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 $.Ol 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 wanted 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

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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



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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.


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