Document:

LIMITED LIABILITY COMPANY AGREEMENT

                                       OF

             PUTNAM INVESTMENTS EMPLOYEES' SECURITIES COMPANY II LLC

                                   Dated as of
                                  June 15, 2001

          The undersigned (the "Members,") hereby agree to form and hereby form,
as of the date and year first above written, a limited liability company (the
"Company") pursuant to the provisions of the Delaware Limited Liability Company
Act, which shall be governed by, and operated pursuant to, the terms and
provisions of this Limited Liability Company Agreement (the "Agreement").

                                   ARTICLE I

                               General Provisions

          Section 1.1 Definitions. For the purposes of this Agreement:

          (a) "Advisers Act" shall mean the Investment Advisers Act of 1940, as
amended.

          (b) "Affiliate" shall have the meaning as set forth in the Investment
Company Act.

          (c) "AFR Rate" shall mean the fixed rate of return equal to the
long-term "applicable federal rate" (within the meaning of section 1274(d) of
the Code and the Treasury Regulations thereunder), compounded semi-annually, as
of the date of the first Initial Closing.

          (d) "AFR Return" shall have the meaning set forth in Section 4.2(b).

          (e) "Agreement" shall have the meaning set forth in the preamble.

          (f) "Business Day" shall mean any day other than (i) Saturday or
Sunday and (ii) any other day on which banks located in New York City are
required or authorized by law to remain closed.

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          (g) "Capital Account" shall have the meaning set forth in Section 3.2.

          (h) "Capital Commitment" shall mean, with respect to any Profits
Member, the amount set forth opposite such Member's name and designated as such
in the books of the Company.

          (i) "Capital Contribution" shall mean, with respect to the Managing
Member or any Profits Member, the amount contributed to the capital of the
Company pursuant to this Agreement.

          (j) "Cause" means misappropriation of assets of Putnam or any
Subsidiary, willful misconduct in the performance of the duties of the Profit
Member's position, refusal to perform the duties of the Profit Member's
position, violation of the Profit Member's Non-Solicitation Agreement or
Confidentiality Agreement or other restrictive covenant with Putnam or any
Subsidiary, violation of the Putnam Code of Ethics, violation of rules and
regulations issued by any regulatory authority, breach of fiduciary duty or
breach of trust, willful violation of an important Putnam policy, conviction of
a felony, imprisonment for any crime, or any other action likely to bring
substantial discredit to Putnam.

          (k) "Change in Control of MMC" means the first to occur of the
following events after the date of this Agreement:

               (i) any "person," as such term is used in Sections 13(d) and
          14(d) of the Securities Exchange Act of 1934, as amended ("Exchange
          Act") (other than MMC, any trustee or other fiduciary holding
          securities under an employee benefit plan of MMC or any corporation
          owned, directly or indirectly, by the stockholders of MMC in
          substantially the same proportions as their ownership of stock of
          MMC), is or becomes the "beneficial owner" (as defined in Rule 13d-3
          under the Exchange Act), directly or indirectly, of securities of MMC
          representing 50% or more of the combined voting power of MMC's then
          outstanding voting securities; or

               (ii) during any period of two consecutive years, individuals who
          at the beginning of such period constitute the Board of Directors of
          MMC (the "MMC Board"), and any new director (other than a director
          designated by a person who has entered into an agreement with MMC to
          effect a transaction described in clause (i), (iii), or (iv) of this
          definition whose election by the MMC Board or nomination for election
          by MMC's stockholders was approved by a vote of at least two-

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          thirds (2/3) of the directors then still in office who either were
          directors at the beginning of the period or whose election or
          nomination for election was previously so approved, cease for any
          reason to constitute at least a majority thereof; or

               (iii) the stockholders of MMC approve a merger or consolidation
          of MMC with any other corporation, other than (A) a merger or
          consolidation which would result in the voting securities of MMC
          outstanding immediately prior thereto continuing to represent (either
          by remaining outstanding or by being converted into voting securities
          of the surviving or parent entity) more than 50% of the combined
          voting power of the voting securities of MMC or such surviving or
          parent entity outstanding immediately after such a merger or
          consolidation or (B) a merger or consolidation effected to implement a
          recapitalization of MMC (or similar transaction) in which no "person"
          (as hereinabove defined) acquired 50% or more of the combined voting
          power of MMC's then outstanding securities; or

               (iv) the stockholders of MMC approve a plan of complete
          liquidation of MMC or an agreement for the sale or disposition by MMC
          of all or substantially all of MMC's assets (or any transaction having
          a similar effect).

          (l) "Change in Control of Putnam" means the first to occur of the
following events after the date of this Agreement:

               (i) MMC approves a plan of complete liquidation of Putnam or a
          sale or other disposition of all or substantially all of its assets to
          an entity of which MMC holds less than 50% of the voting power of
          securities; or

               (ii) MMC, together with its subsidiaries, trustees or other
          fiduciaries holding securities of Putnam under an employee benefit
          plan maintained by MMC or by a subsidiary of MMC, ceases for any
          reason (including by reason of a sale or other disposition, including
          a spinoff or public offering) to be a beneficial owner of securities
          of representing more than 50% of the voting power of the securities of
          Putnam.

          (m) "Closing" shall mean the Initial Closing and any date as of which
the Managing Member shall admit one or more additional members to the Company.

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          (n) "Code" shall have the meaning set forth in Section 2.2(h).

          (o) "Company" shall have the meaning set forth in the preamble.

          (p) "Confidentiality Agreement" shall mean the Confidentiality
Agreement or any similar agreement or provision in effect from time to time
between the Profits Member and the Managing Member or any of its Affiliates.

          (q) "Employee" shall mean a person who is employed by Putnam or any of
its subsidiaries at the time such person receives a Profits Interest in the
Company.

          (r) "Fiscal Period" shall mean the period commencing on the Initial
Closing, and thereafter each period commencing on the day immediately following
the last day of the preceding Fiscal Period and ending at the close of business
on the first to occur of (i) December 31 of such period and (ii) any other day
as determined in the sole and absolute discretion of the Managing Member.

          (s) "Fiscal Year" shall have the meaning set forth in Section 1.3.

          (t) "Indemnified Persons" shall have the meaning set forth in Section
2.7(a).

          (u) "Initial Closing" means the first date as of which the Company
receives the initial Capital Contributions from or on behalf of Members.

          (v) "Interests" shall mean the interest of a Member in the profits and
losses of the Company, such Member's right to receive distributions of the
Company's assets and all other rights and obligations of such Member under this
Agreement.

          (w) "Investment Company Act" shall mean the Investment Company Act of
1940, as amended.

          (x) "Majority of the Unaffiliated Interests" means the Members (other
than the Managing Member, its Affiliates, and any member that is not entitled to
vote on or consent to any matter) who, at the time in question, have Capital
Commitments aggregating more than 50% of all Capital Commitments of the Members
(other than the Managing Member, its Affiliates and any member that is not
entitled to vote on or consent to any matter).

          (y) "Managing Member" shall have the meaning set forth in Section
1.5(b).

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          (z) "Managing Member Capital Commitment" shall have the meaning set
forth in Section 3.1(a).

          (aa) "Marketable Securities" shall mean securities that are (i) traded
on an established U.S. national or non-U.S. securities exchange or (ii) reported
through NASDAQ or a comparable established non-U.S. over-the-counter trading
system or (iii) otherwise traded over-the-counter or purchased and sold in
transactions effected pursuant to Rule 144A under the Securities Act of 1933, as
amended ("Securities Act"), in each case that the Managing Member believes are
marketable at a price approximating their value as determined in Section 3.6
within a reasonable period of time and are not subject to restrictions on
transfer under the Securities Act or other applicable securities laws or subject
to contractual restrictions on transfer.

          (bb) "Members" shall mean the Managing Member and the Profits Members
set forth on Schedule A hereto.

          (cc) "MMC" means Marsh & McLennan Companies, Inc., a Delaware
corporation, and any successor thereto.

          (dd) "Net Loss" shall mean the net loss of the Company with respect to
a Fiscal Period, as determined for federal income tax purposes, PROVIDED that
such loss shall be decreased by the amount of all income during such period that
is exempt from federal income tax and increased by the amount of all
expenditures made by the Company during such period that are not deductible for
federal income tax purposes and that do not constitute capital expenditures.

          (ee) "Net Profit" shall mean the net income of the Company with
respect to a Fiscal Period, as determined for federal income tax purposes,
provided that such income shall be increased by the amount of all income during
such period that is exempt from federal income tax and increased by the amount
of all expenditures made by the Company during such period that are not
deductible for federal income tax purposes and that do not constitute capital
expenditures.

          (ff) "Nonrecourse Deductions" shall have the meaning set forth in
Treasury Regulations Section 1.704-2(b)(1).

          (gg) "Nonrecourse Liability" shall have the meaning set forth in
Treasury Regulations Section 1.752-1(a)(2).

          (hh) "Non-Solicitation Agreement" shall mean the Non-Solicitation
Agreement or any similar agreement or provision in effect from time to time
between the Profits Member and the Managing Member or any of its Affiliates.

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          (ii) "Partner Nonrecourse Debt" shall have the meaning set forth in
Treasury Regulations Section 1.704-2(b)(4).

          (jj) "Partner Nonrecourse Debt Minimum Gain" shall have the meaning
set forth in Treasury Regulations Section 1.704-2(i)(2).

          (kk) "Partner Nonrecourse Deductions" shall have the meaning set forth
in Treasury Regulations Section 1.704-2(i)(1).

          (ll) "Partnership Minimum Gain" shall have the meaning set forth in
Treasury Regulations Section 1.704-2(b)(2).

          (mm) "Pass-Thru Member" shall have the meaning set forth in Section
8.3.

          (nn) "Percentage Interest" shall mean, with respect to a Profits
Member, a fraction, the numerator of which is the amount of such Member's
Capital Commitment and the denominator of which is the sum of all Profits
Members' Capital Commitments.

          (oo) "Person" shall mean any natural person, corporation, partnership,
trust, limited liability company or other entity.

          (pp) "Portfolio Investment" shall mean any investment made by the
Company, other than a Temporary Investment.

          (qq) "Profits Interest" shall mean interest in the Company held by a
Profits Member.

          (rr) "Profits Member" shall have the meaning set forth in Section
1.5(a).

          (ss) "Putnam" shall mean Putnam Investments LLC, a Delaware Limited
Liability Company, and any successor thereto.

          (tt) "Regulatory Allocations" shall have the meaning set forth in
Section 3.3(b).

          (uu) "Retirement" shall mean, as to a Profits Member, a termination of
the Profits Member's employment under circumstances that the Committee, as
described in the Putnam Investments LLC Equity Partnership Plan, determines as
qualifying as retirement for purposes hereof and not inconsistent with the
treatment of the Managing Member's other plans.

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          (vv) "Special Termination" shall mean termination of a Profits
Member's employment by reason of death, Total Disability or Retirement.

          (ww) "Tax Matters Member" shall have the meaning set forth in Section
8.3.

          (xx) "Temporary Investments" shall mean investments in (i) cash or
cash equivalents, (ii) marketable direct obligations issued or unconditionally
guaranteed by the United States, or issued by any agency thereof, maturing
within one year from the date of acquisition thereof, (iii) money market
instruments, commercial paper or other short-term debt obligations having at the
date of purchase by the Company the highest or second highest rating obtainable
from either Standard & Poor's Ratings Services or Moody's Investors Services, or
their respective successors, (iv) interest bearing accounts at a registered
broker-dealer, (v) money market mutual funds, (vi) certificates of deposit
maturing within one year from the date of acquisition thereof issued by
commercial banks incorporated under the laws of the United States or any state
thereof or the District of Columbia, each having at the date of acquisition by
the Company combined capital and surplus of not less than $100 million, (vii)
overnight repurchase agreements with primary Federal Reserve Bank dealers
collateralized by direct U.S. Government obligations, (viii) short- and
medium-term fixed income investments paying interest exempt, in the opinion of
counsel to the issuer thereof, from federal income tax, (ix) pooled investment
funds or accounts that invest only in securities or instruments of the type
described in (i) through (viii).

          (yy) "THL Fund V" shall mean the Thomas H. Lee Equity Fund V, L.P.

          (zz) "Total Disability" means, as to any Profits Member, a total
disability within the meaning of any long-term disability plan maintained for
the benefit of the Profits Member or, if the Profits Member is not covered by
such disability plan, then as determined by the Managing Member. A person will
be considered to have terminated employment due to his or her "Total Disability"
on the first day of his or her continuous absence from work on account of the
disability supporting his or her certification as having a Total Disability.

          (aaa) "Treasury Regulations" shall mean the income tax regulations
promulgated under the Code, as amended, reformed or otherwise modified from time
to time.

          Section 1.2 COMPANY NAME. The Company shall do business under the name
of Putnam Investments Employees' Securities Company II LLC or such other name as
the Managing Member may select from time to time.

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          Section 1.3 FISCAL YEAR. The fiscal year of the Company ("Fiscal
Year") shall end on December 31 of each year (or such other day as determined in
the sole and absolute discretion of the Managing Member).

          Section 1.4 PRINCIPAL OFFICE. The principal office of the Company
shall be at One Post Office Square, Boston, Massachusetts 02109, or such other
place as may from time to time be designated by the Managing Member. The
Managing Member shall give prompt notice of any change to each Member.

          Section 1.5 MEMBERS, LIABILITY OF MEMBERS.

          (a) The names of all of the Members other than the Managing Member
(the "Profits Members") are set forth in Part II of Schedule A hereto.

          (b) The Member who is designated in Part I of Schedule A as the
Managing Member (the "Managing Member") shall be the Managing Member.

          (c) Except as may be otherwise provided by the Delaware Limited
Liability Company Act or herein, the debts, obligations and liabilities of the
Company, whether arising in contract, tort or otherwise, shall be solely the
debts, obligations and liabilities of the Company, and the Members shall not be
obligated personally for any such debt, obligation or liability of the Company
solely by reason of being a member of the Company.

          Section 1.6 PURPOSES OF COMPANY.

          (a) The Company is organized for the purpose of (i) making direct,
side-by-side co-investments, to the extent practicable, with the THL Fund V and
(ii) engaging in all activities and transactions as the Managing Member may deem
reasonably necessary, advisable or incidental in connection therewith,
including, without limitation:

                    (A) to place record title to, or the right to use, Company
               assets in, the name or names of one or more nominees (corporate
               or otherwise) or trustees for any purpose convenient or
               beneficial to the Company;

                    (B) to have its business and affairs managed by the Managing
               Member, subject to and in accordance with Article II;

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                    (C) to engage third parties to provide administrative
               services to the Company or for any other permissible activity;
               and

                    (D) to engage personnel and employees of the Company, the
               Managing Member or its affiliates, whether part-time or
               full-time, to engage attorneys, independent auditors or such
               other persons as the Managing Member may deem necessary or
               advisable, and to do all such other acts as the Managing Member,
               or such personnel or employees acting within the scope of
               authority granted to them by the Managing Member or this
               Agreement, may deem necessary or advisable in connection with
               carrying out the business of the Company including, without
               limitation, subject to the supervision of the Company, to offer
               and sell interests in the Company to prospective investors in
               accordance with the Securities Act, as amended or any exemption
               thereunder and all applicable state securities or blue sky laws
               with such sales charges payable by the Managing Member and to do
               all things necessary or appropriate in connection with making
               such offers and sales.

          Section 1.7 ASSIGNABILITY OF INTEREST.

          (a) Except with the express written consent of the Managing Member,
which may be withheld in its sole and absolute discretion, a Profits Member may
not assign, sell, transfer, pledge, hypothecate or otherwise dispose of any of
the attributes of its interest in the Company in whole or in part to any Person.
Any assignment, sale, transfer, pledge, hypothecation or other disposition made
in violation of this Section 1.7 shall be void and of no effect. Furthermore, no
transferee of an Interest shall become a Profits Member except upon admission
pursuant to Section 5.1 upon the consent of the Managing Member which may be
withheld in its sole and absolute discretion.

          (b) Without the consent of a Majority of the Unaffiliated Interests,
the Managing Member may not assign, sell, transfer, pledge, hypothecate or
otherwise dispose of any of the attributes of its interest in the Company, as
Managing Member, as a whole or in part, to any Person, unless, immediately prior
to and after such assignment, sale, transfer, pledge, hypothecation or other
disposal, such Person was controlled by the Managing Member or by the Person or
Persons who controlled the Managing Member immediately prior to such
transaction.

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          Section 1.8 REGISTERED OFFICE AND AGENT IN DELAWARE. The address of
the Company's registered office in the State of Delaware is 1209 Orange Street,
Wilmington, Delaware, which may be changed by the Managing Member from time to
time in its sole and absolute discretion. The name of its registered agent at
that address is The Corporation Trust Company. The Company may from time to time
have such other place or places of business within or without the State of
Delaware as may be designated by the Managing Member.

                                   ARTICLE II

                              Management of Company

          Section 2.1 MANAGEMENT GENERALLY. The management of the Company shall
be vested exclusively in the Managing Member. The Profits Members shall have no
part in the management of the Company, and shall have no authority or right in
their capacity as Profits Members to act on behalf of the Company in connection
with any matter. Employees of the Company shall have authority to act on behalf
and in the name of the Company to the extent authorized by the Managing Member
acting as the equivalent of the board of directors of a corporation or as
expressly authorized by this Agreement.

          Section 2.2 AUTHORITY OF MANAGING MEMBER. The Managing Member shall
have the power by itself on behalf and in the name of the Company to carry out
any and all of the objects and purposes of the Company set forth in Section 1.6
and to perform all acts and enter into and perform all contracts and other
undertakings necessary or advisable or incidental thereto, including, without
limitation, the power to:

          (a) exercise with full discretion to purchase, sell and exercise
voting or consent rights with respect to all instruments, investments and other
property in which the Company assets may be invested and otherwise on such terms
and conditions as the Managing Member shall determine, including but not limited
to the power to invest funds held by the Company in Temporary Investments
pending investment in Portfolio Investments, pending distributions or for any
other purpose;

          (b) open, maintain and close accounts with brokers, dealers, banks,
currency dealers and others, including the Managing Member and its affiliates,
and issue all instructions and authorizations to entities regarding the purchase
and sale or entering into, as the case may be, of securities, certificates of
deposit, bankers acceptances, agreements for the borrowing and lending of
portfolio securities and other assets, instruments and investments for the
purpose of seeking to achieve the Company purposes as well as to facilitate
capital contributions, distributions,

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withdrawals, the payment of Company expenses and the business and affairs of the
Partnership in general;

          (c) open, maintain and close bank accounts and draw checks or other
orders for the payment of monies;

          (d) acquire, lease, sell, hold or dispose of any assets, liabilities
or investments in the name or for the account of the Company or enter into any
contract or endorsement in the name or for the account of the Company with
respect to any such assets or investments or in any other manner bind the
Company to acquire, lease, sell, hold or dispose of any such assets or
investments whatsoever on such terms as the Managing Member shall determine and
to otherwise deal in any manner with the assets of the Partnership in accordance
with the purposes of the Managing Member;

          (e) borrow money from any source or with any party, upon such terms
and conditions as the Managing Member may deem advisable and proper, to execute
promissory notes, drafts, bills of exchange and other instruments and evidences
of indebtedness and to secure the payment thereof by mortgage, pledge or
assignment of or security interest in all or any part of property then owned or
thereafter acquired by the Company, and refinance, recast, modify or extend any
of the obligations of the Company and the instruments securing those
obligations;

          (f) employ, retain, or otherwise secure or enter into contracts,
agreements and other undertakings with persons in connection with the management
and operation of the Company's business, including, without limitation, any
attorneys and accountants, and including, without limitation, contracts,
agreements or other undertakings and transactions with the Managing Member, any
other Member or any person controlling, under common control with or controlled
by the Managing Member or any other Member, all on such terms and for such
consideration as the Managing Member deems advisable; provided, however, that
any such contracts, agreements or other undertakings and transactions with the
Managing Member or any other Member or any person controlling, under common
control with or controlled by the Managing Member or any other Member shall be
on terms and for consideration which are arm's-length and fair to the parties
consistent with the fiduciary standards applicable to the Managing Member and
shall also be subject to the terms of Section 2.5 to the extent applicable;

          (g) take any and all action which is permitted under the Delaware
Limited Liability Company Act and which is customary or reasonably related to
the business of the Company;

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          (h) make such elections under the Internal Revenue Code of 1986, as
amended (the "Code"), and other relevant tax laws as to the treatment of items
of Company income, gain, loss, deduction and expense, and as to all other
relevant matters, as the Managing Member deems necessary or appropriate,
including, without limitation, the election referred to in Section 754 of the
Code, determination of which items are to be capitalized or treated as current
expenses, and selection of the method of accounting and bookkeeping procedures
to be used by the Company;

          (i) bring or defend, pay, collect, compromise, arbitrate, resort to
legal action, or otherwise adjust claims or demands of or against the Company;

          (j) deposit, withdraw, invest, pay, retain and distribute the
Company's funds in a manner consistent with the provisions of this Agreement;

          (k) cause the Company to carry such indemnification insurance as the
Managing Member deems necessary to protect it and any other individual or entity
entitled to indemnification by the Company pursuant to Section 2.7;

          (l) do any and all acts on behalf of the Company, and exercise all
rights and perform all obligations of the Company, with respect to its interest
in any property or any Person, including, without limitation, the voting of
securities, the filing of reports and other documents with governmental
authorities and self-regulatory organizations, participation in arrangements
with creditors, the institution and settlement or compromise of suits and
administrative proceedings and other like or similar matters;

          (m) authorize any officer, director, employee or other agent of the
Managing Member or any employee or agent of the Company to act for and on behalf
of the Company in any or all of the foregoing matters and all matters incidental
thereto as fully as if such person were the Managing Member;

          (n) create any classes of Members having such relative rights, powers
and duties as may from time to time be established by the Managing Member, so
long as such relative rights, powers and duties do not adversely affect any of
the rights, powers and duties of any Members who are Members at the time of the
creation of such classes, and to amend, without the consent of any of the
Members, the terms and provisions of this Agreement to reflect such relative
rights, powers and duties as are applicable to such classes which have been
created pursuant to this Section 2.2(n).

          (o) appoint persons to act as officers of the Company as desirable,
necessary or appropriate; and

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          (p) make any determinations required hereunder including but not
limited to determinations of amounts attributable to Portfolio Investments;
amounts not attributable to Portfolio Investments; whether a disposition had
been complete or partial; and amounts credited or debited to each Capital
Account with respect to each Portfolio Investment.

          Section 2.3 MEETINGS. There shall be no meetings of the Members unless
called by the Managing Member.

          Section 2.4 RELIANCE BY THIRD PARTIES. Persons dealing with the
Company are entitled to rely conclusively upon the certificate of the Managing
Member or any officer to which it delegates authority to the effect that it is
then acting as the Managing Member of one or more classes or such agent with
respect to one or more classes and upon the power and authority of the Managing
Member and any employee or agent of the Managing Member or the Company as herein
set forth.

          Section 2.5 ACTIVITIES OF MANAGING MEMBER AND AFFILIATES; CONFLICTS OF
INTEREST.

          (a) The Managing Member, its officers, directors, managers, employees
or other agents and agents and employees of the Company shall devote so much of
their time to the affairs of the Company as in their judgment the conduct of the
Company business shall reasonably require and the Managing Member, its officers,
directors, managers, employees or agents and agents and employees of the Company
shall not be obligated to do or perform any act or thing in connection with the
business of the Company not expressly set forth herein. Notwithstanding anything
to the contrary in this Agreement, the officers, directors, managers and
employees of the Managing Member and any Person controlling, under common
control with or controlled by the Managing Member and any employees of the
Company will be permitted to perform similar duties for any entity.

          (b) Nothing herein contained shall be deemed to preclude the Managing
Member or its Affiliates, its officers, directors, managers, employees or other
agents or agents of any of them or employees of the Company, from engaging
directly or indirectly in any other business or from directly or indirectly
purchasing, selling or holding securities, options, separate accounts,
investment contracts, commodities, futures, currency, currency units and forward
currency or currency unit contracts or any other asset and any interests therein
for their own accounts or for the account of any other Person, whether as
investment manager, dealer, broker or otherwise. No Member shall, by reason of
being a Member in the Company, have any right to participate in any manner in
any profits or income earned or derived by or accruing to the Managing Member or
its Affiliates, or its officers, directors, manag-

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ers, employees or other agents, from the conduct of any business other than the
business of the Company or from the conduct of any activities for any account
other than that of the Company.

          (c) The Managing Member may, in its sole and absolute discretion,
allocate investment opportunities that are appropriate for more than one entity
or account sponsored or managed by the Managing Member or its Affiliates in a
manner determined to be fair to such entities by the Managing Member acting in
good faith in accordance with applicable fiduciary standards. The Managing
Member shall have the right to cause the Company or other entities that the
Company controls or invests in to do business with any other investment
partnership of which the Managing Member is the managing member, general
partner, manager or performs similar functions or entities which such other
partnership controls or invests in, in each case, in its sole and absolute
discretion. The Managing Member shall have the right to cause the Company to
execute trades in securities and other instruments with or through the Managing
Member or any of its affiliates so long as such transactions substantially
comply with all applicable regulatory requirements and represent "best
execution" in the good faith judgment of the Managing Member, taking into
account all factors pertinent to the transaction.

          (d) Except as discussed in the offering documents provided to
investors prior to subscribing (as to which consent shall be deemed to have been
given), the Managing Member and its Affiliates may not, acting as principal,
purchase from or sell to the Company any securities unless the Managing Member
shall have disclosed to the Members, prior to completion of such transaction,
the pertinent details thereof and its interest therein and received the consent
of Members holding a Majority of the Unaffiliated Interests. The Managing Member
and its Affiliates may engage in agency cross transactions (as defined for
purposes of the Advisers Act) with the Company if the Managing Member and its
Affiliates comply with all pertinent provisions of such Act and the rules and
regulations thereunder and all other pertinent laws and regulations; provided,
that the Company shall have authority to revoke the foregoing authority by a
resolution adopted by Members holding a Majority of the Unaffiliated Interests.

          Section 2.6 EXCULPATION. No Indemnified Person shall be liable to any
Member or the Company for any act or failure to act on behalf of the Company,
unless such act or failure to act resulted from the willful misfeasance, bad
faith or gross negligence of the Indemnified Person. Each Indemnified Person may
consult with counsel and accountants in respect of Company affairs and shall be
fully protected and justified in any action or inaction which is taken in
accordance with the advice or opinion of such counsel or accountants reasonably
selected. Notwithstanding any of the foregoing to the contrary, the provisions
of this Section 2.6 shall not be

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construed so as to relieve (or attempt to relieve) any Indemnified Person of any
liability, to the extent (but only to the extent) that such liability may not be
waived, modified or limited under applicable law, but shall be construed so as
to effectuate the provisions of this Section 2.6 to the fullest extent permitted
by law.

          Section 2.7 INDEMNIFICATION OF MANAGING MEMBER AND OTHERS.

          (a) The Company, out of its own assets and not out of the assets of
any Member (except as provided in Section 2.7(b) below), shall indemnify and
hold harmless the Managing Member, its Affiliates and any of their respective
officers, directors, managers, members, shareholders, employees or agents,
and/or the legal representatives and any officer, employee or agent of the
Company and any member of any advisory board to the Managing Member or the
Company (herein collectively called the "Indemnified Persons"), to the fullest
extent permitted by law from and against any loss, expense, judgment, settlement
cost, fee and related expenses (including attorneys' fees and expenses), costs
or damages suffered or sustained by reason of being or having been the Managing
Member, an officer, director, member, employee or agent (or a legal
representative or controlling person of) of the Managing Member, or any officer,
employee or agent of the Company or any member of any advisory board to the
Managing Member or the Company, or arising out of or in connection with action
or failure to act on the part of such Indemnified Person unless such act or
failure to act was the result of the willful misfeasance, bad faith or gross
negligence of such Indemnified Person. To the extent that such costs and
expenses are directly attributable to a particular class, such costs and
expenses shall be borne entirely by such class; such costs and expenses not
attributable to any one class will be allocated pro rata. The Company shall,
upon advice of counsel that such Indemnified Person is not likely not to be
entitled to such indemnification, advance to any Indemnified Person reasonable
attorneys' fees and other costs and expenses incurred in connection with the
defense of any action or proceeding which arises out of conduct including any
costs and expenses incurred in enforcing the indemnification under this Section
2.7. The Managing Member hereby agrees and each other Indemnified Person shall
agree in the event that such an advance is made by the Company, it will be
subject to repayment to the extent that it is finally judicially determined that
the Indemnified Person was not entitled to indemnification under this Section
2.7.

          (b) Notwithstanding any other provision of this Agreement, the
Managing Member is authorized to take any action that it determines to be
necessary or appropriate to cause the Company or any class of the Company to
comply with any Federal, state, local and foreign withholding requirement with
respect to any payment, allocation, or distribution by the Company to any Member
or other Person. All amounts so withheld, and, in the manner determined by the
Managing Member in its sole and absolute discretion, amounts withheld with
respect to any payment, allo-

                                       15
<PAGE>

cation or distribution by any Person to the Company, shall be treated as
distributions under the applicable provisions of this Agreement to the
applicable Members under this Agreement. If any such withholding requirement
with respect to any Member exceeds the amount distributable to such Member under
this Agreement, or if any such withholding requirement was not satisfied with
respect to any item previously allocated, paid or distributed to such Member,
such Member or any successor or assignee with respect to such Member's interest
hereby indemnifies and agrees to hold harmless the other Members and the Company
for such excess amount or such withholding requirement, as the case may be
(including any interest, additions and penalties).

          (c) Notwithstanding any of the foregoing to the contrary, the
provisions of this Section 2.7 shall not be construed so as to provide for the
indemnification of any Indemnified Person for any liability to the extent (but
only to the extent) that such indemnification would be in violation of
applicable law or such liability may not be waived, modified or limited under
applicable law, but shall be construed so as to effectuate the provisions of
this Section 2.7 to the fullest extent permitted by law.

          Section 2.8 PAYMENT OF COSTS AND EXPENSES.

          (a) The Managing Member will be responsible for all legal, accounting,
filing and other out-of-pocket expenses of organizing and raising capital for
the Company.

          (b) The Company shall pay all taxes imposed on and payable by the
Company, all investment expenses (i.e., expenses which the Managing Member
reasonably determines to be directly related to the investment of the Company's
assets, such as brokerage and commission expenses, fees and expenses of open and
closed-end funds, margin, premium and interest expenses, fees and disbursements
of transfer agents, registrars, custodians, subcustodians, administrators,
investment advisors, and escrow agents and all other investment related expenses
of any type), and any extraordinary expenses (such as litigation and
indemnification of the Managing Member). The Managing Member shall pay all other
operating expenses of the Company; including all general overhead expenses of
the Company, which includes the rent of the offices which the Managing Member
and Company will occupy, compensation and benefits of the administrative staff
and investment professionals of the Company and the Managing Member, any costs
or expenses of an advisory board to the Company or the Managing Member,
telephones and general purpose office equipment of the Company and the Managing
Member.

                                       16
<PAGE>

                                  ARTICLE III

            Capital Contributions; Capital Accounts; and Allocations

          Section 3.1 CAPITAL COMMITMENTS AND CONTRIBUTIONS.

          (a) CAPITAL COMMITMENTS. The Managing Member hereby agrees to make
Capital Contributions in an aggregate amount equal to the sum of all Capital
Commitments of the Profits Members as set forth in the separate subscription
agreements between the Company and each Profits Member (such aggregate amount,
the "Managing Member Capital Commitment").

          (b) CAPITAL CONTRIBUTIONS. With respect to each Portfolio Investment,
the Managing Member shall make a Capital Contribution to the Company in an
amount equal to the amount of the capital to be invested in such Portfolio
Investment.

          (c) NO THIRD PARTY BENEFICIARIES. The provisions of this Section 3.1
are intended solely to benefit the Company and the Members and, to the fullest
extent permitted by applicable law, shall not be construed as conferring any
benefit upon any creditor of the Company (and no such creditor shall be a third
party beneficiary of this Agreement), and no Member shall have any duty or
obligation to any creditor of the Company to make any contributions to the
Company pursuant to this Section 3.1.

          Section 3.2 CAPITAL ACCOUNTS. A capital account (a "Capital Account")
shall be established and maintained on the Company's books with respect to each
Member, in accordance with the provisions of Treasury Regulations Section
1.704-1(b), including the following:

          (a) Each Member's Capital Account shall be increased by (i) the amount
of that Member's Capital Contributions, if any; (ii) the amount of Net Profit
(or items thereof) allocated to that Member; and (iii) any other increases
required by the Treasury Regulations.

          (b) Each Member's Capital Account shall be decreased by (i) the amount
of Net Loss (or items thereof) allocated to that Member; (ii) the amount of Net
Loss (or items thereof) allocated to that Member; (ii) all cash amounts
distributed to that Member pursuant to this Agreement, other than any amount
required to be treated as a payment for property or services for federal income
tax purposes; (iii) the fair market value of any property distributed in kind to
that Member (net of any liabilities secured by such distributed property that
such Member is considered to as-

                                       17
<PAGE>

sume or take subject to for federal income tax purposes); and (iv) any other
decreases required by the Treasury Regulations.

          (c) All provisions of this Agreement relating to the maintenance of
Capital Accounts are intended to comply with the Code and Treasury Regulations
thereunder and shall be interpreted and applied in a manner consistent with such
law. The Managing Member shall make any necessary modifications to this Section
3.2 in the event events occur that might otherwise cause this Agreement not to
comply with such law or any changes thereto.

          Section 3.3 ALLOCATIONS TO MEMBERS' CAPITAL ACCOUNTS.

          (a) GENERAL RULE. Except as otherwise provided in this Agreement, the
Managing Member shall, in its sole and absolute discretion, allocate Net Profit
(and items thereof) and Net Loss (and items thereof) for any Fiscal Year in a
manner that the Managing Member deems necessary or appropriate to effectuate the
intended economic sharing arrangement of the Members as reflected in Article IV.

          (b) REGULATORY AND RELATED ALLOCATIONS. Notwithstanding anything
expressed or implied to the contrary in this Agreement, the following special
allocations (the "Regulatory Allocation") shall be made to the Capital Accounts
of the Members in the following order:

               (i) MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
          Treasury Regulations Section 1.704-2, if there is a net decrease in
          Partnership Minimum Gain during any Fiscal Period, each Member shall
          be specially allocated items of Company income and gain for such
          Fiscal Period (and, if necessary, subsequent Fiscal Periods) in an
          amount equal to such Member's share of the net decrease in such
          Partnership Minimum Gain, as determined in accordance with Treasury
          Regulations Section 1.7042(g). Allocations pursuant to the previous
          sentence shall be made in proportion to the respective amounts
          required to be allocated to the Members pursuant thereto. The items to
          be so allocated shall be determined in accordance with Treasury
          Regulations Section 1.7042. This Section 3.3(b)(i) is intended to
          comply with the minimum gain chargeback requirement in such Treasury
          Regulations and shall be interpreted consistently therewith.

               (ii) PARTNER MINIMUM GAIN CHARGEBACK. Except as otherwise
          provided in Treasury Regulations Section 1.704-2, if there is a net
          decrease in Partner Nonrecourse Debt Minimum Gain attributable

                                       18
<PAGE>

          to Partner Nonrecourse Debt during any Fiscal Period, each Member
          shall be specially allocated items of Company income and gain for such
          Fiscal Period (and, if necessary, subsequent Fiscal Periods) in an
          amount equal to such Member's share, if any, of the net decrease in
          Partner Nonrecourse Debt Minimum Gain attributable to such Partner
          Nonrecourse Debt, as determined in accordance with Treasury
          Regulations Section 1.704-2(i). 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. This Section 3.3(b)(ii) is intended to
          comply with the minimum gain chargeback requirements in such Treasury
          Regulations and shall be interpreted consistently therewith.

               (iii) NONRECOURSE DEDUCTIONS. Any Nonrecourse Deductions for any
          Fiscal Period shall be allocated to the Members in any manner
          permitted by the applicable Treasury Regulations.

               (iv) PARTNER NONRECOURSE DEDUCTIONS. Any Partner Nonrecourse
          Deductions for any Fiscal Period shall be allocated to the Member who
          bears the economic risk of loss with respect to the Partner
          Nonrecourse Debt to which such Partner Nonrecourse Deductions are
          attributable in accordance with Treasury Regulations Section 1.704-2.

          (c) CURATIVE ALLOCATIONS. The Regulatory Allocations are intended to
comply with certain requirements of Treasury Regulations under Section 704 of
the Code. Notwithstanding any other provision of this Article III (other than
the Regulatory Allocations), the Regulatory Allocations shall be taken into
account in allocating other Company items of income, gain, loss, deduction and
expense among the Members so that, to the extent possible, the net amount of
such allocations of other Company items and the Regulatory Allocations shall be
equal to the net amount that would have been allocated to the Members pursuant
to this Section 3.3 if the Regulatory Allocations had not been made.

          (d) SECTION 754 ADJUSTMENTS. Pursuant to Treasury Regulation Section
1.7041(b)(2)(iv)(m), to the extent an adjustment to the adjusted tax basis of
any Company asset under Section 734(b) or Section 743(b) of the Code is required
to be taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to the
Members in a manner consistent

                                       19
<PAGE>

with the manner in which their Capital Accounts are required to be adjusted
pursuant to such Treasury Regulations.

          (e) TRANSFER OF OR CHANGE IN INTERESTS. The Managing Member is
authorized to adopt any convention or combination of conventions likely to be
upheld for federal income tax purposes regarding the allocation and/or special
allocation of items of Company income, gain, loss, deduction and expense with
respect to a newly issued Interest, a transferred Interest and a redeemed
Interest. A transferee of an Interest shall succeed to the Capital Account of
the transferor Member to the extent it relates to the transferred Interest.

          (f) CERTAIN EXPENSES. Syndication and organization expenses, as
defined in Section 709 of the Code (and to the extent necessary as determined in
the sole and absolute discretion of the Managing Member, any other items), shall
be allocated to the Capital Account of the Managing Member.

          (g) ALLOCATION PERIODS AND UNREALIZED ITEMS. Subject to applicable
Treasury Regulations and other applicable law notwithstanding anything expressed
or implied to the contrary in this Agreement, the Managing Member may, in its
sole and absolute discretion, determine allocations to Capital Accounts based on
an annual, quarterly or other period and/or on realized and unrealized net
increases or net decreases (as the case may be) in fair market value of Company
property.

          Section 3.4 TAX ALLOCATIONS.

          (a) Items of Company income, gain, loss, deduction and expense shall
be allocated, for federal, state and local income tax purposes, among the
Members in the same manner as the Net Profit (and items thereof) and Net Loss
(and items thereof) of which such items are components were allocated pursuant
to Section 3.3; provided, however, that tax purposes allocations shall be made
in accordance with Section 704(c) of the Code and the Treasury Regulations
promulgated thereunder, to the extent so required thereby.

          (b) Allocations pursuant to this Section 3.4 are solely for federal,
state and local income tax purposes and shall not affect, or in any way be taken
into account in computing, any Member's Capital Account or share of Net Profit
(and items thereof) or Net Loss (and items thereof).

          (c) The Members are aware of the tax consequences of the allocations
made by this Section 3.4 and hereby agree to be bound by the provisions of this
Section 3.4 in reporting their shares of items of Company income, gain, loss,
deduction and expense.

                                       20
<PAGE>

          Section 3.5 DETERMINATIONS BY MANAGING MEMBER. All matters concerning
the computation of Capital Accounts, the allocation of Net Profit (and items
thereof) and Net Loss (and items thereof), the allocation of items of Company
income, gain, loss, deduction and expense for tax purposes and the adoption of
any accounting procedures not expressly provided for by the terms of this
Agreement shall be determined by the Managing Member in its sole and absolute
discretion. Such determination shall be final and conclusive as to all the
Members. Notwithstanding anything expressed or implied to the contrary in this
Agreement, in the event the Managing Member shall determine, in its sole and
absolute discretion, that it is prudent to modify the manner in which the
Capital Accounts, or any debits or credits thereto, are computed in order to
effectuate the intended economic sharing arrangement of the Members as reflected
in Article IV, the Managing Member may make such modification without the
approval of Profits Members.

          Section 3.6 VALUATION. For Capital Account and tax purposes, subject
to the discretion of the Managing Member, Company assets will be valued at their
respective cost bases until sale, disposition or other taxable event. Whenever
valuation of Company assets or net assets is required by this Agreement, the
Managing Member shall determine the fair market value thereof in good faith in
accordance with the following description:

          (a) Valuation shall be determined with respect to Marketable
Securities (i) that are primarily traded on a securities exchange, at the
average of their closing sale prices on the principal securities exchange for
which they are traded for the five Business Days immediately preceding and
including the date of determination and the five Business Days after the date of
the determination or, if no sales occurred on any such day, the mean between the
closing "bid" and "asked" prices on such day; and (ii) the principal market for
which is or is deemed to be the over-the-counter market, at the average of their
closing sales prices on each Business Day during such period, as published by
NASDAQ or any similar organization, or if such price is not so published on any
such day, the mean between their closing "bid" and "asked" prices, if available,
on such day, which prices may be obtained from any reputable pricing service,
broker or dealer, and

          (b) Valuation shall be determined with respect to all other securities
or other assets or interests in the Company, other than cash and securities, at
the value determined by the Managing Member in good faith considering all
factors, information and data determined to be pertinent.

                                       21
<PAGE>

                                   ARTICLE IV

                    Withdrawals and Distributions of Capital

          Section 4.1 WITHDRAWALS AND DISTRIBUTIONS IN GENERAL.(a) No Member
shall have the right to withdraw or demand distributions of any amount in its
Capital Account, except as expressly provided in this Article IV and in Article
VII.

          Section 4.2 CURRENT DISTRIBUTIONS OR PLAN.

          (a) CASH DISTRIBUTIONS. The Company may make distributions of cash
revenues, reduced, in the sole and absolute discretion of the Managing Member,
by reserves, expenses, fees and taxes, if any, of the Company.

          (b) GENERAL DISTRIBUTIONS. Subject to Section 4.4, net proceeds
attributable to the disposition of a Portfolio Investment, together with any
dividends or interest income earned with respect to such Portfolio Investment,
shall be distributed as follows:

               (i) 100% to the Managing Member until the cumulative amount
          distributed to the Managing Member pursuant to this clause (i) is
          equal to the sum of (y) the aggregate Capital Contributions of the
          Managing Member used to fund the cost of such Portfolio Investment and
          each other Portfolio Investment previously disposed of and (z) such
          additional amount as is necessary to provide the Managing Member with
          a rate of return on the amount of such Capital Contributions equal to
          the AFR Rate on each such Capital Contribution (such sum of clauses
          (y) and (z), the "AFR Return"); and

               (ii) the remainder to the Profits Members pro rata in accordance
          with their respective Capital Commitments.

          Section 4.3 DEEMED SALE OF ASSETS. Prior to the dissolution of the
Company, the Managing Member intends generally to avoid making in-kind
distributions of non-marketable securities. For all purposes of this Agreement,
(i) any property (other than United States dollars) that is distributed in kind
to one or more Members with respect to a Fiscal Period (including, without
limitation, any such in-kind property that is distributed upon the dissolution
and winding up of the Company) shall be deemed to have been sold for an amount
of cash equal to its fair market value as determined under Section 3.6, (ii) the
unrealized gain or loss inherent in such property shall be treated as recognized
gain or loss for purposes of determining Net Profit and Net Loss, (iii) such
gain or loss shall be allocated pursuant to Section

                                       22
<PAGE>

3.3 for such Fiscal Period and (iv) such in-kind distribution shall be made
after giving effect to such allocation.

          Section 4.4 RESTRICTIONS ON DISTRIBUTIONS. The foregoing provisions of
this Article IV to the contrary notwithstanding, no distribution shall be made:
(a) if such distribution would violate any contract or agreement to which the
Company is then a party or any law, rule, regulation, order or directive of any
governmental authority then applicable to the Company; (b) to the extent that
the Managing Member, in its sole and absolute discretion, determines that any
amount otherwise distributable should be retained by the Company to pay, or to
establish a reserve for the payment of, any liability or obligation of the
Company, whether liquidated, fixed, contingent or otherwise; (c) to hedge an
existing investment; or (d) to the extent that the Managing Member, in its sole
and absolute discretion, determines that the cash available to the Company is
insufficient to permit such distribution.

          Section 4.5 DEFICIT RESTORATION AND CLAWBACK BY PROFITS MEMBERS.

          (a) IN GENERAL. If, as of the date of the dissolution of the Company
(but in any event not later than 90 days after the last day of the Company's
last taxable year), but prior to the application of this Section 4.5, the
aggregate amount distributed pursuant to Article IV and Article VII to the
Managing Member is not sufficient to provide for the AFR Return, each Profits
Member shall, subject to Section 4.5(b), contribute to the Company, an amount
that equals the amount of such shortfall determined by the Managing Member to be
attributable to the Capital Contributions made by the Managing Member that
relate to the Capital Commitment of such Profit Member and the Company shall,
subject to applicable law, distribute such amount to the Managing Member.

          (b) CERTAIN TERMINATIONS OF EMPLOYMENT. If a Profits Member forfeits
any portion of his Profits Interest pursuant to Section 6.1, such Profits Member
shall be required to contribute to the Company an amount equal to the product of
(i) the amount determined under Section 4.5(a) and (ii) the percentage
determined under the following table:

           Full years since grant of Profits Interest               Percentage

           Less than 1                                              0%
           1                                                        25%
           2                                                        50%
           3                                                        75%
           4 or more                                                100%

                                       23
<PAGE>

provided that if the Profits Member forfeits his Profits Interest as a result of
a termination of employment for Cause or subsequent violation of the Profit
Member's Non-Solicitation Agreement or Confidentiality Agreement with Putnam,
the percentage shall be 0% (zero).

          Section 4.6 EXCUSE OF MEMBERS FROM A PORTFOLIO INVESTMENT. If the
Managing Member, in its sole discretion, determines that it is in the best
interests of the Company, the Members or a portfolio company that one or more
Members should be excused from participating in a Portfolio Investment, the
Managing Member shall modify the terms and provisions of this Article IV as it
determines, in its sole and absolute discretion, to be appropriate and
equitable.

          Section 4.7 INTEREST. No interest shall be paid or credited to the
Members with respect to their Capital Contributions, their Capital Accounts or
upon any undistributed funds left on deposit with the Company.

                                   ARTICLE V

                            Admission of New Members

          Section 5.1 ADMISSION OF MEMBERS.

          (a) Members will be admitted to the Company (i) as of the Initial
Closing and (ii) at any time after the Initial Closing at the sole and absolute
discretion of the Managing Member, subject only to the condition that each new
Member agrees to be bound by the terms and provisions hereof. Such agreement to
be bound shall be deemed to occur upon admission of such Member, which shall
occur as of the date such person is named in the books and records of the
Company. Such new Members will have the same rights and obligations of all the
Members admitted at the Initial Closing except that such new Members will not
participate in Portfolio Investments made prior to their investment in the
Company. The Managing Member, in its sole and absolute discretion, may at any
time admit or refuse to admit a transferee of an interest as a Member or a
substituted Member, or it may replace a terminated Member under Section 6.1(b)
with a substituted Member. Such agreement to be bound shall be deemed to occur
upon admission of such Member, which shall occur as of the date such person is
named in the books and records of the Company. Such substituted Members will
have the same rights and obligations of all the Members admitted at the Initial
Closing except that such substituted Members will not participate in Portfolio
Investments made prior to their investment in the Company. The Managing Member,
in its sole and absolute discretion, may at any time admit or refuse to admit a
transferee of an interest as a Member or a substitute Mem-

                                       24
<PAGE>

ber, or it may replace a terminated Member under Section 6.1(b) with a
substitute Member.

          (b) The Managing Member may appoint and admit a new Managing Member
immediately prior to its transfer of its interest if such new Managing Member
satisfies the requirements set forth in Section 1.7(b).

                                   ARTICLE VI

           Withdrawal, Termination of Employment, Death, Incompetency

          Section 6.1 WITHDRAWAL OF MEMBERS; TERMINATION OF EMPLOYMENT.

          (a) A Member shall not have the right to withdraw from the Company
except with the prior written consent of the Managing Member, which consent may
be granted or withheld in its sole and absolute discretion.

          (b) If the employment of a Profits Member by the Managing Member or an
Affiliate thereof terminates for any reason other than a Special Termination
prior to the earlier of (i) the eighth anniversary of the date of this Agreement
or (ii) the date of a Change in Control of MMC or a Change in Control of Putnam,
such Profits Member shall forfeit his Profits Interest to the extent described
in Section 6.1(f).

          (c) Unless otherwise determined by the Managing Member (such
determination to occur only in individual isolated situations), in the case of
any Special Termination any Profits Interest held by the Member shall be fully
vested as of the date of such termination and shall not be forfeited, subject to
compliance with the terms of any Non-Solicitation or Confidentiality Agreement
with Putnam.

          (d) Unless otherwise determined by the Managing Member, in the event
that a Profits Member breaches such Profits Member's Non-Solicitation Agreement
with Putnam, such Profits Member shall: (i) forfeit his Profits Interests to the
extent described in Section 6.1(f) and (ii) be required promptly to repay 50% of
all amounts previously distributed to such Profits Member pursuant to this
Agreement.

          (e) Unless otherwise determined by the Managing Member, in the event
that a Profits Member breaches such Profits Member's Confidentiality Agreement
with Putnam, such Profits Member shall forfeit his Profits Interests to the
extent described in Section 6.1(f).

                                       25
<PAGE>

          (f) Notwithstanding any other term or provision of this Agreement, if
a Profits Member forfeits his interest pursuant to this Section 6.1, (i) such
Profits Member shall have no further right to receive distributions of any kind
from the Company pursuant to this Agreement or to consent to or vote on any
matter requiring the consent or vote of any member of the Company; (ii) such
Profits Member shall continue to have the obligation set forth in Section 4.5;
and (iii) the Managing Member shall receive all distributions that previously
would have been made to such Profits Member. The Managing Member shall have the
right, in its sole and absolute discretion, to cause a Profits Member to forfeit
a portion rather than all of his Profits Interest pursuant to this Section 6.1.

          Section 6.2 EFFECT OF DEATH, ETC. The death, disability, incapacity,
incompetency, bankruptcy, insolvency or dissolution of a Member shall not
dissolve the Company or class thereof. The legal representatives, if any, of a
Member shall succeed as assignee to the Member's interest in the Company upon
the death, incapacity, incompetency, bankruptcy, insolvency or dissolution of a
Member, but shall not be admitted as a substituted member without the consent of
the Managing Member in its sole and absolute discretion.

          Section 6.3 LIMITATIONS ON WITHDRAWAL OF CAPITAL ACCOUNTS. The right
of any Member or the legal representatives of such Member to have distributed
any of such Member's Capital Accounts pursuant to this Article VI is subject to
the provision by the Managing Member for all Company liabilities in accordance
the Delaware Limited Liability Company Act, and for reserves for contingencies
established by the Managing Member in good faith.

          Section 6.4 WITHDRAWAL, REMOVAL OR REPLACEMENT OF MANAGING MEMBER. The
Managing Member may resign or withdraw effective at any time upon 30 days' prior
written notice to the Members. The Profits Members shall have no right to remove
or replace the Managing Member or to continue the Company upon the resignation,
withdrawal, bankruptcy or insolvency of the Managing Member.

                                  ARTICLE VII

                       Duration and Termination of Company

          Section 7.1 DURATION. The term of the Company will be unlimited unless
terminated in accordance with the Delaware Limited Liability Company Act. There
shall be a dissolution of a class of the Company and its affairs shall be wound
up upon the first to occur of any of the following events:

                                       26
<PAGE>

               (i) The termination or liquidation of the THL Fund V, subject to
          extension in the sole discretion of the Managing Member; or

               (ii) The withdrawal or dissolution and commencement of winding up
          of the Managing Member, or the assignment by the Managing Member of
          its entire interest in the Company in contravention of this Agreement,
          or the occurrence of any other event that causes the Managing Member
          to cease to be a managing member of the Company under the Delaware
          Limited Liability Company Act unless, within 90 calendar days after
          the occurrence of such event, a substitute managing member is
          appointed by the Managing Member effective as of such event; or

               (iii) A decision, made by the Managing Member in its sole and
          absolute discretion, to dissolve the Company; or

               (iv) The entry of a decree of judicial dissolution.

          Section 7.2 TERMINATION. On termination of the business of the
Company, the Managing Member shall, within no more than 30 days after completion
of a final audit of the Company's books and records (which shall be performed
within 90 days of such termination), make distributions, out of Company assets
in the following manner and order:

          (a) to payment and discharge of the claims of all creditors of the
Company who are not Members;

          (b) to payment and discharge of the claims of all creditors of the
Company who are Members;

          (c) to the Members or their respective legal representatives in
accordance with the positive balances in their respective Capital Accounts,
after taking into account all adjustments to Capital Accounts for all periods.

                                  ARTICLE VIII

                   Accounting, Tax Returns; Reports to Members

          Section 8.1 ACCOUNTING.

          (a) The books and records of the Company shall be kept on the cash
basis or the accrual basis, as determined by the Managing Member in its sole

                                       27
<PAGE>

and absolute discretion. The Company shall report its operations for tax
purposes on the cash method or the accrual method, as determined by the Managing
Member in its sole and absolute discretion. The taxable year of the Company
shall be the calendar year, unless the Managing Member shall designate another
taxable year for the Company that is a permissible taxable year under the Code.

          (b) The books and records of the Company shall be audited by
independent certified accountants selected by the Managing Member, as of the end
of each Fiscal Year.

          Section 8.2 FILING OF TAX RETURNS. The appropriate officers of the
Company shall prepare and file, or cause the Company's accountants to prepare
and file, a federal information tax return and any required state and local
income tax and information returns for each taxable year of the Company. The
Managing Member has sole and absolute discretion as to whether or not to prepare
and file (or cause its accountants to prepare and file) composite, group or
similar state, local and foreign tax returns on behalf of the Members where and
to the extent permissible under applicable law. Each Member hereby agrees to
execute any relevant documents (including a power of attorney authorizing such a
filing), to furnish any relevant information and otherwise to do anything
necessary in order to facilitate any such composite, group or similar filing.
Any taxes paid by the Company in connection with any such composite, group or
similar filing shall be treated as an advance to the relevant Members (with
interest being charged thereon) and shall be recouped by the Company out of any
distributions subsequently made to such relevant Members. Such advances may be
funded by Company borrowing. Both the deduction for interest payable by the
Company with respect to any such borrowing, and the corresponding income from
interest received by the Company from the relevant Members, shall be
specifically allocated to such Members. The books and records of the Company
shall be audited by independent certified accountants selected by the Managing
Member, as of the end of each Fiscal Year.

          Section 8.3 TAX MATTERS MEMBER. The Managing Member shall be
designated as the tax matters partner for the Company (the "Tax Matters Member")
as provided in Section 6231(a)(7) of the Code. Each Person (for purposes of this
Section 8.3, called a "PassThru Member") that holds or controls an Interest on
behalf of, or for the benefit of another Person or Persons, or which PassThru
Member is beneficially owned (directly or indirectly) by another Person or
Persons shall, within 30 days following receipt from the Tax Matters Member of a
notice or document, convey such notice or other document in writing to all
holders of beneficial interests in the Company holding such interest through
such PassThru Member. In the event that the Company shall be the subject of an
income tax audit by any federal, state or local authority, to the extent such
class of the Company is treated as an entity for

                                       28
<PAGE>

purposes of such audit, including administrative settlement and judicial review,
the Tax Matters Member shall be authorized to act for, and its decision shall be
final and binding upon, the Company and each Member. All expenses incurred in
connection with any such audit, investigation, settlement or review shall be
borne by the Company.

          Section 8.4 ANNUAL REPORTS TO MEMBERS. Within 90 days after the end of
each Fiscal Year (or as soon thereafter as practicable), the Company shall
prepare and mail to each Person who was a Member during such Fiscal Year, or
shall cause others to do so, a financial report setting forth the following:

          (a) a balance sheet of the Company as of the close of such Fiscal
Year; and

          (b) a statement showing the Net Income or Net Loss for such Fiscal
Year in reasonable detail.

          The financial report for the Company for each Fiscal Year shall be
accompanied by the report thereon of the independent accountants selected by the
Managing Member and a statement, addressed separately to each Member, of the
amount of each of the Capital Accounts of such Member as of the close of such
Fiscal Year. The Company shall not be required to provide to any Member in
writing any listing of its assets or liabilities or any portion thereof.

          Section 8.5 TAX INFORMATION. Within 90 days after the end of each
taxable year of the Company or as soon thereafter as practicable, the Company
shall prepare and distribute to each Member and, to the extent necessary each
former Member (or such Member's legal representatives), at the expense of the
Company, a report setting forth in sufficient detail such information as shall
enable such Member or former Member (or such Member's legal representatives) to
prepare its respective federal, state and local income tax returns in accordance
with the laws, rules and regulations then prevailing. The Company shall also
provide Schedules K-1 to Members as soon as practicable after the end of each
taxable year of the Company.

                                   ARTICLE IX

                                  Miscellaneous

          Section 9.1 GENERAL. This Agreement: (i) shall be binding on the
executors, administrators, estates, heirs, and legal successors and
representatives of the Members; and (ii) may be executed, through the use of
separate signature pages or in any number of counterparts with the same effect
as if the parties executing such counterparts had all executed one counterpart;
provided, however, that each such

                                       29
<PAGE>

counterpart shall have been executed by the Managing Member and that the
counterparts, in the aggregate, shall have been signed by all of the Members.

          Section 9.2 POWER OF ATTORNEY. Each of the Members hereby appoints the
Managing Member, or any of its officers, if any, (and any substitute or
successor managing member or any officer thereof or of the Company) each acting
individually, as the true and lawful representative of such Member and
attorney-in-fact, in such Member's name, place and stead:

          (a) to receive and pay over to the Company on behalf of such Member,
to the extent set forth in this Agreement, all funds received hereunder;

          (b) to complete or correct, on behalf of such Member and in accordance
with such Member's instructions, all documents to be executed by such Member in
connection with such Member's subscription for an interest in the Company,
including, without limitation, filling in or amending amounts, dates, and other
pertinent information; and

          (c) to make, execute, sign, acknowledge, swear to and file: (i) a
Certificate of Limited Company of the Company and all amendments thereto as may
be required under the Delaware Limited Liability Company Act including, without
limitation, any such filing for the purpose of admitting the undersigned and
others as Members and describing their initial or any increased Capital
Contributions; (ii) any and all instruments, certificates, and other documents
which may be deemed necessary or desirable to effect the winding-up and
termination of the Company (including, but not limited to, a Certificate of
Cancellation of the Certificate of Limited Liability Company); (iii) any
business certificate, fictitious name certificate, amendment thereto, or other
instrument, agreement or document of any kind necessary or desirable to
accomplish the business, purpose and objectives of the Company, or required by
any applicable federal, state or local law; (iv) any counterparts of this
Agreement and any amendments to which such Member is a signatory which have been
adopted as provided in this Agreement; (v) any amendments to any such amendments
(as provided in this Agreement); and (vi) all other filings with agencies of the
federal government, of any state or local government, or of any other
jurisdiction, which the Managing Member considers necessary or desirable to
carry out the purposes of this Agreement, and the business of the Company.

          The power of attorney hereby granted by each of the Members is coupled
with an interest, is irrevocable, shall survive the transfer of the Member's
interest in the Company and shall survive, and shall not be affected by, the
subsequent death, disability, incapacity, incompetency, termination, bankruptcy,
insolvency or dissolution of such Member.

                                       30
<PAGE>

          Such representative and attorney-in-fact shall not have any right,
power or authority to amend or modify this Agreement when acting in such
capacity.

          Section 9.3 AMENDMENTS TO AGREEMENT. The terms and provisions of this
Agreement may be modified or amended at any time and from time to time (i)(A)
with the written consent of Members holding a Majority of the Unaffiliated
Interests or (B) by notice mailed to the address of record of each Member which
is not objected to in writing within 30 days of mailing by Members holding a
Majority of the Unaffiliated Interests and (ii) with the written consent of the
Managing Member; provided, however, that without the consent of the Members the
Managing Member may amend the Agreement or the Schedule hereto to (i) reflect
changes validly made in the membership of the Company and the Capital
Contributions of the Members; (ii) reflect a change in the name of the Company;
(iii) make a change that is necessary or, in the opinion of the Managing Member,
advisable to qualify the Company as a limited liability company in which the
Members have limited liability under the laws of any state, or ensure that the
Company will not be treated as an association taxable as a corporation for
federal income tax purposes; (iv) make a change that does not adversely affect
the Members in any material respect; (v) make a change that is necessary or
desirable to cure any ambiguity or mistake, or to correct or supplement any
provision in this Agreement that would be inconsistent with any other provision
in this Agreement or that is necessary or desirable to satisfy any requirements,
conditions or guidelines contained in any opinion, directive, order, ruling or
regulation of any federal or state statute, so long as such change is made in a
manner which minimizes any adverse effect on the Members; or that is required or
contemplated by this Agreement; (vi) make a change in any provision of this
Agreement that requires any action to be taken by or on behalf of the Managing
Member or the Company pursuant to the requirements of applicable Delaware law if
the provisions of applicable Delaware law are amended, modified or revoked so
that the taking of such action is no longer required; (vii) prevent the Company
or the Managing Member from in any manner being (A) deemed an "investment
company" subject to registration and regulation under the provisions of the
Investment Company Act, (B) treated as a "publicly traded partnership" for
purposes of Section 7704 of the Code, or (C) subject to federal income tax as an
association taxable as a corporation; or (viii) make any amendment necessary to
give effect to the terms of, and amendments agreed to by investors in THL Fund
V; or (ix) make any other amendments similar to the foregoing. To the extent an
amendment relates to particular classes only those classes affected shall vote
thereon, with such determination to be made by the Managing Member in its sole
discretion. The same voting procedures shall apply to class specific amendments
as above. Each affected Member, however, must consent to any amendment which
would (a) reduce such Member's Capital Account or rights of contribution or
withdrawal; (b) reduce the protections provided by this sentence and the
following sentence to such Member; (c) result in the Company being treated as an

                                       31
<PAGE>

association taxable as a corporation for federal income tax purposes; (d) reduce
the right of such Member to share in the profits of the Company; or (e) increase
such Member's liability with respect to losses and expenses of the Company.
Notwithstanding any provision in this Agreement to the contrary, no amendment to
this Agreement shall increase the liability of a Member without such Member's
consent.

          Section 9.4 CHOICE OF LAW. Notwithstanding the place where this
Agreement may be executed by any of the parties thereto, the parties expressly
agree that all the terms and provisions hereof shall be construed under the laws
of the State of Delaware and, without limitation thereof, that the Delaware
Limited Liability Company Act as now adopted or as may be hereafter amended
shall govern the limited liability company aspects of the Agreement.

          Section 9.5 SURVIVAL. All indemnities and reimbursement obligations
made pursuant to this Agreement shall survive dissolution and liquidation of the
Company until expiration of the longest applicable statute of limitations
(including extensions and waivers) with respect to the matter for which a party
would be entitled to be indemnified or reimbursed, as the case may be.

          Section 9.6 NOTICES. Each notice relating to this Agreement shall be
in writing and delivered in person, by facsimile, by courier, Federal Express or
similar delivery service or by registered or certified mail. The receipt of any
notice transmitted by facsimile must be confirmed by any means acceptable in the
preceding sentence to be effective, provided, however, that such a confirmation
does not, in turn, have to be confirmed. All notices to the Company shall be
addressed to its principal office and place of business. All notices addressed
to a Member shall be addressed to such Member at the address provided to the
Company by such Member and set forth in the books and records of the Company.
Any Member may designate a new address by notice to that effect given to the
Company. Unless otherwise specifically provided in this Agreement, a notice
shall be deemed to have been effectively given when faxed or mailed by
registered or certified mail to the proper address, the Business Day after
deposit with an overnight courier or when delivered in person.

          Section 9.7 GOODWILL. No value shall be placed on the name or goodwill
of the Company, which shall belong exclusively to the Managing Member.

          Section 9.8 HEADINGS. The titles of the Articles and the headings of
the Sections of this Agreement are for convenience of reference only, and are
not to be considered in constructing the terms and provisions of this Agreement.

                                       32
<PAGE>

          Section 9.9 CONSTRUCTION AND INTERPRETATION. If any question should
arise with respect to the operation of the Company, which is not otherwise
specifically provided for in this Agreement, or with respect to the
interpretation of this Agreement, the Managing Member is hereby authorized to
make a final determination with respect to any such question and to interpret
this agreement in such a manner as it shall deem fair and equitable, and its
determination and interpretations so made shall be final and binding on all
parties. Whenever possible, the provisions of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be unenforceable or invalid under
said applicable law, such provision shall be ineffective only to the extent of
such unenforceability or invalidity, and the remaining provisions of this
Agreement shall continue to be binding and in full force and effect.

          Section 9.10 CONFIDENTIALITY. No Member shall have the right to
inspect the books and records of the Company with respect to another Member's
Capital Account. Nothing in this Section 9.10 shall prevent a Member from
inspecting the books and records with respect to the Member's own Capital
Account.

          Section 9.11 CONSENT TO JURISDICTION. All Members expressly agree that
all disputes hereunder with respect to the Company's interpretation of this
Agreement or any other matters related to the Company or this Agreement shall be
brought in the Court of Chancery, New Castle County, Delaware.

                                       33
<PAGE>

                  IN WITNESS WHEREOF, the undersigned have hereunto set their
hands as of the date first set forth above.

MANAGING MEMBER:                           PROFITS MEMBER:

                                           ------------------------------------
Putnam Investment Holdings, LLC            Signature of Profits Member

By:                                        ------------------------------------
   --------------------------------------    Print Name of Profits Member

Name:
     ------------------------------------

Title:
      -----------------------------------

                                       34
<PAGE>

             Putnam Investments Employees' Securities Company II LLC

                                   SCHEDULE A

                                                            Dated: June 15, 2001

                                     Part I

                                 MANAGING MEMBER

                                             Amount of Capital     Total Capital
Name and Address                             Commitment            Contributions
Putnam Investment Holdings, LLC
One Post Office Square
Boston, Massachusetts 02109

                                     PART II

                                 PROFITS MEMBERS

          Name and Address

          [See attached Schedule]EXHIBIT 4.20
                             1999 STOCK OPTION PLAN
                                       OF
                              INTER PARFUMS, INC.

      1.    PURPOSES  OF THE  PLAN.  This  stock  option  plan (the  "Plan")  is
designed to provide an  incentive  to key  employees,  officers,  directors  and
consultants of Inter Parfums, Inc., a Delaware corporation (the "Company"),  and
its present  and future  subsidiary  corporations,  as defined in  Paragraph  17
("Subsidiaries"),  and to  offer  an  additional  inducement  in  obtaining  the
services of such  individuals.  The Plan  provides  for the grant of  "incentive
stock options,"  within the meaning of Section 422 of the Internal  Revenue Code
of  1986,  as  amended  (the  "Code"),  nonqualified  stock  options  and  stock
appreciation rights ("SARs").

      2.    SHARES SUBJECT TO THE PLAN. The aggregate number of shares of Common
Stock,  $.001 par value per share,  of the  Company  ("Common  Stock") for which
options or SARs may be granted under the Plan shall not exceed  1,000,000.  Such
shares may, in the discretion of the Board of Directors, consist either in whole
or in part of authorized but unissued shares of Common Stock or shares of Common
Stock held in the treasury of the Company. The Company shall at all times during
the term of the Plan reserve and keep  available such number of shares of Common
Stock as will be sufficient to satisfy the requirements of the Plan.  Subject to
the provisions of Paragraph 14, any shares subject to an option or SAR which for
any reason expire, are canceled or are terminated  unexercised (other than those
which expire,  are canceled or  terminated  pursuant to the exercise of a tandem
SAR or option) shall again become  available for the granting of options or SARs
under the Plan. The number of shares of Common Stock  underlying that portion of
an option or SAR which is exercised (regardless of the number of shares actually
issued) shall not again become available for grant under the Plan.

      3.    ADMINISTRATION OF THE PLAN.

      (a)   The Plan  shall be  administered  by the Board of  Directors,  or if
appointed,  by a Stock  Option  Committee  consisting  of not less  than two (2)
members  of the  Board  of  Directors,  each of whom  shall  be a  "non-employee
director"  within the meaning of Rule 16b-3  promulgated  by the  Securities and
Exchange  Commission.  (The group  administering  the plan is referred to as the
"Committee).  The  failure  of any of the  Committee  members  to  qualify  as a
Anon-employee  director" shall not otherwise affect the validity of the grant of
any option or SAR, or the issuance of shares of Common Stock  otherwise  validly
issued  upon  exercise  of any such  option.  A majority  of the  members of the
Committee shall  constitute a quorum,  and the acts of a majority of the members
present at any  meeting at which a quorum is present,  and any acts  approved in
writing by all members without a meeting, shall be the acts of the Committee.

      (b)   Subject to the express  provisions of the Plan, the Committee  shall
have the authority,  in its sole  discretion,  to determine the  individuals who
shall receive options and SARS; the times when they shall receive them;  whether
an option shall be an incentive or a nonqualified  stock option;  whether an SAR
shall be granted separately, in tandem with or in addition to an option;

<PAGE>

the  number of shares to be subject  to each  option  and SAR;  the term of each
option and SAR; the date each option and SAR shall become  exercisable;  whether
an option or SAR shall be exercisable in whole, in part or in installments,  and
if in  installments,  the number of shares to be  subject  to each  installment;
whether the installments  shall be cumulative,  the date each installment  shall
become  exercisable and the term of each installment;  whether to accelerate the
date of exercise of any installment; whether shares may be issued on exercise of
an option as partly paid, and, if so, the dates when future  installments of the
exercise  price  shall  become  due and the  amounts of such  installments;  the
exercise  price of each  option  and the base  price  of each  SAR;  the form of
payment of the  exercise  price;  the form of payment  by the  Company  upon the
optionee's  exercise of an SAR;  whether to require that the optionee  remain in
the  employ of the  Company  or its  Subsidiaries  for a period of time from and
after the date the  option or SAR is granted to him;  the  amount  necessary  to
satisfy the Company's obligation to withhold taxes; whether to restrict the sale
or other disposition of the shares of Common Stock acquired upon the exercise of
an option or SAR and to waive any such  restriction;  to subject the exercise of
all or any portion of an option or SAR to the  fulfillment of  contingencies  as
specified  in the  Contract  (described  in  Paragraph  12),  including  without
limitations,  contingencies  relating to financial  objectives (such as earnings
per share,  cash flow  return,  return on  investment  or growth in sales) for a
specified period for the Company, a division,  a product line or other category,
and/or the period of continued  employment  of the optionee  with the Company or
its Subsidiaries,  and to determine whether such contingencies have been met; to
construe  the  respective  Contracts  and the  Plan;  with  the  consent  of the
optionee,  to cancel or modify an option or SAR,  provided such option or SAR as
modified  would be  permitted  to be granted on such date under the terms of the
Plan;  and  to  make  all  other  determinations   necessary  or  advisable  for
administering  the Plan.  The  determinations  of the  Committee  on the matters
referred to in this Paragraph 3 shall be conclusive.

      4.    ELIGIBILITY.  The Committee may, consistent with the purposes of the
Plan,  grant  incentive stock options to key employees  (including  officers and
directors who are employees) and  nonqualified  stock options and/or SARs to key
employees,  officers,  directors  and  consultants  of the Company or any of its
Subsidiaries  from time to time, within ten (10) years from the date of adoption
of the Plan by the Board of Directors,  covering such number of shares of Common
Stock as the  Committee may  determine;  provided,  however,  that the aggregate
market value  (determined at the time the stock option is granted) of the shares
for which any eligible  person may be granted  incentive stock options under the
Plan or any plan of the Company,  or of a Parent or a Subsidiary  of the Company
which are  exercisable  for the first time by such optionee  during any calendar
year shall not exceed  $100,000.  Any option  (or  portion  thereof)  granted in
excess of such amount shall be treated as a nonqualified stock option.

      SECTION 4A. CODE SECTION 162(M) PROVISIONS.

      (a)   Notwithstanding  any other  provision of the Plan,  if the Committee
determines that at the time a person is granted an option or SAR, such person is
then, or is likely to become,  a Covered Person (as hereinafter  defined),  then
the Committee may provide that this Section 4A is applicable to such grant.

                                       2
<PAGE>

      (b)   Notwithstanding  any provision of this Plan,  no person  eligible to
receive a grant of an option or SAR under this Plan shall be granted  options to
purchase or an SAR in excess of 100,000 shares of common stock in any one fiscal
year.  Such 100,000  maximum  number shall be  appropriately  adjusted for stock
splits, stock dividends and the like.

      (c)   Notwithstanding  any provision of this Plan,  the exercise price for
all options and the base price for all SARs to be granted under the Plan,  shall
not be less than the fair market value of the Common Stock at the time of grant.

      (d)   The term "Covered Person" shall mean a "covered employee" within the
meaning of Code Section 162(m)(3) or any successor provision thereto.

      5.    EXERCISE PRICE AND BASE PRICE.

      (a)   The  exercise  price of the shares of Common Stock under each option
and the base price for each SAR shall be determined by the Committee;  provided,
however,  in the case of an incentive stock option, the exercise price shall not
be less than 100% of the fair  market  value of the Common  Stock on the date of
grant, and further  provided,  that if, at the time an incentive stock option is
granted,  the optionee owns (or is deemed to own) stock possessing more than ten
percent (10%) of the total combined  voting power of all classes of stock of the
Company, of any of its Subsidiaries or of a Parent, the exercise price shall not
be less than 110% of the fair market  value of the Common  Stock  subject to the
option at the time of the granting of such option.

      (b)   The fair market value of the Common stock on any day shall be (a) if
the principal market for the Common stock is a national securities exchange, the
average between the high and low sales prices of the Common stock on such day as
reported by such exchange or on a consolidated  tape reflecting  transactions on
such  exchange;  (b) if the  principal  market  for the  Common  Stock  is not a
national  securities exchange and the Common Stock is quoted on The Nasdaq Stock
Market  ("NASDAQ"),  and (i) if actual sales price information is available with
respect to the Common  Stock,  then the  average  between the high and low sales
prices of the Common Stock on such day on NASDAQ, or (ii) if such information is
not available,  then the average between the highest bid and lowest asked prices
for the Common Stock on such day on NASDAQ;  or (c) if the principal  market for
the Common Stock is not a national  securities  exchange and the Common Stock is
not quoted on NASDAQ,  then the average between the highest bid and lowest asked
prices  for the Common  Stock on such day as  reported  by The  Nasdaq  Bulletin
Board,  or a comparable  service;  provided  that if clauses (a), (b) and (c) of
this Paragraph are all inapplicable, or if no trades have been made or no quotes
are available for such day, then the fair market value of the Common Stock shall
be  determined  by  the  Committee  by any  method  consistent  with  applicable
regulations adopted by the Treasury  Department  relating to stock options.  The
determination  of the  Committee  shall be conclusive  in  determining  the fair
market value of the stock.

      6.    TERM.  The term of each option and SAR granted  pursuant to the Plan
shall be such

                                       3
<PAGE>

term as is established by the Committee,  in its sole  discretion,  at or before
the term of each incentive  stock option  granted  pursuant to the Plan shall be
for a period not exceeding ten (10) years from the date of granting thereof, and
further,  provided,  that if, at the time an incentive  stock option is granted,
the optionee owns (or is deemed to own) stock  possessing  more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company,
of any of its  Subsidiaries  or of a  Parent,  the term of the  incentive  stock
option  shall be for a period not  exceeding  five (5) years.  Options  shall be
subject to earlier termination as hereinafter provided.

      7.    EXERCISE.

      (a)   An  option  or SAR (or any  part or  installment  thereof)  shall be
exercised by giving  written  notice to the Company at its principal  office (at
present 551 Fifth Avenue,  New York, NY 10176)  stating  whether an incentive or
nonqualified  stock option or SAR is being  exercised,  specifying the number of
shares as to which such option or SAR is being exercised,  and in the case of an
option,  accompanied by payment in full of the aggregate exercise price therefor
(or the amount due on exercise if the Contract permits installment  payments) in
the  discretion  of the Committee  (a) in cash or by certified  check,  (b) with
previously  acquired  shares of Common  Stock  having an  aggregate  fair market
value,  on the date of exercise,  equal to the aggregate  exercise  price of all
options being exercised,  or (c) any combination thereof. In addition,  upon the
exercise of a  nonqualified  stock option or SAR, the Company may withhold  cash
and/or  shares  of Common  Stock to be issued  with  respect  thereto  having an
aggregate fair market value equal to the amount which it determined is necessary
to satisfy its obligation to withhold  Federal,  state and local income taxes or
other taxes incurred by reason of such exercise.  Alternatively, the Company may
require the holder to pay to the Company such  amount,  in cash,  promptly  upon
demand.  The Company  shall not be required to issue any shares  pursuant to any
such option or SAR until all required payments have been made. Fair market value
of the shares shall be determined in accordance with Paragraph 5.

      (b)   A person  entitled to receive  Common  Stock upon the exercise of an
option or SAR shall not have the rights of a  shareholder  with  respect to such
shares until the date of issuance of a stock certificate to him for such shares;
provided,  however,  that  until such stock  certificate  is issued,  any option
holder using  previously  acquired shares in payment of an option exercise price
shall have the rights of a shareholder with respect to such previously  acquired
shares.

      (c)   In no case may a fraction of a share be  purchased  or issued  under
the  Plan.  Any  option  granted  in  tandem  with an SAR  shall  no  longer  be
exercisable to the extent the SAR is exercised,  and the exercise of the related
option shall cancel the SAR to the extent of such exercise.

      8.    STOCK APPRECIATION RIGHTS.

      (a)   An SAR may be granted  separately,  in tandem with or in addition to
any option, and may be granted before, simultaneously with or after the grant of
an option hereunder. In addition, the holder of an option may, in lieu of making
the payment  required at the time of exercise under  Paragraph 7, include in the
written  notice  referred to therein an  "election" to

                                       4
<PAGE>

exercise the option as an SAR. In such case,  the  Committee  shall have fifteen
(15) days from the  receipt of notice of the  election  to  decide,  in its sole
discretion,  whether or not to accept the election and notify the option  holder
of its decision.  If the Committee  consents,  such exercise shall be treated as
the exercise of an SAR with a base price equal to the exercise price.

      (b)   Upon the exercise of an SAR, the holder shall be entitled to receive
an  amount  equal to the  excess of the fair  market  value of a share of Common
Stock on the date of exercise  over the base price of the SAR. Such amount shall
be paid, in the discretion of the Committee, in cash, Common Stock having a fair
market  value on the date of  payment  equal to such  amount,  or a  combination
thereof. For purposes of this Paragraph 8, fair market value shall be determined
in accordance with Paragraph 5.

      9.    TERMINATION OF ASSOCIATION WITH THE COMPANY.

      (a)   Any holder of an incentive option whose association with the Company
(and its  Subsidiaries)  has  terminated  for any reason other than his death or
permanent and total  disability (as defined in Section 22(e)(3) of the Code) may
exercise such option, to the extent exercisable on the date of such termination,
at any time within  three (3) months  after the date of  termination,  but in no
event after the expiration of the term of the option; provided, however, that if
his  association  shall be terminated  either (i) for cause, or (ii) without the
consent of the Company, said option shall terminate immediately.

      (b)   Any and all  nonqualified  stock  options or SARs granted  under the
Plan shall terminate  simultaneously  with the termination of association of the
holder  of  such   nonqualified   option  or  SAR  with  the  Company  (and  its
Subsidiaries)  for any  reason  other  than the  death or  permanent  and  total
disability (as defined in Section 22(e)(3) of the Code) of such holder.

      (c)   Options and SARs granted under the Plan shall not be affected by any
change in the status of an optionee  so long as he  continues  to be  associated
with the Company or any of the Subsidiaries.

      (d)   Nothing in the Plan or in any option or SAR  granted  under the Plan
shall confer on any individual  any right to continue to be associated  with the
Company or any of its  Subsidiaries,  or  interfere in any way with the right of
the Company or any of its Subsidiaries to terminate the holder's  association at
any time for any reason  whatsoever  without  liability to the Company or any of
its subsidiaries.

      10.   DEATH OR DISABILITY OF AN OPTIONEE.

      (a)   If an optionee dies while he is  associated  with the Company or any
of its  Subsidiaries,  or within three (3) months after such termination for the
holder of an incentive  option (unless such termination was for cause or without
the consent of the Company),  the option or SAR may be exercised,  to the extent
exercisable on the death, by his executor,  administrator or other person at the
time  entitled by law to his rights  under the option or SAR, at any time within
one (1) year

                                       5
<PAGE>

after death,  but in no event after the  expiration of the term of the option or
SAR.

      (b)   Any holder whose  association  with the Company or its  Subsidiaries
has  terminated  by reason of a permanent  and total  disability  (as defined in
Section  22(e) (3) of the Code) may  exercise  his option or SAR,  to the extent
exercisable upon the effective date of such termination,  at any time within one
(1) year after such date,  but in no event after the  expiration  of the term of
the option or SAR.

      11.   COMPLIANCE WITH SECURITIES  LAWS. The Committee may require,  in its
discretion, as a condition to the exercise of an option or SAR that either (a) a
registration  statement  under  the  Securities  Act of 1933,  as  amended  (the
"Securities Act"), with respect to such shares shall be effective at the time of
exercise or (b) there is an exemption from registration under the Securities Act
for the issuance of shares of Common Stock upon such  exercise.  Nothing  herein
shall be construed as requiring  the Company to register  shares  subject to any
option  or SAR  under  the  Securities  Act.  In  addition,  if at any  time the
Committee shall determine in its discretion that the listing or qualification of
the shares subject to such option or SAR on any securities exchange or under any
applicable law, or the consent or approval of any governmental  regulatory body,
is necessary or desirable as a condition of, or in connection with, the granting
of an option or SAR, or the issue of shares  thereunder,  such option or SAR may
not be exercised in whole or in part unless such listing, qualification, consent
or approval  shall have been  effected or obtained  free of any  conditions  not
acceptable to the Committee.

      12.   STOCK  OPTION  AND SAR  CONTRACTS.  Each  option  and SAR  shall  be
evidenced by an appropriate Contract which shall be duly executed by the Company
and the optionee,  and shall contain such terms and conditions not  inconsistent
herewith as may be determined by the Committee,  and which shall provide,  among
other things,  (a) that the optionee agrees that he will remain in the employ of
the Company or its Subsidiaries,  at the election of the Company,  for the later
of (i) the period of time  determined  by the Committee at or before the time of
grant or (ii) the date to which he is then  contractually  obligated  to  remain
associated  with the Company or its  Subsidiaries,  (b) that in the event of the
exercise  of an option or an SAR which is paid with  Common  stock,  unless  the
shares of Common Stock  received upon such exercise  shall have been  registered
under an effective  registration statement under the Securities Act, such shares
will be acquired for investment and not with a view to distribution thereof, and
that such  shares  may not be sold  except  in  compliance  with the  applicable
provisions of the Securities  Act, and (c) that in the event of any  disposition
of the shares of Common Stock  acquired upon the exercise of an incentive  stock
option within two (2) years from the date of grant of the option or one (1) year
from the date of transfer of such shares to him,  the  optionee  will notify the
Company  thereof in  writing  within 30 days  after  such  disposition,  pay the
Company,  on demand,  in cash an amount necessary to satisfy its obligation,  if
any, to withhold  any  Federal,  state and local  income taxes or other taxes by
reason of such  disqualifying  disposition  and provide the Company,  on demand,
with such information as the Company shall reasonably  request to determine such
obligation.

      13.   ADJUSTMENTS UPON CHANGES IN COMMON STOCK.  Notwithstanding any other
provisions  of the Plan,  in the event of any change in the  outstanding  Common
Stock by reason of

                                       6
<PAGE>

a  stock  dividend,  recapitalization,  merger,  consolidation,  reorganization,
split-up,  combination or exchange of shares or the like,  the aggregate  number
and kind of shares  available  under the Plan, the aggregate  number and kind of
shares subject to each  outstanding  option and SAR and the exercise  prices and
base prices thereof shall be  appropriately  adjusted by the Board of Directors,
whose determination shall be conclusive.

      14.   AMENDMENTS AND  TERMINATION OF THE PLAN. The Plan was adopted by the
Board of Directors on February 8, 1999. No options may be granted under the Plan
after February 7, 2009. The Board of Directors,  without further approval of the
Company's stockholders,  may at any time suspend or terminate the Plan, in whole
or in  part,  or  amend  it from  time to time in such  respects  as it may deem
advisable,  including, without limitation, in order that incentive stock options
granted  hereunder meet the requirements for "incentive stock options" under the
Code, or any comparable  provisions thereafter enacted and conform to any change
in  applicable  law or to  regulations  or rulings of  administrative  agencies;
provided,  however,  that no amendment  shall be effective  without the prior or
subsequent approval of a majority of the Company's outstanding stock entitled to
vote thereon which would (a) except as  contemplated  in Paragraph 13,  increase
the maximum  number of shares for which  options may be granted  under the Plan,
(b)  materially  increase  the  benefits to  participants  under the plan or (c)
change the eligibility  requirements for individuals entitled to receive options
hereunder.  No termination,  suspension or amendment of the Plan shall,  without
the  consent of the holder of an existing  option  affected  thereby,  adversely
affect his rights under such option.

      15.   NONTRANSFERABILITY  OF OPTIONS.  No option or SAR granted  under the
Plan shall be  transferable  otherwise  than by will or the laws of descent  and
distribution,  or qualified  domestic  relations order as defined in the Code or
Title I of the Employee Retirement Income Security Act, and options and SARs may
be  exercised,  during the  lifetime of the holder  thereof,  only by him or his
legal representatives. Except to the extent provided above, options and SARs may
not be assigned,  transferred,  pledged,  hypothecated or disposed of in any way
(whether by operation of law or  otherwise)  and shall not subject to execution,
attachment or similar process.

      16.   SUBSTITUTIONS  AND  ASSUMPTIONS  OF OPTIONS  OF CERTAIN  CONSTITUENT
CORPORATIONS.  Anything in this Plan to the contrary notwithstanding,  the Board
of directors may, without further approval by the  stockholders,  substitute new
options  for  prior  options  and new  SARs  for  prior  SARs  of a  Constituent
Corporation  (as defined in Paragraph 17) or assume the prior options or SARs of
such Constituent Corporation.

      17.   DEFINITIONS.

      (a)   The term "Subsidiary"  shall have the same definition as "subsidiary
corporation" in Section 425(f) of the Code.

      (b)   The  term  "Parent"  shall  have  the  same  definition  as  "parent
corporation" in Section 425(e) of the Code.

                                       7
<PAGE>

      (c)   The term "Constituent  Corporation" shall mean any corporation which
engages with the Company,  its Parent or  Subsidiary,  in a transaction to which
section  425(a) of the Code applies (or would apply if the option or SAR assumed
or substituted were an incentive stock option),  or any Parent or any Subsidiary
of such corporation.

      18.   CONDITIONS PRECEDENT. The Plan shall be subject to

      (a)   approval  by the  holders of a majority  of shares of the  Company's
capital  stock  outstanding  and entitled to vote thereon at the next meeting of
its stockholders,  or the written consent of the holders of a majority of shares
that would have been  entitled to vote  thereon,  and no options or SARs granted
hereunder  may be exercised  prior to such  approval,  provided that the date of
grant of any options  granted  hereunder  shall be determined as if the Plan had
not been subject to such approval; and

      (b)   notification  of the adoption of the Plan to The Nasdaq Stock Market
by the filing of the appropriate  documents,  forms and exhibits, and no options
or SARs granted hereunder may be exercised prior to fifteen (15) days after such
filing,  provided that the date of grant of any options granted  hereunder shall
be determined as if the Plan had not been subject to such filing.

                                       8

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