion of
the premium or  premiums  on such  policy or policies  paid prior to the date of
sale which cover a period  beyond the date of sale.  Such right of purchase must
be  exercised by the Member  within  thirty (30) days after such sale of his/her
Ownership  Interest or the termination of this Agreement.  Upon exercise of such
right,  the  insured  Member  shall  deliver  the  purchase  price  for the life
insurance   policy  or  policies  to  the   Company,   and  the  Company   shall
simultaneously  execute  and  deliver to the Member all the  documents  that are
required  to  transfer  ownership  of the policy or  policies.  If such right of
purchase  is not  exercised  within  such  30-day  period,  the Company may make
whatever  disposition  of the life  insurance  policy or  policies it shall deem
proper.



OPERATING AGREEMENT- Page 19
<PAGE>
         9.5  ACCEPTANCE  OF  TRANSFEREE  AS A NEW MEMBER.  A transferee  may be
admitted  to the Company as a new member with all of the rights of a Member only
upon satisfaction of all of the following conditions:

         a. The transferee shall become a party to this Agreement as a Member by
executing such documents and  instruments as the Company may reasonably  request
as may be necessary or  appropriate  to confirm such  Transferee as a Member and
such  transferee's  agreement  to be bound by the terms and  conditions  of this
Agreement.

         b. The transferee shall pay or reimburse the Company for all reasonable
legal cost that the  Company  incurs in  connection  with the  admission  of the
transferee as a Member.

         c. ORS 63.185(4) shall not apply in the event of the admission of a new
member.

         9.6 DISTRIBUTIONS AND ALLOCATIONS  REGARDING  TRANSFERS.  If a Member's
Ownership  Interest  is  transferred  during any fiscal  year of the  Company in
compliance with the provisions of this Agreement,  profits, losses and all other
items  attributable  to such  Ownership  Interest  for such fiscal year shall be
divided and allocated  between the  transferor and the transferee by taking into
account  their  varying  interests  during such fiscal year in  accordance  with
applicable  provisions  of the Internal  Revenue Code of 1986,  as amended.  All
distributions  on or  before  the  date  of a  transfer  shall  be  made  to the
transferor and all  distributions  thereafter  shall be made to the  transferee.
Solely for purposes of making such  allocations and  distributions,  the Company
shall  recognize  such  transfer  not later than the end of the  calendar  month
during which it is given notice of such  transfer.  The Company  shall not incur
any liability for making  allocations and  distributions  in accordance with the
provisions  of this Section 9,  whether or not the Company has  knowledge of any
transfer.

                                   ARTICLE 10
                              CESSATION OF A MEMBER

         10.1 CESSATION.  A person shall cease to be a Member upon the happening
of any of the following events:

         a.  The  withdrawal  of a  Member  pursuant  to  Section  10.2  of this
Agreement;

         b. The expulsion of a Member pursuant to Section 10.3;

         c. The bankruptcy of a Member;

         d.  The  death  of a  Member  or the  entry  of an  order of a court of
competent  jurisdiction  adjudicating  the  Member  incompetent  to  manage  the
Member's person or estate;

         e.  The  transfer  of  Member's  entire  Ownership   Interest  and  the
acceptance of the transferee as a new member.


OPERATING AGREEMENT- Page 20
<PAGE>
         10.2  WITHDRAWAL.  A  Member  may not  voluntarily  withdraw  from  the
Company,  unless such  withdrawal  is with the consent of the other  Members and
shall result in the transferee being deemed a new member.

         10.3  EXPULSION.  A Member  may be  expelled  from the  Company  upon a
determination by the Members that the Member has been guilty of wrongful conduct
that  adversely  and  materially  affects the  business of the  Company,  or has
willfully and  persistently  committed a material breach of this  Agreement,  or
otherwise  breached  a duty owed to the  Company  or the other  Members,  to the
extent that it is not reasonably practicable to carry on the business affairs of
the Company  with the  Member.  An  expelled  Member  shall be treated as having
withdrawn   voluntarily   from  the  Company  on  the  date  of  the   expulsion
determination.

         10.4 RIGHTS UPON CESSATION. In the event that any person ceases to be a
Member for any reason other than set forth in Section 10.1(e) of this Agreement,
the following shall apply:

         A.  The  Person  shall  be  treated  as a  transferee  from the date of
cessation until such time as the person has received all  distributions to which
the person is or may be due under this Agreement;

         B. If the cessation is a Dissolution Event and the business and affairs
of the Company are wound up under Article 11 of this Agreement, the person shall
be entitled to  participate  in the winding up of the Company to the same extent
as any  Member  except  that any  distributions  to which  the  person  would be
entitled shall be reduced by the damages sustained by the Company as a result of
the dissolution and winding up.

                                   ARTICLE 11
                           DISSOLUTION AND WINDING UP

         11.1 COVENANT NOT TO CAUSE DISSOLUTION.  Except as otherwise  permitted
by this  Agreement,  each  Member  hereby  covenants  and agrees not to take any
voluntary  action that would cause the Company to dissolve  and  notwithstanding
any provision of the Act, the Company shall not dissolve prior to the occurrence
of a dissolution event ( "Dissolution Event").

         11.2  DISSOLUTION  EVENTS.  The Company  shall  dissolve  and  commence
winding  up and  liquidating  upon the  first  to occur of any of the  following
Dissolution Events:

         a. The  unanimous  vote of Members to dissolve,  wind up, and liquidate
the Company;

         b. The sale of all or substantially all of the assets of the Company;

         c. The happening of any other event that makes it unlawful,  impossible
or impracticable to carry on the business of the Company;

         d. The  happening  of any event  that  causes a Member to cease to be a
Member.


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<PAGE>
         Notwithstanding  anything in the Act to the contrary, the foregoing are
the exclusive events which may cause the Company to dissolve,  except for events
which may cause judicial or administrative dissolution under the Act.

         11.3  CONTINUATION.  Upon the occurrence of any  Dissolution  Event set
forth in Section 11.2 of this  Agreement,  the Company shall not be dissolved or
required  to be wound up if,  within one  hundred  twenty  (120) days after such
event,  Members  will  aggregate  Ownership  Interests in excess of 50% agree to
continue the business of the Company. Unless such an election is made within the
120-day period, the Company shall wind up its affairs in accordance with Section
11.4 hereof.

         11.4  WINDING UP.  Upon the  occurrence  of a  Dissolution  Event,  the
Company shall  continue  solely for the purposes of winding up its affairs in an
orderly  manner,  liquidating  its assets and satisfying the claims of creditors
and Members,  and no Member shall take any action that is inconsistent  with, or
not necessary to or  appropriate  for, the winding up of the Company's  business
and affairs. To the extent not inconsistent with the foregoing,  all obligations
in this Agreement shall continue in full force and effect until such time as the
Company's  assets have been  distributed  pursuant  to this  Section  11.4.  The
Manager(s) shall be responsible for overseeing the winding up and dissolution of
the Company,  shall take full account the assets and liabilities of the Company,
shall cause the  Company's  assets to be liquidated as promptly as in consistent
with obtaining the fair value thereof and shall cause the proceeds therefrom, to
the extent sufficient  therefor,  to be applied and distributed in the following
order:

         a. First,  to the payment and discharge of all of the  Company's  debts
and liabilities to creditors other than Members;

         b. Second,  to the payment and discharge of all of the Company's  debts
and liabilities to Members;

         c.  Third,  100%  to the  Members  in  proportion  to  their  Ownership
Interest.

         11.5     RIGHTS OF MEMBERS.   Except as otherwise provided in this
Agreement,

         a. each  Member  shall look solely to the assets of the Company for the
return of  contributions  and shall  have no right or power to demand or receive
property other than cash from the Company, and

         b. no Member shall have priority over any other Member as to the return
of contributions, distributions or allocations.

         11.6 NOTICE OF DISSOLUTION.  In the event a Dissolution Event occurs or
an event  occurs  that  would  result in the  dissolution  of the  Company,  the
Manager(s) shall,  within 10 days thereafter,  provide written notice thereof to
each Member and to all other  parties with whom the Company  regularly  conducts
business, as determined in the discretion of the Manager(s).


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<PAGE>
                                   ARTICLE 12
                                   AMENDMENTS

         The Members may amend or repeal the  provisions  of this  Agreement  by
unanimous  action.  Any  amendment  shall be set forth in writing,  or by action
taken at a meeting of Members called for that purpose. This Agreement may not be
amended or repealed by oral agreement of the Members.

                                   ARTICLE 13
                                  MISCELLANEOUS

         13.1     GOVERNING LAW.  This Agreement shall be governed by Oregon
law.

         13.2  SEVERABILITY.  If one or more of the provisions of this Agreement
is held to be  unenforceable  under  applicable  law,  such  provision  shall be
excluded  from  this  Agreement  and the  balance  of this  Agreement  shall  be
interpreted  as if such  provision  were so excluded and shall be enforceable in
accordance with its terms.

         13.3  THIRD-PARTY  BENEFICIARIES.  The provisions of this Agreement are
intended  solely for the benefit of the  Members  and shall  create no rights or
obligations  enforceable by any third party, including creditors of the Company,
except as otherwise provided by applicable law.

         13.4  COUNTERPARTS.  This  Agreement  may be  executed  in two or  more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same instrument.

         13.5  TITLES  AND  SUBTITLES.  The titles  and  subtitles  used in this
Agreement  are  used  for  convenience  only  and  are not to be  considered  in
construing or interpreting this Agreement.

         13.6 NOTICES.  All notices required or permitted to be given under this
Agreement shall be in writing.  Notices may be served by certified or registered
mail,  postage  pre-paid  with return  receipt  requested;  by private  courier,
prepaid; by facsimile or other telecommunications device, or personally.  Mailed
notices  shall  be  deemed  delivered  five  (5) days  after  mailing,  properly
addressed.  Notices by courier  shall be deemed  delivered  on the date that the
courier  warrants that delivery  occurred.  Telecommunications  notices shall be
deemed delivered when receipt is confirmed by confirming transmission.  Unless a
party  changes  its  address  by giving  notice to the other  party as  provided
herein,  notices shall be delivered to the parties at the addresses set forth on
the signature page of this Agreement.

         13.7  ARBITRATION.  If any  controversy  or claim  arising  out of this
Agreement  cannot be  settled,  the  controversy  or claim  shall be  settled by
arbitration in accordance with the rules of the American Arbitration Association
or Arbitration  Services of Portland,  Inc., which ever organization is selected
by the party which first  initiates  arbitration by filing a claim in accordance
withe rules of the  organization,  as then in effect,  and judgment on the award
may be entered in any court having jurisdiction.  Nothing herein shall prevent a
Member or the Company from resort to a court of competent  jurisdiction in those
instances  where  injunctive  relief  may  be  appropriate  or for  purposes  of
expelling a Member.

OPERATING AGREEMENT- Page 23
<PAGE>
         13.8     ATTORNEYS' FEES.

                  If any  suit  or  action  arising  out of or  related  to this
Agreement is brought by any party,  including an  arbitration  proceeding  under
Section  13.7 of this  Agreement,  the  prevailing  party  shall be  entitled to
recover its costs and fees,  including reason attorneys' fees,  incurred by such
party in such suit or action, including any appellate proceeding.

         13.9     AMENDMENTS AND WAIVERS.

                  Any  provision  of  this  Agreement  may be  amended  and  the
observance of any  provision may be waived only with the written  consent of the
Company and the Members.

         13.10    ENTIRE AGREEMENT.

                  This  Agreement  and  the  other  documents  to  be  furnished
pursuant  to this  Agreement  embody  the  full  and  entire  understanding  and
agreement  between the parties  with  respect to the subject  matter  hereof and
supersede all prior agreements with respect to the subject matter hereof.  There
are no restrictions, promises, representations, warranties or undertakings other
than those expressly set forth or referred to in this Agreement.

SMOG CENTERS OF CALIFORNIA,  LLC

By: /s/ STEPHEN D. WILSON, Manager

MEMBER:

CALIFORNIA CLEAN AIR, INC.

By:/s/ STEPHEN D. WILSOn
     Stephen D. Wilson,  President



OPERATING AGREEMENT- Page 24
<PAGE>
                                    EXHIBIT A

                              MEMBER CONTRIBUTIONS

NAMES AND ADDRESSES                   AMOUNT               OWNERSHIP INTEREST

California Clean Air, Inc.
10345 SW 69th Ave.
Tigard, OR 97223                                                    100%


















































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