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.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(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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________________________________________________________________________________
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[LOGO]
KAYE GROUP INC.
122 East 42nd Street
New York, New York 10168
Notice of Annual Meeting of Stockholders
To Be Held on May 15, 2000
To the Stockholders of Kaye Group Inc.:
The Annual Meeting of Stockholders of Kaye Group Inc. (the "Company") will
be held at Club 101, 101 Park Avenue, New York, New York, on Monday, May 15,
2000, 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 2001 Annual Meeting of Stockholders;
|_| To amend the Company's Stock Option Plan and Restated Supplemental
Stock Option Plan by merging the Plans and increasing the number of
shares of Common Stock available for the grant of awards from
1,000,000 shares to 1,350,000 shares; 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 1, 2000 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, 1999
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, 2000
<PAGE>
[LOGO]
KAYE GROUP INC.
122 East 42nd Street
New York, New York 10168
MAILING DATE
April 20, 2000
Proxy Statement for Annual Meeting of Stockholders
To be Held on May 15, 2000
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 15, 2000, 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 2001 Annual Meeting of Stockholders;
Proposal 2. |_| To amend the Company's Stock Option Plan and Restated
Supplemental Stock Option Plan by merging the Plans and increasing the
number of shares of Common Stock available for the grant of awards
from 1,000,000 shares to 1,350,000 shares; and
Proposal 3. |_| 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 1, 2000 will be
entitled to notice of, and entitled to vote at the Meeting. On such record date
there were outstanding 8,463,354 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.
<PAGE>
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 Proposal No. 2 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 Stock Option Plans (Proposal No. 2).
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 Stock
Option Plans (Proposal No. 2). 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
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.
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.
<PAGE>
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of April 1, 2000 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 8,463,354 shares of Common Stock outstanding as of that date.
Shares Beneficially Owned (1)
Record Owner Number Percent
- ------------ ------ -------
Kaye Investments L.P. (2) 2,216,140 26.19
ZS Pubco I L.P. (3) 1,129,242 13.34
Woodbourne Partners, L.P. (4) 864,137 10.21
Directors and Named Executives:
Bruce D. Guthart (2)(5) 501,575 6.28
Howard Kaye (2)(5) 949,686 11.22
Michael P. Sabanos (5) 28,000 *
Robert L. Barbanell (5) 22,000 *
Richard Butler (5) 26,800 *
Elliot S. Cooperstone (5) 3,000 *
David Ezekiel (5) 25,000 *
Ned L. Sherwood (5) 485,003 5.73
Marc I. Cohen (5) 10,750 *
Robert N. Munao (5 ) 0 *
All executive officers and directors as a group
(10 persons) (2)(5)
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* 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 1, 2000.
(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 and Howard Kaye own 5.3% and 47.3% respectively,
of KINV. Howard Kaye owns 19.2% of WKA. Pursuant to Investments' partnership
agreement and the KINV and WKA stockholders' agreements, the number of shares
reflected in the above chart for Messrs. Guthart and Kaye include shares that
would be distributed to them upon the dissolution of Investments, KINV and WKA.
Messrs. Guthart and Kaye 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 Messrs. Guthart and
Kaye in the above chart includes 605,545 shares that would be distributed to
Messrs. Guthart and Kaye upon the dissolution of Investments, KINV and WKA. The
number of shares reflected for Investments in the above chart also includes
606,545 shares that would be distributed to Messrs. Guthart and Kaye upon the
dissolution of Investments, KINV and WKA. Thus, if such shares were distributed
to Messrs. Guthart and Kaye, the remaining shares held by Investments would
total 1,609,595. 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 Mr.
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 Amendment No. 1 to Schedule 13D filed August 5, 1999, by the
beneficial owners named therein.
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<PAGE>
(4) 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.
(5) Includes options (see note (1)) for the following individuals to acquire the
following shares: Bruce D. Guthart, 180,000; Howard Kaye, 20,000; Michael P.
Sabanos, 23,000; Robert L. Barbanell, 10,000; Richard Butler, 15,000; Elliot
Cooperstone, 3,000; David Ezekiel, 15,000; Marc I. Cohen, 10,000; and Robert N.
Munao, 0.
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, 2000), 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 44 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 1993. He was appointed
CEO in 1996 and Chairman in 1997. Mr. Guthart is an officer and 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. (since November 1999, Chairman and
CEO only), Claims Administration Corporation (since November 1999, Chairman and
CEO only), Program Brokerage Corporation (since November 1999, Chairman and CEO
only), 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 54 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 partner 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 43 years old. Mr. Sabanos, the Chief
Financial Officer ("CFO") of the Company, was appointed Executive Vice President
of the Company in November 1999. He had served as the Senior Vice President
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.
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<PAGE>
Mr. Sabanos is also a director and, except where noted, Executive Vice President
(previously 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 69 years old. He has served as President of Robert
L. Barbanell Associates, Inc., a financial consultancy firm since July 1994. He
is a director of Cantel Industries, Inc., Marine Drilling Companies, Inc. and
Sentry Technology Corporation.
Richard B. Butler is 46 years old. Mr. Butler is the Senior Managing
Partner of Strategic Capital Advisors, LLC, a financial services consulting
firm. From 1992 to 1999 Mr. Butler was Managing Director and Head of the
Financial Institutions Group at ING Barings, a global investment banking firm.
From 1995 to 1999, he also served as President and CEO of ING (U.S.) Capital
Securities, a wholly owned subsidiary of ING Barings. Mr. Butler was Managing
Director of the Worldwide Insurance Group at Chase Manhattan Bank from 1982 to
1992.
Elliot S. Cooperstone is 38 years old. He is Chairman and Chief Executive
Officer of EmployeeMatters, Inc., an internet-based business 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 51 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 110 insurance companies that IAS manages. Mr. Ezekiel
is also a director of H&H Reinsurance Brokers, Ltd.
Ned L. Sherwood is 50 years old. He owns and controls the general partner
of ZS Fund, L.P. Mr. Sherwood has served as President of N.L. Sherwood & Co.,
Inc., a private investment firm, since September 1985. He is also a director of
Mazel Stores and Market Facts, Inc. Mr. Sherwood is an officer and director of
ZS Kaye, Inc., a limited partner of Investments; and a member of ZS Pubco I
L.L.C., the general partner of ZS Pubco I. L.P.
PROPOSAL TO AMEND THE STOCK OPTION PLANS
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. Restated Supplemental Stock Option Plan (collectively the "Option
Plans") is 350,000 and 650,000, respectively, for a total of 1,000,000 shares
available for the grant of awards. As of December 31, 1999, 1,000,000 shares
were awarded to eligible participants pursuant to the Option Plans. The Company
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. The Company has also found
that offering options is a significant factor in attracting new employees in
this economic climate. On January 24, 2000 the Company's Board of Directors
approved an amendment of the Option Plans to merge the Stock Option Plan into
the Restated Supplemental Stock Option Plan (the Option Plans are virtually
identical in substance), and to increase the total number of shares of Common
Stock available for the grant of awards under such Option Plans from 1,000,000
to 1,350,000, and approved its submission to the stockholders for adoption. The
merged Option Plans shall be referred to as the Amended and
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<PAGE>
Restated Stock Option Plan. It is the intention of the Company that options may
be granted under the Amended and Restated Stock Option Plan through May 2010.
The proposed Amended and Restated Stock Option Plan is set forth as Exhibit A to
this Proxy Statement.
The Board of Directors unanimously recommends approval of the Amendment
of the Option Plans by stockholders. Unless otherwise instructed, signed proxies
which are returned in a timely manner will be voted FOR approval of the
Amendment.
DIRECTOR MEETINGS AND COMPENSATION
Board of Directors
The Board of Directors held eight meetings during the year ended December
31, 1999. Each of the Company's directors participated in excess of 75% 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, 1999.
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 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 the Restated 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 four meetings during the year ended December 31, 1999. Each of
the Committee members attended all of the meetings.
The Investment Committee oversees the Company's and its subsidiaries'
investment activity. The members of the Investment Committee are Messrs. Butler,
Sabanos, Ezekiel and Sherwood. The Investment Committee held one meeting during
the year ended December 31, 1999. Each of the Committee members attended the
meeting.
Director Compensation
In 1999, 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 1999 of $20,500,
$17,500, $20,500 and $17,500, respectively, for their services, as well as 5,000
stock options each in 1999. The exercise price for the options granted in 1999
is $8.24, which is above the trading price of the Common Stock as of April 1,
2000.
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<PAGE>
Compensation Committee Interlocks and Insider Participation
Mr. Sherwood was a director of, and had shared beneficial ownership of more
than ten percent of the outstanding common stock of, Sun Television and
Appliances, Inc. ("Sun TV"). In 1994, Sun TV and a subsidiary of the Company
entered into two agreements whereby the Company's subsidiary agreed to assume
certain service contracts that were sold by Sun TV to its retail customers (the
"Agreement") and contracted with Sun TV to have Sun TV provide repair services
under certain service contracts. The Board of Directors believes that the
agreements were commercially reasonable. On September 11, 1998, Sun TV filed
bankruptcy petitions under Chapter 11 of the Bankruptcy Code. The Company's
subsidiary filed a proof of claim on March 11, 1999 for any and all amounts that
are due and owing under the Agreement.
INFORMATION REGARDING EXECUTIVE COMPENSATION
Summary Compensation Table
The following Summary Compensation Table discloses for the fiscal year
indicated individual compensation information on Mr. Guthart, the Company's
Chief Executive Officer in 1999, and the four other most highly compensated
executive officers (collectively, the "named executives"):
<TABLE>
<CAPTION>
Long-Term
Annual Compensation (1) Compensation(4)
------------------------ Other Annual ---------------
Fiscal Salary Bonus Compensation Options
Name and Principal Position Year ($) ($) ($)(2) (#)
--------------------------- ---- --- --- ------ ---
<S> <C> <C> <C> <C> <C>
Bruce D. Guthart 1999 $450,000 $100,000 $ 8,678 102,500(5)
Chairman, 1998 450,000 450,000 8,261 0
President, and 1997 453,300 315,000 6,529 200,000
Chief Executive Officer
Howard Kaye 1999 $450,000 $ 0 $ 15,263 0
Chairman of Kaye Insurance 1998 450,000 66,667 15,103 0
Associates, Inc. 1997 454,278 0 9,394 0
Michael P. Sabanos 1999 $250,000 $ 55,000 $ 12,099 75,000
Executive Vice President 1998 247,500 125,000 10,626 0
and Chief Financial Officer 1997 219,077 44,000 12,892 25,000
Marc I. Cohen 1999 $250,000 $110,000 $ 10,819 85,500
President 1998 250,000 250,000 10,324 5,000
Program Brokerage Corp., 1997 168,269 40,600 3,250 15,000
Claims Administration Corp., and
Old Lyme Ins. Co. of Rhode Island
Robert N. Munao 1999 $ 40,770(3) $ 9,826 $ 0 10,000
Executive Director of 1998 0 0 0 0
Kaye Insurance Associates, Inc. 1997 0 0 0 0
</TABLE>
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(1) All compensation described in the table was paid by the Company's
subsidiary, Kaye Insurance Associates, Inc., except for Mr. Cohen's compensation
which was paid by the Company's subsidiary, Program Brokerage Corporation.
(2) All amounts include the estimated value of a Company-provided automobile
devoted to personal use, commissions and employer contributions made pursuant to
the Company's Retirement Savings Plan.
(3) Mr. Munao's employment with the Company commenced on November 1, 1999 and,
thus, his salary, as reflected, was for a portion of the year.
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<PAGE>
(4) During 1998 Messrs. Sabanos and Cohen were each granted 38,461 shares of
Performance Stock under the Company's Stock Performance Plan. In 1999, Mr. Munao
was granted 13,008 shares of Performance Stock under the 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 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. The dollar value of the
grants to Messrs. Sabanos, Cohen and Munao on the date of such grants was
$250,000, $250,000 and $100,000, respectively. 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. In 1999, 7,692 of the shares
granted to Messrs. Sabanos and Cohen were awarded pursuant to the Plan. No
shares granted or awarded under this Plan have vested.
(5) Mr. Guthart was granted options for 225,000 shares of the Company's stock,
of which 102,500 were issued effective December 16, 1999, and the balance will
be issued upon shareholder approval of Proposal 2 at the next Annual Meeting of
Stockholders. See Compensation Committee Report.
Employment Agreements
Messrs. Guthart and Munao have employment agreements with the Company or
its subsidiaries which expire on December 31, 2001, and May 25, 2001,
respectively. The employment agreements between the Company and Mr. Sabanos, and
the Company and Mr. Cohen may be terminated by the Company or the employee, 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 his employment agreement, 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. The Board of Directors has approved a proposal recommended
by the Compensation Committee that in the event of a termination of employment
within one year following a Change of Control of the Company, certain key
executives would receive one times their annual compensation.
Options
The following table sets forth certain information relating to stock option
grants made in 1999 to the named executives:
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Option Term
Number of % of Total -----------
Securities Options
Underlying Granted to
Options Employees in Exercise Expiration
Name Granted (#) Fiscal Year (1) Price Date (5%) (10%)
---- ----------- --------------- ----- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Bruce D. Guthart 102,500 30.0 $7.50 12/14/09 $483,463 $1,225,190
Michael P. Sabanos 75,000 21.9 7.50 12/14/09 353,753 896,480
Marc Cohen 10,000 2.9 8.24 10/31/09 51,821 131,324
75,000 21.9 7.50 12/14/09 353,753 896,480
Robert Munao 10,000 2.9 8.24 10/31/09 51,821 131,324
</TABLE>
(1) Does not include 20,000 options issued to directors during 1999.
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<PAGE>
The following table sets forth, as of December 31, 1999, 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 170,000 / 195,000
Howard Kaye 20,000 / 2,500
Michael P. Sabanos 21,000 / 89,000
Marc Cohen 7,000 / 98,000
Robert Munao 0 / 10,000
Compensation Committee Report
Through the Kaye Group Inc. Stock Option Plan and the Kaye Group Inc.
Restated Supplemental Stock Option Plan, 1,000,000 options were awarded as of
December 31, 1999, and no options were available to be awarded. On January 24,
2000, the Company's Board of Directors approved the amendment of the Kaye Group
Inc. Option Plan and Restated Supplemental Stock Option Plan to merge the Option
Plans and to increase the total number of shares of Common Stock available for
the grant of awards from the combined Plans from 1,000,000 to 1,350,000, 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 1999 to Mr.
Munao as well as to other employees of the Company.
Having established a policy for executive compensation, as described in the
Company's proxies dated April 17, 1997, April 14, 1998 and April 20, 1999, the
Compensation Committee began holding discussions in early 2000 with the
Company's Chairman, President and Chief Executive Officer, Bruce D. Guthart, as
to a formula for a bonus achievable in 2000 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 2000, 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.
Subsequent to the approval by the stockholders of the 1999 Equity Incentive
Compensation Plan, the Board and Messrs. Guthart and Sabanos (i.e, the proposed
recipients of grants under the Plan), jointly deemed that an award of options
pursuant to the Company's Option Plans would more appropriately compensate and
incentivize such executive employees to achieve continued growth of the
Company's business and stock price, and to fully share in the financial success
of the Company. Accordingly, rather than make any award to such individuals (or
to any other individual) pursuant to the 1999 Equity Incentive Compensation
Plan, on December 16, 1999, the Compensation Committee approved and recommended
for ratification to the Board the award of certain stock option grants to
Messrs. Guthart and Sabanos and to Marc Cohen, who had been recently appointed
as President of several of the Company's subsidiaries, effective December 16,
1999. The Compensation Committee recommended that Messrs. Sabanos and Cohen
should be immediately granted
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<PAGE>
options on 75,000 Shares of Kaye Group Inc. stock, and that Mr. Guthart should
be granted options on 225,000 Shares, as follows: he should immediately receive
102,500 options, which were all of the options available for grant on December
16, 1999, with the balance of the options (122,500) to be issued pending the
approval by the stockholders at the next Annual Meeting of an appropriate
increase in the number of shares of the Company's stock available for option
grants, and, in the absence of such stockholder approval, Mr. Guthart would
receive an appropriate "Change of Control" payment. On January 24, 2000, the
Board ratified the Compensation Committee's recommendation.
By the Compensation Committee:
Robert L. Barbanell
Elliot S. Cooperstone
Ned L. Sherwood
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PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return during the five years, ended December 31, 1999, with the Center for
Research and Security Prices ("CRSP") Index for NASDAQ Stock Market (U.S.
Companies), the NASDAQ Insurance Stock Index (which index includes approximately
80 corporations that describe themselves as insurance entities and are traded on
the NASDAQ system), and a group of peer insurance brokerage companies and
property and casualty companies (Arthur J. Gallagher & Co., Brown & Brown Inc.,
Frontier Insurance Group Inc., Hilb Rogal and Hamilton Co., Meadowbrook
Insurance Group, Mutual Risk Management, Ltd. and Penn-American Group). This
peer group will replace the NASDAQ Insurance Stock Index in proxies issued by
the Company in the future. The Company selected the businesses in this peer
group in its good faith belief that these other public companies are most
similar to the Company's insurance business. The graph assumes $100 invested on
December 31, 1994 in the Company's Common Stock and $100 invested at that time
in each of the selected indices. The Company and the indices assume that all
dividends are reinvested.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
KAYE GROUP INC.,
CRSP INDEX FOR NASDAQ STOCK MARKET
(U.S. COMPANIES), NASDAQ INSURANCE STOCKS AND PEER GROUP
[THE FOLLOWING TABLE IS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
[OBJECT OMITTED]
<TABLE>
<CAPTION>
Period Ending
Index 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Kaye Group Inc. 100.00 83.01 55.37 70.71 81.20 91.82
NASDAQ - Total US 100.00 141.34 173.90 213.07 300.43 555.99
NASDAQ Insurance Index 100.00 142.05 161.92 237.52 211.62 164.41
KAYE Group Inc. Peer Group 100.00 141.28 144.73 202.68 213.20 169.19
</TABLE>
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<PAGE>
CERTAIN RELATED TRANSACTIONS AND RELATIONSHIPS
Transactions with Non-Consolidated Entities
International Advisory Services, Ltd., an insurance management company
located in Bermuda of which Mr. Ezekiel, a Director of the Company, and an
officer of Old Lyme Insurance Co., Ltd., is a director, provides various
management services to Old Lyme Insurance Co., Ltd., a subsidiary of the
Company. During 1997, 1998 and 1999, Old Lyme Insurance Co., Ltd. paid to
International Advisory Services, Ltd. management fees of $37,500, $30,000 and
$20,000, respectively.
Mr. Ezekiel 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 $38,114, $0, and $0, in
1997, 1998 and 1999, respectively, in connection with such contract.
Mr. Sherwood, a Director of the Company, is a director of, and had 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, 1998, 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 International L.P. ("KILP"), the former owner of the majority of
shares of Common Stock of the Company, incurred a management fee to Kaye
Insurance Associates, Inc., a subsidiary of the Company, 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.
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<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
the Company's Common Stock, to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of the
Company's Common Stock. Officers, directors and greater than ten percent
stockholders are required by Securities and Exchange Commission regulations to
furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, during the fiscal year ended December 31, 1999,
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,
2000. 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, 2001 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 1,
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
intends to present, or is aware that others will present, at the Meeting. If any
other proper business should be presented at the Meeting, the proxies will be
voted in respect thereof in accordance with the discretion and judgment of the
person or persons voting the proxies.
By order of the Board of Directors,
Ivy S. Fischer
Secretary
Kaye Group Inc.
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<PAGE>
EXHIBIT A
KAYE GROUP INC.
AMENDED AND RESTATED STOCK OPTION PLAN
ARTICLE I
Purpose of Plan
The Amended and Restated Stock Option Plan (the "Plan") of Kaye Group Inc.
("KGI" and, together with its subsidiaries, the "Company"), has been adopted by
the Board of Directors and stockholders of KGI effective May, 2000, shall
replace the Stock Option Plan (effective August 1993) and the Restated
Supplemental Stock Option Plan (effective May 1999), and 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.
"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.
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"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, 1,350,000 shares, subject to adjustment in accordance with paragraph
6.4. To the extent any Options expire unexercised or are canceled, 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.
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 in any one calendar year. 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.
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<PAGE>
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 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.
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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 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 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),
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<PAGE>
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.
* * * * *
