OPERATING AGREEMENT

                                       OF

                       WASHINGTON UROLOGICAL SERVICES, LLC


                    (A Washington Limited Liability Company)


                           Dated: ____________, 199__










THE LLC MEMBERSHIP  INTERESTS  REPRESENTED BY THIS OPERATING  AGREEMENT HAVE NOT
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED,  OR UNDER THE  SECURITIES  ACTS OR LAWS OF ANY STATE IN
RELIANCE UPON EXEMPTIONS UNDER THOSE ACTS OR LAWS. THE SALE OR OTHER DISPOSITION
OF THE MEMBERSHIP INTERESTS IS RESTRICTED AS STATED IN THIS OPERATING AGREEMENT,
AND IN ANY EVENT IS  PROHIBITED  UNLESS THE LLC  RECEIVES  AN OPINION OF COUNSEL
SATISFACTORY  TO IT AND ITS COUNSEL THAT SUCH SALE OR OTHER  DISPOSITION  CAN BE
MADE WITHOUT  REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY
APPLICABLE STATE SECURITIES ACTS AND LAWS. BY ACQUIRING THE MEMBERSHIP  INTEREST
REPRESENTED BY THIS OPERATING AGREEMENT, EACH MEMBER REPRESENTS THAT IT WILL NOT
SELL OR OTHERWISE  DISPOSE OF ITS MEMBERSHIP  INTEREST  WITHOUT  REGISTRATION OR
OTHER  COMPLIANCE WITH THE AFORESAID ACTS AND THE RULES AND  REGULATIONS  ISSUED
THEREUNDER.
<PAGE>

                                TABLE OF CONTENTS
 

ARTICLE I - FORMATION OF THE COMPANY...........................................1
         1.1      Formation....................................................1
         1.2      Name.........................................................1
         1.3      Registered Office and Registered Agent.......................1
         1.4      Principal Place of Business..................................1
         1.5      Purposes and Powers..........................................1
         1.6      Term.........................................................2
         1.7      Nature of Members' Interests.................................2

ARTICLE II - DEFINITIONS.......................................................2
         2.1      Definitions..................................................2

ARTICLE III - MANAGEMENT OF THE COMPANY.......................................11
         3.1      The Managing Board..........................................11
         3.2      Specific Authority of the Managing Board....................11
         3.3      Limitation on Authority of Managing Board...................13
         3.4      Termination of the Management Agreement.....................14
         3.5      Specific Authority of Managing Board........................14
         3.6      Number, Term and Qualification..............................15
         3.7      Removal and Replacement.....................................15
         3.8      Authority as to Third Persons...............................15
         3.9      Compensation and Expenses...................................15
         3.10     Action by the Managing Board................................15
         3.11     Action Without Meeting.  ...................................16
         3.12     Meeting by Communications Device.  .........................16
         3.13     Authorized Representative of Company.  .....................16
         3.14     Indemnification of Managing Board Members and Sun.  ........16
         3.15     Limitation on Liability.  ..................................17
         3.16     Liability for Return of Capital Contribution.  .............17

ARTICLE IV - RIGHTS AND OBLIGATIONS OF MEMBERS................................17
         4.1      Names and Addresses of Members..............................17
         4.2      No Management by Members....................................17
         4.3      Election of Member Designees................................17
         4.4      Action by Members...........................................17
         4.5      Operation of Lithotripter System............................18
         4.6      Outside Activities..........................................18
         4.7      Disclosure of Confidential Information......................19
         4.8      Limited Liability...........................................20

ARTICLE V - CAPITAL CONTRIBUTIONS,
         GUARANTIES AND DILUTION OFFERINGS....................................20

                                                      -i-
<PAGE>

         5.1      Member's Contribution.......................................20
         5.3      Dilution Offerings..........................................20
         5.4      Conditions to the Capital Contributions of the Members......20
         5.5      Capital Accounts............................................21

ARTICLE VI - REPRESENTATIONS, WARRANTIES AND
         COVENANTS OF THE MANAGING BOARD......................................22
         6.1      Managing Board's Representations and Warranties.............22
         6.2      Managing Board's Covenants..................................22

ARTICLE VII - ALLOCATIONS, ELECTIONS AND REPORTS..............................22
         7.1      Profits and Losses..........................................22
         7.2      Sales Commission............................................23
         7.3      Nonrecourse Deductions......................................23
         7.4      Member Nonrecourse Deductions...............................23
         7.5      Allocations Between Transferor and Transferee...............23
         7.6      Gains from Capital Transactions.............................24
         7.7      Contributed Property........................................24
         7.8      Minimum Gain Chargeback.....................................24
         7.9      Member Minimum Gain Chargeback..............................24
         7.10     Qualified Income Offset.....................................25
         7.11     Gross Income Allocation.....................................25
         7.12     Section 754 Adjustment......................................25
         7.13     Curative Allocations........................................26
         7.14     Compliance with Treasury Regulations........................26
         7.15     Tax Withholding.............................................26

ARTICLE VIII - DISTRIBUTIONS..................................................26
         8.1      Company Cash Flow...........................................26
         8.2      Company Refinancing Proceeds................................26
         8.3      Company Sales Proceeds......................................26
         8.4      Distributions in Liquidation................................27
         8.5      Limitation Upon Distributions...............................27

ARTICLE IX - TRANSFER OF INTERESTS AND ADMISSION OF MEMBERS...................27
         9.1      Transferability of Membership Interests.....................27
         9.2      Restrictions on Transfers by Members........................28
         9.3      Rights of Transferee........................................28
         9.4      Admission of Members........................................29
         9.5      Amendment of Certificate of Formation and Qualification.....29
         9.6      Fundamental Changes.........................................29

ARTICLE X - OPTIONAL PURCHASE OF MEMBERSHIP INTERESTS
         ON CERTAIN EVENTS....................................................30

                                                      -ii-
<PAGE>

         10.1     Death.......................................................30
         10.2     Bankruptcy, Insolvency or Assignment for Benefit
                                        of Creditors of a Member..............31
         10.3     Default under Guaranties....................................32
         10.4     Breach of Section 4.6.......................................32
         10.5     Domestic Proceeding.........................................33
         10.6     Divestiture Option..........................................34
         10.7     Purchase Price..............................................35
         10.8     Closing of Purchase and Sale................................36
         10.9     Terms and Conditions of Purchase............................37

ARTICLE XI - DISSOLUTION AND LIQUIDATION OF THE COMPANY.......................37
         11.1     Dissolution Events..........................................37
         11.2     Continuation................................................38
         11.3     Liquidation.................................................38
         11.4     Certificate of Cancellation.................................39

ARTICLE XII - MISCELLANEOUS...................................................39
         12.1     Fiscal Year.................................................39
         12.2     Records.....................................................39
         12.3     Reports.....................................................39
         12.4     Reserves....................................................39
         12.5     Notices.....................................................39
         12.6     Amendments..................................................40
         12.7     Additional Documents........................................40
         12.8     Representations of Members..................................40
         12.9     Survival of Rights..........................................40
         12.10    Interpretation and Governing Law............................40
         12.11    Severability................................................40
         12.12    Agreement in Counterparts...................................40
         12.13    Tax Matters Partner.........................................41
         12.14    Third Parties...............................................41
         12.15    Power of Attorney...........................................41
         12.16    Arbitration.................................................41


Attachments:

Schedule I - Names,  Initial Capital  Contributions and Percentage  Interests of
the Members
                                                      -iii-
<PAGE>

                               OPERATING AGREEMENT

                                       OF

                       WASHINGTON UROLOGICAL SERVICES, LLC

THIS OPERATING AGREEMENT of WASHINGTON UROLOGICAL SERVICES, LLC (the "Company"),
a  limited  liability  company  organized  pursuant  to the  Washington  Limited
Liability   Company   Act,  is  executed   effective  as  of  the  ____  day  of
______________,  199__, by and among the Company and the persons  executing this
Agreement as the Members (as defined below).

                      ARTICLE I - FORMATION OF THE COMPANY

     1.1  Formation.  The  Company was formed on August 31, 1998 upon the filing
with the Secretary of State of the  Certificate of Formation of the Company.  In
consideration  of the mutual premises and covenants  contained  herein and other
good and valuable consideration,  the receipt and sufficiency of which is hereby
acknowledged,  the parties  hereto agree that the rights and  obligations of the
parties and the  administration and termination of the Company shall be governed
by this Agreement, the Certificate of Formation and the Act.

     1.2 Name. The name of the Company is as set forth on the cover page of this
Agreement.  The  Managing  Board may change the name of the Company from time to
time  as it  deems  advisable,  provided  that  appropriate  amendments  to this
Agreement and the  Certificate of Formation and necessary  filings under the Act
are first obtained.

     1.3 Registered Office and Registered Agent. The Company's registered office
shall be at 520  Pike  Street,  Seattle,  Washington  98101  and the name of its
initial registered agent at such address shall be the CT Corporation System.

     1.4 Principal  Place of Business.  The  principal  place of business of the
Company  shall be  located  at 15195  National  Avenue,  Suite  203,  Los Gatos,
California 95032, or at any other place or places as the Managing Board may from
time to time deem necessary or advisable.

     1.5 Purposes and Powers.

          (a) The purpose and business of the Company shall  be: (i) to operate
     one or more transportable lithotripters (or any other renal stone treatment
     equipment)  for the treatment of renal stones  primarily in the area of the
     State  of  Washington  west of the  Cascade  Mountains,  or in  such  other
     location(s) as the Managing Board may determine to be in the best interests
     of the  Company;  (ii) to  acquire  and  operate  in the  future  any other
     therapeutic  urological  device or equipment  provided  that such device or
     equipment has received FDA premarket approval at the time it is acquired by
     the  Company;  (iii)  to  acquire  an  interest  in  any  business  entity,
     including,  without limitation,  a limited  partnership,  limited liability
     company or corporation,  that engages in any business activity described in
     this Section
                                                      -1-
<PAGE>

          1.5;  and  (iv) to  engage  in any and all  activities  incidental  or
     related to the  foregoing,  upon and subject to the terms and conditions of
     this Agreement.

          (b) The Company  shall have any and all powers which are  necessary or
     desirable to carry out the  purposes  and  business of the Company,  to the
     extent the same may be legally  exercised  by limited  liability  companies
     under  the Act.  The  Company  shall  carry  out the  foregoing  activities
     pursuant to the  arrangements set forth in the Certificate of Formation and
     this Agreement.

          1.6 Term. The Company shall  continue in existence  until the close of
     the Company's  business on December 31, 2020, unless the Company is earlier
     dissolved  and its affairs wound up in  accordance  with the  provisions of
     this Agreement or the Act.

          1.7 Nature of Members'  Interests.  The  Membership  Interests  of the
     Members in the Company shall be personal  property for all purposes.  Legal
     title to all  Company  assets  shall  be held in the  name of the  Company.
     Neither  any  Member  nor a  successor,  representative  or  assign of such
     Member, shall have any right, title or interest in or to any Property owned
     by the Company or the right to partition any Property owned by the Company.
     Membership  Interests are  evidenced by the execution of this  Agreement by
     the Members.

                            ARTICLE II - DEFINITIONS

          2.1 Definitions. The following terms used in this Agreement shall have
     the following meanings (unless otherwise expressly provided herein):

          2.1.1"Act" means the Washington  Limited Liability Company Act, as the
     same may be amended from time to time.

          2.1.2 "Adjusted  Capital Account  Deficit" means,  with respect to any
     Member, the deficit balance, if any, in such Member's Capital Account as of
     the end of the relevant  Fiscal Year,  after giving effect to the following
     adjustments:

               (i)  Credit to such  Capital  Account  any  amounts to which such
          Member is obligated to restore or is deemed to be obligated to restore
          pursuant to the penultimate sentences of Treasury Regulations Sections
          1.704-2(g)(1) and 1.704-2(i)(5); and

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

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

                                                      -2-
<PAGE>

               2.1.3 "Adjusted  Capital  Contributions"  means, as of any day, a
          Member's Capital Contributions adjusted as follows:

               (i) Increased by the amount of any Company  liabilities which, in
          connection  with  Distributions,  are  assumed  by such  Member or are
          secured by any Company Property distributed to such Member; and

               (ii)  Reduced by the amount of cash and the value of any  Company
          property  distributed to such Member and the amount of any liabilities
          of such  Member  assumed by the  Company  or which are  secured by any
          property contributed by such Member to the Company.

               In the event any Member  transfers  all or any  portion of his or
          her  Membership   Interest  in  accordance  with  the  terms  of  this
          Agreement, his or her transferee shall succeed to the Adjusted Capital
          Contribution  of  the  transferor  to the  extent  it  relates  to the
          transferred Membership Interest or portion thereof.

               2.1.4  "Affiliate"  of a specified  Person means  (i) any  Person
          directly or  indirectly  controlling,  controlled  by or under  common
          control  with  the  specified  Person;  (ii)  any  Person  owning  or
          controlling  10% or more of the  outstanding  voting  interest of such
          specified  Person;  (iii) any  officer,  director  or  partner of such
          specified  Person;  and  (iv) if the  specified  Person is an officer,
          director or partner, any entity for which the specified Person acts in
          such capacity.

               2.1.5 "Agreement" means this Operating Agreement, as amended from
          time to time.

               2.1.6  "Bank"  means First  Citizens  Bank & Trust  Company,  its
          successor in interest,  or any other commercial financial  institution
          providing financing to the Company.

               2.1.7  "Bankruptcy"  means with  respect  to a Member,  when such
          Member (i) makes an  assignment  for the  benefit of  creditors;  (ii)
          files a voluntary petition in bankruptcy; (iii) is adjudged a bankrupt
          or insolvent,  or has entered  against him or her an order for relief,
          in any bankruptcy or insolvency  proceeding;  (iv) files a petition or
          answer seeking for himself or herself any reorganization, arrangement,
          composition, readjustment,  liquidation, dissolution or similar relief
          under any  statute,  law or  regulation;  (v) files an answer or other
          pleading admitting or failing to contest the material allegations of a
          petition  filed  against  him or her in  any  proceeding  of the  type
          described in clauses  (i)-(iv)  above;  or (vi) seeks,  consents to or
          acquiesces in the appointment of a trustee,  receiver or liquidator of
          the Member or of all or any substantial part of his or her properties.
          "Bankruptcy"  shall  also be deemed to have  occurred  to a Member 120
          days after the  commencement  of any  proceeding  against  such Member
          seeking  reorganization,   arrangement,   composition,   readjustment,
          liquidation,  dissolution or similar relief under any statute,  law or
          regulation,  if the proceeding has not been dismissed, or if within 90
          days after the appointment  without his or her consent or acquiescence
          of a trustee,  receiver or  liquidator  of the Member or of all or any
          substantial  part of his or her  properties,  the  appointment  is not
          vacated or stayed,  or within 90 days after the expiration of any such
          stay, the appointment is not vacated.

               2.1.8 "Capital  Account" means,  with respect to any Member,  the
          capital account  maintained for such Member in accordance with Section
          5.5 of this Agreement.
                                                      -3-
<PAGE>

               2.1.9  "Capital  Contribution"  means  all  contributions  to the
          Company of cash or property  (valued for this purpose at initial gross
          fair market value as  determined  by the  contributing  Member and the
          Managing Board) made by a Member or his or her predecessor in interest
          which shall include,  without  limitation,  those  contributions  made
          pursuant to Article V of this Agreement.

               2.1.10 "Capital Transaction" means any transactions undertaken by
          the Company or by any company or partnership in which the Company owns
          an  interest,  which,  were it to  generate  proceeds,  would  produce
          Company Sales Proceeds or Company Refinancing Proceeds.

               2.1.11  "Certificate  of  Formation"  means  the  Certificate  of
          Formation of the Company filed with the Secretary of State, as amended
          or restated from time to time.

               2.1.12 "Code" means the Internal Revenue Code of 1986, as amended
          from  time to time (and any  corresponding  provisions  of  succeeding
          law).

               2.1.13  "Company  Cash Flow" for any period means the excess,  if
          any, of (A) the sum of (i) all gross receipts from any source for such
          period,  other  than from  Company  loans,  Capital  Transactions  and
          Capital Contributions, and (ii) any funds released by the Company from
          previously  established  reserves,  over  (B) the sum of (i) all  cash
          expenses  paid  by  the  Company  for  such  period   (including   any
          compensation to the Members and their  Affiliates);  (ii) all  amounts
          paid by the Company in such period on account of the  amortization  of
          the principal of any debts or  liabilities  of the Company  (including
          loans from any Member); (iii) capital expenditures of the Company; and
          (iv) a  reasonable  reserve  for future  expenditures  as  provided by
          Section 13.4; provided,  however,  that the amounts referred to in (B)
          (i),  (ii) and (iii)  above  shall be taken into  account  only to the
          extent  not  funded  by  Capital  Contributions,  loans or paid out of
          previously  established  reserves.  Such term shall also  include  all
          other funds  deemed  available  for  distribution  and  designated  as
          Company Cash Flow by the Managing Board.

               2.1.14  "Company  Minimum Gain" means gain as defined in Treasury
          Regulations Section 1.704-2(d).

          2.1.15 "Company Refinancing Proceeds" means (i) the cash realized from
     the financing or refinancing  of all or any portion of any Company  assets,
     less the  retirement  of any  related  secured  loans,  the  payment of all
     expenses  relating  to  the  transaction  and  the  establishment  of  such
     reasonable  reserves as the Managing  Board shall deem prudent or necessary
     and (ii) the Company's  allocable  portion of cash realized by an entity in
     which  the  Company  owns  an  interest  from  such  entity   financing  or
     refinancing all or any portion of such entity's assets, less the retirement
     of any related  secured  loans and the payment of all expenses  relating to
     such transaction.

          2.1.16  "Company Sales  Proceeds" means (i) the cash realized from the
     sale, exchange,  condemnation,  casualty or other disposition of all or any
     portion of any Company assets not in the ordinary course of business,  less
     the retirement of any related  secured  loans,  the payment of all expenses
     relating  to the  transaction  and the  establishment  of  such  reasonable
     reserves as the Managing Board shall deem prudent or necessary and (ii) the
     Company's  allocable  portion  of cash  realized  by an entity in which the
     Company owns an interest from the sale, exchange, condemnation, casualty or
     other
                                                      -4-
<PAGE>

          disposition  of all or any portion of such entity's  assets not in the
     ordinary  course of business,  less the  retirement of any related  secured
     loans and the payment of all expenses relating to such transaction.

          2.1.17  "Depreciation" means, for each Fiscal Year, an amount equal to
     the depreciation,  amortization, or other cost recovery deduction allowable
     with  respect to an asset for such  Fiscal  Year,  except that if the Gross
     Asset Value of an Asset differs from its adjusted  basis for federal income
     tax purposes at the beginning of such Fiscal Year, Depreciation shall be an
     amount  which bears the same ratio to such  beginning  Gross Asset Value as
     the federal income tax depreciation,  amortization,  or other cost recovery
     deduction for such Fiscal Year bears to such beginning  adjusted tax basis;
     provided,  however,  that if the  adjusted  basis for  federal  income  tax
     purposes  of an  asset  at the  beginning  of such  Fiscal  Year  is  zero,
     Depreciation  shall be determined  with reference to such  beginning  Gross
     Asset Value using any reasonable method selected by the Managing Board.

          2.1.18  "Dilution  Offering"  means,  as provided in Article V of this
     Agreement,  the future offering of additional  Membership  Interests in the
     Company by the Managing Board.  Except as otherwise  provided in Article V,
     any successful Dilution Offering will proportionately reduce the Percentage
     Interests of the then current Members in the Company.

          2.1.19 "Distribution" means any money or other property distributed to
     a Member with respect to the Member's  Membership  Interest,  but shall not
     include any payment to a Member for materials or services  rendered nor any
     reimbursement  to a Member for expenses  permitted in accordance  with this
     Agreement.

          2.1.20 "Domestic Proceeding" means any divorce, annulment,  separation
     or similar domestic proceeding between a married couple.

          2.1.21 "Encumbrance" means any lien, pledge,  encumbrance,  collateral
     assignment or hypothecation.

          2.1.22  "Equipment"  means the equipment to be acquired by the Company
     and used in the operation of the  Lithotripter  System including the mobile
     transport vehicle, the transportable lithotripter and miscellaneous medical
     equipment and supplies,  and any similar  additional  equipment acquired by
     the Company in the future.

          2.1.23 "FDA" means the United States Food and Drug Administration.

          2.1.24 "Fiscal Year" means an annual accounting period ending December
     31 of each year during the term of the Company,  unless otherwise specified
     by the Managing Board.

          2.1.25 "Gains from Capital  Transactions"  means the gains realized by
     the  Company  as a result of or upon any sale,  exchange,  condemnation  or
     other  disposition  of capital assets of the Company or any entity in which
     the Company shall own an interest  (which assets shall include Code Section
     1231 assets and all real and  personal  property) or as a result of or upon
     the damage to or destruction of such capital assets.

                                                      -5-
<PAGE>

          2.1.26  "Gross Asset  Value"  means,  with  respect to any asset,  the
     asset's adjusted basis for federal income tax purposes, except as follows:

               (i) The initial Gross Asset Value of any asset  contributed  by a
          Member to the  Company  shall be the gross fair  market  value of such
          asset,  as  determined  by the  contributing  Member and the  Managing
          Board,  provided that, if the  contributing  Member is a member of the
          Managing Board,  such Member shall abstain from the  determination  of
          the fair market value of a contributed asset;

               (ii) The  Gross  Asset  Values  of all  Company  assets  shall be
          adjusted  to equal  their  respective  gross fair  market  values,  as
          determined by the Managing Board, as of the following  times:  (a) the
          acquisition of an additional  interest in the Company (other than upon
          the initial formation of the Company) 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 of more  than a de  minimis
          amount of Company  property  as  consideration  for an interest in the
          Company;  and (c) the liquidation of the Company within the meaning of
          Treasury Regulations Section 1.704-1(b)(2)(ii)(g);  provided, however,
          that the  adjustments  pursuant  to clauses (a) and (b) above shall be
          made  only  if the  Managing  Board  reasonably  determine  that  such
          adjustments  are  necessary  or  appropriate  to reflect the  relative
          economic interests of the Members in the Company;

               (iii) The Gross Asset Value of any Company asset  distributed  to
          any Member  shall be adjusted to equal the gross fair market  value of
          such  asset  on  the  date  of   distribution  as  determined  by  the
          distributee and the Managing Board,  provided that, if the distributee
          is a member of the Managing Board,  such Member shall abstain from the
          determination of the fair market value of the distributed asset; and

               (iv) The Gross Asset Values of Company  assets shall be increased
          (or  decreased) to reflect any  adjustments  to the adjusted  basis of
          such assets  pursuant to Code Section  734(b) or Code Section  743(b),
          but only to the extent that such adjustments are taken into account in
          determining Capital Accounts pursuant to Treasury  Regulations Section
          1.704-1(b)(2)(iv)(m)   and  Sections   2.1.47(vi)   and  7.12  hereof;
          provided,  however,  that Gross  Asset  Values  shall not be  adjusted
          pursuant to this Section  2.1.26(iv) to the extent the Managing  Board
          determine that an adjustment  pursuant to Section 2.1.26(ii) hereof is
          necessary or appropriate in connection  with a transaction  that would
          otherwise result in an adjustment pursuant to this Section 2.1.26(iv).

          If the Gross Asset Value of an asset has been  determined  or adjusted
          pursuant  to  Section  2.1.26(i),   Section  2.1.26(ii),   or  Section
          2.1.26(iv) hereof, such Gross Asset Value shall thereafter be adjusted
          by the Depreciation  taken into account with respect to such asset for
          purposes of  computing  Profits,  Gains from Capital  Transactions  or
          Losses.

                                                      -6-
<PAGE>

               2.1.27 "Guaranty" means the Guaranty  Agreement pursuant to which
          each Member will  guarantee a portion of the  Company's  obligation to
          the Bank under the Loan. The form of Guaranty Agreement is included in
          the Subscription Packet accompanying the Memorandum.

               2.1.28  "Lithotripter  System" means the mobile transport vehicle
          and operational lithotripter.

               2.1.29  "Loan" means the loan of up to $550,000  from the Bank to
          the Company.  Loan proceeds will be used by the Company to (i) acquire
          a  transportable  lithotripter  with options  (estimated at $400,000),
          (ii)  acquire  and upfit a mobile van to  transport  the  lithotripter
          (estimated at $50,000),  (iii) pay the applicable  state sales and use
          taxes on the purchase of the  lithotripter  and van  (estimated  to be
          $38,700), and (iv) serve as working capital (estimated at $61,300).

               2.1.30  "Losses  from  Capital  Transactions"  means  the  losses
          realized  by the  Company  as a result of or upon any sales  exchange,
          condemnation or other disposition of the capital assets of the Company
          (which include Code Section 1231 assets) or as a result of or upon the
          damage or destruction of such capital assets.

               2.1.31 "Management Agent" means Sun Medical  Technologies,  Inc.,
          the initial management agent of the Company, and any other Person that
          succeeds such management agent in its capacity as management agent.

               2.1.32  "Management  Agreement"  means the agreement  pursuant to
          which the Management Agent will provide daily  management  services to
          the Company.

               2.1.33  "Majority  in  Interest"  means,   with  respect  to  any
          referenced group of Members, a combination of any of such Members who,
          in the aggregate,  own more than fifty percent (50%) of the Percentage
          Interests owned by all of such referenced group of Members.

               2.1.34  "Managing  Board" means the four person board of managers
          comprised of two designees  appointed by Sun and two designees elected
          by the non-Sun  affiliated  Members of the Company,  and which has the
          management authority set forth in Article III.

               2.1.35  "Member" means each Person  designated as a member of the
          Company on Schedule I hereto,  or any additional  member admitted as a
          member of the Company in accordance with Article IX.  "Members" refers
          to such Persons as a group.

               2.1.36  "Member  Minimum  Gain" means an amount,  with respect to
          each Member  Nonrecourse  Debt, equal to the Company Minimum Gain that
          would  result  if such  Member  Nonrecourse  Debt  were  treated  as a
          Nonrecourse   Liability,   determined  in  accordance   with  Treasury
          Regulations Section 1.704-2(i).

               2.1.37 "Member  Nonrecourse Debt" means any nonrecourse debt (for
          the purposes of Treasury  Regulations Section 1.1001-2) of the Company
          for which any Member  bears the  "economic  risk of loss,"  within the
          meaning of Treasury Regulations Section 1.752-2.

                                                      -7-
<PAGE>

               2.1.38  "Member  Nonrecourse   Deductions"  means  deductions  as
          described in Treasury  Regulations Section  1.704-2(i).  The amount of
          Member  Nonrecourse  Deductions  with respect to a Member  Nonrecourse
          Debt for any Fiscal  Year  equals the  excess,  if any, of (A) the net
          increase, if any, in the amount of Member Minimum Gain attributable to
          such Member  Nonrecourse  Debt during such Fiscal  Year,  over (B) the
          aggregate amount of any  Distributions  during that Fiscal Year to the
          Member  that  bears  the  economic   risk  of  loss  for  such  Member
          Nonrecourse  Debt  to the  extent  such  Distributions  are  from  the
          proceeds  of such  Member  Nonrecourse  Debt and are  allocable  to an
          increase  in  Member   Minimum  Gain   attributable   to  such  Member
          Nonrecourse Debt,  determined in accordance with Treasury  Regulations
          Section 1.704-2(i).

               2.1.39  "Membership  Interest"  means all of a Member's rights in
          the Company,  including without limitation,  the Member's share of the
          Profits and Losses of the Company, the right to receive Distributions,
          any right to vote and any right to  participate  in the  management of
          the Company as provided in the Act and this Agreement.

               2.1.40  "Memorandum"  means the  Confidential  Private  Placement
          Memorandum  of the Company  dated  December 21, 1998, as amended or as
          supplemented.

               2.1.41 "Nonrecourse  Deductions" means deductions as set forth in
          Treasury Regulations Section 1.704-2(b)(1).  The amount of Nonrecourse
          Deductions  for a given Fiscal Year equals the excess,  if any, of (A)
          the net increase, if any, in the amount of Company Minimum Gain during
          such Fiscal Year, over (B) the aggregate  amount of any  Distributions
          during such Fiscal Year of proceeds of a  Nonrecourse  Liability  that
          are  allocable  to an increase  in Company  Minimum  Gain,  determined
          according  to  the   provisions   of  Treasury   Regulations   Section
          1.704-2(h).

               2.1.42  "Nonrecourse  Liability" means any Company  liability (or
          portion  thereof)  for which no Member  bears  the  "economic  risk of
          loss," within the meaning of Treasury Regulations Section 1.752-2.

               2.1.43  "Offering"  means the  initial  offering  of Units in the
          Company pursuant to the Memorandum.

               2.1.44  "Percentage  Interest"  means  the  percentage  which the
          Capital  Contributions of a Member of the Company bears to the Capital
          Contributions  of all  Members.  As  provided in Article V, a Member's
          Percentage Interest may be reduced by a future Dilution Offering.  The
          Members' Percentage Interests in the Company as of the date hereof are
          as set forth in Schedule I attached hereto.  Any future adjustments in
          the Member's Percentage Interests, due to future Dilution Offerings or
          otherwise, will be reflected by revisions to Schedule I.

               2.1.45  "Person"  means an  individual,  a  foreign  or  domestic
          corporation,  a professional  corporation,  a  partnership,  a limited
          partnership,  a limited liability company, a foreign limited liability
          company, an unincorporated association, or other legal entity.

               2.1.46  "Prime"  means Prime Medical  Services,  Inc., a publicly
          held Delaware corporation and parent of Sun.

                                                      -8-
<PAGE>

               2.1.47  "Profits  and Losses"  means,  for each Fiscal  Year,  an
          amount equal to the Company's  taxable  income or loss for such Fiscal
          Year  (excluding  Gains  from  Capital  Transactions),  determined  in
          accordance  with Code Section  703(a) (for this purpose,  all items of
          income,  gain,  loss,  or deduction  required to be stated  separately
          pursuant to Code Section 703(a)(1) shall be included in taxable income
          or loss), with the following adjustments:

               (i) Any income of the Company that is exempt from federal  income
          tax and not  otherwise  taken into  account in  computing  Profits and
          Losses  pursuant  to this  definition  (excluding  Gains from  Capital
          Transactions) shall be added to such taxable income or loss;

               (ii)  Any   expenditures   of  the  Company   described  in  Code
          Section 705(a)(2)(B)   or   treated  as  Code   Section   705(a)(2)(B)
          expenditures     pursuant    to    Treasury     Regulations    Section
          1.704-1(b)(2)(iv)(i),   and  not  otherwise   taken  into  account  in
          computing  Profits or Losses  pursuant to this Section 2.1.47 shall be
          subtracted from such taxable income or loss;

               (iii) In the event the Gross Asset Value of any Company  asset is
          adjusted  pursuant to Section  2.1.26,  the amount of such  adjustment
          shall be taken into  account as gain or loss from the  disposition  of
          such asset for purposes of computing Profits or Losses;

               (iv)  Gain or loss  resulting  from any  disposition  of  Company
          property with respect to which gain or loss is recognized  for federal
          income tax purposes  shall be computed by reference to the Gross Asset
          Value of the property disposed of,  notwithstanding  that the adjusted
          tax basis of such property differs from its Gross Asset Value;

               (v) In lieu of the  depreciation,  amortization,  and other  cost
          recovery  deductions  taken into  account in  computing  such  taxable
          income or loss,  there shall be taken into  account  Depreciation  for
          such fiscal year or other  period,  computed  in  accordance  with the
          definition of Depreciation set out hereof;

               (vi) To the extent an adjustment to the adjusted tax basis of any
          Company asset  pursuant to Code Section  734(b) or Code Section 743(b)
          is    required    pursuant    to    Treasury    Regulations    Section
          1.704-1(b)(2)(iv)(m)(4)  to  be  taken  into  account  in  determining
          Capital  Accounts  as  a  result  of  a  distribution  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 the  adjustment
          increases the basis of the asset) or loss (if the adjustment decreases
          the basis of the asset) from the disposition of the asset and shall be
          taken into account for purposes of computing Profits or Losses;

               (vii) Notwithstanding any other provision of this Section 2.1.47,
          any items which are specially allocated pursuant to Sections 7.3, 7.4,
          7.8,  7.9,  7.10,  7.11,  7.12 or 7.13 hereof  shall not be taken into
          account in computing Profits or Losses.
                                                      -9-
<PAGE>

               The  amounts  of the  items  of  Company  income,  gain,  loss or
          deduction  available  to be specially  allocated  pursuant to Sections
          7.3,  7.4,  7.8,  7.9,  7.10,  7.11,  7.12 or  7.13  hereof  shall  be
          determined by applying rules  analogous to those set forth in Sections
          (i) through (vi) above.

               2.1.48  "Property"  means any and all  property  acquired  by the
          Company,   real  and/or  personal   (including,   without  limitation,
          intangible property).

               2.1.49 "Pro Rata Basis" means in connection with an allocation or
          distribution in proportion to the respective  Percentage  Interests of
          the class of Members to which reference is made.

               2.1.50 "Sales Agency  Agreement" means the sales agency agreement
          through  which  MedTech  Investments,  Inc., an Affiliate of Sun and a
          broker-dealer  company  registered  with the  Securities  and Exchange
          commission  and a member of the  National  Association  of  Securities
          Dealers,  Inc.  shall  offer and sell the  membership  interest of the
          Company pursuant to the Memorandum.

               2.1.51 "Sales Commission" means the $100.00 sales commission paid
          to MedTech Investments,  Inc. for each Unit sold to parties other than
          Sun and its Affiliates.

               2.1.52  "Secretary  of  State"  means the  Secretary  of State of
          Washington.

               2.1.53 "Service" means the Internal Revenue Service.

               2.1.54  "Service Area" means the  geographic  region in which the
          Company operations are expected to be conducted and which will include
          the area of the State of Washington west of the Cascade Mountains.

               2.1.55 "Sun" means Sun Medical  Technologies,  Inc., a California
          corporation  wholly  owned by  Prime,  and an  initial  Member  of the
          Company.

               2.1.56 "Tax Matters  Partner" means the Person  designated by the
          Managing  Board as the "tax matters  partner," as that term is defined
          in the Code.

               2.1.57  "Transfer"  means  sell,  assign,   transfer,   lease  or
          otherwise  dispose  of  property,   including  without  limitation  an
          interest in the Company.

               2.1.58  "Treasury  Regulations"  means the Income Tax Regulations
          and  Temporary  Regulations   promulgated  under  the  Code,  as  such
          regulations may be amended from time to time (including  corresponding
          provisions of succeeding regulations).

               2.1.59  "Units" means the 100 equal  membership  interests in the
          Company  offered  pursuant to the  Memorandum  for a price per Unit of
          $1,500  in  cash  and  personal   guaranty  of  1%  of  the  Company's
          obligations under the Loan.

               2.1.60  "Withdrawing  Member" has the  meaning  assigned to it in
          Article X.

                                                      -10-
<PAGE>

                     ARTICLE III - MANAGEMENT OF THE COMPANY

         3.1      The Managing Board.

                    (a) Except as otherwise  may be  expressly  provided in this
               Agreement, the Certificate of Formation or the Act, all decisions
               with respect to the management of the business and affairs of the
               Company  shall  be made by  action  of the  Managing  Board.  The
               Managing Board shall have full and complete authority,  power and
               discretion to manage and control the business of the Company,  to
               make all decisions regarding those matters and to perform any and
               all  other  acts  or  activities  customary  or  incident  to the
               management  of the  Company's  business,  except only as to those
               acts and things as to which  approval by the Members is expressly
               required  by this  Agreement.  The  Managing  Board may  delegate
               responsibility  for the  day-to-day  management of the Company to
               any Person retained by the Managing Board  (including  Members or
               their  Affiliates)  who shall have and  exercise on behalf of the
               Company all powers and rights  necessary or  convenient  to carry
               out such management responsibilities.

                    (b) The members of the Managing Board shall be under no duty
               to devote all of their time to the business of the  Company,  but
               shall devote only such time as they deem necessary to conduct the
               Company  business  and to operate  and  manage the  Company in an
               efficient manner.

                    (c)  The  Managing  Board  may  charge  to the  Company  all
               ordinary and necessary  costs and expenses,  direct and indirect,
               attributable  to the  activities,  conduct and  management of the
               business of the  Company.  The costs and  expenses to be borne by
               the  Company  shall   include,   but  are  not  limited  to,  all
               expenditures incurred in acquiring and financing the Equipment or
               other Company  property,  legal and accounting fees and expenses,
               salaries of  employees  of the  Company,  consulting  and quality
               assurance  fees  paid  to  independent   contractors,   insurance
               premiums and interest.

     3.2  Specific  Authority  of  the  Managing  Board.  Without  limiting  the
generality  of Section 3.1 above,  and except as  otherwise  prohibited  by this
Agreement or the Act,  the  Managing  Board shall have and exercise on behalf of
the  Company  all powers and rights  necessary  or  convenient  to carry out the
purposes of the Company.  Such powers shall  include,  without  limitation,  the
following:

     (a) To conduct the Offering and acquire the Lithotripter System;

     (b) Subject to the limitations set forth in Sections 3.3(f) and 3.3(h),  to
purchase,  hold, manage, lease, license and dispose of Company assets, including
the  purchase,  exchange,  trade,  or sale of Company  assets at such price,  or
amount,  for cash,  securities  or other  property  and upon such terms,  as the
Managing Board deems to be in the best interests of the Company;  provided, that
should  the  Company  assets be  exchanged  or traded  for  securities  or other
property (the  "Replacement  Property")  the Managing  Board shall have the same
powers with regard to the  Replacement  Property as it does towards the property
traded;

                                                      -11-
<PAGE>

     (c) To exercise the option of the Company to purchase a Member's Membership
Interest pursuant to Article X;

     (d)  To  determine  the  travel   itinerary  and  site  locations  for  the
Lithotripter System or other Company technology;

     (e) Subject to the limitations set forth in Section 3.3(g),  to acquire (i)
additional  Lithotripter Systems, (ii) any other assets related to the provision
of lithotripsy  treatment services, or (iii) any other assets or equipment or an
interest  in another  entity  consistent  with the  purposes  of the  Company as
provided in Section 1.5 (collectively,  the "Additional  Assets"), at such times
and at such price and upon such terms,  as the Managing Board deems to be in the
best interest of the Company;

     (f) Subject to the limitations set forth in Section 3.3(h), to borrow money
for any Company purpose and, if security is required therefor, to subject to any
security  device  any  portion  of  the  Property  of  the  Company,  to  obtain
replacements  of any  other  security  device,  to  repay,  in whole or in part,
refinance,  increase,  modify,  consolidate  or extend any  Encumbrance or other
security device;

     (g) To deposit,  withdraw, invest, pay, retain (including the establishment
of reserves) and distribute the Company funds in accordance  with the provisions
of this Agreement;

     (h)  To  consent  to  the  modifications,   renewal  or  extension  of  any
obligations  to the  Company  of any  Person  or of any  agreement  to which the
Company is a party or of which it is a beneficiary;

     (i) To enter into and carry out  contracts  and  agreements  and any or all
other documents and instruments,  and to do any and all such other things as may
be in furtherance of Company purposes or necessary or appropriate to the conduct
of the Company activities;

     (j)  Subject to the  limitations  set forth in Section  3.3(c),  to adjust,
compromise,  settle or refer to arbitration any claim against or in favor of the
Company,  and to  institute,  prosecute  and defend any  actions or  proceedings
relating to the Company, its business and property;

     (k) To make all decisions  related to principles  and methods of accounting
and federal income tax elections;

     (l)  Generally  to possess  and  exercise  any and all  rights,  powers and
privileges of managers under the Act and the laws of the State of Washington;

     (m) To do and  perform  all such  other  acts and  things  and to  execute,
acknowledge and deliver any and all other documents or instruments in connection
with any or all of the foregoing;

                                                      -12-
<PAGE>

     (n) To engage or retain  one or more  persons  to  perform  acts or provide
materials as may be required by the Company,  at the Company's  expense,  and to
compensate  such  person or persons at a rate to be set by the  Managing  Board,
provided that the  compensation  is at the then  prevailing rate for the type of
services and  materials  provided,  or both.  Any person,  whether a Member,  an
Affiliate of a Member or otherwise  may be employed or engaged by the Company to
render services and provide materials, including, but not limited to, management
services,   professional  services,   accounting  services,  quality  assessment
services,  legal services,  marketing services,  maintenance services or provide
materials; and if such person is a Member or an Affiliate of a Member, he or she
shall be  entitled  to,  and shall be paid  compensation  for said  services  or
materials, anything in this Agreement to the contrary notwithstanding,  provided
that  the  compensation  to be  received  for  such  services  or  materials  is
competitive  in  price  and  terms  with  then  prevailing  rate for the type of
services  and/or  materials  provided.  The Company,  pursuant to the terms of a
Management  Agreement,  will contract with the Management  Agent with respect to
the supervision and  coordination  of the management and  administration  of the
day-to-day  operations of the Lithotripter  System for an initial  quarterly fee
equal to 7.5% of Company net profits per calendar quarter. Costs incurred by the
Management  Agent in performing its duties as management  agent shall be paid as
agreed to by the Company and Management  Agent and as specifically  set forth in
the Management Agreement. The Company may also make arrangements with hospitals,
other  treatment  facilities  and  qualified  physicians  desiring  to  use  the
Lithotripter System for treatment of patients. Owning an interest in the Company
shall  not be a  condition  to using the  Lithotripter  System.  Subject  to the
limitations set forth in Section 4.6, any Person, whether a Member, an Affiliate
of a Member or otherwise, that contracts with the Company to render services and
provide materials, including the Management Agent and its Affiliates, may engage
in or  possess  an  interest  in  other  business  ventures  of any  nature  and
description  independently  or with others,  including,  but not limited to, the
operation of a mobile  lithotripsy  treatment  unit similar to the  Lithotripter
System,  whether  or not  such  business  ventures  are in  direct  or  indirect
competition with the Company, and neither the Company nor the Members shall have
any right by virtue of this Agreement in and to said independent  ventures or to
the income or profits derived therefrom; and

     (o) Subject to the limitations set forth in Sections 3.3(d) and 3.3(g),  to
cause the Company to engage in a Dilution Offering as provided in Section 5.3.

     3.3 Limitation on Authority of Managing Board.  Notwithstanding anything to
the contrary in this Agreement, the Managing Board shall undertake the following
actions upon  receiving  the prior written  consent of the Members  representing
two-thirds of the aggregate interests in the Company:

     (a) Any  act in  contravention  of this  Agreement  or the  Certificate  of
Formation;

     (b) Any act  which  would  make it  impossible  to  carry  on the  ordinary
business of the Company,  other than a transfer of all or  substantially  all of
the assets of the Company;

     (c) Confess a material  judgment against the Company in connection with any
threatened or pending legal action;
                                                      -13-
<PAGE>

     (d) Cause the  Company  to engage in a Dilution  Offering  as  provided  in
Section 5.3  pursuant to which the Percentage  Interests of the existing Members
are diluted by more than 15% in the aggregate; and

     (e)   Institute   and  carry  out  any  plan   providing  for  the  merger,
consolidation  or sale of Membership  Interests or any other actions outlined in
Section 9.6 hereof;

     (f) Sell any Company  assets in a single  transaction  or series of related
transactions with an aggregate fair market value in excess of $50,000;

     (g) Adopt the annual Company  capital and operating  budget,  including the
approval of the  Company's  Purchase  Price  Formula (as that term is defined in
Section  10.7),  provided,  that in the case of approvals  of Company  operating
budget  expenditures  involving  compensation  or  reimbursement  to  Members or
Affiliates of Members  engaged by the Company to render  services and/or provide
materials  (collectively,  the "Affiliated Contracting Parties"), the Affiliated
Contracting  Parties  shall  abstain from voting on the approval of such Company
expenditures;

     (h)  Incurring  any single  capital  expenditure  in excess of $50,000  not
contemplated in the Company's annual capital and operating  budget, or incurring
any long-term  debt or any single  borrowing of the Company in excess of $50,000
not contemplated in the Company's annual capital and operating budget;

     (i) Amend the Operating Agreement;

     (j) Modify the purposes of the  Company's  business as set forth in Section
1.5; or

     (k) Accept or reject the  Company's  right of first  refusal to provide the
Alternative  Services as described in Section 4.6 below  (provided  that Sun and
its Affiliates shall abstain from voting on such right of first refusal).

     3.4 Termination of the Management  Agreement.  Except as otherwise provided
herein or in the Management Agreement, the Company may, in the event such action
is in the best  interests  of the Company,  exercise its right to terminate  the
Management  Agreement and select a replacement  Management Agent for the Company
upon the prior written  consent of the Managing Board and a Majority in Interest
of the  Members.  In the event of a deadlock of the  Managing  Board  and/or the
Members,  the decision of whether or not to terminate the  Management  Agreement
shall be submitted  to binding  arbitration  in  accordance  with Section  12.16
hereof.

     3.5 Specific Authority of Managing Board. Notwithstanding Sections 3.1, 3.2
and 3.3, the Managing Board shall have and may exercise on behalf of the Company
the following powers:

     (a) To  prepare  or cause to be  prepared  reports,  statements  and  other
relevant information for distribution to Members; and

                                                      -14-
<PAGE>

     (b) To open  accounts  and  deposit and  maintain  funds in the name of the
Company in banks or savings and loan associations.

     3.6 Number,  Term and  Qualification.  The Managing  Board shall consist of
four (4)  managers,  comprised  of two  designees  appointed  by Sun  (the  "Sun
Designees")  and  two  designees  elected  annually  pursuant  to the  vote of a
Majority  in Interest of the Members  (excluding  Sun and its  Affiliates)  (the
"Member  Designees").  One of the  Sun  Designees,  as  determined  in the  sole
discretion  of Sun,  shall  serve as the  Chairman  of the  Managing  Board (the
"Chairman").  The Chairman shall only have the authority to act on behalf of the
Company  as  specifically  set  forth  herein,  or  as  otherwise  approved  and
authorized  by the  Managing  Board and  Members.  The Members  may,  upon their
unanimous consent,  change the number of managers serving on the Managing Board.
Each manager shall  continue to hold office until his or her death,  resignation
or removal and replacement by his or her designating party. Managers need not be
residents of the State of Washington  or Members of the Company,  and may be any
Person selected by Sun or the other Members (excluding Sun and its Affiliates).

     3.7 Removal and Replacement.  Sun and the other Members  (excluding Sun and
its  Affiliates)  may  remove  and  replace  one or  more  of  their  respective
designated managers at any time, with or without cause; provided,  however, that
written  notice of such  removal and  replacement  must be given to the Managing
Board and all  Members  at least  five (5) days  before  the  effective  date of
removal and replacement.

     3.8 Authority as to Third  Persons.  Notwithstanding  Sections 3.3, 3.4 and
3.5  the  signed  statement  of the  Chairman  reciting  that  he or she has the
authority or the necessary approvals of either the Managing Board or the Members
for any action,  as to any third  Person,  shall be  conclusive  evidence of the
authority  of the  Managing  Board to take that  action and of  compliance  with
Sections 3.3  or  3.4,  if  applicable.   Each  Member  will  promptly   execute
instruments  determined by the Managing  Board to be appropriate to evidence the
authority of the Managing Board to consummate any transaction  permitted by this
Agreement.

     3.9 Compensation and Expenses.  The members of the Managing Board shall not
receive any  compensation  from the Company  for  serving as  managers,  but all
expenses  incurred by the managers in connection  with their service as managers
will be paid or promptly  reimbursed by the Company.  Nothing  contained in this
Section  3.8 is  intended  to affect the  Percentage  Interest of a manager as a
Member or the  amounts  that may be payable to a manager by reason of his or her
respective Percentage Interests.

     3.10 Action by the Managing  Board.  Any action to be taken by the Managing
Board under this  Agreement may be taken at a meeting of the Managing Board held
on such terms,  and after such notice as the members of the  Managing  Board may
establish;  provided,  however,  that notice of a meeting of the Managing  Board
must be given to all  members  entitled to vote at the meeting at least five (5)
days before the date of the meeting. All of the members of the Managing Board in
office shall constitute a quorum for the transaction of business at a meeting of
the Managing Board,  and the affirmative vote of a three-fourths of such members
shall constitute the act of the Managing Board,  unless a different  affirmative
vote is otherwise specifically provided for herein. A Managing Board
                                                      -15-
<PAGE>

     member who is present at a meeting of the Managing Board at which action on
any  Company  matter is taken is deemed to have  assented  to the  action  taken
unless he or she  objects at the  beginning  of the meeting  (or  promptly  upon
arrival) to the holding,  or transacting of business at, the meeting,  or unless
his or her  dissent or  abstention  is entered in the  minutes of the meeting or
unless he or she shall file written  notice of his or her dissent or  abstention
to such action with the presiding  officer of the meeting before its adjournment
or with the Chairman  immediately after adjournment of the meeting. The right of
dissent  or  abstention  shall not apply to a member of the  Managing  Board who
voted in favor of such action.

     3.11 Action Without Meeting.  Unless otherwise  provided in this Agreement,
any action  required or permitted to be taken at a meeting of the Managing Board
may be taken  without a meeting  if the  action is taken by all  members  of the
Managing  Board.  Such action must be evidenced by one or more written  consents
signed by each member before or after such action,  describing the action taken,
and  included in the records of the Company.  Action taken  without a meeting is
effective when the last manager signs the consent,  unless the consent specifies
a different effective date.

     3.12 Meeting by Communications  Device.  Unless otherwise  provided in this
Agreement,  the Managing Board may permit any or all members to participate in a
meeting  by,  or  conduct  the  meeting   through  the  use  of,  any  means  of
communication by which all members  participating may  simultaneously  hear each
other during the meeting.  A member  participating in a meeting by this means is
deemed to be present in person at the meeting.

     3.13  Authorized  Representative  of Company.  Sun is hereby  appointed  an
authorized  representative  and agent of the Company and the Managing  Board for
the sole purpose of negotiating, making, entering and executing on behalf of the
Company any and all contracts and agreements and any or all other  documents and
instruments,  and to do any and all such  other  things as may be  necessary  or
appropriate  to conducting  and  consummating  the Offering.  Such actions shall
include,  but shall  not be  limited  to,  the  formation  of the  Company,  the
finalization  of the Loan  from the Bank,  the  offering  of Units to  investors
through the Sales Agent  pursuant to the Sales Agency  Agreement,  providing for
the  escrow  of the  Offering  proceeds  and  Guaranties  with  the Bank and the
termination thereof,  and the acceptance and rejection of investor  subscription
applications  for purchases of Units.  Upon the  termination of the Offering and
the  closing of the Loan by Sun,  the  authority  granted to it pursuant to this
Section 3.12 shall be null and void and become of no further force or effect.

     3.14  Indemnification  of Managing  Board  Members and Sun.  Subject to the
limitations  set forth in this Section 3.13,  all of the acts and deeds taken or
performed by Sun and its officers,  directors,  and employees in the name of the
Company while acting on behalf of the Company in conducting and consummating the
Offering as set forth in Section 3.12 above, shall, upon the completion thereof,
be ratified,  adopted and approved in all  respects as the duly  authorized  and
official acts and deeds of the Company. In addition, Sun, the Managing Board and
its  members  shall have no  liability  to the Company  which  arises out of any
action or inaction of Sun or the Managing  Board if Sun and the  Managing  Board
and its members in good faith  determined that such course of conduct was in the
best interest of the Company and such course of conduct did not constitute gross
negligence or willful misconduct of Sun, the Managing Board and its members. The
Company shall  indemnify  Sun and the members of the Managing  Board against any
direct and actual losses, liabilities, damages or
                                                      -16-
<PAGE>

     expenses (including court cost and reasonable attorney's fees but excluding
consequential  damages) that Sun and any of the members incur in connection with
the  Company  but only to the  extent  that such  parties  acted in good  faith,
without gross negligence,  and in a manner reasonably believed to be in the best
interests of the  Company.  Any  attorney's  fees or other  litigation  expenses
incurred  by Sun or a member of the  Managing  Board  shall be  advanced to such
party within thirty (30) days of receipt of a written demand therefor,  together
with an  undertaking  by or on behalf of the party to repay to the Company  such
amount if it is  ultimately  determined  that such party is not  entitled  to be
indemnified by the Company pursuant to this Section 3.13.

     3.15  Limitation  on  Liability.  No member of the Managing  Board shall be
liable to the  Company  for  monetary  damages  for an act or  omission  in such
person's  capacity as a manager,  except for (i) acts or omissions  that involve
intentional  misconduct or a knowing  violation of law;  (ii) any  distributions
received  from the Company in violation  of the Act;  and (iii) any  transaction
from  which a manager  derived  an  improper  personal  benefit.  Any  repeal or
modification of this section shall not adversely  affect the right or protection
of a director existing at the time of such repeal or modification.

     3.16 Liability for Return of Capital  Contribution.  The Managing Board and
its members shall not be liable for the return of the Capital  Contributions  of
the Members,  and upon dissolution,  the Members shall look solely to the assets
of the Company.

                 ARTICLE IV - RIGHTS AND OBLIGATIONS OF MEMBERS

     4.1 Names and Addresses of Members.  The names,  addresses  and  Percentage
Interests of the Members are as reflected in Schedule I attached hereto and made
a part hereof, which Schedule shall be amended by the Company upon the effective
date of any Transfer or subsequent issuance of any Membership Interest.

     4.2 No  Management  by Members.  The  Members in their  capacity as Members
shall not take part in the  management or control of the business,  nor transact
any business  for the Company,  nor shall they have power to sign for or to bind
the Company. The Company may, however,  contract with one or more Members to act
as the local medical  director(s)  for the  Lithotripter  System.  No Member may
withdraw from the Company except as expressly permitted herein.

     4.3  Election  of Member  Designees.  The  Members  (excluding  Sun and its
Affiliates),  pursuant  to a vote of a Majority  in  Interest,  shall  elect two
managers annually to serve on the Managing Board. The Members (excluding Sun and
its Affiliates)  shall have the power to remove and replace such managers as set
forth in Section 3.6.

     4.4 Action by Members.  Any action to be taken by the Members under the Act
or this  Agreement  may be taken (i) at a meeting  of the  Members  held on such
terms,  and after such notice as the  Managing  Board may  establish;  provided,
however,  that  notice  of a meeting  of  Members  must be given to all  Members
entitled  to vote at the  meeting at least five (5) days  before the date of the
meeting, or (ii) by written action of either the Members representing two-thirds
of the aggregate  interests in the Company or a Majority in Interest,  whichever
is applicable; provided, however, that any action requiring

                                                      -17-
<PAGE>

     the consent of all Members under the Act or this Agreement taken by written
action must be signed by all Members. No notice need be given of action proposed
to be taken by written action,  or an approval given by written  action,  unless
specifically required by this Agreement or the Act. Such written actions must be
kept with the records of the Company.

     4.5  Operation of  Lithotripter  System.  The Members  shall not operate or
utilize the  Lithotripter  System or other Company  equipment except pursuant to
(i) an agreement with the Company;  or (ii) any other  arrangement  specifically
approved by the Managing Board.

     4.6 Outside Activities. The Members agree that they owe fiduciary duties to
the  Company  and,  as a  consequence,  each  Member  agrees  that he, she or it
(including his, her or its Affiliates) shall not engage in "Outside  Activities"
(as defined  below) in the  Service  Area while he, she or it is a Member of the
Company,  except as otherwise  provided below.  The phrase "Outside  Activities"
means directly or indirectly  owning,  leasing or subleasing a lithotripter  (or
any  similar  equipment  or  competing  devices  used for  treating  renal stone
disease) or any other urological  therapeutic equipment acquired by the Company.
Prohibited  indirect ownership shall include the direct or indirect ownership of
any  interest  in a  business  venture  (through  stock  ownership,  partnership
interest  ownership,  ownership  by or  through  a close  family  member,  or as
otherwise  determined  in  good  faith  by the  Managing  Board)  involving  the
ownership,  purchase, lease, sublease,  promotion,  management or operation of a
lithotripter (or similar  equipment or competing devices used for treating renal
or biliary  stone  disease),  unless the  Managing  Board  determines  that such
activity by the Members is not detrimental to the best interests of the Company.

     Upon the termination or transfer of a Member's  interest in the Company for
any reason (including a transfer pursuant to Section 10.4 hereof),  other than a
material  breach of this Agreement by the Company which is not cured in a timely
manner,  the  withdrawing  Member  shall  not,  for a  period  of two (2)  years
following  the  date  of  his,  her or its  withdrawal,  engage  in any  Outside
Activities in the Service Area.

     In the event a Member  wishes and intends to engage in an Outside  Activity
in the Service Area, he, she or it must provide written notice of such intent to
the Managing Board prior to engaging in the Outside Activity. The written notice
shall be deemed an  election by the Member to  withdraw  from the  Company  (the
"Notice of  Withdrawal"),  and shall give the  Company  the  purchase  rights as
provided in Section  10.4  hereof.  After the Notice of  Withdrawal,  the former
Member may engage in an Outside  Activity in the Service Area only after waiting
the period of two years specified in this Section 4.6. In the event of breach of
the waiting period, the Company shall be entitled to any remedy at law or equity
with respect to such breach,  including without limitation an injunction or suit
for damages.

     If a Member during his, her or its  participation in the Company engages in
an Outside  Activity in the Service Area without  first  notifying  the Managing
Board in violation of this Section 4.6, the Member shall be deemed to have given
a Notice of Withdrawal on the date the Managing Board first becomes aware of the
Member's  Outside Activity in the Service Area. Upon receiving a Member's Notice
of Withdrawal or equivalent thereof,  the Company may invoke the purchase rights
provided in Section  10.4 and shall be  entitled  to any other  remedy at law or
equity including without limitation an injunction or suit for damages.

                                                      -18-
<PAGE>

     Notwithstanding  any provisions of this Section 4.6 to the contrary,  it is
understood and agreed by the parties hereto that Sun and its Affiliates,  to the
extent  permitted  by  contract  and  applicable  laws,  will  at  the  earliest
practicable date after the date hereof cease to provide lithotripsy  services at
any location in the Service Area and will use their  reasonable  best efforts to
either terminate their existing  contracts and assist the Company in negotiating
new  contracts  on its own  behalf  with such  facilities  in the  Service  Area
currently being served by Sun or its  Affiliates,  or assign all related service
contracts from such discontinued operations to the Company.  However, in certain
limited  circumstances  it may be in  the  best  interest  of  the  Company  (as
determined  by the Managing  Board) for Sun, or an Affiliate of Sun, to contract
directly  with a hospital or other  treatment  facility as agent for the Company
and such activities shall not be deemed a violation of this Section 4.6. In such
circumstances Sun or its Affiliate (as the case may be) will contract solely for
the  benefit  of the  Company,  and  unless  otherwise  agreed to by Sun (or its
Affiliate) and the Managing Board,  Sun (or its Affiliate) shall not receive any
compensation as a result of such agreements.

     In  addition,  in the event Sun or its  Affiliates  desire to expand any of
their  urological  medical  treatment  services in the  Service  Area to include
services  using  equipment  other  than   lithotripsy   equipment   (other  than
replacement  parts or models for Sun's or its Affiliates'  existing  lithotripsy
equipment  in the  Service  Area)  (the  "Alternative  Services"),  Sun,  or its
Affiliate,  as the case may be,  shall give  written  notice of such intent (the
"Notice of Intent") to the Managing Board prior to engaging in such  Alternative
Services.  Upon receiving the Notice of Intent,  the Company shall have a 60-day
right of first refusal to provide the Alternative Services on the same terms and
conditions  as Sun, or its  Affiliate,  proposes to provide  them in the Service
Area. Upon the expiration of the Company's  right of first refusal,  Sun, or its
Affiliate,  as the case may be, may commence providing the Alternative  Services
and neither  the Company nor the Members  shall have any right by virtue of this
Agreement in and to the income or profits derived therefrom.

     4.7 Disclosure of Confidential  Information.  Each Member  acknowledges and
agrees that his, her or its  participation  in the Company under this  Agreement
necessarily  involves  his,  her or its  understanding  of and access to certain
trade secrets and other confidential  information  pertaining to the business of
the Company.  Accordingly,  each Member agrees that at all times during his, her
or its  participation  in the Company as a Member and thereafter,  he, she or it
will not,  directly or indirectly,  without the express written authority of the
Company,  unless  required by law or directed by a  applicable  legal  authority
having  jurisdiction  over the  Member,  disclose  or use for the benefit of any
person,  corporation  or other  entity  (other  than the  Company),  or himself,
herself or itself, (i) any trade,  technical,  operational,  management or other
secrets,  any patient or customer lists or other confidential or secret data, or
any other proprietary, confidential or secret information of the Company or (ii)
any  confidential  information  concerning  any of the  financial  arrangements,
financial  positions,   hospital  or  physician  contracts,  third  party  payor
arrangements,  quality  assurance  and outcome  analysis  programs,  competitive
status, customer or supplier matters, internal organizational matters, technical
abilities,  or other business affairs of or relating to the Company. The Members
acknowledge that all of the foregoing constitutes proprietary information, which
is the  exclusive  property  of the  Company.  The  obligations  imposed in this
Section 4.7  shall not apply to information  that is in the public domain at the
time of  disclosure or is known by the Member  independently  of his, her or its
participation  in the  Company.  In the event of breach of this  Section  4.7 as
determined by the Managing Board, the Company shall be entitled to any
                                                      -19-
<PAGE>

     remedy at law or equity  with  respect to such  breach,  including  without
limitation, an injunction or suit for damages.

     4.8 Limited Liability. No Member shall be required to make any contribution
to the  capital of the  Company  except as set forth in Article V, nor shall any
Member in his,  her or its  capacity as such be bound by, or  personally  liable
for, any expense, liability or obligation of the Company except to the extent of
his,  her  or its  (i)  interest  in the  Company,  (ii) Guaranties  of  Company
obligations, and (iii) obligation to return Distributions made to him, her or it
under certain circumstances as required by the Act.


                       ARTICLE V - CAPITAL CONTRIBUTIONS,
                        GUARANTIES AND DILUTION OFFERINGS

     5.1 Member's  Contribution.  Each Member hereby  agrees to  contribute  and
shall  contribute  to the capital of the Company on the date of his,  her or its
admission to the Company the cash amount set forth opposite his, her or its name
on Schedule I attached hereto.

     5.2 No Interest.  Except as otherwise provided herein, no interest shall be
paid on any contribution to the capital of the Company.

     5.3 Dilution  Offerings.  Subject to the  limitations  set forth in Section
3.3(d),  if the Managing Board determines that it is in the best interest of the
Company,  the Managing Board may, from time to time, cause the Company to issue,
offer and sell  additional  Membership  Interests  in the  Company (a  "Dilution
Offering")  to  local  urologists  who  are  not  already  Members   ("Qualified
Investors").  The primary  purpose of any  Dilution  Offering  would be to raise
additional  capital for any legitimate  Company  purpose as set forth in Section
1.5.  Any  Membership  Interests  offered by the Company in a Dilution  Offering
shall be sold in the manner and  according to the terms  prescribed  in the sole
discretion  of the  Managing  Board;  provided,  however,  that  any  additional
Membership  Interests offered in a Dilution Offering will be sold for a purchase
price per 1% Membership  Interest  determined by the Purchase  Price Formula set
forth in Section 10.7.  The parties hereto agree that the Purchase Price Formula
shall  reflect the fair market value of a  Membership  Interest and the Purchase
Price  Formula  shall be subject to  revision  from time to time as set forth in
Section 3.3(g). Any sale of additional  Membership  Interests will result in the
proportionate  dilution  of the Company  Percentage  Interests  of the  existing
Members.  Any investor  acquiring a Membership  Interest in a Dilution  Offering
shall  agree  to be  bound  by  the  terms  of  this  Agreement,  and  shall  be
automatically  admitted  as a Member of the  Company  notwithstanding  any other
provisions  in this  Agreement to the contrary.  Any  adjustment in the Members'
Percentage  Interests  resulting from a Dilution  Offering shall be set forth on
Schedule I attached hereto.

     5.4 Conditions to the Capital  Contributions of the Members. The obligation
of the Members to make cash Capital  Contributions  hereunder are subject to the
condition that the representations,  warranties, agreements and covenants of the
Managing  Board set forth in Article VI of this  Agreement are and shall be true
and correct or have been and will have been complied with in all
                                                      -20-
<PAGE>

     material respects on the date such Capital Contributions are required to be
made, except to the extent that any such  representation  or warranty  expressly
pertains to an earlier date.

     5.5 Capital  Accounts.  A Capital  Account  shall be  established  for each
Member and shall be credited with each Member's Capital  Contributions  pursuant
to Section 5.1. All  contributions  of property to the Company by a Member shall
be valued and credited to the Member's  Capital Account at such property's gross
fair market value on the date of contribution as determined by the  contributing
Member and the Managing Board.  All  distributions  of Property to the Member by
the Company shall be valued and debited against the Member's  Capital Account at
such  Property's  gross  fair  market  value  on the  date  of  distribution  as
determined by the Managing  Board.  Each Member's  Capital  Account shall at all
times be determined  and  maintained  pursuant to the principles of this Section
5.5 and Treasury  Regulations Section  1.704-1(b)(2)(iv).  A Member shall not be
entitled to withdraw any part of his or her Capital  Account except as otherwise
specifically  provided herein.  Each Member's Capital Account shall be increased
in accordance with such Regulations by:

     (i)  The  amount  of  Profits  allocated  to the  Member  pursuant  to this
Agreement;

     (ii) The amount of all Gains From  Capital  Transactions  allocated  to the
Member pursuant to this Agreement; and

     (iii) The amount of any Company  liabilities assumed by the Member or which
are secured by any Company property distributed to such Member.

     Each Member's  Capital  Account shall be decreased in accordance  with such
Regulations by:

     (i)  The  amount  of  Losses  allocated  to the  Member  pursuant  to  this
Agreement;

     (ii) The amount of Company Cash Flow  distributed to the Member pursuant to
this Agreement;

     (iii) The amount of Company Sales Proceeds and Company Refinancing Proceeds
distributed to the Member pursuant to this Agreement; and (iv) The amount of any
liabilities  of the Member  assumed by the  Company or which are  secured by any
property contributed by such Member to the Company.

     In addition,  each Member's  Capital Account shall be subject to such other
adjustments  as may be  required  in order to comply  with the  capital  account
maintenance requirements of Section 704(b) of the Code.

     In the event that the Managing Board shall  determine that it is prudent to
modify  the  manner in which the  Capital  Accounts,  or any  debits or  credits
thereto  (including,   without   limitation,   debits  or  credits  relating  to
liabilities that are secured by contributed or distributed  property or that are
assumed by the  Company or the  Members),  are  computed in order to comply with
such  Treasury  Regulations,  the  Managing  Board may make  such  modification,
provided that it is not likely to have a material effect
                                                      -21-
<PAGE>

     on the amounts distributable to any Member upon dissolution of the Company.
The Managing  Board also shall (i) make any  adjustments  that are  necessary or
appropriate to maintain equality between the Capital Accounts of the Members and
the amount of Company  capital  reflected on the  Company's  balance  sheet,  as
computed for book  purposes,  in accordance  with Treasury  Regulations  Section
1.704- 1(b)(2)(iv)(g),  and (ii) make any appropriate modifications in the event
unanticipated  events might  otherwise  cause this  Agreement not to comply with
Treasury Regulations Section 1.704-1(b).

                  ARTICLE VI - REPRESENTATIONS, WARRANTIES AND
                         COVENANTS OF THE MANAGING BOARD

     6.1 Managing  Board's  Representations  and Warranties.  The Managing Board
hereby represents and warrants to the Members that:

     (a) The Company is a limited  liability  company formed in accordance  with
and validly existing under the Act and the other applicable laws of the State of
Washington;

     (b) The  interest  in the  Company  of the  Members  will  have  been  duly
authorized or created and validly  issued and the Members shall have no personal
liability to contribute money to the Company other than the amounts agreed to be
contributed by them in the manner and on the terms set forth in this  Agreement,
subject, however, to such limitations as may be imposed under the Act; and

     (c) No material  breach or default  adverse to the Company exists under the
terms of any other material agreement affecting the Company.

     6.2 Managing Board's Covenants.  The Managing Board hereby covenants to the
Members that:

     (a) It will at all times act in a  fiduciary  manner  with  respect  to the
Company and the Members.

     (b) It will cause the Company to carry adequate public liability,  property
damage and other  insurance  as is customary in the business to be engaged in by
the Company.

                ARTICLE VII - ALLOCATIONS, ELECTIONS AND REPORTS

     7.1 Profits and Losses.

     (a) Except as otherwise provided herein,  Profits and Losses of the Company
and all items of tax  credit and tax  preference  shall be  allocated  among the
Members in
                                                      -22-
<PAGE>

     accordance with their  respective  Percentage  Interests.  In the event the
Percentage  Interests  vary during any Fiscal  Year,  Profits and Losses and all
items of tax credit and tax  preference  for such Fiscal Year shall be allocated
among the Members as provided in Section 7.5 below.

     (b) Losses  allocated  pursuant  to this  Section  7.1 shall not exceed the
maximum amount of Losses that can be so allocated  without causing any Member to
have an Adjusted  Capital  Account Deficit at the end of any Fiscal Year. In the
event  some but not all of the  Members  would  have  Adjusted  Capital  Account
Deficits  as  a  consequence  of  an  allocation  of  Losses  pursuant  to  this
Section 7.1,  the limitation set forth in this Section 7.1 shall be applied on a
Member by Member  basis so as to allocate  the maximum  possible  Losses to each
Member under Section 1.704-1(b)(2)(ii)(d) of the Treasury Regulations.

     7.2  Sales  Commission.  The Sales  Commission  shall be  allocated  to the
Members holding Units to the extent such Members paid the Sales Commission,  and
in proportion to their  respective  capital  contributions  represented  by such
Units (i.e.,  $100 in Sales  Commission per each such Unit). The purpose of this
Section 7.2 is to allocate the Sales  Commission  to those  Members who actually
bore the burden of paying the Sales Commission.

     7.3 Nonrecourse Deductions. Nonrecourse Deductions shall be allocated among
the Members in accordance with their respective Percentage Interests.

     7.4 Member Nonrecourse Deductions.  Any Member Nonrecourse Deductions shall
be specially  allocated  to the Member who bears the economic  risk of loss with
respect  to the  Member  Nonrecourse  Debt  to  which  such  Member  Nonrecourse
Deductions are  attributable  in accordance  with Treasury  Regulations  Section
1.704-2(i).

     7.5  Allocations  Between  Transferor and  Transferee.  In the event of the
transfer of all or any part of a Member's  Membership  Interest  (in  accordance
with the  provisions  of this  Agreement) at any time other than at the end of a
Fiscal Year, the change in any Member's  Percentage Interest or the admission of
a new Member (in accordance with the terms of this Agreement),  the transferring
Member or new Member's share of the Company's income, gain, loss, deductions and
credits,  as computed both for  accounting  purposes and for federal  income tax
purposes,  shall be allocated  between the transferor  Member and the transferee
Member, or the new Member and the other Members, as the case may be, in the same
ratio as the number of days in such Fiscal Year before and after the date of the
transfer or admission; provided, however, that if there has been a sale or other
disposition  of the assets of the  Company  (or any part  thereof)  during  such
Fiscal Year,  then upon the mutual  agreement of all the Members  (excluding the
new Member and the  transferring  Member),  the Company  shall treat the periods
before and after the date of the transfer or admission as separate  Fiscal Years
and allocate the Company's net income,  gain,  net loss,  deductions and credits
for each of such deemed  separate  Fiscal Years of the Company.  Notwithstanding
the foregoing,  the Company's "allocable cash basis items," as that term is used
in Section  706(d)(2)(B) of the Code,  shall be allocated as required by Section
706(d)(2) of the Code and the Treasury Regulations thereunder.

                                                      -23-
<PAGE>

     7.6 Gains from Capital Transactions. Gains from Capital Transactions during
any Fiscal Year shall be allocated as follows:

     (a) First, to those Members whose Capital Accounts immediately prior to the
Capital  Transaction  were  negative,  in an amount  sufficient  to increase the
Capital  Accounts to zero, but in the event sufficient gain is not recognized to
do so,  then  among  them  pro rata in  proportion  to  their  negative  Capital
Accounts;

     (b) Second, to the Members in an amount equal to the difference between the
Company Sales  Proceeds to be  distributed to each of the Members as provided in
Section 8.3 and the Capital  Accounts of each respective  Member as adjusted (if
necessary)  by  paragraph  (a) above,  but in the event  sufficient  gain is not
recognized to do so, then among the Members in an amount which, when credited to
the Capital  Accounts of the Members,  results in the Members'  Capital Accounts
bearing  the same  ratio to one  another  as the  ratio of the  distribution  of
Company Sales  Proceeds to each of the Members,  as provided in Section 8.3; and
thereafter

     (c) Any remaining  gain shall be allocated  among the Members in accordance
with  their  respective  Percentage  Interests  as of the  date  of the  Capital
Transaction giving rise to the gain.

     7.7  Contributed  Property.  In accordance with Code Section 704(c) and the
Treasury Regulations  thereunder,  income, gain, loss and deduction with respect
to any property  contributed to the capital of the Company shall, solely for tax
purposes,  be allocated among the Members so as to take account of any variation
between the adjusted  basis of such  property to the Company for federal  income
tax purposes and its initial Gross Asset Value at the time of contribution.

     Any elections or other decisions relating to such allocations shall be made
by the Members in any manner that reasonably  reflects the purpose and intention
of this  Agreement.  Allocations  pursuant  to this  Section  7.7 are solely for
purposes of federal,  state and local taxes and shall not affect,  or in any way
be taken into account in  computing,  any Member's  Capital  Account or share of
Profits,  Losses, other items or Distributions pursuant to any provision of this
Agreement.

     7.8 Minimum Gain Chargeback.  If there is a net decrease in Company Minimum
Gain during any Fiscal Year,  each Member shall be specially  allocated items of
Company  income and gain for such Fiscal  Year (and,  if  necessary,  subsequent
years) in an amount equal to such Member's  share of the net decrease in Company
Minimum  Gain,   determined  in  accordance  with  Treasury  Regulation  Section
1.704-2(g).  Allocations  pursuant  to the  previous  sentence  shall be made in
proportion  to the  respective  amounts  required to be allocated to each Member
pursuant thereto. The items to be so allocated shall be determined in accordance
with Treasury Regulations  Sections 1.704-2(f) and 1.704- 2(j)(2).  This Section
7.8 is  intended  to comply  with the minimum  gain  chargeback  requirement  in
Treasury Regulation 1.704-2(f) and shall be interpreted consistently therewith.

     7.9 Member  Minimum Gain  Chargeback.  If there is a net decrease in Member
Minimum Gain  attributable to a Member  Nonrecourse Debt, as defined in Treasury
Regulation Section 1.704- 2(i)(4), during any Fiscal Year, each Member who has a
share of the Member Minimum Gain

                                                      -24-
<PAGE>

     attributable to such Member Nonrecourse Debt, determined in accordance with
Treasury Regulation Section 1.704-2(i)(5), shall be specially allocated items of
Company  income and gain for such Fiscal  Year (and,  if  necessary,  subsequent
Fiscal Years) in an amount equal to such  Member's  share of the net decrease in
Member Minimum Gain attributable to such Member Nonrecourse Debt,  determined in
accordance with Treasury Regulation Section  1.704-2(i)(4) and (5).  Allocations
pursuant to the previous  sentence shall be made in proportion to the respective
amounts required to be allocated to each Member pursuant  thereto.  The items to
be so allocated  shall be  determined in  accordance  with Treasury  Regulations
Section  1.704-2(i)(4).  This  Section 8.8 is intended to comply with the Member
Minimum Gain chargeback  requirement in Treasury Regulation  Section 1.704(i)(4)
and shall be interpreted consistently therewith.

     7.10  Qualified  Income  Offset.  If any Member  unexpectedly  receives  an
adjustment,  allocation  or  distribution  as described in Treasury  Regulations
Section  1.704-1(b)(2)(ii)(d)(4) through (6) which causes or increases a deficit
Capital  Account  balance in such  Member's  Capital  Account (as  determined in
accordance  with such  Regulation),  items of  Company  income and gain shall be
specially  allocated to each such Member in an amount and 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 7.10 shall be made if and only to the extent
that such Member would have an Adjusted  Capital Account Deficit after all other
allocations  provided for in this Article VII have been  tentatively  made as if
this Section 7.10 were not in this Agreement. This provision is intended to be a
"qualified  income  offset," as defined in Treasury  Regulation  Section  1.704-
1(b)(2)(ii)(d),  such  Regulation  being  specifically  incorporated  herein  by
reference.

     7.11 Gross Income Allocation. In the event any Member has a deficit Capital
Account at the end of any  Fiscal  Year which is in excess of the sum of (i) the
amount such Member is obligated  to restore,  and (ii) the amount such Member is
deemed to be  obligated  to restore  pursuant to the  penultimate  sentences  of
Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5),  each such Member
shall be specially  allocated  items of Company income and gain in the amount of
such excess as quickly as possible, provided that an allocation pursuant to this
Section 7.11 shall be made if and only to the extent that such Member would have
a deficit  Capital  Account  in  excess of such sum after all other  allocations
provided for in this Article VII have been  tentatively  made as if this Section
7.11 and Section 7.10 hereof were not in this Agreement.

     7.12 Section 754  Adjustment.  To the extent an  adjustment to the adjusted
tax basis of any Company asset  pursuant to Code Section  734(b) or Code Section
743(b)   is    required,    pursuant    to    Treasury    Regulations    Section
1.704-1(b)(2)(iv)(m)(2)     or    Treasury     Regulations     Section    1.704-
1(b)(2)(iv)(m)(4),  to be taken into account in determining  Capital Accounts as
the result of a Distribution to a Member in complete liquidation of his interest
in the Company,  the amount of such adjustment to the Capital  Accounts shall be
treated as an item of gain (if the adjustment  increases the basis of the asset)
or loss (if the adjustment  decreases such basis) and such gain or loss shall be
specially  allocated to the Members in  accordance  with their  interests in the
Company in the event that Treasury  Regulations Section  1.704-1(b)(2)(iv)(m)(2)
applies,  or to the Members to whom such distribution was made in the event that
Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.

                                                      -25-
<PAGE>

     7.13 Curative  Allocations.  The allocations set forth in Sections  7.1(b),
7.2, 7.3, 7.7, 7.8, 7.9,  7.10, and 7.11 hereof (the  "Regulatory  Allocations")
are intended to comply with certain requirements of the Treasury Regulations. It
is the intent of the  Members  that,  to the  extent  possible,  all  Regulatory
Allocations  shall be offset either with other  Regulatory  Allocations  or with
special  allocations of other items of Company  income,  gain, loss or deduction
pursuant to this Section 7.13. Therefore, notwithstanding any other provision of
this Article VII (other than the  Regulatory  Allocations),  the Managing  Board
shall make such offsetting special allocations of Company income,  gain, loss or
deduction in whatever  manner they  determine  appropriate  so that,  after such
offsetting  allocations are made,  each Member's  Capital Account balance is, to
the extent possible, equal to the Capital Account balance such Member would have
had if the Regulatory Allocations were not part of the Agreement and all Company
items were allocated  pursuant to Section  7.1(a).  In exercising its discretion
under this  Section  7.13,  the Managing  Board shall take into  account  future
Regulatory  Allocations under Sections 7.8 and 7.9 that,  although not yet made,
are likely to offset other Regulatory Allocations previously made under Sections
7.3 and 7.4.

     7.14 Compliance  with Treasury  Regulations.  The above  provisions of this
Article VII  notwithstanding,  it is  specifically  understood that the Managing
Board may without the consent of any Member make such elections, tax allocations
and adjustments,  including amendments to this Agreement,  as the Managing Board
deem necessary or appropriate  to maintain to the greatest  extent  possible the
validity of the tax allocations set forth in this Agreement,  particularly  with
regard to Treasury Regulations under Code Section 704(b).

     7.15 Tax Withholding.  The Company shall be authorized to pay, on behalf of
any Member, any amounts to any federal, state or local taxing authority,  as may
be necessary  for the Company to comply with tax  withholding  provisions of the
Code or other income tax or revenue laws of any taxing authority.  To the extent
the Company  pays any such amounts that it may be required to pay on behalf of a
Member,  such amounts shall be treated as a cash Distribution to such Member and
shall reduce the amount otherwise distributable to such Member.

                          ARTICLE VIII - DISTRIBUTIONS

     8.1  Company  Cash Flow.  Company  Cash Flow for each Fiscal  Year,  to the
extent available,  shall be distributed to the Members within 60 days of the end
of each Fiscal Year,  or earlier in the  discretion  of the Managing  Board,  in
accordance with the Members respective  Percentage  Interests at the time of the
distribution.

     8.2 Company  Refinancing  Proceeds.  Company Refinancing  Proceeds,  to the
extent  available,  shall be  distributed  to the Members  within 60 days of the
Capital  Transaction giving rise to such proceeds,  or earlier in the discretion
of the Managing  Board,  in accordance  with the Members  respective  Percentage
Interests at the time of the distribution.

     8.3 Company Sales Proceeds.  Company Sale Proceeds, to the extent available
shall be distributed  to the Members  within 60 days of the Capital  Transaction
giving rise to such proceeds, or
                                                      -26-
<PAGE>

     earlier,  in the discretion of the Managing  Board,  in accordance with the
Members respective Percentage Interests at the time of the distribution.

     8.4 Distributions in Liquidation.  Upon liquidation of the Company, all the
Company's  Property  shall be liquidated or  distributed  as provided in Section
11.3 and Profits and Losses allocated accordingly. Proceeds from the liquidation
of the Company shall be distributed in accordance with the provisions of Section
11.3.

     8.5 Limitation Upon  Distributions.  No Distribution  shall be declared and
paid if payment of such  Distribution  would  cause the  Company to violate  any
limitation  on  distributions  provided in the Act or provided in any  agreement
entered into by the Company for the express  purpose of obtaining  financing for
Company operations.

           ARTICLE IX - TRANSFER OF INTERESTS AND ADMISSION OF MEMBERS

     9.1 Transferability of Membership Interests.

     (a) The term  "transfer"  when used in this  Agreement  with  respect  to a
Membership Interest includes a sale, assignment,  gift, pledge, exchange, or any
other disposition (but does not include the issuance of new Membership Interests
pursuant to a Dilution Offering);

     (b) The  Membership  Interest of any Member  shall not be  transferred,  in
whole or in part,  except in accordance  with the conditions and limitations set
forth in Section 9.2 or Article X;

     (c) The transferee of a Membership Interest by assignment, operation of law
or otherwise,  shall have only the rights,  powers and privileges  enumerated in
Section 9.3 or otherwise  provided by law and may not be admitted to the Company
as a Member except as provided in Section 9.4;

     (d)  Notwithstanding  any provision herein to the contrary,  this Agreement
shall  in no way  restrict  the  issuance  or  transfers  of stock of Sun or its
Affiliates; and

     (e) Notwithstanding  any provision herein to the contrary,  the issuance of
Membership  Interests  pursuant to a Dilution  Offering and the admission of new
Members  pursuant to a Dilution  Offering shall be governed by the provisions of
Section 5.3 of this Agreement.

                                                      -27-
<PAGE>

     9.2 Restrictions on Transfers by Members.

     (a) All or part of a  Membership  Interest may be  transferred  by a Member
only with the prior written  approval of the Managing Board,  which approval may
be granted or denied in its sole discretion.

     (b) The  Managing  Board  shall not approve  any  transfer of a  Membership
Interest,  except a pledge of any  Membership  Interest by the Managing Board to
any bank, insurance company or other financial  institution to secure payment of
indebtedness (a "Permitted Pledge"), or otherwise unless the proposed transferee
shall have furnished the Managing Board with a sworn statement that:

     (i) The  proposed  transferee  proposes  to acquire  his or her  Membership
Interest  as a  principal,  for  investment  and not  with a view to  resale  or
distribution;

     (ii)  The   proposed   transferee   meets   such   requirements   regarding
sophistication, income and net worth as required by applicable state and federal
securities laws;

     (iii) The proposed transferee has met such net worth and income suitability
standards as have been established by the Managing Board;

     (iv) The proposed  transferee  recognizes  that  investment  in the Company
involves  certain risks and has taken full  cognizance of and understands all of
the risk factors related to the purchase of a Membership Interest; and

     (v) The proposed  transferee has met all other requirements of the Managing
Board for the proposed transfer.

     (c)  Other  than  in the  case  of a  Permitted  Pledge,  a  transfer  of a
Membership Interest may be made only if, prior to the date thereof,  the Company
upon request receives an opinion of counsel,  satisfactory in form and substance
to the Managing Board,  that neither the offering nor the proposed transfer will
require  registration  under  federal or  applicable  state  securities  laws or
regulations.

     9.3 Rights of  Transferee.  Unless  admitted  to the Company as a Member in
accordance  with Section 9.4, the transferee of a Membership  Interest or a part
thereof or any right, title or interest therein (including any transferee having
an interest in a Membership  Interest as a result of a Permitted  Pledge)  shall
not be  entitled  to any of the  rights,  powers,  or  privileges  of his or her
predecessor  in interest,  except that (s)he shall be entitled to receive and be
credited  or debited  with his or her  proportionate  share of Company  Profits,
Losses,  Gains from  Capital  Transactions,  Company  Cash Flow,  Company  Sales
Proceeds, Company Refinancing Proceeds and Distributions in liquidation.
                                                      -28-
<PAGE>

     9.4 Admission of Members.  Except as otherwise  provided in Section 5.3 and
Article X, the transferee of all or part of the Membership Interest of a Member,
may be admitted to the Company as a Member upon furnishing to the Managing Board
all of the following:

     (a) The written  approval of a Majority in Interest of the Members  (except
the  assignor  Member),  or the assignor  Member  alone,  which  approval may be
granted or denied in the sole  discretion of such Members or Member (as the case
may be);

     (b) The written  approval of the  Managing  Board,  which  approval  may be
granted or denied in the sole discretion of the Managing Board;

     (c)  Acceptance,  in a form  satisfactory to the Managing Board, of all the
terms and  conditions  of this  Agreement  and any other  documents  required in
connection  with the  operation  of the  Company  pursuant  to the terms of this
Agreement;

     (d) If the transferee is a corporation, a certified copy of a resolution of
its Board of  Directors  authorizing  it to become a Member  under the terms and
conditions of this Agreement;

     (e) A properly executed power of attorney  substantially  identical to that
contained in Section 12.15;

     (f) Such other  documents  or  instruments  as may be  required in order to
effect his or her admission as a Member; and

     (g) Payment of such  reasonable  expenses as may be incurred in  connection
with his or her admission as a Member.

     9.5 Amendment of Certificate of Formation and  Qualification.  The Managing
Board shall take all steps  necessary and  appropriate to prepare and record any
amendments to the  Certificate of Formation,  as may be necessary or appropriate
from time to time to comply with the requirements of the Act, and shall take all
steps  necessary  and  appropriate  to prepare and record any and all  documents
necessary  to qualify  the Company to do  business  in  jurisdictions  where the
Company is doing  business,  and may for these  purposes  exercise  the power of
attorney delivered to the Company pursuant to Sections 9.4 and 12.15.

     9.6 Fundamental  Changes.  As provided in Section  3.3(e),  if the Managing
Board and the Members representing  two-thirds of the aggregate interests in the
Company approve a plan providing for the merger or  consolidation of the Company
with another person or entity,  or the sale of all or  substantially  all of the
Membership  Interests,  including without  limitation the exchange of Membership
Interests for equity  interests in another person or entity or for cash or other
consideration or combination thereof,  then and in such event, the Members shall
be obligated to take or refrain from taking, as the case may be, such actions as
the  plan  may  provide,   including,   without   limitations,   executing  such
instruments,  and  providing  such  information  as  the  Managing  Board  shall
reasonably  request.  Any plan  described in this Section 9.6 may also effect an
amendment to the Certificate of Formation or Operating

                                                      -29-
<PAGE>

     Agreement,  or the adoption of a new operating agreement in connection with
the merger of the Company with  another  person or entity as provided in Section
25.15.410 of the Act. The plan may also provide that the Managing  Board members
shall receive fees for services rendered in connection with the operation of the
Company or any successor  entity  following the consummation of the transactions
described  in the plan,  and neither the Company nor the Members  shall have any
right  by  virtue  of  this  Agreement  in the  income  derived  therefrom.  Any
securities or other  consideration  to be distributed to the Members pursuant to
the plan shall be  distributed in the manner set forth in Section 11.3 as though
the Company were being liquidated.  For this purpose only, the fair market value
of the  securities or other  consideration  to be received  pursuant to the plan
shall be treated as "Profits"  and the capital  accounts of the Members shall be
increased in the manner  provided in Section 5.5. No Member shall be entitled to
any appraisal or similar rights in connection  with a plan  contemplated by this
Section 9.6.

              ARTICLE X - OPTIONAL PURCHASE OF MEMBERSHIP INTERESTS
                                ON CERTAIN EVENTS

     10.1 Death.  Upon the death of a Member,  the deceased  Member's  executor,
administrator,  or other legal or  personal  representative  shall give  written
notice of that fact to the Managing Board.  The Company shall have the option to
purchase  at the  Closing  (as  defined  below) the  Membership  Interest of the
deceased  Member  (whose  executor,  administrator  or other  legal or  personal
representative  shall then become obligated to sell such Membership Interest) at
the price  determined in the manner  provided in Section 10.7 of this  Agreement
and on the terms and conditions provided in Section 10.8 of this Agreement.  The
Company  shall  have a period of thirty  (30) days  following  the date it first
received  notice of the death of the Member (the "First Option  Period")  within
which to notify in writing the  deceased  Member's  executor,  administrator  or
other legal or personal representative,  whether the Company desires to purchase
all or a portion of the  Membership  Interest  of the  deceased  Member.  If the
Company  does not  elect to  purchase  the  entire  Membership  Interest  of the
deceased  Member  before the  expiration  of the First Option  Period and in the
manner provided herein, the Members shall have the option to purchase all or any
part of the  Membership  Interest of the  deceased  Member not  purchased by the
Company at the price  determined in the manner  provided in Section 10.7 of this
Agreement  and on the terms and  conditions  provided  in  Section  10.8 of this
Agreement.  Any Member  desiring  to purchase  any part or all of the  remaining
Membership Interest of the deceased Member shall deliver to the Managing Board a
written  election to  purchase  all or a  specified  portion of such  Membership
Interest within the ten (10) day period  immediately  following the close of the
First  Option  Period  (the  "Second  Option  Period").  If the  Members  in the
aggregate  elect to purchase more than the Membership  Interest then  available,
each electing Member shall have a priority,  up to that portion specified in his
or her  notice of  election,  to  purchase  such  proportion  of the  Membership
Interest of the deceased Member then available as his or her Percentage Interest
bears to the aggregate Percentage Interests of the Members electing to purchase.
That portion of the deceased Member's  Membership Interest not purchased on such
a priority  basis shall be allocated in one or more  successive  allocations  to
those  remaining  Members  electing to purchase more of the Membership  Interest
than they have a priority right, up to the portion specified in their respective
elections,  in the proportion that each of their  Percentage  Interests bears to
the aggregate Percentage Interest of all of them.

                                                      -30-

<PAGE>

     Within  the ten (10) day  period  immediately  following  the  close of the
Second  Option  Period (the  "Confirmation  Period"),  the Managing  Board shall
inform each  electing  Member of the portion of the  Membership  Interest of the
deceased Member as to which his or her election is effective. The Managing Board
shall  give  notice  to the  deceased  Member  within  the ten (10)  day  period
following the close of the Confirmation  Period (the  "Notification  Period") of
the election by the Members to exercise their option. Such notice shall indicate
the portion of the deceased Member's  Membership Interest that will be purchased
by each of the  purchasing  Members and the Company,  if any. Any portion of the
Membership  Interest not  purchased by the Company and Members  shall be held by
the deceased  Member's  executor,  administrator  or other legal  representative
pursuant to the terms of this Agreement.

     10.2  Bankruptcy,  Insolvency or  Assignment  for Benefit of Creditors of a
Member.  In the event that an  involuntary  or  voluntary  proceeding  under the
Federal  Bankruptcy Code, as amended,  is filed for or against any Member, or if
any Member shall make an assignment for the benefit of his or her creditors,  or
if any Member has a receiver or custodian  appointed  for his or her assets,  or
any  Member  generally  fails to pay his or her debts  when due,  the  insolvent
Member shall give written  notice (the "Notice of  Insolvency")  to the Managing
Board of the commencement of any such proceeding or the occurrence of such event
within  five days of the  first  notice  to him or her of such  commencement  or
occurrence  of such event.  The Company shall have the option to purchase at the
Closing (as defined  below) the  Membership  Interest  of the  insolvent  Member
(which insolvent Member or his trustee, custodian, receiver or other personal or
legal  representative,  as the case may be, shall then become  obligated to sell
such  Membership  Interest) at the price  determined  in the manner  provided in
Section  10.7 of this  Agreement  and on the terms and  conditions  provided  in
Section 10.8 of this  Agreement.  The Company shall have a period of thirty (30)
days  following the date of either the Notice of  Insolvency,  or if such formal
notice is not given,  the date the  Managing  Board first  becomes  aware of the
financial  condition  of the Member as outlined in this Article 10.2 (the "First
Option  Period"),  within which to notify in writing the insolvent Member or his
trustee, custodian, receiver, or other legal or personal representative, whether
the Company  wishes to purchase all or a portion of the  Membership  Interest of
the  insolvent  Member.  If the Company  does not elect to  purchase  the entire
Membership  Interest of the insolvent  Member before the expiration of the First
Option  Period and in the manner  provided  herein,  the Members  shall have the
option to purchase all or any part of the  Membership  Interest of the insolvent
Member  not  purchased  by the  Company  at the price  determined  in the manner
provided  in  Section  10.7 of this  Agreement  and on the terms and  conditions
provided in Section 10.8 of this Agreement.  Any Member desiring to purchase any
part or all of the remaining  Membership  Interest of the insolvent Member shall
deliver to the Managing Board a written  election to purchase all or a specified
portion of such Membership  Interest within the ten (10) day period  immediately
following the close of the First Option Period (the "Second Option Period").  If
the Members in the aggregate elect to purchase more than the Membership Interest
then available,  each electing Member shall have a priority,  up to that portion
specified in his or her notice of election,  to purchase such  proportion of the
Membership  Interest  of  the  insolvent  Member  then  available  as his or her
Percentage Interest bears to the aggregate  Percentage  Interests of the Members
electing to purchase. That portion of the insolvent Member's Membership Interest
not  purchased  on such a  priority  basis  shall  be  allocated  in one or more
successive  allocations to those remaining  Members electing to purchase more of
the  Membership  Interest  than they have a priority  right,  up to the  portion
specified in their  respective  elections,  in the proportion that each of their
Percentage Interests bears to the aggregate Percentage Interest of all of them.

                                                      -31-
<PAGE>

     Within  the ten (10) day  period  immediately  following  the  close of the
Second  Option  Period (the  "Confirmation  Period"),  the Managing  Board shall
inform each  electing  Member of the portion of the  Membership  Interest of the
insolvent  Member as to which his or her  election is  effective.  The  Managing
Board shall give notice to the  insolvent  Member within the ten (10) day period
following the close of the Confirmation  Period (the  "Notification  Period") of
the election by the Members to exercise their option. Such notice shall indicate
the portion of the insolvent Member's Membership Interest that will be purchased
by each of the  purchasing  Members and the Company,  if any. Any portion of the
Membership  Interest not  purchased by the Company and Members  shall be held by
the insolvent Member, his or her trustee, custodian,  receiver or other legal or
personal representative pursuant to the terms of this Agreement.

     10.3 Default under Guaranties.  Notwithstanding any other provision of this
Article X to the  contrary,  if any of the events  outlined in Sections  10.1 or
10.2 or any other  defaulting  event  outlined in the Guaranty (the  "Defaulting
Events") should occur with respect to a Member (the  "Defaulting  Member"),  and
the  Managing  Board  determines  (in its sole  discretion)  that such event may
result in default and  acceleration  of an  obligation  secured by the  Guaranty
unless another guarantor  acceptable to the Bank can be substituted in the place
of the  Defaulting  Member,  then the  Managing  Board  shall  have the right to
immediately  take the steps as outlined  in this  Section  10.3 to prevent  such
default.  Upon the Managing  Board  receiving  notice of a  Defaulting  Event as
provided above,  the Managing Board, in its sole discretion,  shall  immediately
have  the  right  to  either  (i) sell the  entire  Membership  Interest  of the
Defaulting  Member  to an  investor  approved  of by the  Managing  Board,  (ii)
purchase  for the  Company's  account  the  entire  Membership  Interest  of the
Defaulting  Member,  or  (iii)  sell  the  entire  Membership  Interest  of  the
Defaulting  Member to one or more of the other Members.  The  Defaulting  Member
shall sell his or her Membership Interest to the purchaser at the purchase price
determined  in the  manner  as  provided  in  Section  10.7 and on the terms and
conditions as provided in Section 10.8. The transfer of the Membership Interest,
the payment of the purchase price, and the assumption of the Defaulting Member's
obligations  under his or her Guaranty (as provided in Section  10.7),  shall be
made at such  time as  determined  by the  Managing  Board in order to avoid the
default and acceleration of the obligation secured by the Guaranty.  Each Member
hereby  makes,  constitutes  and  appoints  the  Chairman,  with  full  power of
substitution, his or her true and lawful attorney-in-fact,  to take such actions
and execute such documents on his or her behalf to effect the transfer of his or
her  Membership  Interest as provided in this  Section  10.3,  in the event such
Member becomes a Defaulting Member.

     10.4 Breach of Section 4.6. In the event the Managing Board either receives
a Notice of Withdrawal as provided in Section 4.6 or receives notice of a breach
of Section 4.6 by a Member (the  "Competing  Member"),  the  Managing  Board may
elect,  in its sole  discretion,  to treat  such  event as a default  under this
Agreement  and enforce the  provisions  of this Section  10.4. In the event of a
deadlock of the Managing Board, the Managing Board's determination of whether to
treat a  Member's  Notice of  Withdrawal  under  Section 4.6  or the notice of a
Member's  breach of  Section  4.6 as a default  under  this  Agreement  shall be
submitted to binding arbitration in accordance with Section 12.16 hereof. If the
Managing  Board  (pursuant  to its own vote or the  decision  of an  arbitrator)
elects to enforce the  provisions of this Section 10.4, the Managing Board shall
give written  notice of such election (the "Notice of Default") to the Competing
Member within 180 days of the date the Managing Board first  received  notice of
the defaulting event. Upon giving the Notice of Default,  the Company shall have
the option to purchase at the Closing (as defined below) the Membership Interest
of the Competing Member
                                                      -32-
<PAGE>

     (which Competing Member shall then become obligated to sell such Membership
Interest) at the price determined in the manner provided in Section 10.7 of this
Agreement  and on the terms and  conditions  provided  in  Section  10.8 of this
Agreement.  The Company  shall have a period of thirty (30) days  following  the
date of the Notice of Default (the "First Option Period") within which to notify
in writing the Competing Member, whether the Company wishes to purchase all or a
portion of the Membership  Interest of the Competing Member. If the Company does
not elect to purchase the entire  Membership  Interest of the  Competing  Member
before the  expiration  of the First  Option  Period and in the manner  provided
herein,  the Members  shall have the option to  purchase  all or any part of the
Membership  Interest of the Competing Member not purchased by the Company at the
price determined in the manner provided in Section 10.7 of this Agreement and on
the terms and conditions provided in Section 10.8 of this Agreement.  Any Member
desiring to purchase any part or all of the remaining Membership Interest of the
Competing  Member  shall  deliver to the  Managing  Board a written  election to
purchase all or a specified  portion of such Membership  Interest within the ten
(10) day period immediately  following the close of the First Option Period (the
"Second Option Period").  If the Members in the aggregate elect to purchase more
than the Membership  Interest then available,  each electing Member shall have a
priority,  up to that portion  specified  in his or her notice of  election,  to
purchase such proportion of the Membership Interest of the Competing Member then
available as his or her Percentage  Interest  bears to the aggregate  Percentage
Interests  of the Members  electing to purchase.  That portion of the  Competing
Member's  Membership  Interest not  purchased on such a priority  basis shall be
allocated  in one or more  successive  allocations  to those  remaining  Members
electing to purchase more of the  Membership  Interest than they have a priority
right,  up to the  portion  specified  in  their  respective  elections,  in the
proportion  that  each of their  Percentage  Interests  bears  to the  aggregate
Percentage Interest of all of them.

     Within  the ten (10) day  period  immediately  following  the  close of the
Second  Option  Period (the  "Confirmation  Period"),  the Managing  Board shall
inform each  electing  Member of the portion of the  Membership  Interest of the
Competing  Member as to which his or her  election is  effective.  The  Managing
Board shall give notice to the  Competing  Member within the ten (10) day period
following the close of the Confirmation  Period (the  "Notification  Period") of
the election by the Members to exercise their option. Such notice shall indicate
the portion of the Competing Member's Membership Interest that will be purchased
by each of the  purchasing  Members and the Company,  if any. Any portion of the
Membership  Interest not  purchased by the Company and Members  shall be held by
the Competing Member pursuant to the terms of this Agreement.

     10.5 Domestic Proceeding.  In the event that a spouse of a Member commences
against a Member,  or a Member is named in, a  Domestic  Proceeding,  the Member
shall give written notice (the "Notice of Domestic  Proceeding") to the Managing
Board of the  commencement of any such proceeding  within five days of the first
notice to him or her of such commencement.  The Company shall have the option to
purchase at the Closing (as defined below) the Membership Interest of the Member
involved in the Domestic Proceeding (which Member shall then become obligated to
sell such Membership  Interest),  at the price determined in the manner provided
in Section 10.7 of this  Agreement and on the terms and  conditions  provided in
Section 10.8 of this  Agreement.  The Company shall have a period of thirty (30)
days following the date of either the Notice of Domestic Proceeding,  or if such
formal notice is not given,  the date the Managing  Board first becomes aware of
the domestic  circumstances  of the Member as provided in this Section 10.5 (the
"First Option Period"), within which to notify in

                                                      -33-
<PAGE>

     writing the Member involved in the Domestic Proceeding, whether the Company
wishes to purchase all or a portion of the  Membership  Interest of such Member.
If the Company does not elect to purchase the Membership  Interest of the Member
involved in the Domestic  Proceeding  before the  expiration of the First Option
Period and in the manner provided  herein,  the Members shall have the option to
purchase all or any part of the  Membership  Interest of the Member  involved in
the Domestic  Proceeding not purchased by the Company at the price determined in
the manner  provided  in  Section  10.7 of this  Agreement  and on the terms and
conditions  provided in Section 10.8 of this  Agreement.  Any Member desiring to
purchase  any part or all of the  remaining  Membership  Interest  of the Member
involved  in the  Domestic  Proceeding  shall  deliver to the  Managing  Board a
written  election to  purchase  all or a  specified  portion of such  Membership
Interest within the ten (10) day period  immediately  following the close of the
First  Option  Period  (the  "Second  Option  Period").  If the  Members  in the
aggregate  elect to purchase more than the Membership  Interest then  available,
each electing Member shall have a priority,  up to that portion specified in his
or her  notice of  election,  to  purchase  such  proportion  of the  Membership
Interest of the Member involved in the Domestic Proceeding then available as his
or her Percentage  Interest bears to the aggregate  Percentage  Interests of the
Members electing to purchase.  That portion of the Member's  Membership Interest
not  purchased  on such a  priority  basis  shall  be  allocated  in one or more
successive  allocations to those remaining  Members electing to purchase more of
the  Membership  Interest  than they have a priority  right,  up to the  portion
specified in their  respective  elections,  in the proportion that each of their
Percentage Interests bears to the aggregate Percentage Interest of all of them.

     Within  the ten (10) day  period  immediately  following  the  close of the
Second  Option  Period (the  "Confirmation  Period"),  the Managing  Board shall
inform each  electing  Member of the portion of the  Membership  Interest of the
Member  involved in the Domestic  Proceeding  as to which his or her election is
effective.  The Managing  Board shall give notice to the Member  involved in the
Domestic  Proceeding  within the ten (10) day period  following the close of the
Confirmation  Period (the "Notification  Period") of the election by the Members
to exercise their option. Such notice shall indicate the portion of the Member's
Membership Interest that will be purchased by each of the purchasing Members and
the Company, if any. Any portion of the Membership Interest not purchased by the
Company  and  Members  shall be held by such  Member  involved  in the  Domestic
Proceeding pursuant to the terms of this Agreement.

     10.6  Divestiture  Option.  If state  or  federal  regulations  or laws are
enacted or applied,  or if any other legal  developments  occur,  which,  in the
opinion of the Managing Board adversely affect (or potentially adversely affect)
the operation of the Company (e.g.,  the enactment or application of prohibitory
physician  self-referral  legislation  against the Company or its Members),  the
Managing  Board  shall  promptly  notify  the  Members of the  applicable  legal
development and in good faith  diligently work with the Members to devise a plan
pursuant to which the  Company  may avoid such  adverse  effect,  including  the
modification  of this  Agreement and any other  contracts or agreements  entered
into by the Company.  In the event the Managing  Board and Members are unable to
devise such a plan within a  reasonable  time period,  the Managing  Board shall
elect, in its discretion,  to either (i) take the steps outlined in this Section
10.6 to divest the Members of their Membership  Interests,  or (ii) dissolve the
Company as provided in Article XI. If the Managing  Board chooses option (i), it
shall  deliver a written  notice of such  decision to all of the Members and Sun
shall purchase such Membership Interests for its own account. The purchase price
to be paid for each Membership Interest shall be determined in the

                                                      -34-
<PAGE>

     manner as provided in Section 10.7 and shall be on the terms and conditions
as provided in Section  10.8.  The  transfer of the  Membership  Interests,  the
payment of the purchase  price and the  assumption  of the Members'  obligations
under their respective Guaranties (as provided in Section 10.7) shall be made at
such time as determined by the Managing Board to be in the best interests of the
Company  and  its  Members.  In the  event  of the  transfer  of the  Membership
Interests of all the Members to Sun  pursuant to option (i) above,  the transfer
of  the  Membership  Interests,  the  payment  of the  purchase  price  and  the
assumption of the Members'  obligations  under their  respective  Guaranties (as
provided in Section 10.7) shall be made either as of the  effective  date of the
applicable legal development giving rise to the divestiture,  or at such earlier
date as  determined  by the  Managing  Board to be in the best  interests of the
Company and its Members. Each Member hereby makes,  constitutes and appoints the
Chairman,  with full  power of  substitution,  his,  her or its true and  lawful
attorney-in-fact, to take such actions and execute such documents on his, her or
its behalf to effect the  transfer  of his,  her or its  Membership  Interest as
provided in this Section  10.6.  The  foregoing  power of attorney  shall not be
affected by the  subsequent  incapacity,  mental  incompetence,  dissolution  or
bankruptcy of any Member.

     10.7  Purchase  Price.  The  purchase  price to be paid for the  Membership
Interest  of any  Member  whose  interest  is being  purchased  pursuant  to the
provisions of Sections 10.1, 10.2,  10.3,  10.4, 10.5 or 10.6 (the  "Withdrawing
Member")  shall be determined in the manner  provided in this Section 10.7.  The
purchase price for a Membership Interest purchased pursuant to the provisions of
Sections 10.2, 10.3 or 10.4 shall be an amount equal to the Withdrawing Member's
share of the Company's  book value,  if any,  (prorated in the event that only a
portion of his or her  Membership  Interest is being  purchased) as reflected by
the Capital Account of the Withdrawing  Member  (unadjusted for any appreciation
in  Company  assets and as reduced  by  depreciation  deductions  claimed by the
Company for tax  purposes)  as of the  Valuation  Date (as defined  below).  The
determination of the Withdrawing  Member's Capital Account on the Valuation Date
(as defined  below)  shall be made by the  Company's  internal  accountant  (the
"Company  Accountant")  upon a review of the Company's  books of account,  and a
formal audit is expressly waived.  The statement of the Company  Accountant with
respect to the Capital Account of the  Withdrawing  Member on the Valuation Date
shall  be  binding  and  conclusive  upon the  Company,  the  purchaser  and the
Withdrawing Member and his, her or its representative. In the case of a purchase
of a Membership  Interest  pursuant to the provisions of Sections 10.1,  10.5 or
10.6, the purchase price shall be an amount equal to two (2) times the aggregate
distributions made with respect to such Membership  Interest pursuant to Section
8.1 during the  twelve-month  period ending on the Valuation Date (the "Purchase
Price  Formula").  The Purchase  Price Formula shall be subject to revision from
time to time as set forth in Section  3.3(g).  The  Valuation  Date shall be the
last day of the month immediately  preceding the month in which occurs:  (i) the
death of a Member,  in the case of a  purchase  by  reason  of  death;  (ii) the
bankruptcy  or  insolvency  of a Member,  in the case of a purchase by reason of
such bankruptcy or insolvency;  (iii) the notice of Defaulting Event as provided
in Section  10.3,  in the case of a purchase  occurring by reason of one of such
events;  (iv) the Notice of  Withdrawal  or breach of Section 4.6 as provided in
Section 10.4 in the case of a purchase by reason thereof;  (v) the  commencement
of the Domestic Proceeding, in the case of a purchase by reason thereof; or (iv)
the Notice of Election as provided in Section 10.6, in the case of a purchase by
reason thereof.  Any Member whose Membership  Interest is purchased  pursuant to
the  provisions  of  Sections  10.1,  10.2,  10.3,  10.4,  10.5 or 10.6 shall be
entitled  only to the purchase  price which shall be paid at the Closing in cash
(or by certified  or  cashier's  check) and shall not be entitled to any Company
distributions  made after the  Valuation  Date. If as of the date of the Closing
the Withdrawing Member still has an outstanding
                                                      -35-
<PAGE>

     personal obligation under the Guaranty (the  "Obligation"),  the purchasing
Member (or  Members,  as the case may be, in  proportion  to their  share of the
purchased  Membership  Interest)  shall  assume the  Obligation,  indemnify  the
Withdrawing Member from the Obligation,  and take such steps deemed necessary by
the  Managing  Board to formally  evidence  the  assumption  of the  Obligation,
including  without  limitation,  executing  such  documents and  providing  such
financial  information  to the  Bank  (as  the  case  may  be) to  evidence  the
assumption  of the  Obligation,  and  obtain,  if  possible,  the release of the
Withdrawing Member from the Obligation. The transfer of a Membership Interest of
a Withdrawing  Member shall be deemed to occur as of the Valuation  Date and the
Withdrawing  Member  shall have no voting or other rights as a Member after such
date. The purchaser shall be entitled to any  distributions  attributable to the
transferred  interest  after the  Valuation  Date and the Company shall have the
right to deduct the  amount of any such  distributions  made to the  Withdrawing
Member after the Valuation Date from the purchase price.

     10.8 Closing of Purchase and Sale.  The Closing of any purchase and sale of
a Membership  Interest pursuant to Sections 10.1, 10.2, 10.3, 10.4, 10.5 or 10.6
of this Agreement  shall take place at the principal  office of the Company,  or
such other place  designated by the Managing  Board,  on the date  determined as
follows (the "Closing"):

     (a) In the case of a purchase and sale  occurring by reason of the death of
a Member as provided in Section  10.1 of this  Agreement,  the Closing  shall be
held on the thirtieth  day (or if such  thirtieth day is not a business day, the
next business day following the thirtieth day) immediately following the last to
occur of:

     (i) Qualification of the executor or personal administrator of the deceased
Member's estate;

     (ii) The date on which any necessary determination of the purchase price of
the Membership Interest to be purchased has been made; or

     (iii) The date that coincides with the close of the First Option Period, if
the option  exercised  by the Company is with  respect to the entire  Membership
Interest of the deceased  Member,  or the date that  coincides with the close of
the Notification  Period, if the option exercised by the Company is with respect
to less  than all of the  Membership  Interest  of the  deceased  Member  or the
Company does not exercise its option.

     (b) In  the  case  of a  purchase  and  sale  occurring  by  reason  of the
occurrence of one of the events  described in Sections 10.2, 10.3, 10.4, 10.5 or
10.6 of this  Agreement,  the Closing  shall be held on the thirtieth day (or if
such  thirtieth  day is not a business  day, the next business day following the
thirtieth day) immediately following the later to occur of:

                                                      -36-
<PAGE>

     (i) The date on which any necessary  determination of the purchase price of
the Membership Interest to be purchased has been made; or

     (ii) The date that coincides with the close of the First Option Period,  if
the option  exercised  by the Company is with  respect to the entire  Membership
Interest of the Member  whose  interest is being  transferred,  or the date that
coincides with the close of the Notification  Period, if the option exercised by
the  Company is with  respect to less than all the  Membership  Interest of such
Member or the Company does not exercise its option.

     At the  Closing,  although  not  necessary  to  effect  the  transfer,  the
Withdrawing  Member shall concurrently with tender and receipt of the applicable
purchase price,  deliver to the purchaser duly executed  instruments of transfer
and assignment,  assigning good and marketable  title to the portion or portions
of the Withdrawing Member's entire Membership Interest thus purchased,  free and
clear from any liens or encumbrances  or rights of others  therein.  The parties
acknowledge  that  occurrence  of any  of the  triggering  events  described  in
Sections  10.1,  10.2,  10.3,  10.4,  10.5 or 10.6 and  compliance  with all the
Articles of this  Agreement,  except the execution of the transfer  documents by
the Withdrawing Member as provided above in this Section 10.8, are sufficient to
effect the  complete  transfer  of the  Withdrawing  Member's  interest  and the
Withdrawing  Member shall be deemed to consent to admission of the transferee as
a  substitute  Member.  Notwithstanding  the date of the  Closing  or  whether a
Closing is  successfully  held,  the  transfer  of a  Membership  Interest  of a
Withdrawing  Member shall be deemed to occur as of the Valuation Date as defined
in Section  10.7.  The deemed  transfer is effective  regardless  of whether the
Withdrawing Member performs the duties set forth in this Section 10.8.

     10.9 Terms and Conditions of Purchase.  The Membership Interest of a Member
shall not be transferred to any Member unless the  requirements  of Sections 9.2
and 9.4 (b) through (g) are satisfied with respect to it. The purchaser shall be
liable for all obligations  and  liabilities  connected with that portion of the
Membership Interest transferred to it unless otherwise agreed in writing.

             ARTICLE XI - DISSOLUTION AND LIQUIDATION OF THE COMPANY

     11.1 Dissolution  Events.  The Company will be dissolved upon the happening
of any of the following events:

     (a) The expiration of its term on December 31, 2020;

     (b) The  determination  of the Managing Board and the Members  representing
two-thirds of the aggregate  interests of the Company that the Company should be
dissolved;
                                                      -37-
<PAGE>

     (c)  Pursuant to Section  3.3(e),  the  approval of a plan by the  Managing
Board  and the  Members  providing  for  the  merger,  consolidation  or sale of
Membership Interests as described in Section 9.6;

     (d) The  election of the Managing  Board to dissolve the Company  following
the occurrence of an event described in Section 10.6;

     (e) The sale,  exchange or other disposition of all or substantially all of
the  Property  of the  Company  without  making  provision  for the  replacement
thereof;

     (f) The  Bankruptcy  or  dissolution  of a Member or the  occurrence of any
other event which  terminates  the continued  membership  of any Member,  unless
there is at least one  remaining  Member  and the  business  of the  Company  is
continued  by the written  consent of a Majority  in  Interest of the  remaining
Members within ninety (90) days of the occurrence of such event; or

     (g) Any other event  resulting in the  dissolution  or  termination  of the
Company under the laws of the State of Washington.

     11.2  Continuation.  Upon the occurrence of any of the events  described in
Section  11.1(f)  above with respect to any of the Members,  the business of the
Company  will be  continued if within  ninety (90)  calendar  days a Majority in
Interest of the remaining Members elect to continue the business of the Company.
If the  Members  fail to  continue  the  Company's  business as provided in this
Section 11.2, the Company will be liquidated under Section 11.3.

     11.3  Liquidation.  Upon the  happening  of any of the events  specified in
Section  11.1 and, if  applicable,  the failure to continue  the business of the
Company under Section  11.2,  the Managing  Board,  or any  liquidating  trustee
elected by a Majority in Interest of the Members,  will  commence as promptly as
practicable  to wind up the Company's  affairs  unless the Managing Board or the
liquidating  trustee  (either,  the  "Liquidator")  determines that an immediate
liquidation  of Company  assets would cause undue loss to the Company,  in which
event the liquidation may be deferred for a time determined by the Liquidator to
be appropriate.  Assets of the Company may be liquidated or distributed in kind,
as the  Liquidator  determines to be  appropriate.  The Members will continue to
share Company Cash Flow,  Profits and Losses during the period of liquidation in
the manner set forth in Articles VII and VIII. The proceeds from  liquidation of
the Company, including repayment of any debts of Members to the Company, and any
Company  assets that are not sold in  connection  with the  liquidation  will be
applied in the following order of priority:

     (a) To payment of the debts and  satisfaction  of the other  obligations of
the Company, including without limitation debts and obligations to Members;

     (b)  To  the  establishment  of  any  reserves  deemed  appropriate  by the
Liquidator for any  liabilities  or  obligations of the Company,  which reserves
will be held for the purpose of paying  liabilities or  obligations  and, at the
expiration of a period the Liquidator deems appropriate,  will be distributed in
the manner provided in Section 11.3(c); and
                                                      -38-
<PAGE>

     (c) To the  payment  to the  Members  of the  positive  balances  in  their
respective Capital Accounts, pro rata, in proportion to the positive balances in
those capital accounts after giving effect to all allocations  under Article VII
and all  distributions  under Article VIII for all prior periods,  including the
period during which the process of liquidation occurs.

     11.4  Certificate of  Cancellation.  Upon the dissolution and completion of
the winding up of the Company,  the Managing  Board shall cause a Certificate of
Cancellation  to be  executed  on  behalf  of the  Company  and  filed  with the
Secretary of State,  and the Managing Board shall execute,  acknowledge and file
any  and  all  other  instruments   necessary  or  appropriate  to  reflect  the
dissolution and winding up of the Company.


                           ARTICLE XII - MISCELLANEOUS

     12.1 Fiscal Year.  The Fiscal Year will end on December 31, unless  another
fiscal year-end is selected by the Managing Board.

     12.2  Records.  Proper and complete  records and books of account  shall be
kept by the Managing  Board in which shall be entered fully and  accurately  all
transactions  and such other matters  relating to the Company's  business as are
usually entered into records and books of account  maintained by persons engaged
in business of like character.  The records of the Company will be maintained at
the  principal  place of business of the Company,  or at any other  location the
Managing Board selects  provided that the Company keep at its principal place of
business the records  required by the Act to be  maintained  there.  Appropriate
records  in  reasonable   detail  will  be  maintained  to  reflect  income  tax
information  for the  Members.  Each  Member may  inspect and make copies of the
records  maintained by the Company  during  reasonable  business  hours and upon
reasonable  notice.  Each Member, at his or her expense,  may make copies of the
records  maintained  by the  Company  and may  require  an audit of the books of
account maintained by the Company to be conducted by the independent accountants
for the Company.

     12.3 Reports. The Managing Board, at the expense of the Company, will cause
to be  prepared in  accordance  with the method of  accounting  then used by the
Company and  distributed to each Member within ninety (90) days after the end of
each  Fiscal  Year,  a balance  sheet as of the close of the Fiscal Year and the
annual  income tax returns and related  schedules  of the Company for the Fiscal
Year.

     12.4  Reserves.  The  Managing  Board  may  cause  the  Company  to  create
reasonable  reserve  accounts to be used exclusively for repairs and acquisition
of Additional Assets and for any other valid Company purpose. The Managing Board
shall in its sole  discretion  determine  the amount of payments to such reserve
accounts.

     12.5 Notices.  The Managing  Board will notify the Members of any change in
the name, principal or registered office or registered agent of the Company. Any
notice or other  communication  required by this  Agreement  must be in writing.
Notices  and  other  communications  will be  deemed  to have  been  given  when
delivered by hand or dispatched by telegraph, telex or other means of electronic
facsimile  transmission,  or three  business  days after being  deposited in the
United States mail, postage

<PAGE>

                                                      -39-
     prepaid, addressed to the Member to whom the notice is intended to be given
at his or her address set forth on Schedule I of this  Agreement or, in the case
of the Company,  to its principal place of business provided for in Section 1.4.
A Person  may  change  his or her  notice  address  by notice in  writing to the
Company and to each other Member given under this Section 12.5.

     12.6 Amendments. As expressly provided in this Agreement in Section 3.3(h),
no amendment of this  Agreement  will be valid or binding upon the Members,  nor
will any waiver of any term of this  Agreement be  effective,  unless in writing
and signed by the Managing Board and the Members representing  two-thirds of the
aggregate interests in the Company.

     12.7 Additional Documents. Each party agrees to execute and acknowledge all
documents and writings  which the Managing Board may deem necessary or expedient
in the creation of this Company and the achievement of its purpose, specifically
including but not limited to, a certificate of formation and all amendments,  as
well as any cancellation thereof.

     12.8 Representations of Members. Each Member represents and warrants to the
Company and every other  Member that (s)he (a) is fully aware of, and is capable
of bearing,  the risks relating to an investment in the Company, (b) understands
that his or her  interest  in the  Company  has not been  registered  under  the
Securities Act of 1933, as amended, or the securities law of any jurisdiction in
reliance upon  exemptions  contained in those laws,  and (c) has acquired his or
her  interest in the Company for his or her own account,  with the  intention of
holding the interest for investment  and without any intention of  participating
directly or  indirectly  in any  redistribution  or resale of any portion of the
interest  in  violation  of the  Securities  Act of  1933,  as  amended,  or any
applicable law.

     12.9  Survival  of  Rights.  Except as  herein  otherwise  provided  to the
contrary,  this Agreement  shall be binding upon and inure to the benefit of the
parties, their successors and assigns.

     12.10 Interpretation and Governing Law. When the context in which words are
used in this Agreement indicates that such is the intent,  words in the singular
number  shall  include the plural and vice versa.  The  masculine  gender  shall
include the feminine and neuter.  The Article and Section headings or titles and
the table of contents shall not define,  limit, extend or interpret the scope of
this Agreement or any  particular  Article or Section.  This Agreement  shall be
governed and  construed in  accordance  with the laws of the State of Washington
without giving effect to the conflicts of laws provisions thereof.

     12.11  Severability.  If any  provision,  sentence,  phrase or word of this
Agreement or the application thereof to any Person or circumstance shall be held
invalid, the remainder of this Agreement,  or the application of such provision,
sentence,  phrase, or word to Persons or  circumstances,  other than those as to
which it is held invalid, shall not be affected thereby.

     12.12 Agreement in Counterparts.  This Agreement may be executed in several
counterparts,  each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.  In addition, this Agreement may contain
more than one  counterpart  of the  signature  pages and this  Agreement  may be
executed by the affixing of the signatures of each of the Members to one of such
                                                      -40-
<PAGE>


counterpart signature pages; all of such signature pages shall be read as though
one,  and they shall have the same force and effect as though all of the signers
had signed a single signature page.  12.13 Tax Matters Partner.  For purposes of
this Agreement,  the Managing Board shall designate  either a Member or a member
of the Managing Board as the Tax Matters  Partner (as defined in Section 6231 of
the Code).

     12.14  Third  Parties.   The  agreements,   covenants  and  representations
contained  herein are for the benefit of the parties hereto inter se. Nothing in
this  Agreement  is  intended to benefit any third  parties  including,  without
limitation,  any creditor of the Company  and/or any Member.  No creditor of the
Company or any Member will be entitled to require the Managing  Board to solicit
or accept any loan or  additional  capital  contribution  for the  Company or to
enforce  any right  which the  Company or any Member may have  against a Member,
whether arising under this Agreement or otherwise.

     12.15 Power of Attorney. Each Member hereby makes, constitutes and appoints
Stan Johnson,  or his successor in interest as determined by the Managing Board,
severally,   with   full   power  of   substitution,   his   true   and   lawful
attorneys-in-fact,  for him and in his name, place and stead and for his use and
benefit to sign and acknowledge,  file and record,  any amendments  hereto among
the Members for the further  purpose of  executing  and filing on behalf of each
Member,  any and all articles of organization  or other  documents  necessary to
constitute  the  Company  or to effect  the  continuation  of the  Company,  the
admission  or  withdrawal  of  members,  the  qualification  of the Company in a
foreign  jurisdiction  (or  amendment to such  qualification),  the admission of
substitute  Members or the  dissolution or termination of the Company,  provided
such  continuation,  admission,  withdrawal,  qualification,  or dissolution and
termination are in accordance with the terms of this Agreement.

     The foregoing power of attorney is a special power of attorney coupled with
an interest,  is  irrevocable  and shall  survive the death,  legal  incapacity,
dissolution  or Bankruptcy of each Member.  It may be exercised by said attorney
by listing all of the Members executing any instrument over the signature of the
attorney-in-fact acting for all of them. The power of attorney shall survive the
delivery of an  assignment by a Member of the whole or any portion of his or her
Unit.  In those cases in which the  assignee of, or the  successor  to, a Member
owning a Unit has been approved by the Members for admission to the Company as a
substitute  Member,  the power of attorney shall survive for the sole purpose of
enabling  the Managing  Board to execute,  acknowledge  and file any  instrument
necessary to effect such substitution.

     12.16  Arbitration.  Any dispute  arising out of or in connection with this
Agreement  or the breach  thereof  shall be decided by  arbitration  in Seattle,
Washington in accordance with the then effective commercial arbitration rules of
the American Arbitration Association, and judgment thereof may be entered in any
court having jurisdiction thereof.



                                                      -41-
<PAGE>


     IN WITNESS  WHEREOF,  the  undersigned,  being the Chairman of the Managing
Board and initial Members of the Company,  have caused this Agreement to be duly
adopted by the Company as of the date first written above,  and do hereby assume
and agree to be bound by and to  perform  all of the terms  and  provisions  set
forth in this Agreement.

                             MANAGING BOARD:

 

                             By:                                               
                                 ____________________________, Chairman

                             MEMBER:
                             SUN MEDICAL TECHNOLOGIES, INC.,
                               a California corporation

                             By:                                               
                                 Stan Johnson
                                 President


                                                      -42-
<PAGE>


                           COUNTERPART SIGNATURE PAGE


     By signing this  Counterpart  Signature Page, the undersigned  acknowledges
his  or her  acceptance  of  that  certain  Operating  Agreement  of  Washington
Urological Services, LLC, and his or her intention to be legally bound thereby.

                  Dated this _________ day of ___________________, 199__.



                                    ---------------------------

                                    Signature



                                    ---------------------------

                                    Printed Name




STATE OF _______________                    )
                                            )
COUNTY OF _____________                     )


     BEFORE ME, the  undersigned  Notary  Public in and for the State and County
set forth above, on the _______ day of _____________________,  199__, personally
appeared ____________________________, and, being by me first duly sworn, stated
that (s)he  signed  this  Counterpart  Signature  Page for the purpose set forth
above and that the statements contained therein are true.



                                    ---------------------------

                                    Signature of Notary Public



                                    ---------------------------

                                    Printed Name of Notary

My Commission Expires:

___________________________

[SEAL]

                                                      -43-
<PAGE>

           OPERATING AGREEMENT OF WASHINGTON UROLOGICAL SERVICES, LLC

                                   SCHEDULE I


Names and Address        Initial Capital
of Members         Contribution      Guaranty(1)             Percentage Interest

General Partner
Sun Medical 
Technologies, Inc.  $33,460             131,450                  23.90%

Limited partners
as a whole          114,150             418,550                  76.10%


     TOTALS       $ 147,610           $ 550,000                 100.00%        




(1) Represents the principal  portion of each Member's guaranty  obligation,  as
each Member's  obligation  under the Guaranty  includes not only principal,  but
also (as provided in the  Guaranty)  accrued and unpaid  interest,  late payment
penalties  and all  costs  incurred  by the  Bank in  collecting  any  defaulted
obligations.  The  principal  amount of the loan is  $550,000.  The Members will
guarantee  1% of the loan  (up to a $5,500  principal  guaranty)  for each  Unit
purchased as provided in the Memorandum.
                                                      -44-
<PAGE>