**Exhibit3.5.2**

** **

**LIMITEDLIABILITY COMPANY OPERATING AGREEMENT**

**OF**

**PATSAIRCRAFT, LLC**

 

This LIMITED LIABILITY COMPANY OPERATING AGREEMENT(this “Agreement”) of PATS AIRCRAFT, LLC, a limited liability company organizedunder the laws of Delaware (the “Company”), is made and entered into effectiveas of December 23, 2003 by DeCrane Aircraft Holdings, Inc., a Delawarecorporation (the “Initial Member”). Capitalized words and phrases used in thisAgreement and not otherwise defined here are used as defined in Article 13or 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, etseq., as amended from time to time (the “Act”), by filing a Certificate ofFormation of the Company with the office of the Secretary of State of the Stateof 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.             **ORGANIZATION**

 

## 1.1           **Name**

The name of the Company will be “PATS AIRCRAFT,LLC.”  The business of the Company maybe conducted under that name or, upon compliance with applicable laws, anyother name that the Board of Directors deems appropriate or advisable.  Any Manager may file any fictitious namecertificates and similar filings, and any amendments thereto, that such Managerconsiders appropriate or advisable.

 

## 1.2           **Purpose and Limitations**

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 by Managers and Board ofDirectors**

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.

 

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## 1.4           **Principal Office**

The principal office of the Company shall be at PATSAIRCRAFT, LLC, 21652 Nanticoke Avenue, Georgetown, Delaware 19947.  The Board of Directors may change theprincipal place of business of the Company to any place from time to time intheir discretion.

 

## 1.5           **Agent for Service of Process**

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

 

# 2.             **CAPITAL CONTRIBUTIONS**

 

## 2.1           **Initial Member**

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

 

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

 

## 2.2           **Initial Capital 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 shall make available to the Manager his orits expertise for the benefit of the Company and the Company’s business.

 

## 2.4           **Guarantees of 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.

 

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## 2.5           **Additional Capital Contributions orLoans**

No Member shall be required to contribute or lend anyadditional funds to the Company.

 

## 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 points above the primelending rate of Bank of America, NA (or a similar financial institutionacceptable to the lending Member and the Managers) then in effect.

 

## 2.7           **Investment Representation**

Each Member represents and warrants to the Company asof the date on which he or it becomes a Member that (a) he or it has apre-existing personal or business relationship with each other Member, and (b)his or its acquisition of an Interest is made as principal for his or its ownaccount and not with a view to or for sale in connection with any distributionof such Interest.

 

## 2.8           **Title to Property**

All real and personal property owned by the Companyshall be owned by it as an entity and, insofar as permitted by applicable law,no Member shall have any ownership interest in such property in his or itsindividual name or right, and each Member’s interest in the Company shall bepersonal property for all purposes.

 

## 2.9           **Interests Uncertificated**

Interests shall not be evidenced or represented by anyinstrument or certificate, but rather, their ownership shall be determined byreference to the terms of this Agreement as it may be amended from time totime.

 

# 3.             **DISTRIBUTIONS**

 

## 3.1           **Distributions Generally**

The Managers shall cause the Company to make suchdistributions to the Members in amounts (if any) as may be determined from timeto time by the Board of Directors.   Anydistributions that are made to Members shall be made in the following order andpriority:

 

(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.

 

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## 3.2           **Estimated Tax Payments**

If required by applicable law, or permitted byapplicable law and approved by the Board of Directors, the Managers may causethe Company to make estimated payments of tax for any Member after consultationwith such Member.

 

## 3.3           **Amounts Withheld**

All amounts withheld pursuant to applicable law withrespect to any payment or distribution to the Company or the Members shall betreated as amounts distributed to such Members for all purposes under thisAgreement.  The Managers shall allocateany such amounts among the Members in accordance with applicable law.

 

## 3.4           **Return of Capital**

Except as otherwise provided in this Agreement, noMember shall demand or receive a return of his or its Capital Contributionwithout the approval of the Board of Directors.  Under circumstances requiring a return of any Capital Contribution,no Member shall have the right to receive property other than cash except asmay be specifically provided in this Agreement.  No Member shall have any personal liability for the repayment ofthe Capital Contribution of any other Member.

 

# 4.             **FINANCE**

 

## 4.1           **LLC Funds**

All property of the Company in the form of cash nototherwise invested shall be deposited in one or more bank accounts maintainedin the name of the Company or the name of the Initial Member, in such financialinstitutions as the Managers shall determine. The funds of the Company shallnot be commingled with the funds of any other Person.  The Managers shall deposit into such accounts all revenue andproceeds of or in connection with the Company’s business and all amountsreceived by the Managers from, for, or on behalf of, the Company.

 

## 4.2           **Books and Records**

The Managers shall maintain or cause to be maintainedaccurate books and records of account of the business of the Company inaccordance with generally accepted accounting principles consistently applied,setting forth a true and accurate account of all business transactions arisingout of and in connection with the conduct of the Company’s business.

 

## 4.3           **Tax Information**

The Managers shall prepare or cause to be prepared,and file, any applicable tax returns required to be filed by the Companyconsistent with the terms of this Agreement. The Managers shall select an accounting firm to prepare any such taxreturns, subject to approval by the Board of Directors.  Within 90 days after the end of each taxableyear (or such earlier deadlines as may be imposed upon the Members by law), theManagers shall deliver to each Member all tax information regarding the Companynecessary for such Member to make all required returns, together with a copy ofany federal, state and local income tax or information returns of the Companyfor the year, and a report listing each material elective adjustment orcalculation (if any) made by any Manager with respect to such period pursuantto Article 14 hereof.

 

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## 4.4           **Allocations**

The Profits, Losses and other items of the Companyshall be allocated as set forth in Article 14 (Additional TaxProvisions).  The Members agree to bebound by these allocations in reporting their shares of the Company’s income,loss and other items for income tax purposes.

 

# 5.             **ROLE OF THE MANAGERS**

 

## 5.1           **Managers**

The Initial Member of the Company has designated thefollowing persons to serve as the initial managers and officers of the Company(herein, “Managers”), until changed pursuant to Sections 5.3 or 5.4:

 
| R. Jack DeCrane       |   | Chief Executive Officer               |
|-----------------------|--------|---------------------------------------|
| Robert G. Martin      |   | Chief Operating Officer               |
| Richard J.  Kaplan    |   | Chief Financial Officer and Secretary |
| Daniel Fulgham        |   | President                             |
| William Hubbard       |   | Vice President                        |
| George Toly           |   | Vice President                        |
| Stephen A.  Silverman |   | Assistant Secretary                   |

##  

## 5.2           **Authority**

Except to the extent otherwise provided in theArticles of Organization or this Agreement (including the powers reserved tothe Board of Directors and the Members), the business and affairs of the Companyshall be managed and all corporate powers shall be exercised by the Managers,who shall have all of the authority, rights and powers which may be possessedby managers of a limited liability company under the Act, and may at theirdiscretion, delegate and assign their management duties.  The Managers may act jointly or severally intheir role as Managers, and the act of any one Manager is the act of all Managers.

 

## 5.3           **Qualification and Election**

The Managers of the Company shall be selected by theInitial Member.   The Initial Member mayappoint additional Managers from time to time in its discretion, with suchtitle and such roles as the Initial Member may specify.

 

## 5.4           **Removal and Resignation**

(a)           AllManagers serve at the pleasure of the Initial Member, and any Manager may beremoved with or without cause by the Initial Member, for any reason or noreason, by providing written notice thereof to such Manager.

 

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

 

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## 5.5           **Duties and Obligations 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.

 

## 5.6           **Matters Requiring Unanimous Consent ofthe Members**

Notwithstanding any other term of this Agreement, theManagers shall not, without the unanimous written 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 oncapital, issue or redeem Interests, options or other securities of the Companyor any subsidiary 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           **Matters Requiring the Approval of theBoard 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)           Appointor remove an auditor;

 

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

 

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(c)           Causethe Company to acquire shares of or any interest in any corporation or otherlegal entity, or create any partnership, joint venture or legal entity of whichthe Company is or will be a partner, member or similar participant.

 

5.8           **Indemnificationof Managers**

 

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

The Company, its receiveror its trustee, shall indemnify, save harmless and pay all judgments and claimsagainst the Managers relating to any liability or damage incurred by reason ofany act performed or omitted to be performed by the Managers in connection withthe business of the Company, including attorneys’ fees incurred by the Managersin connection with the defense of any action based on any such act or omission,which attorneys’ fees may be paid as incurred, including all such liabilities underfederal and state securities laws (including the Securities Act of 1933, asamended) as permitted by law.

 

### 5.8(b)      **If Manager is Exonerated in the Proceeding**

In the event of anyaction by a Member against a Manager, including a derivative suit on behalf ofthe Company, the Company shall indemnify, save harmless and pay all expenses ofsuch Manager, including attorneys’ fees, incurred in the defense of suchaction, if such Manager is successful in such action.

 

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

Notwithstanding theforegoing 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**

Any indemnification underthis Section 5.8 shall be paid from and only to the extent of theCompany’s assets, and no Member shall have personal liability for such indemnification.

 

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

 

## 6.1           **Number and Designation of Directors**

The Company shall have a Board of Directors composedof two directors.  The Initial Memberdesignates R. Jack DeCrane and Richard J. Kaplan******as the initial directors.

 

## 6.2           **Rights and Powers**

The Board of Directors shall have the powers reservedto it in this Agreement and, in addition, may take any action reserved to theMembers in this Agreement or in the Act.

 

## 6.3           **Term; Removal**

Each director serves at the pleasure of the Member whodesignated him  or her pursuant toSection 3.1;  and each Member having theright to designate one or

 

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more directors may remove and replace such designated directors atwill, by notice to the Managers and directors.   In the event a Member sells, transfers or loses all of itsInterests in the Company, all directors designated by such Member shall beremoved from the Board of Directors and their seats shall be declared vacant.

 

## 6.4           **Meetings**

The Board of Directors shall meet at such times asthey may elect from time to time, in each case at the dates and times agreed bythe directors; but the Board of Directors shall not be required to meet at anyfixed time.  The rules set forth inSection 8.2(a), (d), (e), (f) and (g) for the meetings of Members shall alsoapply to all meetings of the Board of Directors, *except* that there shall beno record date in connection with propositions to be put to a vote at meetingsof the Board.  60% of the then-seated directors shall constitute a quorum for anytransacting of business by the Board of Directors, and the Board of Directorsmay not act in the absence of a quorum. Any action approved by a majority of the directors present at a dulycalled meeting of the Board of Directors at which a quorum is present, or byall of the directors then-seated by written consent without meeting, shall bethe action of the Board of Directors. Any action that may be taken at any meeting of the Board of Directorsmay be taken without a meeting if a consent in writing, setting forth theaction so taken, is signed and delivered to the Managers by directors havingnot less than the minimum number of votes that would be necessary to authorizeor take that action at a meeting at which all of the directors entitled to votethereon were present and voted.

 

## 6.5           **Limited Liability**

The rights and powers of a member of the Board ofDirectors, in his capacity as a director, shall not exceed the rights andpowers that a member of a manager-managed limited liability company couldexercise under the Act.  Except to theextent (if any) otherwise required by the Act, no director shall be liable forthe debts, liabilities, contracts or any other obligations of the Company.

 

# 7.             **ROLE OF MEMBERS**

 

## 7.1           **Rights and Powers**

The Members shall have the powers reserved to them inthis Agreement or in the Act.

 

## 7.2           **Limited Liability**

Except to the extent (if any) otherwise required inthe Act, no Member shall be liable for the debts, liabilities, contracts or anyother obligations of the Company.

 

## 7.3           **No Partition**

No Member or director shall, either directly orindirectly, take any action to require partition of the Company or of any ofits property or to cause the sale of any of such property, nor shall anyManager do so without the approval of the Board of Directors.

 

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# 8.             **MEETINGS OF MEMBERS**

 

## 8.1           **Required Meetings**

The Member or Members shall hold meetings at suchtimes as it or they may unanimously agree in writing, but shall not be requiredto meet at any fixed time.  At any suchmeeting, Members holding a majority in Interest shall constitute a quorum.  No action can be taken by the Members at ameeting after a quorum ceases to be present at the meeting.  The failure of the Company to observe anycorporate formalities or requirements relating to the exercise of its powers ormanagement of its business or affairs under this Agreement or the Act shall notbe grounds for imposing personal liability on the Members for liabilities ofthe Company.

 

## 8.2           **Procedure**

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

Unless all of the Membersagree otherwise in writing, meetings of Members shall be held at the chiefexecutive office of the Initial Member in California (or at any other place inthe County of Los Angeles, State of California, selected by the Board ofDirectors and specifically identified in the notice of the meeting), so long asthe meeting place has adequate facilities to permit participation by telephoneconference call.

 

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

A meeting of the Membersmay be called by any Manager, or by any Member or Members representing morethan 10% of the Interests for the purpose of addressing any matters on whichthe 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.

 

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### 8.2(d)      **Adjourned****Meetings**

When a meeting of Membersis adjourned to another time or place, unless the articles of organization orthis 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 transacted atthe original meeting.  If theadjournment is for more than 45 days, or if after the adjournment a new recorddate is fixed for the adjourned meeting, a notice of the adjourned meetingshall be given to each Member of record entitled to vote at the meeting.

 

### 8.2(e)      **Waiver of Notice**

The actions taken at anymeeting of Members, however called and noticed, and wherever held, have thesame validity as if taken at a meeting duly held after regular call and notice,if a quorum is present either in person or by proxy, and if, either before orafter the meeting, each of the Members entitled to vote, not present in personor by proxy, signs a written waiver of notice or consents to the holding of themeeting or approves the minutes of the meeting.  All waivers, consents, and approvals shall be filed with theCompany records or made a part of the minutes of the meeting. Attendance of aperson at a meeting shall constitute a waiver of notice of the meeting, exceptwhen the person objects, at the beginning of the meeting, to the transaction ofany business because the meeting is not lawfully called or convened. Attendanceat a meeting is not a waiver of any right to object to the consideration ofmatters required by this title to be included in the notice but not soincluded, if the objection is expressly made at the meeting. Neither thebusiness 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)       **Participation by Telephone ConferenceCall**

Members may participatein a meeting of Members through the use of conference telephones or similarcommunications equipment, as long as all Members participating in the meetingcan hear one another.  Participation ina meeting pursuant to this provision constitutes presence in person at thatmeeting.

 

### 8.2(g)      **Nature of Proposal**

Any action approved at ameeting, other than by unanimous approval of those entitled to vote, shall bevalid only if the general nature of the proposal so approved was stated in thenotice of meeting (or at the previous meeting) or in any written waiver ofnotice.

 

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

A majority in Interest ofthe Members represented in person or by proxy shall constitute a quorum at ameeting of Members.  In the absence of aquorum, any meeting of Members may be adjourned from time to time by the voteof a majority of the Interest represented either in person or by proxy, but noother business may be transacted.

 

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### 8.2(i)       **Written Action Without Meeting**

Any action that may betaken at any meeting of the Members may be taken without a meeting if a consentin writing, setting forth the action so taken, is signed and delivered to theManagers within 60 days of the record date for that action by Members havingnot less than the minimum number of votes that would be necessary to authorizeor take that action at a meeting at which all Members entitled to vote thereonwere present and voted.

 

(1)           Unlessthe consents of all Members entitled to vote have been solicited in writing,(A) notice of any Member approval of an amendment to the articles oforganization or this Agreement, a dissolution of the Company, or a merger ofthe Company, without a meeting by less than unanimous written consent shall begiven at least 10 days before the consummation of the action authorized by suchapproval, and (B) prompt notice shall be given of the taking of any otheraction approved by Members without a meeting by less than unanimous writtenconsent, to those Members entitled to vote who have not consented in writing.

 

(2)           AnyMember giving a written consent, or the Member’s proxyholder, may revoke theconsent by a writing received by the Company prior to the time that writtenconsents of Members having the minimum number of votes that would be requiredto authorize the proposed action have been filed with the Company, but may notdo so thereafter. This revocation is effective upon its receipt at theprincipal office of the Company in California.

 

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

The use of proxies inconnection with this section will be governed in the same manner as in the caseof corporations formed under the Delaware General Corporation Law.

 

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

In order that the Companymay determine the Members of record entitled to notices of any meeting or tovote, or entitled to receive any distribution or to exercise any rights inrespect 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)           Therecord date for determining Members entitled to notice of or to vote at ameeting of Members shall be at the close of business on the business day nextpreceding the day on which notice is given or, if notice is waived, at theclose of business on the business day next preceding the day on which themeeting 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

 

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resolution relating thereto, or the 60th day prior to the date of theother action, whichever is later.

 

(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 aManager or the Members who called the meeting fix a new record date for theadjourned meeting, but the Manager or the Members who called the meeting shallfix a new record date if the meeting is adjourned for more than 45 days fromthe date set for the original meeting.

 

## 8.3           **Voting Rights**

The Members shall have the right to vote on thematters explicitly set forth in this Agreement or in the Act.  Each Member shall have a vote on all matterson which all Members may vote equal to his or its LLC Percentage.  With respect to the Members, the term“majority in interest” means more than 50% of the LLC Percentages of allMembers.

 

## 8.4           **Rules of Conduct**

At each meeting of Members they shall appoint a chairwho shall conduct the meeting and who shall appoint a secretary of the meetingto keep minutes and file the minutes with the Company’s permanent files.

 

# 9.             **RESTRICTIONS ON TRANSFER**

 

## 9.1           **Restriction on Transfers**

Except as otherwise permitted by this Agreement, noMember shall Transfer all or any portion of any Interest.

 

## **9.2****          Permitted Transfers**

The Initial Member may Transfer its Interest inconnection with a sale of substantially all assets of the Initial Member, tothe purchaser thereof.  The InitialMember may Transfer its Interest for the purpose of providing security for anobligation, by hypothecation, pledge, collateralization or otherwise.   Any Interest so held or Transferred shallremain subject to all of the provisions of this Agreement and the Member, bothindividually and as trustee of the trust, shall continue to be considered a“Member” for purposes of this Agreement.

 

## 9.3           **Involuntary Transfer**

Any proposed Transfer of an Interest that is requiredby law pursuant to any insolvency proceeding of a Member shall be subject tothe terms and conditions of this Agreement, including Section 9.7.

 

## 9.4           **Prohibited Transfers**

Any purported Transfer of an Interest that is notpermitted by this Agreement shall be null and void and of no effect whatever; *provided*that if the Company is required to recognize a Transfer that is not sopermitted, the Interest Transferred shall be strictly limited to thetransferor’s rights to allocations and distributions under this

 

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Agreement with respect to the Transferred Interest, which allocationsand distributions may be applied (without limiting any other legal or equitablerights of the Company) to satisfy any debts, obligations, or liabilities for damagesthat the transferor or transferee of such Interest may have to the Company.

 

In the case of a Transfer or attempted Transfer thatis not permitted by this Agreement, the parties engaging or attempting toengage in such Transfer shall be liable to indemnify and hold harmless theCompany and the other Members from all costs, liabilities and damages that anyof such indemnified Persons may incur (including additional tax liability andlawyers’ fees and expenses) as a result of such Transfer or attempted Transferand efforts to enforce this Section 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**

Notwithstanding anything to the contrary in thisAgreement, at law or in equity, no Member shall Transfer or otherwise deal withany Interest in a way that would cause a default under any material agreementto which the Company is a party or by which it is bound.

 

## 9.7           **Admission of Members**

No new Members shall be admitted without the approvalrequired by Section 5.6.  A transfereeof an Interest shall not be admitted as a Member without the approval requiredby Section 5.6, *provided* that if the transferee is already a Member at thetime of the transfer and the transfer is permitted by this Agreement, then thetransferee shall have all rights of a Member with respect to the transferred Interest.

 

## 9.8           **Rights of Unadmitted Assignees**

Notwithstanding any other provision of this Agreement,a Person who acquires an Interest but who is not admitted as a Member of theCompany pursuant to this Agreement shall be entitled only to receive, to theextent assigned, the distributions and the allocations to which the assignorwould be entitled under this Agreement, but

 

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shall have no right to vote or to participate in the management andaffairs of the Company, or to exercise any of the rights of a Member.

 

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

 

# 11.           **DISSOLUTION**

 

## 11.1         **Liquidating Events**

The Company shall dissolve and commence winding up andliquidating upon the first to occur of any of the following (“LiquidatingEvents”):

 

(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         **Continuing Limited Liability Company**

Notwithstanding any provision of the Act, the Companyshall not dissolve prior to the occurrence of a Liquidating Event.  The withdrawal, resignation or retirement ofany Member which the Company is required by proper authority to recognize, orthe death, expulsion, bankruptcy or dissolution of any Member or the occurrenceof any other event which terminates the continued membership in the Company ofany Member shall not be a liquidating event.

 

## 11.3         **Winding Up**

Upon the occurrence of 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;

 

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(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

 

(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         **Application of Proceeds**

The liquidation proceeds shall be applied anddistributed, to the extent sufficient to do so, in the following order:

 

First, to the payment and discharge of all of theCompany’s debts and liabilities to creditors other than the Members;

 

Second, to the payment and discharge of all of theCompany’s debts and liabilities to the Members; and

 

The balance, if any, to the Members in accordance withtheir Capital Accounts, after giving effect to all contributions, distributionsand allocations for all periods.  Anyin-kind distributions of property of the Company shall be made among theMembers pro rata in proportion with their relative Capital Accounts.

 

## 11.5         **Negative Capital Accounts**

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

 

Distributions shall be made pursuant to thisArticle 11 to the Members who have positive Capital 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         **Discretionary Withholding andDistributions**

With the approval of the Board of Directors, a prorata portion of the distributions that would otherwise be made to the Memberspursuant 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*

 

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thatassets of any such trust shall be distributed to the Members from time to time,in the reasonable discretion of the liquidator appointed hereunder, in the sameproportions as the amount distributed to such trust by the Company wouldotherwise have been distributed to the Members pursuant to this Agreement; or

 

(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 as otherwise provided in this Agreement, theMembers shall look solely to the assets of the Company for the return of theirCapital Contributions and no Member shall have any right or power to demand orreceive property other than cash from the Company.  No Member shall have priority over any other Member as to thereturn of his or its Capital Contribution, distributions or allocations.

 

## 11.8         **Notice of Dissolution**

If a Liquidating Event occurs, the Company shall,within 60 days after the occurrence, provide written notice of the occurrenceto each of the Members and to all known creditors and claimants whose namesappear on the records of the Company.

 

## 11.9         **Certificates of Dissolution**

Upon the dissolution of the Company, the liquidatorappointed hereunder  and, to the extentrequired, any other party hereto or appointed hereunder, shall promptly signand cause to be filed certificates of dissolution in accordance with the Actand the laws of any other states or jurisdictions in which the Company hasfiled its Articles of Organization or qualified to transact intrastatebusiness.

 

# 12.           **OTHER PROVISIONS**

 

## 12.1         **Entire Agreement**

This Agreement, which includes material provisions onthe schedules hereto, each of which is incorporated in full herein, constitutesthe entire agreement pertaining to the organization of the Company andcompletely supersedes all other agreements and all drafts, understandings,negotiations and discussions, whether oral or written, among the partiespertaining to the subject matter of this Agreement.

 

## 12.2         **Amendments**

No amendment or waiver of any provision of thisAgreement shall be effective unless and until an instrument reflecting theamendment or waiver has received the approval of the Members.

 

The waiver by any party of a breach or default of anyprovision of this Agreement shall not operate or be construed as a waiver ofany subsequent breach or default.  Aparty’s failure either to insist upon any other party’s strict performance ofany provision of this Agreement or to exercise any of the party’s rights orremedies under this

 

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Agreement shall not constitute a waiver of any default by the otherparty or of any right or remedy of the non-defaulting party.

 

## 12.3         **Governing Law**

Delaware law shall governthis Agreement, any agreement to amend or adopt this Agreement, and alldisputes arising hereunder.

 

## 12.4         **Severable Provisions**

The provisions of this Agreement are severable, and ifany provision is determined to be illegal or otherwise unenforceable, in wholeor in part, then the remaining provisions, and any partially unenforceableprovisions to the extent enforceable, shall nevertheless be binding andenforceable and shall be construed as closely as possible to their originalmeanings.

 

## 12.5         **Binding Effect**

Except as otherwise provided in this Agreement, everyprovision of this Agreement shall bind and benefit the Members and theirrespective heirs, legatees, legal representatives, successors, transferees andassigns.

 

## 12.6         **Parties in Interest; Third Parties**

All references in this Agreement to “parties” refer tothe parties to this Agreement.  Nothingin this Agreement, expressed or implied, is intended to confer on any Person orentity other than a party any right or remedy under or by reason of thisAgreement.  The provisions of thisAgreement are not intended to benefit any creditor or other Person (other thana Member in his or its capacity as a Member) to whom any debts, liabilities orobligations are owed or who otherwise has a claim against the Company or anyMember; and no such creditor or other Person shall obtain any right under thisAgreement against the Company or any Member by reason of any such debt,liability or obligation, or otherwise.

 

# 13.           **DEFINITIONS**

Capitalized words and phrases used in this Agreementhave the following meanings

 

## 13.1         “**Adjusted Capital Contributions”**

means, as of any day with respect to a Member, suchMember’s Capital Contributions, adjusted as follows:

 

(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 toSections 3.1 (Distributions Generally) and 11.4 (Dissolution/Applicationof

 

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Proceeds)and the amount of any liabilities of such Member assumed by the Company orwhich are secured by any property contributed by such Member to the Company.

 

(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 this Operating Agreement, as amended from timeto time.

 

## 13.3         “**Board of Directors**”

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         “**Capital Account**”

means, with respect to any Member, the Capital Accountmaintained for such Person in accordance with the following provisions andSection 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 toSections 14.4 (Minimum Gain Chargeback) through 14.12 (Order ofApplication), and the amount of any of the Company’s liabilities assumed bysuch Person or which are secured by any property of the Company distributed tosuch 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         “**Capital Contribution**”

means, with respect to any Member, the amount of moneyand the gross fair market value of any property (other than money) contributedpursuant to this Agreement to the controlled by such a person or entity.

 

## 13.7         “**Code**”

means the Internal Revenue Code of 1986, as amendedfrom time to time.

 

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## 13.8         “**Company**”

means the California limited liability company createdand pursuant to this Agreement and the limited liability company continuing thebusiness in the event of dissolution as provided in Section 11.2 (Dissolution).

 

## 13.9         “**Initial Member**”

has the meaning set forth for such term in theintroductory paragraph of this Agreement.

 

## 13.10       “**Interest**”

means, with respect to any Member, the ownershiprights of the Member in the Company, including the right to receivedistributions from the Company.  In theevent any Interest is Transferred in accordance with the provisions of thisAgreement, the transferee of such interest shall succeed to the Interest of hisor its transferor to the extent it is Transferred.

 

## 13.11       “**Liquidating Event**”

has the meaning set forth in Section 11.1.

 

## 13.12       “**LLC Percentage**”

means, with respect to any Member at any time, theproportion (expressed as a percentage) of such Member’s Interests at such timeto the aggregate number of all Interests then outstanding.   If any Interest is Transferred inaccordance with the provisions of this Agreement, the transferee of suchInterest shall succeed to the portion of the transferor’s LLC Percentagerepresented by the Transferred Interest.

 

## 13.13       **“Managers”**

means the Persons serving as managers of the Companywithin the meaning of the Act and pursuant to the terms and conditions of thisAgreement.

 

## 13.14       “**Member**”

means any Person who is (a) the Initial Member, asdesignated in Section 2.1, or subsequently admitted as a Member pursuantto this Agreement, *and*(b) who owns an Interest.  “Members” means all such Persons.

 

## 13.15        “**Person**”

means any individual, corporation, partnership,limited liability company, joint venture, association, joint stock company,trust (including any beneficiary of the trust), unincorporated organization, orgovernment or any agency or political subdivision.

 

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

means, for each fiscal year or other period, an amountequal to the Company’s taxable income or loss for such year or period, determinedin accordance with Section 14.21.

 

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## 13.17       “**Transfer**”

(a)           means,as a noun, any voluntary or involuntary assignment, transfer, sale, pledge,hypothecation or other disposition, and, as a verb, voluntarily orinvoluntarily to assign, transfer, sell, pledge, hypothecate or otherwisedispose of or to obtain a charging order against.   A “Transfer” includes a gift or transmutation of an Interestinto another type of property interest or into an Interest jointly owned withanother Person, including a gift or transmutation of a separate propertyInterest into a community or other joint property Interest with a spouse or anotherPerson, or the partition of a community or other joint property Interest (whethervoluntarily, pursuant to a divorce proceeding or otherwise).

 

# 14.           **ADDITIONAL TAX PROVISIONS**

 

## 14.1         **Tax Classification**

The Members intend that the Company shall beclassified as a partnership for federal income tax purposes under CodeSection 7701(a)(2) and the corresponding provisions, if any, of state andlocal 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 and Other Items**

After giving effect to the special allocations inSections 14.4 (Minimum Gain Chargeback) through 14.12 (Order ofApplication), Losses for any fiscal year or other period shall be allocated inthe 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 Section 1.704-1(b)(2)(ii)(*d*)of the Regulations.

 

Except as otherwise provided in this Agreement, allitems of the Company income, gain, loss, deduction, credit and any otherallocations not otherwise provided for shall be divided among the Members inthe same proportions as they share Losses for the period.

 

## 14.4         **Minimum Gain Chargeback**

Except as provided in Section 1.704-2(f) of theRegulations, notwithstanding any other provision of this Article 14, ifthere is a net decrease in Minimum Gain during any fiscal year of the Company,each Member shall be specially

 

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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         **Member Nonrecourse Debt Minimum Gain**

Except as provided in Section 1.704-2(i)(4) of theRegulations, notwithstanding any other provision of this Article 14 exceptSection 14.4, if there is a net decrease in Member Nonrecourse DebtMinimum Gain attributable to a Member Nonrecourse Debt during any Companyfiscal year, each Member who has a share of the Member Nonrecourse Debt MinimumGain attributable to such Member Nonrecourse Debt, determined in accordancewith Section 1.704-2(i)(5) of the Regulations, shall be specially allocateditems of Company income and gain for such year (and, if necessary, subsequentyears) in an amount equal to the portion of such Member’s share of the netdecrease in Member Nonrecourse Debt Minimum Gain attributable to such MemberNonrecourse Debt, determined in accordance with Section 1.704-2(i)(4) of theRegulations.  Allocations pursuant tothe previous sentence shall be made in proportion to the respective amounts requiredto be allocated to each Member pursuant to such Regulations.  The items to be so allocated shall bedetermined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of theRegulations.  This Section 14.5 isintended to comply with the minimum gain chargeback requirement in Section1.704-2(i)(4) of the Regulations and shall be interpreted consistently with it.

 

## 14.6         **Qualified Income Offset**

In the event any Member unexpectedly receives anyadjustments, allocations or distributions described in Section 1.704-1(b)(2)(ii)(*d*)(*4*),(*5*)or (*6*)of the Regulations, items of Company income and gain shall be speciallyallocated to each such Member in an amount and manner sufficient to eliminate,to the extent required by the Regulations, the Adjusted Capital Account Deficitof such Member as quickly as possible, *provided* that an allocation pursuant tothis Section 14.6 shall be made only if and to the extent that such Memberwould have an Adjusted Capital Account Deficit after all other allocations providedfor in this Section 14.6 have been tentatively made as if thisSection 14.6 were not in the Agreement.

 

## 14.7         **Gross Income Allocation**

In the event any Member has a deficit Capital Accountat the end of any Company fiscal year which is in excess of the sum of (1) the amountsuch Member is obligated to restore pursuant to any provision of this Agreementand (2) the amount such Member is deemed to be obligated to restore pursuant tothe penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of theRegulations, each such Member shall be specially allocated items of Companyincome and gain in the amount of such excess as quickly as possible, *provided*that an allocation pursuant to this Section 14.7 shall be made only if and tothe extent that such Member would have a deficit Capital Account in

 

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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         **Nonrecourse Deductions**

Nonrecourse Deductions for any fiscal year or otherperiod shall be specially allocated among the Members in proportion to theirLLC Percentages.

 

## 14.9         **Member Nonrecourse Deductions**

Any Member Nonrecourse Deductions for any fiscal yearor other period shall be specially allocated to the Member who bears theeconomic risk of loss with respect to the Member Nonrecourse Debt to which suchMember Nonrecourse Deductions are attributable in accordance with Section1.704-2(i)(1) of the Regulations.

 

## 14.10       **Code Section 754 Adjustments**

To the extent an adjustment to the adjusted tax basisof any Company asset pursuant to Code Section 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 into account in determining Capital Accounts asthe result of a distribution to a Member in complete liquidation of his or itsinterest in the Company, the amount of such adjustment to Capital Accountsshall be treated as an item of gain (if the adjustment increases the basis ofthe asset) or loss (if the adjustment decreases such basis) and such gain orloss shall be specially allocated to the Members in accordance with theirInterests if such Section 1.704-1(b)(2)(iv)(*m*)(*2*) applies, or, if such Section1.704-1(b)(2)(*m*)(*4*) applies, to the Member to whom suchdistribution was made.

 

## 14.11       **Curative Allocations**

The allocations in the last sentence of the firstparagraph of Section 14.3 (Losses and Other Items) and Sections 14.4(Minimum Gain Chargeback), 14.5 (Member Nonrecourse Debt Minimum Gain), 14.6(Qualified Income Offset), 14.7 (Gross Income Allocation), 14.8 (NonrecourseDeductions), 14.9 (Member Nonrecourse Deductions) and 14.10 (CodeSection 754 Adjustments) (the “**Regulatory Allocations**”) are intended tocomply with certain requirements of the Regulations.  It is the intent of the Members that, to the extent possible, allRegulatory Allocations shall be offset either with other Regulatory Allocationsor with special allocations of other items of Company income, gain, loss ordeduction pursuant to this Section 14.11. Therefore, notwithstanding any other provision of this Article 14(other than the Regulatory Allocations), the Managers shall make suchoffsetting special allocations of Company income, gain, loss or deduction inwhatever manner they determine appropriate so that, after such offsettingallocations are made, each Member’s Capital Account balance is, to the extentpossible, equal to the Capital Account balance such Member would have had ifthe Regulatory Allocations were not part of the Agreement and all Company itemswere allocated pursuant to Section 14.2. In exercising their discretion under this Section 14.11, theManagers shall take into account future Regulatory Allocations underSections 14.4 and 14.5 that, although not yet made, are likely to offsetother Regulatory Allocations previously made under Sections 14.8 and 14.9.

 

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## 14.12       **Order of Application**

Sections 14.4 through 14.11 shall be applied in theorder in which they are set forth in this Agreement.

 

## 14.13       **Allocation Method**

For purposes of determining the Profits, Losses or anyother items allocable to any period, Profits, Losses and any such other items shallbe determined on a daily, monthly, or other basis, as determined by theManagers using any permissible method under Code Section 706 and theRegulations under it.

 

## 14.14       **Excess Nonrecourse Liabilities**

Solely for purposes of determining a Member’s proportionateshare of the “excess nonrecourse liabilities” of the Company within the meaningof Section 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 of Distributions**

To the extent permitted by Section 1.704-2(h)(3) ofthe Regulations, the Managers shall endeavor to treat cash distributions toMembers as having been made from the proceeds of Nonrecourse Liabilities orMember Nonrecourse Debt only to the extent that such distributions would causeor increase an Adjusted Capital Account Deficit for any Member.

 

## 14.16       **Tax Allocations:  Code Section 704(c)**

In accordance with Code Section 704(c), income,gain, loss and deduction with respect to any property contributed to thecapital of the Company shall, solely for tax purposes, be allocated among theMembers so as to take account of any variation between the adjusted basis ofsuch property to the Company for federal income tax purposes and its initialGross Asset Value (computed in accordance with Section 14.22(d)(1)).

 

If the Gross Asset Value of any Company asset isadjusted pursuant to Section 14.22(d)(3), subsequent allocations ofincome, gain, loss and deduction with respect to such asset shall take accountof any variation between the adjusted basis of such asset for federal incometax purposes and its Gross Asset Value in the same manner as under CodeSection 704(c) and the Regulations under it.

 

Any elections or other decisions relating to suchallocations shall be made by the Managers in any manner that reasonablyreflects the purpose and intention of this Agreement.  Allocations pursuant to this Section 14.16 are solely forpurposes of federal, state and local taxes and shall not affect, or in any waybe taken into account in computing, any Person’s Capital Account or share ofProfits, Losses, other items or distributions pursuant to any provision of thisAgreement.

 

## 14.17       **Distributions and Allocations in Respectto Transferred Interests**

If any Interest is Transferred during any accountingperiod in compliance with Article 8 (Restrictions on Transfer), thenProfits, Losses, each item of Profit and Loss

 

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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 distributions on or before the date of suchTransfer shall be made to the transferor, and all distributions thereaftershall be made to the transferee.

 

## 14.18       **Tax Characterization of Payments to aSelling Partner**

The Managers shall, to the greatest extent allowed bylaw, determine the tax classification of all payments by the Company or aMember to a Selling Member.  The partiesintend that such payments shall, to the extent possible, be deductible to the Companyand ordinary income to the Selling Member.

 

## 14.19       **Negative Capital Accounts: Tax Issues**

When a Tax Liquidation occurs, any distributionsrequired by Section 11.5((a)) shall be made in compliance withSection 1.704-1(b)(2)(ii)(*b*)(*2*) of the Regulations.

 

## 14.20       **Tax Matters Partner**

The Initial Member shall be the Person designated toreceive all notices from the Internal Revenue Service and other tax authoritiesthat pertain to the tax affairs of the Company, and shall be the “tax matterspartner” for purposes of Code Sections 6221 through 6233.  Each party agrees to be bound by those CodeSections.  The “tax matters partner”shall provide to each other Member in a timely manner the notices required tobe provided by Section 301.6223(g)-1T of the Regulations and the correspondingprovisions of state tax law.  The “taxmatters partner” shall be reimbursed by the Company for expenses reasonablyincurred 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 matterspartner” or ceases to be a Member, then the Members shall select another “taxmatters partner.”

 

## 14.21       **Tax Definitions**

 

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

means, with respect toany Member, the deficit balance, if any, in such Member’s Capital Account as ofthe end of the relevant fiscal year, after giving effect to the followingadjustments:

 

(1)             Credit to suchCapital Account any amounts which such Member is obligated to restore pursuantto any provision of this Agreement or is deemed to be obligated to restorepursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and1.704-2(i)(5); and

 

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

 

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The foregoing definitionof Adjusted Capital Account Deficit is intended to comply with the provisionsof Section 1.704-1(b)(2)(ii)(*d*) of the Regulations and shall beinterpreted consistently with it.

 

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

In determining the amountof any liability for purposes of Sections 13.1(a), 13.1(b), 13.5(a) and13.5(b) there shall be taken into account Code Section 752(c) and anyother 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 and appliedin a manner consistent with it.

 

If the Managers determinethat to comply with the Regulations it is prudent to modify the manner in whichthe Capital Accounts, or any debits or credits to the Capital Accounts(including debits or credits relating to liabilities which are secured byproperty contributed to or distributed from the Company or which are assumed bythe 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.

 

The Managers also shall(a) make any adjustments that are necessary or appropriate to maintainequality between the Capital Accounts of the Members and the amount of Companycapital reflected on the Company’s balance sheet, as computed for bookpurposes, 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 each fiscalyear or other period, an amount equal to the depreciation, amortization orother cost recovery deduction allowable with respect to an asset for such yearor other period, except that if the Gross Asset Value of an asset differs fromits adjusted basis for federal income tax purposes at the beginning of suchyear or other period, Depreciation shall be an amount which bears the same ratioto such beginning Gross Asset Value as the federal income tax depreciation,amortization or other cost recovery deduction for such year or other periodbears to such beginning adjusted tax basis; *provided, however,* that if the federalincome tax depreciation, amortization or other cost recovery deduction for suchyear is zero, Depreciation shall be determined with reference to such beginningGross Asset Value using any reasonable method selected by the Managers.

 

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

means, with respect toany asset, the asset’s adjusted basis for federal income tax purposes, exceptas follows:

 

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(1)             The initial GrossAsset Value of any asset contributed by a Member to the Company shall be thegross fair market value of such asset, as determined by the contributing Memberand the Company;

 

(2)             The Gross Asset Valueof any the Company asset distributed to any Member shall be the asset’s grossfair market value on the date of distribution;

 

(3)             The Gross AssetValues of all the Company assets shall be adjusted to equal their respectivegross fair market values, as determined by the Managers, as of the followingtimes:  (a) the acquisition of anadditional Interest 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 AssetValues of the property of the Company shall be increased (or decreased) toreflect any adjustments 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 andSections 14.10 (Code Section 754 Adjustments) and 14.22(j)(6)(Profits and Losses); *provided, however,* that Gross Asset Valuesshall not be adjusted pursuant to this Section 14.22(d)(4) to the extentthe Managers determine that an adjustment pursuant to Section 14.22(d) isnecessary or appropriate in connection with a transaction that would otherwiseresult in an adjustment pursuant to this Section 14.22(d)(4).

 

(5)             After the Gross AssetValue of an asset has been determined or adjusted pursuant toSection 14.22(d)(1), (3) or (4), such Gross Asset Value shall be adjustedby the Depreciation taken into account with respect to such asset for purposesof computing Profits and Losses.

 

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

has the meaning set forthin Section 1.704-2(b)(4) of the Regulations.

 

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

means an amount, withrespect to each Member Nonrecourse Debt, equal to the Minimum Gain that wouldresult if such Member Nonrecourse Debt were treated as a Nonrecourse Liability,determined in accordance with Section 1.704-2(i)(3) of the Regulations.

 

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

has the meaning set forthin Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations.

 

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

has the meaning set forthin Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.

 

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

has the meaning set forthin Section 1.704-2(b)(1) of the Regulations.

 

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

has the meaning set forthin Section 1.704-2(b)(3) of the Regulations.

 

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

under Section 13.16shall be determined in accordance with Code Section 703(a) (for thispurpose, all items of income, gain, loss or deduction required to be statedseparately pursuant to Code Section 703(a)(1) shall be included in taxableincome or loss), with the following adjustments:

 

(1)             Any income of theCompany that is exempt from federal income tax and not otherwise taken intoaccount in computing Profits or Losses pursuant to this Section 14.22(j)shall be added to such taxable income or loss;

 

(2)             Any expenditures ofthe Company described in Code Section 705(a)(2)(B) or treated as CodeSection 705(a)(2)(B) expenditures pursuant toSection 1.704-1(b)(2)(iv)(*i*) of the Regulations, and not otherwisetaken into account in computing Profits or Losses pursuant to thisSection 14.22(j) shall be subtracted from such taxable income or loss;

 

(3)             If the Gross AssetValue of any Company asset is adjusted pursuant to Section  14.22(d)(3) or(4), the amount of such adjustment shall be taken into account as gain or lossfrom the disposition of such asset for purposes of computing Profits or Losses;

 

(4)             Gain or lossresulting from any disposition of property of the Company with respect to whichgain or loss is recognized for federal income tax purposes shall be computed byreference to the Gross Asset Value of such property disposed of,notwithstanding that the adjusted tax basis of such property differs from itsGross Asset Value;

 

(5)             In lieu of thedepreciation, amortization and other cost recovery deductions taken intoaccount in computing such taxable income or loss, there shall be taken intoaccount Depreciation for such fiscal year or other period, computed inaccordance with Section 14.22(c) (Depreciation);

 

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(6)             To the extent anadjustment to the adjusted tax basis of any Company asset pursuant to CodeSection 734(b) or 743(b) is required by Section 1.704-1(b)(2)(iv)(*m*)(*4*)of the Regulations to be taken into account in determining Capital Accounts asa result of a distribution other than in liquidation of a Member’s interest inthe Company, the amount of such adjustment shall be treated as an item of gain(if the adjustment 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 anyother provision of this Section 14.22(j), any items which are speciallyallocated pursuant to Sections 14.4 (Minimum Gain Chargeback) through14.12 (Order of Application) shall not be taken into account in computingProfits or Losses.

 

The amounts of the itemsof 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 Income TaxRegulations promulgated under the Code, as such regulations may be amended fromtime to time.

 

### 14.21(m)         “**Tax Liquidation**”

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

 

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THIS AGREEMENT AFFECTS IMPORTANT RIGHTS.    EACH PARTY REPRESENTS TO EACH OTHER PARTY THAT HE OR IT HASREAD THIS AGREEMENT AND HAS HAD THE OPPORTUNITY TO SEEK INDEPENDENT TAX ANDLEGAL ADVICE CONCERNING THIS AGREEMENT.

 

 
| *Initial  Member:*              |   |
|---------------------------------|--------|
|                            |   |
| DeCRANE AIRCRAFT HOLDINGS, INC. |   |
|                            |   |
|                            |   |
| By:                             |   | /s/ Richard J. Kaplan |   |   |
|                                 |        |  |  |  |

 

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