SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant
Filed by a Party other than the Registrant
Check the appropriate box:
|_| Preliminary Proxy Statement
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Kaye Group Inc.
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
_____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11: (Set forth the amount on which the filing fee is
calculated and state how it was determined.)
_____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________________
5) Total fee paid
|_| Fee paid previously with preliminary materials
|_| Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
1) Amount previously paid: _________________________________________________
2) Form, schedule or registration statement no. ____________________________
3) Filing party: ___________________________________________________________
4) Date filed: _____________________________________________________________
<PAGE>
KAYE GROUP INC.
Index
o Proxy Statement
o Proxy Card
<PAGE>
[GRAPHIC]
KAYE GROUP INC.
122 East 42nd Street
New York, New York 10168
Notice of Annual Meeting of Stockholders
To Be Held on May 11, 1998
To the Stockholders of Kaye Group Inc.:
The Annual Meeting of Stockholders of Kaye Group Inc. (the "Company") will
be held at the 101 Club, 101 Park Avenue, New York, New York, on Monday, May 11,
1998, at 10:00 a.m., local time, for the following purposes:
|_| To elect eight directors of the Company to serve for a term expiring at
the 1999 Annual Meeting of Stockholders;
|_| To transact such other business as may properly come before the meeting
or any adjournment thereof.
The Board of Directors has fixed the close of business on March 27, 1998 as
the record date for determining the stockholders entitled to notice of and to
vote at the meeting or any adjournment thereof. An envelope is enclosed for your
convenience which, if mailed in the United States, requires no postage.
A copy of the Company's Annual Report for the year ended December 31, 1997
and a Proxy Statement accompany this notice. The Company will provide a copy of
its Annual Report on Form 10-K to any stockholder, without cost, upon written
request.
By order of the Board of Directors,
Ivy S. Fischer
Secretary
Kaye Group Inc.
April 14, 1998
<PAGE>
[GRAPHIC]
KAYE GROUP INC.
122 East 42nd Street
New York, New York 10168
MAILING DATE
April 14, 1998
Proxy Statement for Annual Meeting of Stockholders
To be Held on May 11, 1998
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Kaye Group Inc. (the "Company") for use at
the Annual Meeting of Stockholders (the "Meeting") to be held on May 11, 1998,
and at any adjournment thereof. Costs of solicitation will be borne by the
Company. Following the original solicitation of proxies by mail, certain of the
officers and regular employees of the Company may solicit proxies by
correspondence, telephone, or in person, but without extra compensation. The
Company will reimburse brokers and other nominee holders for their reasonable
expenses incurred in forwarding the proxy materials to the beneficial owners.
Unless otherwise indicated thereon, when you sign and return the enclosed
proxy properly executed, the shares represented thereby will be voted FOR the
Directors described herein, and as to any other business as may properly be
brought before the Annual Meeting and any adjournments or postponements thereof
in the discretion of the proxy holders. Each holder of record giving the proxy
enclosed with this Proxy Statement may revoke it at any time, prior to the
voting thereof at the Meeting, by (i) delivering to the Company a written
revocation of the proxy, (ii) delivering to the Company a duly executed proxy
bearing a later date or (iii) voting in person at the Meeting. Attendance by a
stockholder at the Meeting will not in itself constitute the revocation of a
proxy.
VOTING SECURITIES
The holders of record of the Company's common stock, par value $.01 per
share (the "Common Stock"), at the close of business on March 27, 1998 will be
entitled to vote at the meeting. On such record date there were outstanding
8,474,435 shares of Common Stock.
The enclosed proxy provides space for a stockholder to vote for, or to
withhold authority to vote for, any or all of the Company's nominees for
Directors.
The presence, in person or by proxy, of holders of Common Stock
representing a majority of the votes is necessary to constitute a quorum to
transact business at the Meeting. Shares as to which authority to vote on Item 1
is withheld, and broker non-votes (where a broker submits a proxy but does not
have authority to vote a client's
<PAGE>
shares on one or more matters) will be considered present at the Meeting for
purposes of establishing a quorum. With respect to the election of Directors,
neither shares as to which authority to vote has been withheld (to the extent
withheld) nor broker non-votes will be considered affirmative votes.
Kaye International L.P., which together with an affiliated company
beneficially owns 72.9% of the Common Stock, has advised the Company that it
intends to vote its shares in favor of the nominees listed below under "Nominees
for Directors" which would assure the election of the Company's nominees.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of March 25, 1998 with
respect to beneficial ownership of the Company's Common Stock by any person who
is known to the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock, each Director, each nominee for Director,
the named executives (as defined below) and all Directors and executive officers
as a group, based upon 8,474,435 shares of Common Stock outstanding as of that
date.
2
<PAGE>
Shares Beneficially Owned (1)
-----------------------------
Record Owner Number Percent
- ------------ ------ -------
Kaye International L.P. (2) 6,088,029 71.84%
54 Morris Lane
Scarsdale, New York 10583
John S. Weil (3) 619,191 7.31%
Old Lyme Holdings of Rhode Island, Inc. (4) 52,950 *
175 Metro Center Boulevard - Suite 10
Warwick, Rhode Island 02886
Directors and Named Executives:
Howard Kaye (2)(4)(6) 18,454 *
Lawrence Greenfield (2)(4)(5)(6) 23,375 *
Bruce D. Guthart (2)(4)(6) 106,157 1.25%
Ned L. Sherwood (2)(4) 8,264 --
David Ezekiel (6) 12,000 *
Richard Butler (6) 7,100 *
Robert L. Barbanell(6) 9,000 *
Michael P. Sabanos(6) 10,000 0
Elliot S. Cooperstone 0 0
Richard Bass (6) 400 *
All executive officers and directors as a group 197,750 2.33%
(10 persons) (2) (4)
- ----------------------------------
* denotes less than 1%
(1)Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission which generally attribute beneficial
ownership of securities to persons who possess sole or shared voting power
and/or investment power with respect to those securities. The figures assume
exercise by the stockholder named in each row of all options held by such
stockholder which are exercisable within 60 days of March 25, 1998.
(2)The general partners of Kaye International L.P. ("KILP") are ZS Kaye L.P.
("ZS LP") and Kaye Investments L.P. ("Investments"), each a Delaware limited
partnership. Investments is the managing general partner of KILP, although ZS LP
has certain contractual approval rights. The managing general partner of
Investments is Kaye KINV, Inc., a Delaware corporation ("Kaye Inc."). Howard
Kaye, Lawrence Greenfield and Bruce D. Guthart, directors or named executives of
the Company, own 47.30%, 35.75%, and 5.26%, respectively, of the stock of Kaye
Inc. The general partner of ZS LP is ZS Kaye, Inc., a Delaware corporation. Ned
L. Sherwood owns 43.71% of the stock of ZS Kaye, Inc. Messrs. Sherwood, Kaye,
Greenfield and Guthart and ZS LP, ZS Kaye, Inc., Investments, and Kaye Inc. may
be deemed to be beneficial owners of the Common Stock of the Company owned by
KILP, but each disclaims such beneficial ownership.
(3)Pursuant to Amendment No. 2 to Schedule 13D filed June 18, 1997, on behalf of
Mr. John D. Weil, Mr. Weil disclaims beneficial ownership of such shares.
(4)Ned Sherwood, Howard Kaye, Lawrence Greenfield and Bruce D. Guthart own
25.0%, 16.5%, 9.0% and 3.5%, respectively, of Old Lyme Holdings of Rhode Island,
Inc. Messrs. Sherwood, H. Kaye, Greenfield and Guthart disclaim beneficial
ownership of the Common Stock of the Company owned by Old Lyme Holdings of Rhode
Island, Inc.
(5)Includes 5,400 shares held by family members of Mr. Greenfield. Mr.
Greenfield disclaims beneficial ownership of such shares.
(6)Includes vested options for the following individuals to acquire the
following shares: Bruce D. Guthart, 95,000; Howard Kaye, 13,000; Lawrence
Greenfield, 13,000; David Ezekiel, 7,000; Richard Butler, 7,000; Robert L.
Barbanell, 3,000; Michael P. Sabanos, 9,000; and Richard Bass, 400.
3
<PAGE>
KILP has informed the Company that it intends to liquidate subsequent to
the date of the mailing of this proxy, and to distribute its assets, including
shares of Common Stock, to its owners including Messrs. Kaye, Greenfield and
Guthart as well as Investments and ZS LP.
MATTERS TO BE VOTED ON AT THE MEETING
ELECTION OF DIRECTORS
Pursuant to the bylaws of the Company, the Board of Directors has
determined that the number of Directors constituting the full Board of Directors
is eight. Each Director is to be elected to hold office until the next Annual
Meeting of Stockholders or until his successor is chosen and qualified. Messrs.
Guthart, Sherwood, Ezekiel and Butler became Directors of the Company in 1993.
Mr. Barbanell became a Director in 1995. Mr. Kaye became a Director in 1996.
Messrs. Sabanos and Cooperstone became Directors in 1997.
The Company believes that each of the nominees for Director will be able to
serve. If any of the nominees would be unable to serve, the enclosed proxy
confers authority to vote in favor of such other person or persons as the Board
of Directors at the time recommends to serve in place of the person or persons
unable to serve.
Nominees for Directors
Listed below are the name, age (as of April 1, 1998), principal business
experience during the last five years, and other information regarding each of
the persons proposed to be nominated for election as Director.
Bruce D. Guthart, C.P.C.U., is 42 years old. Mr. Guthart is the Chairman,
President and Chief Executive Officer ("CEO") of the Company. He has held the
position of President of the Company since its formation in 1993. He was
appointed CEO in 1996 and Chairman in 1997. He has been an Executive Vice
President of KILP since 1991. Mr. Guthart is an officer and director of Walter
Kaye Associates, Inc. and an officer, director and stockholder of Kaye KINV,
Inc., general partners of one of the general partners of KILP. Mr. Guthart is
also a director and, except where noted, Chairman, CEO and President of the
following subsidiaries of the Company: Old Lyme Insurance Company of Rhode
Island, Inc., Claims Administration Corporation, Program Brokerage Corporation,
Old Lyme Insurance Company, Ltd. (director only), Park Brokerage, Ltd. (director
only), Kaye Insurance Associates, Inc. (director, CEO and President only),
Kaye-Western Insurance & Risk Services, Inc. (director, CEO and President only),
Kaye Corporation of Connecticut (director, CEO and President only), Kaye
Administrators Corporation (director, CEO and President only), Kaye Services
Corp.
Howard Kaye is 52 years old. Mr. Kaye is Chairman of Kaye Insurance
Associates, Inc. and previously served as Chairman of the Company. He has been
the Chairman and Chief Executive Officer of KILP since 1991. Mr. Kaye is an
officer, director and stockholder of Walter Kaye Associates, Inc. and Kaye KINV,
Inc., general partners of one of the general partners of KILP. Mr. Kaye is also
a director and Chairman of the following subsidiaries of the Company:
Kaye-Western Insurance & Risk Services, Inc., Kaye Corporation of Connecticut,
Kaye Administrators Corporation.
Michael P. Sabanos, C.P.A., is 41 years old. Mr. Sabanos was elected to the
Board of Directors effective December 31, 1997. He is the Senior Vice President
and Chief Financial Officer ("CFO") of the Company and has served in that
capacity since joining the Company in 1996. Prior to joining the Company, Mr.
Sabanos was Executive Vice President and Chief Financial Officer of
Kalvin-Miller International, Inc. from 1993 to 1996. Prior to that, he was First
Vice President and U.S. Corporate Finance Director of Willis Corroon Group plc.
Mr. Sabanos is also a director and, except where noted, Senior Vice President
and CFO of the following subsidiaries of the Company: Old Lyme Insurance Company
of Rhode Island, Inc., Claims Administration Corporation, Program Brokerage
Corporation, Old Lyme Insurance Company, Ltd. (director only), Park Brokerage,
Ltd.
4
<PAGE>
(director only), Kaye Insurance Associates, Inc., Kaye Corporation of
Connecticut, Kaye Administrators Corporation, Kaye-Western Insurance & Risk
Services, Inc., Kaye Services Corp.
Robert L. Barbanell is 67 years old. He has served as President of Robert
L. Barbanell Associates, Inc., a financial consultant firm since July 1994. Mr.
Barbanell was employed by Bankers Trust New York Corporation from June 1986 to
June 1994 as Managing Director, and from December 1981 to June 1986 as Senior
Vice President. He is a director of Cantel Industries, Inc., Marine Drilling
Companies, Inc. and Sentry Technology Corporation.
Richard B. Butler is 44 years old. He is a Managing Director (Insurance
Advisory and Finance Group) of ING Capital Corporation. Since November 7, 1996,
Mr. Butler has served as President and Chief Executive Officer of ING (U.S.)
Capital Securities, a wholly owned subsidiary of ING Group. He has served in
other officer positions at ING Capital Corporation since May 1993. Mr. Butler
was a Vice President and Manager (Insurance Finance and Advisory Group) of
Westpac Banking Corporation from February 1992 to May 1993. From 1982 to
February 1992, he was a Managing Director of Chase Manhattan Bank.
Elliot S. Cooperstone is 36 years old. Mr. Cooperstone was elected to the
Board of Directors effective December 31, 1997. He is an Executive Vice
President and CFO of Payroll Transfers, Inc. ("PTI"), a Tampa, Florida
privately-held employee administration outsourcing firm. Mr. Cooperstone is
responsible for the Sales & Marketing, Finance, and Business Development
functions at PTI. Prior to joining PTI in 1997, Mr. Cooperstone served as
Executive Vice President and Chief Administrative Officer of Alexander and
Alexander Services, Inc. ("A&A"), one of the world's largest risk management and
insurance brokerage organizations, from 1994-1997, before its acquisition by Aon
Corporation in 1997. Mr. Cooperstone was also President and CEO of A&A's U.S.
operation. He has previously held management positions with Travelers Group as
Assistant to the Vice Chairman (1993-1994), and Director of Strategic Planning
for The Walt Disney Company (1992-1993). In addition, he spent five years as a
consultant and manager with the Boston Consulting Group (1988-1992).
David Ezekiel is 49 years old. He has, since 1981, been the President and
Managing Director of International Advisory Services, Ltd., an insurance
management company in Bermuda that operates Old Lyme Insurance Company, Ltd., a
subsidiary of the Company, under contract as one of 85 insurance companies that
it manages.
Ned L. Sherwood is 48 years old. He has served as President of Zaleski,
Sherwood & Co., Inc., a private investment firm, since September 1985. Mr.
Sherwood is also a director of Sun Television and Appliances, Inc., Mazel Stores
and Market Facts, Inc. Mr. Sherwood is an officer and director of ZS Kaye, Inc.,
a general partner of one of the general partners of KILP.
5
<PAGE>
DIRECTOR MEETINGS AND COMPENSATION
Board of Directors
The Board of Directors held seven meetings during the year ended December
31, 1997. Each of the Company's directors participated in excess of 75% of the
meetings held subsequent to such Director's election to the Board.
Committees of the Board
Pursuant to its bylaws, the Company has established standing Audit,
Compensation and Investment Committees.
The Audit Committee reviews and makes recommendations to the Board of
Directors regarding internal accounting and financial controls and accounting
principles, auditing practices, the engagement of independent public accountants
and the scope of the audit to be undertaken by such accountants. The Audit
Committee also reviews material transactions between the Company and its
subsidiaries and KILP and KILP's affiliates. The bylaws of the Company require
that a majority of the members of the Audit Committee be independent directors.
The current members of the Audit Committee are Messrs. Butler, Barbanell and
Ezekiel. The Audit Committee held three meetings during the year ended December
31, 1997. Mr. Butler participated in all of the meetings; Messrs. Barbanell and
Ezekiel participated in 67% of the meetings.
The Compensation Committee has the authority of the Board of Directors with
respect to the compensation, benefit and employment policies and arrangements
for all officers of the Company and with respect to the compensation and benefit
plans generally applicable to the Company's employees. The Committee also
administers the Company's 1993 Stock Option Plan and Supplemental Stock Option
Plan dated May 1996 with authority to grant options to eligible individuals, and
the Stock Performance Plan. The members of the Compensation Committee are
Messrs. Barbanell, Sherwood and Cooperstone. The Compensation Committee did not
hold any formal meetings during the year ended December 31, 1997, but did take
action by written consent.
The Investment Committee oversees the Company's and its subsidiaries'
investment activity. The members of the Investment Committee are Messrs.
Sherwood, Butler and Sabanos.
Director Compensation
Directors of the Company not employed by the Company or affiliated with
KILP receive fees of $10,000 annually, $1,000 per board meeting attended and
$500 per committee meeting attended, as well as an annual grant of 5,000 options
for the Company's stock. Chairpersons of the Audit and Compensation Committees
receive an additional $500 per quarter. Messrs. Butler, Ezekiel and Barbanell
received aggregate fees of $23,000, $21,000 and $25,000 for their services in
1997, respectively, as well as 5,000 stock options each in 1997. In addition,
Elliot Cooperstone received 5,000 stock options. The exercise price for the
options granted in 1997 is above the current trading price of the common stock.
Compensation Committee Interlocks and Insider Participation
Mr. Sherwood served on the Company's Compensation Committee during the year
ended December 31, 1997. Mr. Sherwood owns interests in ZS Kaye L.P., a general
partner of KILP. The Company and affiliates of KILP are engaged in various
transactions. See "Certain Related Transactions and Relationships."
Mr. Sherwood is a director of, and has shared beneficial ownership of more
than ten percent of the outstanding common stock of, Sun Television and
Appliances, Inc. ("Sun TV"). In 1994 , Sun TV and a subsidiary of the Company
entered into an agreement whereby the Company's subsidiary will from time to
time
6
<PAGE>
assume certain service contracts which were sold by Sun TV to its retail
customers. The Board of Directors believes that the agreement was negotiated
upon commercially reasonable terms and is in the best interest of the Company.
One of the Company's subsidiaries receives a percentage of the retail price at
which such contracts are sold. Contracts assumed through December 31, 1997 can
result in a potential maximum fee of $1,375,200.
INFORMATION REGARDING EXECUTIVE COMPENSATION
Summary Compensation Table
The following Summary Compensation Table discloses for the fiscal year
indicated individual compensation information on Mr. Guthart, the Company's
Chief Executive Officer in 1997, and the four other most highly compensated
executive officers (collectively, the "named executives"):
<TABLE>
<CAPTION>
Annual Compensation(1)
Long-Term
Compensation
------------
Other Annual
Fiscal Salary Bonus Compensation Options
Name and Principal Position Year ($) ($) ($)(4) (#)
- --------------------------- ---- -------- ------ ------------ -------
<S> <C> <C> <C> <C> <C>
Bruce D. Guthart 1997 $453,300 $315,000 $ 6,529 200,000
Chairman (since 1996 589,007 158,666(2) 5,698 0
December 1997), President 1995 519,327 166,500(3) 2,389 12,500
and Chief Executive Officer
Howard Kaye 1997 $454,278 $ 0 $ 9,394 0
Chairman of Kaye Insurance 1996 674,972 192,334(2) 5,722 0
Associates, Inc. 1995 633,042 210,000(2) 6,430 12,500
Lawrence Greenfield 1997 $335,996 $ 66,667 $ 8,400 0
Vice Chairman of 1996 489,376 125,000(2) 5,825 0
Kaye Insurance Associates, Inc. 1995 493,765 165,000(2) 5,880 12,500
Michael P. Sabanos 1997 $219,077 $ 44,000 $12,892 25,000
Senior Vice President 1996 126,923(5) 30,000 6,375 10,000
and Chief Financial 1995 0 0 0 0
Officer
Richard Bass 1997 $381,461 $ 0 $ 4,895 0
Senior Vice President, 1996 439,458 0 4,776 0
Kaye Insurance Associates, Inc. 1995 344,959 0 2,552 0
- --------------------------------
</TABLE>
(1)All compensation described in the table was paid by the Company's subsidiary,
Kaye Insurance Associates, Inc.
(2)Incentive Bonus Award earned under the Kaye International L.P. bonus plan
(the "KILP Bonus Plan"). Obligations under the KILP Bonus Plan were assumed by
Kaye Holding Corp. pursuant to the Acquisition Agreement, dated as of August 3,
1995, among the Company, KILP, Kaye Holding Corp. and certain individuals, and
consummated October 2, 1995. The aggregate amount of the bonus was limited to
$500,000 in each of 1995 and 1996. The KILP Bonus Plan terminated on December
31, 1996.
(3)$125,000 represents bonus under the KILP Bonus Plan. See Note (2).
(4)All amounts represent personal use portion of company provided automobile and
employer contributions made pursuant to the Company's Retirement Savings Plan.
(5)Mr. Sabanos' employment with the Company commenced on May 15, 1996 and, thus,
his salary, as reflected, was for a portion of the year.
7
<PAGE>
Employment Agreements
Messrs. Guthart, Sabanos and Bass have employment agreements with the
Company or its subsidiaries which expire on December 31, 2001, May 31, 1998 and
December 31, 1999, respectively. The Company has reached an agreement with Mr.
Sabanos to extend his term of employment until either he or the Company provides
60 days written notice of termination to the other.
Upon termination of employment related to Change of Control of the Company,
as defined in their respective employment agreements, Mr. Guthart is entitled to
receive two times his Prior Compensation, as defined, and benefits, and his
previously granted stock options vest; and Mr. Sabanos is entitled to receive
his base salary for a duration of 12 months minus the period which elapsed
following Change in Control and prior to termination, plus benefits.
Options
The following table sets forth certain information relating to stock option
grants made in 1997 to the named executives:
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
% of Total Annual Rates of
Number of Options Stock Price
Securities Granted to Appreciation for
Underlying Employees Option Term
Options in Fiscal Exercise Expiration ----------------
Name Granted (#) Year (1) Price Date (5%) (10%)
- ---------------- ----------- -------- ----- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Bruce D. Guthart 200,000 66.28 $5.00 4/15/07 $628,895 $1,593,742
Howard Kaye 0
Lawrence Greenfield 0
Michael P. Sabanos 25,000 8.29 $5.00 2/1/07 $ 78,612 $ 199,218
Richard Bass 0
</TABLE>
(1) Does not include 20,000 options issued to directors during 1997, and options
which were repriced in 1997 for those other than named executive officers and
directors.
8
<PAGE>
The following table sets forth, as of December 31, 1997, certain
information relating to stock option grants held by the named executives:
Number of Securities Underlying
Unexercised Options at
Fiscal Year End (#)
Name Exercisable/Unexercisable
------------------ -------------------------
Bruce D. Guthart 85,000 / 117,500
Howard Kaye 13,000 / 9,500
Lawrence Greenfield 13,000 / 9,500
Michael P. Sabanos 2,000 / 33,000
Richard Bass 0 / 2,000
Compensation Committee Report
On October 1, 1997, the Board of Directors approved the Kaye Group Inc.
Stock Performance Plan, which was also approved by the Stockholders of the
Company at the Special Meeting of Stockholders held on December 30, 1997.
Subsequently, the Special Committee of the Compensation Committee consisting of
Messrs. Barbanell and Cooperstone approved certain grants under the Plan.
Having established a policy for executive compensation in 1997 as described
in the Company's proxy dated April 17, 1997, the Compensation Committee began
holding discussions in early 1998 with the Chief Executive Officer, Bruce D.
Guthart, as to a formula for a bonus achievable in 1998 and, specifically, the
performance targets for such a bonus. The Committee has determined that Mr.
Guthart shall be entitled to receive a bonus equal to 50% of his base salary if
the Company's earnings per share ("EPS") for the calendar year 1998, as adjusted
for events deemed in good faith by the Board of Directors to be extraordinary,
equals a target amount, and shall be adjusted either upward or downward if EPS
exceeds or does not reach such target.
By the Compensation Committee:
Robert L. Barbanell
Elliot S. Cooperstone
Ned L. Sherwood
9
<PAGE>
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return during the four years, four and one-half months ended December 31, 1997
with the CRSP Index for NASDAQ Stock Market (U.S. Companies) and the NASDAQ
Insurance Stock Index (which index includes approximately 80 corporations that
describe themselves as insurance entities and are traded on the NASDAQ system).
The graph assumes $100 invested on August 17, 1993 (the first date the Company's
shares traded) in the Company's Common Stock and $100 invested at that time in
each of the selected indices. Total return assumes that all dividends are
reinvested.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
KAYE GROUP INC.
CRSP INDEX FOR NASDAQ STOCK MARKET
(U.S. COMPANIES) AND NASDAQ INSURANCE STOCKS
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
CRSP Index for NASDAQ Insurance
Date Kaye Group Inc. NASDAQ Stock Index
- ---- --------------- ------ -----------
08/17/93 100.00 100.00 100.00
12/31/93 112.50 105.81 95.38
12/31/94 97.50 103.50 89.81
12/31/95 80.00 149.75 127.53
12/31/96 52.85 184.31 145.37
12/31/97 66.25 226.30 213.30
10
<PAGE>
CERTAIN RELATED TRANSACTIONS AND RELATIONSHIPS
Transactions with Non-Consolidated Entities
International Advisory Services, Ltd., an insurance management company
located in Bermuda of which Mr. Ezekiel, a Director of the Company, is the
principal stockholder, provides various management services to Old Lyme
Insurance Co., Ltd., a subsidiary of the Company. During 1995, 1996 and 1997,
Old Lyme Insurance Co., Ltd. paid to International Advisory Services, Ltd.
management fees of $65,000, $36,250 and $37,500 respectively.
Mr. Ezekiel, a Director of the Company, is a stockholder of H & H
Reinsurance Brokers, Ltd. Pursuant to a reinsurance contract between Old Lyme
Insurance Company of Rhode Island, Inc., a subsidiary of the Company,
Transatlantic Reinsurance Company and USF Reinsurance Company, H & H Reinsurance
Brokers, Ltd. received commissions of $24,587, $7,000 and $38,114 in 1995, 1996
and 1997, respectively, as a result of such transaction.
Mr. Sherwood, a Director of the Company, is a director of, and has shared
beneficial ownership of more than ten percent of the outstanding common stock of
Sun TV. In, 1994, Sun TV and a subsidiary of the Company entered into an
agreement whereby the Company's subsidiary will from time to time assume certain
service contracts which were sold by Sun TV to its retail customers. The Board
of Directors believes that the agreement was negotiated upon commercially
reasonable terms and is in the best interest of the Company. The Company's
subsidiary will receive a percentage of the retail price at which such contracts
are sold. The agreement is cancelable by either party on thirty days notice.
Contracts assumed through December 31, 1997 can result in a potential maximum
fee of $1,375,200.
On October 2, 1995, the Company (formerly Old Lyme Holding Corp.), KILP and
certain individuals consummated the transactions (the "Transactions")
contemplated by the Acquisition Agreement, dated as of August 3, 1995 (the
"Acquisition Agreement"), among the Company, KILP, Kaye Holding Corp. ("KHC")
and certain individuals. Pursuant to the Acquisition Agreement, (i) KHC acquired
from KILP and certain individuals 100% of the interests in five insurance
brokerage and brokerage-related businesses and certain related assets (the
"Retail Brokerage Business") in exchange for 17.6% of KHC's total outstanding
common stock and assumption by KHC of certain KILP liabilities and (ii) the
Company transferred to KHC all of the stock of the Company's subsidiaries and
any other assets in exchange for 82.4% of KHC's total outstanding common stock
and KHC assumed the Company's liabilities. In addition, at such closing, the
Company, KILP, KHC and certain individuals, who are parties to the Acquisition
Agreement, entered into a Stockholders Agreement (the "Stockholders Agreement")
which provided for various transfer restrictions on the KHC common stock,
including rights of first offer, participation rights and "drag-along" rights.
Messrs. Kaye, Greenfield, Guthart, and Sherwood had and continue to have,
indirect ownership interests in KILP. Messrs. Kaye, Greenfield, Guthart and
Sherwood are parties to the Stockholders Agreement.
On May 16, 1995, the Company loaned to KILP $7,100,000. In the
Transactions, the obligations of KILP under such loan were assumed by KHC and
the rights to receive payment under such loan were transferred to KHC and the
obligation canceled.
On December 30, 1997, subsequent to a vote of Stockholders at a Special
Meeting of Stockholders of the Company, KHC was merged with and into the
Company, with the Company being the survivor. As a result, each share of KHC's
Common Stock, par value $.01 per share, was converted into 82.63835 shares of
the Company's Common Stock, par value $.01 per share. The Merger increased the
number of outstanding shares of the Company's Common Stock from 7,020,000 to
8,474,435.
11
<PAGE>
Kaye Insurance Associates, Inc. ("KIA") or its predecessor incurred a
management fee of $175,000 annually to ZS Fund L.P., which is one of the general
partners of KILP. KIA had an accrued payable to ZS Fund L.P. as of December 31,
1996 and 1995 of $175,000 and $625,000, respectively. This management fee
arrangement terminated on December 31, 1996.
KILP incurred a management fee of $50,000 in 1997 to KIA pursuant to a
Management Agreement, dated January 1, 1997.
Transactions with Consolidated Entities
As described below, prior to the consummation of the Transactions, the
Company and its then current subsidiaries engaged in certain transactions with
the entities (or their predecessors) acquired by KHC in the Transactions. As a
result of the Transactions, the Company's historical financial statements were
restated to reflect the combined results of operations, assets, liabilities and
net worth of the Company and the Retail Brokerage Business in a manner similar
to a pooling of interests. Such restatement resulted in the related transactions
being eliminated in consolidation.
Prior to the closing of the Transactions, the Company and certain of the
affiliates of KILP comprising the Retail Brokerage Business were parties to the
following agreements: (i) Executive and Sharing Availability Agreement
("Executive Agreement"), whereby certain individuals were made available to the
Company; (ii) Overhead Sharing Agreement ("Overhead Agreement"), whereby the
Company participated in insurance coverage obtained by the Retail Brokerage
Business and officers and employees of the Company were entitled to participate
in employee benefits maintained by the Retail Brokerage Business; (iii) License
Agreement ("License Agreement"), whereby the Company was granted a royalty free
license or sub-license, to the extent permitted, to use proprietary data systems
and software developed, used and licensed by the Retail Brokerage Business; (iv)
Facilities Use Agreement ("Facilities Use Agreement"), whereby the Company was
permitted to utilize office space leased by the Retail Brokerage Business as
needed by the Company; and (v) Sub-Brokerage Agreement (the "Brokerage
Agreement"), whereby a subsidiary of the Company appointed certain entities
comprising the Retail Brokerage Business as sub-brokers for the insurance
written under the Company's insurance programs.
The amounts paid, prior to the Transactions, by the Company and its
subsidiaries to KILP and its subsidiaries comprising the Retail Brokerage
Business in the year set forth below pursuant to such agreements are as follows:
1995
----
Executive Agreement $ 369,000
Overhead Agreement 60,000
Facilities Use Agreement 383,000
Brokerage Agreement 3,667,000
During the year ended December 31, 1995 (prior to the Transactions),
subsidiaries of the Company paid brokerage commissions to various affiliates of
KILP (including their predecessors, but excluding the subsidiaries and their
predecessors) aggregating $774,000, some of which amounts were paid by such
entities to independent, non-affiliated, brokers. During 1995, such affiliates
of KILP (and their predecessors) provided various administrative, management,
underwriting and claims services to subsidiaries of the Company, for which
reimbursement was included as part of the brokerage commissions paid to such
entities.
12
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COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
the Company's Common Stock, to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of the
Company's Common Stock. Officers, directors and greater than ten percent
stockholders are required by Securities and Exchange Commission regulations to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, during the fiscal year ended December 31, 1997,
the Company's officers, directors and greater than ten percent beneficial owners
complied with all applicable Section 16(a) filing requirements.
INDEPENDENT AUDITORS
Coopers & Lybrand L.L.P. has been selected by the Company to serve as its
independent certified public accountants for the fiscal year ending December 31,
1998. Representatives of Coopers & Lybrand L.L.P. are expected to be present at
the Annual Meeting of Stockholders. They will have the opportunity to make
statements if they desire to do so and will be available to respond to
appropriate questions.
FUTURE STOCKHOLDER PROPOSALS
In order to be considered for inclusion in the Proxy Statement for the 1999
Annual Meeting of Stockholders, stockholder proposals must be submitted to the
Company on or before January 15, 1999.
OTHER BUSINESS
As of the date hereof, the foregoing is the only business which management
intends to present, or is aware that others will present, at the meeting. If any
other proper business should be presented at the meeting, the proxies will be
voted in respect thereof in accordance with the discretion and judgment of the
person or persons voting the proxies.
By order of the Board of Directors,
Ivy S. Fischer
Secretary
Kaye Group Inc.
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PROXY
KAYE GROUP INC.
This Proxy is Solicited on Behalf of the Board of Directors
The holder of shares of Common Stock (the "Common Stock") of Kaye Group
Inc. (the "Company") whose signature appears on the reverse side hereof hereby
constitutes and appoints each of Bruce D. Guthart and Ivy S. Fischer, with full
power of substitution, as proxies to vote all of the shares of Common Stock held
of record by such holder on March 27, 1998, at the Annual Meeting of
Stockholders of the Company to be held on Monday, May 11, 1998 at Club 101, 101
Park Avenue, New York, New York, at 10:00 a.m., local time, and any adjournments
thereof, as directed on the matters set forth on the reverse side proposed by
the Company.
- ----------------- -----------------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------------- -----------------
<PAGE>
|_X_| Please mark
votes as in
this example
This Proxy, when properly completed and returned, will be voted in the manner
directed herein by the undersigned shareholder, IF NO DIRECTION IS GIVEN, THIS
PROXY WILL BE VOTED "FOR" THE ITEMS BELOW.
1. Election of Directors Nominees:, Bruce D. Guthart, Howard Kaye, Michael P.
Sabanos, Robert L. Barbanell, Richard B. Butler, Elliot S. Cooperstone,
David Ezekiel and Ned L. Sherwood
FOR WITHHELD
ALL FROM ALL
|_| NOMINEES |_| NOMINEES
|_| --------------------------------------
For all nominees except as noted above
Signature: ________________________ Date: ____________________
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment
thereof.
MARK HERE ADDRESS CHANGE AND NOTE AT LEFT |_|
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE. Please date and sign exactly as your name appears at left.
All joint owners should sign. When signing as a fiduciary, representative or
corporate officer, give full title as such. If you receive more than one proxy
card, please sign and return all cards received.
Signature: ________________________ Date: ____________________
