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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).
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SCHEDULE 13D
- - -----------------------
CUSIP NO. 057213100
- - -----------------------
- - ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1 S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
John Andrew Levin ###-##-####
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CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
2 (a) [_]
(b) [_]
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SEC USE ONLY
3
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SOURCE OF FUNDS
4
(See Items 3 and 4) 00
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CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [_]
5
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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
- - ------------------------------------------------------------------------------
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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
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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
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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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
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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
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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
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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
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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
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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
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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
<PAGE>
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
<PAGE>
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:
<PAGE>
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
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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
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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):
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(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%
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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
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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
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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.
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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").
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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:
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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:
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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.
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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.
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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).
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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.
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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):
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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
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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
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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
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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.
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(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.
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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.
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(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
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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
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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.
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(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
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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.
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(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.
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(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.
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(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
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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
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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
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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
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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.
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(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.
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(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):
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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,
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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.
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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
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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
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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
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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
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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
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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;
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(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
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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;
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(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.
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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
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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.
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(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
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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
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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.
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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
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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.
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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.
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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
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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.
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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).
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(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.
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(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.
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(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
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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.
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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.
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(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.
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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
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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.
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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
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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.
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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.
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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
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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
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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.
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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
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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
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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.
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(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).
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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.
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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
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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,
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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,
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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
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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
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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
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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.
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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-
<PAGE>
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-
<PAGE>
<TABLE>
<CAPTION>
L x DS
-- --
DV ES
<S> <C>
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;
</TABLE>
(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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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-
<PAGE>
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-
<PAGE>
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
<PAGE>
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.
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(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
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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
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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
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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
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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.
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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
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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
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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).
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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.
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(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:
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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)
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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.
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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
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SCHEDULE I
Melody L. Prenner Sarnell
Jeffrey A. Kigner
Daniel E. Aron
Frank F. Rango
Barton G. Ice
Carol L. Novak
16
