Document:

FOURTH AMENDMENT TO LOAN AGREEMENT

     THIS FOURTH  AMENDMENT TO LOAN AGREEMENT (the  "Agreement")  is dated as of
the 3lst day of  January,  2001 and is by and  between  SUMMIT  BANK,  a banking
institution  of the State of New  Jersey  having an office at 250 Moore  Street,
Hackensack,  New Jersey  07601 (the  "Bank");  and KAYE GROUP  INC.,  a Delaware
corporation  having its  principal  executive  offices  located at 122 East 42nd
Street, New York, New York 10168 (the "Borrower").

     WHEREAS,  the  Borrower  and the Bank  have  heretofore  entered  into that
certain Loan Agreement  dated June 24, 1998, as amended by a First  Amendment to
Loan Agreement  dated as of July 31, 1999, a Second  Amendment to Loan Agreement
dated as of November 1, 1999 and a Third Amendment to Loan Agreement dated as of
October 31, 2000 (the "Loan Agreement"); and

     WHEREAS,  the Borrower has  requested  the Bank to make certain  additional
amendments  to the Loan  Agreement,  and the Bank has  agreed  to do so upon the
terms and conditions described herein.

     NOW,  THEREFORE,  in  consideration  of the  premises  and  other  good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged, the parties hereto agree as follows:

     1. Defined Terms. Except as otherwise indicated herein, all words and terms
defined in the Loan Agreement shall have the same meanings when used herein.

     2. Amendment to Loan Agreement. The following definition appearing in
Section 1.1 of the Loan Agreement is hereby amended to read in its entirety as
follows:

     "Revolving Loan Termination Date" shall mean April 30,2001.

     3. Substitute Note.  Concurrently  herewith,  the Borrower is executing and
delivering  to the Bank a  substitute  revolving  note in the maximum  principal
amount of $4,500,000 (the  "Substitute  Note") in  substitution  for, but not in
repayment  of, that certain  Substitute  Revolving  Note dated as of October 31,
2000 in the maximum principal amount of $4,500,000 (the "Prior Note") previously
issued by the Borrower to the Bank.  The  execution and delivery by the Borrower
of the Substitute Note pursuant to the provisions  hereof shall not constitute a
refinancing, repayment, accord and satisfaction or novation of the Prior Note or
the indebtedness evidenced thereby.

     4. Representations and Warranties. In order to induce the Bank to enter
into this Agreement and amend the Loan Agreement as provided herein, the
Borrower hereby represents and warrants to the Bank that:

          (a) All of the  representations  and  warranties  of the  Borrower set
forth in Article IV of the Loan Agreement are true,  complete and correct in all
material respects on and as of the date hereof with the same force and effect as
if made on and as of the  date  hereof  and as if set  forth  at  length  herein
(except that  representations and warranties which are expressly stated to be as
of a certain date are true,  complete and correct in all material respects as of
such certain date).

<PAGE>

          (b) No Default or Event of Default presently exists and is continuing
on and as of the date hereof.

          (c) Since the date of the Borrower's most recent financial  statements
delivered to the Bank, no material  adverse change has occurred in the business,
assets,  liabilities,  financial  condition  or  results  of  operations  of the
Borrower, and no event has occurred or failed to occur which is likely to have a
material  adverse  effect  on  the  business,  assets,  liabilities,   financial
condition or results of operations of the Borrower.

          (d) The Borrower has full power and authority to execute,  deliver and
perform any action or step which may be necessary to carry out the terms of this
Agreement  and all other  agreements,  documents  and  instruments  executed and
delivered by the  Borrower to the Bank  concurrently  herewith or in  connection
herewith (collectively,  the "Amendment Documents");  each Amendment Document to
which the  Borrower  is a party  has been duly  executed  and  delivered  by the
Borrower  and is  the  legal,  valid  and  binding  obligation  of the  Borrower
enforceable in accordance with its terms, subject to any applicable  bankruptcy,
insolvency,  general  equity  principles  or other  similar laws  affecting  the
enforcement of creditors' rights generally.

          (e) The execution, delivery and performance of the Amendment Documents
will  not  (i)  violate  any  provision  of any  existing  law,  statute,  rule,
regulation  or  ordinance,  (ii)  conflict  with,  result  in a  breach  of,  or
constitute a default under (A) the  certificate of  incorporation  or by-laws of
the  Borrower,  (B)  any  order,  judgment,   award  or  decree  of  any  court,
governmental authority, bureau or agency, or (C) any mortgage, indenture, lease,
contract or other  agreement or  undertaking to which the Borrower is a party or
by which the Borrower or any of its properties or assets may be bound,  or (iii)
result in the creation or  imposition of any lien or other  encumbrance  upon or
with  respect to any  property or asset now owned or  hereafter  acquired by the
Borrower.

          (f)  No  consent,  license,  permit,  approval  or  authorization  of,
exemption by, notice to, report to, or registration,  filing or declaration with
any person is required in connection with the execution,  delivery,  performance
or validity of the Amendment Documents or the transactions contemplated thereby.

     5. No Defenses.  The Borrower expressly acknowledges and agrees that (a) as
of January 31, 2001, the outstanding  principal amount of (i) the Revolving Loan
is $0,  (ii)  all  Acquisition  Advances  is $0,  and  (iii)  the  Term  Loan is
$2,070,380.75, and (b) such amounts, together with accrued interest thereon, are
owed  to the  Bank  without  defense,  offset  or  counterclaim  of  any  nature
whatsoever.  The Borrower hereby waives and releases all claims against the Bank
with respect to the  Obligations  and the  documents  evidencing or securing the
same.

     6. Bank Costs.  The  Borrower  shall  reimburse  the Bank on demand for all
costs,  including  legal fees and  expenses,  incurred by the Bank in connection
with  this  Agreement,  the  other  Amendment  Documents  and  the  transactions
referenced  herein.  If such  amounts are not paid within ten days of the Bank's
request  therefor,  the  Borrower  hereby  authorizes  the  Bank to  charge  the
Borrower's account for the amount of such fees and expenses.

     7. No Change. Except as expressly set forth herein, all of the terms and
provisions of the Loan Agreement shall continue in full force and effect.

     8. Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts and all such counterparts taken together shall constitute
one and the same instrument.

<PAGE>

     9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey.

     IN WITNESS WHEREOF,  the Borrower and the Bank have executed this Agreement
as of the date above written.

                                           SUMMIT BANK

                                           By: /s/ Lisa Cohen
                                               ----------------------------
                                               Lisa Cohen
                                               Vice President

                                           KAYE GROUP INC.

                                           By: /s/ Michael P. Sabanos
                                               ----------------------------
                                               Michael P. Sabanos
                                               Executive Vice President
                                               and Chief Financial Officer

<PAGE>

STATE OF NEW JERSEY  :
                     :ss.
COUNTY OF BERGEN     :

     BE IT  REMEMBERED,  that on this 14th day of February,  2001 before me, the
subscriber,  personally  appeared  LISA COHEN,  who I am  satisfied  is the Vice
President of SUMMIT BANK, the corporation named in and subscribing to the within
instrument and she, being by me duly sworn, acknowledged, deposed and said that,
in her capacity as such officer, she executed the foregoing instrument on behalf
of said corporation for the uses and purposes therein expressed.

                                               /s/ Ruth S. Fiqueroa
                                               ----------------------------
                                                      RUTH S. FIGUEROA
                                                 NOTARY PUBLIC OF NEW JERSEY
STATE OF NEW YORK    :                        My Commission Expires Aug. 5, 2004
                      ss.
COUNTY OF NEW YORK   :

     BE IT REMEMBERED,  that on this 13th day of February,  2OOl, before me, the
subscriber,  personally  appeared MICHAEL P. SABANOS,  who I am satisfied is the
Executive  Vice  President and Chief  Financial  Officer of KAYE GROUP INC., the
corporation named in and subscribing to the foregoing instrument;  and he, being
by me duly sworn, acknowledged, deposed and said that such inslmment was made by
such  corporation,  and that he signed and delivered the same as such officer of
such corporation as its voluntary act and deed for the uses and purposes therein
expressed.

                                           /s/ Halette Hammer
                                    -------------------------------------
                                               HALETTE HAMMER
                                      Notary Public, State of New York
                                              No. 02HA5060485
                                       Qualified in New York County
                                   Commission Expires November 12, 2002

<PAGE>

                           SUBSTITUTING REVOLVING NOTE

$4,500,000                                                As of January 31, 2001

     FOR  VALUE  RECEIVED,   the  undersigned,   KAYE  GROUP  INC.,  a  Delaware
corporation  (the  "Borrower"),  hereby  unconditionally  promises  to pay on or
before April 30, 2001 (the "Revolving Loan Termination  Date"),  to the order of
SUMMIT BANK, a banking  institution of the State of New Jersey (the "Bank"),  at
the office of the Bank located at 250 Moore Street,  Hackensack,  New Jersey, or
at such other  location  as the Bank  shall  designate,  in lawful  money of the
United  States of America and in  immediately  available  funds,  the  principal
amount of the  lesser of (i)  $4,500,000  or (ii) so much  thereof as shall have
been  advanced  (the  "Advances")  by the Bank to the Borrower  pursuant to that
certain Loan Agreement dated June 24, 1998, as amended, between the Borrower and
the Bank (the  "Agreement"). Terms defined in the Agreement  shall have the same
meanings when used herein.

     The Borrower further agrees to pay interest in like money at such office on
the  unpaid  principal  amount  hereof  from time to time at a rate or rates per
annum and at such times as are provided in the Agreement.

     The Borrower  shall pay to the Bank a late charge (the "Late Charge") in an
amount  equal to five  percent  (5%) of any payment  which is more than ten (10)
days in arrears  to cover the extra  expense  involved  in  handling  delinquent
payments,  but in no event  shall any Late  Charge be less than $25 or more than
$2,500. The term "payments" shall be construed to include  principal,  interest,
fees and any other  amount  due under the terms of this Note or any of the other
Loan  Documents.  Acceptance by the Bank of payment of a Late Charge shall in no
way be  construed  to be an election of remedies or waiver by the Bank of any of
its rights at law or under the terms of any of the Loan Documents.

     Subject to the provisions of Section 2.25 of the  Agreement,  this Note may
be  prepaid,  in  whole or in part,  at one time or from  time to time,  without
premium or penalty in accordance with the provisions of the Agreement.

     All payments made hereunder  shall be applied:  first, to any fees or other
charges owing to the Bank hereunder; second, to accrued and unpaid interest; and
third,  to  the  outstanding  principal  balance  hereof.   Notwithstanding  the
foregoing,  upon  the  occurrence  of an Event of  Default,  the Bank may  apply
payments received hereunder in such manner as it shall determine in its sole and
absolute discretion.

     This Note is secured by the  Collateral  described  in the  Agreement,  the
Pledge and Security Agreement and the other Loan Documents, and is guaranteed by
the Guarantors pursuant to the Guaranty Agreement.

     This Note is being  executed  and  delivered by the Borrower to the Bank in
substitution for that certain Substitute  Revolving Note dated as of October 31,
2000 from the Borrower in favor of the Bank in the maximum  principal  amount of
$4,500,000 (the "Prior Note").

<PAGE>

The  execution  and  delivery  of this Note shall not  constitute  a  repayment,
refinancing,  accord  and  satisfaction  or  novation  of the Prior  Note or the
indebtedness evidenced thereby.

     The Bank may declare this Note to be immediately  due and payable if any of
the following events shall have occurred and be continuing:

     (1) Failure by the Borrower to make any payment of principal or interest
under this Note on any date when due; or

     (2) An Event of Default shall have  occurred  under the Agreement or any of
the other Loan Documents.

     Upon the  occurrence of any Event of Default,  the Bank may, in addition to
such other and  further  rights and  remedies  as  provided  by law or under the
Agreement or under any of the other Loan Documents, (i) collect interest on such
overdue amount from the date of such maturity until paid at ante per annum equal
to three (3%)  percent in excess of Base Rate,  (ii) setoff such amount  against
any deposit  account  maintained in the Bank by the Borrower,  and such right of
setoff shall be deemed to have been  exercised  immediately  upon such stated or
accelerated  maturity even though such setoff is not noted on the records of the
Bank until a later time and (iii) hold as security  any property  heretofore  or
hereafter  delivered into the custody,  control or possession of the Bank or any
entity acting as agent for the Bank by any person liable for the payment of this
Note.

     This Note may not be changed  orally,  but only by an agreement in writing,
signed by the party against whom enforcement of any waiver, change, modification
or discharge is sought.

     Should  the  indebtedness  represented  by this Note or any part  hereof be
collected  at law or in equity,  or in  bankruptcy,  receivership,  or any other
court  proceeding,  or should this Note be placed in the hands of attorneys  for
collection  upon  default,  the  Borrower  agrees  to pay,  in  addition  to the
principal  and  interest  due  and  payable  hereon,  all  reasonable  costs  of
collecting or attempting to collect this Note, including  reasonable  attorneys'
fees and expenses.

     This Note  shall be and  remain  in full  force  and  effect  and in no way
impaired  until the  actual  payment  thereof  to the Bank,  its  successors  or
assigns.

     Anything  herein to the contrary  notwithstanding,  the  obligations of the
Borrower  under this Note shall be subject to the  limitation  that  payments of
interest shall not be required to the extent that receipt of any such payment by
the Bank would be contrary to provisions of law  applicable to the Bank limiting
the maximum rate of interest which may be charged or collected by the Bank.

     The Borrower and all  endorsers  and  guarantors  of this Note hereby waive
presentment, demand for payment, protest and notice of dishonor of this Note.

     This Note is binding upon the Borrower and its  successors  and assigns and
shall inure to the benefit of the Bank and its successors and assigns.

                                        2

<PAGE>

     This Note and the rights and  obligations  of the parties  hereto  shall be
subject to and governed by the laws of the State of New Jersey.

     IN WITNESS  WHEREOF,  the undersigned has caused this Substitute  Revolving
Note to be duly executed by its authorized  officer as of the day and year above
written.

                                          KATE GROUP INC.

                                          By: /s/ Michael P. Sabanos
                                              ---------------------------------
                                              Michael P. Sabanos
                                              Executive Vice President
                                              & Chief Financial Officer

                                        3

<PAGE>

STATE OF NEW YORK     :
                       ss.
COUNTY OF NEW YORK    :

     BE IT REMEMBERED,  that on this 13th day of February,  2001, before me, the
subscriber,  personally  appeared MICHAEL P. SABANOS,  who I am satisfied is the
Executive  Vice  President and Chief  Financial  Officer of KAYE GROUP INC., the
corporation  named in and subscribing to the foregoing instrument; and he, being
by me duly sworn,  acknowledged,  deposed and said that such instrument was made
by such  corporation,  and that he signed and delivered the same as such officer
of such  corporation  as its  voluntary  act and deed for the uses and  purposes
therein expressed.

                                             /s/ Halette Hammer
                                    ------------------------------------
                                               HALETTE HAMMER
                                      Notary Public, State of New York
                                               No. 02HA5060485
                                        Qualified in New York County
                                    Commission Expires November 12, 2002

                                        4Kaye Group Inc.
                              122 East 42nd Street
                            New York, New York 10168

                                                                January 17, 2001

Michael Sabanos
62 Sherwood Drive
Huntington, New York  11743

Dear Mr. Sabanos:

     Kaye  Group  Inc.  (the  "Company")  considers  it  essential  to the  best
interests  of its  stockholders  to  foster  the  continuous  employment  of key
management personnel. In this connection,  the Board of Directors of the Company
(the "Board") recognizes that, as is the case with many publicly held companies,
the  possibility  of a change in control of the  Company may exist and that such
possibility, and the uncertainty and questions which it may raise, may result in
the  departure or  distraction  of key personnel to the detriment of the Company
and its stockholders.

     The  Board  has  determined  that  appropriate  steps  should  be  taken to
reinforce  and  encourage  the  continued  attention  and  dedication of certain
employees,  including yourself,  to their assigned duties without distraction in
the face of potentially disturbing circumstances arising from the possibility of
a change in control of the Company.

     In order to induce  you to remain in the  employ of the  Company  or of any
Subsidiary (as defined below) which you are employed by, the Company agrees that
you shall receive the severance benefits set forth in this letter agreement (the
"Agreement") in the event your  employment with the Company or such  Subsidiary,
as the case may be,  is  terminated  under  the  circumstances  described  below
subsequent  to a Change  in  Control  (as  defined  below) of the  Company.  The
severance  benefit,  if any,  that you may be entitled  to under this  Agreement
shall be in lieu of any other severance or other termination-related  benefit to
which you may be entitled under your Employment  Agreement (as defined below) or
otherwise,  and to the extent your Employment Agreement provides any termination
related benefits, your Employment Agreement is hereby amended. For the avoidance
of doubt,  nothing  contained herein shall be deemed to affect your rights under
the Company's Stock Performance Plan.

     The  execution  of this  Agreement  does not  constitute a  termination  or
cancellation  of the  employment  agreement  between  you and the Company or any
Subsidiary,  as the case may be (the  "Employment  Agreement"),  or the  at-will
nature of your employment  with the Company or any  Subsidiary,  as the case may
be. The Employment  Agreement and the at-will nature of your employment with the
Company  or any  Subsidiary,  as the case may be,  shall  continue  in force and
effect after the date this Agreement is executed by the Company and you.

<PAGE>

     Severance Benefit

     If, during the period  beginning upon the occurrence of a Change in Control
and  ending  on the  one-year  anniversary  date  thereof,  your  employment  is
terminated  (i) by the Company  other than for  "Cause"  (as defined  below) and
other  than as a result  of your  death or  disability,  or (ii) by you for Good
Reason (as defined below),  then the Company shall pay to you an amount equal to
your annual base salary. Such payment shall be made in cash in a lump sum within
30 days after the date your employment is so terminated.  In addition, until you
find other  employment  providing you with (a) health,  (b) accidental death and
dismemberment and (c) life insurance,  the Company shall continue to provide you
with such type of insurance  (for a period not to exceed 12 months from the date
of any such  termination)  unless the Company  plans which are then in effect do
not permit such continued coverage,  in which case, the Company will provide you
with a cash amount  sufficient to pay the cost of such insurance  until you find
other employment, but in no event in excess of 12 months.

     Definitions

     For purposes of this Agreement:

     (a) "Change in Control" shall mean the occurrence of any of the following:

          (i) The  acquisition  by any  individual,  entity or group (within the
     meaning of Section  13(d)(3) or 14(d)(2) of the Securities  Exchange Act of
     1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
     (within the meaning of Rule 13d-3  promulgated  under the Exchange  Act) of
     51% or more of either (A) the then  outstanding  shares of common  stock of
     the Company (the  "Outstanding  Company  Common Stock") or (B) the combined
     voting  power of the then  outstanding  voting  securities  of the  Company
     entitled to vote generally in the election of directors  (the  "Outstanding
     Company Voting Securities");  provided,  however, that for purposes of this
     subsection (i), the following acquisitions shall not constitute a Change of
     Control:  (1) any  acquisition  by Kaye  Investments  L.P.  ("KILP") or its
     affiliates,  (2) any acquisition if, after such  acquisition,  KILP and its
     affiliates own more Outstanding  Company Voting  Securities and Outstanding
     Company Common Stock than the acquiring Person;  (3) any acquisition by any
     employee  benefit plan (or related  trust)  sponsored or  maintained by the
     Company or any corporation or other entity  controlled by the Company,  (4)
     changes  in the  beneficial  ownership  of KILP  so long as new  beneficial
     owners(s)  are now  current  owners  (directly  or  indirectly)  of KILP or
     control,  are controlled by or under common control with such owners or are
     related by blood,  marriage  or  adoption  to any  current  owner who is an
     individual  or are heirs and  beneficiaries  of any current owner who is an
     individual,  or (5) any  acquisition  by any  corporation  or other  entity
     pursuant to a transaction  which  complies with clauses (A), (B) and (C) of
     subparagraph (iii) of this paragraph (a); or

                                       -2-
<PAGE>

          (ii) Individuals who, as of the date hereof, constitute the Board (the
     "Incumbent  Board") cease for any reason to constitute at least  two-thirds
     of the Board;  provided,  however,  that any individual becoming a director
     subsequent to the date hereof whose election, or nomination for election by
     the Company's  shareholders,  was approved by a vote of at least two-thirds
     of the directors then comprising the Incumbent Board shall be considered to
     be a member of the Incumbent Board; or

          (iii)  Consummation of a  reorganization,  merger or  consolidation or
     sale or other  disposition of all or substantially all of the assets of the
     Company (a "Business  Combination"),  in each case, unless,  following such
     Business  Combination,  (A) all or substantially all of the individuals and
     entities who were the beneficial owners,  respectively,  of the Outstanding
     Company Common Stock and Outstanding Company Voting Securities  immediately
     prior  to  such  Business   Combination   beneficially   own,  directly  or
     indirectly, more than 51% of, respectively,  the then outstanding shares of
     common stock and the combined voting power of the then  outstanding  voting
     securities  entitled to vote generally in the election of directors (or, if
     not  a  corporation,  their  equivalent),  as  the  case  may  be,  of  the
     corporation  or other  entity  resulting  from  such  Business  Combination
     (including,  without  limitation,  a corporation or other entity which as a
     result  of  such  transaction  owns  the  stock  of the  Company  or all or
     substantially all of the Company's assets either directly or through one or
     more subsidiaries) in substantially the same proportions as their ownership
     immediately prior to such Business  Combination of the Outstanding  Company
     Common Stock and Outstanding Company Voting Securities, as the case may be,
     (B) no Person  (excluding any  corporation  or other entity  resulting from
     such Business  Combination or any employee  benefit plan (or related trust)
     of the Company or such  corporation  or other  entity  resulting  from such
     Business  Combination)  beneficially owns,  directly or indirectly,  51% or
     more of,  respectively,  the then outstanding shares of common stock of the
     corporation or other entity  resulting from such Business  Combination,  or
     the combined voting power of the then outstanding voting securities of such
     corporation  or other  entity  except to the  extent  that  such  ownership
     existed prior to the Business  Combination  and (C) at least  two-thirds of
     the  members of the board of  directors  of the  corporation  (or, if not a
     corporation,  their equivalent),  resulting from such Business  Combination
     were  members of the  Incumbent  Board at the time of the  execution of the
     initial  agreement,  or of the  action  of the  Board,  providing  for such
     Business Combination; or

          (iv) Approval by the shareholders of the Company of a complete
     liquidation or dissolution of the Company.

     (b) "Cause"  shall mean (i) a material  breach by you of the  provisions of
your Employment Agreement,  which breach shall not have been cured by you within
sixty (60) days following  notice thereof by the Company or any  Subsidiary,  as
the case may be, to you, (ii) the commission of gross negligence or bad faith by
you in the course of your  employment,  which  commission has a material adverse
effect on the Company or any of its Subsidiaries, (iii) the commission by you of
a criminal act of fraud,  theft or dishonesty  causing  material  damages to the
Company or any of its  Subsidiaries  or (iv) your  conviction  of (or plead nolo
contendere to)

                                       -3-
<PAGE>

any felony, or misdemeanor involving moral turpitude if such misdemeanor results
in material  financial harm to or materially  adversely  affects the goodwill of
the Company or any of its Subsidiaries.

     (c) "Good Reason" shall mean:

          (i) the  assignment  to you of any duties  substantially  inconsistent
     with the position with the Company or any  Subsidiary,  as the case may be,
     that you held immediately prior to the Change in Control of the Company, or
     a  significant   adverse  alteration  in  the  nature  or  status  of  your
     responsibilities  or the conditions of your employment from those in effect
     immediately prior to such Change in Control,  excluding for this purpose an
     isolated  and  inadvertent  action  not  taken in bad  faith  and  which is
     remedied by the  Company or any  Subsidiary,  as the case mat be,  promptly
     after receipt of notice thereof given by you;

          (ii) a reduction by the Company or any Subsidiary, as the case may be,
     in your  annual  base salary as in effect on the date hereof or as the same
     may be  increased  from time to time,  except for  across-the-board  salary
     reductions  similarly  affecting  all key  personnel of the Company and its
     Subsidiaries and all key personnel of any person in control of the Company;

          (iii) any  failure by the Company to require  any  successor  (whether
     direct or indirect, by purchase, merger, consolidation or otherwise) to all
     or substantially all of the business and/or assets of the Company to assume
     expressly and agree to perform this Agreement and the Employment  Agreement
     in  the  same  manner  and to the  same  extent  that  the  Company  or any
     Subsidiary,  as the case may be,  would be  required  to perform if no such
     succession had taken place;

          (iv) the relocation of the Company's or any Subsidiary's,  as the case
     may be, offices at which you are principally  employed immediately prior to
     the date of the Change in Control of the Company to a location more than 35
     miles from such location, or the Company's or any Subsidiary's, as the case
     may be,  requiring you to be based anywhere other than the Company's or any
     Subsidiary's,  as the case may be,  offices  at such  location,  except for
     required travel on the Company's or any  Subsidiary's,  as the case may be,
     business to an extent  substantially  consistent  with your business travel
     obligations immediately prior to the Change in Control;

          (v) the failure by the Company or any Subsidiary,  as the case may be,
     to  continue to provide you with  benefits  substantially  similar to those
     enjoyed by you under any of the Company's or any Subsidiary's,  as the case
     may be, life  insurance,  medical,  accident,  disability or other employee
     benefit or compensation  plans in which you were  participating at the time
     of the Change in Control  of the  Company,  the taking of any action by the
     Company which would  directly or indirectly  materially  reduce any of such
     benefits, or the failure by the Company or any Subsidiary,  as the case may
     be, to provide you with the number of paid  vacation  days to which you are
     entitled on the basis

                                       -4-
<PAGE>

     of years of service with the Company or any Subsidiary, as the case may be,
     in accordance with the Company's or any  Subsidiary's,  as the case may be,
     normal  vacation  policy in effect at the time of the  Change in Control of
     the Company,  unless such failure or taking of action similarly affects all
     key personnel of the Company and its  Subsidiaries and all key personnel of
     any person in control of the Company;

     (d)  "Subsidiary"  shall mean any  corporation or other entity of which the
securities  having a majority of the voting power in electing  directors are, at
the time of determination, owned by the Company, directly or through one or more
Subsidiaries.

     Gross-Up

     Anything in this  Agreement to the contrary  notwithstanding,  in the event
any  payment or  distribution  by the  Company to you under  this  Agreement  (a
"Payment")  would be subject to the  excise tax  imposed by Section  4999 of the
Internal  Revenue Code of 1986, as amended  (such excise tax,  together with any
similar tax under any new or  replacement  provision to such Section  4999,  are
hereinafter  collectively  referred to as the "Excise  Tax"),  then you shall be
entitled to receive an  additional  payment (a "Gross-Up  Payment") in an amount
such that after payment by you of all taxes, including,  without limitation, any
income  taxes and Excise Tax imposed upon the  Gross-Up  Payment,  you retain an
amount  of the  Gross-Up  Payment  equal  to the  Excise  Tax  imposed  upon the
Payments.  All  determinations   required  to  be  made  for  purposes  of  this
computation,  including  whether and when a Gross-Up Payment is required and the
amount of such Gross-Up  Payment and the  assumptions to be utilized in arriving
at such  determination,  shall be made by the Company's  independent  accounting
firm which shall provide detailed  supporting  calculations  both to the Company
and you within 15 business days of the receipt of notice from you that there has
or will be a Payment, or such earlier time as is requested by the Company.

     Miscellaneous

     You agree to  cooperate  with the Company  and to use your best  efforts to
assist  the  Company  in  effecting  a  Change  in  Control.  You  agree to hold
confidential  all  information  regarding a potential  Change in Control and all
information  contained herein and not to communicate  with potential  purchasers
(other than with the consent and pursuant to the instructions of the Company).

     This Agreement  shall be binding upon and shall inure to the benefit of the
Company and its  successors  and assigns  (including,  without  limitation,  any
entity or person who shall acquire all or substantially all of the businesses or
assets  of the  Company  and its  Subsidiaries,  whether  by  purchase,  merger,
consolidation  or  otherwise)  and you and your  heirs,  legal  representatives,
executors and assigns.

     This Agreement  sets forth the entire  agreement and  understanding  of the
parties  relating  to the  subject  matter  hereof,  and  supersedes  all  prior
agreements,  arrangements and understandings,  whether written or oral, relating
to the subject matter hereof.

                                       -5-
<PAGE>

     This Agreement may be amended, modified,  superseded,  canceled, renewed or
extended,  and the terms or  covenants  hereof may be waived,  only by a written
instrument  executed by both  parties  hereto and with the consent of the Board.
The failure of either party at any time or times to require  performance  of any
provision hereof shall in no manner affect such party's right at a later time to
enforce  the  same.  No  waiver  by  either  party of the  breach of any term or
covenant  contained in this Agreement,  whether by conduct or otherwise,  in any
one or more  instances,  shall be deemed to be, or  construed  as, a further  or
continuing  waiver of any such  breach or waiver of the breach of any other term
or covenant contained in this Agreement.

     This Agreement shall be governed by, and construed in accordance  with, the
laws of the State of New York, without regard to principles of conflicts of law.

     If any provision of this Agreement shall be held invalid or  unenforceable,
such invalidity or  unenforceability  shall apply only in the jurisdiction where
such holding shall have occurred and only as to such  provision and shall not in
any  manner  affect or  render  invalid  or  unenforceable  any other  severable
provision  of this  Agreement,  and this  Agreement  shall be  modified  in such
jurisdiction so that such invalid or unenforceable  provision thereafter will be
enforceable.

     No notice, consent,  approval or communication provided for herein or given
in connection herewith shall be validly given, made,  delivered or served unless
it is in writing and  delivered  personally,  or sent by a recognized  overnight
courier (with all costs  prepaid),  or sent by  registered  or certified  United
States  mail,  postage  prepaid,  with  return  receipt  requested,  or  sent by
facsimile  transmission,  to the addresses  for each party set forth below.  Any
party  hereto may from time to time  change  its  address by notice to the other
parties given in the manner provided for herein.  Notices,  consents,  approvals
and  communications  delivered  personally or sent by overnight courier shall be
deemed to have been given upon  delivery to the  respective  addresses set forth
below,  or five (5) days after the date when mailed,  if sent by  registered  or
certified United States mail, or when receipt is confirmed, if sent by facsimile
transmission. Addresses of the parties are the following:

                  If to the Company, to:

                           Kaye Group Inc.
                           122 East 42nd Street
                           New York, New York 10168

                  If to you, to:

                           Michael Sabanos
                           62 Sherwood Drive
                           Huntington, New York 11743

                                       -6-
<PAGE>

     None of your rights  under this  Agreement  may be  assigned,  transferred,
pledged,  or otherwise disposed of, other than by your will or under the laws of
descent and distribution,  and any amount paid to you pursuant to this Agreement
shall not be taken into account in computing  your salary or other  compensation
for purposes of determining any benefit or  compensation  payable to you or your
beneficiaries or estate under any pension,  retirement,  life insurance or other
benefit arrangement of the Company or any Subsidiary.

                                      * * *

     Please  signify your  agreement to the foregoing by signing this  Agreement
below and returning it to the Company.

                                          Very truly yours,

                                          KAYE GROUP INC.

                                          By:_______________________________
                                                Name:
                                                Title:

AGREED:

-----------------------------
      Michael Sabanos

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