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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BAKER, FENTRESS & COMPANY
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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Baker, Fentress & Company
Established 1891
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on April 18, 2000
To Our Shareholders:
The annual meeting of shareholders of Baker, Fentress & Company will be
held at the Grand Hyatt--New York Hotel, 109 East 42nd Street (Park and
Lexington), New York, New York, on Tuesday, April 18, 2000, at 9:00 a.m.,
local time, for the following purposes:
1. To elect five directors;
2. To amend the Company's Amended and Restated Certificate of Incorporation
to change the Company's name from "Baker, Fentress & Company" to "BKF
Capital Group, Inc."
3. To amend and restate the Baker, Fentress & Company 1998 Incentive
Compensation Plan;
3. To ratify or reject the selection of Ernst & Young LLP as independent
auditors for the Company; and
4. To transact such other business as may properly come before the meeting.
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Shareholders of record at the close of business on February 28, 2000, are
entitled to vote at the meeting.
By Order of the Board of Directors
Norris Nissim
Secretary
Chicago, Illinois
March 13, 2000
Please indicate your voting instructions on the enclosed proxy card, date
and sign, and return it in the enclosed envelope. Please mail the proxy card
promptly to help save the cost of additional solicitations.
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PROXY STATEMENT
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The board of directors of the Company is soliciting proxies from
shareholders for use at the annual meeting that will be held on April 18, 2000
and at any adjournment or adjournments of that meeting. The Company began
mailing these proxy materials to shareholders on or about March 13, 2000.
The 2000 annual meeting of the Company marks the first time that the
Company is asking shareholders to vote on issues since the completion of the
Plan for Distribution of Assets of Baker, Fentress & Company (the "Plan for
Distribution of Assets"). On August 19, 1999, shareholders approved the sale
of all the Company's publicly-traded securities and all or most of the
Company's private placement securities, as well as the distribution of the
proceeds of those sales (less the expenses associated with the Plan for
Distribution of Assets) to the Company's shareholders. Shareholders also
approved the distribution of the shares held by the Company of Consolidated-
Tomoka Land Co., formerly a majority-owned subsidiary of the Company, to the
Company's shareholders. In accordance with the Plan for Distribution of
Assets, the Company also took steps to maintain its special tax status as a
regulated investment company through December 31, 1999. Beginning January 1,
2000, the Company will be treated for tax purposes as an ordinary corporation.
On January 7, 2000, the Company made the final distribution to shareholders
under the Plan for Distribution of Assets and simultaneously effected a one-
for-six reverse stock split of the Company's shares. After completion of those
distributions on January 7, 2000, the Company began its current operations as
an operating company through its wholly owned subsidiary, John A. Levin & Co.
Inc., a registered investment adviser, and its related companies. The Company
has applied for, but has not yet received, an order of the Securities and
Exchange Commission declaring that it has ceased to be an investment company.
The Company cannot predict when that order might be entered.
This proxy statement describes each of the matters on which the board of
directors is asking shareholders to vote. The board recommends that you vote
in favor of each of these proposals.
ITEM 1. ELECTION OF DIRECTORS
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The board of directors is asking you to elect five directors at the
meeting. The board has nominated the following persons to serve as directors
for terms expiring at the annual meeting of shareholders in 2003: David D.
Grumhaus, Jeffrey A. Kigner and James S. Tisch. Mr. Grumhaus and Mr. Kigner
currently are directors. Mr. Tisch has not served as a director of the
Company.
The board also has nominated Anson M. Beard, Jr. and Peter J. Solomon for
election to terms expiring at the annual meeting of shareholders in 2001. Mr.
Beard was named by the directors to fill a vacancy on the board in February
2000 and has not previously been elected by shareholders. Mr. Solomon has not
served as a director of the Company. If any nominee should be unable to serve,
the persons named as proxies shall vote for such other person as shall be
determined by such persons in accordance with their judgment.
The Company's Bylaws fix the number of directors at thirteen. During 1999
and 2000, three directors resigned from the board and four other directors are
not seeking re-election. As a result, there will be four vacancies on the
board (one Class I, one Class II and two Class III directors) after the annual
meeting. Although there will be vacancies on the board, you may not vote for a
greater number of persons than the nominees named. The Company's Restated
Certificate of Incorporation permits a majority of the directors to fill
vacancies that occur. Shareholders are entitled to one vote per share in the
election of directors (called straight voting), with no right of cumulation. A
plurality vote of the shares present at the meeting, in person or by proxy, is
required to elect directors, assuming a quorum is present. This means that
shareholders with a greater ownership percentage are more likely to elect the
directors.
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Additional information concerning the nominees and the directors who are
continuing in office appears below.
Directors Nominated for Election
<TABLE>
<CAPTION>
Name, Age, and Principal Expiration of
Occupation During the Director Expiration of Term if
Last Five Years Since Class Current Term Elected Other Business Affiliation(s)
- ------------------------ -------- ----- ------------- ------------- ----------------------------
<S> <C> <C> <C> <C> <C>
Anson M. Beard, Jr.-- 2000 II 2001 2001 Director of Levin Management
age 63 (2) Co., Inc. and John A. Levin
Retired; former & Co., Inc. from July 1997
investment banker through February 2000
David D. Grumhaus-- 1988 I 2000 2003 Director of Niche Software
age 64 (1)(3) Systems, Inc. (computer
President of Casey software company)
Travel Corporation
(travel agency)
Jeffrey A. Kigner--age 1996 I 2000 2003
39
Vice-Chairman of the
Company since February
2000 and Co-Chairman of
Levin Management Co.,
Inc. and John A. Levin
& Co., Inc. since June
1997 and Chief
Investment Officer of
John A. Levin & Co.,
Inc. since September
1997; prior thereto,
Executive Vice
President of John A.
Levin & Co., Inc. from
June 1996 to June 1997;
prior thereto,
Securities
Analyst/Portfolio
Manager of the
predecessor to John A.
Levin & Co., Inc.
Peter J. Solomon--age 61 -- II -- 2001 Director of General Cigar
Chairman of Peter J. Holdings, Inc. (cigar
Solomon Company Limited manufacturer), Monro Muffler
and Peter J. Solomon Brake, Inc. (automotive
Securities Co., LTD repair services), Office
(investment banking) Depot, Inc. (supplier of
office products) and
Phillips-Van Heusen
Corporation (apparel and
footwear
marketer/manufacturer)
James S. Tisch--age 47 -- I -- 2003 Director of CNA Financial
President since October Corp. (holding company whose
1994 and Chief subsidiaries consist of
Executive Officer since insurance companies) and
January 1999 of Loews Vail Resorts, Inc. (resort
Corporation (holding operator)
company whose
subsidiaries are
engaged in insurance,
cigarette
manufacturing, hotel
operations, offshore
oil and gas operations
and distribution of
watches and clocks) and
Chief Executive Officer
of Diamond Offshore
Drilling, Inc.
(offshore oil and gas
company) since March
1998; prior thereto,
Chief Operating Officer
of Loews Corporation
</TABLE>
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Directors Continuing in Office
<TABLE>
<CAPTION>
Name, Age, and
Principal Occupation
During the Last Five Director Expiration of
Years Since Class Current Term Other Business Affiliation(s)
-------------------- -------- ----- ------------- ----------------------------
<S> <C> <C> <C> <C>
J. Barton Goodwin--age 1987 III 2002 Director of Factual Data
53 (1)(4) Corp. (mortgage servicing
Managing director of company)
BCI Partners, Inc.
(private capital
investment group),
general partner of
Bridge Associates II
and Teaneck Associates
and member of
Glenpointe Associates,
LLC, Glenpointe V, LLC
and BCI Investors, LLC
John A. Levin--age 61* 1996 III 2002 Director of Morgan Stanley
(1) Dean Witter group of
Chairman since investment funds (16 funds)
February 2000, Chief
Executive Officer and
President of the
Company and Chairman
and Chief Executive
Officer of Levin
Management Co., Inc.
and John A. Levin &
Co., Inc. since June
1996; prior thereto,
President and
Securities
Analyst/Portfolio
Manager of the
predecessor to John A.
Levin & Co., Inc.
Burton G. Malkiel--age 1982 III 2002 Director of Prudential
67 (2)(3) Insurance Co. of America,
Professor of Banco Bilbao Vizcaya
Economics, Princeton Gestinova (Spanish bank) and
University Vanguard group of investment
funds (102 funds)
Dean J. Takahashi--age 1997 II 2001
42 (2)
Senior director of
investments, Yale
University
</TABLE>
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Notes to Tables
(1) Member of the executive committee, which has the authority during
intervals between meetings of the board of directors to exercise the power
of the board, with certain exceptions. James P. Gorter, a director of the
Company who will not be continuing in office after the annual meeting, was
a member of the executive committee during 1999.
(2) Member of the compensation committee, which had eight meetings during
1999. During 1999, William H. Springer and Frederick S. Addy, each a
director of the Company who will not be continuing in office after the
annual meeting, were members of the compensation committee. David D.
Peterson, a former director of the Company, was also a member of the
compensation committee throughout 1999. The committee makes
recommendations to the board of directors concerning the Company's
compensation policies. The committee also administers the Baker, Fentress
& Company 1998 Incentive Compensation Plan and the Levin Management Co.,
Inc. and Subsidiaries Key Employee Incentive Bonus Plan, which was
terminated after adoption of the 1998 Incentive Compensation Plan. Messrs.
Beard, Malkiel and Takahashi became members of the compensation committee
in February 2000.
(3) Member of the audit committee, which had two meetings during 1999. The
committee makes recommendations regarding the selection of independent
auditors and meets with representatives of the Company's independent
auditors to determine the scope, and review the results, of each audit.
Each of the members of the audit committee is independent as defined by
The New York Stock Exchange's listing standards. In compliance with the
listing standards, the board will add a third member to the Audit
Committee at a later date.
(4) Member of the nominating committee, which had two meetings during 1999.
During 1999, Eugene V. Fife, a director of the Company who will not be
continuing in office after the annual meeting, was also a member of the
nominating committee. The committee makes recommendations to the board of
directors regarding the selection of candidates to be nominated for
election to the board. The committee does not consider nominees
recommended by shareholders.
During 1999, the board of directors conducted six meetings, including
regularly scheduled and special meetings. Each director attended at least 75%
of the meetings of the board of directors and committees on which he served
during 1999.
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ITEM 2. CHANGE OF NAME
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As discussed above, the Company's shareholders approved the Plan For
Distribution of Assets pursuant to which the Company distributed or liquidated
substantially all of its assets, with the exception of Levin Management Co.,
Inc. ("Levin Management") and its subsidiaries (collectively, "Levco") and
changed the nature of the Company's business so that it ceased to operate as
an investment company. The Board believes that changing the Company's name to
BKF Capital Group, Inc. will reflect the change in the nature of the Company's
business, while maintaining continuity with the Company's past.
The board of directors of the Company has unanimously adopted and approved,
and recommends that the Company's shareholders adopt and approve, the
following amendment to Article FIRST of the Company's Restated Certificate of
Incorporation, as amended, which would change the name of the Company from
"Baker, Fentress & Company" to "BKF Capital Group, Inc.":
The Restated Certificate of Incorporation of the Company is hereby
amended by changing Article FIRST thereof so that, as amended, Article
FIRST of the Certificate of Incorporation of the Company shall read in its
entirety as follows:
"FIRST: The name of the corporation is BKF Capital Group, Inc."
The proposed Certificate of Amendment to the Restated Certificate of
Incorporation of Baker, Fentress & Company is attached hereto as Exhibit A.
The affirmative vote of the holders of a majority of the outstanding shares
of common stock is necessary to approve the proposed Amendment. Unless
otherwise instructed, properly executed proxies which are returned in a timely
manner will be voted in favor of adoption of the proposed Amendment.
The board recommends a vote FOR approval of the proposed Amendment.
ITEM 3. AMENDMENT OF THE COMPANY'S INCENTIVE COMPENSATION PLAN
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In December 1998, the Company's shareholders approved the Baker, Fentress &
Company 1998 Incentive Compensation Plan (the "Incentive Compensation Plan").
Among other things, the Incentive Compensation Plan allows the Company and
Levco to:
. pay their officers and employees in common stock of the Company or Levin
Management, including through stock options, restricted stock grants and
stock appreciation rights;
. pay their officers and employees based on their individual performance,
or on the performance of a group of people, or on some part or all of the
performance of the Company or Levco as a whole;
. lend money to participants to permit them to exercise options or
otherwise in connection with awards under the Incentive Compensation
Plan; and
. require the partial payment of compensation to the Company's outside
directors with stock options.
The Company adopted the Incentive Compensation Plan in compliance with the
terms of an order from the Securities and Exchange Commission ("SEC")
exempting the Company from certain provisions of the Investment Company Act of
1940 (the "1940 Act") that would otherwise have prohibited the Incentive
Compensation Plan. As a result, the Company designed certain provisions of the
Incentive Compensation Plan to take into account the requirements of the 1940
Act and the exemptive order granted by the SEC to permit adoption of the
Incentive Compensation Plan.
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In light of the changes to the Company as a result of the Plan for
Distribution of Assets, the Company has filed an application to de-register as
an investment company. The board believes that it would be desirable, after
the Company no longer is registered as an investment company, to amend the
Incentive Compensation Plan to eliminate those provisions that were required
by the Company's status as an investment company and that are more restrictive
than plan provisions customarily applicable to operating companies. None of
the requested changes would be effective until the Company ceases to be
registered as an investment company. The Company cannot guarantee when the SEC
will enter an order declaring that the Company has ceased to be an investment
company. The proposed amended and restated plan was adopted by the board in
February 2000.
The principal changes proposed to be made to the Incentive Compensation
Plan are as follows:
. remove all references to the 1940 Act;
. remove the Company's ability to pay employees of the Company or its
subsidiaries in Levin Management stock and all references to such
payments of Levin Management stock;
. increase the number of shares available for issuance under the Incentive
Compensation Plan to 1,300,000 (about 20% of the Company's outstanding
shares), plus 10% of the number of shares of common stock issued or
delivered by the Company during the term of the Incentive Compensation
Plan (excluding any shares issued in connection with awards under the
Incentive Compensation Plan);
. remove the limitation that no more than 35% of the shares of the
Company's common stock available for delivery may be granted, in the
aggregate, to any one eligible person;
. remove the requirements that (i) participants must secure repayment of
all loans made under the Incentive Compensation Plan with the Company
stock to be acquired or other acceptable collateral and (ii) no loan may
have a maturity of more than five years or bear interest at a rate below
the "applicable federal rate" as defined in the Internal Revenue Code
(the "Code");
. eliminate the automatic grant of options to non-interested (non-employee)
directors of the Company upon their initial election to the board and on
the date of each annual meeting of the Company's shareholders;
. add a change of control provision, under which certain restrictions
applicable to awards granted under the Incentive Compensation Plan would
be waived and such awards would be fully payable as of the time of the
change in control (this could make it more difficult for a third party to
acquire the Company);
. remove the requirement that the board review the plan at least annually;
and
. remove the requirement that the Company receive exemptive relief from the
SEC to permit the continued operation of the Incentive Compensation Plan
after its initial 5-year term.
The board believes that the proposed amendments to the Incentive
Compensation Plan will make the Incentive Compensation Plan comparable to
incentive compensation plans that the Company's competitors have adopted and
would support the Company's efforts to attract, retain, motivate and reward
highly qualified employees.
The proposed amendments increase the number of shares available for
issuance under the Incentive Compensation Plan. This could result in each
shareholder owning a smaller proportional interest in the Company. This means
that if you approve the amendments to the Incentive Compensation Plan, it
could have the effect of reducing the market value of or "diluting" your
investment.
The full text of the Incentive Compensation Plan, as proposed to be amended
and restated (the "Amended Plan"), is attached as Exhibit B to this proxy
statement. The principal terms of the Amended Plan are summarized below, but
are qualified in their entirety by reference to Exhibit B. Please read the
full text of the Amended Plan before you decide how to vote.
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Description of the Amended Plan
Purpose and Eligibility The Company believes the Amended Plan will help
it and its subsidiaries attract, retain, motivate
and reward executives, employees and other
persons who provide services to the Company and
its subsidiaries by providing them with the
opportunity to earn incentive compensation
directly linked to the long-term value of the
Company's common stock. If the market value of
the Company's stock increases, these executives,
employees and others will receive value, as will
the Company's shareholders. As of February 16,
2000, the closing market price of common stock of
the Company as quoted on The New York Stock
Exchange was $10.375.
Under the terms of the Incentive Compensation
Plan, all 82 executives and employees of Levco,
and other persons, are eligible to participate in
the Incentive Compensation Plan and would
continue to be eligible to participate in the
Amended Plan. The compensation committee makes
the final determination as to who, among those
eligible to participate, will receive awards.
During 1999, the receipt of equity-based
compensation (stock options and restricted stock)
was elective, and 15 persons were given the
opportunity to elect to receive options and
restricted stock pursuant to the Incentive
Compensation Plan.
Administration The compensation committee of the board (the
"Committee") will administer the Amended Plan. In
general, the Committee has full discretion to
select participants, determine the type, terms
and conditions of awards, and adopt rules,
regulations and guidelines for the proper
administration of the Amended Plan. The Committee
may delegate certain of its duties, power and
authority to the Company's officers.
Types of Awards The Amended Plan permits the Committee to grant
the following types of performance-based
compensation:
. non-qualified and incentive stock options;
. stock appreciation rights (including
freestanding and tandem stock appreciation
rights);
. restricted stock;
. deferred stock;
. bonus stock;
. dividend equivalents;
. annual incentive awards; and
. long-term performance awards.
Each grant of performance-based compensation
under the Amended Plan is referred to
individually as an "award" and, collectively, as
"awards". The awards are described more fully
below.
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Shares Available
Overall Limit The board has authorized reserving for issuance a
total of 1,300,000 shares of common stock (about
20% of the Company's currently outstanding common
stock) plus 10% of the number of shares of common
stock issued or delivered by the Company during
the term of the Amended Plan (excluding any
issuance or delivery in connection with awards
under the Amended Plan).
The Committee may also adjust the number and kind
of shares available for use in awards when
certain corporate transactions occur.
Shares covered by awards granted under the
Amended Plan that wholly or in part are not
earned, or that expire or are forfeited,
terminated, cancelled, settled in cash, payable
solely in cash or exchanged for other awards, do
not count toward the overall limit.
The Committee also has the authority to give
participants cash or other property in lieu of a
stock-based award.
Special Limits Limit on Incentive Stock Options. Under the
Amended Plan, the Company may not grant incentive
stock options for more than 1,000,000 shares. If
an incentive stock option is not exercised, the
unissued shares will be available for other
incentive stock options. The Company can only
grant incentive stock options to individuals who
at the time of grant are employees of the Company
or a subsidiary. "Incentive stock options" are
options described in Section 422 of the Code
which provides certain tax advantages for
participants who receive such options.
Cash Award Limit. The Amended Plan also limits
the maximum dollar amount of cash awards that a
participant may earn in a single year to $20
million.
Stock Award Limit. In each fiscal year, no
individual may receive stock options, stock
appreciation rights ("SARs") restricted stock,
deferred stock, or any other type of award
relating to, in each case, more than 1,000,000
shares of common stock, subject to adjustment.
Awards
General The Amended Plan permits the grant of stock
options, SARs, restricted stock, deferred stock,
stock bonuses, and other awards valued in whole
or in part by reference to, or otherwise based
on, Company common stock. Awards may be granted
alone or in addition to, in tandem with, or in
substitution or exchange for any other award.
7
<PAGE>
With the Committee's consent, the Company and/or
its subsidiaries may lend money to a participant
(or arrange or guarantee a loan to a participant)
to give the participant the cash needed to
exercise any stock option, purchase Company
stock, or make any other payment in connection
with any award, including the payment of taxes
due in connection with any award. The Committee
shall have discretion to determine the amount,
terms and provisions of any such loan or loans,
including the interest rate to be charged, the
terms on which the loan is to be repaid and the
conditions, if any, under which the loan may be
forgiven.
Stock Options A stock option is the right to purchase one share
of stock at a time in the future at a
predetermined price (the "exercise price"). Stock
options may be incentive stock options or non-
qualified stock options. The exercise price of
any stock option shall be determined by the
Committee, provided that such exercise price
shall not be less than the fair market value of a
share of stock on the date of grant of the
option. The Committee may adjust the price to
reflect certain corporate actions or, if the
option is granted in lieu of cash compensation,
discount the exercise price by the amount of cash
compensation the Participant gives up in order to
receive the option.
Stock options issued under the Amended Plan will
expire ten years from the date of the grant.
Although the Committee has the discretion to
determine otherwise, the Committee expects that
most stock options will vest over a period of
three years after the grant date and will become
fully vested upon a change in control of the
Company. Unless the Committee provides otherwise,
options will expire 30 days after a participant's
termination of employment. If a participant's
employment is terminated because of death,
retirement or disability, the holder of the
option must exercise the option within one year,
or before its expiration ten years after the date
of grant, whichever is earlier.
Restricted Stock The Amended Plan permits the Committee to make
grants of restricted shares of Company stock.
Restricted Stock is stock given to a participant,
usually without the participant having to make
any payment in return, that is subject to
restrictions on transferability, risk of
forfeiture and other restrictions. A participant
who receives Restricted Stock will have all the
rights of a stockholder, including the right to
vote the Restricted Stock and the right to
receive dividends, unless the participant is
limited by the terms of the Amended Plan or any
award agreement relating to the Restricted Stock.
During the period of restriction, the participant
may not sell, transfer, pledge, hypothecate,
margin or otherwise encumber the Restricted
Stock. Except as the Committee otherwise
determines, if a participant's employment is
terminated during the restriction period, the
participant will forfeit the Restricted Stock
which the Company will reacquire.
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SARs Stock appreciation rights (SARs) entitle a
participant to receive the excess, if any, of the
fair market value on the date of exercise over
the exercise price of the stock appreciation
right or, in the case of a tandem stock
appreciation right granted in tandem with an
option, the option exercise price of the related
stock option.
The Committee will determine whether or not an
SAR is granted as a tandem award (which is an
award that is combined with another award,
usually to provide an alternative form of
compensation of comparable economic value), and
any other terms and conditions of any SAR.
SARs issued under the Amended Plan, unless the
Committee provides otherwise, will expire 30 days
after a participant's termination of employment.
However, if a participant's employment terminates
because the participant dies, retires or becomes
disabled, the award must be exercised within one
year.
Deferred Stock A grant of "Deferred Stock" is the right to
receive the Company's common stock, cash, or a
combination of stock or cash at the end of a time
period specified by the Committee. At the end of
the deferral period or, if permitted by the
Committee, at the time elected by the
participant, the Company will deliver the
Company's common stock (or cash having an equal
value, or a combination of cash and stock) to the
participant. Except as the Committee otherwise
determines, if a participant's employment is
terminated during the applicable deferral period,
the participant will forfeit all Deferred Stock
that is at that time subject to deferral (other
than a deferral at the election of a
participant).
Bonus Stock The Amended Plan authorizes the Committee to
grant Company stock as a bonus, or to grant such
stock or other awards in lieu of obligations to
pay cash or deliver other property under the
Amended Plan or other plans or compensatory
arrangements.
Dividend Equivalents Under the Amended Plan, the Committee may grant
"Dividend Equivalents" to a participant. Dividend
Equivalents entitle a participant to receive
cash, Company stock or other awards equal in
value to dividends paid for a specified number of
shares of Company stock or other periodic
payments.
Qualified Performance- The Amended Plan will permit the Committee to
Based Criteria make annual incentive awards and performance
awards. The Company may pay these awards in cash,
other awards, or Company stock. The grant,
exercise and/or settlement of such award will be
contingent upon the achievement of pre-
established performance goals, unless the
Committee determines that a performance award or
annual incentive award is not intended to qualify
as "performance-based compensation" for purposes
of Code Section 162(m). (Code Section 162(m)
provides that compensation in excess of
$1 million to certain officers of a public
company is not deductible for income tax purposes
unless it qualifies as "performance-based
compensation.")
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<PAGE>
The Committee will establish a targeted level or
levels of performance measured by one or more of
the following general business criteria:
. earnings per share;
. revenues;
. cash flow;
. return measures;
. economic value added;
. operating margin;
. net income;
. pretax earnings;
. pretax operating earnings;
. operating earnings;
. total shareholder return;
. performance of managed funds;
. market share;
. assets under management;
. reduction in costs;
. increase in the fair market value of
Company stock; and
. stated goals as compared to the performance
of a published or special index deemed
applicable by the Committee, including, but
not limited to, the Russell 1000 Value
Index, the S&P 500 Stock Index, the S&P
Financial Index, the SNL Investment Adviser
Index or a group of comparable companies.
These performance goals are objective and seek to
meet the requirements of Code Section 162(m). The
Committee will measure whether a participant has
achieved a performance goal over a performance
period of one year for an annual incentive award,
or up to ten years for a performance award. The
Committee may reduce the amount paid to a
participant in connection with an annual
incentive award or performance award, but may not
increase the amount unless the Committee
determines at the time of grant that the award is
not intended to qualify as "performance-based
compensation" for purposes of Code Section
162(m).
Amendment The board may amend, alter, suspend, discontinue
or terminate the Amended Plan or the Committee's
authority to grant awards under the Plan without
shareholder approval, except that any amendment
or alteration to the Amended Plan shall be
subject to shareholder approval at the annual
meeting next following such board action if
shareholder approval is required by state or
federal law or regulation or the rules of any
stock exchange on which the Company's stock is
listed or quoted.
10
<PAGE>
The Committee may waive any conditions or rights
under or amend, alter, suspend, discontinue or
terminate any award granted. However, no board or
Committee action may materially and adversely
affect the rights of participants under any
previously granted and outstanding award without
the consent of the affected participant.
Effectiveness and Term The Amended Plan shall take effect only upon the
later to occur of (i) shareholder approval at the
annual meeting and (ii) the Company's receipt of
an order from the SEC declaring that the Company
has ceased to be an investment company.
Section 162(m) of the Code requires shareholder
approval of "qualified performance-based
criteria" every five years. Therefore, the
Company expects to submit the Amended Plan to
shareholders for reapproval at the 2005 annual
meeting. Subject to such shareholder reapproval,
the Amended Plan will remain in effect for an
additional five year cycle.
11
<PAGE>
Benefits Under the Incentive Compensation Plan
As of the date of this proxy statement, the compensation committee has not
made any decision about awards that will be made under the Amended Plan in
2000, or as a part of compensation for 2000. The following table shows the
grants of options and restricted stock units that were made in January 2000,
generally as part of each recipient's compensation for 1999. The numbers below
reflect the Company's 1 for 6 reverse stock split in January 2000.
<TABLE>
<CAPTION>
Restricted Securities
Stock Award Underlying
Position Dollar Value ($)(a) Options
-------- ------------------- ----------
<C> <S> <C> <C>
John A. Levin Chairman, Chief $189,005 34,570(b)
Executive Officer and
President of the
Company and Chairman
and Chief Executive
Officer of Levin
Management Co., Inc and
John A. Levin
& Co., Inc.
James P. Gorter Former Chairman of the 0 0
board of directors
James P. Koeneman Assistant Secretary and 0 0
former Executive Vice
President and Secretary
Scott E. Smith Former Executive Vice 0 0
President
Gregory T. Rogers Executive Vice President 0 65,049(c)
and Chief Operating
Officer
Senior portfolio
managers as a group 706,515 194,273(d)
Current executive
officers as a group 207,014 102,912(e)
Current directors who
are not executive
officers as a group 0 0
Nominees for director
as a group 0 0
Associates of any
directors, executive
officers or nominees
as a group 0 0
All employees as a
group 87,987(f) 16,091(f)
</TABLE>
- --------
(a) Value at the date of grant, January 20, 2000.
(b) The exercise price of the options shown is $13.03125 per share. The
options vest in two equal installments, at December 31, 2000 and December
31, 2001.
(c) Options granted in connection with the commencement of Mr. Rogers'
employment. The exercise price of the options shown is $13.03125 per
share. The options vest in three equal installments of 21,683 at December
31, 2000, December 31, 2001 and December 31, 2002, respectively.
(d) Five senior portfolio managers who are employees but not officers of
Levco, received grants of 5% or more of the total options granted, and
grants of restricted stock. The number of securities underlying options
ranged from 10,975 shares to 65,846 shares, with an exercise price of
$13.03125 per share, and vest in one or two annual installments beginning
December 31, 2000. The grants of restricted stock units ranged from 59,996
to 360,001 shares.
(e) The exercise price of all options shown is $13.03125 per share.
(f) The amount reported excludes the amount granted to the current executive
officers of the Company and to the Levco senior portfolio managers because
such amounts are shown elsewhere on the table.
12
<PAGE>
Federal Income Tax Consequences
The following discussion is only a summary of general federal income tax
consequences to the Company and participants, and does not cover all possible
federal, state or local income tax consequences of participation in the
Amended Plan.
Grant of Awards The grant of a stock option, SAR or restricted
stock award has no immediate federal income tax
consequences. The participant will not recognize
any taxable income and the Company will not be
entitled to any tax deduction. However, in the
case of a restricted stock award, the participant
may elect to recognize income at the time the
award is granted as described under "Awards
Payable in Restricted Stock" below.
Exercise of Non-Qualified The optionee will generally recognize ordinary
Stock Options income in an amount equal to the excess of the
fair market value of the shares on the exercise
date over the option exercise price.
Exercise of Stock The participant will generally recognize ordinary
Appreciation Rights income on the exercise date in an amount equal to
any cash and the fair market value of any
unrestricted shares received.
Awards Payable in In the case of an exercise of a stock option or
Restricted Stock SAR payable in restricted stock, or in the case
of an award of restricted stock, the immediate
federal income tax effect for the recipient will
depend on the nature of the restrictions.
Generally, the fair market value of the stock
will not be taxable to the recipient as ordinary
income until the year in which his or her
interest in the stock is freely transferable or
is no longer subject to a substantial risk of
forfeiture. However, the recipient may elect to
recognize income when the stock is received,
rather than when his or her interest in the stock
is freely transferable or is no longer subject to
a substantial risk of forfeiture. If the
recipient makes this election, the amount taxed
to the recipient as ordinary income is determined
as of the date of receipt of the restricted
stock.
Exercise of Incentive There is generally no income tax liability at the
Stock Options time of exercise of an incentive stock option,
unless the participant exercises the option more
than three months (one year if the participant is
disabled) after terminating employment. However,
the excess of the fair market value of the stock
on the exercise date over the option exercise
price is included in the optionee's income for
purposes of the alternative minimum tax. The
optionee will realize a long-term capital gain or
loss upon a sale of the stock, equal to the
difference between the option price and the sale
price, if he or she does not sell the stock
before one year from the date of the exercise or
two years from the date of the stock option
grant, whichever is later. If the optionee has
not held the stock for the required period,
ordinary income tax treatment will apply to the
excess of the fair market value of the stock on
the date of exercise over the option exercise
price (or, if less, the
13
<PAGE>
amount of gain realized on the disposition of the
stock), and the balance of any gain or any loss
will be treated as capital gain or loss (long-
term or short-term, depending on whether the
optionee has held the shares for more than one
year).
Cash Awards Cash awards will be included in income at the
time of receipt and will be subject to tax at
ordinary income tax rates. Any awards that are
properly deferred under an applicable deferred
compensation plan of the Company will be taxable
when actually or constructively received under
such plan's terms.
Tax Deductions by the Upon the exercise of a non-qualified stock
Company option, the exercise of an SAR, the award of
unrestricted stock, the recognition of income on
restricted stock, or the disqualifying sale of
shares (within one year after acquisition or two
years after the option grant) acquired on
exercise of an incentive stock option, the
Company generally will be allowed an income tax
deduction equal to the ordinary income recognized
by a participant. The Company will not receive an
income tax deduction as a result of the exercise
of an incentive stock option. When a cash payment
is made pursuant to an award, the recipient will
recognize the amount of the cash payment as
ordinary income, and the Company will generally
be entitled to a deduction in the same amount,
subject to the restrictions described below.
The Company may be unable to deduct amounts that
would otherwise be deductible under the rules
described above (a) if it is determined that the
amount paid does not constitute reasonable
compensation; (b) if the amount paid constitutes
part of the acquisition price of another business
or is otherwise required to be capitalized; (c)
if the Company fails to comply with requirements
relating to the proper reporting of compensation
and tax withholding; (d) if the services with
respect to which the compensation is paid are
rendered to an affiliate of the Company that does
not file a consolidated federal income tax return
with the Company; or (e) if Section 162(m) of the
Code applies. Section 162(m) provides in general
that a publicly traded company may not deduct
more than $1 million in compensation paid in any
one calendar year to its chief executive officer
or to any other executive officer whose
compensation is required to be disclosed in its
proxy statement. Certain types of compensation,
including qualified performance-based
compensation, are exempt from this limitation.
The affirmative vote of the holders of a majority of the shares of common
stock present in person or by proxy and entitled to vote at the meeting is
necessary to approve the Amended Plan. Unless otherwise instructed, properly
executed proxies which are returned in a timely manner will be voted in favor
of adoption of the Amended Plan.
The board recommends a vote FOR approval of the Amended Plan.
14
<PAGE>
ITEM 4. SELECTION OF INDEPENDENT AUDITORS
- -------------------------------------------------------------------------------
The Company's board of directors, including a majority of the directors who
are not interested persons of the Company, has selected Ernst & Young LLP,
independent auditors, to audit the financial statements of the Company for the
year ending December 31, 2000. Ernst & Young LLP has served the Company in
this capacity since 1987 and has no direct or indirect financial interest in
the Company except as independent auditors. The Company is asking shareholders
to ratify the selection of Ernst & Young LLP as independent auditors of the
Company. A representative of Ernst & Young LLP is expected to attend the
meeting and will be available to respond to questions raised at the meeting.
The representative from Ernst & Young LLP also will have the opportunity to
make a statement if he or she desires to do so.
The affirmative vote of the holders of a majority of the shares of common
stock present in person or by proxy and entitled to vote at the meeting is
necessary to ratify the appointment of Ernst & Young LLP as independent
auditors of the Company. Unless otherwise instructed, properly executed
proxies which are returned in a timely manner will be voted in favor of the
selection of Ernst & Young LLP.
The board recommends a vote FOR ratification of the appointment of Ernst &
Young LLP as independent auditors of the Company.
OTHER MATTERS
- -------------------------------------------------------------------------------
As of the date of this proxy statement, we do not intend to bring any other
matters before the meeting, and we are not aware of any proposals to be
presented to the meeting by others. If any other matter comes before the
meeting, however, the persons named in the proxy solicited by the board of
directors will vote thereon in accordance with their judgment.
15
<PAGE>
INTERESTS IN STOCK
- -------------------------------------------------------------------------------
The table below contains information as of December 31, 1999 on the number
of shares of common stock of the Company as to which each named officer of the
Company and all directors, nominees and officers of the Company as a group,
had outright ownership, or, alone or with others, any power to vote or dispose
of the shares, or to direct the voting or disposition of the shares by others,
and the percentage of the aggregate of such shares to all of the outstanding
shares of the respective companies.
<TABLE>
<CAPTION>
Shares of Baker, Fentress & Company(a)
----------------------------------------------------
Power Over Voting
or Disposition of
Outright Other Shares (b) Aggregate
Ownership ------------------ ---------
of Shares Alone Shared Shares Percent (c)
--------- ------------------ --------- -----------
<S> <C> <C> <C> <C> <C>
Frederick S. Addy........ 0 0 0 0 0.00
Anson M. Beard, Jr....... 0 0 0 0 0.00
Eugene V. Fife........... 1,024 0 0 1,024 0.02
J. Barton Goodwin........ 0 0 125,147 125,147 1.92
James P. Gorter.......... 21,555 0 22,976 44,531 0.68
David D. Grumhaus........ 1,332 0 59,194 60,526 0.93
Jeffrey A. Kigner........ 0 0 0 0 0.00
John A. Levin............ 587,517(d) 0 47,715 635,232 9.77
Burton G. Malkiel........ 0 0 0 0 0.00
Peter J. Solomon......... 0 0 0 0 0.00
William H. Springer...... 0 0 0 0 0.00
Dean J. Takahashi........ 182 0 0 182 0.00
James S. Tisch........... 0 0 0 0 0.00
James P. Koeneman........ 170 0 75 245 0.00
Scott E. Smith........... 401 0 885 1,286 0.02
Directors and officers as
a group (15 persons).... 611,157(d) 0 255,992 867,149 13.33
</TABLE>
- --------
Notes to Table:
(a) The Company has adjusted the number of shares reported by each director
and officer to reflect the Company's 1 for 6 reverse stock split in
January 2000.
(b) Each person disclaims beneficial ownership of such shares.
(c) Number has been rounded.
(d) Includes 14,504 restricted stock units.
16
<PAGE>
The following table contains information with respect to the "beneficial
ownership" (as defined by the Securities and Exchange Commission) of shares of
the Company's common stock, as of December 31, 1999, by each person (other
than Mr. Levin whose share ownership information is shown above) who is known
by management of the Company to be the beneficial owner of more than five
percent of such stock. Except as otherwise indicated by footnote, the persons
below have sole voting and investment power over their shares.
<TABLE>
<CAPTION>
Shares
Beneficially
Name and Address Owned (a) Percent
- ---------------- ------------ -------
<S> <C> <C>
Warren E. Buffett 1440 Kiewit Plaza, Omaha, Nebraska 340,333 5.23%
68131...................................................
Yale University, Investments Office, 230 Prospect Street,
New Haven, Connecticut 06511-2107....................... 363,615(b) 5.59%
CSS, LLC, 401 South LaSalle Street, #1500, Chicago, 341,312 5.25%
Illinois 60605..........................................
</TABLE>
- --------
(a) The Company has adjusted the number of shares reported by each 5% holder
to reflect the Company's 1 for 6 reverse stock split in January 2000.
(b) Does not include 182 shares owned by Mr. Takahashi, a Yale University
employee who is a member of the Company's board of directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
- -------------------------------------------------------------------------------
Each director and officer of the Company is required to report his or her
transactions in shares of Company common stock to the SEC within a specified
period following a transaction. Based on our review of filings with the SEC
and written representations furnished to us, during 1999 the directors and
officers filed all such reports within the specified time period except Mr.
Grumhaus, who filed two reports covering five transactions for two accounts
late.
17
<PAGE>
EXECUTIVE OFFICERS
- -------------------------------------------------------------------------------
The current executive officers of the Company are:
<TABLE>
<CAPTION>
Name, Age, and Principal Occupation
Since January 1, 1995 Office(a) Year First Elected
- ----------------------------------- --------------------- ---------------------
<S> <C> <C>
John A. Levin--age 61 Chairman, Chief 2000 (as Chairman)
Chairman since February 2000, Executive Officer and 1996 (as CEO and
Chief Executive Officer and President President)
President of the Company and
Chairman and Chief Executive
Officer of Levin Management Co.,
Inc. and John A. Levin & Co., Inc.
since June 1996; prior thereto,
President and Securities
Analyst/Portfolio Manager of the
predecessor to John A. Levin &
Co., Inc.
Jeffrey A. Kigner--age 39 Vice-Chairman of the 2000
Vice-Chairman of the Company since Company
February 2000 and Co-Chairman of
Levin Management Co., Inc. and
John A. Levin & Co., Inc. since
1997 and Chief Investment Officer
of John A. Levin & Co., Inc. since
September 1997; prior thereto,
Executive Vice President of John
A. Levin & Co., Inc. from June
1996 to June 1997; prior threto,
Securities Analyst/Portfolio
Manager of the predecessor to John
A. Levin & Co., Inc.
Gregory T. Rogers--age 34 Executive Vice 2000
Executive Vice President and Chief President and Chief
Operating Officer of the Company, Operating Officer
Levin Management Co., Inc. and
John A. Levin & Co., Inc. since
February 2000; prior thereto,
Managing Director of BARRA
Strategic Consulting.
Glenn A. Aigen--age 37 Senior Vice 2000
Senior Vice President, Chief President, Chief
Financial Officer and Treasurer of Financial Officer and
the Company, Levin Management Co., Treasurer
Inc. and John A. Levin & Co., Inc.
since February 2000; Vice
President, Chief Financial Officer
and Director of Operations of
Levin Management Co., Inc. and
John A. Levin & Co., Inc. from
June 1996 to February 2000; prior
thereto, Director of Operations of
the predecessor to John A. Levin &
Co., Inc.
Norris Nissim--age 33 Vice President, 2000
Vice President, General Counsel General Counsel and
and Secretary of the Company and Secretary
Vice President and General Counsel
of Levin Management Co., Inc. and
John A. Levin & Co., Inc. since
February 2000; Director of Legal
Affairs of Levin Management Co.,
Inc. and John A. Levin & Co., Inc.
from August 1996 to February 2000;
prior thereto, Associate, Schulte
Roth & Zabel LLP.
</TABLE>
- --------
(a) Each officer of the Company generally holds office until the first meeting
of the board after the annual meeting of shareholders and until his
successor is elected and qualified.
18
<PAGE>
COMPENSATION
- -------------------------------------------------------------------------------
Directors' Compensation
Company employees who serve as directors of the Company receive no
compensation for such services. The Company pays non-employee directors,
including Levco employees or officers, an annual retainer of $20,000 (the
Chairman receives $32,000), payable in quarterly installments. Non-employee
directors receive $1,500 for each board meeting and $500 for each meeting of a
committee of the board that they attend in person or by telephone and $5,000
per year for serving as the chairman of any committee of the board. The
Company also reimburses directors for their out-of-pocket expenses incurred in
connection with such meetings.
Under the Incentive Compensation Plan, on December 30, 1998, the Company
granted each non-employee director an option to purchase 1,000 shares of the
Company's common stock. On April 22, 1999, the Company granted another option
to each non-employee director to purchase 250 shares of the Company. In light
of the adoption of the Plan for Distribution of Assets of the Company, each
director of the Company voluntarily terminated his rights to such shares of
Company stock in June 1999.
Under the terms of the current Incentive Compensation Plan, the Company
will automatically grant each non-employee director an initial stock option
(the "Initial Option") on the effective date of any non-interested director's
initial election to the board. The Company will automatically grant another
option to each non-employee director at the close of business on the date of
this annual shareholder meeting (the "Annual Option"), unless that non-
employee director received his Initial Option within the preceding 90 days.
The Initial Option consists of a one-time option to purchase 1,000 shares of
the Company's common stock. The Annual Option consists of an annual grant of
250 shares of the Company's common stock. These options become exercisable in
three equal installments after each of the first, second and third
anniversaries of the date of the grant.
As described in an earlier section of this proxy statement, the Company has
proposed to amend and restate the Incentive Compensation Plan. If the Amended
Plan is approved by shareholders and becomes effective, the Company's non-
interested directors would not receive the automatic grant of options.
Instead, the non-interested directors would be eligible to receive grants of
options from time to time, in the discretion of the Committee.
Executive Compensation
The following table sets forth compensation for the years ended December
31, 1999, December 31, 1998 and December 31, 1997 received by the Company's
Chief Executive Officer and the Company's three other most highly compensated
executive officers serving at the end of fiscal year 1999 (each of whom was
paid in excess of $100,000 in aggregate compensation by the Company and
Levco).
19
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------ --------------------------------------
Awards
--------------------------------------
Name and Principal Restricted Stock Securities Underlying All Other
Position Year Salary Bonus Award(s) ($) Options (#) Compensation
------------------ ---- ----------- ------------- ---------------- --------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
John A. Levin 1999 $867,165(a) $1,635,000(b) $189,005(c) 34,570(d) $30,000(e)
Chairman, Chief
Executive 1998 990,748(a) 1,614,706(b) 0 0 30,000(e)
Officer and President 1997 783,912(a) 1,711,658(b) 0 0 30,000(e)
James P. Gorter 1999 0 0 0 0 54,500(f)(g)
Former Chairman of the 1998 0 0 0 0 64,000(f)
Board 1997 0 0 0 0 55,450(f)
James P. Koeneman 1999 168,000 100,500 0 0 36,204(g)(h)
Former Executive Vice 1998 160,000 85,000 0 0 36,126(h)
President 1997 155,000 72,000 0 0 36,126(h)
Scott E. Smith 1999 162,750 237,250 0 0 35,126(i)
Former Executive Vice 1998 155,000 300,000 0 0 35,168(i)
President 1997 150,000 125,000 0 0 35,168(i)
</TABLE>
- --------
(a) In each of the years shown, Mr. Levin received $50,000 from the Company
for serving as an officer of the Company. The balance of Mr. Levin's
salary ($817,165 in 1999, $940,748 in 1998, and $733,912 in 1997) was paid
by Levco for serving as an officer and director of that company.
(b) Amounts reported as bonuses for Mr. Levin are bonuses Levco paid to Mr.
Levin for serving as an officer and director of that company and its
subsidiaries.
(c) In lieu of a portion of his cash bonus for 1999, Mr. Levin received an
award of 14,504 Restricted Stock units, having a fair market value on the
date of grant as shown in the table. The Restricted Stock is subject to
restrictions on transfer and is subject to risk of forfeiture that expires
one-half on December 31, 2000 and the balance on December 31, 2001.
(d) In lieu of a portion of his cash bonus for 1999, Mr. Levin received a
grant of non-qualified stock options as shown in the table. One-half of
the options vest on December 31, 2000 and the balance vests on December
31, 2001. All of the options have an exercise price of $13.03125 per
share.
(e) Amounts reported reflect contributions John A. Levin & Co., Inc., paid to
the Levco retirement plan, a target benefit pension plan funded by
employer contributions in which Mr. Levin participates. The amount of the
contribution made for each employee is determined by a formula that takes
into account, among other things, the age of the employee for whom the
contribution is made. The benefit received under the Levco plan upon
retirement depends on the aggregate contributions to the plan for the
participant and the investment performance of those assets.
(f) The amount reported reflects the compensation Mr. Gorter received from the
Company for serving as a director of the Company ($49,000 in 1999, $46,000
in 1998 and $39,450 in 1997) and compensation received for serving as a
director of Consolidated-Tomoka Land Co. ($5,500 in 1999 and $18,000 in
each of 1998 and 1997), which until September 24, 1999, was a majority-
owned subsidiary of the Company.
(g) In connection with the closing of the Chicago office, all employees based
in Chicago will lose their jobs. The board has approved severance
arrangements for these employees. The severance arrangements include full
vesting of the Baker, Fentress & Company Money Purchase Pension Plan, a
termination bonus for 2000 and a severance payment determined by base
compensation and length of service. The Company will also continue to
provide to terminated employees health insurance benefits for a period of
time based on length of service.
(h) The amount reported reflects the sum Mr. Koeneman received from Company
contributions to the Company's money purchase pension plan ($30,000 in
each year), Company contributions to the Company's defined benefit pension
plan ($4,478 in 1999, $4,478 in 1998 and $4,478 in 1997) and Company
contributions to the life and disability plans ($1,726 in 1999, $1,648 in
1998 and $1,648 in 1997).
(i) The amount reported reflects the sum Mr. Smith received from Company
contributions to the Company's money purchase pension plan ($30,000 in
each year), Company contributions to the Company's defined benefit pension
plan ($3,664 in 1999, $3,664 in 1998 and $3,664 in 1997) and Company
contributions to its life and disability plans ($1,462 in 1999, $1,504 in
1998 and $1,504 in 1997).
20
<PAGE>
Option Grants in 1999
The Company granted no options in 1999. However, as described above in the
Summary Compensation Table, the Company granted the following options in 2000
as part of the executive officer's 1999 incentive compensation.
<TABLE>
<CAPTION>
Number of Shares Percent of Total Exercise
Underlying Options Granted to or Base Grant Date
Options Employees in Price Expiration Present
Name Granted(1) Fiscal Year ($/Share) Date Value(2)
- ---- ---------------- ------------------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
John A. Levin........... 34,570 18.9% $13.03125 12/31/09 $189,005
James P. Gorter......... -- -- -- -- --
James P. Koeneman....... -- -- -- -- --
Scott E. Smith.......... -- -- -- -- --
</TABLE>
- --------
(1) The exercise price of each option is the fair market value of the Common
Stock on the date of grant. Options vest in two equal annual installments
beginning on December 31, 2000.
(2) The grant date present value is based on a modified Black-Scholes option
pricing model, assuming an expected exercise period of seven years, a risk
free rate of 6.35%, volatility of 22.39%, zero dividend yield, and no
discount for risk of forfeiture.
Employment Contracts
Mr. Levin has an employment contract with the Company and Levin Management
and Messrs. Kigner and Rogers have employment contracts with Levin Management.
Messrs. Levin and Kigner entered into their employment contracts at the time
the Company acquired Levco. Mr. Rogers entered into his contract upon his
employment with Levin Management on December 31, 1999. Mr. Rogers' contract
ends on December 31, 2002 and automatically renews for one year periods
thereafter unless either party provides written notice of its intent not to
extend the term of the contract. Mr. Levin's and Mr. Kigner's contracts began
on June 27, 1996 and continue for a term of five years. Each employment
contract contains confidentiality and noncompetition provisions (the non-
competition provision in Mr. Kigner's contract runs for four years, through
June 28, 2000). Each contract also contains provisions that require the
Company or Levin Management to pay each individual if the Company or Levin
Management terminates his employment without cause (as defined in the
contract). The Company, Levin Management and Messrs. Levin, Rogers and Kigner
must seek arbitration for any disputes brought under the contracts.
Pension Plan
The Company's officers and employees participate in the Company's
retirement plan, contributions to which are included in the cash compensation
table. The Company's retirement plan is a trusteed money purchase pension plan
funded by Company contributions equal to 25% of the compensation paid or
accrued to participating employees, subject to a $30,000 annual contribution
limitation per participant. The benefit received under the retirement plan
upon retirement depends on the aggregate contributions to the plan for the
participant and the investment performance of those assets.
<TABLE>
<CAPTION>
Pension or
Retirement
Benefits Accrued
as Part of the
Name of Person Company's Expenses
- -------------- ------------------
<S> <C>
James P. Gorter.............................................. none
John A. Levin................................................ none(a)
James P. Koeneman............................................ $30,000
Scott E. Smith............................................... 30,000
</TABLE>
- --------
(a) Does not include Mr. Levin's participation in the Levin Management Co.,
Inc. Retirement Plan. See Note (e) under Executive Compensation--Summary
Compensation Table.
21
<PAGE>
Compensation Committee Interlocks and Insider Participation
In 1999, the members of the Committee were William H. Springer, Frederick
S. Addy and David D. Peterson. Messrs. Springer, Addy and Peterson served as
directors of the Company and as members of the Committee until February 10,
2000. During 1999, Mr. Peterson was the only member of the Committee who was a
current or past executive officer or employee and none of the Company's
executive officers served on the board or the compensation committee of any
entity whose directors or officers served on the Company's Committee. Mr.
Peterson was president of the Company before he retired from that position in
June 1996.
As of February 10, 2000, the members of the Committee are Anson M. Beard
Jr., Burton G. Malkiel and Dean J. Takahashi. None of the Company's current or
past executive officers or employees serves on the Committee. None of the
Company's executive officers serves on the board or the compensation committee
of any entity whose directors or officers serve on the Company's Committee.
Compensation Committee Report on Executive Compensation
The Committee of the board makes decisions on compensation of the Company's
executives. Each member of the Committee is a non-employee director. The
Committee establishes the compensation of John A. Levin, Chief Executive
Officer, based on its evaluation of Mr. Levin's performance. It establishes
the compensation of the other officers of the Company in consultation with Mr.
Levin. The full board reviews all decisions by the Committee relating to the
compensation of all the Company's officers.
The Company's executive compensation program reflects the philosophy that
compensation should reward executives for outstanding individual performance
and, at the same time, align the interests of executives closely with those of
shareholders. To implement that philosophy, the Company offers each of its
executives a combination of base salary and annual cash bonuses. Each
executive officer, with the exception of Mr. Levin, also participates in the
Company's Money Purchase Pension Plan. Through this compensation structure,
the Company aims to reward above-average corporate performance and recognize
individual initiative and achievements.
The Committee administers the Baker, Fentress & Company 1998 Incentive
Compensation Plan, pursuant to which the Company and Levco may pay their
employees, based on performance, in cash or in Company stock (including stock
options and restricted stock units).
Base Salary
Base salaries reflect individual positions, responsibilities, experience,
and potential contribution to the success of the Company. Actual salaries vary
according to the Committee's subjective assessment of a number of factors in
its review of base salaries of Company executives. The Company conducts annual
reviews to ensure that base salaries are competitive, that they reflect the
specific responsibilities of individual executives and that they appropriately
reward individual executives for their contributions to the Company's
performance.
Bonuses
At the Committee's sole discretion, the Company may pay each executive
officer a cash bonus based on the Committee's assessment of the executive
officer's individual performance and the performance of the Company or
business unit. In its evaluation of the performance of the officer and the
determination of incentive bonuses, the Committee does not assign quantitative
relative weights to different factors or follow mathematical formulas. Rather,
the Committee makes its determination in each case after considering the
factors it deems relevant at the time.
22
<PAGE>
For officers of the Company other than Mr. Levin, the amounts of 1999
bonuses were determined as part of the severance arrangements made by the
Company for these employees, all of whom have lost, or will lose, their jobs
in connection with the Company's Plan for Distribution of Assets.
Compensation of Chief Executive Officer
The Committee establishes the annual base salary of the Chief Executive
Officer. For 1999, the Company paid Mr. Levin $50,000 to serve as the
Company's Chief Executive Officer. This amount does not include the salary Mr.
Levin receives from Levco for serving as an officer and director of Levco.
Unlike the other executive officers, Mr. Levin does not receive a cash bonus
from the Company based on his individual or the Company's performance.
Limits on Deductibility of Compensation
For corporate income tax purposes, the Company may not deduct compensation
paid to certain executive officers in excess of $1 million, unless it is
performance-based compensation and is paid pursuant to a plan meeting certain
requirements of the Code. The Committee currently anticipates that, to the
extent practicable and in the Company's best interest, the Company will pay
executive compensation in a manner that satisfies the requirements of the Code
to permit the Company to deduct the compensation.
Compensation Committee Members
William H. Springer (Chairman)
Frederick S. Addy
David D. Peterson
AUDIT COMMITTEE REPORT
- -------------------------------------------------------------------------------
The board has adopted a charter for the Audit Committee, a copy of which is
attached to this proxy statement as Exhibit C. Pursuant to this charter, the
Audit Committee makes recommendations regarding the selection of independent
auditors and meets with representatives of the Company's independent auditors
to determine the scope, and review the results, of each audit. In 1999, the
audit Committee met with representatives of Ernst & Young LLP, the Company's
independent auditors, to review the results of the 1998 audit and to review
the scope of the 1999 audit.
In February 2000, the Audit Committee met with members of the Ernst & Young
LLP engagement team to review the results of the 1999 audit. The Audit
Committee also discussed the audited financial statements and the results of
the audit with the Company's management.
During the February 2000 meeting, the Audit Committee discussed the matters
required to be discussed by Statements on Auditing Standards No. 61, with
Ernst & Young LLP. Further, the Audit Committee received at that meeting the
written disclosures and letter from Ernst & Young LLP required by Independence
Standards Board Standard No. 1. Standard No. 1 requires auditors to
communicate, in writing, at least annually all relationships between the
auditor and the Company that, in the auditor's professional judgment, may
reasonably be thought to affect the auditor's independence. The Audit
Committee has received this written disclosure and has discussed with Ernst &
Young LLP its independence.
The Audit Committee will meet with Ernst & Young LLP again in 2000 to
review the scope of the 2000 audit.
Audit Committee Members
David D. Grumhaus
Burton G. Malkiel
23
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
- --------------------------------------------------------------------------------
The following chart shows the Company's annual total returns from 1994
through 1999. On August 19, 1999, the Company's shareholders approved the Plan
for Distribution of Assets, pursuant to which the Company distributed or
liquidated substantially all of its assets, with the exception of Levco, and
changed the nature of the Company's business so that it no longer operated as a
registered investment company. Currently, the Company's chief operating
business is as an investment adviser. Because the chart that follows contains
the Company's returns from 1994 through 1999, the chart includes information
about the Company during that period in which the Company was operating as a
registered investment company and during the period after the August 19, 1999
shareholder meeting in which the Company distributed or liquidated
substantially all of its assets except Levco. To reflect the changing nature of
the Company's business, the chart sets forth a comparison of the Company's
total return with the annual return of (i) all closed-end, equity investment
companies ("Closed-End Funds") reported by Morningstar, Inc.; (ii) the SNL
Investment Adviser Index; and (iii) the S&P 500 Index. The chart is based on an
investment of $100 on December 31, 1994, and assumes that all dividends and
capital gain distributions were reinvested. The chart is not an indicator of
the future performance of the Company. Thus, it should not be used to predict
the future performance of the Company's stock.
Comparison of Cumulative Five Year Total Return
[Comparison of Cumulative Five Year Total Return Graphic]
<TABLE>
<CAPTION>
12/30/94 12/29/95 12/29/96 12/31/97 12/31/98 12/31/99
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Baker, Fentress &
Company $100 $133 $154 $193 $199 $267
- -------------------------------------------------------------------------------
Closed-End Funds 100 119 133 152 158 175
- -------------------------------------------------------------------------------
S&P Financial Index 100 161 209 319 418 534
- -------------------------------------------------------------------------------
SNL Investment Adviser
Index 100 139 202 363 411 652
- -------------------------------------------------------------------------------
S&P 500 Index 100 138 169 226 290 351
</TABLE>
Total returns assume that dividends and capital gain distributions are
reinvested.
24
<PAGE>
PROXY SOLICITATION; VOTING; ADJOURNMENT
- -------------------------------------------------------------------------------
If you properly sign your proxy and return it on time, your shares will be
voted at the Annual Meeting in accordance with the directions you mark on your
proxy card. If you properly sign and return your proxy, but don't mark any
directions on it, your shares will be voted for the election of each of the
nominated directors, for approval of the charter amendment to change the
Company's name, for approval of the Amended Plan, and for the ratification of
the selection of Ernst & Young LLP as independent auditors of the Company.
You may revoke your proxy at any time before it is voted, either in person
at the meeting, by written notice to the Company, or by delivery of a later
dated proxy. No appraisal rights exist for any action proposed to be taken at
the Annual Meeting.
Shareholders of record at the close of business on February 28, 2000 are
entitled to participate in the meeting and to cast one vote for each share
held. The Company had 6,504,852 shares of common stock outstanding on the
record date. There is no other class of stock outstanding. Proxy material is
first being mailed to shareholders on or about March 13, 2000.
Proxies will be solicited by mail. Directors, officers, and a small number
of regular employees may solicit proxies, personally or by telephone,
telegraph or mail, but such persons will not be specially compensated for such
services. In addition, the Company may engage Corporate Investor
Communications, Inc. to render proxy solicitation services at a cost estimated
at $6,000. The Company will inquire of any shareholder of record known to be a
broker, dealer, bank, or other nominee as to whether other persons were the
beneficial owners of shares held of record by such persons. If so, the Company
will supply additional copies of solicitation materials for forwarding to
beneficial owners and will make reimbursement for reasonable out-of-pocket
costs. The Company will bear all costs of solicitation and related actions.
ChaseMellon Shareholder Services, LLC, the Company's transfer agent,
tabulates the proxies. Under Delaware law (under which the Company is
organized) and the Company's bylaws, a majority of the shares outstanding on
the record date, excluding shares held in the Company's treasury, must be
present at the meeting in person or by proxy to constitute a quorum for the
transaction of business. Shares abstaining from voting or present but not
voting, including broker non-votes, are counted as "present" for purposes of
determining the existence of a quorum. Broker non-votes are shares held by a
broker or nominee for which an executed proxy is received by the Company, but
which are not voted as to one or more proposals because instructions have not
been received from the beneficial owners or persons entitled to vote and the
broker or nominee does not have discretionary voting power.
Any decision to adjourn the meeting would be made by vote of the shares
present at the meeting, in person or by proxy. Proxies would be voted in favor
of adjournment if there were not enough shares present at the meeting to
constitute a quorum. If sufficient shares were present to constitute a quorum,
but insufficient votes had been cast in favor of an item to approve it,
proxies would be voted in favor of adjournment only if the board determined
that adjournment and additional solicitation was reasonable and in the best
interest of shareholders, taking into account the nature of the proposal, the
percentage of votes actually cast, the percentage of negative votes, the
nature of any further solicitation that might be made and the information
provided to shareholders about the reasons for additional solicitation.
25
<PAGE>
PROPOSALS OF SHAREHOLDERS
- -------------------------------------------------------------------------------
The Company must receive any shareholder proposal to be considered for
inclusion in proxy material for the Company's annual meeting of shareholders
in April 2001 at the principal executive
office of the Company, One Rockefeller Plaza, 19th Floor, New York, New York
10020, no later than December 8, 2000. Submission of a proposal does not
guarantee inclusion of the proposal in the proxy statement or its presentation
at the meeting since certain rules under the federal securities laws must be
satisfied.
AVAILABLE INFORMATION
- -------------------------------------------------------------------------------
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 and files reports, proxy statements and other information
with the Commission. Those reports, proxy statements and other information may
be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following Regional Offices of the Commission: Chicago Regional Office, 500
West Madison Street, Chicago, Illinois 60661; and New York Regional Office,
Seven World Trade Center, New York, New York 10048. Copies of such material
can be obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Shareholders of the Company may obtain, without charge, copies of the
Company's most recent annual report and semi-annual report by writing to the
Company at One Rockefeller Plaza, 19th Floor, New York, New York 10020 or by
calling (800) BKF-1891. Shareholders may also obtain copies of the annual,
semi-annual and quarterly reports on the Company's web site at
www.bakerfentress.com.
March 13, 2000
26
<PAGE>
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
BAKER, FENTRESS & COMPANY
Baker, Fentress & Company, a corporation organized and existing under the
laws of the State of Delaware (the "Company"), DOES HEREBY CERTIFY:
FIRST: That by unanimous vote of the Board of Directors of the Company,
resolutions were duly adopted setting forth a proposed amendment to the
Restated Certificate of Incorporation of the Company, declaring such
amendment to be advisable and calling for the consideration of the proposed
amendment by the stockholders of the Company at the next annual meeting.
The resolutions setting forth the proposed amendment are as follows:
RESOLVED, that the Board of Directors of the Company hereby declares
it advisable that the Restated Certificate of Incorporation of the
Company be amended by deletion of article FIRST and the insertion of
the following in lieu thereof:
"FIRST: The name of the corporation is BKF Capital Group, Inc."
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, the annual meeting of the stockholders of the Company was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware, at which meeting the necessary
number of shares as required by statute were voted in favor of the
amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
FOURTH: That the effective time and date of said amendment shall be
, and the amendment provided for herein shall be effective as
of that time and date.
IN WITNESS WHEREOF, the Company has caused this certificate to be signed by
John A. Levin, its Chairman, Chief Executive Officer and President, this
day of April 2000.
Baker, Fentress & Company
By: _________________________________
John A. Levin
Chairman, Chief Executive Officer
and President
A-1
<PAGE>
EXHIBIT B
BAKER, FENTRESS & COMPANY
1998 Incentive Compensation Plan
(as amended and restated)
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Purpose............................................................... B-1
2. Definitions........................................................... B-1
3. Administration........................................................ B-2
(a) Authority of the Committee.......................................... B-2
(b) Manner of Exercise of Committee Authority........................... B-3
(c) Limitation of Liability............................................. B-3
4. Stock Subject to Plan................................................. B-3
(a) Overall Number of Shares of Stock Available for Delivery............ B-3
(b) Application of Limitation to Grants of Awards....................... B-3
(c) Availability of Shares Not Delivered under Awards................... B-3
5. Eligibility; Per-Person Award Limitations............................. B-4
6. Specific Terms of Awards.............................................. B-4
(a) General............................................................. B-4
(b) Options............................................................. B-4
(c) Stock Appreciation Rights........................................... B-5
(d) Restricted Stock.................................................... B-5
(e) Deferred Stock...................................................... B-6
(f) Bonus Stock and Awards in Lieu of Obligations...................... B-6
(g) Dividend Equivalents................................................ B-6
(h) Annual Incentive and Performance Awards............................. B-6
7. Certain Provisions Applicable to Awards............................... B-7
(a) Stand-Alone, Additional, Tandem, and Substitute Awards.............. B-7
(b) Term of Awards...................................................... B-7
(c) Form and Timing of Payment under Awards; Deferrals.................. B-7
(d) Exemptions from Section 16(b) Liability............................. B-7
(e) Loan Provisions..................................................... B-7
(f) General Terms Relating to Awards.................................... B-8
8. Performance and Annual Incentive Awards............................... B-8
(a) Performance Conditions.............................................. B-8
(b) Performance Awards Granted to Designated Covered Employees.......... B-8
(c) Annual Incentive Awards Granted to Designated Covered Employees..... B-9
(d) Written Determinations.............................................. B-10
(e) Status of Section 8(b) and Section 8(c) Awards under Code Section
162(m)................................................................. B-10
9. Change in Control..................................................... B-11
(a) Effect of "Change in Control" on Non-Performance Based Awards....... B-11
(b) Effect of "Change in Control" on Performance-Based Awards........... B-11
(c) Definition of "Change in Control"................................... B-11
(d) Definition of "Change in Control Price"............................. B-12
</TABLE>
B-i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
10. General Provisions..................................................... B-12
(a) Compliance with Legal and Other Requirements......................... B-12
(b) Limits on Transferability; Beneficiaries............................. B-12
(c) Adjustments.......................................................... B-12
(d) Taxes................................................................ B-13
(e) Changes to the Plan and Awards....................................... B-13
(f) Limitation on Rights Conferred under Plan........................... B-14
(g) Unfunded Status of Awards; Creation of Trusts........................ B-14
(h) Nonexclusivity of the Plan........................................... B-14
(i) Payments in the Event of Forfeitures; Fractional Shares............. B-14
(j) Governing Law....................................................... B-14
(k) Plan Effective Date and Shareholder Approval......................... B-14
</TABLE>
B-ii
<PAGE>
1. Purpose. The purpose of this 1998 Incentive Compensation Plan, as
amended and restated (the "Plan"), is to assist Baker, Fentress & Company
("BKF") and its subsidiaries in attracting, retaining, motivating, and
rewarding high-quality executives, employees, and other persons who provide
services to BKF and/or its subsidiaries, enabling such persons to acquire or
increase a proprietary interest in BKF in order to strengthen the mutuality of
interests between such persons and shareholders of BKF, and providing such
persons with annual and long-term performance incentives to expend their
maximum efforts in the creation of shareholder value. The Plan is also
intended to qualify certain compensation awarded under the Plan for tax
deductibility under Code Section 162(m) to the extent deemed appropriate by
the Committee (or any successor committee) of the Board of Directors of BKF.
Adoption of the Plan and the grant of Awards in accordance with the terms of
the Plan has been determined by the Board of Directors of BKF to be in the
best interests of BKF and its shareholders.
2. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof:
(a) "Annual Incentive Award" means an Award granted to a Participant
which is conditioned upon satisfaction, during a period not in excess of
one year, of performance criteria established by the Committee.
(b) "Award" means any Option, SAR, Restricted Stock, Deferred Stock,
Stock granted as a bonus or in lieu of another award, Dividend Equivalent,
Other Stock-Based Award, Performance Award or Annual Incentive Award,
together with any other right or interest granted to a Participant under
the Plan.
(c) "Beneficiary" means the person, persons, trust or trusts which have
been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards
or other rights are transferred if and to the extent permitted under
Section 10(b) hereof. If, upon a Participant's death, there is no
designated Beneficiary or surviving designated Beneficiary, then the term
Beneficiary means the Participant's estate.
(d) "Beneficial Owner" shall have the meaning ascribed to such term in
Rule 13d-3 under the Exchange Act and any successor to such Rule.
(e) "Board" means BKF's Board of Directors.
(f) "Code" means the Internal Revenue Code of 1986, as amended from time
to time, including regulations thereunder and successor provisions and
regulations thereto.
(g) "Committee" means a committee of two or more directors designated by
the Board to administer the Plan, each of whom shall be (i) a "non-employee
director" within the meaning of Rule 16b-3 under the Exchange Act, and (ii)
an "outside director" as defined under Code Section 162(m), unless
administration of the Plan by "outside directors" is not then required in
order to qualify for tax deductibility under Code Section 162(m).
(h) "Covered Employee" means an Eligible Person who is a Covered
Employee as specified in Section 8(e) of the Plan.
(i) "Deferred Stock" means a right, granted to a Participant under
Section 6(e) hereof, to receive Stock, cash or a combination thereof at the
end of a specified deferral period.
(j) "Dividend Equivalent" means a right, granted to a Participant under
Section 6(g), to receive cash, Stock, other Awards or other property equal
in value to dividends paid with respect to a specified number of shares of
Stock, or other periodic payments.
(k) "Effective Date" means the date on which BKF shareholders approve
the adoption of the Plan.
B-1
<PAGE>
(l) "Eligible Person" means each Executive Officer or director of BKF
and other officers and employees of BKF or any of its subsidiaries. An
employee on leave of absence may be considered as still in the employ of
BKF or a subsidiary for purposes of eligibility for participation in the
Plan. In addition, a person who has been offered employment by BKF or any
of its subsidiaries or agreed to become a director of BKF is eligible to be
granted an Award under the Plan; provided, however, that such Award shall
be canceled if such person fails to commence such employment or service as
a director, and no payment of value may be made in connection with such
Award until such person has commenced such employment or service.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, including rules thereunder and successor provisions and
rules thereto.
(n) "Executive Officer" means an executive officer of BKF as defined
under the Exchange Act.
(o) "Fair Market Value" means the fair market value of Stock, Awards or
other property as determined by the Committee or under procedures
established by the Committee. Unless otherwise determined by the Committee,
the Fair Market Value of Stock shall be equal to the closing price per
share reported on a consolidated basis on the principal stock exchange upon
which Stock is traded on the date on which the value is to be determined
(or the last immediately preceding date on which Stock was traded).
(p) "Incentive Stock Option" or "ISO" means any Option intended to be
and designated as an incentive stock option within the meaning of Code
Section 422 or any successor provision thereto.
(q) "Option" means a right, granted to a Participant under Section 6(b)
hereof, to purchase Stock or other Awards at a specified price during
specified time periods.
(r) "Participant" means a person who has been granted an Award under the
Plan which remains outstanding, including a person who is no longer an
Eligible Person.
(s) "Performance Award" means an Award granted to a Participant which is
conditioned upon satisfaction, during a period in excess of one year but in
no event more than ten years, of performance criteria established by the
Committee.
(t) "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
and shall include a "group" as defined in Section 13(d) thereof.
(u) "Restricted Stock" means Stock granted to a Participant under
Section 6(d) hereof that is subject to certain restrictions and to a risk
of forfeiture.
(v) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
applicable to the Plan and Participants, promulgated by the Securities and
Exchange Commission under Section 16 of the Exchange Act.
(w) "Stock" means either BKF Common Stock, and such other securities as
may be substituted (or resubstituted) for BKF Common Stock pursuant to
Section 10(c) hereof.
(x) "Stock Appreciation Rights" or "SAR" means a right granted to a
Participant under Section 6(c) hereof.
3. Administration. (a) Authority of the Committee. The Plan shall be
administered by the Committee. A majority of the Committee shall constitute a
quorum, and the acts of a majority of the members present at any meeting at
which a quorum is present, or acts approved in writing by all of the members,
shall be the acts of the Committee. The Committee shall have full and final
authority, in each case subject to and consistent with the provisions of the
Plan, to select Eligible Persons to become Participants, grant Awards,
determine the type, number and other terms and conditions of, and all other
matters relating to, Awards, prescribe Award agreements (which need not be
identical for each Participant) and rules and regulations for the
administration of the Plan, construe and interpret
B-2
<PAGE>
the Plan and Award agreements and correct defects, supply omissions or
reconcile inconsistencies therein, and to make all other decisions and
determinations as the Committee may deem necessary or advisable for the
administration of the Plan. Other provisions of the Plan notwithstanding, the
Board shall perform the functions of the Committee for purposes of
interpreting or otherwise administering grants to non-employee directors.
(b) Manner of Exercise of Committee Authority. Any action of the Committee
shall be final, conclusive and binding on all persons, including BKF, its
subsidiaries, Participants, Beneficiaries, transferees under Section 11(b)
hereof or other persons claiming rights from or through a Participant, and
shareholders. The express grant of any specific power to the Committee, and
the taking of any action by the Committee, shall not be construed as limiting
any power or authority of the Committee. The Committee may delegate to
officers or managers of BKF or any subsidiary, or committees thereof, the
authority, subject to such terms as the Committee shall determine, to perform
such functions, including administrative functions, as the Committee may
determine, to the extent that such delegation will not result in the loss of
an exemption under Rule 16b-3(d)(1) for Awards granted to Participants subject
to Section 16 of the Exchange Act in respect of BKF and will not cause Awards
intended to qualify as "performance-based compensation" under Code Section
162(m) to fail to so qualify. The Committee may appoint agents to assist it in
administering the Plan.
(c) Limitation of Liability. The Committee and each member thereof shall be
entitled, in good faith, to rely or act upon any report or other information
furnished to him or her by any executive officer, other officer or employee of
BKF or a subsidiary, BKF's independent auditors, consultants or any other
agents assisting in the administration of the Plan. Members of the Committee
and any officer or employee of BKF or a subsidiary acting at the direction or
on behalf of the Committee shall not be personally liable for any action or
determination taken or made in good faith with respect to the Plan, and shall,
to the extent permitted by law, be fully indemnified and protected by BKF with
respect to any such action or determination; provided that nothing herein
shall be construed to protect any such person from any liability to BKF or its
shareholders to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of his
or her duties, or by reason of reckless disregard of his or her obligations
and duties.
4. Stock Subject to Plan. (a) Overall Number of Shares of Stock Available
for Delivery. Subject to adjustment as provided in Section 10(c) hereof, the
total number of shares of Stock reserved and available for delivery in
connection with Awards under the Plan shall be (i) 1,300,000, plus (ii) 10% of
the number of shares of Stock issued or delivered by BKF during the term of
the Plan (excluding any issuance or delivery in connection with Awards, or any
other compensation or benefit plan of BKF); provided, however, that the total
number of shares of Stock with respect to which ISOs may be granted shall not
exceed one million. Any shares of Stock delivered under the Plan shall consist
of authorized and unissued shares or treasury shares.
(b) Application of Limitation to Grants of Awards. No Award may be granted
if the number of shares of Stock to be delivered in connection with such Award
or, in the case of an Award relating to shares of Stock but settleable only in
cash (such as cash-only SARs), the number of shares to which such Award
relates, exceeds the number of shares of Stock remaining available under the
Plan minus the number of shares of Stock issuable in settlement of or relating
to then-outstanding Awards. The Committee may adopt reasonable counting
procedures to ensure appropriate counting, avoid double counting (as, for
example, in the case of tandem or substitute awards) and make adjustments if
the number of shares of Stock actually delivered differs from the number of
shares previously counted in connection with an Award.
(c) Availability of Shares Not Delivered under Awards. Shares of Stock
subject to an Award under the Plan that is canceled, expired, forfeited,
settled in cash or otherwise terminated without a delivery
B-3
<PAGE>
of shares to the Participant, including (i) the number of shares withheld in
payment of any exercise or purchase price of an Award or taxes relating to
Awards, and (ii) the number of shares surrendered in payment of any exercise
or purchase price of an Award or taxes relating to any Award, will again be
available for Awards under the Plan, except that if any such shares could not
again be available for Awards to a particular Participant under any applicable
law or regulation, such shares shall be available exclusively for Awards to
Participants who are not subject to such limitation.
5. Eligibility; Per-Person Award Limitations. Awards may be granted under
the Plan only to Eligible Persons. In each fiscal year during any part of
which the Plan is in effect, an Eligible Person may not be granted Awards
relating to more than one million shares of Stock, subject to adjustment as
provided in Section 10(c), under each of Sections 6(b), 6(c), 6(d), 6(e),
6(f), 6(g) and 6(h). For purposes of applying the foregoing limitation to
Sections 6(b) and 6(c), any Option or SAR that is canceled shall be treated as
remaining outstanding, and any amendment to an Option or SAR that reduces the
exercise or grant price (other than customary anti-dilution adjustments) shall
be treated as the cancellation of the original Option or SAR and the issuance
of a new Option or SAR. In addition, the maximum cash Award that may be earned
under the Plan pursuant to Section 6(h) in respect of any fiscal year shall be
$20 million, determined on an annualized basis in the case of a Performance
Award.
6. Specific Terms of Awards. (a) General. Awards may be granted on the
terms and conditions set forth in this Section 6. In addition, the Committee
may impose on any Award or the exercise thereof, at the date of grant or
thereafter (subject to Section 11(e)), such additional terms and conditions,
not inconsistent with the provisions of the Plan, as the Committee shall
determine, including terms requiring forfeiture of Awards in the event of
termination of employment by the Participant and terms permitting a
Participant to make elections relating to his or her Award. The Committee
shall retain full power and discretion to accelerate, waive or modify, at any
time, any term or condition of an Award that is not mandatory under the Plan.
Except in cases in which the Committee is authorized to require other forms of
consideration under the Plan, or to the extent other forms of consideration
must by paid to satisfy the requirements of the Delaware General Corporation
Law, no consideration other than services may be required for the grant (but
not the exercise) of any Award.
(b) Options. The Committee is authorized to grant Options to Participants
on the following terms and conditions:
(i) Exercise Price. The exercise price per share of Stock purchasable
under an Option shall be determined by the Committee, provided that such
exercise price shall be not less than the Fair Market Value of a share of
Stock on the date of grant of such Option except as provided under Section
7(a) hereof.
(ii) Time and Method of Exercise. The Committee shall determine the time
or times at which or the circumstances under which an Option may be
exercised in whole or in part (including based on achievement of
performance goals and/or future service requirements), the methods by which
such exercise price may be paid or deemed to be paid, the form of such
payment, including, without limitation, cash, Stock, other Awards, or other
property (including notes or other contractual obligations of Participants
to make payment on a deferred basis), and the methods by or forms in which
Stock will be delivered or deemed to be delivered to Participants.
(iii) ISOs. The terms of any ISO granted under the Plan shall comply in
all respects with the provisions of Code Section 422. Anything in the Plan
to the contrary notwithstanding, no term of the Plan relating to ISOs
(including any SAR in tandem therewith) shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be
exercised, so as to disqualify either the Plan or any ISO under Code
Section 422, unless the Participant has first requested the change that
will result in such disqualification.
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(c) Stock Appreciation Rights. The Committee is authorized to grant SARs to
Participants on the following terms and conditions:
(i) Right to Payment. A SAR shall confer on the Participant to whom it
is granted a right to receive, upon exercise thereof, the excess of (A) the
Fair Market Value of one share of Stock on the date of exercise over (B)
the grant price of the SAR as determined by the Committee.
(ii) Other Terms. The Committee shall determine at the date of grant or
thereafter, the time or times at which and the circumstances under which a
SAR may be exercised in whole or in part (including based on achievement of
performance goals and/or future service requirements), the method of
exercise, method of settlement, form of consideration payable in
settlement, method by or forms in which Stock will be delivered or deemed
to be delivered to Participants, whether or not a SAR shall be in tandem or
in combination with any other Award, and any other terms and conditions of
any SAR. SARs may be either freestanding or in tandem with other Awards.
(d) Restricted Stock. The Committee is authorized to grant Restricted Stock
to Participants on the following terms and conditions:
(i) Grant and Restrictions. Restricted Stock shall be subject to such
restrictions on transferability, risk of forfeiture and other restrictions,
if any, as the Committee may impose, which restrictions may lapse
separately or in combination at such times, under such circumstances
(including based on achievement of performance goals and/or future service
requirements), in such installments or otherwise, as the Committee may
determine at the date of grant or thereafter. Except to the extent
restricted under the terms of the Plan and any Award agreement relating to
the Restricted Stock, a Participant granted Restricted Stock shall have all
of the rights of a shareholder, including the right to vote the Restricted
Stock and the right to receive dividends thereon (subject to any mandatory
reinvestment or other requirement imposed by the Committee). During the
restricted period applicable to the Restricted Stock, subject to Section
11(b) below, the Restricted Stock may not be sold, transferred, pledged,
hypothecated, margined or otherwise encumbered by the Participant.
(ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment during the applicable restriction period,
Restricted Stock that is at that time subject to restrictions shall be
forfeited and reacquired by the issuing company; provided that the
Committee may provide, by rule or regulation or in any Award agreement, or
may determine in any individual case, that restrictions or forfeiture
conditions relating to Restricted Stock shall be waived in whole or in part
in the event of terminations resulting from specified causes, and the
Committee may in other cases waive in whole or in part the forfeiture of
Restricted Stock.
(iii) Certificates for Stock. Restricted Stock granted under the Plan
may be evidenced in such manner as the Committee shall determine. If
certificates representing Restricted Stock are registered in the name of
the Participant, the Committee may require that such certificates bear an
appropriate legend referring to the terms, conditions and restrictions
applicable to such Restricted Stock, that the issuing company retain
physical possession of the certificates, and that the Participant deliver a
stock power to the issuing company, endorsed in blank, relating to the
Restricted Stock.
(iv) Dividends, Distributions and Splits. As a condition to the grant of
an Award of Restricted Stock, the Committee may require that any cash
dividends or distributions paid on a share of Restricted Stock be
automatically reinvested in additional shares of Restricted Stock or
applied to the purchase of additional Awards under the Plan. Unless
otherwise determined by the Committee, Stock distributed in connection with
a Stock split, Stock dividend or distribution, and other property
distributed as a dividend, shall be subject to restrictions and a risk of
forfeiture to the same extent as the Restricted Stock with respect to which
such Stock or other property has been distributed.
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(e) Deferred Stock. The Committee is authorized to grant Deferred Stock to
Participants, which are rights to receive Stock, cash, or a combination
thereof at the end of a specified deferral period, subject to the following
terms and conditions:
(i) Award and Restrictions. Satisfaction of an Award of Deferred Stock
shall occur upon expiration of the deferral period specified for such
Deferred Stock by the Committee (or, if permitted by the Committee, as
elected by the Participant). In addition, Deferred Stock shall be subject
to such restrictions (which may include a risk of forfeiture) as the
Committee may impose, if any, which restrictions may lapse at the
expiration of the deferral period or at earlier specified times (including
based on achievement of performance goals and/or future service
requirements), separately or in combination, in installments or otherwise,
as the Committee may determine. Deferred Stock may be satisfied by delivery
of Stock, cash equal to the Fair Market Value of the specified number of
shares of Stock covered by the Deferred Stock, or a combination thereof, as
determined by the Committee at the date of grant or thereafter.
(ii) Forfeiture. Except as otherwise determined by the Committee, upon
termination of employment during the applicable deferral period or portion
thereof to which forfeiture conditions apply (as provided in the Award
agreement evidencing the Deferred Stock), all Deferred Stock that is at
that time subject to deferral (other than a deferral at the election of the
Participant) shall be forfeited; provided that the Committee may provide,
by rule or regulation or in any Award agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating to
Deferred Stock shall be waived in whole or in part in the event of
terminations resulting from specified causes, and the Committee may in
other cases waive in whole or in part the forfeiture of Deferred Stock.
(iii) Dividend Equivalents. Unless otherwise determined by the Committee
at date of grant, Dividend Equivalents on the specified number of shares of
Stock covered by an Award of Deferred Stock shall be either (A) paid with
respect to such Deferred Stock at the dividend payment date in cash or in
shares of unrestricted Stock having a Fair Market Value equal to the amount
of such dividends, or (B) deferred with respect to such Deferred Stock and
the amount or value thereof automatically deemed reinvested in additional
Deferred Stock, other Awards or other investment vehicles, as the Committee
shall determine or permit the Participant to elect.
(f) Bonus Stock and Awards in Lieu of Obligations. The Committee is
authorized to grant Stock as a bonus, or to grant Stock or other Awards in
lieu of obligations to pay cash or deliver other property under the Plan or
under other plans or compensatory arrangements, provided that, in the case of
Participants subject to Section 16 of the Exchange Act, the amount of such
grants remains within the discretion of the Committee to the extent necessary
to ensure that acquisitions of Stock or other Awards are exempt from liability
under Section 16(b) of the Exchange Act. Stock or Awards granted hereunder
shall be subject to such other terms as shall be determined by the Committee.
(g) Dividend Equivalents. The Committee is authorized to grant Dividend
Equivalents to a Participant, entitling the Participant to receive cash,
Stock, or other Awards equal in value to dividends paid with respect to a
specified number of shares of Stock, or other periodic payments. Dividend
Equivalents may be awarded on a free-standing basis or in connection with
another Award. The Committee may provide that Dividend Equivalents shall be
paid or distributed when accrued or shall be deemed to have been reinvested in
additional Stock, Awards, or other investment vehicles, and subject to such
restrictions on transferability and risks of forfeiture, as the Committee may
specify.
(h) Annual Incentive and Performance Awards. The Committee is authorized to
make Annual Incentive Awards and Performance Awards payable in cash, Stock, or
other Awards, on terms and conditions established by the Committee, subject to
Section 8 in the event of Annual Incentive Awards or Performance Awards
intended to qualify as "performance-based compensation" for purposes of Code
Section 162(m).
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7. Certain Provisions Applicable to Awards. (a) Stand-Alone, Additional,
Tandem, and Substitute Awards. Awards granted under the Plan may, in the
discretion of the Committee, be granted either alone or in addition to, in
tandem with, or in substitution or exchange for, any other Award or any award
granted under another plan of BKF, any subsidiary, or any business entity to
be acquired by BKF or any subsidiary, or any other right of a Participant to
receive payment from BKF or any subsidiary. Such additional, tandem, and
substitute or exchange Awards may be granted at any time. If an Award is
granted in substitution or exchange for another Award or award, the Committee
shall require the surrender of such other Award or award in consideration for
the grant of the new Award. In addition, Awards may be granted in lieu of cash
compensation, including in lieu of cash amounts payable under other plans of
BKF or any subsidiary, in which the value of Stock subject to the Award is
equivalent in value to the cash compensation (for example, Deferred Stock or
Restricted Stock), or in which the exercise price, grant price or purchase
price of the Award in the nature of a right that may be exercised is equal to
the Fair Market Value of the underlying Stock minus the value of the cash
compensation surrendered (for example, Options granted with an exercise price
"discounted" by the amount of the cash compensation surrendered).
(b) Term of Awards. The term of each Award shall be for such period as may
be determined by the Committee; provided that in no event shall the term of
any Option or SAR exceed a period of ten years (or such shorter term as may be
required in respect of an ISO under Code Section 422).
(c) Form and Timing of Payment under Awards; Deferrals. Subject to the
terms of the Plan and any applicable Award agreement, payments to be made by
BKF or any subsidiary upon the exercise of an Option or other Award or
settlement of an Award may be made in such forms as the Committee shall
determine, including, without limitation, cash, Stock, or other Awards, and
may be made in a single payment or transfer, in installments, or on a deferred
basis. The settlement of any Award may be accelerated, and cash paid in lieu
of Stock in connection with such settlement, in the discretion of the
Committee or upon the occurrence of one or more specified events. Installment
or deferred payments may be required by the Committee to the extent necessary
to qualify payments for deductibility under Code Section 162(m), or permitted
at the election of the Participant on terms and conditions established by the
Committee. Payments may include, without limitation, provisions for the
payment or crediting of reasonable interest on installment or deferred
payments or the grant or crediting of Dividend Equivalents or other amounts in
respect of installment or deferred payments denominated in Stock. Any payments
mandatorily deferred by the Committee to qualify such payments for
deductibility under Code Section 162(m) shall include a reasonable rate of
interest.
(d) Exemptions from Section 16(b) Liability. It is the intent of BKF and
its subsidiaries that the grant of any Awards to or other transaction by a
Participant who is subject to Section 16 of the Exchange Act shall be exempt
under Rule 16b-3 (except for transactions acknowledged in writing to be non-
exempt by such Participant). Accordingly, if any provision of this Plan or any
Award agreement does not comply with the requirements of Rule 16b-3 as then
applicable to any such transaction, such provision shall be construed or
deemed amended to the extent necessary to conform to the applicable
requirements of Rule 16b-3 so that such Participant shall avoid liability
under Section 16(b).
(e) Loan Provisions. With the consent of the Committee, and subject at all
times to, and only to the extent, if any, permitted under and in accordance
with, laws and regulations and other binding obligations or provisions
applicable to BKF and/or any subsidiary, BKF and/or any subsidiary may make,
guarantee or arrange for a loan or loans to a Participant with respect to the
exercise of any Option, purchase of Stock or other payment in connection with
any Award, including the payment by a Participant of any or all federal, state
or local income or other taxes due in connection with any Award. Subject to
such limitations, the Committee shall have full authority to decide whether to
make a loan or loans hereunder and to determine the amount, terms and
provisions of any such loan or loans, including the interest rate to be
charged in respect of any such loan or loans, the terms on which the loan is
to be repaid and conditions, if any, under which the loan or loans may be
forgiven.
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<PAGE>
(f) General Terms Relating to Awards. Unless the Committee provides
otherwise at the time of grant or by amendment, an Option, SAR, grant of
Restricted Stock or Deferred Stock will become exercisable or settleable, as
the case may be, in three equal installments after each of the first, second
and third anniversaries of the date of grant based on the Participant's
continued employment with BKF or any of its subsidiaries. Unless the Committee
provides otherwise at the time of grant or by amendment, an Option or SAR will
have a maximum term of ten years after the date of grant and will expire 30
days after the Participant's termination of employment with BKF and its
subsidiaries, except if such termination occurs by reason of the Participant's
death, retirement or disability, in which case the Option or SAR will be
immediately exercisable and may be exercised by the Participant or his or her
Beneficiary within one year following such termination (but in no event later
than the maximum term of the Option or SAR).
8. Performance and Annual Incentive Awards. (a) Performance Conditions. The
right of a Participant to exercise or receive a grant or settlement of any
Award, and the timing thereof, may be subject to such performance conditions
as may be specified by the Committee. The Committee may use such business
criteria and other measures of performance as it may deem appropriate in
establishing any performance conditions, and may exercise its discretion to
reduce or increase the amounts payable under any Award subject to performance
conditions; provided, however, that all Performance Awards and Annual
Incentive Awards shall comply with the requirements of Sections 8(b) and 8(c)
hereof unless the Committee specifically determines at the time of grant that
such Award is not intended to qualify as "performance-based compensation"
under Code Section 162(m).
(b) Performance Awards Granted to Designated Covered Employees. Unless the
Committee determines that a Performance Award is not intended to qualify as
"performance-based compensation" for purposes of Code Section 162(m), the
grant, exercise and/or settlement of such Performance Award shall be
contingent upon achievement of preestablished performance goals and other
terms set forth in this Section 8(b).
(i) Performance Goals Generally. The performance goals for such
Performance Awards shall consist of one or more business criteria and a
targeted level or levels of performance with respect to each of such
criteria, as specified by the Committee consistent with this Section 8(b).
Performance goals shall be objective and shall otherwise meet the
requirements of Code Section 162(m) and regulations thereunder (including
Regulation 1.162-27 and successor regulations thereto), including the
requirement that the level or levels of performance targeted by the
Committee result in the achievement of performance goals being
"substantially uncertain." The Committee may determine that such
Performance Awards shall be granted, exercised and/or settled upon
achievement of any one performance goal or that two or more of the
performance goals must be achieved as a condition to grant, exercise and/or
settlement of such Performance Awards. Performance goals may differ for
Performance Awards granted to any one Participant or to different
Participants.
(ii) Business Criteria. One or more of the following business criteria
for BKF, on a consolidated basis, and/or for specified subsidiaries,
business units, funds or partnerships of BKF or any of its subsidiaries
(except with respect to the total shareholder return and earnings per share
criteria), shall be used by the Committee in establishing performance goals
for such Performance Awards: (1) earnings per share; (2) revenues; increase
in revenues; the excess of all or a portion of revenues over operating
expenses (excluding expenses determined by the Committee at the time
performance goals are established); (3) cash flow; (4) cash flow return on
investment; (5) return on net assets, return on assets, return on
investment, return on capital, return on equity; (6) economic value added;
(7) operating margin; (8) net income; pretax earnings; pretax earnings
before interest, depreciation, amortization and/or incentive compensation;
pretax operating earnings; operating earnings; (9) total shareholder
return; (10) performance of managed fund(s); (11) market share; (12) assets
under management; (13) reduction in costs; (14) increase in the
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Fair Market Value of Stock; and (15) any of the above goals as compared to
the performance of a published or special index deemed applicable by the
Committee including, but not limited to, the Russell 1000 Value Index, the
Standard & Poor's 500 Stock Index, the Standard & Poor's Financial Index,
the SNL Investment Adviser Index or a group of comparator companies. One or
more of the foregoing business criteria shall also be exclusively used in
establishing performance goals for Annual Incentive Awards granted to a
Covered Employee under Section 8(c) hereof.
(iii) Performance Period; Timing for Establishing Performance Goals.
Achievement of performance goals in respect of such Performance Awards
shall be measured over a performance period of up to ten years, as
specified by the Committee. Performance goals shall be established not
later than 90 days after the beginning of any performance period applicable
to such Performance Awards, or at such other date as may be required or
permitted for "performance-based compensation" under Code Section 162(m).
(iv) Performance Award Pool. The Committee may establish a Performance
Award pool, which shall be an unfunded pool, for purposes of measuring
performance of BKF, any subsidiary and/or any business unit of BKF and/or
any of its subsidiaries in connection with Performance Awards. The amount
of such Performance Award pool shall be based upon the achievement of a
performance goal or goals based on one or more of the business criteria set
forth in Section 8(b)(ii) hereof during the given performance period, as
specified by the Committee in accordance with Section 8(b)(iii) hereof. The
Committee may specify the amount of the Performance Award pool as a
percentage of any of such business criteria, a percentage thereof in excess
of a threshold amount, or as another amount which need not bear a strictly
mathematical relationship to such business criteria, provided that the
amount of the Performance Award pool can be determined by an independent
third party in possession of all the relevant facts.
(v) Settlement of Performance Awards; Other Terms. Settlement of such
Performance Awards shall be in cash, Stock or other Awards, in the
discretion of the Committee. The Committee may, in its discretion, reduce
the amount of a settlement otherwise to be made in connection with such
Performance Awards, but may not exercise discretion to increase any such
amount payable to a Covered Employee in respect of a Performance Award
subject to this Section 8(b). The Committee shall specify the circumstances
in which such Performance Awards shall be paid or forfeited in the event of
termination of employment by the Participant prior to the end of a
performance period or settlement of Performance Awards.
(c) Annual Incentive Awards Granted to Designated Covered Employees. Unless
the Committee determines that an Annual Incentive Award is not intended to
qualify as "performance-based compensation" for purposes of Code Section
162(m), the grant, exercise and/or settlement of such Annual Incentive Award
shall be contingent upon achievement of preestablished performance goals and
other terms set forth in this Section 8(c).
(i) Annual Incentive Award Pool. The Committee may establish an Annual
Incentive Award pool, which shall be an unfunded pool, for purposes of
measuring performance of BKF, any subsidiary and/or any business unit of
BKF and/or any of its subsidiaries in connection with Annual Incentive
Awards. The amount of such Annual Incentive Award pool shall be based upon
the achievement of a performance goal or goals based on one or more of the
business criteria set forth in Section 8(b)(ii) hereof during the given
performance period, as specified by the Committee in accordance with
Section 8(b)(iii) hereof. The Committee may specify the amount of the
Annual Incentive Award pool as a percentage of any of such business
criteria a percentage thereof in excess of a threshold amount, or as
another amount which need not bear a strictly mathematical relationship to
such business criteria, provided that the amount of the Annual Incentive
Award pool can be determined by an independent third party in possession of
all the relevant facts.
(ii) Potential Annual Incentive Awards. Not later than the end of the
90th day of each fiscal year, or at such other date as may be required or
permitted in the case of Awards intended to be
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"performance-based compensation" under Code Section 162(m), the Committee
shall determine the Eligible Persons who will potentially receive Annual
Incentive Awards, and the amounts potentially payable thereunder, for that
fiscal year, either out of an Annual Incentive Award pool established by
such date under Section 8(c)(i) hereof or as individual Annual Incentive
Awards. In the case of individual Annual Incentive Awards intended to
qualify under Code Section 162(m), the amount potentially payable shall be
based upon the achievement of a performance goal or goals based on one or
more of the business criteria set forth in Section 8(b)(ii) hereof in the
given performance year, as specified by the Committee; in other cases, such
amount shall be based on such criteria as shall be established by the
Committee.
(iii) Payout of Annual Incentive Awards. After the end of each fiscal
year, the Committee shall determine the amount, if any, of (A) the Annual
Incentive Award pool, and the maximum amount of potential Annual Incentive
Award payable to each Participant in the Annual Incentive Award pool, or
(B) the amount of potential Annual Incentive Award otherwise payable to
each Participant. The Committee may, in its discretion, determine that the
amount payable to any Participant as a final Annual Incentive Award shall
be increased or reduced from the amount of his or her potential Annual
Incentive Award, including a determination to make no final Award
whatsoever, but may not exercise discretion to increase any such amount in
the case of an Annual Incentive Award intended to qualify under Code
Section 162(m). The Committee shall specify the circumstances in which an
Annual Incentive Award shall be paid or forfeited in the event of
termination of employment by the Participant prior to the end of a fiscal
year or settlement of such Annual Incentive Award. Settlement of Annual
Incentive Awards shall be in cash, Stock or other Awards, in the discretion
of the Committee.
(d) Written Determinations. All determinations by the Committee as to the
establishment of performance goals, the amount of any Performance Award pool
or potential individual Performance Awards and as to the achievement of
performance goals relating to Performance Awards under Section 8(b), and the
amount of any Annual Incentive Award pool or potential individual Annual
Incentive Awards and the amount of final Annual Incentive Awards under Section
8(c), shall be made in writing in the case of any Award intended to qualify
under Code Section 162(m). No Performance Award or Annual Incentive Award
intended to qualify under Code Section 162(m) shall be paid until the
Committee has certified in writing that the applicable performance goals have
been achieved. The Committee may not delegate any responsibility relating to
such Performance Awards or Annual Incentive Awards.
(e) Status of Section 8(b) and Section 8(c) Awards under Code Section
162(m). It is the intent of BKF and its subsidiaries that Performance Awards
and Annual Incentive Awards under Sections 8(b) and 8(c) hereof granted to
persons who are likely to be Covered Employees within the meaning of Code
Section 162(m) and regulations thereunder (including Regulation 1.162-27 and
successor regulations thereto) shall, if so designated by the Committee,
constitute "performance-based compensation" within the meaning of Code Section
162(m) and regulations thereunder. Accordingly, the terms of Sections 8(b),
(c), (d) and (e), including the definitions of Covered Employee and other
terms used therein, shall be interpreted in a manner consistent with Code
Section 162(m) and regulations thereunder. The foregoing notwithstanding,
because the Committee cannot determine with certainty whether a given
Participant will be a Covered Employee with respect to a fiscal year that has
not yet been completed, the term Covered Employee as used herein shall mean
any Eligible Person who receives a Performance Award or an Annual Incentive
Award unless the Committee determines, at the time of grant, that such Award
is not intended to qualify as "performance-based compensation" for purposes of
Code Section 162(m). If any provision of the Plan as in effect on the date of
adoption or any agreements relating to Performance Awards or Annual Incentive
Awards that are designated as intended to comply with Code Section 162(m) does
not comply or is inconsistent with the requirements of Code Section 162(m) or
regulations thereunder, such provision shall be construed or deemed amended to
the extent necessary to conform to such requirements.
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9. Change in Control. (a) Effect of "Change in Control" on Non-Performance
Based Awards. In the event of a "Change in Control," the following provisions
shall apply to non-performance based Awards, including Awards as to which
performance conditions previously have been satisfied or are deemed satisfied
under Section 9(b), unless otherwise provided by the Committee in the Award
document:
(i) All deferral of settlement, forfeiture conditions and other
restrictions applicable to Awards granted under the Plan shall lapse and
such Awards shall be fully payable as of the time of the Change in Control
without regard to deferral and vesting conditions, except to the extent of
any waiver by the Participant or other express election to defer beyond a
Change in Control and subject to applicable restrictions set forth in
Section 10(a);
(ii) Any Award carrying a right to exercise that was not previously
exercisable and vested shall become fully exercisable and vested as of the
time of the Change in Control and shall remain exercisable and vested for
the balance of the stated term of such Award without regard to any
termination of employment or service by the Participant other than a
termination for "cause" (as defined in any employment or severance
agreement between the Company or a subsidiary or affiliate and the
Participant then in effect or, if none, as defined by the Committee and in
effect at the time of the Change in Control), subject only to applicable
restrictions set forth in Section 10(a); and
(iii) The Committee may, in its discretion, determine to extend to any
Participant who holds an Option the right to elect, during the 60-day
period immediately following the Change in Control, in lieu of acquiring
the shares of Stock covered by such Option, to receive in cash the excess
of the Change in Control Price over the exercise price of such Option,
multiplied by the number of shares of Stock covered by such Option, and to
extend to any Participant who holds other types of Awards denominated in
shares the right to elect, during the 60-day period immediately following
the Change in Control, in lieu of receiving the shares of Stock covered by
such Award, to receive in cash the Change in Control Price multiplied by
the number of shares of Stock covered by such Award.
(b) Effect of "Change in Control" on Performance-Based Awards. In the event
of a "Change in Control," with respect to an outstanding Award subject to
achievement of performance goals and conditions, such performance goals and
conditions will be deemed to be met if and to the extent so provided by the
Committee in the Award document governing such Award or other agreement with
the Participant.
(c) Definition of "Change in Control." A "Change in Control" shall be
deemed to have occurred if, after the Effective Date, there shall have
occurred any of the following:
(i) any "person" as such term is currently used in Section 13(d) of the
Exchange Act, other than John A. Levin or any entity directly or indirectly
controlled by him, becomes a "beneficial owner," as such term is currently
used in Rule 13d-3 promulgated under that Act, of 50% or more of BKF's
Voting Stock, which term means the issued and outstanding capital stock or
other securities of any class or classes having general voting power, under
ordinary circumstances in the absence of contingencies, to elect the
directors of a corporation;
(ii) a majority of the Board consists of individuals other than
Incumbent Directors, which term means the members of the Board on the
Effective Date; provided that any individual becoming a director subsequent
to such date whose election or nomination for election was supported by a
majority of the directors who then comprised the Incumbent Directors shall
be considered an Incumbent Director;
(iii) all or substantially all of the assets or business of BKF are
disposed of pursuant to a merger, consolidation, or other transaction
(other than the asset distribution transactions contemplated in BKF's proxy
statement dated July 22, 1999) unless (A) the shareholders of BKF
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immediately prior to such merger, consolidation or other transaction
beneficially own, directly or indirectly, in substantially the same
proportion as they owned BKF's Voting Stock, all of the Voting Stock or
other ownership interests of the entity or entities, if any, that succeed
to the business of BKF, or (B) a majority of the board of directors of the
surviving corporation in such a transaction consists of Incumbent Directors
or directors appointed by Levin Management Co., Inc. but excluding
directors who were members of the other entity's board of directors;
(iv) the Board adopts any plan of liquidation providing for the
distribution of all or substantially all of BKF's assets; or
(v) BKF combines with another company and is the surviving corporation
but, immediately after the combination, the shareholders of BKF immediately
prior to the combination hold, directly or indirectly, 50% or less of the
Voting Stock of the combined company (there being excluded from the number
of shares held by such shareholders, but not from the Voting Stock of the
combined company, any shares received by affiliates of such other company
in exchange for securities of such other company).
(d) Definition of "Change in Control Price." The "Change in Control Price"
means an amount in cash equal to the higher of (i) the amount of cash and fair
market value of property that is the highest price per share paid (including
extraordinary dividends) in any transaction triggering the Change in Control
or any liquidation of shares following a sale of substantially all assets of
the Company, or (ii) the highest Fair Market Value per share at any time
during the 60-day period preceding and 60-day period following the Change in
Control.
10. General Provisions. (a) Compliance with Legal and Other Requirements.
BKF may, to the extent deemed necessary or advisable by the Committee,
postpone the issuance or delivery of Stock or payment of other benefits under
any Award until completion of such registration or qualification of such Stock
or other required action under any federal or state law, rule or regulation,
listing or other required action with respect to any stock exchange or
automated quotation system upon which the Stock is listed or quoted, or
compliance with any other obligation of BKF as the Committee may consider
appropriate, and may require any Participant to make such representations,
furnish such information and comply with or be subject to such other
conditions as it may consider appropriate in connection with the issuance or
delivery of Stock or payment of other benefits in compliance with applicable
laws, rules, and regulations, listing requirements, or other obligations.
(b) Limits on Transferability; Beneficiaries. No Award or other right or
interest of a Participant under the Plan shall be pledged, hypothecated or
otherwise encumbered or subject to any lien, obligation or liability of such
Participant to any party (other than BKF or a subsidiary), or assigned or
transferred by such Participant otherwise than by will or the laws of descent
and distribution or to a Beneficiary upon the death of a Participant, and such
Awards or rights that may be exercisable shall be exercised during the
lifetime of the Participant only by the Participant or his or her guardian or
legal representative, except that Awards and other rights (other than ISOs and
SARs in tandem therewith) may be transferred to one or more Beneficiaries or
other transferees during the lifetime of the Participant to facilitate estate
planning, and may be exercised by such transferees in accordance with the
terms of such Award, but only if and to the extent such transfers are
permitted by the Committee pursuant to the express terms of an Award agreement
(subject to any terms and conditions which the Committee may impose thereon).
A Beneficiary, transferee, or other person claiming any rights under the Plan
from or through any Participant shall be subject to all terms and conditions
of the Plan and any Award agreement applicable to such Participant, except as
otherwise determined by the Committee, and to any additional terms and
conditions deemed necessary or appropriate by the Committee.
(c) Adjustments. In the event that any dividend or other distribution
(whether in the form of cash, Stock, or other property), recapitalization,
forward or reverse split, reorganization, merger,
B-12
<PAGE>
consolidation, spin-off, combination, repurchase, share exchange, liquidation,
dissolution or other similar corporate transaction or event affects the Stock
such that an adjustment is determined by the Committee to be appropriate under
the Plan, then the Committee shall, in such manner as it may deem equitable,
adjust any or all of (i) the number and kind of shares of Stock which may be
delivered in connection with Awards granted thereafter, (ii) the number and
kind of shares of Stock by which annual per-person Award limitations are
measured under Section 5 hereof, (iii) the number and kind of shares of Stock
subject to or deliverable in respect of outstanding Awards and (iv) the
exercise price, grant price or purchase price relating to any Award and/or
make provision for payment of cash or other property in respect of any
outstanding Award. In addition, the Committee is authorized to make
adjustments in the terms and conditions of, and the criteria included in,
Awards (including Performance Awards and performance goals, and Annual
Incentive Awards and any Annual Incentive Award pool or performance goals
relating thereto) in recognition of unusual or nonrecurring events (including,
without limitation, events described in the preceding sentence, as well as
acquisitions and dispositions of businesses and assets) affecting BKF, any
subsidiary or any business unit, or the financial statements of BKF or any
subsidiary or business unit, or in response to changes in applicable laws,
regulations, accounting principles, tax rates and regulations or business
conditions or in view of the Committee's assessment of the business strategy
of BKF, any subsidiary or business unit thereof, performance of comparable
organizations, economic and business conditions, personal performance of a
Participant, and any other circumstances deemed relevant; provided that no
such adjustment shall be authorized or made if and to the extent that such
authority or the making of such adjustment would cause Options, SARs,
Performance Awards granted under Section 8(b) hereof or Annual Incentive
Awards granted under Section 8(c) hereof to Participants designated by the
Committee as Covered Employees and intended to qualify as "performance-based
compensation" under Code Section 162(m) and regulations thereunder to
otherwise fail to qualify as "performance-based compensation" under Code
Section 162(m) and regulations thereunder.
(d) Taxes. BKF and/or any subsidiary is authorized to withhold from any
Award granted, any payment relating to an Award under the Plan, including from
a distribution of Stock, or any payroll or other payment to a Participant,
amounts of withholding and other taxes due or potentially payable in
connection with any transaction involving an Award, and to take such other
action as the Committee may deem advisable to enable BKF and/or any subsidiary
and Participants to satisfy obligations for the payment of withholding taxes
and other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax
obligations, either on a mandatory or elective basis in the discretion of the
Committee.
(e) Changes to the Plan and Awards. The Board may amend, alter, suspend,
discontinue or terminate the Plan or the Committee's authority to grant Awards
under the Plan without the consent of shareholders or Participants, except
that any amendment or alteration to the Plan shall be subject to the approval
of BKF's shareholders not later than the annual meeting next following such
Board action if such shareholder approval is required by any federal or state
law or regulation or the rules of any stock exchange or automated quotation
system on which the Stock may then be listed or quoted, and the Board may
otherwise, in its discretion, determine to submit other such changes to the
Plan to shareholders for approval; provided that, without the consent of an
affected Participant, no such Board action may materially and adversely affect
the rights of such Participant under any previously granted and outstanding
Award. The Committee may waive any conditions or rights under, or amend,
alter, suspend, discontinue or terminate any Award theretofore granted and any
Award agreement relating thereto, except as otherwise provided in the Plan;
provided that, without the consent of an affected Participant, no such
Committee action may materially and adversely affect the rights of such
Participant under such Award. Notwithstanding anything in the Plan to the
contrary, if any right under this Plan would cause a transaction to be
ineligible for pooling of interest accounting that would, but for the right
hereunder, be eligible for such accounting treatment, the Committee may modify
or adjust
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<PAGE>
the right so that pooling of interest accounting shall be available, including
the substitution of Stock having a Fair Market Value equal to the cash
otherwise payable hereunder for the right which caused the transaction to be
ineligible for pooling of interest accounting.
(f) Limitation on Rights Conferred under Plan. Neither the Plan nor any
action taken hereunder shall be construed as (i) giving any Eligible Person or
Participant the right to continue as an Eligible Person or Participant or in
the employ or service of BKF or a subsidiary, (ii) interfering in any way with
the right of BKF or a subsidiary to terminate any Eligible Person's or
Participant's employment or service at any time, (iii) giving an Eligible
Person or Participant any claim to be granted any Award under the Plan or to
be treated uniformly with other Participants and employees, or (iv) conferring
on a Participant any of the rights of a shareholder of BKF unless and until
the Participant is duly issued or transferred shares of Stock in accordance
with the terms of an Award.
(g) Unfunded Status of Awards; Creation of Trusts. The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant or obligation to deliver
Stock pursuant to an Award, nothing contained in the Plan or any Award shall
give any such Participant any rights that are greater than those of a general
creditor of BKF; provided that the Committee may authorize the creation of
trusts and deposit therein cash, Stock, other Awards or other property, or
make other arrangements to meet BKF's obligations under the Plan. Such trusts
or other arrangements shall be consistent with the "unfunded" status of the
Plan unless the Committee otherwise determines with the consent of each
affected Participant. The trustee of such trusts may be authorized to dispose
of trust assets and reinvest the proceeds in alternative investments, subject
to such terms and conditions as the Committee may specify and in accordance
with applicable law.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the
Board nor its submission to the shareholders of BKF for approval shall be
construed as creating any limitations on the power of the Board or a committee
thereof to adopt such other incentive arrangements as it may deem desirable
including incentive arrangements and awards which do not qualify under Code
Section 162(m).
(i) Payments in the Event of Forfeitures; Fractional Shares. Unless
otherwise determined by the Committee, in the event of a forfeiture of an
Award with respect to which a Participant paid cash or other consideration,
the Participant shall be repaid the amount of such cash or other
consideration. No fractional shares of Stock shall be issued or delivered
pursuant to the Plan or any Award. The Committee shall determine whether cash,
other Awards or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.
(j) Governing Law. The validity, construction and effect of the Plan, any
rules and regulations under the Plan, and any Award agreement shall be
determined in accordance with the Delaware General Corporation Law, without
giving effect to principles of conflicts of laws, and applicable federal law.
(k) Plan Effective Date and Shareholder Approval. The Plan (as amended and
restated) has been adopted by the Board, subject to approval by the
shareholders of BKF at its 2000 annual meeting and receipt from the Securities
and Exchange Commission of an order exempting BKF from the Investment Company
Act of 1940. The Plan shall remain in effect for the year in which it is
approved by BKF shareholders and each of the next four succeeding years unless
sooner terminated by the Board in accordance with Section 10(e). The Plan
shall be submitted for re-approval by BKF shareholders at the first meeting of
shareholders held during such fifth succeeding year, and all Awards made
during such fifth succeeding year shall be contingent upon such approval. If
the Plan is so approved, it shall continue in effect for such year and the
next four succeeding years, at which time it will again be subject to re-
approval by BKF shareholders. The Plan shall continue in effect in the same
manner for successive cycles of five years, subject to re-approval by BKF
shareholders every five years in accordance with Regulation 1.162-27, until
amended or terminated by the Board.
B-14
<PAGE>
EXHIBIT C
Baker, Fentress & Company
Audit Committee Charter
(as adopted on 2/10/00)
I. Organization
The audit committee of the Board of Directors shall be comprised of at
least three directors who are independent of management and the Company.
Members of the audit committee shall be considered independent if they have no
relationship to the Company that may interfere with the exercise of their
independence from management and the Company, and shall otherwise satisfy the
applicable membership requirements under the rules of the New York Stock
Exchange. During any period in which the Company is registered as an
investment company under the Investment Company Act of 1940, all of the
members of the audit committee shall be directors who are not "interested
persons" of the Company within the meaning of section 2(a)(19) of the
Investment Company Act. All audit committee members will be financially
literate, and at least one member shall have accounting or related financial
management expertise.
II. Statement of Policy
The audit committee shall strive to provide assistance to the Board of
Directors in fulfilling the Board's responsibility to the Company's
shareholders, potential shareholders, and investment community relating to
corporate accounting, reporting practices of the Company, and the quality and
integrity of financial reports of the Company. In so doing, it is the
responsibility of the audit committee to maintain free and open communication
between the directors, the independent auditors, the internal auditors (if
any), and the senior management of the Company.
The function of the audit committee is oversight. The management of the
Company is responsible for the preparation, presentation and integrity of the
Company's financial statements. Management is responsible for maintaining
appropriate accounting and financial reporting principles and policies and
internal controls and procedures designed to assure compliance with accounting
standards and applicable laws and regulations.
III. Responsibilities
In carrying out its responsibilities, the audit committee believes its
policies and procedures should remain flexible, to best react to changing
conditions and to reasonably ensure to the directors and shareholders that the
corporate accounting and reporting practices of the Company are in accordance
with all requirements and are of the highest quality.
In carrying out these responsibilities, the audit committee will:
1. Obtain the full Board of Directors' approval of this Charter and
review and reassess this Charter as conditions dictate, but no less
frequently than annually .
2. Review and recommend to the directors the independent auditors to be
selected to audit the financial statements of the Company and its
subsidiaries.
3. Have a clear understanding with the independent auditors that they
are ultimately accountable to the Board of Directors and the audit
committee, as the shareholders' representatives, who have the ultimate
authority in deciding to engage, evaluate, and if appropriate, terminate
their services.
C-1
<PAGE>
4. Meet with the independent auditors and senior management of the
Company to review the scope of the proposed audit and timely quarterly
reviews for the current year and the procedures to be utilized, the
independent auditors' compensation, and at the conclusion thereof review
such audit or review, including any comments or recommendations of the
independent auditors.
5. Review with the independent auditors, and financial and accounting
personnel, the adequacy and effectiveness of the accounting and financial
controls of the Company, and elicit any recommendations for the improvement
of such internal controls or particular areas where new or more detailed
controls or procedures are desirable. Particular emphasis should be given
to the adequacy of internal controls to expose any payments, transactions,
or procedures that might be deemed illegal, may have the appearance of a
conflict of interest or may otherwise be deemed improper. Further, the
committee periodically should review the Company's policy statements and
Code of Ethics to determine their adherence to applicable laws and
regulations.
6. Review reports received from regulators, and other legal and
regulatory materials that may have a material effect on the financial
statements or related Company compliance policies.
7. Inquire of management and the independent auditors about significant
risks or exposures and assess the steps management has taken to minimize
such risks to the Company.
8. Review the quarterly financial statements with senior management and
the independent auditors prior to the filing of the Form 10-Q (or, during
any period in which the Company is a registered investment company, prior
to the filing of any quarterly or semiannual report to shareholders) or
prior to the press release of results, if possible to facilitate early
identification and resolution of material accounting and reporting issues
and to discuss any other matters required to be communicated to the
committee by the auditors, including whether the auditors take exception to
the disclosure and content of the Company's financial statements. The chair
of the committee, or an alternate member of the committee designated by the
committee, may represent the entire committee for purposes of this review.
9. Review the annual financial statements with management and the
independent auditors, including:
. to determine that the independent auditors are satisfied with the
disclosure and content of the financial statements to be presented to
the shareholders;
. to review with financial management and the independent auditors the
results of their timely analysis of significant financial reporting
issues and practices, including changes in, or adoptions of,
accounting principles and disclosure practices, and discuss any other
matters required to be communicated to the committee by the auditors;
. to review with senior management and the independent auditors their
judgments about the quality, not just acceptability, of accounting
principles and the clarity of the financial disclosure practices used
or proposed to be used, and particularly, the degree of
aggressiveness or conservatism of the Company's accounting principles
and underlying estimates, and other significant decisions made in
preparing the financial statements; and
. to discuss with the independent auditors the matters required to be
discussed by SAS 61 (communications required by auditors relating to
the conduct of an audit), as it may be modified or superseded.
10. On an annual basis, obtain from the independent auditors a written
communication delineating all their relationships and professional services
as required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees. In addition, review with the independent
auditors the nature and scope of any disclosed relationships or
professional services and take, or recommend that the Board of Directors
take, appropriate action to ensure the continuing independence of the
auditors.
C-2
<PAGE>
11. Make a recommendation to the Board Directors, based on the
committee's reviews and discussions as described in paragraphs 9 and 10 of
this Charter, that the Company's annual financial statements be included,
or not be included, in the Company's Annual Report on Form 10-K (or, during
any period in which the Company is a registered investment company, its
annual report to shareholders).
12. Provide sufficient opportunity for the independent auditors to meet
with the members of the audit committee without members of management
present. Among the items to be discussed in these meetings are the
independent auditors' evaluation of the Company's financial, accounting,
and auditing personnel, and the cooperation that the independent auditors
received during the course of the audit.
13. Review accounting and financial human resources and succession
planning within the Company.
14. Report the results of the annual audit to the Board of Directors. If
requested by the Board, invite the independent auditors to attend the full
Board of Directors meeting to assist in reporting the results of the annual
audit or to answer other directors' questions (alternatively, the other
directors, particularly the other independent directors, may be invited to
attend the audit committee meeting during which the results of the annual
audit are reviewed).
15. Submit the minutes of all meetings of the audit committee to, or
discuss the matters discussed at each committee meeting with, the Board of
Directors.
16. Investigate any matter brought to its attention within the scope of
its duties, with the power to retain outside counsel or other consultants
for this purpose if, in its judgment, that is appropriate.
17. Require for each annual meeting of shareholders of the Company (or
special meeting at which directors are to be elected) held on or after
December 15, 2000 that the Company's proxy statement include a report of
the audit committee and other disclosures meeting the requirements of Item
7(e) of Rule 14A-101 under the Securities Exchange Act of 1934, as amended
or superseded from time to time, including attaching a copy of this Charter
to the Company's proxy statement every three years, or the year after any
significant amendment to the Charter.
C-3
<PAGE>
PROXY PROXY
BAKER, FENTRESS & COMPANY
Proxy Solicited By The Board Of Directors
For The Annual Meeting of Shareholders - April 18, 2000
J. Barton Goodwin, John A. Levin and Burton G. Malkiel, or any of them, each
with the power of substitution and revocation, are hereby authorized to
represent the undersigned, with all powers which the undersigned would possess
if personally present, to vote the Common Stock of the undersigned at the annual
meeting of shareholders of BAKER, FENTRESS & COMPANY to be held at the Grand
Hyatt - New York Hotel, 109 E. 42nd Street (Park & Lexington), New York, New
York, on Tuesday, April 18 at 9:00 a.m., local time, and at any postponements or
adjournments of that meeting, as set forth below, and in their discretion upon
any other business that may properly come before the meeting.
<TABLE>
<S> <C>
Please indicate change of address here and mark
the box on the other side.
___________________________________________________
All capitalized terms used in this proxy shall have the ___________________________________________________
same meanings assigned to them in the Proxy Statement. ___________________________________________________
</TABLE>
(Continued and to be signed on reverse side.)
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
YOUR VOTE IS IMPORTANT.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED POSTMARKED ENVELOPE.
<PAGE>
Please mark your vote as indicated in this example. [X]
The Board of Directors recommends that you vote FOR the proposals below.
<TABLE>
<S> <C> <C>
1. To elect five directors: 2. To amend the Company's Amended and FOR AGAINST ABSTAIN
Restated Certificate of Incorporation to change
FOR all nominees WITHHOLD the Company's name from "Baker, Fentress & [ ] [ ] [ ]
listed below AUTHORITY Company" to "BKF Capital Group, Inc.";
(except as marked to vote for all nominees
to the contrary) listed below 3. To amend and restate the Baker, Fentress
[ ] [ ] & Company 1998 Incentive Compensation Plan; [ ] [ ] [ ]
Nominees: Anson M. Beard, Jr., David D. Grumhaus, 4. To ratify or reject the selection of Ernst & Young
Jeffrey A. Kigner, Peter J. Solomon and James S. Tisch LLP as independent auditors for the Company; and [ ] [ ] [ ]
(Instruction: To withhold authority to vote for any 5. To transact such other business as may properly
individual nominee, write that nominee's name on the come before the meeting.
space provided below.)
</TABLE>
______________________________
Check here if you plan to attend the meeting. [ ]
Check here for address change. [ ]
Dated ___________________________, 2000
-------------------------------------
Signature(s)
Please vote, sign, date and return
this proxy card promptly using the
enclosed envelope.
- --------------------------------------------------------------------------------
. FOLD AND DETACH HERE .
[MAP APPEARS HERE]
