**Exhibit 3.7.2**

 

**LIMITED LIABILITYCOMPANY OPERATING AGREEMENT**

**OF**

**DETTMERS INDUSTRIES, LLC**

 

This LIMITED LIABILITY COMPANY OPERATING AGREEMENT(this “Agreement”) of Dettmers Industries, LLC, a limited liability company organizedunder the laws of Delaware (the “Company”), is made and entered into effectiveas of July 1, 2000 byDeCrane Aircraft Holdings, Inc., a Delaware corporation (the “Initial Member”).Capitalized words and phrases used in this Agreement and not otherwise definedhere are used as defined in Article 13 or in Section 14.21 (Tax Definitions).

 

RECITALS

 

WHEREAS, the Initial Member formed the Companypursuant to the Delaware Limited Liability Company Act, 6 Del. C.§ 18-101, et seq., as amended from time to time (the “Act”), by filing aCertificate of Formation of the Company with the office of the Secretary ofState of the State of Delaware.

 

WHEREAS, the Initial Member intends that the Companybe treated as a pass-through entity for federal income tax purposes.

 

NOW, THEREFORE, the Initial Member hereby provides asfollows:

 

# 1.                                       **O****RGANIZATION**

 

## 1.1                                 **Name**

The name of the Company will be “Dettmers Industries, LLC.” Thebusiness of the Company may be conducted under that name or, upon compliancewith applicable laws, any other name that the Board of Directors deemsappropriate or advisable.  Any Managermay file any fictitious name certificates and similar filings, and anyamendments thereto, that such Manager considers appropriate or advisable.

 

## 1.2                                 **Purpose andLimitations**

The purpose of theCompany is to engage in any lawful activity for which a limited liabilitycompany may be organized under the Act. The Company shall have full power and authority to do every act andthing necessary or convenient to carry out the purposes for which it wasformed.

 

## 1.3                                 **Managed byManagers and Board of Directors**

The Company shall be managed by its Managers appointedhereunder, subject to the supervision and powers of the Board of Directors asset forth in this Agreement.

 

## 1.4                                 **PrincipalOffice**

The principal office of the Company shall be atDettmers Industries, LLC, 7778 S.W. Ellipse Way, Stuart, Florida 34997.  The Board of Directors may change the

 

1

----

 

principal place ofbusiness of the Company to any place from time to time intheir discretion.

 

## 1.5                                 **Agent forService of Process**

The initial agent for service of process on theCompany shall be CT Corporation System.

 

# 2.                                       **CAPITALCONTRIBUTIONS**

 

## 2.1                                 **InitialMember**

DeCrane Aircraft Holdings, Inc. shall be the soleInitial Member.  The address, initialCapital Contribution and initial LLC Percentage of the Initial Member are:

 

| **Member, Address**                                                                                                                                    |   | **CapitalContribution**                                  |   | **Initial LLC  Percentage** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------|--------|-----------------------------|
| DeCrane Aircraft Holdings,  Inc.  2361 Rosecrans Avenue,          Suite 180  El Segundo, California 90245 |   | 100% of the  capital stock of  Dettmers Industries, Inc. |   | 100%                        |
| Totals:                                                                                                                                                |   |                                                     |   | 100%                        |

 

## 2.2                                 **InitialCapital Contribution**

The initial Capital Contribution shall be paid to theCompany concurrently with the signing of this Agreement.  No Person shall be treated as a Member forany purpose until the Company receives such Person’s initial CapitalContribution.

 

## 2.3                                 **Expertise**

Each Member shallmake available to the Manager his or its expertise for the benefit of theCompany and the Company’s business.

 

## 2.4                                 **Guaranteesof the Company’s Debts**

If a Member guarantees a debt of the Company and thatdebt is paid by the Member (or its successors in interest), then such paymentshall be considered a loan to the Company and not an additional CapitalContribution.  The amount of debt paidby the Member shall be repayable out of the Company’s cash and, unlessotherwise agreed between the Company and the lending Member, shall bearinterest at an annual rate equal to one percentage point above the primelending rate of Bank of America, NA (or another similar financial institution,if any, designated jointly by such Member and the Managers) in effect at thetime the debt is paid.

 

## 2.5                                 **AdditionalCapital Contributions or Loans**

No Member shall berequired to contribute or lend any additional funds to the Company.

 

2

----

 

## 2.6                                 **Loans**

If any Member makes any loan to the Company oradvances money on its behalf, the amount of any such loan or advance shall notbe treated as a Capital Contribution but shall be a debt due from theCompany.  The amount of any such loan oradvance by a lending Member shall be repayable out of the Company’s cash andshall bear interest at an annual rate equal to one pointsabove the prime lending rate of Bank of America, NA (or a similar financialinstitution acceptable to the lending Member and the Managers) then in effect.

 

## 2.7                                 **InvestmentRepresentation**

Each Memberrepresents and warrants to the Company as of the date on which he or it becomesa Member that (a) he or it has a pre-existing personal or businessrelationship with each other Member, and (b) his or its acquisition of anInterest is made as principal for his or its own account and not with a view toor for sale in connection with any distribution of such Interest.

 

## 2.8                                 **Title toProperty**

All real andpersonal property owned by the Company shall be owned by it as an entity and,insofar as permitted by applicable law, no Member shall have any ownershipinterest in such property in his or its individual name or right, and eachMember’s interest in the Company shall be personal property for all purposes.

 

## 2.9                                 **InterestsUncertificated**

Interests shall not be evidenced or represented by any instrumentor certificate, but rather, their ownership shall be determined by reference tothe terms of this Agreement as it may be amended from time to time.

 

# 3.                                       **DISTRIBUTIONS**

 

## 3.1                                 **Distributions****Generally**

The Managers shallcause the Company to make such distributions to the Members in amounts (if any)as may be determined from time to time by the Board of Directors.  Any distributions that are made to Membersshall be made in the following order and priority:

 

(a)                                  First,to the Members until their Adjusted Capital Contributions are reduced to zero(pro rata among them in proportion to their Adjusted Capital Contributions);and

 

(b)                                 Second,the balance, if any, to the Members in proportion to their LLC Percentages atthat time.

 

## 3.2                                 **EstimatedTax Payments**

If required byapplicable law, or permitted by applicable law and approved by the Board ofDirectors, the Managers may cause the Company to make estimated payments of taxfor any Member after consultation with such Member.

 

3

----

 

## 3.3                                 **AmountsWithheld**

All amountswithheld pursuant to applicable law with respect to any payment or distributionto the Company or the Members shall be treated as amounts distributed to suchMembers for all purposes under this Agreement. The Managers shall allocate any such amounts among the Members in accordancewith applicable law.

 

## 3.4                                 **Return ofCapital**

Except asotherwise provided in this Agreement, no Member shall demand or receive areturn of his or its Capital Contribution without the approval of the Board ofDirectors.  Under circumstances requiringa return of any Capital Contribution, no Member shall have the right to receiveproperty other than cash except as may be specifically provided in thisAgreement.  No Member shall have anypersonal liability for the repayment of the Capital Contribution of any otherMember.

 

# 4.                                       **FINANANCE**

 

## 4.1                                 **LLC Funds**

All property ofthe Company in the form of cash not otherwise invested shall be deposited inone or more bank accounts maintained in the name of the Company or the name ofthe Initial Member, in such financial institutions as the Managers shalldetermine. The funds of the Company shall not be commingled with the funds ofany other Person.  The Managers shalldeposit into such accounts all revenue and proceeds of or in connection withthe Company’s business and all amounts received by the Managers from, for, oron behalf of, the Company.

 

## 4.2                                 **Books andRecords**

The Managers shallmaintain or cause to be maintained accurate books and records of account of thebusiness of the Company in accordance with generally accepted accountingprinciples consistently applied, setting forth a true and accurate account ofall business transactions arising out of and in connection with the conduct ofthe Company’s business.

 

## 4.3                                 **Tax Information**

The Managers shallprepare or cause to be prepared, and file, any applicable tax returns requiredto be filed by the Company consistent with the terms of this Agreement.  The Managers shall select an accounting firmto prepare any such tax returns, subject to approval by the Board ofDirectors.  Within 90 days after the endof each taxable year (or such earlier deadlines as may be imposed upon theMembers by law), the Managers shall deliver to each Member all tax informationregarding the Company necessary for such Member to make all required returns, togetherwith a copy of any federal, state and local income tax or information returnsof the Company for the year, and a report listing each material electiveadjustment or calculation (if any) made by any Manager with respect to such periodpursuant to Article 14 hereof.

 

## 4.4                                 **Allocations**

The Profits,Losses and other items of the Company shall be allocated as set forth inArticle 14 (Additional Tax Provisions). The Members agree to be bound by

 

4

----

 

these allocations in reporting their shares of the Company’s income,loss and other items for income tax purposes.

 

# 5.                                       **ROLE OF THE MANAGERES**

 

## 5.1                                 **Managers**

The Initial Memberof the Company has designated the following persons to serve as the initialmanagers and officers of the Company (herein, “Managers”), until changedpursuant to Sections 5.3 or 5.4:

 

R. Jack DeCrane                                                   ChiefExecutive Officer

Richard J. Kaplan                                                 ChiefFinancial Officer and Secretary

Andrew Perl                                                          President

Jeffrey A. Nerland                                                VicePresident and Authorized Representative

Stephen A. Silverman                                          AssistantSecretary

 

## 5.2                                 **Authority**

Except to theextent otherwise provided in the Articles of Organization or this Agreement(including the powers reserved to the Board of Directors and the Members), thebusiness and affairs of the Company shall be managed and all corporate powersshall be exercised by the Managers, who shall have all of the authority, rightsand powers which may be possessed by managers of a limited liability companyunder the Act, and may at their discretion, delegate and assign theirmanagement duties.  The Managers may actjointly or severally in their role as Managers, and the act of any one Manageris the act of all Managers.

 

## 5.3                                 **Qualificationand Election**

The Managers ofthe Company shall be selected by the Initial Member.  The Initial Member may appoint additional Managers from time totime in its discretion, with such title and such roles as the Initial Membermay specify.

 

## 5.4                                 **Removal andResignation**

(a)           All Managers serve at the pleasure ofthe Initial Member, and any Manager may be removed with or without cause by theInitial Member, for any reason or no reason, by providing written noticethereof to such Manager.

 

(b)           Any Manager may resign at any time bygiving written notice to the Company. Any such resignation shall take effect at the date of the receipt ofsuch notice or at any later time specified therein; and, unless otherwisespecified therein, the acceptance of such resignation shall not be necessary tomake it effective.

 

## 5.5                                 **Duties andObligations of the Managers**

The Managers shall take all actions which may benecessary or appropriate to operate and manage the Company’s business, andotherwise directed by the Board of Directors.

 

5

----

 

## 5.6                                 **MattersRequiring Unanimous Consent of the Members**

Notwithstandingany other term of this Agreement, the Managers shall not, without the unanimouswritten consent of the Members:

 

(a)           Doany act in contravention of this Agreement;

 

(b)           Doany act which would make it impossible to carry on the ordinary business of theCompany, except as otherwise provided in this Agreement;

 

(c)           Sellor otherwise dispose of at one time all or substantially all of the property ofthe Company, except pursuant to Section 11.3(e) (Winding Up);

 

(d)           Amendthis Agreement or the Certificate of Formation;

 

(e)           Liquidateor dissolve the Company;

 

(f)            Admita new Member;

 

(g)           Reduce,increase or alter the outstanding capital of the Company, make any call on capital,issue or redeem Interests, options or other securities of the Company or anysubsidiary of the Company;

 

(h)           Granta power of attorney or other delegation of the Members’ powers; or

 

(i)            Causethe Company to merge or consolidate with any other business.

 

## 5.7                                 **MattersRequiring the Approval****of the Board of Directors**

Notwithstanding any other term of this Agreement,without first obtaining the approval of a majority of the Board of Directors,at a meeting duly held, or by a written act of such Directors in lieu of ameeting, the Managers shall not:

 

(a)           Appoint or remove an auditor;

 

(b)           Obtain, incur or suffer an aggregateamount of debt other than in the ordinary course of its business in excess of$50,000; or

 

(c)           Cause the Company to acquire sharesof or any interest in any corporation or other legal entity, or create anypartnership, joint venture or legal entity of which the Company is or will be apartner, member or similar participant.

 

6

----

 

## 5.8                                 **Indemnificationof Manager****s**

 

### 5.8(a)                   **Mandatory**

TheCompany, its receiver or its trustee, shall indemnify, save harmless and payall judgments and claims against the Managers relating to any liability ordamage incurred by reason of any act performed or omitted to be performed bythe Managers in connection with the business of the Company, includingattorneys’ fees incurred by the Managers in connection with the defense of anyaction based on any such act or omission, which attorneys’ fees may be paid asincurred, including all such liabilities under federal and state securitieslaws (including the Securities Act of 1933, as amended) as permitted by law.

 

### 5.8(b)                  **If Manageris Exonerated in the Proceeding**

Inthe event of any action by a Member against a Manager, including a derivativesuit on behalf of the Company, the Company shall indemnify, save harmless andpay all expenses of such Manager, including attorneys’ fees, incurred in thedefense of such action, if such Manager is successful in such action.

 

### 5.8(c)                   **No Indemnification**

Notwithstandingthe foregoing provisions of this Section 5.8, the Managers shall not beindemnified from any liability for fraud, bad faith, willful misconduct orgross negligence.

 

### 5.8(d)                  **Limitation**

Anyindemnification under this Section 5.8 shall be paid from and only to theextent of the Company’s assets, and no Member shall have personal liability forsuch indemnification.

 

# 6.                                       **ROLE OFTHE BOARD OF DIRECTORS**

 

## 6.1                                 **Number andDesignation of Directors**

The Company shallhave a Board of Directors composed of two directors.  The Initial Member designates R. Jack DeCrane and Richard J.Kaplan as theinitial directors.

 

## 6.2                                 **Rights andPowers**

The Board ofDirectors shall have the powers reserved to it in this Agreement and, inaddition, may take any action reserved to the Members in this Agreement or inthe Act.

 

## 6.3                                 **Term;Removal**

Each directorserves at the pleasure of the Member who designated him or her pursuant toSection 3.1; and each Member having the right to designate one or more directorsmay remove and replace such designated directors at will, by notice to the Managersand directors.  In the event a Membersells, transfers or loses all of its Interests in the Company, all directorsdesignated by such Member shall be removed from the Board of Directors andtheir seats shall be declared vacant.

 

7

----

 

## 6.4                                 **Meetings**

The Board ofDirectors shall meet at such times as they may elect from time to time, in eachcase at the dates and times agreed by the directors; but the Board of Directorsshall not be required to meet at any fixed time.  The rules set forth in Section 8.2(a), (d), (e), (f) and (g) forthe meetings of Members shall also apply to all meetings of the Board ofDirectors, *except*that there shall be no record date in connection with propositions to be put toa vote at meetings of the Board.  60% of the then-seated directors shallconstitute a quorum for any transacting of business by the Board of Directors,and the Board of Directors may not act in the absence of a quorum.  Any action approved by a majority of thedirectors present at a duly called meeting of the Board of Directors at which aquorum is present, or by all of the directors then-seated by written consentwithout meeting, shall be the action of the Board of Directors.  Any action that may be taken at any meetingof the Board of Directors may be taken without a meeting if a consent inwriting, setting forth the action so taken, is signed and delivered to theManagers by directors having not less than the minimum number of votes thatwould be necessary to authorize or take that action at a meeting at which allof the directors entitled to vote thereon were present and voted.

 

## 6.5                                 **LimitedLiability**

The rights andpowers of a member of the Board of Directors, in his capacity as a director,shall not exceed the rights and powers that a member of a manager-managedlimited liability company could exercise under the Act.  Except to the extent (if any) otherwiserequired by the Act, no director shall be liable for the debts, liabilities, contractsor any other obligations of the Company.

 

# 7.                                       **ROLE OF MEMBERS**

 

## 7.1                                 **Rights andPowers**

The Members shallhave the powers reserved to them in this Agreement or in the Act.

 

## 7.2                                 **LimitedLiability**

Except to theextent (if any) otherwise required in the Act, no Member shall be liable forthe debts, liabilities, contracts or any other obligations of the Company.

 

## 7.3                                 **No Partition**

No Member ordirector shall, either directly or indirectly, take any action to requirepartition of the Company or of any of its property or to cause the sale of anyof such property, nor shall any Manager do so without the approval of the Boardof Directors.

 

# 8.                                       **MEETINGS OF MEMBERS**

 

## 8.1                                 **Required****Meetings**

The Member orMembers shall hold meetings at such times as it or they may unanimously agreein writing, but shall not be required to meet at any fixed time.  At any such meeting, Members holding amajority in Interest shall constitute a quorum.  No

 

8

----

 

action can be taken by the Members at a meeting after a quorum ceasesto be present at the meeting.  Thefailure of the Company to observe any corporate formalities or requirementsrelating to the exercise of its powers or management of its business or affairsunder this Agreement or the Act shall not be grounds for imposing personalliability on the Members for liabilities of the Company.

 

## 8.2                                 **Procedure**

 

### 8.2(a)                   **Location**

Unless all of theMembers agree otherwise in writing, meetings of Members shall be held at thechief executive office of the Initial Member in California (or at any otherplace in the County of Los Angeles, State of California, selected by the Boardof Directors and specifically identified in the notice of the meeting), so longas the meeting place has adequate facilities to permit participation bytelephone conference call.

 

### 8.2(b)                  **Call**

A meeting of theMembers may be called by any Manager, or by any Member or Members representingmore than 10% of the Interests for the purpose of addressing any matters onwhich the Members may vote.

 

### 8.2(c)                   **Notice**

(1)           WheneverMembers are required or permitted to take any action at a meeting, a writtennotice of the meeting shall be given pursuant to Article 12 (OtherProvisions) not less than 10 days nor more than 60 days before the date of themeeting to each Member entitled to vote at the meeting. The notice shall statethe place, date, and hour of the meeting and the general nature of the businessto be transacted.  No other business maybe transacted at this meeting.

 

(2)           Anaffidavit of mailing of any notice or report in accordance with the provisionsof this paragraph, signed by a Manager, shall be prima facie evidence of thegiving of the notice or report.

 

(3)           Uponwritten request to a Manager by any person entitled to call a meeting ofMembers, the Manager shall immediately cause notice to be given to the Membersentitled to vote that a meeting will be held at a time requested by the personcalling the meeting, not less than 10 days nor more than 60 days after thereceipt of the request. If the notice is not given within 20 days after receiptof the request, the person entitled to call the meeting may give the notice or,upon the application of that person, the superior court of the county inCalifornia in which the principal office of the Company is located shallsummarily order the giving of the notice, after notice to the Company affordingit an opportunity to be heard.  Thecourt may issue any order as may be appropriate, including an order designatingthe time and place of the meeting, the record date for determination of membersentitled to vote, and the form of notice.

 

### 8.2(d)                  **AdjournedMeetings**

When a meeting ofMembers is adjourned to another time or place, unless the articles of organizationor this Agreement otherwise require and, except as provided in this paragraph,notice need not be given of the adjourned meeting if the time and place thereofare announced at the meeting at which the adjournment is taken. At the adjournedmeeting, the Company may transact any business that may have been

 

9

----

 

transacted at the original meeting.  If the adjournment is for more than 45 days,or if after the adjournment a new record date is fixed for the adjournedmeeting, a notice of the adjourned meeting shall be given to each Member ofrecord entitled to vote at the meeting.

 

### 8.2(e)                   **Waiver ofNotice**

The actions takenat any meeting of Members, however called and noticed, and wherever held, havethe same validity as if taken at a meeting duly held after regular call andnotice, if a quorum is present either in person or by proxy, and if, either beforeor after the meeting, each of the Members entitled to vote, not present inperson or by proxy, signs a written waiver of notice or consents to the holdingof the meeting or approves the minutes of the meeting.  All waivers, consents, and approvals shallbe filed with the Company records or made a part of the minutes of the meeting.Attendance of a person at a meeting shall constitute a waiver of notice of themeeting, except when the person objects, at the beginning of the meeting, tothe transaction of any business because the meeting is not lawfully called orconvened. Attendance at a meeting is not a waiver of any right to object to theconsideration of matters required by this title to be included in the noticebut not so included, if the objection is expressly made at the meeting. Neitherthe business to be transacted nor the purpose of any meeting of Members need bespecified in any written waiver of notice, unless otherwise provided in thearticles of organization or operating agreement, except as provided inparagraph (g) below.

 

### 8.2(f)                     **Participationby Telephone Conference Call**

Members mayparticipate in a meeting of Members through the use of conference telephones orsimilar communications equipment, as long as all Members participating in themeeting can hear one another. Participation in a meeting pursuant to this provision constitutespresence in person at that meeting.

 

### 8.2(g)                  **Nature ofProposal**

Any actionapproved at a meeting, other than by unanimous approval of those entitled tovote, shall be valid only if the general nature of the proposal so approved wasstated in the notice of meeting (or at the previous meeting) or in any writtenwaiver of notice.

 

### 8.2(h)                  **Quorum**

A majority inInterest of the Members represented in person or by proxy shall constitute aquorum at a meeting of Members.  In theabsence of a quorum, any meeting of Members may be adjourned from time to timeby the vote of a majority of the Interest represented either in person or byproxy, but no other business may be transacted.

 

### 8.2(i)                      **WrittenAction Without Meeting**

Any action thatmay be taken at any meeting of the Members may be taken without a meeting if aconsent in writing, setting forth the action so taken, is signed and deliveredto the Managers within 60 days of the record date for that action by Membershaving not less than the minimum number of votes that would be necessary to

 

10

----

 

authorize or take that action at a meeting at whichall Members entitled to vote thereon were present and voted.

 

(1)           Unless the consents of all Membersentitled to vote have been solicited in writing, (A) notice of any Memberapproval of an amendment to the articles of organization or this Agreement, adissolution of the Company, or a merger of the Company, without a meeting byless than unanimous written consent shall be given at least 10 days before theconsummation of the action authorized by such approval, and (B) prompt noticeshall be given of the taking of any other action approved by Members without ameeting by less than unanimous written consent, to those Members entitled tovote who have not consented in writing.

 

(2)           AnyMember giving a written consent, or the Member’s  proxyholder, may revoke the consent by a writing received by theCompany prior to the time that written consents of Members having the minimumnumber of votes that would be required to authorize the proposed action havebeen filed with the Company, but may not do so thereafter. This revocation iseffective upon its receipt at the principal office of the Company in California.

 

### 8.2(j)                      **Proxies**

The use of proxiesin connection with this section will be governed in the same manner as in thecase of corporations formed under the Delaware General Corporation Law.

 

### 8.2(k)                   **Record Date**

In order that theCompany may determine the Members of record entitled to notices of any meetingor to vote, or entitled to receive any distribution or to exercise any rightsin respect of any other lawful action, a Manager, or Members representing morethan 10 percent of the interests of Members, may fix, in advance, a recorddate, that is not more than 60 days nor less than 10 days prior to the date ofthe meeting and not more than 60 days prior to any other action. If no recorddate is fixed:

 

(1)           The record date for determiningMembers entitled to notice of or to vote at a meeting of Members shall be atthe close of business on the business day next preceding the day on whichnotice is given or, if notice is waived, at the close of business on thebusiness day next preceding the day on which the meeting is held.

 

(2)           Therecord date for determining Members entitled to give consent to limitedliability company action in writing without a meeting shall be the day on whichthe first written consent is given.

 

(3)           Therecord date for determining Members for any other purpose shall be at the closeof business on the day on which the Managers adopt the resolution relatingthereto, or the 60th day prior to the date of the other action, whichever islater.

 

(4)           Thedetermination of Members of record entitled to notice of or to vote at ameeting of Members shall apply to any adjournment of the meeting unless

 

11

----

 

a Manager or the Members who called the meeting fix anew record date for the adjourned meeting, but the Manager or the Members whocalled the meeting shall fix a new record date if the meeting is adjourned formore than 45 days from the date set for the original meeting.

 

## 8.3                                 **Voting Rights**

The Members shallhave the right to vote on the matters explicitly set forth in this Agreement orin the Act.  Each Member shall have avote on all matters on which all Members may vote equal to his or its LLCPercentage.  With respect to theMembers, the term “majority in interest” means more than 50% of the LLCPercentages of all Members.

 

## 8.4                                 **Rules ofConduct**

At each meeting ofMembers they shall appoint a chair who shall conduct the meeting and who shallappoint a secretary of the meeting to keep minutes and file the minutes withthe Company’s permanent files.

 

# 9.                                       **RESTRICTIONS ON TRANSFERS**

 

## 9.1                                 **Restrictionon Transfers**

Except asotherwise permitted by this Agreement, no Member shall Transfer all or anyportion of any Interest.

 

## 9.2**                                 PermittedTransfers**

The Initial Membermay Transfer its Interest in connection with a sale of substantially all assetsof the Initial Member, to the purchaser thereof.  The Initial Member may Transfer its Interest for the purpose ofproviding security for an obligation, by hypothecation, pledge,collateralization or otherwise.   AnyInterest so held or Transferred shall remain subject to all of the provisionsof this Agreement and the Member, both individually and as trustee of thetrust, shall continue to be considered a “Member” for purposes of thisAgreement.

 

## 9.3                                 **InvoluntaryTransfer**

Any proposedTransfer of an Interest that is required by law pursuant to any insolvencyproceeding of a Member shall be subject to the terms and conditions of thisAgreement, including Section 9.7.

 

## 9.4                                 **ProhibitedTransfers**

Any purportedTransfer of an Interest that is not permitted by this Agreement shall be nulland void and of no effect whatever; *provided* that if the Company is requiredto recognize a Transfer that is not so permitted, the Interest Transferredshall be strictly limited to the transferor’s rights to allocations anddistributions under this Agreement with respect to the Transferred Interest,which allocations and distributions may be applied (without limiting any otherlegal or equitable rights of the Company) to satisfy any debts, obligations, orliabilities for damages that the transferor or transferee of such Interest mayhave to the Company.

 

12

----

 

In the case of aTransfer or attempted Transfer that is not permitted by this Agreement, theparties engaging or attempting to engage in such Transfer shall be liable toindemnify and hold harmless the Company and the other Members from all costs,liabilities and damages that any of such indemnified Persons may incur(including additional tax liability and lawyers’ fees and expenses) as a resultof such Transfer or attempted Transfer and efforts to enforce thisSection 9.4, including such indemnity.

 

## 9.5**                                 GeneralTransfer Provisions**

(a)           AllTransfers shall be by instrument in form and substance satisfactory to counselfor the Company and shall contain an expression by the transferee of his or itsintention to accept the Transfer and to adopt and be bound by all of theprovisions of this Agreement, and shall provide for the payment by thetransferor of all reasonable expenses incurred by the Company in connectionwith such Transfer, including the necessary amendments to this Agreement toreflect such Transfer.  The transferorshall sign and acknowledge all such instruments, in form and substancereasonably satisfactory to the Company’s counsel, as may be necessary ordesirable to effect such Transfer.

 

(b)           TheCompany shall not dissolve or terminate upon the admission of any new Member orupon any permitted Transfer.  EachMember hereby waives any right such Member may have to dissolve, liquidate orterminate the Company in any such event.

 

(c)           ThisSection 9.5 imposes additional restrictions on the Transfer of Interestsand does not permit any Transfer not otherwise permitted by this Agreement.

 

## 9.6                                 **Compliance**

Notwithstandinganything to the contrary in this Agreement, at law or in equity, no Membershall Transfer or otherwise deal with any Interest in a way that would cause adefault under any material agreement to which the Company is a party or bywhich it is bound.

 

## 9.7                                 **Admission ofMembers**

No new Membersshall be admitted without the approval required by Section 5.6.  A transferee of an Interest shall not beadmitted as a Member without the approval required by Section 5.6, *provided*that if the transferee is already a Member at the time of the transfer and thetransfer is permitted by this Agreement, then the transferee shall have allrights of a Member with respect to the transferred Interest.

 

## 9.8                                 **Rights ofUnadmitted Assignees**

Notwithstandingany other provision of this Agreement, a Person who acquires an Interest butwho is not admitted as a Member of the Company pursuant to this Agreement shallbe entitled only to receive, to the extent assigned, the distributions and theallocations to which the assignor would be entitled under this Agreement, but shallhave no right to vote or to participate in the management and affairs of theCompany, or to exercise any of the rights of a Member.

 

13

----

 

# 10.                                 **[DELIBERATELY OMITTED.]**

 

# 11.                                 **DISSOULTION**

 

## 11.1                           **LiquidatingEvents**

The Company shalldissolve and commence winding up and liquidating upon the first to occur of anyof the following (“Liquidating Events”):

 

(a)           Thedecision of all of the Members to dissolve, wind up and liquidate the Company;

 

(b)           Thesale or transfer by the Company of all or substantially all of its assets;

 

(c)           Theoccurrence of any other event that makes it unlawful or impossible to carry onthe business of the Company; or

 

(d)           Entryof a decree of judicial dissolution pursuant to the Act.

 

## 11.2                           **ContinuingLimited Liability Company**

Notwithstandingany provision of the Act, the Company shall not dissolve prior to theoccurrence of a Liquidating Event.  Thewithdrawal, resignation or retirement of any Member which the Company isrequired by proper authority to recognize, or the death, expulsion, bankruptcyor dissolution of any Member or the occurrence of any other event whichterminates the continued membership in the Company of any Member shall not be aliquidating event.

 

## 11.3                           **Winding Up**

Upon the occurrenceof a Liquidating Event:

 

(a)           TheCompany shall continue solely for the purposes of winding up its affairs in anorderly manner, liquidating its assets, and satisfying the claims of its creditorsand Members;

 

(b)           NoMember shall take any action that is inconsistent with, or not necessary to orappropriate for, the winding up of the Company’s business and affairs;

 

(c)           Aperson, who may but need not be a Member, shall be unanimously selected by theMembers (or by arbitration pursuant to the terms hereof if agreement cannot bereached) as the Company’s liquidator, and shall be responsible for overseeingthe winding up and dissolution of the Company and shall take full account ofthe Company’s liabilities and assets;

 

(d)           NoManager shall receive any additional compensation for any services performedpursuant to this Section 11.3;

 

(e)           Unlessall Members agree upon a sale among themselves or a division in kind of assets,the assets of the Company shall be sold in the usual course of business usingreasonable business judgment; and

 

14

----

 

(f)            Ifany property of the Company is to be distributed in kind upon the liquidationof the Company, such property shall be liquidated as promptly as is consistentwith obtaining its fair value.

 

## 11.4                           **Applicationof Proceeds**

The liquidationproceeds shall be applied and distributed, to the extent sufficient to do so,in the following order:

 

First, to thepayment and discharge of all of the Company’s debts and liabilities to creditorsother than the Members;

 

Second, to thepayment and discharge of all of the Company’s debts and liabilities to theMembers; and

 

The balance, ifany, to the Members in accordance with their Capital Accounts, after givingeffect to all contributions, distributions and allocations for allperiods.  Any in-kind distributions ofproperty of the Company shall be made among the Members pro rata in proportionwith their relative Capital Accounts.

 

## 11.5                           **NegativeCapital Accounts**

If a LiquidationEvent and a Tax Liquidation both occur, then:

 

Distributionsshall be made pursuant to this Article 11 to the Members who have positiveCapital Accounts; and

 

(a)           Ifany Member has a deficit balance in his or its Capital Account (after givingeffect to all contributions, distributions and allocations for all taxableyears, including the year during which such liquidation occurs), then suchMember shall have no obligation to contribute to the capital of the Company andthe deficit shall not be considered a debt owed to the Company or any otherPerson for any purpose whatsoever; and

 

(b)           Section 14.19(Negative Capital Accounts: Tax Issues) shall apply.

 

## 11.6                           **DiscretionaryWithholding and Distributions**

With the approvalof the Board of Directors, a pro rata portion of the distributions that wouldotherwise be made to the Members pursuant to this Article 11 may be:

 

(a)           Distributedto a trust established for the benefit of the Members for the purposes ofliquidating property of the Company, collecting amounts owed to the Company,and paying any contingent or unforeseen liabilities or obligations of the Companyor of the Managers arising out of or in connection with the Company, *provided*that assets of any such trust shall be distributed to the Members from time totime, in the reasonable discretion of the liquidator appointed hereunder, inthe same proportions as the amount distributed to such trust by the Companywould otherwise have been distributed to the Members pursuant to thisAgreement; or

 

15

----

 

(b)           Withheldto provide a reasonable reserve for liabilities (contingent or otherwise) ofthe Company and to reflect the unrealized portion of any installment obligationsowed to the Company, *provided*that such withheld amounts shallbe distributed to the Members as soon as practicable.

 

## 11.7                           **Rights of Members**

Except asotherwise provided in this Agreement, the Members shall look solely to theassets of the Company for the return of their Capital Contributions and noMember shall have any right or power to demand or receive property other thancash from the Company.  No Member shallhave priority over any other Member as to the return of his or its CapitalContribution, distributions or allocations.

 

## 11.8                           **Notice ofDissolution**

If a LiquidatingEvent occurs, the Company shall, within 60 days after the occurrence, providewritten notice of the occurrence to each of the Members and to all knowncreditors and claimants whose names appear on the records of the Company.

 

## 11.9                           **Certificatesof Dissolution**

Upon thedissolution of the Company, the liquidator appointed hereunder  and, to the extent required, any other partyhereto or appointed hereunder, shall promptly sign and cause to be filedcertificates of dissolution in accordance with the Act and the laws of anyother states or jurisdictions in which the Company has filed its Articles of Organizationor qualified to transact intrastate business.

 

# 12.                                 **OTHERPROVISIONS**

 

## 12.1                           **EntireAgreement**

This Agreement,which includes material provisions on the schedules hereto, each of which isincorporated in full herein, constitutes the entire agreement pertaining to theorganization of the Company and completely supersedes all other agreements andall drafts, understandings, negotiations and discussions, whether oral orwritten, among the parties pertaining to the subject matter of this Agreement.

 

## 12.2                           **Amendments**

No amendment orwaiver of any provision of this Agreement shall be effective unless and untilan instrument reflecting the amendment or waiver has received the approval ofthe Members.

 

The waiver by anyparty of a breach or default of any provision of this Agreement shall notoperate or be construed as a waiver of any subsequent breach or default.  A party’s failure either to insist upon anyother party’s strict performance of any provision of this Agreement or toexercise any of the party’s rights or remedies under this Agreement shall notconstitute a waiver of any default by the other party or of any right or remedyof the non-defaulting party.

 

16

----

 

## 12.3                           **Governing Law**

Delaware law shall govern this Agreement, anyagreement to amend or adopt this Agreement, and all disputes arising hereunder.

 

## 12.4                           **SeverableProvisions**

The provisions ofthis Agreement are severable, and if any provision is determined to be illegalor otherwise unenforceable, in whole or in part, then the remaining provisions,and any partially unenforceable provisions to the extent enforceable, shall neverthelessbe binding and enforceable and shall be construed as closely as possible totheir original meanings.

 

## 12.5                           **Binding Effect**

Except asotherwise provided in this Agreement, every provision of this Agreement shallbind and benefit the Members and their respective heirs, legatees, legalrepresentatives, successors, transferees and assigns.

 

## 12.6                           **Parties inInterest; Third Parties**

All references inthis Agreement to “parties” refer to the parties to this Agreement.  Nothing in this Agreement, expressed orimplied, is intended to confer on any Person or entity other than a party anyright or remedy under or by reason of this Agreement.  The provisions of this Agreement are not intended to benefit anycreditor or other Person (other than a Member in his or its capacity as a Member)to whom any debts, liabilities or obligations are owed or who otherwise has aclaim against the Company or any Member; and no such creditor or other Personshall obtain any right under this Agreement against the Company or any Memberby reason of any such debt, liability or obligation, or otherwise.

 

# 13.                                 **DEFINITIONS**

Capitalizedwords and phrases used in this Agreement have the following meanings

 

## 13.1                           “**AdjustedCapital Contributions**”

means, as of anyday with respect to a Member, such Member’s Capital Contributions, adjusted asfollows:

 

(a)           Increasedby the amount of any Company liabilities which, in connection withdistributions to such Member pursuant to Section 3.1 (Distributions Generally)and 11.4 (Dissolution/Application of Proceeds) are assumed by such Member orare secured by any property of the Company distributed to such Member; and

 

(b)           Reducedby the amount of cash and the Gross Asset Value (as defined in Section 14.21)of any property of the Company distributed to such Member pursuant to Sections 3.1(Distributions Generally) and 11.4 (Dissolution/Application of Proceeds) andthe amount of any liabilities of such Member assumed by the Company or whichare secured by any property contributed by such Member to the Company.

 

17

----

 

(c)           Ifsuch Member Transfers all or any portion of his Interest in accordance with theterms of this Agreement, his transferee shall succeed to his or its AdjustedCapital Contributions to the extent it relates to the Transferred Interest.

 

## 13.2                           “**Agreement**”

means thisOperating Agreement, as amended from time to time.

 

## 13.3                           “**Board ofDirectors**”

means the board established pursuant to Article 6(Role of the Board of Directors).

 

## 13.4                           “**Business Day**”

means a day that is not a Saturday, Sunday or publicholiday in the place to which the notice, consent or other communication issent.

 

## 13.5                           “**CapitalAccount**”

means, withrespect to any Member, the Capital Account maintained for such Person inaccordance with the following provisions and Section 14.21:

 

(a)           Toeach Person’s Capital Account there shall be credited such Person’s CapitalContribution, such Person’s distributive share of Profits and any items in thenature of income or gain which are specially allocated pursuant to Sections 14.4(Minimum Gain Chargeback) through 14.12 (Order of Application), and the amountof any of the Company’s liabilities assumed by such Person or which are securedby any property of the Company distributed to such Person.

 

(b)           Toeach Person’s Capital Account there shall be debited the amount of money andthe Gross Asset Value of any property distributed to such Person pursuant toany provision of this Agreement, such Person’s distributive share of Losses andany items in the nature of expenses or losses which are specially allocatedpursuant to Sections 14.4 through 14.12 and the amount of any liabilitiesof such Person assumed by the Company or which are secured by any propertycontributed by such Person to the Company.

 

(c)           Ifany Interest is Transferred in accordance with this Agreement, the transfereeshall succeed to the Capital Account of the transferor to the extent it relatesto the Transferred Interest.

 

## 13.6                           “**CapitalContribution**”

means, withrespect to any Member, the amount of money and the gross fair market value ofany property (other than money) contributed pursuant to this Agreement to thecontrolled by such a person or entity.

 

## 13.7                           “**Code**”

means the InternalRevenue Code of 1986, as amended from time to time.

 

18

----

 

## 13.8                           “**Company**”

means theCalifornia limited liability company created and pursuant to this Agreement andthe limited liability company continuing the business in the event ofdissolution as provided in Section 11.2 (Dissolution).

 

## 13.9                           “**InitialMember**”

has the meaningset forth for such term in the introductory paragraph of this Agreement.

 

## 13.10                     “**Interest**”

means, withrespect to any Member, the ownership rights of the Member in the Company,including the right to receive distributions from the Company.  In the event any Interest is Transferred inaccordance with the provisions of this Agreement, the transferee of suchinterest shall succeed to the Interest of his or its transferor to the extentit is Transferred.

 

## 13.11                     “**LiquidatingEvent**”

has the meaningset forth in Section 11.1.

 

## 13.12                     “**LLCPercentage**”

means, withrespect to any Member at any time, the proportion (expressed as a percentage)of such Member’s Interests at such time to the aggregate number of allInterests then outstanding.   If anyInterest is Transferred in accordance with the provisions of this Agreement,the transferee of such Interest shall succeed to the portion of the transferor’sLLC Percentage represented by the Transferred Interest.

 

## 13.13                     “**Managers**”

means the Personsserving as managers of the Company within the meaning of the Act and pursuantto the terms and conditions of this Agreement.

 

## 13.14                     “**Member**”

means any Personwho is (a) the Initial Member, as designated in Section 2.1, orsubsequently admitted as a Member pursuant to this Agreement, *and*(b) whoowns an Interest.  “Members” means allsuch Persons.

 

## 13.15                     “**Person**”

means anyindividual, corporation, partnership, limited liability company, joint venture,association, joint stock company, trust (including any beneficiary of thetrust), unincorporated organization, or government or any agency or politicalsubdivision.

 

## 13.16                     “**Profits**”and “**Losses**”

means, for eachfiscal year or other period, an amount equal to the Company’s taxable income orloss for such year or period, determined in accordance with Section 14.21.

 

19

----

 

## 13.17                     “**Transfer**”

(a)           means, as a noun, any voluntary or involuntaryassignment, transfer, sale, pledge, hypothecation or other disposition, and, asa verb, voluntarily or involuntarily to assign, transfer, sell, pledge,hypothecate or otherwise dispose of or to obtain a charging order against.   A “Transfer” includes a gift ortransmutation of an Interest into another type of property interest or into anInterest jointly owned with another Person, including a gift or transmutationof a separate property Interest into a community or other joint propertyInterest with a spouse or another Person, or the partition of a community or other joint property Interest (whether voluntarily,pursuant to a divorce proceeding or otherwise).

 

# 14.                                 **ADDITIONAL TAX PROVISIONS**

 

## 14.1                           **TaxClassification**

The Members intendthat the Company shall be classified as a partnership for federal income taxpurposes under Code Section 7701(a)(2) and the corresponding provisions,if any, of state and local law.

 

## 14.2                           **Profits**

After giving effect to the special allocations inSections 14.4 (Minimum Gain Chargeback) through 14.12 (Order ofApplication), Profits for any fiscal year or other period shall be allocated tothe Members in proportion to their LLC Percentages.

 

## 14.3                           **Losses andOther Items**

After givingeffect to the special allocations in Sections 14.4 (Minimum GainChargeback) through 14.12 (Order of Application), Losses for any fiscal year orother period shall be allocated in the following order and priority:

 

(a)           Exceptas provided in Section 14.3(b), Losses shall be allocated to the Members inproportion to their LLC Percentages.

 

(b)           TheLosses allocated pursuant to Section 14.3(a) shall not exceed the maximumamount of Losses that can be so allocated without causing any Member to have anAdjusted Capital Account Deficit at the end of any fiscal year.  If some but not all of the Members wouldhave Adjusted Capital Account Deficits as a consequence of an allocation ofLosses pursuant to Section 14.3(a), the limitation set forth in thisSection 14.3(b) shall be applied on a Member-by-Member basis so as toallocate the maximum permissible Losses to each Member under Section1.704-1(b)(2)(ii)(*d*) of the Regulations.

 

Except asotherwise provided in this Agreement, all items of the Company income, gain,loss, deduction, credit and any other allocations not otherwise provided forshall be divided among the Members in the same proportions as they share Lossesfor the period.

 

## 14.4                           **Minimum Gain****Chargeback**

Except as providedin Section 1.704-2(f) of the Regulations, notwithstanding any other provisionof this Article 14, if there is a net decrease in Minimum Gain during anyfiscal year of the Company, each Member shall be specially

 

20

----

 

allocated items of Company income and gain for such year (and, ifnecessary, subsequent years) in an amount equal to the portion of such Member’sshare of the net decrease in Minimum Gain, determined in accordance withSection 1.704-2(g) of the Regulations. Allocations pursuant to the previous sentence shall be made inproportion to the respective amounts required to be allocated to each Memberpursuant to such Regulations.  The itemsto be so allocated shall be determined in accordance with Sections1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations.  This Section 14.4 is intended to comply with the minimumgain chargeback requirement in Section 1.704-2(f) of the Regulations and shallbe interpreted consistently with it.

 

## 14.5                           **MemberNonrecourse Debt Minimum Gain**

Except as providedin Section 1.704-2(i)(4) of the Regulations, notwithstanding any otherprovision of this Article 14 except Section 14.4, if there is a net decreasein Member Nonrecourse Debt Minimum Gain attributable to a Member NonrecourseDebt during any Company fiscal year, each Member who has a share of the MemberNonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt,determined in accordance with Section 1.704-2(i)(5) of the Regulations, shallbe specially allocated items of Company income and gain for such year (and, ifnecessary, subsequent years) in an amount equal to the portion of such Member’sshare of the net decrease in Member Nonrecourse Debt Minimum Gain attributableto such Member Nonrecourse Debt, determined in accordance with Section1.704-2(i)(4) of the Regulations. Allocations pursuant to the previous sentence shall be made inproportion to the respective amounts required to be allocated to each Memberpursuant to such Regulations.  The itemsto be so allocated shall be determined in accordance with Sections1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations.  This Section 14.5 is intended to comply with the minimumgain chargeback requirement in Section 1.704-2(i)(4) of the Regulations andshall be interpreted consistently with it.

 

## 14.6                           **QualifiedIncome Offset**

In the event anyMember unexpectedly receives any adjustments, allocations or distributions describedin Section 1.704-1(b)(2)(ii)(*d*)(*4*), (*5*) or (*6*) of the Regulations, items of Companyincome and gain shall be specially allocated to each such Member in an amountand manner sufficient to eliminate, to the extent required by the Regulations,the Adjusted Capital Account Deficit of such Member as quickly as possible, *provided*that an allocation pursuant to this Section 14.6 shall be made only if and tothe extent that such Member would have an Adjusted Capital Account Deficitafter all other allocations provided for in this Section 14.6 have beententatively made as if this Section 14.6 were not in the Agreement.

 

## 14.7                           **Gross IncomeAllocation**

In the event anyMember has a deficit Capital Account at the end of any Company fiscal yearwhich is in excess of the sum of (1) the amount such Member is obligated torestore pursuant to any provision of this Agreement and (2) the amount suchMember is deemed to be obligated to restore pursuant to the  penultimate sentences of Sections1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations, each such Member shall bespecially allocated items of Company income and gain in the amount of suchexcess as quickly as possible, *provided* that an allocation pursuant tothis Section 14.7 shall be made only if and to the extent that such Memberwould have a deficit Capital Account in

 

21

----

 

excess of such sum after all other allocations provided for inSections 14.4 through 14.10 have been tentatively made as if thisSection 14.7 were not in the Agreement.

 

## 14.8                           **NonrecourseDeductions**

NonrecourseDeductions for any fiscal year or other period shall be specially allocatedamong the Members in proportion to their LLC Percentages.

 

## 14.9                           **MemberNonrecourse Deductions**

Any MemberNonrecourse Deductions for any fiscal year or other period shall be speciallyallocated to the Member who bears the economic risk of loss with respect to theMember Nonrecourse Debt to which such Member Nonrecourse Deductions are attributablein accordance with Section 1.704-2(i)(1) of the Regulations.

 

## 14.10                     **Code Section754 Adjustments**

To the extent anadjustment to the adjusted tax basis of any Company asset pursuant to CodeSection 734(b) or 743(b) is required, pursuant to Section 1.704-1(b)(2)(iv)(*m*)(*2*)or 1.704-1(b)(2)(iv)(*m*)(*4*) of the Regulations, to be taken intoaccount in determining Capital Accounts as the result of a distribution to aMember in complete liquidation of his or its interest in the Company, theamount of such adjustment to Capital Accounts shall be treated as an item ofgain (if the adjustment increases the basis of the asset) or loss (if theadjustment decreases such basis) and such gain or loss shall be specially allocatedto the Members in accordance with their Interests if such Section 1.704-1(b)(2)(iv)(*m*)(*2*)applies, or, if such Section 1.704-1(b)(2)(*m*)(*4*) applies, to the Member to whom suchdistribution was made.

 

## 14.11                     **CurativeAllocations**

The allocations inthe last sentence of the first paragraph of Section 14.3 (Losses and OtherItems) and Sections 14.4 (Minimum Gain Chargeback), 14.5 (MemberNonrecourse Debt Minimum Gain), 14.6 (Qualified Income Offset), 14.7 (GrossIncome Allocation), 14.8 (Nonrecourse Deductions), 14.9 (Member NonrecourseDeductions) and 14.10 (Code Section 754 Adjustments) (the “**RegulatoryAllocations**”) are intended to comply with certain requirements ofthe Regulations.  It is the intent ofthe Members that, to the extent possible, all Regulatory Allocations shall beoffset either with other Regulatory Allocations or with special allocations ofother items of Company income, gain, loss or deduction pursuant to thisSection 14.11.  Therefore, notwithstandingany other provision of this Article 14 (other than the RegulatoryAllocations), the Managers shall make such offsetting special allocations ofCompany income, gain, loss or deduction in whatever manner they determineappropriate so that, after such offsetting allocations are made, each Member’sCapital Account balance is, to the extent possible, equal to the Capital Accountbalance such Member would have had if the Regulatory Allocations were not partof the Agreement and all Company items were allocated pursuant toSection 14.2.  In exercising theirdiscretion under this Section 14.11, the Managers shall take into accountfuture Regulatory Allocations under Sections 14.4 and 14.5 that, althoughnot yet made, are likely to offset other Regulatory Allocations previously madeunder Sections 14.8 and 14.9.

 

22

----

 

## 14.12                     **Order ofApplication**

Sections 14.4through 14.11 shall be applied in the order in which they are set forth in thisAgreement.

 

## 14.13                     **AllocationMethod**

For purposes ofdetermining 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 Managers using any permissiblemethod under Code Section 706 and the Regulations under it.

 

## 14.14                     **ExcessNonrecourse Liabilities**

Solely forpurposes of determining a Member’s proportionate share of the “excessnonrecourse liabilities” of the Company within the meaning ofSection 1.752-3(a)(3) of the Regulations, the Members’ interests in theCompany’s Profits are in proportion to their LLC Percentages.

 

## 14.15                     **Source ofDistributions**

To the extentpermitted by Section 1.704-2(h)(3) of the Regulations, the Managers shallendeavor to treat cash distributions to Members as having been made from theproceeds of Nonrecourse Liabilities or Member Nonrecourse Debt only to theextent that such distributions would cause or increase an Adjusted CapitalAccount Deficit for any Member.

 

## 14.16                     **TaxAllocations:  Code Section 704(c)**

In accordance withCode Section 704(c), income, gain, loss and deduction with respect to anyproperty contributed to the capital of the Company shall, solely for taxpurposes, be allocated among the Members so as to take account of any variationbetween the adjusted basis of such property to the Company for federal incometax purposes and its initial Gross Asset Value (computed in accordance withSection 14.22(d)(1)).

 

If the Gross AssetValue of any Company asset is adjusted pursuant to Section 14.22(d)(3),subsequent allocations of income, gain, loss and deduction with respect to suchasset shall take account of any variation between the adjusted basis of suchasset for federal income tax purposes and its Gross Asset Value in the samemanner as under Code Section 704(c) and the Regulations under it.

 

Any elections orother decisions relating to such allocations shall be made by the Managers inany manner that reasonably reflects the purpose and intention of thisAgreement.  Allocations pursuant to thisSection 14.16 are solely for purposes of federal, state and local taxesand shall not affect, or in any way be taken into account in computing, anyPerson’s Capital Account or share of Profits, Losses, other items ordistributions pursuant to any provision of this Agreement.

 

## 14.17                     **Distributionsand Allocations in Respect to Transferred Interests**

If any Interest isTransferred during any accounting period in compliance with Article 8(Restrictions on Transfer), then Profits, Losses, each item of Profit and Loss

 

23

----

 

and all other items attributable to the Transferred Interest for suchperiod shall be divided and allocated between the transferor and the transfereeby taking into account their varying Interests during the period in accordancewith Code Section 706(d), using any conventions permitted by law andselected by the Managers.

 

All distributionson or before the date of such Transfer shall be made to the transferor, and alldistributions thereafter shall be made to the transferee.

 

## 14.18                     **TaxCharacterization of Payments to a Selling Partner**

The Managersshall, to the greatest extent allowed by law, determine the tax classificationof all payments by the Company or a Member to a Selling Member.  The parties intend that such payments shall,to the extent possible, be deductible to the Company and ordinary income to theSelling Member.

 

## 14.19                     **NegativeCapital Accounts: Tax Issues**

When a TaxLiquidation occurs, any distributions required by Section 11.5((a)) shallbe made in compliance with Section 1.704-1(b)(2)(ii)(*b*)(*2*) of the Regulations.

 

## 14.20                     **Tax MattersPartner**

The Initial Membershall be the Person designated to receive all notices from the Internal RevenueService and other tax authorities that pertain to the tax affairs of theCompany, and shall be the “tax matters partner” for purposes of Code Sections6221 through 6233.  Each party agrees tobe bound by those Code Sections.  The“tax matters partner” shall provide to each other Member in a timely manner thenotices required to be provided by Section 301.6223(g)-1T of the Regulationsand the corresponding provisions of state tax law.  The “tax matters partner” shall be reimbursed by the Company forexpenses reasonably incurred in connection with his work as “tax matters partner.”  The “tax matters partner” shall not beotherwise compensated for such work; and if he or it resigns as “tax matters partner” or ceases to be aMember, then the Members shall select another “tax matters partner.”

 

## 14.21                     **TaxDefinitions**

 

### 14.21(a)                       “**Adjusted Capital Account Deficit**”

means,with respect to any Member, the deficit balance, if any, in such Member’sCapital Account as of the end of the relevant fiscal year, after giving effectto the following adjustments:

 

(1)                  Creditto such Capital Account any amounts which such Member is obligated to restorepursuant to any provision of this Agreement or is deemed to be obligated torestore pursuant to the penultimate sentences of Regulations Sections1.704-2(g)(1) and 1.704-2(i)(5); and

 

(2)                  Debitto such Capital Account the items described in Sections 1.704-1(b)(2)(ii)(*d*)(*4*),(*5*)and (*6*)of the Regulations.

 

24

----

 

The foregoingdefinition of Adjusted Capital Account Deficit is intended to comply with theprovisions of Section 1.704-1(b)(2)(ii)(*d*) of the Regulations and shall be interpretedconsistently with it.

 

### 14.21(b)                      **Capital Accounts:  Tax Issues**

Indetermining the amount of any liability for purposes of Sections 13.1(a),13.1(b), 13.5(a) and 13.5(b) there shall be taken into account Code Section 752(c)and any other applicable provisions of the Code and Regulations.

 

The provisions ofSection 13.5 (Capital Account) and the other provisions of this Agreementrelating to the maintenance of Capital Accounts are intended to comply withSection 1.704-1(b) of the Regulations, and shall be interpreted andapplied in a manner consistent with it.

 

If the Managersdetermine that to comply with the Regulations it is prudent to modify themanner in which the Capital Accounts, or any debits or credits to the CapitalAccounts (including debits or credits relating to liabilities which are securedby property contributed to or distributed from the Company or which are assumedby the Company or Members), are computed, they may make such modification, *provided*that it is not likely to have a material effect on the amounts distributable toany Member pursuant to Article 10 (Dissolution) upon the dissolution ofthe Company.

 

TheManagers also shall (a) make any adjustments that are necessary orappropriate to maintain equality between the Capital Accounts of the Membersand the amount of Company capital reflected on the Company’s balance sheet, ascomputed for book purposes, in accordance with Section 1.704-1(b)(2)(iv)(*g*)of the Regulations, and (b) make any appropriate modifications ifunanticipated events might otherwise cause this Agreement not to comply withSection 1.704-1(b) of the Regulations.

 

### 14.21(c)                       “**Depreciation**”

means, for eachfiscal year or other period, an amount equal to the depreciation, amortizationor other cost recovery deduction allowable with respect to an asset for suchyear or other period, except that if the Gross Asset Value of an asset differsfrom its adjusted basis for federal income tax purposes at the beginning ofsuch year or other period, Depreciation shall be an amount which bears the sameratio to such beginning Gross Asset Value as the federal income taxdepreciation, amortization or other cost recovery deduction for such year orother period bears to such beginning adjusted tax basis; *provided, however,* that ifthe federal income tax depreciation, amortization or other cost recoverydeduction for such year is zero, Depreciation shall be determined withreference to such beginning Gross Asset Value using any reasonable methodselected by the Managers.

 

### 14.21(d)                      “**Gross Asset Value**”

means, withrespect to any asset, the asset’s adjusted basis for federal income tax purposes,except as follows:

 

25

----

 

(1)           The initial Gross Asset Value of anyasset contributed by a Member to the Company shall be the gross fair marketvalue of such asset, as determined by the contributing Member and the Company;

 

(2)           The Gross Asset Value of any theCompany asset distributed to any Member shall be the asset’s gross fair marketvalue on the date of distribution;

 

(3)           The Gross Asset Values of all theCompany assets shall be adjusted to equal their respective gross fair marketvalues, as determined by the Managers, as of the following times:  (a) the acquisition of an additionalInterest by any new or existing Member in exchange for more than a *de minimis*Capital Contribution; (b) the distribution by the Company to a Member ofmore than a *de minimis*amount of property as consideration for an interest in the Company if suchadjustment is necessary or appropriate to reflect the relative economicinterests of the Members in the Company; and (c) the Tax Liquidation ofthe Company; *provided, however* that adjustments pursuant to clauses (a)and (b) above shall be made only if the Managers reasonably determine that suchadjustments are necessary or appropriate to reflect the relative economicinterests of the Members in the Company.

 

(4)           The Gross Asset Values of theproperty of the Company shall be increased (or decreased) to reflect anyadjustments to the adjusted basis of such assets pursuant to CodeSection 734(b) or Code Section 743(b), but only to the extent thatsuch adjustments are taken into account in determining Capital Accountspursuant to Section 1.704-1(b)(2)(iv)(*m*) of the Regulations and Sections 14.10(Code Section 754 Adjustments) and 14.22(j)(6) (Profits and Losses); *provided,however,* that Gross Asset Values shall not be adjusted pursuant tothis Section 14.22(d)(4) to the extent the Managers determine that anadjustment pursuant to Section 14.22(d) is necessary or appropriate inconnection with a transaction that would otherwise result in an adjustmentpursuant to this Section 14.22(d)(4).

 

(5)           After the Gross Asset Value of anasset has been determined or adjusted pursuant to Section 14.22(d)(1), (3)or (4), such Gross Asset Value shall be adjusted by the Depreciation taken intoaccount with respect to such asset for purposes of computing Profits andLosses.

 

### 14.21(e)                       “**Member Nonrecourse Debt**”

has the meaningset forth in Section 1.704-2(b)(4) of the Regulations.

 

### 14.21(f)                         “**Member Nonrecourse Debt Minimum Gain**”

means an amount,with respect to each Member Nonrecourse Debt, equal to the Minimum Gain thatwould result if such Member Nonrecourse Debt were treated as a NonrecourseLiability, determined in accordance with Section 1.704-2(i)(3) of theRegulations.

 

26

----

 

### 14.21(g)                      “**Member Nonrecourse Deductions**”

has the meaningset forth in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations.

 

### 14.21(h)                      “**Minimum Gain**”

has the meaningset forth in Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.

 

### 14.21(i)                          “**Nonrecourse Deductions**”

has the meaningset forth in Section 1.704-2(b)(1) of the Regulations.

 

### 14.21(j)                          “**Nonrecourse Liability**”

has the meaningset forth in Section 1.704-2(b)(3) of the Regulations.

 

### 14.21(k)                       “**Profits**” and “**Losses**”

underSection 13.16 shall be determined in accordance with CodeSection 703(a) (for this purpose, all items of income, gain, loss ordeduction required to be stated separately pursuant to CodeSection 703(a)(1) shall be included in taxable income or loss), with thefollowing adjustments:

 

(1)           Any income of the Company that isexempt from federal income tax and not otherwise taken into account in computingProfits or Losses pursuant to this Section 14.22(j) shall be added to suchtaxable income or loss;

 

(2)           Any expenditures of the Companydescribed in Code Section 705(a)(2)(B) or treated as CodeSection 705(a)(2)(B) expenditures pursuant to Section 1.704-1(b)(2)(iv)(*i*)of the Regulations, and not otherwise taken into account in computing Profitsor Losses pursuant to this Section 14.22(j) shall be subtracted from suchtaxable income or loss;

 

(3)           If the Gross Asset Value of anyCompany asset is adjusted pursuant to Section  14.22(d)(3) or (4), theamount of such adjustment shall be taken into account as gain or loss from thedisposition of such asset for purposes of computing Profits or Losses;

 

(4)           Gain or loss resulting from anydisposition of property of the Company with respect to which gain or loss isrecognized for federal income tax purposes shall be computed by reference tothe Gross Asset Value of such property disposed of, notwithstanding that theadjusted tax basis of such property differs from its Gross Asset Value;

 

(5)           In lieu of the depreciation,amortization and other cost recovery deductions taken into account in computingsuch taxable income or loss, there shall be taken into account Depreciation forsuch fiscal year or other period, computed in accordance withSection 14.22(c) (Depreciation);

 

27

----

 

(6)           To the extent an adjustment to theadjusted tax basis of any Company asset pursuant to Code Section 734(b) or743(b) is required by Section 1.704–1(b)(2)(iv)(*m*)(*4*) of the Regulations to betaken into account in determining Capital Accounts as a result of adistribution other than in liquidation of a Member’s interest in the Company,the amount of such adjustment shall be treated as an item of gain (if theadjustment increases the basis of the asset) or loss (if the adjustmentdecreases the basis of the asset) from the disposition of the asset and shallbe taken into account for purposes of computing Profits or Losses; and

 

(7)           Notwithstanding any other provisionof this Section 14.22(j), any items which are specially allocated pursuantto Sections 14.4 (Minimum Gain Chargeback) through 14.12 (Order ofApplication) shall not be taken into account in computing Profits or Losses.

 

The amounts of theitems of Company income, gain, loss, or deduction available to be specificallyallocated pursuant to Sections 14.4 (Minimum Gain Chargeback) through 14.12(Order of Application), shall be determined by applying rules analogous tothose set forth in this Section 14.22(j).

 

### 14.21(l)                                                          “**Regulations**”

means the IncomeTax Regulations promulgated under the Code, as such regulations may be amendedfrom time to time.

 

### 14.21(m)                                                    “**TaxLiquidation**”

means theliquidation of the Company within the meaning of Section 1.704-1(b)(2)(ii)(*g*)of the Regulations.

 

28

----