-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WTQNlsI3YI4oL0T8yLVfwakQlQr+4gMzk8eVuV8ElvwS0bgGGjsszLJQCbS8Bf4W b0z8qFhcOvmiBF0KiIl9MA== 0000950131-96-003211.txt : 19960723 0000950131-96-003211.hdr.sgml : 19960723 ACCESSION NUMBER: 0000950131-96-003211 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19960708 DATE AS OF CHANGE: 19960718 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: BAKER FENTRESS & CO ET AL CENTRAL INDEX KEY: 0000009235 STANDARD INDUSTRIAL CLASSIFICATION: 0000 IRS NUMBER: 360767530 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-10454 FILM NUMBER: 96592152 BUSINESS ADDRESS: STREET 1: 200 W MADISON ST STREET 2: STE 3510 CITY: CHICAGO STATE: IL ZIP: 60606 BUSINESS PHONE: 3122369190 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: LEVIN JOHN A CENTRAL INDEX KEY: 0001018093 STANDARD INDUSTRIAL CLASSIFICATION: IRS NUMBER: 98322958 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: JOHN A LEVIN & CO INC STREET 2: ONE ROCKEFELLER PLAZA 25TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10020 BUSINESS PHONE: 2123328400 SC 13D 1 SCHEDULE 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 BAKER, FENTRESS & COMPANY - - -------------------------------------------------------------------------------- (Name of Issuer) COMMON STOCK, PAR VALUE $1.00 PER SHARE - - -------------------------------------------------------------------------------- (Title of Class of Securities) 057213100 -------------------- (CUSIP Number) JOHN A. LEVIN With A Copy To: John A. Levin & Co., Inc. PAUL, WEISS, RIFKIND, WHARTON & GARRISON One Rockefeller Plaza, 25th Floor 1285 Avenue of the Americas New York, New York 10020 New York, New York 10019-6064 Tel: (212) 332-8400 Attention: Valerie E. Radwaner, Esq. Fax: (212) 332-8408 Tel: (212) 373-3425 Fax: (212) 373-2348 - - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) June 28, 1996 ------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [_]. Check the following box if a fee is being paid with the statement [X]. (A fee is not required only if the reporting person: (1) has a previous statement on file reporting beneficial ownership of more than five percent of the class of securities described in Item 1; and (2) has filed no amendment subsequent thereto reporting beneficial ownership of five percent or less of such class.) (See Rule 13d-7.) Note: Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D - - ----------------------- CUSIP NO. 057213100 - - ----------------------- - - ------------------------------------------------------------------------------ NAME OF REPORTING PERSON 1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON John Andrew Levin ###-##-#### - - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP 2 (a) [_] (b) [_] - - ------------------------------------------------------------------------------ SEC USE ONLY 3 - - ------------------------------------------------------------------------------ SOURCE OF FUNDS 4 (See Items 3 and 4) 00 - - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [_] 5 - - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6 U.S.A. - - ------------------------------------------------------------------------------ SOLE VOTING POWER 7 NUMBER OF (See Item 5) 3,797,780 SHARES ----------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8 (See Item 5) 13,312 OWNED BY ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9 REPORTING (See Item 5) 3,797,780 PERSON ----------------------------------------------------------- SHARED DISPOSITIVE POWER WITH 10 (See Item 5) 13,312 - - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11 (See Item 5) 3,811,092 - - ------------------------------------------------------------------------------ CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES 12 [_] - - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13 (See Item 5) 11.8% - - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON 14 IN - - ------------------------------------------------------------------------------ SCHEDULE 13D CUSIP NO. 057213100. --------- Item 1. Security and Issuer. - - ------- ------------------- This Statement on Schedule 13D relates to shares of common stock, par value $1.00 per share (the "Common Stock"), of Baker, Fentress & Company, a Delaware corporation ("BKF"). The principal executive offices of BKF are located at 200 West Madison Street, Chicago, Illinois 60606. Item 2. Identity and Background. - - ------- ----------------------- This Schedule 13D is being filed by John A. Levin ("Mr. Levin"), whose business address is One Rockefeller Plaza, 25th Floor, New York, New York 10020 and whose principal occupation is President and Chief Executive Officer of BKF, which is a closed-end investment company registered under the Investment Company Act of 1940, as amended (the "Investment Company Act"), and such other occupations as are described in Item 4 hereof. During the last five years Mr. Levin has not been (i) convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of which was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Mr. Levin is a citizen of the United States. Item 3. Source and Amount of Funds or Other Consideration. - - ------- ------------------------------------------------- On June 28, 1996, John A. Levin & Co., Inc., a Delaware corporation ("Old LEVCO"), merged into JALC Acquisition Corp. (presently known as Levin Management Co., Inc.), a Delaware corporation and wholly-owned subsidiary of BKF ("Levin Management"), with Levin Management being the surviving corporation in the merger (the "Merger"). The Merger was consummated pursuant to the Amended and Restated Agreement and Plan of Merger, dated as of May 13, 1996 (the "Merger Agreement"), by and among BKF, Levin Management, Old LEVCO, Mr. Levin, Melody L. Prenner Sarnell, Jeffrey A. Kigner, Frank F. Rango, Daniel E. Aron, Barton G. Ice and Carol L. Novak (the forgoing individuals, collectively, the "Stockholders," who owned all of the outstanding capital stock of Old LEVCO). In the Merger, Mr. Levin received consideration in the form of a cash payment of $19,536,445.50 and 3,797,780 shares of Common Stock (the "Merger Shares"), the beneficial ownership of which, when combined with the Managed Shares (as defined in Item 4 hereof), is the subject of this Schedule 13D. The other Stockholders also received consideration in the form of cash and Common Stock in accordance with the terms of the Merger Agreement. A copy of the Merger Agreement is attached hereto as Exhibit A and is incorporated herein by reference. The description in this Schedule 13D of the Merger Agreement is qualified in its entirety by reference to the full text thereof. See Item 4 hereof for information relating to the Managed Shares. Item 4. Purpose of Transaction. - - ------- ---------------------- The Merger was effected to promote the joint interests of BKF, Old LEVCO and their respective stockholders. Upon consummation of the Merger, (i) the election of Mr. Levin to the board of directors of BKF by vote of the BKF stockholders on June 27, 1996 became effective, (ii) Mr. Levin was appointed President and Chief Executive Officer of BKF and President of Levin Management, (iii) Mr. Levin was elected to the board of directors of both Levin Management and its wholly owned subsidiary John A. Levin & Co., Inc. ("New LEVCO"), each of whose place of business is One Rockefeller Plaza, 25th Floor, New York, New York 10020 and (iv) Mr. Levin was appointed President of New LEVCO. New LEVCO is a registered investment adviser under the Investment Advisers Act of 1940, as amended, who specializes in managing equity portfolios for taxable and tax-exempt institutional and individual investors primarily within the United States. Mr. Levin provides general client advice and management of client funds on behalf of New LEVCO. Pursuant to the Portfolio Management Agreement, dated as of June 28, 1996 (the "Portfolio Management Agreement"), between BKF and New LEVCO, New LEVCO will manage the publicly traded securities in BKF's investment portfolio. The Portfolio Management Agreement was approved by the stockholders of BKF on June 27, 1996. A copy of the Portfolio Management Agreement is attached hereto as Exhibit B and is incorporated herein by reference. The description in this Schedule 13D of the Portfolio Management Agreement is qualified in its entirety by reference to the full text thereof. An aggregate of 13,312 shares of Common Stock (the "Managed Shares") are held in accounts managed by New LEVCO pursuant to investment advisory agreements, of which 7,517 of such Managed Shares are contained in managed accounts for the benefit of Mr. Levin's wife and four children. As a result of Mr. Levin's relationship with New LEVCO, Mr. Levin may be deemed the indirect beneficial owner of the Managed Shares. New LEVCO holds the Managed Shares on behalf of the managed accounts for investment purposes. Mr. Levin has acquired the Merger Shares pursuant to the Merger and intends to hold such shares for investment purposes. Mr. Levin may from time to time acquire additional shares of Common Stock in the open market or in privately negotiated transactions, subject to availability of the shares of Common Stock at prices deemed favorable, BKF's business or financial condition and to other factors and conditions Mr. Levin deems appropriate. Alternatively, Mr. Levin may sell all or a portion of his shares of Common Stock in the open market or in privately negotiated transactions subject to the terms of the Merger Agreement, the Escrow Agreement (as defined in Item 5 hereof) and the Registration Rights Agreement (as defined in Item 6 hereof) and to the factors and conditions referred to above. Except as set forth above in this Item 4, Mr. Levin has no present plans or proposals that relate to or would result in: (a) the acquisition by any person of additional securities of BKF, or the disposition of securities of BKF, (b) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving BKF or any of its subsidiaries, (c) a sale or transfer of a material amount of assets of BKF or of any of its subsidiaries, (d) any change in the present board of directors or management of BKF, including any plans or proposals to change the number or term of such directors or to fill any existing vacancies on such board, (e) any material change in the present capitalization or dividend policy of BKF, (f) any other material change in BKF's business or corporate structure, including but not limited to any plans or proposals to make any changes in BKF's investment policy for which a vote is required by Section 13 of the Investment Company Act, (g) changes in BKF's charter, by-laws or instruments corresponding thereto or other actions that may impede the acquisition of control of BKF by any person, (h) causing a class of securities of BKF to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association, (i) a class of equity securities of BKF becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or (j) any action similar to any of those enumerated above. Item 5. Interest in Securities of the Issuer. - - ------- ------------------------------------ Mr. Levin is the beneficial owner of 3,797,780 shares of Common Stock and may be deemed to be the beneficial owner of 13,312 additional shares of Common Stock, which represent, in aggregate, approximately 11.8% of the Common Stock outstanding./1// Mr. Levin has sole voting power with respect to all of the Merger Shares, but has sole dispositive power only as to 1,321,832 of the Merger Shares. The remaining 2,475,948 of the Merger Shares (the "Escrow Shares") were deposited into an escrow account pursuant to the Escrow Agreement, dated as of June 28, 1996 (the "Escrow Agreement"), by and among BKF, the Stockholders and UMB Bank, N.A., as escrow agent, for the purpose of securing, in accordance with the terms of the Merger Agreement and the Escrow Agreement, certain indemnification payments to which BKF may become entitled under the Merger Agreement./2// While Mr. Levin has sole power to vote the Escrow Shares, he has no right to transfer or otherwise dispose of such shares until released from escrow or as otherwise permitted by the terms of the Merger Agreement and the Escrow Agreement. A copy of the Escrow Agreement is attached hereto as Exhibit C and is incorporated herein by reference. The description of the Escrow Agreement in this Schedule 13D is qualified in its entirety by reference to the full text thereof. New LEVCO shares voting power with respect to the 7,517 Managed Shares contained in the managed accounts for the benefit of Mr. Levin's wife and four children with the beneficiaries of such accounts. As to the remaining 5,795 Managed Shares, New LEVCO has no voting power. New LEVCO shares dispositive power as to all of the Managed Shares with the beneficiaries of the corresponding managed accounts. Except as described in the Merger Agreement or the Escrow Agreement, or as otherwise described in this Schedule 13D, Mr. Levin has not engaged in any transaction involving any securities issued by BKF within the sixty-day period immediately preceding the date of this Schedule 13D and, with the exception of the shares of Common Stock described above, Mr. Levin does not beneficially own any securities issued by BKF. - - ---------------- /1// Such percentage is based on the aggregate number of shares of Common Stock issued in the Merger, which was 4,858,879, plus the aggregate number of shares of Common Stock outstanding as of May 10, 1996, which was 27,543,641, based on the information provided in the BKF Proxy Statement, dated as of May 14, 1996. /2// Pursuant to the Merger Agreement and the Escrow Agreement, all of the shares of Common Stock received in the Merger by each other Stockholder were deposited into such escrow account and were restricted in substantially the same manner and for substantially the same purpose as Mr. Levin's Escrow Shares. Notwithstanding anything to the contrary contained in this Schedule 13D, and in accordance with Rule 13d-4 promulgated under the Exchange Act, the filing of this Schedule 13D shall not be construed as an admission that Mr. Levin is the beneficial owner of the 13,312 Managed Shares. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. Pursuant to the Registration Rights Agreement, dated as of June 28, 1996 (the "Registration Rights Agreement"), by and among BKF and the Stockholders, each of the Stockholders were granted certain rights to register, pursuant to the Securities Act of 1933, as amended, the shares of Common Stock received by such Stockholder in the Merger. A copy of the Registration Rights Agreement is attached hereto as Exhibit D and is incorporated herein by reference. The description of the Registration Rights Agreement in this Schedule 13D is qualified in its entirety by reference to the full text thereof. Except as set forth in this Item 6 and Items 3, 4 and 5 of this Schedule 13D, Mr. Levin has no contracts, arrangements, understandings or relationships (legal or otherwise) with respect to any securities of BKF. Item 7. Material To Be Filed as Exhibits. Exhibit Index. A. Amended and Restated Agreement and Plan of Merger, dated as of May 13, 1996, by and among BKF, Levin Management, Old LEVCO and the Stockholders. B. Portfolio Management Agreement, dated as of June 28, 1996, between BKF and New LEVCO. C. Escrow Agreement, dated as of June 28, 1996, by and among BKF, the Stockholders and UMB Bank, N.A., as escrow agent. D. Registration Rights Agreement, dated as of June 28, 1996, by and among BKF and the Stockholders. SIGNATURE After reasonable inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. DATE: July 8, 1996 /s/ John A. Levin ----------------------------------------- JOHN A. LEVIN EX-99.A 2 AMENDED & RESTATED AGMT AND PLAN OF MERGER-5/13/96 EXHIBIT A AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER Dated as of May 13, 1996 by and among Baker, Fentress & Company, JALC Acquisition Corp., John A. Levin & Co., Inc., John A. Levin, Melody L. Prenner Sarnell, Jeffrey A. Kigner, Daniel E. Aron, Frank F. Rango, Barton G. Ice and Carol L. Novak TABLE OF CONTENTS ARTICLE I.....................................................................2 THE MERGER AND CONTRIBUTION...................................................2 1.1 The Merger..............................................................2 1.2 Effective Time..........................................................2 1.3 Effect of the Merger....................................................2 1.4 Certificate of Incorporation............................................2 1.5 Bylaws..................................................................2 1.6 Contribution............................................................2 1.7 Directors and Officers..................................................2 ARTICLE II....................................................................3 CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES............................3 2.1 Conversion of Shares....................................................3 2.2 Exchange of Shares......................................................9 2.3 Closing of Transfer Books...............................................9 2.4 Acquisition of G.P. Subsidiary..........................................9 ARTICLE III..................................................................10 CLOSING......................................................................10 3.1 Closing................................................................10 3.2 Procedure at the Closing...............................................10 ARTICLE IV..................................................................11 DEFINITIONS.................................................................11 4.1 Assets.................................................................12 4.2 Code...................................................................12 4.3 Commodity Exchange Act.................................................12 4.4 Contract...............................................................12 4.5 ERISA..................................................................12 4.6 Exchange...............................................................12 4.7 Exchange Act...........................................................12 4.8 Form ADV...............................................................12 4.9 GAAP...................................................................12 4.10 Governmental Entity...................................................12 4.11 Interim Transactions..................................................12 4.12 Investment Advisers Act...............................................12 4.13 Investment Company....................................................12 4.14 Investment Contracts..................................................13 4.15 Investment Company Act................................................13 4.16 Investment Partnerships...............................................13 4.17 Knowledge.............................................................13 4.18 LEVCO Entity..........................................................13 4.19 LEVCO Broker Subsidiary...............................................13 4.20 LEVCO Subsidiaries....................................................13 4.21 Lien..................................................................13 4.22 Material Adverse Effect...............................................13 4.23 Person................................................................13 4.24 Related Agreements....................................................13 4.25 Securities Act........................................................14 4.26 SEC...................................................................14 4.27 Stockholder Representative............................................14 4.28 Taxes.................................................................14 4.29 Tax Returns...........................................................14 4.30 Terminable Contracts..................................................14 4.31 Trading Days..........................................................14 ARTICLE V....................................................................14 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS AS TO THE STOCKHOLDERS.................................................................14 5.1 Authority.............................................................15 5.2 No Violation..........................................................15 5.3 Ownership of LEVCO Common Stock.......................................15 5.4 Brokers and Finders...................................................15 5.5 Approvals.............................................................16 5.6 Investment Representations............................................16 5.7 Health................................................................16 ARTICLE VI...................................................................16 REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS AS TO LEVCO AND THE INVESTMENT PARTNERSHIPS......................................................16 6.1 Organization and Authority of LEVCO...................................17 6.2 Charter, Bylaws, Agreements of Limited Partnership and Minutes........17 6.3 Authority.............................................................17 6.4 No Violation..........................................................17 6.5 Capitalization........................................................18 6.6 Approvals.............................................................18 ii 6.7 Financial Statements...................................................l9 6.8 No Adverse Change......................................................20 6.9 Subsidiaries...........................................................20 6.10 Taxes.................................................................22 6.11 Interests of Insiders.................................................23 6.12 Title to Assets; Property.............................................23 6.13 Insurance.............................................................25 6.14 Other Material Contracts..............................................25 6.15 Bank Accounts and Money Market Funds..................................26 6.16 Litigation............................................................26 6.17 Brokers and Finders...................................................26 6.18 Employee Benefit Plans and Employees..................................26 6.19 Filings, Etc..........................................................29 6.20 Representations and Warranties Regarding the Investment Advisory Business..............................................................30 6.21 Disclosure............................................................35 6.22 Registration as a Broker-Dealer.......................................35 6.23 Registration under the Commodity Exchange Act.........................36 6.24 Registration as an Insurance Agent....................................36 6.25 Registration as a Transfer Agent......................................36 ARTICLE VII..................................................................36 REPRESENTATIONS AND WARRANTIES OF BKF........................................36 7.1 Organization and Authority.............................................37 7.2 Binding Obligation.....................................................37 7.3 No Violations..........................................................37 7.4 No Authorization or Consents Required..................................38 7.5 No Actions, Suits or Proceedings.......................................38 7.6 Ineligible Persons.....................................................38 7.7 Brokers and Finders....................................................38 7.8 BKF Financial Statements...............................................39 7.9 No Adverse Change......................................................39 7.10 BKF Capital Stock.....................................................39 7.11 BKF Charter Documents.................................................40 7.12 Disclosure............................................................40 7.13 SEC Reports...........................................................40 7.14 Restrictive Covenants.................................................40 7.15 Litigation............................................................40 7.16 Filings; Etc..........................................................41 7.17 Regulatory Compliance.................................................42 7.18 Employee Benefit Plans................................................42 7.19 Merger Subsidiary.....................................................43 7.20 Investment Adviser Subsidiary.........................................43 iii ARTICLE VIII.................................................................43 CONDUCT OF BUSINESS PRIOR TO THE CLOSING.....................................43 8.1 Conduct of LEVCO's Business Prior to Closing...........................43 8.2 Conduct of BKF's Business Prior to Closing.............................46 8.3 Consents and Approvals.................................................47 8.4 Benefit Plans and Insurance............................................48 8.5 Formation of Levco Broker Subsidiary...................................48 8.6 Related Agreements.....................................................48 ARTICLE IX...................................................................48 ADDITIONAL AGREEMENTS........................................................48 9.1 Advisory Contract and Other Consents...................................48 9.2 Approval by Holders of BKF Common Stock, Related Indemnities...........49 9.3 Compliance with Securities Laws........................................51 9.4 Current Information....................................................53 9.5 Access; Information....................................................53 9.6 Non-Solicitation.......................................................53 9.7 Notification of Certain Matters........................................54 9.8 Press Releases, Etc....................................................54 9.9 Tax Information........................................................55 9.10 Updated Financial Statements..........................................55 9.11 BKF Portfolio.........................................................55 9.12 Payment of Certain Transaction Expenses...............................55 9.13 LEVCO Closing Balance Sheet...........................................56 9.14 Treatment of Accounts Receivable......................................56 9.15 Bifurcation Event.....................................................56 9.16 Bridge Partners.......................................................57 9.17 LEVCO Stockholder Approval............................................57 ARTICLE X....................................................................58 CONDITIONS...................................................................58 10.1 Conditions to Each Party's Obligations to Consummate..................58 10.2 Conditions Precedent to BKF's and Merger Subsidiary's Obligations.....59 10.3 Conditions Precedent to LEVCO's and the Stockholder's Obligations.....63 ARTICLE XI...................................................................65 TERMINATION..................................................................65 11.1 Termination...........................................................65 iv 11.2 Effect of Termination and Abandonment.................................66 ARTICLE XII..................................................................66 INDEMNIFICATION..............................................................66 12.1 General...............................................................66 12.2 Indemnification by the Stockholders...................................67 12.3 Indemnification by BKF ...............................................67 12.4 Indemnification Procedure for Third Party Claims......................67 12.5 Certain Limitations on Indemnification................................69 12.6 Termination of Rights Hereunder.......................................70 12.7 Escrow Fund...........................................................70 12.8 Determination of Losses after Escrow..................................71 ARTICLE XIII.................................................................72 OTHER COVENANTS..............................................................72 13.1 Employment of LEVCO's Employees.......................................72 13.2 Confidentiality.......................................................72 13.3 Tax Matters...........................................................73 ARTICLE XIV..................................................................73 GUARANTEES; STOCKHOLDER REPRESENTATIVE.......................................73 14.1 Guarantees............................................................73 14.2 Stockholder Representative............................................73 ARTICLE XV...................................................................74 GENERAL PROVISIONS...........................................................74 15.1 Survival..............................................................74 15.2 Notices...............................................................74 15.3 Counterparts..........................................................75 15.4 Governing Law.........................................................75 15.5 Expenses..............................................................75 15.6 Waiver; Amendment.....................................................76 15.7 Entire Agreement; No Third-Party Beneficiaries, Etc...................76 15.8 Assignment............................................................76 15.9 Interpretation........................................................76 15.10 Further Assurances...................................................77 15.11 Consistent Accounting................................................77 15.12 Severability.........................................................77 15.13 Exclusive Remedy.....................................................77 v LIST OF EXHIBITS Exhibit 10.1(h) Form of Registration Rights Agreement Exhibit 10.1(i) Form of Portfolio Management Agreement Exhibit 10.2(d)(i) Form of John A. Levin Employment Agreement Exhibit 10.2(d)(ii) Form of Melody L. Prenner Sarnell and Jeffrey A. Kigner Employment Agreements Exhibit 10.2(e)(i) Form of Opinion of Paul, Weiss, Rifkind, Wharton & Garrison Exhibit 10.2(e)(ii) Form of Opinion of Schulte Roth & Zabel Exhibit 10.3(e) Form of Opinion of Bell, Boyd & Lloyd Exhibit 12.7 Form of Escrow Agreement Exhibit 13.1 Form of Other Stockholder Employment Agreement vi AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of May 13, 1996 by and among Baker, Fentress & Company, a Delaware corporation ("BKF"), JALC Acquisition Corp., a Delaware corporation ("Merger Subsidiary"), John A. Levin & Co., Inc., a Delaware corporation ("LEVCO"), and John A. Levin ("Levin"), Melody L. Prenner Sarnell, Jeffrey A. Kigner, Daniel E. Aron, Frank F. Rango, Barton G. Ice and Carol L. Novak (the foregoing individuals, individually, a "Stockholder" and collectively, the "Stockholders"). This Agreement amends and restates in its entirety the Agreement and Plan of Merger, dated as of November 19, 1995 (the "Signing Date"), by and among BKF, Merger Subsidiary, LEVCO and the Stockholders. Recitals This Agreement provides for the merger of LEVCO, of which the Stockholders are the holders of all of the outstanding capital stock, with and into Merger Subsidiary, a wholly-owned subsidiary of BKF (the "Merger"), with Merger Subsidiary being the surviving corporation in the Merger. In the Merger, the outstanding shares of common stock of LEVCO will be converted into the right to receive shares of common stock of BKF and cash as set forth herein. The Merger is intended to qualify as a reorganization within the meaning of Section 368(a)(1)(A) and (a)(2)(D) of the Internal Revenue Code of 1986, as amended. This Agreement records the representations and warranties made by BKF and the Stockholders, sets forth certain covenants and agreements of the parties, provides conditions to the obligations of the parties and sets forth other provisions relating to the Merger. The Boards of Directors of BKF, Merger Subsidiary and LEVCO have approved and adopted this Agreement and have approved the Merger upon the terms and subject to the conditions set forth in this Agreement. Covenants NOW, THEREFORE, BKF, Merger Subsidiary, LEVCO and the Stockholders, in consideration of the agreements, covenants and conditions contained herein, hereby make the following representations and warranties, give the following covenants and agree as follows: ARTICLE I The Merger And Contribution 1.1 The Merger. Upon the terms and subject to the conditions hereof, and in accordance with the General Corporation Law of the State of Delaware (the "Corporation Law"), LEVCO shall be merged with and into Merger Subsidiary, at the Effective Time (as defined in Section 1.2 hereof). Upon and after the Effective Time, Merger Subsidiary shall continue as the surviving corporation (the "Surviving Corporation") and the separate existence of LEVCO shall cease. 1.2 Effective Time. The Merger shall become effective at the time of filing of a certificate of merger (the "Certificate of Merger"), with the Secretary of State of the State of Delaware in such form as required by, and executed in accordance with the relevant provisions of, the Corporation Law and is mutually reasonably acceptable to BKF and LEVCO. The date and time when the Merger shall become effective is herein referred to as the "Effective Time." 1.3 Effect of the Merger. At the Effective Time, the effect of the Merger shall be in accordance with the applicable provisions of the Corporation Law. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, except as otherwise provided herein, all the property, rights, privileges, powers and franchises of LEVCO and Merger Subsidiary shall vest in the Surviving Corporation, and all debts, liabilities and duties of LEVCO and Merger Subsidiary shall become the debts, liabilities and duties of the Surviving Corporation. 1.4 Certificate of Incorporation. The certificate of incorporation of Merger Subsidiary shall be amended by the Certificate of Merger to change the name of the Surviving Corporation to Levin Management Co., Inc. and, as so amended, the certificate of incorporation of Merger Subsidiary shall be the certificate of incorporation of the Surviving Corporation. 1.5 Bylaws. The bylaws of Merger Subsidiary shall be the bylaws of the Surviving Corporation. 1.6 Contribution. Immediately after the Effective Time, the Surviving Corporation will contribute (the "Contribution") the Investment Contracts, the G.P. Subsidiary Stock (as hereinafter defined), all of the outstanding common stock of LEVCO Broker Subsidiary and certain related assets of Surviving Corporation to a wholly-owned subsidiary of the Surviving Corporation ("Investment Adviser Subsidiary"). Immediately after the Contribution, the certificate of incorporation of Investment Adviser Subsidiary shall be amended to change the name of Investment Adviser Subsidiary to John A. Levin & Co., Inc. 1.7 Directors and Officers ---------------------- (a) James P. Gorter, Levin, Jeffrey A. Kigner, Melody L. Prenner Sarnell and two directors or officers of BKF to be designated by BKF shall be the directors of the Surviving Corporation and each of its subsidiaries and shall hold office from the Effective Time until their 2 successors are duly elected or appointed and qualified in the manner provided in the bylaws of the Surviving Corporation or such subsidiary, as the case may be, or as otherwise provided by law. (b) The persons mutually designated by BKF and LEVCO shall be the officers of the Surviving Corporation and of each of its subsidiaries and shall hold office from the Effective Time until their successors are duly elected or appointed and qualified in the manner provided in the bylaws of the Surviving Corporation or such subsidiary, as the case may be, or as otherwise provided by law. ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES 2.1 Conversion of Shares (a) The shares of the common stock, $.01 par value per share, of LEVCO (the "LEVCO Common Stock") issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holders thereof, be converted, based on the capitalization of LEVCO set forth in Schedule 5.3(a) to the LEVCO Disclosure Schedule, into the right to receive the following: (i) in the case of each share of LEVCO Common Stock owned of record immediately prior to the Effective Time by a Stockholder other than Levin, the number of shares of common stock, $1.00 par value per share, of BKF ("BKF Common Stock") equal to the result (rounded to the nearest hundredth share) obtained through application of the following formula: $17,250,000 - ((AUMA + TE + PC) x 0.15) + CG -------------------------------------------- (the "Fraction") / 3,000 $15.80 where AUMA = the aggregate dollar amount of the Assets Under Management Adjustment Amount determined in accordance with Section 2.1(b)(i); TE = the aggregate dollar amount of the Transaction Expenses determined in accordance with Section 2.1(b)(ii); PC = the aggregate dollar amount of the Partnership Capital determined in accordance with Section 2.1(b)(iii); and CG = the product of (x) the per share capital gains distributions ("Capital Gains Distributions") on the BKF Common Stock for which the record date has occurred between the date of this Agreement and Closing, other than the 3 aggregate $1.20 capital gains distribution declared by BKF's Board of Directors in part on September 7, 1995 and in part on November 3, 1995 and (y) the Fraction (assuming CG equals zero); plus an amount in cash equal to the result (rounded to the nearest penny) obtained through application of the following formula: ($17,250,000 - ((AUMA + TE + PC) x 0.15)) / 3,000 where AUMA, TE and PC have the same meanings as set forth above. (ii) in the case of each share of LEVCO Common Stock owned of record by Levin immediately prior to the Effective Time, the number of shares of BKF Common Stock equal to the result (rounded to the nearest hundredth share) obtained through application of the following formula: $62,750,000 - ((AUMA + TE + PC) x 0.85) + CG -------------------------------------------- $15.80 (the "Second Fraction") / 7,000 where AUMA, TE and PC have the same meanings as set forth in subparagraph (i) of this Section 2.1(a) and CG means the product of (x) the Capital Gains Distributions and (y) the Second Fraction (assuming CG equals zero); plus, an amount in cash equal to the result (rounded to the nearest penny) obtained through application of the following formula: ($17,750,000 + ((AUMA + TE + PC) x 0.15)) / 7,000 where AUMA, TE and PC have the same meaning as set forth in subparagraph (i) above of this Section 2.1(a). For avoidance of doubt, in no event shall the aggregate number of shares of LEVCO Common Stock issued and outstanding immediately prior to the Effective Time be converted in the Merger into the right to receive more than an aggregate of $35,000,000 in cash and (i) a number of shares of BKF Common Stock having an aggregate dollar value at a price of $15.80 per share equal to $80,000,000 minus the aggregate dollar amount of (x) the Assets Under Management Adjustment Amount (if any), (y) the Transaction Expenses (if any) and (z) the Partnership Capital (such number of shares, the "Full Shares") plus (ii) such additional number of shares of BKF Common Stock equal to the result obtained by multiplying the Full Shares times the Capital Gains Distributions and dividing such result by $15.80. (b) The dollar amounts to be applied in the formulas set forth in Section 2.1(a) shall be determined in accordance with this Section 2.1(b): 4 (i) (A) For purposes of this Agreement, "Assets Under Management" means (x) the assets under LEVCO's management as investment adviser that are the subject of an Investment Contract (as hereinafter defined), whether written or oral, between LEVCO and a Client (as defined in Section 6.20) of LEVCO, but such assets shall not at any time include any assets under LEVCO's management wherein the Client is, or that are beneficially owned (as such term is defined in Rule 13d-3 under the Exchange Act) by, a Stockholder or a Related Person (as hereinafter defined) of a Stockholder and (y) the portfolio assets of each Investment Partnership. A "Related Person" of a Stockholder means (i) any of the descendants or spouses of descendants of a great-grandfather of such Stockholder or of such Stockholder's spouse (any person having such a relationship being herein referred to as a "Family Member") or any trust primarily for the benefit of such Stockholder and/or any one or more Family Members of such Stockholder (a "Family Trust") or (ii) any partnership, corporation or other form of business or investment entity or association (any of the foregoing, an "Enterprise") directly or indirectly controlled by such Stockholder or any Family Member or Family Trust of such Stockholder; provided, however, that in no event shall a Related Person of Levin be deemed a Related Person of any Stockholder. For purposes of this Agreement, a Person (as hereinafter defined) is "affiliated with" another Person if it, directly or indirectly, through one or more intermediaries controls, is controlled by or is under common control with such other Person; and "control" when used with respect to a specified Person, means the power to direct or cause the direction of the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, partnership or other ownership interests, by contract or otherwise; and the terms "controlled" and "controlling" have meanings correlative with the foregoing. (B) Set forth on Schedule 2.1(A) of the LEVCO Disclosure Schedule (as defined in Section 4.30) is (x) a list of each Investment Contract covering Assets Under Management as of November 16, 1995 (the "Base Date") and the dollar amount of the Assets Under Management under each such Investment Contract as of such Base Date and (y) the dollar amount of the portfolio assets of each Investment Partnership as of the Base Date (the sum of (x) and (y) is herein called the "Base Assets Under Management"), which dollar amounts have been determined as hereinafter provided. If at the Closing, the dollar amount of LEVCO's Closing Assets Under Management (as hereinafter defined) as to which Agreed Consents (as hereinafter defined) have been obtained by LEVCO (as certified to BKF as provided in Section 10.2(c)) is less than 85% of the dollar amount of LEVCO's Base Assets Under Management, the "Assets Under Management Adjustment Amount," as used in the formulas set forth in Section 2.1(a), shall be equal to the result (rounded to the nearest penny) obtained by multiplying (x) the percentage by which such Closing Assets Under Management are less than 85% of LEVCO's Base Assets Under Management by (y) $115,000,000. For example, if at Closing the dollar amount of Closing Assets Under Management as to which LEVCO has received an Agreed Consent are 80% 5 of the dollar amount of LEVCO's Base Assets Under Management, the Assets Under Management Adjustment Amount would be $5.75 million. The dollar amount of the Base Assets Under Management of LEVCO has been determined as of the close of business on the Base Date on a basis consistent with the manner in which such Assets Under Management are valued for purposes of providing valuations to the Client (or in the case of the Investment Partnerships, the limited partners) with respect to the particular Assets Under Management. For purposes hereof, "Closing Assets Under Management" shall mean the Base Assets Under Management plus (i) the aggregate dollar amount of any investments by a Client (whether or not the Client was a Client on the Base Date or remains a Client on the Closing Date) or additional capital contributions of a partner (whether or not the partner was a partner on the Base Date or remains a partner on the Closing Date) to an Investment Partnership, which investments are made after the Base Date and prior to the Closing Date, plus (ii) the aggregate dollar amount of all fees payable to LEVCO deducted from the accounts of Clients or partners of the Investment Partnerships, which deductions are made after the Base Date and prior to the Closing Date, and minus (iii) the aggregate dollar amount of all withdrawals from the account of any Client (whether or not the Client was a Client on the Base Date or remains a Client on the Closing Date) and all withdrawals of capital by partners (whether or not the partner was a partner on the Base Date or remains a partner on the Closing Date) of the Investment Partnerships, which withdrawals are made after the Base Date and prior to the Closing Date; provided, however, that if an L.P. Bifurcation Event (as defined in Section 9.15(a)) shall have occurred, the dollar amount of the capital withdrawn from an Investment Partnership by any Person who is required to withdraw such capital from such Investment Partnership as required by Section 9.15 shall not be so deducted. (C) For purposes hereof, an "Agreed Consent" shall be deemed to have been given with respect to an Investment Contract included in the Closing Assets Under Management if: (x) in the case of any Investment Contract in existence at the Base Date with a Client that is an institutional investor or an individual investor whose Assets Under Management by LEVCO exceed $500,000 as of the date a consent is first solicited from such Client or the affirmative consent of whom is required under the terms of the Investment Contract with such Client, a written consent to the assignment of such Investment Contract to the Surviving Corporation, and, upon the Contribution, to the Investment Adviser Subsidiary has been obtained from the Client or the Client has entered into a new written Investment Contract with the Investment Adviser Subsidiary, in either case on terms not less favorable to the Investment Adviser Subsidiary than the original Investment Contract was to LEVCO (provided that such Investment Contract will be deemed to be on terms not less favorable to the Investment Adviser Subsidiary than the original Investment Contract was to LEVCO if it provides for break points in the fee schedule comparable to the break points being offered by LEVCO to Clients with comparable Assets Under 6 Management prior to the date of this Agreement), (y) in the case of any Investment Contract in existence at the Base Date with a Client who is an individual investor whose Assets Under Management by LEVCO are $500,000 or less as of the date a notice of the type referred to below is first given to such Client and whose affirmative consent is not required under the applicable terms of the Investment Contract with such Client, the Client has been given at least twenty Trading Days prior notice of the proposed assignment of such Client's Investment Contract in accordance with the terms of this Agreement and has not objected to the assignment of such Investment Contract or indicated his or her intent to terminate such Investment Contract, and (z) in the case of any Investment Contract entered into after the Base Date, such Investment Contract is on terms not materially different than those of Investment Contracts in existence immediately prior to the date of this Agreement for accounts of a similar size and with similar investment objectives (or if such terms are different, contains terms which LEVCO can reasonably demonstrate are no less favorable to LEVCO than those being offered to the public by LEVCO's competitors with comparable performance records and experience in the investment management business to accounts of a similar size and with similar investment objectives), and such Investment Contract contains as a specific term thereof a consent to the assignment of such Investment Contract to the Surviving Corporation, and upon the Contribution, to the Investment Adviser Subsidiary. An "Agreed Consent" shall be deemed to have been given with respect to (x) the account of any partner in any Investment Partnership if such partner shall have consented to the transactions contemplated by Schedule 9.1(c) with respect to such Investment Partnership and shall not on the Closing Date have withdrawn or indicated its intention to withdraw as a partner in the Investment Partnership except as contemplated by Schedule 9.1(c), and (y) the account of any partner whose capital is required to be withdrawn from the Partnership as a result of the occurrence of an L.P. Bifurcation Event. (ii) Not later than the second Trading Day prior to the Closing, the Stockholders shall obtain from their legal counsel, accountants or other third party consultants to whom or which they are or will be obligated to pay fees and expenses with respect to the transactions contemplated by this Agreement (the "Transaction Advisers"), except Goldman, Sachs & co. and any Persons providing services to Goldman Sachs & Co., including its counsel, a statement (which shall be final and binding as against BKF and the Surviving Corporation) of each Transaction Adviser's professional fees and expenses (including disbursements) for the transactions contemplated by this Agreement. The aggregate dollar amount of such statements shall be the "Transaction Expenses." (iii) As of the close of business on the Trading Day immediately preceding the Closing Date, LEVCO shall determine the dollar amount of the minimum general partner capital contributions that are required to have been made as of such time with respect to each Investment Partnership (as hereinafter 7 defined) in order to comply with Revenue Procedure 89-12 of the Internal Revenue Service (or any successor law, regulation or revenue procedure thereto), and the Stockholders shall certify such amount to BKF, which certification shall set forth in reasonable detail the manner of determining such amount for each Investment Partnership. The aggregate dollar amount of such minimum general partner capital contributions shall be the "Partnership Capital" for all purposes of this Agreement. The total number of shares of BKF Common Stock to be issued in the Merger determined pursuant to Section 2.1(a) are referred to herein as the "Merger Shares," the aggregate amount of cash to be paid in the Merger (except Fractional Share Payments, as hereinafter defined) determined pursuant to Section 2.1(a) is referred to herein as the "Cash Consideration" and the Merger Shares and the Cash Consideration payable in the Merger are together referred to herein as the "Merger Consideration." As used in this Agreement, the Merger Value means the sum of the Cash Consideration plus the numerator of the Fraction set forth in Section 2.1(a)(i) and the numerator of the Second Fraction set forth in Section 2.1(a)(ii). Any shares of LEVCO Common Stock held in the treasury of LEVCO immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, be canceled without consideration and be retired and cease to exist. (b) At the Effective Time each share of the common stock, par value $.01 per share, of Merger Subsidiary issued and outstanding immediately prior to the Effective Time shall be converted into and shall become one share of common stock of the Surviving Corporation and each certificate heretofore representing any such shares shall, after the Effective Time and without any action on the part of the holder thereof, be deemed to represent the same number of shares of the Surviving Corporation. (c) No certificates or scrip representing fractional shares of BKF Common Stock shall be issued upon the surrender for exchange of certificates of LEVCO Common Stock; no stock split or dividend with respect to shares of BKF Common Stock shall relate to any fractional share interest, and no such fractional share interest will entitle the owner thereof to vote as, or to any other rights of, a stockholder of BKF. In lieu of such fractional shares, any holder of LEVCO Common Stock who would otherwise be entitled to a fractional share of BKF Common Stock will, upon surrender of his certificate to BKF in accordance with Section 2.2, be entitled to receive cash (a "Fractional Share Payment") in an amount determined by multiplying such fraction by the closing price of BKF Common Stock on the New York Stock Exchange Composite Tape, as reported in The Wall Street Journal (Midwest Edition) on the Trading Day immediately preceding the Closing and rounding the product to the nearest whole cent. The fractional share interests of each Stockholder shall be aggregated, so that no Stockholder shall receive a Fractional Share Payment in an amount greater than the value of one full share of BKF Common Stock (determined as provided in the preceding sentence). No interest shall accrue or be paid with respect to fractional share interests with respect to cash payable in lieu of fractional share interests. 8 2.2 Exchange of Shares. At the Closing, Merger Subsidiary shall, upon receipt from each of the Stockholders of a certificate or certificates representing the issued and outstanding shares of LEVCO Common Stock owned by such Stockholder (collectively, the "Certificates" and individually, a "Certificate"), deliver to such Stockholder a certificate or certificates representing the Merger Shares such Stockholder is entitled to receive determined in accordance with Section 2.1(a) hereof, together with any Cash Consideration and Fractional Share Payment payable in respect of such shares of LEVCO Common Stock as provided in Section 2.1(a) and 2.1(c), respectively. As of the Effective Time, each Certificate that prior to the Effective Time represented shares of LEVCO Common Stock shall be deemed for all corporate purposes (including voting rights) to evidence the Merger Consideration to be delivered in exchange therefor under the terms of this Agreement. No transfer taxes shall be payable by the Stockholders in connection with their receipt of the Merger Shares, except that if any certificate for the Merger Shares is to be issued in a name other than that in which the Certificate surrendered for exchange is registered, it shall be a condition of such exchange that the Certificate so surrendered shall be properly endorsed and otherwise in proper form for transfer and that the Stockholder surrendering such Certificate shall pay to BKF any transfer or other taxes required by reason of the issuance of such Merger Shares in any name other than that of such Stockholder, or establish to the satisfaction of BKF that such tax has been paid or is not applicable. If any Certificate shall have been lost, stolen or destroyed, such Certificate shall be deemed to have been surrendered properly to BKF for all purposes of this Section 2.2 if the Stockholder owning such Certificate shall have delivered to BKF a sworn affidavit as to such claim (and, if required in the sole discretion of BKF, a bond in such form and amount, and with such surety, sufficient to indemnify BKF against such claim). 2.3 Closing of Transfer Books. At the Effective Time, the stock transfer books of LEVCO shall be closed and no transfer of the shares of LEVCO Common Stock shall thereafter be made. 2.4 Acquisition of G.P. Subsidiary. Subject to the terms and conditions of this Agreement, simultaneously with consummation of the Merger, Levin, Melody L. Prenner Sarnell, Jeffrey A. Kigner and Frank F. Rango (collectively, the "G.P. Stockholders") shall sell, transfer, assign, convey and deliver to Merger Subsidiary, and Merger Subsidiary shall purchase, acquire and accept from the G.P. Stockholders, all of the G.P. Stockholders' right, title and interest, free and clear of all Liens, in and to all of the issued and outstanding shares of capital stock (the "G.P. Subsidiary Stock") of the wholly-owned corporation ("G.P. Subsidiary") to be formed by the G.P. Stockholders to acquire the general partner interests in each of the Investment Partnerships as contemplated by Section 9.1(c) hereof and Schedule 9.1(c). In consideration thereof, at Closing Merger Subsidiary shall pay to each of the G.P. Subsidiary Stockholders in accordance with Section 3.2(h) an amount equal to each such individual's share of the Partnership Capital (the "G.P. Subsidiary Purchase Price"). 9 ARTICLE III CLOSING 3.1 Closing. The closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Bell, Boyd & Lloyd, Three First National Plaza, 70 West Madison Street, Suite 3300, Chicago, Illinois, or at such other place as the parties may agree, at 10:00 a.m. on the last Trading Day of the month (or, if such day is a Friday, on the Monday following the last Trading Day) in which the later of the following two events shall occur: (i) approval of the Merger by the stockholders of BKF and (ii) expiration or termination of the waiting period imposed by the HSR Act (as hereinafter defined); provided that if any of the other conditions which are set forth in Article X of this Agreement have not been satisfied (or waived by the party entitled to the benefit of such conditions) by said date, then the Closing shall take place on a subsequent date as soon as practicable after the satisfaction or waiver of such conditions, or at such other place, time and date as BKF and LEVCO may agree. At the Closing, the parties shall cause the Certificate of Merger to be filed in accordance with the applicable provisions of the Corporation Law. The date on which the Closing occurs is referred to herein as the "Closing Date." 3.2 Procedure at the Closing. At the Closing, the parties hereto agree to take the following steps in the order listed below (provided, however, that upon their completion all such steps shall be deemed to have occurred simultaneously): (a) Each Stockholder and LEVCO shall deliver to BKF the certificates described in Section 10.2(c) hereof and all other previously undelivered documents required to be delivered by the Stockholders or LEVCO to BKF at or prior to the Closing pursuant to the terms of this Agreement. (b) BKF and Merger Subsidiary shall deliver to the Stockholders the certificate described in Section 10.3(c) hereof and all other previously undelivered documents required to be delivered by the BKF or Merger Subsidiary to the Stockholders at or prior to the Closing pursuant to the terms of this Agreement. (c) Merger Subsidiary and LEVCO shall file with the Secretary of State of the State of Delaware the Certificate of Merger. (d) Each Stockholder shall deliver Certificates representing all shares of LEVCO Common Stock owned by such Stockholder to UMB Bank, N.A., BKF's custodian, and Merger Subsidiary shall deliver by wire transfer of immediately available funds to an account theretofore designated by such Stockholder in writing to Merger Subsidiary to each such Stockholder the Cash Consideration to which such Stockholder is entitled pursuant to Section 2.1, and a certificate or certificates representing the Merger Shares (other than the Escrow Shares, as defined in Section 12.7 hereof) to which such Stockholder is entitled pursuant to Section 2.1, which shall be duly executed and in valid form, registered in the name of such Stockholder and bearing the following legend: 10 THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN REGISTERED UNDER SAID ACT OR AN EXEMPTION FROM REGISTRATION IS AVAILABLE. (e) Merger Subsidiary shall also deliver to any Stockholder entitled thereto, by wire transfer of immediately available funds to an account theretofore designated by such Stockholder in writing to Merger Subsidiary, the amount of any Fractional Share Payment. (f) Merger Subsidiary shall deliver to the Escrow Agent designated in Section 12.7 hereof the Escrow Shares for deposit pursuant to the Escrow Agreement (as defined in Section 12.7). (g) The G.P. Stockholders shall deliver to Merger Subsidiary certificates representing all of the shares of G.P. Subsidiary Stock. (h) Merger Subsidiary shall deliver to each G.P. Stockholder by wire transfer of immediately available funds to an account theretofore designated by each G.P. Stockholder in writing to Merger Subsidiary, the G.P. Subsidiary Purchase Price in the same proportion as the number of shares of G.P. Subsidiary Stock sold by such G.P. Stockholder bears to the aggregate number of shares of outstanding G.P. Subsidiary Stock. (i) BKF, Merger Subsidiary and each of the Stockholders shall execute and deliver a cross receipt acknowledging receipt from the other, respectively, of the shares of LEVCO Common Stock and the Merger Consideration and Fractional Share Payments. (j) Merger Subsidiary and the G.P. Stockholders shall execute and deliver a cross-receipt acknowledging receipt from the other, respectively, of the G.P. Subsidiary Stock and the G.P. Subsidiary Purchase Price. (k) Merger Subsidiary shall deliver to each Transaction Adviser, by wire transfer of immediately available funds to an account theretofore designated by such Transaction Adviser in writing to Merger Subsidiary, the portion of the Transaction Expenses attributable to such Transaction Adviser. (l) Immediately after the Effective Time, the Surviving Corporation shall effect the Contribution in favor of Investment Adviser Subsidiary by contributing to Investment Adviser Subsidiary the Investment Contracts, the G.P. Subsidiary Stock, the outstanding common stock of LEVCO Broker Subsidiary and certain related assets of Surviving Corporation. ARTICLE IV DEFINITIONS For the purposes of this Agreement, the following terms shall have the meanings set forth below: 11 4.1 "Assets" of any Person means all of such Person's business, assets, properties, security deposits and prepaid items, goodwill and rights of every kind and description, tangible and intangible, wherever located. 4.2 "Code" means the Internal Revenue Code of 1986, as amended. 4.3 "Commodity Exchange Act" means the Commodity Exchange Act of 1974, as amended. 4.4 "Contract" means any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, concession, franchise, license, permit, exception, order or approval to or with a Governmental Entity or other third party. 4.5 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. 4.6 "Exchange" means the New York Stock Exchange, Inc. 4.7 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 4.8 "Form ADV" means the filing on Form ADV required to be made under the Investment Advisers Act with the SEC in connection with the registration of the filing party as an investment adviser under the Investment Advisers Act. 4.9 "GAAP" means United States generally accepted accounting principles applied on a consistent basis throughout the periods indicated. 4.10 "Governmental Entity" means any domestic (federal, state or local), foreign or supranational court, commission, governmental body, or regulatory or administrative agency, authority or tribunal. 4.11 "Interim Transactions" means (i) the formation of LEVCO Broker Subsidiary (as hereinafter defined) as a wholly-owned subsidiary of LEVCO and the contribution to it of the Assets of LEVCO relating to the broker-dealer business and operations of LEVCO as contemplated by Section 8.5, (ii) the acquisition by G.P. Subsidiary of the general partner interests in each of the Investment Partnerships as contemplated by Section 9.1(c) and Schedule 9.1(c) and (iii) the withdrawal of LEVCO as a general partner of Bridge Partners Specialized Investment Fund, L.P., a Delaware limited partnership ("Bridge Partners"), all of which transactions are contemplated by this Agreement to occur between the date hereof and Closing. 4.12 "Investment Advisers Act" means the Investment Advisers Act of 1940, as amended. 4.13 "Investment Company" means each investment company registered under the Investment Company Act for which LEVCO acts as investment adviser or sub- adviser. 12 4.14 "Investment Contracts" means, with respect to any Person that is an investment adviser, the respective contracts between such Person and the clients of that Person relating to the provision by that Person for a fee, commission or other payment, of investment advisory, asset management, consulting or administrative services. 4.15 "Investment Company Act" means the Investment Company Act of 1940, as amended. 4.16 "Investment Partnerships" means (i) Meadow Lane Associates, L.P., (ii) Purchase Associates, L.P., (iii) L.R.K. Savings, L.P., (iv) SLSB Partners, L.P. and (v) Island Drive Partners, L.P., each a Delaware limited partnership. 4.17 "Knowledge" means, with respect to any Person, the actual knowledge of such Person or, if such Person is a corporation, of any member of the board of directors of such Person or any officer of such Person, in each case after due inquiry. 4.18 "LEVCO Entity" means each of LEVCO, each LEVCO Subsidiary and each Investment Partnership. 4.19 "LEVCO Broker Subsidiary" means the Person to be formed by LEVCO to acquire the Assets of LEVCO relating to the broker-dealer business and operations of LEVCO as contemplated by Section 8.5. 4.20 "LEVCO Subsidiaries" means LEVCO Broker Subsidiary and G.P. Subsidiary. 4.21 "Lien" means any agreement, restriction, pledge, lien, option, security interest, mortgage, claim, charge, restriction on transferability, preemptive right or other encumbrance of any kind whatsoever. 4.22 "Material Adverse Effect" means with respect to any Person, a material adverse effect on the business, Assets, financial condition, results of operations or prospects (in the case of prospects, not taking into account general economic and securities market conditions or general industry developments) of such Person. 4.23 "Person" means any individual, partnership, corporation, limited liability company, association, trust, joint venture, entity, unincorporated organization, and any government, governmental department or agency or political subdivision thereof. 4.24 "Related Agreements" means any agreement, instrument or certificate executed by BKF, Merger Subsidiary, LEVCO or any Stockholder in connection with this Agreement, including: (i) the employment agreements, the forms of which are set forth as Exhibits 10.2(d)(i) and 10.2(d)(ii) (the "Employment Agreements"), (ii) the Registration Rights Agreement, the form of which is set forth as Exhibit 10.1(h), (iii) the Portfolio Management Agreement, the form of which is set forth as Exhibit 10.1(i) and (iv) the Escrow Agreement, the form of which is set forth as Exhibit 12.7. 13 4.25 "Securities Act" means the Securities Act of 1933, as amended. 4.26 "SEC" means the Securities and Exchange Commission. 4.27 "Stockholder Representative" means Levin, who has been appointed as representative of the Stockholders for certain purposes of this Agreement pursuant to Section 14.2 hereof, or any successor to Levin as provided in Section 14.2. 4.28 "Taxes" means all federal, state, county, local, foreign and other taxes (including, without limitation, income, gross income, profits, premium, estimated, excise, sales, services, use, occupancy, gross receipts, franchise, license, ad valorem, severance, capital levy, production, stamp, transfer, withholding, employment, unemployment, social security, payroll and property taxes, customs duties and other governmental charges and assessments), together with any interest, additions to tax or penalties. 4.29 "Tax Returns" means all returns, amended returns, declarations, reports, estimates, information returns and statements required or permitted to be filed in respect of Taxes. 4.30 "Terminable Contracts" means those contracts of LEVCO or any Investment Partnership (other than Investment Contracts, the agreements of limited partnership of the Investment Partnerships, insurance policies set forth on Schedule 6.13 of the LEVCO Disclosure Schedule and LEVCO Benefit Plans) which, by their terms or under applicable law, would be breached, or under which a default would occur, or which would, or would be required to, terminate as a result of the consummation of the transactions contemplated by this Agreement unless the parties' consent to the transfer of such contract is obtained, such Terminable Contracts being listed on Schedule 4.30 of the disclosure schedule delivered to BKF by the Stockholders concurrently with the execution of this Agreement (the "LEVCO Disclosure Schedule"). 4.31 "Trading Days" means those days on which the Exchange is open for trading. References to "the date hereof", "the date of this Agreement" and like terms shall be deemed to be references to the Signing Date. ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS AS TO THE STOCKHOLDERS Each of the Stockholders hereby represents and warrants to BKF that the statements contained in this Article V with respect to himself or herself are correct as of the Signing Date and will be correct as of the Closing Date as though made at the Closing Date (except for statements made as of a specific date, which are correct as of such date). 14 5.1 Authority. The Stockholder has full right, power and authority to execute, deliver and perform this Agreement and the Related Agreements to which it is a party. This Agreement has been duly executed and delivered by the Stockholder and, assuming this Agreement constitutes a valid and binding obligation of the other parties hereto, constitutes (and the other Related Agreements to which the Stockholder will be a party, when executed and delivered, will be duly executed and delivered and will constitute, assuming such other Related Agreements constitute a valid and binding obligation of the other parties thereto) valid and legally binding obligations of the Stockholder enforceable against the Stockholder in accordance with the respective terms of the Merger Agreement and each such Related Agreement, except as the enforceability thereof may be subject to or limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the rights of creditors generally and general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). 5.2 No Violation. Neither the execution and delivery by the Stockholder of this Agreement or of any Related Agreement to which the Stockholder is or at Closing will be a party, nor consummation of the transactions herein or therein contemplated, nor compliance with the terms, conditions and provisions hereof or thereof will conflict with or violate any provision of applicable law, or result in a violation of or default under any provision of any regulation, order, writ, injunction or decree of any Governmental Entity applicable to the Stockholder or, assuming that the agreements of the Stockholder set forth on Schedule 5.3(b) of the LEVCO Disclosure Schedule are terminated, of any Contract to which the Stockholder is a party or by which the Stockholder is bound or to which the Stockholder is subject, or constitute a default thereunder. 5.3 Ownership of LEVCO Common Stock. The Stockholder owns the number of the issued and outstanding shares of LEVCO Common Stock set forth opposite the Stockholder's name on Schedule 5.3(a) of the LEVCO Disclosure Schedule. The Stockholder is the record and beneficial owner of such shares of LEVCO Common Stock, free and clear of any Liens, except for such Liens arising from Contracts set forth on Schedule 5.3(b) of the LEVCO Disclosure Schedule. As of the Effective Time, the Stockholder will be the record and beneficial owner of such Stockholder's shares of LEVCO Common Stock, free and clear of any Liens. The Stockholder is not a party to any option, warrant, purchase right or other Contract which could require the Stockholder to sell, transfer or otherwise dispose of such Stockholder's shares of LEVCO Common Stock, or to any voting trust, proxy, agreement or understanding with respect to the voting of such Stockholders' shares of LEVCO Common Stock, except for those Contracts set forth on Schedule 5.3(b) of the LEVCO Disclosure Schedule and other Contracts among Stockholders entered into between the date hereof and Closing (each of which Contracts will have been terminated on or prior to the Closing). 5.4 Brokers and Finders. Except for the employment of Goldman, Sachs & Co. by LEVCO, the Stockholder has not employed any broker or finder or incurred any liability for any financial advisory fees, brokerage fees, commissions or finder's fees, and no broker or finder has acted, directly or indirectly, for the Stockholder, in connection with this Agreement or the transactions contemplated hereby. 15 5.5 Approvals. No approval, authorization, order, license, or consent of or registration, qualification or filing with any Governmental Entity and no approval or consent by any other Person is required to be obtained or made by the Stockholder in connection with the execution, delivery or performance of this Agreement and the Related Agreements by the parties thereto (other than BKF and Merger Subsidiary), other than as contemplated by Article X. 5.6 Investment Representations. (a) The Stockholder acknowledges that the BKF Common Stock to be received by him or her is not registered under the Securities Act and that such BKF Common Stock may not be sold or otherwise transferred in the absence of registration under the Securities Act or an exemption therefrom under such Act. (b) The Stockholder is acquiring the BKF Common Stock to be received by him or her for his or her own account for investment purposes and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of distributing or selling the same in violation of the Securities Act. Except as contemplated by this Agreement, the Stockholder has no present or contemplated agreement, undertaking, arrangement, obligation, or commitment providing for the disposition of the BKF Common Stock to be received by him or her. (c) The Stockholder has had the opportunity to make a detailed inquiry concerning BKF and its business and personnel. The officers of BKF have made available to the Stockholder any and all written information which the Stockholder has requested and have answered to the Stockholder's satisfaction all inquiries made by the Stockholder. (d) The Stockholder is an accredited investor as defined in Regulation D under the Securities Act. 5.7 Health. In the case of Levin, Melody L. Prenner Sarnell and Jeffrey A. Kigner only, to the knowledge of such Stockholder, such Stockholder is not subject on the date hereof to any health condition and disability which would prevent or materially impair his or her ability to perform his or her obligations hereunder or under such Stockholder's Employment Agreement. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS AS TO LEVCO AND THE INVESTMENT PARTNERSHIPS The Stockholders hereby represent and warrant, jointly and severally, to BKF that the statements contained in this Article VI are correct as of the Signing Date and will be correct as of the Closing Date as though made at the Closing Date (except for statements made as of a specific date, which are correct as of such date): 16 6.1 Organization and Authority of LEVCO. LEVCO is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, with full power and authority to own or lease and use its properties and assets and to carry on its business as such business is now conducted. Except as set forth in Schedule 6.20(c)(i)(a) and Schedule 6.22(a) of the LEVCO Disclosure Schedule, LEVCO possesses all licenses, franchises, permits and other rights necessary to conduct its business as such business is now conducted. LEVCO is duly qualified to do business as a foreign corporation under the laws of the states listed on Schedule 6.1 of the LEVCO Disclosure Schedule and is not by reason of the nature of its business or the ownership or leasing of its properties required to be qualified to do business in any other jurisdiction where the failure to so qualify would reasonably be expected to have a Material Adverse Effect on LEVCO. 6.2 Charter, Bylaws, Agreements of Limited Partnership and Minutes. The copies of the certificate of incorporation of LEVCO and of the certificate of limited partnership of each of the Investment Partnerships as certified by the Secretary of State of the State of Delaware; the agreement of limited partnership of each of the Investment Partnerships as certified by a general partner of each such Investment Partnership; the bylaws of LEVCO as certified by the Secretary of LEVCO; and the minutes of meetings of the stockholders and board of directors (or consents or other actions in lieu thereof) of LEVCO and the minutes of the meetings of the partners of each of the Investment Partnerships (or consents or other actions in lieu thereof) furnished or made available to BKF by LEVCO are true, correct and complete and conform to the originals thereof. 6.3 Authority. LEVCO has full right, power and authority to execute, deliver and perform this Agreement and the Related Agreements to which it is a party, and all proper actions of the board of directors of LEVCO authorizing the execution, delivery and performance hereof and thereof have been taken. At the Closing, all proper actions of the Stockholders of LEVCO approving and adopting this Agreement and the Merger shall have been taken (including, without limitation, the affirmative vote by each Stockholder in favor of, or the written consent of each Stockholder to, the approval and adoption of this Agreement and the Merger). This Agreement has been duly executed and delivered by LEVCO and, assuming this Agreement constitutes a valid and binding obligation of the other parties hereto, constitutes (and the Related Agreements to which LEVCO will be a party, when executed and delivered, will be duly executed and delivered and will constitute, assuming such Related Agreements constitute a valid and binding obligation of the other parties thereto) valid and legally binding obligations of LEVCO enforceable against it in accordance with the respective terms of the Merger Agreement and each such Related Agreement, except as the enforceability thereof may be subject to or limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the rights of creditors generally and general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). 6.4 No Violation. Neither the execution and delivery by the Stockholders and LEVCO of this Agreement or of any Related Agreement to which any of the Stockholders or LEVCO is or at Closing will be a party, nor consummation of the transactions herein or therein contemplated, nor compliance by the Stockholders or LEVCO with the terms, conditions and 17 provisions hereof or thereof will (i) conflict with or violate any provision of applicable law, the certificate of incorporation of LEVCO or either of the LEVCO Subsidiaries or the certificates of limited partnership or the agreements of limited partnership of any of the Investment Partnerships, or (ii) require the consent of any partner in the Investment Partnerships, or (iii) result in a violation of or default under any provision of any regulation, order, writ, injunction or decree of any Governmental Entity applicable to any LEVCO Entity or (iv) result in a violation or a default under any Contract (other than Terminable Contracts) to which any LEVCO Entity is a party or by which any LEVCO Entity is bound or to which any LEVCO Entity is subject, or constitute a default thereunder or give rise to a right of termination, cancellation or acceleration of any obligation thereunder, contractually require any offer to purchase or any prepayment of any debt, contractually require the payment of (or result in the vesting of) any severance, golden parachute, change of control or similar type of payment, or give rise to the loss of any material benefit under or result in the creation or imposition of any Lien upon the Assets of any LEVCO Entity pursuant to the terms of any such Contract (except as contemplated by this Agreement), assuming in the case of clauses (i) through (iv), that all of the consents contemplated by Sections 10.1, 10.2 and 10.3 are obtained and the actions contemplated by Section 9.1(c) have occurred and that the consents contemplated by Section 8.3(b) are obtained and that the provisions of the Hart- Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), shall have been complied with and the waiting period thereunder shall have expired or terminated, and except in the case of clause (iv) only, for violations, defaults, terminations, cancellations, accelerations, contractual requirements, losses or Liens that would not reasonably be expected to involve the payment by a LEVCO Entity or the Surviving Corporation of greater than $25,000 individually or $100,000 in the aggregate. 6.5 Capitalization. The authorized capital stock of LEVCO consists of 10,000 shares of LEVCO Common Stock, all of which are issued and outstanding. LEVCO holds no shares of LEVCO Common Stock in its treasury. All outstanding shares of LEVCO Common Stock are validly issued, fully paid and nonassessable, and not subject to preemptive rights, and are held of record by the respective Stockholders as set forth on Schedule 5.3(a) of the LEVCO Disclosure Schedule. Except as set forth on Schedule 6.5 of the LEVCO Disclosure Schedule, there are no other shares of capital stock or other equity securities of LEVCO outstanding and no outstanding options, warrants, scrip, rights to subscribe to, calls, commitments or agreements of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of capital stock of LEVCO. 6.6 Approvals. Assuming that all of the consents contemplated by Section 8.3(b) are obtained, (i) no approval, authorization, order, license or consent of or registration, qualification or filing with any Governmental Entity and (ii) no approval or consent by any other Person is required to be obtained or made by any LEVCO Entity in connection with the execution, delivery or performance of this Agreement and the Related Agreements by the parties thereto (other than BKF or Merger Subsidiary), other than as contemplated by Section 9.3 and Article X and as set forth on Schedule 6.6 of the LEVCO Disclosure Schedule and except in the case of clause (ii) only, for such approvals, authorizations, orders, licenses, consents, registrations, qualifications or 18 filings the absence of which would not reasonably be expected to involve the payment by a LEVCO Entity or the Surviving Corporation of greater than $25,000 individually or $100,000 in the aggregate. 6.7 Financial Statements. (a) LEVCO has delivered to BKF audited balance sheets of LEVCO as at the close of its fiscal years ended December 31, 1992 through December 31, 1994, together with the related statements of income, stockholder's equity and cash flows for the fiscal years ended December 31, 1992 through December 31, 1994, accompanied by a report of Richard A. Eisner & Company, L.L.P. ("Eisner") thereon. LEVCO will deliver to BKF, LEVCO Subsequent Financials (as defined in Section 9.10) with respect to the fiscal year of LEVCO ended December 31, 1995 as required by Section 9.10. Such balance sheets and financial statements (including the notes thereto) for such periods are collectively called the "LEVCO Audited Financials" and are, or to the extent delivered as contemplated by Section 9.10 will be, attached hereto to Schedule 6.7(a) of the LEVCO Disclosure Schedule. (b) LEVCO has also delivered to BKF copies of its (i) FOCUS Reports filed on Form X-17A-5 (the "FOCUS Reports") as of March 31, 1995 and June 30, 1995 and (ii) unaudited balance sheet at September 30, 1995, together with the related unaudited statements of income, stockholder's equity and cash flows for the nine-month period then ended, together with the review report of Eisner thereon (the "September 30, 1995 Financial Statements"). LEVCO will deliver to BKF, LEVCO Subsequent Financials and FOCUS Reports with respect to the fiscal quarters ending after the date hereof and prior to the Closing as and to the extent required by Section 9.10. The September 30, 1995 Financial Statements and all such quarterly LEVCO Subsequent Financials are referred to collectively as the "LEVCO Unaudited Financials" and are, or to the extent delivered as contemplated by Section 9.10, will be attached to Schedule 6.7(b) of the LEVCO Disclosure Schedule. The LEVCO Audited Financials and the LEVCO Unaudited Financials are hereinafter sometimes collectively referred to as the "LEVCO Financial Statements." (c) The LEVCO Financial Statements fairly present (or will when delivered, fairly present) the financial position and results of operations of LEVCO on the dates thereof and for the fiscal periods then ended, in accordance with GAAP which, except as may otherwise be noted in the footnotes thereto, shall have been applied on a basis consistent with prior periods except, in the case of the LEVCO Unaudited Financial Statements, for normal recurring year-end accruals reflected thereon or omitted therefrom which are not individually or in the aggregate material and for the absence of complete footnotes. The LEVCO Financial Statements reflect or provide for claims against and debts and liabilities of LEVCO, absolute, accrued, contingent or otherwise, as at the dates thereof in accordance with GAAP, except for normal recurring year-end accruals reflected on or omitted from the LEVCO Unaudited Financials which are not individually or in the aggregate material, and the year-end adjustments described on Schedule 6.7(c). Each FOCUS Report delivered or to be delivered complied (and with respect to FOCUS Reports filed with the SEC after the date hereof and prior to Closing, will comply) at the date 19 thereof in all material respects with the rules and regulations of the SEC relating thereto and fairly present the information required to be presented therein pursuant to Rule 17a-5 under the Exchange Act with respect to LEVCO at such date. 6.8 No Adverse Change. As of the date hereof, and except as set forth on Schedule 6.8 of the LEVCO Disclosure Schedule, since December 31, 1994, (a) there has been no Material Adverse Effect with respect to any LEVCO Entity; (b) there have been no distributions paid or declared to the Stockholders except as reflected in the LEVCO Financial Statements; (c) LEVCO has not issued or sold any interest, option, note or other security of LEVCO; (d) no material physical property owned or leased by LEVCO has suffered any destruction or damage, regardless of whether or not the loss suffered was insured; (e) there has been no write-down or write-off by LEVCO or any Investment Partnership of any of their respective Assets, including, without limitation, write-offs of accounts receivable (except for revaluations of portfolio holdings in the ordinary course of business); (f) no Investment Contracts collectively accounting for more than 5% of the Assets Under Management of LEVCO at December 31, 1994 have been terminated; (g) neither LEVCO nor any Investment Partnership has sold or otherwise disposed of any Assets other than in the ordinary course of business; and (h) neither LEVCO nor any Investment Partnership has incurred any debt or liability, absolute, accrued, contingent or otherwise, other than debts and obligations incurred in the ordinary course of business consistent with past practice or that are otherwise specifically set forth in the LEVCO Disclosure Schedule. 6.9 Subsidiaries. (a) Except for the formation of the LEVCO Subsidiaries immediately prior to Closing as contemplated by Section 8.5 and Schedule 9.1(c), neither LEVCO nor any Investment Partnership has any subsidiaries and neither LEVCO nor any Investment Partnership has, at any time since their respective dates of formation, owned any controlling interest or general partner interest in any other Person (except, in the case of LEVCO, the Investment Partnerships and Bridge Partners Specialized Investment Fund, L.P., a Delaware limited partnership ("Bridge Partners")). No LEVCO Entity owns, directly or indirectly, except solely for investment purposes in the ordinary course of its business, any of the capital stock of or any other equity interest in any corporation, association, trust or similar entity, any interest in the equity of any partnership (other than, in the case of LEVCO, such general partner interests in the Investment Partnerships as are described in Schedule 6.9(b) of the LEVCO Disclosure Schedule) or similar entity, any share in any joint venture, or any other equity or proprietary interest in any entity or enterprise, however organized and however such interest may be denominated or evidenced. No LEVCO Entity has or owns, except solely for investment purposes in the ordinary course of its business, any rights, options, subscriptions, warrants or other agreements of any kind to purchase or otherwise to receive or be issued any shares of such capital stock, or securities or obligations of any kind convertible into shares of such capital stock, existing in favor of any Person. Neither any Stockholder nor any affiliate of any Stockholder owns any shares of or other equity interests in Purchase Offshore, Ltd., a Cayman Islands corporation ("Purchase Offshore"), or any general partner or other controlling or managing interest in any Person (other than LEVCO and the general partner interests held, directly or indirectly, in the Investment Partnerships) organized to conduct any investment business. 20 (b) As of the date hereof, the record and beneficial ownership of the general partner interests in each Investment Partnership is as set forth on Schedule 6.9(b) of the LEVCO Disclosure Schedule. As of the Closing, assuming consents contemplated by 10.2(h) are obtained and the transactions contemplated by Section 9.1(c) and Schedule 9.1(c) of the LEVCO Disclosure Schedule have occurred, G.P. Subsidiary will be the sole record and beneficial owner of the general partner interests in each Investment Partnership, free and clear of any Liens. Except as set forth on Schedule 6.9(b) of the LEVCO Disclosure Schedule, each of the Investment Partnerships is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Delaware with full power and authority to own or lease and use its properties and assets and to carry on its business as such business is now conducted. Each of the Investment Partnerships possesses all licenses, franchises, permits and other rights necessary to conduct its business as such business is now conducted. None of the Investment Partnerships is by reason of the nature of its business or its ownership of properties or otherwise required to be qualified to do business as a foreign limited partnership in any jurisdiction other than the jurisdictions listed opposite the name of such Investment Partnership on Schedule 6.9(b) of the LEVCO Disclosure Schedule and except where the failure to so qualify would not reasonably be expected to have a Material Adverse Effect on such Investment Partnership. (c) As of the Closing, the authorized capital stock of LEVCO Broker Subsidiary will consist of 1,000 shares of common stock, par value $.01 per share, all of which will be issued and outstanding and held beneficially and of record by LEVCO, free and clear of any Liens. As of the Closing, the authorized capital stock of G.P. Subsidiary will consist of 1,000 shares of common stock, par value $.01 per share, all of which will be issued and outstanding. As of the Closing, the shares of G.P. Subsidiary will be held beneficially and of record by the G.P. Subsidiary Stockholders as set forth on Schedule 6.9(c) of the LEVCO Disclosure Schedule, free and clear of any Liens. All such shares will as of Closing have been validly issued, fully paid and nonassessable, and not subject to preemptive rights. As of the Closing, there will be no other share of capital stock or other equity securities of a LEVCO Subsidiary outstanding and no outstanding options, warrants, scrip, rights to subscribe to, calls, commitments or agreement of any character whatsoever relating to, or securities or rights convertible into or exchangeable for, shares of capital stock of a LEVCO Subsidiary. As of the Closing and except as contemplated by Section 9.3 in the case of LEVCO Broker Subsidiary, each LEVCO Subsidiary will be a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, with full power and authority to own or lease and use its properties and assets and to carry on its business in the same manner as such business is now conducted by LEVCO; will possess all licenses, franchises, permits, and other rights necessary to conduct its business in the same manner as such business is now conducted by LEVCO; and will be qualified to do business in each jurisdiction where by reason of the nature of its business or the ownership of its properties or otherwise, it is required to be so qualified, except where the failure to so qualify would not reasonably be expected to have a Material Adverse Effect on such LEVCO Subsidiary. 21 6.10 Taxes. (a) All Tax Returns required by applicable law to be filed by or on behalf of any LEVCO Entity have been timely filed, or requests for extensions have been timely filed, granted, and have not yet expired. Each of the Tax Returns filed by any LEVCO Entity in cases where any such Person is required to pay a Tax liability directly, correctly and accurately reflects the amount of its Tax liability and any other material information required to be set forth on such Tax Return, and, in all other cases, correctly and accurately reflects such Person's income, gains, losses, deductions and credits for the relevant fiscal year (or other period) and any other material information required to be set forth on such Tax Return. LEVCO has previously delivered to BKF accurate and complete copies of all such returns filed through the date hereof, as well as any examination reports and statements of adjustments or deficiencies with respect to each LEVCO Entity from December 31, 1991 through the date hereof (and for any other periods for which the statute of limitations has not expired), and will deliver to BKF accurate and complete copies of any such returns, reports or statements made or received from the date hereof through Closing. All Taxes payable by each LEVCO Entity that are shown on filed Tax Returns, or to be shown on Tax Returns that have been extended but not yet filed, have been paid. In the case of Taxes required to be paid directly by any LEVCO Entity for any period for which no Tax Return is yet due but with respect to which GAAP would require that amounts in respect of such Taxes be accrued, all such Taxes have been paid or adequately reserved for on the books of such LEVCO Entity. Each LEVCO Entity has withheld or collected all Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party. Except with respect to those matters set forth on Schedule 6.10 of the LEVCO Disclosure Schedule, no audit examination of any Tax Return of any LEVCO Entity is in progress and no LEVCO Entity nor any director, officer or general partner of any of them has been notified by any Tax authority that any audit examination of any LEVCO Entity is contemplated. Except with respect to those matters set forth on Schedule 6.10 of the LEVCO Disclosure Schedule, there is no Tax deficiency or claim for additional Taxes or interest thereon or penalties or additions to tax in connection therewith asserted against any LEVCO Entity. Except as set forth on Schedule 6.10, the Tax Returns filed by LEVCO and each Investment Partnership have not been audited. Except as set forth on Schedule 6.10 of the LEVCO Disclosure Schedule, no claim has ever been made by an authority in a jurisdiction where any LEVCO Entity does not file reports or returns that any such Person not filing reports or returns in that jurisdiction is or may be, or its partners are or may be, subject to taxation by that jurisdiction which has not yet been resolved, or if resolved and any amount was determined to be payable, in respect of which such amount has not yet been paid. There are no Liens on any of the equity interests or assets of any LEVCO Entity that arose in connection with any failure to pay Taxes. Except as set forth on Schedule 6.10, no LEVCO Entity has ever entered into a closing agreement pursuant to Section 7121 of the Code or any similar provision of state law. No LEVCO Entity has agreed to, or is required to, make any adjustments under Section 481(a) of the Code by reason of a change in accounting method or otherwise. (b) Except as set forth in Schedule 6.10, no LEVCO Entity is party to an extension or waiver, that is currently in effect, of any statute of limitations in respect of the assessment or collection of any Tax due or in respect of any adjustment to any Tax Return. 22 (c) Each Investment Partnership is, and at all times since its formation has been, properly classified for federal and state income tax purposes as a partnership that is not publicly traded (within the meaning of Section 7704 of the Code) (and not as a publicly traded partnership, association or corporation). (d) LEVCO does not have current or accumulated "earnings and profits" within the meaning of Section 312 of the Code in excess of $600,000. (e) LEVCO is, and at all times since July 1, 1988 has been, properly classified for federal and New York state income tax purposes as an S corporation within the meaning of Section 1361 of the Code. (f) No LEVCO Entity has filed a consent under Section 341(f) of the Code. (g) No LEVCO Entity is a party to any tax allocation or tax-sharing agreement or has any liability for the Taxes of any Person (i) under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local, or foreign law), (ii) as a transferee or successor, (iii) by contract, or (iv) otherwise. 6.11 Interests of Insiders. Except as set forth on Schedule 6.11 of the LEVCO Disclosure Schedule and except for normal advances for business expenses incurred in the ordinary course of business and reimbursement of business expenses incurred in the ordinary course of business, no current or former officer, director or stockholder of LEVCO or a LEVCO Subsidiary or any general partner of any Investment Partnership, nor any affiliate of any of the foregoing Persons, (i) has any loan (except participant loans under LEVCO Benefit Plans (as defined in Section 6.18) as permitted by applicable law) or other obligation for borrowed money outstanding to or from any LEVCO Entity, or for which any LEVCO Entity is or may be liable under a guaranty or otherwise, or (ii) has any material interest (other than portfolio holdings or ownership of less than 5% of the shares of a publicly traded company and other than the G.P. Subsidiary Stockholders' ownership of G.P. Subsidiary or any entity organized by or for the Stockholders to receive payments for Assigned Accounts, as defined in and contemplated by, Section 9.14) hereof in any Person with which any LEVCO Entity has entered into any Contract, or with which any LEVCO Entity does business and which would influence that Person in doing business with any LEVCO Entity. 6.12 Title to Assets; Property. (a) Each LEVCO Entity has (or in the case of the LEVCO Subsidiaries, at the Closing will have) good and marketable title to, or valid and subsisting leasehold interests in, all of their respective Assets, including in the case of LEVCO, the Assets reflected in the September 30, 1995 Financial Statements, except such Assets as have been disposed of in the ordinary course of the business consistent with past practice or as otherwise permitted by this Agreement, free and clear of any Liens, except for (i) such minor imperfections of title, or insignificant Liens, as do not, individually or in the aggregate, materially detract from the values of the Assets subject thereto, or materially interfere with the present or contemplated uses thereof, (ii) mechanics and other statutory Liens, Liens of broker-dealers and other financial counterparties 23 on assets of the investment portfolios of the Investment Partnerships incurred in the ordinary course of business and the Lien of taxes not yet due and payable, and (iii) the Liens listed on Schedules 6.12(a), 6.12(d) or 6.12(e) of the LEVCO Disclosure Schedule which collectively would not reasonably be expected to have a Material Adverse Effect on any LEVCO Entity. The Assets so owned or leased by each LEVCO Entity constitute all of the Assets used in or necessary for the conduct of the business of such LEVCO Entity as now conducted. (b) Each LEVCO Entity's personal property is in good order and repair and is operable and fit to be used for its intended purposes in all material respects. No LEVCO Entity owns or has ever owned any real estate. Each LEVCO Entity holds its leased real and personal properties under valid and binding leases, each such lease is effective in accordance with its respective terms, and there is not under any such lease any existing material default (or any event which with notice or lapse of time or both would become a material default) pertaining to such LEVCO Entity, or to the knowledge of each of LEVCO and the Stockholders, pertaining to the lessor thereunder. All such leases of real property and all such leases of personal property providing for annual rental payments by a LEVCO Entity of more than $10,000 and in effect on the date hereof are set forth on Schedule 6.12(b) of the LEVCO Disclosure Schedule, and LEVCO has delivered to BKF correct and complete copies of all such leases. (c) Except for portfolio holdings, no Investment Partnership owns, or has any leasehold interest in, any Asset. (d) Schedule 6.12(d) of the LEVCO Disclosure Schedule sets forth all trademarks, trade names, service marks and copyrights (whether or not such trademarks, trade names, service marks and copyrights are registered), and all pending applications therefor, owned, licensed or used by a LEVCO Entity at the date hereof, other than software or publications commercially available on a retail basis. Each LEVCO Entity has, or has the right to use, and after consummation of the transactions contemplated hereby, the Surviving Corporation and its Subsidiaries will have, or have the right to use, free and clear of any Liens or claims of others, all franchises, permits, licenses, trademarks, service marks (whether registered or unregistered), trademark applications, service mark applications, trade names, copyrights, trade secrets, designs and other intellectual property and proprietary rights ("Proprietary Rights") necessary to carry on its business as currently conducted. To the knowledge of each of the Stockholders and LEVCO, no LEVCO Entity has infringed, misappropriated or violated any valid Proprietary Rights or contractual relationships of others relating thereto. No LEVCO Entity and no Stockholder has received any notice, claim or protest respecting any such infringements or violations and no LEVCO Entity has given any indemnification to any Person for any such infringements, misappropriations or violations. There is no pending or threatened claim asserted in writing by or on behalf of any LEVCO Entity for infringement or misappropriation of any Proprietary Rights owned by a LEVCO Entity and to the knowledge of each of the Stockholders and LEVCO, there is no reasonable basis for any such claim. (e) Schedule 6.12(e) of the LEVCO Disclosure Schedule identifies all computer software owned or licensed by any LEVCO Entity at the date hereof, except for any such software commercially available on a retail basis. Each LEVCO Entity owns or licenses all 24 computer software developed or currently used by it and each LEVCO Entity has the right to use such software as presently used by it without infringing upon the Proprietary Rights (including trade secrets rights) of a third party. The computer software owned or licensed by the LEVCO Entities constitutes all of the computer software necessary to conduct the business of each such LEVCO Entity as now conducted. Consummation of the transactions contemplated hereby will not result in a material impairment of the legal rights of an LEVCO Entity to any of such software. 6.13 Insurance. Each insurance policy that is maintained by any LEVCO Entity at the date hereof with respect to their respective businesses or Assets or upon the life of any person employed by any of them is set forth on Schedule 6.13 of the LEVCO Disclosure Schedule showing the amount of coverage under each such policy, the deductibles therefor and copayments required to be made in connection therewith, and claims made to date under each such policy. Except as set forth on Schedule 6.13 of the LEVCO Disclosure Schedule, no LEVCO Entity is in default with respect to any insurance policy and no LEVCO Entity has received any notice of cancellation or termination of, or of any material premium increase with respect to, any insurance policy. All such policies will not be subject to cancellation or termination as a result of the transactions contemplated hereby, except as set forth on Schedule 6.13 of the LEVCO Disclosure Schedule. 6.14 Other Material Contracts. (a) All Contracts (other than the Investment Contracts) to which any LEVCO Entity is a party or by which any LEVCO Entity or any Investment Partnership is bound on the date hereof and that involve future payment obligations by the Company of in excess of $10,000 or which are not terminable by such LEVCO Entity that is a party thereto on 30 or fewer days' notice, or that otherwise are material to the business of such LEVCO Entity, are listed on Schedule 6.14(a) of the LEVCO Disclosure Schedule, and all of such Contracts are valid and effective in accordance with their respective terms. (b) Except as set forth in Schedule 6.14(b) of the LEVCO Disclosure Schedule, no LEVCO Entity is a party to any loan agreement, bank credit agreement or other agreement relating to the borrowing of money. (c) No LEVCO Entity or, to the knowledge of LEVCO or the Stockholders, any other party thereto is in default under (nor is any LEVCO Entity or the Stockholders aware of any fact or event which with the lapse of time or the giving of notice or both would constitute a default under) any Contracts made or obligation owed by it except as set forth on Schedule 6.14(c) of the LEVCO Disclosure Schedule. Except for the Terminable Contracts listed on Schedule 4.30 of the LEVCO Disclosure Schedule, the Investment Contracts, the LEVCO Benefit Plans and any insurance contracts listed on Schedule 6.13 of the LEVCO Disclosure Schedule, all Contracts listed on Schedule 6.14(a) of the LEVCO Disclosure Schedule will continue to be valid, binding and enforceable and in full force and effect upon the consummation of the transactions contemplated hereby. 25 (d) Except as listed on Schedule 6.14(d) of the LEVCO Disclosure Schedule, no LEVCO Entity has given a power of attorney to any person which is presently outstanding or in force for any purpose whatsoever. 6.15 Bank Accounts and Money Market Funds. Set forth on Schedule 6.15 of the LEVCO Disclosure Schedule is the name and location of each bank and money market fund in which any LEVCO Entity has an account or accounts or safe deposit boxes, the name and number of each account or box, the names of persons authorized to draw thereon or having access thereto, and the balance of each account and the contents of each box as of the date hereof (or such earlier date as is indicated on Schedule 6.15 of the LEVCO Disclosure Schedule). 6.16 Litigation. (a) Except as set forth on Schedule 6.16 of the LEVCO Disclosure Schedule, there are no legal, administrative or arbitration actions, suits, proceedings or investigations of any kind pending, or, to the best of LEVCO's and each Stockholder's knowledge, threatened before any Governmental Entity by or against any LEVCO Entity's respective business or Assets or which affect any LEVCO Entity's business or Assets and which (if determined adversely to LEVCO) would be reasonably likely to interfere materially with the marketing of services or products of any LEVCO Entity or otherwise have a Material Adverse Effect on any LEVCO Entity, and no LEVCO Entity is the subject of any injunction, order or decree. (b) There are no actions, suits or proceedings pending and, to the knowledge of LEVCO or any of the Stockholders, no investigations are pending and no actions, suits or proceedings are threatened, before any court, commission, agency or other administrative authority or Governmental Entity by or against any LEVCO Entity or any Stockholder which, if adversely determined, would be reasonably likely to restrain or enjoin or otherwise adversely affect the consummation of the transactions contemplated by this Agreement or the Related Agreements or declare unlawful the transactions or events contemplated by this Agreement or cause such transactions to be rescinded. There are no judgments, injunctions, orders or other judicial or administrative mandates outstanding against or affecting any LEVCO Entity or any of the Stockholders which would be reasonably likely to restrain or enjoin the consummation of the transactions contemplated by this Agreement. 6.17 Brokers and Finders. Except for Goldman, Sachs & Co., no LEVCO Entity has employed any broker or finder or incurred any liability for any financial advisory fees, brokerage fees, commissions or finder's fees, and no broker or finder has acted, directly or indirectly, for any LEVCO Entity in connection with this Agreement or the transactions contemplated hereby. Such fees as any LEVCO Entity or any of the Stockholders may owe to Goldman, Sachs & Co. shall be the sole obligation of the Stockholders. 6.18 Employee Benefit Plans and Employees. (a) LEVCO has delivered or made available to BKF, prior to the execution of this Agreement, true and complete copies (or, with respect to unwritten plans, written descriptions) of (i) each of each LEVCO Entity's pension, profit sharing, retirement (including 26 supplemental or excess retirement), deferred compensation, savings, or other similar plans or arrangements, as in effect on the date of this Agreement, including, without limitation, any "employee pension benefit plan", as that term is defined in Section 3(2) of ERISA, which benefits or is intended to benefit any of the present or former employees, officers, directors, stockholders or partners of any LEVCO Entity or the dependents, spouses, or other beneficiaries of any of such persons (the "LEVCO Pension Plans"), (ii) each of each LEVCO Entity's employment or consulting agreements, severance agreements (including, without limitation, change of control or golden parachute agreements or arrangements), bonus, profit-sharing, incentive, deferred compensation, supplemental or excess retirement, life insurance, health, or other plans, policies, contracts, or arrangements as in effect on the date of this Agreement, other than a LEVCO Pension Plan or LEVCO Welfare Plan (as hereinafter defined) that provides benefits or perquisites to or in respect of any of the present or former employees, officers, directors, stockholders or partners of any LEVCO Entity or the dependents, spouses, or other beneficiaries of any of such persons and (iii) each of each LEVCO Entity's severance, bonus, incentive, life insurance, health, vacation, tuition assistance or reimbursement, legal services, salary continuation, travel or accident insurance or benefits, disability insurance or benefits, or unemployment benefits plans, policies, contracts or arrangements, including, without limitation, each "employee welfare benefit plan" within the meaning of Section 3(1) of ERISA as in effect on the date of this Agreement that provides benefits or perquisites to or in respect of present or former employees, officers, directors, stockholders or partners of any LEVCO Entity or the dependents, spouses, or other beneficiaries of, any of such persons (the "LEVCO Welfare Plans") (all the foregoing being collectively the "LEVCO Benefit Plans"). All LEVCO Benefit Plans are listed on Schedule 6.18(a) of the LEVCO Disclosure Schedule. Except as set forth in Schedule 6.18(a) of the LEVCO Disclosure Schedule, none of the Investment Partnerships maintains or has ever maintained any plans of the type included in the definition of LEVCO Benefit Plans. No LEVCO Entity has participated in or been a member of, or been required to contribute to, and no LEVCO Benefit Plan is or has been, a "multiemployer plan" within the meaning of Section 3(37) or Section 4001(a)(3) of ERISA that is subject to Title IV of ERISA. (b) The LEVCO Entities have made or caused to be made all contributions to and all premiums or payments under the LEVCO Benefit Plans required to be made through the date hereof under the terms of such LEVCO Benefit Plans or applicable law, and has properly accrued or otherwise reflected in its financial statements in accordance with GAAP all other liabilities or charges with respect to such LEVCO Benefit Plans required so to have been accrued or reflected. There are no claims or proceedings pending or, to the best knowledge of LEVCO and the Stockholders, threatened, nor is there any reasonable basis known to any LEVCO Entity or the Stockholders for any such claim or proceeding, by or involving the Internal Revenue Service, the U.S. Department of Labor, the Pension Benefit Guaranty Corporation, or any participant or beneficiary, with respect to any LEVCO Benefit Plan or any employee benefit plan formerly maintained by any LEVCO Entity or to which it has contributed, other than claims for benefits in the normal course including claims pursuant to domestic relations orders. Except as set forth in Schedule 6.18(b) of the LEVCO Disclosure Schedule, neither the projected benefit obligations under any LEVCO Pension Plan, determined in accordance with FASB Statement No. 87, nor the benefit liabilities of any LEVCO Pension Plan on a termination basis, exceeds the fair market value of the assets of such LEVCO Pension Plan. 27 (c) Each of the LEVCO Benefit Plans in all material respects conforms to and has been administered in accordance with the applicable provisions of ERISA and the Code and all other applicable laws, rules, and regulations. To the best of the Stockholders' and LEVCO's knowledge, no non-exempt prohibited transaction has occurred with respect to any LEVCO Benefit Plan which is subject to ERISA. With respect to the LEVCO Benefit Plans, no event has occurred and, to the best knowledge of the Stockholders and LEVCO, there exists no condition or set of circumstances, in connection with which any LEVCO Entity would be subject to any liability, penalty, tax, excise, lien or encumbrance or loss of tax deduction under ERISA or the Code, including, without limitation, Sections 302(f), 409 or 502, Part 6 of Title I or Title IV of ERISA, or Sections 162(n), 404 or 412(n) or Chapters 43 or 99 of the Code (except liability for benefit claims and funding obligations payable in the ordinary course). No LEVCO Entity is, or has been at any time during the five years preceding the date of this Agreement, a member of a "controlled group" as defined in Section 412 of the Code, Part B of Title 1 of ERISA, or a group of trades or businesses under common control as defined in Section 4001(b) of ERISA, that included a Person that either (i) failed to make any required annual or quarterly contribution to a plan subject to the minimum funding standards of either Section 412 of the Code or Part 3 of Title 1 of ERISA, (ii) obtained a waiver of such minimum funding standards, (iii) terminated a single-employer plan subject to Title IV of ERISA without fully funding all benefit commitments thereunder, (iv) withdrew or partially withdrew from a multiemployer pension plan subject to Title IV of ERISA unless the full amount of any withdrawal liability (whether or not being contested) has been paid. None of the LEVCO Pension Plans has incurred a reportable event as defined in Section 4043 of ERISA that has not been properly reported. (d) Each LEVCO Pension Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter taking into account the Tax Reform Act of 1986 and nothing has occurred since the date of such letter that could reasonably be expected to affect adversely the qualified status of any such LEVCO Pension Plan. Each trust created under any LEVCO Pension Plan has been at all times exempt from federal income tax under Section 501(a) of the Code, and each trust created under any LEVCO Welfare Plan intended to qualify as a voluntary employee benefit association has been at all times exempt from federal income tax under Section 501(c)(9) of the Code. (e) Except as disclosed on Schedule 6.18(e) of the LEVCO Disclosure Schedule, no LEVCO Welfare Plan provides medical or death benefits (whether or not insured) with respect to current or former employees, officers, directors, stockholders or partners beyond their date of retirement or other termination of service (other than continuation of health coverage to the extent required under Part 6 of Title I of ERISA). (f) Except as disclosed on Schedule 6.18(f) of the LEVCO Disclosure Schedule, the consummation of the transactions contemplated by this Agreement will not obligate LEVCO to provide any current or former officer, director, stockholder, partner or employee of any LEVCO Entity, including, but not limited to, Continued Employees (as defined in Section 13.1), with severance pay, unemployment compensation or any similar payment. 28 (g) No LEVCO Entity is bound by any collective bargaining unit agreement or any other legally binding Contract, whether or not in writing, to maintain an employee pension plan or employee welfare plan now in force with respect to any of the employees of LEVCO or any Investment Partnership. (h) With respect to LEVCO Benefit Plans, the transactions contemplated by this Agreement shall not result in any action or the establishment of any relationship prohibited by Section 406 or 407 of ERISA (determined after taking into account any applicable exemptions). (i) Schedule 6.18(i) of the LEVCO Disclosure Schedule sets forth a list of all employees of LEVCO and each Investment Partnership. Except for the LEVCO Benefit Plans listed on Schedule 6.18(a) no LEVCO Entity has any employee contract or non-terminable (whether with or without penalty) employment arrangements with any person. To the knowledge of LEVCO and the Stockholders, none of the persons listed on Schedule 6.18(i) is subject to a confidentiality, non-disclosure, non-solicitation or non-competition agreement with any person or entity other than a LEVCO Entity. To the knowledge of LEVCO and the Stockholders, none of the Persons listed on Schedule 6.18(i) is in breach of any such employment arrangement, or any fiduciary duty of such Person to any LEVCO Entity and no such Person has given notice to LEVCO or a Stockholder of any intention to terminate such Person's employment with LEVCO, either before or after the Effective Date. No LEVCO Entity has committed any unfair labor practices or received notice of a claim of unfair labor practices against it or any of its directors, officers, employees, agents or partners. 6.19 Filings, Etc. (a) Except as set forth in Schedule 6.20(c)(i)(a) and Schedule 6.22(a) of the LEVCO Disclosure Schedule, since December 31, 1990 and except for the matters contemplated by Section 9.3, each LEVCO Entity has had and now has all permits, licenses, certificates of authority, orders and approvals of, and have made all filings, applications and registrations with, Governmental Entities (including by the rules of any self-regulatory body) that are required in order to permit each of them to carry on its respective business as presently conducted, and such permits, licenses, certificates of authority, registrations, orders and approvals are in full force and effect, except where such failures to have or make or keep in full force and effect any permit, license, certificate of authority, registration, order, approval, filing, application or registration referred to above would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on any LEVCO Entity. Except as set forth in Schedule 6.20(c)(i)(a) and Schedule 6.22(a) of the LEVCO Disclosure Schedule, the conduct of each LEVCO Entity's business has never, and currently does not, violate or infringe any applicable federal, state or local law, statute, ordinance, license, rule or regulation including those of the self- regulatory bodies which violations or infringements would reasonably be expected to have, individually or in the aggregate, have a Material Adverse Effect on any LEVCO Entity. 29 (b) Without limiting the foregoing, except as set forth in Schedule 6.20(c)(i)(a) and Schedule 6.22(a) of the LEVCO Disclosure Schedule, each LEVCO Entity and each of their officers, partners and employees that or who is required to be registered as an investment adviser, broker-dealer, commodity trading adviser, commodity pool operator, registered representative or sales person with the SEC, CFTC, the securities commission or any other commission of any state or any state or federal securities or futures self-regulatory body is duly registered as such and such registration is in full force and effect, except where the failure to be so registered or to have such registration in full force and effect would not, individually or in the aggregate, be reasonably expected to have a Material Adverse Effect on such LEVCO Entity. (c) There are no proceedings pending or, to the knowledge of LEVCO or any Stockholder, threatened, that are reasonably likely to result in the revocation, cancellation or suspension, or any adverse modification, of any permit, license, certificate of authority, order or approval referred to in Section 6.19(a) and the execution and delivery of this Agreement and the consummation of any transactions contemplated hereby will not, except as set forth in Schedule 6.1 9(C) of the LEVCO Disclosure Schedule, result in any such revocation, cancellation, suspension, or any adverse modification, of any permit, license, certificate of authority, order or approval referred to in Section 6.19(a). (d) Except as listed in LEVCO's Form ADV, no LEVCO Entity nor, to the knowledge of LEVCO or any Stockholder, any officer, director, partner or employee thereof, is a party or subject to any order, judgment or decree (other than exemptive orders) relating to its business with or by any federal, state, local or foreign regulatory authority. 6.20 Representations and Warranties Regarding the Investment Advisory Business. (a) Investment Contracts and Clients. (i) Each written Investment Contract and any subsequent renewal thereof (A) has been duly authorized, executed and delivered by LEVCO; (B) to the knowledge of LEVCO and the Stockholders and except as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on LEVCO or the Surviving Corporation, (x) has been duly authorized, executed and delivered by each party thereto other than LEVCO and, (y) in the case of an Investment Company, has been adopted and continued in compliance with Section 15(a) of the Investment Company Act (or appropriate exemptive relief therefrom); (C) assuming such Investment Contracts (and any subsequent renewals thereof) constitute valid and binding obligations of the other party thereto, is a valid and binding agreement of LEVCO, enforceable in accordance with its terms (subject to ERISA or to bankruptcy, insolvency, moratorium, fraudulent transfer and similar laws affecting creditors' rights generally and to general equity principles); (D) each of LEVCO and, to the knowledge of LEVCO and the Stockholders, the Client is in compliance in all material respects with the terms of each Investment Contract to which it is a party, and no event has occurred or condition exists that constitutes or with notice or the 30 passage of time would constitute a default thereunder. Except as set forth on Schedule 6.20(a) of the LEVCO Disclosure Schedule, none of the Investment Contracts, or any other arrangements or understandings relating to rendering of investment advisory or management services, including without limitation all subadvisory services or administration services to any Client or other person, contains any undertaking by LEVCO to collect flat fees or to waive or reimburse any or all fees thereunder. As of the date hereof, no Client accounting for more than 1% of the Assets Under Management as of the Base Date of LEVCO has notified LEVCO or any of the Stockholders that it intends to discontinue its relationship with LEVCO. As used in this Agreement, the term "Client" means any client to which LEVCO provides investment management, investment advisory, administration or consulting services on the date hereof, and includes each Investment Company and the Investment Partnerships. Schedule 2.1(A) is a true and correct list of the Investment Contracts covering Assets Under Management of LEVCO as of the Base Date and a true and correct determination of the dollar amount of the Base Assets Under Management valued in accordance with Section 2.1(b)(i)(B). (ii) The accounts of each Client that is subject to ERISA have been managed by LEVCO such that LEVCO, in the exercise of such management, is in compliance in all material respects with the applicable requirements of ERISA and all prohibited transaction class exemptions issued pursuant thereto, including without exemption Prohibited Transaction Class Exemptions 77-9, 81-6, and 86-128), and consummation of the transactions contemplated hereby will not result in a violation of such ERISA requirements. (iii) The account of each Investment Company that has been managed by LEVCO has been managed by LEVCO in compliance in all material respects with the Investment Company's investment objectives, policies and restrictions as contained from time to time in its registration statement filed with the SEC and the requirements of the Investment Company Act. (b) Investment Partnership Financial Statements. LEVCO has delivered to BKF: (i) audited balance sheets of each Investment Partnership (except Island Drive Partners, L.P.) as of December 31, 1994 and December 31, 1993, and the related financial statements for the years ended December 31, 1994 and December 31, 1993, accompanied by reports of Eisner thereon; (ii) an audited balance sheet of Island Drive Partners, L.P. as of December 31, 1994 and the related financial statements for the year ended December 31, 1994, accompanied by a report of Eisner thereon; and (iii) an unaudited balance sheet of each Investment Partnership as of September 30, 1995 and the related financial statements for the nine months then ended, accompanied by a report of Eisner thereon. LEVCO will deliver to BKF LEVCO Subsequent Financials for the Investment Partnerships as required by Section 9.10. All such financial statements (the "Investment Partnership Financial Statements") have been or will be prepared in accordance with GAAP, which has been and will be applied on a basis consistent with prior periods, except as otherwise disclosed therein, and present or will present fairly the financial 31 position and results of operations of each Investment Partnership at the dates, and for the periods, stated therein except, in the case of any unaudited Investment Partnership Financial Statements, for normal recurring year-end accruals reflected thereon or omitted therefrom which are not individually or in the aggregate material and for the absence of complete footnotes. The Investment Partnership Financial Statements reflect or provide for all liabilities, whether absolute, accrued, contingent or otherwise, of the Investment Partnerships that are required to be reflected in such financial statements (including the notes thereto) as at the dates hereof pursuant to the requirements of GAAP, except for normal recurring year-end accruals reflected on or omitted from unaudited interim Investment Partnership Financial Statements, which are not individually or in the aggregate material and the year-end adjustments described on Schedule 6.20(b). (c) Regulatory Compliance of LEVCO and the Investment Partnerships. Except as set forth in the following Schedules of the LEVCO Disclosure Schedule: (i) LEVCO is and has been since 1982 duly registered as an investment adviser under the Investment Advisers Act. LEVCO is registered as an investment adviser in the states referenced in item 7, Part I of its current Form ADV (such states, except as set forth on Schedule 6.20(c)(i)(a) of the LEVCO Disclosure Schedule, constituting all jurisdictions where such registration is required in order to conduct its business), and, except as set forth on Schedule 6.20(c)(i)(a) of the LEVCO Disclosure Schedule, is in compliance in all material respects with all federal and state laws requiring registration, licensing or qualification as an investment adviser. Each such federal and state registration is in full force and effect. LEVCO has made available to BKF a true and complete copy of its Form ADV, as amended to date, filed with the SEC; copies of all state registration forms, likewise as amended to date; and copies of all current reports required to be kept by LEVCO pursuant to the Investment Advisers Act and rules promulgated thereunder, and required pursuant to applicable state statutes. The information contained in such forms and reports was true and complete at the time of filing in all material respects. LEVCO has filed all amendments required to be filed to its Form ADV and state registration forms under federal and state law. Schedule 6.20(c)(i)(b) of the LEVCO Disclosure Schedule identifies the examination and/or certification qualifications of each of LEVCO's adviser representatives. (ii) Neither LEVCO nor any of the Investment Partnerships (considering Meadow Lane Associates, L.P. and Island Drive Partners, L.P. as a single entity for this purpose) is, nor on the Closing Date will any of them be, an Investment Company which is required to be registered under that Act in order to engage in the transactions described in Section 7 of that Act. None of the Investment Partnerships is a "broker" or "dealer" within the meaning of the Exchange Act. Copies of all inspection reports or similar documents furnished to LEVCO by the SEC or any state regulatory authority or any self-regulatory organization since January 1, 1990 are listed on Schedule 6.20(c)(ii) of the 32 LEVCO Disclosure Schedule and have been provided to BKF. Except as set forth in Schedule 6.16 of the LEVCO Disclosure Schedule, there is not pending, or to the knowledge of the Stockholders and LEVCO, threatened any investigation of LEVCO or any of the Investment Partnerships or any of their records by the SEC or any state regulatory authority or any self- regulatory organization, and since December 31, 1990 and except as listed on Schedule 6.20(c)(ii) of the LEVCO Disclosure Schedule, neither LEVCO nor any of the Investment Partnerships has been notified by the SEC or any state regulatory authority or any self-regulatory organization that any past inspection has revealed any deficiency in any such entity's recordkeeping or compliance with the Investment Advisers Act, the Exchange Act, the Securities Act, the Investment Company Act or applicable state statutes. No such deficiency would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on any LEVCO Entity. (iii) To the knowledge of LEVCO and the Stockholders, no assets of any Investment Partnership constitute "plan assets" within the meaning of Department of Labor Regulation (S) 2510.3-101. (iv) Except as listed on Schedule 6.20(c)(iv) of the LEVCO Disclosure Schedule, LEVCO does not act as investment adviser or sub- adviser to any Investment Company. (v) Except for brokerage commissions on portfolio securities transactions for an Investment Company in compliance with procedures adopted under Rule 17e-1 under the Investment Company Act, neither LEVCO nor any Stockholder nor any other "affiliated person" of LEVCO, as such term is defined in the Investment Company Act, receives or is entitled to receive any compensation, directly or indirectly, (i) from any person in connection with the purchase or sale of securities or other property to, from or on behalf of any such Investment Company, or (ii) from any such Investment Company or its security holders for other than bona fide investment advisory or other services. (vi) Except as listed on Schedule 6.20(c)(vi) of the LEVCO Disclosure Schedule, there are no sub-advisers for any Investment Partnership. (vii) Except as set forth on Schedule 6.20(c)(vii) of the LEVCO Disclosure Schedule, during the preceding 12 months neither LEVCO nor any of the Investment Partnerships has received any material written investor complaints that have not been resolved, nor has any Investment Partnership received redemption requests which are outstanding as of the date hereof, except those that will be satisfied in the ordinary course of business or pursuant to the terms of such Investment Partnership's partnership agreement. (viii) LEVCO has adopted a formal code of ethics that complies with Section 17(j) of the Investment Company Act and Rule 17(j)-1 thereunder, and a written policy regarding insider trading which complies with Section 204A of 33 the Investment Advisers Act. The policies of LEVCO with respect to avoiding conflicts of interest have been made available to BKF. To the knowledge of LEVCO and the Stockholders, except as set forth in Schedule 6.20(c)(viii) of the LEVCO Disclosure Schedule, there have been no material violations or allegations of material violations as of the date hereof of such policies that have occurred or been made. (ix) Neither LEVCO nor, to the knowledge of LEVCO or any Stockholder, any person "associated" (as defined under the Investment Advisers Act) with LEVCO, has for the period beginning not less than five years prior to the date hereof and ending on the date hereof been convicted of any crime or is or has been subject to any disqualification that would be a basis for denial, suspension or revocation of registration of an investment adviser under Section 203(e) of the Investment Advisers Act or disclosure under Rule 206(4)-4 thereunder or denial, suspension or revocation of registration of a broker-dealer under Section 15 of the Exchange Act, or for disqualification as an investment adviser for any Investment Company pursuant to Section 9(a) of the Investment Company Act, or for suspension or revocation of registration as a commodity pool operator or commodity trading adviser pursuant to Section 8a of the Commodity Exchange Act, and to LEVCO's or any Stockholder's knowledge there is no basis for, or proceeding or investigation that is reasonably likely to become the basis for, any such disqualification, denial, suspension or revocation. (x) The offering of the limited partnership interests in each Investment Partnership and Bridge Partners and the participation by any LEVCO Entity in the offering of securities of Purchase Offshore and any other Person was conducted in compliance in all material respects with the Securities Act, the Commodities Exchange Act and other federal, state or foreign securities laws, in each case to the extent applicable to such offering. The offering memorandum used in connection with each such offering and all supplemental advertising and marketing material relating thereto complied in all material respects at the time of the use of such offering memoranda or material with the Securities Act, state and foreign securities laws and the rules of the National Association of Securities Dealers ("NASD"), in each case to the extent applicable to such offering. None of such offering memoranda or supplemental advertising and marketing materials as of their respective dates of offering, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. (xi) LEVCO is a "qualified professional asset manager" within the meaning of Prohibited Transaction Class Exemption 84-14 published by the U.S. Department of Labor. 34 (xii) Except as set forth in Schedule 6.20(c)(xii) of the LEVCO Disclosure Schedule, LEVCO has no arrangements with paid solicitors. 6.21 Disclosure. The representations and warranties made by the Stockholders in this Agreement (when read together with the LEVCO Disclosure Schedule) and the Related Agreements do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make any such representation or warranty, in the light of the circumstances under which it was made, not misleading. 6.22 Registration as a Broker-Dealer. (a) LEVCO is, and at the Closing Date LEVCO or LEVCO Broker Subsidiary will be, duly registered under the Exchange Act as a broker-dealer with the SEC and is, and at the Closing Date LEVCO or LEVCO Broker Subsidiary will be, in compliance in all material respects with the applicable provisions of the Exchange Act and the applicable rules and regulations thereunder, including, but not limited to, the net capital requirements thereof. LEVCO is, and at the Closing Date LEVCO or LEVCO Broker Subsidiary will be, a member in good standing of the NASD and in compliance in all material respects with all applicable rules and regulations of the NASD, including without limitation the NASD's rules of fair practice (the "Rules of Fair Practice"). Except as set forth on Schedule 6.22(a) of the LEVCO Disclosure Schedule, LEVCO is, and at the Closing Date LEVCO or LEVCO Broker Subsidiary will be, duly registered as a broker-dealer under, and in compliance in all material respects with, the applicable laws of all jurisdictions in which it is required to be so registered and the rules and regulations thereunder (collectively, the "State Laws"). (b) As of the date hereof, LEVCO has delivered to BKF a true, correct and complete copy of LEVCO's Uniform Application for Broker-Dealer Registration on Form BD (the "BD"), reflecting all amendments thereto filed with the SEC to the date hereof, true, correct and complete copies of the Uniform Application for Securities Industry Registration or Transfer on Form U-4, as filed by each current principal and registered representative of LEVCO (each, a "U-4"), and true, correct and complete copies of each report filed since January 1, 1992 with the SEC, the NASD or any state securities agency, including without limitation quarterly focus reports and annual statements of financial condition (each, a "Report"). Schedule 6.22 of the LEVCO Disclosure Schedule sets forth a complete list of the identities of each principal and registered representative of LEVCO, their series licenses and each Report. The BD and each U-4 and other Report of LEVCO are in compliance in all material respects with the applicable requirements of the Exchange Act and the rules and regulations thereunder, the applicable requirements of the By-Laws of the NASD and any schedule thereto and rules thereunder and the State Laws and the rules and regulations thereunder. The BD and each U-4 and other Report of LEVCO do not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Each registered representative and principal of LEVCO has, at least the minimum series license for the activities which such registered representative or principal performs for LEVCO. 35 (c) Except as set forth in Schedule 6.22(c) of the LEVCO Disclosure Schedule the net capital, as such term is defined in Rule 15c3-1 under the Exchange Act, of LEVCO satisfies, and since LEVCO's inception has satisfied, the minimum net capital requirements of the Exchange Act and of the laws of any jurisdiction in which LEVCO conducts business, and has been sufficient to permit LEVCO to operate without restriction on its ability to expand its business under Article III, Section 38 of the NASD Rules of Fair Practice. Except as set forth in Schedule 6.22(c) of the LEVCO Disclosure Schedule, LEVCO is not, and at the Closing Date neither LEVCO nor LEVCO Broker Subsidiary will be, party to, or bound by, the terms of any restriction agreement with the NASD other than a restriction agreement entered into in the ordinary course of business (and not as a result of any disciplinary or enforcement action) the terms of which are not materially more restrictive to LEVCO or LEVCO Broker Subsidiary than the terms of the restriction agreement set forth in Schedule 6.22(c). 6.23 Registration under the Commodity Exchange Act. (a) LEVCO and Melody L. Prenner Sarnell are each duly registered under the Commodity Exchange Act as a commodity pool operator ("CPO") and LEVCO is duly registered under the Commodity Exchange Act as a commodity trading adviser ("CTA"), and each of them is in compliance in all material respects with the Commodity Exchange Act and the rules and regulations thereunder. To the extent and if required by Part 4 of the regulations under the Commodity Exchange Act, LEVCO and Melody L. Prenner Sarnell have each delivered all relevant disclosure documents to their commodity trading advisory clients and to all pools in respect of which they act as a CPO. (b) LEVCO and Melody L. Prenner Sarnell are each members in good standing of the National Futures Association both in their respective capacities as a CTA and as a CPO. 6.24 Registration as an Insurance Agent. LEVCO is not required to be registered as an insurance agent, broker, consultant or adviser under the laws of any state. 6.25 Registration as a Transfer Agent. LEVCO (i) is not registered as a transfer agent under the Exchange Act and (ii) is not engaged in any conduct or activity that would require it to be so registered. ARTICLE VII REPRESENTATIONS AND WARRANTIES OF BKF BKF represents and warrants to LEVCO that the statements contained in this Article VII are correct as of the Signing Date and will be correct as of the Closing Date as though made at the Closing Date (except for statements made as of a specific date, which are correct as of such date): 36 7.1 Organization and Authority. Each of BKF and Merger Subsidiary is a Delaware corporation duly organized, validly existing and in good standing under the laws of the state of Delaware. Each of BKF and Merger Subsidiary has all requisite power and authority to enter into this Agreement and the Related Agreements to which it is a party and to perform its obligations hereunder and thereunder. The execution and delivery of this Agreement by BKF and Merger Subsidiary and the consummation by BKF and Merger Subsidiary of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of BKF and Merger Subsidiary (including the unanimous approval of BKF's Board of Directors) and no other corporate proceedings on the part of BKF are necessary to authorize (i) this Agreement, (ii) the Merger, (iii) the issuance of BKF Common Stock pursuant to the Merger and (iv) the election of Levin, Melody L. Prenner Sarnell and Jeffrey A. Kigner to the Board of Directors of BKF (collectively, the "Stockholder Approval Matters"), other than the approval and adoption of the Stockholder Approval Matters by the affirmative vote of a majority of the outstanding shares of BKF Common Stock and the filing and recordation of the Certificate of Merger as required by the Corporation Law. The Board of Directors of BKF has received from Lazard Freres & Co. LLC ("Lazard") its opinion that the consideration to be paid by BKF in the Merger is fair to BKF from a financial point of view. 7.2 Binding Obligation. This Agreement has been duly executed and delivered by BKF and Merger Subsidiary and, assuming this Agreement constitutes a valid and binding obligation of the other parties hereto, constitutes, and the Related Agreements to which BKF and Merger Subsidiary will be a party, when executed and delivered, will be duly executed and delivered and will constitute, the legal, valid and binding obligation of BKF and Merger Subsidiary enforceable against them in accordance with the respective terms of the Merger Agreement and each such Related Agreement, except as the enforceability thereof may be limited by or subject to bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting the rights of creditors generally and general principles of equity (regardless of whether enforcement is sought in a proceeding at law or in equity). 7.3 No Violations. Assuming the approval and adoption of the Stockholder Approval Matters by the holders of the BKF Common Stock as set forth herein, neither the execution and delivery by each of BKF and Merger Subsidiary of this Agreement or of any Related Agreement to which BKF and Merger Subsidiary is or at Closing will be a party, nor consummation of the transactions herein or therein contemplated, nor compliance by each of BKF and Merger Subsidiary with the terms, conditions, and provisions hereof or thereof will (i) conflict with or violate any provision of applicable law or of the certificates of incorporation or bylaws of each of BKF and Merger Subsidiary, or (ii) result in a violation of or default under any provision of any regulation, order, writ, injunction or decree of any Governmental Entity applicable to BKF or Merger Subsidiary, or (iii) result in a violation of or default under any Contract to which BKF or Merger Subsidiary is a party or by which BKF or Merger Subsidiary is bound or to which BKF or Merger Subsidiary is subject or constitute a default thereunder or give rise to a right of termination, cancellation or acceleration of any obligation thereunder, or give rise to the loss of a material benefit under or result in the creation or imposition of any Lien upon any Assets of BKF or Merger Subsidiary pursuant to such Contract, except in the case of clauses (i) through (iv), such conflicts, breaches, defaults, losses or Liens that would not reasonably be expected, 37 individually or in the aggregate, to have a Material Adverse Effect on BKF, materially impair the ability of BKF and Merger Subsidiary to perform their respective obligations hereunder or prevent the consummation of the transactions contemplated hereby and assuming in the case of clauses (i) through (iv) that all of the consents, approvals and notices contemplated by Sections 9.2, 10.1, 10.2 and 10.3 are obtained and the provisions of the HSR Act have been complied with and the waiting period thereunder shall have expired or terminated. 7.4 No Authorization or Consents Required. No approval, authorization, order, license or consent of or registration, qualification or filing with any Governmental Entity or the Exchange and no approval or consent by any other Person is required to be obtained or made by BKF or Merger Subsidiary in connection with the execution, delivery or performance of this Agreement and the Related Agreements by the parties thereto (other than LEVCO and the Stockholders), other than in each such case as contemplated by Sections 9.2 and 9.3 and Article X hereof and other than such authorizations, approvals, orders, licenses, regulations, filings, and consents the failure of which to obtain, and such notices or filings the failure of which to make, would not reasonably be expected to have a Material Adverse Effect on BKF, would not materially impair the ability of BKF and Merger Subsidiary to perform their obligations hereunder or prevent the consummation of the transactions contemplated hereby. 7.5 No Actions, Suits or Proceedings. There are no actions, suits, proceedings or investigations pending and, to the knowledge of BKF, no investigations are pending and no actions, suits or proceedings are threatened, before any court, commission, agency or other administrative authority or Governmental Entity by or against BKF or Merger Subsidiary which, if adversely determined, would be reasonably likely to restrain or enjoin or otherwise adversely affect the consummation of the transactions contemplated by this Agreement or the Related Agreements or declare unlawful the transactions or events contemplated by this Agreement or cause such transactions to be rescinded. There are no judgments, injunctions, orders or other judicial or administrative mandates outstanding against or affecting BKF or Merger Subsidiary which would be reasonably likely to restrain or enjoin the consummation of the transactions contemplated by this Agreement. 7.6 Ineligible Persons. Neither BKF nor any "affiliated person" thereof, as defined in the Investment Company Act: (i) is ineligible pursuant to Section 9(a) of the Investment Company Act to serve as an investment adviser (or in any other capacity contemplated by the Investment Company Act) to a registered investment company; or (ii) to the knowledge of BKF, as of the date hereof, has engaged since January 1, 1991 or is currently engaging in any of the conduct specified in Section 9(b) of the Investment Company Act or Section 203(e) of the Investment Advisers Act, that would reasonably be expected to result in SEC action to disqualify BKF or any of its affiliates as an investment adviser. 7.7 Brokers and Finders. Except for Lazard, BKF has not employed any broker or finder or incurred any liability for any financial advisory fees, brokerage fees, commissions or finder's fees, and no broker or finder has acted, directly or indirectly, for BKF in connection with this Agreement or the transactions contemplated hereof. Such fees as BKF may owe to Lazard shall be the sole obligation of BKF. 38 7.8 BKF Financial Statements. (a) BKF has delivered to LEVCO audited statements of assets and liabilities of BKF as of the close of its fiscal years ended December 31, 1994 and December 31, 1993 and statements of operations, changes in net assets and cash flows for each of the years in the period ended December 31, 1994, accompanied by a report of Ernst & Young thereon. BKF will deliver to LEVCO, BKF Subsequent Financials (as defined in Section 9.10) with respect to the fiscal year ending December 31, 1995 as required by Section 9.10. Such statements of assets and liabilities and statements of operations, changes in net assets and cash flows (including the notes thereto) for such periods are collectively called the "BKF Audited Financials" and are, or to the extent delivered as contemplated by Section 9.10 will be, attached hereto as Schedule 7.8(a) of the disclosure schedule delivered to LEVCO by BKF concurrently with the execution of this Agreement (the "BKF Disclosure Schedule"). (b) BKF has also delivered to LEVCO copies of its Form N-SAR for the six month period ending June 30, 1995. BKF will deliver to LEVCO, BKF Subsequent Financials with respect to the interim fiscal periods ending after the date hereof and prior to the Closing as required by Section 9.10. All such BKF Subsequent Financials are referred to collectively as the "BKF Unaudited Financials" and will be attached to Schedule 7.8(b) of the BKF Disclosure Schedule. The BKF Audited Financials and the BKF Unaudited Financials are hereinafter sometimes collectively referred to as the "BKF Financial Statements." (c) The BKF Financial Statements fairly present (or will, when delivered, fairly present) the financial position and results of operations of BKF on the dates thereof and for the fiscal periods then ended, in accordance with GAAP which, except as may otherwise be noted in the footnotes thereto, has been applied on a basis consistent with prior periods. The BKF Financial Statements reflect or provide for claims against and debts and liabilities of BKF, absolute, accrued, contingent or otherwise, as at the dates thereof in accordance with GAAP, except for normal year-end accruals reflected on or omitted from the BKF Unaudited Financial Statements which are not individually or in the aggregate material. 7.9 No Adverse Change. As of the date hereof, since December 31, 1994, (a) there has been no Material Adverse Effect with respect to BKF; (b) there have been no dividends or other distributions declared or paid with respect to BKF's Common Stock other than a $.20 per share dividend paid on June 7, 1995, a $.15 per share dividend declared on November 3, 1995 and the $1.20 per share capital gain distribution declared in part on September 7, 1995 and in part on November 3, 1995; and (c) the physical properties owned or leased by BKF have not suffered any destruction or damage, regardless of whether or not the loss suffered was insured, that would be reasonably expected, individually or in the aggregate, to have a Material Adverse Effect on BKF. 7.10 BKF Capital Stock. At the Signing Date, the authorized capital stock of BKF consisted of 40,000,000 shares of Common Stock, par value $1.00 per share. At the close of business on November 16, 1995, (i) 26,441,682 shares of BKF Common Stock were issued and outstanding, (ii) no shares of BKF Common Stock were reserved for issuance under employee 39 benefit plans, (iii) 3,591,292 shares of BKF Common Stock were reserved for issuance under BKF's dividend reinvestment plan, and (iv) no shares of BKF Common Stock were held by BKF in BKF's treasury. All outstanding shares of BKF Common Stock are duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. Except as set forth above, at the Signing Date, there were no options, warrants, scrips, rights, call, commitments, agreements, arrangements, arrangements or undertakings of any kind whatsoever issued by or on behalf of BKF relating to, or securities or rights convertible into or exchangeable for, shares of capital stock or other voting securities of BKF. All BKF Common Stock issued by BKF to the Stockholders hereunder, when issued by BKF in accordance with the terms of this Agreement, will be duly authorized, validly issued, fully paid and non-assessable and free and clear of all Liens. 7.11 BKF Charter Documents. The copies of the respective certificates of incorporation and bylaws of BKF and the Merger Subsidiary (collectively, the "BKF Charter Documents"), the respective minutes of all meetings of the board of directors of BKF and Merger Subsidiary (or consents in lieu thereof), and the BKF Code of Ethics adopted pursuant to Section 17(j) of the Investment Company Act and Rule 17j-1 thereunder that in each case have been furnished or made available to LEVCO and the Stockholders by BKF are true, correct and complete copies thereof. 7.12 Disclosure. The representations and warranties made by BKF in this Agreement (when read together with the BKF Disclosure Schedule) and the Related Agreements do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make any such representation or warranty, in light of the circumstances under which it was made, not misleading. 7.13 SEC Reports. Except as set forth in Schedule 7.13 of the BKF Disclosure Schedule, BKF has timely filed all reports required to be filed by it pursuant to the federal securities laws and the rules and regulations of the SEC promulgated thereunder (the "BKF SEC Reports"), all of which, at the time such BKF SEC Reports were filed, complied in all material respects with the applicable requirements of the Investment Company Act, Securities Act and the Exchange Act. None of the BKF SEC Reports, at the time filed, contained any statement which, at the time and in light of the circumstances under which it was made, was false or misleading with respect to any material fact, or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 7.14 Restrictive Covenants. BKF is not a party to any contract containing noncompetition provisions that would limit BKF's ability after the Closing to engage in business in any area or to compete against any Person. 7.15 Litigation. Except as disclosed in the BKF SEC Reports, (i) there are no legal, administrative or arbitration actions, suits, proceedings or investigations of any kind pending, or, to the best of BKF's or Merger Subsidiary's knowledge, threatened before any Governmental Entity by or against BKF's or Merger Subsidiary's respective business or Assets or which affect 40 BKF's or Merger Subsidiary's business or Assets, and (ii) neither BKF nor Merger Subsidiary is the subject of any injunction, order or decree, except in either case (i) or (ii) any such actions, suits, proceedings, investigations, injunctions, orders or decrees that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on BKF. 7.16 Filings, Etc. (a) Other than the SEC Order (as defined in Section 10.1(b)), BKF has all permits, licenses, certificates of authority, orders and approvals of, and has made all filings, applications and registrations with, Governmental Entities (including by the rules of any self-regulatory body) that are required in order to permit it to carry on its business as presently conducted, and such permits, licenses, certificates of authority, registrations, orders and approvals are in full force and effect, except where such failures to have or make or keep in full force and effect any permit, license, certificate of authority, registration, order, approval, filing, application or registration referred to above would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on BKF, materially impact the ability of BKF and Merger Subsidiary to perform their respective obligations hereunder or under the Related Agreements or prevent the consummation of the transactions contemplated hereby or thereby. The conduct of BKF's business has never, and currently does not, violate or infringe any applicable federal, state or local law, statute, ordinance, license, rule or regulation including those of the self-regulatory bodies except any such violations or infringements that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on BKF, materially impair the ability of BKF and Merger Subsidiary to perform their respective obligations hereunder or under the Related Agreements or prevent the consummation of the transactions contemplated hereby or thereby. (b) Without limiting the foregoing, BKF and each of its officers and employees that or who is required to be registered as an investment adviser, or advisory representative or a sales person with the SEC, the securities commission or any other commission of any state or any self-regulatory body is duly registered as such and such registration is in full force and effect, except any such failures to be so registered or to have such registration in full force and effect as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on BKF, materially impair the ability of BKF and Merger Subsidiary to perform their respective obligations hereunder or under the Related Agreements or prevent the consummation of the transactions contemplated hereby or thereby. (c) Except as disclosed in the BKF SEC Reports, there are no proceedings pending or, to the knowledge of BKF, threatened, that are reasonably likely to result in the revocation, cancellation or suspension, or any adverse modification, of any permit, license, certificate of authority, order or approval referred to in Section 7.16(a) and the execution and delivery of this Agreement and the consummation of any transactions contemplated hereby will not result in any such revocation, cancellation, suspension, or any adverse modification, of any permit, license, certificate of authority, order or approval referred to in Section 7.16(a), except in either such case, any such revocation, cancellation, suspension or adverse modification that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse 41 Effect on BKF, materially impair the ability of BKF and Merger Subsidiary to perform their respective obligations hereunder or under the Related Agreements or prevent the consummation of the transactions contemplated hereby or thereby. (d) To BKF's knowledge, none of its officers, directors, or employees is a party or subject to any order, judgment or decree (other than exemptive orders) relating to BKF's business with or by any federal, state, local or foreign regulatory authority, except any such order, judgment or decree which would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on BKF, materially impair the ability of BKF and Merger Subsidiary to perform their respective obligations hereunder or under the Related Agreements or prevent the consummation of the transactions contemplated hereby or thereby. 7.17 Regulatory Compliance. BKF is, and at all times since November 19, 1970 has been, duly registered under the Investment Company Act as a non- diversified closed-end management investment company and is, and at all times since November 19, 1970 has been, in compliance with the Investment Company Act and the rules thereunder, except where the failure to so be in compliance would not reasonably be expected to have a Material Adverse Effect on BKF. BKF is, and at all times since August 4, 1994 has been duly registered under the Investment Advisers Act and has been in compliance with the Investment Advisers Act and the rules thereunder, except where the failure to so be in compliance would not reasonably be expected to have a Material Adverse Effect on BKF, materially impair the ability of BKF and Merger Subsidiary to perform their respective obligations hereunder or under the Related Agreements or prevent the consummation of the transactions contemplated hereby or thereby. 7.18 Employee Benefit Plans. (a) BKF's liabilities under all employee benefit plans as defined in Section 3(1) of ERISA maintained or contributed to by BKF (the "BKF Benefit Plans") are properly reflected on the BKF Financial Statements in accordance with GAAP (including without limitation SFAS 87 and 106), and BKF has not adopted any new BKF Benefit Plan, terminated any BKF Benefit Plan, or made any material amendment to any BKF Benefit Plan (other than as required to maintain the tax qualified status thereof) since December 31, 1994, which adoption, termination or amendment would reasonably be expected to have a Material Adverse Effect on BKF, materially impair the ability of BKF and Merger Subsidiary to perform their respective obligations hereunder or under the Related Agreements or prevent the consummation of the transactions contemplated hereby or thereby. (b) With respect to the BKF Benefit Plans, the transactions contemplated by this Agreement shall not result in any action or the establishment of any relationship prohibited by Section 406 or 407 of ERISA (determined after taking into account any applicable exemptions). (c) All BKF employee benefit plans can be terminated without creating additional obligations or liabilities on BKF, not reflected on the BKF Financial Statements, which would, in the aggregate, have a Material Adverse Effect on BKF. The amount of 42 unfunded benefit liability on a termination basis of the Baker, Fentress & Company Defined Benefit Pension Plan is not greater than $200,000. 7.19 Merger Subsidiary. Merger Subsidiary has not, and prior to and at the Closing will not have, engaged directly or indirectly in any business or activities of any type or kind whatsoever, has not entered into any Contract with any Person, and is not, and prior to and at the Closing will not be, subject to or bound by any obligation or undertaking, except for (a) the creation of Investment Adviser Subsidiary for the purpose of effecting the Contribution as contemplated by Section 1.6 hereto, and the taking of the other actions contemplated by this Agreement to be taken with respect to Investment Adviser Subsidiary, (b) the acquisition by Merger Subsidiary from BKF of cash and shares of BKF Common Stock for the purpose of satisfying Merger Subsidiary's obligations hereunder and, subject to Section 8.2(c), the incurrence by Merger Subsidiary of indebtedness to finance such acquisition and (c) such other activities as are expressly contemplated by this Agreement. The Surviving Corporation, the Investment Adviser Subsidiary, G.P. Subsidiary and LEVCO Broker Subsidiary are hereinafter collectively referred to as the "LEVCO Companies." 7.20 Investment Adviser Subsidiary. Other than as expressly contemplated by this Agreement, the Investment Adviser Subsidiary has not, and prior to and at the Closing will not have, (a) engaged directly or indirectly in any business or activities of any type or kind whatsoever, (b) entered into any Contract with any Person, or (c) become subject to or bound by any obligation or undertaking. ARTICLE VIII CONDUCT OF BUSINESS PRIOR TO THE CLOSING 8.1 Conduct of LEVCO's Business Prior to Closing. The Stockholders and LEVCO hereby covenant and agree with BKF that from the Signing Date through the Closing, each LEVCO entity shall operate, and the Stockholders shall cause them to operate, their respective businesses only in the ordinary course, recognizing that in the case of their investment activities, general economic and securities market conditions or general industry developments may result in new investment strategies. Each LEVCO Entity shall meet all of its obligations as they become due, shall pay all valid accounts payable in due course in accordance with its practice heretofore (unless such payment is being contested in good faith by appropriate proceedings), shall incur no long-term indebtedness (it being agreed that the making of any accrual in respect of rent payable under the Lease (as defined in Section 10.2(i)) shall not be regarded as the incurrence of long-term indebtedness) and shall use its reasonable efforts to continue to solicit new clients and to offer investment advisory and related services (as applicable) in the ordinary course of business, to maintain its corporate records, to keep its accounts receivable current, to preserve its business organization and assets and maintain its rights, franchises and business and customer relations necessary to run the business as currently run in all material respects, to keep available the services of its employees, and to preserve the goodwill of its Clients, suppliers, and others with whom business relationships exist. Without in any way limiting the foregoing, and 43 except as contemplated by this Agreement, LEVCO and the Stockholders agree that no LEVCO Entity will do any of the following prior to the Closing without the consent of BKF (given as provided in the last paragraph of this Section 8.1), which shall not be unreasonably withheld: (a) except as contemplated by the Interim Transactions, issue or sell any capital stock, option or other equity security of LEVCO or a LEVCO Subsidiary or any general partner interest in any of the Investment Partnerships; (b) other than as described on Schedule 6.14(b) of the LEVCO Disclosure Schedule, incur any indebtedness for borrowed money or issue or sell any debt securities; (c) other than as described on Schedule 6.14(b) of the LEVCO Disclosure Schedule or as described in clauses (i) or (ii) of Section 6.12(a), mortgage, pledge or otherwise subject to any Lien, any of its Assets, tangible or intangible; (d) amend any base salary of, or grant or amend any guaranteed bonus arrangement for, any director, officer, employee, sales representative, agent or consultant (other than any cost of living increase consistent with past practice) or hire any additional directors, officers, employees, agents or consultants except in the ordinary course of business; (e) except as may be required by law, or as otherwise contemplated by Section 8.4, amend in any material respect any LEVCO Benefit Plan or adopt any other employment, collective bargaining, bonus, profit-sharing, compensation, pension, health insurance, welfare, retirement, deferred compensation or other plan, agreement, trust, fund or arrangement for the benefit of officers, directors, partners, stockholders, employees, sales representatives, agents or others except in the ordinary course of business; (f) amend its certificate of incorporation or bylaws, certificate of limited partnership, agreement of limited partnership, as the case may be, except as required by law or as contemplated by this Agreement or the Interim Transactions; (g) change in any material respect its accounting (including tax accounting) methods, practices or principles, except as required by law or GAAP; (h) enter into any type of business materially different from that conducted by LEVCO or any Investment Partnership as of the date of this Agreement (including, in the case of LEVCO and any LEVCO Subsidiary, any business that could be properly represented by a SIC Code other than 6282 or 6211); (i) declare or pay any dividend or distribution of its property (other than cash, cash equivalents or accounts receivable) or directly or indirectly redeem, purchase or otherwise acquire any shares of LEVCO or a LEVCO Subsidiary capital stock or any general partner interest in an Investment Partnership, except as contemplated by this Agreement; 44 (j) other than as contemplated by Section 15.8 hereof and the Interim Transactions, allow any shares of LEVCO Common Stock, any shares of capital stock of a LEVCO Subsidiary or any general partner interest in any of the Investment Partnerships to be transferred or otherwise disposed of except as contemplated by this Agreement; (k) sell or dispose of any assets of a LEVCO Entity (other than accounts receivable), any of the proceeds of which sale are paid as a dividend or distribution to the Stockholders, or sell, lease, abandon or otherwise dispose of any of its material assets or acquire by merging or consolidating with, or by purchasing substantial portion of the assets of or equity in, or by any other means, any business or any corporation, partnership, joint venture, association or other business organization or division thereof or otherwise acquire any material assets, except for purchases and sales of portfolio holdings and other assets in the ordinary course of business consistent with past practice and except as contemplated by the Interim Transactions and the disposition of the shares held by LEVCO on the date hereof in Cortech Inc. and Sugen, Inc.; (l) other than with respect to the purchase and sale of portfolio holdings and the entering into Investment Contracts in the ordinary course of business, make any commitment or enter into any Contract, except for (i) any commitment or Contract to be fully performed and discharged prior to Closing and (ii) any commitment or Contract involving aggregate payments to or by a LEVCO Entity not in excess of $60,000, providing for termination without notice by LEVCO or the Investment Partnership on 90 days or fewer notice, and made by such LEVCO Entity in the ordinary course of business consistent with past practice; (m) alter through merger, liquidation, reorganization, restructuring or in any other fashion the corporate structure or ownership of LEVCO or any Investment Partnership, except as contemplated in connection with the Interim Transactions; (n) revalue any of its assets, including, without limitation, writing off notes or accounts receivable, other than revaluations of investment securities in the ordinary course of business consistent with past practice; (o) make any tax election or settle or compromise any material tax liability; (p) settle or compromise any pending or threatened suit, action or claim by any third party relating to the transactions contemplated hereby; (r) take any action which would make any of the representations or warranties of the Stockholders contained in the Agreement untrue or incorrect in any material respect (or in the case of representations and warranties which are qualified by their terms by a reference to materiality, untrue or incorrect in any respect), or would make it impossible to satisfy any of the conditions contained in Article X; (s) change its practice with respect to billing any fees, commissions or other payments to Clients under Investment Contracts or of management, incentive or other fees payable with respect to the portfolio holdings of the Investment Partnerships so as to cause any 45 such fees, commissions or payments to be accrued in accordance with GAAP during any period prior to Closing that would have been accrued in any period subsequent to Closing; (t) incur or agree to incur any expense that would be payable in whole or in part after Closing that is not reflected in the expenses of the business in the three months prior to Closing, regardless of whether such expense or the action of incurring it would be otherwise permitted under this Section 8.1; or (u) agree or commit to do any of the foregoing; it being understood, that any and all accounts receivable of LEVCO (including those which are billed but unpaid and those which have not been billed as of the Closing) accrued in accordance with GAAP prior to or as of the Closing Date (all such accounts receivable being herein referred to as "Assigned Accounts") may be assigned to the Stockholders on or prior to the Closing. If any LEVCO Entity shall propose to take any action requiring the consent of BKF as provided in this Section 8.1, it shall notify BKF in writing, which notice shall set forth all material details of the action it proposes to take. The directors and officers of LEVCO shall also make themselves reasonably available to answer any questions of BKF and its representatives concerning the proposed action. Unless BKF shall have objected in writing within fifteen Trading Days to the taking of such action by such LEVCO Entity, BKF shall be deemed to have consented to such action. 8.2 Conduct of BKF's Business Prior to Closing. (a) BKF hereby covenants and agrees with LEVCO and the Stockholders that from the Signing Date through the Closing, BKF will not, nor will it permit Merger Subsidiary to, do any of the following except as provided in Section 8.2(b): (i) issue any capital stock, option or other equity security (other than pursuant to its dividend and capital gain reinvestment plan); (ii) amend its certificate of incorporation (other than to increase the number of authorized shares of BKF Common Stock) or bylaws, or amend the BKF Code of Ethics except as required by the Investment Company Act or the rules thereunder; (iii) issue or sell any debt securities, other than in connection with the financing of the transactions contemplated hereby; (iv) merge or consolidate with any Person or sell all or substantially all of its Assets to any Person; (v) acquire all or substantially all of the Assets of, or a controlling equity interest in, any other Person other than by means of a private placement investment consistent with BKF's past practice and Section 9.11 hereof; 46 (vi) alter through merger, liquidation, reorganization, restructuring or other similar transaction its corporate structure; or (vii) agree or commit to do any of the foregoing. (b) If BKF intends to take any of the foregoing actions, it shall provide the Stockholder Representative with all material terms of the proposed transaction and shall reasonably consult with the Stockholder Representative for the purpose of obtaining the Stockholder Representative's consent to such action, which consent shall not be unreasonably withheld. Unless the Stockholder Representative shall have objected in writing within fifteen Trading Days to the taking of such action by BKF, the Stockholder Representative shall be deemed to have consented to such action. In the event the Stockholder Representative shall not have consented to the taking of any of the actions described in Section 8.2(a) by BKF, and BKF shall take such action, the sole remedy of the Stockholders and LEVCO shall be to terminate this Agreement as provided in Section 11.1. (c) Any credit facility entered into to finance all or any portion of the Merger Consideration for which any of the LEVCO Companies will be an obligor or guarantor shall contain terms and conditions mutually satisfactory to BKF and LEVCO and, in connection therewith, BKF and LEVCO shall cooperate with the other and, together with their respective representatives, consult thereon. 8.3 Consents and Approvals. (a) Subject to the terms and conditions herein provided, each of the parties hereto agrees to cooperate with the others and use all reasonable efforts (except for those actions with respect to which this Agreement requires the use of reasonable best efforts) to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable to consummate the transactions contemplated by this Agreement as promptly as practicable, including, without limitation, under the HSR Act and all other applicable laws and regulations. (b) To the extent that the rights of LEVCO or any Investment Partnership under any contract, including any Investment Contract or Terminable Contract, may not be assigned without the consent or approval of another party thereto, LEVCO, as soon as practicable after the SEC shall have issued the SEC Order (as defined in Section 10.1(b)), shall use all reasonable efforts to obtain any such consent, and BKF shall cooperate with LEVCO in connection therewith. Without limiting the foregoing, LEVCO will use all reasonable efforts to obtain, or cause to be obtained, all consents necessary to be obtained in order to consummate the transactions contemplated hereby. (c) Each of the parties hereto agrees to cooperate with the others and use all reasonable efforts to obtain confirmation from the staff of the SEC or NASD, as appropriate, that the registration of LEVCO Broker Subsidiary as a broker-dealer will be treated as a successor registration pursuant to Rule 15b1-3 under the Exchange Act. 47 8.4 Benefit Plans and Insurance. Prior to Closing, each of the parties hereto agrees to use its reasonable efforts and to cooperate with the others in order to develop the terms of, and to make appropriate arrangements for the implementation of, employee benefit plans covering employees of both BKF and the LEVCO Companies on a uniform basis after the Closing; provided, however, that nothing herein shall be construed as requiring BKF to extend its existing defined benefit plans to the employees of the LEVCO Companies. Each of the parties hereto also agrees to use its reasonable efforts and to cooperate with the others, prior to the Closing, in order to develop and arrange for the provision of insurance policies intended to cover both BKF and the LEVCO Companies after the Closing. 8.5 Formation of Levco Broker Subsidiary. Prior to the Closing, LEVCO shall cause all of the Assets of LEVCO relating to its broker-dealer business to be contributed to LEVCO Broker Subsidiary. In connection therewith, LEVCO Broker Subsidiary shall comply with the covenants contained in Section 9.3. At the Closing, the net capital, as such term is defined in Rule 15c3-1 under the Exchange Act, will be in excess of 150% of the minimum net capital requirements of the Exchange Act and the laws of any jurisdiction in which LEVCO has been conducting broker-dealer business. 8.6 Related Agreements. On or before the Closing, each of the parties thereto shall have entered into the Related Agreements. ARTICLE IX ADDITIONAL AGREEMENTS 9.1 Advisory Contract and Other Consents. (a) As soon as the SEC shall have issued the SEC Order, LEVCO shall cause all of the Clients under LEVCO's Investment Contracts to be informed of the transactions contemplated by this Agreement and shall, in compliance with the Investment Advisers Act, give each such Client an opportunity to consent to the assignment of its Investment Contract. LEVCO shall use its reasonable best efforts to obtain each such Client's actual written consent to assignment of its Investment Contract to the Surviving Corporation and, upon the Contribution, to the Investment Adviser Subsidiary on terms at least as favorable to the Investment Adviser Subsidiary as the terms of such Investment Contract on the date hereof (each a "Client Consent" and collectively, the "Client Consents"). (b) Notwithstanding Section 9.1(a), as soon as reasonably practicable after execution of this Agreement, LEVCO shall cause each Investment Company Client to be informed of the transactions contemplated by this Agreement and LEVCO and the Stockholders shall use their reasonable best efforts to cause each such Investment Company, in compliance with the Investment Company Act, to enter into a new Advisory Contract with the Surviving Corporation, having terms at least as favorable as the existing Advisory Contract and effective at the Closing, or consent in writing to assignment of the existing Advisory Contract to the Surviving Corporation. The Stockholders shall pay all expenses, if any, incurred by or on behalf of the Investment Company in connection with such new Advisory Contract or consent to 48 assignment, including, without limitation, the costs relating to any proxy solicitation, to the extent required by the Investment Company. LEVCO agrees to use its reasonable best efforts to cause BKF to be given an opportunity to review and comment upon, prior to use, drafts of any materials to be given to security holders of an Investment Company describing the transactions contemplated by this Agreement, including proxy materials or materials prepared pursuant to any SEC exemptive orders. (c) It is contemplated by the parties that prior to the Closing, the ownership of the general partner interests in each of the Investment Partnerships will be restructured as set forth in Schedule 9.1(c). Promptly following the execution and delivery of this Agreement, LEVCO shall establish, subject to BKF's approval which shall not be unreasonably withheld or delayed, appropriate procedures to notify the limited partners in the Investment Partnerships of the transactions contemplated by Schedule 9.1(c) and to obtain all necessary consents thereto from such limited partners including but not limited to any consents necessary to amend, if necessary, the agreement of limited partnership of each Investment Partnership to permit consummation of the transactions contemplated by this Agreement. LEVCO shall deliver to BKF drafts of the consent solicitation materials and amendments to the agreements of limited partnership of the Investment Partnerships so as to afford BKF an opportunity to review and comment on such documents. LEVCO shall not send the consent solicitation materials to the partners in the Investment Partnerships until LEVCO has received from BKF comments thereon or written notice that it has no comments, and BKF shall supply such comments or notice reasonably promptly and in any event within ten Trading Days after receipt of such materials. All amendments to the agreements of limited partnership of the Investment Partnerships (i) shall be in form and substance reasonably satisfactory to BKF, (ii) shall provide for all management fees and performance fees (including, subject to Section 10.2(h), the Meadow Lane Associates, L.P. Performance Fees (as defined in Schedule 9.1(c))) to be paid either to the Surviving Corporation or to G.P. Subsidiary and all incentive allocations to be allocated to G.P. Subsidiary (iii) if requested by BKF, will eliminate the ability of G.P. Subsidiary after the Closing to pay any Person, other than G.P. Subsidiary, any management fee, incentive fee or performance fee described on Schedule 9.1(c), to allocate to any Person other than G.P. Subsidiary, any incentive allocation described on such Schedule or to exclude Persons associated with LEVCO or Surviving Corporation in calculating any such fee or allocation. LEVCO shall obtain copies of all written responses to such notifications and partner consents and a written report describing all oral responses to such notifications, all of which shall be made available to BKF. 9.2 Approval by Holders of BKF Common Stock; Related Indemnities. (a) The parties hereto shall cooperate with one another as provided in this Section 9.2 to obtain the approval of the Stockholder Approval Matters, in each case by the affirmative vote of a majority of the outstanding shares of BKF Common Stock (such approval being referred to hereinafter as the "BKF Stockholder Approval"). BKF shall, as soon as practicable after the Notice shall have been published in the Federal Register, take all action necessary in accordance with the Corporation Law and its certificate of incorporation and bylaws to convene a meeting of BKF's stockholders to, among other things, seek to obtain the BKF Stockholder Approval, and BKF shall consult with LEVCO in connection therewith. 49 (b) In connection with obtaining the BKF Stockholder Approval, the parties shall cooperate with one another to make full and complete disclosure of all facts material to the giving of such BKF Stockholder Approval, and BKF shall use its reasonable best efforts and take prompt steps to prepare, file and clear with the SEC the Proxy Materials (as defined below) and to disseminate to its security holders the Proxy Materials, all at the expense of BKF. BKF shall bear all expenses in connection with the preparation of the Proxy Materials, except that LEVCO shall bear its expenses (including legal and accounting fees and expenses) in connection with preparing any information concerning LEVCO required to be included in the Proxy Materials and in reviewing the Proxy Materials. BKF shall use its reasonable best efforts to obtain the BKF Shareholder Approval, which may include, in BKF's sole judgment, the engagement of a proxy solicitation agent. The Proxy Statement included in the Proxy Materials shall include the recommendation of the Board of Directors of BKF in favor of the Stockholder Approval Matters (the "Recommendation") unless (i) BKF shall not have received for inclusion in the Proxy Materials an opinion from Lazard to the effect that the consideration to be paid in the Merger is fair to BKF from a financial point of view or (ii) the Board of Directors of BKF concludes in good faith upon the written advice of outside counsel that such action is necessary for the Board of Directors of BKF to comply with its fiduciary obligations to stockholders under applicable law. The term "Proxy Materials" means the proxy statement, form of proxy and any additional soliciting materials, including all amendments and supplements thereto, used or intended for use in connection with obtaining the BKF Stockholder Approval. (c) BKF shall deliver drafts of the Proxy Materials to LEVCO a reasonable time prior to filing such documents with the SEC and prior to mailing the Proxy Statement to BKF Stockholders so as to afford LEVCO and the Stockholders an opportunity to review and comment on such documents. BKF shall not file the Proxy Materials with the SEC until BKF has received from LEVCO comments regarding the Proxy Materials, or written notice that it has no such comments and LEVCO shall supply such comments or notice reasonably promptly and in any event within ten Trading Days after receipt of the Proxy Materials. BKF shall notify LEVCO promptly of the receipt of any comments of the SEC regarding the Proxy Materials and of any request by the SEC for amendments or supplements or for additional information with respect thereto, and will supply LEVCO with copies of all correspondence between BKF and its representatives, on the one hand, and the SEC or the members of its staff, on the other hand, with respect to the Proxy Materials. BKF, LEVCO and the Stockholders each shall use all reasonable efforts to obtain and furnish the information required to be included in the Proxy Materials, including preparation of the BKF Subsequent Financials and LEVCO Subsequent Financials. (d) BKF represents that the Proxy Materials, on the date such materials are filed with the SEC, on the date such materials are first mailed to BKF's stockholders and on the date of the stockholders meeting at which the BKF Stockholder Approval is sought (and on the dates of any adjourned sessions of such meeting), shall not include a misstatement of a material fact and shall not omit to state any material fact required to be stated therein or necessary in order to make the statements contained therein, in light of the circumstances under which made, not false or misleading; provided that such representation shall not apply to the extent that any such misstatement of a material fact or omission of a material fact was made by BKF in conformity with information concerning LEVCO or the Stockholders furnished to BKF by LEVCO or the 50 Stockholders in writing specifically for inclusion in the Proxy Materials. BKF agrees to notify LEVCO and the Stockholders of, and to take all reasonable actions within its power to correct, any such information provided by BKF for use in the Proxy Materials which shall have become false or misleading in any material respect prior to the Closing. The Proxy Materials, when filed by BKF with the SEC, shall comply as to form in all material respects with all requirements of applicable law. (e) The Stockholders represent, jointly and severally, that the information concerning LEVCO and the Stockholders furnished by them in writing specifically for inclusion in the Proxy Materials, on the date such materials are filed with the SEC, on the date such materials are first mailed to BKF's Stockholders and on the date of the stockholders meeting at which the BKF Stockholder Approval is sought (and on the dates of any adjourned sessions of such meeting), shall not include a misstatement of a material fact and shall not omit to state any material fact required to be stated therein or necessary in order to make the statements contained therein, in light of the circumstances under which made, not false and misleading. LEVCO and each Stockholder agrees to notify BKF of, and to take all reasonable actions within their power to correct, any such information provided by such Person for use in the Proxy Materials which shall have become false or misleading in any material respect prior to Closing. 9.3 Compliance with Securities Laws. (a) Within thirty (30) days after the Closing and at LEVCO's expense (which expense, to the extent incurred after Closing, will be paid by inclusion of amounts therefor in the cash on hand of LEVCO at Closing as contemplated by Schedule 10.2(o)), the Investment Adviser Subsidiary shall prepare and file with the SEC a Form ADV for the Investment Adviser Subsidiary. Prior to the Closing, LEVCO shall cooperate fully with BKF in furnishing information needed to prepare such Form ADV. (b) At LEVCO's expense (which expense, to the extent incurred after Closing, will be paid by inclusion of amounts therefor in the cash on hand of LEVCO as contemplated by Schedule 10.2(o)), BKF, the Surviving Corporation or Investment Adviser Subsidiary shall file, and (to the extent such filings are prepared or made prior to Closing) LEVCO shall cooperate fully with BKF in preparing and filing, all such other forms and other documents required to be filed or delivered under applicable federal and state laws, and regulations promulgated thereunder, relating to or regulating the activities of investment advisers, including without limitation the Investment Advisers Act, the Exchange Act and the Securities Act, as a result of the consummation of the transactions contemplated by this Agreement. (c) Prior to the Closing and at LEVCO's expense, LEVCO shall prepare and file with the Commodity Futures Trading Commission, and BKF shall cooperate fully with LEVCO in preparing and filing the appropriate CTA registration forms on behalf of the Investment Adviser Subsidiary and CPO registration forms on behalf of G.P. Subsidiary, and such registrations (i) shall have become effective under the Commodity Exchange Act prior to or upon Closing or (ii) shall be scheduled to become effective within the period of time that Investment Adviser Subsidiary and G.P. Subsidiary shall be entitled to rely on the registrations 51 of their respective predecessors pursuant to applicable successor registration provisions. In addition, and at LEVCO's expense, LEVCO shall prepare and file with the NFA on behalf of the Investment Adviser Subsidiary and G.P. Subsidiary, and BKF shall cooperate fully with LEVCO in preparing and filing, all such other documents required to be filed or delivered in order to qualify each of Investment Adviser Subsidiary and G.P. Subsidiary as a member of the NFA. (d) Within thirty (30) days after the Closing Date and at LEVCO's expense (which expense, to the extent incurred after Closing, will be paid by inclusion of amounts therefor in the cash on hand of LEVCO at Closing as contemplated by Schedule 10.2(o)), the Surviving Corporation or the Investment Adviser Subsidiary shall prepare and file with the Central Registration Depository a Form BD for LEVCO Broker Subsidiary. In addition, within thirty (30) days after the Closing Date and at LEVCO's expense (which expense, to the extent incurred after Closing, will be paid by inclusion of amounts therefor in the cash on hand of LEVCO at Closing as contemplated by Schedule 10.2(o)), the Surviving Corporation or the Investment Adviser Subsidiary shall prepare and file with the NASD all such other documents required to be filed or delivered in order to qualify LEVCO Broker Subsidiary as a member of the NASD and to transfer all employee registrations and qualifications of LEVCO employees in connection therewith. Prior to the Closing, LEVCO shall cooperate fully with BKF in furnishing information needed to prepare such Form BD and other documents. (e) At LEVCO's expense (which expense, to the extent incurred after Closing, will be paid by inclusion of amounts therefor in the cash on hand of LEVCO at Closing as contemplated by Schedule 10.2(o)), BKF, the Surviving Corporation, the Investment Adviser Subsidiary or LEVCO Broker Subsidiary shall file, and (to the extent such filings are prepared or made prior to Closing) LEVCO shall cooperate fully with such Persons in preparing and filing, all such other forms and other documents required to be filed or delivered under applicable federal and state laws, and regulations promulgated thereunder, relating to or regulating the activities of broker-dealers, including without limitation the Exchange Act and the Securities Act, as a result of the consummation of the transactions contemplated by this Agreement. (f) Prior to the Closing, LEVCO shall, at LEVCO's expense, register as an investment adviser in each state where LEVCO is required to be so registered, including those states in which registration is required as set forth in Schedule 6.20(c)(i)(a) of the LEVCO Disclosure Schedule, and each employee of LEVCO who is required to be registered or qualified under the laws and regulations of such state relating to the activities of investment advisers shall be so registered and qualified. (g) Prior to the Closing, LEVCO shall, at LEVCO's expense, register as a broker-dealer in each state where LEVCO is required to be so registered, including those states in which registration is required as set forth in Schedule 6.22(a) of the LEVCO Disclosure Schedule, and each employee of LEVCO required to be so registered or qualified under the laws and regulations of each such state relating to the activities of broker-dealers shall be so registered and qualified. 52 9.4 Current Information. During the period from the date of this Agreement to the Closing, each of LEVCO and BKF will cause one or more of its representatives to confer on a regular and frequent basis with representatives of the other party with respect to the status of its ongoing operations. Each party will promptly notify the other parties of any material change in the normal course of its business or of any complaints from a Governmental Entity or regulatory authority or a self-regulatory body, investigations or hearings (or communications indicating that the same may be contemplated), the institution or the threat of any litigation that comes to their attention which would, in any manner, challenge, prevent, alter or materially delay any of the transactions contemplated hereby and each party will keep the other party informed with respect to such events. LEVCO and BKF will notify each other of the status of regulatory applications and third party consents related to the actions contemplated hereby. 9.5 Access: Information. (a) From and after the date hereof, LEVCO shall afford to BKF and its representatives, and BKF shall afford to LEVCO and its representatives, such access during normal business hours and without material business interruption to the other's books, records (including, without limitation, tax returns and appropriate work papers of independent auditors under normal professional courtesy), Assets and such other information as BKF or LEVCO may reasonably request. After the Closing, BKF shall retain or cause the Surviving Corporation to retain for tax and regulatory purposes and to otherwise comply with this Agreement, all related books and records and other information relating to years 1988-1995 for at least seven years after each of the respective taxable years 1988-1995. (b) All non-public records, books, contracts, instruments, computer data and other data and information (collectively, the "Information") concerning the other parties furnished pursuant to this Agreement shall be subject to the Confidentiality Letter Agreement (as defined in Section 15.1 hereinafter) and the confidentiality agreements contained in Section 13.2, as applicable. In the event of the termination of this Agreement, each party shall return or destroy all Information furnished to such party and its representatives hereunder and all analyses, compilations, data, studies, other documents prepared by such party or its representatives containing or based in whole or in part on any such Information. 9.6 Non-Solicitation. (a) The Stockholders and LEVCO agree that neither any Stockholder, LEVCO nor any of LEVCO's directors, officers or employees nor any agent or representative of any Stockholder or LEVCO (including, without limitation, any investment banker, attorney or accountant retained by any of them) shall initiate, solicit, encourage or entertain, directly or indirectly, any inquiries or the making of any proposal or offer with respect to a merger, consolidation or similar transaction involving, or any purchase of any substantial portion of the assets or any substantial portion of the equity securities of LEVCO, or the assignment of any substantial portion of any investment advisory, subadvisory or distribution agreement by LEVCO, or the transfer of general partner interests in any of the Investment Partnerships other than as contemplated by the Interim Transactions (any of the foregoing, a "LEVCO Competing 53 Proposal") or engage in any negotiations concerning, or provide any confidential information or data with respect to, or have any discussions with any Person relating to, a LEVCO Competing Proposal. The Stockholders and LEVCO shall promptly notify BKF of any written or oral communications received by any of them from any Person with respect to any LEVCO Competing Proposal. (b) BKF agrees that neither it nor any of its directors, officers or employees nor any agent or representative of it (including without limitation, any investment banker, attorney or accountant retained by any of them) shall initiate or solicit, directly or indirectly, the making of any proposal or offer with respect to the purchase by BKF of a substantial portion of the equity securities or assets of, or a merger, consolidation or similar transaction involving, an entity registered under the Investment Advisers Act (any of the foregoing a "BKF Acquisition Proposal"), or engage in any negotiations concerning, or provide any confidential information or data with respect to, or have any discussions with any Person relating to any BKF Acquisition Proposal, and shall promptly notify LEVCO of any written or oral communication received by any of them from any Person proposing that BKF make any BKF Acquisition Proposal. 9.7 Notification of Certain Matters. Each party shall give prompt notice to the other parties of: (i) the occurrence or non-occurrence of any event which would be likely to cause any representation and warranty contained herein to be untrue or inaccurate in any material respect (or in the case of representations and warranties contained herein qualified by their terms by a reference to materiality, to be untrue or inaccurate in any respect), and (ii) any inability by such party to comply with or satisfy a condition or agreement contained herein or in any Related Agreement in any material respect. 9.8 Press Releases, Etc. Each of LEVCO, the Stockholders and BKF agree that, without notification to the other a reasonable time in advance of such disclosure, it shall not disclose the negotiation or execution of this Agreement or of any information concerning the transactions contemplated hereunder to BKF stockholders or clients of LEVCO or BKF or to other Persons (other than Persons employed by or consultants to any LEVCO Entity or the Stockholders, BKF, any of BKF's subsidiaries or affiliates and their respective attorneys, investment bankers and accountants) in advance of the publication by LEVCO and BKF of press releases (as appropriate) on such matters pursuant to this Section 9.8. LEVCO and BKF will consult with each other as to the form, substance and timing of any press release or other public disclosure of the existence of this Agreement, matters related to this Agreement or any of the transactions contemplated hereby and no such press release or other public disclosure shall be made without the consent of the other, which shall not be unreasonably withheld or delayed; provided, however, that the parties may make such disclosures as are required by law after making reasonable efforts in the circumstances to consult in advance with the other parties. The provisions of this Section 9.8 shall apply not only to the initial public disclosures by each party but also to the form and content of any and all subsequent press releases or other public disclosure. 54 9.9 Tax Information. LEVCO shall cooperate in obtaining from the appropriate taxing authority for BKF's review tax account information for federal, state or local taxes of LEVCO and the Investment Partnerships, as reasonably requested by BKF. 9.10 Updated Financial Statements. (a) As soon as possible following the completion of the fiscal year ending December 31, 1995 (and in any event not later than 90 days after the completion of such fiscal year), LEVCO will deliver to BKF with respect to itself and each Investment Partnership a balance sheet as at December 31, 1995 together with the related financial statements for the year then ended as to which financial statements the independent public accountants of LEVCO and the respective Investment Partnerships shall have issued an unqualified opinion. In connection with the preparation of Proxy Materials, LEVCO shall also deliver to BKF with respect to itself and each Investment Partnership such quarterly balance sheets and related financial statements as are required to be included in the Proxy Materials by the Exchange Act and the rules of the SEC thereunder. All of such balance sheets and financial statements (including the notes thereto, if any) are collectively called the "LEVCO Subsequent Financials." LEVCO shall also deliver to BKF each FOCUS Report filed by it with the SEC prior to the Closing, as soon as practicable after the filing of such report with the SEC. (b) Prior to the Closing Date and as soon as possible following the completion of the fiscal year ending December 31, 1995 (and in any event not later than 90 days after the completion of any such fiscal year), BKF will deliver to LEVCO with respect to itself a statement of assets and liabilities as at December 31, 1995 together with the related statements of operations, changes in net assets and cash flows for the year then ended as to which financial statements the independent public accountants of BKF shall have issued an unqualified opinion. In connection with the preparation of Proxy Materials, BKF shall also deliver to LEVCO such quarterly balance sheets and related financial statements as are required to be included in the Proxy Materials by the Exchange Act and the rules of the SEC thereunder. All of such statements of assets and liabilities and statements of operations, changes in net assets and cash flows (including the notes thereto, if any) are collectively called the "BKF Subsequent Financials." BKF shall also deliver to LEVCO each Form N-SAR filed by it with the SEC prior to Closing, as soon as practicable after the filing of such report with the SEC. (c) The LEVCO Subsequent Financials shall be LEVCO Financial Statements for purposes of Section 6.7 and shall comport with the requirements of the Exchange Act and Regulation S-X. The BKF Subsequent Financials shall be BKF Financial Statements for purposes of Section 7.8 and shall comport with the requirements of the Exchange Act and Regulation S-X. 9.11 BKF Portfolio. After the Signing Date hereof and prior to the Closing Date, BKF will not acquire assets for its portfolio of private placement securities if such acquisition will cause BKF's portfolio of private placement securities to exceed 25% of its total net assets. 9.12 Payment of Certain Transaction Expenses. BKF shall pay or cause to be paid the Transaction Expenses on or before the Closing Date. 55 9.13 LEVCO Closing Balance Sheet. On or immediately prior to the Closing Date, each LEVCO Entity will discharge and satisfy all liabilities, absolute, accrued, contingent or otherwise, that would be required to be recorded on a balance sheet of such LEVCO Entity prepared in accordance with GAAP as of the Closing, except accrued rental expense under the Lease and any other liability as to which BKF has consented as set forth in Section 8.1. 9.14 Treatment of Accounts Receivable. BKF shall cause Surviving Corporation and Investment Adviser Subsidiary to send a notice to each Client of an Assigned Account (in a form mutually acceptable to BKF and the Stockholder Representative, the "Payment Instructions") to the effect that payment should be sent by such Client to an account designated by the Stockholder Representative (i) to the extent that such Assigned Account was billed, but not paid, prior to the Closing, in an amount equal to the amount so billed (unless LEVCO shall have previously sent such Payment Instructions, it being understood that, notwithstanding Section 8.1 hereof, BKF hereby acknowledges that LEVCO may send such mutually acceptable instructions prior to Closing), such Payment Instructions to be sent on or promptly following the Closing, (ii) if not billed prior to the Closing, such Payment Instructions to be sent in the next quarterly bill sent to such Client (the timing of which shall be consistent with LEVCO's past billing practices) (the amount so billed, the "Billed Amount"), (A) to the extent such Assigned Account reflects fee accruals by LEVCO for a full fiscal quarter, in an amount equal to such accruals, (B) to the extent such Assigned Account reflects fee accruals by LEVCO for one month, in an amount equal to one- third of the Billed Amount, or (C) to the extent such Assigned Account reflects fee accruals by LEVCO for two months, in an amount equal to two-thirds of the Billed Amount. 9.15 Bifurcation Event. (a) If BKF or its representatives are informed by the staff of the SEC that the SEC Order will not contain exemptive relief allowing the LEVCO Companies to compensate certain of their key employees ("Key Employees") pursuant to a "profit-sharing" plan within the meaning of Section 17(d) of the Investment Company Act and Rule 17d-1 thereunder or that inclusion of such request for relief will materially delay the processing of BKF's application for exemptive relief (a "Bifurcation Event"), the parties agree as follows: (i) Promptly after BKF or its representatives have been so informed by the staff of the SEC, BKF shall notify the Stockholders of the happening of such Bifurcation Event; (ii) Compensation of the Key Employees will be made in accordance with Section 4(b)(ii) of each such Key Employee's employment agreement entered into pursuant to Section 10.2(d) hereto and any compensation contemplated by Section 4(b)(i) of such Key Employee's employment agreement shall be null and void; and (iii) BKF, Merger Subsidiary and Investment Adviser Subsidiary agree, notwithstanding (i) and (ii) above, to continue to use their reasonable best efforts to obtain from the SEC prior to Closing exemptive relief 56 allowing the LEVCO Companies to compensate Key Employees pursuant to a "profit-sharing" plan within the meaning of Section 17(d) of the Investment Company Act and Rule 17d-1 thereunder. (b) If BKF or its representatives are informed by the staff of the SEC that the Notice will not contain exemptive relief allowing an affiliated person of BKF or the LEVCO Companies (as that term is defined in Section 2(a)(3) of the Investment Company Act as modified by the Order) to own limited partner interests in the Investment Partnerships or that inclusion of such request for relief will materially delay the processing of BKF's application for exemptive relief (an "L.P. Bifurcation Event"), the parties agree as follows: (i) Promptly after BKF or its representatives have been so informed by the staff of the SEC, BKF shall notify the Stockholders of the happening of such L.P. Bifurcation Event; (ii) To the extent necessary to prevent an L.P. Bifurcation Event, (x) each Stockholder owning a general partner or limited partner interest in any Investment Partnership shall, prior to the Closing Date, redeem such partner interest in accordance with the agreement of limited partnership of each such Investment Partnership, as applicable, and (y) LEVCO and all Stockholders shall cause the limited partner interest of any limited partner owning an interest of 5% or more of the capital of any Investment Partnership to be redeemed in accordance with the agreement of limited partnership of such Investment Partnership to the extent necessary to cause such limited partner's interest to be less than 5% of the capital of such Investment Partnership, such that at the Closing Date, except as permitted by the SEC Order, no affiliated person of BKF or the LEVCO Companies (as that term is defined above) shall own any general or limited partner interest in any Investment Partnership; and (iii) BKF, Merger Subsidiary and Investment Adviser Subsidiary agree, notwithstanding (i) and (ii) above, to continue, until such relief is either granted or denied, to use their reasonable best efforts to obtain from the SEC exemptive relief allowing affiliated persons of BKF or the LEVCO Companies (as that term is defined above) to own limited partner interests in the Investment Partnerships. 9.16 Bridge Partners. Prior to the Closing, LEVCO will cease to be a general partner of Bridge Partners. 9.17 LEVCO Stockholder Approval. The Stockholders shall, as promptly as possible after the execution of this Agreement, execute a unanimous written consent as holders of all of the outstanding capital stock of LEVCO, approving and adopting this Agreement and the Merger, and shall promptly deliver a copy of such consent to BKF. 57 ARTICLE X CONDITIONS 10.1 Conditions to Each Party's Obligations to Consummate. The respective obligations of each party to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or waiver in writing at or prior to the Closing of the following conditions: (a) No Termination. None of the parties shall have terminated this Agreement pursuant to Section 11.1. (b) SEC Order. The SEC shall have issued the order (the "SEC Order") requested by BKF in SEC Proceeding No. 812-9528, granting exemptive relief from provisions of the Investment Company Act and rules thereunder, and the SEC Order, in the sole judgment of BKF after reasonable consultation with LEVCO, shall be adequate to permit consummation by BKF of the transactions contemplated by this Agreement and the Related Agreements, and shall not have imposed any condition, requirement or commitment in connection therewith which, in the sole judgment of BKF, is reasonably likely to have a Material Adverse Effect on the Surviving Corporation, Investment Adviser Subsidiary and the LEVCO Subsidiaries (collectively, the "LEVCO Companies"), considered as one enterprise, or BKF. (c) Other Regulatory Requirements. The transactions contemplated by this Agreement shall have been approved by any Governmental Entity or self- regulatory body, the approval of which is required to permit consummation thereof (except such approvals which Section 9.3 contemplates will be obtained after Closing), without the imposition of any condition, requirement or commitment which is reasonably likely to have a Material Adverse Effect on the LEVCO Companies, considered as one enterprise, or BKF; and all waiting periods arising under the HSR Act or any other applicable law shall have duly lapsed or been terminated. (d) Absence of Litigation. No action or proceeding shall have been instituted or threatened on or before the Closing Date before any Governmental Entity pertaining to the transactions contemplated by this Agreement, the result of which is reasonably likely to prevent or make illegal the consummation of such transactions or which would be reasonably likely to have a Material Adverse Effect on the LEVCO Companies, considered as one enterprise, or BKF. Neither BKF nor LEVCO shall be subject to any order, decree or injunction of a court or agency of competent jurisdiction which either enjoins or prohibits the consummation of any of the transactions contemplated by this Agreement. (e) BKF Stockholder Approval. BKF Stockholder Approval shall have been obtained. (f) CTA and CPO Registration. The registration of Investment Adviser Subsidiary as a CTA and the registration of G.P. Subsidiary as a CPO under federal law and as a member of the NFA shall have been filed and become effective or be scheduled to become effective as provided in Section 9.3(d). 58 (g) Escrow Agreement. BKF, the Stockholders and the Escrow Agent (as defined in Section 12.7) shall have entered into an Escrow Agreement in substantially the form of Exhibit 12.7. (h) Registration Rights Agreement. BKF and the Stockholders shall have entered into a Registration Rights Agreement in substantially the form of Exhibit 10.1(h). (i) Portfolio Management Agreement. BKF and Investment Adviser Subsidiary shall have entered into an agreement whereby Investment Adviser Subsidiary will manage certain assets of BKF, such agreement to be substantially in the form of Exhibit 10.1(i). (j) NYSE Listing. The shares of BKF Common Stock to be issued pursuant to the Merger shall have been approved for listing on the Exchange, subject to notice of issuance. 10.2 Conditions Precedent to BKF's and Merger Subsidiary's Obligations. The obligation of BKF and Merger Subsidiary to consummate the transactions contemplated hereby shall be subject to the fulfillment or waiver (in writing) at or prior to the Closing of the following conditions; (a) Representations and Warranties. The representations and warranties of the Stockholders set forth or referred to in this Agreement and in any schedule or exhibit hereto shall be true and correct in all material respects (except for such representations and warranties which are qualified by their terms by a reference to materiality, which representations and warranties as so qualified shall be true and correct in all respects) (i) as of the Signing Date and (ii) as of the Closing Date, as though made on and as of each such date, except (x) for any such representations and warranties made as of a specified date, which shall be true and correct in all material respects as of such date, (y) as expressly contemplated or permitted by this Agreement and (z) for in the case of the representations and warranties made on and as of the Closing Date, such inaccuracies which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the LEVCO Companies, considered as one enterprise, or BKF or on the ability of the parties to consummate the transactions contemplated by this Agreement. Notwithstanding the foregoing, the parties acknowledge and agree that if Closing Assets Under Management as to which an Agreed Consent has been duly obtained and is in full force and effect are less than 100% but greater than 75% of the Base Assets Under Management (in each case, calculated in accordance with Section 2.1(b) hereof), then any reduction in the Assets Under Management since the date of this Agreement shall not constitute a Material Adverse Effect on BKF or the Surviving Corporation, or on the ability of the parties to consummate the transactions contemplated by this Agreement. (b) Performance of Agreements and Covenants. Each and all of the agreements and covenants of LEVCO and the Stockholders to be performed and complied with pursuant to this Agreement and the other agreements contemplated hereby prior to the Closing Date shall have been duly performed and complied with by them in all material respects. 59 (c) Certificates. The Stockholders shall have delivered a certificate, dated as of the Closing Date and signed by each of them, to the effect that the conditions set forth in Sections 10.2(a) and (b) of this Agreement have been satisfied. Notwithstanding the foregoing, if BKF and Merger Subsidiary shall elect to enter into and complete the Closing despite the fact that the Stockholders shall have specifically indicated in the certificate described in the immediately preceding sentence any inaccuracy or inaccuracies as to any representation or warranty of the Stockholders contained in this Agreement (when read together with the LEVCO Disclosure Schedule) or any Related Agreement that the Stockholders reasonably expect, individually or in the aggregate, will have a Material Adverse Effect on the LEVCO Companies, considered as one enterprise, or BKF or on the ability of the parties to consummate the transactions contemplated by this Agreement, the Stockholders shall not be liable to BKF for any Losses (as defined in Section 12.2) arising out of or resulting from the specified inaccuracy or inaccuracies. The Stockholders shall also have caused to be delivered a certificate, dated the Closing Date and signed by the Stockholders, certifying (i) the dollar amount of LEVCO's Closing Assets Under Management at the Closing as to which an Agreed Consent has been duly obtained and is in full force and effect, (ii) the dollar amount of the Partnership Capital, (iii) that Section 9.12 has been complied with and (iv) that the condition contained in Section 10.2(o) has been complied with. (d) Employment Agreements. Levin shall have entered into an employment agreement with BKF and the Merger Subsidiary, for itself and as the Surviving Corporation, substantially in the form of Exhibit 10.2(d)(i), such agreement to become effective at Closing. Melody L. Prenner Sarnell and Jeffrey A. Kigner shall each have entered into an employment agreement with Merger Subsidiary for itself and as the Surviving Corporation, substantially in the form of Exhibit 10.2(d)(ii), such agreements to become effective at Closing. (e) Opinion of Counsel. BKF shall have received (i) an opinion from Paul, Weiss, Rifkind, Wharton & Garrison, substantially as provided in Exhibit 10.2(e)(i) hereto and (ii) an opinion from Schulte Roth & Zabel, substantially as provided in Exhibit 10.2(e)(ii), in each case addressed to BKF and dated the Closing Date. Such counsel may specify the jurisdiction or jurisdictions in which the partners thereof are admitted to practice and that they are not admitted to practice in any other jurisdiction or experts in the law of any other jurisdiction. To the extent the foregoing opinion concerns the laws of any other jurisdiction (or in the case of the opinion of Schulte Roth & Zabel, relates to state securities laws), such opinion of counsel may be rendered by other counsel admitted to practice in such other jurisdiction reasonably satisfactory to BKF (or in the case of any opinion of Schulte Roth & Zabel relating to state securities laws, may be rendered by other counsel with specialized expertise in such area, such counsel to be satisfactory to BKF in its sole discretion), such opinion of counsel to be to the same effect as the applicable opinion set forth in Exhibit 10.2(e)(i) or Exhibit 10.2(e)(ii), as the case may be, and otherwise in customary form with customary exceptions. (f) Consents. LEVCO shall have obtained written consent to the assignment of the Contracts that are set forth on Schedule 10.2(g) to the LEVCO Disclosure Schedule. 60 (g) LEVCO Stockholders' Agreement. The Stockholders' Agreement between LEVCO and the Stockholders and each of the agreements related thereto, each as described on Schedule 5.3(b) of the LEVCO Disclosure Schedule, shall have been terminated. (h) Investment Partnerships. The consent of the required percentage of the limited partners of each Investment Partnership to the transactions contemplated by Section 9.1(c) and Schedule 9.1(c) shall have been obtained in accordance with the Delaware Revised Uniform Limited Partnership Act and the agreement of limited partnership of such Investment Partnership; provided that this condition shall not be deemed not to have been satisfied by reason of the failure of the partners of Meadow Lane Associates, L.P. to approve an amendment to the agreement of limited partnership of Meadow Lane Associates, L.P. providing that the Meadow Lane Associates, L.P. Performance Fees (as defined in Schedule 9.1(c) of the LEVCO Disclosure Schedule) be paid to G.P. Subsidiary, if the amendment has been submitted to such partners for their approval or disapproval and LEVCO has used its reasonable best efforts to cause that amendment to be approved. (i) Lease. LEVCO shall have received a consent, in form and substance reasonably satisfactory to BKF, from the landlord under its lease (the "Lease"), for its offices at One Rockefeller Plaza, 25th Floor, New York, New York 10020 to the change of ownership of LEVCO contemplated hereby. (j) Certificate Regarding Constituent Documents. LEVCO shall have delivered a certificate, dated as of the Closing Date, and signed on its behalf by its Secretary or an Assistant Secretary, certifying that since the date hereof, there have been no amendments or other modifications to the certificate of incorporation or bylaws of LEVCO, and that the officers of LEVCO are those persons named in the certificate. (k) Subsequent Financials. LEVCO shall have delivered to BKF the LEVCO Subsequent Financials, all as required by Section 9.10. (l) Approval of Documentation. The form and substance of all opinions, certificates and other documents delivered hereunder shall be reasonably satisfactory in all respects to BKF and its counsel. (m) Written Contracts. All Investment Contracts to which LEVCO is a party as of the Closing Date shall be in writing, shall reflect the current fee arrangements between LEVCO and the client, and shall provide for the receipt of compensation by LEVCO. (n) John A. Levin. As of the Closing Date, Levin shall be President and Chief Executive Officer of LEVCO and shall not have any health condition or disability which would be reasonably likely to prevent him from performing immediately after the Closing in the capacities contemplated by the employment agreement to be entered into by him referred to in Section 10.2(d). Any question as to the existence of any health condition or disability of Levin for purposes of this Agreement as to which Levin and BKF cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to Levin and BKF. If Levin and BKF cannot agree as to a qualified independent physician, each shall appoint such a 61 physician and those two physicians shall select a third who shall make such determination in writing. The determination of whether or not Levin shall have a health condition or disability made in writing to BKF and Levin shall be final and conclusive for all purposes of this Agreement. (o) Working Capital. LEVCO's cash on hand immediately prior to the Closing shall not be less than the amount calculated in accordance with Schedule 10.2(o). (p) Investment Adviser Registration. LEVCO shall have received notice of the effective registration (i) of LEVCO as an investment adviser and (ii) of each employee of LEVCO acting as an agent or representative of LEVCO, in each state in which LEVCO is required to be so registered, including, without limitation, those states in which registration is required as set forth in Schedule 6.20(c)(i)(a) of the LEVCO Disclosure Schedule, and each such notice of registration shall not limit the extent and manner to which LEVCO or any of its agents or representatives may conduct business, other than as required, in the ordinary course, by the Investment Advisers Act, or by applicable state law, the rules and regulations thereunder, or the securities regulatory authority which administers such state law, rules and regulations. There shall be no actions, suits or proceedings pending or threatened before any court, commission, agency or other administrative authority or other Governmental Entity by or against LEVCO resulting from LEVCO's or any of its agents' or representatives' failure to be registered as an investment adviser in any state where LEVCO and its agents or representatives were or are required to be so registered. (q) Broker-Dealer Registration. LEVCO or LEVCO Broker Subsidiary shall have received notice of the effective registration (i) of LEVCO or LEVCO Broker Subsidiary as a broker-dealer and (ii) of each employee of LEVCO or LEVCO Broker Subsidiary acting as an agent or representative of LEVCO or LEVCO Broker Subsidiary, in each state in which LEVCO or LEVCO Broker Subsidiary is required to be so registered, including, without limitation, those states in which registration is required as set forth in Schedule 6.22(a) of the LEVCO Disclosure Schedule, and each such notice of registration shall not limit the extent and manner to which LEVCO or LEVCO Broker Subsidiary or any of its agents or representatives may conduct business, other than as required, in the ordinary course, by the Exchange Act, the NASD Rules of Fair Practice, an NASD restriction agreement the terms of which are not materially more restrictive to LEVCO or LEVCO Broker Subsidiary than the terms of the NASD restriction agreement set forth in Schedule 6.22(c), or by applicable state law, the rules and regulations thereunder, or the securities regulatory authority which administers such state law, rules and regulations. There shall be no actions, suits or proceedings pending or threatened before any court, commission, agency or other administrative authority or Governmental Entity by or against LEVCO or LEVCO Broker Subsidiary resulting from LEVCO's or LEVCO Broker Subsidiary's or any of their respective agents' or representatives' failure to be registered as a broker-dealer in any state where LEVCO or LEVCO Broker Subsidiary and their respective agents or representatives were or are required to be so registered. 62 10.3 Conditions Precedent to LEVCO's and the Stockholder's Obligations. The obligation of LEVCO and the Stockholders to consummate the transactions contemplated hereby shall be subject to fulfillment or waiver (in writing) at or prior to the Closing of the following conditions: (a) Representations and Warranties. The representations and warranties of BKF and Merger Subsidiary set forth or referred to in this Agreement and in any schedule or exhibit hereto shall be true and correct in all material respects (except for such representations and warranties which are qualified by their terms by a reference to materiality, which representations and warranties as so qualified shall be true and correct in all respects) (i) as of the Signing Date and (ii) as of the Closing Date, as though made on and as of each such date, except (x) for any such representations and warranties made as of a specified date, which shall be true and correct in all material respects as of such date, (y) as expressly contemplated or permitted by this Agreement and (z) for in the case of the representations and warranties made on and as of the Closing Date, such inaccuracies which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on BKF and the LEVCO Companies, taken as one entity, or on the ability of the parties to consummate the transactions contemplated by the Agreement. (b) Performance of Agreements and Covenants. Each and all of the agreements and covenants of BKF and Merger Subsidiary to be performed and complied with pursuant to this Agreement and the other agreements contemplated hereby prior to the Closing Date shall have been duly performed and complied with by them in all material respects. (c) Certificates. Each of BKF and Merger Subsidiary shall have delivered a certificate, dated as of the Closing Date and signed on its behalf by its chief executive officer and its chief financial officer, to the effect that the conditions set forth in Sections 10.3(a) and (b) of this Agreement have been satisfied. Notwithstanding the foregoing, if LEVCO and the Stockholders shall elect to enter into and complete the Closing despite the fact that BKF shall have specifically indicated in the certificate described in the immediately preceding sentence any inaccuracy or inaccuracies as to any representation or warranty of BKF contained in this Agreement (when read together with the BKF Disclosure Schedule) or any Related Agreement that BKF reasonably expects, individually or in the aggregate, will have a Material Adverse Effect on BKF or the LEVCO Companies or on the ability of the parties to consummate the transactions contemplated by this Agreement, BKF shall not be liable to the Stockholders for any losses arising out of or resulting from the specified inaccuracy or inaccuracies. (d) Delivery of Merger Consideration. Merger Subsidiary shall have delivered to each Stockholder or the Stockholder's designee (i) certificates representing the Merger Shares deliverable to such Stockholder pursuant to Section 2.2, (ii) the Cash Consideration and (iii) Fractional Share Payments deliverable to such Stockholder pursuant to Section 2. 63 (e) Opinions of Counsel. LEVCO shall have received from Bell, Boyd & Lloyd, counsel to BKF, an opinion in substantially as provided in Exhibit 10.3(e) hereto. Such counsel may specify the jurisdiction or jurisdictions in which the partners thereof are admitted to practice and that they are not admitted to practice in any other jurisdiction or experts in the law of any other jurisdiction. To the extent the foregoing opinion concerns the laws of any other jurisdiction or pertains to matters beyond the scope of such counsel's engagement, such opinion of counsel may be rendered by other counsel admitted to practice in such other jurisdiction reasonably satisfactory to LEVCO, such opinion of counsel to be to the same effect as the applicable opinion contained in Section 10.3(e), and otherwise in customary form with customary exception. (f) Secretary's Certificate. BKF and Merger Subsidiary shall have delivered a certificate, dated as of the Closing Date and signed on its behalf by its secretary or an assistant secretary, certifying that since the date hereof, there have been no amendments or other modifications to its certificate of incorporation or bylaws and that the officers of BKF and Merger Subsidiary are those persons named in the certificate. (g) Approval of Documentation. The form and substance of all opinions, certificates and other documents delivered hereunder shall be reasonably satisfactory in all respects to LEVCO and the Stockholders and their counsel. (h) Subsequent Financials. BKF shall have delivered to LEVCO the BKF Subsequent Financials, all as required by Section 9.10. (i) James P. Gorter. James P. Gorter ("Gorter") shall be the Chairman of the Board of Directors of BKF and shall not have any health condition or disability which would be reasonably likely to prevent him from continuing to perform immediately after the Closing in such capacity in the same manner in which he performed immediately prior to the Closing. Any question as to the existence of a health condition or disability of Gorter for purposes of this Agreement as to which Gorter and LEVCO cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to Gorter and LEVCO. If Gorter and LEVCO cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of whether or not Gorter shall have a health condition or disability made in writing to LEVCO and Gorter shall be final and conclusive for all purposes of this Agreement. (j) Tax Opinion. LEVCO shall have received an opinion from Paul, Weiss, Rifkind, Wharton & Garrison to the effect that the Merger will be treated for federal income tax purposes as a reorganization qualifying under the provisions of Section 368(a) of the Code, which opinion shall not have been withdrawn or modified in any material respect. 64 ARTICLE XI TERMINATION 11.1 Termination. This Agreement may, by written notice, be terminated at any time prior to the Closing: (a) by the mutual written consent of LEVCO and BKF; or (b) by either LEVCO or BKF, at any time after September 30, 1996 if the Closing shall not theretofore have occurred; or (c) by either LEVCO or BKF, if any permanent injunction or action by any Governmental Entity of competent jurisdiction enjoining, denying approval of, or otherwise prohibiting the consummation of the transactions contemplated hereby shall have become final and nonappealable; or (d) by either LEVCO or BKF, if the Stockholder Approval Matters shall fail to have obtained the required BKF Stockholder Approval at a meeting duly convened therefor; or (e) by either LEVCO or BKF, if there shall not be in full force and effect on the Closing Date, Agreed Consents with respect to Closing Assets Under Management the dollar amount of which is at least 75% of the dollar amount of LEVCO's Base Assets Under Management; or (f) by either LEVCO or BKF, at any time after June 30, 1996, if the SEC Order shall not theretofore have been issued by the SEC; or (g) by either LEVCO or BKF, if (i) the Board of Directors of BKF shall not make the Recommendation in the Proxy Materials or shall at any time thereafter prior to Closing withdraw, modify or change the Recommendation in a manner adverse to the Stockholders or LEVCO or shall have resolved to do any of the foregoing or (ii) the Board of Directors of BKF shall have approved any BKF Acquisition Proposal; or (h) by BKF, in the event there has been (i) a breach of any representation or warranty of any Stockholder or the Stockholders contained in this Agreement that would reasonably be expected to have a Material Adverse Effect on LEVCO or on the LEVCO Companies, considered as one enterprise, after the consummation of the Merger or (ii) a breach of any material covenant or agreement of LEVCO or the Stockholders contained in this Agreement which breach is not curable or, if curable, has not been cured within 30 days after written notice to LEVCO and the Stockholders; or (i) by LEVCO, in the event there has been (i) a breach of any representation or warranty of BKF contained in this Agreement that would reasonably be expected to have a Material Adverse Effect on BKF and the LEVCO Companies considered as one entity after 65 consummation of the Merger or (ii) a breach by BKF or Merger Subsidiary of any material covenant or agreement contained in this Agreement which breach is not curable or, if curable, has not been cured within 30 days after written notice to BKF and Merger Subsidiary; or (j) by LEVCO, if BKF shall have taken any of the actions set forth in Section 8.2(a) without the consent of the Stockholder Representative; or (k) by LEVCO, if any Person (including any partnership, limited partnership, syndicate or other "group" (as such term is used in Section 13(d)(3) of the Exchange Act) shall, directly or indirectly, (i) have acquired beneficial ownership of any securities of BKF representing in excess of 25% of the voting power of all outstanding equity securities of BKF (a "Substantial Bloc"), or (ii) have commenced a tender or exchange offer for a Substantial Bloc and such tender or exchange offer shall not have been withdrawn or terminated. 11.2 Effect of Termination and Abandonment. In the event of termination of this Agreement and abandonment of the transactions contemplated hereby pursuant to this Article XI, except as otherwise specifically provided herein, no party hereto (or any of its partners, shareholders, directors, officers, employees, agents, consultants or representatives) shall have any liability or further obligation to any other party to this Agreement, except for any obligations to reimburse costs and expenses as set forth in Section 15.5 and except that nothing herein will relieve any party from liability for any material breach of this Agreement. In the event this Agreement is terminated by LEVCO or BKF pursuant to Section 11.1(g) (except if at the time of the failure to make the Recommendation in the Proxy Materials or at the time of the withdrawal of, or modification or change to the Recommendation (or resolution to do so), there shall have occurred a Material Adverse Effect since the date hereof or the date the Recommendation was made, as the case may be, with respect to LEVCO), then BKF shall pay to LEVCO a fee (the "Termination Fee") of $1,150,000 by wire transfer of same day funds, within two Trading Days of such termination to an account designated in writing by the Stockholder Representative. In addition, in the event of a termination pursuant to which the Termination Fee is payable, BKF will pay to LEVCO promptly upon demand the amount of all of LEVCO's out-of- pocket expenses with respect to this Agreement and the transactions contemplated hereby, including any fees and expenses of LEVCO's investment bankers, attorneys and accountants, up to a maximum amount of $500,000. ARTICLE XII INDEMNIFICATION 12.1 General. From and after the Closing, the parties shall indemnify each other as provided in this Article XII. For the purpose of this Article XII, the Stockholders shall be deemed to have made all of their representations and warranties set forth in this Agreement without any qualification as to materiality, including without limitation any qualification as to whether the fact or matter represented would or would not reasonably be expected to have a Material Adverse Effect on any Person. 66 12.2 Indemnification by the Stockholders. (a) From and after the Closing Date, each of the Stockholders will jointly and severally indemnify and hold harmless BKF, the LEVCO Companies and their respective directors, officers and controlling persons within the meaning of the Exchange Act (the "BKF Indemnified Parties") against any and all expenses, losses, claims, damages, fines, penalties, liabilities and costs, including reasonable attorneys fees and expert witness fees and any fees received from clients that must be disgorged or losses or expenses incurred in connection with client or customer claims, including claims for rescission of securities transactions, but excluding any punitive or exemplary damages except to the extent payable to third parties and excluding any consequential damages to such BKF Indemnified Persons (other than to LEVCO Companies) (all of the foregoing herein collectively referred to as "Losses") sustained or incurred by any one or more of the BKF Indemnified Parties based upon, arising from or otherwise in respect of (i) any inaccuracy of any representation or warranty made by the Stockholders in Article VI (when read together with the portions of the LEVCO Disclosure Schedule relating thereto) or Section 9.2(e) of this Agreement or the certificates delivered pursuant to Article X of this Agreement, (ii) any default by LEVCO or the Stockholders under any of their covenants or agreements contained in this Agreement, (iii) any Loss or obligation based upon, arising out of or otherwise in respect of Bridge Partners, (iv) any Loss based upon, arising out of or otherwise in respect of the failure of any arrangement of a LEVCO Entity with a paid solicitor to comply with Rule 206(4)-3 under the Investment Advisers Act, and (v) any Loss based upon, arising out of or otherwise in respect of LEVCO having failed to register as an investment adviser or broker-dealer in any state in which registration was required prior to the Closing or any employee of LEVCO having failed to register or qualify under the laws or regulations of any such state relating to the activities of investment advisers and broker-dealers. (b) From and after the Closing Date, each Stockholder severally, but not jointly, agrees to indemnify and hold harmless the BKF Indemnified Parties from and against any Losses sustained or incurred by any one or more of the BKF Indemnified Parties based upon, arising out of or otherwise in respect of any inaccuracy of any representation or warranty contained in Article V of this Agreement (when read together with the portions of the LEVCO Disclosure Schedule relating thereto) or the certificates delivered pursuant to Article X of this Agreement. 12.3 Indemnification by BKF. From and after the Closing Date, BKF will indemnify and hold harmless the Stockholders against any and all Losses at any time sustained or incurred by any one or more of the Stockholders based upon, arising out of, or otherwise with respect of (a) any inaccuracy of any representation or warranty made by BKF in Article VII of this Agreement (when read together with the BKF Disclosure Schedule) or Section 9.2(d) of this Agreement or the certificates delivered pursuant to Article X of this Agreement and (b) any default by BKF or Merger Subsidiary under any of their covenants or agreements contained in this Agreement. 12.4 Indemnification Procedure for Third Party Claims. In the event that subsequent to the Closing Date any person or entity entitled to indemnification under this Agreement (an "Indemnified Party") receives notice of the assertion of any claim or of the commencement of 67 any action or proceeding by any entity that is not a party to this Agreement (including, but not limited to, any Governmental Entity) (a "Third Party Claim") against such Indemnified Party, against which indemnification may be provided under this Agreement (such party providing indemnification, an "Indemnifying Party"), the Indemnified Party shall give written notice together with a statement of any available information regarding such claim to the Indemnifying Party (or in the case of a claim for which the Stockholders may be jointly and severally liable, to the Stockholder Representative) within 10 days after learning of such claim (or within such shorter time as may be necessary to give the Indemnifying Party a reasonable opportunity to respond to such claim). The Indemnifying Party shall have the right, upon written notice to the Indemnified Party (the "Defense Notice") within 15 days after receipt from the Indemnified Party of notice of such claim, which notice by the Indemnifying Party shall specify the counsel it will appoint to defend such claim ("Defense Counsel"), to conduct at its expense the compromise or defense against such claim in its own name, or if necessary in the name of the Indemnified Party; provided, however, that the Indemnified Party shall have the right to approve the Defense Counsel, which approval shall not be unreasonably withheld; and provided further the Indemnifying Party will not compromise or settle any claim without the prior written consent of the Indemnified Party, which consent will not be unreasonably withheld or delayed (it being understood that the failure of the Indemnified Party to give such consent shall not be considered unreasonable in respect of any compromise or settlement that does not include an unconditional release of such Indemnified Party from all liability arising out of, or that may arise out of, such claim). The Indemnifying Party and the Indemnified Party further agree: (a) In the event that the Indemnifying Party shall fail to give the Defense Notice, it shall be deemed to have elected not to conduct the defense of the subject claim, and in such event the Indemnified Party shall have the right to conduct such defense in good faith and to compromise and settle the claim, with the prior consent of the Indemnifying Party, such consent not to be unreasonably withheld or delayed (provided, however, that it is understood that the failure of such Indemnifying Party to give such consent shall not be considered unreasonable in respect of any compromise or settlement that does not include an unconditional release of such Indemnifying Party from all liability arising, or that may arise out of, such claim), and the Indemnifying Party will be liable for all costs, expenses, settlement amounts or other Losses paid or incurred in connection therewith. (b) In the event that the Indemnifying Party does deliver a Defense Notice and thereby elects to conduct and control the defense of the subject claim, the Indemnified Party will cooperate with and make available to the Indemnifying Party such assistance and materials as it may reasonably request, all at the expense of the Indemnifying Party, and the Indemnified Party shall have the right at its expense to participate in the defense assisted by counsel of its own choosing, but shall not have the right to compromise or settle such claim. (c) A failure by an Indemnified Party to give timely, complete or accurate notice of a Third Party Claim as provided in this Section 12.4 will not affect the rights or obligations of any party hereunder except and only to the extent that, as a result of such failure, any party entitled to receive such notice was prejudiced thereby. 68 12.5 Certain Limitations on Indemnification. (a) No BKF Indemnified Party shall be entitled to receive any indemnification payments under Section 12.2 in respect of inaccuracies of representations or warranties made by the Stockholders in Article VI as of the Signing Date unless and until the aggregate of all Losses suffered by all BKF Indemnified Parties arising therefrom or relating thereto exceeds on a cumulative basis one percent of the Merger Value. No BKF Indemnified Party shall be entitled to receive any indemnification payments under Section 12.2 in respect of inaccuracies of representations and warranties made by the Stockholders in Article VI (except Sections 6.1 through 6.6, 6.9 and 6.17) as of the Closing Date, which representations and warranties were true and correct as of the date of this Agreement, unless and until the aggregate of all Losses suffered by all BKF Indemnified Parties arising therefrom or relating thereto exceeds one percent of the Merger Value. Each of the foregoing limitations is herein called an "Indemnification Basket." (b) No Stockholder shall be entitled to receive any indemnification payments under Section 12.3 in respect of inaccuracies of representations or warranties made by BKF in Article VII as of the date of this Agreement unless and until the aggregate of all Losses suffered by the Stockholders arising therefrom or relating thereto exceeds on a cumulative basis one percent of the Merger Value. No Stockholder shall be entitled to receive any indemnification payments under Section 12.3 in respect of inaccuracies of representations and warranties made by BKF in Article VII (except Sections 7.1 through 7.4, 7.7, 7.10 and 7.14) as of the Closing Date, which representations and warranties were true and correct as of the date of this Agreement, unless and until the aggregate of all Losses suffered by the Stockholders arising therefrom or relating thereto exceeds one percent of the Merger Value. (c) The BKF Indemnified Parties shall not be entitled to receive any indemnification payments under Section 12.2 to the extent that the aggregate of all such payments, when added to all other indemnification payments previously made to the BKF Indemnified Parties hereunder, exceeds 50% of the Merger Value (such amount, the "Maximum Value Amount"). (d) The Stockholders shall not be entitled to receive any indemnification payments under Section 12.3 to the extent that the aggregate of all such payments, when added to all other indemnification payments previously made to the Stockholders hereunder, exceeds the Maximum Value Amount. (e) Notwithstanding the foregoing, no Stockholder shall have any liability under Section 12.2 for any Losses in excess of such Stockholder's Pro Rata Share (being the percentage amount set forth opposite such Stockholder's name on Schedule 12.2 of the LEVCO Disclosure Schedule) of the Maximum Value Amount. (f) All Losses under this Article XII shall be computed net of any insurance recovery by the Indemnified Party relating thereto (net of the expenses of such recovery incurred by the Indemnified Party, other than increases in premiums). The parties hereto agree that any indemnification payment under this Article XII shall be deemed an adjustment to the purchase price paid pursuant to this Agreement. 69 12.6 Termination of Rights Hereunder. (a) No claim for breach of a representation or warranty may be made under the provisions of Section 12.2 (except for Reserved Claims) after March 31 in the second calendar year following the Closing Date ("First Survival Date") except that (i) any claim based upon or arising out of the breach or inaccuracy of any representation or warranty contained in Sections 5.1, 5.2, 5.3, 5.5, 5.6, 6.1, 6.2, 6.3 and 6.5 may be made at any time, (ii) any claim based upon or arising out of the breach or inaccuracy of a representation or warranty contained in Section 6.10 may be made at any time prior to expiration of the applicable statute of limitations and (iii) any claim based upon or arising out of the breach or inaccuracy of a representation or warranty contained in Sections 6.4, 6.6, 6.16, 6.19, 6.20(c) through (e), 6.22 through 6.25 and 6.21 (insofar as it relates to any of the representations made in the foregoing Sections) may be made at any time prior to the third anniversary of the Closing Date (the "Survival Date"). (b) No claim for breach of a representation or warranty may be made under the provisions of Section 12.3 (except for Reserved Claims) after the First Survival Date, except that any claim based upon or arising out of the breach or inaccuracy of any representation or warranty contained in Sections 7.1, 7.2, 7.3 and the last sentence of Section 7.10 may be made at any time. (c) "Reserved Claims" means any claims as to which any BKF Indemnified Party has given LEVCO notice or any Stockholder has given BKF notice, in each case on or prior to the relevant expiration date of the right to make such claim as provided in Sections 12.6(a) and (b) and, in the case of claims arising from Third Party Claims, Section 12.4. 12.7 Escrow Fund. (a) As soon as practicable after the Effective Time, shares of BKF Common Stock having a value at the price of $15.80 per share equal to 50% of the Merger Value (the "Escrow Shares") shall be registered in the name of, and be deposited with UMB Bank, N.A. as escrow agent (the "Escrow Agent"), such deposit to constitute the Escrow Fund (as defined in the Escrow Agreement referred to below) and to be governed by the terms set forth herein and in the Escrow Agreement, the form of which is attached hereto as Exhibit 12.7 (the "Escrow Agreement"). The Escrow Fund shall be available to compensate BKF for any Losses for which BKF is entitled to indemnification under Section 12.2. (b) During the Escrow Period (as defined in the Escrow Agreement), BKF shall, with respect to any claim for Losses hereunder, proceed first against the Escrow Fund in accordance with the terms of the Escrow Agreement and only after no Escrow Shares remain in the Escrow Fund with respect to the Stockholder against whom indemnification is claimed which are not subject to any claim thereunder relating to other alleged Losses, then against such Stockholder directly, subject to the other terms and provisions of this Article XII including, without limitation, the limitations on recovery set forth in Sections 12.5(a), 12.5(c) and 12.5(e). To the extent any Stockholder is required to satisfy any claim for Losses other than out of the Escrow Fund, such Stockholder may satisfy such Losses by delivery to BKF of shares of BKF Common Stock issued in the Merger, the value of which will be deemed to be $15.80 per share minus the per share amount of any capital gains distribution on shares of BKF Common Stock 70 for which the record date occurs from and after the Closing Date through the date such share of BKF Common Stock is delivered to BKF pursuant to this Article XII, in each case as adjusted for any stock dividend, stock split or combination of the BKF Common Stock. 12.8 Determination of Losses after Escrow. If Escrow Shares remaining in the Escrow Fund (as defined in the Escrow Agreement) are insufficient to satisfy claims for Joint Losses (as defined below) or if Designated Shares remaining in a Stockholder's Designated Account (as such terms are defined in the Escrow Agreement) are insufficient to satisfy claims for Several Losses against such Stockholder (as defined below) or if the Escrow Fund has been terminated as provided in the Escrow Agreement, BKF shall only proceed against a Stockholder with respect to any claim for Losses hereunder, on or before the relevant expiration date of the right to make such claim as provided in Section 12.6(a), as set forth below. (a) BKF shall deliver a certificate signed by any officer of BKF, other than the Stockholder Representative (the "Officer's Certificate") (i) stating that Losses exist in an aggregate amount greater than the relevant Indemnification Basket or that no Indemnification Basket is applicable to such Losses and (ii) specifying in reasonable detail (A) the individual items of such Losses included in the amount so stated, (B) in the case of Losses arising out of any inaccuracy or breach of a representation or warranty contained in Article V of this Agreement ("Several Losses"), the Stockholder against whom indemnification therefore is claimed (each such Stockholder the "Indemnifying Stockholder"), (C) the portion of such Losses constituting Several Losses, if any, and the portion of such Several Losses to be paid by such Indemnifying Stockholder for Several Losses, (D) the portion of such Losses not constituting Several Losses, if any ("Joint Losses"), (E) the day each such item of Loss was paid, incurred or sustained and (F) the nature of the misrepresentations, breach of warranty or claim to which such item is related. (b) For a period of forty-five (45) days after the delivery of the notice specified above, the Stockholder Representative shall be entitled to object in a written statement to the claim or claims made in the Officer's Certificate. If the Stockholder Representative shall so object in writing to any claim or claims by BKF made in any Officer's Certificate, BKF shall have forty- five (45) days to respond in a written statement to the objection of the Stockholder Representative. If after such forty-five (45) day period there remains a dispute as to any claims, the Stockholder Representative and BKF shall attempt in good faith for sixty (60) days to agree upon the rights of the respective parties with respect to each of such claims. If the Stockholder Representative and BKF fail to reach agreement during such sixty (60) day period, either BKF or the Stockholder Representative may, by written notice to the other, demand arbitration of the matter unless the amount of the damage or loss is at issue in a pending litigation with a third party, in which event arbitration shall not be commenced until such amount is ascertained or both parties agree to arbitration; and in either such event the matter shall be settled by arbitration conducted by an arbitrator to be selected in accordance with the following sentence. Within fifteen (15) days after such written notice demanding arbitration is sent, BKF and the Stockholder Representative shall each select one arbitrator, and the two arbitrators so selected shall select a third arbitrator which shall be the arbitrator (the "Arbitrator") for all purposes of this Agreement. The decision of the Arbitrator as to the validity and amount of any claim in such 71 Officer's Certificate shall be binding and conclusive on the parties hereto; provided, however, that regardless of such decision or award the amount of indemnification owed to BKF shall be subject to the limitations contained in Section 12.5. (c) Judgment upon any award by the Arbitrator may be entered in any court having jurisdiction. Any such arbitration shall be held (i) in the case of the first such arbitration, in Chicago, Illinois, (ii) in the case of the second such arbitration, in New York, New York and (iii) in each subsequent arbitration, in one of such jurisdictions other than the jurisdiction in which the immediately preceding arbitration was held, under the commercial rules then in effect of the American Arbitration Association. Each party to an arbitration conducted hereunder shall pay its own expenses, including legal fees, and the fees of the Arbitrator and the administrative fee, if any, of the American Arbitration Association, shall in each case, be borne 50/50 by BKF, on the one hand, and the Stockholder or Stockholders, as the case may be, that is the subject of such arbitration, on the other hand. (d) Notwithstanding the foregoing, in the event BKF shall have delivered an Officer's Certificate under the Escrow Agreement with respect to any Losses, and insufficient Escrow Shares are available in the Escrow Fund to satisfy the claim relating thereto, the validity and amount of which has been determined and awarded by the arbitrator selected pursuant to, and as defined in the Escrow Agreement, then the parties shall not be required to separately observe the provisions of this Section 12.8 with respect to such Losses, other than the proviso to Section 12.8(b). ARTICLE XIII OTHER COVENANTS 13.1 Employment of LEVCO's Employees. Surviving Corporation shall offer continued employment on and after the Closing Date to all employees of LEVCO who were such immediately prior to the Closing Date (the "Continued Employees"). Nothing contained herein shall be construed to modify the "at will" employee status of those of LEVCO's employees who are immediately prior to the Closing "at will" employees, and Surviving Corporation shall retain the absolute right to terminate such Continued Employees at any time and for any reason or no reason on or after the Closing Date, subject to the arrangements contemplated in the employment agreements contemplated by Section 10.2(d). Surviving Corporation and each Stockholder who is not a party to the Employment Agreements contemplated by Section 10.2(d) will enter into a one-year Employment Agreement in substantially the form of Exhibit 13.1 hereto, if such Stockholder remains an employee of LEVCO at the Closing. 13.2 Confidentiality Each of LEVCO and the Stockholders, on behalf of themselves and in the case of LEVCO, its directors, officers, employees, agents and advisers, agree to keep confidential any and all information and data of a proprietary or confidential nature with respect to BKF and its subsidiaries and affiliates which any of them has received as a result of any investigation made in connection with this Agreement; provided, however, that the foregoing covenant shall not apply to any such information or data to the extent disclosure thereof is required by applicable law, order, rule or regulation. 72 13.3 Tax Matters. The Stockholders and BKF agree to report the Merger as a reorganization within the meaning of Section 368(a) of the Code for federal, state and local income tax purposes. The Stockholders and BKF agree to file, and to cause LEVCO to file, all income Tax Returns affected by, or required or permitted to include, the transactions contemplated by this Agreement in a manner consistent with the treatment described in the preceding sentence. BKF shall not take, or permit the LEVCO Companies to take, and the Stockholders shall not take, any action after Closing that would itself (without regard to any action taken by LEVCO or the Stockholders prior to the Effective Time) disqualify the Merger as a reorganization within the meaning of Section 368(a) of the Code. ARTICLE XIV GUARANTEES; STOCKHOLDER REPRESENTATIVE 14.1 Guarantees. BKF hereby guarantees for the benefit of LEVCO and the Stockholders the performance by Merger Subsidiary of all of its obligations under this Agreement and each Related Agreement executed and delivered by Merger Subsidiary. The Stockholders, jointly and severally, hereby guarantee for the benefit of BKF the performance by LEVCO of all of its obligations under this Agreement and each Related Agreement executed and delivered by LEVCO, which in no event shall be deemed to include any obligations of the LEVCO Companies from and after the consummation of the Merger. 14.2 Stockholder Representative. (a) The Stockholders hereby appoint Levin as the Stockholder Representative. In the event Levin shall at any time be unable to, or shall notify BKF that he is unwilling to, continue to perform the duties of the Stockholder Representative, the remaining Stockholders shall promptly designate a successor Stockholder Representative, and in the absence of such an appointment, Melody L. Prenner Sarnell shall serve as the Stockholder Representative. (b) A decision, act, consent or instruction of the Stockholder Representative shall constitute a decision of all Stockholders and shall be final, binding and conclusive upon each such Stockholder, and BKF may rely upon any decision, act, consent or instruction of the Stockholder Representative as being the decision, act, consent or instruction of each and every Stockholder. BKF is hereby relieved from any liability to any Person for any acts done by them in accordance with such decision, act, consent or instruction of the Stockholder Representative, except for liability arising out of fraud, gross negligence, bad faith or willful default under this Agreement. (c) In dealing with this Agreement and any instruments, agreements or documents relating thereto, and in exercising or failing to exercise all or any of the powers conferred upon the Stockholder Representative hereunder, (i) the Stockholder Representative shall not assume any, and shall incur no, responsibility whatsoever to any Stockholder by reason of any error in judgment or other act or omission performed or omitted hereunder or in connection with this Agreement, excepting only responsibility for any act or failure to act which represents gross negligence or willful misconduct, and (ii) the Stockholder Representative shall 73 be entitled to rely on the advice of counsel, public accountants or other independent experts experienced in the matter at issue, and any error in judgment or other act or omission of the Stockholder Representative pursuant to such advice shall in no event subject the Stockholder Representative to liability to any Stockholder. The Stockholders shall severally indemnify the Stockholder Representative and hold him or her harmless against any loss, liability or expense incurred without gross negligence or bad faith on the part of the Stockholder Representative and arising out of or in connection with the acceptance or administration of his or her duties hereunder. All of the indemnities, immunities and powers granted to the Stockholder Representative under this Agreement shall survive the termination of this Agreement. ARTICLE XV GENERAL PROVISIONS 15.1 Survival. If this Agreement is terminated prior to the Closing Date, the agreements of the parties in Sections 9.8, 11.2, 13.2 and 15.5, and the letter agreement dated September 5, 1995 between BKF and LEVCO (the "Confidentiality Letter Agreement"), shall survive. 15.2 Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly received (i) on the date given if delivered personally or by cable, telegram, telex or telecopy or (ii) on the date received if mailed by registered or certified mail (return receipt requested), to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): if to BKF: Baker, Fentress & Company 200 West Madison Street, #3510 Chicago, Illinois 60606 Phone: 312/236-9190 Fax: 312/236-6772 Attention: James P. Gorter, Chairman Copies to: Bell, Boyd & Lloyd Three First National Plaza 70 West Madison, Suite #3300 Chicago, Illinois 60602 Phone: 312-372-1121 Fax: 312-372-2098 Attention: Janet D. Olsen and 74 if to LEVCO, Levin, the Stockholders Representative, or any other Stockholder: John A. Levin & Co., Inc. One Rockefeller Plaza, 25th Floor New York, New York 10020 Phone: 212-332-8400 Fax: 212-332-8408 Attention: John A. Levin, President Copies to: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, New York 10019-6064 Phone: 212-373-3000 Fax: 212-757-3990 Attention: Matthew Nimetz and copies to Stockholders at their addresses set forth on Schedule 15.2 hereto. 15.3 Counterparts. This Agreement may be executed in counterparts (including executed counterparts delivered and exchanged by facsimile transmission) each of which shall be deemed to constitute an original, but all of which together shall constitute one and the same instrument. 15.4 Governing Law. The validity, interpretation and effect of this Agreement shall be governed exclusively by the laws of the State of Delaware, excluding the conflict of laws rules of that state. Each of the parties to this Agreement hereby irrevocably and unconditionally agrees (i) to be subject to the jurisdiction of the courts of the State of Delaware and of the federal courts sitting in the State of Delaware, and (ii) to the extent such party is not otherwise subject to service of process in the State of Delaware, to appoint and maintain an agent in the State of Delaware as such party's agent for acceptance of legal process, and that service made pursuant to (ii) above shall have the same legal force and effect as if served upon such party personally within the State of Delaware. For purposes of implementing the parties' agreement to appoint and maintain an agent for service of process in the State of Delaware, each such party that has not as of the date hereof already duly appointed such an agent does hereby appoint RL&F Service Corp., One Rodney Square, 10th Floor, Wilmington, Delaware 19801, as such agent. 15.5 Expenses. (a) Except as provided in paragraph (b) of this Section 15.5, each party will bear its own expenses in connection with this Agreement and any other expenses which this Agreement specifically states the particular party shall bear. If the Merger is consummated, the Stockholders agree that, except as is consistent with the provisions hereof, the LEVCO Companies shall not bear any expense relating to the transactions contemplated by this Agreement that is not fully discharged at or prior to Closing. 75 (b) If this Agreement is terminated pursuant to Section 11.1 hereof (other than clause (a) thereof), by reason of the willful failure of a party to fulfill a condition to the performance of the other party's obligations or to perform a covenant of this Agreement or by reason of a willful breach by any party to this Agreement, such party shall be fully liable for any and all costs and expenses (including, but not limited to, reasonable attorneys' fees and expenses) in connection with this Agreement and the transactions contemplated hereby incurred by the other party or parties. 15.6 Waiver; Amendment. Any provision of this Agreement may be (i) amended or modified at any time (including the structure of the transactions contemplated hereby, or any part thereof), by an agreement in writing among the parties hereto and executed in the same manner as this Agreement or (ii) waived by the party benefited by the provision. 15.7 Entire Agreement; No Third-Party Beneficiaries, Etc. All exhibits and schedules hereto shall be deemed to be incorporated into and made part of this Agreement. This Agreement, together with the Related Agreements, the exhibits and schedules hereto and thereto and the Confidentiality Letter Agreement, represents the entire understanding of the parties hereto with reference to the transactions contemplated hereby and supersedes any and all other oral or written agreements heretofore made. All terms and provisions of the Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective personal representatives, heirs, successors and permitted assigns. Except as otherwise explicitly stated herein, nothing in this Agreement is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. 15.8 Assignment. This Agreement may not be assigned by any party hereto without the written consent of the parties and any purported assignment in violation hereof shall be null and void. Notwithstanding the foregoing, in the event that Frank F. Rango, Barton G. Ice, Daniel E. Aron or Carol L. Novak ceases to be an employee of LEVCO at any time prior to the Closing, such Stockholder agrees to assign its rights under this Agreement to Levin in the event Levin purchases the shares of such Stockholder pursuant to the Stockholder Agreement dated as of September 18, 1995 among the Stockholders and LEVCO. In such event, Levin shall succeed to all rights and obligations of such Stockholder hereunder as if he were such Stockholder, except that the obligation contained in Section 13.1 will not apply to Levin. 15.9 Interpretation. Unless otherwise expressly provided or unless the context requires otherwise, (a) all references in this Agreement to Articles, Sections, Schedules and Exhibits of this Agreement, (b) all references to statutes and related regulations shall include all amendments of the same and any successor or replacement statutes and regulations, (c) words of any gender shall be deemed to include each other gender, (d) words used using the singular or plural number also shall include the plural and singular number, respectively, (e) references to "hereof," "herein," "hereby" and similar terms shall refer to this entire Agreement (including the Schedules and Exhibits hereto) and (f) references to any Person shall be deemed to mean and include the successors and permitted assigns of such Person (or in the case of a Governmental Entity, Persons succeeding to the relevant functions of such Person). 76 15.10 Further Assurances. The parties hereto agree to execute and deliver any and all papers and documents which may be reasonably necessary to carry out the terms of this Agreement. 15.11 Consistent Accounting. The parties to this Agreement shall consult with each other for the purpose of arriving at consistent accounting, tax and reporting treatment, whether public or private, of the transactions contemplated hereby. 15.12 Severability. The provisions of this Agreement are severable and the invalidity of any provision shall not affect this validity of any other provision. 15.13 Exclusive Remedy. Each of the parties hereto acknowledges and agrees that from and after the Closing, its sole and exclusive remedy with respect to any and all claims relating to the subject matter of this Agreement (other than claims for payment by BKF of Transaction Expenses, the payments contemplated by Section 11.2 hereof and the payments of expenses contemplated by Sections 9.2 and 9.3) shall be pursuant to the indemnification provisions set forth in Article XII, except that nothing in this Agreement shall be deemed to constitute a waiver of any tort claims of, or causes of action arising from, fraud by any party. 77 IN WITNESS WHEREOF, the parties have duly executed, or caused to be duly executed by their respective officers thereunto duly authorized, this Agreement, all as of the date first written above. BAKER, FENTRESS & COMPANY By: /s/ James P. Gorter ------------------------------------ Title: Chairman JOHN A. LEVIN & CO., INC. By: /s/ John A. Levin ------------------------------------ Title: President JALC ACQUISITION CORP. By: /s/ James P. Gorter ------------------------------------ Title: /s/ John A. Levin --------------------------------------- JOHN A. LEVIN /s/ Melody L. Prenner Sarnell --------------------------------------- MELODY L. PRENNER SARNELL /s/ Jeffrey A. Kigner --------------------------------------- JEFFREY A. KIGNER /s/ Daniel E. Aron --------------------------------------- DANIEL E. ARON /s/ Frank F. Rango --------------------------------------- FRANK F. RANGO /s/ Barton G. Ice --------------------------------------- BARTON G. ICE /s/ Carol L. Novak --------------------------------------- CAROL L. NOVAK 78 EX-99.B 3 PORTFOLIO MGMT AGMT DTD 6/28/96 EXHIBIT B PORTFOLIO MANAGEMENT AGREEMENT As of June 28, 1996, Baker, Fentress & Company, a Delaware corporation registered under the Investment Company Act of 1940, as amended ("1940 Act") as a closed-end non-diversified management investment company ("BKF"), hereby appoints John A. Levin & Co., Inc., a Delaware corporation registered under the Investment Advisers Act of 1940, as amended (the "Advisers Act") as an investment adviser, of New York, New York, and an indirect wholly-owned subsidiary of BKF ("Manager"), as a discretionary portfolio manager on the terms and conditions set forth herein of the portion of assets of BKF currently invested, and intended to be invested in publicly-traded equity securities (other than the portion of BKF assets represented by shares of common stock, $1.00 par value, of Consolidated-Tomoka Land Co.) (the assets to be managed by Manager hereinafter referred to as the "Account"). 1. Management. Manager shall manage the investment and reinvestment of the Account and advise with respect thereto for the period and on the terms set forth in this Agreement, subject to the overall control of the Board of Directors of BKF. Manager shall give due consideration to the investment policies and restrictions and the other statements concerning BKF in BKF's certificate of incorporation, as amended, by-laws, registration statement under the 1940 Act, registration statement under the Securities Act of 1933 ("1933 Act"), if any, to the provisions of the 1933 Act and the 1940 Act and rules and regulations thereunder, to BKF's overall investment programs and strategies, to the provisions of the Internal Revenue Code of 1986, as amended, applicable to BKF as a regulated investment company and to other applicable laws ("Investment Policies and Restrictions"). Manager shall not, without the prior approval of the Board of Directors of BKF, effect any transactions which would cause BKF to be out of compliance with any of such Investment Policies and Restrictions. Manager shall for all purposes be deemed to be an independent contractor and not an agent of BKF and shall, unless otherwise expressly provided or authorized, have no authority to act for or represent BKF in any way. 2. Portfolio Transactions. Manager shall have authority and sole discretion to select brokers and dealers to execute portfolio transactions initiated by Manager and to select the markets on or in which transactions will be executed; provided, however, such selection shall be subject to obtaining the best combination of net price and execution and in accordance with the portfolio transaction policies of BKF as set forth from time to time in BKF's registration statement on Form N-2 under the 1940 Act. Manager shall not execute any portfolio transactions for the Account with a broker or dealer that is an "affiliated person" (as defined in the 1940 Act) of BKF or Manager, without the prior written approval of BKF and provided that BKF is promptly notified in writing of such transactions (and in no case shall such notification be later than the end of the quarter in which such transaction occurred). 3. Expenses Borne by BKF. BKF shall pay all expenses incidental to its organization, operations and business not specifically assumed or agreed to be paid by Manager pursuant to paragraphs 4 and 6, including, without limitation: all charges of depositories, custodians, sub-custodians and other agencies for the safekeeping and servicing of its cash, securities, and other property, and of its transfer, shareholder recordkeeping, dividend disbursing, and redemption agents, if any; all charges for equipment or services used for obtaining price quotations or for communication between BKF, Manager and the custodian, transfer agent or any other agent selected by BKF; all charges for accounting services provided to BKF by the custodian, BKF, or any other provider of accounting services; all expenses of portfolio pricing, net asset value computation and reporting of portfolio information to BKF or Manager; all charges for services to BKF by independent auditors; all charges for services to BKF by legal counsel; all expenses of printing and distributing notices, proxy solicitation material and reports to shareholders of BKF; all expenses related to preparing and transmitting certificates representing BKF shares, if any; all expenses of bond and insurance coverage required by law or deemed advisable by the Board of Directors of BKF; all brokers' commissions and other normal charges incident to the purchase and sale of portfolio securities; all taxes and corporate fees payable to Federal, state or other governmental agencies, domestic or foreign; all stamp or other transfer taxes; all expenses of registering and maintaining the registration of BKF under the 1940 Act, all expenses of registering its shares under the 1933 Act, of qualifying and maintaining qualification of BKF and of BKF shares for sale under securities laws of various states or other jurisdictions and of registration and qualification of BKF under all other laws applicable to BKF or its business activities; and all fees, dues and other expenses incurred by BKF in connection with membership of BKF in any trade association or other investment company organization. 4. Expenses Borne by Manager. Manager, at its own expense, shall furnish all executive and other personnel, office space, and office facilities to the extent necessary in connection with the performance of its duties and obligations under this Agreement. Manager shall not be required to pay or provide any credit for services provided by BKF's custodian, transfer agent, or other agents. 5. Portfolio Management Fee. For the services to provided to the Account by the Manager, BKF will pay Manager a monthly fee at the annual fee of .30 of 1% of the average net assets of the Account, calculated and paid on the last business day of each month. The fee shall be pro-rated for any month during which this Agreement is in effect for only a portion of the month. 6. Non-Exclusivity; Service to other Clients. The services of Manager to BKF hereunder are not to be deemed exclusive and Manager shall be free to render the same or similar services to others. It is acknowledged by BKF that Manager and its directors, officers, employees and affiliates perform investment advisory services for various clients, including other clients' discretionary accounts and investment partnerships for which a wholly-owned subsidiary of the Manager serves as general partners. It is understood that Manager shall not have any obligation to purchase or sell, or to recommend for purchase or sale, for the Account any security which Manager (or any affiliated person of Manager) may purchase or sell for its or their own account or for the account of any other client. 7. Standard of Care. Neither Manager, nor any of its directors, officers, agents or employees shall be liable or responsible to BKF or its shareholders for any error of judgment, 2 mistake of law or any loss arising out of any investment, or for any other act or omission in the performance by Manager or, acting on its behalf, by any of its directors, officers, agents or employees, of its duties under this Agreement, except for liability resulting from willful misfeasance, bad faith or gross negligence on Manager's part or from reckless disregard by Manager of its obligations and duties under this Agreement. 8. Amendment. This Agreement may not be amended without the affirmative votes (a) of a majority of the Board of Directors of BKF, including a majority of those directors who are not "interested persons" of BKF, or of Manager, voting in person at a meeting called for the purpose of voting on such approval, and (b) of a "majority of the outstanding shares" of BKF. For purposes of this Agreement, the terms "interested person" and "vote of a majority of the outstanding shares" shall be construed in accordance with their respective definitions in Sections 2(a)(19) and 2(a)(42) of the 1940 Act and, with respect to the first term, as modified by the order issued by the Securities and Exchange Commission in SEC Proceeding No. 812-9528 (the "SEC Order"), and with respect to the latter term, in accordance with Rule 18f-2 under the 1940 Act. 9. Termination. This Agreement may be terminated at any time, without payment of any penalty, by the Board of Directors of BKF, or by a vote of a majority of the outstanding shares of BKF, upon at least thirty (30) days' written notice to Manager. This Agreement may be terminated by BKF at any time upon at least thirty (30) days' written notice to Manager. This Agreement shall terminate automatically in the event of its assignment (as defined in Section 2(a)(4) of the 1940 Act). Unless terminated as hereinbefore provided, this Agreement shall continue in effect until , 1998* and thereafter from year to year only so long as such continuance is specifically approved at least annually (a) by a majority of those directors who are not interested persons (as defined in Section 8 above) of BKF or of Manager, voting in person at a meeting called for the purpose of voting on such approval, and (b) by either the Board of Directors of BKF or by a vote of a majority of the outstanding shares (as defined in Section 8 above) of BKF. 10. Confidentiality. Subject to the duty of Manager and BKF to comply with applicable law, including any demand of any regulatory or taxing authority having jurisdiction, Manager and BKF shall treat as confidential all information pertaining to the Account and the actions of Manager and BKF in respect thereof. 11. Administration of Account. In furtherance of administration of BKF, Manager agrees to the following: a. It will maintain in good form its registration as an investment adviser under the Advisers Act and promptly provide, upon request, to BKF copies of its registration statement in connection therewith and any amendments thereto. b. It will maintain, keep current, and preserve on behalf of BKF, in the manner required or permitted by the 1940 Act and the rules thereunder, records relating to the portfolio - - --------------------------------- * Two years from date of this Agreement. 3 management of the Account identified by BKF as provided for under Section 31 of the 1940 Act, from time to time. Manager agrees that such records are the property of BKF and will be surrendered to BKF promptly upon request. c. It will maintain a written code of ethics complying with the requirements of Rule 17j-1 under the 1940 Act and will provide BKF with a copy of the code of ethics, including any amendments thereto, and evidence of its adoption. Within 45 days of the end of each year while this Agreement is in effect, an officer of Manager shall certify to BKF that Manager has complied with the requirements of Rule 17j-l during the previous year and that there has been no violation of its code of ethics or, if such a violation has occurred, that appropriate action was taken in response to such violation. Upon the written request of BKF, Manager shall permit BKF to examine the reports required to be made by Manager under Rule 17j-1(c)(1). d. Upon request, Manager will promptly supply BKF with any information concerning Manager and its employees and affiliates which BKF may reasonably require in connection with the preparation of its registration statements, proxy material, reports and other documents required to be filed under the 1940 Act, the 1933 Act, and other applicable securities laws. e. Manager will vote all proxies solicited by or with respect to the issuers of securities in which assets of the Account may be invested from time to time. 12. Severability. If any term or condition of this Agreement shall be invalid or unenforceable to any extent or in any application, then the remainder of this Agreement, and such term or condition except to such extent or in such application, shall not be affected thereby, and each and every term and condition of this Agreement shall be valid and enforced to the fullest extent and in the broadest application permitted by law. 13. References and Headings. In this Agreement and in any amendment to it, references to this Agreement and all expressions such as "herein," "hereof," and "hereunder" shall be deemed to refer to this Agreement or this Agreement as amended or affected by any such amendments. Headings are placed herein for convenience of reference only and shall not be taken as a part hereof or control or affect the meaning, construction or effect of this Agreement. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original. 14. Governing Law. To the extent that state law has not been preempted by the provisions of any law of the United States heretofore or hereafter enacted, as the same may be amended from time to time, this Agreement shall be administered, construed and enforced according to the laws of the State of Illinois. 4 Dated: BAKER, FENTRESS & COMPANY ATTEST: By: /s/ James P. Gorter -------------------------------- /s/ James P. Koeneman - - ---------------------------------- , Secretary - - --------------- JOHN A. LEVIN & CO., INC. ATTEST: By: /s/ John A. Levin -------------------------------- /s/ Carol L. Novak - - ------------------------------------ , Secretary - - --------------- 5 EX-99.C 4 ESCROW AGMT DATED 6/28/96 EXHIBIT C ESCROW AGREEMENT THIS ESCROW AGREEMENT (this "Agreement") is made this 28th day of June, 1996, by and among Baker, Fentress & Company, a Delaware corporation ("BKF"), John A. Levin, Melody L. Prenner Sarnell, Jeffrey A. Kigner, Daniel E. Aron, Frank F. Rango, Barton G. Ice, and Carol L. Novak (collectively, the "Stockholders") and UMB Bank, N.A., as escrow agent (the "Escrow Agent"). WHEREAS, BKF and the Stockholders are among the parties to an Amended and Restated Agreement and Plan of Merger (the "Merger Agreement") dated as of May 13, 1996, pursuant to which the Stockholders will receive as part of the Merger Consideration (as defined in the Merger Agreement) shares of capital stock, $1.00 par value of BKF ("BKF Common Stock"). All capitalized terms used in this Agreement shall have the same meanings assigned to them in the Merger Agreement. The Stockholders have agreed pursuant to Section 12.7 of the Merger Agreement and pursuant to this Agreement to the deposit of an aggregate number of BKF Common Stock having a value at a deemed price of $15.80 per share equal to 50% of the Merger Value in an escrow fund (such shares less any distributions made pursuant to Section 3 hereof, is hereinafter referred to as the "Escrow Fund") for the purpose of compensating BKF for any Losses for which BKF is entitled to indemnification under Section 12.2 of the Merger Agreement. WHEREAS, the parties hereto wish to enter into this Agreement for the purpose of establishing the Escrow Fund, specifying the procedure to be followed in determining the existence of Losses and describing the method of making payments from the Escrow Fund. NOW, THEREFORE, the parties hereto hereby AGREE as follows: 1. Establishment of Escrow. Each Stockholder hereby deposits with the Escrow Agent, for deposit in the Escrow Fund, the number of shares of BKF Common Stock set forth opposite his or her name on Schedule 1 hereto, (such number of shares, as reduced from time to time pursuant to this Agreement, the "Designated Shares" and, together with all their Designated Shares, the "Escrow Shares") and, as a result, the Escrow Fund is hereby established by BKF and the Stockholders at the Escrow Agent. The Escrow Agent hereby accepts from the Stockholders, for deposit in the Escrow Fund, the Escrow Shares to be held and disbursed in accordance with the terms hereof. The parties hereto acknowledge that the Escrow Agent does not have any interest in the Escrow Shares, the Escrow Fund, Designated Shares, any voting rights pertaining to such Escrow Shares or any dividends, capital gains distributions or other distributions thereon and the parties hereto further acknowledge that the Escrow Agent is serving as escrow holder only and shall have possession of such Escrow Shares only for such purpose. 2. Holding and Accounting for Shares. --------------------------------- (a) Each Stockholder shall deliver to the Escrow Agent his or her respective Designated Shares, and such Designated Shares shall be reregistered in the name of the Escrow Agent and the Escrow Agent shall hold and maintain such Designated Shares, as Escrow Agent, upon the terms and conditions set forth in this Agreement in a separate account (such account, the "Designated Account"). (b) Notwithstanding Section 2(a) hereof, during the Escrow Period (as hereinafter defined) each Stockholder shall retain the right to exercise and shall be entitled to exercise, in person or by its nominee or proxy, any and all rights and powers to vote his or her Designated Shares and to take part in or give consent with respect to any corporate action with respect to which such shares are able or required to be voted. BKF shall cause the Escrow Agent to, and the Escrow Agent shall, promptly notify each Stockholder upon the receipt of any proxy, similar solicitation material or any shareholder communication, and BKF shall cause the Escrow Agent to, and the Escrow Agent shall, promptly (but in no case later than the third Business Day (as hereinafter defined) following receipt) deliver such materials to each Stockholder. The Escrow Agent shall vote all proxies solicited with respect to each Stockholder's Designated Shares only in accordance with the written instructions of such Stockholder (or his or her nominee or proxy, but only if accompanied by written instrument evidencing such nomination or proxy) or if no such written instructions are received by the Escrow Agent by the close of business on the 10th Business Day immediately following the date on which such proxies were sent to such Stockholder, then, in accordance with the written instructions of John A. Levin (if any). The Escrow Agent shall have no right to, and shall not, vote any of the Escrow Shares other than in accordance with the immediately preceding sentence. As used herein, "Business Day" means any day (other than a Saturday, Sunday or holiday) on which banks are open for business in Kansas City, Missouri or such other city in which the Escrow Agent principally performs its escrow administration functions, as notified by the Escrow Agent to BKF and the Stockholder Representative in writing from time to time. (c) Notwithstanding Section 2(a) hereof, during the Escrow Period, each Stockholder shall retain the right to receive and shall be entitled to receive any and all dividends, capital gains and other distributions paid or declared with respect to such Stockholder's Designated Shares and the Escrow Agent shall promptly (but in no event later than the third Business Day following receipt by it) deliver by wire transfer to such Stockholder all such dividends, capital gains and other distributions pursuant to wire instructions set forth on Schedule 2(c) hereto or such other written instructions as may be provided by such Stockholder from time to time at least three Business Days prior to the date such payment is to be made to the Stockholder. (d) Notwithstanding Section 2(a) hereof, from time to time during the Escrow Period, each Stockholder shall have the right to transfer all or a portion of its Designated Shares to any one or more other Stockholders; provided, however, that, after giving effect to all transfers pursuant to this clause (d), no Stockholder shall have fewer Designated Shares as a result of a transfer pursuant hereto than such Stockholder had immediately prior to such transfer. If any -2- Stockholder (the "Transferring Stockholder") elects to so transfer any number of its Designated Shares (the "Transferred Number") to any other Stockholder (the "Transferee"), it shall so notify the Escrow Agent and BKF in writing (a Transfer Notice") and within two business days of receipt of the Transfer Notice, (i) BKF shall, if so directed by the Transferring Stockholder, (A) issue to such Transferring Stockholder stock certificates representing such number of Designated Shares as such Transferring Stockholder may request in order to allow the transfer of the Transferred Number of Designated Shares and (B) immediately thereafter, cause such newly issued certificates to be reregistered in the name of the Escrow Agent and (ii) the Escrow Agent shall (A) upon receipt of such newly issued certificates, return to BKF for cancellation the certificates theretofore representing such Transferring Stockholder's Designated Shares and (B) cause the Transferred Number of such Transferring Stockholder's Designated Shares to be transferred from the Transferring Stockholder's Designated Account to the Transferee's Designated Account. Upon any such transfer, Schedule 1 hereto shall be amended accordingly. 3. Determination of Losses. ----------------------- (a) Upon receipt by the Escrow Agent on or before the last day of the Escrow Period of a certificate signed by any officer of BKF, other than the Stockholder Representative (an "Officer's Certificate"), (i) stating that Losses exist in an aggregate amount greater than the relevant Indemnification Basket or that no Indemnification Basket is applicable to such Losses and (ii) specifying in reasonable detail (A) the individual items of such Losses included in the amount so stated, (B) in the case of Losses arising out of any inaccuracy or breach of a representation or warranty contained in Article V of the Merger Agreement ("Several Losses"), the Stockholder against whom indemnification therefor is claimed (each such Stockholder, the "Indemnifying Stockholder"), (C) the portion of such Losses constituting Several Losses, if any, and the portion of such Several Losses to be paid by such Indemnifying Stockholder, (D) the portion of such Losses not constituting Several Losses, if any ("Joint Losses), (E) the date each such item of Loss was paid, incurred or sustained and (F) the nature of the misrepresentations, breach of warranty or claim to which such item is related, the Escrow Agent shall, subject to the provisions of Section 3(c) hereunder, deliver to BKF (x) in the case of Several Losses out of such Indemnifying Stockholder's Designated Account, as promptly as practicable, an aggregate number of shares of BKF Common Stock equal to the quotient of (A) the dollar amount of such Several Losses and (B) $15.80 minus the per share amount of any capital gains distribution on the Escrow Shares for which the record date has occurred from the Closing Date through the date such Escrow Shares are paid to BKF hereunder, in each case adjusted for any stock dividends on or stock splits or combinations of the BKF Common Stock (such difference, the "Deemed Value") and (y) in the case of Joint Losses, out of each Stockholder's Designated Account, as promptly as practicable, an aggregate number of BKF Common Shares equal to the result of the following formula -3-
L x DS -- -- DV ES Where: L = the aggregate dollar amount of the Joint Losses claimed in such Officer's Certificate; DV = the Deemed Value; DS = such Stockholder's Designated Shares remaining in his or her Designated Account at the time of Payment of such Joint Losses to BKF; and ES = the aggregate remaining Escrow Shares at the time of payment of such Joint Losses to BKF;
(the calculation of the number of shares of BKF Common Stock to be paid to BKF out of each Stockholder's Designated Shares pursuant to clause (x) or (y), as applicable, is herein called a "Share Delivery Calculation"). Prior to any payment by the Escrow Agent under this Section 3(a), BKF shall deliver to the Escrow Agent an Officer's Certificate setting forth the Share Delivery Calculation. (b) [Intentionally omitted.] (c) At the time of delivery of any Officer's Certificate to the Escrow Agent, a duplicate copy of such Officer's Certificate shall be delivered to the Stockholder Representative and for a period of forty-five (45) days after receipt of such Officer's Certificate by the Escrow Agent, the Escrow Agent shall make no delivery of BKF Common Stock unless the Escrow Agent shall have received written authorization from the Stockholder Representative to make such delivery. After the expiration of such forty-five (45) day period, if such Officer's Certificate shall not have been withdrawn by BKF, the Escrow Agent shall make delivery of BKF Common Stock from each Indemnifying Stockholder's Designated Account in an amount determined in accordance with the applicable Share Delivery Calculation, provided that no such delivery may be made if the Stockholder Representative shall object in a written statement to the claim made, or calculation set forth, in an Officer's Certificate, and such statement shall have been delivered to the Escrow Agent and to BKF and received by each such party prior to the expiration of such forty-five (45) day period. (d) In case the Stockholder Representative shall so object in writing to any claim or claims by BKF made in any Officer's Certificate, BKF shall have forty-five (45) days after the date of receipt by the Escrow Agent of such written objection to respond in a written statement to the objection of the Stockholder Representative. If after such forty-five (45) day period there remains a dispute as to any claims or calculations set forth, the Stockholder Representative and BKF shall attempt in good faith during the sixty (60) day period thereafter to agree upon the rights of the respective parties with respect to each of such claims. If the -4- Stockholder Representative and BKF should so agree, a memorandum setting forth such agreement shall be prepared and signed by both parties and shall be furnished to the Escrow Agent. The Escrow Agent shall be entitled to rely on any such memorandum and, if required by the terms of such memorandum, shall distribute BKF Common Stock from each Indemnifying Stockholder's Designated Account in accordance with the terms thereof and the applicable Share Delivery Calculation. The resolution set forth in any such memorandum shall be final, binding and conclusive on the parties hereto with respect to the matters covered therein. (e) If no such agreement has been reached after such 60-day period, either BKF or the Stockholder Representative may, by written notice to the other, demand arbitration of the matter unless the amount of the damage or loss is at issue in pending litigation with a third party, in which event arbitration shall not be commenced until such amount is ascertained or both parties agree to arbitration; and in either such event the matter shall be settled by arbitration conducted by an arbitrator to be selected in accordance with the following sentence. Within fifteen (15) days after such written notice is sent, BKF and the Stockholder Representative shall each select one arbitrator, and the two arbitrators so selected shall select a third arbitrator which shall be the arbitrator (the "Arbitrator") for all purposes of this Agreement. The decision of the Arbitrator as to the validity and amount of any Losses claimed in such Officer's Certificate or the Share Delivery Calculation, if applicable, shall be binding and conclusive upon the parties to this Agreement, and the Escrow Agent shall be entitled to act in accordance with such decision and make or withhold payments out of the Escrow Fund in accordance therewith and the applicable Share Delivery Calculation; provided, however, that such decision shall be delivered to the Escrow Agent in writing evidencing the appointment of the Arbitrator. (f) Judgment upon any award rendered by the Arbitrator may be entered in any court having jurisdiction. Any such arbitration shall be held (i) in the case of the first such arbitration, in Chicago, Illinois, (ii) in the case of the second such arbitration, in New York, New York and (iii) in each subsequent arbitration, in one of such jurisdictions other than the jurisdiction in which the immediately preceding arbitration was held, under the commercial rules then in effect of the American Arbitration Association. Each party to an arbitration conducted hereunder shall pay its own expenses, including legal fees, and the fees of the Arbitrator and the administrative fee, if any, of the American Arbitration Association, shall, in each case, be borne 50/50 by BKF, on one hand, and the Stockholder or Stockholders, as the case may be, subject to such arbitration, on the other hand. 4. Termination of Escrow Period. ---------------------------- (a) The term (the "Escrow Period") of the Escrow Fund created hereunder shall commence on the date hereof and shall terminate on the third anniversary of the Closing Date; provided, however, that the number of Designated Shares in each Designated Account, which, in the reasonable judgment of BKF, subject to the objection of the Stockholder Representative and the subsequent arbitration of the matter in the manner provided in this Agreement, are necessary to satisfy (in accordance with the applicable Share Delivery Calculations) any unsatisfied claims specified in any Officer's Certificate delivered to the Escrow Agent prior to termination of the Escrow Period with respect to facts and circumstances -5- existing prior to expiration of the Escrow Period, shall remain in the Escrow Fund until such claims have been resolved in accordance herewith at which time all Escrow Shares remaining in the Escrow Fund shall be delivered to the Stockholders in accordance with Section 4(b). (b) Subject to the proviso set forth in Section 4(a) above, BKF agrees to instruct the Escrow Agent to deliver to each Stockholder upon the termination of the Escrow Period the Designated Shares then remaining in such Stockholder's Designated Account. 5. Duties and Responsibilities of Escrow Agent. ------------------------------------------- (a) The Escrow Agent, by signing this Agreement, agrees to hold and dispose of the Escrow Shares in accordance with the terms hereof. The duties and responsibilities of the Escrow Agent shall be limited to those expressly set forth in this Agreement and it shall not be subject to, nor obligated to recognize, any other agreement between, or direction or instruction of, any or all of the parties hereto even though reference thereto may be made therein; provided, however, with the written consent of the Escrow Agent, this Agreement may be amended at any time or times by an instrument in writing signed by the Stockholder Representative and BKF. (b) The Escrow Agent is authorized, in its sole discretion, to disregard any and all notices or instructions given by any of the undersigned or by any other Person except only such notices or instructions as are provided for herein and orders or process of the Arbitrator or of any court entered or issued with or without jurisdiction. If any property subject hereto is at any time attached, garnished or levied upon under any court order or in case the payment, assignment, transfer, conveyance or delivery of any such property shall be stayed or enjoined by any court order, or in case any order, judgment or decrees shall be made or entered by any court affecting such property or any part thereof, then and in any of such events the Escrow Agent is authorized, in its sole discretion, to rely upon and comply with any such order, writ, judgment or decree which it is advised by legal counsel of its own choosing is binding upon it; and if the Escrow Agent complies with any such order, writ, judgment or decree it shall not be liable to any of the parties hereto or to any other Person by reasons of such compliance even though such order, writ, judgment or decree may be subsequently reversed, modified, annulled, set aside or vacated; provided, however, that the Escrow Agent shall be liable for damages arising out of its fraud, gross negligence, bad faith or willful misconduct under this Agreement. (c) The Escrow Agent shall not be personally liable for any act taken or omitted hereunder if taken or omitted by it in good faith and in the exercise of its own best judgment and BKF and the Stockholders, jointly and severally, agree to indemnify and save the Escrow Agent, in its capacity as such, harmless from all loss, cost, damages, fees and expenses, including, but not limited to reasonable attorney's fees (collectively, "Escrow Agreement Losses") suffered or incurred by the Escrow Agent as a result thereof; provided, however, that the Escrow Agent shall be liable for, and shall not be entitled to indemnification in respect of, any Escrow Agreement Losses arising out of its fraud, gross negligence, bad faith or willful misconduct under this Agreement. The Escrow Agent shall also be fully protected in relying upon any written notice, demand, certificate, waiver, authorization, memorandum, request, letter, -6- opinion, power of attorney or any other document delivered to it pursuant to the terms of this Agreement which it in good faith believes to be genuine. (d) The Escrow Agent acts hereunder as depository only, and is not responsible or liable in any manner for the sufficiency, correctness, genuineness or validity of this Agreement, any instrument deposited with it hereunder, or with respect to the form or execution of the same, or the identity, authority, or right of any person executing or depositing the same. (e) In the event of any disagreement between the undersigned or the person or persons named in the instructions delivered pursuant to this Agreement or with any other persons resulting in adverse claims and demands being made in connection with or for any papers, money or property involved herein, or affected hereby, the Escrow Agent shall be entitled to refuse to comply with any demand or claim, as long as such disagreement shall continue, and in so refusing to make any delivery or other disposition of any money, papers or property involved or affected hereby, the Escrow Agent shall not be or become liable to the undersigned or to any person named in such instructions for its refusal to comply with such conflicting or adverse demands, and the Escrow Agent shall be entitled to refuse and refrain to act until: (i) The rights of the adverse claimants shall have been fully and finally adjudicated in a court assuming and having jurisdiction of the parties and money, papers and property involved herein or affected hereby; (ii) All differences shall have been resolved by agreement and the Escrow Agent shall have been notified thereof in writing, signed by all the interested parties; or (iii) The Arbitrator shall render a decision pursuant to Section 3(e) hereof. (f) The Escrow Agent may consult with legal counsel in the event of any dispute or question as to the construction of any of the provisions hereof or its duties hereunder, and it shall incur no liability and shall be fully protected in acting in accordance with the opinion and instructions of such counsel. 6. Semi-Annual Statement. On each six month anniversary of this Agreement during the Escrow Period, the Escrow Agent shall send to each Stockholder and BKF a statement setting forth the aggregate number of Designated Shares held pursuant to this Agreement in such Stockholder's Designated Account. 7. Resignation; Successor Escrow Agent. ----------------------------------- 7.1 Resignation. The Escrow Agent (and any successor escrow agent) may at any time resign as such by delivering the Escrow Fund to any successor Escrow Agent jointly designated by the Stockholder Representative and BKF in writing, or to any court of competent jurisdiction, whereupon the Escrow Agent shall be discharged of and from any and all further obligations arising in connection with this Agreement. The resignation of the Escrow Agent will -7- take effect on the earlier of (a) the appointment of a successor (including by a court of competent jurisdiction) or (b) the day which is thirty (30) days after the date of delivery of its written notice of resignation to the Stockholder Representative and BKF. If the Escrow Agent has not received a designation of a successor Escrow Agent at the end of such thirty (30) day period, the Escrow Agent's sole responsibility after such time shall be to safekeep the Escrow Fund until receipt of a designation of successor Escrow Agent or a joint written disposition instruction by the other parties hereto or a final order of a court of competent jurisdiction. 8. Termination of the Escrow Agent. BKF and the Stockholder Representative may jointly terminate the appointment of the Escrow Agent hereunder by written instructions signed by BKF and the Stockholder Representative specifying the date upon which such termination shall take effect. In the event of such termination, BKF and the Stockholder Representative shall jointly appoint a successor escrow agent and, upon written receipt of written instructions signed by BKF and the Stockholder Representative and payment of all outstanding fees and expenses payable to the Escrow Agent pursuant to this Agreement, the Escrow Agent shall promptly turn over the Escrow Fund to such successor escrow agent. Any such termination shall be effective on the date specified in the termination documents, or, if not specified, then on the date when signed by the parties thereto. The Escrow Agent shall thereafter have no further obligations hereunder. Upon receipt of the Escrow Fund, the successor escrow agent shall thereupon be bound by all of the provisions hereof. This Agreement shall be terminated upon disbursement of the assets held by the Escrow Agent hereunder. 9. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly received (i) on the date received if delivered personally or by cable, telegram, telex or telecopy or (ii) on the date received if mailed by registered or certified mail (return receipt requested), to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): if to BKF: Baker, Fentress & Company 200 West Madison Street, #3510 Chicago, Illinois 60606 Attention: James P. Gorter Copy to: Bell, Boyd & Lloyd 70 West Madison Street, Suite 3300 Chicago, Illinois 60602 Attention: Janet D. Olsen if to the Stockholders (other than John A. Levin): to the addresses set forth on Schedule 15.2 of the LEVCO Disclosure Schedule (as defined in the Merger Agreement) -8- Copy to: John A. Levin & Co., Inc. One Rockefeller Plaza New York, New York 10020 Copy to: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, New York 10019-6064 Attention: Matthew Nimetz if to the Stockholder Representative: Mr. John A. Levin John A. Levin & Co., Inc. One Rockefeller Plaza New York, New York 10020 Copy to: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, New York 10019-6064 Attention: Matthew Nimetz if to the Escrow Agent: UMB Bank, N.A. 928 Grand Avenue 13th Floor, Corporate Trust Department Kansas City, Missouri 64106 Attention: Fredrick D. Deay, II 10. Entire Agreement. This Agreement, together with the Merger Agreement, contains the entire agreement between BKF and the Stockholders with respect to the subject matter hereof and supersedes any and all prior agreements, written or oral, with respect to the subject matter hereof. The Escrow Agent is not a party to the Merger Agreement or any other agreement between BKF and the Stockholders, and the Escrow Agent's duties shall be determined solely by reference to this Agreement. 11. Waivers and Amendments. This Agreement may be amended, modified, extended, superseded, canceled or renewed, and the terms and conditions hereof may be waived, only by a written instrument signed by BKF and the Stockholder Representative and consented to in writing by the Escrow Agent, or, in the case of a waiver, by any of BKF, the Stockholder Representative or the Escrow Agent, as the party so waiving compliance. 12. Expenses. The fees, costs, charges and expenses of the Escrow Agent incurred pursuant hereto shall be borne by BKF as set forth in Schedule 12 hereto, except that any fees, costs, charges and expenses (including taxes) incurred as a result of a transfer as set -9- forth in Section 2(d) hereto shall be borne by each Transferring Stockholder and Transferee who is a party to such transfer. 13. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the respective heirs, executors, successors and assigns to the parties hereto. This Agreement is not intended to confer any benefit on any Person other than the parties hereto and, accordingly, shall not create any third party beneficiaries hereof. 14. Counterparts. This Agreement may be executed in one or more counterparts with all such counterparts constituting one and the same agreement. 15. Headings. The headings set forth in this Agreement are for convenience of reference only and do not, and shall not be construed to, limit or otherwise define the terms or provisions of this Agreement or otherwise have any substantive effect. 16. Governing Law. The validity, interpretation and effect of this Agreement shall be governed exclusively by the laws of the State of Delaware, excluding the conflict of laws rules of that state. Each of the parties to this Agreement hereby irrevocably and unconditionally agrees (i) to be subject to the jurisdiction of the courts of the State of Delaware and of the federal courts sitting in the State of Delaware, and (ii) to the extent such party is not otherwise subject to service of process in the State of Delaware, to appoint and maintain an agent in the State of Delaware as such party's agent for acceptance of legal process, and that service made pursuant to (ii) above shall have the same legal force and effect as if served upon such party personally within the State of Delaware. For purposes of implementing the parties' agreement to appoint and maintain an agent for service of process in the State of Delaware, each such party that has not as of the date hereof already duly appointed such an agent does hereby appoint RL&F Service Corp., One Rodney Square, 10th Floor, Wilmington, Delaware 19801, as such agent. 17. Stockholder Representative. -------------------------- (a) The Stockholders hereby appoint John A. Levin as the Stockholder Representative. In the event John A. Levin shall at any time be unable to, or shall notify BKF and the Escrow Agent in writing that he is unwilling to, continue to perform the duties of the Stockholder Representative, the remaining Stockholders shall promptly designate a successor Stockholder Representative and shall promptly notify the Escrow Agent in writing of such successor Stockholder Representative, and in the absence of such an appointment, Melody L. Prenner Sarnell shall serve as the Stockholder Representative. (b) A decision, act, consent or instruction of the Stockholder Representative shall constitute a decision of all Stockholders and shall be final, binding and conclusive upon each such Stockholder, and the Escrow Agent and BKF may rely upon any decision, act, consent or instruction of the Stockholder Representative as being the decision, act, consent or instruction of each and every Stockholder. The Escrow Agent and BKF are hereby relieved from any liability to any Person for any acts done by them in accordance with such decision, act, consent or instruction of the Stockholder Representative, except for liability arising out of fraud, gross negligence, bad faith or willful misconduct under this Agreement. -10- (c) In dealing with this Agreement and any instruments, agreements or documents relating thereto, and in exercising or failing to exercise all or any of the powers conferred upon the Stockholder Representative hereunder, (i) the Stockholder Representative, to the fullest extent permitted by applicable law, shall not assume any, and shall incur no, responsibility whatsoever to any Stockholder by reason of any error in judgment or other act or omission performed or omitted hereunder or in connection with this Agreement, excepting only responsibility for any act or failure to act which represents gross negligence or willful misconduct, and (ii) the Stockholder Representative, to the fullest extent permitted by applicable law, shall be entitled to rely on the advice of counsel, public accountants or other independent experts experienced in the matter at issue, and any error in judgment or other act or omission of the Stockholder Representative pursuant to such advice shall in no event subject the Stockholder Representative to liability to any Stockholder. The Stockholders shall severally indemnify the Stockholder Representative and hold him or her harmless against any loss, liability or expense incurred without gross negligence or bad faith on the part of the Stockholder Representative and arising out of or in connection with the acceptance or administration of his or her duties hereunder. All of the indemnities, immunities and powers granted to the Stockholder Representative under this Agreement shall survive the termination of this Agreement. -11- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. Baker, Fentress & Company By: /s/ James P. Gorter --------------------------- Title: CHAIRMAN ------------------------ UMB Bank, N.A., as Escrow Agent By: /s/ Frank C. Bramwell --------------------------- Title: VICE PRESIDENT ------------------------ /s/ John A. Levin ------------------------------- John A. Levin /s/ Melody L. Prenner Sarnell ------------------------------- Melody L. Prenner Sarnell /s/ Jeffrey A. Kigner ------------------------------- Jeffrey A. Kigner /s/ John A. Levin ------------------------------- Frank F. Rango* /s/ Barton G. Ice ------------------------------- Barton G. Ice /s/ Daniel E. Aron ------------------------------- Daniel E. Aron /s/ Carol L. Novak ------------------------------- Carol L. Novak *Under Power of Attorney, dated June 11, 1996, granted to John A. Levin. -12- EX-99.D 5 REGISTRATION RIGHTS AGMT DATED 6/28/96 EXHIBIT D --------- REGISTRATION RIGHTS AGREEMENT Agreement dated as of June 28, 1996, among Baker, Fentress & Company ("BKF"), John A. Levin ("Levin") and those individuals named on Schedule I hereto (together with Levin, the "Investors"). WHEREAS, simultaneously with the execution and delivery of this Agreement, BKF, JALC Acquisition Corp. ("Merger Subsidiary") and John A. Levin & Co., Inc. ("LEVCO") and all of the holders of the outstanding capital stock of LEVCO have consummated transactions pursuant to an Amended and Restated Agreement and Plan of Merger dated as of May 13, 1996 (the "Merger Agreement") pursuant to which, among other things, LEVCO has been merged with and into Merger Subsidiary and the shares of common stock of LEVCO have been converted into cash and shares of common stock, $1.00 par value per share, of BKF ("BKF Common Stock"); and WHEREAS, BKF and the Investors desire to set forth certain registration rights with respect to the BKF Common Stock received by them pursuant to the Merger Agreement; and WHEREAS, the execution and delivery of this Agreement by BKF and the Investors is an express condition precedent under the Merger Agreement, and BKF and Levin are executing and delivering this Agreement in satisfaction of such condition precedent; NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, and for other good and valuable consideration, the parties hereto agree as follows: SECTION 1. Demand Registrations. -------------------- (a) Demand Registrations. Subject to the terms set forth herein, at any time following the Holding Period (as hereinafter defined), upon the written request of Levin that BKF effect the registration of up to the Registrable Amount of Registrable Securities held by him as of the Closing Date (as such terms are hereinafter defined), under the Securities Act of 1933, as amended, (the "1933 Act") and specifying the intended method or methods of disposition thereof, BKF shall promptly send written notice of such requested registration to all other Investors. Within five (5) days after receipt of such notice, any Investor may notify BKF in writing of his or her request to have up to the Registrable Amount of Registrable Securities held by such Investor as of the Closing Date included in such registration (each such other Investor so notifying BKF of such a request, a "Participating Stockholder"). Thereupon BKF shall effect the registration (the "Demand Registration") under the 1933 Act of all Registrable Securities requested to be registered by Levin and each Participating Stockholder (collectively, the "Selling Stockholders") to the extent required to permit the disposition in accordance with the requested method thereof and in accordance with the procedures set forth in Section 2; provided that upon at least two business days notice prior to the effective date of any Registration Statement (as defined below) filed in connection with such registration, each Participating Stockholder shall have the right to withdraw his or her request to have its Registrable Securities included in such Registration Statement; provided, further, that if the managing underwriter (selected by Levin in accordance with subsection (b) hereof) of any underwritten offering subject to this Section 1 shall inform BKF, Levin and the Participating Stockholders that, in its reasonable opinion, the number of Registrable Securities requested to be included in such registration by the Participating Stockholders would adversely effect such offering, then the managing underwriter of such offering shall limit the number of Registrable Securities included in such offering so as to eliminate such adverse effect by reducing the number of Registrable Securities to be included by the Participating Stockholders on a pro rata basis (measured by a fraction of the numerator of which is the number of Registrable Securities that a Participating Stockholder requested to be included in the registration and the denominator of which is the total number of Registrable Securities requested to be included by all Participating Stockholders); provided, further, that if the managing underwriter eliminated all Registrable Securities requested to be included in such offering by the Participating Stockholders and, in its reasonable opinion, the number of Registrable Securities requested to be included in such registration by Levin would adversely affect such offering, the managing underwriter shall limit the number of Registrable Securities included in such offering so as to eliminate such adverse effect by reducing the number of Registrable Securities intended to be included by Levin. Notwithstanding the foregoing, BKF shall not be required to take action to effect the registration of Registrable Securities pursuant to this Section 1, if: (i) BKF has effected a Demand Registration during the prior 365 day period; (ii) BKF has effected three (3) registrations pursuant to Section 1 hereof; or (iii) BKF shall have notified Levin in writing that in the good faith judgment of the Board of Directors of BKF it would not be in the best interests of BKF or its stockholders for a registration statement to be filed or declared effective in the near future; provided that, BKF's obligation hereunder to effect such Demand Registration shall not be deferred for a period in excess of two months. (b) Underwritten Offerings. Whenever a registration requested pursuant to Section 1 contemplates an underwritten offering, (i) only Registrable Securities designated by Levin and the Participating Stockholders in their sole discretion may be included in such underwriting agreement relating to such offering, unless Levin shall have permitted (in writing) other securities to be included in such registration and such underwritten offering and (ii) Levin shall have the right to select the managing underwriter(s) to administer the offering, from a list of five nationally prominent investment banking firms named by BKF as reasonably acceptable to it and delivered to Levin. 2 (c) Withdrawal. If, at any time after requesting registration pursuant to this Section 1 and prior to the effective date of the Registration Statement filed in connection with such registration request, Levin shall determine for any reason not to register such Registrable Securities, Levin may, by giving written notice to BKF, withdraw his request for such registration (which election of withdrawal shall be binding upon, and shall be deemed to have been made by, each Participating Stockholder), provided, however, that such withdrawal will decrease by one the number of demands available to Levin hereunder. After such withdrawal by Levin, BKF shall be relieved of its obligations to register any Registrable Securities in connection with such registration request by Levin (including those of the Participating Stockholders). (d) Piggy Back Rights. If BKF proposes to file a registration statement under the 1933 Act with respect to an offering by BKF of BKF Common Stock (an "Offering") (other than an offering in connection with an acquisition by BKF, pursuant to an offering by BKF to its existing shareholders of rights to acquire BKF Common Stock, or for the purpose of registering BKF Common Stock to be issued under BKF's dividend or capital gains reinvestment plan or any employee benefit plan (a "Permitted Offering")), then BKF shall give written notice of such proposed filing to the Investors at least fifteen (15) days prior to the anticipated filing date, and such notice shall offer each Investor the opportunity to register all of the Registrable Securities held by the Investor as of the Closing Date on the same terms and conditions as similar securities included therein. Upon the written request of Investors made within five (5) days after notice is given by BKF (such Investor notice specifying the number of Registrable Securities sought to be sold by each such Investor), BKF will use its reasonable best efforts to effect the registration of the Registrable Shares which BKF has been so requested by the Investors to register. The failure by an Investor to advise BKF in writing of his or her election to participate in such registration within the five (5) day period shall constitute an election not to register or participate, without prejudice to the Investor's right to participate in subsequent registrations or offerings or to demand or participate, as the case may be, in a registration pursuant to Section 1. If requested by the underwriters for such Offering, the Investors on whose behalf Registrable Securities are to be distributed shall enter into an underwriting agreement with such underwriters, such agreement to contain such representations and warranties by the Investors participating in the Offering and such other terms and provisions as are customarily contained in underwriting agreements for secondary offerings, including, without limitation, indemnities substantially to the effect and to the extent provided in Section 4(b) hereof; provided that the Investors participating in the Offering shall reasonably cooperate with BKF in the negotiation of the underwriting agreement. If BKF and the managing underwriter or underwriters of such Offering determine that the inclusion of the Registrable Securities and any other shares of BKF Common Stock as to which the holders ("Other Holders") shall have registration rights in such registration would be harmful to the prospects of a successful offering of the securities being offered in such registration, then the amount of securities to be offered for the account of each of the Investors and the Other Holders shall be reduced on a pro rata basis based on the number of shares of BKF Common Stock held by each Investor and Other Holder to the amount necessary to reduce the total amount of securities to be included in the Offering to the amount which would not be harmful to the prospects of a successful offering as recommended in good faith by BKF. Any such determination will be set forth in a certificate of an executive officer of BKF or a certificate of 3 such managing underwriter delivered to the Investors requesting to participate in the Offering, which certificate will set forth the number of shares of BKF Common Stock held by the Investor which will be included in the Offering. If, at any time after giving written notice of its intention to register any securities and prior to the effective date of the registration statement, BKF shall determine for any reason either not to register or to delay registration of such securities, BKF may, at its election, give written notice of such determination to each holder of Registrable Securities and thereupon, (i) in the case of a determination not to register any Registrable Securities in connection with such Offering (but not from its obligation to pay the Registration Expenses in connection therewith), without prejudice, however, to the rights of any Investor under Section 1 hereto, and (ii) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities, for the same period as the delay in registering such other securities in the Offering. (e) Certain Definitions. ------------------- (i) Terms used herein but not otherwise defined shall have the respective meaning ascribed thereto in the Merger Agreement. (ii) Holding Period. "Holding Period" shall mean the time period beginning on the Closing Date and ending 365 days thereafter. (iii) Registrable Amount. "Registrable Amount" means, with respect to each Investor, in the case of the first two (2) requests for registration pursuant to this Section 1, one-third of the amount of Registrable Securities held by such Investor as of the Closing Date and, in the case of the third request for registration pursuant to this Section 1, all Registrable Securities held by such Investor as of the Closing Date. (iv) Registrable Securities. "Registrable Securities" shall mean those shares of BKF Common Stock issued to the Investors pursuant to the Merger Agreement. As to any particular Registrable Securities, such securities will cease to be Registrable Securities when they have been distributed to the public pursuant to a offering registered under the 1933 Act or sold to the public through a broker, dealer or market maker in compliance with Rule 144 under the 1933 Act (or any similar rule then in force) (v) Registration Expenses. "Registration Expenses" means all expenses incident to BKF and BKF's performance of or compliance with Sections 1 and 2, including, without limitation, all registration, filing, NYSE listing and NASD fees, all fees and expenses of complying with securities or "Blue Sky" laws (including fees and disbursements of counsel in connection with "Blue Sky" qualifications of Registrable Securities), all word processing, duplicating and printing expenses, messenger and delivery expenses incurred by BKF, the fees and disbursements of counsel for BKF (but not for the Selling Stockholders) and of its independent, public accountants, including the expenses of "cold comfort" letters required by or incident to such performance and compliance, the fees and expenses of any special experts retained by BKF in connection with a registration and any fees and disbursements of underwriters customarily paid by issuers of securities and to which BKF and the underwriter have separately agreed in BKF's sole discretion; provided, that, in no event shall "Registration 4 Expenses" include any underwriting discounts or commissions and transfer taxes with respect to the Registrable Securities or any fees, expenses and disbursements of the Investors' legal counsel and accountants. (v) Closing Date. As set forth in the Merger Agreement, the "Closing Date" shall mean the date as of which the closing of the transactions contemplated by the Merger Agreement has occurred. SECTION 2. Registration Procedures. ----------------------- (a) If and whenever BKF is required to effect the registration of any Registrable Securities under the 1933 Act as provided in Section 1, BKF shall promptly: (i) prepare and file with the SEC a registration statement on form N-2 or any successor registration form at the time in effect (the "Registration Statement") with respect to such Registrable Securities, and all amendments, post-effective amendments and supplements to the Registration Statement as may be necessary under the 1933 Act and the rules and regulations thereunder to permit the sale of the Registrable Securities in accordance with the intended method of distribution. (ii) use its best efforts to cause the Registration Statement to become effective and thereafter to remain effective until the earlier of the (i) completion of the distribution of the Registrable Securities in accordance with the intended method or methods of disposition by the Selling Stockholders set forth in the Registration Statement, as amended, or (ii) 120 days from the effective date (the "Registration Term"). (iii) furnish to the Selling Stockholders, prior to the filing of the Registration Statement, such reasonable number of copies, drafts and conformed versions of such Registration Statement as is proposed to be filed, and thereafter, copies of such Registration Statement, each amendment and supplement thereto (in each case including all exhibits thereto), the prospectus and statement of additional information included in such Registration Statement (including each preliminary prospectus and statement of additional information) in such quantities as the Selling Stockholders may reasonably request in order to facilitate the disposition of the Registrable Securities; (iv) use its best efforts to register or qualify the Registrable Securities under such other securities or blue sky laws of such jurisdictions as the Selling Stockholders reasonably requests and do any and all other acts and things which may be reasonably necessary to allow the Selling Stockholders to consummate the disposition in such jurisdictions of the Registrable Securities; provided that BKF will not be required to (a) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph (iii), (b) subject itself to taxation in any such jurisdiction or (c) consent to general service of process in any such jurisdiction; (v) notify the Selling Stockholders, at any time when a prospectus relating to the proposed sale is required to be delivered under the 1933 Act, of the happening of 5 any event as a result of which the prospectus included in such Registration Statement or amendment contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and BKF will prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of the Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein to make the statements therein, in light of the circumstances under which they were made, not misleading; (vi) use its reasonable best efforts to cause the Registrable Securities to be listed on the New York Stock Exchange, Inc. (the "NYSE"). (vii) use reasonable efforts to cause the Registrable Securities to be registered with or approved by such other federal or state governmental agencies or authorities as may be necessary by virtue of the business and operations of BKF to enable the Selling Stockholders to consummate the disposition of such Registrable Securities; (viii) enter into customary agreements and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities, including, without limitation, if requested by the underwriters for any underwritten offering by Selling Stockholders, an underwriting agreement with such underwriters for such offering, such agreement to be reasonably satisfactory in substance and form to BKF, each Selling Stockholder and the underwriters, containing such representations and warranties by BKF and such other terms as are generally prevailing in agreements of that type, including, without limitation, indemnities by BKF to the underwriters substantially to the effect and to the extent provided in Section 4; provided, that the Selling Stockholders will reasonably cooperate with BKF in the negotiation of the underwriting agreement; provided, further, BKF shall not require any Selling Stockholder to make any representations or warranties to or agreements with BKF other than representations, warranties or agreements regarding such Selling Stockholder, such holder's Registrable Shares and such holder's intended method of distribution or any other representations required by applicable law; (ix) make available, at reasonable times and upon reasonable prior notice, for inspection by the Selling Stockholders, any underwriter participating in any disposition pursuant to such registration, and any attorney, accountant or other agent retained by the Selling Stockholders or any such underwriter (all of the foregoing, collectively, the "Agents"), financial and other records, pertinent corporate documents and properties of BKF (collectively, the "Records") as shall be reasonably necessary to enable them to exercise their due diligence responsibility within the meaning of the 1933 Act, and cause the officers, directors and employees of BKF to supply information reasonably requested by any such Agent in connection with such registration; provided that (i) Records and information obtained hereunder shall be used by such persons only to fulfill their due diligence responsibility and (ii) Records or information which BKF determines, in good faith, to be confidential shall not be disclosed by the Agents unless (x) BKF determines that the disclosure of such Records or information is necessary to avoid or correct a material misstatement or omission in the Registration Statement 6 or (y) the release of such Records or information is ordered pursuant to a subpoena or other order from a court or governmental authority of competent jurisdiction. Each Selling Stockholder further agrees that it will, upon learning that disclosure of such Records or information is sought in a court or governmental authority, give notice to BKF and allow BKF to undertake appropriate action to prevent disclosure of the Records or information deemed confidential; (x) use reasonable efforts to furnish to the underwriters in such offering (i) at the effective date of such Registration Statement and the date of the closing of the sale of the Registrable Securities to the underwriters in such offering, a "comfort" letter signed by the independent certified public accountants who have certified the financial statements included or incorporated by reference in such Registration Statement, covering such matters as are customarily covered in "comfort letters" for similar offerings and (ii) at the date of closing of the sale of the Registrable Securities to the underwriters in such offering, a signed opinion of counsel for BKF, dated the closing date of such offering, covering such matters as are customarily covered in opinion letters for similar offerings; and (xi) otherwise use reasonable efforts to comply with applicable rules and regulations of the SEC, and make generally available to its security holders, as soon as reasonably practicable, an earnings statement covering a period of twelve (12) months, beginning within three (3) months after the effective date of the Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder. (b) Upon the request of BKF, the Selling Stockholders will promptly furnish to BKF in writing, during the period within which BKF is required to effect such registration, all information as may be reasonably required for inclusion in the Registration Statement, or any amendment, post-effective amendment or supplement thereto. SECTION 3. Registration Expenses. --------------------- (a) BKF Expenses. With respect to the first two Demand Registrations under this Agreement, BKF will bear all Registration Expenses in connection with the registration or qualification of those Registrable Securities. (b) Investor Expenses. With respect to all Demand Registrations under this Agreement, the Selling Stockholders will bear pro-rata (measured by a fraction the numerator of which is the number of Registrable Securities sold in an underwritten offering by each Selling Stockholder and the denominator of which is the number of Registrable Securities sold by all Selling Stockholders) all underwriting discounts and commissions, if any, and will bear, severally, the fees, expenses and disbursements of their own legal counsel and accountants. With respect to the third Demand Registration under this Agreement, the Selling Stockholders will also bear pro-rata all Registration Expenses (other than the fees and disbursements of counsel to BKF and of BKF's independent public accountants), and shall bear, severally, the fees, expenses and disbursements of their own legal counsel and accountants. 7 SECTION 4. Indemnification --------------- (a) BKF agrees to, and does hereby, indemnify and hold harmless to the extent permitted by law, each Selling Stockholder and each other Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls such underwriter within the meaning of the 1933 Act, and their respective directors, officers, partners, employees and affiliates (each a "Seller Indemnified Party"), against any and all losses, claims, damages or liabilities to which such Seller Indemnified Party may become subject under the 1933 Act or otherwise, and to reimburse each Seller Indemnified Party for any legal or any other expenses incurred by them in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding, insofar as such losses, claims, damages , liabilities (or actions or proceedings, whether commenced or threatened, in respect thereof) arising out of or are based upon: (i) any untrue statement, or alleged untrue statement, of a material fact contained in or incorporated by reference in the Registration Statement, any amendment or supplement thereto, or any post-effective amendment thereof, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; or (ii) any untrue statement, or alleged untrue statement, of a material fact contained or incorporated by reference in any preliminary prospectus or statement of additional information, if used prior to the effective date of a Registration Statement, or contained or incorporated by reference in the final prospectus or statement of additional information if used within the Registration Term, or the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading; provided, however, that BKF shall not be liable under this Section 4 with respect to any preliminary prospectus or statement of additional information to the extent that any such loss, claim, damage or liability results solely from such Seller Indemnified Party's failure to send or give a copy of the final prospectus, as the same may be then supplemented or amended, within the time required by the 1933 Act to the Person asserting the existence of an untrue statement or alleged untrue statement or omission or alleged omission at or prior to the written confirmation of the sale of the Registrable Securities to such Person, which untrue statement or omission was corrected in the final prospectus or statement of additional information; or (iii) a violation by BKF in connection with such offering or sale of such Registrable Securities; provided, however, that the indemnification agreement contained herein shall not apply to losses, claims, damages, liabilities or actions arising out of, or based upon, any such untrue statement or alleged untrue statement, or any such omission or alleged omission, if such statement or omission was made in reliance upon, and in conformity with, information furnished to BKF by any Selling Stockholder in writing specifically stating that it is for use in connection with the preparation of such Registration Statement or any preliminary or final prospectus or statement of 8 additional information contained in such registration statement or any such amendment thereof or supplement thereto. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of any Selling Stockholder and shall survive the transfer of such securities by any Selling Stockholder and termination of this Agreement. (b) Each Selling Stockholder shall (in the same manner and to the same extent as set forth in Section 4(a) to the extent to which it, they or any of them may become subject), indemnify, to the extent permitted by law, BKF, and each person, if any, who controls BKF within the meaning of the 1933 Act, its directors, officers employees and affiliates, if such statement or omission was made in reliance upon and in conformity with information furnished to BKF by such Selling Stockholder in writing specifically stating that it is for use in the preparation of a registration statement filed pursuant to this Agreement or any amendment thereof or supplement thereto; provided that the maximum amount required to be paid by each such Selling Stockholder under this provision shall not exceed the net aggregate proceeds received such Selling Stockholder from the sale of the securities under the Registration Statement during the Registration Term. (c) Conduct of Indemnification Proceedings. In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to Subsection (a) or (b) of this Section 4, such person (hereinafter called the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (hereinafter called the "indemnifying party") in writing. If any such proceeding shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein, and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 4 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and the indemnified party shall have been advised by counsel that there may be one or more legal defenses available to such indemnified party that are different from or additional to those available to such indemnifying party or that another legal conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all such indemnified parties, and that all such fees and expenses shall be reimbursed as they are incurred. In the case of any such separate firm for the indemnified parties, such firm shall be designated in writing by the indemnified parties with the consent of the indemnifying party, which consent shall not be unreasonably withheld. The indemnifying party shall not be liable for any settlement of any 9 proceeding effected without its prior written consent, but if settled with such consent or if there shall be a final non-appealable judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which any indemnified party is or could reasonably be expected to have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) Contribution. If the indemnification provided for in this Section 4 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to in this Section 4, then the indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses (i) in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the statement or omission which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as shall be appropriate to reflect the relative benefits received by the indemnifying and indemnified party from the offering of Registrable Securities covered by such registration statement; provided that for the purposes of this clause (ii) the relative benefits received by any Selling Stockholder shall be deemed not to exceed the amount of proceeds received by such Selling Stockholder. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any matter in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 4 hereof, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 4(d) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in the immediately preceding paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. If indemnification is available under this Section 4, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Section 4(a) and 4(b) hereof without regard to the relative fault of said indemnifying party or indemnified party or any other equitable consideration provided for in this Section 4(d). 10 SECTION 5. Additional Covenants. -------------------- (a) 144 Exemption. With a view to making available to each Investor the benefits of Rule 144 promulgated under the 1933 Act or any successor provision that may at any time permit an Investor to sell securities of BKF to the public without registration, BKF agrees to use reasonable efforts to: (i) file with the SEC in a timely manner all reports and other documents required of BKF as a condition to the availability of SEC Rule 144; and (ii) furnish to any Investor forthwith upon request a written statement by BKF that it has complied with the report requirements of SEC Rule 144. (b) Certain Activities. From and after the date of this Agreement, BKF shall not, without the prior consultation with Levin, enter into any agreement with any holder or prospective holder of any securities of BKF which would grant registration rights to (or contain cutback provisions in favor of) such holder or prospective holder any more favorable than are provided to Investors herein in Section 1. (c) Holdback. Each Investor and BKF shall not sell, make a short sale of, loan, grant any option for the purchase of, or effect any public sale or distribution or other disposition of, any Registrable Securities (other than as part of an underwritten public offering hereunder) or, in the case of BKF, equity securities of BKF, (other than Permitted Offerings) for a period commencing 10 days prior to the execution of the definitive underwriting agreement in respect of any registration hereunder and ending no later than 90 days thereafter (or such shorter period as may be requested by the managing underwriter in respect of any such registration). SECTION 6. Transfer. -------- (a) Notice of Proposed Transfer. Prior to any proposed transfer of any Registrable Securities (other than under Section 1 hereto), an Investor shall give written notice to BKF of its intention to effect such transfer. Each such notice shall describe the manner of the proposed transfer and, if requested by BKF, shall be accompanied by an opinion reasonably satisfactory to BKF rendered by counsel reasonably acceptable to BKF to the effect that the proposed transfer may be effected without registration under the 1933 Act, whereupon such Investor shall be entitled to transfer such securities in accordance with the terms of its notice. Each certificate representing Registrable Securities transferred as above provided shall bear the legend set forth in Section 3.2 of the Merger Agreement, unless (i) such transfer is in accordance with the provisions of Rule 144 or (ii) the opinion of counsel referred to above is to the further effect that the transferee and any subsequent transferee (other than an affiliate of BKF) would be entitled to transfer such securities in a public sale without registration under the 1933 Act. In connection with any transfer of Registrable Securities in which it shall be required that the Registrable Securities continue to bear the legend set forth in Section 3.2 of the Merger Agreement, the transferee shall agree in a writing reasonably satisfactory to BKF to be bound by the provisions of Section 3.2 of the Merger Agreement and this Section 6. 11 (b) Transfer of Registration Rights. The rights hereunder may be transferred by an Investor to a transferee (a "Permitted Transferee") pursuant to a private transaction wherein the amount of Registrable Securities being so transferred equal (i) at least 10% of the aggregate amount of Registrable Securities held by all of the Investors as of the Closing Date or (ii) all of the Registrable Securities held by the Investor so transferring such Registrable Securities. In connection with any transfer by Levin of rights hereunder, Levin shall retain the sole right to request the demand registration pursuant to Section 1. SECTION 7. Miscellaneous. ------------- (a) Termination. Except with respect to Sections 3, 4 and 6, the rights of the Investors under this Agreement shall expire at such time as Levin is able to sell all of his Registrable Securities under SEC Rule 144 within a nine (9) month period. (b) Assignment. This Agreement is binding upon the parties hereto and their respective heirs, executors, successors and assigns and with respect to any Investor, any Permitted Transferee. (c) Counterparts. This Agreement may be executed in separate counterparts, each of which will be an original and all of which taken together will constitute one and the same agreement. (d) Conflicting Agreements. BKF shall not hereafter grant any rights to any person to register securities of BKF, the exercise of which would conflict with the rights granted to the Investors of the Registrable Securities under this Agreement. (c) Entire Agreement. This Agreement, together with the Merger Agreement, contain the entire agreement among the parties hereto with respect to the subject matter hereof and supersedes any and all prior agreements, written or oral, with respect to the subject matter hereof. (d) Waivers and Amendments. This Agreement may be amended, modified, extended, superseded, canceled or renewed, and the terms and conditions hereof may be waived, only by a written instrument signed by BKF and Levin, or, in the case of a waiver, by any of BKF or the Investor, as the party so waiving compliance. (e) Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and delivered personally, by telegram, telex or telecopy, mailed by certified or registered mail, return receipt requested and postage prepaid, or sent via a nationally recognized overnight courier to the recipient. Such notices, demands and other communications will be sent to the address indicated below: 12 To BKF: 200 West Madison Street Suite 3510 Chicago, Illinois 60606 Phone: (312) 236-9190 Fax: (312) 236-6772 Attention: James P. Gorter Copy to: Bell, Boyd & Lloyd 70 West Madison Street, Suite 3300 Chicago, Illinois 60602 Phone: (312) 372-1121 Fax: (312) 372-2098 Attention: Janet D. Olsen To Levin: One Rockefeller Plaza 25th Floor New York, New York 10020 Phone: (212) 332-8400 Fax: (212) 332-8408 Attention: John A. Levin Copy to: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, New York 10019-6064 Phone: (212) 373-3000 Fax: (212) 757-3990 Attention: Matthew Nimetz To the other Investors: To the addresses set forth on Schedule 15.2 of the LEVCO Disclosure Schedule (as defined in the Merger Agreement) 13 Copy to: Paul, Weiss, Rifkind, Wharton & Garrison 1285 Avenue of the Americas New York, New York 10019-6064 Phone: (212) 373-3000 Fax: (212) 757-3990 Attention: Matthew Nimetz or to such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any such communications shall be deemed to have been received (i) when delivered, if personally delivered or by telegram, telex or telecopy, (ii) the next business day after it is sent, if sent by nationally recognized overnight courier or (iii) on the third business day following the date on which the piece of mail containing such communication is posted if sent by registered or certified mail. (f) Severability. The provisions of this Agreement are severable and the invalidity of any provision shall not affect the validity of any other provision. (g) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware (without reference to its conflicts of law rules). Each of the parties to this Agreement hereby irrevocably and unconditionally agrees (i) to be subject to the jurisdiction of the courts of the State of Delaware and of the federal courts sitting in the State of Delaware, and (ii) to the extent such party is not otherwise subject to service of process in the State of Delaware, to appoint and maintain an agent in the State of Delaware as such party's agent for acceptance of legal process, and that service made pursuant to (ii) above shall have the same legal force and effect as if served upon such party personally within the State of Delaware. For purposes of implementing the parties' agreement to appoint and maintain an agent for service of process in the State of Delaware, each such party that has not as of the date hereof already duly appointed such an agent does hereby appoint RL&F Service Corp., One Rodney Square, 10th Floor, Wilmington, Delaware 19801, as such agent. 14 IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement on the day and year first above written. BAKER, FENTRESS & COMPANY By: /s/ James P. Gorter ----------------------------------- Title: Chairman ----------------------------------- /s/ John A. Levin ----------------------------------------- John A. Levin /s/ Melody L. Prenner Sarnell ----------------------------------------- Melody L. Prenner Sarnell /s/ Jeffrey A. Kigner ----------------------------------------- Jeffrey A. Kigner /s/ Daniel E. Aron ----------------------------------------- Daniel E. Aron /s/ John A. Levin ----------------------------------------- Frank F. Rango* /s/ Barton G. Ice ----------------------------------------- Barton G. Ice /s/ Carol L. Novak ----------------------------------------- Carol L. Novak *Under Power of Attorney, dated June 11, 1996, granted to John A. Levin. 15 SCHEDULE I Melody L. Prenner Sarnell Jeffrey A. Kigner Daniel E. Aron Frank F. Rango Barton G. Ice Carol L. Novak 16 -----END PRIVACY-ENHANCED MESSAGE-----