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<PAGE>   1

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
                                   FORM 10-K

[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                                       OR

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

       FOR THE TRANSITION PERIOD FROM                TO                .

                          COMMISSION FILE NO. 1-10024
                            ------------------------

                            BKF CAPITAL GROUP, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
                            ------------------------

<TABLE>
<S>                                              <C>
                    DELAWARE                                        36-0767530
        (STATE OR OTHER JURISDICTION OF                          (I.R.S. EMPLOYER
         INCORPORATION OR ORGANIZATION)                        IDENTIFICATION NO.)

    ONE ROCKEFELLER PLAZA NEW YORK, NEW YORK                          10020
    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                        (ZIP CODE)
</TABLE>

      REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:  (212) 332-8400
                            ------------------------
          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

<TABLE>
<CAPTION>
                                                              NAME OF EACH EXCHANGE
              TITLE OF EACH CLASS                              ON WHICH REGISTERED
              -------------------                             ---------------------
<S>                                              <C>
    Common stock, par value $1.00 per share                  New York Stock Exchange
</TABLE>

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                      None

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.  Yes [X]  No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K.  [ ]

     The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 26, 2001 was $116,970,986 (based on the closing sale
price of $20.25 on March 26, 2001 as reported by the New York Stock
Exchange -- Composite Transactions). For this computation, the registrant has
excluded the market value of all shares of its common stock reported as
beneficially owned by named executive officers and directors of the registrant;
such exclusion shall not be deemed to constitute an admission that any such
person is an "affiliate" of the registrant.

     At March 26, 2001, 6,518,665 shares of BKF Capital Group, Inc. common
stock, par value $1.00 per share, were outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE:

     Part III of this Form 10-K incorporates by reference portions of the
registrant's definitive Proxy Statement for its 2001 Annual Meeting of
Stockholders to be held on May 24, 2001, which will be filed with the Securities
and Exchange Commission within 120 days after the end of its fiscal year ended
December 31, 2000 pursuant to Regulation 14A.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2

                                     PART I

ITEM 1.  BUSINESS

INTRODUCTION

     BKF Capital Group, Inc. (formerly Baker, Fentress & Company) ("BKF")
operated previously as a non-diversified, closed-end management investment
company under the Investment Company Act of 1940. Pursuant to a Plan for
Distribution of Assets adopted on August 19, 1999, BKF sold substantially all of
its investment securities and distributed the cash proceeds, along with shares
of Consolidated-Tomoka Land Company, to its stockholders. These distributions
were completed by January 7, 2000. On April 18, 2000, BKF received a
deregistration order from the Securities and Exchange Commission, which
completed BKF's transformation from an investment company to an operating
company.

     BKF now operates entirely through John A. Levin & Co., Inc. ("John A. Levin
& Co."), an asset management business acquired by BKF in June 1996, and its
related companies. As part of the acquisition, BKF formed Levin Management Co.,
Inc. ("Levin Management") to provide administrative and management services to
John A. Levin & Co. and its related companies. Levin Management and all its
subsidiaries are referred to collectively herein as "Levco". John A. Levin & Co.
owns 100% of LEVCO Securities, Inc. ("LEVCO Securities"), a registered
broker-dealer, and Levco GP, Inc. ("Levco GP"), which is the general partner of
several investment partnerships managed by Levco, which are referred to as the
"Levco Partnerships."

     BKF was incorporated in Delaware in 1954. Its executive offices are located
at One Rockefeller Plaza, New York, New York 10020. Its telephone number is
(212) 332-8400, and its website address is www.bkfcapital.com.

                         [BKF Capital Group Flow Chart]

PRODUCTS AND SERVICES

     Levco is an investment adviser registered under the Investment Advisers Act
of 1940 that specializes in managing equity portfolios for institutional and
individual investors primarily in the United States. Most accounts are managed
pursuant to a large cap value strategy. Levco also offers an event-driven
alternative investment product and other more specialized investment programs.
As of December 31, 2000, assets under management were approximately $11.5
billion.

     Through Levco GP, Levco acts as the general partner of a number of private
investment partnerships and, through John A. Levin & Co., serves as an adviser
to private investment vehicles organized outside the United States. For managing
these vehicles, John A. Levin & Co. and Levco GP are entitled to receive both a
fixed management fee based on a percentage of the assets managed and a share of
the net profits of the investment vehicles.

     In July 1996, Levco began participating in its first wrap fee program with
a major financial institution. Since then, it has joined other such programs. In
wrap fee programs, clients pay the sponsoring broker an asset-based fee that
covers brokerage commissions, advisory services, custodial fees and other
reporting and

                                        1
<PAGE>   3

administrative services. Investors are able to select Levco from among a limited
number of managers participating in the program, and Levco receives a portion of
the wrap fee paid by the clients who select Levco to manage their accounts
through the program.

     LEVCO Securities clears trades through Correspondent Services Corporation,
a UBS/PaineWebber affiliated company, on a fully-disclosed basis. Generally,
LEVCO Securities' clients are advisory clients of John A. Levin & Co., and the
trades executed through LEVCO Securities are generally placed by John A. Levin &
Co. in its capacity as investment adviser.

     The following chart shows the breakdown of Levco's total assets under
management as of December 31, 2000 by account type:

                             [Levco's Total Assets]

     Institutional Accounts.  As of December 31, 2000, institutional accounts
represented 37.9% of Levco's total assets under management, with a total market
value of approximately $4.34 billion. As of such date, Levco served as
investment adviser to more than 140 separate institutional accounts. The average
institutional account value at December 31, 2000 was approximately $30.7
million.

     Wrap Fee Accounts.  With approximately $3.0 billion of managed assets as of
December 31, 2000, wrap fee accounts represented 25.8% of Levco's total assets
under management. As of December 31, 2000, Levco had approximately 12,400 wrap
fee accounts, the average value of which was approximately $240,000.

     Individual Accounts.  Levco also manages accounts for individuals, which
comprised approximately 19.1% of Levco's total assets under management as of
December 31, 2000, with a total market value of $2.2 billion. As of December 31,
2000, Levco's individual client base represented more than 500 accounts, the
average value of which was approximately $4.4 million.

     Investment Companies.  As of December 31, 2000, registered investment
companies represented 6.1% of Levco's total assets under management, with a
total market value of $705 million. Currently, Levco serves as investment
adviser or subadviser to five registered investment funds: Levco Equity Value
Fund, Vanguard Equity Income Fund, MainStay Research Value Fund, the Large
Company Stock Value Fund in the Charter Funds Series of the CIGNA Funds Group
and the CIF Core Equity Fund of the Commonfund Institutional Funds.

     Private Investment Funds.  As of December 31, 2000, proprietary
unregistered investment funds, with a total market value of $202 million
(excluding the event-driven vehicles), represented approximately 1.8% of Levco's
total assets under management.

     Event-Driven Accounts.  As of December 31, 2000, event-driven accounts,
with a total market value of $1.1 billion, represented 9.3% of Levco's total
assets under management. These accounts invest in event-driven situations, such
as merger arbitrage or distressed companies.

                                        2
<PAGE>   4

     The table below shows the assets under management of Levco at the dates
indicated:

                            ASSETS UNDER MANAGEMENT

<TABLE>
<CAPTION>
                                                               AT DECEMBER 31
                                        -------------------------------------------------------------
                                         2000      1999     1998     1997     1996     1995     1994
                                        -------   ------   ------   ------   ------   ------   ------
                                                                (IN MILLIONS)
<S>                                     <C>       <C>      <C>      <C>      <C>      <C>      <C>
ADVISORY ACCOUNTS
Institutional and Individual
  Accounts............................  $ 7,260   $6,251   $6,569   $6,220   $5,627   $5,037   $3,505
BKF Assets Managed by Levco(a)........       --       --      505      491      470       --       --
Wrap Fee Accounts.....................    2,975    1,450      757      351       45        0        0
Private Investment Funds..............      202      101      127      158      224      221      190
Event-Driven Accounts.................    1,071      642      355      139      123      129      120
                                        -------   ------   ------   ------   ------   ------   ------
     Total............................  $11,508   $8,444   $8,313   $7,359   $6,489   $5,387   $3,815
                                        =======   ======   ======   ======   ======   ======   ======
</TABLE>

---------------
(a) The BKF portfolio managed by Levco was liquidated during the period between
    August 19, 1999 and December 31, 1999.

     Levco's assets under management have increased over each of the periods
indicated. This growth has been generated by maintaining a relatively stable
client base, attracting new clients and entering the wrap fee business, as well
as through market appreciation of assets under management. Levco's wrap fee
business has attracted net "new business" in each year since its inception in
1996 -- meaning that the assets under management of new clients and additional
contributions of assets by existing clients have exceeded withdrawals of assets
by clients. In 1997 and 1998, Levco's institutional and individual separate
account business grew overall, although the level of redemptions from separate
account clients was higher than the amount of new assets Levco obtained. In
these years, increases in assets from market appreciation more than offset the
net withdrawals. In 1999, the separate account business experienced a decline,
as increases in assets from market appreciation could not fully offset net
withdrawals. In 2000, the separate account business grew primarily as the result
of market appreciation, but also experienced net contributions.

DISTRIBUTION

     Levco employs eighteen marketing and client service professionals dedicated
to attracting and retaining clients. The field force includes four regional
marketing directors focused on attracting assets through wrap fee programs and
from smaller institutional accounts and two institutional salespeople. In
addition, Levco has a client servicing team of eight employees and an
information resources group of four employees. These groups are responsible for
communications with clients, consultants and financial intermediaries, as well
as for the production of marketing materials. Senior investment professionals
assist in the marketing effort by taking part in client presentations or
meetings.

     Levco also has solicitation arrangements with third parties whereby such
third parties, in accordance with applicable laws and regulations, solicit
clients for Levco investment products and are compensated by Levco for such
services.

     For the large cap value product, distribution efforts are focused mainly in
the United States. For the event driven product and alternative investment
strategies generally, extensive marketing efforts are directed towards U.S. and
non-U.S. clients.

PORTFOLIO PERFORMANCE INFORMATION

     Success in the investment management industry depends in large part on an
investment advisor's performance. Shown below is historical information relating
to the performance of accounts managed by Levco in its large cap value style as
compared to the Russell 1000 Value Index and the S&P 500 Index. The Russell 1000
Value Index measures the performance of those companies in the Russell 1000
Index (which

                                        3
<PAGE>   5

include the 1,000 largest U.S. companies based on market capitalization) with
lower price/book ratios and lower forecasted growth rates. The S&P 500 Index is
a broad-based, unmanaged market-weighted index of 500 U.S. companies.

                          COMPARISON OF ANNUAL RETURNS

<TABLE>
<CAPTION>
                                     2000    1999    1998    1997    1996    1995    1994    1993    1992
                                     -----   -----   -----   -----   -----   -----   -----   -----   -----
<S>                                  <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>
Levco Composite (net)..............  15.40%  16.79%  15.87%  23.00%  21.02%  32.95%   0.37%  13.82%  14.08%
Russell 1000 Value Index...........   7.01    7.35   15.63   35.18   21.64   38.36   (1.98)  18.07   13.58
S&P 500 Index......................  (9.10)  21.04   28.58   33.36   22.96   37.58    1.30   10.06    7.62
</TABLE>

<TABLE>
<CAPTION>
                                                                                         JANUARY 1, 1986 TO
                                     1991    1990    1989    1988    1987    1986        DECEMBER 31, 2000
                                     -----   -----   -----   -----   -----   -----      --------------------
<S>                                  <C>     <C>     <C>     <C>     <C>     <C>        <C>
Levco Composite (net)..............  25.36%  (3.40)% 29.21%  22.52%  12.88%  15.23%            772.54%
Russell 1000 Value Index...........  24.55   (8.08)  25.19   23.16     .05   19.98             604.74
S&P 500 Index......................  30.45   (3.14)  31.65   16.57    5.22   18.70             681.28
</TABLE>

Past performance is not indicative of future results.

NOTES TO COMPARISON OF ANNUAL RETURNS

     Basis of Presentation:  The investment performance results for the Levco
composite for the years 1986 through 1999 were examined by independent public
accountants. The performance for the year 2000 has not been examined.

     The investment performance results have been prepared in compliance with
the Association for Investment Management and Research ("AIMR") Performance
Presentation Standards from January 1, 1993 through December 31, 1999. The full
period is not in compliance because for periods prior to January 1, 1993
size-weighted composite returns were calculated using end-of-period market
values. AIMR has not been involved with the preparation or review of this
report.

     Managed Accounts:  Levco's composite includes all fee paying accounts
managed on a fully discretionary basis, including taxable and tax-exempt
accounts, except (1) accounts managed for immediate family of employees, (2)
accounts with assets under $1,000,000, (3) one account for which only the equity
portion of the portfolio is managed, (4) accounts for pooled vehicles and
similarly managed accounts utilizing investment strategies different from the
strategy utilized by the accounts included in the composite, and (5) accounts
managed under a broker-sponsored wrap-fee program.

     Calculation of Performance:  For the period from January 1, 1986 through
December 31, 1989, the results reflect the deduction of a 1% annual investment
management fee, payable quarterly at a rate of 0.25% of ending market value.
This is the maximum investment management fee charged by Levco. These results do
not reflect actual fees charged. For the periods beginning January 1, 1990, the
net results reflect the deduction of the actual dollar-weighted fee rate paid by
all accounts in the composite. Levco has calculated the dollar-weighted rate by
dividing the quarterly investment management fees paid by the accounts in the
composite by the total composite asset value. This dollar-weighted fee rate also
included the performance fees paid by certain accounts. Inclusion of the
performance based fee does not materially affect the dollar-weighted fee rate.

CONTRACTUAL ARRANGEMENTS

     Levco enters into investment advisory and management agreements with, or
for the benefit of, each of its clients. Levco bases its management fees, other
than incentive allocations from the Levco Partnerships, performance-based fees
and certain fixed dollar amount arrangements (generally with family members of
employees) on a percentage of assets under management and scales these fees
according to the size of each account. Generally, either party may terminate
these agreements at any time upon written notice. In cases in which Levco serves
as an adviser or sub-adviser for a mutual fund client, the mutual fund client or
the investment adviser generally may terminate the relevant sub-advisory
agreement on relatively short notice.
                                        4
<PAGE>   6

     In connection with Levco's activities as a broker-dealer, Levco maintains a
contractual relationship with Correspondent Services Corp. ("CSC"), a
UBS/PaineWebber affiliated company, for clearance services. The agreement is a
standard clearing agreement that either party may terminate upon 60 days prior
written notice, or immediately for cause. The agreement assigns account
supervisory responsibility to Levco and grants CSC the authority to execute and
report securities transactions for Levco's clients.

EMPLOYEES

     As of December 31, 2000, Levco employed 87 people, including 23 investment
professionals, of whom nine were primarily portfolio managers, 10 were primarily
securities analysts and four were traders or trading associates. The senior
investment professionals have an average of eight years at Levco.

BUSINESS STRATEGY

     BKF seeks to capitalize on the strength of its long-term performance record
and its experienced investment and professional staff to increase its assets
under management. Its business strategy contains the following key elements:

     Attracting and Retaining Experienced Professionals.  As an investment
management firm focused on active portfolio management, fundamental research and
superior client service, BKF's goal is to attract and retain the talent
necessary to implement Levco's investment strategies and service its clients.
Each of the other elements of BKF's business strategy is highly dependent on
attracting and retaining qualified personnel. The equity awards made to
employees in 2000 (see "Management's Discussion and Analysis of Financial
Condition and Results of Operations") gave employees a stake in the success of
BKF, and the implementation of an ongoing equity award program is one of BKF's
key objectives.

     Increasing Marketing for Institutional Separate Accounts.  The major part
of Levco's institutional separate account business has been developed without
the benefit of a sales force in the field dedicated to the solicitation of
institutional separate accounts. Levco intends to increase its presence in the
institutional separate account marketplace through the addition of marketing and
client service personnel and increasing its level of contact with pension plan
sponsors, corporations, industry consultants and financial intermediaries.

     Increasing Distribution Through Financial Intermediaries.  Clients obtained
through wrap fee programs have made a significant contribution to assets under
management since Levco joined its first wrap fee program in 1996. Levco is also
managing a significant amount of assets for mutual funds and through a 401(k)
platform sponsored by a major insurance company. Levco intends to devote
sufficient resources to maintain its existing relationships with financial
intermediaries and to develop new relationships with major financial
institutions.

     Developing Complementary Value Strategies.  In 2000, Levco hired a senior
portfolio manager to develop a small cap equity value product. This senior
portfolio manager is also playing a leadership role in the development of a
small/mid cap equity value product which utilizes the resources of the entire
team of investment professionals committed to the large cap value product. Levco
believes that the development of these products will make it more attractive to
existing and potential clients by enabling it to offer a wider range of products
in the value equity area.

     Increasing Capacity of Alternative Investment Strategies.  The event driven
product has significantly increased its assets under management over the past
three years and, since it receives incentive fees, BKF has seen the product's
revenues increase significantly. Alternative investment strategies, however,
face capacity constraints. Levco is seeking to increase its ability to manage
assets in alternative investment strategies through the addition of skilled
investment personnel, increased marketing of existing alternative investment
strategies that have significant unused capacity, and the development of new
alternative investment products.

COMPETITION

     Levco competes with investment management firms, mutual fund complexes,
insurance companies, banks, brokerage firms and other financial institutions
that offer products that are similar to, or are alternatives
                                        5
<PAGE>   7

to, those offered by Levco. Many of the investment management firms with which
Levco competes are subsidiaries of larger financial institutions or are
significantly larger in terms of assets under management or revenues. Levco has
historically competed on the basis of its long-term investment record and the
quality of its personnel, investment process and level of client service. In
order to stay competitive, Levco will need to increase its assets under
management and revenues so that it can attract and retain quality personnel and
devote the required resources to its distribution efforts.

REGULATION

     Virtually all aspects of Levco's business are subject to various federal
and state laws and regulations. Levco is registered with the Securities and
Exchange Commission under the Investment Advisers Act of 1940. The Investment
Advisers Act imposes numerous obligations on registered investment advisers,
including fiduciary, record keeping, operational and disclosure obligations.
John A. Levin & Co. is also registered with the Commodity Futures Trading
Commission as a commodity trading advisor and a commodity pool operator and
Levco GP is registered with that agency as a commodity pool operator. John A.
Levin & Co. and Levco GP are members of the National Futures Association. LEVCO
Securities is registered as a broker-dealer under the Securities Exchange Act of
1934, is a member of the National Association of Securities Dealers, Inc. and is
a member of the Municipal Securities Rulemaking Board. In addition, Levco is
subject to the Employee Retirement Income Security Act of 1974 and its
regulations insofar as it is a "fiduciary" with respect to certain clients.

     The regulations to which Levco is subject are primarily designed to protect
investment advisory clients, and the agencies implementing such regulations have
broad administrative powers, including the power to limit, restrict or even
prohibit entities from carrying on their business in the event of a failure to
comply. Possible sanctions for significant failures include the suspension of
individual employees, limitations on engaging in certain lines of business for
specified periods of time, revocation of investment adviser, broker-dealer or
other registrations, censures and fines.

RISK FACTORS

     In addition to the risks referred to elsewhere in this Annual Report on
Form 10-K, the following risks, among others, sometimes have affected, and in
the future could affect BKF's business, financial condition or results of
operations. The risks described below are not the only ones facing BKF.
Additional risks not presently known to BKF or that BKF currently deems
immaterial may also impact its business.

  Levco is dependent on key personnel

     Levco is dependent on the efforts of its senior investment and business
professionals. In particular, Levco is dependent on the efforts of Mr. John A.
Levin, the chairman and chief executive officer of BKF. The loss of Mr. Levin's
services could have a material adverse effect on Levco because it could
jeopardize its relationships with its clients and result in the loss of those
accounts. The term of Mr. Levin's employment agreement with BKF and Levin
Management ends on June 28, 2001. Although Mr. Levin has not indicated that he
will leave BKF, there can be no assurance that Mr. Levin will remain at BKF or
that he will continue to work in his current capacity. Similarly, Mr. Frank F.
Rango and Mr. Henry L. Levin are responsible for the management of the event
driven product, and the loss of their services could jeopardize relationships
with clients purchasing this product and result in the loss of assets managed
pursuant to the strategy. Mr. Rango and Mr. Henry Levin are not parties to any
employment agreement with BKF or Levco.

     Levco's future success depends on its ability to retain and attract
qualified personnel to conduct its investment management business. The market
for qualified portfolio managers is highly competitive and has grown more so in
recent years as the entire industry has experienced growth. To the extent that
Levco further diversifies its products and strategies, Levco anticipates that it
will need to add portfolio managers and investment analysts. No assurance can be
given that Levco will succeed in its efforts to recruit and retain the required
personnel. The loss of key personnel or the inability to recruit and retain
qualified portfolio managers and marketing personnel could have a material
adverse effect on Levco's business.

                                        6
<PAGE>   8

     In December 1998, BKF adopted an incentive compensation plan to give Levco
the ability to attract and retain talented professionals with equity-based and
cash compensation. In 2000, grants of restricted stock units and options were
made under the plan to certain investment personnel and key executives. If the
price of BKF common stock decreases, no assurance can be given that the
equity-based compensation will serve its purpose to attract and retain talented
professionals.

 A decline in the performance of the securities markets could have an adverse
 effect on Levco's revenues

     Levco's operations are affected by many economic factors, including the
performance of the securities markets. During recent years, unusually favorable
and sustained performance of the U.S. securities markets, and the U.S. equity
market in particular, has attracted substantial inflows of new investments in
these markets and has contributed to significant market appreciation. This has
led to an increase in Levco's assets under management and revenues. More
recently, the securities markets have experienced significant volatility.
Declines in the securities markets, in general, and the equity markets, in
particular, would likely reduce Levco's assets under management and consequently
reduce its revenues. In addition, any continuing decline in the equity markets,
failure of these markets to sustain their prior rates of growth, or continued
volatility in these markets could result in investors withdrawing from the
equity markets or decreasing their rate of investment, either of which would
likely adversely affect Levco. Levco's rates of growth in assets under
management and revenues have varied from year to year, and there can be no
assurance that the growth rates sustained in the past will continue. Levco is
generally a "value" manager, meaning that its primary investment strategy is to
invest in stocks it believes are relatively undervalued. A general decline in
the performance of value securities could have an adverse effect on Levco's
revenues. Levco also offers an event-driven product. The failure to implement
the event driven strategy in an efficient manner could likewise impact Levco's
revenues.

  Poor investment performance could adversely affect Levco's financial condition

     Success in the investment management industry depends largely on investment
performance. Good performance generally stimulates sales of services and
investment products and tends to keep withdrawals and redemptions low. This
generates higher management fees, which are based on the amount of assets under
management and sometimes on investment performance. If Levco experiences poor
performance, this will likely result in decreased sales, decreased assets under
management and the loss of accounts, with corresponding decreases in revenue.

     Success in the investment management industry also depends on the ability
of an investment manager, and third parties with whom the investment manager
contracts, to successfully perform administrative, back-office and trade
execution functions. A failure by Levco or a third party contracted by Levco to
perform such functions could adversely impact Levco's revenues.

  The loss of significant customers could adversely affect Levco's revenues

     As of December 31, 2000, Levco had approximately 350 customers (counting as
single customers each wrap fee program and excluding proprietary pooled
investment vehicles), of which the ten largest generated approximately $21.2
million of revenues for Levco in 2000 (including incentive fees or allocations),
or approximately 27.5% of BKF's total revenues. The loss of any of these
customers could have a material adverse effect on BKF's revenues.

  A decrease in Levco's management fees, the cancellation of investment
  management agreements or poor investment performance by the private investment
  vehicles could adversely affect Levco's profits

     Management Fees.  Some segments of the investment management industry have
experienced a trend toward lower management fees. Levco must maintain a level of
investment returns and service that is acceptable to clients given the fees they
pay. No assurance can be given that Levco will be able to maintain its current
fee structure or client base. Reduction of the fees for new or existing clients
could have a material adverse impact on Levco's profits.

                                        7
<PAGE>   9

     Cancellation of Investment Management Agreements.  It is expected that
Levco will derive almost all of its revenue from investment management
agreements. For investment companies, a majority of the disinterested members of
each fund's board must approve these agreements at least annually and the
agreements are terminable without penalty on 60 days' notice. The agreements
with Levco's separately-managed account clients generally are terminable by the
client without penalty and with little or no notice. Any failure to renew, or
termination of, a significant number of these agreements could have a material
adverse effect on Levco.

     Poor Investment Performance of the Private Investment Vehicles.  BKF
derives revenue from incentive fees and general partner incentive allocations
earned with respect to its proprietary unregistered investment funds. Good
performance by these funds generates higher incentive fees and incentive
allocations because those fees and allocations are based on the performance of
the assets under management. On the other hand, relatively poor performance will
result in lower or no incentive fees or allocations, and will tend to lead to
decreased assets under management and the loss of accounts, with corresponding
decreases in revenue.

  Levco is subject to competition in the investment management business

     The investment management business is highly competitive. Levco competes
with a large number of domestic and foreign investment management firms,
commercial banks, insurance companies, broker-dealers and other firms offering
comparable investment services. Many of the financial services companies with
which Levco competes have greater resources and assets under management than
Levco does and offer a broader array of investment products and services.

     BKF believes that the most important factors affecting Levco's ability to
attract and retain clients are the abilities, performance records and
reputations of its portfolio managers, the ability to hire and retain key
investment personnel, the attractiveness of investment strategies to potential
investors and competitive fees and investor service. Levco's ability to increase
and retain client assets could be adversely affected if client accounts
underperform client expectations or if key investment personnel leave Levco.
Levco's ability to compete with other investment management firms also depends,
in part, on the relative attractiveness of its investment philosophies and
methods under prevailing market conditions. The absence of significant barriers
to entry by new investment management firms in the institutional managed
accounts business increases competitive pressure.

  Levco is dependent on information systems

     Levco is highly dependent on information systems and technology and
depends, to a great extent, on third parties who are responsible for managing,
maintaining and updating these systems. No assurance can be given that Levco's
current systems will continue to be able to accommodate its growth or that the
costs of its outsourcing arrangements will not increase. The failure to
accommodate growth or an increase in costs could have an adverse effect on
Levco.

  Conflicts of interest may arise and adversely affect Levco

     From time to time, Levco's officers, directors and employees may own
securities which one or more of its clients also own. Although Levco maintains
internal policies regarding individual investments by its officers, directors
and employees which require them to report securities transactions and restrict
certain transactions so as to minimize possible conflicts of interest, possible
conflicts of interest may arise that could have an adverse effect on Levco.

  Government regulations may adversely affect Levco's business

     Virtually all aspects of Levco's business are subject to various federal
and state laws and regulations. See "Item 1. Business -- Regulation." Levco is
subject to the Investment Advisers Act of 1940 and is subject to the Employee
Retirement Income Security Act of 1974 and its regulations insofar as it is a
"fiduciary" with respect to certain clients. John A. Levin & Co. is registered
with the Commodity Futures Trading Commission as a commodity trading advisor and
a commodity pool operator, and Levco GP is registered with that agency as a
commodity pool operator. John A. Levin & Co. and Levco GP are members of the
National Futures
                                        8
<PAGE>   10

Association. LEVCO Securities is registered as a broker-dealer under the
Securities Exchange Act of 1934, is a member of the National Association of
Securities Dealers, Inc. and is a member of the Municipal Securities Rulemaking
Board.

     If Levco fails to comply with these laws and regulations, these agencies
may impose sanctions, including the suspension of individual employees,
limitations on business activities for specified periods of time, revocation of
registration, and other censures and fines. Changes in these laws or regulations
could adversely affect Levco's profitability and operations.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     Some of the statements made in this Annual Report on Form 10-K, including
statements under "Item 1. Business" and "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations," that are not
historical facts, including, most importantly, those statements preceded by,
followed by, or that include the words "may," "believe," "expects,"
"anticipates," or the negation thereof, or similar expressions constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. For those statements, BFK claims the protection
of the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act. These forward-looking statements are based on
BFK's current expectations and are susceptible to a number of risks,
uncertainties and other factors, and BFK's actual results, performance and
achievements may differ materially from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include the following: competition; the existence or absence of adverse
publicity; changes in business strategy; quality of management; availability,
terms and deployment of capital; business abilities and judgment of personnel;
availability of qualified personnel; labor and employee benefit costs; changes
in, or failure to comply with, government regulations; the costs and other
effects of legal and administrative proceedings; and other risks and
uncertainties referred to in this document and in BFK's other current and
periodic filings with the Securities and Exchange Commission, all of which are
difficult or impossible to predict accurately and many of which are beyond BFK's
control. BFK will not undertake and specifically decline any obligation to
publicly release the result of any revisions, which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events. In addition, it is BFK's policy generally not to make any specific
projections as to future earnings, and BFK does not endorse any projections
regarding future performance that may be made by third parties.

ITEM 2.  PROPERTIES

     BFK's executive offices are located at One Rockefeller Plaza, New York, New
York. BFK's offices currently encompass 33,000 square feet and are governed by a
lease, which expires January 31, 2008. BFK expects to occupy an additional
20,231 square feet under this lease and at this location commencing July 1, 2001
and to extend the term of the lease through September 30, 2011. The majority of
BFK's operations are conducted at this location, and BKF believes that these
facilities are adequate for their current and anticipated levels of operation.

ITEM 3.  LEGAL PROCEEDINGS

     Neither BKF nor Levco is currently involved in any legal proceedings.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of BKF's security holders during the
fourth quarter of the fiscal year ended December 31, 2000.

                                        9
<PAGE>   11

                                    PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDERS
        MATTERS

     BKF's common stock trades on the New York Stock Exchange (the "NYSE") under
the symbol "BKF". At the close of business of March 26, 2001, there were 222
stockholders of record of BKF's common stock.

     The following table sets forth for the periods indicated the high and low
reported sale prices per share for the common stock as reported on the NYSE:

<TABLE>
<CAPTION>
                                                              STOCK PRICE RANGES
                                                              ------------------
                                                               HIGH        LOW
                                                              -------    -------
<S>                                                           <C>        <C>
First quarter 2000(a).......................................   14.44      10.00
Second quarter 2000.........................................   15.88      11.88
Third quarter 2000..........................................   23.31      15.56
Fourth quarter 2000.........................................   19.38      16.00
</TABLE>

---------------
(a) The public market for BKF's common stock prior to January 7, 2000 was based
    on BKF's net assets and operations as a closed-end investment company. For
    this reason, the stock prices before and after January 7, 2000 are not
    comparable. The high and low stock prices in 1999 (adjusted to reflect the 1
    for 6 reverse stock split effected on January 7, 2000) were as follows:
    first quarter -- 94.50 high, 86.63 low; second quarter -- 121.13 high, 87.75
    low; third quarter -- 121.50, 82.13 low; fourth quarter -- 86.63 high, 82.13
    low.

DIVIDENDS

     BKF has not declared any dividends since the completion of the plan of
distribution of assets on January 7, 2000. On such date, BKF paid a cash
distribution of $73.80 per share (adjusted to reflect the 1 for 6 reverse stock
split effected on January 7, 2000). This amount includes the cash proceeds from
the sale of investment securities pursuant to the Plan for Distribution of
Assets. In 1999, BKF paid aggregate cash dividends in the amount of $25.80 per
share (adjusted to reflect the 1 for 6 reverse stock split effected on January
7, 2000). Such dividend payments reflected the distribution of the net income
and gains realized by BKF as a registered investment company.

     As an operating business, BKF intends to retain future earnings, if any,
for the development of its business, and it is not anticipated that the board of
directors will declare or pay any dividends on the common stock in the
foreseeable future. The declaration and payment of dividends by BKF is in the
discretion of the board of directors. BKF is a holding company, and its ability
to pay dividends is subject to the ability of its subsidiaries to provide cash.
The board of directors will determine future dividend policy based on the
results of operations, financial conditions, capital requirements and other
circumstances.

ITEM 6.  SELECTED FINANCIAL DATA

     The selected financial data has been derived in part from BKF's unaudited
consolidated pro forma statements of income and should be read in conjunction
with such statements and Management's Discussion

                                        10
<PAGE>   12

and Analysis of Financial Condition and Results of Operations. All amounts are
in millions, excluding share and per share data.

<TABLE>
<CAPTION>
                                              2000        1999        1998        1997       1996(3)
                                            ---------   ---------   ---------   ---------   ---------
<S>                                         <C>         <C>         <C>         <C>         <C>
REVENUES:
Investments Management Fees (IMF):
Advisory..................................  $    30.8   $    29.8   $    30.8   $    31.9   $    28.4
Wrap Accounts.............................       10.3         5.2         3.6         1.2          --
Event-Driven..............................        4.5         2.0         0.3          --          --
                                            ---------   ---------   ---------   ---------   ---------
     Total IMF Fees.......................       45.6        37.0        34.7        33.1        28.4
Incentive Fees and Allocations............       29.7        10.3         4.7         2.9         3.7
                                            ---------   ---------   ---------   ---------   ---------
     Total Fees...........................       75.3        47.3        39.2        36.0        32.1
Other.....................................        1.7         1.4         1.5         1.6         1.3
                                            ---------   ---------   ---------   ---------   ---------
     Total Revenues.......................       77.0        48.7        40.7        37.6        33.4
EXPENSES:
Employee Compensation and Benefits........       57.4        26.3        22.0        18.2        13.6
Non-Compensation Expenses.................       11.7         8.8         7.1         5.5         5.5
                                            ---------   ---------   ---------   ---------   ---------
     Total Expenses.......................       69.1        35.1        29.1        23.7        19.1
                                            ---------   ---------   ---------   ---------   ---------
Income before interest,taxes and
  amortization............................        7.9        13.6        11.6        13.9        14.3
                                            ---------   ---------   ---------   ---------   ---------
Net realized and unrealized loss on
  investments.............................       (0.2)
Interest income...........................        1.4         0.4         0.3         0.2
Interest expense..........................        0.1          --          --          --          --
Amortization of intangibles(2)............        7.6        11.9        11.9        18.0         7.7
                                            ---------   ---------   ---------   ---------   ---------
Income (loss) before taxes................        1.4         2.1         0.0        (3.9)        6.6
Income tax expense (benefit)..............       (0.7)        6.5         5.3         6.5         7.2
                                            ---------   ---------   ---------   ---------   ---------
Income before cumulative effect of
  accounting change.......................        2.1        (4.4)       (5.3)      (10.4)       (0.6)
Cumulative effect of accounting change....       53.4          --          --          --          --
                                            ---------   ---------   ---------   ---------   ---------
Net (loss)................................  $   (51.3)  $    (4.4)  $    (5.3)  $   (10.4)  $    (0.6)
                                            =========   =========   =========   =========   =========
PER SHARE DATA:
Basic:
Income (loss) before cumulative effect of
  accounting change.......................  $    0.32   $   (0.67)  $   (0.81)  $   (1.59)  $   (0.09)
Cumulative effect of accounting change....      (8.21)         --          --          --          --
                                            ---------   ---------   ---------   ---------   ---------
Net (loss)................................  $   (7.89)  $   (0.67)  $   (0.81)  $   (1.59)  $   (0.09)
                                            =========   =========   =========   =========   =========
Diluted:
Income (loss) before cumulative effect of
  accounting change.......................  $    0.32   $   (0.67)  $   (0.81)  $   (1.59)  $   (0.09)
Cumulative effect of accounting change....      (8.15)
                                            ---------   ---------   ---------   ---------   ---------
Net (loss)................................  $   (7.83)  $   (0.67)  $   (0.81)  $   (1.59)  $   (0.09)
                                            =========   =========   =========   =========   =========
Proforma basic shares outstanding(1)......  6,504,890   6,504,852   6,504,852   6,504,852   6,504,852
                                            =========   =========   =========   =========   =========
Proforma diluted shares outstanding.......  6,549,889   6,504,852   6,504,852   6,504,852   6,504,852
                                            =========   =========   =========   =========   =========
</TABLE>

---------------
(1) Gives effect for reverse stock split of 1 for 6 effectuated January 7, 2000.
    Assumes same amount of shares were issued throughout period.

(2) 1997 amortization includes a write-off of $4.6 of an employment contract for
    termination of an employee.

(3) The information shown for 1996 includes the period before BKF's acquisition
    of Levco on June 28, 1996. The compensation for 1996 has been adjusted to
    reflect the agreed-upon revenue split pursuant to the bonus plan approved by
    stockholders.

                                        11
<PAGE>   13

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

INTRODUCTION

     BKF operates entirely through Levco, an investment adviser registered with
the U.S. Securities and Exchange Commission that was acquired by BKF in June
1996. Levco specializes in managing equity portfolios for institutional and
individual investors primarily in the United States. Most accounts are managed
pursuant to a large cap value strategy; Levco also offers an event-driven
product as well as other more specialized investment programs.

     Levco acts as the general partner of a number of investment partnerships
and also acts as an adviser to private investment vehicles organized outside the
United States.

     With respect to accounts managed pursuant to its large cap value strategy,
Levco generally receives advisory fees based on a percentage of the market value
of assets under management, including market appreciation or depreciation and
client contributions and withdrawals. With respect to private investment
vehicles and separate accounts managed pursuant to similar strategies, Levco is
generally entitled to receive both a fixed management fee based on a percentage
of the assets under management and a share of net profits.

     Levco obtains some of its clients for its large cap value product through
wrap fee programs sponsored by major financial services companies. In these
programs, clients pay the sponsoring broker an asset-based fee that covers
brokerage commissions, advisory services, custodial fees, and other reporting
and administrative services. Investors are able to select Levco from among a
limited number of managers participating in the program, and Levco receives a
portion of the wrap fee paid by the clients who select Levco to manage their
accounts through the program.

     At December 31, 2000, assets under management at Levco were $11.5 billion,
up from $8.4 billion a year earlier. Following is a comparison of Levco assets
under management (in millions) as defined by product and client type:

<TABLE>
<CAPTION>
                                            DECEMBER 31, 2000    DECEMBER 31, 1999    DECEMBER 31, 1998
                                            -----------------    -----------------    -----------------
<S>                                         <C>                  <C>                  <C>
Institutional.............................       $ 5,064              $4,351               $4,713
BKF(a)....................................            --                  --                  505
Non-institutional.........................         2,196               1,900                1,856
Event Driven..............................         1,071                 642                  355
Private Investment Funds..................           202                 101                  127
Wrap......................................         2,975               1,450                  757
                                                 -------              ------               ------
     Total................................       $11,508              $8,444                8,313
                                                 =======              ======               ======
</TABLE>

---------------
(a) The BKF portfolio managed by Levco was liquidated during the period between
    August 19, 1999 and December 31, 1999.

     Levco also has a wholly-owned broker-dealer subsidiary that clears trades
through CSC on a fully disclosed basis. Generally, the customers of the
broker-dealer subsidiary are advisory clients of Levco, and the trades executed
through the broker-dealer are generally placed by Levco in its capacity as
investment adviser.

     The following discussion and analysis of the results of operations is based
on the Consolidated Statements of Financial Condition at December 31, 2000 and
1999 (pro forma) and the Pro Forma Consolidated Statements of Income for each of
the three years in the period ended December 31, 2000 of BKF Capital Group, Inc.
and Subsidiaries (which are included elsewhere herein) and should be read in
conjunction with such financial statements. In light of the evolution of BKF
from a closed-end management investment company to a holding company whose
primary asset is the investment management business of Levco, pro forma
financial statements have been included in this Annual Report on Form 10-K in
order to provide meaningful comparisons of financial information for the years
ended December 31, 2000, 1999 and 1998. We have not included a discussion of
historical financial results of BKF as a closed-end management investment

                                        12
<PAGE>   14

company because it completed the distribution of substantially all of its assets
on January 7, 2000 pursuant to a Plan of Distribution of Assets approved by
stockholders on August 19, 1999 and ceased to be registered as an investment
company on April 18, 2000. Particular attention should be paid to the fact that
a change in accounting principle was effected on April 18, 2000 resulting in an
amortization expense that has been reflected in the pro forma financial
statements. This amortization expense has been reflected on a pro forma basis in
the financial statements for 1999 and 1998, and the financial statements for
2000 reflect the actual cumulative amortization charge absorbed by BKF in 2000
as the result of the change in accounting principle.

     Certain statements under this caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations" constitute "forward-looking
statements" under the Private Securities Litigation Reform Act of 1995. See
"Item 1. Business -- Special Note Regarding Forward Looking Statements."

PRO FORMA RESULTS OF OPERATIONS

  YEAR ENDED DECEMBER 31, 2000 AS COMPARED TO YEAR ENDED DECEMBER 31, 1999

     Revenues

     Total revenues for 2000 rose to $77.04 million, reflecting an increase of
58.3% from $48.66 million in revenues in 1999. This increase was primarily
attributable to (1) a 23.5% increase in investment advisory fees (excluding
incentive fees and general partner incentive allocations) from $36.93 million
(excluding investment advisory fees received for managing the portfolio of BKF)
to $45.61 million and (2) a 188.2% increase in incentive fees and general
partner incentive allocations from $10.31 million to $29.70 million. The
increase in investment advisory fees is primarily attributable to the increase
in assets under management in (1) the large cap value strategy, which
experienced a significant increase in assets managed in wrap fee programs, and
(2) the event-driven product. The increase in incentive fees and general partner
incentive allocations is primarily attributable to (1) the increase in assets
under management in the event driven product and (2) approximately $5.1 million
in incentive fees and general partner incentive allocations from accounts or
vehicles following the large cap value strategy or specialized investment
strategies (other than the event driven product) which had not produced
incentive fees or allocations in 1999. Incentive fees and general partner
incentive allocations are accrued on a quarterly basis but are primarily
determined and billed at the end of the applicable contract year or upon
withdrawal.

     Net commission income generated by the broker-dealer business rose 22.3%
from $1.42 million to $1.74 million.

     Agreements relating to several of the private investment funds managed by
Levco have been amended to allow for direct participation by employee controlled
entities in the fees and allocations generated by such funds. These changes will
lead to a decrease in reported revenues, and a corresponding dollar-for-dollar
decrease in reported compensation expense, in 2001.

     Expenses

     Total expenses for 2000 rose 63.0% from $47.01 million to $76.65 million.
Excluding amortization of intangibles, total expenses rose 96.6% from $35.11
million to $69.05 million. The largest component of this increase was a 118.2%
increase in compensation expense, which went from $26.30 million to $57.38
million. This increase in compensation expense is primarily attributable to (1)
the increase in revenues (as cash compensation expense is based on a percentage
of pre-tax, pre-compensation profits) and (2) grants of restricted stock units
to employees of the firm.

     BKF anticipates that cash compensation expense as a percentage of pre-tax,
pre-compensation profits will further increase in 2001 under the compensation
guidelines approved by the board of directors.

     In connection with 2000 compensation and as part of a broader incentive
compensation program meant to retain and attract key employees, the compensation
committee of BKF's board of directors approved grants of 650,485 restricted
stock units to BKF employees. These grants vested immediately and resulted in
compensation expense of $11.77 million in 2000. Under the terms of the stock
award agreements relating to the grants,

                                        13
<PAGE>   15

the actual delivery of shares of stock will not take place for three years and
will be subject to the satisfaction of certain conditions by the recipients.
Because the grants utilized a significant portion of the equity available under
the BKF 1998 Incentive Compensation Plan, which allows for the issuance of up to
1,300,000 shares, BKF anticipates that stockholders will be requested to approve
an amendment to the plan to allow for the issuance of an additional 2,000,000
shares under the plan, of which only 1,300,000 may be taken from the authorized
and unissued shares of BKF.

     Other operating expenses of BKF rose 40.1% from $6.70 million to $9.38
million, primarily reflecting an increase in marketing fees paid to third
parties for soliciting investors on behalf of Levco. Other factors contributing
to the rise were increased promotional expenses relating to internal marketing
efforts and an increase in portfolio management and trading system costs.

     BKF expects to enter into a lease amendment providing it with an additional
20,231 square feet in its current location, commencing July 1, 2001. This lease
amendment will result in an additional annual expense of approximately $1.3
million, part of which may be offset through the subleasing of unused space.

     Operating Income

     Operating income decreased 76.5% to $388,000 from $1.65 million, reflecting
the increase in expenses, including the restricted stock unit grants, which
exceeded the increase in revenues. Excluding the amortization of intangibles and
the grant of restricted stock units, operating income rose 49.6%, from $13.55
million to $20.26 million.

     Interest Income

     Interest income increased by 214.3%, from $431,000 to $1.36 million. This
increase in interest income resulted from four major factors: (1) increased cash
generated by operations; (2) the shift of a portion of 1999 compensation from
cash to equity-based instruments; (3) a reduction in estimated tax payments
resulting from the utilization of a portion of a capital loss; and (4) the
reclassification of the $65 million BKF loan to Levco to equity in December
1999. This reclassification enabled Levco to cease making interest payments to
BKF, resulting in higher cash balances for Levco.

     Loss on Investments

     In 2000, BKF had a net realized and unrealized loss on investments of
$228,000 primarily as the result of the permanent write down of a historical
private placement position that had been part of BKF's portfolio when it was an
investment company. This loss was partly offset by net gains in small cap,
small/mid cap, and financial services long only equity value portfolios funded
by BKF in the fourth quarter of 2000 in order to establish track records for
developing products. A pro forma adjustment to the 1999 financial statements
eliminating investment company specific income resulted in there being no pro
forma net loss or gain on investments in 1999.

     Income Taxes

     BKF recorded an income tax benefit of ($665,000) in 2000, as compared to a
tax provision of $6.46 million in 1999.

     In 2000, BKF realized a $10.9 million capital loss relating to an
investment that was made when BKF was still an investment company; $4.53 million
of this loss was used in 2000 to offset taxable capital gains. The balance of
the unused capital loss will be carried back to previous taxable years to offset
prior taxable capital gains. Such carry back will result in a tax refund.

     Absent the non-deductible amortization expense and the realization of the
capital loss previously recorded as an unrealized loss by the investment
company, BKF would have an effective tax rate of 47%. For the period ended
December 31, 2000, application of a 47% effective tax rate results in a
provision for taxes of $5.75 million. This amount was offset by ($6.4) million
in future tax benefits primarily attributable to ($3.0) million in future tax
benefits from the unused portion of the capital loss, ($5.6) million in future
tax benefits
                                        14
<PAGE>   16

relating to future compensation deductions attributable to the grant of
restricted stock units (as the compensation expense is not deductible for tax
purposes until the delivery of the underlying stock) and $2.2 million in future
taxable income attributable to deferred revenue and unrealized gain on
investments. An effective tax rate of 46% (before amortization) was used to
calculate the provision for taxes at December 31, 1999.

     Change in Accounting Principle

     A change in accounting principle that became effective on April 18, 2000
upon the de-registration of BKF as an investment company resulted in a
cumulative amortization expense deriving from the 1996 acquisition of Levco by
BKF. The de-registration of BKF transformed BKF into an operating company and
caused the 1996 transaction to become subject to purchase accounting rules. This
amortization expense is non-deductible for income tax purposes because the
purchase accounting method is being applied retroactively. A one-time charge to
income in the amount of $53.37 million for accumulated amortization from June
1996 through April 18, 2000 was recorded in the second quarter of 2000. This was
a non-cash charge.

  YEAR ENDED DECEMBER 31, 1999 AS COMPARED TO THE YEAR ENDED DECEMBER 31, 1998

     Revenues

     Revenues increased 19.4% from 1998 to 1999, to $48.66 million from $40.75
million. This increase was primarily attributable to a 119.7% increase in
incentive fees and general partner incentive allocations from $4.69 million to
$10.31 million. This increase in incentive fees and general partner incentive
allocations was primarily the result of the increase in assets under management
in the event driven product. Incentive fees and general partner incentive
allocations are accrued on a quarterly basis but are primarily determined and
billed at the end of the applicable contract year or upon withdrawal.

     Investment advisory fees rose 6.6% from 1998 to 1999, from $34.66 million
to $36.93 million, primarily as the result of the growth in assets under
management in wrap fee programs, as the management fees from assets gathered
through these distribution channels rose to $5.2 million from $3.6 million.

     Net commission income generated by the broker-dealer business rose 1.7%
from $1.40 million to $1.42 million.

     Expenses

     Total expenses increased to $47.01 million in 1999 from $41.08 million in
1998, or 14.4%. Excluding amortization of intangibles, total expenses rose 20.3%
from $29.18 million to $35.11 million. Compensation expenses rose 19.1% in 1999,
to $26.30 million from $22.08 million. A major contributor to the rise in the
expenses was the increase in the number of employees from 64 to 80 during 1998.
In 1999, a full year of expenses relating to these employees were incurred for
the first time. In 1999, the number of employees increased from 80 to 82.

     In 1999, BKF's board of directors established a target percentage for the
amount of profits (before taxes, compensation and amortization expenses) that
should be allocated to compensation. This target percentage was established with
the goal of creating a structure that would allow Levco to retain key
professionals and took into account the compensation structure at other
investment management businesses. The target percentage for 1999 was higher than
the percentage actually paid in 1998. Under the BKF 1998 Incentive Compensation
Plan, certain professionals elected to shift a portion of their cash
compensation into grants of restricted stock units ("RSUs") and non-qualified
options. This shift had the effect of reducing compensation expense for 1999.
Those employees electing to receive equity in lieu of cash forfeited their
rights to the cash equivalent portion of their bonus ($1.7 million) in return
for the RSUs and non-qualified options received. In return, these employees
received an additional 20% of equity based on the amount exchanged. The RSUs and
options require future services as a condition to the ultimate receipt of the
underlying number of shares of BKF stock. BKF's policy is to record the RSU
expense ratably over the required service period.

                                        15
<PAGE>   17

     Other operating expenses rose 22.1% to $6.70 million from $5.48 million.
The largest factors in this rise in other operating expenses were Levco's share
of professional fees relating to the implementation of the 1998 BKF Incentive
Compensation Plan and the increase in expenses relating to the institutional
marketing effort. Other factors relating to the rise in non-compensation
expenses were the increase in the depreciation expense relating to the office
space taken on the 19th floor at One Rockefeller Plaza, which expense was
calculated for only one quarter of 1998, and the costs associated with the
implementation of a new portfolio management and trading system for accounts
managed through wrap fee programs.

     Operating Income

     Operating income increased to $1.65 million in 1999 from a loss of $332,000
in 1998. Excluding amortization of intangibles, operating income rose 17.1% from
$11.56 million in 1998 to $13.55 million in 1999, reflecting the increase in
revenues, which exceeded the increase in expenses.

     Interest Income

     Interest income increased by 22.8%, from $351,000 to $431,000. This
increase in interest income resulted primarily from increased cash generated by
operations.

     Income Taxes

     BKF recorded an income tax expense of $6.46 million in 1999, an increase of
22.3% over the 1998 income tax expense of $5.28 million. This increase primarily
reflects an increase in income before taxes (as determined without a deduction
for the amortization of intangibles). An effective tax rate of 46% (before
amortization) was used to make the determination with respect to the income tax
expense at December 31, 1999, while an effective tax rate of 43% (before
amortization) was used to calculate the provision for taxes at December 31,
1998. The differential in tax rates is primarily due to state allocations.

LIQUIDITY AND CAPITAL RESOURCES

     BKF's current assets as of December 31, 2000 consist primarily of cash,
short term investments, advisory fees receivable and marketable equity
securities.

     BKF's business is not capital intensive. BKF has historically met its cash
and liquidity needs through cash generated by operating activities. At December
31, 2000, BKF had cash and cash equivalents of $22.27 million, compared to
$14.36 million at December 31, 1999. This increase in cash and cash equivalents
primarily reflects the retention of operating income. The increase in investment
advisory fees receivable to $27.84 million at December 31, 2000 from $12.45
million at December 31, 1999 primarily reflects the increase in incentive fees
earned as well as the increase in investment management fees resulting from the
increase in assets under management. The increase in investments in affiliated
investment partnerships to $11.86 million at December 31, 2000 from $7.63
million at December 31, 1999 primarily reflects the increase in incentive
allocations to Levco GP. It is Levco's general practice to withdraw the
incentive allocations earned within three months after the fiscal year. The
decrease in other assets to $703,000 at December 31, 2000 from $912,000 at
December 31, 1999 is primarily attributable to the return of a portion
($375,000) of the security deposit under the terms of Levco's lease agreement.

     The increase in current and non-current deferred tax assets to $6.71
million in 2000 from $298,000 in 1999 is primarily attributable to (1) the
realization of a $10.9 million dollar capital loss relating to an investment
made when BKF was still an investment company, of which only $4.53 million was
used to offset capital gains in 2000, and (2) a $12.09 million compensation
expense deduction that may be taken at such time as the shares underlying the
restricted stock units that have been granted are actually delivered.

     Prepaid expenses and other current assets rose to $2.34 million at December
31, 2000 from $1.34 million at December 31, 1999 as the result of the purchase
of a new, three year Directors and Officers/Errors and Omissions Liability
insurance policy. The premium for the policy is being financed by BKF over a
30-month period, resulting in an insurance payable of $578,000 at December 31,
2000.

                                        16
<PAGE>   18

     Investments in securities of $2.49 million represent investments made by
the Company in the fourth quarter of 2000 to seed small cap, small/mid cap and
financial services long only equity value products.

     Accrued expenses were $3.39 million at December 31, 2000, as compared to
$4.74 million at December 31, 1999. This decrease is primarily attributable to
the completion of the wind down of the Chicago-based operations of BKF.

     Accrued bonuses were at $28.06 million at December 31, 2000, as compared to
$13.35 million at December 31, 1999. This increase is attributable to the
increase in revenues over this same period.

     Based upon BKF's current level of operations and anticipated growth, BKF
expects that cash flows from operating activities will be sufficient to finance
its working capital needs for the foreseeable future. BKF has no material
commitments for capital expenditures, and BKF's business is not seasonal.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Because BKF's revenues are largely driven by the market value of Levco's
assets under management, these revenues are exposed to fluctuations in the
equity markets. Management fees for most accounts are determined based on the
market value of the account on the last day of the quarter with respect to which
the investment advisory fee is charged, so any significant increases or
decreases in market value occurring on or shortly before the last day of a
quarter may materially impact revenues for the quarter. Furthermore, because
Levco manages most of its assets in a large cap value style, a general decline
in the performance of value stocks could have an adverse impact on Levco's
revenues. Similarly, a lack of opportunity to implement, or a failure to
successfully implement, Levco's event-driven, risk arbitrage strategy, could
reduce performance based incentive fees and allocations and thereby negatively
impact BKF's revenues.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

     The independent auditor's reports and financial statements are included in
Item 14 of this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     Not applicable.

                                    PART III

ITEMS 10, 11, 12, AND 13.

     The information required by Items 10, 11, 12 and 13 will be furnished on or
prior to April 30, 2001 (and is hereby incorporated by reference) by an
amendment hereto or pursuant to a definitive proxy statement involving the
election of directors pursuant to Regulation 14A, which will contain such
information.

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a) The following documents are filed as part of this Form 10-K:

         (1) Financial Statements

         Included herein at pages F-1 through F-26.

         (2) Financial Data Schedules

         All schedules are omitted, as the required information is inapplicable
         or is included in the financial statements or related notes.

                                        17
<PAGE>   19

         (3) Exhibits

         The following exhibits are filed as part of this Annual Report on Form
         10-K:

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<C>       <S>
  3.1     Restated Certificate of Incorporation of Registrant, as
          amended (incorporated by reference to Exhibit 3(i) to
          Registrant's Quarterly Report on Form 10-Q for the period
          ended June 30, 2000 (SEC File No. 1-10024)).
  3.2     Bylaws of Registrant (incorporated by reference to Exhibit
          3(ii) to Registrant's Quarterly Report on Form 10-Q for the
          period ended June 30, 2000 (SEC File No. 1-10024)).
  4.1     Specimen of Common Stock Certificate.*
 10.1     Lease dated December 20, 1993 between Rockefeller Center
          Properties and John A. Levin & Co., Inc. (including the
          second, third and fourth amendments thereto).*
 10.2     Employment Agreement dated June 28, 1996 between John A.
          Levin, BKF Capital Group, Inc. and Levin Management Co.,
          Inc.*
 10.3     Employment Agreement dated December 31, 1999 between Gregory
          T. Rogers, BKF Capital Group, Inc. and Levin Management Co.,
          Inc.*
 10.4     Registrant's 1998 Incentive Compensation Plan, as amended
          (incorporated by reference to Exhibit 10.1 to Registrant's
          Quarterly Report on Form 10-Q for the period ended September
          30, 2000 (SEC File No. 1-10024)).
 10.5     Registrant's Deferred Compensation Plan (incorporated by
          reference to Exhibit 10.2 to Registrant's Quarterly Report
          on Form 10-Q for the period ended September 30, 2000 (SEC
          File No. 1-10024)).
 10.6     Form of Stock Option Award Agreement (incorporated herein by
          reference to Exhibit 4.4 to Registrant's Registration
          Statement on Form S-8 filed with the Commission on November
          17, 2000 (Registration No. 333-50132)).
 10.7     Form of Deferred Stock Award Agreement (incorporated by
          reference to Exhibit 4.5 to Registrant's Registration
          Statement on Form S-8 filed with the Commission on November
          17, 2000 (Registration No. 333-50132)).
 21.1     Subsidiaries of Registrant.*
 23.1     Consent of Ernst & Young LLP.*
 24.1     Powers of Attorney (included on the Signature Pages
          hereto).*
</TABLE>

---------------
* Filed herewith

     (b) Reports on Form 8-K

     On April 25, 2000, BKF Capital Group, Inc. filed a report on Form 8-K,
which included information under Item 5 of such form.

                                        18
<PAGE>   20

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                          BKF CAPITAL GROUP, INC.

                                          By:       /s/ JOHN A. LEVIN
                                            ------------------------------------
                                                       John A. Levin
                                                 Chairman, Chief Executive
                                                   Officer and President

Date: April 2, 2001

     Each person whose signature appears below hereby constitutes and appoints
John A. Levin and Glenn A. Aigen and each of them, his true and lawful
attorney-in-fact and agent with full power of substitution, for him in any and
all capacities, to execute and cause to be filed with the Securities and
Exchange Commission any and all amendments to the Annual Report on Form 10-K,
with exhibits thereto, and any other documents connected therewith and to
perform any acts necessary to be done in order to file such documents, and
hereby ratifies and confirms all that said attorney-in-fact or their substitute
or substitutes may do or case to be done by virtue hereof.

     Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report and the foregoing power of attorney have been signed by the
following persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
                     SIGNATURE                                      TITLE                      DATE
                     ---------                                      -----                      ----
<S>                                                  <C>                                   <C>

                 /s/ JOHN A. LEVIN                   Chairman, Chief Executive Officer     April 2, 2001
---------------------------------------------------    and President (Principal Executive
                   John A. Levin                       Officer)

                /s/ GLENN A. AIGEN                   Senior Vice President and Chief       April 2, 2001
---------------------------------------------------    Financial Officer (Principal
                  Glenn A. Aigen                       Financial and Accounting Officer)

              /s/ ANSON M. BEARD, JR.                              Director                April 2, 2001
---------------------------------------------------
                Anson M. Beard, Jr.

               /s/ J. BARTON GOODWIN                               Director                April 2, 2001
---------------------------------------------------
                 J. Barton Goodwin

               /s/ DAVID D. GRUMHAUS                               Director                April 2, 2001
---------------------------------------------------
                 David D. Grumhaus

               /s/ BURTON G. MALKIEL                               Director                April 2, 2001
---------------------------------------------------
                 Burton G. Malkiel

               /s/ PETER J. SOLOMON                                Director                April 2, 2001
---------------------------------------------------
                 Peter J. Solomon
</TABLE>

                                        19
<PAGE>   21

<TABLE>
<CAPTION>
                     SIGNATURE                                      TITLE                      DATE
                     ---------                                      -----                      ----
<S>                                                  <C>                                   <C>
               /s/ DEAN J. TAKAHASHI                               Director                April 2, 2001
---------------------------------------------------
                 Dean J. Takahashi

                /s/ JAMES S. TISCH                                 Director                April 2, 2001
---------------------------------------------------
                  James S. Tisch
</TABLE>

                                        20
<PAGE>   22

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                               PAGE
                                                              NUMBER
                                                              ------
<S>                                                           <C>
Report of Independent Auditors..............................    F-2
Report of Independent Accountants...........................    F-3
Consolidated Statement of Financial Condition at December
  31, 2000..................................................    F-4
Pro Forma Consolidated Statement of Financial Position at
  December 31, 1999.........................................    F-5
Pro Forma Consolidated Statement of Income for the year
  ended December 31, 2000...................................    F-7
Pro Forma Consolidated Statement of Income for the year
  ended December 31, 1999...................................    F-8
Pro Forma Consolidated Statement of Income for the year
  ended December 31, 1998...................................    F-9
Pro Forma Consolidated Statements of Cash Flows for the
  years ended December 31, 2000, 1999 and 1998..............   F-10
Consolidated Statements of Cash Flows (historical) for the
  years ended December 31, 2000, 1999 and 1998..............   F-11
Consolidated Statements of Changes in Stockholders' Equity
  (historical) for the years ended December 31, 2000, 1999
  and 1998..................................................   F-13
Notes to Consolidated Financial Statements..................   F-14
</TABLE>

                                       F-1
<PAGE>   23

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
  BKF Capital Group, Inc.

     We have audited the accompanying consolidated statements of financial
condition of BKF Capital Group, Inc. (formerly known as Baker, Fentress &
Company) as of December 31, 2000 and 1999, and the consolidated statements of
income, changes in stockholders' equity and cash flows for each of the years in
the three year period ended December 31, 2000. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

     As discussed in Note 1 to the financial statements, in 2000, BKF Capital
Group, Inc. changed its method of accounting for its acquisition of Levin
Management Co., Inc. in 1996.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
BKF Capital Group, Inc. at December 31, 2000 and 1999, and the consolidated
results of its operations and its cash flows for each of the years in the three
year period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States.

/s/ Ernst & Young LLP

January 31, 2001

                                       F-2
<PAGE>   24

                       REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors and Stockholders
  BKF Capital Group, Inc.

     We have reviewed the pro forma adjustments reflecting the transaction
described in Note 1 and the application of those adjustments to the historical
amounts in the accompanying pro forma consolidated statement of financial
condition of BKF Capital Group, Inc. (formerly known as Baker, Fentress &
Company) as of December 31, 1999, and the pro forma consolidated statements of
income and cash flows for each of the years in the three year period ended
December 31, 2000. The historical financial statements are derived from the
historical financial statements of BKF Capital Group, Inc. and Levin Management
Co., Inc., which were both audited by us. Such pro forma adjustments are based
on management's assumptions described in Note 1. Our review was conducted in
accordance with standards established by the American Institute of Certified
Public Accountants.

     A review is substantially less in scope than an examination, the objective
of which is the expression of an opinion on management's assumptions, the pro
forma adjustments, and the application of those adjustments to historical
financial information. Accordingly, we do not express such an opinion.

     The objective of this pro forma financial information is to show what the
significant effects on the historical financial information might have been had
the transaction occurred at an earlier date. However, the pro forma financial
statements are not necessarily indicative of the results of operations or
related effects on financial position that would have been attained had the
above-mentioned transaction actually occurred earlier.

     Based on our review, nothing came to our attention that caused us to
believe that management's assumptions do not provide a reasonable basis for
presenting the significant effects directly attributable to the above-mentioned
transaction described in Note 1, that the related pro forma adjustments do not
give appropriate effect to those assumptions, or that the pro forma column does
not reflect the proper application of those adjustments to the historical
financial statement amounts in the pro forma consolidated statement of financial
condition as of December 31, 1999, and the pro forma consolidated statements of
income and cash flows for each of the years in the three year period ended
December 31, 2000.

/s/ Ernst & Young LLP

January 31, 2001

                                       F-3
<PAGE>   25

                    BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
                               DECEMBER 31, 2000
              (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                  (SEE NOTE 1)

<TABLE>
<S>                                                           <C>
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents...................................  $ 22,268
Investment advisory fees receivable.........................    27,842
Investments in securities (cost $2,489).....................     2,622
Prepaid expenses and other current assets...................     2,339
Deferred tax asset..........................................     1,080
                                                              --------
          Total current assets..............................    56,151
                                                              --------
NONCURRENT ASSETS:
Investments in affiliated partnerships......................    11,860
Fixed assets (net of accumulated depreciation of $2,316)....     3,070
Other assets................................................       703
Deferred tax asset..........................................     5,628
INTANGIBLE ASSETS:
Goodwill....................................................    23,363
Employment contracts........................................    23,363
Investment advisory contracts...............................    70,088
Accumulated amortization....................................   (60,977)
                                                              --------
          Total assets......................................  $133,249
                                                              ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accrued expenses............................................  $  3,390
Accrued bonuses.............................................    28,056
Accrued incentive compensation..............................       321
Income taxes payable........................................       377
Other liabilities...........................................       974
                                                              --------
          Total current liabilities.........................    33,118
                                                              --------
STOCKHOLDERS' EQUITY: (SEE NOTE 10)
Common stock, $1 par value, authorized -- 60,000,000 shares;
  issued and outstanding -- 6,518,665 shares................     6,519
Additional paid-in capital..................................    62,227
Retained earnings...........................................    31,385
                                                              --------
          Total stockholders' equity........................   100,131
                                                              --------
          Total liabilities and stockholders' equity........  $133,249
                                                              ========
</TABLE>

                             See accompanying notes
                                       F-4
<PAGE>   26

                    BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

            PRO FORMA CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
              (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                  (SEE NOTE 1)

<TABLE>
<CAPTION>
                                              BKF CAPITAL                        PRO FORMA        PRO FORMA
                                              GROUP, INC.        LEVCO        ADJUSTMENTS AND    CONSOLIDATED
                                              DECEMBER 31,    DECEMBER 31,     INTERCOMPANY      DECEMBER 31,
                                                  1999            1999          ELIMINATION          1999
                                              ------------    ------------    ---------------    ------------
                                               (AUDITED)       (AUDITED)                         (UNAUDITED)
<S>                                           <C>             <C>             <C>                <C>
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents...................    $481,988        $ 12,431(a)      $(480,058)        $ 14,361
Investment advisory fees receivable(h)......          --          12,460(f)            (10)          12,450
Prepaid expenses and other current assets...         858             485                              1,343
Deferred tax asset..........................          --             298                                298
                                                --------        --------                           --------
         Total current assets...............     482,846          25,674                             28,452
                                                --------        --------                           --------
NONCURRENT ASSETS:
Investments in affiliated partnerships......          --           7,633                              7,633
Fixed assets (net of accumulated
  depreciation of $1,533)...................          --           3,154                              3,154
Other assets................................          --             912                                912
Investments(e)..............................       1,000              --                              1,000
Investment in Levco.........................      92,000              --(c)         (3,611)              --
                                                                        (g)        (88,389)
INTANGIBLE ASSETS:
Goodwill....................................          --              --(c)         23,363           23,363
Employment contracts........................          --              --(c)         23,363           23,363
Investment advisory contracts...............          --              --(c)         70,088           70,088
Accumulated amortization....................          --              --(c)        (49,812)         (49,812)
                                                --------        --------                           --------
         Total assets.......................    $575,846        $ 37,373                           $108,153
                                                ========        ========                           ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accrued expenses............................    $  2,718        $  2,036(b)      $     (10)        $  4,744
Accrued bonuses(h)..........................          --          13,346                             13,346
Income taxes payable(h).....................          --             604                                604
                                                --------        --------                           --------
         Total liabilities..................       2,718          15,986                             18,694
                                                --------        --------                           --------
STOCKHOLDERS' EQUITY:
Common stock, $1 par value, authorized --
  60,000,000 shares; issued and
  outstanding -- 6,504,852 shares...........      39,029              --(d)        (32,524)           6,505
Additional paid-in capital..................     463,426          55,517(a)       (422,115)          50,092
                                                                        (c)        (39,018)
                                                                        (b)             10
                                                                        (c)         (3,611)
                                                                        (d)         32,524
                                                                        (a)         51,748
                                                                        (g)        (88,389)
Undistributed net realized gains............      57,943              --(a)        (57,943)              --
Unrealized depreciation of investments......     (39,018)             --(c)         39,018               --
Retained earnings(h)........................      51,748         (34,130)(a)       (51,748)          32,862
                                                                        (f)            (10)
                                                                        (c)         67,002
                                                --------        --------                           --------
         Total stockholders' equity.........     573,128          21,387                             89,459
                                                --------        --------                           --------
Total liabilities and stockholders'
  equity....................................    $575,846        $ 37,373                           $108,153
                                                ========        ========                           ========
</TABLE>

                             See accompanying notes
                                       F-5
<PAGE>   27

---------------
(a) To record final distribution made to shareholders on January 7, 2000.

(b) To reflect reversal of advisory fee payable to Levco.

(c) To record the initial acquisition by BKF under purchase accounting and the
    reclassification of the intercompany loan.

(d) To record the reverse stock split (6,504,852 shares are issued and
    outstanding after the reverse split).

(e) Represents investments in two private placement securities to be liquidated.

(f) To reverse advisory fee receivable from BKF.

(g) To eliminate the intercompany investment in Levco in consolidation.

(h) Reflects the retroactive effect of the accrual of incentive fees of $375 and
    the related effect to accrued bonuses, income taxes payable and retained
    earnings of $235, $66 and $74, respectively.

                             See accompanying notes
                                       F-6
<PAGE>   28

                    BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

                   PRO FORMA CONSOLIDATED STATEMENT OF INCOME
              (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                  (SEE NOTE 1)

<TABLE>
<CAPTION>
                                                                                         PRO FORMA
                                                                                        CONSOLIDATED
                                                       YEAR ENDED                        YEAR ENDED
                                                      DECEMBER 31,      PRO FORMA       DECEMBER 31,
                                                          2000        ADJUSTMENTS(A)        2000
                                                      ------------    --------------    ------------
                                                       (AUDITED)                        (UNAUDITED)
<S>                                                   <C>             <C>               <C>
REVENUES:
Investment advisory fees............................    $ 45,605                         $  45,605
Incentive fees......................................      29,695                            29,695
Commission income -- net............................       1,736                             1,736
                                                        --------          -----          ---------
          Total revenues............................      77,036             --             77,036
                                                        --------          -----          ---------
EXPENSES:
Employee compensation and benefits..................      45,613                            45,613
Employee compensation -- grants of restricted stock
  units.............................................      11,767                            11,767
Occupancy & equipment rental........................       2,286                             2,286
Other operating expenses............................       9,379                             9,379
Amortization of intangibles.........................       7,603                             7,603
                                                        --------          -----          ---------
          Total expenses............................      76,648             --             76,648
                                                        --------          -----          ---------
Operating income....................................         388             --                388
Other income (expense):
Net realized and unrealized loss on investments.....        (456)           228               (228)
Interest and dividend income........................       1,761           (406)             1,355
Interest expense....................................        (105)                             (105)
                                                        --------          -----          ---------
Income before taxes and cumulative effect of change
  in accounting principle...........................       1,588           (178)             1,410
                                                        --------          -----          ---------
Income tax (benefit)................................        (665)                             (665)
                                                        --------          -----          ---------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
  ACCOUNTING PRINCIPLE..............................       2,253           (178)             2,075
                                                        --------          -----          ---------
Cumulative effect to April 18, 2000 of change in
  accounting principle..............................     (53,374)                          (53,374)
                                                        --------          -----          ---------
NET (LOSS)..........................................    $(51,121)         $(178)         $ (51,299)
                                                        ========          =====          =========
Basic income (loss) per share(b):
Income before cumulative effect of accounting
  change............................................                                     $    0.32
Cumulative effect of accounting change..............                                         (8.21)
                                                                                         ---------
Net (loss)..........................................                                     $   (7.89)
                                                                                         =========
Diluted income (loss) per share(b):
Income before cumulative effect of accounting
  change............................................                                     $    0.32
Cumulative effect of accounting change..............                                         (8.15)
                                                                                         ---------
Net (loss)..........................................                                     $   (7.83)
                                                                                         =========
Weighted average shares outstanding(b):
  Basic.............................................                                     6,504,890
  Diluted...........................................                                     6,549,889
</TABLE>

---------------
(a) To reverse the investment company specific income and expenses of BKF
    Capital Group, Inc. for the period January 1, 2000 to April 18, 2000.

(b) Calculation reflects the reverse stock split (which was effectuated January
    7, 2000).

                             See accompanying notes
                                       F-7
<PAGE>   29

                    BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

                   PRO FORMA CONSOLIDATED STATEMENT OF INCOME
              (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                  (SEE NOTE 1)

<TABLE>
<CAPTION>
                                           BKF CAPITAL                                     PRO FORMA
                                           GROUP, INC.        LEVCO                       CONSOLIDATED
                                            YEAR ENDED      YEAR ENDED                     YEAR ENDED
                                           DECEMBER 31,    DECEMBER 31,     PRO FORMA     DECEMBER 31,
                                               1999            1999        ADJUSTMENTS        1999
                                           ------------    ------------    -----------    ------------
                                            (AUDITED)       (AUDITED)                     (UNAUDITED)
<S>                                        <C>             <C>             <C>            <C>
REVENUES:
Investment advisory fees.................    $    --         $38,019(a)       (1,085)      $  36,934
Incentive fees(f)........................         --          10,305                          10,305
Commission income -- net.................         --           1,419                           1,419
                                             -------         -------                       ---------
          Total revenues.................         --          49,743                          48,658
                                             -------         -------                       ---------
EXPENSES:
Employee compensation and benefits(f)....      3,691          27,008(b)       (3,691)         26,297
                                                                    (a)         (711)
Occupancy & equipment rental.............        247           2,120(b)         (247)          2,120
Other operating expenses.................      4,793           5,288(b)       (4,793)          6,696
                                                                    (a)        1,408
Investment advisory fees.................      1,085              --(a)       (1,085)             --
Amortization of intangibles..............         --              --(c)       11,896          11,896
                                             -------         -------                       ---------
          Total expenses.................      9,816          34,416                          47,009
                                             -------         -------                       ---------
Operating income (loss)..................     (9,816)         15,327                           1,649
Other income (expense):
Net realized and unrealized gains from
  investments............................     24,466              --(b)      (24,466)             --
Interest income..........................      9,995             431(b)       (9,995)            431
Dividend income..........................      7,940              --(b)       (7,940)             --
Interest income
  (expense) -- intercompany..............      6,054          (6,054)                             --
Interest expense -- bank borrowing.......       (258)             --(b)          258              --
                                             -------         -------                       ---------
Income before taxes......................     38,381           9,704                           2,080
                                             -------         -------                       ---------
Income tax expense(f)....................         --           4,493(d)        1,965           6,458
                                             -------         -------                       ---------
  Net income (loss)......................    $38,381         $ 5,211                       $  (4,378)
                                             =======         =======                       =========
Net (loss) per share:
  Basic and diluted(e)...................                                                  $   (0.67)
                                                                                           =========
Weighted average shares
  outstanding -- basic and diluted(e)....                                                  6,504,852
                                                                                           =========
</TABLE>

---------------
(a) To adjust the advisory fee for the revenue earned by Levco for the
    management of the BKF public portfolio, record additional operating expenses
    to be borne by Levco which had been previously borne by BKF and the
    corresponding reduction in employee bonuses.

(b) To reverse the investment company specific income and expenses of BKF
    Capital Group, Inc. for the period.

(c) To record the amortization of the intangible assets using purchase
    accounting for the original acquisition of Levco by BKF.

(d) To record additional taxes for the pro forma adjustments.

(e) Basis of calculation reflects the reverse stock split (which was effectuated
    January 7, 2000).

(f) Reflects the accrual of incentive fees of ($204) and the related effect to
    employee compensation expense and provision for income taxes of ($121) and
    ($36), respectively.
                             See accompanying notes
                                       F-8
<PAGE>   30

                    BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

                   PRO FORMA CONSOLIDATED STATEMENT OF INCOME
              (DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
                                  (SEE NOTE 1)

<TABLE>
<CAPTION>
                                            BKF CAPITAL                                     PRO FORMA
                                            GROUP, INC.        LEVCO                       CONSOLIDATED
                                             YEAR ENDED      YEAR ENDED                     YEAR ENDED
                                            DECEMBER 31,    DECEMBER 31,     PRO FORMA     DECEMBER 31,
                                                1998            1998        ADJUSTMENTS        1998
                                            ------------    ------------    -----------    ------------
                                             (AUDITED)       (AUDITED)                     (UNAUDITED)
<S>                                         <C>             <C>             <C>            <C>
REVENUES:
Investment advisory fees..................    $    --         $36,168(a)       (1,509)      $  34,659
Incentive fees(f).........................         --           4,691                           4,691
Commission income -- net..................         --           1,395                           1,395
                                              -------         -------                       ---------
          Total revenues..................         --          42,254                          40,745
                                              -------         -------                       ---------
EXPENSES:
Employee compensation and benefits(f).....      1,448          22,833(b)       (1,448)         22,083
                                                                     (a)         (750)
Occupancy & equipment rental..............        342           1,614(b)         (342)          1,614
Other operating expenses..................      2,599           4,076(b)       (2,599)          5,484
                                                                     (a)        1,408
Investment advisory fees..................      1,509              --(a)       (1,509)             --
Amortization of intangibles...............         --              --(c)       11,896          11,896
                                              -------         -------                       ---------
          Total expenses..................      5,898          28,523                          41,077
                                              -------         -------                       ---------
Operating income (loss)...................     (5,898)         13,731                            (332)
Other income (expense):
Net realized and unrealized gains from
  investments.............................     59,208              --(b)      (59,208)             --
Interest income...........................      2,379             351(b)       (2,379)            351
Dividend income...........................     12,057              --(b)      (12,057)             --
Interest income
  (expense) -- intercompany...............      6,391          (6,391)                             --
Interest expense -- bank borrowing........       (339)             --(b)          339              --
                                              -------         -------                       ---------
Income before taxes.......................     73,798           7,691                              19
                                              -------         -------                       ---------
Income tax expense(f).....................         --           3,339(d)        1,943           5,282
                                              -------         -------                       ---------
  Net income (loss).......................    $73,798         $ 4,352                       $  (5,263)
                                              =======         =======                       =========
Net (loss) per share:
  Basic and diluted(e)....................                                                  $   (0.81)
                                                                                            =========
Weighted average shares
  outstanding -- basic and diluted(e).....                                                  6,504,852
                                                                                            =========
</TABLE>

---------------
(a) To adjust the advisory fee for the revenue earned by Levco for the
    management of the BKF public portfolio, record additional operating expenses
    to be borne by Levco which had been previously borne by BKF and the
    corresponding reduction in employee bonuses.

(b) To reverse the investment company specific income and expenses of BKF
    Capital Group, Inc. for the year.

(c) To record the amortization of the intangible assets using purchase
    accounting for the original acquisition of Levco by BKF.

(d) To record additional taxes for the pro forma adjustments.

(e) Basis of calculation reflects the reverse stock split (which was effectuated
    January 7, 2000).

(f) Reflects the accrual of incentive fees of ($160) and the related effect to
    employee compensation expense and provision for income taxes of ($134) and
    ($17), respectively.

                             See accompanying notes
                                       F-9
<PAGE>   31

                    BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

                PRO FORMA CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
                             (AMOUNTS IN THOUSANDS)
                                  (SEE NOTE 1)

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                2000       1999       1998
                                                              --------    -------    -------
<S>                                                           <C>         <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Pro forma net loss..........................................  $(51,299)   $(4,378)   $(5,263)
Adjustments to reconcile pro forma net loss to net cash
  provided by operations:
  Depreciation and amortization(a)..........................    61,773     12,654     12,266
  Compensation expense for vesting of restricted stock
     units..................................................    12,268         --         --
  Tax benefit related to employee compensation plans........        34         --         --
  Unrealized (gain) on marketable securities................      (133)        --         --
  Realized loss on investments..............................       108         --         --
  Changes in operating assets and liabilities:
     (Increase) in investment advisory fees receivable......   (15,392)    (2,702)    (1,407)
     (Increase) decrease in prepaid expenses and other
       current assets.......................................       (86)       113        372
     (Increase) in investments in affiliated investment
       partnerships.........................................    (4,227)    (2,750)      (664)
     (Increase) in investments in securities................    (2,489)        --         --
     (Increase) in deferred income taxes....................    (6,410)      (214)       (84)
     (Increase) decrease in other assets....................       209        542       (172)
     Increase (decrease) in accrued expenses................    (1,354)       426        913
     Increase in accrued bonuses............................    14,710      2,839        551
     Increase in other liabilities..........................       396         --         --
     Increase (decrease) in income taxes payable............      (228)       167       (812)
                                                              --------    -------    -------
Net cash provided by operating activities...................     7,880      6,697      5,700
                                                              --------    -------    -------
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed asset additions.......................................      (711)      (925)    (2,700)
Proceeds from sale of investments...........................       892         --         --
                                                              --------    -------    -------
Net cash provided by (used in) investing activities.........       181       (925)    (2,700)
                                                              --------    -------    -------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of loan principal...................................      (332)        --         --
Cash included in deemed contribution (distribution).........       178     (2,190)    (2,273)
                                                              --------    -------    -------
Net cash (used in) financing activities.....................      (154)    (2,190)    (2,273)
                                                              --------    -------    -------
Net increase in cash and cash equivalents...................     7,907      3,582        727
Cash and cash equivalents at the beginning of the period....    14,361     10,779     10,052
                                                              --------    -------    -------
Cash and cash equivalents at the end of the period..........  $ 22,268    $14,361    $10,779
                                                              ========    =======    =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest......................................  $    105    $    --    $    --
                                                              ========    =======    =======
Cash paid for taxes.........................................  $  5,998    $ 4,912    $ 4,208
                                                              ========    =======    =======
</TABLE>

---------------
(a) Includes cumulative effect of change in accounting principle in 2000.

                             See accompanying notes
                                       F-10
<PAGE>   32

                            BKF CAPITAL GROUP, INC.

                     STATEMENTS OF CASH FLOWS -- HISTORICAL
                                   (AUDITED)
                             (AMOUNTS IN THOUSANDS)
                                  (SEE NOTE 1)

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                          -----------------------------------
                                                           2000(A)      1999(B)      1998(B)
                                                          ---------    ---------    ---------
<S>                                                       <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase (decrease) in net assets resulting from
  operations............................................  $ (53,972)   $  38,381    $  73,798
Adjustments to reconcile net increase (decrease) in net
  assets resulting from operations to net cash provided
  by (used in) operating activities:
  Depreciation and amortization(c)......................     61,575           --           --
  Net realized and unrealized (gain) loss on
     investments........................................        268      (24,466)     (59,208)
  Compensation expense for vesting of restricted stock
     units..............................................     12,143           --           --
  Tax benefit related to employee compensation plans....         34           --           --
  Decrease in receivable for securities sold............         --          564          912
  (Increase) in investment advisory fees receivable.....    (16,251)          --           --
  Decrease in dividends and interest receivable.........         --          791        2,383
  (Increase) in prepaid expenses and other current
     assets.............................................       (114)          --           --
  (Increase) decrease other assets......................         67          378          (70)
  (Increase) in investments in affiliated investment
     partnerships.......................................     (7,343)          --           --
  (Increase) in investments in securities...............     (2,489)          --           --
  (Increase) in deferred income taxes...................     (6,708)          --           --
  Increase (decrease) in accrued expenses...............     (1,027)       1,913       (1,260)
  Increase in accrued bonuses...........................     23,319           --           --
  Increase in other liabilities.........................        396           --           --
  (Decrease) in income taxes payable....................     (1,220)          --           --
  (Decrease) in payable for investment management fee...         --         (117)          (8)
  (Decrease) in payable for securities purchased........         --           --       (6,502)
  Net amortization of discounts.........................         --         (414)        (505)
                                                          ---------    ---------    ---------
     Net cash provided by operating activities..........      8,678       17,030        9,540
                                                          ---------    ---------    ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of portfolio securities.....................         --     (247,686)    (421,722)
  Proceeds from sales of portfolio securities...........        599      887,074      502,012
  Net realized gain on financial futures transactions...         --           --          324
  Sales/maturities of money market securities, net......         --       24,794        4,767
  Fixed asset additions.................................       (562)          --           --
  Cash from previously unconsolidated subsidiary........     11,873           --           --
                                                          ---------    ---------    ---------
     Net cash provided by investing activities..........     11,910      664,182       85,381
                                                          ---------    ---------    ---------
</TABLE>

                             See accompanying notes
                                       F-11
<PAGE>   33

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                          -----------------------------------
                                                           2000(A)      1999(B)      1998(B)
                                                          ---------    ---------    ---------
<S>                                                       <C>          <C>          <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
  Dividends and capital gain distributions..............   (480,058)    (236,575)     (86,193)
  Repayment of bank borrowing...........................         --       (5,000)          --
  Payment of loan principal.............................       (250)          --           --
                                                          ---------    ---------    ---------
     Net cash (used in) financing activities............   (480,308)    (241,575)     (86,193)
                                                          ---------    ---------    ---------
Net increase (decrease) in cash and cash equivalents....   (459,720)     439,637        8,728
Cash and cash equivalents at the beginning of the
  period................................................    481,988       42,351       33,623
                                                          ---------    ---------    ---------
Cash and cash equivalents at the end of the period......  $  22,268    $ 481,988    $  42,351
                                                          =========    =========    =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest..................................  $      94    $      --    $      --
                                                          =========    =========    =========
Cash paid for taxes.....................................  $   5,049    $      --    $      --
                                                          =========    =========    =========
</TABLE>

---------------
(a) The cash flow represents the historical cash flows of BKF Capital Group,
    Inc. (the former registered investment company) for the period January 1,
    2000 to April 18, 2000 and the combined cash flows of the holding company
    for the period April 19, 2000 to December 31, 2000.

(b) Represents the historical cash flows of the Company operating as a
    registered investment company.

(c) Includes cumulative effect of change in accounting principle in 2000.

                             See accompanying notes
                                       F-12
<PAGE>   34

                    BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

    CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY -- HISTORICAL
                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
                                   (AUDITED)
                             (AMOUNTS IN THOUSANDS)
                                  (SEE NOTE 1)

<TABLE>
<CAPTION>
                                              COMMON       ADDITIONAL       RETAINED
                                              STOCK      PAID-IN CAPITAL    EARNINGS       TOTAL
                                             --------    ---------------    ---------    ---------
<S>                                          <C>         <C>                <C>          <C>
Balance at December 31, 1997...............  $ 35,983       $ 414,411       $ 333,323    $ 783,717
Dividend and capital gain distributions....        --              --         (86,193)     (86,193)
Reinvestment of capital gain
  distributions............................     3,046          49,015         (52,061)          --
Net income.................................        --              --          73,798       73,798
                                             --------       ---------       ---------    ---------
Balance at December 31, 1998...............    39,029         463,426         268,867      771,322
Dividend and capital gain distributions....        --              --        (236,575)    (236,575)
Net income.................................        --              --          38,381       38,381
                                             --------       ---------       ---------    ---------
Balance at December 31, 1999...............    39,029         463,426          70,673      573,128
Dividend, capital gain and return of
  capital distributions....................                  (445,868)        (34,190)    (480,058)
1 for 6 reverse stock split................   (32,524)         32,524              --           --
Baker Fentress & Company deemed
  contribution.............................        --             178              --          178
Consolidation of previously unconsolidated
  subsidiary...............................        --                          46,201       46,201
Grants of restricted stock units (note
  10)......................................        --          11,767              --       11,767
Issuance of common stock (note 10).........        14             166              --          180
Tax benefit related to employee
  compensation plans.......................        --              34              --           34
Net (loss).................................        --              --         (51,299)     (51,299)
                                             --------       ---------       ---------    ---------
Balance at December 31, 2000...............  $  6,519       $  62,227       $  31,385    $ 100,131
                                             ========       =========       =========    =========
</TABLE>

                             See accompanying notes
                                       F-13
<PAGE>   35

                    BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                  YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BASIS OF PRESENTATION

     BKF Capital Group, Inc. (formerly Baker, Fentress & Company, hereto
referred to as "BKF" or the "Company") operated under the Investment Company Act
of 1940 as a non-diversified closed-end management investment company. In August
1999, the Board of Directors and shareholders of BKF adopted and implemented a
Plan for Distribution of Assets ("Plan"), pursuant to which substantially all of
BKF's investment securities were sold. The cash proceeds, as well as shares of
Consolidated-Tomoka Land Company ("CTO"), were subsequently distributed to
shareholders by January 7, 2000. The Company received a deregistration order
from the Securities and Exchange Commission ("SEC") on April 18, 2000,
effectively completing its evolution from an investment company to a holding
company whose primary business now operates through a wholly owned subsidiary,
Levin Management Co., Inc. and its subsidiaries, all of which are referred to as
"Levco." As of April 2000, financial reporting of BKF and Levco is on a
consolidated basis. The Company trades on the New York Stock Exchange, Inc.
("NYSE") under the symbol "BKF".

     The Consolidated Financial Statements of Levco include its wholly owned
subsidiary, John A. Levin & Co., Inc. ("JALCO"), and JALCO's two wholly owned
subsidiaries, LEVCO GP Inc. ("LEVCO GP") and LEVCO Securities, Inc. ("LEVCO
Securities"). All intercompany transactions have been eliminated in
consolidation.

     JALCO is an investment advisor registered under the Investment Advisers Act
of 1940, as amended, which provides investment advisory services to its clients
which include U.S. and foreign corporations, mutual funds, limited partnerships,
universities, pension and profit sharing plans, individuals, trusts,
not-for-profit organizations and foundations. JALCO also participates in broker
consults programs (Wrap Accounts) with three nationally recognized financial
institutions. LEVCO Securities is registered with the SEC as a broker-dealer and
is a member of the National Association of Securities Dealers, Inc. LEVCO GP
acts as the general partner of seven affiliated investment partnerships and is
registered with the Commodities Futures Trading Commission as a commodity pool
operator.

     The BKF Consolidated Statement of Financial Condition at December 31, 1999,
reflects the historical accounting treatment of the Company as a registered
investment company with its investment in Levco carried at fair value.

     The pro forma adjustments to the Pro Forma Consolidated Statement of
Financial Condition at December 31, 1999 reflect the liquidation of
substantially all of the private and public portfolios of BKF, the distribution
of cash as well as shares of CTO, and the recasting of the June 1996 acquisition
of Levco using purchase accounting (thereby taking into account intangible
assets and amortization thereon).

     The Pro Forma Consolidated Statements of Income for each year in the three
year period ended December 31, 2000 present the historical results of BKF and
Levco giving effect to the following pro forma adjustments:

     - elimination of the intercompany investment management fee revenues
       resulting from the liquidation of the BKF public portfolio, which had
       been managed by Levco;

     - operating expenses attributable to operating a publicly traded company,
       which were previously borne by BKF;

     - reduction of Levco's 1999 and 1998 compensation expense based on the
       reduction of revenue and increase in expenses;

     - reversal of all investment company specific components of BKF revenue and
       expenses since the Company will have no ongoing operations other than
       that of Levco;

                                       F-14
<PAGE>   36
                    BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     - elimination of the intercompany interest expense due to the
       reclassification of the BKF loan to Levco's equity (which was effectuated
       in December 1999);

     - amortization expense on intangible assets based on the recasting of the
       June 1996 acquisition of Levco by BKF using the purchase method of
       accounting. This item is non-deductible for income tax purposes;

     - income tax effect of pro forma adjustments; and

     - the 1 to 6 reverse stock split effectuated on January 7, 2000

     The Pro Forma Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998 reflect the pro forma cash flows of the
combined companies as if BKF had received its deregistration order effective
January 1, 1998. BKF and Levco financial information is being presented on a
consolidated basis.

THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS ARE PRESENTED SINCE THEY ARE
MORE REPRESENTATIVE OF THE COMPANY'S OPERATIONS AFTER THE IMPLEMENTATION OF THE
PLAN.

     The pro forma financial statements do not necessarily represent the results
of operations or the financial position of the Company which actually would have
occurred had the proposed transaction been previously consummated or project the
results of operations or the financial position of the Company for any future
date or period. The SEC approved the application for deregistration of the
Company as a registered investment company on April 18, 2000. Therefore, the Pro
Forma Consolidated Statement of Income for the year ended December 31, 2000
reflects the non-recurring charge relating to the change in accounting method
for the cumulative effect of the amortization of intangible assets resulting
from recording the Levco transaction under purchase accounting.

     All numerical information presented in the notes to the consolidated
financial statements has been rounded to the nearest thousand dollars, unless
otherwise noted.

REVENUE RECOGNITION

     Generally, investment advisory fees are billed quarterly, in arrears, and
are based upon a percentage of the market value of each account at the end of
the quarter. Wrap account fees are billed quarterly based upon a percentage of
the market value of each account as of the previous calendar quarter end.
Incentive fees and general partner incentive allocations earned from affiliated
investment partnerships and incentive fees from other accounts are accrued on a
quarterly basis and are billed at the end of their respective contract year.

     Commissions and related clearing charges earned on securities transactions
executed by LEVCO Securities, and related expenses, are recorded on a trade-date
basis.

     In December 1999, the SEC issued Staff Accounting Bulletin ("SAB") No. 101,
"Revenue Recognition in Financial Statements." SAB No. 101 provides guidance on
applying generally accepted accounting principles to revenue recognition issues
in financial statements. The Company has adopted SAB No. 101 as required in the
first quarter of 2000. The adoption of SAB No. 101 has not had a material effect
on the Company's results of operations or financial position.

CASH AND CASH EQUIVALENTS

     The Company treats all highly liquid instruments with maturities at
acquisition of six months or less as cash equivalents. The Company maintained
substantially all of its cash and equivalents invested in interest bearing
instruments at two nationally recognized financial institutions to which the
Company is exposed to market and credit risk.

                                       F-15
<PAGE>   37
                    BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INVESTMENTS IN AFFILIATED INVESTMENT PARTNERSHIPS

     Investments in affiliated investment partnerships are held through LEVCO GP
and are recorded based upon the equity method of accounting. The investment
amount equals the sum of LEVCO GP's capital accounts in the partnerships. LEVCO
GP is also entitled to a special allocation of income from the applicable
affiliated investment partnerships based on their performance. Each of the
investment partnerships trade primarily in marketable equity securities.

INVESTMENTS IN SECURITIES

     Investments in securities consist primarily of equity securities and are
accounted for as "trading securities" and are stated at quoted market values.
The resulting unrealized gains and losses are included in net realized and
unrealized gain (loss) from investments. Realized gains and losses are recorded
on the identified cost basis. Dividend income is included in interest and
dividend income in the Pro Forma Consolidated Statements of Income.

INCOME TAXES

     The Company accounts for income taxes under the liability method prescribed
by Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes." Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to the differences between the financial statement
carrying amount of existing assets and liabilities and their respective tax
basis. Future tax benefits are recognized only to the extent that realization of
such benefits is more likely than not to occur.

     The Company intends to file consolidated federal, state and local income
tax returns. Prior to April 18, 2000, BKF was a Regulated Investment Company
("RIC"), which distributed all of its income. It generally was not subject to
income taxes and, therefore, no tax provision was previously recorded. Levco, an
operating company, is subject to federal, state and local taxes on income. The
Pro Forma Consolidated Statements of Income for the years ended December 31,
2000, 1999 and 1998 reflect a tax provision based upon the pro forma
consolidated results of operations.

USE OF ESTIMATES

     The preparation of the Consolidated Financial Statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the Consolidated Financial Statements and reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from those estimates.

LONG LIVED ASSETS

     Long-lived assets are accounted for in accordance with SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," which requires impairment losses to be recognized on long-lived
assets used in operations when indication of an impairment exists.

FIXED ASSETS

     Furniture, fixtures, office and computer equipment and leasehold
improvements are carried at cost less accumulated depreciation. Depreciation of
furniture, fixtures, office and computer equipment is provided over the
estimated useful lives of the respective assets. Leasehold improvements are
amortized over the shorter of the economic life or the term of the lease.

                                       F-16
<PAGE>   38
                    BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INTANGIBLE ASSETS

     The cost in excess of net assets of Levco acquired by BKF in June 1996 is
reflected as goodwill, employment contracts, and investment advisory contracts
in the Consolidated Statements of Financial Condition at December 31, 2000 and
1999. Goodwill is amortized straight line over 15 years and investment contracts
over 10 years. Employment contracts are amortized over the life of the contract.
Whereas the Pro Forma Consolidated Financial Statements reflect these intangible
assets under the purchase accounting method, the retroactive income effect of
recasting this transaction was recorded in 2000 as a one-time change in
accounting principle charge to income for all accumulated amortization from June
1996 through April 18, 2000.

EARNINGS PER SHARE

     The Company has not presented historical earnings per share due to the
significant changes in its operations, which are not reflected in the historical
financial statements. BKF, as a registered investment company, presented its net
asset value ("NAV") per share. The pro forma earnings per share are shown using
the actual BKF shares outstanding (adjusted for the 1 to 6 reverse stock split
effectuated in January 2000).

     The Company adopted SFAS No. 128, "Earnings Per Share" in the second
quarter of 2000. Pro forma basic earnings (loss) per share is calculated by
dividing pro forma net income (loss) by the weighted average number of common
shares outstanding during the year. Pro forma diluted earnings (loss) per share
is computed by dividing pro forma net income (loss) by the total of the weighted
average number of shares of common stock outstanding and common stock
equivalents. Diluted earnings (loss) per share is computed using the treasury
stock method. There were no common stock equivalents granted prior to January
2000.

     The following table sets forth the computation of basic and diluted
earnings (loss) per share (all amounts in thousands, except share and per share
data):

<TABLE>
<CAPTION>
                                                        YEAR ENDED DECEMBER 31,
                                                 --------------------------------------
                                                 PRO FORMA     PRO FORMA     PRO FORMA
                                                    2000          1999          1998
                                                 ----------    ----------    ----------
<S>                                              <C>           <C>           <C>
Income (loss) before cumulative effect of
  accounting change............................  $    2,075    $   (4,378)   $   (5,263)
                                                 ----------    ----------    ----------
Cumulative effect of accounting change.........     (53,374)           --            --
                                                 ----------    ----------    ----------
Net (loss).....................................  $  (51,299)   $   (4,378)   $   (5,263)
                                                 ==========    ==========    ==========
Basic weighted-average shares outstanding......   6,504,890     6,504,852     6,504,852
  Dilutive potential shares from stock options
     (see note 10).............................      44,999            --            --
                                                 ----------    ----------    ----------
Diluted weighted-average shares outstanding....   6,549,889     6,504,852     6,504,852
                                                 ==========    ==========    ==========
Basic (loss) per share:
  Income (loss) before cumulative effect of
     accounting change.........................  $     0.32    $    (0.67)   $    (0.81)
                                                 ----------    ----------    ----------
Cumulative effect of accounting change.........       (8.21)           --            --
                                                 ----------    ----------    ----------
Net (loss).....................................  $    (7.89)   $    (0.67)   $    (0.81)
                                                 ==========    ==========    ==========
Diluted (loss) per share:
  Income (loss) before cumulative effect of
     accounting change.........................  $     0.32    $    (0.67)   $    (0.81)
                                                 ----------    ----------    ----------
Cumulative effect of accounting change.........       (8.15)           --            --
                                                 ----------    ----------    ----------
Net (loss).....................................  $    (7.83)   $    (0.67)   $    (0.81)
                                                 ==========    ==========    ==========
</TABLE>

                                       F-17
<PAGE>   39
                    BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     In calculating diluted earnings (loss) per share for the year ended
December 31, 2000, 786,706 common stock equivalents were excluded due to their
antidilutive effect on the calculation.

COMPREHENSIVE INCOME

     The Company has not presented consolidated statements of comprehensive
income in accordance with SFAS No. 130, "Reporting Comprehensive Income,"
because it does not have any items of "other comprehensive income".

FAIR VALUES OF FINANCIAL INSTRUMENTS

     The carrying amount of all assets and liabilities, other than goodwill and
fixed assets, in the Consolidated Statements of Financial Condition approximate
their fair values.

BUSINESS SEGMENTS

     The Company has not presented business segment data, in accordance with
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," because it operates predominantly in one business segment, the
investment advisory and asset management business.

STOCK-BASED COMPENSATION

     The Company follows SFAS No. 123, "Accounting for Stock-Based
Compensation," and has adopted the intrinsic value method for all arrangements
under which employees receive shares of stock or other equity instruments of the
Company or if the Company incurs liabilities to employees in amounts based on
the price of its stock. Fair value disclosures are included in Note 10.

COSTS OF COMPUTER SOFTWARE DEVELOPED FOR INTERNAL USE

     In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 requires the
capitalization of certain costs incurred in connection with developing or
obtaining software for internal use. The Company adopted this standard in
January 2000. The adoption has not had a material effect on the Company's Pro
Forma results of operations and financial position.

RECLASSIFICATIONS

     Certain amounts in the 1999 and 1998 consolidated financial statements have
been reclassified to conform with current year classifications.

RECENT ACCOUNTING PRONOUNCEMENT

     In 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards for derivative instruments,
including certain derivatives embedded in other contracts and for hedging
activities. SFAS No. 133 generally requires an entity to recognize all
derivatives as either assets or liabilities in the consolidated statement of
financial condition and measure those investments at fair value. SFAS No. 133,
as amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133," and
SFAS No. 138, "Accounting for Certain Derivative and Certain Hedging Activities,
an amendment to FASB Statement No. 133," is required to be adopted for fiscal
years beginning after June 15, 2000. The Company will adopt the new standard
effective January 1, 2001 and does not anticipate that the adoption of the new
standard will have a significant impact on the consolidated results of
operations or financial position of the Company.

                                       F-18
<PAGE>   40
                    BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. OFF-BALANCE SHEET RISK

     LEVCO Securities acts as an introducing broker and all transactions for its
customers are cleared through and carried by a major U.S. securities firm on a
fully disclosed basis. LEVCO Securities has agreed to indemnify its clearing
broker for losses that the clearing broker may sustain from the customer
accounts introduced by LEVCO Securities. In the event a customer is unable to
fulfill its contractual obligation to the clearing broker, LEVCO Securities may
be exposed to off-balance sheet risk.

3. INVESTMENT ADVISORY FEES RECEIVABLE

     Included in investment advisory fees receivable is approximately $2,362,000
and $375,000 of accrued incentive fees as of December 31, 2000 and 1999,
respectively, for which the full contract measurement period has not been
reached. The Company has provided for the applicable expenses relating to this
revenue. If the accrued incentive fees are not ultimately realized, a
substantial portion of the related accrued expenses will be reversed.

4. SIGNIFICANT CUSTOMER

     The Company recorded revenue from one of its broker consults programs of
approximately $9.6 million and $5.1 million for the years ended December 31,
2000 and 1999, respectively.

5. RELATED PARTY TRANSACTIONS

TRANSACTIONS BETWEEN BKF AND LEVCO

     In June 1996, Levco borrowed $65 million under a term loan agreement (as
amended) with BKF. The loan bore interest at 10.25% per annum during 1999. The
loan was originally due on June 28, 1999 and was subsequently extended to
December 15, 1999 with an interest rate of LIBOR plus 3.5%. On December 15,
1999, Levco's loan due to BKF matured and BKF's Board of Directors approved the
reclassification of the loan to the capital of Levco on that date.

     In 1999 and 1998, Levco managed the publicly traded portion of BKF's
investment portfolio (see Note 1). Advisory fees earned from this relationship
for the years ended December 31, 1999 and 1998 were approximately $1.1 million
and $1.5 million, respectively. Subsequent to December 31, 1999, pursuant to
BKF's Plan and liquidation of its public portfolio, Levco ceased to receive any
advisory fees from BKF.

INVESTMENT ADVISORY FEES FROM RELATED PARTIES

     The Company earned investment advisory fees from accounts for which four
current members of the Company's Board of Directors (of which one is an Officer
of the Company) have controlling discretion. The amounts earned from these
accounts were $2.6 million, $2.3 million and $2.0 million for the years ended
December 31, 2000, 1999 and 1998, respectively.

INVESTMENTS IN AFFILIATED INVESTMENT PARTNERSHIPS AND RELATED REVENUE

     The Company earned investment advisory fees and general partner allocations
(inclusive of incentive fees) from affiliated domestic investment partnerships
and offshore investment vehicles of approximately $28.9 million, $12.2 million
and $5.2 million, primarily from two investment vehicles, for the years ended
December 31, 2000, 1999 and 1998, respectively.

     Included in investments in affiliated partnerships at December 31, 2000 and
1999 are approximately $9.2 million and $5.4 million, respectively, of incentive
allocations from affiliated investment partnerships. It is the Company's general
practice to withdraw the incentive allocations earned from the affiliated
investment partnerships within three months after the fiscal year. LEVCO GP has
general partner liability with respect to

                                       F-19
<PAGE>   41
                    BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

its interest in each of the affiliated investment partnerships and has no assets
other than its interest in these partnerships and certain cash and cash
equivalents which aggregate approximately $12.0 million and $7.7 million at
December 31, 2000 and 1999, respectively. Included in investment advisory fees
receivable are $13.0 million and $3.7 million of incentive fees from sponsored
offshore investment vehicles at December 31, 2000 and 1999, respectively.

COMMISSION REVENUES

     All commission revenues reflected on the Pro Forma Consolidated Statements
of Income have been generated by transactions introduced to a clearing broker by
LEVCO Securities, which acts as a broker for certain investment advisory
accounts of the Company. Commission revenues have been presented net of the
related clearing expenses.

6. STOCKHOLDERS' EQUITY

     The Company effectuated a 1 to 6 reverse stock split on January 7, 2000.
All share numbers and per share amounts in the Company's consolidated financial
statements reflect the reverse split.

7. COMMITMENT

     The Company has office space obligations that require monthly payments plus
escalations through January 2008. At December 31, 2000 the minimum annual rental
commitments under the operating lease are as follows:

<TABLE>
<S>                                                       <C>
2001....................................................  $ 1,403,000
2002....................................................    1,423,000
2003....................................................    1,483,000
2004....................................................    1,484,000
2005....................................................    1,484,000
2006 to January 2008....................................    3,095,000
                                                          -----------
Total minimum payments required.........................  $10,372,000
                                                          ===========
</TABLE>

     Rent expense was $1,142,000, $1,062,000 and $1,017,000, net of subrental
income of $264,000, $110,000 and $6,000, for the years ended December 31, 2000,
1999 and 1998, respectively. The subrental agreement expires on June 30, 2001.

8. NET CAPITAL REQUIREMENT

     LEVCO Securities is subject to the SEC's Uniform Net Capital Rule 15c3-1
("Rule"), which requires the maintenance of minimum net capital and requires
that the ratio of aggregate indebtedness to net capital, both as defined, shall
not exceed 15 to 1. At December 31, 2000 and 1999, LEVCO Securities was in
compliance with this Rule.

9. EMPLOYEE BENEFIT PLANS

     Levco has adopted a Section 401(k) plan. All employees with six months or
more of service are eligible to participate in the plan. Eligible participants
may contribute up to 15% of their earnings, subject to statutory limitations.
Levco may match employee contributions, up to 100%, subject to statutory
limitations. Included in employee compensation and benefits was $446,000,
$428,000 and $322,000 of the employee match contributions for the years ended
December 31, 2000, 1999, and 1998, respectively.

                                       F-20
<PAGE>   42
                    BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     As of January 1, 2000, the Company froze its target Benefit Plan (the
"Benefit Plan") which covered all employees who reached the age of 20.5 and had
completed nine months of service to the Company. Contributions were made by the
Company based on the employee's age and compensation. As of December 31, 1999
the Benefit Plan was fully funded and the Company had no further liability. The
Company incurred expenses of $299,000 and $264,000 for the years ended December
31, 1999 and 1998, respectively.

10. INCENTIVE COMPENSATION AND DEFERRED COMPENSATION PLANS

     In December 1998, the shareholders of BKF approved an Incentive
Compensation Plan ("Compensation Plan") that allows the Company to pay officers
and employees part of their compensation in restricted stock units ("RSU") and
other forms of equity-based compensation, including stock options. The original
number of shares of BKF common stock that may be issued under the Compensation
Plan was 650,000 shares, giving effect to the 1 to 6 reverse stock split
effectuated in January 2000. In April 2000, the Compensation Plan was amended to
increase the number of shares that may be issued to 1,300,000. At December 31,
2000, 186,205 shares are available for future grants.

A. RESTRICTED STOCK UNITS

     In January 2000, the Company issued 76,855 RSU's and 183,178 non-qualified
stock options (see Note 10B) to purchase BKF shares under the Compensation Plan
as a component of the 1999 year-end bonuses. Those employees electing to receive
RSU's and non-qualified options forfeited their rights to the cash equivalent
portion of their bonus in return for the RSU's and options received. In return,
these employees received an additional 20% of equity based on the amount
exchanged. Levco did not incur any compensation expense related to the
Compensation Plan in fiscal 1999.

     These RSU's vest over a two-year period ending December 31, 2001. The RSU's
require future services as a condition to the ultimate receipt of the underlying
shares of BKF common stock. The Company's policy is to expense these amounts
ratably over the required service period. The expense for the year ended
December 31, 2000 relating to the vesting of the RSU's was $500,000.

     In November 2000, the Company granted 443,976 RSU's to employees. The
common stock underlying the RSU's will be deliverable on the third anniversary
date of the grant, although the common stock may be deliverable earlier in the
event of a change in control, death or disability, or later if electively
deferred by employees under certain circumstances. While no additional services
will be required to obtain delivery of the underlying common stock (i.e., the
award is "vested"), delivery of the common stock may not be made if the grantee
engages in certain conduct, including being terminated for cause and violating
any policy of the Company or otherwise acting in a manner detrimental to the
Company (including violating noncompetition or nonsolicitation provisions of the
award).

     In addition, certain executive officers of the Company, who are subject to
performance based criteria with regard to their compensation, were granted
206,509 RSU's as of December 29, 2000 after meeting the predetermined
performance goals for the year ended December 31, 2000 (subject to the same
terms described above).

     Pursuant to APB Opinion No. 25 and because future service is not required
as a condition to the delivery of the underlying shares of common stock, the
Company recorded non cash compensation expense of approximately $11.8 million
during the quarter ended December 31, 2000 relating to the RSU's awarded in
November and December 2000. This expense is based on the average market price of
the Company's stock on the date of grant.

     In April 2000, the Company also adopted a Long Term Deferred Compensation
Plan to provide a competitive long term incentive for key officers and
employees. RSU's vesting in 2000 were eligible to be deferred into this plan. As
of December 31, 2000, 24,613 of vested RSU's were deferred pursuant to the plan.

                                       F-21
<PAGE>   43
                    BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
                                                    VESTED &                     VESTING
                                   RSU'S GRANTED    DELIVERED    VESTED     DECEMBER 31, 2001
                                   -------------    ---------    -------    -----------------
<S>                                <C>              <C>          <C>        <C>
January 2000.....................      76,855        13,813       24,613         38,429
November 2000....................     443,976            --      443,976             --
December 2000....................     206,509            --      206,509             --
                                      -------        ------      -------         ------
Total............................     727,340        13,813      675,098         38,429
                                      -------        ------      -------         ------
</TABLE>

B. NON-QUALIFIED STOCK OPTIONS

     With respect to the 183,178 non-qualified stock options issued in January
2000 (see Note 10A), the employee may purchase BKF shares at an exercise price
of $13.03125 (the average market price on the date of grant). These options are
exercisable in equal annual installments in December 2000 and December 2001
subject to satisfying employment conditions, with exceptions for termination due
to death, retirement or a change in control of the ownership of BKF. Once the
service requirements have been met, these options will remain outstanding and
exercisable until the tenth anniversary of the date of grant, subject to earlier
expiration upon termination of employment. On January 20, 2000, the Committee
granted an additional 130,098 non-qualified options that will expire in January
2010. These options also have an exercise price of $13.03125 and vest over one
to three years.

     In July 2000, the Committee granted 73,179 non-qualified stock options to
purchase BKF shares at a price of $15.875 (the average market price on the date
of grant). The options are exercisable in three equal installments commencing
July 2001 subject to satisfying employment conditions, with exceptions for
termination due to death, retirement or a change in control of the ownership of
BKF. Once the service requirements have been met, these options will remain
outstanding and exercisable until the tenth anniversary of the date of grant,
subject to earlier expiration upon termination of employment.

     The following table summarizes information about BKF stock options
outstanding at December 31, 2000:

<TABLE>
<CAPTION>
                                                           EXERCISABLE
NUMBER OF OPTIONS   EXERCISE PRICE   EXPIRATION DATE    NUMBER OF OPTIONS
-----------------   --------------   ----------------   -----------------
<S>                 <C>              <C>                <C>
     313,276            $13.03       January 20, 2010        178,316
      73,179            $15.88          June 30, 2010             --
     -------                                                 -------
     386,455                                                 178,316
     =======                                                 =======
</TABLE>

     At December 31, 2000, the weighted average exercise price and remaining
contractual life of options outstanding were $13.57 and 9.14 years,
respectively.

     Pursuant to SFAS No. 123 "Accounting for Stock-Based Compensation," the
Company has elected to account for its stock option plan under APB Opinion 25,
"Accounting for Stock Issued to Employees," and adopt the disclosure only
provisions for SFAS No. 123. Under APB Opinion 25, no compensation costs were
recognized relating to the option grants because the exercise price of the
options awarded was equal to the fair market price of the common stock on the
dates of the grants. Under SFAS No. 123, the net loss would have been increased
by $963,000 and the basic and diluted loss per share would have been increased
by $.15 for the year ended December 31, 2000.

                                       F-22
<PAGE>   44
                    BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The fair value of each option granted in 2000 was estimated using the
Black-Scholes option-pricing model with the following assumptions:

<TABLE>
<CAPTION>
                                                           JANUARY     JULY
                                                           -------    -------
<S>                                                        <C>        <C>
Expected dividend yield..................................    0.00%      0.00%
Expected volatility......................................   15.45%     19.37%
Risk-free interest.......................................    6.35%      6.07%
Expected term............................................  7 years    7 Years
Fair value...............................................    $4.97      $6.23
</TABLE>

11. NON CASH TRANSACTIONS

     In 1998 when the Company was operating as registered investment company,
$52.06 million of capital gain distributions were reinvested.

     During 2000, the Company financed a portion of its Directors and
Officers/Errors and Omissions insurance policy (premium $910,000). The financed
amount is payable in 30 equal monthly installments of approximately $32,000.

     The Company issued 13,813 shares of common stock in lieu of cash
compensation aggregating $180,000 during the year ended December 31, 2000.

12. INCOME TAXES

     Principally due to state and local taxes and non-deductible amortization,
the Company's provision (benefit) for income taxes differs from the amount of
income tax determined by applying the applicable U.S. federal statutory income
tax rate. The Company has determined that the amortization expense on intangible
assets is non-deductible since the purchase method of accounting has been
retroactively applied to June 1996.

     Deferred tax assets arise from the future tax benefit on deferred and non
cash compensation, and utilization of realized capital losses. Deferred tax
liabilities arise from deferred revenues, unrealized gains on investments, and
state and local taxes.

     The provision (benefit) for income taxes consists of the following:

<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                                     -----------------------------------
                                                     PRO FORMA    PRO FORMA    PRO FORMA
                                                       2000         1999         1998
                                                     ---------    ---------    ---------
<S>                                                  <C>          <C>          <C>
Current:
  Federal..........................................   $ 3,322      $4,952       $3,908
  State and local..................................     2,423       1,720        1,458
                                                      -------      ------       ------
Total current......................................     5,745       6,672        5,366
                                                      -------      ------       ------
Deferred:
  Federal..........................................    (4,667)       (161)         (63)
  State and local..................................    (1,743)        (53)         (21)
                                                      -------      ------       ------
Total deferred.....................................    (6,410)       (214)         (84)
                                                      -------      ------       ------
Total provision (benefit)..........................   $  (665)     $6,458       $5,282
                                                      =======      ======       ======
</TABLE>

                                       F-23
<PAGE>   45
                    BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities, shown net in the deferred tax
asset on the Consolidated Statements of Financial Condition, consists of the
following:

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                              ------------------------
                                                              PRO FORMA     PRO FORMA
                                                                 2000          1999
                                                              ----------    ----------
<S>                                                           <C>           <C>
Deferred tax asset:
  Compensation..............................................   $ 6,252        $ 183
  Capital loss..............................................     3,007           --
  Depreciation..............................................        55           --
  Unrealized losses on investments..........................        --          290
                                                               -------        -----
Gross deferred tax asset....................................     9,314          473
                                                               -------        -----
Deferred tax liabilities:
  Deferred state income taxes...............................      (610)          --
  Deferred revenues.........................................    (1,179)        (175)
  Unrealized gains on investments...........................      (815)          --
                                                               -------        -----
Gross deferred tax liability................................    (2,605)        (175)
                                                               -------        -----
Net deferred tax asset......................................   $ 6,708        $ 298
                                                               =======        =====
</TABLE>

     A reconciliation of income tax expense (benefit) with expected federal
income tax expense (benefit) computed at the applicable federal tax rate of 35%
is as follows:

<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                                     -----------------------------------
                                                     PRO FORMA    PRO FORMA    PRO FORMA
                                                       2000         1999         1998
                                                     ---------    ---------    ---------
<S>                                                  <C>          <C>          <C>
Expected income tax expense (benefit)..............   $   494      $  728       $    7
Increase in income tax resulting from:
  State and local taxes, net.......................       442       1,084          934
  Non-deductible amortization(1)...................     2,661       4,164        4,164
  Other............................................        --         482          177
Decrease in income tax resulting from:
  Effect of capital loss recognition(2)............    (4,262)         --           --
                                                      -------      ------       ------
Income tax expense (benefit).......................   $  (665)     $6,458       $5,282
                                                      =======      ======       ======
</TABLE>

---------------
(1) The difference between 2000 and prior years presented is attributable to the
    effect of the accounting change discussed in Note 1.

(2) Primarily, the effect of the recognition of a capital loss related to
    certain private portfolio investments held by BKF when it operated as an
    investment company.

                                       F-24
<PAGE>   46
                    BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following table sets forth selected quarterly financial data (all
amounts in thousands, except share and per share data):

<TABLE>
<CAPTION>
                                    PRO FORMA                                           PRO FORMA
2000                                   Q1           Q2           Q3           Q4          TOTAL
----                                ---------    ---------    ---------    ---------    ---------
<S>                                 <C>          <C>          <C>          <C>          <C>
Revenues..........................  $  15,273    $  16,906    $  18,865    $  25,992    $  77,036
Operating income (loss)...........      4,732        2,240           73       (6,657)         388
Income (loss) before cumulative
  effect of accounting change.....      2,467          262         (807)         153        2,075
Cumulative effect of accounting
  change..........................         --      (53,374)          --           --      (53,374)
Net income (loss).................  $   2,467    $ (53,112)   $    (807)   $     153    $ (51,299)
Earnings (loss) per share:
  Basic:
     Income (loss) before
       cumulative effect of
       accounting change..........  $    0.38    $    0.04    $   (0.12)   $    0.02    $    0.32
     Cumulative effect of
       accounting change..........         --        (8.21)          --           --        (8.21)
     Net income (loss)............  $    0.38    $   (8.17)   $   (0.12)   $    0.02    $   (7.89)
Diluted:
  Income (loss) before cumulative
     effect of accounting
     change.......................  $    0.38    $    0.04    $   (0.12)   $    0.02    $    0.32
  Cumulative effect of accounting
     change.......................         --        (8.21)          --           --        (8.15)
  Net income (loss)...............  $    0.38    $   (8.17)   $   (0.12)   $    0.02    $   (7.83)
Weighted average shares
  outstanding:
  Basic...........................  6,504,852    6,504,852    6,504,852    6,505,002    6,504,890
                                    =========    =========    =========    =========    =========
  Diluted.........................  6,504,852    6,504,852    6,504,852    6,589,593    6,549,889
                                    =========    =========    =========    =========    =========
Common stock price per share(1):
  High............................  $   14.44    $   15.88    $   23.31    $   19.38
  Low.............................  $   10.00    $   11.88    $   15.56    $   16.00
  Close...........................  $   12.06    $   15.88    $   19.50    $   18.25
</TABLE>

<TABLE>
<CAPTION>
                                    PRO FORMA    PRO FORMA    PRO FORMA    PRO FORMA    PRO FORMA
1999                                   Q1           Q2           Q3           Q4          TOTAL
----                                ---------    ---------    ---------    ---------    ---------
<S>                                 <C>          <C>          <C>          <C>          <C>
Revenue...........................  $  11,405    $  12,596    $  12,265    $  12,392    $  48,658
Operating income (loss)...........        569        1,003          802         (725)       1,649
Net (loss)........................  $  (1,028)   $    (795)   $    (865)   $  (1,690)   $  (4,378)
(Loss) per share:
  Basic:..........................  $   (0.16)   $   (0.12)   $   (0.13)   $   (0.26)   $   (0.67)
  Diluted:........................  $   (0.16)   $   (0.12)   $   (0.13)   $   (0.26)   $   (0.67)
Weighted average shares
  outstanding:
  Basic and Diluted...............  6,504,852    6,504,852    6,504,852    6,504,852    6,504,852
                                    =========    =========    =========    =========    =========
Common stock price per share(1)
</TABLE>

                                       F-25
<PAGE>   47
                    BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
                                    PRO FORMA    PRO FORMA    PRO FORMA    PRO FORMA    PRO FORMA
1998                                   Q1           Q2           Q3           Q4          TOTAL
----                                ---------    ---------    ---------    ---------    ---------
<S>                                 <C>          <C>          <C>          <C>          <C>
Revenue...........................  $   9,976    $  10,388    $   9,416    $  10,965    $  40,745
Operating income (loss)...........        690          405       (1,229)        (198)        (332)
Net (loss)........................  $    (891)   $  (1,062)   $  (1,949)   $  (1,361)   $  (5,263)
(Loss) per share:
  Basic:..........................  $   (0.14)   $   (0.16)   $   (0.30)   $   (0.21)   $   (0.81)
  Diluted:........................  $   (0.14)   $   (0.16)   $   (0.30)   $   (0.21)   $   (0.81)
Weighted average shares
  outstanding:
  Basic and Diluted...............  6,504,852    6,504,852    6,504,852    6,504,852    6,504,852
                                    =========    =========    =========    =========    =========
Common stock price per share(1)
</TABLE>

---------------
(1) The public market for the Company's common stock prior to January 7, 2000
    was based on the Company's net assets and operations as a closed-end
    investment company. For this reason, the stock prices before and after
    January 7, 2000 are not comparable.

                                       F-26
<PAGE>   48

                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<C>       <S>
  4.1     Specimen of Common Stock Certificate
 10.1     Lease dated December 20, 1993 between Rockefeller Center
          Properties and John A. Levin & Co., Inc. (including the
          second, third and fourth amendments thereto).
 10.2     Employment Agreement dated June 28, 1996 between John A.
          Levin, BKF Capital Group, Inc. and Levin Management Co.,
          Inc.
 10.3     Employment Agreement dated December 31, 1999 between Gregory
          T. Rogers, BKF Capital Group, Inc. and Levin Management Co.,
          Inc.
 21.1     Subsidiaries of Registrant
 23.1     Consent of Ernst & Young LLP
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.1
<SEQUENCE>2
<FILENAME>y47045ex4-1.txt
<DESCRIPTION>SPECIMEN OF COMMON STOCK CERTIFICATE
<TEXT>

<PAGE>   1
            COMMON STOCK                                            COMMON STOCK

            THIS CERTIFICATE IS TRANSFERABLE IN                       SHARES
 NUMBER     THE CITY OF NEW YORK OR IN RIDGEFIELD
            PARK, NJ

                                  [GRAPHIC OF STATUE OF LIBERTY]


            INCORPORATED UNDER THE LAWS                      CUSIP 05548G 10 2
             OF THE STATE OF DELAWARE                        SEE REVERSE FOR
                                                             CERTAIN DEFINITIONS


                                      BKF CAPITAL GROUP, INC.

            THIS CERTIFIES THAT


                                             SPECIMEN


            IS THE OWNER OF

  SHARES, FULLY PAID AND NON-ASSESSABLE, OF THE COMMON STOCK, $1 PAR VALUE, OF

                                       CERTIFICATE OF STOCK

            BKF Capital Group, Inc., a Delaware Corporation, transferable on
            the books of the Company in person or by duly authorized attorney
[BKF        upon surrender of this certificate properly endorsed.
CAPITAL
GROUP            This certificate shall not be valid unless countersigned by the
SEAL]       Transfer Agent and registered by the Registrar.

                 Witness the seal of the Company and the signatures of its duly
            authorized officers.

            Dated:

             COUNTERSIGNED AND REGISTERED:
               CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
                    (RIDGEFIELD PARK, NJ)

                 TRANSFER AGENT AND REGISTRAR

            BY
[DELAWARE CAPITAL GROUP INC. SEAL]
                                         /s/                   /s/
                 AUTHORIZED SIGNATURE      SECRETARY               PRESIDENT
<PAGE>   2
     The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:


     TEN COM - as tenants in common  UNIF GIFT MIN ACT-       Custodian
     TEN ENT - as tenants by the                        ------          ------
               entireties                               (Cust)         (Minor)
     JT TEN  - as joint tenants with                    under Uniform Gifts to
               right of survivorship                    Minors Act
               and not as tenants in
               common                                       ---------------
                                                                (State)


    Additional abbreviations may also be used though not in the above list.

For value received,                    hereby sell, assign and transfer unto
                    ------------------

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
[                                    ]

-------------------------------------------------------------------------------
   (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF
    ASSIGNEE)

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                                                                          shares
-------------------------------------------------------------------------
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint

                                                                        Attorney
-----------------------------------------------------------------------
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.

Dated
      ---------------------

                              --------------------------------------------------
                              NOTICE: The signature to this assignment must
                                      correspond with the name as written upon
                                      the face of the certificate in every
                                      particular, without alteration or
                                      enlargement or any change whatever.


                               -------------------------------------------------
                               THE SIGNATURE(S) TO THIS ASSIGNMENT SHOULD BE
                               GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
                               (BANKS, STOCKBROKERS, SAVINGS AND LOAN
                               ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
                               AN APPROVED SIGNATURE GUARANTEE MEDALLION
                               PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>y47045ex10-1.txt
<DESCRIPTION>LEASE DATED 12/20/93
<TEXT>

<PAGE>   1

Lease No.

                         ROCKEFELLER CENTER PROPERTIES,

                                                     Landlord,

                                       TO

                            JOHN A. LEVIN & CO., INC.

                                                       Tenant.

                                   ----------

                                      Lease

                             Dated December 20, 1993

                                   ----------

                              One Rockefeller Plaza           Building

                          ROCKEFELLER CENTER PROPERTIES
                           1230 AVENUE OF THE AMERICAS
                              NEW YORK. N.Y. 10020

<PAGE>   2

                                TABLE OF CONTENTS

Demise of Premises, Term and Rent .........................................    1

Completion and Occupancy ..................................................    2

Use of Premises ...........................................................    3

Fixtures ..................................................................    4

Electric Current and Water ................................................    5

Various Covenants .........................................................    6

Assignment, Mortgaging, Subletting, etc ...................................    9

Changes or Alterations by Landlord ........................................   13

Damage by Fire, etc .......................................................   14

Condemnation ..............................................................   15

Compliance with Laws ......................................................   16

Accidents to Sanitary and other Systems ...................................   17

Subordination .............................................................   17

Notices ...................................................................   19

Conditions of Limitation ..................................................   19

Re-entry by Landlord ......................................................   20

Damages ...................................................................   21

Waivers by Tenant .........................................................   22

Tenant's Removal ..........................................................   22

Elevators, Cleaning, Services, etc ........................................   22

Lease Contains All Agreements-No Waivers ..................................   24

Parties Bound; Exculpation ................................................   24

Curing Tenant's Defaults-Additional Rents .................................   25

Adjustments for Changes in Landlord's Costs and Expenses ..................   26

Miscellaneous .............................................................   30

Security ..................................................................   32

<PAGE>   3

Brokerage Commission ......................................................   33

Quiet Enjoyment ...........................................................   33

Hazardous Substances ......................................................   33

Work by Tenant ............................................................   34

Sprinklers ................................................................   35

Asbestos Removal by Tenant ................................................   36

Termination by Tenant .....................................................   37

Extra Space ...............................................................   37

Assignment of Lease .......................................................   38

<PAGE>   4

RCP-L(1/92)
GTS:VL

                                                                          [LOGO]

      Lease, dated December 20, 1993, between ROCKEFELLER CENTER PROPERTIES, a
partnership, having an office at 1230 Avenue of the Americas, New York, N.Y.
10020 (the "Landlord"), and JOHN A. LEVIN & CO., INC., a Delaware corporation,
having an office at One Rockefeller Plaza, New York, N.Y. 10020 (the "Tenant"),

                                   Witnesseth:

                                   ARTICLE ONE
                        Demise of Premises, Term and Rent

      1.1. The Landlord does hereby lease and demise to the Tenant, and the
Tenant does hereby hire and take from the Landlord, subject and subordinate to
the Qualified Encumbrances (as hereinafter defined) and upon and subject to the
provisions of this Lease, for the term hereinafter stated, the space(s)
substantially as shown hatched on the diagram(s) attached hereto as Exhibit A
and designated as 'A' on the 25th Floor of the building known as One Rockefeller
Plaza (the "Building"), situated upon a plot of land (the "Land"), and
comprising a part of Rockefeller Center (the "Center"), in the Borough of
Manhattan, New York, N.Y., together with all fixtures, equipment, improvements,
installations and appurtenances which at the commencement of or during the term
of this Lease are thereto attached (except items not deemed to be included
therein and removable by the Tenant as provided in Article Four); which
space(s), fixtures, equipment, improvements, installations and appurtenances are
sometimes called the "Premises".

      1.2. The term of this Lease shall commence on October 1, 1994 (subject to
Article Two, such date for the commencement of the term of this Lease being the
"term commencement date") and shall end on September 30, 2004 or on such earlier
date upon which the term may expire or be terminated pursuant to any of the
conditions of limitation or other provisions of this Lease or pursuant to law.

      1.3. The Premises may be used for the following, but no other, purposes,
namely: executive, administrative, general, sales and clerical offices of a
corporation or other entity engaged in investment management and related
activities or for any other business or businesses which are not prejudicial to
the reputation of, or reflect unfavorably on, the Center so as to detract from
it as a location for an outstanding type of business occupancy, including
activities incidental thereto.

      1.4. The rent reserved under this Lease for the term of this Lease shall
consist of (a) fixed rent, at the following rate(s), namely: $526,008.00 per
annum commencing on the term commencement date and ending on September 30, 1999;
and $593,880.00 per annum thereafter payable in equal monthly installments in
advance on the first day of each and every calendar month of the term of this
Lease for which fixed rent is reserved as aforesaid (except that, if the term
commencement date shall be other than the first day of a calendar month, the
first monthly installment of fixed rent, apportioned for the part month in
question, shall be payable on the term commencement date and except that the
Tenant shall pay, upon the execution of this Lease by the Tenant, $43,834.00 to
be applied against the first installment or installments of fixed rent coming
due hereunder), plus (b) the additional rent payable as provided in this Lease;
all to be paid to

<PAGE>   5
                                       2


the Landlord, at its office as set forth above, or at such other place or places
as the Landlord shall designate to the Tenant, in lawful money of the United
States of America; provided, however, that, notwithstanding the foregoing, the
fixed rent payable hereunder shall be abated in the aggregate amount of
$743,706.00, which said abatement shall be applicable to the first installment
or installments of fixed rent becoming due hereunder.

      1.5 The Tenant shall pay the fixed rent and additional rent (collectively
"Rent") as and when the same shall become due and payable as provided in this
Lease, without demand therefor, and without any setoff or deduction whatsoever
except as expressly otherwise provided herein, and keep, observe and perform,
and permit no violation of, each and every provision contained in this Lease on
the part of the Tenant to be kept, observed and performed.

      1.6 In determining the rentable area and, where applicable, the useable
area of any building in the Center or any portion thereof pursuant to any
provision of this Lease, the rentable area or useable area of such building or
such portion, as the case may be, shall be the rentable area or useable area
thereof in square feet determined in accordance with the Standard Method of
Floor Measurement for Office Buildings approved by The Real Estate Board of New
York, Inc., which became effective on January 1, 1987, assuming a 20% loss
factor from rentable to useable. The parties agree that as of the date hereof
the Premises contain 16,968 rentable square feet.

      1.7 The term "Qualified Encumbrances" means (a) matters of record
affecting the Premises, Building or Land on the date of this Lease or hereafter
approved by the Tenant, which approval shall not be unreasonably withheld, (b)
the underlying mortgages and underlying leases to which this Lease is
subordinate pursuant to Article Thirteen, (c) any declaration of restrictions or
other document in respect of the transfer of use of development rights, (d) any
declaration or other document which subjects all or any portion of the Land
and/or the Building to a condominium regime, and (e) any preservation or similar
easement, declaration or agreement containing covenants, restrictions or
agreements in respect of the maintenance of the Building and/or the Land as a
landmark site with or held by a governmental agency or an entity designated or
accepted by a governmental agency (each, a "Preservation Agreement").

                                   ARTICLE TWO
                            Completion and Occupancy

      2.1. The Tenant has examined and shall accept the Premises in their
existing condition and state of repair and understands that no work is to be
performed by the Landlord in connection therewith except the work the Landlord
is required to do by the terms of this Lease. The Landlord, either through its
own employees or through a contractor or contractors to be engaged by it for
such purpose, will proceed with due dispatch, subject to delay by causes beyond
its reasonable control, Tenant Delay (as hereinafter defined) and the failure of
any present occupant of the Premises to vacate and surrender the same, to do all
of the work during regular working hours and will exercise all reasonable
efforts to complete all of such work not later than the specific date
hereinabove designated for the commencement of the term of this Lease. If the
Landlord is required by this Lease to do any such work without expense to the
Tenant and the cost of such work is increased due to any Tenant Delay, the
Tenant shall pay to the Landlord an amount equal to such increase in cost.

      2.2. Unless otherwise specifically provided in this Lease, if any of the
space demised hereunder and constituting the Premises shall not be available for
possession by the Tenant on the specific date hereinabove designated for the
commencement of the term with respect to such space for any reason, including,
without limitation, the continued occupancy in a portion of the Premises by a
current subtenant thereof, then this Lease shall not be affected thereby but, in
such case, the term commencement date with respect to such space only shall be
postponed until the date when such space shall be available for possession by
the Tenant, provided, that there shall be no such postponement of the term
commencement date with respect to any portion of the Premises the Landlord shall
deliver possession of to the Tenant or for any delay in the availability of any
space in the Premises for possession by the Tenant which shall be due to (a) any
act or omission of the Tenant, any affiliate thereof or their respective agents,
officers, partners, directors, contractors, employees, licensees or invitees,
including,

<PAGE>   6
                                       3


without limitation, delays due to changes in or additions to any work to be done
by the Landlord or delays in submission of information, approving working
drawings or estimates or giving authorizations or approvals ("Tenant Delay"), or
(b) the noncompletion by the Landlord of any work, whether in connection with
the layout or finish of any space in the Premises or otherwise, which the
Landlord is not required to do by the terms of this Lease until after the term
commencement date; it being understood that the Tenant shall have no claim
against the Landlord, and the Landlord shall have no liability to the Tenant, by
reason of any such postponement of said specific date. No part of the Premises
shall be deemed unavailable for possession by the Tenant, nor shall any work
which the Landlord is obligated to perform in such part of the Premises be
deemed incomplete for the purpose of any adjustment of fixed rent payable under
this Lease, solely due to the noncompletion of details of construction,
decoration or mechanical adjustments which are minor in character and the
noncompletion of which does not materially interfere with the Tenant's use of
such part of the Premises. Subject to the foregoing, the parties to this Lease
expressly provide that, if any of the space demised hereunder and constituting
the Premises is not available for possession by the Tenant on the specific date
hereinabove designated for the commencement of the term with respect to such
space, the Tenant, except with the consent of the Landlord, shall not be
entitled to possession of such space until the same is delivered to the Tenant
by the Landlord and there shall be no abatement of rent by reason thereof, and
the Tenant shall not have any claim against the Landlord nor any right to
rescind this Lease, and the Landlord shall have no liability to the Tenant, by
reason thereof The foregoing Section 2.2 shall constitute "an express provision
to the contrary" as such phrase is used in Section 223-a of the Real Property
Law of the State of New York and shall constitute a waiver of the Tenant's
rights pursuant to such Section 223-a and any other law of like import now or
hereafter in force.

      2.3. The Tenant by taking possession of any part of the Premises shall be
conclusively deemed to have agreed that the Landlord, up to the time of such
possession, had performed all of its obligations under this Lease with respect
to such part and that such part, except for latent defects and except for minor
details of construction, decoration and mechanical adjustment referred to above,
was in satisfactory condition as of the date of such possession.

                                  ARTICLE THREE
                                 Use of Premises

      3.1. The Tenant shall not, except with the prior consent of the Landlord,
use, or suffer or permit the use of, the Premises or any part thereof for any
purpose other than the uses permitted in Article One, provided, that the
portions, if any, of the Premises which are identified as toilets or utility
areas shall be used by the Tenant only for the purposes for which they are
designed and the portions, if any, of the Premises which are identified as
storage areas shall be used only for storage purposes.

      3.2. The Tenant shall not use, or suffer or permit the use of, the
Premises or any part thereof in any manner or for any purpose or do, bring or
keep anything, or suffer or permit anything to be done, brought or kept, therein
(including, without limitation, the installation or operation of any electrical,
electronic or other equipment) which (i) would violate any provision of this
Lease or is unlawful or in contravention of the Certificate of Occupancy for the
Building, or (ii) in the reasonable judgment of the Landlord may in any way
impair or interfere with any of the Building services or the proper and economic
heating, air conditioning, cleaning or other servicing of the Building or the
Premises or impair or interfere with the use of any of the other areas of the
Building by, or occasion discomfort, inconvenience or annoyance to, any other
tenant of the Building or the Center or impair the appearance of the Building;
nor shall the Tenant use, or suffer or permit the use of, the Premises or any
part thereof in any manner, or do, or suffer or permit the doing of, anything
therein or in connection with the Tenant's business or advertising which, in the
reasonable judgment of the Landlord, may be prejudicial to the business of the
Landlord or the reputation of the Landlord, the Building or the Center or
reflect unfavorably on the Landlord, the Building or the Center or confuse or
mislead the public as to any connection or relationship between the Landlord and
the Tenant.

<PAGE>   7
                                       4


      3.3. Unless otherwise specifically provided in this Lease, the Tenant will
not use, or suffer or permit the use of, the Premises or any part thereof for
any of the following purposes, whether or not incidental to the Tenant's
business, namely: (a) manufacturing of any kind, (b) broadcasting or the
business of broadcasting by wire or wireless of any programs or pictures of any
sort, or for the sale of apparatus or devices connected with the business of
such broadcasting, (c) the retail sale of any item whatsoever, (d) an auction of
any kind, or (e) the preparation, dispensation or consumption of food or
beverages, except, that parts of the Premises may be used as a pantry and
lunchroom for employees of the Tenant and for the installation and operation of
food and beverage vending machines upon the condition in each case that (1) no
cooking or other preparation of food (other than the preparation of beverages
and heating of prepared food) shall be done in the Premises, (2) no food or
beverages will be kept or served in the Premises in a manner or under any
conditions which shall be the occasion for fumes or odors being emitted from, or
detectable outside of, the Premises, (3) such parts of the Premises shall be at
all times maintained by the Tenant in a clean and sanitary condition and free of
refuse (including use of extermination services whenever required), and (4) the
Tenant will keep the plumbing and sanitary systems and installations serving
such parts of the Premises to the points they connect with the main vertical
risers and stacks of the Building in a good state of repair and operating
condition.

      3.4. If any governmental license or permit shall be required for the
proper and lawful conduct of any business or other activity carried on in the
Premises and, if the failure to secure such license or permit would, in any way,
affect the Landlord, the Tenant shall promptly procure and thereafter maintain
such license or permit, submit the same to inspection by the Landlord, and
comply with the terms and conditions thereof.

      3.5. Neither the Tenant nor any occupant of the Premises shall use the
words "Rockefeller", "Center" or "Radio City", or any combination or simulation
thereof, for any purpose whatsoever, including (but not limited to) as or for
any corporate, firm or trade name, trademark or designation or description of
merchandise or services, except that the foregoing shall not prevent the use, in
a conventional manner and without emphasis or display, of the words "Rockefeller
Center" and/or, where applicable, "Rockefeller Plaza" as part of the Tenant's
business address. Neither the Tenant nor any occupant of the Premises shall use
the name of the Building or the name of the entity for which the Building is
named or any part or abbreviation (including initials) of either such name
except that the foregoing shall not prevent the use of the name of the Building
or any part thereof, in a conventional manner and without emphasis or display,
as a part of the Tenant's or such occupant's business address or by reference in
the ordinary course of its business.

                                  ARTICLE FOUR
                                    Fixtures

      4.1. All fixtures, equipment, improvements and installations ("Fixtures")
attached to, or built into, the Premises at the commencement of or during the
term of this Lease, whether or not installed at the expense of the Tenant or by
the Tenant, shall be and remain part of the Premises and be deemed the property
of the Landlord and shall not be removed by the Tenant except as otherwise
expressly provided in this Lease. All electric, plumbing, heating, sprinkling,
dumbwaiter, elevator, fixtures and outlets, venetian blinds, partitions,
railings, gates, doors, vaults, stairs, paneling (including display cases and
cupboards recessed in paneling), molding, shelving, radiator enclosures, floors,
and ventilating, silencing, air conditioning and cooling equipment shall be
deemed to be included in Fixtures, whether or not attached to or built into the
Premises. Notwithstanding the foregoing, Tenant shall (i) close up any slab
penetration in the Premises made by or on behalf of the Tenant and (ii) remove
from the Building all Fixtures furnished and installed in any part of the
Premises by or on behalf of the Tenant (whether or not attached thereto or built
therein) at the sole expense of the Tenant (and with respect to which no credit
or allowance shall have been granted to the Tenant by the Landlord), as well as
any safes, vault areas, lead-lined rooms, conveyors, pneumatic tubes, internal
elevators, and mechanical and electrical rooms and telephone switchrooms
furnished or installed by or on behalf of the Tenant and the equipment therein;
provided that the Tenant shall not be required to remove Fixtures furnished and
installed in replacement of an item for which Tenant neither paid nor received a
credit or allowance. All such closing and removal shall be performed not later
than the expiration or termination of the Lease and shall be performed subject
to the provisions of this

<PAGE>   8
                                       5


Lease, including, without limitation, subsection (e) of Article Six. The Tenant
shall repair any damage to the Premises arising from such closing and removal
described in the preceding sentence. The cost of repairing any damage to the
Premises or the Building arising from such closing and removal described in the
preceding sentences shall be paid by the Tenant upon demand. If any Fixture
which as aforesaid may or is required to be removed by the Tenant is not so
removed within the time above specified therefor, then the Landlord may at its
election deem that the same has been abandoned by the Tenant to the Landlord,
but no such election shall relieve the Tenant of its obligation to pay the cost
and expense of removing the same or the cost of repairing damage arising from
such removal. Notwithstanding the foregoing, the Landlord may, by notice to the
Tenant, prohibit the closing of any slab penetration not theretofor closed and
the removal of any or all items the Tenant is required to remove pursuant to
this Section 4.1 but has not theretofor removed.

      4.2. All the perimeter walls of the Premises, any balconies, terraces or
roofs adjacent to the Premises (including any flagpoles or other installations
on said walls, balconies, terraces or roofs), and any space in and/or adjacent
to the Premises used for shafts, stairways, stacks, pipes, conduits, ducts, mail
chutes, conveyors, electric or other utilities, sinks, fans or other Building
and Center facilities, and the use thereof, as well as access thereto through
the Premises (at and for such times as shall not unreasonably interfere with the
Tenant's business) for the purposes of such use and the operation, improvement,
replacement, addition, repair, maintenance or decoration thereof, are expressly
reserved to the Landlord.

                                  ARTICLE FIVE
                           Electric Current and Water

      5.1. The Landlord shall furnish, through the existing transmission
facilities installed by it in the Building, alternating electric current to the
electric closets and panels provided by the Landlord and serving the Premises in
such reasonable quantity as may be required for the Tenant's ordinary use of the
Premises for the purposes herein specified, but such quantity shall not exceed,
in the aggregate, an average of four watts per useable square foot of space in
the Premises. Such alternating electric current shall be measured by a meter or
meters provided and installed by the Landlord at such location or locations as
the Landlord shall select, it being understood that Tenant is responsible for
installation of meter service, including, without limitation, CT cabinets, meter
pans and associated wiring, but excluding the meter itself. The Tenant shall pay
to the Landlord, as billed by the Landlord, at the end of each billing period of
the public utility company then supplying such alternating electric current to
the Center an amount which shall be the sum of (i) 109% of the product obtained
by multiplying the actual number of kilowatt hours of electric current consumed
by the Tenant in such billing period by a fraction having as its numerator the
amount charged the Landlord for the Center by said public utility for the total
number of kilowatt hours billable to the Landlord for the Center's tenants' use
in such billing period and as its denominator said total number of kilowatt
hours plus (ii) any sales, use or other similar taxes applicable to the amount
determined pursuant to the foregoing clause (i). In any circumstances where any
meter measures consumption of electricity by more than one tenant, the Landlord
shall make a reasonable estimate of such consumption and allocate the cost
thereof pro rata to the tenants (including the Tenant) which derive the benefit
thereof in accordance with the respective rentable areas occupied by such
tenants and subject to such shared metering.

      5.2. The Landlord may, at its option, upon not less than thirty (30) days'
prior notice to the Tenant, discontinue the furnishing of electric current to
the Premises or any part thereof and, in such event, the Tenant shall contract
for the supplying of such electric current thereto with the public service
company supplying electric current to the neighborhood. It being understood that
the Landlord will not discontinue, except where otherwise mandated by any
Requirements (as hereafter defined), the furnishing of such electric current to
the Premises until the Tenant has had a reasonable time to contract for the
furnishing of such electric current with such public service company; provided,
however, that the Tenant proceeds in a diligent manner with respect to such
conversion. The Landlord shall permit its risers, conduits and feeders serving
the Premises, to the extent available, suitable and safely capable, to be used
for the purpose of supplying such electric current.

<PAGE>   9
                                       6


      5.3. If the Tenant shall require electric current for use in the Premises
in excess of such reasonable quantity to be furnished as provided in Section 5.1
above and the Landlord, at its option, shall make such excess load available to
the Tenant, then the Tenant shall pay the Landlord's then standard charge for
such excess load availability along with the consumption charges specified in
Section 5.1. In addition to the foregoing charges, if, in the Landlord's
judgment, such additional electric current cannot be furnished unless additional
risers, conduits, feeders, switchboards and/or appurtenances are installed in
the Building, the Landlord, upon request of the Tenant, will proceed with
reasonable diligence to install such additional risers, conduits, feeders,
switchboards and/or appurtenances provided the same and the use thereof shall be
permitted by all laws, ordinances, rules, orders and regulations of all
governmental and quasi-governmental authorities and of all insurance bodies, at
any time duly issued and in force (collectively, "Requirements") applicable to
the Land, the Building or the Premises or any part thereof, to the Tenant's use
thereof or to the Tenant's observance of any provision of this Lease and shall
not cause damage or injury to the Building or the Premises or cause or create a
dangerous or hazardous condition or entail excessive or unreasonable alterations
or repairs or interfere with or disturb other tenants or occupants of the
Building, and the Tenant shall pay all reasonable costs and reasonable expenses
incurred by the Landlord in connection with such installation; provided, that
the Tenant may, at its expense, install such additional risers, feeders,
switchboards and/or appurtenances (and all work and actions in connection
therewith shall be subject to the provisions of subsection (e) of Article Six).
The Tenant shall purchase and install all lamps, starters and ballasts
(including replacements thereof) used in the lighting fixtures in the Premises.

      5.4. Hot and Cold water will be furnished by the Landlord at the
Landlord's cost and expense for normal use in cleaning and in lavatory, toilet
facilities, pantry and drinking fountains, if any, in the Premises. Where any
water is otherwise furnished or any steam is furnished by the Landlord
(exclusive of steam for heating the Premises), the Tenant shall pay (i) the cost
of supplying, installing and maintaining a meter to measure the water or steam
(exclusive of steam for heating the Premises) so furnished, (ii) the reasonable
charges of the Landlord for the water or steam (exclusive of steam for heating
the Premises) so furnished and, in the case of water, for any required pumping
and heating thereof, and (iii) any sales, use or similar taxes, sewer rent or
other charges which may be imposed by any government or agency thereof based
upon the quantity of water or steam so furnished or the charge therefor.

      5.5. The Landlord shall in no way be liable for any failure, inadequacy or
defect in the character or supply of electric current, water or steam furnished
to the Premises except for actual damage suffered by the Tenant by reason of any
such failure, inadequacy or defect caused by the gross negligence or willful
misconduct of the Landlord.

                                   ARTICLE SIX
                                Various Covenants

      6.1. The Tenant shall:

            (a) take good care of the Premises, keep clean the portions of the
      Premises which the Landlord is not required by this Lease to clean, and
      pay the cost of making good any injury, damage or breakage (including,
      without limitation, the cost of removing stains from floors and walls)
      done by the Tenant, any other occupant of the Premises (other than the
      Landlord), any affiliate thereof, or any of their respective employees,
      officers, directors, partners, contractors, agents, licensees or invitees
      (each, a "Tenant Party"), other than any damage with respect to which the
      Tenant is released from liability pursuant to Section 9.3;

            (b) observe and comply with the rules and regulations annexed to,
      and made a part of, this Lease and such other and further reasonable rules
      and regulations as the Landlord hereafter at any time may make and
      communicate to the Tenant and which, in the judgment of the Landlord
      reasonably exercised, shall be necessary or desirable for the reputation,
      safety, care or appearance of the Center, or the preservation of good
      order therein, or the operation or maintenance of the Center, or the
      equipment thereof, or the comfort of

<PAGE>   10
                                       7


      tenants or others in the Center; provided, however, that in the case of
      any conflict between the provisions of this Lease and any such rule or
      regulation, the provisions of this Lease shall control;

            (c) permit the Landlord, any landlord under any of the underlying
      leases, any mortgagee under any of the underlying mortgages and any other
      party designated by the Landlord, and their respective representatives, to
      enter the Premises upon prior reasonable notice (which may be oral) at
      such hours as shall not unreasonably interfere with the Tenant's business,
      for the purposes of inspection and permit them or any of their agents or
      contractors to enter at any time without notice in case of emergency and
      otherwise at any time with reasonable notice for the purpose of complying
      with any Requirement or exercising any right reserved to the Landlord
      under Article Eight or elsewhere by this Lease in which case the Landlord
      shall act in a commercially reasonable manner (it being understood that
      the parties specified in this subsection are third-party beneficiaries of
      the covenants specified in this subsection in the event of the Landlord's
      breach of any obligation it may have to any such party to exercise a right
      of access on such party's behalf);

            (d) make no claim against the Landlord or any landlord under any of
      the underlying leases for any injury or damage to the Tenant or to any
      other person or for any damage to, or loss (by theft or otherwise) of, or
      loss of use of, any property of the Tenant or of any other person,
      irrespective of the cause of such injury, damage or loss, unless caused by
      the gross negligence or willful misconduct of the Landlord, its agents,
      servants or employees, in the operation or maintenance of the Premises or
      the Building, it being understood that no property other than such as
      might normally be brought upon or kept in the Premises as an incident to
      the reasonable use of the Premises for the purposes specified in this
      Lease will be brought upon or kept in the Premises;

            (e) make no alteration, change, addition, improvement, repair or
      replacement (an "Alteration") in, to, or about, the Premises, and do no
      work in such connection, without in each case the prior review and consent
      of the Landlord, and then only by workmen and contractors of the Landlord
      or by workmen and contractors of the Tenant acceptable to the Landlord,
      and in a manner in keeping with the landmark status of, and consistent
      with, the design, construction and equipment of the Building and the
      Center and upon terms and conditions and at times, reviewed and consented
      to by the Landlord and in accordance with the rules, regulations and
      guidelines of the Landlord pertaining to the performance of such
      Alterations, and make no contract for nor employ any labor in connection
      with the maintenance, cleaning or other servicing of the Premises (a
      "Tenant Service") without like consent, which consents, to the extent
      granting same shall not impose any additional burden on Landlord but only
      in the case of nonstructural Alterations and structural Alterations
      required by any Requirement applicable to the Premises or any part thereof
      or to Tenant's use thereof or to Tenant's observance of any provision of
      this Lease, shall not be unreasonably withheld; in addition, the Tenant
      shall:

                  (i) notwithstanding anything in this Lease to the contrary,
            make all changes (once reviewed and consented to by the Landlord),
            whether or not structural and whether or not in the Premises,
            required by any Requirement as a result of any Alteration or Tenant
            Service;

                  (ii) pay as and when the same become due and payable all
            reasonable charges incurred by it in connection with any Alteration
            including, but not limited to, the Landlord's reasonable charges for
            making such reviews and inspections as it may deem necessary or
            desirable in connection with the consideration of the granting of,
            and compliance with, any such consent;

                  (iii) if any notice or claim of any lien be given or filed by
            or against the Building or the Land for any work, labor or services
            performed, or for any materials, products or equipment used,
            furnished or manufactured for use, therein or thereon or in
            connection with the performance of any Alteration or Tenant Service,
            promptly, but in all events within thirty (30) days, discharge or
            remove the same by payment, bonding or otherwise; other than any
            lien given or filed in connection with any work, labor or service,
            or for any materials, products or equipment used, furnished or
            manufactured for use in connection with the installation of a
            sprinkler tap and loop by the Landlord pursuant to Article Thirty
            hereof;

<PAGE>   11
                                       8


                  (iv) notwithstanding any such review and consent, not permit
            the use of any contractors, workmen, labor, material or equipment in
            the performance of any Alteration or Tenant Service if the use
            thereof, in the Landlord's judgment reasonably exercised, will
            disturb harmony with any trade engaged in performing any other work,
            labor or service in or about the Building or the Center or
            contribute to any labor dispute;

                  (v) permit no such work to be undertaken in connection with
            any Alteration or Tenant Service unless insurance protecting the
            Tenant and each of the Tenant's consultants, contractors and
            subcontractors, and the Indemnitees (as hereinafter defined),
            against liability for worker's compensation and for bodily injuries
            and death, as well as for property damage arising out of or in
            connection with the performance and completion of such Alteration,
            shall be procured and maintained in full force and effect throughout
            the prosecution thereof, at the sole cost and expense of the Tenant
            and/or its consultants, contractors and subcontractors; all such
            insurance to be commercially reasonable as to form, amounts and
            insurers and reasonably acceptable to the Landlord and the Tenant
            will furnish to the Landlord certificates of such insurance prior to
            the commencement of such work; and

                  (vi) deliver, within thirty (30) days after completion of the
            Alteration, record drawings and specifications of the Premises
            reflecting the Alteration prepared on an Autocad Computer Assisted
            Drafting and Design ("CADD") System (or such other system or medium
            as the Landlord may accept) using naming conventions issued by the
            American Institute of Architects ("AIA") in June 1990 (or such other
            naming convention the Landlord may accept) and magnetic computer
            media of such record drawings and specifications, translated into
            DXF format or another format accepted by the Landlord;

            (f) not violate, or permit the violation of, any condition imposed
      by the standard fire insurance policy issued for office buildings in the
      Borough of Manhattan, New York, N.Y., and not do, suffer or permit
      anything to be done, or keep, suffer or permit anything to be kept, in the
      Premises, which would increase the fire or other casualty insurance rate
      on the Building or property therein, or which would result in insurance
      companies of good standing refusing to insure the Building or any such
      property in amounts and against risks as reasonably determined by the
      Landlord;

            (g) permit the Landlord to show the Premises at reasonable times
      upon prior reasonable notice (which may be oral) during Business Hours (as
      hereinafter defined) to any lessee, or any prospective purchaser, lessee,
      mortgagee or assignee of any mortgage or underlying lease, of the Building
      and/or the Land or of the Landlord's interest therein, and their
      representatives, and during the 12 months preceding the expiration of this
      Lease with respect to any part of the Premises similarly show such part to
      any person contemplating the leasing of all or a portion of the same;

            (h) at the expiration or any earlier termination of this Lease with
      respect to any part of the Premises, terminate its occupancy of, and quit
      and surrender to the Landlord, such part of the Premises broom-clean and
      in as good condition as it was at the commencement of such term, except
      for (1) ordinary wear and tear, (2) condemnation, (3) damage, not required
      to be repaired or replaced by the Tenant and (4) loss or damage by fire or
      other casualty, which shall not have been occasioned by the fault of any
      Tenant Party or with respect to which the Tenant is released from
      liability pursuant to Section 9.3;

            (i) at any time and from time to time upon not less than ten (10)
      days' prior notice by the Landlord, execute, acknowledge and deliver to
      the Landlord a statement of the Tenant (or if the Tenant is a corporation
      or a partnership, an appropriate officer or partner, as the case may be,
      of the Tenant) certifying that this Lease is unmodified and in full force
      and effect (or if there have been modifications, that the same is in full
      force and effect as modified and stating the modifications), and the dates
      to which the Rent has been paid in advance, if any, stating whether or not
      to the best knowledge of the signer of such certificate the Landlord is in
      default in the keeping, observance or performance of any provision
      contained in this Lease and, if so, specifying each such default, and such
      other information as Landlord may reasonably request, it being intended
      that any such statement may be relied upon by any landlord under any
      underlying lease (as defined

<PAGE>   12
                                       9


      in Article Thirteen hereof) or any lessee or mortgagee, or any prospective
      purchaser, lessee, mortgagee or assignee of any underlying mortgage (as
      defined in Article Thirteen hereof);

            (j) indemnify, and save harmless, the Landlord, and its agents and
      partners and its and their respective contractors licensees, invitees,
      servants, officers, directors, agents and employees, any mortgagee under
      any underlying mortgage and any landlord under any of the underlying
      leases (the "Indemnitees") from and against all liability (statutory or
      otherwise), claims, suits, demands, damages, judgments, costs, interest
      and expenses (including reasonable counsel fees and disbursements incurred
      in the defense thereof) to which any Indemnitee may (except insofar as it
      arises out of the gross negligence or willful misconduct of any such
      Indemnitee in the operation and maintenance of the Building) be subject or
      suffer whether by reason of, or by reason of any claim for, any injury to,
      or death of, any person or persons or damage to property (including any
      loss of use thereof) or otherwise arising from or in connection with the
      use of, or from any work or thing whatsoever done in, any part of the
      Premises (other than by such Indemnitee) or by any Tenant Party in the
      Center during the term of this Lease or during the period of time, if any,
      prior to the commencement of such term that the Tenant may have been given
      access to such part for the purpose of doing work or otherwise, or as a
      result of any Tenant Party performing any such work or otherwise that
      subjects any Indemnitee to any Requirement to which such Indemnitee would
      not otherwise be subject, or arising from any condition of the Premises
      due to or resulting from any default by the Tenant in the keeping,
      observance or performance of any provision contained in this Lease or from
      any act or negligence of any Tenant Party; and

            (k) maintain, at all times during the term of this Lease and during
      any other times the Tenant is granted access to the Premises, a policy or
      policies of commercial general liability insurance (including, without
      limitation, insurance of the Tenant's contractual liability under this
      Lease) written on an occurrence basis with the premiums fully paid on or
      before the due date, issued by a reputable insurance company licensed to
      do business in the State of New York, having a minimum rating A- by A.M.
      Best & Company or such other financial rating as the Landlord may at any
      time consider appropriate, and reasonably acceptable to the Landlord. Such
      insurance shall afford minimum limits as the Landlord may reasonably
      designate from time to time, but in no event less than $3,000,000 per
      occurrence with a $5,000,000 aggregate in respect of injury or death to
      any number of persons and not less than $3,000,000 for damage to or loss
      of use of property in any one occurrence. Each such policy shall provide
      that it cannot be cancelled except upon 30 days' prior notice to the
      Landlord and shall name the Indemnitees and such other designees as the
      Landlord may from time to time designate as additional insureds
      thereunder. The Tenant shall furnish original certificates of such
      insurance to the Landlord prior to the term commencement date (or any date
      on which the Tenant is granted earlier access) and thereafter not less
      than 30 days prior to the expiration of each such policy and any renewals
      or replacements thereof.

      6.2. The Landlord shall at any time and from time to time upon not less
than 10 days' prior notice by the Tenant, execute, acknowledge and deliver to
the Tenant a statement of the Landlord certifying that this Lease is unmodified
and in full force and effect (or if there have been modifications, that the same
is in full force and effect as modified and stating the modifications), and the
dates to which the fixed rent and additional rent have been paid in advance, if
any, and stating whether or not to the best knowledge of the signer of such
certificate the Tenant is in default in the keeping, observance or performance
of any term or condition contained in this Lease and, if so, specifying each
such default of which the signer may have knowledge, it being intended that any
such statement may be relied upon by any assignee, prospective assignee,
subtenant or prospective subtenant of the Tenant.

                                  ARTICLE SEVEN
                    Assignment, Mortgaging, Subletting, etc.

      7.1. Except as may be otherwise specifically provided in this Article, the
Tenant covenants, for the Tenant and its successors, assigns and legal
representatives, that neither this Lease nor the term and estate hereby granted,
nor any part hereof or thereof, will be assigned, mortgaged, pledged, encumbered
or otherwise transferred (it

<PAGE>   13
                                       10


being agreed that (y) issuance by the Tenant of stock and/or the transfer of
already-issued stock/partnership interest, in one or more transactions so as to
transfer control or transfer 50% or more of an interest in the Tenant, other
than through over-the-counter or national securities exchange transactions by
those holding less than a 5% interest in the Tenant, or (z) sale or transfer of
25% or more of the assets of the Tenant in one or more transactions, other than
in the ordinary course of business, shall, in either event, be deemed an
assignment of this Lease), and that neither the Premises, nor any part thereof,
will be encumbered in any manner by reason of any act or omission on the part of
the Tenant, or will be used or occupied, or permitted to be used or occupied, or
utilized for desk space, for mailing privileges or as a concession, by anyone
other than the Tenant, or will be sublet, or offered or advertised for
subletting; provided, however, that, if the Tenant is a corporation, (a) the
assignment or transfer of this Lease, and the term and estate hereby granted, to
any (1) corporation into which the Tenant is merged or with which the Tenant is
consolidated or (2) partnership to which all of the assets of the Tenant are
transferred and only for so long as the Tenant retains management control of
said partnership and is owner of more than fifty (50%) percent of the
partnership interests of said partnership (such corporation or partnership being
hereinafter in this Article called the "Assignee") without the prior consent of
the Landlord shall not be deemed to be prohibited hereby if, and upon the
express conditions that, (i) the primary purpose for such merger, consolidation
or partnership change is other than the transfer of this Lease, (ii) the
surviving entity has a net worth at least equal to that of the Tenant's on the
date hereof or the date of merger, consolidation or partnership change,
whichever is greater, and (iii) at least thirty (30) days prior to the merger,
consolidation or partnership change, the Assignee shall have executed and
delivered to the Landlord an agreement in form and substance satisfactory to the
Landlord whereby the Assignee shall agree to be personally bound by and upon all
the provisions set forth in this Lease on the part of the Tenant to be kept,
observed or performed, and whereby the Assignee shall expressly agree that the
provisions of this Article shall, notwithstanding such assignment or transfer,
continue to be binding upon it with respect to all future assignments and
transfers, (b) the Landlord will consent to the Tenant permitting the Premises
to be used and occupied for the purposes specified in, and subject to the
provisions of, this Lease, by any subsidiary or affiliate of the Tenant or
Tenant's parent, but only for so long as the occupant remains a subsidiary or
affiliate of the Tenant or Tenant's parent, provided that (I) the Tenant
provides reasonable evidence of the relationship of the subsidiary or affiliate
to the Tenant or Tenant's parent, (II) in the Landlord's reasonable judgment the
subsidiary or affiliate or Tenant's parent is of a character and engaged in a
business such as in keeping with the standards in those respects for the
Building and its occupancy and (III) it being understood that an entity shall
only be a subsidiary of the Tenant or Tenant's parent if the Tenant or Tenant's
parent owns, directly or indirectly, 50% or more of the stock or partnership
interests in the entity and shall only be an affiliate of the Tenant or Tenant's
parent if under common ownership, that is, direct or indirect ownership by an
entity holding 50% or more of the stock or partnership interests in both the
Tenant or Tenant's parent and such affiliate and (c) the Landlord will consent
to the Tenant permitting the Premises to be used and occupied for the purposes
specified in, and subject to the provisions of, this Lease, by any corporation
or partnership in which, and only for so long as, Elizabeth Lavin remains the
owner, directly or indirectly, of 100% of the stock or partnership interest of
such entity, provided that (I) the Tenant provides reasonable evidence of the
relationship of such entity to Elizabeth Lavin, and (II) in the Landlord's
reasonable judgment the entity is of a character and engaged in a business such
as in keeping with the standards in those respects for the Building and its
occupancy.

      7.2.1. In the event the Tenant desires the Landlord's consent to the
subletting of all or any part of the Premises for any part of the term of this
Lease with respect thereto, the Tenant shall notify the Landlord of the name of
the proposed sublessee, such information as to the proposed sublessee's
business, financial responsibility and standing as the Landlord may reasonably
require, and of the terms and conditions of the proposed subletting, which
notice shall (except in the case of (x) a proposed subletting to a subsidiary of
the Tenant or, (y) proposed sublettings commencing in the first three years of
the term of this Lease for space or spaces, individually or in the aggregate,
totaling 30% or less of the rentable square foot area of the Premises) contain
an offer to vacate and surrender, as of the Special Surrender Date (as
hereinafter defined), either (i) if the Tenant proposes to sublet only a part of
the Premises, the space to be demised by the proposed sublease, together with
such other space, if any, as is demised to the Tenant by this Lease as may be
reasonably required for public corridors, toilets and core facilities serving
the space so proposed to be sublet (said spaces(s) being herein collectively
called a "Partial Space"), or (ii) if the Tenant proposes to sublet the entire
Premises, the entire Premises. The term "Special Surrender Date" as used in this
Article, shall mean a date to be specified in such notice from the Tenant;
provided, however, said specified date shall be (a) the last day of a calendar
month during the term hereof with

<PAGE>   14
                                       11


respect thereto, and (b) not earlier than a date occurring sixty (60) days after
the giving of such notice and not later than the date for the commencement of
the term of the proposed subletting.

      7.2.2. The Landlord may accept such offer by a notice given to the Tenant
within thirty (30) days after the receipt of such notice from the Tenant. If the
Landlord accepts such offer and such offer pertains to a Partial Space, then
effective as of the Special Surrender Date, this Lease shall be deemed modified
so that the term and estate granted by this Lease with respect to such Partial
Space (unless the same shall have expired sooner pursuant to any of the other
conditions of limitation or provisions of this Lease or pursuant to law) shall
expire on the Special Surrender Date with the same effect as if the Special
Surrender Date were the date specified in this Lease for the expiration of the
term of this Lease with respect to such Partial Space and the annual fixed rent
payable hereunder, to the extent that such fixed rent relates to such Partial
Space and such abatement is in excess of the annual rate of any other existing
abatement of fixed rent relating thereto under any other term or condition of
this Lease, shall be abated at the Applicable Rental Rate (as hereinafter
defined) for each square foot of the rentable area of the Partial Space from and
after the Special Surrender Date. If the Landlord accepts such offer and such
offer pertains to the entire Premises, then this Lease shall be deemed modified
so that the term and estate granted by this Lease (unless the same shall have
expired sooner pursuant to any of the conditions of limitation or other
provisions of this Lease or pursuant to law) shall expire on the Special
Surrender Date with the same effect as if the Special Surrender Date were the
date specified in this Lease for the expiration of the term hereof and the fixed
rent payable hereunder shall be apportioned as of the Special Surrender Date.
The Tenant shall terminate its occupancy of such Partial Space or the Premises,
as the case may be, not later than the Special Surrender Date.

      7.2.3. The term "Applicable Rental Rate" as used in this Article shall be
deemed to mean $31.00 per annum for the period commencing on the term
commencement date and ending on September 30, 1999; and $35.00 per annum
thereafter.

      7.2.4. In the event of such expiration of the term of this Lease with
respect to a Partial Space, any changes, improvements and alterations to any
portion of the remaining Premises demised by this Lease after the Special
Surrender Date (including, but not limited to, the erection of a boundary wall
to separate such portion from such Partial Space) made necessary or desirable in
the Landlord's reasonable judgment by reason of such expiration shall be made by
the Landlord at the Tenant's expense.

      7.2.5. In the event the Landlord does not accept an offer made by the
Tenant in a notice given to the Landlord pursuant to Section 7.2.1. hereof or
the Tenant is not required to make such an offer in such notice, the Landlord
will not unreasonably withhold or delay its consent to the proposed subletting
referred to in said notice on the terms and conditions set forth in said notice;
provided, however, that the Landlord shall not in any event be obligated to
consent to any such proposed subletting unless:

                  (a) the sublessee under any such subletting shall be such
            person, firm or corporation as in the Landlord's reasonable judgment
            is of a character and engaged in a business such as is in keeping
            with the standards in those respects for the Building and its
            occupancy and shall not be a (i) government or a governmental
            authority or a subdivision or an agency of any government or any
            governmental authority or (ii) a tenant of either the Landlord or a
            subsidiary or affiliate of the Landlord, provided that the Landlord
            has comparable space available in the Center for such tenant;

                  (b) such subletting shall be at a rental rate not less than
            ninety percent (90%) of the rental rates then being charged under
            leases being entered into by the Landlord for comparable space in
            the Center and for a comparable term and provided that the Tenant
            shall not advertise such rates in any publicly disseminated medium;

                  (c) the space so to be sublet shall be regular in shape;

                  (d) such consent shall be evidenced by the delivery of, and
            shall be subject to the terms and conditions of, a "Consent to
            Sublease" duly executed by the Landlord, the Tenant and the
            sublessee which Consent to Sublease shall be substantially in the
            form attached as Exhibit C and on such customary form of the
            Landlord as is adopted by it for such purpose, for which the

<PAGE>   15
                                       12


            Tenant shall pay to the Landlord a reasonable processing charge in
            connection therewith, which charge shall not exceed $3,000.00; and

                  (e) the Tenant and the sublessee shall agree that the
            sublessee will not, without the prior consent of the Landlord,
            assign the sublease or under-sublet the space so sublet or any part
            thereof.

      7.2.6. All of the terms and conditions of any such "Consent to Sublease"
so executed by the Landlord, the Tenant and the sublessee shall be deemed to be
terms and conditions of this Lease and the violation by the Tenant or the
sublessee of any term or condition of such "Consent to Sublease" shall entitle
the Landlord to all the rights and remedies provided for in this Lease or by law
in the case of any violation of a term or condition of this Lease.

      7.2.7. If the aggregate amount payable as rent (including without
limitation, all amounts payable on account of changes in Real Estate Taxes,
operating costs, maintenance costs, labor rates, indexes or other formula
contained in the sublease) with respect to any period of time by a sublessee
under a sublease of any part of the Premises made by the Tenant shall be in
excess of the Tenant's Basic Cost (as hereinafter defined) for such period for
such part of the Premises, then, promptly after the collection by the Tenant of
such amounts so payable for such period under such sublease, the Tenant will pay
to the Landlord, as additional rent hereunder, an amount equal to 50% of the
excess of such amounts so collected for such part of the Premises over the
Tenant's Basic Cost for such part of the Premises for such part of the term. The
term "Tenant's Basic Cost," as used herein with respect to any period for which
any part of the Premises is sublet, shall mean the sum of (i) fixed rent at the
Applicable Rental Rate for each square foot of the rentable area of such part of
the Premises, and (ii) the amount payable by the Tenant to the Landlord for such
period with respect to such part of the Premises pursuant to Article Twenty-four
hereof. The Tenant shall diligently enforce all rights it has under any sublease
and at law to collect all amounts payable by the sublessee.

      7.2.8. The Tenant shall deliver to the Landlord a statement within thirty
(30) days after the end of each calendar year in which any part of the term of
this Lease occurs specifying as to such calendar year, and within thirty (30)
days after the expiration or earlier termination the term of this Lease
specifying with respect to the elapsed portion of the calendar year in which
such expiration or termination occurs (a) each sublease in effect during the
period covered by such statement and as to each sublease, the date of its
execution and delivery, the number of square feet of the rentable area demised
thereby, the term thereof, and a computation in reasonable detail showing
whether or not anything is payable by the Tenant to the Landlord pursuant to
this Article with respect to such sublease for the period covered by such
statement; and (b) whether or not anything is payable by the Tenant to the
Landlord pursuant to this Article with respect to any payments received from a
sublessee during such period but which relate to an earlier period and showing
in reasonable detail the computation of the amount so payable.

      7.2.9. Each sublease of the Premises or a portion thereof shall be subject
and subordinate to this Lease and the rights of the Landlord under this Lease
and any violation of any provision of this Lease, whether by act or omission, by
any sublessee shall be deemed a violation of such provision by the Tenant, it
being the intention of the parties that the Tenant shall assume and be liable to
the Landlord for any and all acts and omissions of all sublessees if such act or
omission, if made by the Tenant, would be a violation of any provision of this
Lease. No sublease shall provide for a term which extends beyond the day prior
to the then expiration date of this Lease. In the event of the Tenant's default
in the payment of any fixed rent and/or additional rent under this Lease beyond
any applicable period of grace, the Landlord may collect rent from any sublessee
so long as such default shall continue, and the Landlord may apply the same to
the curing of any such default under this Lease in any order of priority the
Landlord may select, any unapplied balance thereof to be applied by the Landlord
against subsequent installments of Rent, but the Landlord's collection of Rent
from a sublessee shall not constitute a recognition by the Landlord of
attornment by such sublessee nor a waiver by the Landlord of any default by the
Tenant.

      7.2.10. As security for the performance of the Tenant's obligations under
this Lease, the Tenant hereby agrees that if and only for so long as the Tenant
shall be in default in the payment of fixed rent and/or additional rent payable
under this Lease beyond any applicable period of grace, the Tenant shall assign
(and, subject to the

<PAGE>   16
                                       13


conditions set forth herein, hereby does assign) to the Landlord all of the
Tenant's interest in and to all present and future subleases of space in the
Premises, together with all modifications, renewals and extensions thereof now
existing or hereafter made, and also together with the rights to sue for,
collect and receive all rents, additional rents and other sums payable to the
Tenant under such subleases.

      7.3. Without in any way suggesting permission for the Tenant to assign the
Lease, if the Lease is nonetheless assigned by the order of a court or otherwise
but not as permitted by Section 7.1 above, the Tenant shall pay to the Landlord
75% of any consideration received by the Tenant for the assignment, net of
brokerage commissions and legal fees incurred by the Tenant in connection
therewith and not reimbursed by the assignee. The amounts to be paid to the
Landlord under this Section shall be deemed to be deferred rent payable only out
of amounts collected by the Tenant in connection with an assignment and shall be
deemed forgiven if no assignment occurs.

      7.4. The Landlord will, at the request of the Tenant, maintain listings on
the Building directory of the names of the Tenant and the names of any officers
or employees of the Tenant; provided, however, that the number of names so
listed shall be in the same proportion to the capacity of the building directory
as the aggregate number of square feet of rentable area of the Premises is to
the aggregate number of square feet of rentable area of the Center. Without
implying any right to do so, the listing of any name other than that of the
Tenant, whether on the doors or windows of the Premises, on the Building
directory, or otherwise, shall not operate to vest any right or interest in this
Lease or in the Premises or be deemed to be the consent of the Landlord referred
to in Section 7.1, it being expressly understood that any such listing is a
privilege extended by the Landlord revocable at will by notice to the Tenant.

                                  ARTICLE EIGHT
                       Changes or Alterations by Landlord

      8.1.1. The Landlord reserves the right to make such Alterations in or to
the Building (including the Premises) and the fixtures and equipment thereof, as
well as in or to the street entrances, halls, passages, elevators, escalators
and stairways and other parts of the Building and the Center, and to erect,
maintain and use pipes, ducts and conduits in and through the Premises, all as
it may reasonably deem necessary or desirable; provided, that (a) the exercise
of such rights shall not result in an unreasonable obstruction of the means of
access to the Premises or unreasonable interference with the use of the
Premises, (b) that the Landlord will restore the portion of the Premises
affected by any such Alterations to its condition existing prior to the
commencement of the work in connection therewith to the extent reasonably
practicable in light of the Alterations made, and/or (c) if any such Alterations
shall reduce the floor area of the Premises (other than a de minimus amount),
the fixed rent payable hereunder (to the extent that such fixed rent relates to
such part of the floor area of the Premises and such abatement is in excess of
the annual rate of any other existing abatement of fixed rent relating to such
part of the floor area of the Premises under any other term or condition of this
Lease) shall be abated with respect to such part of the floor area of the
Premises for the period from the date of the making thereof to the date
specified in this Lease for the expiration of the full term of this Lease.
Nothing in this Section or in Article Six shall be deemed to relieve the Tenant
of any duty, obligation or liability to make any repair, replacement or
improvement or comply with any Requirement.

      8.1.2. The Landlord will, subject to, and except as otherwise provided in,
the other terms and conditions of this Lease, with reasonable dispatch and in a
manner and at such times as shall not unreasonably interfere with the use of the
Premises nor unreasonably obstruct the means of access to the Premises, make as
and when required all repair, structural or otherwise, interior or exterior, to
the Building to the extent the failure to do so would adversely affect the
Tenant's use of or access to the Premises (including its public areas, fixtures,
appurtenances, systems and facilities, but excluding anything which constitutes
subdivision, layout and finish of spaces in the Building rented to, or available
for renting to, tenants) as may be necessary to restore the same to a state of
good working order, condition and repair and to a standard in keeping with the
reputation of the Building as a location for an outstanding type of business
occupancy.

<PAGE>   17
                                       14


      8.2. The Landlord reserves the right to change the name or address of the
Building at any time. Neither this Lease nor any use by the Tenant shall give
the Tenant any right or easement to the use of any door or any passage
connecting the Building with any subway or any other building or to the use of
any public conveniences, and the use of such doors, passages and conveniences
may be regulated or discontinued at any time by the Landlord.

                                  ARTICLE NINE
                              Damage by Fire, etc.

      9.1. If any part of the Premises shall be damaged by fire or other perils,
the Tenant shall give prompt notice thereof to the Landlord and the Landlord
shall proceed with reasonable diligence subject to adjustment and collection of
any insurance proceeds and the provisions of any Qualified Encumbrance to repair
such damage, and, if any part of the Premises shall be rendered untenantable by
reason of such damage (including untenantability due to lack of access thereto),
the annual fixed rent payable under this Lease, to the extent that such fixed
rent relates to such part of the Premises, shall be abated for the period from
the date of such damage to the date when such part of the Premises shall have
been made tenantable or to such earlier date upon which either such part of the
Premises would have been tenantable but for Tenant Delay or the full term of
this Lease with respect to such part of the Premises shall expire or terminate,
unless (a) the Landlord shall make available to the Tenant, during the period of
such repair, other space in the Center, comparable in size and characteristics
to the Premises, reasonably suitable for the temporary carrying on of the
Tenant's business, or (b) such fire or other damage shall have resulted from the
negligence of any Tenant Party; provided that such abatement shall be made only
to the extent that it is in excess of the annual rate of any other existing
abatement of fixed rent relating thereto under any provision of this Lease other
than Section 1.4. hereof. The Landlord shall not be liable for any inconvenience
or annoyance to the Tenant or injury to the business of the Tenant resulting in
any way from such damage or the repair thereof The Tenant understands that the
Landlord will not carry insurance of any kind on (w) the Tenant's goods,
furniture or furnishings, (x) on any Fixtures removable by the Tenant as
provided in this Lease, (y) on Tenant improvements or betterments or (a) on any
property in the care, custody and control of the Tenant, and that the Landlord
shall not be obligated to repair any damage thereto or replace the same.

      9.2. If substantial alteration or reconstruction of the Building shall, in
the reasonable opinion of the Landlord, be required as a result of damage by
fire or other perils (whether or not the Premises shall have been damaged by
such fire or other casualty), then this Lease and the term and estate hereby
granted may be terminated by the Landlord by a notice, given within sixty (60)
days of such damage specifying a date, not less than thirty (30) days after the
giving of such notice, for such termination. In addition, if a substantial part
of the Premises is rendered untenantable as a result of such damage by fire or
other peril and it is determined by the Landlord that such part of the Premises
cannot be made tenantable within a period of fifteen (15) months after the
occurrence of such fire or other peril, then this Lease and the term and estate
hereby granted may be terminated by the Landlord or the Tenant by a notice
specifying a date, not less than thirty (30) days after the giving of such
notice for such termination, which notice must be given within sixty (60) days
(i) of such damage if such termination notice is given by the Landlord, or (ii)
the Tenant's receipt of the Landlord's estimate of the time needed to repair the
Premises if such termination notice is given by the Tenant. In the event of the
giving of notice of termination, this Lease and the term and estate hereby
granted shall expire as of the date specified in such notice with the same
effect as if such date were the date initially specified in this Lease as the
expiration date, and the fixed rent payable under this Lease shall be
apportioned as of such date of termination, subject to abatement, if any, as and
to the extent above provided.

      9.3. The Landlord and the Tenant hereby release each other with respect to
any liability which the released party might otherwise have to the releasing
party for any damage to the Building or the Premises or the contents thereof by
fire or other peril occurring during the term of this Lease to the extent of the
proceeds received under a policy or policies of insurance permitting such
release. Each party will use best efforts to cause its property and/or other
applicable insurance policy to include a provision permitting such a release of
liability; provided, that if such a provision is obtainable from such insurer
only at an additional expense, the insured party shall notify the other party
and, unless the other party pays such additional expense within ten (10) days
thereafter, the

<PAGE>   18
                                       15


insured party shall thereafter be free of its waiver of subrogation so long as
an additional cost is required under the policy in question.

      9.4. This Lease shall be considered an express agreement governing any
case of damage to or destruction of, or any part of, the Building or the
Premises by fire or other peril, and Section 227 of the Real Property Law of the
State of New York providing for such a contingency in the absence of express
agreement, and any other law of like import now or hereafter in force, shall
have no application in such case.

                                   ARTICLE TEN
                                  Condemnation

      10.1. If all of the Premises shall be lawfully condemned or taken in any
manner for any public or quasi-public use, this Lease and the term and estate
hereby granted shall forthwith cease and terminate as of the date of vesting of
title in such condemnation or taking. If only a part of the Premises shall be so
condemned or taken, then the term and estate hereby granted with respect to such
part of the Premises shall forthwith cease and terminate as of the date of
vesting of title in such condemnation or taking and the annual fixed rent
payable under this Lease, to the extent that such fixed rent relates to such
part of the Premises, shall be abated for the period from the date of such
vesting of title to the date specified in this Lease for the expiration of the
full term of this Lease with respect to such part of the Premises, but only to
the extent that such abatement is in excess of the annual rate of any other
existing abatement of fixed rent relating thereto under any other provision of
this Lease other than Section 1.4. hereof. If only a part of the Building shall
be so condemned or taken, then (a) if substantial alteration or reconstruction
of the Building or the Premises shall, in the reasonable opinion of the
Landlord, be necessary or desirable as a result of such condemnation or taking,
this Lease and the term and estate hereby granted may be terminated by the
Landlord within sixty (60) days following the date on which the Landlord shall
have received notice of such vesting of title, by a notice to the Tenant
specifying a date, not less than thirty (30) days after the Landlord's notice,
for such termination, or (b) if such condemnation or taking shall be of a
substantial part of the Premises or of a substantial part of the means of access
thereto, this Lease and the term and estate hereby granted may be terminated by
the Tenant, within sixty (60) days following the date upon which the Tenant
shall have received notice of such vesting of title, by a notice to the Landlord
specifying a date, not less than thirty (30) days after the Tenant's notice, for
such termination, or (c) if neither the Landlord nor the Tenant elects to
terminate this Lease, this Lease shall not be affected by such condemnation or
taking, except that this Lease and the term and estate hereby granted with
respect to the part of the Premises so condemned or taken shall expire on the
date of the vesting of title to such part and except that the fixed rent payable
under this Lease shall be abated to the extent, if any, hereinabove provided in
this Article. If only a part of the Premises shall be so condemned or taken and
this Lease and the term and estate hereby granted with respect to the remaining
portion of the Premises are not terminated, the Landlord will proceed with
reasonable diligence, subject to the provisions of any Qualified Encumbrance and
without requiring the Landlord to expend more than it collects as an award
therefor, to restore the remaining portion of the Premises as nearly as
practicable to the same condition as it was in prior to such condemnation or
taking.

      10.2. The termination of this Lease and the term and estate hereby granted
in any of the cases specified in this Article shall be with the same effect as
if the date of such termination were the date originally specified for the
expiration of the full term of this Lease, and the fixed rent payable under this
Lease shall be apportioned as of such date of termination.

      10.3. If there is any condemnation or taking of all or a part of the
Building, the Landlord shall be entitled to receive the entire award in the
condemnation proceeding, including any award made for the value of the estate
vested by this Lease in the Tenant, and the Tenant hereby expressly assigns to
the Landlord any and all right, title and interest of the Tenant now or
hereafter arising in or to any such award or any part thereof, and the Tenant
shall be entitled to receive no part of such award; provided, that the Tenant
shall not be precluded from intervening for the Tenant's own interest in any
such condemnation proceeding to claim or receive from the condemning authority
any compensation to which the Tenant may otherwise lawfully be entitled in such
case in

<PAGE>   19
                                       16


respect of property removable by the Tenant under Article Four or for moving
expenses, but only to the extent such compensation does not reduce the award
otherwise payable to the Landlord.

      10.4. If the whole or any part of the Premises, or of the Tenant's
leasehold estate, shall be taken in condemnation proceedings or by any right of
eminent domain for temporary use or occupancy, the foregoing provisions of this
Article Ten shall not apply and the Tenant shall continue to pay, in the manner
and at the times herein specified, the full amount of the rent and other charges
payable by the Tenant under this Lease, and, except only to the extent that the
Tenant may be prevented from so doing pursuant to the terms of the order of the
condemning authority, the Tenant shall perform and observe all of the other
provisions of this Lease upon the part of the Tenant to be performed and
observed, as though such taking had not occurred. In the event of any taking
referred to in this Section 10.4, the Landlord shall be entitled to receive any
portion of the condemnation proceeds paid as compensation for the cost of
restoration of the Building and the Tenant shall be entitled to receive the
balance of the condemnation proceeds paid for such taking, whether paid by way
of damages, rent or otherwise, unless such period of temporary use or occupancy
shall extend beyond the expiration or termination of this Lease, in which case
the balance of the condemnation proceeds shall be apportioned between the
Landlord and the Tenant as of the date of the expiration or termination of this
Lease. The Landlord shall, upon the expiration of any such period of temporary
use or occupancy, restore the Building, as nearly as may be reasonably possible
within the balance of the term of the Lease, to the condition in which the same
was immediately prior to such taking, subject to the provisions of any Qualified
Encumbrance and without requiring the Landlord to expend more than it collects
as an award therefor.

                                 ARTICLE ELEVEN
                              Compliance with Laws

      11.1. The Tenant shall comply with all Requirements applicable to the
Premises or any part thereof, to the Tenant's use thereof or to the Tenant's
observance of any provision of this Lease, except that the Tenant shall not be
under any obligation to comply with any Requirement requiring any structural
alteration of or in connection with the Premises solely by reason of the use
thereof for any of the purposes permitted in Article One and not by reason of
(i) a condition which has been created by, or at the instance of, any Tenant
Party, (ii) a breach by any Tenant Party of any provision of this Lease or (iii)
a Requirement having as a primary purpose the benefit of disabled persons. Where
any structural alteration of or in connection with the Premises is required by
any such Requirement, and, by reason of the express exception specified above,
the Tenant is not under any obligation to make such alteration, the Landlord
will make such alteration if the cost of making the same is not in excess of
fifty (50%) percent of the annual rate of fixed rent then payable under this
Lease (such cost shall not be deemed to include the cost of providing and
installing a sprinkler loop and tap, if such work is part of such alteration),
or if such cost is in excess of fifty (50%) percent of the annual rate of fixed
rent payable under this Lease then the Landlord shall have the option of making
such alteration or of terminating this Lease and the term and estate hereby
granted by giving to the Tenant not less than thirty (30) days' prior notice of
such termination; provided, that, if within fifteen (15) days after the giving
of notice of termination, the Tenant shall request the Landlord to make such
alteration at the expense of the Tenant, then such notice of termination shall
be ineffective; the Landlord shall proceed with reasonable diligence to make
such alteration and the Tenant shall pay to the Landlord all costs and expenses
incurred by the Landlord in connection therewith in excess of fifty (50%)
percent of the annual rate of fixed rent then payable under this Lease and shall
maintain on deposit with the Landlord such security for the payment of such
costs and expenses as the Landlord shall from time to time request. For purpose
of this Article, providing and installing of sprinklers shall be deemed to be a
non-structural alteration; except that the sprinkler loop and tap shall be
deemed a structural alteration.

      11.2. If a notice of termination shall be given by the Landlord under this
Article and such notice shall not become ineffective as above provided, this
Lease and the term and estate hereby granted shall terminate on the date
specified in such notice with the same effect as if such date were the date
originally specified for the expiration of this Lease, and the fixed rent
payable under this Lease shall be apportioned as of such date of termination.

<PAGE>   20
                                       17


                                 ARTICLE TWELVE
                     Accidents to Sanitary and other Systems

      12.1. The Tenant shall give to the Landlord prompt notice of any damage
to, or defective condition in, any part or appurtenance of the Building's
sanitary, electrical, heating, air conditioning, ventilating or other systems
serving, located in, or passing through, the Premises. Any such damage or
defective condition shall he remedied by the Landlord with reasonable diligence
except to the extent Tenant is specifically required to remedy same under the
terms of this Lease, but if such damage or defective condition (other than any
damage with respect to which the Tenant is relieved from liability pursuant to
Section 9.3) was caused by, or by the use by, any Tenant Party or is with
respect to any Fixture, installed by or at the request of Tenant or in
connection with the initial build-out of the Premises, the cost of the remedy
thereof shall be paid by the Tenant upon demand. The Tenant shall not be
entitled to claim any damages against the Landlord arising from any such damage
or defective condition unless the same shall have been caused by the gross
negligence or willful misconduct of the Landlord in the operation or maintenance
of the Premises or the Building and the same shall not have been remedied by the
Landlord with reasonable diligence after notice from the Tenant; nor shall the
Tenant be entitled to claim any damages against any other party (including,
without limitation, any third party vendor or other supplier of services to the
Landlord) arising from any such damage or defective condition unless the same
shall have been caused by the gross negligence or willful misconduct of such
party in the operation or maintenance of the Premises or the Building and the
same shall not have been remedied by such party with reasonable diligence after
notice thereof; nor shall the Tenant be entitled to claim any eviction by reason
of any such damage or defective condition unless the same shall have been caused
by the gross negligence or willful misconduct of the Landlord in the operation
or maintenance of the Premises or the Building and shall not have been made
tenantable by the Landlord within a reasonable time after notice from the
Tenant.

                                ARTICLE THIRTEEN
                                  Subordination

      13.1. This Lease and the term and estate hereby granted are and shall be
subject and subordinate to the lien of each mortgage which may now or at any
time hereafter affect the Premises, the Building and/or the Land, or the
Landlord's interest therein (collectively, the "underlying mortgages");
provided, however, that, the foregoing subordination to the lien of each
underlying mortgage, held by an affiliate, parent or subsidiary of the Landlord
only, shall be conditioned upon the Tenant's receipt from such mortgagee
thereunder of a subordination, nondisturbance and attornment agreement in form
and substance acceptable to such mortgagee and otherwise consistent with the
provisions of this Section 13.1. An entity shall only be a subsidiary of the
Landlord or Landlord's parent if the Landlord or Landlord's parent owns,
directly or indirectly, 50% or more of the stock or partnership interests in the
entity and shall only be an affiliate of the Landlord or the Landlord's parent
if under common ownership, that is, direct or indirect ownership by an entity
holding 50% or more of the stock or partnership interest in both the Tenant or
the Tenant's parent and such affiliate. If the Land is leased by the Landlord
from RCP Associates, a partnership, as successor in interest to The Trustees of
Columbia University in the City of New York pursuant to a lease dated October 1,
1928, as heretofore amended, this Lease and the term and estate hereby granted
are and shall be subject and subordinate to said lease as so amended and to each
agreement hereafter made modifying, supplementing, extending or renewing said
lease. If any part of the Premises is situated in the building known as 600
Fifth Avenue, this Lease and the term and estate hereby granted are and shall be
subject and subordinate to the lease dated August 23, 1949 from The Minister,
Elders and Deacons of The Reformed Protestant Dutch Church of the City of New
York to Massachusetts Mutual Life Insurance Company and to the lease dated June
16, 1949 from the Landlord to said Massachusetts Mutual Life Insurance Company
as each of said leases has been heretofore amended (the Landlord being the
successor in interest to said Massachusetts Mutual Life Insurance Company under
each of said leases) and to each agreement hereafter made modifying,
supplementing, extending or renewing either of said leases. If any part of the
Premises is situated in the building known as 75 Rockefeller Plaza, this Lease
and the term and estate hereby granted are and shall be subject and subordinate
to the lease dated October 18, 1977 from 75 Plaza Limited, N.V. to the Landlord,
as heretofore amended, and to each agreement hereafter made modifying,
supplementing, extending or

<PAGE>   21
                                       18


renewing said lease. This lease shall also be subject and subordinate to any
future ground or net lease of the Land and/or the Building; provided, however,
that, the foregoing subordination to the lien of any ground or net lease of the
Land and/or the Building, held by an affiliate, parent or subsidiary of the
Landlord only, shall be conditioned upon the Tenant's receipt from such lessor
thereunder of a subordination, nondisturbance and attornment agreement in form
and substance acceptable to such lessor and otherwise consistent with the
provisions of this Section 13.1. All of said leases as so modified,
supplemented, extended and renewed are herein collectively called the
"underlying leases". If any part of the Premises is situated in the building
known as 30 Rockefeller Plaza and 1250 Avenue of the Americas, this Lease and
the term and estate hereby granted are and shall be subject and subordinate to
the Declaration Establishing a Plan for Condominium Ownership of The Rockefeller
Center Tower Condominium (and the by-laws annexed thereto) dated as of December
1, 1988, as the same may have been or may hereafter be amended. The foregoing
provisions for the subordination of this Lease and the term and the estate
hereby granted shall be self-operative and no further instrument shall be
required to effect any such subordination; but the Tenant shall, from time to
time, upon request by the Landlord, execute and deliver any and all instruments
that may be necessary or proper to effect such subordination or to confirm or
evidence the same, and in the event that the Tenant shall fail to execute and
deliver any such instrument, the Landlord, in addition to any other remedies,
may, as the agent or attorney-in-fact of the Tenant, execute and deliver the
same, and the Tenant hereby irrevocably constitutes and appoints the Landlord
the Tenant's agent and attorney-in-fact, coupled with an interest, for such
purpose. If the Landlord's interest in the Building or the Land shall be sold or
conveyed to any person, firm or corporation upon the exercise of any remedy
provided for in any underlying mortgage or by law or equity, or if the
Landlord's interest in this Lease is assigned or conveyed to the landlord under
any ground lease as a result of a default by the tenant under the ground lease
and a resulting termination thereof, such person, firm or corporation succeeding
to the Landlord's interest in the Building or Land or this Lease and each
person, firm or corporation thereafter succeeding to its interest in the
Building or the Land or this Lease (i) shall not be liable for any act or
omission of the Landlord under this Lease occurring prior to such sale or
conveyance, (ii) shall not be subject to any offset, defense or counterclaim
accruing prior to such sale or conveyance, (iii) shall not be bound by any
payment prior to such sale or conveyance of Rent for more than one month in
advance (except prepayments in the nature of security for the performance by the
Tenant of its obligations hereunder), (iv) shall not be bound by any amendment
or modification of this Lease made (y) after notice to the Tenant of the
execution of the underlying mortgage or underlying lease in question and (z)
without the consent of such mortgagee or lessor (or their nominees, successors
or assigns), where required, (v) shall not be bound by any covenant to perform
(including, without limitation, any covenant to complete) any renovation or
construction in connection with the Premises or the Building or to pay any sums
to the Tenant in connection therewith, in either case arising or accruing prior
to the date of such sale or conveyance of the Landlord's interest; and (vi)
shall be liable for the performance of the other obligations of the Landlord
under this Lease only during the period such successor landlord shall hold such
interest. Within thirty (30) days following execution and delivery of this
Lease, the Landlord shall deliver to the Tenant for its signature a
subordination, nondisturbance and attornment agreement among the Landlord, the
Tenant and Rockefeller Center Properties, Inc., in form and substance acceptable
to Rockefeller Center Properties, Inc. and otherwise consistent with the
provisions of this Section 13.1. Except as otherwise expressly provided herein,
the Landlord agrees to use reasonable efforts to obtain a subordination,
nondisturbance and attornment agreement from the future holders of any
underlying mortgages in form and substance acceptable to such future holders of
such underlying mortgages and otherwise consistent with the provisions of
Section 13.1.

      13.2. If this Lease and the term and estate hereby granted are subject and
subordinate to any underlying lease, then the Tenant hereby agrees (a) that it
will attorn to the lessor under said underlying lease effective as of the
expiration or earlier termination of the term of said underlying lease and will
recognize said lessor as the Landlord under this Lease, and (b) that,
notwithstanding such expiration or earlier termination of the term of said
underlying lease, this Lease shall continue for the balance of the term of this
Lease in accordance with its provisions. Within thirty (30) days following
execution and delivery of this Lease, the Landlord shall deliver to the Tenant
for its signature a subordination, nondisturbance and attornment agreement
between the Tenant and RCP Associates, in form and substance acceptable to RCP
Associates and otherwise consistent with the provisions of Section 13.1. Except
as otherwise expressly provided herein, the Landlord agrees to use reasonable
efforts to obtain a subordination, nondisturbance and attornment agreement from
the future holders of any underlying leases

<PAGE>   22
                                       19


in form and substance acceptable to such future holders of such underlying
leases and otherwise consistent with the provisions of Section 13.1.

                                ARTICLE FOURTEEN
                                    Notices

      14.1. Any notice, consent, approval, request, communication, bill, demand
or statement (collectively, "Notices") under this Lease by either party to the
other party shall be in writing and shall be deemed to have been duly given when
delivered personally or by overnight mail service to such other party and a
receipt has been obtained or on the third day after being mailed in a postpaid
envelope (registered or certified, return receipt requested) addressed to such
other party, which address for the Landlord shall be as above set forth and for
the Tenant shall be the Premises to the attention of John A. Levin (or the
Tenant's address as above set forth if mailed prior to the Term Commencement
Date), or if the address of such other party for notices shall have been duly
changed as hereinafter provided, if so mailed to such other party at such
changed address. Either party may at any time change the address for Notices by
a Notice stating the change and setting forth the changed address. If the term
"Tenant" as used in this Lease refers to more than one person, any Notice to any
one of such persons shall be deemed to have been duly given to the Tenant. If
and to the extent requested by the Landlord, the Tenant shall give copies of all
Notices to the Landlord to holders of underlying mortgages and underlying leases
of which the Tenant has notice.

                                 ARTICLE FIFTEEN
                            Conditions of Limitation

      15.1. This Lease and the term and estate hereby granted are subject to the
limitation that:

            (a) if the Tenant shall default in the payment of any Rent and any
      such default shall continue for ten (10) days after notice,

            (b) if the Tenant shall default in observing any provision of
      Article Three or of subsection (e) or (f) of Section 6.1 and such default
      shall continue and shall not be remedied by the Tenant within three (3)
      business days (except that, with respect to any such default of any
      provision of clause (iv) of subparagraph (e) of Section 6.1. hereof, said
      period shall be twenty-four (24) hours) after notice,

            (c) if the Tenant shall default in observing any provision of this
      Lease (other than a default of the character referred to in subsection (a)
      or (b) of this Section), and if such default shall continue and shall not
      be remedied by the Tenant within thirty (30) days after notice or, if such
      default cannot for causes beyond the Tenant's control, with due diligence
      be cured within said period of thirty (30) days, if the Tenant (i) shall
      not, promptly upon the giving of such Notice, give the Landlord notice of
      the Tenant's intention to duly institute all steps necessary to remedy
      such default, (ii) shall not duly institute and thereafter diligently
      prosecute to completion all steps necessary to remedy the same, or (iii)
      shall not remedy the same within a reasonable time after the date of the
      giving of said notice by the Landlord, which period shall in no event
      exceed ninety (90) days,

            (d) if any event shall occur or any contingency shall arise whereby
      this Lease or the estate hereby granted or the unexpired balance of the
      full term of this Lease would, by operation of law or otherwise, devolve
      upon or pass to any person, firm or corporation other than the Tenant
      (except as permitted under Article Seven), or if the Tenant shall desert
      or abandon the Premises (whether or not the keys be surrendered or the
      rent is paid),

            (e) if any other lease held by the Tenant from the Landlord or any
      affiliate of the Landlord shall expire or terminate (whether or not the
      term thereof shall then have commenced) as a result of the default of the
      Tenant

<PAGE>   23
                                       20


      thereunder or of the occurrence of an event as therein provided (other
      than by expiration of the hill term thereof or pursuant to a cancellation
      or termination option therein contained or pursuant to provisions similar
      to those contained in the first sentence of Article Ten), or

            (f) when and to the extent permitted by law, if a petition in
      bankruptcy shall be filed by or against the Tenant, or if the Tenant shall
      make a general assignment for the benefit of its creditors, or the Tenant
      shall receive the benefit of any insolvency or reorganization act, or if a
      receiver or trustee is appointed for any portion of the Tenant's property
      and such appointment is not vacated within sixty (60) days, or if an
      execution or attachment shall be issued under which the Premises shall be
      taken or occupied by anyone other than the Tenant,

then in any of said cases the Landlord may give to the Tenant a notice of
intention to end the term of this Lease, and, if such notice is given, this
Lease and the term and estate hereby granted (whether or not the term shall
theretofore have commenced) shall terminate upon the expiration of seven (7)
days from the date the notice is deemed given with the same effect as if the
last of said seven (7) days were the date originally specified as the expiration
of the full term of this Lease, but the Tenant shall remain liable for damages
as provided in this Lease or pursuant to law. If this Lease shall have been
assigned, the term "Tenant", as used in subsections (a) to (f), inclusive, of
this Section 15.1, shall be deemed to include the assignee and the assignor or
either of them under any such assignment unless the Landlord shall, in
connection with such assignment, release the assignor from any further liability
under this Lease, in which event the term "Tenant", as used in said subsections,
shall not include the assignor so released.

                                 ARTICLE SIXTEEN
                              Re-entry by Landlord

      16.1. If this Lease shall terminate under Article Fifteen, or if the
Tenant shall default in the payment of any Rent on any date upon which the same
becomes due, and if such default shall continue for five (5) days after the
Landlord shall have given to the Tenant a notice specifying such default, the
Landlord or the Landlord's agents and servants may immediately or at any time
thereafter re-enter the Premises, or any part thereof in the name of the whole,
either by summary dispossess proceedings or by any suitable action or proceeding
at law, without being liable to indictment, prosecution or damages therefor, and
may repossess the same, and may remove any persons therefrom, to the end that
the Landlord may have, hold and enjoy the Premises again as and of its first
estate and interest therein. The words "re-enter", "re-entry", and "re-entering"
as used in this Lease are not restricted to their technical legal meanings.

      16.2. If this Lease shall terminate under the provisions of Article
Fifteen or if the Landlord undertakes any summary dispossess or other proceeding
or action or other measure for the enforcement of its right of re-entry (any
such termination of this Lease or undertaking by the Landlord being a "Default
Termination"), the Tenant shall thereupon pay to the Landlord the Rent up to the
time of such Default Termination, and shall likewise pay to the Landlord all
such damages which, by reason of such Default Termination, shall be payable by
the Tenant as provided in this Lease or pursuant to law. Also in the event of a
Default Termination the Landlord shall be entitled to retain all moneys, if any,
paid by the Tenant to the Landlord, whether as advance rent or as security for
rent, but such moneys shall be credited by the Landlord against any Rent due
from the Tenant at the time of such Default Termination or, at the Landlord's
option, against any damages payable by the Tenant as provided in this Lease or
pursuant to law.

      16.3. In the event of a breach or threatened breach on the part of the
Tenant of any of its obligations under this Lease, the Landlord shall also have
the right of injunction. The specified remedies to which the Landlord may resort
under this Lease are cumulative and are not intended to be exclusive of any
other remedies or means of redress to which the Landlord may lawfully be
entitled at any time, and the Landlord may invoke any remedy allowed at law or
in equity as if specific remedies were not provided for in this Lease.

<PAGE>   24
                                       21


                                ARTICLE SEVENTEEN
                                     Damages

      17.1. If there is a Default Termination of this Lease, the Tenant will pay
to the Landlord as damages, at the election of the Landlord, either:

            (a) a sum which, at the time of such Default Termination, represents
      the then present value (such computation to be made by using the then
      prevailing rate of most recently issued bonds or notes issued by the
      United States Treasury having a maturity closest to but not exceeding the
      period commencing with the day following the date of such Default
      Termination and ending with the date originally specified as the
      expiration date of this Lease (the "Remaining Period")) of the excess, if
      any, of (1) the aggregate of the fixed rent and the additional rent under
      Article Twenty-four (if any) which, had this Lease not so terminated,
      would have been payable under this Lease by the Tenant for the Remaining
      Period over (2) the aggregate rental value of the Premises for the same
      period, or

            (b) sums equal to the aggregate of the fixed rent and the additional
      rent under Article Twenty-four (if any) which would have been payable by
      the Tenant had this Lease not terminated by such Default Termination,
      payable upon the due dates therefor specified in this Lease following such
      Default Termination and until the date originally specified as the
      expiration of this Lease; provided, that if the Landlord shall relet all
      or any part of the Premises for all or any part of the Remaining Period
      (the Landlord having no obligation to so relet the Premises), the Landlord
      shall credit the Tenant with the net rents received by the Landlord from
      such reletting, such net rents to be determined by first deducting from
      the gross rents as and when received by the Landlord from such reletting
      the expenses incurred by the Landlord in terminating this Lease and
      re-entering the Premises and of securing possession thereof, as well as
      the expenses of reletting, including altering and preparing the Premises
      for new tenants, brokers' commissions, and all other expenses properly
      chargeable against the Premises and the rental therefrom in connection
      with such reletting, it being understood that any such reletting may be
      for a period equal to or shorter or longer than said period; provided,
      further, that (i) in no event shall the Tenant be entitled to receive any
      excess of such net rents over the sums payable by the Tenant to the
      Landlord, (ii) in no event shall the Tenant be entitled, in any suit for
      the collection of damages pursuant to this subsubsection (b), to a credit
      in respect of any net rents from a reletting except to the extent that
      such net rents are actually received by the Landlord prior to the
      commencement of such suit, and (iii) if the Premises or any part thereof
      should be relet in combination with other space, then proper apportionment
      on a square foot rentable area basis shall be made of the rent received
      from such reletting and of the expenses of reletting.

      17.2. For the purposes of this Article, the amount of additional rent
which would have been payable by the Tenant under Article Twenty-four shall, for
each Computation Year (as defined in Article Twenty-four) ending after such
Default Termination, be deemed to be an amount equal to the amount of additional
rent payable by the Tenant for the Computation Year immediately preceding the
Computation Year in which such Default Termination occurs or if the Default
Termination occurs prior to the end of the first Computation Year, then the
Landlord's reasonable estimate of what additional rent would have been had the
Lease commenced one year earlier, and in either case deemed increased each year
by the percentage increase in additional rent for the immediately preceding
Computation Year over the additional rent for the twelve-month period prior
thereto or, if the Lease term did not occur throughout such prior years,
Landlord's reasonable estimate of what such increase would have been had the
term occurred during such years. Suit or suits for the recovery of any damages
payable by the Tenant, or any installments thereof, may be brought by the
Landlord from time to time at its election, and nothing in this Lease shall be
deemed to require the Landlord to postpone suit until the date when the term of
this Lease would have expired but for such Default Termination.

      17.3. Nothing in this Lease shall be construed as limiting or precluding
the recovery by the Landlord against the Tenant of any sums or damages to which,
in addition to the damages specified above, the Landlord may lawfully be
entitled by reason of any default under this Lease on the part of the Tenant.

<PAGE>   25
                                       22


                                ARTICLE EIGHTEEN
                                Waivers by Tenant

      18.1. The Tenant, for itself and all other Tenant Parties, and on behalf
of any and all persons, firms, entities and corporations claiming through or
under any Tenant Party, including, without limitation, creditors of all kinds,
does hereby waive and surrender all right and privilege which they or any of
them might have under or by reason of any present or future law to redeem the
Premises or to have a continuance of this Lease for the full term hereby demised
after the Tenant is dispossessed or ejected therefrom by process of law or under
the terms of this Lease or after the expiration or termination of this Lease as
provided in this Lease or pursuant to law. The Tenant also waives (a) the right
of the Tenant to trial by jury in any summary dispossess or other proceeding
that may hereafter be instituted by the Landlord against the Tenant with respect
to the Premises or in any action that may be brought to recover rent, damages or
other sums payable under this Lease, and (b) the provisions of any law relating
to notice and/or delay in levy of execution in case of an eviction or dispossess
of a tenant for nonpayment of rent, and of any other law of like import now or
hereafter in effect. If the Landlord commences any such summary dispossess
proceeding, the Tenant will not interpose any counterclaim of whatever nature or
description in such proceeding, other than a compulsory counterclaim.

                                ARTICLE NINETEEN
                                Tenant's Removal

      19.1. Any personal property which shall remain in any part of the Premises
after the expiration or termination of the term of this Lease with respect to
such part shall be deemed to have been abandoned, and either may be retained by
the Landlord as its property or may be disposed of in such manner as the
Landlord may see fit at the Tenant's cost; provided, that the Tenant will, upon
request of the Landlord, remove from the Building any such personal property by
the later of the expiration or termination of this Lease or thirty (30) days
after the Landlord's request.

                                 ARTICLE TWENTY
                       Elevators, Cleaning, Services, etc.

      20.1. The Landlord will, at the Landlord's sole cost and expense, (i)
supply passenger elevator service during Business Hours to each floor, above the
street floor of the Building, which is served by the Building's passenger
elevators and on which the Premises are, or any portion thereof is, located,
with one of said elevators being subject to call for such service during hours
other than Business Hours, (ii) supply an elevator for the transmission of
freight to said floor or floors during Business Hours, (iii) subject to any
applicable policies or regulations adopted by any utility or governmental
authority, supply during Business Hours in the heating season heat for the
warming of the Premises and the public portions of the Building, (iv) subject to
any applicable policies or regulations adopted by any utility or governmental
authority, supply during Business Hours air conditioning (including cooling
during the cooling season as, an the Landlord's reasonable judgment, may be
necessary) and ventilation to all portions of the Premises, if any, which are
served by the Building's air conditioning and ventilation systems, and (v) clean
any portion of the Premises which is located on a floor above the street floor
of the Building except any such portion used exclusively for preparing,
dispensing or consumption of food or beverages or as an exhibition area or
classroom or for storage, shipping room, mail room or similar purposes or which
is a toilet (other than a toilet shown on any diagram attached hereto as Exhibit
A) or a shop or is used for a trading floor or exclusively for operation of
computer, data processing, reproduction, duplicating or similar equipment. In
order for said air conditioning system to function properly, the Tenant must, to
the extent they are missing therefrom, install window blinds or shades on all
windows of the Premises and must lower and close such window blinds or shades on
all windows facing the sun whenever said air conditioning system is in operation
and the Tenant will at all times comply with all regulations and requirements
which the Landlord may reasonably prescribe for the proper functioning and
protection of said air conditioning system. No representation is made by

<PAGE>   26
                                       23


the Landlord with respect to the adequacy or fitness of such air conditioning or
ventilation to maintain temperatures that may be required for, or because of,
the operation of any computer, data processing or other equipment of the Tenant
and where air conditioning or ventilation is required for any such purpose and
the Landlord assumes no responsibility, and shall have no liability for any loss
or damage however sustained, in connection therewith. The cleaning specification
annexed hereto as Exhibit B set forth substantially the extent and scope of the
cleaning to be performed by the Landlord in the Premises as hereinabove provided
in this paragraph. Unless otherwise provided in this Lease, "Business Hours",
means the generally customary daytime business hours of the Tenant (but not
before 8:00 A.M. or after 6:00 P.M.) of days other than Saturdays, Sundays and,
as established by the Landlord, holidays. The air conditioning to be provided
during the cooling season with respect to said portions of the Premises served
by said air conditioning system shall be such as to provide a temperature of not
more than 76 degrees Fahrenheit dry bulb (plus or minus 2 degrees) and 50% (plus
or minus 5%) relative humidity when the outside temperature is not more than 93
degrees Fahrenheit dry bulb. If any one or more the following conditions apply
to a portion of the Premises, then the maintenance of the above temperature
standard shall not apply to that portion of the Premises, namely (i) average
occupancy over one person per 100 square feet, (ii) an average monthly
electrical load in excess of 4-watts per useable square foot, and/or (iii)
renovations performed by the Tenant which interfere with a properly designed
flow of cool conditioned air. When the outside temperature exceeds 93 degrees,
the air conditioning system shall be operated at full capacity but without being
required to maintain a particular temperature. At all times other than described
above, the Building's systems shall be operated by the Landlord during the
season when heat is required to maintain an average temperature of 72 degrees
Fahrenheit (plus or minus 2 degrees) throughout the Premises. The air circulated
through the ducts of the air conditioning system of the Building serving the
Premises shall consist of an average amount of fresh air to meet applicable
ventilation codes.

      20.2. The Landlord agrees that the Tenant may install a supplemental air
conditioning system in the Premises having a maximum capacity of fifteen (15)
tons subject to the terms and conditions of this Lease, including but not
limited to, the provisions of Article Thirty and Article 6.1(e). In addition,
the Landlord shall provide to the Tenant up to fifteen (15) tons of air
conditioning capacity in the form of chilled water for the Tenant's supplemental
air conditioning. If the Tenant receives chilled water, the Tenant shall pay the
Landlord's charges (as same may exist from time to time) for its actual usage
(the Landlord's current charge is $750 per ton, per year). The Tenant shall
install a meter to measure its usage in a location approved by the Landlord. The
Tenant shall also pay the Landlord's connection charge of $150 per ton, with a
minimum charge of $1,500, for such chilled water. Such Landlord charges are
subject to change at any time during the term of this Lease, any increase to be
limited to the direct pass through of any increase in the Landlord's cost for
electricity and water used to provide chilled water.

      20.3. The Landlord shall, when and to the extent reasonably requested by
the Tenant, furnish additional elevator, heating, air conditioning, ventilating
and/or cleaning services upon such reasonable terms and conditions as shall be
determined by the Landlord, including the payment by the Tenant of the
Landlord's reasonable charge therefor. The Tenant will also pay the Landlord's
reasonable charge for (a) any additional cleaning of the Premises required
because of the carelessness or indifference of any Tenant Party or because of
the nature of any Tenant Party business, and (b) the removal of any refuse and
rubbish of any Tenant Party from the Premises and the Building, except
wastepaper and similar discarded material placed by the Tenant in wastepaper
baskets and left for emptying as an incident to the Landlord's normal cleaning
of the Premises. If the cost to the Landlord for cleaning the Premises shall be
increased due to the use of any part of the Premises during hours other than
Business Hours or due to there being installed in the Premises, at the request
of or by any Tenant Party, any materials or finish other than those which are of
the standard adopted by the Landlord for the Building, the Tenant shall pay to
the Landlord an amount equal to such increase in cost.

      20.4. All or any of the elevators in the Building may, at the option of
the Landlord, be manual or automatic elevators, and the Landlord shall be under
no obligation to furnish an elevator operator or starter for any automatic
elevator, but if the Landlord shall furnish any elevator operator or starter for
any automatic elevator, the Landlord may discontinue furnishing such elevator
operator or starter.

<PAGE>   27
                                       24


      20.5. The Landlord reserves the right, without liability to the Tenant and
without constituting any claim of constructive eviction, to stop or interrupt
any heating, elevator, escalator, lighting, ventilating, air conditioning,
power, water, cleaning or other service and to interrupt the use of any Building
facilities, at such times as may be necessary and for as long as may reasonably
be required by reason of accidents, strikes, the making of repairs, alterations
or improvements, inability to secure a proper supply of fuel, steam, water,
electricity, labor or supplies, or by reason of any other cause beyond the
reasonable control of the Landlord; provided, that any such stoppage or
interruption for the purpose of making any discretionary alteration or
improvement shall be made at such times and in such manner as shall not
unreasonably interfere with the Tenant's use of the Premises; and provided,
further, that the Landlord will make all such repairs, alterations and
improvements with due dispatch subject to causes beyond the Landlord's
reasonable control. Notwithstanding anything in the foregoing provisions of this
Section 20.5, to the contrary, if due to the negligence or intentional act of
the Landlord any Essential Service which the Landlord is required to provide to
the Tenant under this Lease is interrupted for a period of fifteen (15)
consecutive business days, then, to the extent the Landlord receives insurance
proceeds for loss of rental income resulting from such interruption of an
Essential Service, (a) if the entire Premises is rendered untenantable or
otherwise cannot be used for the conduct of the Tenant's business, and (b) the
Tenant does not in fact use the entire Premises for the conduct of its business,
the Tenant shall be entitled to an abatement of the fixed rent for each day
after such fifteen (15) business day period that the entire Premises shall
remain untenantable and the Tenant does not use any portion thereof for the
conduct of its business. For the purposes of this Article, "Essential Service"
shall mean electric, heat, air conditioning, ventilation and at least one
elevator serving the Premises.

                               ARTICLE TWENTY-ONE
                    Lease Contains All Agreements-No Waivers

      21.1. This Lease contains all of the understandings relating to the
leasing of the Premises and the Landlord's obligations in connection therewith
and neither the Landlord nor any agent or representative of the Landlord has
made or is making, and the Tenant in executing and delivering this Lease is not
relying upon, any warranties, representations, promises or statements
whatsoever, except to the extent expressly set forth in this Lease. All
understandings and agreements, if any, heretofore had between the parties are
merged in this Lease, which alone fully and completely expresses the agreement
of the parties.

      21.2. The failure of the either party to insist in any instance upon the
strict keeping, observance or performance of any provision of this Lease or to
exercise any election in this Lease shall not be construed as a waiver or
relinquishment for the future of such provision, but the same shall continue and
remain in full force and effect. No waiver or modification by either party of
any provision of this Lease shall be deemed to have been made unless expressed
in writing and signed by such party. No surrender of possession of the Premises
or of any part thereof or of any remainder of the term of this Lease shall
release the Tenant from any of its obligations under this Lease unless accepted
by the Landlord in writing. The receipt and retention by the Landlord of Rent
from anyone other than the Tenant shall not be deemed a waiver of the breach by
the Tenant of any provision in this Lease, or the acceptance of such other
person as a tenant, or a release of the Tenant from its further observance of
the provisions of this Lease. The receipt and retention by the Landlord of Rent
with knowledge of the breach of any provision of this Lease shall not be deemed
a waiver of such breach.

                               ARTICLE TWENTY-TWO
                           Parties Bound; Exculpation

      22.1. The provisions of this Lease shall bind and benefit the respective
successors, assigns and legal representatives of the parties to this Lease
except that (1) no violation of the provisions of Article Seven shall operate to
vest any rights in any successor, assignee or legal representative of the Tenant
and (2) the provisions of this Article shall not be construed as modifying the
conditions of limitation contained in Article Fifteen. The obligations of the
Landlord under this Lease shall not, however, be binding upon the Landlord
herein named (or

<PAGE>   28
                                       25


any transferee of its interest in the Building or the Premises) with respect to
the period (i) subsequent to the transfer of its interest in the Building or the
Premises (a lease of the entire interest being deemed such a transfer), or (ii)
subsequent to the expiration or earlier termination of the term of any
underlying lease to which this Lease and the term and estate hereby granted may
be subject and subordinate and wherein the lessor thereunder has agreed to
recognize this Lease in case the term of said underlying lease expires or
terminates prior to the expiration or termination of the term of this Lease if
the Landlord would not then be entitled to terminate this Lease pursuant to said
Article Fifteen or to exercise any dispossess remedy provided for in this Lease
or by law; and in any such event those covenants shall, subject to Article
Thirteen, thereafter be binding upon the transferee of such interest in the
Building or the Premises or the lessor under said underlying lease, as the case
may be, until the next such transfer of such interest.

      22.2. The Tenant shall look solely to the Landlord's interest in the Land
and the Building (or the proceeds thereof) for the satisfaction of any monetary
claim under this Lease, or for the collection of any judgment (or other judicial
process) based thereon, and no other property or assets of the Landlord (or any
affiliate, shareholder, director, officer, employee, partner, agent,
representative, or beneficiary of the Landlord, disclosed or undisclosed) shall
be subject to levy, execution or other enforcement procedure for the
satisfaction of such claim or judgment (or other judicial process).

                              ARTICLE TWENTY-THREE
                    Curing Tenant's Defaults-Additional Rents

      23.1. If the Tenant shall default in the observance of any provision of
this Lease, the Landlord, without thereby waiving such default, may perform the
same for the account and at the expense of the Tenant (a) immediately or at any
time thereafter and without notice in the case of emergency or in case such
default unreasonably interferes with the use by any other tenant of any space in
the Building or with the efficient operation of the Building or will result in a
violation of any Requirement applicable to the Land, the Building or the
Premises or any part thereof, to the Tenant's use thereof or to the Tenant's
observance of any provision of this Lease, or in a cancellation of an insurance
policy maintained by the Landlord, and (b) in any other case if such default
continues after thirty (30) days from the date of the giving by the Landlord of
notice of the Landlord's intention so to perform the same, unless such default
cannot, for causes beyond the Tenant's control, with due diligence be cured
within said period of thirty (30) days and the Tenant (i) shall, promptly upon
the giving of such notice, give the Landlord notice of the Tenant's intention to
duly institute all steps necessary to remedy such default, (ii) shall duly
institute and thereafter diligently prosecute to completion all steps necessary
to remedy the same, and (iii) shall remedy the same within a reasonable time
after the date of the giving of such notice by the Landlord, which period shall
in no event exceed ninety (90) days; provided, however, notwithstanding the
provisions of clause (b) above, that if the Tenant's default constitutes a
default under any underlying lease or underlying mortgage and the lessor or
mortgagee thereof notifies the Landlord of such default, then if the cure period
afforded the Tenant extends beyond the tenth day preceding the end of the cure
period permitted to the Landlord under the underlying lease or underlying
mortgage, the Landlord may so notify the Tenant, in which event the Landlord's
right to cure the Tenant's default will commence upon such tenth day. All
reasonable costs and reasonable expenses incurred by the Landlord in connection
with any such performance by it for the account of the Tenant and all reasonable
costs and reasonable expenses, including reasonable counsel fees and
disbursements incurred by the Landlord in any action or proceeding (including
any summary dispossess proceeding) brought by the Landlord to enforce any
obligation of the Tenant under this Lease and/or right of the Landlord in or to
the Premises, shall be paid by the Tenant to the Landlord upon demand. Except as
expressly provided to the contrary in this Lease, all costs and expenses which,
pursuant to this Lease (including the rules and regulations referred to in this
Lease) are incurred by the Landlord and payable to it by the Tenant and all
charges, amounts and sums payable to the Landlord by the Tenant for any
property, material, labor, utility or other services which, pursuant to this
Lease or at the request and for the account of the Tenant, are provided,
furnished or rendered by the Landlord shall become due and payable by the Tenant
to the Landlord in accordance with the terms of bills therefor to be rendered by
the Landlord to the Tenant. If any cost, expense, charge, amount or sum referred
to in this Section or elsewhere in this Lease is not paid when due as provided
in this

<PAGE>   29
                                       26


Lease, the same shall become due by the Tenant as additional rent under this
Lease. If any Rent or damages payable under this Lease is not paid when due, the
same shall bear interest at the rate of 5% above the prime commercial rate of
The Chase Manhattan Bank (National Association) or any successor thereto for
unsecured borrowings in effect at the time, per annum (but in no event at a rate
in excess of that permitted by law) from the due date thereof until paid and the
amount of such interest shall be deemed additional rent under this Lease. If
there is a nonpayment by the Tenant of any such additional rent and/or any other
additional rent becoming due under this Lease, the Landlord, in addition to any
other right or remedy, shall have the same rights and remedies as in the case of
default by the Tenant in the payment of the fixed rent. If the Tenant is in
arrears in payment of Rent, the Tenant waives the Tenant's right, if any, to
designate the items against which any payments made by the Tenant are to be
credited, and the Landlord may apply any payments made by the Tenant to any
items the Landlord sees fit, irrespective of and notwithstanding any designation
or request by the Tenant as to the items against which any such payments shall
be credited. The Landlord reserves the right, without liability to the Tenant
and without constituting any claim of constructive eviction, to suspend
furnishing or rendering to the Tenant any property, material, labor, utility or
other service, wherever the Landlord is obligated to furnish or render the same
at the expense of the Tenant (exclusive of any service which the Landlord
furnishes for no additional charge pursuant to Article Five and Article Twenty
hereof, and exclusive of alternating electric current furnished pursuant to the
first paragraph of Article Five hereof), in the event that (but only so long as)
the Tenant is in arrears in paying the Landlord therefor at the expiration of
five (5) days after the Landlord shall have given to the Tenant notice demanding
the payment of such arrears.

                              ARTICLE TWENTY-FOUR
            Adjustments for Changes in Landlord's Costs and Expenses

      24.1. If for any Computation Year, the R.E. Tax Share of the Real Estate
Taxes shall be greater than Base Real Estate Taxes, or 110% of the O.E. Share of
the Cost of Operation and Maintenance shall be greater than 110% of the Base
COM, then the Tenant shall pay to the Landlord, as additional rent, an amount
equal to the product obtained by multiplying such excess or excesses by the
Tenant's Area.

      24.2. In order to provide for current payments on account of the
additional rent which may be payable to the Landlord pursuant to Section 24.1
for any Computation Year, the Tenant agrees to make such payments on account of
said additional rent for and during such Computation Year, as the case may be,
as follows:

            (a) With respect to Real Estate Taxes, the Tenant shall pay its
      share thereof in two semiannual installments in advance on the first day
      of June and December, each equal to the product of the Tenant's Area
      multiplied by one-half of the excess of the R.E. Tax Share of the Real
      Estate Taxes for the Tax Year in which the Landlord's corresponding tax
      payment falls over the Base Real Estate Taxes, it being understood that if
      the tax bill for the following Tax Year is not received in time to bill
      the June 1 payment, the Landlord may estimate the payment due on June 1
      based on the Landlord's estimate of the Real Estate Taxes for such
      following Tax Year. If, upon issuance of the tax bill for such following
      Tax Year, such estimated amount results in an underpayment, the Tenant
      shall pay to the Landlord the amount of the underpayment. If, upon
      issuance of the tax bill for such following Tax Year, such estimated
      amount results in an overpayment, the Landlord shall either pay to the
      Tenant an amount equal to the overpayment or permit the Tenant a credit
      for such amount against future Rent payments; provided, however, that if
      any rent abatement is then in effect pursuant to the terms and conditions
      of this Lease, and no Rent is due the Landlord from the Tenant, the
      Landlord shall pay to the Tenant the amount of any such overpayment. If
      there shall be any increase in Real Estate Taxes for any Tax Year, whether
      during or after such Tax Year, or if there shall be any decrease in the
      Real Estate Taxes for any Tax Year, whether during or after such Tax Year,
      the Tenant shall pay its share of any increase, or, to the extent the
      decrease does not reduce the RE. Tax Share of Real Estate Taxes below the
      Base Real Estate Taxes, receive its share of any decrease, substantially
      in the same manner as provided in the preceding two sentences. If during
      the term of the Lease, Real Estate Taxes are required to be paid (either
      to the appropriate taxing authorities or as a tax escrow to the holder of
      an underlying lease or an underlying mortgage), on any other date or dates
      than as presently required, then the Tenant's payments

<PAGE>   30
                                       27


      toward Real Estate Taxes shall be correspondingly accelerated or revised
      so that such payments are due at least thirty (30) days prior to the date
      payments are due to the taxing authorities or to the holder of an
      underlying lease or underlying mortgage.

            (b) With respect to Cost of Operation and Maintenance, the Tenant
      shall pay an amount each month equal to the product of the Tenant's Area
      multiplied by 1/12th of the excess of 110% of the O.E. Share of the Cost
      of Operation and Maintenance for such Computation Year as reasonably
      estimated by the Landlord over 110% of the Base COM, the installment for
      each calendar month to be due and payable upon the receipt from the
      Landlord of a bill for the same. If, as finally determined, the amount of
      additional rent payable by the Tenant to the Landlord pursuant to this
      Subsection for such Computation Year shall be greater than (resulting in
      an underpayment) or be less than (resulting in an overpayment) the
      aggregate of all the installments so paid on account to the Landlord by
      the Tenant for such Computation Year, then, promptly after the receipt of
      the bill for such Computation Year and, in performance of its obligations
      under Section 24.1, the Tenant shall, in case of such an underpayment, pay
      to the Landlord an amount equal to such underpayment or the Landlord
      shall, in case of such an overpayment, either pay to the Tenant an amount
      equal to such overpayment or permit the Tenant a credit for such amount
      against future rent payments.

      24.3. As used in this Article:

            (a) "Computation Year" shall mean each calendar year in which occurs
      any part of the term of this Lease and, in the case of a Default
      Termination of this Lease, in which would have occurred any part of the
      full term of this Lease except for such Default Termination.

            (b) "Tax Year" shall mean the twelve (12) month period commencing
      July 1 of each year, or such other twelve (12) month period as may be duly
      adopted as the fiscal year for real estate tax purposes in The City of New
      York.

            (c) "Tenant's Area" shall mean the number of square feet in the
      rentable area of the Premises.

            (d) "R.E. Tax Share" shall mean a fraction whose numerator is one
      and whose denominator is the number of square feet of the rentable area of
      the Center (excluding from such denominator the number of rentable square
      feet in any portion of the Center (i) not leased to the Tenant and for
      which Real Estate Taxes are not payable in full, or (ii) for which the
      Real Estate Taxes are payable directly in whole or in part by any person,
      firm or corporation other than the Landlord, without reimbursement by the
      Landlord or (iii) at the Landlord's election, constituting a condominium
      unit not wholly or partially leased to the Tenant); provided that the
      Landlord may elect to limit the denominator to only the number of square
      feet in the rentable area of the Building (which the Landlord advises the
      Tenant currently contains 586,370 rentable square feet determined in
      accordance with Section 1.6. hereof) if the Landlord makes a similar
      election for all buildings it owns in the Center. The Landlord advises the
      Tenant that the Center currently contains 6,784,036 rentable square feet
      (determined in accordance with Section 1.6. hereof) for purposes of
      measuring R.E. Tax Share.

            (e) "O.E. Share" shall mean a fraction whose numerator is one and
      whose denominator is the number of square feet in the rentable area of all
      buildings in the Center exclusive of the rentable area of any such
      building or any structure on any such building operated and maintained by
      and at the expense of any person, firm or corporation (other than the
      Landlord or, at Landlord's election, any affiliate of Landlord) or of any
      theater or garage located in the Center; provided that the Landlord may
      elect to limit the denominator to only the number of square feet in the
      rentable area of the Building if the Landlord makes a similar election for
      all buildings it owns in the Center. The Landlord advises the Tenant that
      the Center currently contains 7,414,055 rentable square feet for purposes
      of measuring O.E. Share (determined in accordance with in Section 1.6.
      hereof).

            (f) "Real Estate Taxes" shall mean the taxes and assessments imposed
      upon the Center (to the extent the Landlord does not make the election in
      the proviso of subsection (d) above), including without limitation
      assessments made as a result of the Center or part thereof being within a
      business improvement district (other
<PAGE>   31
                                       28


      than any interest or penalties imposed in connection therewith), and all
      expenses, including fees and disbursements of counsel and experts,
      reasonably incurred by, or reimbursable by, the Landlord in connection
      with any application for a reduction in the assessed valuation for the
      Center or for a judicial review thereof (but in no event shall expenses be
      included in Base Real Estate Taxes). If due to a future change in the
      method of taxation any franchise, income, profit or other tax shall be
      levied against the Landlord in substitution in whole or in part for or in
      lieu of any tax which would otherwise constitute a Real Estate Tax, such
      franchise, income, profit or other tax shall be deemed to be a Real Estate
      Tax for the purposes of this Lease. Real Estate Taxes shall not include
      any portion thereof (i) allocable to an area not leased to the Tenant and
      for which what would otherwise be Real Estate Taxes are not payable in
      full (ii) payable directly, in whole or in part, by a person, firm, entity
      or corporation other than the Landlord, without reimbursement by the
      Landlord, or (iii) allocable to a condominium unit that the Landlord
      elects pursuant to clause (d) above to exclude from the calculation of
      R.E. Tax Share.

            (g) "Cost of Operation and Maintenance" shall mean the actual cost
      incurred by the Landlord or its affiliates with respect to the ownership,
      operation, maintenance and repair of the Center (to the extent the Center
      is included in the calculation of O.E. Share, it being understood that if
      less than the entire Center is included in such calculation, then Cost of
      Operation and Maintenance shall include a portion of the common area
      expenses of the Center in the same proportion as the rentable area of the
      building or buildings included in the calculation of O.E. Share bears to
      the aggregate rentable area in all buildings in the Center) and the curbs
      and sidewalks adjoining the same, including, without limitation, the cost
      incurred for air conditioning; mechanical ventilation; heating; interior
      and exterior cleaning; rubbish removal; window washing (interior and
      exterior, including inside partitions); elevators; escalators; hand tools
      and other moveable equipment to the extent same are not required to be
      capitalized in accordance with good accounting practice; porter and matron
      service; electric current, steam, water and other utilities; association
      fees and dues, other than to political organizations or parties;
      protection and security service; repairs; maintenance; compliance with any
      Preservation Agreement to the extent same are not required to be
      capitalized in accordance with good accounting practice; fire, extended
      coverage, boiler, sprinkler, apparatus, rental income, public liability
      and property damage insurance; supplies; wages, salaries, disability
      benefits, pensions, hospitalization, retirement plans and group insurance
      respecting service and maintenance employees, building superintendents,
      concierges, managers, their assistants and clerical staffs, and persons
      engaged in supervision of the foregoing; uniforms and working clothes for
      such employees and the cleaning thereof; expenses imposed pursuant to any
      collective bargaining agreement with respect to such employees; payroll,
      social security, unemployment and other similar taxes with respect to such
      employees; sales, use and other similar taxes; vault charges; franchise
      fees payable in connection with the concourse levels of the Center; water
      rates; sewer rents; charges of any independent contractor who does any
      work with respect to the operation, maintenance and repair of the Center
      and the curbs and sidewalks adjoining the same; legal, accounting and
      other professional fees; decorations; and the annual depreciation or
      amortization over the useful life thereof of costs, including financing
      costs, incurred for any equipment, device or other capital improvement
      made or acquired which is either intended as a laborsaving measure or to
      effect other economies in the operation, maintenance or repair of the
      Center and said curbs and sidewalks (but only to the extent that the
      annual benefits anticipated to be realized therefrom are reasonably
      related to the annual amount to be amortized) or which is required by any
      Requirement; provided, that the term "Cost of Operation and Maintenance"
      shall not include (1) Real Estate Taxes, special assessments, franchise
      taxes or taxes imposed upon or measured by the income or profits of the
      Landlord, (2) except for depreciation and amortization specifically
      provided for in this subsection, the cost of any item which is, or should
      in accordance with good accounting practice be, capitalized on the books
      of the Landlord, (3) the cost of any electricity furnished to the Premises
      or any other space in the Center demised to other tenants, (4) the cost of
      any work or service performed for any tenant of space in the Center
      (including the Tenant) at such tenant's cost and expense, (5) any costs
      incurred with respect to any theater or garage located in the Center, (6)
      management fees, if such fees are in excess of independent management
      agents' fees customary in the City of New York for first class office
      buildings, (7) any legal fees, brokerage expenses, advertising expenses or
      renting commissions incurred in leasing space, (8) any interest on or
      amortization of any indebtedness of the Landlord for borrowed money, (9)
      any rent payable under any underlying lease, (10) any cost to the extent
      that the Landlord is reimbursed for such costs (other than through the
      payment of rent), (11) the costs of subdivision, layout and finish of any
      space in the Center performed in connection with the

<PAGE>   32
                                       29


      occupancy of such space by a new tenant or in connection with a renewal of
      a new lease for such space with the existing tenant thereof, (12) any
      fines or penalties assessed against the Landlord as a result of any
      governmental authority, (13) any costs incurred by the Landlord as a
      result of the gross negligence, willful misconduct or wrongful acts of any
      of its employees, or (14) the cost of any salary payable to, or the cost
      of any fringe benefits in connection with, the Chairman of the Board, the
      President, or any Vice President (other than any Senior Vice President in
      the Operating Division) of the Landlord and their respective secretaries.
      If during any period for which the Cost of Operation and Maintenance is
      being computed the Landlord is not for all or any part of such period
      furnishing any particular work or service (the cost of which if performed
      by the Landlord would constitute a Cost of Operation and Maintenance) to a
      portion of the Center due to the fact that such portion is not leased to a
      tenant or that the Landlord is not obligated to perform such work or
      service in such portion, then the amount of the Cost of Operation and
      Maintenance for such period shall be deemed, for the purposes of this
      Article, to be increased by an amount equal to the additional Cost of
      Operation and Maintenance which would reasonably have been incurred during
      such period by the Landlord if it had furnished such work or service.

            (h) "Base Real Estate Taxes" shall mean the R.E. Tax Share of the
      Real Estate Taxes for the Tax Year beginning on July 1, 1994 and ending on
      June 30, 1995.

            (i) "Base COM" shall mean the O.E. Share of the Cost of Operation
      and Maintenance for the Computation Year beginning on January 1, 1994 and
      ending on December 31, 1994.

      24.4. If the term commencement date shall be a day other than a January 1
or the date fixed for the expiration of the full term of this Lease shall be a
day other than December 31, or if there is any abatement of the fixed rent
payable under this Lease (other than any abatement under Article One hereof) or
any termination of this Lease (other than a Default Termination), or if there is
any increase or decrease in the Tenant's Area, then in each such event in
applying the provisions of this Article with respect to any Tax Year or
Computation Year in which such event occurred, appropriate adjustments shall be
made to reflect the result of such event on a basis consistent with the
principles underlying the provisions of this Article, taking into consideration
(i) the portion of such Tax Year or Computation Year, as the case may be, which
shall have elapsed prior to or after such event, (ii) the rentable area of the
Premises affected thereby, and (iii) the duration of such event.

      24.5. The Tenant shall not (and hereby waives any and all rights it may
now or hereafter have to) institute or maintain any action, proceeding or
application in any court or other body having the power to fix or review
assessed valuations, for the purpose of reducing the Real Estate Taxes.

      24.6. In the event the Landlord fails to bill the Tenant for Tenant's
share of Real Estate Taxes or Cost of Operation and Maintenance by the time such
amounts would otherwise be due and payable hereunder, the Tenant shall pay the
amount most recently billed for the item in question, subject to subsequent
adjustment to reflect the correct amount due. In the event of an overpayment by
the Tenant hereunder, the Landlord shall refund any excess payment made by the
Tenant promptly after the correct amount due is determined.

      24.7. When requested by the Tenant within one hundred twenty (120) days
following the receipt by it of any Escalation Statement, the Landlord, in
substantiation of its determination of the amounts set forth in said Escalation
Statement, will furnish to the Tenant such additional information as reasonably
may be required for such purpose, and, as may be necessary for the verification
of such information; it being expressly understood that (i) the Landlord shall
be under no duty to preserve any such records, or any data or material related
thereto, beyond such time as shall be its customary practice with respect
thereto, and (ii) the Tenant shall covenant and agree to keep such information
confidential for its use only for the purposes stated herein. For purposes of
this Article, "Escalation Statement" shall mean a final statement setting forth
the amount payable by the Tenant or the Landlord, as the case may be, for a
specified Computation Year pursuant to this Article.

<PAGE>   33
                                       30


                               ARTICLE TWENTY-FIVE
                                  Miscellaneous

      25.1. If the Landlord shall consent to the omission or removal of any part
of, or the insertion of any door (other than to a public corridor) or other
opening in, any wall separating the Premises from other space adjoining the
Premises, then (a) the Tenant shall be deemed to have assumed responsibility for
all risks (including, without limitation, damage to, or loss or theft of,
property) incident to the use of said door or other opening or the existence
thereof (unless due to the Landlord's gross negligence or willful misconduct),
and shall indemnify and save the Indemnitees harmless from and against any
claim, demand or action for, or on account of, any such loss, theft or damage,
and (b) upon the expiration or termination of this Lease or any lease of said
adjoining space, the Landlord may enter the Premises and close up such door or
other opening by erecting a wall to match the wall separating the Premises from
said adjoining space, and the Tenant shall pay the reasonable cost thereof and
such work may be done during Business Hours and while the Tenant is in occupancy
of the Premises and the Tenant shall not be entitled to any abatement of fixed
rent or other compensation on account thereof; provided, that nothing shall be
deemed to vest the Tenant with any right or interest in, or with respect to,
said adjoining space, or the use thereof, and the Tenant hereby expressly waives
any right to be made a party to, or to be served with process or other notice
under or in connection with, any proceeding which may hereafter be instituted by
the Landlord for the recovery of the possession of said adjoining space.

      25.2. Without incurring any liability to the Tenant, the Landlord may
permit access to the Premises and open the same, whether or not the Tenant shall
be present, upon demand of any receiver, trustee, assignee for the benefit of
creditors, sheriff, marshal or court officer entitled to, or reasonably
purporting to be entitled to, such access for the purpose of taking possession
of, or removing, the Tenant's property or for any other purpose (but this
provision and any action by the Landlord hereunder shall not be deemed a
recognition by the Landlord that the person or official making such demand has
any right or interest in or to this Lease, or in or to the Premises), or upon
demand of any representative of the fire, police, building, sanitation or other
department of the city, state or federal government.

      25.3. If an excavation shall be made upon any land adjacent to the
Building, or shall be authorized to be made, the Tenant shall afford to the
person causing or authorized to cause such excavation a license to enter upon
the Premises for the purpose of doing such work as said person shall deem
necessary to preserve the Building from injury or damage, all without any claim
for damages or indemnity against the Landlord or diminution or abatement of
rent.

      25.4. The Tenant shall not be entitled to exercise any right of
termination or other option granted to it by this Lease at any time when the
Tenant is in default beyond any applicable notice and grace periods under this
Lease. With respect to any such exercise, time shall be of the essence.

      25.5. The headings of the Articles of this Lease are for convenience only
and are not to be considered in construing said Articles.

      25.6. As used in this Section, the term "facility" means stores,
restaurants, cafeterias, rest rooms, and any other facility of a public nature
in the Building. The Tenant will not discriminate by segregation or otherwise
against any person or persons because of race, creed, color, sex (except as
appropriate in the case of rest rooms) or national origin in furnishing, or by
refusing to furnish, to such person or persons the use of any facility in the
Premises, including any and all services, privileges, accommodations, and
activities provided thereby. The Tenant's noncompliance with the provisions of
this Section shall constitute a material breach of this Lease. In the event of
such noncompliance, the Landlord may take appropriate action to enforce
compliance, may terminate this Lease in accordance with the provisions of this
Lease, or may pursue such other remedies as may be provided by law. In the event
of termination, the Tenant shall be liable to the Landlord for damages in
accordance with the provisions of this Lease.

<PAGE>   34
                                       31


      25.7. If the Tenant holds-over in the Premises after the expiration or
termination of this Lease without the consent of the Landlord, the Tenant shall:

            (a) pay as hold-over rental for each month of the hold-over tenancy
      an amount equal to the greater of (i) one and one-half times the fair
      market rental value of the Premises for such month (as reasonably
      determined by Landlord) or (ii) one and one-half times the Rent which
      Tenant was obligated to pay for the month immediately preceding the
      expiration or termination of this Lease;

            (b) be liable to the Landlord for (i) any payment or rent concession
      which Landlord may be required to make to any tenant obtained by the
      Landlord for all or any part of the Premises (a "New Tenant") in order to
      induce such New Tenant not to terminate its lease by reason of the
      holding-over by the Tenant and (ii) the loss of the benefit of the bargain
      if any New Tenant shall terminate its lease by reason of the holding-over
      by the Tenant; and

            (c) indemnify the Landlord against all claims for damages by any New
      Tenant.

      No holding-over by the Tenant, nor the payment to the Landlord of the
amounts specified above, shall operate to extend the term of this Lease.

      25.8. Any obligation of the Landlord or the Tenant which by its nature or
under the circumstances can only be, or by the provisions of this Lease may be,
performed after the expiration or earlier termination of this Lease, and any
liability for a payment which shall have accrued to or with respect to any
period ending at the time of such expiration or termination, unless expressly
otherwise provided in this Lease, shall survive the expiration or earlier
termination of this Lease.

      25.9. If any provision of this Lease or the application thereof to any
person or circumstance shall, to any extent, be invalid or unenforceable, the
remainder of this Lease, or the application of such provision to persons or
circumstances other than those as to which it is invalid or unenforceable, shall
not be affected thereby, and each provision of this Lease shall be valid and be
enforced to the fullest extent permitted by law.

      25.10. Notwithstanding anything to the contrary herein contained, no term
or provision of this Lease which may be or become inconsistent with the
provisions of Section 9-1.1 of the Estates, Powers and Trusts Law of the State
of New York, or any successor thereto in effect during the term of this Lease,
shall be operative following twenty-one years after the death of the last to die
of those descendants of John D. Rockefeller, Sr. in being on the date of this
Lease.

      25.11. It is the intention of the Landlord and the Tenant to create the
relationship of landlord and tenant, and no other relationship whatsoever, and
nothing herein shall be construed to make the Landlord and the Tenant partners
or joint venturers, or to render either party hereto liable for any of the debts
or obligations of the other party.

      25.12. The Landlord and the Tenant acknowledge that (i) improvements
(including Fixtures) made or installed by the Tenant in the Premises do not
constitute consideration for the granting of this Lease to the Tenant and (ii)
there has been no adjustment in the fixed or additional rent payable under this
Lease on account of such improvements (including Fixtures).

      25.13. If there is any payment required to be made by the Tenant under
this Lease for which no time period is stated within which the payment must be
made, such payment shall be made within thirty (30) days after demand by the
Landlord.

<PAGE>   35
                                       32


                               ARTICLE TWENTY-SIX
                                    Security

      26.1. The Tenant shall at all times maintain on deposit with the Landlord
cash in the amount of $131,502.00 as security for the full and faithful
keeping, observance and performance of all of the provisions of this Lease
provided to be kept, observed or performed by the Tenant (expressly including,
without being limited to, the payment as and when due of the Rent and any other
sums or damages payable by the Tenant under this Lease) and the payment of any
and all other damages for which the Tenant shall be liable by reason of any act
or omission contrary to any of said provisions. If the Landlord invests the
deposit, any interest earned thereon, less the Landlord's reasonable
administrative fee associated with holding and investing the deposit (which in
no event shall exceed one-half of one percent (.5%)), shall be deemed added to
the deposit to be held as additional security hereunder and shall be treated the
same as the initial deposit. If at any time the Tenant shall be in default in
the payment of any Rent and/or any other sums or damages or shall otherwise be
in default in the keeping, observance or performance of any of the provisions of
this Lease, then at the Landlord's election, the cash on deposit with it as
aforesaid may be applied by the Landlord to the payment of the Rent, other sums
or damages in respect to which the Tenant is so in default and/or, if the Tenant
is otherwise in default in the keeping, observing or performing as aforesaid of
any of the provisions of this Lease, said cash on deposit may be applied by the
Landlord to the payment of such costs and expenses as the Landlord shall incur
in curing any such default without relieving the Tenant of its obligation to the
extent such amount applied is inadequate. If at any time the Landlord is
required to return or repay to the Tenant, for any reason in connection with the
bankruptcy or insolvency of the Tenant, any fixed rent, additional rent and/or
any other sums paid by the Tenant to the Landlord under the Lease, then, at the
Landlord's election, the security may be applied by the Landlord to offset such
return or repayment. If as a result of any such application, the amount of cash
on deposit with the Landlord shall at any time be less than that hereinabove
specified, the Tenant shall forthwith deposit with the Landlord additional cash
in an amount equal to the deficiency. If, at the expiration or earlier
termination of this Lease, all of said Rent other sums or damages, costs and
expenses shall have been paid by the Tenant to the Landlord and the Tenant shall
not be in default in the keeping, observance or performance of any other
provision of this Lease, then the Landlord shall return to the Tenant all, or
such part of the cash, if any, then on deposit with the Landlord pursuant to
this Section 26.1.

      26.2. In lieu of maintaining on deposit with the Landlord cash as
aforesaid, the Tenant may maintain with the Landlord a clean, unconditional
irrevocable letter of credit issued by a New York clearing house bank in the
amount of $131,502.00 drawable upon by the Landlord, either in partial draws or
in one full draw, at any time when cash on deposit with it as aforesaid might
and to the extent could have been applied by the Landlord pursuant to the first
paragraph of this Article upon the delivery to said bank of the Landlord's
certificate to such effect, and otherwise containing terms and conditions
satisfactory to the Landlord. The Landlord shall use any amount so drawn in
accordance with said first paragraph. If at any time the sum of the amount
drawable pursuant to said letter of credit plus any cash on deposit with the
Landlord pursuant to this Article shall be less than the amount of $131,502.00,
the Tenant agrees forthwith to deposit with the Landlord a new letter of credit
complying herewith or cash equal to such deficiency.

      26.3. If any letter of credit so maintained with the Landlord provides
that the amount drawable pursuant to said letter of credit shall cease to be
available on a date prior to November 30, 2004, the Tenant shall, at least 30
days prior to the date specified in said letter of credit as being the date on
which such drawable amount will cease to be available, either furnish to the
Landlord a renewal or extension of said letter of credit, a new letter of credit
complying herewith, or deposit with the Landlord such amount of cash as shall,
when added to any cash then on deposit with the Landlord, equal the amount of
$131,502.00. Failure to comply with the provisions of the preceding sentence
prior to the commencement of said 30-day period shall be deemed to be a default
under this Lease and the Landlord may, at any time during said 30-day period,
draw upon such letter of credit and retain as security hereunder the amount so
drawn.

      26.4. All amounts deposited by the Tenant with the Landlord pursuant to
this Article shall, at all times prior to their application as provided in this
Article, be maintained on deposit by the Landlord in an interest bearing

<PAGE>   36
                                       33


account in a federally insured (a) commercial bank, (b) savings bank or (c)
savings and loan association, and, so long as the Tenant is not in default in
the due keeping, observance or performance of any of the terms and conditions of
this Lease, the Landlord will remit the interest accrued thereon to the Tenant
at least once each year.

                              ARTICLE TWENTY-SEVEN
                              Brokerage Commission

      27.1. The Tenant represents that the only broker with which it has dealt
in connection with this Lease is Rockefeller Center Management Corporation. The
Tenant shall indemnify and save harmless the Indemnitees from and against all
liability, claims, suits, demands, judgments, costs, interest and expenses
(including reasonable counsel fees and disbursements incurred in the defense
thereof) to which the Indemnitees may be subject or suffer by reason of any
claim made by any person, firm or corporation other than the aforementioned
broker for any commission, expense or other compensation as a result of the
execution and delivery of this Lease or the demising of the Premises by the
Landlord to the Tenant pursuant to this Lease.

      27.2. The Landlord shall pay any brokerage commission due to Rockefeller
Center Management Corporation by reason hereof pursuant to the provisions of a
separate agreement, if any.

                              ARTICLE TWENTY-EIGHT
                                 Quiet Enjoyment

      28.1. If, and so long as, the Tenant performs each and every provision in
this Lease on the part of the Tenant to be performed, the Tenant shall quietly
enjoy the Premises without hindrance or molestation by the Landlord or by any
other person lawfully claiming the same, subject, however, to the provisions of
this Lease and to the Qualified Encumbrances.

                               ARTICLE TWENTY-NINE
                              Hazardous Substances

      29.1. The Tenant shall not (i) cause or permit to be brought to the
Building, the Land or the Center any hazardous substances, (ii) cause or permit
the storage or use of hazardous substances in any manner not permitted by any
Requirements applicable to the Land, the Building or the Premises or any part
thereof, to the Tenant's use thereof or to the Tenant's observance of any
provision of this Lease, or (iii) cause or permit the escape, disposal or
release of any hazardous substances on or in the vicinity of the Building, Land
or Center; provided, that nothing herein shall prevent the Tenant's use of any
hazardous substances customarily used in the ordinary course of office work if
such use is for such ordinary course of office work and is in accordance with
all Requirements applicable to the Land, the Building or the Premises or any
part thereof, to the Tenant's use thereof or to the Tenant's observance of any
provision of this Lease.

      29.2. "Hazardous substances" are (i) any "hazardous wastes" as defined by
the Resource, Conservation and Recovery Act of 1976 (42 U.S.C. Section 6901 et
seq.), as amended, and regulations promulgated thereunder; (ii) any "hazardous,
toxic or dangerous waste, substance or material" specifically defined as such in
(or for purposes of) the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. Section 9601 et seq.) as amended, and
regulations promulgated thereunder; and (iii) any hazardous, toxic or dangerous
chemical, biological or other waste, substance or material as defined in any
so-called "superfund" or "superlien" law or any other federal, state or local
statute, law, ordinance, code, rule, regulation, order or decree regulating,
relating to or imposing liability or standards of conduct concerning such waste,
substance or material; including, without limiting the generality of the
foregoing, asbestos, radon, urea formaldehyde, polychlorinated biphenyls, and
petroleum products including gasoline, fuel oil, crude oil and various
constituents of such

<PAGE>   37
                                       34


products. Without limiting the generality of Section 6.1(j) hereof, the Tenant
agrees that the covenants and warranties contained in this Article are included
within the matters as to which the Indemnitees shall be indemnified pursuant to
said Section 6.1(j).

      29.3. The covenants contained in this Article shall survive the expiration
or earlier termination of this Lease.

                                 ARTICLE THIRTY
                                 Work by Tenant

      30.1. The Tenant shall, not less than thirty (30) days prior to the term
commencement date, submit to the Landlord, for the Landlord's review and
consent, complete architectural, electrical and mechanical working drawings and
specifications and sample boards showing the proposed renovation of the Premises
(herein called "the Work Area") as desired by the Tenant and in keeping with the
landmark status of, and consistent with the design, construction and equipment
of the Building and the Center and in conformity with its standards, all in such
form and in such detail as may be reasonably required by the Landlord. In the
event the Tenant removes, or materially alters fifty percent (50%) or more of
the ceiling area in the Work Area in connection with such renovation, the Tenant
shall provide and install a sprinkler system for the Work Area in full
compliance with Local Law 5/1973, as amended (hereafter "Local Law 5"); except
for the sprinkler tap to the Premises and the sprinkler loop therein, both of
which shall be provided and installed by the Landlord after the term
commencement date, and otherwise subject to Article Two, at the Landlord's sole
cost and expense. The working drawings, specifications and sample boards to be
submitted to the Landlord as aforesaid shall be prepared by a competent
architect licensed in the State of New York (in consultation with a competent
engineer licensed in the State of New York where required by the nature of the
work), reasonably satisfactory to the Landlord, who shall be engaged by the
Tenant and who, at the Tenant's expense, shall furnish all architectural and
engineering services necessary, including, without limitation, hydraulic
calculations, for the preparation of said working drawings, specifications and
sample boards and in connection with securing the aforesaid consent thereof by
the Landlord and with the securing by the Tenant of such consents as by reason
of the nature of the work shown on said working drawings, specifications and
sample boards, may be required from the Department of Buildings of the City of
New York and any other governmental or quasi-governmental authorities,
including, without limitation, Landmarks Preservation Commission of the City of
New York.

      30.2. If the Landlord shall not consent to any working drawing,
specification or sample board as submitted by the Tenant, the Landlord shall
with reasonable promptness, but in any event within twenty (20) business days of
the Landlord's receipt of such drawings or specifications, notify the Tenant
thereof and of the particulars of such revisions therein as are reasonably
required by the Landlord for the purpose of obtaining its said consent and as
promptly as reasonably possible after being so informed by the Landlord, the
Tenant shall submit to the Landlord, for the Landlord's consent (which consent
shall not be unreasonably withheld or delayed), a working drawing, specification
or sample board, as the case may be, incorporating such revisions or
incorporating such modifications thereto as are suggested by the Tenant and
approved by the Landlord (said working drawings and specifications, as so
consented to, being herein called "the Working Drawings"). Any such consent by
the Landlord shall not be deemed to be a representation or warranty that the
same is properly designed to perform the function for which it is intended or
complies with any applicable Requirement, but only that the work required
thereby is compatible with the design and structure of the Building.

      30.3. Such renovation shall be performed in accordance with, and subject
to all of the terms and conditions of this Lease (including, but not limited to,
subparagraph (e) of Section 6.1 hereof except that the Tenant shall not be
obligated to pay to the Landlord the Landlord's charges for supervising such
renovation). Upon the consent by the Landlord of the Working Drawings, the
Tenant shall proceed with due dispatch to cause the work as shown on such
Working Drawings to be completed at the Tenant's sole cost and expense.

      30.4. The workmen and the contractors performing the work and the manner,
terms and conditions upon which the same is performed shall be satisfactory to
and approved by the Landlord and such workmen and

<PAGE>   38
                                       35


contractors shall be approved or disapproved by the Landlord within the same
time and in the same manner as the Landlord approves or disapproves the Working
Drawings. The work shall at all times comply with (a) all applicable
Requirements having jurisdiction with respect thereto, and (b) with the
reasonable rules, regulations and guidelines of the Landlord pertaining to the
performance thereof.

      30.5. Within thirty (30) days after substantial completion of the work,
the Tenant shall deliver to the Landlord (i) copies of paid receipts certified
by an officer of the Tenant, (ii) general releases and waivers of lien from all
consultants, contractors, subcontractors and materialmen involved in the
performance of the work and the materials furnished in connection therewith,
(iii) a certificate from the Tenant's architect certifying that the work has
been completed in accordance with this Lease, all applicable rules and
regulations of the Landlord, all Requirements and the Working Drawings, and (iv)
record drawings and specifications of the Premises reflecting the renovation as
provided in clause (iv), subparagraph (e) of Section 6.1. Notwithstanding the
foregoing, but in all events subject to the Tenant's obligation to keep the
Premises and the Building free of liens, the Tenant shall not be required to
deliver to the Landlord any general release or waiver of lien, as required by
the preceding sentence, if the Tenant shall be disputing in good faith the
payment which would otherwise entitle the Tenant to such release or waiver,
provided that the Tenant shall keep the Landlord advised in a timely fashion of
the status of any such dispute and the basis therefor and the Tenant shall
deliver to the Landlord the general release or waiver of lien when any such
dispute is settled.

      30.6. The Landlord agrees that upon receipt by it of evidence satisfactory
to it (as provided in Section 30.5. above) of the completion of such work in a
manner reasonably satisfactory to the Landlord, and upon the furnishing by the
Tenant to the Landlord of the evidence (as provided in Section 30.5. above) of
the payment therefor by the Tenant, the Landlord shall reimburse to the Tenant
the lesser of (i) the payment of the actual cost of such work, or (ii)
$75,000.00.

                               ARTICLE THIRTY-ONE
                                   Sprinklers

      31.1. If during the initial renovation of the Work Area the Tenant does
not remove or materially alter the ceiling as described in Section 30.1. hereof
and provide and install a sprinkler system in the Work Area as provided therein,
then, in the event the Tenant at anytime thereafter during the term of this
Lease removes or materially alters fifty percent (50%) or more of the ceiling in
the Work Area, the Tenant shall provide and install a sprinkler system for the
Work Area. Such installation shall be performed in accordance with and subject
to all of the terms and conditions of this Lease (including but not limited to
Article Six hereof). The Landlord will, subject to Article Two, be responsible
for providing and installing a sprinkler tap to the Work Area and a sprinkler
loop therein, at its sole cost and expense which sprinkler tap and loop shall be
connected to the Building's base building water supply system.

      31.2. The Tenant agrees to permit the Landlord to enter the Work Area in
order to install the sprinkler tap and sprinkler loop and the Landlord may do
such work during Business Hours while the Tenant is in occupancy of the Work
Area. The Tenant shall not be entitled to any abatement of fixed rent or other
compensation by reason thereof.

                               ARTICLE THIRTY-TWO
                           Asbestos Removal by Tenant

      32.1. The Landlord shall, prior to the term commencement date, cause to be
conducted at its cost and expense, by a licensed inspector selected by the
Landlord an inspection for the purpose of detecting the presence of asbestos in
the Work Area. Upon the completion of such inspection the Landlord shall submit
a copy of the inspection report to the Tenant.

<PAGE>   39
                                       36


      32.2. In the event that the asbestos inspection report indicates that
asbestos removal is required, the Tenant shall submit to the Landlord, for the
Landlord's approval, complete specifications detailing the proposed asbestos
removal from the Work Area, consistent with the design, construction and
equipment of the Building and in conformity with its standards, all in such form
and in such detail as may be reasonably required by the Landlord. In no event
shall any such specifications include removal of asbestos from the Building's
core or perimeter, from behind perimeter heating units or from shafts, columns,
beams or wet stacks, if any. The specifications to be submitted to the Landlord
as aforesaid shall be prepared by a competent engineer licensed in the State of
New York, reasonably satisfactory to the Landlord, who shall be engaged by the
Tenant and who, at the Tenant's expense, shall furnish all architectural and
engineering services necessary for the preparation of said specifications and in
connection with securing the aforesaid approval thereof by the Landlord and with
the securing by the Tenant of such approvals as by reason of the nature of the
work shown on said specifications, may be required from the Department of
Buildings of the City of New York and any other governmental authorities. The
Tenant shall furnish three estimates from qualified contractors of the proposed
cost of the asbestos removal along with the specifications licensed in the State
of New York to perform such asbestos removal.

      32.3. Should the Landlord not accept any estimate or specifications as
submitted by the Tenant, the Landlord shall, with reasonable promptness, notify
the Tenant thereof and of the particulars of such revisions therein as are
reasonably required by the Landlord for the purpose of obtaining its said
approval and as promptly as reasonably possible after being so informed by the
Landlord the Tenant shall submit to the Landlord, for the Landlord's approval
(which approval shall not be unreasonably withheld), a revised estimate
acceptable to the Landlord and/or a specification, as the case may be,
incorporating such revisions or incorporating such modifications thereto as are
suggested by the Tenant and approved by the Landlord (said specifications, as so
approved, being herein called "the Specifications"). Any such approval by the
Landlord shall not be deemed to be a representation or warranty that the same is
properly designed to perform the function for which it is intended or complies
with any Requirements, but only that the work required thereby will not
interfere with the systems of the Building and is compatible with the design and
structure of the Building.

      32.4. Such removal shall be performed in accordance with, and subject to
all of the terms and conditions of this Lease (including, but not limited to,
Article Six hereof). Upon the approval by the Landlord of the Specifications and
the revised estimate, the Tenant shall proceed with due dispatch to cause the
work as shown on such approved Specifications to be properly supervised,
monitored and completed at the Tenant's sole cost and expense.

      32.5. The Landlord agrees that upon receipt by it of evidence satisfactory
to it of the completion of such work by the Tenant in a manner satisfactory to
the Landlord and upon the furnishing by the Tenant to the Landlord of (i) the
discharge of any lien filed in connection with such work, and (ii) certificates
issued by a licensed independent testing laboratory (other than the entity
performing the asbestos removal) indicating the satisfactory removal of
asbestos; the Landlord shall reimburse to the Tenant that amount which is the
lesser of (a) the estimate as approved by the Landlord, subject to any change
orders approved by the Landlord, or (b) the actual cost to the Tenant of such
work.

                              ARTICLE THIRTY-THREE
                              Termination by Tenant

      33.1. The Tenant may, effective as of September 30, 1999, elect to
terminate this Lease and the term and estate hereby granted (the "Termination
Date"), by giving to the Landlord notice thereof on or prior to September 30,
1998, as to which date time is of the essence. The Tenant shall also be required
in connection with such termination to make a Termination Payment to the
Landlord concurrent with the giving of such notice. For purposes of this
Article, "Termination Payment" shall mean $628,346.25.

      33.2. In the event of the giving of such notice and the making as
aforesaid of the Termination Payment, this Lease and the term and estate hereby
granted (unless the same shall have expired sooner pursuant to any of the

<PAGE>   40
                                       37


other conditions of limitation or provisions of this Lease or pursuant to law)
shall terminate on the Termination Date with the same effect as if the
Termination Date were the date hereinbefore specified for the expiration of the
full term granted by this Lease. The Tenant shall terminate its occupancy of the
Premises not later than the Termination Date and the fixed rent hereunder shall
be apportioned as of such date.

      33.3. With respect to the foregoing termination, the Tenant shall complete
and timely submit all returns and questionnaires relating to New York City and
State real property transfer tax laws and any other applicable real property
transfer or gains tax laws (the taxes which are the subject of such laws are
hereinafter collectively called "Transfer Taxes"). The Tenant shall timely pay
all Transfer Taxes, if any, and shall deliver evidence, reasonably acceptable to
the Landlord, of such payment simultaneously to the Landlord. The Tenant shall
indemnify and hold harmless the Landlord from all losses, liabilities, interest,
judgments, suits, demands, damages, costs and expenses (including attorneys'
fees and disbursements incurred in the defense thereof) which the Landlord may
incur by reason of the Tenant's failure to complete and timely submit any and
all Transfer Tax returns and questionnaires and/or the Tenant's failure to
timely pay any and all Transfer Taxes. The provisions of this paragraph shall
survive the expiration of the Lease.

                               ARTICLE THIRTY-FOUR
                                   Extra Space

      34.1. The parties agree and understand that all of the space on the 24th
and 26th floors of the Building (all or any part of such space hereinafter
called an "Extra Space") is currently vacant. After the Landlord completes the
initial leasing of all or any part of the Extra Space, and if this Lease shall
at the time be in full force and effect and the term hereof shall not have
expired or terminated, the Landlord will not enter into a lease with any other
person, firm or corporation covering the demise of any Extra Space until a
period of thirty (30) days shall have elapsed after the Landlord shall have
notified the Tenant that such Extra Space is or will be available for leasing.
The Landlord agrees that, if so requested by the Tenant, it will negotiate in
good faith with the Tenant during said period of thirty (30) days for the
leasing of such Extra Space to the Tenant upon terms mutually satisfactory to
the Landlord and the Tenant, which shall, with the exception of the financial
terms, be substantially the terms and conditions of this Lease. If such mutually
satisfactory terms with respect to any Extra Space have not been agreed to by
the Landlord and the Tenant in a written agreement, fully executed and
unconditionally delivered by both parties by the end of such period of thirty
(30) days, then the Landlord shall have no further obligation to the Tenant with
respect to such Extra Space.

      34.2. Notwithstanding anything hereinbefore contained to the contrary, the
Extra Space shall not be deemed to be available for leasing to the Tenant if (i)
the Landlord renews or extends, in whole or in part, the then existing lease
covering the Extra Space or leases all or any part of the Extra Space to the
then present lessee of the Extra Space, or (ii) the Extra Space has been
previously offered to the Tenant and the Tenant has not exercised such option or
the Landlord and the Tenant failed to achieve mutually satisfactory terms with
respect to a prior offer of the Extra Space.

                               ARTICLE THIRTY-FIVE
                               Assignment of Lease

      35.1. In connection with a one time only bona fide sale of the Tenant's
business, an assignment of this Lease by the Tenant, to a person, firm or
corporation (herein called the "Assignee"), shall not be deemed a violation of
Article Seven hereof, provided that:

                  (a) the Tenant shall notify the Landlord of the name of the
            proposed Assignee, such information as to the proposed Assignee's
            business, financial responsibility and standing as the Landlord may
            reasonably require. Such Assignee shall be, in the Landlord's
<PAGE>   41
                                       38


reasonable judgment, of a character as is in keeping with the standards in those
respects for the Building; and

      (b) the Landlord shall approve such assignment or transfer, which approval
will not be unreasonably withheld or delayed upon the express conditions that:

            (I) such Assignee shall have the financial resources necessary to
      meet its obligation under the Lease and the Assignee shall supply such
      financial information to the Landlord as may be reasonably necessary for
      the Landlord to determine the same and if, in the Landlord's reasonable
      judgment, the Assignee does not have the necessary financial resources,
      then the Landlord reserves the right to require the posting of such
      security or guarantee as the Landlord deems reasonably necessary to secure
      the obligations under this Lease;

            (II) the Tenant, as assignor, and the Assignee will execute and
      deliver to the Landlord an agreement in form and substance satisfactory to
      the Landlord whereby the Tenant shall be released from its obligations
      under the Lease and the Assignee shall agree to be bound by and upon all
      of the terms and conditions set forth in this Lease, and for which the
      Tenant shall pay to the Landlord a reasonable processing charge, not to
      exceed $2,500.00; and

            (III) the Tenant and the Assignee shall agree that the Assignee
      shall not, without the prior approval of the Landlord pursuant to this
      Article, further assign or transfer the Lease or the Premises or any part
      thereof.

                            (Continued on next page)

<PAGE>   42

                                       39

      In Witness Whereof, the Landlord and the Tenant have duly executed this
Lease as of the day and year first above written.


                                     ROCKEFELLER CENTER PROPERTIES
                                     By: ROCKEFELLER CENTER MANAGEMENT
                                     CORPORATION, its Agent

                                     By:
                                       -------------------------------
                                                        Vice President

Attest:


-----------------------------------
                Assistant Secretary


                                     John A. Levin & Co., Inc.

                                     By: John A. Levin
                                       -------------------------------
                                                             President

      Attest:

      /s/ Carol L. Novak
      --------------------------------
                             Secretary

<PAGE>   43

                             RULES AND REGULATIONS

      1. The rights of the Tenant in the sidewalks, entrances, corridors,
stairways, elevators and escalators of the Building are limited to ingress to
and egress from the Premises for any Tenant Party, and the Tenant shall not
invite to the Premises, nor permit the visit thereto by, persons in such numbers
or under such conditions as to interfere with the use and enjoyment by others of
the sidewalks, entrances, corridors, stairways, elevators, escalators or any
other facilities of the Building. Fire exits and stairways are for emergency use
only, and they shall not be used for any other purpose by any Tenant Party. The
Landlord shall have the right to regulate the use of and operate the public
portions of the Building, as well as portions furnished for the common use of
the tenants, in such manner as it deems best for the benefit of the tenants
generally.

      2. The Landlord may refuse admission to the Building outside of Business
Hours to any person not having a pass issued by the Landlord or not properly
identified, and may require all persons admitted to or leaving the Building
outside of Business Hours to register. Any person whose presence in the Building
at any time shall, in the judgment of the Landlord, be prejudicial to the
safety, character, reputation and interests of the Building or of its tenants
may be denied access to the Building or may be ejected therefrom. In case of
invasion, riot, public excitement or other commotion the Landlord may prohibit
all access to the Building during the continuance of the same, by closing doors
or otherwise, for the safety of the tenants or protection of property in the
Building. The Landlord shall, in no way, be liable to the Tenant for damages or
loss arising from the admission, exclusion or ejection of any person to or from
the Premises or the Building under the provisions of this rule. The Landlord may
require any person leaving the Building with any package or other object to
exhibit a pass from the tenant from whose Premises the package or object is
being removed, but the establishment or enforcement of such requirement shall
not impose any responsibility on the Landlord for the protection of the Tenant
against the removal of property from the Premises of the Tenant.

      3. The Tenant shall not obtain or accept for use in the Premises ice,
drinking water, food, beverage, towel, linen, uniform, barbering, bootblacking
or similar or related services from any persons not authorized by the Landlord
to furnish such services. Such services shall be furnished only at such hours,
in such places within the Premises and under such regulations as may be fixed by
the Landlord.

      4. Where any damage to the public portions of the Building or to any
portions used in common with other tenants is caused by any Tenant Party, the
cost of repairing the same shall be paid by the Tenant upon demand.

      5. Except in the case of a shop, no lettering, sign, advertisement,
trademark, emblem, notice or object shall be displayed in or on the windows or
doors, or on the outside of the Premises, or at any point inside the Premises
where the same might be visible outside the Premises, except that the name of
the Tenant may be displayed on the entrance door of the Premises, subject to the
approval of the Landlord as to the location, size, color and style of such
display. The inscription of the name of the Tenant on the door of the Premises
shall be done by the Landlord and the expense thereof shall be paid by the
Tenant to the Landlord.

      6. No awnings or other projections of any kind over or around the windows
or entrances of the Premises shall be installed by the Tenant, and only such
window blinds and shades as are approved by the Landlord shall be used in the
Premises. Linoleum, tile or other floor covering shall be laid in the Premises
only in a manner approved by the Landlord.

      7. The Landlord shall have the right to prescribe the weight and position
of safes and other objects of excessive weight, and no safe or other object
whose weight exceeds the lawful load for the area upon which it would stand
shall be brought into or kept upon the Premises. If, in the judgment of the
Landlord, it is necessary to distribute the concentrated weight of any safe or
heavy object, the work involved in such distribution shall be done in such
manner as the Landlord shall determine and the expense thereof shall be paid by
the Tenant. The

<PAGE>   44

moving of safes and other heavy objects shall take place only upon previous
notice to, and at times and in a manner approved by, the Landlord, and the
persons employed to move the same in and out of the Building shall be acceptable
to the Landlord. No machines, machinery or electrical or electronic equipment or
appliances of any kind shall be placed or operated so as to disturb other
tenants. Freight, furniture, business equipment, merchandise and packages of any
description shall be delivered to and removed from the Premises only in the
freight elevators and through the service entrances and corridors, and only
during hours and in a manner approved by the Landlord.

      8. No noise, including the playing of any musical instrument, radio or
television, which, in the judgment of the Landlord, might disturb other tenants
in the Building, shall be made or permitted by the Tenant. No animal shall be
brought into or kept in the Building or the Premises. No dangerous, inflammable,
combustible or explosive object or material shall be brought into or kept in the
Building by the Tenant or with the permission of the Tenant, except as permitted
by law and the insurance companies insuring the Building or the property
therein. The Tenant shall not cause or permit any odors of cooking or other
processes, or any unusual or other objectionable odors, to permeate in or
emanate from the Premises. Any cuspidors or containers or receptacles used as
such in the Premises, shall be emptied, cared for and cleaned by the Tenant.

      9. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows in the Premises and no lock on any door shall be changed or
altered in any respect. Duplicate keys for the Premises and toilet rooms shall
be procured only from the Landlord, and the Tenant shall pay to the Landlord the
Landlord's reasonable charge therefor. Upon the expiration or termination of the
Lease, all keys of the Premises and toilet rooms shall be delivered to the
Landlord.

      10. All entrance doors in the Premises shall be left locked by the Tenant
when the Premises are not in use. No door (other than a door in an interior
partition of the Premises) shall be left open at any time.

      11. The Landlord reserves the right to rescind, alter or waive any rule or
regulation at any time prescribed by the Landlord when, in its judgment, it
deems it necessary, desirable or proper for its best interest or for the best
interests of the tenants, and no recision, alteration or waiver of any rule or
regulation in favor of one tenant shall operate as a recision, alteration or
waiver in favor of any other tenant. The Landlord shall not be responsible to
the Tenant for the nonobservance or violation by any other tenant of any of the
rules or regulations at any time prescribed by the Landlord.

      12. The Tenant shall promptly notify the Landlord of any inspection of the
Premises by governmental agencies having jurisdiction over matters involving
health or safety.

      13. The Tenant shall be responsible for maintaining the Premises rodent
and insect free. Extermination services shall be provided by the Tenant on a
monthly basis and additionally as required by the Landlord.

      14. All food storage areas shall be adequately protected against vermin
entry by a contractor approved in advance by the Landlord.

      15. Drain pipes shall be kept free of obstructions and operable at all
times.

      16. Exit signs shall be illuminated, and other exit identification shall
be operable, at all times.

      17. Emergency lighting, including battery components, shall be in good
working condition at all times.

<PAGE>   45

                                    EXHIBIT B

                             CLEANING SPECIFICATIONS

GENERAL

            All hard surface flooring to be dust mopped nightly. All other floor
         maintenance shall be done at Tenant's expense.

            All carpeting and rugs to be carpet swept nightly and vacuumed twice
      monthly.

            Hand dust nightly all furniture tops and exposed surfaces of
      shelves, ledges and bookcases within reach.

            Empty and wipe clean all wastebaskets nightly and remove the
      contents thereof from the Premises.

            Empty and wipe clean all ash trays and screen all sand urns nightly.

            Wash clean all water fountains and coolers nightly.

            Dust all door and other ventilating louvers within reach, as
      necessary.

            Dust all telephones as necessary.

            Sweep all private stairway structures nightly.

            All windows are to be washed approximately five times per year.

            Do all high dusting approximately once every three months, namely:

                        Dust all pictures, frames, charts, graphs and similar
                  wall hangings not reached in nightly cleaning.

                        Dust clean all vertical surfaces, such as walls,
                  partitions, doors and bucks and other surfaces not reached in
                  nightly cleaning.

                        Dust clean all pipes, ventilating and conditioning
                  louvers, ducts, diffusers, high mouldings and other high areas
                  not reached in nightly cleaning.

                        Dust all lighting fixtures, including exterior surfaces
                  of diffusers and enclosures.

                        Dust all venetian blinds.

CORE LAVATORIES

            Sweep and wash all lavatory floors nightly, using disinfectants.

            Wash and disinfect all basins, bowls and urinals nightly.

            Wash and disinfect all toilet seats nightly.

<PAGE>   46

            Hand dust and clean, washing where necessary, all partitions, tile
      walls, dispensers and receptacles in all lavatories and restrooms nightly.

            Empty paper towel receptacles and transport wastepaper from the
      Premises nightly.

            Fill toilet tissue holders nightly (tissue to be furnished by
      Landlord).

            Empty sanitary disposal receptacles nightly.

            Wash interior of wastecans and receptacles at least once a week.

            If core lavatory is within Tenant's space, the soap and towel
      dispenser will be filled at Tenant's direction at Tenant's expense. If
      core lavatory is on a public corridor, the soap and towel dispenser will
      be maintained by Landlord.

PUBLIC AND CORE AREAS AND ELEVATORS

            Dust mop all floors nightly and wash once a week. Spray buff
      resilient tile flooring on a semi-monthly schedule.

            Inspect, maintain and keep clean firehoses, extinguishers and
      similar equipment as necessary.

            Spot wash wall of corridors and public stairways as necessary.

            Empty and screen all cigarette urns daily.

            Mop floor in public stairwells once per week.

            Dust elevator doors and frames, and Building directories as
      required.

                                    *********

      "Nightly", as used herein, shall be exclusive of Saturdays, Sundays and
holidays.

      "Holidays", as used herein, shall mean any day which is specified as a
holiday for all union members in the applicable building service union agreement
(as distinguished from days which are specified as holidays in such union
agreement on an individual basis such as a member's birthday or a death of a
relative).

<PAGE>   47

                                    EXHIBIT C

                               Consent to Sublease

      ROCKEFELLER CENTER PROPERTIES, a partnership, having an office at No. 1230
Avenue of the Americas, New York, N.Y. 10020 (herein called "the landlord"),
hereby consents to the subletting by (herein called "the Tenant"), to (herein
called "the Subtenant"), of a portion not exceeding square feet of rentable area
of the premises on the Floor of the Building known as in Rockefeller Center, in
the Borough of Manhattan, New York, N.Y., for a term expiring not later than
which premises are now leased and demised by the Landlord to the Tenant by that
certain lease dated (said lease, as the same may have been and may hereafter be
amended by any indentures or agreements supplemental thereto, is herein called
"the Lease'), such consent being subject to and upon the following terms and
conditions, to each of which the Tenant and the Subtenant expressly agree:

      (1) Nothing herein contained shall be construed to modify, waive, impair
or affect any of the terms or conditions contained in the Lease (except as may
be herein expressly provided), or to waive any breach of the Tenant in the due
keeping, observance or performance thereof.

      (2) The Tenant shall be and remain liable and responsible for the due
keeping, performance and observance throughout the term of the Lease, of all of
the terms and conditions therein set forth on the part of the Tenant to be kept,
performed and observed and for the payment of the fixed rent, percentage rent
(if any), additional rent and all other sums now and/or hereafter becoming
payable thereunder, expressly including as such additional rent, any and all
charges for any property, material, labor, utility or other services furnished
or rendered by the Landlord in or in connection with the premises demised by the
Lease, whether for, or at the request of, the Tenant or the Subtenant.

      (3) The sublease to cover the space to be sublet by the Tenant to the
Subtenant shall be subject and subordinate at all times to the Lease, and to all
of the terms and conditions of the Lease and of this Consent, and the Subtenant
shall not do, permit or suffer anything to be done in, or in connection with the
Subtenant's use or occupancy of, the portion of the premises so sublet which
would violate any of said terms and conditions.

      (4) The Subtenant shall not, without the prior written consent of the
Landlord, assign the aforesaid sublease or under-sublet the space so sublet or
any part thereof.

      (5) This Consent shall not be construed as a consent by the Landlord to,
or as permitting, any other or further subletting by the Tenant.

      (6) The portion of the premises so sublet shall (subject to all of the
terms and conditions of the Lease) be used solely for

<PAGE>   48

      (7) Upon the expiration or any earlier termination of the term of the
Lease with respect to the portion of the premises so sublet or in case of the
surrender of the Lease by the Tenant to the Landlord, the aforesaid sublease and
the term and estate thereby granted shall terminate as of the effective date of
such expiration, termination or surrender, and the Subtenant shall vacate such
portion of the premises on such date.

      (8) A true and complete copy of the aforesaid sublease and a true and
complete copy of each amendment thereto shall be delivered to the Landlord
within 10 days after the execution and delivery thereof by the parties thereto;
it being understood that the Landlord shall not be deemed to be a party to said
sublease or any such amendment nor bound by any of the terms or conditions
thereof and that neither the execution and delivery of this Consent nor the
receipt by the Landlord of a copy of said sublease or a copy of any such
amendment shall be deemed to change any provision of this Consent or to be a
consent to, or an approval by the Landlord of, any term or condition contained
in said sublease or any such amendment.

<PAGE>   49

      IN WITNESS WHEREOF, the parties hereto have cause these presents to be
duly executed as of

                                   ROCKEFELLER CENTER PROPERTIES,
                                   By ROCKEFELLER CENTER MANAGEMENT
                                   CORPORATION, its Agent


                                   By
                                     ---------------------------------
Attest:                                                 Vice President
                                                 LANDLORD

-----------------------------
          Assistant Secretary


                                     -----------------------------


                                    By
                                     ---------------------------------
Attest:                                                 Vice President
                                                 TENANT

-----------------------------
          Assistant Secretary


                                     -----------------------------


                                    By
                                     ---------------------------------
Attest:                                                 Vice President
                                                 SUBTENANT

-----------------------------
          Assistant Secretary

<PAGE>   50

                            SECOND AMENDMENT TO LEASE

            This SECOND AMENDMENT TO LEASE, dated as of January 22, 1998 (this
"Amendment"), between RCPI TRUST, a Delaware business trust having an office c/o
Tishman Speyer Properties, L.P., 45 Rockefeller Plaza, New York, New York 10111
("Landlord"), and LEVIN MANAGEMENT CO., INC., a Delaware corporation having an
office at One Rockefeller Plaza, New York, New York 10020 ("Tenant").

                              W I T N E S S E T H :

            WHEREAS, Landlord's predecessor in interest, Rockefeller Center
Properties, and Tenant's predecessor-in-interest, John A. Levin & Co., Inc.,
entered into that certain Lease, dated December 20, 1993, amended by
Supplemental Indenture, dated March 2,1995, and First Amendment to Lease, dated
June 23, 1997 (the "First Amendment"), with respect to Space `A' on the 25th
Floor (the "25th Floor Premises"), Space `A' on the 10th Floor (the "10th Floor
Premises") and Space `Y' on the Subbasement Floor (the "Subbasement Premises")
(the 25th Floor Premises, the 10th Floor Premises and the Subbasement Premises
collectively, the "Premises") of the building located at One Rockefeller Plaza,
New York, New York (the "Building");

            WHEREAS, John A. Levin & Co., formerly known as JALC Subsidiary
Corp. ("Guarantor"), executed a certain Guaranty, dated as of June 28, 1996,
whereby Guarantor guaranteed all of Tenant's obligations under the Lease; and

            WHEREAS, Landlord and Tenant desire to modify the Original Lease to
(i) extend the term of the Lease with respect to the 25th Floor Premises, (ii)
provide for the leasing by Tenant of certain additional space consisting of the
entire 19th Floor of the Building, (iii) terminate the Lease with respect to the
10th Floor Premises, and (iv) otherwise modify the terms and conditions of the
Original Lease, all as hereinafter set forth (the Original Lease, as modified by
this Amendment, the "Lease").

            NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Landlord and Tenant agree as
follows:

            1. Capitalized Terms; Recitals. All capitalized terms used herein
and not otherwise defined in this Amendment shall have the meanings ascribed to
them in the Original Lease.

<PAGE>   51
                                       2


            2. Extension of Term; Rent. (a) The term of the Original Lease with
respect to the 25th Floor Premises is hereby extended for the period (the
"Extension Period") commencing on October 1, 2004 (the "Extension Period
Commencement Date") and ending on the last day of the calendar month in which
the day immediately preceding the 10 year anniversary of the 19th Floor Premises
Commencement Date (as hereinafter defined) occurs (the "Extended Expiration
Date"), or such earlier date upon which the term may expire or be terminated
pursuant to any of the conditions of limitation or other provisions of the Lease
or pursuant to law upon all of the terms and conditions of the Original Lease,
as modified by this Amendment. All references in the Original Lease with respect
to the 25th Floor Premises to the expiration date of "September 30, 2004" shall
be deemed to be references to the "Extended Expiration Date" and all references
to "term" or "term of this Lease" or words of similar import shall be deemed to
refer to the term of the Original Lease as extended by the Extension Period.

            (b) The fixed rent payable under the Lease for the Extension Period
with respect to the 25th Floor Premises only shall be an amount equal to
$763,560.00 per annum ($63,630.00 per month) payable at the times and in the
manner specified in the Lease for the payment of Rent.

            (c) During the Extension Period, Tenant shall pay all additional
rent payable pursuant to Article Twenty-Four of the Original Lease with respect
to the 25th Floor Premises, except that (w) the clause "110% of" in Section 24.1
of the Original Lease shall be deemed to be deleted in both places in which it
appears, (x) the clause "110% of" in Section 24.2(b) of the Original Lease shall
be deemed to be deleted in both places in which it appears, (y) the term "Base
Real Estate Taxes" shall mean the R.E. Tax Share of the Real Estate Taxes for
the Tax Year commencing on July 1,1997 and ending on June 30, 1998, and (z) the
term "Base COM" shall mean the O.E. Share of the Cost of Operation and
Maintenance for the Computation Year commencing on January 1, 1998 and ending on
December 31, 1998.

            3. Lease of 19th Floor Premises. (a) Landlord hereby leases to
Tenant, and Tenant hereby leases from Landlord, the entire 19th Floor of the
Building, designated as Space `A', and being more particularly shown on Exhibit
A attached hereto (the "19th Floor Premises"), for a term commencing on the date
of execution and delivery of this Amendment by Landlord and Tenant (the 19th
floor Premises Commencement Date"), and ending on the Extended Expiration
Date, or such earlier date upon which the term may expire or be terminated
pursuant to any of the conditions of limitation or other provisions of the Lease
or pursuant to law, upon all of the terms and conditions of the Original Lease,
as modified by this Amendment. Landlord shall not be liable for failure to
deliver possession of the 19th Floor Premises to Tenant on any specified date,
and such failure shall not impair the validity of this Amendment. Landlord shall
be

<PAGE>   52
                                       3


deemed to have delivered possession of the 19th Floor Premises to Tenant upon
the giving of notice by Landlord to Tenant stating that the 19th Floor Premises
are vacant, in the condition required under this Amendment, and available for
Tenant's occupancy. There shall be no postponement of the 19th Floor Premises
Commencement Date for (i) any delay in the delivery of possession of the 19th
Floor Premises to Tenant which results from any Tenant Delay (as hereinafter
defined) or (ii) any delay by Landlord in the performance of details of
construction, decoration and mechanical adjustments, if any, the noncompletion
of which do not materially interfere with Tenant's use of the 19th Floor
Premises, or which, in accordance with good construction practice, should be
completed after the completion of other work to be performed in the 19th Floor
Premises (collectively, "Punch List Items") relating to Landlord's 19th Floor
Work (as hereinafter defined). The provisions of this Section 3(a) are intended
to constitute "an express provision to the contrary" within the meaning of
Section 223-a of the New York Real Property Law or any successor thereto.

            (b) Effective as of the 19th Floor Premises Commencement Date,
Tenant shall lease the 19th Floor Premises upon all of the terms and conditions
of the Original Lease, except as follows:

                  (i) The fixed rent payable under the Lease shall be increased
            by an amount equal to (x) $641,840.00 per annum ($53,486.67 per
            month) for the period commencing on June 1,1998 (the "19th Floor
            Premises Rent Commencement Date") and ending on the day preceding
            the 5 year anniversary of the 19th Floor Premises Commencement Date,
            both dates inclusive, and (y) $722,070.00 per annum ($60,172.50 per
            month) for the period commencing on the 5 year anniversary of the
            19th Floor Premises Commencement Date and ending on the Extended
            Expiration Date, both dates inclusive.

                  (ii) The 19th Floor Premises shall be deemed to consist of
            16,046 rentable square feet for all purposes of the Lease.

                  (iii) (x) Landlord shall pay to Tenant, toward payment of the
            cost of the work to be performed by Tenant in connection with
            Tenant's initial occupancy of the 19th Floor Premises (the "19th
            Floor Initial Installations"), an amount ("Landlord's Contribution")
            not to exceed the difference of (A) $802,300.00 less (B) the NPV
            Differential (as hereinafter defined), provided that as of the date
            on which Landlord is required to make payment pursuant to this
            Paragraph 3(b)(iii): (i) the Lease is in full force and effect and
            (ii) no Event of Default then exists. Tenant shall pay all costs of
            the 19th Floor Initial Installations in excess of Landlord's
            Contribution. Landlord's Contribution shall be payable solely on
            account of labor directly related to the 19th Floor Initial
            Installations and materials delivered to the 19th Floor Premises in
            connection with the 19th Floor Initial

<PAGE>   53
                                       4


Installations, except that Tenant may apply up to 5% of Landlord's Contribution
to pay "soft costs" incurred in connection with the 19th Floor Initial
Installations, which shall be limited to the actual architectural, consulting
and engineering fees incurred by Tenant in connection therewith, and Tenant may
apply Landlord's Contribution towards overtime freight elevator charges incurred
by Tenant in connection with the 19th Floor Initial Installations. Tenant shall
not be entitled to receive any portion of Landlord's Contribution not actually
expended by Tenant in the performance of the 19th Floor Initial Installations in
accordance with this Paragraph 3(b)(iii) nor shall Tenant have any right to
apply any unexpended portion of Landlord's Contribution as a credit against Rent
or any other obligation of Tenant under the Lease. Following the calculation of
the NPV Differential, if it shall be determined that Landlord shall have made an
overpayment of Landlord's Contribution, Tenant shall pay to Landlord the amount
of such overpayment within 10 days after the amount due is determined. For
purposes hereof, "NPV Differential" shall mean the positive difference, if any,
of (x) the net present value to Landlord as of the date of execution and
delivery of a New Lease (as hereinafter defined) by Landlord and another tenant
(the "New Lease Execution Date") of the fixed rent payable under the Original
Lease with respect to the 10th Floor Premises for the period commencing on the
New Lease Execution Date and ending on September 30, 2004 (assuming such fixed
rent is paid annually in advance), less the cost of Landlord's Work (as defined
in the First Amendment) (assuming such cost was incurred by Landlord on the New
Lease Execution Date) and the total brokerage commissions payable by Landlord in
connection with the leasing of the 10th Floor Premises pursuant to the Original
Lease (assuming such commissions (except for the portion of the commissions
payable following the expiration of Tenant's right to terminate its leasing of
the 10th Floor Premises pursuant to the Original Lease) were paid by Landlord on
the New Lease Execution Date, and assuming the portion of the commissions
payable following the expiration of Tenant's right to terminate its leasing of
the 10th Floor Premises pursuant to the Original Lease were paid by Landlord on
the first day of the lease year in which such termination right expired), with
all present value amounts calculated using a discount rate equal to 10% per
annum, less (y) the net present value to Landlord as of the New Lease Execution
Date of the fixed rent payable under the New Lease with respect to the 10th
Floor Premises for the period commencing on the New Lease Execution Date and
ending on September 30, 2004 (assuming such fixed rent is paid annually in
advance), less the value of any free rent period (including any construction
period prior to the commencement date of the New Lease) under the New Lease
commencing on the New Lease Execution Date (assuming such free rent is credited
or applied during the applicable lease year specified in the New Lease), the
cost of Landlord's Work and any work to be performed by Landlord pursuant to the
New Lease (assuming such costs were incurred

<PAGE>   54
                                       5


by Landlord on the New Lease Execution Date), any tenant improvement
contribution to be provided by Landlord pursuant to the New Lease (assuming such
contribution was paid by Landlord on the New Lease Execution Date) and the total
brokerage commissions payable by Landlord in connection with the leasing of the
10th Floor Premises pursuant to the Original Lease and the New Lease (except for
any brokerage commission that may be payable to Landlord's Agent if an outside
broker procured the tenant under the New Lease) (assuming such commissions were
paid by Landlord on the New Lease Execution Date), with all present value
amounts calculated using a discount rate equal to 10% per annum. Attached hereto
as Exhibit C is an example of the calculation of the NPV Differential using the
above methodology which has been agreed to by Landlord and Tenant and which will
be used as the basis for the determination of the actual NPV Differential.

            (y) Landlord shall pay Landlord's Contribution to Tenant following
commencement of Tenant's business operations at the 19th Floor Premises, the
final completion of the 19th Floor Initial Installations and the execution and
delivery of a New Lease by Landlord and another tenant, within 30 days following
the submission by Tenant to Landlord of a written requisition, signed by the
chief financial officer of Tenant and accompanied by (i) copies of paid invoices
covering all of the 19th Floor Initial Installations, (ii) a written
certification from Tenant's architect stating that (A) the 19th Floor Initial
Installations described on such invoices have been completed in accordance with
the plans and specifications approved by Landlord, (B) such work has been paid
in full by Tenant, and (C) all contractors, subcontractors and materialmen have
delivered to Tenant waivers of lien with respect to such work (copies of which
shall be included with such architect's certification), (iii) proof of the
satisfactory completion of all required inspections and the issuance of any
required approvals and sign-offs by all Governmental Authorities having
jurisdiction thereover, (iv) certificates of final approval of such 19th Floor
Initial Installations required by any Governmental Authority, and shall furnish
Landlord with copies thereof, together with "as-built" plans and specifications
for such 19th Floor Initial Installations prepared on an Autocad Computer
Assisted Drafting and Design System (or such other system or medium as Landlord
may accept) using naming conventions issued by the American Institute of
Architects in June, 1990 (or such other naming convention as Landlord may
accept) and magnetic computer media of such record drawings and specifications,
translated into DXF format or another format acceptable to (v) such other
documents and information as Landlord may reasonably request. The right to
receive Landlord's Contribution is for the exclusive benefit of Tenant, and in
no event shall such right be assigned to or be enforceable by or for the benefit
of any third party, including any contractor, subcontractor,

<PAGE>   55
                                       6


materialman, laborer, architect, engineer, attorney or any other Person. For
purposes hereof, "Governmental Authority (Authorities)" shall mean the United
States of America, the City, County or State of New York or any political
subdivision, agency, department, commission, board, bureau or instrumentality of
any of the foregoing, or any landmarks preservation agency (or other entity
designated or accepted for such purpose by any Governmental Authority or
landmarks preservation agency), now existing or hereafter created, having
jurisdiction over the Building, the Land or the Center.

            (iv) Tenant shall pay to Landlord or its designee, within ten (10)
Business Days after demand, all reasonable out-of-pocket costs actually incurred
by Landlord in connection with the 19th Floor Initial Installations, including
costs incurred in connection with (x) Landlord's review of the 19th Floor
Initial Installations (including review of requests for approval thereof), and
(y) the provision of Building personnel during the performance of the 19th Floor
Initial Installations required by trade union policy or otherwise, to operate
elevators or otherwise to facilitate the 19th Floor Initial Installations.

            (v) Tenant shall pay all additional rent payable pursuant to Article
Twenty-Four of the Original Lease with respect to the 19th Floor Premises,
except that (v) the clause "110% of" in Section 24.1 of the Original Lease shall
be deemed to be deleted in both places in which it appears, (w) the clause "110%
of" in Section 24.2(b) of the Original Lease shall be deemed to be deleted in
both places in which it appears, (x) the term "Base Real Estate Taxes" shall
mean the R.E. Tax Share of the Real Estate Taxes for the Tax Year commencing on
July 1, 1997 and ending on June 30, 1998, (y) the term "Base COM" shall mean the
O.E. Share of the Cost of Operation and Maintenance for the Computation Year
commencing on January 1, 1998 and ending on December 31, 1998, and (z) Tenant's
Area shall equal 16,046 rentable square feet.

            (vi) Tenant has inspected the 19th Floor Premises and agrees (x) to
accept possession of the 19th Floor Premises in the "as is" condition existing
on the 19th Floor Premises Commencement Date, (y) that neither Landlord nor
Landlord's agents have made any representations or warranties with respect to
the 19th Floor Premises or the Building except as expressly set forth herein,
and (z) Landlord has no obligation to perform any work, supply any materials,
incur any expense or make any alterations or improvements to the 19th Floor
Premises or the Building to prepare the same for Tenant's occupancy, except for
the work set forth on Exhibit B to this Amendment ("Landlord's 19th Floor
Work"). Tenant's occupancy of any portion of the 19th Floor Premises for the
conduct of its business shall be conclusive evidence, as against

<PAGE>   56
                                       7


Tenant, that (A) Landlord has Substantially Completed Landlord's 19th Floor
Work, (B) Tenant has accepted possession of the 19th Floor Premises in their
then current condition, and (C) the 19th Floor Premises and the Building are in
a good and satisfactory condition as required by the Lease. As to Landlord's
19th Floor Work, "Substantial Completion" or "Substantially Completed" means
that such work has been completed in accordance with (i) the provisions of this
Amendment applicable thereto, (ii) the plans and specifications for such work,
and (iii) all applicable Requirements, except for Punch List Items.

            (vii) Tenant shall install, and thereafter maintain in good order
and repair, a sprinkler system and fire-alarm and life-safety system serving the
19th Floor Premises. Such installation and maintenance shall be performed by
Tenant in accordance with this Lease, the Rules and Regulations and all
Requirements. If the Fire Insurance Rating Organization or any Governmental
Authority or any of Landlord's insurers requires or recommends any modifications
or Alterations be made or any additional equipment be supplied in connection
with the sprinkler system or fire-alarm and life-safety system serving the
Building or the 19th Floor Premises by reason of Tenant's business, or the
location of the partitions, trade fixtures, or other contents of the 19th Floor
Premises, Landlord (to the extent such modifications or Alterations are
structural, affect any Building system or involve the performance of work
outside the 19th Floor Premises), or Tenant (to the extent such modifications or
Alterations are nonstructural, do not affect any Building system and do not
involve the performance of work outside the 19th Floor Premises) shall make such
modifications or Alterations, and supply such additional equipment, in either
case at Tenant's expense.

            (viii) As part of the 19th Floor Initial Installations, Tenant shall
have the right to install an auxiliary HVAC system to service the 19th Floor
Premises. Landlord shall provide Tenant with up to 3 tons of chilled water for
Tenant's autonomous HVAC system through the common cooling tower unit servicing
the Building. As part of the 19th Floor Initial Installations, Tenant shall, at
Tenant's sole cost and expense, perform all necessary work and install all
required equipment to permit Tenant to tap into Landlord's chilled water risers;
provided that Landlord shall perform the actual tap in to the Building's chilled
water risers for a one-time tap in fee of $1,500.00 payable by Tenant prior to
the performance of such tap-in. Tenant shall pay, as additional rent, an annual
sum equal to the product of (a) the charge Landlord has then established as
customary for the provision of chilled water per connected ton multiplied by (b)
the number of connected tons of chilled water Landlord is obligated to provide
to Tenant, which amount shall be payable as additional rent in equal monthly
installments in advance on the first day of each month during the Term.

<PAGE>   57
                                       8


                  (ix) The provisions of Article Five of the Original Lease
            shall be applicable to the 19th Floor Premises, except that the
            clause "four watts" in the first sentence of Section 5.1 shall be
            deemed to be deleted and the clause "six watts" inserted in place
            thereof.

                  (x) Except as provided in this Amendment, all references in
            the Original Lease to the "Premises" shall be deemed to include the
            19th Floor Premises for all purposes of the Lease.

                  (xi) The following provisions of the Original Lease shall not
            be applicable to the leasing of the 19th Floor Premises: Section
            20.2 and Articles Twenty-Seven, Thirty, Thirty-One and Thirty-Two.

            4. Termination of 10th Floor Premises. (a) Effective as of the date
(the "Termination Date") that Landlord and another tenant execute and deliver a
lease (the "New Lease") for the 10th Floor Premises, the term of the Lease with
respect to the 10th Floor Premises only shall terminate as if such date was
initially set forth in the Lease as the expiration date thereof.

            (b) On or before the Termination Date, Tenant shall vacate the 10th
Floor Premises in accordance with the Lease, remove all of Tenant's personal
property therefrom and deliver vacant possession thereof to Landlord, time being
of the essence. Any fixtures, installations or personal property remaining in
the 10th Floor Premises after the Termination Date shall be deemed abandoned by
Tenant and Landlord may take possession thereof and dispose of same, at Tenant's
sole cost and expense, in any manner Landlord determines without accountability
therefor to Tenant. Tenant acknowledges that effective upon the close of the
Termination Date the Lease with respect to the 10th Floor Premises shall have
terminated and expired and Tenant shall have abandoned and surrendered any claim
of possession to the 10th Floor Premises to Landlord.

            (c) Tenant represents and warrants that it has not assigned, pledged
or encumbered the Lease or sublet the 10th Floor Premises or done or suffered
any other action as a result of which the Lease or the 10th Floor Premises might
be subject to any lien or encumbrance. Tenant warrants that the foregoing
covenants and representations will be true and correct as of the Termination
Date, Tenant has and will have good right to surrender the 10th Floor Premises
on or before the Termination Date, and delivery of possession of the 10th Floor
Premises will be made to Landlord on or before the Termination Date free and
clear of all liens and encumbrances of any kind whatsoever.

            (d) If Tenant shall fail to surrender the 10th Floor Premises to
Landlord pursuant to this Paragraph 4 on or before the Termination Date, then
Tenant shall be deemed to be a holdover in the 10th Floor Premises and be

<PAGE>   58
                                       9


subject to all of Landlord's rights and remedies available to it as landlord
under the Lease or otherwise, at law or in equity.

            (e) With respect to the foregoing termination, Tenant shall complete
and timely submit all returns and questionnaires relating to New York City and
State real property transfer tax laws and any other applicable real property
transfer or gains tax laws (the taxes which are the subject of such laws are
hereinafter collectively "Transfer Taxes"). Tenant shall timely pay all Transfer
Taxes, if any, and shall deliver evidence, reasonably acceptable to Landlord, of
such payment simultaneously to Landlord. Tenant shall indemnify, defend (with
counsel reasonably acceptable to Landlord) and hold harmless Landlord from all
losses, liabilities, interest, judgments, suits, demands, damages, costs and
expenses (including attorneys' fees and disbursements incurred in the defense
thereof) which Landlord may incur by reason of Tenant's failure to complete and
timely submit any and all Transfer Tax returns and questionnaires and/or
Tenant's failure to timely pay any and all Transfer Taxes. The provisions of
this Paragraph 4 shall survive the expiration of the Lease.

            (f) Provided Tenant is not in default under any of the terms or
provisions of the Lease, Landlord shall, within 10 days Business Days after the
Termination Date and after delivery of possession of the 10th Floor Premises to
Landlord in the manner required by the Lease, return to Tenant the Additional
Security Deposit (as defined in the First Amendment), or the remaining portion
thereof.

            5. Modifications. The provisions of the Original Lease are hereby
amended as follows:

            (a) Article Six of the Original Lease is hereby amended by deleting
Section 6.1(e)(vii) and inserting the following in place thereof:

      "(vii) Tenant is hereby notified that the Premises are subject to the
      jurisdiction of the Landmarks Preservation Commission. In accordance with
      Sections 25-305, 25-306, 25-309 and 25-310 of the Administrative Code of
      the City of New York and the rules set forth in Title 63 of the Rules of
      the City of New York, any demolition, construction, reconstruction,
      alteration or minor work as described in such Sections and such rules may
      not be commenced within or at the Premises without the prior written
      approval of the Landmarks Preservation Commission. Tenant is notified that
      such demolition, construction, reconstruction, alteration or minor work
      includes, but is not limited to, (a) work to the exterior of the Premises
      involving windows, signs, awnings,

<PAGE>   59
                                       10


      flagpoles, banners and storefront alterations and (b) interior work to the
      Premises that (i) requires a permit from the Department of Buildings or
      (ii) changes, destroys or affects an interior architectural feature of an
      interior landmark or an exterior architectural feature of an improvement
      that is a landmark or located on a landmark site or in a historic
      district."

            (b)Section 6.1(e)(ii) of the Original Lease is hereby amended by
inserting the following at the end thereof:

      "; provided that in connection with the 19th Floor Initial Installations
      or any renovation of the 25th Floor Premises performed within 12 months
      after the date of the Second Amendment to Lease, such reasonable charges
      shall not include a Landlord supervisory fee."

            (c) Article Six of the Original Lease is hereby amended by inserting
the following clauses (viii) and (ix) after Section 6.1(e)(vii):

      "(viii) The approval of plans or specifications, or the consent by
      Landlord to the making of any alterations, changes, additions,
      improvements, repairs or replacements does not constitute Landlord's
      agreement or representation that such plans, specifications or
      alterations, changes, additions, improvements, repairs or replacements
      comply with any legal requirements, requirements of insurance bodies or
      the certificate of occupancy issued for the Building. Landlord shall have
      no liability to Tenant or any other party in connection with Landlord's
      approval of plans and specifications for any alterations, changes,
      additions, improvements, repairs or replacements, or Landlord's consent to
      Tenant's performing any alterations, changes, additions, improvements,
      repairs or replacements.

      (ix) Notwithstanding anything to the contrary contained herein, Tenant
      shall pay to Landlord or its designee, within 10 days after demand, all
      out-of-pocket costs actually incurred by Landlord in connection with any
      Alteration, including costs incurred in connection with (i) Landlord's
      review of the Alterations (including review of requests for approval
      thereof), and (ii) the provision of Building personnel during the
      performance of any Alteration required by trade union policy or otherwise,
      to operate elevators or otherwise to facilitate any Alteration. In
      addition, Tenant shall pay to Landlord or its

<PAGE>   60
                                       11


      designee, upon demand, an administrative fee with respect to the
      performance of any Alteration (other than the 19th Floor Initial
      Installations or any renovation of the 25th Floor Premises performed
      within 12 months after the date of the Second Amendment to Lease) and the
      scheduling of Building equipment, facilities and personnel in connection
      therewith which fee shall be payable as follows: 5% of the cost of
      Tenant's Alterations up to $100,000; 4% of the cost of Tenant's
      Alterations between $100,000 and $250,000; 3% of the cost of Tenant's
      Alterations between $250,000 and $500,000; and 2% of the cost of Tenant's
      Alterations in excess of $500,000."

            (d) Section 6(k) of the Original Lease is hereby deleted in its
entirety and the following inserted in place thereof:

            "Tenant, at Tenant's expense, shall obtain and keep in full force
            and effect during the term of this Lease, (1) a policy of commercial
            general liability insurance on an occurrence basis against claims
            for bodily injury, death and/or property damage occurring in or
            about the premises or the Building, under which Tenant is named as
            the insured and Landlord, Landlord's managing agent, any lessors
            under underlying leases, any holders of underlying mortgages and any
            other parties whose names shall have been furnished by Landlord to
            Tenant from time to time are named as additional insureds, which
            insurance shall provide primary coverage without contribution from
            any other insurance carried by or for the benefit of Landlord,
            Landlord's managing agent or any lessors under underlying leases or
            any holders of underlying mortgages named as additional insureds,
            and Tenant agrees to obtain blanket broad-form contractual liability
            coverage to insure its indemnity obligations set forth in Article
            Six hereof. The minimum limits of liability shall be a combined
            single limit with respect to each occurrence in an amount of not
            less than $3,000,000 per occurrence, with a $5,000,000 annual
            aggregate; provided, however, that Landlord may require Tenant to
            increase such coverage, from time to time, to that amount of
            insurance which in Landlord's reasonable judgment is then being
            customarily required by landlords for similar office space in
            first-class buildings in the City of New York. If the aggregate
            limit applying to the Premises is reduced by the payment of a claim
            or establishment of a reserve equal to or greater than 50% of the
            annual aggregate, Tenant shall immediately arrange to have the
            aggregate limit restored by

<PAGE>   61
                                       12


            endorsement to the existing policy or the purchase of an additional
            insurance policy unless, in Landlord's reasonable judgment, Tenant
            maintains sufficient excess liability insurance to satisfy the
            liability requirements of this Lease without the reinstatement of
            the aggregate limit, (2) insurance against loss or damage by fire,
            and such other risks and hazards as are insurable under then
            available standard forms of "all risk" property insurance policies
            with extended coverage, insuring Tenant's goods, furniture and
            furnishings, all fixtures removable by Tenant as provided in the
            Lease, and all of Tenant's alterations and improvements to the
            Premises, for the full insurable value thereof or replacement cost
            value thereof, having a deductible amount, if any, not exceeding
            $25,000; (3) during the performance of any alteration, until
            completion thereof, Builder's risk insurance on an "all risk" basis
            and on a completed value form including a Permission to Complete and
            Occupy endorsement, for full replacement value covering the interest
            of Landlord and Tenant (and their respective contractors and
            subcontractors), any lessor of an underlying lease and any holder of
            an underlying mortgage in all work incorporated in the Building and
            all materials and equipment in or about the premises; (4) Workers'
            Compensation Insurance, as required by law; (5) Business
            Interruption Insurance; and (6) such other insurance in such amounts
            as Landlord, any holder of an underlying mortgage and/or any lessor
            of an underlying lease may reasonably require from time to time,
            provided that in Landlord's reasonable judgment such insurance is
            then being customarily required by landlords, mortgagees or superior
            lessors for similar office space in first-class buildings in the
            City of New York.

            (ii) All insurance required to be carried by Tenant pursuant to the
            terms of this Lease shall contain a provision that (1) no act or
            omission of Tenant (other than intentional unlawful or fraudulent
            acts) shall affect or limit the obligation of the insurance company
            to pay the amount of any loss sustained, (2) the policy shall be
            noncancellable and/or no material change in coverage shall be made
            thereto unless Landlord, each lessor of an underlying lease and each
            holder of an underlying mortgage shall have received 30 days' prior
            notice of the same by certified mail, return receipt requested, (3)
            Tenant shall be solely responsible for the payment of all premiums
            under such policies and Landlord, the lessors of underlying leases
            and the holders of underlying mortgages

<PAGE>   62
                                       13


            shall have no obligation for the payment thereof, and (4) shall be
            effected under valid and enforceable policies issued by reputable
            and independent insurers permitted to do business in the State of
            New York, and rated in Best's Insurance Guide, or any successor
            thereto (or if there be none, an organization having a national
            reputation) as having a Best's Rating of "A-"and a "Financial Size
            Category" of at least "IX" or if such ratings are not then in
            effect, the equivalent thereof or such other financial rating as
            Landlord may at any time consider appropriate.

                  (iii) On or prior to the 19th Floor Premises Commencement
            Date, Tenant shall deliver to Landlord appropriate policies of
            insurance, including evidence of waivers of subrogation, required to
            be carried by each party pursuant to this Lease. Evidence of each
            renewal or replacement of a policy shall be delivered by Tenant to
            Landlord at least 10 days prior to the expiration of such policy. In
            lieu of the policies of insurance required to be delivered to
            Landlord pursuant to this section (the "Policy"), Tenant may deliver
            to Landlord a certification from Tenant's insurance company which
            shall be binding on Tenant's insurance company, and which shall
            expressly provide that such certification (1) conveys to Landlord
            and any other named insured and/or additional insureds thereunder
            (the "Insured Parties") all the rights and privileges afforded under
            the Policy as primary insurance, and (2) contains an unconditional
            obligation of the insurance company to advise all Insured Parties in
            writing by certified mail, return receipt requested, at least 30
            days in advance of any termination of or change to the Policy that
            would affect the interest of any of the Insured Parties.

                  (iv) Landlord and Tenant shall each procure an appropriate
            clause in or endorsement to any property insurance covering the
            premises, the Building and personal property, fixtures and equipment
            located therein, wherein the insurance companies shall waive
            subrogation or consent to a waiver of right of recovery, and
            Landlord and Tenant agree not to make any claim against, or seek to
            recover from, the other for any loss or damage to its property or
            the property of others resulting from fire and other hazards to the
            extent covered by such property insurance; provided, however, that
            the release, discharge, exoneration and covenant not to sue
            contained herein shall be limited by and coextensive with the

<PAGE>   63
                                       14


             terms and provisions of the waiver of subrogation or waiver of
             right of recovery. If the payment of an additional premium is
             required for the inclusion of, or consent to, a waiver of
             subrogation, each party shall advise the other, in writing, of the
             amount of any such additional premiums and the other party may pay
             such additional premium. If such other party shall not elect to pay
             such additional premium, then the first party shall not be required
             to obtain such waiver of subrogation or consent to waiver."

            (e) Section 7.2.3 of the Original Lease is hereby amended by
inserting the following sentence at the end thereof:

      "The term "Applicable Rental Rate" as used in this Article with respect to
      the 19th Floor Premises only shall mean (i) $40.00 per annum for the
      period commencing on the 19th Floor Premises Commencement Date and ending
      on the day preceding the 5 year anniversary of the 19th Floor Premises
      Commencement Date and (ii) $45.00 per annum for the period commencing on
      the 5 year anniversary of the 19th Floor Premises Commencement Date and
      ending on the Extended Expiration Date. The term "Applicable Rental Rate"
      as used in this Article with respect to the 25th Floor Premises only shall
      mean $45.00 per annum for the period commencing on the Extension Period
      Commencement Date and ending on the Extended Expiration Date."

            (f) Section 9.3 of the Original Lease is hereby deleted in its
entirety.

            (g) Article Fourteen of the Original Lease is modified by deleting
Landlord's address set forth therein and replacing such address with the
following addresses:

            "RCPI Trust, c/o Tishman Speyer Properties, L.P., 45 Rockefeller
            Plaza, New York, New York 10111, Attention: Property Manager - One
            Rockefeller Plaza, with copies to (1) Office of the Center, 45
            Rockefeller Plaza, New York, New York 10111, Attention: General
            Counsel, (2) Office of the Center, 45 Rockefeller Plaza, New York,
            New York 10111, Attention: Controller, and (3) Tishman Speyer
            Properties, L.P., 520 Madison Avenue, New York, New York 10022,
            Attention: General Counsel".

<PAGE>   64
                                       15


            (h) Article Twenty-Five of the Original Lease is amended by adding
the following Sections at the end thereof:

            "25.13. Unless Landlord shall render notice to Tenant to the
            contrary, Tishman Speyer Properties, L.P. is authorized to act as
            Landlord's agent ("Landlord's Agent") in connection with the
            performance of this Lease, and Tenant shall direct all
            correspondence and requests to, and shall be entitled to rely upon
            correspondence received from, Tishman Speyer Properties, L.P., as
            agent for Landlord in accordance with Article Fourteen. Tenant
            acknowledges that Tishman Speyer Properties, L.P. is acting solely
            as agent for Landlord in connection with the foregoing; and neither
            Tishman Speyer Properties, L.P. nor any of its direct or indirect
            partners, officers, shareholders, directors, employees, principals,
            agents or representatives shall have any liability to Tenant in
            connection with this Lease, and Tenant waives any and all claims
            against any and all of such parties arising out of, or in any way
            connected with, this Lease, the Building or the Center.

            25.14. The liability of Landlord for Landlord's obligations under
            this Lease shall be limited to Landlord's interest from time to time
            in the Land and the Building and Tenant shall not look to any other
            property or assets of Landlord or the property or assets of any of
            Landlord's Agent, any holder of an underlying mortgage and any
            lessor an underlying lease, and each of their respective direct and
            indirect partners, officers, shareholders, directors, members,
            trustees, beneficiaries, employees, principals, contractors,
            licensees, invitees, servants, agents and representatives
            (collectively, the "lndemnitees") in seeking either to enforce
            Landlord's obligations under this Lease or to satisfy a judgment for
            Landlord's failure to perform such obligations; and neither Landlord
            nor the Indemnitees shall be personally liable for the performance
            of Landlord's obligations under this Lease."

            (i) Paragraph 6 of the First Amendment is hereby deleted in its
entirety.

            6. Second Additional Security Deposit. (a) Notwithstanding the
provisions of Article Twenty-Six of the Lease or Paragraph 5 of the First
Amendment to Lease, Tenant shall deposit with Landlord upon the execution of
this Amendment, an amount equal to $675,000.00 (the "Second Additional

<PAGE>   65
                                       16


Security Deposit") in cash as security for the faithful performance and
observance by Tenant of the terms, covenants and conditions of the Lease.

            (b) In lieu of a cash deposit, Tenant may deliver the Second
Additional Security Deposit to Landlord in the form of a clean, irrevocable,
non-documentary and unconditional Letter of Credit issued by and drawable upon
any commercial bank, trust company, national banking association or savings and
loan association with offices for banking purposes in the City of New York (the
"Issuing Bank"), which has outstanding unsecured, uninsured and unguaranteed
indebtedness, or shall have issued a letter of credit or other credit facility
that constitutes the primary security for any outstanding indebtedness (which is
otherwise uninsured and unguaranteed), that is then rated, without regard to
qualification of such rating by symbols such as "+" or "-" or numerical
notation, "Aa" or better by Moody's Investors Service and "AA" or better by
Standard & Poor's Ratings Service, and has combined capital, surplus and
undivided profits of not less than $500,000,000. Such Letter of Credit shall (i)
name Landlord and its successors and/or assigns as beneficiary, (ii) be in the
amount of the Second Additional Security Deposit, (iii) have a term of not less
than one year, (iv) permit multiple drawings, (v) be fully transferable by
Landlord without the payment of any fees or charges, and (vi) otherwise be in
form and content satisfactory to Landlord; provided, however, that Landlord
shall in no event be obligated to accept a Letter of Credit for any amount less
than $25,000. If upon any transfer of the Letter of Credit, any fees or charges
shall be so imposed, then such fees or charges shall be payable solely by Tenant
and the Letter of Credit shall so specify. The Letter of Credit shall provide
that it shall be deemed automatically renewed, without amendment, for
consecutive periods of one year each thereafter during the Term, unless the
Issuing Bank sends a notice (the "Non-Renewal Notice") to Landlord by certified
mail, return receipt requested, not less than 45 days next preceding the then
expiration date of the Letter of Credit, stating that the Issuing Bank has
elected not to renew the Letter of Credit. Landlord shall have the right, upon
receipt of a Non-Renewal Notice, to draw the full amount of the Letter of
Credit, by sight draft on the Issuing Bank, and shall thereafter hold or apply
the cash proceeds of the Letter of Credit pursuant to the terms of this
Paragraph. The Issuing Bank shall agree with all drawers, endorsers and bona
fide holders that drafts drawn under and in compliance with the terms of the
Letter of Credit will be duly honored upon presentation to the Issuing Bank at
an office location in Manhattan. The Letter of Credit shall be subject in all
respects to the Uniform Customs and Practice for Documentary Credits (1993
revision), International Chamber of Commerce Publication No. 500.

            (c) If Tenant defaults in the payment or performance of any the
terms, covenants or conditions of the Lease, including the payment of Rent,
Landlord may apply or retain the whole or any part of the Second Additional
Security Deposit or may notify the Issuing Bank and thereupon receive all or a

<PAGE>   66
                                       17


portion of the Second Additional Security Deposit represented by the Letter of
Credit, and use, apply, or retain the whole or any part of such proceeds, as the
case may be, to the extent required for the payment of any fixed rent,
additional rent or any other sum as to which Tenant is in default, including (i)
any sum which Landlord may expend or may be required to expend by reason of
Tenant's default, and (ii) any damages or Deficiency (as defined in the First
Amendment) to which Landlord is entitled pursuant to the Lease or applicable
Requirements, whether such damages or Deficiency accrues before or after summary
proceedings or other reentry by Landlord. If Landlord applies or retains any
part of the Second Additional Security Deposit, Tenant, upon demand, shall
deposit with Landlord the amount so applied or retained so that Landlord shall
have the full Second Additional Security Deposit on hand at all times during the
Term. If Tenant shall fully and faithfully comply with all of the terms,
covenants and conditions of the Lease, the Second Additional Security Deposit
shall be returned to Tenant after the Expiration Date and after delivery of
possession of the Premises to Landlord in the manner required by the Lease.
Tenant expressly agrees that Tenant shall have no right to apply any portion of
the Second Additional Security Deposit against any of Tenant's obligations to
pay Rent under the Lease.

            (d) Upon a sale of the Building or the Land or a leasing of the
Building, or any financing of Landlord's interest therein, Landlord shall have
the right to transfer the cash Second Additional Security Deposit or the Letter
of Credit, as applicable, to the vendee, lessee or lender. With respect to the
Letter of Credit, within five days after notice from Landlord of such sale,
leasing or financing, Tenant, at its sole cost, shall arrange for the transfer
of the Letter of Credit to the new landlord or lender, as designated by Landlord
in the foregoing notice, or to have the Letter of Credit reissued in the name of
the new landlord or lender. Tenant shall look solely to the new landlord or
lender for the return of such cash Second Additional Security Deposit or Letter
of Credit, and the provisions of this paragraph shall apply to every transfer or
assignment made of the Second Additional Security Deposit to a new landlord.
Tenant will not assign or encumber, or attempt to assign or encumber, the cash
Second Additional Security Deposit or Letter of Credit, and neither Landlord nor
its successors or assigns shall be bound by any such actual or attempted
assignment or encumbrance.

            (e) If Tenant (i) has not previously defaulted in its obligation to
pay Rent to Landlord on a timely basis under the Lease and (ii) is not then in
default in the due keeping, observance or performance of any term or condition
of the Lease, then in accordance with the provision of this Paragraph 6(e), on
and after (A) June 1, 1999, the Second Additional Security Deposit shall be
reduced to an amount equal to $500,000.00, (B) June 1, 2000, the Second
Additional Security Deposit shall be reduced to an amount equal to $300,000.00,
and (C) June 1, 2001, the Second Additional Security Deposit shall be reduced to
an amount

<PAGE>   67
                                       18


equal to $75,000.00. If the Second Additional Security Deposit is in the form of
cash, Landlord shall, within 10 Business Days following notice by Tenant to
Landlord that Tenant is entitled to reduce the Second AdditionaI Security
Deposit pursuant to this Paragraph 6(e), deliver to Tenant the amount by which
the Second Additional Security Deposit is reduced or if the Second Additional
Security Deposit is in the form of a Letter of Credit, Tenant may deliver to
Landlord an amendment to the Letter of Credit (which amendment must be
reasonably acceptable to Landlord in all respects) reducing the amount of the
Letter of Credit by the amount of the permitted reduction, and Landlord shall
execute the amendment and such other documents as are reasonably necessary to
reduce the amount of the Letter of Credit in accordance with the terms hereof.

            7. Brokerage. (a) Each of Landlord and Tenant represents and
warrants to the other that it has not dealt with any broker in connection with
this Amendment other than Tishman Speyer Properties, L.P. ("Broker") and that,
to the best of its knowledge, no other broker negotiated this Amendment or is
entitled to any fee or commission in connection herewith. The execution and
delivery of this Amendment by each party shall be conclusive evidence that each
party has relied upon the foregoing representations and warranties.

            (b) Each of Landlord and Tenant shall indemnify, defend, protect and
hold the other party harmless from and against any and all losses, liabilities,
damages, claims, judgments, fines, suits, demands, costs, interest and expenses
of any kind or nature (including reasonable attorneys' fees and disbursements)
incurred in connection with any claim, proceeding or judgment and the defense
thereof which the indemnified party may incur by reason of any claim of or
liability to any broker, finder or like agent (other than Broker) arising out of
any dealings claimed to have occurred between the indemnifying party and the
claimant in connection with this Amendment, or the above representation being
false. The provisions of this Paragraph 7 shall survive the expiration or
earlier termination of the term of the Lease.

            8. No Modification. Except as set forth herein, nothing contained in
this Amendment shall be deemed to amend or modify in any respect the terms,
provisions, or conditions of the Original Lease and such terms, provisions, and
conditions shall remain in full force and effect as modified hereby.

            9. Representations. Tenant hereby represents and warrants to
Landlord that, as of the date hereof, (a) the Lease is in full force and effect
and has not been modified except pursuant to this Amendment; (b) to the best of
Tenant's knowledge, there are no defaults existing under the Lease; (c) to the
best of Tenant's knowledge there exist no valid abatements, causes of action,
counterclaims, disputes, defenses, offsets, credits, deductions, or claims
against the enforcement of any of the terms and conditions of the Lease; and (d)
this

<PAGE>   68
                                       19


Amendment has been duly authorized, executed and delivered by Tenant and
constitutes the legal, valid and binding obligation of Tenant.

            10. Miscellaneous.

            (a) This Amendment contains the entire understanding of the parties
with respect to the subject matter hereof.

            (b) This Amendment shall be governed by the laws of the State of New
York without giving effect to conflict of laws principles thereof.

            (c) This Amendment shall be binding upon and inure to the benefit of
Landlord and Tenant and their successors and permitted assigns.

            (d) The captions, headings, and titles in this Amendment are solely
for convenience of reference and shall not affect its interpretation. For
purposes of this Amendment, whenever the words "include", "includes", or
"including" are used, they shall be deemed to be followed by the words "without
limitation", and, whenever the circumstances or the context requires, the
singular shall be construed as the plural, the masculine shall be construed as
the feminine and/or the neuter and vice versa. This Amendment shall be
interpreted and enforced without the aid of any canon, custom or rule of law
requiring or suggesting construction against the party drafting or causing the
drafting of the provision in question.

            (e) This Amendment shall not be binding upon Landlord or Tenant
unless and until Landlord shall have delivered a fully executed counterpart of
this Amendment to Tenant.

<PAGE>   69
                                       20


            11. Reaffirmation of Guaranty. By execution of this Amendment,
Guarantor hereby confirms that its obligations under the Guaranty are hereby
ratified and shall remain and continue in full force and effect with respect to
the Lease.

            IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment
as of the day and year first above written.

                              LANDLORD:

                              RCPI TRUST
                              By:  Tishman Speyer Properties, L.P., its Agent
                              By: /s/ Philip M. Waterman
                                  -------------------------------
                                      Philip M. Waterman III

                              TENANT:

                              LEVIN MANAGEMENT CO., INC.
                              By: /s/ Jessica M. Bibliowicz
                                  -------------------------------
                                  Name: Jessica M. Bibliowicz
                                  Title: President

GUARANTOR AGREES TO BE BOUND BY
THE PROVISIONS OF PARAGRAPH 11 OF
THIS SECOND AMENDMENT TO LEASE:

JOHN A. LEVIN & CO.

By:   /s/ Jessica M. Bibliowicz
      -------------------------------
      Name: Jessica M. Bibliowicz
      Title: President

<PAGE>   70

                            THIRD AMENDMENT TO LEASE

            This THIRD AMENDMENT TO LEASE, dated as of December 31, 1998 (this
"Amendment"), between RCPI TRUST, a Delaware business trust having an office c/o
Tishman Speyer Properties, L.P., 45 Rockefeller Plaza, New York, New York 10111
("Landlord"), and LEVIN MANAGEMENT CO., INC., a Delaware corporation having an
office at One Rockefeller Plaza, New York, New York 10020 ("Tenant").

                                  WITNESSETH:

            WHEREAS, Landlord's predecessor in interest, Rockefeller Center
Properties, and Tenant's predecessor-in-interest, John A. Levin & Co., Inc.,
entered into that certain Lease, dated December 20, 1993, amended by
Supplemental Indenture, dated March 2, 1995, First Amendment to Lease, dated
June 23, 1997 (the "First Amendment") and Second Amendment to Lease, dated as of
January 22, 1998, with respect to Space 'A' on the 25th Floor (the "25th Floor
Premises"), Space 'A' on the 19th Floor (the "19th Floor Premises") and Space
'Y' on the Subbasement Floor (the "Subbasement Storage Space") (the "Building")
(the Lease as heretofore amended, is hereafter the "Original Lease");

            WHEREAS, pursuant to Paragraph (6) of the Original Lease, Landlord
has elected to terminate the Original Lease with respect to the Subbasement
Storage Space, which termination is effective as of December 31, 1998 (the
"Termination Date");

            WHEREAS, in consideration of Tenant vacating the Sub-basement
Storage Space in accordance with the provisions of the Original Lease prior to
the Termination Date, Landlord has agreed to lease to Tenant, and Tenant has
agreed to hire from Landlord, certain storage premises (the "New Storage Space")
located on the 22nd Floor of the Building, substantially as shown on Exhibit A
and designated as Space 'P', on the terms and conditions set forth herein and in
the Original Lease (the Original Lease, as modified by this Amendment, is
hereafter the "Lease").

            NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Landlord and Tenant agree as
follows:

            1. Capitalized Terms; Recitals. All capitalized terms used herein
and not otherwise defined in this Amendment shall have the meanings ascribed to
them in the Lease.

            2. Modifications. Effective as of the date hereof, all references
contained in the Lease to the "Premises" shall be deemed to include the New

<PAGE>   71
                                        2


Storage Space; all references contained in the Lease to space 'Y', or to the
Subbasement Premises shall be deemed to mean the New Storage Space. All
references contained in the Supplemental Indenture to the "Additional Space"
shall be deemed to mean the New Storage Space.

            3. Brokerage. (a) Each of Landlord and Tenant represents and
warrants to the other that it has not dealt with any broker in connection with
this Amendment other than Tishman Speyer Properties, L.P. ("Landlord's Agent")
and that, to the best of its knowledge, no other broker negotiated this
Amendment and that no broker (other than Landlord's Agent) is entitled to any
fee or commission in connection herewith. The execution and delivery of this
Amendment by each party shall be conclusive evidence that each party has relied
upon the foregoing representations and warranties. Landlord shall pay Landlord's
Agent any commission due in accordance with the terms of a separate agreement.

            (b) Each of Landlord and Tenant shall indemnify, defend, protect and
hold the other party harmless from and against any and all losses, liabilities,
damages, claims, judgments, fines, suits, demands, costs, interest and expenses
of any kind or nature (including reasonable attorneys' fees and disbursements)
incurred in connection with any claim, proceeding or judgment and the defense
thereof which the indemnified party may incur by reason of any claim of or
liability to any broker, finder or like agent (other than Landlord's Agent)
arising out of any dealings claimed to have occurred between the indemnifying
party and the claimant in connection with this Amendment, or the above
representation being false. The provisions of this Paragraph 3 shall survive the
expiration or earlier termination of the term of this Amendment.

            4. No Modification. Except as set forth herein, nothing contained in
this Amendment shall be deemed to amend or modify in any respect the terms,
provisions, or conditions of the Lease and such terms, provisions, and
conditions shall remain in full force and effect as modified hereby.

            5. Construction. If there is any inconsistency between the terms of
this Amendment and the terms of the Lease, the terms of this Amendment shall be
controlling and prevail.

            6. Entire Agreement. This Amendment contains the sole and entire
understanding and agreement of the parties with respect to its entire subject
matter and all prior negotiations, discussions, representations, agreements and
understandings heretofore had among the parties with respect thereto are merged
herein.

            7. Counterparts. This Amendment may be executed in duplicate
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute one and the same instrument.

<PAGE>   72
                                       3


            8. Representations and Warranties, Tenant hereby represents and
warrants to Landlord that, as of the date hereof, (i) the Lease is in full force
and effect and has not been modified except pursuant to this Amendment; (ii) to
the best of Tenant's knowledge, there are no defaults existing under the Lease;
(iii) to the best of Tenant's knowledge there exist no valid abatements, causes
of action, counterclaims, disputes, defenses, offsets, credits, deductions, or
claims against the enforcement of any of the terms and conditions of the Lease;
and (iv) this Amendment has been duly authorized, executed and delivered by
Tenant and constitutes the legal, valid and binding obligation of Tenant.

            9. Miscellaneous. (a) This Amendment shall be governed by the laws
of the State of New York without giving effect to conflict of laws principles
thereof.

            (b) This Amendment shall be binding upon and inure to the benefit of
Landlord and Tenant and their successors and permitted assigns.

            (c) The captions, headings, and titles in this Amendment are solely
for convenience of reference and shall not affect its interpretation.

            (d) This Amendment shall not be binding upon Landlord or Tenant
unless and until Landlord shall have delivered a fully executed counterpart of
this Amendment to Tenant.

            IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment
as of the day and year first above written.

                              LANDLORD:

                              RCPI TRUST
                              By: Tishman Speyer Properties, L.P., its Agent


                              By: /s/ Peter A. Fair
                                 -------------------------------------------
                                    Peter Fair


                              TENANT:

                              LEVIN MANAGEMENT CO., INC.


                              By: /s/ Glenn A. Aigen
                                 -------------------------------------------
                                 Name:  Glenn A. Aigen
                                 Title: VP & CFO
<PAGE>   73

                                   EXHIBIT A

                                   FLOOR PLAN

The floor plan which follows is intended solely to identify the general location
of the New Storage Space, and should not be used for any other purpose. All
areas, dimensions and locations are approximate, and any physical conditions
indicated may not exist as shown.

<PAGE>   74

                               ROCKEFELLER PLAZA

                               [GRAPHIC OMITTED]

<PAGE>   75

                            FOURTH AMENDMENT TO LEASE

            This FOURTH AMENDMENT TO LEASE, dated as of July 18, 2000 (this
"Amendment"), between RCPI TRUST, a Delaware business trust having an office c/o
Tishman Speyer Properties, L.P., 45 Rockefeller Plaza, New York, New York 10111
("Landlord"), and LEVIN MANAGEMENT CO., INC., a Delaware corporation having an
office at One Rockefeller Plaza, New York, New York 10020 ("Tenant").

                              W I T N E S S E T H:

            WHEREAS, Landlord's predecessor in interest, Rockefeller Center
Properties, and Tenant's predecessor-in-interest, John A. Levin & Co., Inc.,
entered into that certain Lease, dated December 20, 1993, amended by
Supplemental Indenture, dated March 2, 1995, First Amendment to Lease, dated
June 23, 1997 (the "First Amendment"), Second Amendment to Lease, dated as of
January 22, 1998 (the "Second Amendment"), and Third Amendment to Lease, dated
as of December 31, 1998 (the "Third Amendment"), with respect to certain
premises (the "Original Premises") in the building (the "Building") located at
One Rockefeller Plaza, New York, New York (the Lease as heretofore amended, is
hereafter the "Original Lease");

            WHEREAS, Landlord and Tenant desire to modify the Original Lease to
provide for the leasing by Tenant of certain additional space consisting of a
portion of the 3rd floor of the Building, and otherwise modify the terms and
conditions of the Original Lease, all as hereafter set forth, (the Original
Lease, as modified by this Amendment, is hereafter the "Lease").

            NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Landlord and Tenant agree as
follows:

            1. Capitalized Terms; Recitals. All capitalized terms used herein
and not otherwise defined in this Amendment shall have the meanings ascribed to
them in the Lease.

            2. Lease of 3rd Floor Premises. (a) Landlord hereby leases to
Tenant, and Tenant hereby leases from Landlord, a portion of the 3rd Floor of
the Building, designated as Space 'D', and being more particularly shown on
Exhibit A attached hereto (the "3rd Floor Premises"), for a term commencing on
the later to occur of (a) July 1, 2000 and (b) the date upon which Landlord
delivers possession of the Premises to Tenant in accordance with the terms of
this Amendment (the "3rd Floor Premises Commencement Date"), and ending on
September 30, 2004, or such earlier date upon which the term may expire or be
terminated pursuant to any of the conditions of limitation or other provisions
of the Lease or pursuant to law, upon all of the terms and conditions of the
Original Lease, as modified by this Amendment. Landlord shall not be liable for
failure to

<PAGE>   76
                                       2


deliver possession of the 3rd Floor Premises to Tenant on any specified date,
and such failure shall not impair the validity of this Amendment. Landlord shall
be deemed to have delivered possession of the 3rd Floor Premises to Tenant upon
the giving of notice by Landlord to Tenant stating that the 3rd Floor Premises
are vacant, in the condition required under this Amendment, and available for
Tenant's occupancy. The provisions of this Section 2(a) are intended to
constitute "an express provision to the contrary" within the meaning of Section
223-a of the New York Real Property Law or any successor thereto.

            (b) Effective as of the 3rd Floor Premises Commencement Date, Tenant
shall lease the 3rd Floor Premises upon all of the terms and conditions of the
Original Lease, except as follows:

                  (i) The fixed rent payable under the Lease shall be increased
            by an amount equal to $159,060.00 per annum ($13,255.00 per month)
            for the period commencing on the date which is 2 months after the
            3rd Floor Commencement Date (the "3rd Floor Premises Rent
            Commencement Date") and ending on September 30, 2004, both dates
            inclusive.

                  (ii) The 3rd Floor Premises shall be deemed to consist of
            2,651 rentable square feet for all purposes of the Lease.

                  (iii) Tenant shall pay all additional rent payable pursuant to
            the Article Twenty-Four of the Original Lease, except that with
            respect to the 3rd Floor Premises only, (v) the clause "110% of" in
            Section 24.1 of the Original Lease shall be deemed to be deleted in
            both places in which it appears, (w) the clause "110% of" in Section
            24.2(b) of the Original Lease shall be deemed to be deleted in both
            places in which it appears, (x) the term "Base Real Estate Taxes"
            shall mean the R.E. Tax Share of the Real Estate Taxes for the Tax
            Year commencing on July 1, 2000 and ending on June 30, 2001, (y) the
            term "Base COM" shall mean the O.E. Share of the Cost of Operation
            and Maintenance for the Computation Year commencing on January 1,
            2000 and ending on December 31, 2000, and (z) Tenant's Area shall
            equal 2,651 rentable square feet.

                  (iv) Tenant has inspected the 3rd Floor Premises and agrees
            (i) to accept possession of the 3rd Floor Premises in the "as is"
            condition existing on the 3rd Floor Premises Commencement Date, (ii)
            that neither Landlord nor Landlord's agents have made any
            representations or warranties with respect to the 3rd Floor Premises
            or the Building except as expressly set forth herein, and (iii)
            Landlord has no obligation to perform any work, supply any
            materials, incur any expense or make any alterations or improvements
            to the 3rd Floor Premises to prepare the 3rd Floor Premises for
            Tenant's occupancy. Tenant's occupancy of any part of the 3rd Floor
            Premises shall be conclusive evidence, as against Tenant, that (A)
            Tenant has accepted possession of the 3rd Floor Premises in their
            then current condition, and (B) the 3rd Floor Premises and the
            Building are in a
<PAGE>   77
                                        3


            good and satisfactory condition as required by this Amendment.
            Notwithstanding the foregoing, Landlord agrees to deliver the 3rd
            Floor Premises to Tenant vacant and in "broom clean" condition.

                  (v) Tenant shall maintain in good order and repair, the
            sprinkler system and fire-alarm and life-safety system serving the
            3rd Floor Premises. Such maintenance shall be performed by Tenant in
            accordance with this Lease, the rules and regulations and all
            Requirements. If the Fire Insurance Rating Organization or any
            Governmental Authority or any of Landlord's insurers requires or
            recommends any modifications or Alterations be made or any
            additional equipment be supplied in connection with the sprinkler
            system or fire-alarm and life-safety system serving the Building or
            the 3rd Floor Premises by reason of Tenant's business, or the
            location of the partitions, trade fixtures, or other contents of the
            3rd Floor Premises, Landlord (to the extent such modifications or
            Alterations are structural, affect any Building System or involve
            the performance of work outside the 3rd Floor Premises), or Tenant
            (to the extent such modifications or Alterations are nonstructural,
            do not affect any Building System and do not involve the performance
            of work outside the 3rd Floor Premises) shall make such
            modifications or Alterations, and supply such additional equipment,
            in either case at Tenant's expense. Landlord represents that, as of
            the date hereof, the sprinkler system and fire-alarm and life-safety
            system serving the 3rd Floor Premises is in working order.

                  (vi) The provisions of Article Five of the Original Lease
            shall be applicable to the 3rd Floor Premises, except that the
            clause "four watts" in the first sentence of Section 5.1 shall be
            deemed to be deleted and the clause "six watts" inserted in place
            thereof.

                  (vii) Section 6.1(e)(ii) of the Original Lease is hereby
            amended by inserting the following at the end thereof:

                        "; provided that in connection with any work to be
                  performed by Tenant in connection with Tenant's initial
                  occupancy of the 3rd Floor Premises, such reasonable charges
                  shall not include a Landlord supervisory fee."

                  (viii) Except as provided in this Amendment, all references in
            the Original Lease to the "Premises" shall be deemed to include the
            3rd Floor Premises for all purposes of the Lease. With respect to
            the 3rd Floor Premises only, all references in the Original Lease to
            "term" or "term of this Lease" or words of similar import shall be
            deemed to refer to the term of the leasing of the 3rd Floor Premises
            and all references to "termination or expiration of this Lease" or
            words of similar import shall be deemed to refer to the termination
            or expiration of the leasing of the 3rd Floor Premises.

<PAGE>   78
                                       4


                  (ix) The term "Applicable Rental Rate" as used in Section
            7.2.3 of the Original Lease with respect to the 3rd Floor Premises
            only shall mean $60.00 per annum for the period commencing on the
            3rd Floor Premises Commencement Date and ending on September 30,
            2004.

                  (x) The following provisions of the Original Lease shall not
            be applicable to the leasing of the 3rd Floor Premises: Section 20.2
            and Articles Twenty-Seven, Thirty, Thirty-One, Thirty-Two and
            Thirty-Three, Paragraph 6 of the First Amendment, Paragraph 7 of the
            First Amendment, and Paragraph 2 of the Second Amendment.

            3. Brokerage. (a) Each of Landlord and Tenant represents and
warrants to the other that it has not dealt with any broker in connection with
this Amendment other than Tishman Speyer Properties, L.P. ("TSP") and Colliers
ABR, Inc. ("Colliers") and that, to the best of its knowledge, no other broker
negotiated this Amendment or is entitled to any fee or commission in connection
herewith. Landlord shall pay Colliers and TSP any commission which may be due in
connection with this Amendment pursuant to a separate agreement. Each of
Landlord and Tenant shall indemnify, defend, protect and hold the other party
harmless from and against any and all losses, liabilities, damages, claims,
judgments, fines, suits, demands, costs, interest and expenses of any kind or
nature (including reasonable attorneys' fees and disbursements) incurred in
connection with any claim, proceeding or judgment and the defense thereof which
the indemnified party may incur by reason of any claim of or liability to any
broker, finder or like agent (other than TSP and Colliers) arising out of any
dealings claimed to have occurred between the indemnifying party and the
claimant in connection with this Amendment, or the above representation being
false. The provisions of this Paragraph 3 shall survive the expiration or
earlier termination of the term of the Lease.

            4. No Modification. Except as set forth herein, nothing contained in
this Amendment shall be deemed to amend or modify in any respect the terms,
provisions, or conditions of the Lease and such terms, provisions, and
conditions shall remain in full force and effect as modified hereby.

            5. Construction. If there is any inconsistency between the terms of
this Amendment and the terms of the Lease, the terms of this Amendment shall be
controlling and prevail.

            6. Entire Agreement. This Amendment contains the sole and entire
understanding and agreement of the parties with respect to its entire subject
matter and all prior negotiations, discussions, representations, agreements and
understandings heretofore had among the parties with respect thereto are merged
herein.

<PAGE>   79
                                        5


            7. Counterparts. This Amendment may be executed in duplicate
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute one and the same instrument.

            8. Representations and Warranties. Tenant hereby represents and
warrants to Landlord that, as of the date hereof, (i) the Lease is in full force
and effect and has not been modified except pursuant to this Amendment; (ii) to
the best of Tenant's knowledge, there are no defaults existing under the Lease;
(iii) to the best of Tenant's knowledge there exist no valid abatements, causes
of action, counterclaims, disputes, defenses, offsets, credits, deductions, or
claims against the enforcement of any of the terms and conditions of the Lease;
and (iv) this Amendment has been duly authorized, executed and delivered by
Tenant and constitutes the legal, valid and binding obligation of Tenant.

            9. Miscellaneous. (a) This Amendment shall be governed by the laws
of the State of New York without giving effect to conflict of laws principles
thereof.

            (b) This Amendment shall be binding upon and inure to the benefit of
Landlord and Tenant and their successors and permitted assigns.

            (c) The captions, headings, and titles in this Amendment are solely
for convenience of reference and shall not affect its interpretation.

<PAGE>   80
                                        6


            (d) This Amendment shall not be binding upon Landlord or Tenant
unless and until Landlord shall have delivered a fully executed counterpart of
this Amendment to Tenant.

            IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment
as of the day and year first above written.

                             LANDLORD:

                             RCPI TRUST
                             By: Tishman Speyer Properties L.P., its Agent


                             By: /s/ Geoffrey P. Wharton
                                ------------------------------------------
                                Geoffrey P. Wharton


                             TENANT:

                             LEVIN MANAGEMENT CO., INC.


                             By: /s/ Glenn A. Aigen
                                ------------------------------------------
                                Name:  Glenn A. Aigen
                                Title: Sr VP & CFO

<PAGE>   81

                                   EXHIBIT A

                                   FLOOR PLAN

The floor plan which follows is intended solely to identify the general location
of the 3rd Floor Premises, and should not be used for any other purpose. All
areas, dimensions and locations are approximate, and any physical conditions
indicated may not exist as shown.

<PAGE>   82

                               ROCKEFELLER PLAZA

                               [GRAPHIC OMITTED]
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>4
<FILENAME>y47045ex10-2.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT: LEVIN
<TEXT>

<PAGE>   1

                                                      Levin Employment Agreement

                              EMPLOYMENT AGREEMENT

      This Agreement is made and entered into by and among Baker, Fentress &
Company ("BKF"), a Delaware corporation, JALC Acquisition Corp. ("Merger
Subsidiary"), a Delaware corporation, for itself and as the Surviving
Corporation (as hereinafter defined), and John A. Levin ("Levin") effective as
of the Effective Date, as defined in Section 2 herein. BKF and Merger Subsidiary
are each referred to herein as a "Company" and collectively as the "Companies."

      WHEREAS, on the Effective Date and pursuant to an Amended and Restated
Agreement and Plan of Merger by and among BKF, Merger Subsidiary, John A. Levin
& Co., Inc. ("LEVCO") and all of the holders of the outstanding capital stock of
LEVCO (the "Merger Agreement"), LEVCO will be merged with and into Merger
Subsidiary with Merger Subsidiary as the surviving corporation (the "Surviving
Corporation"), and all of the outstanding shares of common stock of LEVCO will
be converted into shares of common stock of BKF;

      WHEREAS, on the Effective Date, the Surviving Corporation shall succeed to
all of the rights and obligations of Merger Subsidiary as set forth hereunder;

      WHEREAS, Levin currently serves as the President of LEVCO and is a
shareholder of LEVCO;

      WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Companies wish to employ Levin and Levin wishes to accept such employment;
and

      NOW, THEREFORE, in consideration of the foregoing premises, the value to
be received by Levin under the Merger Agreement, the employment of Levin by the
Companies, the access to the Companies' customer base and Confidential
Information (as hereinafter defined) and the mutual promises, terms, provisions
and conditions set forth in this Agreement, the parties hereby agree:

      1. Employment. Subject to the terms and conditions set forth in this
Agreement, the Companies hereby offer and Levin hereby accepts the employment.

      2. Term. Subject to earlier termination as provided below, Levin shall be
employed by the Companies hereunder for the period (the "Term") commencing on
the Effective Date and ending on the fifth anniversary of the Effective Date.
"Effective Date" as used herein is to be the same date as the Closing Date set
forth in the Merger Agreement.

      3. Capacity; Performance.

      a. During the Term, Levin shall serve as the Chief Executive Officer and
President of BKF and as the President of Merger Subsidiary and shall have such
responsibilities, duties and authority as are generally associated with the
positions of Chief Executive Officer and President (including, without
limitation, the authority to hire, discharge and fix the terms and conditions of

<PAGE>   2

                                                      Levin Employment Agreement

employment of all employees of the Companies and any of their respective
subsidiaries, subject, only in the case of officers, to the approval of the
Board of Directors of BKF (the "Board") (or any committee thereof, to the extent
provided under the Companies' respective by-laws) and as may be assigned from
time to time to Levin by the Board that are consistent with such
responsibilities, duties and authority and Levin's positions as Chief Executive
Officer and President. During the Term. Levin will, consistent with the
provisions of the foregoing sentence, also serve in such offices or positions
with subsidiaries of Merger Subsidiary as the Board may from time to time
determine, to the extent consistent with the responsibilities, duties and
authority of Levin's position as Chief Executive Officer and President of BKF.
Levin shall be based and shall perform his duties primarily at the principal
executive offices of Merger Subsidiary in the City of New York, except for
reasonable travel as the performance of his duties hereunder may require.

      b. During the Term, Levin shall report directly to the Board.

      c. During the Term, Levin shall devote his full business time and best
efforts, business judgment, skill and knowledge exclusively to the advancement
of the business and interests of the Companies and their affiliates and to the
discharge of his duties and responsibilities. Notwithstanding anything herein to
the contrary, nothing in this Agreement shall preclude Levin from (i) serving as
a director or member of a committee of any of the entities listed on Schedule
3(c) hereto, or of any non-profit organization (and, upon the prior written
consent of BKF, which consent shall not be unreasonably withheld, and in
accordance with the Codes of Ethics (as hereinafter defined), any for-profit
organization) not involving a conflict of interest with the Companies, (ii)
engaging in charitable and community activities and (iii) managing his own
investments and assets and those of any Family Members (as hereinafter defined)
(collectively, the "Family Assets"); provided that such activities are conducted
in accordance with each Company's respective code of ethics as adopted under the
Investment Company Act of 1940, as amended (the "1940 Act") and/or the
Investment Advisers Act of 1940 (the "Advisers Act") (collectively, the "Codes
of Ethics"). For purposes of this Agreement, "Family Members" means (i)
descendants or spouses of descendants of a great-grandfather of Levin or his
spouse (any such person being hereinafter referred to as a "Relative"), (ii)
trusts primarily for the benefit of Levin and/or any one or more Relatives of
Levin or (iii) partnerships, corporations or other forms or businesses or
investment entities or associations (any of the foregoing, an "Enterprise")
controlled by one or more of the persons or trusts described in clause (i) or
(ii) above, or with any other Enterprise so controlled.

      d. The Companies shall furnish Levin with office space, secretarial,
communication, and services as shall be appropriate for Levin's position and
reasonably necessary for the performance of his duties under this Agreement.

      e. The Companies agree to use reasonable efforts to cause Levin to be
elected and continued in office throughout the Term as a member of the Board of
Directors of each of the Companies and shall include him in the management slate
for election as a director of each of the Companies at every stockholders'
meeting of the Companies at which directors are elected, and


                                       2
<PAGE>   3

                                                      Levin Employment Agreement

at every meeting of the Board of Directors of the Companies at which his term as
a director would otherwise expire.

      4. Compensation and Benefits. As compensation for all services performed
by Levin under and during the Term:

      a. Base Salaries During the Term, BKF shall pay Levin an initial base
salary of $50,000 per year and Merger Subsidiary shall pay Levin an initial base
salary of $775,000 per year. Such base salary to be paid by Merger Subsidiary
shall be, effective January 1, 1997 and on each anniversary of such date
thereafter during the Term, increased to reflect increases in the Urban Consumer
Price Index of the New York Metropolitan area as of the close of the preceding
year and may be increased from time to time by the Board or a committee thereof,
in its sole discretion. Such base salaries, as in effect at any given time, are
collectively referred to in this Agreement as the "Base Salaries" and shall be
payable in regular installments in accordance with the general payroll practices
of each of the Companies, as may be amended from time to time, for their
respective employees.

      b. Bonus Payments.

      (i) The Companies agree to use their reasonable best efforts to obtain
from the Securities and Exchange Commission an order in SEC Proceeding No.
812-9528 (the "Order") exempting Merger Subsidiary from Section 17(d) of the
1940 Act and Rule 17d-1 thereunder to permit Merger Subsidiary to adopt a
performance-based compensation plan in a form mutually acceptable to BKF and
Levin providing for the payment of non-discretionary cash bonuses to certain
officers and employees of Merger Subsidiary, including Levin, and intended to
qualify under Section 162(m)(4)(c) of the Internal Revenue Code of 1986, as
amended (the "Code") (the "Compensation Plan") and to cause the Compensation
Plan to be adopted by Merger Subsidiary, and BKF agrees to use its reasonable
best efforts to cause the Compensation Plan to be approved by the stockholders
of BKF. If, prior to Closing (as defined in the Merger Agreement), the Order is
obtained and the Compensation Plan is adopted by Merger Subsidiary and approved
by the stockholders of BKF, then, with respect to each full or partial calendar
year within the Term, Levin shall be eligible to receive an annual bonus payment
from Merger Subsidiary pursuant to the Compensation Plan (the "Compensation Plan
Bonus") in an amount determined in accordance with the terms of the Compensation
Plan. If the Order is not received or if the Compensation Plan is submitted to
the stockholders of BKF and is not approved by such stockholders, then neither
BKF nor Merger Subsidiary shall have any further obligation under this
subparagraph (i).

      (ii) If, prior to Closing, the Order is not received, or the Compensation
Plan is not adopted by Merger Subsidiary or is not approved by the stockholders
of BKF, then:


                                       3
<PAGE>   4

                                                      Levin Employment Agreement

(x)   Levin shall be eligible to receive an annual discretionary bonus payment
      from Merger Subsidiary ("Discretionary Bonus") in an amount to be
      determined by the Compensation Committee of the Board, in light of Levin's
      positions, responsibilities and entire compensation packages; and

(y)   compensation amounts payable to Levin by Merger Subsidiary, including Base
      Salary and Discretionary Bonus, if any, awarded to Levin, for any calendar
      year of the Term, which, in combination with all compensation payable to
      Levin by Merger Subsidiary and BKF for such calendar year of the Term, are
      in excess of $1,000,000 (one million dollars) (hereinafter, the "Excess
      Compensation") shall automatically be contributed to a deferred
      compensation plan (the "Deferred Compensation Plan"). The Deferred
      Compensation Plan shall be a nonqualified deferred compensation plan and a
      "Rabbi Trust" administered by an independent trustee shall be established
      to hold the Excess Compensation amounts contributed to the Deferred
      Compensation Plan. Levin shall be entitled to payment of amounts
      contributed to the Deferred Compensation Plan (together with the credited
      interest therein) on the earlier of Levin's termination of employment with
      the Companies for any reason or December 31, 2001. Any amounts held under
      the Deferred Compensation Plan shall be credited with interest at the
      Prime Rate set by the Federal Reserve Bank of New York, adjusted annually
      on the anniversary of the commencement of Levin's employment by Merger
      Subsidiary. If the payment of amounts under the Deferred Compensation Plan
      becomes due in connection with a termination of Levin's employment with
      the Companies, such payments shall be made in a lump sum within ten (10)
      days following the date of such termination of employment. If the payment
      of such amounts becomes due on December 31, 2001 (other than as a result
      of Levin's termination of employment), payment of such amounts (together
      with credited interest through the date of payment) shall be made to Levin
      on each December 31, commencing with December 31, 2001, in such amounts
      which, when aggregated with other compensation paid to Levin in such
      calendar year by the Merger Subsidiary and BKF which is not
      performance-based compensation (as defined in Section 162(m) of the Code)
      does not exceed $1,000,000. Any unpaid amounts in respect of such calendar
      year will be automatically deferred and similarly paid to Levin on the
      next succeeding December 31, and paid in fUll in a lump sum no later than
      the 10th day following Levin's termination of employment with the
      Companies for any reason.

(z)   The Companies will continue to use their reasonable best efforts to obtain
      from the Securities and Exchange Commission an order exempting Merger
      Subsidiary from Section 17(d) of the 1940 Act and Rule 17d-1 thereunder
      to permit Merger Subsidiary to adopt a Compensation Plan and to cause the
      Compensation Plan to be adopted by Merger Subsidiary, and BKF agrees to
      use its reasonable best efforts to cause the Compensation Plan to be
      approved by the stockholders of BKF. If, during the Term, (i) such an
      order is obtained, (ii) Merger Subsidiary has adopted the Compensation
      Plan and (iii) the stockholders of BKF have


                                       4
<PAGE>   5

                                                      Levin Employment Agreement

      approved the Compensation Plan, then, with respect to each full calendar
      year within the Term and commencing after the occurrence of all of the
      foregoing events (as set forth in subparagraphs (i)-(iii)), Levin shall be
      eligible to receive an annual Compensation Plan Bonus.

      c. Benefit Plans. Levin shall participate in all employee benefit plans,
programs and arrangements of the Companies now or hereinafter made available to
any senior executives of the Companies on a basis no less favorable than is made
available to any other such senior executives of the Companies, as such plans,
programs and arrangements may be in effect from time to time (including, without
limitation, each plan, program or arrangement providing for retirement benefits,
supplemental and excess retirement benefits, annual and long-term incentive
compensation (if any), stock options (if any), group life insurance, accident
and death insurance, medical and dental insurance, sick leave, disability
benefits and perquisites). In addition, Levin shall be entitled to at least four
(4) weeks vacation per calendar year and shall receive prompt reimbursement from
the Companies for all out-of-pocket expenses incurred by Levin in performing his
duties hereunder; provided that Levin submits documentation for the
reimbursement of such expenses.

      5. Termination of Employment and Benefits. Notwithstanding the provisions
of Section 2, Levin's employment under this Agreement shall terminate prior to
the expiration of the Term under the following circumstances:

      a. Death.

            (i)   In the event of Levin's death during the Term, Levin's
                  employment under this Agreement shall immediately and
                  automatically terminate, in which event the Companies shall
                  each pay to Levin's designated beneficiary or, if no
                  beneficiary has been designated by him, to his estate, (x) any
                  Base Salaries earned and unpaid as of his death, (y) any
                  Compensation Plan Bonus or Discretionary Bonus (each, a
                  "Bonus") as may previously have been awarded but which remains
                  unpaid, and (z) such additional Compensation Plan Bonus, if
                  any, as may be determined in accordance with the Compensation
                  Plan, if such Compensation Plan is in effect at the time of
                  Levin's death. In the event of death, Levin's designated
                  beneficiary, or, if no beneficiary has been designated by him,
                  his estate, shall be entitled to receive the pro rata portion
                  of either (i) the Compensation Plan Bonus for the year in
                  which Levin's death occurs, as determined under the
                  Compensation Plan or (ii) if no Compensation Plan is in
                  effect, an amount equal to the amount of the highest
                  Discretionary Bonus, if any, paid to Levin during the Term,
                  unless Levin's death occurs during the first year of the Term,
                  in which case the prorated amount of Discretionary Bonus shall
                  be determined at the sole discretion of the Compensation
                  Committee of the Board. The Companies shall otherwise have no
                  further obligation or liability under this Agreement in
                  respect to Levin.


                                       5
<PAGE>   6

                                                      Levin Employment Agreement

            (ii)  In the event of Levin's death or disability during the Term,
                  the Companies agree to use reasonable efforts to cause the
                  person designated by the estate, or legal representative of
                  Levin, if any, (the "Representative") to be elected and
                  continued in such capacity throughout the Designation Period
                  (as hereinafter defined) as a member of the Board and
                  throughout the Designation Period shall use reasonable efforts
                  to include the Representative in the management slate for
                  election as a director of BKF at every stockholders' meeting
                  of BKF at which directors are elected and at every meeting of
                  the Board at which the Representative's term as a director
                  would otherwise expire. For purposes of the foregoing,
                  "Designation Period" shall mean the period between Levin's
                  death or disability and the earliest to occur of (i) the date
                  upon which Levin's estate holds less than 5% of the
                  outstanding shares of BKF common stock, (ii) the date which is
                  three years following his death or disability or (iii) the
                  fifth anniversary of the Effective Date.

      b. Disability.

            i.    The Companies may, by action of the Board, terminate Levin's
                  employment under this Agreement upon advance written notice to
                  Levin, in the event that Levin becomes disabled so as to be
                  unable to perform substantially all of his material duties
                  under this Agreement and remains so disabled for a continuous
                  period of six (6) consecutive months (a "Disability"). In
                  addition, the Board may designate another employee to act in
                  Levin's place during any period in which he is disabled.

            ii.   Until Levin has suffered a Disability for a period of six (6)
                  consecutive months, Levin shall continue to receive the Base
                  Salaries and shall continue to be eligible for a Bonus for the
                  then-current calendar year and such other benefits as may be
                  provided for under the terms of any applicable benefit plan;
                  provided that the amount of such Base Salaries may be reduced
                  by the aggregate amount of disability benefits, if any, paid
                  to Levin under the Companies' disability income plans.

            iii.  Following the Companies' termination of Levin's employment due
                  to Disability, Levin's Base Salaries shall be discontinued
                  under Section 5(b)(ii), except that Levin shall be entitled to
                  receive the pro rata portion of either (i) the Compensation
                  Plan Bonus for the year in which Levin's employment is
                  terminated because of Disability, if a Compensation Plan is in
                  effect at such time, or (ii) if no Compensation Plan is then
                  in effect, an amount equal to the amount of the highest
                  Discretionary Bonus, if any, paid to Levin during the Term,
                  unless Levin's employment is terminated because of Disability
                  during the first year of the Term, in which case the pro rated
                  amount of Discretionary Bonus shall be determined at the sole
                  discretion of the Compensation Committee of the Board. The
                  Companies


                                       6
<PAGE>   7

                                                      Levin Employment Agreement

                  shall otherwise have no further obligation or liability under
                  this Agreement in respect to Levin.

            iv.   Any question as to the existence of the Disability of Levin as
                  to which Levin and the Companies cannot agree shall be
                  determined in writing by a qualified independent physician
                  mutually acceptable to Levin and the Company. If Levin and the
                  Company cannot agree as to a qualified independent physician,
                  each shall appoint such a physician and those two physicians
                  shall select a third who shall make such determination in
                  writing. The determination of whether or not Levin shall have
                  suffered a Disability made in writing to the Companies and
                  Levin shall be final and conclusive for all purposes of this
                  Agreement.

      c. For Cause. The Companies may, by action of a majority of the members of
the Board who are not "interested persons" of BKF or Merger Subsidiary,
terminate Levin's employment under this Agreement for Cause (as hereinafter
defined) at any time upon advance written notice to Levin. For purposes of this
Agreement, the term "interested person" shall be construed in accordance with
the definition contained in Section 2(a)( 19) of the 1940 Act, as amended, and
as modified by the Order. The following shall constitute "Cause" for
termination:

            i.    Levin's conviction of a felony (which through lapse of time or
                  otherwise is not subject to appeal); or

            ii.   Levin's willful, continuing and repeated refusal without
                  proper cause to perform his obligations under this Agreement
                  (other than as a result of Levin's physical or mental
                  incapacity); provided that no termination shall be effective
                  under this clause (ii) unless Levin shall have first received
                  written notice from the Companies describing the basis of such
                  termination for Cause and within 10 days following the
                  delivery of such notice Levin shall have refused to perform or
                  in good faith commence the performance of his obligations
                  under this Agreement.

                  In no event shall the ineffectiveness or incompetence of Levin
                  in the performance of his duties hereunder or a bona fide
                  disagreement over corporate policy be deemed grounds for
                  termination for Cause.

Upon termination of Levin's employment for Cause, the Companies shall have no
further obligation or liability to Levin, other than for Base Salaries earned
and unpaid at the date of termination and any Bonus as may previously have been
awarded to Levin (but which remains unpaid).

      d. Other than for Cause. The Companies may, by action by the Board,
terminate Levin's employment under this Agreement other than for Cause upon
advance written notice to Levin. In the event of such termination, then until
the earlier of (i) the conclusion of a period equal to the remainder of the Term
or (ii) the conclusion of a period of three (3) years following the date of
termination, the Companies shall continue to pay Levin the Base Salaries at the
rate in


                                       7
<PAGE>   8

                                                      Levin Employment Agreement

effect on the date of termination. For the same period or, if earlier, until
Levin is employed with comparable health coverage, the Companies shall also (i)
pay Levin an amount equal to the current cost to the Companies of Levin's
medical and dental insurance plan coverage at the date of termination under the
Companies' plans or (ii) provide for Levin's continued participation in such
plans, but in either case subject to any employee contribution applicable to
Levin on the date of termination and any subsequent general amendment to the
plans. It shall be in the Board's sole discretion to determine whether, for any
period, Levin will receive payment in lieu of actual coverage under the
Companies' medical and dental insurance plans; provided that the foregoing shall
not limit any right Levin may have under any applicable federal or state
continuation coverage laws or conversion rights under the medical and dental
insurance plan. In addition, Merger Subsidiary shall pay Levin (i) the
Compensation Plan Bonus otherwise payable for the year in which such termination
of employment occurs had Levin continued to be employed for the entire calendar
year or (ii) if no Compensation Plan is then in effect, an amount equal to the
amount of the highest Discretionary Bonus paid to Levin during the Term unless
such termination occurs during the first year of the Term, in which case the
amount of the Discretionary Bonus shall be determined in the sole discretion of
the Compensation Committee of the Board. Merger Subsidiary shall have no
obligation to pay any Bonus for any time period thereafter. Other than the Base
Salaries, Bonus, accrued but unpaid Base Salaries, if any, and the benefits
previously described in this Section 5(d), Merger Subsidiary shall pay Levin any
Bonus as may previously have been awarded in accordance with Section 4(b) hereto
(but which remains unpaid), but the Companies shall otherwise have no further
obligation or liability in respect of Levin under this Agreement.

      Notwithstanding any other provision of this Agreement to the contrary,
Levin acknowledges and agrees that any and all payments to which he is entitled
under this Section 5(d) are conditioned upon and subject to his execution of a
general waiver and release, in such form as may be reasonably acceptable to the
Companies and Levin, of all claims and issues arising under the Employment
Agreement, except for such matters covered by provisions of this Agreement which
expressly survive the termination of this Agreement.

      e. By Levin

            i.    Levin shall provide the Companies ninety (90) days' advance
                  written notice in the event he terminates his employment other
                  than for Good Reason (as hereinafter defined); provided that
                  the Board may, in its sole discretion, terminate Levin's
                  employment with the Companies prior to the expiration of the
                  ninety (90) day notice period. In such event and upon the
                  expiration of such 90-day period (or such shorter period as
                  the Board may in its sole discretion determine), Levin's
                  employment under this Agreement shall immediately and
                  automatically terminate, and the Companies shall pay him any
                  Base Salary earned and unpaid as of his termination date and
                  Merger Subsidiary shall pay him any Bonus as may previously
                  have been awarded to Levin in accordance Section 4(b) (but
                  which remains unpaid), but the Companies shall otherwise have
                  no further obligation or liability in respect of Levin under
                  this Agreement.


                                       8
<PAGE>   9

                                                      Levin Employment Agreement

            ii.   Levin may terminate his employment hereunder for "Good Reason"
                  if at any time during the Term the Companies shall be in a
                  material breach of their obligations hereunder. The parties
                  acknowledge and agree that a material breach for purposes of
                  this Section 5(e)(ii) shall include, but not be limited to,
                  (x) any material reduction in Levin's duties, authority,
                  status or responsibilities (whether or not accompanied by a
                  change in title) all as set forth in Section 3 above, (y) a
                  reduction in Levin's Base Salaries, or other material
                  reduction of his other compensation, perquisites or benefits
                  (other than as a result, as determined by the Board in its
                  sole discretion, of decreased earnings of either BKF or Merger
                  Subsidiary as compared to their respective most recently
                  completed fiscal years) or (z) any requirement that Levin be
                  based at a location other than the principal executive
                  officers of Merger Subsidiary in the City of New York. No
                  termination for Good Reason shall be permitted unless the
                  Companies shall have first received written notice from Levin
                  describing the basis of such termination for Good Reason and
                  within ten (10) days following the delivery of such notice the
                  Companies shall not have cured or in good faith commenced the
                  cure of the breach specified in such notice.

A termination of Levin's employment for Good Reason pursuant to Section 5(e)(ii)
shall be treated for purposes of this Agreement as a termination by the
Companies other than for Cause and the provisions of Section 5(d) relating to
the payment of compensation and benefits shall apply.

      6. Effect of Termination. The provisions of this Section 6 shall apply
upon the expiration of the Term, or upon earlier termination pursuant to Section
5.

      a. Except as specifically provided in this Agreement, any benefits which
Levin is entitled to receive under any employee benefit plan of the Companies
shall be determined and paid only in accordance with the terms of such plan as
then in effect; provided that any further accrual of benefits under any such
plan shall terminate pursuant to the terms of such plan based on the date of
termination of Levin's employment and without regard to any continuation of Base
Salaries or other payments to Levin following such date of termination.

      b. Provisions of this Agreement shall survive any termination if expressly
provided in this Agreement or if necessary or desirable to fully accomplish the
purposes of such provision; provided that the provisions of Sections 5,7,8,9,
10, 11, 12 and 15 shall in all events survive any termination of Levin' s
employment and the expiration of the Term.

      c. In the event of termination of Levin, and upon the request of the
Companies, Levin will keep the termination confidential until the Companies have
a reasonable period of time to notify clients and others of such termination.

      d. The obligation of the Companies to make any payments to or on behalf of
Levin under this Agreement shall terminate in the event of Levin's willful or
grossly negligent material breach of his obligations under Sections 8 and 10 if,
within ten (10) days following the delivery


                                       9
<PAGE>   10

                                                      Levin Employment Agreement

of written notice to Levin by the Companies describing such alleged material
breach, Levin shall have failed to cease, or in good faith commence to cease,
the activities constituting such material breach of such obligations. The
obligation of the Companies to make any payment to or on behalf of Levin under
this Agreement shall terminate in the event of Levin's willful or grossly
negligent material breach of his obligations under Section 7, provided that if
such breach is curable such termination of payments shall only be effective if,
within ten (10) days following delivery of written notice to Levin by the
Companies describing such alleged material breach, Levin shall have failed to
cure, or in good faith have commenced to cure, the material breach of such
obligations.

      e. Other than as set forth in Section 5(a)(ii) of this Agreement, in the
event of termination of Levin, Levin shall immediately tender his or her
resignation from the Board of Directors of Merger Subsidiary.

      7. Confidential Information.

      a. Levin acknowledges that the Companies and their affiliates have
developed and will continually develop Confidential Information; and that Levin
may have learned or may continue to learn of Confidential Information during the
course of employment with the Companies. Levin will comply with the reasonable
policies and procedures of the Companies and their affiliates, as amended from
time to time, for protecting Confidential Information and for so long as such
information is not publicly available (other than through the act or omission of
Levin), Levin will not disclose to any person (other than his legal
representatives, counsel and accountants and except as required by court order
or applicable law or for the proper performance of Levin's duties and
responsibilities to the Companies or in defense to any claim asserted against
Levin by the Company), or use for the benefit or gain of Levin or any entity
other than the Companies, any Confidential Information without the prior written
consent of specifically authorized representatives of the Companies. Prior to
Levin's disclosure of any Confidential Information pursuant to court order,
applicable law, or in defense to any claim asserted against him, Levin shall
provide reasonable advance notice to the Companies sufficient to enable the
Companies to contest the disclosure or provision of such Confidential
Information. Levin understands that this restriction shall continue to apply
after Levin's employment terminates, regardless of the reason for such
termination.

      b. Levin shall protect the integrity of Confidential Information and shall
use reasonable efforts to keep confidential all documents, records, tapes and
other media of every kind and description relating to the business, present or
otherwise, of the Companies or their affiliates and any copies, in whole or in
part, thereof (the "Documents") containing Confidential Information. All
Documents, whether or not containing Confidential Information and whether or not
prepared by Levin (other than Documents containing exclusively Confidential
Family Information not otherwise required to be maintained by the Companies
under applicable law, including the Advisers Act), shall be the sole and
exclusive property of the Companies and their affiliates. Levin shall use
reasonable efforts to safeguard all Documents, and all Confidential Information
they contain, and shall surrender to BKF at the time his employment terminates
all Documents then in Levin's possession or control, other than Documents
containing exclusively


                                       10
<PAGE>   11

                                                      Levin Employment Agreement

Confidential Family Information not otherwise required to be maintained by the
Companies under applicable law, including the Advisers Act.

      c. "Confidential Information" means any and all information of the
Companies and their affiliates that is not generally known by others with whom
they did or do compete or do business, or with whom they plan to compete or do
business, other than (i) information which is publicly available (other than
through the act or omission of Levin) and (ii) Confidential Family Information.
Confidential Information includes without limitation such information relating
to (i) the development, research, marketing and financial activities of the
Companies and their affiliates, (ii) the Products and Services (as hereinafter
defined), (iii) the financial performance and strategic plans of the Companies
and their affiliates (other than Family Members), (xv) the identity and special
needs of the clients of the Companies and their affiliates and (v) the people
and organizations with whom the Companies and their affiliates have had or have
business relationships and those relationships. Confidential Information also
includes comparable information that the Companies or any of their affiliates
have received, belonging to clients or others who do business with the Companies
or any of their affiliates (other than Family Members) or any other information
that is, or has been, received by the Companies or any of their affiliates with
any understanding, express or implied, that it will not be disclosed (other than
Confidential Family Information).

      d. "Products and Services" means all products and services offered,
planned, researched, developed, tested, sold, licensed, marketed or otherwise
provided by the Companies or any of their affiliates during Levin's employment.

      e. The Companies acknowledge that Levin possesses and will continue to
obtain and possess Confidential Family Information and that the Companies may
have learned or may continue to learn Confidential Family Information during the
course of Levin's employment with the Companies. For so long as such information
is not publicly available (other than through the act or omission of either of
the Companies or their affiliates) the Companies will not disclose to any person
or entity (other than their legal representatives, counsel and accountants, and
except as required by court order or applicable law including the Advisers Act,
or for the proper performance of the duties and responsibilities of the
Companies to Levin or in defense to any claim asserted against the Companies by
Levin) or use for the benefit or gain of the Companies or any entity other than
Levin, any Confidential Family Information without the prior written consent of
Levin. Prior to the Companies' disclosure of any Confidential Family Information
pursuant to court order, applicable law, or in defense to any claim asserted
against it by Levin, the Companies shall provide reasonable advance notice to
Levin sufficient to enable Levin to contest the disclosure or provision of such
Confidential Information. The Companies understand that this restriction shall
continue to apply after Levin's employment terminates, regardless of the reason
for such termination.

      f. The Companies shall protect the integrity of the Confidential Family
Information and shall use reasonable efforts to keep confidential all documents.
records, tapes and other media of every kind and description relating to the
business and investments, present or otherwise, of Family Members and any
Documents containing Confidential Family Information.


                                       11
<PAGE>   12

                                                      Levin Employment Agreement

Except with respect to Documents that are required to be maintained by the
Companies under applicable law, including the Advisers Act, all Documents
containing exclusively Confidential Family Information shall be the sole and
exclusive property of Levin. The Companies shall safeguard all such Documents
and all Confidential Family Information and shall surrender to Levin at the time
his employment terminates all such Documents then in the possession or control
of the Companies or their affiliates, other than Documents that are required to
be maintained by the Companies or their affiliates under applicable law,
including the Advisers Act.

      g. "Confidential Family Information" means any personal information
relating to Levin or any Family Members and any information regarding the
management of the Family Assets that is distinctly unique to the Family Assets,
and any other information received by any of the Companies from Levin regarding
any Family Member, except for such information that is publicly available other
than through the act or omission of any of the Companies or their affiliates.

      8. Restricted Activities. Levin agrees that some restrictions on his
activities during and after the termination of employment are necessary to
protect the goodwill, Confidential Information, client relationships and other
legitimate interests of the Companies and their affiliates:

      a. While Levin is employed by the Companies and during a period (i) five
(5) years following the Effective Date, in the event Levin's employment is
terminated by the Companies for Cause or is voluntarily terminated by Levin
without Good Reason or (ii) two (2) years following the date of termination of
Levin's employment by the Companies for reasons other than for Cause or by Levin
for Good Reason (provided that such period shall not extend longer than five (5)
years following the Effective Date) (such period, as applicable, hereinafter
referred to as the "Non-Competition Period"), Levin shall not, directly or
indirectly, whether as owner, partner, principal, investor, consultant, agent,
employee, co-venturer or otherwise, compete with the Companies or any of their
affiliates within the United States in the money management business
("Competitive Endeavors") or undertake any planning for any business which would
constitute a Competitive Endeavor; provided, however, that in no event shall the
management of Family Assets constitute a Competitive Endeavor and provided,
further, that nothing herein shall prohibit Levin from becoming an employee,
director or consultant of any entity which may, directly or through its
affiliates, engage in the money management business, so long as Levin's
responsibilities do not include participation, solicitation, consultation,
marketing, recommendation or advice with respect to such money management
business and Levin does not, directly or indirectly, participate, solicit,
consult, market, recommend or advise or make referrals with respect to such
money management business. Other than as set forth above, restricted activity
includes without limitation accepting employment or a consulting position with
any person who is, or at any time prior to termination of Levin's employment has
been, a client of the Companies or any of their affiliates. For the purposes of
this Section, the business of the Companies and their affiliates shall include
all Products and Services offered by the Companies or any of their affiliates or
under development and Levin's undertaking shall encompass all products and
services that may be used in substitution for Products and Services.


                                       12
<PAGE>   13

                                                      Levin Employment Agreement

      b. Levin agrees that, during his employment with the Companies, he will
not, without the prior written approval of the Board, undertake any outside
activity, whether or not competitive with the business of the Companies or their
affiliates, that could reasonably give rise to a conflict of interest or
otherwise interfere with his duties and obligations to the Companies or any of
their affiliates. Notwithstanding the foregoing, Levin may (i) continue to serve
as a director or member of a committee of any of the entities listed in Schedule
3(c) hereto in accordance with the Codes of Ethics, (ii) to the extent such
activities are not competitive with the business of the Companies or their
affiliates, engage in charitable, civic or other community activities without
compensation to him and (iii) render without compensation investment advisory
and trust services with respect to the Family Assets and to one or more Family
Members.

      c. Levin agrees that, during the Non-Competition Period, he will not hire
or attempt to hire any employee of the Companies or any of their affiliates,
assist in such hiring by any person or encourage any such employee to terminate
his or her relationship with the Companies or any of their affiliates.

      d. Levin further agrees that, during the Non-Competition Period, he will
not, directly or indirectly, solicit or encourage any clients or others who do
business with the Companies or any of their affiliates to terminate or diminish
their relationship with any of them or to violate any agreement with any of
them, and while Levin is employed by the Companies and during the period ending
five (5) years following the Effective Date in the event Levin's employment is
terminated by the Companies for Cause or is voluntarily terminated by Levin
without Good Reason, Levin will not conduct, either directly or indirectly, with
any person any business or activity that such client or other person conducts or
could conduct with the Companies or any of their affiliates.

      e. Levin agrees that he will (i) comply with the Codes of Ethics and (ii)
notify the Board of all directorships or memberships on a board of directors or
board of trustees held by him, regardless of whether (y) such office was held
prior to the date hereof or (z) such office would require prior written consent
of the Board. Levin further agrees that, during his employment with the
Companies, he will not become, without the prior written approval of the Board,
a member of the board of directors or board of trustees of any public company or
of any company that could reasonably be expected to become an appropriate
investment for any client of the Companies in an account managed by the
Companies.

      f. The parties intend that the non-competition, non-solicitation and
non-servicing provisions of this Section 8 shall be deemed to be a series of
separate covenants, one for each and every county of each and every state of the
United States of America and each and every political subdivision of each and
every country outside the United States of America where this provision is
intended to be effective.

      9. Cooperation With Regard to Litigation. Levin agrees to cooperate with
the Companies during the Term and thereafter (including following Levin's
termination of employment for any reason), by making himself reasonably
available to testify on behalf of a


                                       13
<PAGE>   14

                                                      Levin Employment Agreement

Company or any of its affiliates, in any action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, relating to events which
occurred either during Levin's employment with the Companies and/or during
Levin's prior employment with LEVCO and any of its related entities, and to
assist a Company, or any of its affiliates, in any such action, suit, or
proceeding, by providing information and meeting and consulting with the Board
or its representatives or counsel, or representatives or counsel to the
Companies or any of their affiliates, as reasonably requested by the Board or
such representatives or counsel. Either Company, as the case may be, agrees to
reimburse Levin, on an after-tax basis, for expenses reasonably incurred in
connection with such provision of testimony or assistance.

      10. Notification Requirement. Until the conclusion of the Non-Competition
Period, Levin shall give notice to the Companies of any change in his address
and of each new job or other business activity that he plans to undertake, at
least seven (7) days prior to beginning any such activity. Such notice shall
state the nature of the activity, the name and address of the person for whom
such job or activity is undertaken and the nature of Levin's business
relationship(s) and position(s) with such person. Levin shall provide the
Companies with such other pertinent information concerning such business
activity as the Companies may reasonably request in order to determine Levin's
continued compliance with his obligations under Sections 7,8,9 and 10.

      11. Enforcement of Covenants.

      (i) Levin acknowledges that he has carefully read and considered all the
terms and conditions of this Agreement, including the conditions and restraints
imposed upon him pursuant to Sections 7, 8, 9 and 10. Levin agrees that said
conditions and restraints are necessary for the reasonable and proper protection
of the Companies and their affiliates and that each and every one of the
conditions and restraints is reasonable in respect to subject matter, length of
time and geographic area, in view of the receipt of consideration pursuant to
the Merger Agreement, in the transactions contemplated above, the geographic
scope and nature of the business in which the Companies are and will continue to
be engaged, his knowledge of the Companies' business, and his relationships with
the Companies' investment advisory and trust clients. Levin further acknowledges
that, were he to breach any of the covenants contained in Sections 7, 8, 9 or
10, the damage to the Companies would be irreparable. Levin therefore agrees
that the Companies, in addition to any other remedies available to them, shall
be entitled to temporary preliminary and permanent injunctive relief against any
breach or threatened breach by him of any of said covenants, without having to
post bond, in a court of competent jurisdiction. The parties further agree that,
in the event that any provision of Sections 7, 8, 9 or 10 shall be determined by
any court of competent jurisdiction to be unenforceable by reason of its being
extended over too great a time, too large a geographic area or too great a range
of activities, such provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by law. The non-prevailing party in
any action brought pursuant to this Section 11(i) shall indemnify and hold
harmless the prevailing party from and against all reasonable legal fees and
expenses paid or incurred by them in connection with such action.


                                       14
<PAGE>   15

                                                      Levin Employment Agreement

      (ii) The Companies acknowledge that they have carefully read and
considered all the terms and conditions of this Agreement, including the
conditions and restraint imposed upon them in Section 7(e), above. The Companies
further acknowledge that were they to breach the confidentiality provision set
forth in Section 7(e) above, the damage to Levin would be irreparable. The
Companies therefore agree that Levin, in addition to any other remedies
available to him, shall be entitled to preliminary and permanent injunctive
relief against any breach or threatened breach of Section 7(e), without having
to post bond, in a court of competent jurisdiction. The non-prevailing party in
any action brought pursuant to this Section 11(ii) shall indemnify and hold
harmless the prevailing party from and against all reasonable legal fees and
expenses paid or incurred by them in connection with such action.

      12. Arbitration. Other than an action brought under Section 11, which may
be brought directly in any court of competent jurisdiction, any dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration in New York, New York in accordance with the rules of
the American Arbitration Association before a board of three (3) disinterested
persons, consisting of one arbitrator to be appointed by the Companies, one by
Levin, and one by the arbitrators so chosen. Judgment may be entered on the
arbitrators' award in any court having jurisdiction. For purposes of entering
any judgment upon an award rendered by the arbitrators, the Companies hereby
consent to the jurisdiction of any or all of the following courts: (i) the
United States District Court for the Southern District of New York, (ii) any of
the courts of the State of New York, or (iii) any other court having
jurisdiction. The Companies further agree that any service of process or notice
requirements in any such proceeding shall be satisfied if the rules of such
court relating thereto have been substantially satisfied. The Companies and
Levin hereby waive, to the fullest extent permitted by applicable law, any
objection which they may now or hereafter have to such jurisdiction and any
defense of inconvenient forum. The Companies and Levin hereby agree that a
judgment upon an arbitrator's award may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. To the extent Levin
substantially prevails in any arbitration pursuant to this Section 12, the
Companies shall indemnify and hold harmless Levin from and against all
reasonable legal fees and expenses paid or incurred by him in connection with
such arbitration. Notwithstanding any other provision of this Agreement, any
payment to Levin under this Agreement shall be postponed during the pendency of
any dispute or controversy arising under or in connection with this Agreement.

      13. Withholding. All payments made by the Companies under this Agreement
shall be reduced by any tax or other amounts required to be withheld by the
Companies under applicable law.

      14. Assignment. Neither of the Companies nor Levin may make any assignment
of this Agreement, or any interest in it, by operation of law or otherwise,
without the prior written consent of the other; provided, however, that a
Company may assign its rights and obligations under this Agreement without the
consent of Levin in the event that such Company shall effect a reorganization,
consolidate with, or merge into any other entity or transfer all or
substantially all of its properties or assets to any other entity; provided,
further, that in the event of such reorganization, consolidation or merger, the
Company shall require any successor (whether direct


                                       15
<PAGE>   16

                                                      Levin Employment Agreement

or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. This Agreement shall inure to the benefit of and be binding
upon the Companies, their respective successors, and permitted assigns. This
Agreement shall also inure to the benefit of and be binding upon Levin, his
executors, administrators and heirs.

      15. Indemnification The Companies will indemnify Levin to the fullest
extent permitted by the General Corporation Law of the State of Delaware or as
otherwise set forth in their respective certificates of incorporation and
by-laws as of the date hereof, and in accordance with applicable law, including
the 1940 Act. During the Term, the Companies will maintain customary officers
and directors insurance substantially similar to such insurance as is currently
in effect with respect to the senior executives and directors of BKF.

      16. Mitigation. Levin shall have no duty to mitigate the amount of any
payment or benefit provided hereunder by seeking alternative employment
following his termination of employment with the Companies. To the extent that
Levin obtains or undertakes other employment, Levin shall be obligated to
mitigate the amount of any payment or benefit provided for in this Agreement to
the extent of any payment or benefit received from such other employment, and
the amounts contained herein shall be correspondingly reduced.

      17. Severability. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.

      18. Waiver. No waiver of any provision of this Agreement shall be
effective unless made in writing and signed by the waiving party. The failure of
either party to require the performance of any term or obligation of this
Agreement, or the waiver by either party of any breach of this Agreement, shall
not prevent any subsequent enforcement of such term or obligation or be deemed a
waiver of any subsequent breach.

      19. Notices. Any and all notices, requests, demands and other
communications provided for or required by this Agreement shall be in writing
and shall be effective when delivered in person or deposited in the United
States mail, postage prepaid, registered or certified, and addressed to Levin at
his last known address on the books of BKF, in the case of BKF, at its principal
place of business, Attention: Chairman of the Board, or in the case of Merger
Subsidiary, at its principal place of business, Attention: John A. Levin or to
such other address as Levin or the Companies may specify by notice to the
others.

      20. Entire Agreement. This agreement constitutes the entire agreement
between the parties and supersedes all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of
Levin's employment, other than the Merger Agreement.


                                       16
<PAGE>   17

      21. Amendment. This Agreement may be amended or modified only by a written
instrument signed by Levin and by an authorized representative of each of the
Companies, it being understood that any such action on behalf of the Companies
may be taken only with the prior approval of the Board.

      22. Headings. The headings and captions in this Agreement are for
convenience only and in no way define or describe the scope or content of any
provision of this Agreement.

      23. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.

      24. Governing Laws. This is a New York contract and shall be construed and
enforced under and be governed in all respects by the substantive laws of The
State of New York, without regard to the conflict of laws principles thereof.

      IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument as of the date first above written.

JOHN A.LEVIN                             BAKER, FENTRESS & COMPANY


/s/ John A. Levin
-------------------------------          By:__________________________
John A. Levin
                                      Title:__________________________


                                            JALC ACQUISITION CORP.

                                         By:__________________________
                                      Title:__________________________

<PAGE>   18

                                                      Levin Employment Agreement

      21. Amendment. This Agreement may be amended or modified only by a written
instrument signed by Levin and by an authorized representative of each of the
Companies, it being understood that any such action on behalf of the Companies
may be taken only with the prior approval of the Board.

      22. Headings. The headings and captions in this Agreement are for
convenience only and in no way define or describe the scope or content of any
provision of this Agreement.

      23. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.

      24. Governing Laws. This is a New York contract and shall be construed and
enforced under and be governed in all respects by the substantive laws of The
State of New York, without regard to the conflict of laws principles thereof.

      IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument as of the date first above written.

JOHN A. LEVIN                               BAKER, FENTRESS & COMPANY

/s/ John A. Levin                           By: /s/ James P. Gorter
----------------------------                   ------------------------------
John A. Levin
                                         Title: CHAIRMAN
                                               ------------------------------

                                           JALC ACQUISITION CORP.

                                           By: /s/ James P. Gorter
                                              ------------------------------

                                          Title: CHAIRMAN
                                              ------------------------------


                                       17
<PAGE>   19

                               Schedule 3(c)
                               -------------

1.    Morgan Stanley Africa Investment Fund, Inc.

2.    Morgan Stanley Asia - Pacific Fund, Inc.

3.    Morgan Stanley Emerging Markets Fund, Inc.

4.    Morgan Stanley Emerging Markets Debt Fund, Inc.

5.    Morgan Stanley Global Opportunity Bond Fund, Inc.

6.    The Brazilian Investment Fund, Inc.

7.    The Latin American Discovery Fund, Inc.

8.    The Morgan Stanley High Yield Fund, Inc.

9.    The Morgan Stanley India Investment Fund, Inc.

10.   The Malaysia Fund, Inc.

11.   The Pakistan Investment Fund, Inc.

12.   The Thai Fund, Inc.

13.   The Turkish Investment Fund, Inc.

14.   Lincoln Center for the Performing Arts, Inc.

15.   The National Institute for the Deaf

16.   The Whitney Museum of American Folk Art

17.   Mt. Sinai Medical Center

18.   Yale University

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>5
<FILENAME>y47045ex10-3.txt
<DESCRIPTION>EMPLOYMENT AGREEMENT: ROGERS
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 10.3


                              EMPLOYMENT AGREEMENT

                  This Agreement is made and entered into as of December 31,
1999 (the "Effective Date"), among LEVIN MANAGEMENT CO., INC., a Delaware
corporation (the "Company"), BAKER, FENTRESS & COMPANY, a Delaware corporation
and the sole stockholder of the Company ("BKF"), and GREGORY T. ROGERS (the
"Employee").

                  I. Employment. Subject to the terms and conditions set forth
in this Agreement, the Company hereby offers employment to the Employee, and the
Employee hereby accepts such employment, on the terms and conditions contained
herein.

                  II. Term. Subject to earlier termination as provided below,
the Employee shall be employed by the Company hereunder for the period (the
"Term") commencing on the date hereof (the "Effective Date") and ending on
December 31, 2002; provided, however, that , commencing on December 31, 2002,
and on each December 31 thereafter, the term shall automatically be extended for
successive one year periods unless either party shall give the other at least
six months advance written notice of their intention not to extend the Term.

                  III.     Capacity; Performance.

                          A. During the Term, the Employee shall serve the
Company as the Company's Chief Operating Officer and Executive Vice President of
Marketing and Strategy and shall report to the Company's Chief Executive Officer
(the "CEO"). The Employee's day to day responsibilities shall include the
management of marketing, product development, legal, personnel and operations,
and such other senior executive duties as may be directed by the CEO or the
Board of Directors of BKF (the "Board"). The Employee shall be based and shall
perform his duties primarily at the principal executive offices of the Company
in the City of New York, except for reasonable travel as the performance of his
duties hereunder may require.

                          B. Except as provided in Section 8(b), during the
Term, the Employee shall devote the Employee's full business time and best
efforts, business judgment, skill and knowledge exclusively to the advancement
of the business and interests of the Company and its affiliates and to the
discharge of the Employee's duties and responsibilities.

                          C. During the Term, the Company shall furnish the
Employee with office space, secretarial, communication, and services as shall be
appropriate for the Employee's position as reasonably necessary for the
performance of his duties under this Agreement.
<PAGE>   2
                          D. If any employee of the Company other than John A.
Levin is a member of the Board at the time of the mailing of the proxy statement
in respect of the 2001 annual meeting of BKF shareholders (the "2001 Annual
Meeting"), then BKF will use its best efforts to nominate the Employee for
election to the Board at the 2001 Annual Meeting. If any employee of the Company
other than John A. Levin is a member of the Board at the time of the mailing of
the proxy statement in respect of the 2002 annual meeting of BKF shareholders
(the "2002 Annual Meeting"), then BKF will use its best efforts to nominate the
Employee for election to the Board at the 2002 Annual Meeting. During any period
in which the Employee is serving as Executive Vice President and Chief Operating
Officer of the Company and is not a Director of BKF, Employee shall be invited
to attend meetings of the Board; provided that the Board may elect from time to
time to meet without the Employee present.

                  IV. Compensation and Benefits. As compensation for all
services performed by the Employee during the Term:

                          A. Signing Bonus. Upon execution of this Agreement,
the Company shall pay the Employee a one-time signing bonus (the "Signing
Bonus") in the amount of $403,848.

                          B. Base Salary. During the Term, the Company shall pay
the Employee a base salary at the annual rate of Four Hundred Thousand Dollars
($400,000.00). Employee's base salary shall be adjusted annually to reflect
increases in the cost of living to the same extent as other senior executives of
the Company. In addition, as of each anniversary of the Effective Date during
the Term, such base salary shall be reviewed, and may be increased (but not
decreased), in the discretion of the Chairman of the Board, subject to the
review and approval of the Board or a committee thereof, in light of the
Employee's position, responsibilities and performance. Employee's base salary,
as in effect at any given time, is referred to in this Agreement as the "Base
Salary" and shall be payable in regular installments in accordance with the
general payroll practices of the Company, as may be amended from time to time,
for its employees.

                          C. Guaranteed Bonuses. For calendar year 2000 and
2001, the Company shall pay the Employee an additional amount of compensation
equal to at least $600,000 (the "Guaranteed Bonus"). Up to 30% of the amount of
the Guaranteed Bonus shall be paid in stock options or other equity-based units
in accordance with the compensation plan of the Company (the "Deferred
Portion"); provided that the Deferred Portion shall vest at no lesser a rate
than in equal one-third annual installments; and provided, further, that the
deferred Portion for 2000 and 2001 shall be no greater, on a percentage basis,
than portion of the annual bonus deferred in each of such years with respect to
the senior executives of the Company generally. The remainder of the Guaranteed
Bonus shall be paid in cash as soon as practical after the end of 2000 or 2001
(as applicable) in accordance with the Company's established


                                       2
<PAGE>   3
practice for the payment of year-end bonuses to senior management, but in no
event later than March 15, 2001 or 2002 (as applicable).

                          D. Annual Incentive Award. For calendar years
commencing with 2002, the Employee shall be eligible for an "Annual Incentive
Award," as defined in the Baker, Fentress & Company 1998 Incentive Compensation
Plan (the "Incentive Plan"), with a target Annual Incentive Award of no less
than $600,000 based on the attainment of performance criteria established by the
Compensation Committee of the Board (the "Compensation Committee") in
consultation with the Employee with respect to such criteria and the amount of
any minimum bonus. A portion of the Annual Incentive Award shall be paid in
stock options or other equity-based units in accordance with the compensation
plan of the Company; provided that the portion of the Annual Incentive Bonus so
paid shall be no greater than the portion so paid to senior executives of the
Company generally; and provided, further, that any deferred portion of the
Annual Incentive Award shall vest at no lesser rate than in equal one-third
annual installments . The remainder of the Annual Incentive Award shall be paid
in cash as soon as practical after the end of the calendar year in accordance
with the Company's established practice for the payment of year-end bonuses to
senior management, but in no event later than March 15, of the following year.
The Employee acknowledges that, to the extent possible, the Annual Incentive
Award will be designed to be exempt from the application of Section 162(m) of
the Internal Revenue Code, meaning, among other things, that the actual amount
of the Annual Incentive Award will be based on objective performance criteria
established by the Compensation Committee in its sole discretion (and the
Employee understands that he will not be a member of the Compensation Committee
nor will he in any way be involved in the determination of the amount of his
Annual Incentive Award).

                          E. Stock Options.

                             1. The Employee shall be granted, pursuant to the
Incentive Plan, options (the "Stock Options") to purchase one percent (1%) of
the total outstanding common stock of BKF, subject to the conditions hereinafter
set forth. The Stock Options shall be granted no later than the earlier of (i)
March 15, 2000 or (ii) the first date following the Effective Date on which
other senior executives of the Company are granted options to purchase BKF
common stock. The per-share exercise price of the Stock Options shall be the
"Fair Market Value" (as defined in the Incentive Plan) of BKF's common stock as
of the date of grant. The Stock Options shall vest and become exercisable
according to the following schedule, provided that the Employee is still
employed on each such date, and provided further that each Stock Option shall
expire on the tenth anniversary of the date of its grant, or sooner as described
below:


                    VESTING DATE                            STOCK OPTIONS VESTED
       --------------------------------------               --------------------
                  December 31, 2000                           1/3

                                       3
<PAGE>   4
                  December 31, 2001                           1/3

                  December 31, 2002                           1/3


All Stock Options shall immediately vest and become exercisable upon a "Change
in Control" (as defined in Section 13). In the event of the termination of the
Employee's employment due to death or Disability, the Employee shall become
immediately vested in that number of Stock Options that would have been vested
had such termination occurred on the second anniversary of the actual date of
termination, and vested Stock Options shall remain outstanding until the earlier
of their scheduled expiration date, or two years following the date of
termination. In the event of the termination of the Employee's employment by the
Company without Cause or by the Employee for Good Reason, all unvested Stock
Options shall immediately become fully vested and exercisable, and remain
outstanding until the earlier of their scheduled expiration date, or two years
following the date of termination. In the event of the termination of the
Employee's employment by the Company for Cause or by the Employee without Good
Reason, all Stock Options, whether or not vested, shall immediately terminate.

                             2. The Stock Options shall be granted under the
Incentive Plan. The terms and conditions of the Stock Options shall be set forth
in a written stock option agreement between BKF and the Employee, which
agreement shall contain no terms or conditions which conflict with those
described in Section 4(e)(i) and (ii) above, and which otherwise shall contain
other customary terms and conditions.

                             3. The Employee shall be entitled to participate in
any long term incentive compensation programs, including future ordinary course
stock option grants, on the same basis as others senior executives of the
Company.

                          F. Benefit Plans. The Employee shall participate in
all employee benefit plans, programs and arrangements of the Company now or
hereinafter made available to any senior executives of the Company on a basis no
less favorable than is made available to any other such senior executives of the
Company, as such plans, programs and arrangements may be in effect from time to
time (including, without limitation, each plan, program or arrangement providing
for retirement benefits, supplemental retirement benefits, group life insurance,
accident and death insurance, medical insurance, sick leave, disability benefits
and perquisites). The Employee shall be entitled to long term disability
coverage in accordance with Company policy for senior executives. In addition,
the Employee shall be entitled to four weeks paid vacation per calendar year and
shall receive prompt reimbursement from the Company for all out-of-pocket
expenses incurred by the Employee in performing his duties hereunder; provided
that the Employee submits documentation for the reimbursement of such expenses
in accordance with the standard expense reimbursement policy of the Company.

                                       4
<PAGE>   5
                  V. Termination of Employment and Benefits. Notwithstanding the
provisions of Section 2, the Employee's employment under this Agreement shall
terminate prior to the expiration of the Term under the following circumstances:

                          A. Death. In the event of the Employee's death during
the Term, the Employee's employment under this Agreement shall immediately and
automatically terminate, in which event the Company shall pay to the Employee's
designated beneficiary or, if no beneficiary has been designated by him, to his
estate, (i) any Base Salary and other amounts or benefits earned or owing but
unpaid as of his death (the "Accrued Amounts"), along with continuation of
Employee's Base Salary for 90 days after the date of death and (ii) a pro-rata
portion of the Guaranteed Bonus or of the target Annual Incentive Award, as
applicable, for the calendar year of the Employee's death, based on the number
of days in such calendar year preceding and including the date of death.
Payments of any Base Salaries, Signing Bonus, Guaranteed Bonus or Annual
Incentive Award pursuant to the preceding sentence shall be made in a lump sum
within 30 days of the date of death. Except as provided in Section 4(e) above,
this Section 5(a) or Section 5(f) below, the Company shall have no further
obligation or liability under this Agreement upon the death of the Employee.

                          B. Disability.

                             1. The Company, by action of the Board, or the
Employee, may terminate the Employee's employment under this Agreement upon
advance written notice to the other, in the event of the Employee's Disability.
For purposes of this Agreement, "Disability" shall mean the Employee's
inability, due to physical or mental incapacity, to substantially perform his
duties and responsibilities under this Agreement for a period of 180 days in any
nine consecutive month period, as determined by an approved medical doctor. For
this purpose an approved medical doctor shall mean a medical doctor selected by
the parties. If the parties cannot agree on a medical doctor, each party shall
select a medical doctor and the two doctors shall select a third who shall be
the approved medical doctor for this purpose. The determination of whether or
not the Employee shall have suffered a Disability made by such medical doctor in
writing to the Company and the Employee shall be final and conclusive for all
purposes of this Agreement. In addition, the Board may designate another
employee to act in the Employee's place during any period in which the Employee
is unable to substantially perform his duties and responsibilities under this
Agreement due to extended illness or injury, whether or not a Disability.

                             2. Until the Employee's employment has been
terminated on account of a Disability, the Employee shall continue to receive
the Base Salary and there shall be no reduction in any other payments or
benefits which the Employee is entitled to receive.

                                       5
<PAGE>   6
                             3. Following the Company's termination of the
Employee's employment due to Disability, the Employee shall be entitled to
receive (i) the Accrued Amounts, (ii) a pro-rata portion of the Guaranteed Bonus
or target Annual Incentive Award, as applicable, for the calendar year in which
the Employee's termination occurs, based on the number of days in such calendar
year preceding and including the date of termination, and (iii) continued
participation (or, at the Company's election, the after-tax economic equivalent
thereof) in all welfare benefits plans of the Company for the remainder of the
Term. Payments of any Base Salary, Signing Bonus, Guaranteed Bonus or Annual
Incentive Award pursuant to the preceding sentence shall be made in a lump sum
within 30 days of the date of the termination of Employee's employment.

                             4. Except as provided in Section 4(e) above, this
Section 5(b) or Section 5(f) below, the Company shall have no further obligation
or liability under this Agreement to or with respect to the Employee after his
termination of employment for Disability.

                          C. By the Company for Cause. The Company may, by
action of the Board, terminate the Employee's employment under this Agreement
for Cause (as hereinafter defined) at any time upon advance written notice to
the Employee. The following, as determined by the Board in its reasonable
judgment, shall constitute "Cause" for termination:

                             1. the Employee's willful misconduct, other than
inconsequential acts, in the performance of the Employee's duties and
responsibilities with respect to the Company or any of its affiliates unless the
Employee reasonably believed that such conduct was in, or not opposed to, the
best interests of the Company;

                             2. the Employee's willful refusal to carry out any
lawful directions of the Chairman or of the Board which are reasonable in light
of the Employee's duties and responsibilities;

                             3. a willful material breach by the Employee of any
provision of this Agreement unless the Employee reasonably believed that such
conduct was in, or not opposed to, the best interests of the Company;

                             4. the Employee is convicted of, or pleads guilty
or no contest to, a felony or a crime involving moral turpitude

provided that no termination under this Section 5(c) shall be effective unless
the Employee shall have first received written notice from the Company
describing the basis of such termination for Cause and, in the case of clauses
(i) - (iii) above, within ten (10) days following the delivery of such notice
the Employee shall have refused to cure the alleged behavior constituting Cause
or in good faith commence the cure of such behavior. In addition, the Chief
Executive Officer of the Company shall use his


                                       6
<PAGE>   7
best efforts to arrange for the Employee a hearing before the Board prior to any
termination of his employment for Cause. Upon termination of the Employee's
employment for Cause, the Company shall have no further obligation or liability
to the Employee, except for Accrued Amounts and as otherwise provided in Section
5(f). Without limiting the generality of the foregoing, the Employee shall have
no right to receive any Guaranteed Bonus, Annual Incentive Award or any other
bonus for the year in which the termination for Cause occurs.

                          D. By the Company Other than for Cause.

                             1. The Company may, by action by the Board,
terminate the Employee's employment under this Agreement other than for Cause
upon at least 15 days advance written notice to the Employee. In the event of
such termination, the Company shall pay the Employee the Accrued Amounts and, in
addition, pay the Employee an amount equal to the sum of (i) Base Salary that
the Employee would have been entitled to receive had he remained employed with
the Company for the remainder of the Term and (ii) the amount of the target
Annual Incentive Awards, and if applicable, the Guaranteed Bonuses, that the
Employee would have received if he had remained employed with the Company for
the remainder of the Term, in a lump sum within 30 days of the date of the
Employee's termination of employment with the Company.

                             2. Following the termination of the Employee's
employment under this Agreement by the Company other than for Cause, for the
remainder of the Term or, if earlier, until the Employee becomes eligible for
medical insurance coverage with another employer, the Company shall provide for
the Employee's continued participation in the Company's health plans (or, at the
Company's election, a payment equal to the after-tax economic equivalent
thereof), but in either case subject to any employee contribution (on a tax
effected basis) applicable to the Employee on the date of termination and any
subsequent general amendment to the plans. It shall be in the Board's sole
discretion to determine whether, for any period, the Employee will receive
payment in lieu of actual coverage under the Company's medical insurance plan;
provided that the foregoing shall not limit any right the Employee may have
under any applicable federal or state continuation coverage laws or conversion
rights under the medical and dental insurance plan, but any period during which
medical coverage is continued pursuant hereto shall count toward any such
continuation rights.

                             3. Except as provided in Section 4(e) above, this
Section 5(d) or Section 5(f) below, the Company shall have no further obligation
or liability under this Agreement to or with respect to the Employee following a
termination of employment other than for Cause.

                          E. By the Employee.

                                       7
<PAGE>   8
                             1. The Employee shall provide the Company thirty
(30) days' advance written notice in the event the Employee terminates his
employment, other than for Good Reason (as hereinafter defined); provided that
the Board may, in its sole discretion, terminate the Employee's employment with
the Company prior to the expiration of the thirty (30) day notice period. In
such event and upon the expiration of such 30 day period (or such shorter time
as the Board in its sole discretion may determine), the Employee's employment
under this Agreement shall immediately and automatically terminate, and the
Company shall pay the Employee the Accrued Amounts as of the Employee's
termination date. The Employee's voluntary termination in accordance with this
Section 5(e) shall not be a breach of this Agreement.

                             2. The Employee may terminate his employment
hereunder for "Good Reason" if at any time during the Term the Company shall be
in a material breach of its obligations hereunder. The parties acknowledge and
agree that a material breach for purposes of this Section 5(e)(ii) shall
include, but not be limited to, (A) a reduction in his then current Base Salary
or in his target bonus opportunity; (B) a breach of the Company's material
obligations under this Agreement; (C) the termination of, or a material
reduction in, any employee benefit or perquisite enjoyed by him (other than as
part of an across-the-board reduction applying to all executive officers of the
Company); (D) a material diminution in his duties or the assignment to him of
duties that materially impair his ability to perform the duties normally
assigned to a person of his title and position at a corporation of the size and
nature of the Company; provided that the hiring of a President of the Company
with the normal duties and responsibilities associated with such a position
shall not be deemed to constitute a diminution of the Employee's duties; (E) the
failure to appoint the Employee to any of the positions in Section 3(a); (F) the
relocation of the Company's principal office, or of his own office as assigned
to him by the Company, to a location more than 30 miles from New York, New York;
or (G) the failure of the Company to obtain the assumption in writing of its
obligation to perform this Agreement by any successor to all or substantially
all of the business or assets of the Company within 15 days after a merger,
consolidation, sale or similar transaction. No termination for Good Reason shall
be permitted unless the Company shall have first received written notice from
the Employee describing the basis of such termination for Good Reason and within
ten (10) days following the delivery of such notice the Company shall not have
cured or in good faith commenced the cure of the breach specified in such
notice. A termination of the Employee's employment for Good Reason pursuant to
Section 5(e)(ii) shall be treated for purposes of this Agreement as a
termination by the Company other than for Cause and the provisions of Section
5(d) relating to the payment of compensation and benefits shall apply.

                             3. Except as provided in Section 4(e) above, this
Section 5(e) or Section 5(f) below, the Company shall have no further obligation
or liability under this Agreement following a termination of employment by the
Employee.

                                       8
<PAGE>   9
                          F. In addition to any amounts which may be payable
following a termination of employment pursuant to one of the paragraphs of this
Section 5, the Employee or his beneficiaries shall be entitled to receive any
benefits that may be provided for under the terms of any employee benefit plan
or program (other than a severance plan) in which the Employee is participating
at the time of termination, and shall be entitled to continuing benefits under
Section 15 hereof. Notwithstanding any other provision of this Agreement to the
contrary, the Employee acknowledges and agrees that any and all payments to
which the Employee is entitled under this Section 5 are conditioned upon and
subject to the Employee's execution of a mutual general waiver and release, in
substantially the form attached hereto, of all claims and issues arising under
this Agreement, except for such matters covered by provisions of this Agreement
which expressly survive the termination of this Agreement; provided, however,
that the Employee shall not be obligated to execute such release, unless within
30 days following his termination of employment, the Company shall have
delivered an executed copy of such mutual release, which shall be limited to
releasing the Employee from all claims known to the Company at the time, and
which shall only be effective upon the Employee's execution of a release which
shall not be so limited as to known claims.

                  VI. Effect of Termination. The provisions of this Section 6
shall apply upon the expiration of the Term, or upon earlier termination
pursuant to Section 5.

                          A. Except as specifically provided in this Agreement,
any benefits which the Employee is entitled to receive under any employee
benefit plan of the Company or its affiliates shall be determined and paid only
in accordance with the terms of such plan as then in effect; provided that any
further accrual of benefits under any such plan shall terminate pursuant to the
terms of such plan based on the date of termination of the Employee's employment
and without regard to any continuation of Base Salary or other payment to the
Employee following such date of termination.

                          B. Provisions of this Agreement shall survive any
termination expressly provided in this Agreement if necessary or desirable to
fully accomplish the purposes of such provision; provided that the provisions of
Sections 4(e), 5, 7, 8, 9, 10, 11, 12 and 15 shall in all events survive any
termination of the Employee's employment and the expiration of the Term.

                          C. In the event of termination of the Employee, and
upon the request of the Company, the Employee will keep the termination
confidential with respect to the Company's clients and other business
relationships until the Company has a reasonable period of time to notify
clients and others of such termination.

                          D. The obligation of the Company to make any payments
to or on behalf of the Employee under Section 5 (other than Section 5(f)) of
this Agreement shall terminate in the event of the Employee's willful or grossly
negligent material breach of the Employee's obligations under Sections 8 (other
than Section 8(e))


                                       9
<PAGE>   10
and 10 if, within ten (10) days following the delivery of written notice to the
Employee by the Company describing such alleged material breach, the Employee
shall have failed to cease, or in good faith commence to cease, the activities
constituting such material breach of such obligations. The obligation of the
Company to make any payment to or on behalf of the Employee under Section 5
(other than Section 5(f)) of this Agreement shall terminate in the event of the
Employee's willful or grossly negligent material breach of the Employee's
obligations under Section 7, provided that if such breach is curable such
termination of payments shall only be effective if, within ten (10) days
following delivery of written notice to the Employee by the Company describing
such alleged material breach, the Employee shall have failed to cure, or in good
faith not have commenced to cure, the material breach of such obligations.

                          E. In the event of termination of the Employee, the
Employee shall immediately tender his resignation from the Board, if applicable.

                          F. The Company acknowledges and agrees that any
amounts due under Section 5 are in the nature of severance payments considered
to be reasonable by the Company and are not in the nature of a penalty.

                  VII. Confidential Information.

                          A. The Employee acknowledges that the Company and each
of its affiliates have developed and will continually develop Confidential
Information; and that the Employee may have learned or may continue to learn of
Confidential Information during the course of employment with the Company. The
Employee will comply with the reasonable policies and procedures of the Company
and its affiliates, as amended from time to time, for protecting Confidential
Information and for so long as such information is not publicly available or
generally known in the Company's industry (other than through the act or
omission of the Employee), the Employee will not disclose to any person (other
than his legal representatives, counsel and accountants and except as required
by court order or applicable law or for the proper performance of the Employee's
duties and responsibilities to the Company and its affiliates or in respect of
any claim asserted involving the Employee and the Company), or use for the
benefit or gain of the Employee or any entity other than the Company, any
Confidential Information without the prior written consent of a specifically
authorized representative of the Company. Prior to the Employee's disclosure of
any Confidential Information pursuant to court order, applicable law, or in
defense to any claim asserted against him (other than claims asserted against
him by the Company), the Employee shall provide reasonable advance notice to the
Company sufficient to enable the Company to contest the disclosure or provision
of such Confidential Information. The Employee understands that this restriction
shall continue to apply after the Employee's employment terminates, regardless
of the reason for such termination.

                          B. The Employee shall protect the integrity of
Confidential Information and shall use reasonable efforts to keep confidential
all documents,


                                       10
<PAGE>   11
records, tapes and other media of every kind and description relating to the
business, present or otherwise, of the Company or its affiliates and any copies,
in whole or in part, thereof (the "Documents") containing Confidential
Information. All Documents, whether or not containing Confidential Information
and whether or not prepared by the Employee, shall be the sole and exclusive
property of the Company and its affiliates. The Employee shall use reasonable
efforts to safeguard all Documents, and all Confidential Information they
contain, and shall surrender to the Company at the time the Employee's
employment terminates, or at such earlier time or times as the Board or its
designee may specify, all Documents then in the Employee's possession or
control.

                          C. "Confidential Information" means any and all
information of the Company and its affiliates that is not generally known by
others with whom they did or do compete or do business, or with whom they plan
to compete or do business other than information which is publicly known or
generally known in the Company's industry (other than through the act or
omission of the Employee). Confidential Information includes without limitation
such information relating to (i) the development, research, marketing and
financial activities of the Company and its affiliates, (ii) the Products and
Services (as hereinafter defined), (iii) the financial performance and strategic
plans of the Company and its affiliates, (iv) the identity and special needs of
the clients of the Company and its affiliates and (v) the people and
organizations with whom the Company and its affiliates have had or have business
relationships and those relationships. Confidential Information also includes
comparable information that the Company or any of its affiliates have received,
belonging to clients or others who do business with the Company or any of its
affiliates or any other information that is, or has been, received by the
Company or any of its affiliates with any understanding, express or implied,
that it will not be disclosed.

                          D. "Products and Services" means all products and
services offered, planned, researched, developed, tested, sold, licensed,
marketed or otherwise provided by the Company or any of its affiliates during
the Employee's employment.

                  VIII. Restricted Activities. The Employee agrees that some
restrictions on the Employee's activities during and after the termination of
employment are necessary to protect the goodwill, Confidential Information,
client relationships and other legitimate interests of the Company and its
affiliates:

                          A. While the Employee is employed by the Company and ,
in the event of a termination of the Employee's employment by the Company for
Cause or by the Employee without Good Reason, for a period of six months
thereafter, the Employee shall not, directly or indirectly, whether as owner,
partner, principal, investor, consultant, agent, employee, co-venturer or
otherwise, compete with the Company or any of its affiliates within the United
States in the money management business ("Competitive Endeavors") or undertake
any planning for any business which would constitute a Competitive Endeavor. For
the purposes of this Section, the business of the Company and its affiliates
shall include all Products and Services


                                       11
<PAGE>   12
offered by the Company or any of its affiliates or under development and the
Employee's undertaking shall encompass all products and services that may be
used in substitution for Products and Services.

                          B. The Employee agrees that, during the Employee's
employment with the Company, the Employee will not, without the prior written
approval of the Board, undertake any outside activity, whether or not
competitive with the business of the Company or its affiliates, that could
reasonably give rise to a conflict of interest or otherwise interfere with the
Employee's duties and obligations to the Company or any of its affiliates.
Notwithstanding the foregoing, the Employee may (i) to the extent such
activities are not competitive with the business of the Company or its
affiliates, engage in charitable, civic or other community activities without
compensation to the Employee and (ii) render without compensation investment
advisory and trust services to immediate members of the Employee's family, which
shall include the Employee and any trust or account which is comprised primarily
of assets held for the benefit of such Employee and/or immediate members of his
family.

                          C. The Employee agrees that, during his employment
with the Company and for one year thereafter (the "Restricted Period"), the
Employee will not knowingly, directly or indirectly, (A) hire or attempt to hire
any person who, during the six-month period ending on the date of such activity,
was an employee of the Company or any of its affiliates (other than an employee
who employment was terminated by the Company), (B) assist another in hiring or
attempting to hire any such person, (C) encourage any such person to terminate
his or her employment with the Company or any of its affiliates (other than in
the course of the Employee's proper performance of his duties hereunder), (D)
solicit or accept business from any person or entity which, during the six-month
period ending on the date of such activity, was a client of the Company or any
of its affiliates, (E) assist another in soliciting or accepting business from
any such person or entity, or (F) encourage any such person or entity to
terminate its business relationship with the Company or any of its affiliates
(other than in the course of the Employee's proper performance of his duties
hereunder).

                          D. The Employee further agrees that during the
Restricted Period the Employee will not directly or indirectly solicit or
encourage any clients or others who do business with the Company or any of its
affiliates to terminate or diminish their relationship with any of them (other
than in the course of the Employee's proper performance of his duties hereunder)
or to violate any agreement with any of them.

                          E. The Employee agrees that, during the Term, he will
(i) comply with the code of ethics of BKF and the Company, as in effect from
time to time and (ii) notify the Board of all directorships or memberships on a
board of directors or board of trustees held by the Employee, regardless of
whether (y) such


                                       12
<PAGE>   13
office was held by the Employee prior to the date hereof or (z) such office
would require prior written consent of the Board.

                          F. The Employee and the Company explicitly and fully
agree that each will not at any time defame, nor during the Restricted Period
impugn or impair the reputation or public perception of or with respect to, or
disparage the other and, in the case of the Company, any of its employees,
directors or affiliates.

                          G. The parties intend that the foregoing provisions of
this Section 8 shall be deemed to be a series of separate covenants, one for
each and every county of each and every state of the United States of America
and each and every political subdivision of each and every country outside the
United States of America where this provision is intended to be effective.

                          H. The term "affiliate" as used in this Agreement
shall mean any entity in control of, controlled by or under common control with
the Company.

                  IX. Cooperation With Regard to Litigation. The Employee agrees
to cooperate with the Company, during the Term and thereafter (including
following the Employee's termination of employment for any reason), by making
himself reasonably available to testify on behalf of the Company or any of its
affiliates, in any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, relating to events which occurred during the
Employee's employment with the Company, and to assist the Company or any of its
affiliates, in any such action, suit, or proceeding, by providing information
and meeting and consulting with the Board or its representatives or counsel, or
representatives or counsel to the Company or any of its affiliates, as
reasonably requested by the Board or such representatives or counsel. The
Company agrees to reimburse the Employee, on an after-tax basis, for expenses
reasonably incurred in connection with such provision of testimony or
assistance; provided such expenses are approved in advance by the Company.

                  X. Notification Requirement. Until the conclusion of the
Restricted Period, the Employee shall give notice to the Company of any change
in the Employee's address and of each new job or other business activity that
the Employee plans to undertake, prior to beginning any such activity. Such
notice shall state the nature of the activity, the name and address of the
person for whom such job or activity is undertaken and the nature of the
Employee's business relationship(s) and position(s) with such person or the
Employee's change of address. The Employee shall provide the Company with such
other pertinent information concerning such business activity as the Company may
reasonably request in order to determine the Employee's continued compliance
with the Employee's obligations under Sections 7, 8, 9 and 10.

                  XI. Enforcement of Covenants. The Employee acknowledges that
the Employee has carefully read and considered all the terms and conditions of
this Agreement, including the conditions and restraints imposed upon the
Employee


                                       13
<PAGE>   14
pursuant to Sections 7, 8, 9 and 10. The Employee agrees that said conditions
and restraints are necessary for the reasonable and proper protection of the
Company and its affiliates and that each and every one of the conditions and
restraints is reasonable in respect to subject matter, length of time and
geographic area, in view of the receipt of consideration pursuant to this
Agreement, in the transactions contemplated above, the geographic scope and
nature of the business in which the Company is and will continue to be engaged,
the Employee's knowledge of the Company's business, and the Employee's
relationships with the Company's investment advisory and trust clients. The
Employee further acknowledges that, were the Employee to breach any of the
covenants contained in Sections 7, 8, 9 or 10, the damage to the Company would
be irreparable. The Employee therefore agrees that the Company, in addition to
any other remedies available to it, shall be entitled to temporary, preliminary
and permanent injunctive relief against any breach or threatened breach by the
Employee of any of said covenants, without having to post bond, in a court of
competent jurisdiction. The parties further agree that, in the event that any
provision of Sections 7, 8, 9 or 10 shall be determined by any court of
competent jurisdiction to be unenforceable by reason of its being extended over
too great a time, too large a geographic area or too great a range of
activities, such provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by law.

                  XII. Arbitration. Other than an action brought under Section
11, which may be brought directly in any court of competent jurisdiction, any
dispute or controversy arising under or in connection with this Agreement shall
be settled exclusively by arbitration in New York, New York in accordance with
the rules of the American Arbitration Association before a board of three (3)
disinterested persons, consisting of one arbitrator to be appointed by the
Company, one by the Employee, and one by the arbitrators so chosen. Judgment may
be entered on the arbitrators' award in any court having jurisdiction. For
purposes of entering any judgment upon an award rendered by the arbitrators, the
Company and the Employee hereby consent to the jurisdiction of any or all of the
following courts: (i) the United States District Court for the Southern District
of New York, (ii) any of the courts of the State of New York located in New
York, New York, or (iii) any other court having jurisdiction. The Company and
the Employee further agree that any service of process or notice requirements in
any such proceeding shall be satisfied if the rules of such court relating
thereto have been substantially satisfied. The Company and the Employee hereby
waive, to the fullest extent permitted by applicable law, any objection which it
may now or hereafter have to such jurisdiction and any defense of inconvenient
forum. The Company and the Employee hereby agree that a judgment upon an
arbitrator's award may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.

                  XIII. Definition of Change in Control. For purposes of this
Agreement, "Change in Control" shall mean the occurrence of any of the following
events:

                                       14
<PAGE>   15
         (i) any "person," as such term is currently used in Section 13(d) of
         the Securities Exchange Act of 1934, 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 the "Voting Stock" (as defined below) of
         the Company;

         (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 to be an Incumbent Director;

         (iii) all or substantially all of the assets or business of the Company
         are disposed of pursuant to a merger, consolidation or other
         transaction (other than the asset distribution transactions
         contemplated in the Company proxy statement dated July 22, 1999),
         unless (A) the shareholders of the Company immediately prior to such
         merger, consolidation or other transactions beneficially own, directly
         or indirectly, in substantially the same proportion as they owned the
         Voting Stock of the Company, all of the Voting Stock or other ownership
         interests of the entity or entities, if any, that succeed to the
         business of the Company 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 merger entity's Board
         of Directors;

         (iv) the Board adopts any plan of liquidation providing for the
         distribution of all or substantially all of the Company's assets; or

         (v) the Company combines with another company and is the surviving
         corporation but, immediately after the combination, the shareholders of
         the Company 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).

For purposes of the above definition, the term "Voting Stock" shall mean 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.

                  XIV. Withholding. All payments made by the Company under this
Agreement shall be reduced by any tax or other amounts required to be withheld
by the Company under applicable law.

                                       15
<PAGE>   16
                  XV. Indemnification.

                          A. The Company agrees that if the Employee is made a
party, or is threatened to be made a party, to any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "Proceeding"), by
reason of the fact that he is or was a director, officer or employee of the
Company or is or was serving at the request of the Company as a director,
officer, member, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether or not the basis of such Proceeding is the Employee's
alleged action in an official capacity while serving as a director, officer,
member, employee or agent, the Employee shall be indemnified and held harmless
by the Company to the fullest extent permitted or authorized by the Company's
certificate of incorporation or bylaws or, if greater, by the laws of the State
of Delaware, against all cost, expense, liability and loss (including, without
limitation, attorney's fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) reasonably incurred or suffered by
the Employee in connection therewith, and such indemnification shall continue as
to the Employee even if he has ceased to be a director, member, employee or
agent of the Company or other entity and shall inure to the benefit of the
Employee's heirs, executors and administrators. The Company shall advance to the
Employee all reasonable costs and expenses incurred by him in connection with a
Proceeding within 20 days after receipt by the Company of a written request for
such advance. Such request shall include an undertaking by the Employee to repay
the amount of such advance if it shall ultimately be determined that he is not
entitled to be indemnified against such costs and expenses.

                          B. Neither the failure of the Company (including its
board of directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of any proceeding concerning payment of
amounts claimed by the Employee under Section 15(a) that indemnification of the
Employee is proper because he has met the applicable standard of conduct, nor a
determination by the Company (including its board of directors, independent
legal counsel or stockholders) that the Employee has not met such applicable
standard of conduct, shall create a presumption that the Employee has not met
the applicable standard of conduct.

                          C. The Company agrees to continue and maintain a
directors' and officers' liability insurance policy covering the Employee to the
extent the Company provides such coverage for its other executive officers.

                  XVI. Assignment. Neither the Company nor the Employee may make
any assignment of this Agreement, or any interest in it, by operation of law or
otherwise, without the prior written consent of the other; provided, however,
that the Company may assign its rights and obligations under this Agreement
without the consent of the Employee in the event that the Company shall effect a
reorganization, consolidate with, or merge into any other entity or transfer all
or substantially all of its


                                       16
<PAGE>   17
properties or assets to any other entity. This Agreement shall inure to the
benefit of and be binding upon the Company, its respective successors and
permitted assigns. This Agreement shall also inure to the benefit of and be
binding upon the Employee, his executors, administrators and heirs.

                  XVII. Mitigation. The Employee shall have no duty to mitigate
the amount of any payment or benefit provided hereunder by seeking alternative
employment following his termination of employment with the Company. To the
extent that the Employee obtains or undertakes other employment during the
period that would have been equal to the remainder of the Term had the
employee's employment with the Company not terminated, the Employee shall be
obligated to mitigate the amount of any payment or benefit provided for in
Section 5 (other than Section 5(f)) of this Agreement to the extent of any cash
compensation (whether or not deferred) or health coverage received from such
other employment during such period, and the amounts contained herein shall be
correspondingly reduced.

                  XVIII. Severability. If any portion or provision of this
Agreement shall to any extent be declared illegal or unenforceable by a court of
competent jurisdiction, then the remainder of this Agreement, or the application
of such portion or provision in circumstances other than those as to which it is
so declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.

                  XIX. Waiver. No waiver of any provision of this Agreement
shall be effective unless made in writing and signed by the waiving party. The
failure of either party to require the performance of any term or obligation of
this Agreement, or the waiver by either party of any breach of this Agreement,
shall not prevent any subsequent enforcement of such term or obligation or be
deemed a waiver of any subsequent breach.

                  XX. Notices. Any and all notices, requests, demands and other
communications provided for or required by this Agreement shall be in writing
and shall be effective when delivered in person or deposited in the United
States mail, postage prepaid, registered or certified, and addressed to the
Employee at the Employee's last known address on the books of the Company or, in
the case of the Company, at its principal place of business, attention of Glenn
Aigen or to such other address as the Employee or the Company may specify by
notice to the others.

                  XXI Entire Agreement. This agreement constitutes the entire
agreement between the parties and supersedes all prior communications,
agreements and understandings, written or oral, with respect to the terms and
conditions of the Employee's employment.

                  XXII Amendment. This Agreement may be amended or modified only
by a written instrument signed by the Employee and by an authorized
representative of


                                       17
<PAGE>   18
the Company, it being understood that any such action on behalf of the Company
may be taken only with the prior approval of the Board.

                  XXIII Headings. The headings and captions in this Agreement
are for convenience only and in no way define or describe the scope or content
of any provision of this Agreement.

                  XXIV Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be an original and all of which together
shall constitute one and the same instrument.

                  XXV Governing Law. This is a New York contract and shall be
construed and enforced under and be governed in all respects by the substantive
laws of the State of New York, without regard to the conflict of laws principles
thereof or such principles of any other jurisdiction which could cause the
application of the law of any jurisdiction other than the State of New York.



                                       18
<PAGE>   19
                  IN WITNESS WHEREOF, this Agreement has been executed as a
sealed instrument as of the date first above written.

EMPLOYEE:                                  BAKER, FENTRESS & COMPANY



/s/ Gregory T. Rogers                      By: /s/ John A. Levin
--------------------------                    ----------------------------------
GREGORY T. ROGERS                             Its President
                                                 -------------------------------



                                           LEVIN MANAGEMENT CO., INC.



                                           By: /s/ John A. Levin
                                              ----------------------------------
                                              Its Chairman
                                                 -------------------------------



                                       19





</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>6
<FILENAME>y47045ex21-1.txt
<DESCRIPTION>SUBSIDIARIES
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 21.1





                             BKF CAPITAL GROUP, INC.

                              LIST OF SUBSIDIARIES






                                                                  State

                                                           Under Which Organized

Levin Management Co., Inc.                                      Delaware
     John A. Levin & Co., Inc.                                  Delaware
         Levco GP, Inc.                                         Delaware
         LEVCO Securities, Inc.                                 Delaware
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>7
<FILENAME>y47045ex23-1.txt
<DESCRIPTION>CONSENT OF ERNST & YOUNG LLP
<TEXT>

<PAGE>   1
                                                                    EXHIBIT 23.1








                         CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-50132) pertaining to the 1998 Incentive Compensation Plan of BKF
Capital Group, Inc. of our report dated January 31, 2001, with respect to the
consolidated financial statements of BKF Capital Group, Inc. included in the
Annual Report (Form 10-K) for the year ended December 31, 2000.

/s/ Ernst & Young LLP

---------------------
New York, NY
March 27, 2001
</TEXT>
</DOCUMENT>
</SUBMISSION>
