<PAGE>

                                                                     EXHIBIT 2.1


                                                                  EXECUTION COPY



                         AGREEMENT AND PLAN OF MERGER

                         Dated as of February 28, 2000
                                 by and among
                          ReliaStar Financial Corp.,
                         Pilgrim Holdings Corporation
                   and Lexington Global Asset Managers, Inc.


AGREEMENT AND PLAN OF MERGER


         This Agreement and Plan of Merger (this "Agreement"), dated as of
February 28, 2000, is made among ReliaStar Financial Corp., a Delaware
corporation ("Buyer"), Pilgrim Holdings Corporation, a Delaware corporation and
a wholly owned subsidiary of Buyer ("Merger Sub"), and Lexington Global Asset
Managers, Inc., a Delaware corporation ("Lexington").

                                   Recitals

         Lexington (or one or more of its subsidiaries) acts as investment
adviser and/or principal underwriter for 16 open-end investment companies and as
sponsor for one registered unit investment trust (collectively, the "Lexington
Funds") registered under the Investment Company Act of 1940, as amended (the
"1940 Act").

         Lexington (or one or more of its subsidiaries) is investment adviser
for various private accounts.

         The Boards of Directors of Buyer, Merger Sub, and Lexington deem it
advisable and in the best interests of each corporation and its respective
stockholders that Merger Sub and Lexington combine in order to advance the
long-term business interests of Buyer, Merger Sub, Lexington, the Lexington
Funds and the Lexington investment advisory or subadvisory clients.

         The strategic combination of Merger Sub and Lexington shall be effected
by the terms of this Agreement through a transaction in which Lexington will
merge with and into Merger Sub (the "Merger").

         In the Merger each share of Lexington's common stock, $.0l par value
per share ("Lexington Common Stock"), issued and outstanding at the Effective
Time (as defined in Section 1.1), shall be converted into cash and/or a fraction
of a share of common stock, $.01 par value per share, of Buyer ("Buyer Common
Stock").

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         For federal income tax purposes, it is intended that the Merger qualify
as a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code").

                                   Agreement

         Now, therefore, intending to be legally bound hereby, the parties agree
as follows:


                                   ARTICLE I

                                  The Merger

         1.1 Effective Time of the Merger. Subject to the terms of this
Agreement, a Certificate of Merger (the "Certificate of Merger") shall be duly
executed by Merger Sub and Lexington and delivered to the office of the Delaware
Secretary of State for filing, as provided in Section 251 of the Delaware
General Corporation Law (the "Delaware Law"), as soon as practicable on the
Closing Date (as defined in Section 1.2). The Merger shall become effective at
the time at which the Certificate of Merger shall have been filed with the
Delaware Secretary of State or at such time thereafter as is provided in the
Certificate of Merger (the "Effective Time").

         1.2 Closing. Closing of the Merger (the "Closing") will take place at
11:00 a.m., New York time, on a date to be specified by Buyer and Lexington,
which shall be no later than the fifth business day after satisfaction or waiver
(to the extent waivable under Article VIII) of all conditions to the
consummation of the Merger set forth in Article VIII of this Agreement (other
than those conditions that by their nature are to be satisfied at the Closing,
but subject to the satisfaction or waiver of those conditions), at the offices
of Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia, Pennsylvania, unless
another date or place is agreed to by Buyer and Lexington. The date on which the
Closing occurs is referred to as the "Closing Date." All actions taken at the
Closing shall be deemed to have been taken simultaneously at the Effective Time.

         1.3 Effects of the Merger.

             (a)  At the Effective Time, in accordance with this Agreement
         and the Delaware Law, (1) Lexington shall be merged with and into
         Merger Sub, (2) the separate corporate existence of Lexington shall
         cease, and (3) Merger Sub shall be the surviving corporation and shall
         continue to be governed by the Delaware Law (Merger Sub is sometimes
         referred to in this Agreement as the "Surviving Corporation").

             (b)  The Merger shall have the other effects set forth in Sections
         259 and 261 of the Delaware Law.

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         1.4 Certificate of Incorporation and Bylaws of the Surviving
Corporation.

             (a)  The Certificate of Incorporation of Merger Sub as in effect
         immediately before the Effective Time shall be the Certificate of
         Incorporation of the Surviving Corporation, until duly amended in
         accordance with the terms thereof and of the Delaware Law.

             (b)  The Bylaws of Merger Sub in effect immediately before the
         Effective Time shall be the Bylaws of the Surviving Corporation, until
         duly amended in accordance with their terms, the Certificate of
         Incorporation of the Surviving Corporation, and the Delaware Law.

         1.5 Directors and Officers of the Surviving Corporation.

             (a)  The directors of Merger Sub holding office at the Effective
         Time shall, from and after the Effective Time, be the directors of the
         Surviving Corporation, to serve until their successors have been duly
         elected or appointed and qualified or until their earlier death,
         resignation, or removal in accordance with the Surviving Corporation's
         Certificate of Incorporation and Bylaws.

             (b)  In addition to such other officers as the Board of Directors
         of the Surviving Corporation may appoint from time to time, the
         officers of Merger Sub holding office at the Effective Time shall, from
         and after the Effective Time, be the officers of the Surviving
         Corporation, to serve until their successors have been duly appointed
         and qualified or until their earlier death, resignation, or removal in
         accordance with the Surviving Corporation's Certificate of
         Incorporation and Bylaws.


                                  ARTICLE II

                           Conversion of Securities

         2.1 Effect on Capital Stock. Subject to the other provisions of this
Article II, at the Effective Time, by virtue of the Merger and without any
action on the part of Buyer, Lexington, Merger Sub, or the holder of any shares
of the following securities:

             (a)  Merger Consideration. Subject to adjustment as provided in
         Sections 2.1(b), 2.1(c) and 2.1(l) and the election and allocation
         provisions of Sections 2.1(i) and 2.1(j), each issued and outstanding
         share of Lexington Common Stock (other than shares of Lexington Common
         Stock held of record by Buyer, Merger Sub, or Lexington or any other
         direct or indirect subsidiary of Buyer or Lexington immediately before
         the Effective Time and other than shares of Lexington Common Stock as
         to which dissenters' rights of appraisal have been exercised as
         contemplated by Section 2.1(k)) shall be automatically converted into
         and become the right to receive (i) 0.231 of a share of Buyer Common
         Stock, (the "Share Consideration"), and (ii) cash in the amount of
         $3.306 (the "Cash Consideration" and, together with the Share
         Consideration, the "Merger Consideration"). At the Effective Time, each
         share of Lexington Common Stock held of record by Buyer, Merger Sub, or
         Lexington or any direct or indirect subsidiary of Buyer or Lexington
         shall be canceled and cease to exist, and no payment shall be made with
         respect to those shares.

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             (b)  Adjustment of Merger Consideration Based on Buyer's Average
         Share Price. The Share Consideration shall not be adjusted as a result
         of changes in the market value of Buyer Common Stock unless the average
         per share closing price of Buyer Common Stock on the New York Stock
         Exchange (the "NYSE") for the five trading days immediately preceding
         the date that is one business day before the Closing Date ("Buyer's
         Average Share Price") is more than $31.625 or less than $25.625. If
         Buyer's Average Share Price is more than $31.625, then the Share
         Consideration shall be reduced to a fraction of a share of Buyer Common
         Stock (expressed as a decimal, rounded to the nearest thousandth), the
         numerator of which shall be the Share Consideration set forth in
         Section 2.1(a)(i) multiplied by $31.625 and the denominator of which
         shall be Buyer's Average Share Price. If Buyer's Average Share Price is
         less than $25.652, then the Share Consideration shall be increased to a
         fraction of a share of Buyer Common Stock (expressed as a decimal,
         rounded to the nearest thousandth), the numerator of which shall be the
         Share Consideration set forth in Section 2.1(a)(i) multiplied by
         $25.625 and the denominator of which shall be Buyer's Average Share
         Price; provided, however, that, in lieu of the foregoing adjustment,
         Buyer may determine, by written notice to Lexington on or before the
         Closing Date, to increase the Cash Consideration by an amount not to
         exceed the product of the Share Consideration multiplied by the
         difference between $25.625 and Buyer's Average Share Price and to
         increase the Share Consideration by a decimal amount (rounded to the
         nearest thousandth) equal to the quotient obtained by dividing (A) the
         difference between (1) the product of the Share Consideration
         multiplied by the difference between $25.625 and the Buyer's Average
         Share Price minus (2) the amount of the increase in the Cash
         Consideration made pursuant to Buyer's determination by (B) Buyer's
         Average Share Price.

             (c)  Adjustment to Merger Consideration Based on Assets Under
         Management. If any adjustment is required by the provisions of the
         following subsections, the Merger Consideration payable by Buyer at the
         Closing determined after giving effect to any adjustment required by
         Section 2.1(b), will be reduced or increased by a percentage calculated
         in the following manner:

                  (1)  Attached hereto as Schedule 2.1(c) is a list prepared by
             Lexington of the Lexington Funds and investment advisory or
             subadvisory clients of Lexington as of December 31, 1999, showing
             for each and as of that date, the client's or fund's name and
             assets under management (the "Original Schedule"). The total assets
             under management listed on the Original Schedule shall be referred
             to as the "Base Net Assets."

                  (2)  At the Closing, Lexington will deliver to Buyer a revised
             Schedule 2.1(c) (the "Revised Schedule") as of the close of
             business on the third business day before the Closing, prepared as
             follows:

                       (A)  all clients that have terminated their investment
                  advisory or subadvisory relationship with Lexington or that
                  have notified Lexington in writing of their intention to
                  terminate that relationship since the date of the Original
                  Schedule shall be deleted from the Revised Schedule;

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                       (B)  clients that have engaged Lexington since the date
                  of the Original Schedule shall be added to the Revised
                  Schedule with their assets under management by Lexington
                  included in the Revised Schedule at the value of those assets
                  on the date Lexington's management commenced;

                       (C)  for clients (other than Lexington Funds) that have
                  withdrawn assets from management by Lexington since the date
                  of the Original Schedule, assets under management for each
                  such client shall be reduced by the same percentage as is
                  calculated by dividing (A) the value of the assets withdrawn
                  as of the date of withdrawal, by (B) the aggregate value of
                  assets managed by Lexington for such client immediately prior
                  to the withdrawal;

                       (D)  for clients (other than Lexington Funds and assets
                  managed by Lexington or its subsidiaries for the Richardson
                  family or any trust for the benefit of the Richardson family)
                  that have added to assets under management since the date of
                  the Original Schedule, assets under management shall be
                  increased by the same percentage as is calculated by dividing
                  (A) the value of the assets added as of the date of the
                  addition of the assets, by (B) the aggregate value of assets
                  managed by Lexington for such client immediately prior to the
                  date Lexington's management commenced;

                       (E)  assets under management for each of the Lexington
                  Funds shall be increased or decreased, as appropriate, by the
                  total of the aggregate net sales or redemptions for such
                  Lexington Funds between December 31, 1999 and the third
                  business day before the Closing; and

                       (F)  the Revised Schedule shall not reflect fluctuations
                  in the market value of assets under management since the date
                  of the Original Schedule.

Pro forma net assets under management shown on the Revised Schedule are referred
to as "Assigned Net Assets."

                  (3)  Assigned Net Assets shall then be divided by Base Net
             Assets, calculated as a percentage, and the resulting percentage
             shall be determined to the nearest one-hundredth of one percent
             (the "Adjustment Percentage").

                  (4)  Any adjustment to the Merger Consideration shall adjust
             the Share Consideration and Cash Consideration by the same
             percentage, determined as follows:

                       (A)  If the Adjustment Percentage is 90% or more but less
                  than or equal to 110%, there shall be no adjustment in the
                  Merger Consideration.

                       (B)  If the Adjustment Percentage is less than 90%, then
                  the Merger Consideration payable at the Closing, determined
                  after giving effect to any adjustment required by Section
                  2.1(b), shall be reduced by one percent for each one percent
                  decrease in Adjustment Percentage in accordance with the
                  following

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                  table, with interpolation as necessary between percentages
                  rounded to the nearest one-thousandth of one percent:


                                            Percent by which Merger
Adjustment Percentage                       Consideration shall be reduced
--------------------------------------------------------------------------
           90                                            0%
           89                                            1
           88                                            2
           87                                            3
           86                                            4
           85                                            5
           84                                            6
           83                                            7
           82                                            8
           81                                            9
           80                                            10

                                  and so forth

                       (C)  If the Adjustment Percentage is greater than 110%,
                  then the Merger Consideration payable at the Closing,
                  determined after giving effect to any adjustment required by
                  Section 2.1(b), shall be increased by one percent for each one
                  percent increase in Adjustment Percentage in accordance with
                  the following table, with interpolation as necessary between
                  percentages rounded to the nearest one-thousandth of one
                  percent:

                                                Percent by which Merger
Adjustment Percentage                       Consideration shall be increased
----------------------------------------------------------------------------
         110%                                            0%
         111                                             1
         112                                             2
         113                                             3
         114                                             4
         115                                             5
         116                                             6
         117                                             7
         118                                             8
         119                                             9
         120                                             10


                                  and so forth

             (d)  Lexington Stock. All shares of Lexington Common Stock, when
         converted pursuant to Section 2.1(a), shall no longer be outstanding
         and shall automatically be canceled and shall cease to exist, and
         holders of certificates that immediately before the Effective Time
         represented shares of Lexington Common Stock (the "Certificates") shall
         cease to have any rights with respect thereto, except the right to
         receive the Merger Consideration in

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         consideration therefor upon the surrender of the Certificates in
         accordance with Section 2.2, without interest.

                  (e)  Lexington Incentive Plans. At the Effective Time, all
         outstanding options (the "Lexington Options") to purchase Lexington
         Common Stock granted under the Lexington 1995 Long Term Incentive Plan
         (the "Lexington Incentive Plan") and all outstanding Lexington
         Restricted Stock granted under the Lexington Incentive Plan (the
         "Lexington Restricted Stock") will become options to purchase Buyer
         Common Stock or Buyer Restricted Stock, respectively, in accordance
         with Section 7.8.

                  (f)  Capital Stock of Merger Sub. Each issued and outstanding
         share of the capital stock of Merger Sub shall remain outstanding as
         one share of capital stock of the Surviving Corporation and shall not
         be converted into any other securities or cash in the Merger. The
         certificates for such shares shall not be surrendered or in any way
         modified by reason of the Merger. No stock of Merger Sub will be issued
         in the Merger.

                  (g)  Fractional Shares. No scrip or fractional shares of Buyer
         Common Stock shall be issued in the Merger. Each fractional share of
         Buyer Common Stock that a holder of Lexington Common Stock would
         otherwise be entitled to receive (after aggregating all shares of Buyer
         Common Stock to be received by that holder) shall be automatically
         converted into the right to receive, at the Effective Time from Buyer,
         an amount in cash in lieu of the fractional share of Buyer Common Stock
         equal to the product of the fraction multiplied by Buyer's Average
         Share Price (rounded up or down to the nearest $.01). Buyer will make
         available to the Exchange Agent (as defined in Section 2.2) the cash
         necessary for the purpose of paying for fractional shares.

                  (h)  Buyer Stock. All shares of Buyer Common Stock into which
         the shares of Lexington Common Stock are converted shall be validly
         issued, fully paid and nonassessable and will have Buyer Rights
         attached thereto in accordance with the Buyer Rights Agreement (as such
         terms are defined in Section 5.2(b)).

                  (i)  Election Procedures. Each record holder (as of the record
         date determined by Lexington) of shares of Lexington Common Stock shall
         have the right to elect in writing to have all of his shares of
         Lexington Common Stock converted into cash or Buyer Common Stock, as
         the case may be, subject to Section 2.1(j), in accordance with the
         following procedures:

                       (1)  At least thirty days prior to the Closing Date, a
                  letter of transmittal and election statement (an "Election
                  Statement") providing for the right to elect to receive cash
                  or Buyer Common Stock and for the tender to the Exchange Agent
                  of the Certificates representing Lexington Common Stock shall
                  be mailed to all record holders of Lexington Common Stock at
                  their respective addresses shown in Lexington's stock transfer
                  records.

                       (2)  Any record holder of Lexington Common Stock may
                  specify, in an Election Statement meeting the requirements of
                  this Section 2.1(i), that, as to all shares of Lexington
                  Common Stock covered by such Election Statement:

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                                 (A)  all such shares shall be converted into
                           Cash Consideration and Share Consideration in the
                           proportions set forth in Section 2.1(a); provided,
                           however, that such election shall be subject to a
                           determination by Buyer in certain events under
                           Section 2.1(b) to convert to cash a portion of the
                           Merger Consideration that would otherwise be Buyer
                           Common Stock; or

                                 (B)  the Cash Consideration payable for all
                           such shares be converted to shares of Buyer Common
                           Stock, in which case such holder shall receive no
                           cash and shall receive additional shares of Buyer
                           Common Stock equal to .50 multiplied by the Share
                           Consideration for each issued and outstanding share
                           of Lexington Common Stock held; provided, however,
                           that such election shall be subject to a
                           determination by Buyer in certain events under
                           Section 2.1(b) to convert to cash a portion of the
                           Merger Consideration that would otherwise be Buyer
                           Common Stock; or

                                 (C)  the Share Consideration payable for all
                           such shares be converted into cash, in which case
                           such holder shall receive no Share Consideration and
                           shall receive additional cash equal to the Share
                           Consideration multiplied by Buyer's Average Share
                           Price.

                           (3)   Notwithstanding anything to the contrary set
                       forth above:

                                 (A)  Any record holder of Lexington Common
                           Stock who is holding such shares for a beneficial
                           owner or as a nominee for one or more beneficial
                           owners may submit an Election Statement on behalf of
                           any such beneficial owner. Any beneficial owner of
                           Lexington Common Stock on whose behalf a record owner
                           of Lexington Common Stock has submitted an Election
                           Statement in accordance with this Section 2.1(i) will
                           be considered a separate holder of Lexington Common
                           Stock for purposes of this Agreement.

                                 (B)  Any holder of Lexington Common Stock who
                           may be considered, by reason of the ownership
                           attribution rules contained in Section 318 of the
                           Internal Revenue Code of 1986, as amended, to own
                           constructively shares of Lexington Common Stock in
                           addition to those actually owned by such holder may
                           submit an Election Statement jointly with one or more
                           of such persons whose shares of Lexington Common
                           Stock such holder may be considered to own
                           constructively, and any such joint Election Statement
                           shall for purposes of this Section 2.1(i) be
                           considered to be a single Election Statement.

                           (4)   An Election Statement will be effective only if
                  a properly completed and signed copy thereof, accompanied by
                  Certificates for the shares of Lexington Common Stock which
                  such Election Statement covers, shall have been actually
                  received by the Exchange Agent no later than one business day
                  before the day of the meeting of the Lexington stockholders to
                  vote upon this agreement (such day being referred to herein as
                  the "Election Deadline"). Delivery shall be effected, and risk
                  of loss and title to the

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                  Certificate shall pass, only upon proper delivery of an
                  Election Statement which meets the requirements of this
                  Section 2.1(i) is hereinafter referred to as an "Effective
                  Election Statement."

                            (5)  Any record holder of Lexington Common Stock who
                  has submitted an Effective Election Statement may at any time
                  until the Election Deadline amend such Election Statement if
                  the Exchange Agent actually receives, no later than the
                  Election Deadline, a later dated, properly completed and
                  signed amended Effective Election Statement.

                                      (6)  Any record holder of Lexington Common
                  Stock may at any time prior to the Election Deadline revoke
                  his Election Statement and withdraw certificates for shares of
                  Lexington Common Stock deposited therewith by written notice
                  actually received by the Exchange Agent no later than the
                  Election Deadline. Any Election Statement relating to shares
                  of Lexington Common Stock which are or become Dissenting
                  Shares (as defined in Section 2.1(k) hereof) shall be deemed
                  automatically revoked. Any notice of withdrawal shall be
                  effective only if it is properly executed and specifies the
                  record holder of the shares to be withdrawn and the
                  Certificate numbers shown on the Certificates representing the
                  shares to be withdrawn.

                            (7)  Lexington and Buyer shall have the right to
                  make rules, not inconsistent with the terms of this Agreement,
                  governing the form, terms and conditions of the Election
                  Statements, the validity and effectiveness of Election
                  Statements and the manner and extent to which they are to be
                  taken into account in making the determinations prescribed by
                  Section 2.1(k) hereof. In the event this Agreement is
                  terminated, the Exchange Agent shall promptly return any
                  Certificates received to the respective record holders.

                  (j)       Allocations. The allocation of cash and/or Buyer
         Common Stock among holders of outstanding shares of Lexington Common
         Stock shall be effected as hereinafter provided:

                            (1)  Except as otherwise provided in Sections
                  2.1(i)(2)(A), 2.1(j)(4) and 2.1(j)(5), all of the shares of
                  Lexington Common Stock held by shareholders who elected to
                  receive cash and Buyer Common Stock in the proportions set
                  forth in Section 2.1(a) or who did not elect in any Effective
                  Election Statement to receive all cash or all Buyer Common
                  Stock shall be converted into cash and Buyer Common Stock at
                  the conversion rate specified in Section 2.1(a) hereof;

                            (2)  Except as otherwise provided in Sections
                  2.1(i)(2)(B) and 2.1(j)(5), all of the shares of Lexington
                  Common Stock held by shareholders who elected in an Effective
                  Election Statement to receive all Buyer Common Stock shall be
                  converted into all Buyer Common Stock on the terms and
                  conditions set forth in Section 2.1(i);

                            (3)  Subject to Section 2.1(j)(4) hereof, Lexington
                  Common Stock held by shareholders who elected in an Effective
                  Election Statement to receive all cash shall be

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                  converted into cash, on the terms and conditions set forth in
                  Section 2.1(i) hereof but only up to the percentage specified
                  below.

                           (4)  If the aggregate amount of cash payable to
                  holders of Lexington Common Stock after giving effect to the
                  foregoing provisions of this Section 2.1(j), including cash
                  payable to holders of Dissenting Shares and cash payable due
                  to fractional shares, pursuant to the Merger exceeds one-third
                  (or, if Buyer has made a determination to increase the Cash
                  Consideration pursuant to Section 2.1(b), such higher
                  percentage as shall be equal to the percentage of the Total
                  Consideration payable in cash, after giving effect to such
                  determination) (the "Specified Cash Percentage") of the Merger
                  Consideration plus the cash payable to holders of Dissenting
                  Shares (the "Total Consideration"), the cash otherwise payable
                  to Lexington stockholders who would otherwise receive any
                  portion of the Merger Consideration in cash shall be reduced
                  pro rata so that the aggregate amount of cash does not exceed
                  the Specified Cash Percentage and such Lexington stockholders
                  shall receive Buyer Common Stock in lieu thereof.

                           (5)  If the aggregate amount of Buyer Common Stock
                  issuable to holders of Lexington Common Stock pursuant to the
                  Merger after giving effect to the foregoing provisions of this
                  Section 2.1(j) exceeds two-thirds (or, if Buyer has made a
                  determination to increase the Cash Consideration pursuant to
                  Section 2.1(b), such lower percentage as shall be equal to the
                  percentage of the Total Consideration payable in Buyer Common
                  Stock, after giving effect to such determination) of the Total
                  Consideration (the "Specified Stock Percentage"), the Buyer
                  Common Stock otherwise issuable to Lexington stockholders who
                  would receive any portion of the Merger Consideration in Buyer
                  Common Stock shall be reduced pro rata so that the aggregate
                  amount of Buyer Common Stock does not exceed the Specified
                  Stock Percentage and such Lexington stockholders shall receive
                  cash in lieu thereof.

                           (6)  If the foregoing election and allocation
                  procedures are found to be unlawful for federal regulatory
                  purposes, this Section 2.2(j) shall be amended to provide such
                  other procedure for reduction of the number of shares of
                  Lexington Common Stock converted to cash and/or Buyer Common
                  Stock as may be agreed upon by Buyer and Lexington and as is
                  consistent with such regulatory purposes.

                           (k)  Dissenters' Rights.

                           (1)  Notwithstanding any provision of this Agreement
                  to the contrary, any shares of Lexington Common Stock held by
                  a holder who has properly asserted his right, if any, for
                  appraisal of such shares in accordance with the Delaware Law
                  and who, as of the Effective Time, has not effectively lost
                  such right to appraisal (the "Dissenting Shares"), shall not
                  be converted into or represent a right to receive the Merger
                  Consideration pursuant to Section 2.1 (a), but the holder
                  thereof shall only be entitled to such rights as are granted
                  by the Delaware Law.

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                         (2)  Notwithstanding the provision of Section
                    2.1(k)(1), if any holder of shares of Lexington Common Stock
                    who asserts his rights, if any, for appraisal or demands
                    payment for such shares under the Delaware Law shall
                    effectively lose his right to appraisal, then, as of the
                    later of the Effective Time or the occurrence of such event,
                    such holder's shares of Lexington Common Stock shall
                    automatically be converted into and represent only the right
                    to receive the Merger Consideration as provided in Section
                    2.1(a), upon surrender of the Certificates representing such
                    shares.

                    (l)  Adjustments. The Merger Consideration shall be
               appropriately adjusted to reflect any stock split, reverse stock
               split, stock dividend, recapitalization, exchange, subdivision,
               combination of, or other similar change (including the exercise
               of any Buyer Rights under the Buyer Rights Agreement) in
               Lexington Common Stock or Buyer Common Stock after the date of
               this Agreement.

               2.2  Exchange of Certificates.

                    (a)  The transfer agent for Buyer Common Stock shall serve
               as exchange agent hereunder (the "Exchange Agent"). Promptly
               after the Effective Time, Buyer shall deposit in trust with the
               Exchange Agent cash and certificates representing the aggregate
               Merger Consideration to be paid to holders of Lexington Common
               Stock and to pay for fractional shares then known to Buyer (such
               Common Stock and cash amounts being referred to as the "Exchange
               Fund"). The Exchange Agent shall, under irrevocable instructions
               received from Buyer, pay the amounts of cash provided for in this
               Article II out of the Exchange Fund. Additional amounts of cash,
               if any, needed from time to time by the Exchange Agent shall be
               provided by Buyer and shall become part of the Exchange Fund. The
               Exchange Fund shall not be used for any other purpose, except as
               provided in this Agreement, or as otherwise agreed to by Buyer
               and Lexington before the Effective Time.

                    (b)  As soon as practicable after the Effective Time, the
         Exchange Agent shall mail to each record holder of Lexington Common
         Stock who, as of the Effective Time was a holder of a Certificate, a
         letter of transmittal (reasonably satisfactory in form and substance to
         Lexington and Buyer) and instructions for its use in effecting the
         surrender of the Certificate for payment therefor and conversion
         thereof. Delivery shall be effected, and risk of loss and title to the
         Certificate shall pass, only upon proper delivery of the Certificate to
         the Exchange Agent and the letter of transmittal shall so reflect. Upon
         surrender to the Exchange Agent of a Certificate, together with a
         letter of transmittal duly executed and properly completed, the holder
         of the Certificate shall be entitled to receive in exchange therefor
         cash and shares of Buyer Common Stock to which that holder of Lexington
         Common Stock is entitled pursuant to the terms of this Agreement (with
         the cash amount being rounded up or down to the nearest $.0l) and the
         Certificate so surrendered shall be marked "Canceled." No interest will
         be paid or accrued on any Merger Consideration.

                    (c)  If any portion of the consideration to be received
         under this Article II upon exchange of a Certificate is to be issued or
         paid to a person other than the person in whose name the Certificate
         surrendered in exchange therefor is registered, it shall be a condition
         of such payment that the Certificate so surrendered shall be properly
         endorsed or otherwise in

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         proper form for transfer and that the person requesting such exchange
         shall pay in advance any transfer or other taxes required by reason of
         a check representing the Merger Consideration, or establish to the
         satisfaction of the Exchange Agent that such tax has been paid or that
         no such tax is applicable. Buyer shall pay any transfer or other taxes
         required by reason of the issuance of a certificate representing shares
         of Buyer Common Stock if the certificate is issued in the name of the
         person in whose name the certificate surrendered in exchange therefor
         is registered; provided, however, that Buyer shall not pay any transfer
         or other tax if payment of any such tax by Buyer otherwise would cause
         the Merger to fail to qualify as a tax-free reorganization under the
         Code.

               (d)  From the Effective Time until surrender in accordance with
         this Section 2.2, each Certificate (other than Certificates
         representing shares held by Buyer, Merger Sub, or Lexington or any
         direct or indirect subsidiary of Buyer or Lexington) shall be deemed,
         for all corporate purposes other than the payment of dividends or other
         distributions, to evidence only the right to receive the cash and/or
         Buyer Common Stock into which such shares of Lexington Common Stock
         shall have been so converted or, in the case of Dissenting Shares, to
         evidence only such rights as are granted by the Delaware Law. After
         surrender, there shall be paid to the person in whose name the Buyer
         Common Stock shall be issued any dividends on Buyer Common Stock that
         shall have a record date and payment date on or after the Effective
         Time and before surrender. All payments in respect of shares of
         Lexington Common Stock that are made in accordance with the terms
         hereof shall be deemed to have been made in full satisfaction of all
         rights pertaining to those securities.

               (e)  In case of any lost, stolen, or destroyed Certificate, the
         holder thereof may be required, as a condition precedent to the
         delivery to the holder of the consideration described in Section 2.1,
         and in accordance with Section 167 of the Delaware Law, to deliver to
         Buyer a bond in such reasonable sum as Buyer may direct as indemnity
         against any claim that may be made against the Exchange Agent, Buyer,
         or the Surviving Corporation with respect to the Certificate alleged to
         have been lost, stolen, or destroyed.

               (f)  After the Effective Time, there shall be no transfers on
         the books of the Surviving Corporation of the shares of Lexington
         Common Stock that were outstanding immediately before the Effective
         Time. If, after the Effective Time, Certificates are presented to
         Surviving Corporation for transfer, they shall be canceled and
         exchanged for the consideration described in Section 2.1. After the
         Effective Time, the shares of Lexington Common Stock shall be delisted
         from the Nasdaq National Market System.

               (g)  Any portion of the Exchange Fund that remains unclaimed by
         the stockholders of Lexington for one year after the Effective Time
         shall be returned to Buyer, upon demand, and any holder of Lexington
         Common Stock who has not theretofore complied with this Section 2.2
         shall thereafter look only to Buyer for issuance of the Merger
         Consideration to which the holder has become entitled under Section
         2.1; provided, however, that neither the Exchange Agent nor any party
         to this Agreement shall be liable to a holder of shares of Lexington
         Common Stock for any amount required to be paid to a public official or
         public entity under any applicable abandoned-property, escheat, or
         similar law.

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<PAGE>

                                  ARTICLE III

                  Representations and Warranties of Lexington

          3.1  General. Lexington represents and warrants to Buyer and Merger
Sub that the statements contained in this Article III are true and correct,
except as set forth in the disclosure schedule delivered by Lexington to Buyer
on the date of this Agreement (the "Lexington Disclosure Schedule").
Notwithstanding any other provision of this Agreement, each exception set forth
in the Lexington Disclosure Schedule shall be deemed to qualify each
representation and warranty set forth in this Agreement (i) that is specifically
identified (by cross-reference or otherwise) in the Lexington Disclosure
Schedule as being qualified by such exception, or (ii) with respect to which the
relevance of such exception is apparent on the face of the disclosure of such
exception set forth in the Lexington Disclosure Schedule. As used throughout
this agreement with respect to any person, the term "Material Adverse Effect"
means any change or effect that, individually or when taken together with all
changes or effects that have occurred before the determination of the occurrence
of the Material Adverse Effect, has had or is reasonably likely to have a
material adverse effect on the business, financial condition, or results of
operations of the person and its subsidiaries taken as a whole; provided,
however, that Material Adverse Effect with respect to any person shall not
include any change in or effect upon the business, financial condition, or
results of operations of such person or any of its subsidiaries directly or
indirectly arising out of or attributable to (a) conditions, events, or
circumstances generally affecting the U.S. economy as a whole, (b) conditions,
events, or circumstances generally affecting the mutual fund industry as a whole
(including regulatory and legal), or (c) any decreases in Lexington Mutual Fund
Assets Under Management. It is further understood that any decrease in the
market price of shares of Lexington Common Stock or Buyer Common Stock shall not
be relevant to a determination of whether a Material Adverse Effect has
occurred.

          3.2  Representations and Warranties.

          (a)  Organization, Standing, Qualification.

                    (1)  Each of Lexington and its subsidiaries (which, for
               purposes of this Article includes Troika Dialog Lexington
               Partners (BVI) Ltd. ("TDLPL")) is a corporation duly organized,
               validly existing, and in good standing under the laws of the
               jurisdiction of its organization and has the requisite power and
               authority to own, lease, and operate its properties and assets
               and to carry on its business as it is now being conducted. Each
               of Lexington and its subsidiaries is duly qualified or licensed
               as a foreign corporation to do business, and is in good standing,
               in each jurisdiction where the character of the properties owned,
               operated, or leased by it, or the nature of its business, makes
               such qualification or licensing necessary, except for those
               jurisdictions where the failure to be so qualified or licensed or
               in good standing would not have a Material Adverse Effect on
               Lexington. The Lexington Disclosure Schedule sets forth a list of
               all of Lexington's subsidiaries and their state of incorporation;
               except as so set forth and except for securities held solely for
               investment purposes, Lexington does not directly or indirectly
               own any capital stock of, or other equity interest in, any
               person. Copies of the charter and bylaws (or similar
               organizational documents) of Lexington

                                       13
<PAGE>

               and each subsidiary of Lexington have been made available to
               Buyer and are complete and correct as of the date hereof.

                    (2)  Each of Lexington Management Corporation and Lexington
               Market Systems Research Advisors, Inc. ("MSR") is and has been
               duly registered as an investment adviser under the Investment
               Advisers Act of 1940, as amended (the "Advisers Act"), and under
               Applicable Law (as defined in Section 4.2(f)). The Lexington
               Disclosure Schedule lists the jurisdictions in which Lexington
               Management Corporation or MSR is registered as an investment
               adviser. Each such registration is in full force and effect.
               Other than the jurisdictions set forth in the Lexington
               Disclosure Schedule for Lexington Management Corporation or MSR,
               neither Lexington nor its subsidiaries is required to be
               registered as an investment adviser in any jurisdiction.

                    (3)  Lexington Funds Distributor, Inc. ("Lexington
               Distributor") is and has been duly registered as a broker-dealer
               under the Securities Exchange Act of 1934 and under other
               Applicable Law. The Lexington Disclosure Schedule lists the
               jurisdictions in which Lexington Distributor is registered as a
               broker-dealer. Each such registration is in full force and
               effect. Other than the jurisdictions set forth in the Lexington
               Disclosure Schedule, Lexington Distributor is not required to be
               registered as a broker-dealer in any other jurisdiction.
               Lexington Distributor is a member in good standing and has all
               licenses and authorizations in self-regulatory or trade
               organizations or registered clearing agencies, required to permit
               the operation of its business as presently conducted, except
               where such failure would not have a Material Adverse Effect on
               Lexington.

                    (4)  TDLPL has all requisite licenses and other
               registrations necessary for it to manage the assets of the Troika
               Dialog Lexington Eurasia Fund.

               (b)  Capitalization. The authorized capital stock of Lexington
         consists of 15 million shares of Lexington Common Stock, of which, as
         of the close of business on February 28, 2000, 4,505,038 shares were
         issued and outstanding, and 5 million shares of preferred stock, $.01
         par value, none of which are outstanding. The authorized capital stock
         of MSR consists of 1,000 shares of common stock, $.01 par value. All of
         the issued and outstanding shares of capital stock of Lexington and the
         capital stock or other equity interests of each of its subsidiaries
         have been duly authorized and validly issued, are fully paid and
         nonassessable, and were not granted in violation of any statutory
         preemptive rights. There are no outstanding subscriptions, options,
         warrants, calls, or other agreements or commitments under which
         Lexington or any subsidiary is or may become obligated to issue, sell,
         transfer, or otherwise dispose of, or purchase, redeem, or otherwise
         acquire, any shares of capital stock of, or other equity interests in,
         Lexington or any subsidiary, and there are no outstanding securities
         convertible into or exchangeable for any such capital stock or other
         equity interests, except for options to purchase up to an aggregate of
         437,100 shares of Lexington Common Stock, as of the close of business
         on February 28, 2000 at an average exercise price of $5.51 and as set
         forth in the Lexington Disclosure Schedule. There are no stock
         appreciation rights, phantom stock rights, or, performance shares
         outstanding issued by Lexington with respect to Lexington or any of its
         subsidiaries. Lexington owns, directly or indirectly, all of the issued
         and outstanding

                                       14
<PAGE>

          shares of each class of capital stock of each of its subsidiaries
          which is wholly owned, and the number of shares of capital stock or
          equity interests set forth on the Lexington Disclosure Schedule of
          each subsidiary which is not wholly owned, in each case free and clear
          of all liens, security interests, pledges, charges, and other
          encumbrances. There are no agreements or understandings to which
          Lexington or any of its subsidiaries is a party with respect to the
          capital stock of Lexington or its subsidiaries.

               (c)  Authorization and Execution. Lexington has the corporate
          power and authority to execute and deliver this Agreement and, subject
          to approval by the stockholders of a majority of the outstanding
          shares of Lexington Common Stock, to consummate the transactions
          contemplated hereby. The execution, delivery, and performance of this
          Agreement by Lexington have been duly authorized by the Board of
          Directors of Lexington, and no further corporate action of Lexington,
          other than the approval of its stockholders, is necessary to
          consummate the transactions contemplated hereby. This Agreement has
          been duly executed and delivered by Lexington and, assuming the
          accuracy of the representations and warranties of Buyer set forth in
          Section 5.2(c), this Agreement constitutes the legal, valid, and
          binding obligation of Lexington, enforceable against Lexington in
          accordance with its terms, except to the extent that enforceability
          may be limited by applicable bankruptcy, insolvency, or similar laws
          affecting the enforcement of creditors' rights generally, and subject
          to general principles of equity.

               (d)  No Conflicts. Neither the execution and delivery of this
          Agreement by Lexington, nor the consummation by Lexington of the
          transactions contemplated hereby will:

                    (1)  conflict with or result in a breach of the charter,
               bylaws, or similar organizational documents, as currently in
               effect, of Lexington or any of its subsidiaries;

                    (2)  require any filing with, or consent or approval of, any
               government, state, or political subdivision thereof, entity
               exercising executive, legislative, judicial, regulatory, or
               administrative functions of or pertaining to government,
               including the Securities and Exchange Commission (the "SEC") and
               any other government authority, agency, department, board,
               commission, or instrumentality of the United States, any State of
               the United States, or any political subdivision thereof, any
               court, tribunal, or arbitrator of competent jurisdiction, or any
               governmental or nongovernmental self-regulatory organization,
               agency, or authority (including the Nasdaq National Market and
               the National Association of Securities Dealers, Inc. (the
               "NASD")) (each, a "Governmental Authority") having jurisdiction
               over any of the businesses or assets of Lexington or any of its
               subsidiaries, except for (A) compliance with the requirements
               under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
               as amended (the "HSR Act"); (B) the filing of the Certificate of
               Merger with the Delaware Secretary of State and appropriate
               documents reflecting the occurrence of the Merger with the
               relevant authorities of the other states in which Lexington is
               licensed or qualified to do business; (C) the consents,
               approvals, filings, and notices required under the 1940 Act and
               the Advisers Act; (D) any consents, approvals, filings, or
               notices required with the NASD or any industry self-regulatory
               organizations; (E) the filing with the SEC of the Proxy
               Statement/Prospectus (as defined in Section 5.2(e)) and
               compliance with any

                                       15
<PAGE>

               other applicable requirements of the Securities Exchange Act of
               1934, as amended (the "Exchange Act"); and (F) such other
               filings, consents, or approvals the failure of which to make or
               obtain would not reasonably be expected to prevent consummation
               of the Merger or to have a Material Adverse Effect on Lexington;

                    (3)  subject to the exceptions contained in, and assuming
               compliance with, clauses (A) through (F) of subsection (d)(2)
               above, violate any Applicable Law applicable to Lexington or any
               of its subsidiaries; or

                    (4)  result in a material breach of, or constitute a
               material default or an event that, with the passage of time or
               the giving of notice, or both, would constitute a material
               default, give rise to a right of termination, cancellation, or
               acceleration, create any entitlement of any third party to any
               material payment or benefit, require the consent of any third
               party, or result in the creation of any material lien on the
               assets of Lexington or any of its subsidiaries under, any
               Material Contract (as defined in Section 3.2(j)).

               (e)  SEC Reports and Financial Statements.

                    (1)  Since December 13, 1995, Lexington and its subsidiaries
               have filed all material reports, registration statements, Forms
               ADV, Forms BD and other filings, together with any material
               amendments required to be made with respect thereto, that it has
               been required to file with any relevant Governmental Authority
               under federal and state securities laws, including the Securities
               Act of 1933, as amended (the "Securities Act"), the Exchange Act.
               All reports, registration statements, and other filings
               (including all exhibits, notes, and schedules thereto and all
               documents incorporated by reference therein) filed by Lexington
               or its subsidiaries with the SEC on or after December 13, 1995,
               together with any amendments thereto, are collectively referred
               to as the "Lexington SEC Reports." As of: (A) with respect to all
               of the Lexington SEC Reports other than registration statements
               filed under the Securities Act, the respective dates of their
               filing with the SEC; and (B) with respect to all registration
               statements filed under the Securities Act, their respective
               effective dates, the Lexington SEC Reports complied in all
               material respects with the rules and regulations of the SEC and
               did not contain any untrue statement of a material fact or omit
               to state a material fact required to be stated therein or
               necessary to make the statements made therein not misleading.
               Since its inception in June 1998, TDLPL has filed all reports,
               registration statements, and other filings, together with any
               amendments required to be made with respect thereto, that it has
               been required to file with any relevant Governmental Authority
               under U.S. federal and state securities laws and under foreign
               law.

                    (2)  The consolidated financial statements (including any
               related notes or schedules) included in Lexington's 1998 Annual
               Report on Form 10-K, as filed with the SEC, were prepared in
               accordance with generally accepted accounting principles,
               consistently applied ("GAAP"), except as may be noted therein or
               in the notes or schedules thereto, and fairly present in all
               material respects the consolidated financial position of
               Lexington and its subsidiaries (except to the extent that TDLPL
               is not

                                       16
<PAGE>

               consolidated) as of December 31, 1997 and 1998 and the
               consolidated results of their operations and cash flows for each
               of the three years in the three-year period ended December 31,
               1998.

                    (3)  The audited consolidated financial statements of
               Lexington and its subsidiaries as of and for the year ended
               December 31, 1999 when delivered will be consistent in all
               material respects with the unaudited consolidated financial
               statements of Lexington and its subsidiaries as of and for
               December 31, 1999 that were previously delivered to Buyer.

               (f)  Proxy Statement. The information supplied by Lexington for
          inclusion in the Proxy Statement (as defined in Section 5.2(e)), as of
          the date of the Proxy Statement/Prospectus and as of the date of the
          meeting of Lexington's stockholders to consider this Agreement and the
          Merger, will not contain any untrue statement of a material fact or
          omit to state any material fact required to be stated therein or
          necessary in order to make the statements therein, in light of the
          circumstances under which they were made, not misleading.

               (g)  Absence of Certain Changes or Events. Except as disclosed in
          any Lexington SEC Report, from December 31, 1998 to the date of this
          Agreement, Lexington and its subsidiaries have conducted their
          respective businesses and operations in the ordinary course consistent
          with past practices, and neither Lexington nor any of its subsidiaries
          has:

                    (1)  split, combined, or reclassified any shares of its
               capital stock or made any other changes in its equity capital
               structure;

                    (2)  purchased, redeemed, or otherwise acquired, directly or
               indirectly, any shares of its equity securities or any options,
               rights, or warrants to purchase equity securities or any
               securities convertible into equity securities;

                    (3)  declared or paid any dividends on or made any other
               distributions (whether in cash, stock, or property) in respect of
               shares of its capital stock, or split, combined, or reclassified
               any of its capital stock, or issued or authorized the issuance of
               any other securities in respect of, in lieu of, or in
               substitution for shares of capital stock of such entity;

                    (4)  issued, delivered, or sold any shares of its capital
               stock or securities convertible into shares of its capital stock,
               or subscriptions, rights, warrants, or options to acquire, or
               other agreements or commitments of any character obligating it to
               issue, any such shares or other convertible securities (other
               than the grant of options to employees in a manner consistent
               with past practices under the Lexington Incentive Plan, and the
               issuance of shares upon the exercise of such options);

                    (5)  incurred, assumed, or guaranteed any indebtedness for
               money borrowed, other than intercompany indebtedness, other than
               that incurred under currently existing debt instruments;

                                       17
<PAGE>

                    (6)  changed or modified in any material respect any
               existing accounting method, principle, or practice, other than as
               required by GAAP;

                    (7)  suffered any business interruption, damage to or
               destruction of its properties, or other incident, occurrence, or
               event (other than changes in general industry, economic, or
               market conditions), which would have a Material Adverse Effect on
               Lexington; or

                    (8)  except for this Agreement, entered into any commitment
               to do any of the foregoing.

               (h)  Tax Matters.

                    (1)  Lexington and its subsidiaries have timely filed (or
               received appropriate extensions for) all material federal, state,
               local, and foreign tax returns ("Tax Returns") required to be
               filed by them with respect to income, gross receipts,
               withholding, social security, unemployment, payroll, franchise,
               excise, use, premium, and other taxes of whatever kind ("Taxes"),
               and have paid all Taxes shown on those Tax Returns to the extent
               they have become due. Lexington's Tax Returns are accurate and
               complete in all material respects.

                    (2)  No Tax Returns filed by Lexington or any of its
               subsidiaries are the subject of pending audits. Neither Lexington
               nor any of its subsidiaries has received, before the date of this
               Agreement, a notice of deficiency or assessment of additional
               material Taxes that remains unresolved. Neither Lexington nor any
               of its subsidiaries has extended the period for assessment or
               payment of any Tax, which extension has not since expired.

                    (3)  Lexington and its subsidiaries have withheld and paid
               over to the appropriate Governmental Authorities all Taxes
               required by law to have been withheld and paid in connection with
               amounts paid or owing to any employee, except for any such Taxes
               that are immaterial in amount.

                    (4)  Neither Lexington nor any of its subsidiaries has been
               a member of an affiliated group (as defined in Section 1504 of
               the Code) filing a consolidated federal income tax return for any
               tax year since January 1, 1992 other than a group the common
               parent of which was Lexington (the "Lexington Consolidated
               Group").

                    (5)  Neither Lexington nor any of its subsidiaries has filed
               a consent under Code Section 341(f) concerning collapsible
               corporations.

                    (6)  Lexington has not been a United States real property
               holding corporation within the meaning of Code Section 897(c)(2)
               during the applicable period specified in Code Section
               897(c)(1)(A)(ii).

                                       18
<PAGE>

                    (7)  Neither Lexington nor any of its subsidiaries is a
               party to any Tax allocation or sharing agreement, except among
               members of the Lexington Consolidated Group.

                    (8)  Neither Lexington nor any of its subsidiaries is
               subject to a Tax lien on any of its property or assets, except
               for current liens for Taxes not yet due.

                    (9)  Lexington has delivered or made available to Buyer true
               and complete copies of all requested federal, state, local, and
               foreign income tax returns with respect to Lexington and its
               subsidiaries.

                    (10) Neither Lexington nor any of its Subsidiaries has made
               any payments, is obligated to make any payments, or is a party to
               any agreement that could obligate it to make any payment that is
               not deductible under Code Section 280G.

                    (11) The reserve for Taxes set forth on the financial
               statements of Lexington contained in Lexington's most recent
               Annual Report on Form 10-K is adequate for the payment of all
               material Taxes through the date thereof and no material Taxes
               have been incurred after December 31, 1998 that were not incurred
               in the ordinary course of business.

                    (12) The 1995 spin-off transaction involving Lexington
               resulted in such federal tax consequences as are consistent with
               the statements as to such matters set forth in the Information
               Statement dated November 30, 1995 relating thereto.

               (i)  Properties.

                    (1)  Lexington owns no real property. The Lexington
               Disclosure Schedule sets forth a true and complete list of all
               real property leased by Lexington or any of its subsidiaries and
               the name of the lessor, the date of the lease, and each amendment
               thereto and the aggregate annual rental or other fee payable
               under the lease. All such leases are enforceable in accordance
               with their respective terms, and there is not, under any such
               lease, any existing material default or event of default by
               Lexington (or event which with notice or lapse of time, or both,
               would constitute a default and in respect of which Lexington has
               not taken adequate steps to prevent the default from occurring).

                    (2)  Lexington has good and valid title to, or, in the case
               of leased properties and assets, valid leasehold interests in,
               all of its tangible properties and assets, real, personal, and
               mixed, used in its business, free and clear of any mortgages,
               liens, pledges, charges, restrictions, encroachments, rights of
               third parties, or other encumbrances of any kind, except for (A)
               liens for current Taxes not yet due and payable, (B) inchoate
               mechanic's, warehousemen's, materialmen's, or similar liens or
               rights arising in the ordinary course of business, (C) liens,
               encumbrances, restrictions, encroachments, and easements, all
               with respect to tangible properties that were not incurred with
               the borrowing of money or the obtaining of advances or credit and
               that do not materially detract the value of or materially
               interfere with the present use of the property subject thereto or
               effected thereby, or otherwise materially impair present

                                       19
<PAGE>

               business operations at such properties, and (D) existing
               mortgages, liens, and encumbrances disclosed in the Lexington SEC
               Reports.

                    (j)  Material Contracts. Except as disclosed in any
               Lexington SEC Report, as of the date hereof, neither Lexington
               nor any of its subsidiaries is a party to or bound by any written
               or oral contract:

                    (1)  with respect to the employment of any directors,
               officers, or employees, other than noncompetition and
               confidentiality agreements with such persons and contracts
               terminable by Lexington upon no more than 60 days' notice without
               penalty;

                    (2)  that is a "material contract" (as is defined in Item
               601(b)(10) of Regulation S-K of the SEC) to be performed after
               the date of this Agreement;

                    (3)  that, after the Effective Time, will materially
               restrict the conduct of any line of business by Lexington or its
               subsidiaries or upon consummation of the Merger will materially
               restrict the ability of the Surviving Corporation to engage in
               any line of business in which it may lawfully engage;

                    (4)  with a labor union (including any collective bargaining
               agreement); or

                    (5)  except as required by the Lexington Incentive Plan
               (including any stock option plan, stock appreciation rights plan,
               restricted stock plan, or stock purchase plan) and the Lexington
               Senior Management Severance Plan, any of the benefits of which
               will be increased, or the vesting of the benefits of which will
               be accelerated, by the occurrence of any stockholder approval or
               the consummation of any of the transactions contemplated by this
               Agreement, or the value of any of the benefits of which will be
               calculated on the basis of any of the transactions contemplated
               by this Agreement.

          All of the foregoing are collectively called "Material Contracts." To
the extent Material Contracts are evidenced by documents, true and complete
copies thereof have been delivered or made available to Buyer. The Lexington
Disclosure Schedule sets forth a true and complete description of the material
terms of each Material Contract that has not been reduced to writing. Each
Material Contract is in full force and effect. Neither Lexington nor any of its
subsidiaries nor, to the knowledge of Lexington, any other party is in material
breach of or in material default under any of the Material Contracts.

               (k)  Intellectual Property. Lexington and its subsidiaries own
         or possess adequate licenses or other valid rights to use (without the
         making of any payment to others, other than licenses for commercially
         available software and payments under agreements disclosed in the
         Lexington Disclosure Schedule, or the obligation to grant rights to
         others in exchange) all of the material patents, trademarks, trade
         names, service marks, domain names, and copyrights, and all
         registrations and applications for any of the foregoing (collectively,
         "Proprietary Rights") necessary to the conduct of its business in the
         manner in which it is presently being conducted. As of the date of this
         Agreement, neither Lexington nor any of its subsidiaries has received
         any written notice that any Proprietary Rights have been declared
         unenforceable or otherwise invalid by any court or Governmental
         Authority. There is, to the knowledge of

                                       20
<PAGE>

          Lexington, no material existing infringement, misuse, or
          misappropriation of any Proprietary Rights by others. From December
          13, 1995 to the date of this Agreement, neither Lexington nor any of
          its subsidiaries has received any written notice alleging that the
          operation of the business of Lexington or any of its subsidiaries
          infringes in any material respect upon the intellectual property
          rights of others. The consummation of the Merger and the other
          transactions contemplated by this Agreement will not result in the
          loss by Lexington of any rights to use computer and telecommunications
          software including source and object code and documentation and any
          other media (including manuals, journals, and reference books) that is
          material to the operation of its business substantially as currently
          conducted.

               (l)  Litigation. No litigation, arbitration, or administrative
          proceeding (1) is pending or, to the knowledge of Lexington,
          threatened against Lexington or any of its subsidiaries as of the date
          of this Agreement that, if decided adversely to Lexington or such
          subsidiary, would have a Material Adverse Effect on Lexington, or (2)
          is pending or, to the knowledge of Lexington, threatened against
          Lexington or any of its subsidiaries as of the date of this Agreement
          that seeks to enjoin or otherwise challenges the consummation of the
          transactions contemplated by this Agreement. As of the date of this
          Agreement, neither Lexington nor any of its subsidiaries is
          specifically identified as a party subject to any material
          restrictions or limitations under any injunction, writ, judgment,
          order, or decree of any Governmental Authority.

               (m)  Permits; Compliance with Laws. Each of Lexington and its
          subsidiaries has all material licenses, franchises, permits, and other
          authorizations of Governmental Authorities necessary to conduct its
          business, and neither Lexington nor any of its subsidiaries is in
          violation of any such license, franchise, permit, or other
          authorization of a Governmental Authority or any Applicable Law,
          except where such failure or violation would not have a Material
          Adverse Effect on Lexington.

               (n)  No Brokers or Finders. Except for Putnam, Lovell, de
          Guardiola & Thornton Inc., Lexington has not engaged any investment
          banker, broker, or finder in connection with the transactions
          contemplated hereby.

               (o)  Retirement and Benefit Plans; Employees.

                    (1)  Each employee pension benefit plan ("Pension Plan"), as
               defined in Section 3 of the Employee Retirement Income Security
               Act of 1974, as amended ("ERISA"), each employee welfare benefit
               plan ("Welfare Plan"), as defined in Section 3 of ERISA, and each
               deferred compensation, bonus, incentive, stock incentive, option,
               stock purchase, severance, or other employee benefit plan,
               agreement, commitment, or arrangement ("Benefit Plan"), that is
               currently maintained by Lexington or any of its ERISA Affiliates
               (as defined in clause (9) below) or to which Lexington or any of
               its ERISA Affiliates currently contributes or is under any
               current obligation to contribute (collectively, the "Lexington
               Employee Plans" and individually, an "Lexington Employee Plan")
               is listed in the Lexington Disclosure Schedule and, to the extent
               any Lexington Employee Plan is evidenced by documents, insurance
               policies, or manuals, true and complete copies thereof have been
               delivered to Buyer, including copies of any

                                       21
<PAGE>

               trust agreement or other funding contract with respect to any
               Lexington Employee Plan. In addition, copies of the most recent
               determination letter issued by the Internal Revenue Service with
               respect to each Pension Plan, copies of the most recent actuarial
               report for each Pension Plan, where applicable, and copies of the
               annual report (Form 5500 Series) required to be filed with any
               Governmental Authority with respect to each Pension Plan and each
               Welfare Plan, for the three most recent plan years of such plan
               for which reports have been filed, have been delivered to Buyer.
               In addition, copies of all material employee communications
               (including summary plan descriptions and employee manuals) with
               respect to each Lexington Employee Plan have been delivered to
               Buyer.

                    (2)  Each of Lexington and its ERISA Affiliates has made on
               a timely basis all contributions or payments required to be made
               by it under the terms of the Lexington Employee Plans, ERISA, the
               Code, or other applicable laws.

                    (3)  No Lexington Employee Plan has an "accumulated funding
               deficiency" (within the meaning of Section 412 of the Code or
               Section 302 of ERISA). Each Lexington Employee Plan that is
               intended to be qualified under Section 401(c) of the Code is the
               subject of a currently effective favorable IRS determination
               letter as to such Plan's qualification under Section 401(a) of
               the Code.

                    (4)  Neither Lexington nor any of its ERISA Affiliates has
               maintained, contributed to or otherwise had any obligation with
               respect to any "multiemployer plan" (as defined in Section 3 of
               ERISA) within the past six years.

                    (5)  To the best of Lexington's knowledge, each Lexington
               Employee Plan (and any related trust or other funding instrument)
               is being administered in all material respects in compliance with
               its terms, and in both form and operation, is in compliance in
               all material respects with the applicable provisions of ERISA,
               the Code, and other laws and regulations (other than adoption of
               any plan amendments for which the deadline has not yet expired),
               and all reports required to be filed with any Governmental
               Authority with respect to each Pension Plan and each Welfare Plan
               required to be listed on the Lexington Disclosure Schedule have
               in all material respects been timely filed.

                    (6)  There is no litigation, arbitration, or administrative
               proceeding pending or, to the knowledge of Lexington, threatened
               against Lexington or any of its ERISA Affiliates or, to the
               knowledge of Lexington, any plan fiduciary by the Internal
               Revenue Service, the U.S. Department of Labor, the PBGC, or any
               participant or beneficiary with respect to any Lexington Employee
               Plan. To the best of Lexington's knowledge, neither Lexington nor
               any of its ERISA Affiliates nor, to the knowledge of Lexington,
               any plan fiduciary of any Pension Plan or Welfare Plan required
               to be listed on the Disclosure Schedule has engaged in any
               transaction in violation of Section 406(a) or (b) of ERISA for
               which an exemption does not exist under Section 408 of ERISA or
               any "prohibited transaction" (as defined in Section 4975(c)(1) of
               the Code) for which an exemption does not exist under Section
               4975(c)(2) or 4975(d) of the Code, or is subject

                                       22
<PAGE>

               to any material excise tax or penalty imposed by the Code or
               ERISA with respect to any Lexington Employee Plan.

                    (7)  Lexington or its ERISA Affiliates have the right to
               terminate or amend any Lexington Employee Plan (including any
               group health plan covering retirees or other former employees) or
               discontinue contributions to any Lexington Employee Plan without
               incurring any liability other than a benefit liability accrued
               under such plan immediately before termination, amendment, or
               discontinuance of contributions.

                    (8)  No Lexington Employee Plan is maintained outside the
               United States.

                    (9)  For purposes of this Section 3.2(o), the term "ERISA
               Affiliate" means any entity which is under "common control" with
               Lexington (within the meaning of Section 4001(b) of ERISA).

                    (10) Neither the execution and delivery of this Agreement
               nor the consummation of the Merger will by itself (A) result in
               any payment (including severance, unemployment compensation,
               excess parachute payment (within the meaning of Section 280G of
               the Code), forgiveness of indebtedness, or otherwise) becoming
               due to any director or any employee of Lexington or any ERISA
               Affiliate from Lexington or any ERISA Affiliate under any
               Lexington Employee Plans or otherwise, (B) increase any benefits
               otherwise payable under any Lexington Employee Plan, or (C)
               result in any acceleration of the time of payment or vesting of
               any such benefits.

               (p)  Environmental Matters.

                    (1)  For purposes of this Section 3.2(p):

                         (A)  "Environmental Law" means the Comprehensive
                    Environmental Response, Compensation and Liability Act, 32
                    U.S.C. (S) 9601 et seq., the Resource Conservation and
                    Recovery Act, 32 U.S.C. (S) 6901 et seq., the Federal Water
                    Pollution Control Act, 33 U.S.C. (S) 1201 et seq., the Clean
                    Water Act, 33 U.S.C. (S) 1321 et seq., the Clean Air Act, 32
                    U.S.C. (S) 7301 et seq., and any other federal, state, local
                    or other governmental statute, regulation, law or ordinance
                    dealing with the protection of human health, natural
                    resources, or the environment; and

                         (B)  "Hazardous Substance" means any pollutant,
                    contaminant, hazardous substance or waste, solid waste,
                    petroleum or any fraction thereof, or any other chemical,
                    substance, or material listed or identified in or regulated
                    by any Environmental Law.

                    (2)  No Hazardous Substances have been spilled, discharged,
               leaked, emitted, injected, disposed of, dumped, or released by
               Lexington or any of its subsidiaries or, to the knowledge of
               Lexington, any other person on, beneath, above, or into the
               environment surrounding any of the real property currently or
               formerly leased

                                       23
<PAGE>

               by Lexington or any of its subsidiaries in such a way as to
               create any unpaid liability of Lexington or any of its
               subsidiaries under any applicable Environmental Law, that would
               have a Material Adverse Effect on Lexington.

               (q)  Labor Matters. Lexington has no knowledge, as of the date of
          this Agreement, of any activities or proceedings of any labor union to
          organize any of its or its subsidiaries' employees.

               (r)  Vote Required. The affirmative vote of the holders of a
          majority of the outstanding shares of Lexington Common Stock is the
          only vote of the holders of any class or series of capital stock of
          Lexington necessary to approve this Agreement and the Merger.

               (s)  Anti-Takeover Provisions. No restrictive provision of any
          "fair price," "moratorium," "control share acquisition," "interested
          stockholder," or other anti-takeover statute or regulation or any
          restrictive effect of any applicable anti-takeover provision in
          Lexington's Certificate of Incorporation or Bylaws is, or at the
          Effective Time will be, applicable to the Merger or the other
          transactions contemplated hereby.

               (t)  Insurance Coverage. Lexington and its subsidiaries have in
          effect insurance coverage with reputable insurers or are self-insured,
          which in respect of amounts, premiums, types, and risks insured,
          constitutes reasonably adequate coverage against all risks customarily
          insured by companies and their subsidiaries comparable in size and
          industry to Lexington and its subsidiaries. All of the insurance
          policies and bonds of Lexington and its subsidiaries are listed in the
          Lexington Disclosure Schedule. Each such insurance policy or bond in
          full force and effect and none of Lexington or any of its subsidiaries
          has received notice or any other indication from any insurer or agent
          of any intent to cancel any such insurance policy or bond.

               (u)  Management Agreements. The Lexington Disclosure Schedule
          sets forth a true and complete list of each of the portfolio
          management agreements and investment advisory or management agreements
          (collectively, the "Management Agreements") related to Lexington's (or
          a subsidiary's) rendering investment advisory services to any client
          other than a U.S.-registered investment company for which Lexington or
          a subsidiary serves as investment adviser (but not sub-adviser),
          distributor or sponsor (but including investment companies for which
          Lexington or a subsidiary serves solely as a sub-adviser and including
          the Troika Dialog Lexington Eurasia Fund) ("Private Accounts"). Each
          such Management Agreement is currently in full force and effect and
          has been performed by Lexington (or its subsidiaries) in accordance
          with all Applicable Laws. No material default or condition or event
          that, after notice or lapse of time or both, would constitute a
          material default on the part of Lexington or any of its subsidiaries
          or, to the knowledge of Lexington, on the part of the other parties to
          such Management Agreements, exists under any of those agreements, and
          each Private Account has, during the term of the pertinent Management
          Agreement, been managed in all material respects consistent with the
          investment goals and restrictions specified in the Management
          Agreement.

               (v)  Voting Agreements. The Board of Directors of Lexington has
          approved a voting agreement (a "Voting Agreement"), in substantially
          the form of Exhibit A, which voting agreement shall be executed by the
          parties set forth on Schedule 3.2(v).

                                       24
<PAGE>

                                  ARTICLE IV

        Representations and Warranties Relating to the Lexington Funds

          4.1  General. Lexington represents and warrants to Buyer and Merger
Sub that the statements contained in this Article IV are true and correct,
except as set forth in the Lexington Disclosure Schedule.

          4.2  Representations and Warranties.

               (a)  No Prohibitions. To the knowledge of Lexington, neither
          Lexington or any of its subsidiaries nor any person associated (as
          such term is construed under Section 3(18) of the Exchange Act or
          Section 202(a)(17) of the Advisers Act) with those companies has
          committed any act (1) enumerated in, or that may subject it to the
          provisions of, Section 15(b)(4) of the Exchange Act, Section 203(e) of
          the Advisers Act or Rule 206(4)-4(b) promulgated thereunder, or
          Section 9 of the 1940 Act, or (2) that would result in a "yes" answer
          to any question contained in Item 22 of Form U-4 (Uniform Application
          for Securities Industry Registration or Transfer) or the equivalent
          item of any successor form or of any non-uniform state form, to the
          extent that such act would result in a Material Adverse Effect on
          Lexington.

               (b)  Organization of the Funds. Each of the Lexington Funds
          (sometimes collectively referred to as the "Lexington Fund Family") is
          a registered investment company (a "Registrant"), or a series of a
          Registrant, organized as a Maryland corporation, or a Massachusetts
          business trust, or a New York grantor trust, duly formed and validly
          existing, and with respect to Lexington Funds that are Maryland
          corporations and Massachusetts business trusts, in good standing under
          the law of its jurisdiction of organization. The Lexington Disclosure
          Schedule sets forth a true, complete, and correct list, as of the date
          hereof, of each of the Registrants and any series thereof, and whether
          any of Lexington, Lexington Management Corporation, or any other
          subsidiary of Lexington acts as investment adviser, broker-dealer, or
          sponsor for the Registrant. Each Lexington Fund for which any
          affiliate of Lexington will act in such capacities after the Effective
          Time is so indicated in the Lexington Disclosure Schedule. Each
          Lexington Fund has the requisite power and authority to carry on its
          business as it is now being conducted.

               (c)  Capitalization of the Lexington Funds. All issued and
          outstanding shares of common stock and shares or units of beneficial
          interest of each Lexington Fund (collectively, "Fund Shares") are, and
          at the Effective Time will be, and all of the authorized but unissued
          Fund Shares of each Lexington Fund will be, when issued for the
          consideration described in the current registration statement relating
          to that Lexington Fund, duly and legally issued and outstanding, fully
          paid, and non-assessable (or in the case of a Massachusetts business
          trust, non-assessable by the Lexington Fund). All of the issued and
          outstanding Fund Shares will, at the Effective Time, be held of record
          by the persons and in the names and amounts set forth in the records
          of State Street Bank and Trust Company, Inc., the transfer agent of
          the Lexington Funds. No Lexington Fund has outstanding any options,
          warrants, or other rights to subscribe

                                       25
<PAGE>

          for or purchase any of its shares, nor is there outstanding any
          security convertible into Fund Shares.

               (d)  Financial Statements of the Lexington Funds. Lexington has
          furnished to Buyer true and complete copies of the audited statements
          of assets and liabilities (including the notes thereto) of each
          Lexington Fund as of the two most recent fiscal/calendar years, the
          related audited statements of operations and changes in net assets for
          the three most recent fiscal/calendar years, and the related audited
          schedules of portfolio investments for the two most recent
          fiscal/calendar years. Lexington also has furnished to Buyer true and
          complete copies of the unaudited statement of assets and liabilities
          (including the notes thereto) of each Lexington Fund as of the most
          recent semi-annual period (June 30, 1999 for the Lexington Funds using
          a calendar year), and the related unaudited statements of operations
          and changes in net assets for such semiannual period.

               (e)  Accuracy of Financial Statements. The audited and unaudited
          financial statements of each Lexington Fund referred to in Section
          4.2(d) present in all material respects the financial position and
          results of operations of the Lexington Fund at the dates and for the
          periods to which they relate and have been prepared in accordance with
          GAAP subject, in the case of the unaudited financial statements, to
          normal year-end audit adjustments and the absence of footnotes. The
          audited financial statements of each Lexington Fund have been
          certified by that Lexington Fund's independent accounting firm.

               (f)  Compliance With Applicable Law. Each Lexington Fund is an
          open-end management investment company or a unit investment trust
          registered under the 1940 Act. Each Lexington Fund is in compliance,
          and at all times since a Lexington subsidiary has served as investment
          adviser or sponsor has been in compliance, in all material respects
          with each federal or state statute, law, ordinance, rule,
          administrative interpretation, regulation, order, writ, injunction,
          directive, judgment, decree, policy, guideline, or other requirement
          (including those of the Nasdaq National Market or the NASD)
          promulgated by a Governmental Authority (collectively, "Applicable
          Law") applicable to any Lexington Fund, except, in each case, for any
          failure to so comply that would have a Material Adverse Effect on the
          applicable Lexington Fund. The shares of each Lexington Fund are
          registered in each jurisdiction in the United States where such
          registration is required due to the offer or sale of such shares in
          the jurisdiction, and those registrations have not been revoked,
          withdrawn, or suspended in any way. The sale of shares in each
          Lexington Fund is currently authorized in each of the United States
          and the District of Columbia. Lexington has furnished to Buyer copies
          of each Registrant's current post-effective amendment to its
          registration statement as most recently filed with the SEC together
          with copies of each Registrant's charter, bylaws, and trust
          instruments, as the case may be. The current prospectus and related
          registration statement, including the current statement of additional
          information, for each of the Registrants (copies of which have been
          delivered to Buyer) conform in all material respects to the applicable
          requirements of the Securities Act, the 1940 Act, and the rules and
          regulations of the SEC thereunder, as well as the applicable
          requirements of the various state securities laws, and do not contain
          any untrue statement of a material fact or omit to state any material
          fact required to be stated therein or necessary to make the statements
          therein, in light of the circumstances under which they were made, not
          misleading.

                                       26
<PAGE>

               (g)  No Conflicts. Neither the execution and delivery of this
          Agreement by Lexington, nor the consummation by Lexington of the
          transactions contemplated hereby will:

                    (1)  conflict with or result in a breach of the charter,
               bylaws, or similar organizational documents, as currently in
               effect, of any of the Registrants;

                    (2)  require any filing with, or consent or approval of, any
               Governmental Authority having jurisdiction over any of the
               businesses or assets of any of the Registrants, except for the
               consents, approvals, filings, and notices required under the 1940
               Act;

                    (3)  violate any statute, law, ordinance, rule, or
               regulation applicable to a Registrant or any injunction,
               judgment, order, writ, or decree to which a Registrant has been
               specifically identified as subject that would have a Material
               Adverse Effect on such Lexington Fund; or

                    (4)  result in a breach of, or constitute a default or an
               event that, with the passage of time or the giving of notice, or
               both, would constitute a default, give rise to a right of
               termination, cancellation, or acceleration, create any
               entitlement of any third party to any material payment or
               benefit, require the consent of any third party, or result in the
               creation of any lien on the assets of a Registrant under, any
               contract of the type referred to in Section 4.2(l) other than
               contracts subject to Section 12(b) or Section 15 of the 1940 Act,
               except such breaches, defaults, terminations, cancellations,
               accelerations, entitlements, absences of consents, or liens that
               would not have a Material Adverse Effect on such Lexington Fund.

               (h)  Adherence to Investment Policies and Restrictions.
          Investments held by each of the Lexington Funds that are open-end
          management investment companies are, and for so long as each Lexington
          Fund has been advised by a Lexington subsidiary have been, consistent
          with the investment policies and restrictions applicable to the
          applicable Lexington Fund. Investments held by each of the Lexington
          Funds that are unit investment trusts are, for so long as a Lexington
          subsidiary has served as sponsor to the unit trust, consistent with
          the prospectus, as amended, for the unit trust. The value of each
          Lexington Fund's net assets is determined using portfolio-valuation
          methods that comply in all material respects with the 1940 Act.

               (i)  Litigation. There are no legal or governmental actions or
          proceedings pending or, to the knowledge of Lexington, threatened
          against any of the Lexington Funds; nor, to the knowledge of
          Lexington, are there any legal or governmental investigations pending
          or threatened against any of the Lexington Funds; nor is there any
          judgment, decree, injunction, rule, order (or, to the knowledge of
          Lexington, any investigation) of any Governmental Authority
          outstanding against any of the Lexington Funds. Neither the SEC, the
          NASD, nor any other regulatory agency has identified any material
          issue in any deficiency letter or other similar inquiry relating to a
          Lexington Fund or its operations, nor is there any unresolved
          violation, criticism, or exception by any such regulatory agency or
          authority therewith that would in any such case have a Material
          Adverse Effect on any such Lexington Fund.

                                       27
<PAGE>

               (j)  Required Reports. For so long as a Lexington subsidiary has
          served as investment adviser, each of the Lexington Funds has filed
          all material prospectuses, annual information forms, financial
          statements, other forms, reports, sales literature, and advertising,
          and any other material documents required to be filed with applicable
          Governmental Authorities, and any material amendments thereto (the
          "Reports"). The Reports have been prepared in accordance with the
          requirements of Applicable Law in all material respects.

               (k)  Taxes. Each Lexington Fund that is registered as an open-end
          management investment company has elected to qualify and, for all
          taxable years that a Lexington subsidiary served as investment adviser
          and with respect to which the applicable statute of limitations
          (including any extensions) has not expired ("open taxable years"), has
          continuously qualified to be treated as a "regulated investment
          company" under Subchapter M of the Code and has continuously been
          eligible to compute, and has for each such taxable year computed, its
          federal income tax under Section 852 of the Code and has no earnings
          and profits accumulated in any taxable year. Each Lexington Fund that
          is a registered unit investment trust is, and has been for all taxable
          years that a Lexington subsidiary has served as a sponsor, a "trust"
          (as defined in Treas. Reg. 301.7701-4) that is subject to subpart E of
          part I of subchapter J of chapter 1 of subtitle A of the Code. At the
          Effective Time, all federal, state, local and foreign tax returns with
          respect to Taxes for any taxable period for which the applicable
          statute of limitations (including any extensions) has not expired and
          during which a Lexington subsidiary has served as investment adviser
          that were or are required to be filed on or before such date by or on
          behalf of a Lexington Fund ("Fund Tax Returns") were or shall have
          been timely filed and were or shall be complete and correct, and all
          federal and other Taxes, including interest, penalties, and additions
          to tax, shown or required to be shown as due on such returns, shall
          have been paid or provided for. No such Fund Tax Return or other
          filing is currently under audit, no assessment has been asserted with
          respect to such Fund Tax Returns or other filings, and no requests for
          waivers of the time to make any such assessment are pending. None of
          the Lexington Funds is delinquent in the payment of any material Tax,
          assessment, or governmental charge.

               (l)  Contracts. The Lexington Disclosure Schedule lists all
          material contracts, including all agreements and arrangements for the
          distribution of shares, to which a Lexington Fund is a party or by
          which a Lexington Fund or its property is bound, other than contracts
          for the purchase or sale of portfolio securities entered into in the
          ordinary course of business. Each contract subject to Section 12(b) or
          15 of the 1940 Act has been duly approved at all times in compliance
          in all material respects with Section 12(b) or 15 of the 1940 Act and
          all other Applicable Laws. Each such contract is currently in full
          force and effect and has been performed by the relevant entity in
          accordance with the 1940 Act and all other Applicable Laws. No
          material default or condition or event that, after notice or lapse of
          time or both, would constitute a material default on the part of
          Lexington or any of its subsidiaries or, to the knowledge of
          Lexington, on the part of the other parties to such advisory and sub-
          advisory agreements, exists under any of those material contracts. Any
          agreements between Lexington or any of its subsidiaries and the
          Lexington Funds that are open-end management investment companies for
          the provision of administrative services, including accounting and
          shareholder services, are valid and enforceable, and the amounts paid
          to Lexington and/or its subsidiaries under the agreements have been
          properly determined in accordance with the terms of the agreements.
          Copies of all such material contracts have been delivered or made
          available for inspection by Buyer and are true and complete.

               (m)  No Material Adverse Changes. Since December 31, 1998 no
          Material Adverse Effect has occurred with respect to any Lexington
          Fund or the status of any Lexington Fund as a regulated investment
          company under the Code.

               (n)  Books. The books and records of each Lexington Fund
          reflecting, among other things, the investment transactions undertaken
          on behalf of each Lexington Fund, the purchase and sale of shares of
          that Lexington Fund by its holders of common stock or shares or units
          of beneficial interests (collectively, "Fund Stockholders"), the
          number of issued and outstanding Lexington Fund shares owned by each
          Fund Stockholder, and the state or other jurisdiction in which those
          shares were offered and sold, are, to the knowledge of Lexington,
          complete and accurate in all material respects.

               (o)  Absence of Undisclosed Liabilities. Each Lexington Fund has,
          to the knowledge of Lexington, no material debts, obligations, or
          liabilities, whether due or to become due, absolute, contingent, or
          otherwise, that are required to be reflected in that Lexington Fund's
          financial statements in accordance with GAAP that are not so reflected
          except for debts, obligations, or liabilities incurred in the ordinary
          course of business since the date of the Lexington Fund's most recent
          audited or unaudited financial statements or that would not be
          material to the applicable Lexington Fund.

                                       28
<PAGE>

               (p)  No Pending Transaction. No Lexington Fund is a party to or
          bound by any agreement, undertaking, or commitment (1) to merge or
          consolidate with, or acquire all or substantially all of the property
          and assets of, any other person, (2) to sell, lease, or exchange all
          or substantially all of its property and assets to any other person,
          or (3) to enter into any investment advisory agreement or distribution
          agreement.

               (q)  Proxy Statements. All proxy statements to be prepared for
          use by the Lexington Funds in connection with the transactions
          contemplated by this Agreement will, with respect to information
          provided by Lexington, any of its subsidiaries, or a Lexington Fund,
          not contain any untrue statement of a material fact, or omit to state
          any material fact required to make the statements therein, in light of
          the circumstances under which they were made, not misleading.

               (r)  Code of Ethics. Lexington Management Corporation, MSR and
          each of the Lexington Funds have adopted a formal code of ethics and a
          written policy regarding personal trading. Such codes and policies
          comply in all materials respects with Section 17(j) of the 1940 Act,
          Rule 17j-1 thereunder, and Section 204A of the Advisers Act, as the
          case may be. To the knowledge of Lexington, for so long as a Lexington
          Fund has been advised or sponsored by a Lexington subsidiary, there
          has been no violation of its code of ethics and personal trading
          policy that would be material to any of the Lexington Funds.

               (s)  No Disqualification. To the knowledge of Lexington, no
          person "associated" (as defined under the Advisers Act) with Lexington
          Management Corporation or MSR has, for a period of five years before
          the date hereof, been convicted of any crime or is or has been subject
          to any disqualification that would be a basis for denial, suspension,
          or revocation of registration of an investment adviser under Section
          203(e) of the Advisers Act or Rule 206(4)-4(b) thereunder or of a
          broker-dealer under Section 15 of the Exchange Act. To the knowledge
          of Lexington, no "affiliated person" (as defined under the 1940 Act)
          of Lexington Management Corporation or MSR has during a period of five
          years before the date hereof been convicted of any crime or is or has
          been subject to any disqualification that would be a basis for
          disqualification as an investment adviser for any investment company
          under Section 9(a) of the 1940 Act, and there is no basis for, or
          proceeding or investigation that is reasonably likely to become the
          basis for, any such disqualification, denial, suspension, or
          revocation.

               (t)  Insurance. Each Registrant has in full force and effect such
          insurance as is required by the 1940 Act and each Registrant that is
          registered as an open-end management investment company has directors'
          and officers' and errors and omissions insurance policies issued in
          amounts reasonably believed to be adequate and appropriate by the
          Registrant's Board. No Registrant is in default under any such
          insurance policy. Complete and correct copies of all insurance
          policies of the Registrants have been made available to Buyer. All
          premiums that are due and payable under such policies have been paid.


                                   ARTICLE V

            Representations and Warranties of Buyer and Merger Sub

     5.1  General. Buyer and Merger Sub jointly and severally
represent and warrant to Lexington that the statements contained in this Article
V are true and correct, except as set forth in the disclosure schedule delivered
by Buyer to Lexington on or before the date of this Agreement (the "Buyer
Disclosure Schedule"). Notwithstanding any other provision of this Agreement,
each exception set forth in the Buyer Disclosure Schedule shall be deemed to
qualify each representation and warranty set forth in this Agreement (i) that is
specifically identified (by cross-reference or otherwise) in the Buyer
Disclosure Schedule as being qualified by such exception, or (ii) with respect
to which the relevance of such exception is apparent on the face of the
disclosure of such exception set forth in the Buyer Disclosure Schedule.

     5.2  Representations and Warranties.

                                       29
<PAGE>

                    (a)  Organization, Standing, Qualification. Each of Buyer
          and Merger Sub is a corporation duly organized, validly existing, and
          in good standing under the laws of the State of Delaware and has the
          requisite power and authority to own, lease, and operate its
          properties and assets and to carry on its business as it is now being
          conducted. Each of Buyer and Merger Sub is duly qualified or licensed
          as a foreign entity to do business, and is in good standing, in each
          jurisdiction where the character of the properties owned, operated, or
          leased by it, or the nature of its business, makes such qualification
          or licensing necessary, except for those jurisdictions where the
          failure to be so qualified or licensed or in good standing would not
          have a Material Adverse Effect on Buyer. Copies of the certificate of
          incorporation and bylaws of Buyer and Merger Sub have been made
          available to Lexington and are complete and correct as of the date
          hereof.

                    (b)  Capitalization. The authorized capital stock of Buyer
          consists of 200 million shares of Buyer Common Stock, of which, as of
          the close of business on February 25, 2000, 88,344,229 shares were
          issued and outstanding, and seven million shares of preferred stock,
          none of which are outstanding. As of February 25, 2000, Buyer has
          reserved for issuance six million shares of Series A Junior
          Participating Preferred Stock issuable under the Amended and Restated
          Rights Agreement, dated as of February 11, 1999, between Buyer and
          Norwest Bank Minnesota, National Association (the "Buyer Rights
          Agreement"). Under the Buyer Rights Agreement, each outstanding share
          of Buyer Common Stock has attached to it certain rights ("Buyer
          Right"), including rights to purchase, under certain circumstances,
          one-twentieth of a share of Series A Junior Participating Preferred
          Stock of Buyer for $100, subject to adjustment. The authorized capital
          stock of Merger Sub consists of 5,166,667 shares of common stock and
          1,750 shares of preferred stock, all of which are outstanding and held
          by Buyer. All of the issued and outstanding shares of Buyer Common
          Stock have been duly authorized and validly issued, are fully paid and
          nonassessable, and were not granted in violation of any statutory
          preemptive rights. There are no outstanding subscriptions, options,
          warrants, calls, or other agreements or commitments under which Buyer
          is or may become obligated to issue, sell, transfer, or otherwise
          dispose of or purchase, redeem, or otherwise acquire, any shares of
          capital stock of, or other equity interests in, Buyer and there are no
          outstanding securities issued by Buyer convertible into or
          exchangeable for any Buyer Common Stock, except for options to
          purchase up to an aggregate of 8,229,385 shares of Buyer Common Stock,
          as of February 25, 2000. There are no stock appreciation rights,
          phantom stock rights, or performance shares outstanding with respect
          to Buyer. Buyer owns, directly or indirectly, all of the issued and
          outstanding shares of each class of capital stock of each of its
          subsidiaries, free and clear of all liens, security interests,
          pledges, charges, and other encumbrances.

                    (c)  Authorization and Execution Each of Buyer and Merger
          Sub has the corporate power and authority to execute and deliver this
          Agreement and to consummate the transactions contemplated hereby. The
          execution, delivery, and performance of this Agreement by Buyer and
          Merger Sub have been duly authorized by the Boards of Directors of
          Buyer and Merger Sub, and no further corporate action of either Buyer
          or Merger Sub is necessary to consummate the transactions contemplated
          hereby. This Agreement has been duly executed and delivered by Buyer
          and Merger Sub and, assuming the accuracy of the representations and
          warranties of Lexington set forth in Section 3.2(c), this Agreement
          constitutes the legal, valid, and binding

                                       30
<PAGE>

         obligation of Buyer and Merger Sub, enforceable against them in
         accordance with its terms, except to the extent that enforceability may
         be limited by applicable bankruptcy, insolvency, or similar laws
         affecting the enforcement of creditors' rights generally, and subject
         to general principles of equity.

         (d)   No Conflicts. Neither the execution and delivery of this
Agreement by Buyer and Merger Sub, nor the consummation by them of the
transactions contemplated hereby will:

                    (1)  conflict with or result in a breach of the certificate
               of incorporation or bylaws, as currently in effect, of Buyer or
               Merger Sub;

                    (2)  require any filing with, or consent or approval of, any
               Governmental Authority having jurisdiction over any of the
               businesses or assets of Buyer, Merger Sub, or any of their
               subsidiaries, except for (A) compliance with the filing
               requirements under the HSR Act; (B) the filing of the Certificate
               of Merger with the Delaware Secretary of State and appropriate
               documents reflecting the occurrence of the Merger with the
               relevant authorities of other states in which Buyer or Merger Sub
               is licensed or qualified to do business; (C) the consents,
               approvals, filings, and notices required under the 1940 Act and
               the Advisers Act; (D) any consents, approvals, filings, or
               notices required with the NASD or any industry self-regulatory
               organizations; and (E) the filing of the Proxy
               Statement/Prospectus and any other compliance with the applicable
               requirements of the Exchange Act; (F) such filings and approvals
               as are required to be made or obtained under the securities or
               "blue sky" laws of various states; and (G) such other filings,
               consents or, approvals the failure to make or obtain would not
               reasonably be expected to prevent consummation of the Merger or
               have a Material Adverse Effect on Buyer;

                    (3)  subject to the exceptions of and assuming compliance
               with clauses (A) through (G) of subsection (d)(2) above, violate
               any Applicable Law applicable to Buyer or Merger Sub; or

                    (4)  result in a material breach of, or constitute a
               material default or an event that, with the passage of time or
               the giving of notice, or both, would constitute a material
               default, give rise to a right of termination, cancellation, or
               acceleration, create any entitlement of any third party to any
               material payment or benefit or require the consent of any third
               party under, any contract that is a "material contract" (as is
               defined in Item 601(b)(10) of Regulation S-K of the SEC) to be
               performed after the date of this Agreement.

               (e)  Proxy Statement. The information supplied by Buyer and
         Merger Sub for inclusion in (a) the Registration Statement on Form S-4
         to be filed under the Securities Act with the SEC by Buyer in
         connection with the Merger for the purpose of registering the shares of
         Buyer Common Stock to be issued in connection with the Merger and the
         resale thereof by persons who may be deemed to be underwriters under
         Rule 145 of the Securities Act (the "Registration Statement") or (b)
         the proxy statement to be distributed in connection with Lexington's
         meeting of stockholders to vote upon this Agreement and the
         transactions contemplated hereby (the "Proxy Statement" and, together
         with the prospectus included in the

                                       31
<PAGE>

         Registration Statement, the "Proxy Statement/Prospectus") will, in the
         case of the Proxy Statement, as of the date of the Proxy Statement and
         as of the date of the meeting of Lexington's stockholders to consider
         this Agreement and the Merger, or, in the case of the Registration
         Statement, as amended or supplemented, at the time it becomes effective
         and at the time of such meeting of the stockholders of Lexington, not
         contain any untrue statement of a material fact or omit to state any
         material fact required to be stated therein or necessary in order to
         make the statements therein, in light of the circumstances under which
         they were made, not misleading. The Proxy Statement/Prospectus will, as
         of its effective date, comply as to form in all material respects with
         all applicable laws, including the provisions of the Securities Act and
         the Exchange Act and the rules and regulations promulgated thereunder,
         except that no representation is made by Buyer or Merger Sub with
         respect to information supplied by Lexington for inclusion therein.
         Buyer is qualified to use Form S-3 under the Securities Act.

               (f)  SEC Reports and Financial Statements.

                    (1)  Since December 31, 1995, Buyer has filed all reports,
               registration statements, and other filings, together with any
               amendments required to be made with respect thereto, that it has
               been required to file with the SEC under the Securities Act and
               Exchange Act. All reports, registration statements, and other
               filings (including all exhibits, notes, and schedules thereto and
               documents incorporated by reference therein) filed by Buyer with
               the SEC on or after January 1, 1996, together with any amendments
               thereto are collectively referred to as the "Buyer SEC Reports."
               As of: (A) with respect to all of the Buyer SEC Reports other
               than registration statements filed under the Securities Act, the
               respective dates of their filing with the SEC; and (B) with
               respect to all registration statements filed under the Securities
               Act, their respective effective dates, the Buyer SEC Reports
               complied in all material respects with the rules and regulations
               of the SEC and did not contain any untrue statement of a material
               fact or omit to state a material fact required to be stated
               therein or necessary to made the statements made therein not
               misleading.

                    (2)  The consolidated financial statements (including any
               related notes or schedules) included in Buyer's 1998 Annual
               Report on Form 10-K, as filed with the SEC, were prepared in
               accordance with GAAP (except as may be noted therein or in the
               notes or schedules thereto) and fairly present in all material
               respects the consolidated financial position of Buyer and its
               subsidiaries as of December 31, 1997 and 1998 and the
               consolidated results of their operations and cash flows for each
               of the three years in the three-year period ended December 31,
               1998.

               (g)  Litigation. No litigation, arbitration, or administrative
         proceeding is (i) pending or, to the knowledge of Buyer, threatened
         against Buyer, its subsidiaries or Merger Sub as of the date of this
         Agreement that, if decided adversely to Buyer, its subsidiaries or
         Merger Sub, would have a Material Adverse Effect on Buyer, or (ii)
         pending or, to the knowledge of Buyer, threatened against Buyer, its
         subsidiaries, or Merger Sub as of the date of this Agreement that seeks
         to enjoin or otherwise challenges the consummation of the transactions
         contemplated by this Agreement. As of the date of this Agreement,
         neither Buyer, its subsidiaries, nor Merger

                                       32
<PAGE>

         Sub is specifically identified as a party subject to any material
         restrictions or limitations under any injunction, writ, judgment,
         order, or decree of any Governmental Authority that seeks to enjoin or
         otherwise challenges or affects the ability of the Buyer to consummate
         the transactions contemplated by this Agreement.

               (h)  Absence of Certain Changes or Events. Except as disclosed in
         the Buyer SEC Reports, from December 31, 1998 to the date of this
         Agreement, Buyer and its subsidiaries have conducted their respective
         businesses and operations in the ordinary course consistent with past
         practices.

               (i)  No Material Adverse Effect. From December 31, 1998 to the
         date of this Agreement, there has been no business interruption, damage
         to or destruction of its properties, or other incident, occurrence, or
         event (other than changes in general industry, economic, or market
         conditions), which would have a Material Adverse Effect on Buyer.

               (j)  Permits; Compliance with Laws. Each of Buyer and Merger Sub
         has all material licenses, franchises, permits, and other
         authorizations of Governmental Authorities necessary to conduct its
         business, and neither Buyer nor Merger Sub is in violation of any such
         license, franchise, permit, or other authorization of a Governmental
         Authority, or any statute, law, ordinance, rule, or regulation
         applicable to it or any of its properties, except where such failure
         would not have a Material Adverse Effect on Buyer.

               (k)  No Brokers or Finders. Neither Buyer nor Merger Sub has
         engaged any investment banker, broker, or finder in connection with the
         transactions contemplated hereby.

               (l)  No Disqualification. To the knowledge of Buyer, no person
         "associated" (as defined under the Advisers Act) with Merger Sub has,
         for a period of five years before the date hereof, been convicted of
         any crime or is or has been subject to any disqualification that would
         be a basis for denial, suspension, or revocation of registration of an
         investment adviser under Section 203(e) of the Advisers Act or Rule
         206(4)-4(b) thereunder or of a broker-dealer under Section 15 of the
         Exchange Act. To the knowledge of Buyer, no "affiliated person" (as
         defined under the 1940 Act) of Merger Sub has during a period of five
         years before the date hereof been convicted of any crime or is or has
         been subject to any disqualification that would be a basis for
         disqualification as an investment adviser for any investment company
         under Section 9(a) of the 1940 Act, and there is no basis for, or
         proceeding or investigation that is reasonably likely to become the
         basis for, any such disqualification, denial, suspension, or
         revocation.

                                       33
<PAGE>

                                  ARTICLE VI

                   Covenants Relating to the Lexington Funds

     6.1  Requisite Approvals Concerning the Lexington Funds. With respect to
each Lexington Fund, and pursuant to the provisions of Section 15 of the 1940
Act, Section 12 of the 1940 Act and Rule 12b-1 thereunder, and each Registrant's
charter, bylaws, and/or trust instruments, each of Lexington and its
subsidiaries, Buyer, and Merger Sub will use its respective reasonable best
efforts in good faith to obtain (and cooperate with one another in obtaining),
as promptly as practicable, the approval of the Registrant's Board of Directors,
if the Registrant is a corporation, or Board of Trustees, if the Registrant is a
business trust (as used in this Agreement, the term "Board," when used with
respect to a Registrant, means the Board of Directors or the Board of Trustees,
as the case may be) of each Registrant in the Lexington Fund Family and of the
stockholders, as required by Section 15 or, to the extent necessary, Rule 12b-1,
of new investment advisory, sub-advisory, administrative, and distribution
agreements and agreements related to plans for each Lexington Fund identical in
all respects to those in effect immediately before the Effective Time which will
be effective immediately after the Effective Time, except for any changes
approved by Buyer and approved by the applicable Board. With respect to each
Lexington Fund that is registered as a unit investment trust, each of Lexington
and its subsidiaries, Buyer and Merger Sub will use its respective reasonable
best efforts in good faith to assign to a person designated by Buyer any
agreement under which Lexington or a subsidiary serve as sponsor, or for Buyer
or such designated person to replace Lexington or its subsidiary as such
sponsor, and to obtain the consent of the trustee of the unit trust to such
action.

     6.2  Termination of Existing Advisory, Sub-Advisory, and Distribution
Arrangements. Each of Lexington and its subsidiaries and Buyer and Merger Sub
shall use its respective reasonable best efforts to cause the Board of each
Registrant to take, and Lexington and its subsidiaries will take, all necessary
and appropriate actions to provide written notice of termination in connection
with the change in control and resulting assignment, as of the Effective Time,
pursuant to the requirements of each existing advisory, sub-advisory,
administrative, and distribution agreement applicable to each such Fund, each
such termination to be effective as of the Effective Time, except for any
changes approved by Buyer and approved by the applicable Board.

     6.3  Information Regarding the Lexington Funds. With respect to each
Registrant, Buyer shall provide as promptly as practicable to the Board of each
Registrant, with copies to Lexington, all information as the Board shall
reasonably request, in accordance with its responsibilities under Sections 15 of
the 1940 Act, to evaluate the terms of the proposed advisory and any
sub-advisory agreements relating to the Lexington Funds. Further, with respect
to each Registrant, Buyer also shall provide to the respective Board, with
copies to Lexington, all information requested to approve the terms of the
distribution agreement and to permit preparation of proxy materials or
prospectuses, as the case may be, to be sent to the stockholders of each
Registrant for the special meeting of stockholders referred in Section 7.6(b).

     6.4  Access to Information Regarding the Lexington Funds. Upon reasonable
notice, Lexington shall (and shall cause its subsidiaries and the Lexington
Funds to) afford to the officers, employees, accountants, counsel, and other
representatives of Buyer, reasonable access, during normal

                                       34
<PAGE>

business hours, to all its properties, books, contracts, commitments, and
records and will cause its, its subsidiaries', and the Lexington Funds'
employees, counsel, financial advisers, and auditors to cooperate with Buyer and
its representatives in its investigation of the business of the Lexington Funds.
Lexington shall (and shall cause its subsidiaries and the Lexington Funds to)
furnish promptly to Buyer a copy of each report, schedule, registration
statement, and other document filed or received by it during such period under
the requirements of securities laws and all other information concerning its
business, properties, and personnel as Buyer or its representatives may
reasonably request. Buyer's investigations shall be conducted in a manner as not
to unreasonably interfere with the operations of the Lexington Funds, and Buyer
will take reasonable precautions to protect the confidentiality of any
information of the Lexington Funds disclosed to such persons during the
investigation. No information or knowledge obtained in any investigation under
this Section 6.4 shall be deemed to modify a representation or warranty
contained in this Agreement or the conditions to the obligation of Buyer to
consummate the Merger.

     6.5  The Registrants' Registration Statements. Lexington and Buyer will
cooperate with each other and each will endeavor in good faith to cause each
Registrant to file a revised prospectus or a post-effective amendment to that
Registrant's registration statement on Form N-1A or S-6, which revised
prospectus or amendment shall reflect changes as necessary in that Registrant's
affairs as a consequence of the transactions contemplated by this Agreement, and
shall cooperate with one another in causing each Registrant to make any other
filing necessary to satisfy disclosure requirements to enable the public
distribution of the shares of beneficial interest of that Registrant to continue
unabated after the Closing.

     6.6  Operations of the Lexington Funds. Lexington shall, or shall cause
its applicable subsidiaries to, (a) inform Buyer weekly of purchases and sales
transactions of each Lexington Fund and provide weekly summaries of portfolio
positions (no earlier than five business days from those transactions); (b)
supply to Buyer unaudited financial statements of each Lexington Fund monthly;
(c) otherwise conduct its activities as investment adviser to each Lexington
Fund in the ordinary course of business consistent with past practice; and (d)
provide Buyer with weekly sales and redemption reports.

     6.7  Undertakings Related to Section 15(f) of the 1940 Act. Buyer and
Lexington agree that neither of them nor any of their affiliates has any express
or implied understanding or arrangement that would impose an "unfair burden" (as
defined in Section 15(f)(2)(B) of the 1940 Act) on any of the Lexington Funds or
would in any way interfere with Lexington's reliance on Section 15(f) of the
1940 Act as a result of the transactions contemplated by this Agreement. The
parties agree to use their respective reasonable best efforts to comply and to
cause the respective Boards to comply with the provisions of Section 15(f) of
the 1940 Act. Compliance with Section 15(f) shall include the following
requirements for the minimum time periods specified in that section:

          (a)  for a period of three years after the Effective Time, at least
     75% of the members of the Board of each Registrant involved, or any
     successor Board by reorganization or otherwise, shall not be "interested
     persons" (as defined in the 1940 Act) of the predecessor or new investment
     adviser or sub-adviser;

                                       35
<PAGE>

          (b)  for a period of two years after the Effective Time, no unfair
      burden shall be imposed on a Lexington Fund (or any successor thereto by
      any reorganization or otherwise) or its stockholders; provided that it is
      understood that any payments or amounts received by Lexington or its
      affiliates in connection with the transaction contemplated hereunder and
      as specified hereunder shall not be deemed to violate Buyer's and its
      affiliates' compliance with the unfair-burden provisions of Section 15(f);
      and

          (c)  all vacancies on the Board of each Lexington Fund (other than
      vacancies created by the death, disqualification, or resignation of any
      Board member interested in Buyer, Lexington, or any of its affiliates or
      otherwise to be filled by such a person) shall be filled by a person who
      is not an interested person of the predecessor or new investment advisor
      and who has been selected and proposed for election by a majority of the
      Board members who are not interested persons of the predecessor or new
      investment advisor.

      6.8 Continued Qualification. Lexington shall use its reasonable best
efforts to ensure that no Registrant takes any action that (a) would prevent any
Lexington Fund from qualifying as a "regulated investment company" under Section
851 of the Code or (b) would be inconsistent with each Lexington Fund's
prospectus and other offering, advertising, and marketing materials.

                                  ARTICLE VII

                       Covenants Relating to the Parties

      7.1 Business Operations of Lexington. Lexington agrees as to itself and
its subsidiaries (except to the extent that Buyer otherwise consents (not to be
unreasonably withheld or delayed) in writing or as contemplated by this
Agreement), to carry on its business in the usual and ordinary course in
substantially the same manner as previously conducted, to pay its debts and
taxes when due subject to good faith disputes over those debts or taxes, to pay
or perform other obligations when due, and, to the extent consistent with such
business, to use all reasonable efforts consistent with past practices and
policies to preserve intact its present business organization, to keep available
the services of its present officers and key employees and preserve its material
relationships with clients, customers, suppliers, distributors, licensors,
licensees, and others having business dealings with it, and generally to
preserve its goodwill and ongoing businesses. Except as expressly stated in this
Agreement, Lexington may not (and may not permit any of its subsidiaries to),
without the prior written consent of Buyer (not to be unreasonably withheld or
delayed):

          (a)  accelerate, amend, or change the period of exercisability of
      options, performance shares, or restricted stock granted under any stock
      plan or authorize cash payments in exchange for any awards granted under
      any of those plans, except as required by the terms of those plans or any
      related agreements or other arrangements in effect as of the date hereof,

          (b)  transfer or license to any person or entity or otherwise extend,
      amend, or modify any of its Proprietary Rights;

                                       36
<PAGE>

               (c)  declare or pay any dividends on or make any other
         distributions (whether in cash, stock, or property) in respect of
         shares of its capital stock, or reclassify any of its capital stock or
         issue or authorize the issuance of any other securities in respect of,
         in lieu of, or in substitution for shares of capital stock, or
         purchase, redeem, or otherwise acquire, or propose to purchase, redeem,
         or otherwise acquire, directly or indirectly, any shares of its capital
         stock or any options, rights, or warrants to purchase any capital stock
         or any securities convertible into or exchangeable for capital stock;

               (d)  issue, deliver, or sell or authorize or propose the
         issuance, delivery, or sale of any shares of its capital stock or
         securities convertible into shares of its capital stock, or
         subscriptions, rights, warrants, or options to acquire, or other
         agreements or commitments of any character obligating it to issue, any
         such shares or other convertible securities (other than the grant of
         options to employees in a manner consistent with past practices and
         under the Lexington Incentive Plan, and the issuance of shares upon the
         exercise of options that were either outstanding as of the date hereof
         or were granted after the date hereof in compliance with this Section
         7.1(d));

               (e)  acquire (whether by merger, consolidation, acquisition of
         stock or assets, or otherwise) any corporation, partnership, or other
         business organization or division thereof, or otherwise acquire or
         agree to acquire any assets that are material, individually or in the
         aggregate, to the business of Lexington and its subsidiaries, taken as
         a whole, other than the joint venture described on Schedule 7.1(e);

               (f)  sell, lease, license, or otherwise dispose of any of its
         properties or assets that are material, individually or in the
         aggregate, to the business of Lexington and its subsidiaries, taken as
         a whole;

               (g)  (1) other than as described on Schedule 7.1(g), increase the
         compensation or benefits payable or to become payable to its directors,
         officers, or employees, except for increases for non-executive-level
         employees in the ordinary course of business; (2) enter into any
         employment or severance agreements with any person; (3) grant any
         severance or termination pay to, except under agreements or policies
         disclosed in the Lexington Disclosure Schedule, or enter into any
         employment or severance agreement with, any employee, except severance
         agreements in accordance with the policies disclosed in the Lexington
         Disclosure Schedule; (4) enter into any collective bargaining
         agreement; (5) establish or, except as required by applicable law,
         amend any bonus, profit sharing, thrift, compensation, stock option,
         restricted stock, pension, retirement, deferred compensation,
         employment, termination, severance, or other plan, trust, fund, policy,
         or arrangement for the benefit of any directors, officers, employees,
         or consultants; or (6) establish any new executive-officer employee
         position;

               (h)  (1) revalue any of its assets, other than revaluations that
         are required in accordance with GAAP or in the ordinary course of
         business; or (2) change or modify in any material respect any existing
         accounting method, principle, or practice, other than as required by
         GAAP;

                                       37
<PAGE>

               (i)  incur any indebtedness for borrowed money or guarantee or
         assume any such indebtedness or issue or sell any debt securities or
         warrants or rights to acquire any debt securities of Lexington or any
         of its subsidiaries or guarantee any debt securities of others, or
         voluntary prepay any outstanding indebtedness (provided that this
         Section 7.1(i) does not preclude intercompany indebtedness, guaranties,
         or assumptions);

               (j)  amend or propose to amend its charter, bylaws, or similar
         organizational documents;

               (k)  make any capital expenditure or commitment other than as
         described on Schedule 7.1(k) or for which it is not contractually bound
         at the date hereof, except for capital expenditures and commitments not
         to exceed $300,000 in total;

               (l)  enter into any new Material Contract (other than in the
         ordinary course of business), or modify in any respect materially
         adverse to Lexington or any of its subsidiaries any existing Material
         Contract;

               (m)  other than as described on Schedule 7.1(m), engage in the
         business of selling any products or services materially different from
         existing products and services, or enter into new lines of business;

               (n)  enter into, terminate, or amend (1) any agreement under
         which it agrees to indemnify any party on behalf of its business or
         under which it agrees to refrain from competing with any party with
         respect to its business or (2) any investment advisory, sub-advisory,
         management, distribution, marketing, custody, or other service
         agreements relating to the Lexington Funds, except for selling
         agreements; or

               (o)  agree to take any of the actions described in subsections
         (a) through (n) above, or take or agree to take any action that is
         reasonably likely to make any of Lexington's representations or
         warranties contained in this Agreement untrue or incorrect in any
         material respect as of the Effective Time.

         7.2   Cooperation. Subject to compliance with applicable law, from the
date hereof until the Effective Time, Buyer, Merger Sub, and Lexington shall
confer on a regular and frequent basis with one or more representatives of the
other parties to report operational matters of materiality and the general
status of ongoing operations and shall promptly provide the other parties and
their counsel with copies of all filings made by the party with any Governmental
Authority in connection with this Agreement, the Merger, and the transactions
contemplated hereby.

         7.3   Access to Information. Upon reasonable notice, Lexington shall
(and shall cause its subsidiaries to) afford to the officers, employees,
accountants, counsel, and other representatives of Buyer, reasonable access,
during normal business hours, to all its properties, books, contracts,
commitments, and records and will instruct its, and its subsidiaries',
employees, counsel, financial advisers, and auditors to cooperate with Buyer and
its representatives in its investigation of the business of Lexington and its
subsidiaries. Lexington shall (and shall cause its subsidiaries to) furnish
promptly to Buyer (a) a copy of each report, schedule, registration statement,
and other document filed or received by it during such period under the
requirements of securities laws and (b) all other

                                       38
<PAGE>

information concerning its business, properties, and personnel as Buyer or its
representatives may reasonably request. Buyer's investigations shall be
conducted in a manner as not to unreasonably interfere with the operations of
Lexington and its subsidiaries, and Buyer will take reasonable precautions to
protect the confidentiality of any information of Lexington and its subsidiaries
disclosed to such persons during the investigation. No information or knowledge
obtained in any investigation under this Section 7.3 shall be deemed to modify a
representation or warranty contained in this Agreement or the conditions to the
obligation of Buyer to consummate the Merger.

     7.4  No Solicitation.

          (a)  Lexington may not, directly or indirectly, through any officer,
     director, employee, representative, or agent of Lexington or any of its
     subsidiaries:

               (1)  seek, encourage, initiate, or solicit any inquiries,
          proposals, or offers from any person or group to acquire any shares of
          capital stock (including by way of a tender offer, but nothing shall
          prohibit customary calls with analysts consistent with past practice
          in respect of Lexington results) of it, any of its subsidiaries, or
          any of the Lexington Funds, to merge or consolidate with it, any of
          its subsidiaries, or any Lexington Fund, or to otherwise acquire any
          significant portion of the assets of it, any of its subsidiaries, or
          the Lexington Funds, or similar transaction involving Lexington, any
          of its subsidiaries, or the Lexington Funds, other than the
          transactions contemplated by this Agreement (any of the foregoing
          inquiries, proposals, or offers being an "Acquisition Proposal");

               (2)  engage in negotiations or discussions concerning an
          Acquisition Proposal with any person or group or disclose or provide
          any non-public information relating to the business of Lexington, any
          of its subsidiaries, or any Lexington Fund, or afford access to the
          properties, books, or records of Lexington, any of its subsidiaries,
          or any Lexington Fund to any person or group that the party has reason
          to believe may be considering an Acquisition Proposal; or

               (3)  agree to, approve, or recommend any Acquisition Proposal.

          (b)  Any violation of the restrictions set forth in Section 7.4(a) by
     any director or officer of Lexington or any of its subsidiaries or any of
     Lexington or its subsidiaries' financial advisers, attorneys, accountants,
     or other representatives, acting on behalf of Lexington or its
     subsidiaries, shall be deemed a violation of Section 7.4(a) by Lexington.

          (c)  Nothing contained in Section 7.4(a), however, prevents Lexington
     from (1) authorizing any of its officers, financial advisers, attorneys,
     accountants, or other representatives to furnish non-public information or
     access to, or to enter into discussions or negotiations with, any person in
     connection with a bona fide Acquisition Proposal by such person that has
     not been solicited after the date hereof, or recommending to its
     stockholders a bona fide written Acquisition Proposal that has not been
     solicited after the date hereof, if, and only to the extent that, (A) the
     Board of Directors of Lexington determines in good faith that such action
     is necessary for it to comply with its fiduciary duties to stockholders
     under Delaware law, (B) before furnishing such non-public information to,
     or entering into

                                       39
<PAGE>

     discussions or negotiations with, such person, the Board of Directors
     receives from such person an executed confidentiality agreement on terms no
     less favorable to Lexington than those contained in the Confidentiality
     Agreement discussed in Section 7.14, (C) the Board of Directors determines
     in good faith that such Acquisition Proposal is reasonably likely to lead
     to a Superior Proposal (as defined in Section 7.4(d)), and (D) the
     Acquisition Proposal did not result from a breach of Section 7.4(a), or (2)
     complying with Rule 14e-2 or Rule 14d-9 promulgated under the Exchange Act
     with regard to an Acquisition Proposal; provided, however, that the
     foregoing clause (2) shall not alter the covenants of Lexington set forth
     in clause (3) of Section 7.4(a).

          (d)  For purposes of this Agreement, "Superior Proposal" means an
     Acquisition Proposal that the Board of Directors of Lexington determines in
     its good faith judgment to be more favorable to its stockholders than the
     Merger and for which financing, to the extent required, is committed or, in
     the good faith judgment of the Board of Directors, is reasonably capable of
     being obtained by the third party.

          (e)  Lexington shall immediately cease and cause to be terminated any
     activities, discussions, or negotiations, existing on the date hereof, with
     any person with respect to any Acquisition Proposal, and will promptly
     request that each such person return or destroy all confidential
     information previously produced to that person by Lexington or its
     subsidiaries.

          (f)  Lexington shall immediately notify Buyer upon receipt by it or
     its advisers of any Acquisition Proposal or any request for non-public
     information in connection with an Acquisition Proposal or for access to the
     properties, books, or records thereof by any person that informs Lexington
     that it is considering making, or has made, an Acquisition Proposal. Such
     notice shall be made orally and in writing and shall indicate in reasonable
     detail the terms and conditions of the proposal, inquiry, or contact, but
     need not disclose the identity of the person making the Acquisition
     Proposal or the request. If Buyer is notified by Lexington of a Superior
     Proposal, then Buyer shall have five business days to make a counter
     proposal; provided, however, that neither the submission nor the failure to
     submit such a counter proposal shall affect Buyer's right to be paid a
     termination fee under Section 10.3.

     7.5  Proxy Statement; Board Recommendation. As promptly as practicable
after the execution hereof, Buyer and Lexington shall jointly prepare the Proxy
Statement, and Buyer shall prepare and file with the SEC as soon as practicable
after the execution hereof the Registration Statement, in which the Proxy
Statement will be included. Buyer shall use its best efforts to have the
Registration Statement declared effective by the SEC as promptly as practicable
after such filing. If at any time any event shall occur which should be set
forth in an amendment of or supplement to the Registration Statement, Buyer
shall prepare and file with the SEC such amendment or supplement as soon
thereafter as is reasonably practicable. The Proxy Statement shall include the
recommendation of the Board of Directors of Lexington in favor of this Agreement
and the Merger; provided that the Board of Directors of Lexington may withdraw
such recommendation if it determines that there exists a Superior Proposal and
its Board of Directors determines that the withdrawal of the recommendation is
necessary for the Board of Directors to comply with its fiduciary duties under
the Delaware law.

                                       40
<PAGE>

     7.6  Stockholders' Meetings of Lexington and the Lexington Funds; Consents
for Private Accounts.

          (a)  Lexington shall call a meeting of its stockholders to be held as
     promptly as practicable for the purpose of voting upon the approval of this
     Agreement and the Merger. The meeting of Lexington's stockholders shall be
     held to vote on this Agreement and the Merger regardless of whether the
     Board of Directors of Lexington determines at any time after the date
     hereof that this Agreement and the Merger are no longer advisable and
     recommends that the stockholders vote against this Agreement and the
     Merger. Subject to Section 7.5, Lexington shall use its reasonable best
     efforts to solicit from its stockholders proxies in favor of approval of
     this Agreement and the Merger.

          (b)  Lexington will use and will cause its subsidiaries to use their
     reasonable best efforts to obtain, as promptly as reasonably practicable,
     the agreement of the Board of each Registrant to call a special meeting of
     stockholders to be held as promptly as reasonably practicable for the
     purpose of voting upon the approval of the advisory agreements to the
     extent consistent with its fiduciary duties under the 1940 Act, to
     recommend that shareholders approve such proposed advisory agreements.

          (c)  With respect to each Private Account, Lexington and its
     subsidiaries, with the assistance of Buyer and Merger Sub, will each use
     its reasonable best efforts in good faith to obtain (and cooperate with one
     another in obtaining), as promptly as practicable, any consent required of
     each other party or of other required persons under any Management
     Agreement to the assignment of such Management Agreements before the
     Closing, including written consent where required under a Management
     Agreement.

     7.7  Legal Conditions to Merger. Each of Buyer, Merger Sub, and Lexington
shall take all reasonable actions necessary to comply promptly with all legal
requirements that may be imposed on it with respect to the Merger (including
furnishing all information required under the HSR Act and in connection with
approvals of or filings with any other Governmental Authorities) and will
promptly cooperate with and furnish information to each other in connection with
any such requirements imposed upon any of them or any of their subsidiaries in
connection with the Merger. Each of Buyer and Lexington shall, and shall cause
its subsidiaries to, take all reasonable actions necessary to obtain (and will
cooperate with each other in obtaining) any consent, authorization, order, or
approval of, or any exemption by, any Governmental Authority or other public
third party, required to be obtained or made by Buyer, Lexington, or any of
their subsidiaries in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement. Nothing in this Section 7.7, however,
shall require Buyer or any of its subsidiaries, in connection with the receipt
of any regulatory approval, to agree (a) to sell, discontinue, or limit, before
or after the Effective Time, any assets, businesses, or interest in any assets
or businesses of it or any of its affiliates, or (b) to any conditions relating
to, or changes or restriction in, the operations of any such assets or
businesses that is reasonably likely to materially and adversely impact the
economic or business benefits to Buyer and Merger Sub of transactions
contemplated hereby.

     7.8  Stock Plans and Options.

                                       41
<PAGE>

          (a)  At the Effective Time, the Lexington Options shall be assumed by
     Buyer. Each Lexington Option so assumed by Buyer under this Agreement shall
     continue to have, and be subject to, substantially the same terms and
     conditions as were applicable under the Lexington Incentive Plan and the
     documents governing such Lexington Option immediately before the Effective
     Time, except that (i) such Lexington Option will vest and become
     immediately exercisable to the extent set forth in the Lexington Incentive
     Plan and the documents governing such Lexington Option and (ii) each
     Lexington Option will be exercisable for that number of whole shares of
     Buyer Common Stock equal to the product of the number of shares of
     Lexington Common Stock that were issuable upon exercise of the option
     immediately before the Effective Time multiplied by the Option Ratio (as
     defined in Section 7.8(d)) and rounded down to the nearest whole number of
     shares of Buyer Common Stock, and the per-share exercise price for the
     shares of Buyer Common Stock issuable upon exercise of such assumed
     Lexington Option will be equal to the quotient determined by dividing the
     exercise price per share of Lexington Common Stock at which the option was
     exercisable immediately before the Effective Time by the Option Ratio,
     rounded up to the nearest whole cent. It is the intention of the parties
     that the Lexington Options so assumed by Buyer qualify following the
     Effective Time as "incentive stock options," as defined in Section 422 of
     the Code, to the extent such options qualified as incentive stock options
     immediately before the Effective Time.

          (b)  At the Effective Time, each share of Lexington Restricted Stock
     as to which restrictions have not lapsed pursuant to the terms of the
     Lexington Incentive Plan and the documents governing the Lexington
     Restricted Stock shall continue to have, and be subject to, substantially
     the same terms and conditions as were applicable under the Lexington
     Incentive Plan and the documents governing such shares of Lexington
     Restricted Stock immediately before the Effective Time, except that there
     shall be substituted for the shares of Lexington Common Stock a number of
     shares of Buyer Common Stock equal to the product obtained by multiplying
     the number of shares of Lexington Restricted Stock by the Option Ratio, and
     rounding the result to the nearest whole number of shares of Buyer Common
     Stock. The resulting number will equal the number of shares of Buyer
     Restricted Stock, so that each share of Buyer Restricted Stock will
     represent the right to receive one share of Buyer Common Stock.

          (c)  Buyer shall take all corporate actions necessary to reserve for
     issuance a sufficient number of shares of Buyer Common Stock for delivery
     upon exercise of all Lexington Options and the vesting of all Lexington
     Restricted Stock assumed in accordance with this Section 7.8. As soon as
     practicable after the Effective Time, Buyer shall file a registration
     statement on Form S-8 (or other applicable form) with respect to the shares
     of Buyer Common Stock subject to those options and restricted stock and
     shall use its best efforts to maintain the effectiveness of the
     registration statement for so long as those options and shares of
     restricted stock remain outstanding.

          (d)  For purposes of this Agreement, the "Option Ratio" shall equal
     the quotient obtained by dividing (i) the Merger Consideration by (ii) the
     Buyer's Average Share Price.

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<PAGE>

     7.9  Consents. Lexington shall use all reasonable efforts to obtain all
necessary third-party consents, waivers, and approvals under any of Lexington's
material agreements, contracts, licenses, or leases to consummate the Merger and
the transactions contemplated thereby.

     7.10 Tax-Free Reorganization. Buyer and Lexington shall each use all
reasonable best efforts to cause the Merger to be treated as a reorganization
within the meaning of Section 368(a)(1)(A) and Section 368(a)(2)(D) of the Code
(a "Reorganization"), including any mutually agreeable re-allocation of the
Merger Consideration between the Share Consideration and the Cash Consideration
that is reasonably necessary to obtain such treatment. To the extent permitted
under applicable tax laws, the Merger shall be reported as a Reorganization in
all federal, state and local Tax Returns filed after the Effective Time. If
Buyer exercises its right to pay additional cash pursuant to the last sentence
of Section 2.1(b) and solely as a result thereof Lexington and Buyer, based on
the advice of tax counsel reasonably believe that the Merger will not be treated
as a Reorganization, the Merger Consideration shall be increased by $3.5
million.

     7.11 NYSE Listing. Buyer shall cause the shares of Buyer Common Stock to be
issued in the Merger to be approved for listing on the NYSE, subject to official
notice of issuance, before the Closing Date.

     7.12 Payment of Transaction Expenses. Prior to the Closing Date, Lexington
shall pay all of its fees and expenses incurred in, or arising from, the
preparation and negotiation of this Agreement and the combination of the parties
through consummation of the Merger and other transactions contemplated hereby,
including termination of employment agreements, change-of-control and severance
payments and fees and expenses of legal counsel, accountants, and financial
advisers.

     7.13 Additional Agreements; Reasonable Efforts. Subject to the terms
hereof, including Section 7.5, each of the parties shall use its reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper, or advisable under Applicable Law to
consummate and make effective the transactions contemplated by this Agreement.

     7.14 Confidentiality Agreement. The Confidentiality Agreement between Buyer
and Lexington dated January 24, 2000 shall remain in full force and effect until
the Effective Time. Until the Effective Time, the parties shall comply with the
terms of the Confidentiality Agreement.

     7.15 Amendment to Rights Agreement. Prior to the date hereof, the Board of
Directors of Lexington has authorized an amendment to the Rights Agreement dated
as of December 13, 1995 between Lexington and First Chicago Trust Company of New
York (the "Lexington Rights Agreement") to provide that (a) Buyer will not
become an "Acquiring Person" as a result of the consummation of the Merger or
the execution of the Voting Agreement and related proxies, (b) no "Stock
Acquisition Date" or "Distribution Date" (as such terms are defined in the
Lexington Rights Agreement) will occur as a result of the consummation of the
Merger or the execution of the Voting Agreement and related proxies, and (c) all
outstanding rights issued and outstanding under the Lexington Rights Agreement
will expire immediately before the Effective Time.

                                       43
<PAGE>

                                 ARTICLE VIII

                             Conditions Precedent

     8.1  Conditions to the Parties' Obligation to Effect the Merger. The
respective obligations of the parties to effect the Merger are subject to the
satisfaction before the Closing of the following conditions, any of which may be
waived, to the extent legally allowed, in writing, by mutual written consent of
the parties:

          (a)  Stockholder Approval. This Agreement and the Merger shall have
     been approved by the requisite vote of the stockholders of Lexington, as
     required by the Delaware Law and by any applicable provisions of
     Lexington's Certificate of Incorporation and Bylaws. The proposals to be
     acted upon at the special meetings of stockholders of the Lexington Funds
     discussed in Section 7.6(b) shall have received affirmative votes
     sufficient for their adoption by (i) Lexington Funds holding 90% of the net
     assets held by all Lexington Funds as reflected on the Revised Schedule
     2.1(c) and (ii) all Lexington Funds except those Lexington Funds set forth
     on Schedule 8.1(a). The consents required under Section 7.6(c), if any,
     shall have been obtained from Private Accounts of institutional clients
     holding 90% of the net assets held by all such Private Accounts and from
     Private Accounts of all other clients holding 80% of the net assets held by
     all such Private Accounts, in each case as reflected on the Revised
     Schedule 2.1(c).

          (b)  HSR Act. The waiting period (and any extension thereof)
     applicable to the consummation of the Merger under the HSR Act shall have
     expired or been terminated.

          (c)  Approvals. There shall have been obtained all permits, consents,
     and approvals of all Governmental Authorities of the type referred to in
     clauses (A), (B), (D), (E), and (F) of Section 3.2(d)(2).

          (d)  No Injunctions or Restraints; Illegality. No temporary
     restraining order, preliminary or permanent injunction, or other order
     issued by any court of competent jurisdiction or other legal or regulatory
     restraint or prohibition preventing the consummation of the Merger shall
     have been issued, nor shall any proceeding brought by a Governmental
     Authority seeking any of the foregoing be pending; nor shall there be any
     action taken, or any statute, rule, regulation, or order enacted, entered,
     enforced, or deemed applicable to the Merger which makes the consummation
     of the Merger illegal.

          (e)  The shares of Buyer Common Stock issuable in the Merger shall
     have been authorized for listing on the NYSE upon official notice of
     issuance.

          (f)  The Registration Statement shall have become effective in
     accordance with the provisions of the Securities Act, and no stop order
     suspending such effectiveness shall have been issued and remain in effect
     and no proceeding for that purpose shall have been instituted by the SEC or
     any state regulatory authorities.

                                       44
<PAGE>

     8.2  Additional Conditions to the Obligations of Buyer and Merger Sub. The
obligations of Buyer and Merger Sub to effect the Merger are subject to the
satisfaction of each of the following conditions, any of which may be waived in
writing by Buyer and Merger Sub:

          (a)  Representations and Warranties. The representations and
     warranties of Lexington contained in Articles III and IV hereof shall be
     true and correct in all material respects (provided that solely for the
     purposes of this Section 8.2(a), the term "in all material respects" shall
     not be deemed to further qualify any representation or warranty that by its
     terms is qualified by any materiality qualification) as of the date hereof
     and immediately before the Effective Time, with the same force and effect
     as if made as of the Effective Time, except that the accuracy of
     representations and warranties that by their terms speak as of the date of
     this Agreement or some other date will be determined as of that date.

          (b)  Performance of Obligations of Lexington. Lexington shall have
     performed in all material respects all obligations required to be performed
     by it under this Agreement at or before the Closing Date.

          (c)  No Material Adverse Change. Since the date hereof, no Material
     Adverse Effect with respect to Lexington or any of the Lexington Funds
     shall have occurred.

          (d)  Officers' Certificate. Buyer shall have received a certificate
     signed on behalf of Lexington by the Chief Executive and Chief Financial
     Officers of Lexington confirming the satisfaction of subsections (a), (b),
     and (c) of this Section 8.2.

          (e)  Legal Opinions. Buyer shall have received an opinion of Ballard
     Spahr Andrews & Ingersoll, LLP and Kramer Levin Naftallis and Frankel (or
     such other outside legal counsel selected by Lexington or the Registrants
     and reasonably acceptable to Buyer), each, special legal counsel to
     Lexington and/or the Lexington Funds, dated the Closing Date reasonably
     acceptable in form and substance to Buyer.

          (f)  Dissenters' Rights. The number of Dissenting Shares shall not
     equal more than 5% of the total of the outstanding shares of Lexington
     Common Stock.

          (g)  Certain Consents. Lexington shall have obtained in writing all
     consents, waivers, or approvals, necessary to provide that consummation of
     the Merger does not constitute a default under, or effect or give rise to a
     right of termination of, each of the Material Contracts identified by an
     asterisk in Part 3.2(d)(4) of the Lexington Disclosure Schedule.

          (h)  Comfort Letter. Buyer shall have received "comfort" letters in
     customary form and substance reasonably satisfactory to Buyer from KPMG
     LLP, certified public accountants for Lexington, dated the date of the
     Proxy Statement, the effective date of the Registration Statement, and the
     Closing Date (or such other dates reasonably acceptable to Buyer) with
     respect to certain financial statements and other financial information
     included in the Registration Statement and any subsequent changes in
     specified balance sheet and income statement items, including total assets,
     working capital, total stockholders' equity, total revenues, and per-share
     amounts of net income.

                                       45
<PAGE>

          (i)  Lexington Assets Under Management. The Adjustment Percentage
     shall be no less than 55%.

          (j)  Closing Date Balance Sheet. Lexington shall have delivered to
     Buyer an unaudited pro forma balance sheet, dated the Closing Date, which
     shall present a positive book value for Lexington.

          (k)  1999 Financials. Lexington shall have delivered to Buyer its
     audited consolidated financial statements (including any related notes or
     schedules) as of and for the one-year period ended December 31, 1999.

          (l)  Spin-off Tax Opinion. Lexington shall have delivered to Buyer an
     accurate copy of the opinion of Davis Polk & Wardwell regarding the tax-
     free status of the 1995 Lexington spin-off transaction.

     8.3  Additional Conditions to the Obligation of Lexington. The obligation
of Lexington to effect the Merger is subject to the satisfaction of each of the
following conditions, any of which may be waived in writing by Lexington:

          (a)  Representations and Warranties. The representations and
     warranties of Buyer and Merger Sub contained in Article V hereof shall be
     true and correct in all material respects (provided that solely for the
     purposes of this Section 8.3(a), the term "in all material respects" shall
     not be deemed to further qualify any representation or warranty that by its
     terms is qualified by any materiality qualification) as of the date hereof,
     and immediately before the Effective Time, with the same force and effect
     as if made as of the Effective Time, except that the accuracy of
     representations and warranties that by their terms speak as of the date of
     this Agreement or some other date will be determined as of that date.

          (b)  Performance of Obligations of Buyer and Merger Sub. Buyer and
     Merger Sub shall have performed in all material respects all obligations
     required to be performed by them under this Agreement at or before the
     Closing Date.

          (c)  Officers' Certificate. Lexington shall have received a
     certificate signed on behalf of Buyer by a Senior Vice President of Buyer,
     and on behalf of Merger Sub by the President or any Vice President of
     Merger Sub, confirming the satisfaction of subsections (a) and (b) of this
     Section 8.3.

          (d)  Legal Opinion. Lexington shall have received an opinion of Faegre
     & Benson LLP, legal counsel to Buyer, dated the Closing Date reasonably
     acceptable in form and substance to Lexington.

          (e)  Tax Opinion. Lexington shall have received from Ballard Spahr
     Andrews & Ingersoll, LLP an opinion substantially to the effect that, on
     the basis of facts, representations and assumptions referenced in such
     opinion that are reasonably consistent with the state of facts existing at
     the Effective Time, the Merger will be treated for United States federal
     income tax purposes as a reorganization within the meaning of Sections
     368(a)(1)(A) and 368 (a)(2)(D) of the Code, and that no gain or loss should
     be required to be recognized by a shareholder of

                                       46
<PAGE>

     Lexington to the extent such shareholder receives Buyer Common Stock in
     exchange for shares of Lexington Common Stock. In rendering such opinion,
     counsel may request and rely upon representations contained in certificates
     of officers of Lexington, Buyer and Merger Sub and the parties shall use
     their reasonable best efforts to make available such truthful certificates.

          (f)  Comfort Letter. Lexington shall have received "comfort" letters
     in customary form and substance reasonably satisfactory to Lexington from
     Deloitte & Touche LLP, certified public accountants for Buyer and Merger
     Sub, dated the date of the Proxy Statement, the effective date of the
     Registration Statement and the Closing Date (or such other dates reasonably
     acceptable to Lexington) with respect to certain financial statements and
     other financial information included in the Registration Statement and any
     subsequent changes in specified balance sheet and income statement items,
     including total assets, working capital, total stockholders' equity, total
     revenues and the total and per share amounts of net income.

          (g)  Employment Agreements. Merger Sub shall have executed employment
     agreements with terms set forth on Exhibit B-1 and B-2 and such other terms
     as agreed by the parties thereto with each of Richard Hisey (Exhibit B-1),
     Alfredo Viegas, Mustafa Zaidi, and Dennis Jamison (for all but Mr. Hisey,
     Exhibit B-2).

                                  ARTICLE IX

               Conduct and Transactions After the Effective Time

     9.1  Employee Matters.

          (a)  From and after the Effective Time, the employee pension benefit
     plans, as defined in Section 3(2) of ERISA, and welfare and other benefit
     plans, programs, and arrangements in effect and sponsored by Lexington
     and/or all or any of its subsidiaries as of the Effective Time shall,
     subject to applicable law, the terms of this Agreement, and the terms of
     such plans, programs, and arrangements, remain in effect with respect to
     those individuals who are employees of Lexington and its subsidiaries until
     such time as the Surviving Corporation shall adopt new employee benefit
     plans and arrangements with respect to employees of the Surviving
     Corporation and its subsidiaries; provided, however, that for employees on
     Lexington's or its subsidiaries' payroll as of the Closing Date, such
     benefit plans and arrangements shall (1) contain no waiting period or pre-
     existing condition exclusions and (2) not be less favorable, in the
     aggregate, than the benefit plans and arrangements provided to similarly
     situated employees of Buyer. Buyer shall be responsible for perpetuating
     the group health plan continuation coverages pursuant to Section 4980B of
     the Code and Sections 601 through 609 of ERISA for all employees of
     Lexington as of the Closing Date and their eligible dependents.

          (b)  From and after the Effective Time, for purposes of determining
     eligibility, vesting, any length of service requirements, waiting periods,
     or benefits based on length of service, and entitlement to vacation and
     severance benefits for employees employed by Lexington or any of its
     subsidiaries immediately before the Effective Time under any compensation,
     severance, welfare, pension, benefit, or savings plan of the Surviving

                                       47
<PAGE>

     Corporation or any of its affiliates in which such employees of Lexington
     and its subsidiaries were, or could reasonably expect to become, eligible
     to participate, service with Lexington or any of its subsidiaries shall be
     credited as if such service had been rendered to the Surviving Corporation
     or such affiliate; provided, however, that such service credit shall not
     operate to duplicate any benefit or the funding thereof.

     9.2  Indemnification. All rights to indemnification, expense advancement,
and exculpation existing in favor of any present or former director, officer,
employee, or agent of Lexington or any of its subsidiaries as provided in the
charter, bylaws, or similar organizational documents of Lexington or any of its
subsidiaries or by law as in effect on the date hereof shall survive the Merger
and continue in full force and effect without amendment thereto for a period of
at least six years after the Effective Time (or, if any relevant claim is
asserted or made within that six-year period, until final disposition of the
claim) with respect to matters occurring at or before the Effective Time, and no
action taken during that period shall be deemed to diminish the obligations set
forth in this Section 9.2. Further, the Surviving Corporation, by virtue of the
Merger and without further action, shall assume as of the Effective Time all
indemnification agreements of Lexington in effect as of the date hereof. Buyer
hereby guarantees the performance of the covenants set forth in this Section
9.2. The provisions of this Section 9.2 are intended for the benefit of, and
shall be enforceable by, directors, officers, and others entitled to
indemnification hereunder and their respective heirs and personal
representatives.

     9.3  Directors and Officers Liability Insurance. For a period of at least
six years after the Effective Time, Buyer shall maintain in effect either (a)
policies of directors' and officers' liability insurance providing at least the
same coverage and amounts and containing terms and conditions that are no less
advantageous in any material respect to the insured parties under such policies
maintained by Lexington as of the date hereof with respect to claims arising
from facts or events that occurred at or before the Effective Time (including
consummation of the transactions contemplated by this Agreement), or (b) a run-
off (that is, a "tail") policy or endorsement with respect to the current policy
of directors' and officers' liability insurance covering claims asserted within
six years after the Effective Time arising from facts or events that occurred at
or before the Effective Time (including consummation of the transactions
contemplated by this Agreement); and such policies or endorsements shall name as
insureds thereunder all present and former directors and officers of Lexington
or any of its subsidiaries.

     9.4  Tax-Free Reorganization Covenants.

          (a)  Following the Merger, the Surviving Corporation will, and Buyer
     will cause the Surviving Corporation to, continue the historic business of
     Lexington or use a significant portion of Lexington's business assets in a
     business.

          (b)  Following the Merger, the Surviving Corporation will not issue,
     and Buyer will not cause the Surviving Corporation to issue, additional
     shares of stock of the Surviving Corporation that would result in Buyer
     losing "control" (within the meaning of Section 368(c) of the Code) of the
     Surviving Corporation.

          (c)  Buyer has no plan or intention to reacquire any of its Common
     Stock issued in the Merger.

                                       48
<PAGE>

          (d)  Buyer has no plan or intention to liquidate the Surviving
     Corporation; to merge the Surviving Corporation with and into another
     corporation; to sell or otherwise dispose of the stock of the Surviving
     Corporation or to cause the Surviving Corporation to sell or otherwise
     dispose of any of the assets of Lexington acquired in the Merger, except
     for dispositions made in the ordinary course of business or transfers
     described in Section 368(a)(2)(C) of the Code.

                                   ARTICLE X

                                  Termination

     10.1 Generally. This Agreement may be terminated at any time before the
Effective Time, whether before or after approval by the stockholders of
Lexington:

          (a)  by mutual written consent of Buyer, Merger Sub, and Lexington;

          (b)  by Buyer and Merger Sub or by Lexington if the transactions
     contemplated hereby have not been consummated on or before December 31,
     2000 (which date may be extended by mutual agreement of Buyer, Merger Sub,
     and Lexington), provided that such failure is not due to the failure of the
     party seeking to terminate this Agreement to comply in all material
     respects with its obligations under this Agreement;

          (c)  by Buyer and Merger Sub, if (1) any of the conditions set forth
     in Sections 8.1 or 8.2 shall become impossible to fulfill other than for
     reasons within the control of Buyer or Merger Sub, and such conditions
     shall not have been waived under Article VIII, or (2) the stockholders of
     Lexington fail to approve this Agreement and the Merger by the vote
     required by the Delaware Law and Lexington's Certificate of Incorporation
     and Bylaws at the first stockholders' meeting called for that purpose,
     including any adjournments thereof;

          (d)  by Lexington, if (1) any of the conditions set forth in Sections
     8.1 or 8.3 shall become impossible to fulfill other than for reasons within
     the control of Lexington, and such conditions shall not have been waived
     under Article VIII, or (2) the stockholders of Lexington fail to approve
     this Agreement and the Merger by the vote required by the Delaware Law and
     Lexington's Certificate of Incorporation and Bylaws at the first
     stockholders' meeting called for that purpose, including any adjournments
     thereof;

          (e)  by Buyer and Merger Sub, if the Lexington Board of Directors
     withdraws or adversely modifies its recommendation to its stockholders of
     this Agreement and the Merger;

          (f)  by Buyer and Merger Sub, if Lexington shall have (1) failed to
     observe or perform in any material respect any of its covenants set forth
     in this Agreement that cannot be or has not been cured within 30 days of
     the giving of written notice to Lexington of such failure or, (2) breached
     a representation or warranty contained in Article III or IV hereof, and
     such breach cannot be or has not been cured within 30 days of the giving of
     written notice to Lexington of such breach, and the condition set forth in
     Section 8.2(a) cannot be satisfied;

                                       49
<PAGE>

          (g)  by Lexington, if Buyer or Merger Sub shall have (1) failed to
     observe or perform in any material respect any of its covenants set forth
     in this Agreement that cannot be or has not been cured within 30 days of
     the giving of written notice to Buyer of such failure or, (2) breached a
     representation or warranty contained in Article V hereof, and such breach
     cannot be or has not been cured within 30 days of the giving of written
     notice to Buyer of such breach, and the condition set forth in Section
     8.3(a) cannot be satisfied.

     10.2  Procedure and Effect of Termination. Upon termination of this
Agreement by Lexington or by Buyer and Merger Sub under Section 10.1, written
notice thereof shall forthwith be given to the other parties and this Agreement
shall terminate and the Merger shall be abandoned without further action by any
of the parties. If this Agreement is terminated as provided herein, no party
shall have any liability or further obligation to any other party to this
Agreement, except as provided in Section 10.3 or to the extent the termination
is the direct result of a willful and material breach by the party of a
representation, warranty, or covenant contained in this Agreement.

     10.3 Expenses; Termination Fee.

          (a)  All expenses incurred in connection with this Agreement and the
     consummation of the transactions contemplated hereby shall be paid by the
     party incurring the expenses.

          (b)  If this Agreement is terminated by Buyer under Sections
     10.1(c)(2) or (f), or by Lexington under Section 10.1(d)(2);

               (1)  then Lexington shall, within five business days of
          termination, pay to Buyer an amount, not to exceed $450,000, equal to
          all reasonable out-of-pocket expenses (including fees and costs of
          attorneys and accountants) incurred by Buyer or Merger Sub in
          connection with the transactions contemplated by this Agreement; and

               (2)  if, on or before the date that is one year after the date of
          termination, a Third-Party Transaction (as defined in subsection (e)
          below) is consummated, then Lexington shall, within five business days
          after the consummation of such Third-Party Transaction, pay to Buyer
          an additional $1.8 million.

          (c)  If this Agreement is terminated by Buyer under Section 10.1(e),

               (1)  then Lexington shall, within five business days of
          termination, pay to Buyer $1.125 million; and

               (2)  if, on or before the date that is one year after the date of
          termination, a Third-Party Transaction is consummated, then Lexington
          shall, within five business days after the consummation of such Third-
          Party Transaction, pay to Buyer an additional $1 million.

          (d)  If this Agreement is terminated by Lexington under Section
     10.1(g), then Buyer shall, within five business days of termination, pay to
     Lexington an amount, not to exceed $450,000, equal to all reasonable out-
     of-pocket expenses (including fees and costs of attorneys

                                       50
<PAGE>

     and accountants) incurred by Lexington in connection with the transactions
     contemplated by this Agreement.

          (e)  As used in Sections 10.3(b) and (c), "Third-Party Transaction"
     means the occurrence of any of the following events: (1) the acquisition of
     Lexington by merger, consolidation, statutory share exchange, or other
     business combination transaction by any person other than Buyer, Merger
     Sub, or any affiliate thereof (a "Third Party"), in which the holders of
     shares of Lexington Common Stock do not, immediately after the transaction,
     directly or indirectly own more than 50% of the voting power of the capital
     stock of Lexington or the surviving corporation in substantially the same
     proportion as before the transaction; (2) the acquisition by any Third
     Party of 50% or more (in book value or market value) of the total assets of
     Lexington and its subsidiaries, taken as a whole; or (3) the acquisition by
     a Third Party of 50% or more of the outstanding shares of Lexington Common
     Stock, whether by tender offer, exchange offer, or otherwise.


          (f)  This Section 10.3 shall survive termination of this Agreement for
     any reason for a period of 13 months thereafter.

                                  ARTICLE XI

                           Miscellaneous Provisions

     11.1 Termination of Representations and Warranties. The representations and
warranties set forth in this Agreement (including those set forth in the
Lexington Disclosure Schedule and the Buyer Disclosure Schedule) or in any
certificate furnished under this Agreement shall not survive the Effective Time.
The covenant of Buyer and Surviving Corporation contained in Section 9.4 shall
survive until the fifth anniversary of the Effective Time. This Section 11.1
shall not limit any other covenant or agreement of the parties that, by its
terms contemplates performance after the Effective Time.

     11.2 Amendment and Modification. To the extent permitted by applicable law,
this Agreement may be amended, modified, or supplemented only by written
agreement of the parties at any time before the Effective Time with respect to
any of the terms contained herein, except that after the special meeting of
Lexington's stockholders to approve this Agreement and the Merger, the amount
and form of the consideration payable in the Merger may not be altered without
the approval of the stockholders of Lexington.

     11.3 Waiver of Compliance; Consents. Any failure of a party to comply with
any obligation, covenant, agreement, or condition herein, to the extent legally
allowed, may be waived in writing by the other, but any such waiver or failure
to insist upon strict compliance with the obligation, covenant, agreement, or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, the consent shall be given in writing in a
manner consistent with the requirements for a waiver of compliance as set forth
in this Section 11.3.

                                       51
<PAGE>

     11.4 Press Releases and Public Announcements. No party may issue any press
release or make any public announcement relating to the subject matter hereof
without the prior written approval of the other parties, which may not be
unreasonably withheld; provided, however, that each party may make any public
disclosure it believes in good faith is required by applicable law, SEC
regulations, or any listing or trading agreement concerning its publicly traded
securities (in which case the disclosing party will use its reasonable best
efforts to consult with and advise the other parties regarding the form and
content of the disclosure before making the disclosure).

     11.5 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, effective when
delivered, or if delivered by express delivery service or facsimile, effective
when delivered, or if mailed by registered or certified mail (return receipt
requested), effective three business days after mailing, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):

                   If to Buyer:

                                     ReliaStar Financial Corp.
                                     20 Washington Avenue South
                                     Minneapolis, MN 55401
                                     Attn: General Counsel
                                     Facsimile: (612) 342-3160

                   With a copy to:

                                     Faegre & Benson LLP
                                     2200 Norwest Center
                                     90 South Seventh Street
                                     Minneapolis, MN 55402
                                     Attn: Thomas G. Morgan
                                     Facsimile: (612) 336-3026

                   If to Merger Sub:

                                     Pilgrim Holdings Corporation
                                     Two Renaissance Square
                                     40 North Central Avenue, Suite 1200
                                     Phoenix, AZ 85004
                                     Attn: Robert W. Stallings
                                     Facsimile: (602) 417-8301

                   If to Lexington:

                                     Lexington Global Asset Manager, Inc.
                                     Park 80 West
                                     Plaza Two
                                     Saddle Brook, NJ 07663
                                     Attn: Robert M. DeMichele

                   With a copy to:

                                     Ballard Spahr Andrews & Ingersoll, LLP
                                     1735 Market Street, 51st Floor
                                     Philadelphia, PA 19103
                                     Attn: William H. Rheiner, Esquire

                                       52
<PAGE>

     11.6  Assignment. This Agreement and all of its provisions shall be binding
upon and shall inure to the benefit of the parties and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests, or obligations hereunder may be assigned or delegated by any
party without the prior written consent of the other parties. This Agreement is
not intended to confer upon any other person except the parties any rights or
remedies hereunder.

     11.7  Interpretation. As used in this Agreement, unless otherwise defined
herein:

           (a)  "including" means "including without limitation";

           (b)  "person" means an individual, a partnership, a limited liability
     company, a joint venture, a corporation, a trust, an incorporated
     organization, or a government or any department or agency thereof;

           (c)  "affiliate" has the meaning set forth in Rule 12b-2 under the
     Exchange Act;

           (d)  "business day" means any day other than a Saturday, Sunday, or a
     day that is a statutory holiday under the laws of the United States or the
     States of Minnesota or New Jersey;

           (e)  all dollar amounts are expressed in United States funds;

           (f)  "to the knowledge of a party" or any similar phrase means the
     actual knowledge of one or more of the executive officers of the party; and

           (g)  "subsidiary" of any specified corporation means, unless
     otherwise provided herein, any corporation of which the outstanding
     securities having ordinary voting power to elect a majority of the board of
     directors are directly or indirectly owned by the corporation, including
     MSR with respect to Lexington.

     11.8  Governing Law. This Agreement shall be governed by the laws of the
State of Delaware, without giving effect to choice-of-law principles.

     11.9  Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

     11.10 Headings; Internal References. The Article and Section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties, and shall not affect the interpretation
hereof.

     11.11 Entire Agreement. This Agreement, including the schedules and
exhibits hereto, the Lexington Disclosure Schedule, the Buyer Disclosure
Schedule, and the Confidentiality Agreement, embody the entire agreement and
understanding of the parties in respect of the subject matter contained herein
and supersede all prior agreements and understandings among the parties with
respect to that subject matter. There are no restrictions, promises,
representations, warranties (express or implied), covenants, or undertakings of
the parties, other than those expressly set forth or referred to in this
Agreement.

                                       53
<PAGE>

     11.12 Severability. If any provision hereof is held by a court of competent
jurisdiction to be invalid, void, or unenforceable, the remainder of the
provisions hereof shall continue in full force and effect and will in no way be
affected or invalidated.

     11.13 Equitable Remedies. The parties agree that money damages or other
remedy at law would not be a sufficient or adequate remedy for any breach or
violation of, or default under, this Agreement by them and that in addition to
all other remedies available to them, each of them shall be entitled, to the
fullest extent permitted by law, to an injunction restraining such breach,
violation, or default or threatened breach, violation, or default and to any
other equitable relief, including specific performance, without bond or other
security being required.

                                       54
<PAGE>

     In witness whereof, Buyer, Merger Sub and Lexington have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.


                            ReliaStar Financial Corp.

                            By:
                            Title:

                            Pilgrim Holdings Corporation

                            By:
                            Title:

                            Lexington Global Asset Managers, Inc.

                            By:
                            Title:

                                       55
<PAGE>

                               Table of Contents

<TABLE>
<CAPTION>
                                                                                                               Page
<S>                                                                                                            <C>
ARTICLE I  The Merger.........................................................................................   12
   1.1   Effective Time of the Merger.........................................................................   12
   1.2   Closing..............................................................................................   12
   1.3   Effects of the Merger................................................................................   12
   1.4   Certificate of Incorporation and Bylaws of the Surviving Corporation.................................   13
   1.5   Directors and Officers of the Surviving Corporation..................................................   13
ARTICLE II  Conversion of Securities..........................................................................   13
   2.1   Effect on Capital Stock..............................................................................   13
      (a)   Merger Consideration..............................................................................   13
      (b)   Adjustment of Merger Consideration Based on Buyer's Average Share Price...........................   14
      (c)   Adjustment to Merger Consideration Based on Assets Under Management...............................   14
      (d)   Lexington Stock...................................................................................   16
      (e)   Lexington Incentive Plans.........................................................................   17
      (f)   Capital Stock of Merger Sub.......................................................................   17
      (g)   Fractional Shares.................................................................................   17
      (h)   Buyer Stock.......................................................................................   17
      (i)   Election Procedures...............................................................................   17
   2.2   Exchange of Certificates.............................................................................   21
ARTICLE III  Representations and Warranties of Lexington......................................................   23
   3.1   General..............................................................................................   23
   3.2   Representations and Warranties.......................................................................   23
      (a)   Organization, Standing, Qualification.............................................................   23
      (b)   Capitalization....................................................................................   24
      (c)   Authorization and Execution.......................................................................   25
      (d)   No Conflicts......................................................................................   25
      (e)   SEC Reports and Financial Statements..............................................................   26
      (f)   Proxy Statement...................................................................................   27
      (g)   Absence of Certain Changes or Events..............................................................   27
      (h)   Tax Matters.......................................................................................   28
      (i)   Properties........................................................................................   29
      (j)   Material Contracts................................................................................   30
      (k)   Intellectual Property.............................................................................   30
      (l)   Litigation........................................................................................   31
      (m)   Permits; Compliance with Laws.....................................................................   31
      (n)   No Brokers or Finders.............................................................................   31
      (o)   Retirement and Benefit Plans; Employees...........................................................   31
      (p)   Environmental Matters.............................................................................   33
      (q)   Labor Matters.....................................................................................   34
      (r)   Vote Required.....................................................................................   34
      (s)   Anti-Takeover Provisions..........................................................................   34
      (u)   Management Agreements.............................................................................   34
      (v)   Voting Agreements.................................................................................   34
ARTICLE IV  Representations and Warranties Relating to the Lexington Funds....................................   35
   4.1   General..............................................................................................   35
   4.2   Representations and Warranties.......................................................................   35
      (d)   Financial Statements of the Lexington Funds.......................................................   36
</TABLE>

                                       56
<PAGE>

<TABLE>
<S>                                                                                                              <C>
      (e)   Accuracy of Financial Statements..................................................................   36
      (f)   Compliance With Applicable Law....................................................................   36
      (g)   No Conflicts......................................................................................   37
      (h)   Adherence to Investment Policies and Restrictions.................................................   37
      (i)   Litigation........................................................................................   37
      (j)   Required Reports..................................................................................   38
      (k)   Taxes.............................................................................................   38
      (l)   Contracts.........................................................................................   38
      (m)   No Material Adverse Changes.......................................................................   38
      (n)   Books.............................................................................................   38
      (o)   Absence of Undisclosed Liabilities................................................................   38
      (p)   No Pending Transaction............................................................................   39
      (q)   Proxy Statements..................................................................................   39
      (r)   Code of Ethics....................................................................................   39
      (s)   No Disqualification...............................................................................   39
      (t)   Insurance.........................................................................................   39
ARTICLE V  Representations and Warranties of Buyer and Merger Sub.............................................   39
   5.1   General..............................................................................................   39
   5.2   Representations and Warranties.......................................................................   39
      (a)   Organization, Standing, Qualification.............................................................   40
      (b)   Capitalization....................................................................................   40
      (c)   Authorization and Execution.......................................................................   40
      (d)   No Conflicts......................................................................................   41
      (e)   Proxy Statement...................................................................................   41
      (f)   SEC Reports and Financial Statements..............................................................   42
      (g)   Litigation........................................................................................   42
      (h)   Absence of Certain Changes or Events..............................................................   43
      (i)   No Material Adverse Effect........................................................................   43
      (j)   Permits; Compliance with Laws.....................................................................   43
      (k)   No Brokers or Finders.............................................................................   43
      (l)   No Disqualification...............................................................................   43
ARTICLE VI  Covenants Relating to the Lexington Funds.........................................................   44
   6.1   Requisite Approvals Concerning the Lexington Funds...................................................   44
   6.2   Termination of Existing Advisory, Sub-Advisory, and Distribution Arrangements........................   44
   6.3   Information Regarding the Lexington Funds............................................................   44
   6.4   Access to Information Regarding the Lexington Funds..................................................   44
   6.5   The Registrants' Registration Statements.............................................................   45
   6.6   Operations of the Lexington Funds....................................................................   45
   6.7   Undertakings Related to Section 15(f) of the 1940 Act................................................   45
   6.8   Continued Qualification..............................................................................   46
ARTICLE VII  Covenants Relating to the Parties................................................................   46
   7.1   Business Operations of Lexington.....................................................................   46
   7.2   Cooperation..........................................................................................   48
   7.3   Access to Information................................................................................   48
   7.4   No Solicitation......................................................................................   49
   7.5   Proxy Statement; Board Recommendation................................................................   50
   7.6   Stockholders' Meetings of Lexington and the Lexington Funds; Consents for Private
         Accounts.............................................................................................   51
   7.7   Legal Conditions to Merger...........................................................................   51
   7.8   Stock Plans and Options.................................................................................51
</TABLE>

                                       57
<PAGE>

<TABLE>
<S>                                                                                                              <C>
   7.9   Consents.............................................................................................   53
   7.10     Tax-Free Reorganization...........................................................................   53
   7.11     NYSE Listing......................................................................................   53
   7.12     Payment of Transaction Expenses...................................................................   53
   7.14     Confidentiality Agreement.........................................................................   53
   7.15     Amendment to Rights Agreement.....................................................................   53
ARTICLE VIII  Conditions Precedent............................................................................   54
   8.1   Conditions to the Parties' Obligation to Effect the Merger...........................................   54
      (a)   Stockholder Approval..............................................................................   54
      (b)   HSR Act...........................................................................................   54
      (c)   Approvals.........................................................................................   54
      (d)   No Injunctions or Restraints; Illegality..........................................................   54
   8.2   Additional Conditions to the Obligations of Buyer and Merger Sub.....................................   55
      (a)   Representations and Warranties....................................................................   55
      (b)   Performance of Obligations of Lexington...........................................................   55
      (c)   No Material Adverse Change........................................................................   55
      (d)   Officers' Certificate.............................................................................   55
      (e)   Legal Opinions....................................................................................   55
      (f)   Dissenters' Rights................................................................................   55
      (g)   Certain Consents..................................................................................   55
      (h)   Comfort Letter....................................................................................   55
      (i)   Lexington Assets Under Management.................................................................   56
      (j)   Closing Date Balance Sheet........................................................................   56
      (k)   1999 Financials...................................................................................   56
      (l)   Spin-off Tax Opinion..............................................................................   56
   8.3   Additional Conditions to the Obligation of Lexington.................................................   56
      (a)   Representations and Warranties....................................................................   56
      (b)   Performance of Obligations of Buyer and Merger Sub................................................   56
      (c)   Officers' Certificate.............................................................................   56
      (d)   Legal Opinion.....................................................................................   56
      (e)   Tax Opinion.......................................................................................   56
      (f)   Comfort Letter....................................................................................   57
      (g)   Employment Agreements.............................................................................   57
ARTICLE IX  Conduct and Transactions After the Effective Time.................................................   57
   9.1   Employee Matters.....................................................................................   57
   9.2   Indemnification......................................................................................   58
   9.4   Tax-Free Reorganization Covenants....................................................................   58
ARTICLE X  Termination........................................................................................   59
   10.1     Generally.........................................................................................   59
   10.2     Procedure and Effect of Termination...............................................................   60
   10.3     Expenses; Termination Fee.........................................................................   60
ARTICLE XI  Miscellaneous Provisions..........................................................................   61
   11.1     Termination of Representations and Warranties.....................................................   61
   11.2     Amendment and Modification........................................................................   61
   11.3     Waiver of Compliance; Consents....................................................................   61
   11.4     Press Releases and Public Announcements...........................................................   62
   11.6     Assignment........................................................................................   63
   11.7     Interpretation....................................................................................   63
   11.8     Governing Law.....................................................................................   63
   11.9     Counterparts......................................................................................   63
</TABLE>

                                       58
<PAGE>

<TABLE>
<S>                                                                          <C>
   11.10    Headings; Internal References.................................   63
   11.11    Entire Agreement..............................................   63
   11.12    Severability..................................................   64
   11.13    Equitable Remedies............................................   64
</TABLE>

                            Index of Defined Terms

Term                                                           Location

1940 Act.....................................................  Recitals
Acquisition Proposal.........................................  (S) 7.4(a)(1)
Adjustment Percentage........................................  (S) 2.1(c)(3)
Advisers Act.................................................  (S) 3.2(a)(2)
Affiliate....................................................  (S) 11.7(c)
Agreement....................................................  Preamble
Applicable Law...............................................  (S) 4.2(f)
Assigned Net Assets..........................................  (S) 2.1(c)(2)
Base Net Assets..............................................  (S) 2.1 (c)(1)
Benefit Plan.................................................  (S) 3.2(o)(1)
Board........................................................  (S) 6.1
Business Day.................................................  (S) 11.7(d)
Buyer........................................................  Preamble
Buyer's Average Share Price..................................  (S) 2.1(b)
Buyer Common Stock...........................................  Recitals
Buyer Disclosure Schedule....................................  (S) 5.1
Buyer SEC Reports............................................  (S) 5.2(f)(1)
Cash Consideration ..........................................  (S) 2.1(a)
Certificate of Merger........................................  (S) 1.1
Certificates.................................................  (S) 2.1(d)
Closing......................................................  (S) 1.2
Closing Date.................................................  (S) 1.2
Code.........................................................  Recitals
Delaware Law.................................................  (S) 1.1
Dissenting Shares............................................  (S) 2.1(k)(1)
Effective Time...............................................  (S) 1.1
Election Statement...........................................  (S) 2.1(i)(1)
Environmental Law............................................  (S) 3.2(p)(1)(A)
ERISA........................................................  (S) 3.2(o)(1)
ERISA Affiliates.............................................  (S) 3.2(o)(9)
Exchange Act.................................................  (S) 3.2(d)(2)
Exchange Agent...............................................  (S) 2.2(a)
Exchange Fund................................................  (S) 2.2(a)
Fund Shares..................................................  (S) 4.2(c)
Fund Stockholders............................................  (S) 4.2(n)
Fund Tax Returns.............................................  (S) 4.2(k)
GAAP.........................................................  (S) 3.2(e)(2)
Governmental Authority.......................................  (S) 3.2(d)(2)
Hazardous Substance..........................................  (S) 3.2(p)(1)(B)
HSR Act......................................................  (S) 3.2(d)(2)
Including....................................................  (S) 11.7(a)
Lexington....................................................  Preamble
Lexington Common Stock.......................................  Recitals
Lexington Consolidated Group.................................  (S) 3.2(h)(4)
Lexington Disclosure Schedule................................  (S) 3.1
Lexington Distributor........................................  (S) 3.2(a)(3)
Lexington Employee Plan(s)...................................  (S) 3.2(o)(1)
Lexington Fund Family........................................  (S) 4.2(b)
Lexington Funds..............................................  Recitals
Lexington Incentive Plans....................................  (S) 2.1(d)

                                       59
<PAGE>

Lexington Options............................................  (S) 2.1(d)
Lexington Restricted Stock...................................  (S) 2.1(e)
Lexington Rights Agreement...................................  (S) 7.15
Lexington SEC Reports........................................  (S) 3.2(e)(1)
Management Agreements........................................  (S) 3.2(u)
Material Adverse Effect......................................  (S) 3.1
Material Contracts...........................................  (S) 3.2(j)
Merger.......................................................  Recitals
Merger Consideration.........................................  (S) 2.1(a)
Merger Sub...................................................  Preamble
MSR..........................................................  (S) 3.2(a)(2)
Multiemployer Plan...........................................  (S) 3.2(o)(4)
NASD.........................................................  (S) 3.2(d)(2)
NYSE.........................................................  (S) 2.1(b)
Option Ratio.................................................  (S) 7.8(d)
Original Schedule............................................  (S) 2.1(c)(1)
Pension Plan.................................................  (S) 3.2(o)(1)
Person.......................................................  (S) 11.7(b)
Private Accounts.............................................  (S) 3.2(u)
Prohibited Transaction.......................................  (S) 3.2(o)(6)
Proprietary Rights...........................................  (S) 3.2(k)
Proxy Statement/Prospectus...................................  (S) 5.2(e)
Registrant...................................................  (S) 4.2(b)
Registration Statement.......................................  (S) 5.2(e)
Reorganization...............................................  (S) 7.10
Reports......................................................  (S) 4.2(j)
Revised Schedule.............................................  (S) 2.1(c)(2)
SEC..........................................................  (S) 3.2(d)(2)
Securities Act...............................................  (S) 3.2(e)(1)
Share Consideration..........................................  (S) 2.1(a)
Specified Cash Percentage....................................  (S) 2.1(j)(4)
Specified Stock Percentage...................................  (S) 2.1(j)(5)
Subsidiary...................................................  (S) 11.7(g)
Superior Proposal............................................  (S) 7.4(d)
Surviving Corporation........................................  (S) 1.3(a)
Tax Returns..................................................  (S) 3.2(h)(1)
Taxes........................................................  (S) 3.2(h)(1)
TDLPL........................................................  (S) 3.2(a)(1)
Third Party..................................................  (S) 10.3(e)
To the knowledge of a party..................................  (S) 11.7(f)
Total Consideration..........................................  (S) 2.1(j)(4)
Voting Agreement.............................................  (S) 3.2(v)
Welfare Plan.................................................  (S) 3.2(o)(1)

                               Index of Exhibits

Exhibit A -     Form of Voting Agreement
Exhibit B-1 -   Employment Agreement - Portfolio of Managers
Exhibit B-2 -   Employment Agreement - Hisey

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