SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[_] Definitive Additional Materials by Rule 14a-6(e)(2))
[_] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
Kaye Group Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the 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)(1) and 0-11.
________________________________________________________________________________
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________________________________________________________________________________
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):
________________________________________________________________________________
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________________________________________________________________________________
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[_] Fee paid previously with preliminary materials:
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[_] 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:
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[GRAPHIC OMITTED]
KAYE GROUP INC.
122 East 42nd Street
New York, New York 10168
Notice of Annual Meeting of Stockholders
To Be Held on May 24, 1999
To the Stockholders of Kaye Group Inc.:
The Annual Meeting of Stockholders of Kaye Group Inc. (the "Company")
will be held at the Club 101, 101 Park Avenue, New York, New York, on Monday,
May 24, 1999, 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 2000 Annual Meeting of Stockholders;
|_| To amend the Company's Supplemental Stock Option Plan to increase the
number of shares of Common Stock available for the grant of awards from
350,000 shares to 650,000 shares;
|_| To approve the Kaye Group Inc. 1999 Equity Incentive Compensation Plan;
and
|_| 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 April 9, 1999 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, 1998
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 20, 1999
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[GRAPHIC OMITTED]
KAYE GROUP INC.
122 East 42nd Street
New York, New York 10168
MAILING DATE
April 20, 1999
Proxy Statement for Annual Meeting of Stockholders
To be Held on May 24, 1999
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 at the Club 101,
101 Park Avenue, New York, New York, on May 24, 1999, at 10:00 a.m., local time,
and at any adjournment thereof. At the Meeting, stockholders of the Company will
consider and act upon the following matters:
Proposal 1. |_| To elect eight directors of the Company to serve for a term
expiring at the 2000 Annual Meeting of Stockholders;
Proposal 2. |_| To amend the Company's Supplemental Stock Option Plan to
increase the number of shares of Common Stock available for the grant of
awards from 350,000 shares to 650,000 shares;
Proposal 3. |_| To approve the Kaye Group Inc. 1999 Equity Incentive
Compensation Plan; and
Proposal 4. |_| To transact such other business as may properly come before
the meeting or any adjournment thereof.
Record Date
The holders of record of the Company's common stock, par value $.01 per
share (the "Common Stock"), at the close of business on April 9, 1999 will be
entitled to notice of, and entitled to vote at the Meeting. On such record date
there were outstanding 8,446,435 shares of Common Stock. The holders of record
on the Record Date of shares of the Common Stock are entitled to one vote per
share of Common Stock on each proposal submitted to a vote at the Meeting.
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Quorum
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Meeting is necessary
to constitute a quorum to transact business at the Meeting. Shares as to which
authority to vote on Proposal No. 1 is withheld, shares abstaining with respect
to Proposals No. 2 and No. 3, and broker non-votes (where a broker submits a
proxy but does not have authority to vote a client's shares on one or more
matters) on any Item will be considered present at the Meeting for purposes of
establishing a quorum.
Required Vote
Under the Company's Certificate of Incorporation and applicable Delaware law,
the affirmative votes of holders of a plurality of the votes cast at a meeting
at which a quorum is present is required to approve the election of directors
(Proposal No. 1), and the affirmative vote of holders of a majority of the
shares of Common Stock represented at a meeting at which a quorum is present is
required to approve the amendment of the Supplemental Stock Plan (Proposal No.
2) and the Kaye Group Inc. 1999 Equity Incentive Compensation Plan (Proposal No.
3).
Proxies
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.
(Proposal No. 1). The proxy also provides space for a stockholder to vote for,
against, or to abstain from voting on approval of the amendment to the
Supplemental Stock Option Plan (Proposal No. 2) and the Kaye Group Inc. 1999
Equity Incentive Compensation Plan (Proposal No. 3). 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
FOR Proposal No. 2 and FOR Proposal No. 3 and for the grant of discretion to the
proxy holders, as to any other business as may properly be brought before the
Annual Meeting and any adjournments or postponements thereof.
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. All written notices of revocation and
other communications with respect to revocation of proxies should be sent to the
attention of the Secretary of Kaye Group Inc. at the Company's offices at 122
East 42nd Street, New York, New York 10168.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE
COMPLETE, DATE AND SIGN YOUR PROXY IN ORDER TO ENSURE THAT YOUR SHARES WILL BE
REPRESENTED AT THE MEETING. THE GIVING OF SUCH PROXY DOES NOT AFFECT YOUR RIGHT
TO VOTE IN PERSON IN THE EVENT THAT YOU ATTEND THE MEETING.
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Manner of Solicitation
The 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.
No Dissenters' Rights
The stockholders of Kaye do not have any rights of appraisal or similar rights
of dissenters, whether they vote for or against the proposals.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of April 9, 1999 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 8,446,435 shares of Common Stock outstanding as of that date.
3
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Shares Beneficially Owned (1)
-----------------------------
Record Owner Number Percent
- ------------ ------ -------
Kaye Investments L.P. (2) 2,216,140 26.24
Woodbourne Partners, L.P. (3) 812,345 9.62
Directors and Named Executives:
Bruce D. Guthart (2)(5) 459,794 5.44
Howard Kaye (2)(5) 958,773 11.35
Michael P. Sabanos (5) 21,000 *
Robert L. Barbanell (5) 18,000 *
Richard Butler (5) 22,800 *
Elliot S. Cooperstone (5) 1,000 *
David Ezekiel (5) 16,000 *
Ned L. Sherwood (2) 485,003 5.74
Lawrence Greenfield (2)(4)(5) 603,143 7.07
Richard Bass (5) 19,147 *
All executive officers and directors as a group
(10 persons) (2)(5) 2,604,660 29.60
- ----------
* denotes less than 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, which 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 on or within 60 days of April 9, 1999.
(2) The general partners of Kaye Investments L.P. ("Investments") are Kaye KINV,
Inc. ("KINV"), a Delaware corporation, and Walter Kaye Associates, Inc. ("WKA"),
a New York corporation. KINV owns 42% of Investments; WKA owns 20% of
Investments. Bruce D. Guthart, Howard Kaye and Lawrence Greenfield own 5.3%,
47.3% and 35.8%, respectively, of KINV. Howard Kaye and Lawrence Greenfield own
19.2% and 16.8%, respectively, of WKA. Pursuant to Investments' partnership
agreement and the KINV and WKA shareholders' agreements, the number of shares
reflected in the above chart for Messrs. Guthart, Kaye and Greenfield include
shares that would be distributed to them upon the dissolution of Investments,
KINV and WKA. Messrs. Guthart, Kaye and Greenfield and KINV and WKA may be
deemed to be beneficial owners of the Common Stock of the Company owned by
Investments, but each disclaims such beneficial ownership. The number of shares
reflected for Investments in the above chart includes 1,058,210 shares that
would be distributed to Messrs. Guthart, Kaye, and Greenfield upon the
dissolution of Investments, KINV and WKA. Thus, if such shares were distributed
to Messrs. Guthart, Kaye, and Greenfield, the remaining shares held by
Investments would total 1,157,930. ZS Kaye Inc. ("ZS") is a limited partner in
Investments. Ned L. Sherwood owns 43.71% of the stock of ZS. The information
contained herein with respect to these shares has been obtained from the
Schedule 13D filed on November 12, 1998, by the beneficial owners named therein.
ZS has no power to vote or dispose of any shares held by Investments, and ZS
disclaims beneficial ownership of shares of Investments. The number of shares
reflected for Ned L. Sherwood in the above chart does not include shares that
would be distributed to Mr. Sherwood upon the dissolution of Investments and ZS.
(3) The information contained herein with respect to these shares has been
obtained from the Amendment No. 3 to Schedule 13D filed September 21, 1998, by
the beneficial owners named therein. Woodbourne Partners, LP disclaims
beneficial ownership of such shares.
(4) Includes 5,400 shares held by family members of Mr. Greenfield. Mr.
Greenfield disclaims beneficial ownership of such shares.
(5) Includes options (see note (1)) for the following individuals to acquire the
following shares: Bruce D. Guthart, 137,500; Howard Kaye, 17,500; Michael P.
Sabanos, 16,000; Robert L. Barbanell, 6,000; Richard Butler, 11,000; Elliot
Cooperstone, 1,000; David Ezekiel, 11,000; Lawrence Greenfield, 17,500; and
Richard Bass, 800.
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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, 1999), 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 43 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. Mr. Guthart is an officer, director
and stockholder of Kaye KINV, Inc., the managing general partner of Kaye
Investments L.P. 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 53 years old. Mr. Kaye is Chairman of Kaye Insurance
Associates, Inc. and previously served as Chairman of the Company. Mr. Kaye is
an officer, director and stockholder of Walter Kaye Associates, Inc. and Kaye
KINV, Inc., general partners of Kaye Investments, L.P. 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 42 years old. Mr. Sabanos 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. 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. (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 68 years old. He has served as President of Robert
L. Barbanell Associates, Inc., a financial consultancy firm since July 1994. Mr.
Barbanell was employed by Bankers Trust New York Corporation from December 1981
to June 1994; from June 1986 to June 1994 he was a Managing Director. He is a
director of Cantel Industries, Inc., Marine Drilling Companies, Inc. and Sentry
Technology Corporation.
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Richard B. Butler is 45 years old. He is a Managing Director (Insurance
Advisory and Finance Group) of ING Barings Furman Selz, LLC. 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 Group Companies since May 1993.
Elliot S. Cooperstone is 37 years old. He is Chairman and Chief Executive
Officer of eSourceOne, Inc., a corporate services outsourcing firm. From 1997
until March 1999, Mr. Cooperstone served as an Executive Vice President of
Payroll Transfers, Inc., a Tampa, Florida privately-held employee administration
outsourcing firm. 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 previously served as
Assistant to the Vice Chairman with Travelers Group.
David Ezekiel is 50 years old. He has, since 1981, been the President and
Managing Director of International Advisory Services, Ltd. ("IAS"), an insurance
management company in Bermuda which is a subsidiary of Mutual Risk Management,
Ltd. IAS manages Old Lyme Insurance Company, Ltd., a subsidiary of the Company,
under contract as one of 100 insurance companies that IAS manages.
Ned L. Sherwood is 49 years old. He owns and controls the general partner
of ZS Fund, L.P. Mr. Sherwood has served as President of Zaleski, Sherwood &
Co., Inc., a private investment firm, since September 1985. He 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 limited partner
of Investments.
PROPOSAL TO AMEND THE SUPPLEMENTAL STOCK OPTION PLAN
The total number of shares of the Company's Common Stock available for the
grant of awards pursuant to the Kaye Group Inc. Stock Option Plan and the Kaye
Group Inc. Supplemental Stock Option Plan is 350,000 and 350,000, respectively,
for a total of 700,000 shares available for the grant of awards. As of December
31, 1998, 659,200 shares were awarded to eligible participants pursuant to the
Stock Option Plan and Supplemental Stock Option Plan. The Company has previously
announced that it intends to continue its strategy to pursue the acquisition of
suitable brokerage firms, and has found that the ability to offer potential
acquisition candidates options in the Company's stock has proved to be a
positive negotiating tool in such transactions. On October 22, 1998, the
Company's Board of Directors approved the amendment of the Kaye Group Inc.
Supplemental Stock Option Plan to increase the total number of shares of Common
Stock available for the grant of awards under such Supplemental Stock Option
Plan from 350,000 to 650,000 (the total shares available pursuant to the
Company's Stock Option Plan and the Supplemental Stock Option Plan, as amended,
would total 1,000,000), and approved its submission to the stockholders for
adoption. The proposed restated Supplemental Stock Option Plan is set forth in
Exhibit A to this Proxy Statement.
The Board of Directors unanimously recommends approval of the Amendment of
the Supplemental Stock Option Plan by stockholders. Unless otherwise instructed,
signed proxies which are returned in a timely manner will be voted FOR approval
of the Amendment.
PROPOSAL TO APPROVE KAYE GROUP INC. 1999 EQUITY INCENTIVE COMPENSATION PLAN
On April 2, 1999, the Board of Directors adopted and approved the Kaye
Group Inc. 1999 Equity Incentive Compensation Plan (the "Incentive Plan") and
approved the submission of the Incentive Plan to the stockholders for their
approval and adoption. The Board of Directors believes that it is advisable to
provide further incentive to the Company's senior executive employees who are
vital to the essential long-term planning and continued growth and success of
the Company. The Board of Directors designed the plan to link
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a portion of such senior executive employees' compensation to the Company's
stock price to motivate these employees to achieve continued growth of the
Company's business and stock price, and to then permit such employees to more
fully share in the financial success of the Company.
The following is a summary of certain material features of the Incentive
Plan. The summary does not purport to be complete and is qualified in its
entirety by reference to the terms of the Incentive Plan set forth as Exhibit B
to this Proxy Statement.
Purposes
The Incentive Plan is designed to promote the interests of the Company and
its stockholders by (i) attracting and retaining officers and other employees of
the Company and its subsidiaries, (ii) motivating such individuals by means of
performance-related incentives to achieve longer-range performance goals and
(iii) enabling such individuals to participate in the long-term growth and
financial success of the Company.
Administration/Eligible Participants
The Incentive Plan will be administered by the Compensation Committee of
the Board of Directors (the "Incentive Plan Committee"). During the 10-year term
of the Incentive Plan, the Incentive Plan Committee will have the sole and
complete authority, subject to the terms of the Incentive Plan, among other
things, to determine when and to whom to make grants of restricted stock or the
right to receive restricted stock (collectively, "Awards"), the number of shares
to be covered by and the terms and conditions of any Award; to prescribe, amend
and rescind rules and regulations relating to the Incentive Plan; and to make
all other determinations and take all other actions that the Incentive Plan
Committee considers necessary or desirable for the administration of the
Incentive Plan.
All officers and employees of the Company or any of its subsidiaries are
eligible to be participants under the Incentive Plan (each, a "Participant"). As
of March 31, 1999, approximately 380 persons were eligible to be Participants.
Awards
The Incentive Plan Committee may grant Awards of restricted stock or the
right to receive restricted stock. Awards of restricted stock will consist of
shares of Common Stock. Vesting of Awards may be conditioned upon the completion
of a specified period of service, the attainment of specified performance goals,
or such other factors as the Incentive Plan Committee may determine. The
Incentive Plan Committee has the authority to determine, among other things, the
duration of the period during which, and the conditions, if any, under which,
the Awards may be forfeited to the Company and the other terms and conditions of
such Awards.
The Incentive Plan Committee may grant performance awards intended to
constitute performance based compensation within the meaning of Section 162(m)
of the Internal Revenue Code of 1986, as amended. The following rules will apply
to such performance awards: (i) payments under the performance award shall be
made solely on account of the attainment of one or more objective performance
goals established in writing by the Incentive Plan Committee not later than 90
days after the commencement of the period of service to which the performance
award relates (or, if less, 25% of such period of service), (ii) the performance
goals to which the performance award relates shall be based on one or more
business criteria applied to the Participant, a business unit of the Company
and/or an affiliate of the Company, such as: stock price, market share, sales,
earnings per share, book value per share, return on equity or costs; and (iii)
once granted, the Incentive Plan Committee may not increase the amount payable
under such performance award. The maximum amount of compensation that can be
paid to any Participant is the value of the shares subject to the Award.
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Adjustments
In the event the Incentive Committee determines that, among other things,
any dividend or other distribution, recapitalization, stock split, reverse stock
split, reorganization, merger, consolidation, split-up, or other similar
corporate transaction or event affects shares of Common Stock such that an
adjustment is determined by the Incentive Committee in its discretion to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Incentive Plan, then
the Incentive Committee may, in such manner as it may deem equitable, adjust any
or all of (i) the number of shares of Common Stock or other securities of the
Company (or number and kind of other securities or property) with respect to
which Awards may be granted, (ii) the number of shares of Common Stock or other
securities of the Company (or number and kind of other securities or property)
subject to outstanding Awards, and (iii) if deemed appropriate, make provision
for a cash payment to the holder of an outstanding Award in consideration for
the cancellation of such Award.
Substitute Awards
Awards may be made under the Incentive Plan in substitution for outstanding
Awards previously granted by the Company or its affiliates or Awards previously
granted by a company acquired by the Company or with which the Company combines.
The number of shares underlying any such substitute Awards shall be counted
against the aggregate number of Shares which are available for grant under
Awards made under the Incentive Plan.
Transferability
Except as otherwise provided in an applicable Award agreement, no Award may
be assigned, alienated, pledged, attached, sold or otherwise transferred or
encumbered by a Participant otherwise than by will or by the laws of descent and
distribution and any such purported assignment, alienation, pledge, attachment,
sale, transfer or encumbrance shall be void and unenforceable against the
Company or any affiliate; provided, however, that the designation of a
beneficiary shall not constitute an assignment, pledge, attachment, sale,
transfer or encumbrance.
Amendments to the Incentive Plan
The Board of Directors may amend, alter, suspend, discontinue, or terminate
the Incentive Plan or any portion thereof at any time; provided, however, that
no such amendment, alteration, suspension, discontinuation or termination shall
be made without stockholder approval if such approval is necessary to comply
with any tax or regulatory requirement applicable to the Incentive Plan and
provided further than any such amendment, alteration, suspension, discontinuance
or termination that would impair the rights of any holder or beneficiary of an
award theretofore granted shall not to that extent be effective without the
consent of the affected Participant.
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New Incentive Plan Benefits
Participation in the Incentive Plan is determined by the Incentive Plan
Committee in its sole discretion as described above. Subject to the approval of
the Incentive Plan by stockholders, the following grants of Awards will be made
under the Incentive Plan.
Number of Shares
Name and Position Underlying Grant/Award
- ----------------- ----------------------
Bruce D. Guthart, Chairman 225,000
President and Chief Executive Officer
Michael P. Sabanos, Senior Vice President 75,000
and Chief Financial Officer
An Award of restricted stock made pursuant to a grant under the Incentive
Plan will vest if the stock price increases to specified dollar amounts by
certain prescribed dates. At the time an Award vests, the shares of restricted
stock will be transferred to the Participant pursuant to the applicable Award
Agreement and will vest ratably over three years, subject to the Participant's
continued employment. Time-vesting may accelerate upon termination by reason of
death or disability, termination by the Company not for cause or by the
Participant for good reason or immediately prior to a change in control. The
restricted shares are held in custody by the Company until the restrictions
lapse.
Federal Income Tax Consequences Relating to Awards
The following is a summary of the principal federal income tax consequences
of Awards that may be granted under the Incentive Plan. The summary is not
intended to be exhaustive; it does not purport to cover all of the special rules
relating thereto, including the state, local or foreign income or other tax
consequences or considerations in connection with Awards. Participants are urged
to consult their own tax advisors with respect to the consequences of their
participation in the Incentive Plan.
The grant of a right to receive restricted stock will not result in taxable
income to the Participant or a deduction to the Company in the year of grant.
The grant or transfer of restricted stock will not result in taxable income to
the Participant or a deduction for the Company in the year of grant if the
restricted stock is subject to a substantial risk of forfeiture within the
meaning of Section 83 of the Code. In such case, the value of such restricted
stock will be taxable to a Participant when such risk lapses. Alternatively, a
Participant may elect to treat as income the fair market value of the restricted
stock on the date of grant by making an election under Section 83(b) of the Code
within 30 days after the date of such grant. The Company will generally be
entitled to a tax deduction equal to the amount of ordinary income recognized by
a Participant in the year such income is recognized. The grant of restricted
stock that is not subject to a substantial risk of forfeiture will be taxable to
a Participant at the time of grant.
General
The Board of Directors unanimously recommends approval of the Incentive
Plan by stockholders. Unless otherwise instructed, signed proxies which are
returned in a timely manner will be voted FOR approval of the Incentive Plan.
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DIRECTOR MEETINGS AND COMPENSATION
Board of Directors
The Board of Directors held seven meetings during the year ended December
31, 1998. Each of the Company's directors participated in excess of 75% of the
meetings, except Mr. Cooperstone who attended five (71%) of the meetings.
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 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, 1998.
Each of the Committee members attended all 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 executive 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 held two meetings during the year ended December 31, 1998. Each of the
Committee members attended both of the meetings.
The Investment Committee oversees the Company's and its subsidiaries'
investment activity. The members of the Investment Committee are Messrs.
Sherwood, Butler and Sabanos. The Investment Committee held two meetings during
the year ended December 31, 1998. Each of the Committee members attended both of
the meetings.
Director Compensation
In 1998, directors of the Company not employed by the Company or affiliated
with Kaye Investments L.P. received 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, Barbanell and Cooperstone received aggregate fees in 1998 of $16,500,
$11,500, $16,500 and $9,500, respectively, for their services, as well as 5,000
stock options each in 1998. The exercise price for the options granted in 1998
is $6.17, which is below 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, 1998. Mr. Sherwood owned interests in ZS Kaye L.P., which was
a general partner of Kaye International L.P. ("KILP") prior to its dissolution
in May 1998. The Company and affiliates of KILP were engaged in various
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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 two agreements whereby the Company's subsidiary agreed to assume
certain service contracts that were sold by Sun TV to its retail customers (the
"Agreement") and contracted with Sun TV to have Sun TV provide repair services
under certain service contracts. The Board of Directors believes that the
agreements were commercially reasonable. On September 11, 1998, Sun TV filed
bankruptcy petitions under Chapter 11 of the Bankruptcy Code. The Company's
subsidiary filed a proof of claim on March 11, 1999 for any and all amounts that
are due and owing under the Agreement.
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 1998, and the three other most highly compensated
executive officers and Mr. Greenfield who, if he was an executive officer, would
have been one of the five most highly compensated executive officers
(collectively, the "named executives"):
Annual Compensation(1)
<TABLE>
<CAPTION>
Long-Term
Compensation(4)
---------------
Other Annual
Fiscal Salary Bonus Compensation Options
Name and Principal Position Year ($) ($) ($)(2) (#)
- --------------------------- ------ ------ ----- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Bruce D. Guthart 1998 $450,000 $450,000 $ 8,261 0
Chairman, 1997 453,300 315,000 6,529 200,000
President, and 1996 589,007 158,666 5,698 0
Chief Executive Officer
Howard Kaye 1998 $450,000 $ 66,667 $ 15,103 0
Chairman of Kaye Insurance 1997 454,278 0 9,394 0
Associates, Inc. 1996 674,972 192,334 5,722 0
Michael P. Sabanos 1998 $247,500 $125,000 $ 10,626 0
Senior Vice President 1997 219,077 44,000 12,892 25,000
and Chief Financial Officer 1996 126,923(3) 30,000 6,375 10,000
Richard Bass 1998 $380,000 $ 0 $ 6,924 0
Senior Vice President of 1997 381,461 0 4,895 0
Kaye Insurance Associates, Inc. 1996 439,458 0 4,776 0
Lawrence Greenfield 1998 $333,333 $ 66,667 $ 8,926 0
1997 335,996 66,667 8,400 0
1996 489,376 $125,000 5,825 0
</TABLE>
- ---------
(1) All compensation described in the table was paid by the Company's
subsidiary, Kaye Insurance Associates, Inc.
(2) All amounts include the estimated value of a Company-provided automobile
devoted to personal use and employer contributions made pursuant to the
Company's Retirement Savings Plan.
(3) Mr. Sabanos' employment with the Company commenced on May 15, 1996 and,
thus, his salary, as reflected, was for a portion of the year.
(4) During 1998 Mr. Sabanos was granted 38,461 shares of Performance Stock under
the Company's Stock Performance Plan. Grants of stock under this plan are
intended to attract and retain Key Employees for a long period after the grant
date. In addition, the plan is
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intended to provide an incentive for Key Employees to achieve long-range
performance goals, and enable Key Employees to share in the successful
performance of the stock of the Company as measured against pre-established
performance goals. None of the shares of Performance Stock granted have been
awarded or vested as of the date of this Proxy Statement. The dollar value of
the grant to Mr. Sabanos on the date of the grant was $250,000. This value
represents the number of shares granted multiplied by the closing market price
of the Company's common stock on the NASDAQ on the date of the grant.
Employment Agreements
Messrs. Guthart and Bass have employment agreements with the Company or its
subsidiaries which expire on December 31, 2001 and December 31, 1999,
respectively. Either the Company or Mr. Sabanos may terminate his employment
with the Company upon 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 (salary and bonus in respect of the
calendar year preceding termination), 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
No stock option grants were made in 1998 to the named executives.
The following table sets forth, as of December 31, 1998, 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 127,500 / 135,000
Howard Kaye 17,500 / 5,000
Michael P. Sabanos 9,000 / 26,000
Richard Bass 400 / 1,600
Lawrence Greenfield 17,500 / 5,000
Compensation Committee Report
Through the Kaye Group Inc. Stock Option Plan and the Kaye Group Inc.
Supplemental Stock Option Plan, 659,200 options were awarded as of December 31,
1998, and 90,800 options were available to be awarded. On October 22, 1998, the
Company's Board of Directors approved the amendment of the Kaye Group Inc.
Supplemental Stock Option Plan to increase the total number of shares of Common
Stock available for the grant of awards from 350,000 to 650,000, and approved
its submission to the stockholders for adoption.
Through the Kaye Group Inc. Stock Performance Plan, the Committee may grant
Performance Stock. Grants of Performance Stock were made during 1998 to Mr.
Sabanos as well as to other employees of the Company.
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<PAGE>
Having established a policy for executive compensation, as described in the
Company's proxies dated April 17, 1997, and April 14, 1998, the Compensation
Committee began holding discussions in early 1999 with the Company's Chairman,
President and Chief Executive Officer, Bruce D. Guthart, as to a formula for a
bonus achievable in 1999 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 1999, 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
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return during the five years, four and one-half months ended December 31, 1998
with the Center for Research and Security Prices ("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.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
NASDAQ U.S. NASDAQ Insurance
Date Kaye Group Inc. Stock Index Stock Index
---- --------------- ----------- -----------
8/17/93 100.00 100.00 100.00
12/31/93 112.53 105.81 95.38
12/31/94 97.62 103.50 89.81
12/31/95 80.21 149.75 127.53
12/31/96 53.14 184.31 145.37
12/31/97 66.66 226.30 213.30
12/31/98 75.51 318.12 189.64
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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, and an
officer of Old Lyme Insurance Company Ltd., is a director, provides various
management services to Old Lyme Insurance Co., Ltd., a subsidiary of the
Company. During 1996, 1997 and 1998, Old Lyme Insurance Co., Ltd. paid to
International Advisory Services, Ltd. management fees of $36,250, $37,500 and
$30,000, respectively.
Mr. Ezekiel, a Director of the Company, is also a director of an insurance
brokerage company, H & H Reinsurance Brokers, Ltd. Pursuant to a reinsurance
contract between Old Lyme Insurance Company of Rhode Island, Inc., a subsidiary
of the Company, and unrelated insurance carriers (Transatlantic Reinsurance
Company and USF Reinsurance Company), H & H Reinsurance Brokers, Ltd. received
commissions from Old Lyme Insurance Company of Rhode Island, Inc. of $7,000,
$38,114 and $1,389 in 1996, 1997 and 1998, respectively, in connection with such
contract.
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 two agreements whereby the Company's subsidiary agreed to assume
certain service contracts that were sold by Sun TV to its retail customers (the
"Agreement") and contracted with Sun TV to have Sun TV provide repair services
under certain service contracts. The Board of Directors believes that the
agreements were commercially reasonable. On September 11, 1998, Sun TV and Sun
TV and Appliances, Inc. filed bankruptcy petitions under Chapter 11 of the
Bankruptcy Code. The Company's subsidiary filed a proof of claim on March 11,
1999 for any and all amounts that are due and owing under the Agreement.
On December 30, 1997, subsequent to a vote of Stockholders at a Special
Meeting of Stockholders of the Company, Kaye Holding Corp. ("KHC"), a
subsidiary, 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.
Kaye Insurance Associates, Inc. ("KIA") incurred a management fee of
$175,000 annually to ZS Fund L.P., which was one of the general partners of Kaye
International L.P. ("KILP"). KIA had an accrued payable to ZS Fund L.P. as of
December 31, 1996 of $175,000. This management fee arrangement terminated on
December 31, 1996.
KILP incurred a management fee to KIA of $50,000 in each of 1998 and 1997,
pursuant to a Management Agreement, dated January 1, 1997. The Management
Agreement terminated in 1998 with the dissolution of KILP.
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
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<PAGE>
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, 1998,
the Company's officers, directors and greater than ten percent beneficial owners
complied with all applicable Section 16(a) filing requirements, except Kaye
Investments L.P., Kaye KINV, Inc., Walter Kaye Associates, Inc., Bruce D.
Guthart, Howard Kaye, Lawrence Greenfield and Walter Kaye did not file the
required forms to report the dissolution of KILP in May 1998 and dissolution of
Old Lyme Holdings of Rhode Island, Inc. in October 1998.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP has been selected by the Company to serve as its
independent certified public accountants for the fiscal year ending December 31,
1999. Representatives of PricewaterhouseCoopers LLP 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
Proposals of stockholders intended to be presented at the next Annual
Meeting of Stockholders must be received by the Company not later than January
25, 2000 to be eligible for inclusion in the proxy statement and form of proxy
relating to that meeting.
Proposals of stockholders intended to be presented at the next annual
meeting of stockholders that are not received by the Company before April 9,
2000 will be untimely. Upon the presentation at the next annual meeting of any
presentation not timely proposed, the persons named in the proxy accompanying
the Company's proxy statement relating to that meeting will have the
discretionary authority to vote all proxies on such matters.
OTHER BUSINESS
As of the date hereof, the foregoing is the only business which management
of the Company 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.
15
<PAGE>
EXHIBIT A
KAYE GROUP INC.
RESTATED SUPPLEMENTAL STOCK OPTION PLAN
ARTICLE I
Purpose of Plan
The Stock Option Plan (the "Plan") of Kaye Group Inc. ("KGI" and, together
with its subsidiaries, the "Company"), adopted by the Board of Directors and
stockholders of KGI effective May, 1996, is intended to advance the best
interests of KGI by providing executives, directors and other employees of the
Company with additional incentives by allowing such employees to acquire an
ownership interest in KGI.
ARTICLE II
Definitions
For purposes of the Plan the following terms have the indicated meanings:
"Board" means the Board of Directors of KGI.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute.
"Committee" means the Compensation Committee or such other committee of the
Board as the Board may designate to administer the Plan. The Committee shall be
composed solely of two or more disinterested persons (as that term is defined in
Rule 16b-3 under the Securities Exchange Act of 1934) as appointed from time to
time by the Board.
"Common Stock" means the Common Stock, par value $.01 per share, of KGI.
"Fair Market Value" of the Common Stock as of any date shall be deemed to
be the closing price of the Common Stock on the principal securities exchange or
market on which the Common Stock is listed or quoted for trading on (or the last
trading day before) the date that such determination is to be made. If the
Common Stock is not listed or quoted on any exchange or market as of the date
such determination is to be made or the Committee determines in good faith that
the price determined in the previous sentence should not be used, then the
Committee shall determine the fair market value of the Common Stock (expressed
on a per-share basis) as of such date, based on the consolidated results of
operations, financial condition and future prospects of the Company and such
other factors as the Committee may deem appropriate. Fair Market Value shall be
determined without regard to any restriction on transferability of the Common
Stock other than any such restriction which by its terms will never lapse.
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"Participant" means any director, executive or other employee of the
Company who has been selected to participate in the Plan by the Committee or the
Board.
"Sale of KGI" means a merger or consolidation effecting a change in control
of KGI, a sale of all or substantially all of the assets of KGI or a sale of a
majority of the outstanding voting securities of KGI effecting a change in
control of KGI.
"Subsidiary" means any subsidiary corporation (as such term is defined in
Section 424(f) of the Code) of KGI.
ARTICLE III
Administration
The Plan shall be administered by the Committee. Subject to the limitations
of the Plan, the Committee shall have the sole and complete authority to: (i)
select Participants, (ii) grant Options to Participants (each as defined in
Article IV) in such forms and amounts as it shall determine, (iii) impose such
limitations, restrictions and conditions upon such Options as it shall deem
appropriate, (iv) interpret the Plan and adopt, amend and rescind administrative
guidelines and other rules and regulations relating to the Plan, (v) correct any
defect or omission or reconcile any inconsistency in the Plan or in any Options
granted under the Plan and (vi) make all other determinations and take all other
actions necessary or advisable for the implementation and administration of the
Plan. The Committee's determinations on matters within its authority shall be
conclusive and binding upon the Participants, the Company and all other persons.
All expenses associated with the administration of the Plan shall be borne by
the Company. The Committee may, as approved by the Board and to the extent
permissible by law, delegate any of its authority hereunder to such persons or
entities as it deems appropriate.
ARTICLE IV
Limitation on Aggregate Shares
The number of shares of Common Stock with respect to which stock purchase
options ("Options") may be granted under the Plan shall not exceed, in the
aggregate, 650,000 shares, subject to adjustment in accordance with paragraph
6.4. To the extent any Options expire unexercised or are cancelled, terminated
or forfeited in any manner without the issuance of Common Stock thereunder, such
shares shall again be available under the Plan. The shares of Common Stock
available under the Plan may consist of authorized and unissued shares, treasury
shares or a combination thereof, as the Committee shall determine.
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ARTICLE V
Awards
5.1 Grant of Options. The Committee may grant Options to Participants from
time to time in accordance with this Article V. Subject to the preceding
sentence, the Committee may grant all available options under the Plan to a
single Participant in one or more grants. Options granted under the Plan may be
nonqualified stock options or "incentive stock options" within the meaning of
Section 422 of the Code or any successor provision, as specified by the
Committee; provided, however, that no incentive stock option may be granted to
any Participant who, at the time of grant, owns stock of the Company (or any
Subsidiary) representing more than 10% of the total combined voting power of all
classes of stock of the Company (or such Subsidiary, unless the exercise price
of such incentive stock option equals at least 110% of the Fair Market Value of
the Common Stock determined as of the date of Option grant). The exercise price
per share of Common Stock under each Option shall be fixed by the Committee at
the time of grant of the Option and shall equal at least 100% of the Fair Market
Value of a share of Common Stock on the date of grant, but not less than the par
value per share (as adjusted pursuant to paragraph 6.4). Options shall be
exercisable at such time or times as the Committee shall determine; provided,
however, that the aggregate Fair Market Value of the Common Stock (determined as
of the date of Option grant) with respect to which incentive stock options are
exercisable for the first time by any Participant during any calendar year
(under all stock option plans of the Company) may not exceed $100,000. The
Committee shall determine the term of each Option, which term shall not exceed
ten years from the date of grant of the Option.
5.2 Exercise Procedure. Options shall be exercisable by written notice to
the Company (to the attention of the Company's Secretary) accompanied by payment
in full of the applicable exercise price. Payment of such exercise price may be
made (i) in cash (including check, bank draft or money order), (ii) at the
discretion of the Committee, by delivery of a full recourse promissory note
bearing interest at a rate not less than the applicable federal rate determined
pursuant to Section 1274 of the Code as of the date of purchase or exercise (a
"Note"), (iii) in shares of Common Stock valued at their Fair Market Value as of
the date of exercise as provided in Section 5.3 below or (iv) a combination of
the foregoing.
5.3 Exchange of Previously Acquired Stock. The option price for shares
being acquired upon the exercise of an Option may be paid, in full or in part,
by the delivery to the Company of a number of shares of Common Stock having an
aggregate Fair Market Value as of the "exercise measurement date" (as
hereinafter defined) equal to the exercise price for the shares being acquired.
5.4 Withholding Tax Requirements. It shall be a condition of the exercise
of any Option (including any exercise of an alternative cash settlement right)
that the Participant exercising the Option make appropriate payment or other
provision acceptable to the Company with respect to any withholding tax
requirement arising from such exercise. The amount of withholding tax required,
if any, with respect to any Option exercise (the "Withholding Amount") shall be
determined by the Treasurer or other appropriate officer of the Company, and the
Participant shall furnish such information and make such representations as such
officer requires to make such determination. If the Company determines that
withholding tax is required with respect to any Option exercise, the Company
shall notify the Participant
A-3
<PAGE>
of the Withholding Amount, and the Participant shall pay to the Company an
amount not less than the Withholding Amount. In lieu of making such payment, the
Participant may elect to pay the Withholding Amount by either (i) delivering to
the Company a number of shares of Common Stock having an aggregate Fair Market
Value as of the "measurement date" (as hereinafter defined) not less than the
Withholding Amount or (ii) directing the Company to withhold (and not to deliver
or issue to the Participant) a number of shares of Common Stock otherwise
issuable upon the Option exercise having an aggregate Fair Market Value as of
the measurement date not less than the Withholding Amount. If the Company
approves, a Participant may elect pursuant to the prior sentence to deliver or
direct the withholding of shares of Common Stock having an aggregate Fair Market
Value in excess of the minimum Withholding Amount but not in excess of the
Participant's applicable highest marginal combined federal income and state
income tax rate, as estimated in good faith by such Participant. Any fractional
share interests resulting from the delivery or withholding of shares of Common
Stock to meet withholding tax requirements shall be settled in cash. All amounts
paid to or withheld by the Company and the value of all shares of Common Stock
delivered to or withheld by the Company pursuant to this Section 5.4 shall be
deposited in accordance with applicable law by the Company as withholding tax
for the Participant's account. If the Treasurer or other appropriate officer of
the Company determines that no withholding tax is required with respect to the
exercise of any Option (because such Option is an incentive stock option or
otherwise), but subsequently it is determined that the exercise resulted in
taxable income as to which withholding is required (as a result of a disposition
of shares or otherwise), the Participant shall promptly, upon being notified of
the withholding requirement, pay to the Company by means acceptable to the
Company the amount required to be withheld; and at its election the Company may
condition any transfer of shares issued upon exercise of an incentive stock
option upon receipt of such payment. The term "measurement date" as used in this
Section 5.4 shall mean the date on which any taxable income resulting from the
exercise of an Option is determined under applicable federal income tax law.
5.5 Conditions and Limitations on Exercise. At the discretion of the
Committee, Options may be made exercisable, in one or more installments, upon
(i) the happening of certain events, (ii) the passage of a specified period of
time, (iii) the fulfillment of certain conditions, or (iv) the achievement by
the Company or any Subsidiary of certain performance goals. In the event of a
Sale of the Company, the Committee may provide, in its discretion, that the
outstanding Options shall become immediately exercisable and that such Options
shall terminate if not exercised as of the date of the Sale of the Company or
any other designated date or that such Options shall thereafter represent only
the right to receive the excess of the consideration per share of Common Stock
offered in such Sale of the Company over the exercise price of such Options.
5.6 Expiration of Options.
(a) Normal Expiration. In no event shall any part of any Option be
exercisable after the stated date of expiration thereof.
(b) Early Expiration Upon Termination of Employment. Except as otherwise
provided by the Committee at the time of grant of such Options, upon termination
for any reason of a Participant's employment by the Company and its
Subsidiaries, all Options or portions thereof held by
A-4
<PAGE>
such Participant that are not vested and exercisable on the date of such
termination shall expire and be forfeited as of such date and all vested Options
held by such Participant shall expire to the extent not theretofore exercised on
the first anniversary of (or, in the case of any incentive stock option, 90 days
following) the date of such termination.
ARTICLE VI
General Provisions
6.1 Written Agreement. Each Option granted hereunder shall be embodied in a
written option agreement which shall be signed by the Participant to whom the
Option is granted and shall be subject to the terms and conditions set forth
herein.
6.2 Listing, Registration and Legal Compliance. If at any time the
Committee determines, in its discretion, that the listing, registration or
qualification of the shares subject to Options upon any securities exchange or
under any state or federal securities or other law or regulation, or the consent
or approval of any governmental regulatory body, is necessary or desirable as a
condition to or in connection with the granting of Options or the purchase or
issuance of shares thereunder, no Options may be granted or exercised, in whole
or in part, unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Committee. The holders of such Options will supply the Company
with such certificates, representations and information as the Company shall
request and shall otherwise cooperate with the Company in obtaining such
listing, registration, qualification, consent or approval. In the case of
officers and other persons subject to Section 16(b) of the Securities Exchange
Act of 1934, as amended, the Committee may at any time impose any limitations
upon the exercise of Options that, in the Committee's discretion, are necessary
or desirable in order to comply with such Section 16(b) and the rules and
regulations thereunder. If the Company, as part of an offering of securities or
otherwise, finds it desirable because of federal or state regulatory
requirements to reduce the period during which any Options may be exercised, the
Committee may, in its discretion and without the Participant's consent, so
reduce such period on not less than 15 days' written notice to the holders
thereof.
6.3 Options Not Transferrable. Options may not be transferred other than by
will or the laws of descent and distribution and, during the lifetime of the
Participant to whom they were granted, may be exercised only by such Participant
(or his or her legal guardian or legal representative). In the event of the
death of a Participant Options which are not vested and exercisable on the date
of death shall terminate; exercise of Options granted hereunder to such
Participant, which are vested as of the date of death, may be made only by the
executor or administrator of such Participant's estate or the person or persons
to whom such Participant's rights under the Options will pass by will or the
laws of descent and distribution.
6.4 Adjustments. In the event of a reorganization, recapitalization, stock
dividend or stock split, or combination or other change in the shares of Common
Stock, the Board or the Committee may, in order to prevent the dilution or
enlargement of rights under outstanding Options, make such adjustments in the
number and type of shares authorized by the Plan, the number and type of shares
covered by outstanding Options and the exercise prices specified therein as may
be determined to be
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appropriate and equitable.
6.5 Rights of Participants. Nothing in the Plan shall interfere with or
limit in any way the right of the Company or any Subsidiary to terminate any
Participant's employment at any time (with or without cause), or confer upon any
Participant any right to continue in the employ of the Company or any Subsidiary
for any period of time or to continue to receive such Participant's current (or
other) rate of compensation. No employee shall have a right to be selected as a
Participant or, having been so selected, to be selected again as a Participant.
6.6 Amendment, Suspension and Termination of Plan. The Board or the
Committee may suspend or terminate the Plan or any portion thereof at any time
and may amend it from time to time in such respects as the Board or the
Committee may deem advisable; provided, however, that no such amendment shall be
made without stockholder approval to the extent such approval is required by
law, agreement or the rules of any exchange upon which the Common Stock is
listed, and no such amendment, suspension or termination shall impair the rights
of Participants under outstanding Options without the consent of the
Participants affected thereby, except as provided below. No Options shall be
granted hereunder after the tenth anniversary of the approval of the Plan by the
stockholders of the Company.
6.7 Amendment of Outstanding Options. The Committee may amend or modify any
Option in any manner to the extent that the Committee would have had the
authority under the Plan initially to grant such Option; provided that, except
as expressly contemplated elsewhere herein or in any agreement evidencing such
Option, no such amendment or modification shall impair the rights of any
Participant under any outstanding Option without the consent of such
Participant.
6.8 Indemnification. In addition to such other rights of indemnification as
they may have as members of the Board or the Committee, the members of the
Committee shall be indemnified by the Company against all costs and expenses
reasonably incurred by them in connection with any action, suit or proceeding to
which they or any of them may be party by reason of any action taken or failure
to act under or in connection with the Plan or any Option granted under the
Plan, and against all amounts paid by them in settlement thereof (provided such
settlement is approved by independent legal counsel selected by the Company) or
paid by them in satisfaction of a judgment in any such action, suit or
proceeding; provided, however, that any such Committee member shall be entitled
to the indemnification rights set forth in this paragraph 6.8 only if such
member has acted in good faith and in a manner that such member reasonably
believed to be in or not opposed to the best interests of the Company and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
that such conduct was unlawful, and further provided that upon the institution
of any such action, suit or proceeding a Committee member shall give the Company
written notice thereof and an opportunity to handle and defend the same before
such Committee member undertakes to handle and defend it on his own behalf.
* * * * *
A-6
<PAGE>
EXHIBIT B
KAYE GROUP INC.
1999 EQUITY INCENTIVE COMPENSATION PLAN
1. Purpose. The purposes of this Kaye Group Inc. 1999 Equity Incentive
Compensation Plan (the "Plan") are to promote the interests of Kaye Group Inc.
(the "Company") and its stockholders by (i) attracting and retaining officers
and other employees of the Company and its Subsidiaries (as defined below); (ii)
motivating such individuals by means of performance-related incentives to
achieve longer-range performance goals; and (iii) enabling such individuals to
participate in the long-term growth and financial success of the Company.
2. Definitions. As used in the Plan, the following terms shall have the
meanings set forth below:
"Affiliate" shall mean (i) any entity that, directly or indirectly, is
controlled by, or controls, or is under common control with, the Company and
(ii) any entity in which the Company has a significant equity interest, in
either case as determined by the Committee.
"Award" shall mean any award of Restricted Stock.
"Award Agreement" shall mean any written agreement, contract, or other
instrument or document evidencing any Award, which may, but need not, be
executed or acknowledged by a Participant.
"Board" shall mean the Board of Directors of the Company.
"Change in Control" For purposes of the Plan, a "Change in Control" shall
mean the occurrence of any of the following: (a) the direct or indirect sale,
lease, exchange or other transfer of all or substantially all of the assets of
the Company to any "person" or "group" (as such terms are used in Sections
13(d)(3) and 14(d)(2) of the Exchange Act); (b) the merger or consolidation of
the Company with or into another corporation with the effect that the then
existing stockholders of the Company hold less than 60% of the combined voting
power of the then outstanding securities of the surviving corporation of such
merger or the corporation resulting from such consolidation having the right to
vote in the election of directors; (c) the replacement of a majority of the
Board over a two-year period from the directors who constituted the Board at the
beginning of such period, and such replacement shall not have been approved by
the Board as constituted at the beginning of such period; (d) a "person" or
"group" (other than an employee stock ownership plan of the Company or any
"person" or "group" that is the beneficial owner (within the meaning of Rule
13d-3 under the Exchange Act) of 5% or more of the combined voting power of the
Company's securities on the date on which the Plan was approved by the Board) as
a result of a tender or exchange offer, open market purchases, privately
negotiated purchases or otherwise, shall have become the beneficial owner
(within the meaning of Rule 13d-3 under the Exchange Act) of securities of the
Company representing 30% or more of the combined voting power of the then
outstanding securities of the Company having the right to vote in the election
of directors; or (e) the adoption by the Board and approval by the Company's
stockholders of a plan of liquidation or dissolution of the Company.
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"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Compensation Committee of the Board.
"Company" shall mean Kaye Group Inc., a Delaware corporation, and any
successor thereto.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Fair Market Value" shall mean, with respect to a Share, as of any date,
(A) if the principal market for the Shares is a national securities exchange,
the closing sales price per Share on such day as reported by such exchange or on
a composite tape reflecting transactions on such exchange, (B) if the principal
market for the Shares is not a national securities exchange and the Shares are
quoted on The Nasdaq Stock Market ("Nasdaq"), and (I) if actual sales price
information is available with respect to the Shares, the closing sales price per
Share on such day on Nasdaq, or (II) if such information is not available, the
average of the highest bid and lowest asked prices per Share on such day on
Nasdaq, or (C) if the principal market for the Shares is not a national
securities exchange and the Shares are not quoted on Nasdaq, the average of the
highest bid and lowest asked prices per Share on such day as reported on the OTC
Bulletin Board Service or by National Quotation Bureau, Incorporated or a
comparable service; provided, however, that if clauses (A), (B) and (C) of this
paragraph are all inapplicable, or if no trades have been made, no quotes are
available for such day, or, in the reasonable judgment of the Committee, none of
the foregoing fairly represents Fair Market Value, the fair market value of a
Share shall be determined by the Committee by any method consistent with
applicable regulations adopted by the Treasury Department relating to the
valuation of stock, stock options or other forms of compensation.
"Participant" shall mean any officer or other employee of the Company or
its Subsidiaries eligible for an Award under Section 5 of the Plan and selected
by the Committee to receive an Award under the Plan.
"Performance Compensation Award" shall mean any Award designated by the
Committee as a Performance Compensation Award pursuant to Section 6(d) of the
Plan.
"Performance Criteria" shall mean the criterion or criteria that the
Committee shall select for purposes of establishing the Performance Goals for a
Performance Period with respect to any Performance Compensation Award under the
Plan. The Performance Criteria that will be used to establish the Performance
Goals shall be based on the attainment of specific levels of performance of the
Company (or Subsidiary, Affiliate, division or operational unit of the Company)
and shall be limited to the following: return on net assets, return on
stockholders' equity, return on assets, return on capital, stockholder returns,
profit margin, earnings per share, net earnings, operating earnings, book value
per share, Fair Market Value per share and sales or market share. To the extent
required under Section 162(m) of the Code, the Committee shall, within the
maximum period allowed under Section 162(m) of the Code, define in an objective
fashion the manner of calculating the Performance Criteria it selects to use for
such Performance Period.
"Performance Formula" shall mean, for a Performance Period, the one or more
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<PAGE>
objective formulas applied against the relevant Performance Goal to determine,
with regard to the Performance Compensation Award of a particular Participant,
whether all, some portion but less than all, or none of the Performance
Compensation Award has been earned for the Performance Period.
"Performance Goals" shall mean, for a Performance Period, the one or more
goals established by the Committee for the Performance Period based upon the
Performance Criteria. The Committee is authorized at any time during the first
90 days of a Performance Period, or at any time thereafter (but only to the
extent the exercise of such authority after the first 90 days of a Performance
Period would not cause the Performance Compensation Awards granted to any
Participant for the Performance Period to fail to qualify as "performance-based
compensation" under Section 162(m) of the Code), in its sole and absolute
discretion, to adjust or modify the calculation of a Performance Goal for such
Performance Period to the extent permitted under Section 162(m) of the Code in
order to prevent the dilution or enlargement of the rights of Participant (i) in
the event of, or in anticipation of, any unusual or extraordinary corporate
item, transaction, event or development affecting the Company; or (ii) in
recognition of, or in anticipation of, any other unusual or nonrecurring event
affecting the Company, or the financial statements of the Company, or in
response to, or in anticipation of, changes in applicable laws, regulations,
accounting principles, or business conditions.
"Performance Period" shall mean the one or more periods of time of at least
one year in duration, as the Committee may select, over which the attainment of
one or more Performance Goals will be measured for the purpose of determining a
Participant's right to and the payment of a Performance Compensation Award.
"Person" shall mean any individual, corporation, partnership, association,
joint-stock company, trust, unincorporated organization, government or political
subdivision thereof or other entity.
"Plan" shall mean this Kaye Group Inc. 1999 Equity Incentive Compensation
Plan, as amended from time to time.
"Restricted Stock" shall mean any Share granted (or a right to receive a
Share granted) by the Committee under Section 6 of the Plan.
"Rule 16b-3" shall mean Rule 16b-3 as promulgated under the Exchange Act,
or any successor rule or regulation thereto as in effect from time to time.
"SEC" shall mean the Securities and Exchange Commission or any successor
thereto and shall include the Staff thereof.
"Shares" shall mean the common shares of the Company, $.01 par value per
share, or such other securities of the Company (i) into which such common shares
shall be changed by reason of a recapitalization, merger, consolidation,
split-up, combination, exchange of shares or other similar transaction or (ii)
as may be determined by the Committee pursuant to Section 4(b) of the Plan.
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<PAGE>
"Subsidiary" shall mean (i) any entity that, directly or indirectly, is
controlled by the Company and (ii) any entity in which the Company has a
significant equity interest, in either case as determined by the Committee.
"Substitute Awards" shall have the meaning specified in Section 4(c) of the
Plan.
3. Administration.
a. The Plan shall be administered by the Committee. Subject to the terms
of the Plan and applicable law, and in addition to other express
powers and authorizations conferred on the Committee by the Plan, the
Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the number of Shares to be covered by, or
with respect to which payments, rights, or other matters are to be
calculated in connection with, Awards; (iii) determine the terms and
conditions of any Award; (iv) determine whether, to what extent, and
under what circumstances Awards may be canceled, forfeited, or
suspended and the method or methods by which Awards may be canceled,
forfeited, or suspended; (v) interpret, administer, reconcile any
inconsistency, correct any default, or supply any omission in the Plan
and any instrument or agreement relating to an Award made under the
Plan; (vi) establish, amend, suspend, or waive such rules and
regulations and appoint such agents as it shall deem appropriate for
the administration of the Plan; and (vii) make any other determination
and take any other action that the Committee deems necessary or
desirable for the administration of the Plan.
b. Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with
respect to the Plan or any Award shall be within the sole discretion
of the Committee, may be made at any time and shall be final,
conclusive and binding upon all Persons, including the Company, any
Affiliate, any Participant, any holder or beneficiary of any Award.
c. No member of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Award
hereunder.
4. Shares Available for Awards.
a. Shares Available. Subject to adjustment as provided in Section 4(b),
the aggregate number of Shares with respect to which Awards may be
granted under the Plan shall be 375,000. If, after the effective date
of the Plan, any Share covered by an Award granted under the Plan, or
to which such an Award relates, is forfeited, or if an Award has
expired, terminated or been canceled for any reason whatsoever (other
than by reason of vesting), then the Shares covered by such Award
shall again be, or shall become, Shares with respect to which Awards
may be granted hereunder.
b. Adjustments. In the event that the Committee determines that any
dividend or other distribution (whether in the form of cash, Shares,
other securities, or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation,
B-4
<PAGE>
split-up, spin-off, combination, repurchase, or exchange of Shares or
other securities of the Company, issuance of warrants or other rights
to purchase Shares or other securities of the Company, or other
similar corporate transaction or event affects the Shares such that an
adjustment is determined by the Committee in its discretion to be
appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the
Plan, then the Committee may, in such manner as it may deem equitable,
adjust any or all of (i) the number of Shares or other securities of
the Company (or the number and kind of other securities or property)
with respect to which Awards may be granted, (ii) the number of Shares
or other securities of the Company (or the number and kind of other
securities or property) subject to outstanding Awards, and (iii) if
deemed appropriate, make provision for a cash payment to the holder of
an outstanding Award in consideration for the cancellation of such
Award.
c. Substitute Awards. Awards may, in the discretion of the Committee, be
made under the Plan in substitution (to the extent otherwise
permitted) for outstanding awards previously granted by the Company or
its Affiliates or by a company acquired by the Company or with which
the Company combines ("Substitute Awards"). The number of Shares
underlying any Substitute Award shall be counted against the aggregate
number of Shares available for Awards under the Plan.
d. Sources of Shares Deliverable Under Awards. Any Shares delivered
pursuant to an Award may consist, in whole or in part, of authorized
and unissued Shares or of treasury Shares.
5. Eligibility. Any officer or other employee of the Company or any of its
Subsidiaries (including any prospective officer or employee) shall be
eligible to be designated a Participant.
6. Restricted Stock.
a. Grant. Subject to the provisions of the Plan, the Committee shall have
sole and complete authority to determine the Participants to whom
Shares of Restricted Stock shall be granted, the number of shares of
Restricted Stock to be granted to each Participant, the duration of
the period during which, and the conditions under which, the
Restricted Stock may vest, including, without limitation, that the
Fair Market Value exceed a targeted Share price and the effect, if
any, of a Change in Control upon the vesting of the Restricted Stock,
and the other terms and conditions of such Awards.
b. Transfer Restrictions. Shares of Restricted Stock (or any interest
therein) may not be sold, assigned, transferred, pledged or otherwise
encumbered, except, in the case of Restricted Stock, as otherwise
provided in the Plan or the applicable Award Agreement (including, but
not limited to, provisions in the Applicable Award Agreement
permitting certain transfers to immediate family members, trusts for
the benefit of immediate family members or the Participant, or other
similar arrangements). Certificates issued in respect of shares of
Restricted Stock shall be registered in the name of the Participant
and retained by the Company. Each Participant shall deposit with the
Company a stock power duly endorsed in blank with respect to all
certificates issued in respect of shares of Restricted Stock. Upon the
lapse of the restrictions applicable to such Shares, the Company shall
deliver a certificate in respect of the applicable number of shares to
the Participant or the Participant's legal representative.
B-5
<PAGE>
c. Dividends or Dividend Equivalents. An Award shall provide the
Participant with dividends or dividend equivalents, payable in cash,
Shares, other securities or other property on a current or deferred
basis.
d. Performance Compensation Awards.
i. General. The Committee shall have the authority, at the time of
grant of any Award, to designate such Award as a Performance
Compensation Award in order to qualify such Award as
"performance-based compensation" under Section 162(m) of the
Code.
ii. Eligibility. The Committee will, in its sole discretion,
designate within the maximum period allowed under Section 162(m)
of the Code which Participants will be eligible to receive
Performance Compensation Awards in respect of such Performance
Period. However, designation of a Participant eligible to receive
an Award hereunder for a Performance Period shall not in any
manner entitle the Participant to receive payment in respect of
any Performance Compensation Award for such Performance Period.
The determination as to whether or not such Participant becomes
entitled to payment in respect of any Performance Compensation
Award shall be decided solely in accordance with the provisions
of this paragraph (d). Moreover, designation of a Participant
eligible to receive an Award hereunder for a particular
Performance Period shall not require designation of such
Participant eligible to receive an Award hereunder in any
subsequent Performance Period and designation of one Person as a
Participant eligible to receive an Award hereunder shall not
require designation of any other Person as a Participant eligible
to receive an Award hereunder in such period or in any other
period.
iii. Discretion of Committee with Respect to Performance Compensation
Awards. With regard to a particular Performance Period, the
Committee shall have full discretion to select the length of such
Performance Period, the Performance Criteria that will be used to
establish the Performance Goals, the kinds and levels of the
Performance Goals that are to apply to the Company and the
Performance Formula. Within the within the maximum period allowed
under Section 162(m) of the Code, the Committee shall, with
regard to the Performance Compensation Awards to be issued for
such Performance Period, exercise its discretion with respect to
each of the matters enumerated in the immediately preceding
sentence of this paragraph (d) and record the same in writing.
iv. Payment of Performance Compensation Awards.
(a) Condition to Receipt of Payment. Unless otherwise provided
in the applicable Award Agreement, a Participant must be
employed by the Company on the last day of a Performance
Period to be eligible to receive Shares or other payment in
respect of a Performance Compensation Award for such
Performance Period.
(b) Limitation. A Participant shall be eligible to receive
payment in
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<PAGE>
respect of a Performance Compensation Award only to the
extent that: (A) the Performance Goals for such period are
achieved; and (B) the Performance Formula as applied against
such Performance Goals determines that all or some portion
of such Participant's Performance Award has been earned for
the Performance Period.
(c) Certification. Following the completion of a Performance
Period, the Committee shall meet to review and certify in
writing whether, and to what extent, the Performance Goals
for the Performance Period have been achieved and, if so, to
calculate and certify in writing that amount of the
Performance Compensation Awards earned for the period based
upon the Performance Formula. The Committee shall then
determine the actual size of each Participant's Performance
Compensation Award for the Performance Period.
(d) Maximum Award Payable. Notwithstanding any provision
contained in this Plan to the contrary, the maximum
Performance Compensation Award payable to any one
Participant under the Plan for a Performance Period is the
Fair Market Value of such Shares on the last day of the
Performance Period to which such Award relates.
7. Amendment and Termination.
a. Amendments to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan or any portion thereof at any time;
provided, however, that no such amendment, alteration, suspension,
discontinuation or termination shall be made without stockholder
approval if such approval is necessary to comply with any tax or
regulatory requirement applicable to the Plan and, provided, further,
that any such amendment, alteration, suspension, discontinuance or
termination that would impair the rights of any Participant or any
holder or beneficiary of any Award theretofore granted shall not to
that extent be effective without the consent of the affected
Participant, holder or beneficiary.
b. Amendments to Awards. The Committee may waive any conditions or rights
under, amend any terms (including, but not limited to, the
acceleration of the vesting of an Award in the case of a Change in
Control) of, or alter, suspend, discontinue, cancel or terminate, any
Award theretofore granted, prospectively or retroactively; provided,
however, that any such waiver, amendment, alteration, suspension,
discontinuance, cancellation or termination that would impair the
rights of any Participant or any holder or beneficiary of any Award
theretofore granted shall not to that extent be effective without the
consent of the affected Participant, holder or beneficiary.
c. Adjustment of Awards Upon the Occurrence of Certain Unusual or
Nonrecurring Events. The Committee is hereby authorized to make
adjustments in the terms and conditions of, and the criteria included
in, Awards in recognition of (i) unusual or nonrecurring events
(including, without limitation, the events described in Section 4(b)
of the Plan) affecting the Company, any Affiliate, or the financial
statements of the Company or any Affiliate, or (ii) changes in
applicable laws, regulations, or accounting principles, whenever, in
any such case, the Committee determines such adjustments are
appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits that are intended to be made available
under the Plan, or otherwise.
B-7
<PAGE>
8. General Provisions.
a. Nontransferability. Except as otherwise provided in the Plan or the
Applicable Award Agreement (including, but not limited to, provisions
in the Applicable Award Agreement permitting transfers to immediate
family members, trusts for the benefit of immediate family members or
the Participant, or other similar arrangements), no Award may be
assigned, alienated, pledged, attached, sold or otherwise transferred
or encumbered by a Participant otherwise than by will or by the laws
of descent and distribution, and any such purported assignment,
alienation, pledge, attachment, sale, transfer or encumbrance shall be
void and unenforceable against the Company or any Affiliate; provided,
however, that the designation of a beneficiary shall not constitute an
assignment, alienation, pledge, attachment, sale, transfer or
encumbrance.
b. No Rights to Awards. No Participant or other Person shall have any
claim to be granted any Award, and there is no obligation for
uniformity of treatment of Participants or holders or beneficiaries of
Awards. The terms and conditions of Awards and the Committee's
determinations and interpretations with respect thereto need not be
the same with respect to each Participant (whether or not such
Participants are similarly situated).
c. Share Certificates. All certificates for Shares or other securities of
the Company or any Affiliate delivered under the Plan pursuant to any
Award shall be subject to such stop transfer orders and other
restrictions as the Committee may deem advisable under the Plan or the
rules, regulations, and other requirements of the SEC, any stock
exchange upon which such Shares or other securities are then listed,
and any applicable Federal or state laws, and the Committee may cause
a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.
d. Withholding. A Participant may be required to pay to the Company or
any Affiliates, and the Company or any Affiliate shall have the right
and is hereby authorized to withhold from any Award, from any payment
due or transfer made under any Award or under the Plan or from any
compensation or other amount owing to a Participant, the amount (in
cash, Shares, other securities, other Awards or other property as
determined by the Committee in its sole discretion) of any applicable
withholding taxes or other amounts in respect of an Award and to take
such other action as may be necessary in the opinion of the Company to
satisfy all obligations for the payment of such taxes and amounts. The
Committee may provide for additional cash payments to holders of
Awards to defray or offset any tax arising from the grant or vesting
of any Award.
e. Award Agreements. Each Award hereunder shall be evidenced by an Award
Agreement which shall be delivered to the Participant and shall
specify the terms and conditions of the Award and any rules applicable
thereto, including, but not limited to, the effect on such Award of
the death, disability or termination of employment or service of a
Participant and the effect, if any, of such other events as may be
determined by the Committee.
f. No Limit on Other Compensation Arrangements. Nothing contained in the
Plan shall prevent the Company or any Affiliate from adopting or
continuing in effect other compensation arrangements, and such
arrangements may be either generally applicable or applicable only in
specific cases.
g. No Right to Employment. The grant of an Award shall not be construed
as giving a
B-8
<PAGE>
Participant the right to be retained in the employ of, or in any
consulting relationship with, the Company or any Affiliate.
h. No Rights as Stockholder. Subject to the provisions of the applicable
Award, no Participant, holder or beneficiary of any Award shall have
any rights as a stockholder with respect to any shares of Restricted
Stock to be distributed under the Plan until such shares of Restricted
Stock shall be issued in accordance with this Plan and the terms of
the applicable Award Agreement. From and after the date of original
issuance, a Participant shall have the right to vote the shares of
Restricted Stock and to receive and to retain all cash dividends
payable or distributable to holders of Shares of record. In connection
with each grant of Restricted Stock hereunder, the applicable Award
Agreement shall specify if and to what extent the Participant shall be
entitled to other rights of a stockholder in respect of such
Restricted Stock.
i. Governing Law. The validity, construction, and effect of the Plan and
any rules and regulations relating to the Plan and any Award Agreement
shall be determined in accordance with the laws of the State of New
York.
j. Severability. If any provision of the Plan or any Award is or becomes
or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any Person or Award, or would disqualify the
Plan or any Award under any law deemed applicable by the Committee,
such provision shall be construed or deemed amended to conform the
applicable laws, or if it cannot be construed or deemed amended
without, in the determination of the Committee, materially altering
the intent of the Plan or the Award, such provision shall be stricken
as to such jurisdiction, Person or Award and the remainder of the Plan
and any such Award shall remain in full force and effect.
k. Other Laws. The Committee may refuse to issue or transfer any Shares
or other consideration under an Award if, acting in its sole
discretion, it determines that the issuance or transfer of such Shares
or such other consideration might violate any applicable law or
regulation or entitle the Company to recover the same under Section
16(b) of the Exchange Act. Without limiting the generality of the
foregoing, no Award granted hereunder shall be construed as an offer
to sell securities of the Company, and no such offer shall be
outstanding, unless and until the Committee in its sole discretion has
determined that any such offer, if made, would be in compliance with
all applicable requirements of the U.S. federal securities laws.
l. No Trust or Fund Created. Neither the Plan nor any Award shall create
or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a
Participant or any other Person. To the extent that any Person
acquires a right to receive payments from the Company or any Affiliate
pursuant to an Award, such right shall be no greater than the right of
any unsecured general creditor of the Company or any Affiliate.
m. No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee shall
determine whether cash, other securities, or other property shall be
paid or transferred in lieu of any fractional Shares or whether such
fractional Shares or any rights thereto shall be canceled, terminated,
or otherwise eliminated.
n. Headings. Headings are given to the Sections and subsections of the
Plan solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way
B-9
<PAGE>
material or relevant to the construction or interpretation of the Plan
or any provision thereof.
9. Term of the Plan.
a. Effective Date. The Plan shall become effective as of the date of its
approval by the Board; provided, however, that no Award shall be
exercisable unless the Plan is approved by the stockholders of the
Company.
b. Expiration. The Plan shall terminate 10 years after the earlier of the
date on which it becomes effective and the date it is approved by the
stockholders of the Company. Notwithstanding the foregoing, all Awards
made under the Plan prior to such termination date shall remain in
effect until such Awards have been satisfied or terminated in
accordance with the terms and provisions of the Plan and the
applicable Award Agreement.
B-10
<PAGE>
DETACH HERE
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 of such holder on April 9, 1999, at the Annual Meeting of Stockholders
of the Company to be held on Monday May 24, 1999 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
- ----------- -----------
DETACH HERE
<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
2. To approve the amendment of the Company's Supplemental Stock Option Plan to
increase the number of shares available for the grant of awards from
350,000 shares to 650,000 shares.
FOR AGAINST ABSTAIN
|_| |_| |_|
3. To approve the Kaye Group Inc. 1999 Equity Incentive Compensation Plan as
described in the Proxy Statement of the Company dated April 20, 1999.
FOR AGAINST ABSTAIN
|_| |_| |_|
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournments
thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |_|
PLEASE COMPLETE, SIGN, DATE, AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE.
Please 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:_____ Signature:__________________ Date:_____
