Document:

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

                                                                January 17, 2001

Marc Cohen
130 Peach Drive
Roslyn, New York  11576

Dear Mr. Cohen:

     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:

                           Marc Cohen
                           130 Peach Drive
                           Roslyn, New York 11576

                                       -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:

-------------------------------
             Marc Cohen

                                       -7-ZS Fund L.P.
                         120 W. 45th Street, Suite 2600
                            New York, New York 10036
                                 (212) 398-6200
                               Fax (212) 398-1808

                                               As of January 5, 2001

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

Gentlemen:

ZS Fund L.P. ("ZS") is pleased to submit this letter agreement (the "Agreement")
confirming  the terms under which ZS will and has served as a financial  advisor
to Kaye Group Inc.,  its  subsidiaries  and other  affiliated  entities  thereof
(collectively,   "Kaye"  or  the  "Company")  in  connection  with  a  potential
transaction  described in the term sheet,  dated  December 23, 2000 and attached
hereto as Exhibit A. (the "Transaction").

In this letter,  we have  outlined our  approach,  timing and fees in performing
this work for the Company.

ZS Role

ZS  either  has or  anticipates  performing  the  following  financial  advisory
services:

o        Formulation of transaction structure

o        Facilitation of due diligence

o        Negotiation of a definitive agreement

o        Working with outside advisors

In performing  its work, ZS will rely upon the assumption  that the  information
provided  to it by Kaye or other  relevant  parties or from  publicly  available
sources is complete and accurate in all  material  respects,  and ZS will assume
that  all  such  information  has  been  prepared  on  a  reasonable  basis.  ZS
acknowledges  that  Ned  Sherwood,  a  principal  of ZS,  may  have  information
available to him in his capacity as a director of Kaye and any such  information
will be

<PAGE>

attributable to ZS.  Accordingly,  ZS may not rely on information  which, to Mr.
Sherwood's knowledge or belief, is inaccurate.

ZS Fees

ZS's fees and  reimbursement  rights  (collectively  the "Transaction  Fee") for
serving as financial  advisor to Kaye with regard to the Transaction  will be as
follows:

1)        An advisory fee payable at the closing of the  Transaction  ("Advisory
          Fee")   based  on  the   aggregate   consideration   (the   "Aggregate
          Consideration,"  as defined in Exhibit  B), paid or payable to Kaye or
          its shareholders in connection with the Transaction. Such Advisory Fee
          shall be payable if, as and when the closing of the Transaction  shall
          occur,  and  shall  be  equal  to 0.8% of the  first  $25  million  of
          Aggregate Consideration plus 0.4% of Aggregate Consideration in excess
          of $25 million.  This  Advisory Fee shall be payable only in the event
          that Fox-Pitt,  Kelton Inc.  ("Fox-Pitt")  releases the Company of any
          fee due to it as a result  of the  Fox-Pitt  engagement  letter  dated
          January 27, 2000, other than for work relating to the preparation of a
          fairness opinion which shall not exceed $250,000.

2)        Reimbursement  for  reasonable   out-of-pocket  expenses  and  related
          charges associated with the Transaction and ZS's work on the Company's
          behalf, including, but not limited to, travel expenses,  provided that
          any such expenses which  individually  exceed $5,000 shall be approved
          in  advance by the  Company.  ZS shall also  notify the  Company  when
          expenses aggregate $5,000 and equal increments thereof, at which times
          ZS shall  request the  Company's  approval  before  incurring  further
          expenses.  The Company hereby acknowledges that (1) fees of Kirkland &
          Ellis incurred on behalf of the Company and (2) expenses relating to a
          business trip to Toronto have been previously approved.  These amounts
          will be payable to ZS whether or not the Transaction is completed.

Engagement Period

The  engagement  period (the  "Engagement  Period") for ZS to serve as financial
advisor  began in  November  2000 and shall  continue  until this  Agreement  is
terminated.  The engagement period may be terminated by either party hereto upon
written notice to the other party,  provided,  however,  that  termination of ZS
hereunder  shall not affect the Company's  obligation to (a) pay ZS the Advisory
Fee if the  Transaction  is consummated  within 12 months of the  termination of
this  Agreement,   and  (b)  reimburse  the  expenses  accruing  prior  to  such
termination to the extent provided herein.

General Matters

Kaye  acknowledges  and agrees that (a) ZS has been  retained as an  independent
contractor to act solely in the capacity described in this Agreement and (b) all
opinions and advice  (written  and oral) given by ZS to the Board in  connection
with this  engagement  are intended  solely for the benefit and use of the Board
(including its attorneys and accountants) and, except when required by law or in
connection with the Company's proxy statement  relating to the Transaction,  may
not be  disclosed  to any third  party or  circulated  or  referred  to publicly
without ZS's prior written consent.

                                      -2-
<PAGE>

It is agreed that all information provided to ZS by the Company, unless publicly
available,  will be held by ZS in strict confidence and will not be disclosed to
anyone other than ZS's agents and advisors  without the Company's prior approval
or used for any purpose other than those  referred to in this  Agreement.  It is
also agreed that ZS is not acting as a fiduciary  or agent of the Board and that
no duties  associated with such a relationship  are created by this  engagement,
except  that  nothing  contained  herein  shall  limit or  otherwise  affect the
fiduciary  obligations of Ned Sherwood as a director of the Company. The Company
acknowledges and agrees that ZS has been retained to act as financial advisor to
the Company and its  engagement  hereunder  is not on behalf of, nor intended to
create any relationship with or duty to, any other person.  This Agreement shall
be binding upon and inure to the benefit of the Company, ZS and their respective
successors and assigns.  This Agreement constitutes the sole agreement regarding
the engagement of ZS by Kaye and may only be amended in writing.  This Agreement
will be governed by and  construed in  accordance  with the laws of the State of
New York applicable to contracts executed in and to be performed in that state.

If the  foregoing  accurately  reflects the basis of our  understanding,  please
countersign and return one of the two signed copies.

Sincerely,

ZS FUND L.P.

By:
   ---------------------------------------
Name:
Title:

Accepted and agreed on this _____ day of _________________, 2001.

KAYE GROUP INC.

By:
    ---------------------------------------
Name:
Title:

                                      -3-
<PAGE>

                                                                       Exhibit A

                              [Term Sheet Attached]

                                      -4-
<PAGE>

                                                                       Exhibit B

                            Aggregate Consideration

For the  purposes of the letter  agreement  between  Kaye Group Inc. and ZS Fund
L.P.  dated January 5, 2000,  the term  Aggregate  Consideration  shall mean the
total amount of cash and securities paid to the  shareholders of the Company (in
their capacities as such) in connection with the Transaction  (including without
limitation  amounts paid to holders of any options  issued by the Company).  The
value of securities  that are freely  tradable in an  established  public market
will be  determined  on the basis of the last market  closing price prior to the
consummation of the Transaction unless such securities are valued at a different
price for the purpose of the  Transaction,  in which case they will be valued at
such price for the purpose of this Exhibit B. The value of  securities  that are
not freely  tradable  or have no  established  public  market  shall be the fair
market  value  thereof  as  determined  in good  faith  by ZS Fund L. P. and the
Company, unless such securities are valued at a particular price for the purpose
of the  Transaction,  in which  case they  will be valued at such  price for the
purpose of this Exhibit B.  Notwithstanding  the provisions of the two preceding
sentences, if any securities are given a value by the Fox-Pitt fairness opinion,
such securities will be valued at such price for the purpose of this Exhibit B.

                                      -5-

<PAGE>

                                                                    CONFIDENTIAL

                            HIL'S Acquisition of KGI

                               Summary of Terms

                               December 23, 2000

Purchase Price              HIL would acquire (the "Transaction") all of the
                            capital stock of KGI for a purchase price equal to
                            $14 per share.

Form of Consideration       Of the $14 per share amount 66.7% to 100% (or $9.34
                            to $14.00 per share) will be payable at closing in
                            cash and 0.0% to 33.3% (or $0.00 to $4.66 per
                            share) will come in the form of convertible notes
                            ("Notes"). The Notes will have an 8.50% interest
                            rate and interest will be payable in cash (semi-
                            annually).  The conversion price will be C$17.00.
                            The Notes will mature 5 years from the date of
                            closing. The Notes will be callable by HIL if
                            HIL's stock trades above C$17.00 for [market
                            provision] consecutive trading days. [The terms of
                            this note will be dependent on tax and
                            transferability issues, as discussed with Prem.
                            Right of first refusal in favor of HIL or FFH on
                            sale of convertible notes to be discussed].

Sources of Cash Portion
of Purchase Price           1. Possible sale of OLHC to C&F [Discuss timing
                            issues with Prem regarding Rhode Island approval]
                            2. Purchase by FFH of convertible notes
                            ("FFH Notes") with same terms as other Notes except
                            for a six year maturity. [To be discussed]
                            3. Possible purchase by strategic life insurance
                            investors of FFH Notes or HIL common stock at a
                            price no less than C$17.00

Treatment of Options        Each of KGI's options will receive consideration
                            equal to the difference between the exercise price
                            and $14.00 per share as provided for in KGI's Stock
                            Option Plan.

Treatment of Restricted
Stock                       Holders of shares of restricted stock of KGI will
                            receive $14.00 in cash per restricted share on the
                            one-year anniversary of the closing of the
                            transaction.

KGI Management Issues       1. Treatment of BG's approximately 325,000 KGI
                            shares [To be discussed Prem/GB].
                            2. Long term restricted stock grants to KGI's key
                            management [To be discussed Prem/BG].

<PAGE>
                                                                    CONFIDENTIAL

Voting Agreements           Shareholders owning at least 51% of KGI's shares
                            would provide a proxy (or similar arrangement)
                            to vote in favor of the Transaction.

Break-Up Fee                If HIL terminates the transaction because KGI is
                            acquired by another entity, KGI would pay HIL a
                            break-up fee equal to 3.0% of the offer value.
                            [Break-up fee provisions to be discussed by
                            attorneys]

Due Dilligence
Completion Target Date      January 15

Definitive Agreement
First Draft Completion
Target Date                 January 5 [To be discussed]

                                             /s/ Robert Horne
                                             ___________________________________
                                             Ned Sherwood or
                                             Robert Horne

                                             /s/ Howard Kaye
                                             ___________________________________
                                             Howard Kaye

                                             /s/ V. P. Watsa
                                             ___________________________________
                                             V. Prem Watsa or
                                             Rick Salsberg

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