Document:

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                                                      Levin Employment Agreement

                              EMPLOYMENT AGREEMENT

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

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

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

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

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

      NOW, THEREFORE, in consideration of the foregoing premises, the value to
be received by Levin under the Merger Agreement, the employment of Levin by the
Companies, the access to the Companies' customer base and Confidential
Information (as hereinafter defined) and the mutual promises, terms, provisions
and conditions set forth in this Agreement, the parties hereby agree:

      1. Employment. Subject to the terms and conditions set forth in this
Agreement, the Companies hereby offer and Levin hereby accepts the employment.

      2. Term. Subject to earlier termination as provided below, Levin shall be
employed by the Companies hereunder for the period (the "Term") commencing on
the Effective Date and ending on the fifth anniversary of the Effective Date.
"Effective Date" as used herein is to be the same date as the Closing Date set
forth in the Merger Agreement.

      3. Capacity; Performance.

      a. During the Term, Levin shall serve as the Chief Executive Officer and
President of BKF and as the President of Merger Subsidiary and shall have such
responsibilities, duties and authority as are generally associated with the
positions of Chief Executive Officer and President (including, without
limitation, the authority to hire, discharge and fix the terms and conditions of

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                                                      Levin Employment Agreement

employment of all employees of the Companies and any of their respective
subsidiaries, subject, only in the case of officers, to the approval of the
Board of Directors of BKF (the "Board") (or any committee thereof, to the extent
provided under the Companies' respective by-laws) and as may be assigned from
time to time to Levin by the Board that are consistent with such
responsibilities, duties and authority and Levin's positions as Chief Executive
Officer and President. During the Term. Levin will, consistent with the
provisions of the foregoing sentence, also serve in such offices or positions
with subsidiaries of Merger Subsidiary as the Board may from time to time
determine, to the extent consistent with the responsibilities, duties and
authority of Levin's position as Chief Executive Officer and President of BKF.
Levin shall be based and shall perform his duties primarily at the principal
executive offices of Merger Subsidiary in the City of New York, except for
reasonable travel as the performance of his duties hereunder may require.

      b. During the Term, Levin shall report directly to the Board.

      c. During the Term, Levin shall devote his full business time and best
efforts, business judgment, skill and knowledge exclusively to the advancement
of the business and interests of the Companies and their affiliates and to the
discharge of his duties and responsibilities. Notwithstanding anything herein to
the contrary, nothing in this Agreement shall preclude Levin from (i) serving as
a director or member of a committee of any of the entities listed on Schedule
3(c) hereto, or of any non-profit organization (and, upon the prior written
consent of BKF, which consent shall not be unreasonably withheld, and in
accordance with the Codes of Ethics (as hereinafter defined), any for-profit
organization) not involving a conflict of interest with the Companies, (ii)
engaging in charitable and community activities and (iii) managing his own
investments and assets and those of any Family Members (as hereinafter defined)
(collectively, the "Family Assets"); provided that such activities are conducted
in accordance with each Company's respective code of ethics as adopted under the
Investment Company Act of 1940, as amended (the "1940 Act") and/or the
Investment Advisers Act of 1940 (the "Advisers Act") (collectively, the "Codes
of Ethics"). For purposes of this Agreement, "Family Members" means (i)
descendants or spouses of descendants of a great-grandfather of Levin or his
spouse (any such person being hereinafter referred to as a "Relative"), (ii)
trusts primarily for the benefit of Levin and/or any one or more Relatives of
Levin or (iii) partnerships, corporations or other forms or businesses or
investment entities or associations (any of the foregoing, an "Enterprise")
controlled by one or more of the persons or trusts described in clause (i) or
(ii) above, or with any other Enterprise so controlled.

      d. The Companies shall furnish Levin with office space, secretarial,
communication, and services as shall be appropriate for Levin's position and
reasonably necessary for the performance of his duties under this Agreement.

      e. The Companies agree to use reasonable efforts to cause Levin to be
elected and continued in office throughout the Term as a member of the Board of
Directors of each of the Companies and shall include him in the management slate
for election as a director of each of the Companies at every stockholders'
meeting of the Companies at which directors are elected, and

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                                                      Levin Employment Agreement

at every meeting of the Board of Directors of the Companies at which his term as
a director would otherwise expire.

      4. Compensation and Benefits. As compensation for all services performed
by Levin under and during the Term:

      a. Base Salaries During the Term, BKF shall pay Levin an initial base
salary of $50,000 per year and Merger Subsidiary shall pay Levin an initial base
salary of $775,000 per year. Such base salary to be paid by Merger Subsidiary
shall be, effective January 1, 1997 and on each anniversary of such date
thereafter during the Term, increased to reflect increases in the Urban Consumer
Price Index of the New York Metropolitan area as of the close of the preceding
year and may be increased from time to time by the Board or a committee thereof,
in its sole discretion. Such base salaries, as in effect at any given time, are
collectively referred to in this Agreement as the "Base Salaries" and shall be
payable in regular installments in accordance with the general payroll practices
of each of the Companies, as may be amended from time to time, for their
respective employees.

      b. Bonus Payments.

      (i) The Companies agree to use their reasonable best efforts to obtain
from the Securities and Exchange Commission an order in SEC Proceeding No.
812-9528 (the "Order") exempting Merger Subsidiary from Section 17(d) of the
1940 Act and Rule 17d-1 thereunder to permit Merger Subsidiary to adopt a
performance-based compensation plan in a form mutually acceptable to BKF and
Levin providing for the payment of non-discretionary cash bonuses to certain
officers and employees of Merger Subsidiary, including Levin, and intended to
qualify under Section 162(m)(4)(c) of the Internal Revenue Code of 1986, as
amended (the "Code") (the "Compensation Plan") and to cause the Compensation
Plan to be adopted by Merger Subsidiary, and BKF agrees to use its reasonable
best efforts to cause the Compensation Plan to be approved by the stockholders
of BKF. If, prior to Closing (as defined in the Merger Agreement), the Order is
obtained and the Compensation Plan is adopted by Merger Subsidiary and approved
by the stockholders of BKF, then, with respect to each full or partial calendar
year within the Term, Levin shall be eligible to receive an annual bonus payment
from Merger Subsidiary pursuant to the Compensation Plan (the "Compensation Plan
Bonus") in an amount determined in accordance with the terms of the Compensation
Plan. If the Order is not received or if the Compensation Plan is submitted to
the stockholders of BKF and is not approved by such stockholders, then neither
BKF nor Merger Subsidiary shall have any further obligation under this
subparagraph (i).

      (ii) If, prior to Closing, the Order is not received, or the Compensation
Plan is not adopted by Merger Subsidiary or is not approved by the stockholders
of BKF, then:

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                                                      Levin Employment Agreement

(x)   Levin shall be eligible to receive an annual discretionary bonus payment
      from Merger Subsidiary ("Discretionary Bonus") in an amount to be
      determined by the Compensation Committee of the Board, in light of Levin's
      positions, responsibilities and entire compensation packages; and

(y)   compensation amounts payable to Levin by Merger Subsidiary, including Base
      Salary and Discretionary Bonus, if any, awarded to Levin, for any calendar
      year of the Term, which, in combination with all compensation payable to
      Levin by Merger Subsidiary and BKF for such calendar year of the Term, are
      in excess of $1,000,000 (one million dollars) (hereinafter, the "Excess
      Compensation") shall automatically be contributed to a deferred
      compensation plan (the "Deferred Compensation Plan"). The Deferred
      Compensation Plan shall be a nonqualified deferred compensation plan and a
      "Rabbi Trust" administered by an independent trustee shall be established
      to hold the Excess Compensation amounts contributed to the Deferred
      Compensation Plan. Levin shall be entitled to payment of amounts
      contributed to the Deferred Compensation Plan (together with the credited
      interest therein) on the earlier of Levin's termination of employment with
      the Companies for any reason or December 31, 2001. Any amounts held under
      the Deferred Compensation Plan shall be credited with interest at the
      Prime Rate set by the Federal Reserve Bank of New York, adjusted annually
      on the anniversary of the commencement of Levin's employment by Merger
      Subsidiary. If the payment of amounts under the Deferred Compensation Plan
      becomes due in connection with a termination of Levin's employment with
      the Companies, such payments shall be made in a lump sum within ten (10)
      days following the date of such termination of employment. If the payment
      of such amounts becomes due on December 31, 2001 (other than as a result
      of Levin's termination of employment), payment of such amounts (together
      with credited interest through the date of payment) shall be made to Levin
      on each December 31, commencing with December 31, 2001, in such amounts
      which, when aggregated with other compensation paid to Levin in such
      calendar year by the Merger Subsidiary and BKF which is not
      performance-based compensation (as defined in Section 162(m) of the Code)
      does not exceed $1,000,000. Any unpaid amounts in respect of such calendar
      year will be automatically deferred and similarly paid to Levin on the
      next succeeding December 31, and paid in fUll in a lump sum no later than
      the 10th day following Levin's termination of employment with the
      Companies for any reason.

(z)   The Companies will continue to use their reasonable best efforts to obtain
      from the Securities and Exchange Commission an order exempting Merger
      Subsidiary from Section 17(d) of the 1940 Act and Rule 17d-1 thereunder
      to permit Merger Subsidiary to adopt a Compensation Plan and to cause the
      Compensation Plan to be adopted by Merger Subsidiary, and BKF agrees to
      use its reasonable best efforts to cause the Compensation Plan to be
      approved by the stockholders of BKF. If, during the Term, (i) such an
      order is obtained, (ii) Merger Subsidiary has adopted the Compensation
      Plan and (iii) the stockholders of BKF have

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                                                      Levin Employment Agreement

      approved the Compensation Plan, then, with respect to each full calendar
      year within the Term and commencing after the occurrence of all of the
      foregoing events (as set forth in subparagraphs (i)-(iii)), Levin shall be
      eligible to receive an annual Compensation Plan Bonus.

      c. Benefit Plans. Levin shall participate in all employee benefit plans,
programs and arrangements of the Companies now or hereinafter made available to
any senior executives of the Companies on a basis no less favorable than is made
available to any other such senior executives of the Companies, as such plans,
programs and arrangements may be in effect from time to time (including, without
limitation, each plan, program or arrangement providing for retirement benefits,
supplemental and excess retirement benefits, annual and long-term incentive
compensation (if any), stock options (if any), group life insurance, accident
and death insurance, medical and dental insurance, sick leave, disability
benefits and perquisites). In addition, Levin shall be entitled to at least four
(4) weeks vacation per calendar year and shall receive prompt reimbursement from
the Companies for all out-of-pocket expenses incurred by Levin in performing his
duties hereunder; provided that Levin submits documentation for the
reimbursement of such expenses.

      5. Termination of Employment and Benefits. Notwithstanding the provisions
of Section 2, Levin's employment under this Agreement shall terminate prior to
the expiration of the Term under the following circumstances:

      a. Death.

            (i)   In the event of Levin's death during the Term, Levin's
                  employment under this Agreement shall immediately and
                  automatically terminate, in which event the Companies shall
                  each pay to Levin's designated beneficiary or, if no
                  beneficiary has been designated by him, to his estate, (x) any
                  Base Salaries earned and unpaid as of his death, (y) any
                  Compensation Plan Bonus or Discretionary Bonus (each, a
                  "Bonus") as may previously have been awarded but which remains
                  unpaid, and (z) such additional Compensation Plan Bonus, if
                  any, as may be determined in accordance with the Compensation
                  Plan, if such Compensation Plan is in effect at the time of
                  Levin's death. In the event of death, Levin's designated
                  beneficiary, or, if no beneficiary has been designated by him,
                  his estate, shall be entitled to receive the pro rata portion
                  of either (i) the Compensation Plan Bonus for the year in
                  which Levin's death occurs, as determined under the
                  Compensation Plan or (ii) if no Compensation Plan is in
                  effect, an amount equal to the amount of the highest
                  Discretionary Bonus, if any, paid to Levin during the Term,
                  unless Levin's death occurs during the first year of the Term,
                  in which case the prorated amount of Discretionary Bonus shall
                  be determined at the sole discretion of the Compensation
                  Committee of the Board. The Companies shall otherwise have no
                  further obligation or liability under this Agreement in
                  respect to Levin.

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                                                      Levin Employment Agreement

            (ii)  In the event of Levin's death or disability during the Term,
                  the Companies agree to use reasonable efforts to cause the
                  person designated by the estate, or legal representative of
                  Levin, if any, (the "Representative") to be elected and
                  continued in such capacity throughout the Designation Period
                  (as hereinafter defined) as a member of the Board and
                  throughout the Designation Period shall use reasonable efforts
                  to include the Representative in the management slate for
                  election as a director of BKF at every stockholders' meeting
                  of BKF at which directors are elected and at every meeting of
                  the Board at which the Representative's term as a director
                  would otherwise expire. For purposes of the foregoing,
                  "Designation Period" shall mean the period between Levin's
                  death or disability and the earliest to occur of (i) the date
                  upon which Levin's estate holds less than 5% of the
                  outstanding shares of BKF common stock, (ii) the date which is
                  three years following his death or disability or (iii) the
                  fifth anniversary of the Effective Date.

      b. Disability.

            i.    The Companies may, by action of the Board, terminate Levin's
                  employment under this Agreement upon advance written notice to
                  Levin, in the event that Levin becomes disabled so as to be
                  unable to perform substantially all of his material duties
                  under this Agreement and remains so disabled for a continuous
                  period of six (6) consecutive months (a "Disability"). In
                  addition, the Board may designate another employee to act in
                  Levin's place during any period in which he is disabled.

            ii.   Until Levin has suffered a Disability for a period of six (6)
                  consecutive months, Levin shall continue to receive the Base
                  Salaries and shall continue to be eligible for a Bonus for the
                  then-current calendar year and such other benefits as may be
                  provided for under the terms of any applicable benefit plan;
                  provided that the amount of such Base Salaries may be reduced
                  by the aggregate amount of disability benefits, if any, paid
                  to Levin under the Companies' disability income plans.

            iii.  Following the Companies' termination of Levin's employment due
                  to Disability, Levin's Base Salaries shall be discontinued
                  under Section 5(b)(ii), except that Levin shall be entitled to
                  receive the pro rata portion of either (i) the Compensation
                  Plan Bonus for the year in which Levin's employment is
                  terminated because of Disability, if a Compensation Plan is in
                  effect at such time, or (ii) if no Compensation Plan is then
                  in effect, an amount equal to the amount of the highest
                  Discretionary Bonus, if any, paid to Levin during the Term,
                  unless Levin's employment is terminated because of Disability
                  during the first year of the Term, in which case the pro rated
                  amount of Discretionary Bonus shall be determined at the sole
                  discretion of the Compensation Committee of the Board. The
                  Companies

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                                                      Levin Employment Agreement

                  shall otherwise have no further obligation or liability under
                  this Agreement in respect to Levin.

            iv.   Any question as to the existence of the Disability of Levin as
                  to which Levin and the Companies cannot agree shall be
                  determined in writing by a qualified independent physician
                  mutually acceptable to Levin and the Company. If Levin and the
                  Company cannot agree as to a qualified independent physician,
                  each shall appoint such a physician and those two physicians
                  shall select a third who shall make such determination in
                  writing. The determination of whether or not Levin shall have
                  suffered a Disability made in writing to the Companies and
                  Levin shall be final and conclusive for all purposes of this
                  Agreement.

      c. For Cause. The Companies may, by action of a majority of the members of
the Board who are not "interested persons" of BKF or Merger Subsidiary,
terminate Levin's employment under this Agreement for Cause (as hereinafter
defined) at any time upon advance written notice to Levin. For purposes of this
Agreement, the term "interested person" shall be construed in accordance with
the definition contained in Section 2(a)( 19) of the 1940 Act, as amended, and
as modified by the Order. The following shall constitute "Cause" for
termination:

            i.    Levin's conviction of a felony (which through lapse of time or
                  otherwise is not subject to appeal); or

            ii.   Levin's willful, continuing and repeated refusal without
                  proper cause to perform his obligations under this Agreement
                  (other than as a result of Levin's physical or mental
                  incapacity); provided that no termination shall be effective
                  under this clause (ii) unless Levin shall have first received
                  written notice from the Companies describing the basis of such
                  termination for Cause and within 10 days following the
                  delivery of such notice Levin shall have refused to perform or
                  in good faith commence the performance of his obligations
                  under this Agreement.

                  In no event shall the ineffectiveness or incompetence of Levin
                  in the performance of his duties hereunder or a bona fide
                  disagreement over corporate policy be deemed grounds for
                  termination for Cause.

Upon termination of Levin's employment for Cause, the Companies shall have no
further obligation or liability to Levin, other than for Base Salaries earned
and unpaid at the date of termination and any Bonus as may previously have been
awarded to Levin (but which remains unpaid).

      d. Other than for Cause. The Companies may, by action by the Board,
terminate Levin's employment under this Agreement other than for Cause upon
advance written notice to Levin. In the event of such termination, then until
the earlier of (i) the conclusion of a period equal to the remainder of the Term
or (ii) the conclusion of a period of three (3) years following the date of
termination, the Companies shall continue to pay Levin the Base Salaries at the
rate in

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                                                      Levin Employment Agreement

effect on the date of termination. For the same period or, if earlier, until
Levin is employed with comparable health coverage, the Companies shall also (i)
pay Levin an amount equal to the current cost to the Companies of Levin's
medical and dental insurance plan coverage at the date of termination under the
Companies' plans or (ii) provide for Levin's continued participation in such
plans, but in either case subject to any employee contribution applicable to
Levin on the date of termination and any subsequent general amendment to the
plans. It shall be in the Board's sole discretion to determine whether, for any
period, Levin will receive payment in lieu of actual coverage under the
Companies' medical and dental insurance plans; provided that the foregoing shall
not limit any right Levin may have under any applicable federal or state
continuation coverage laws or conversion rights under the medical and dental
insurance plan. In addition, Merger Subsidiary shall pay Levin (i) the
Compensation Plan Bonus otherwise payable for the year in which such termination
of employment occurs had Levin continued to be employed for the entire calendar
year or (ii) if no Compensation Plan is then in effect, an amount equal to the
amount of the highest Discretionary Bonus paid to Levin during the Term unless
such termination occurs during the first year of the Term, in which case the
amount of the Discretionary Bonus shall be determined in the sole discretion of
the Compensation Committee of the Board. Merger Subsidiary shall have no
obligation to pay any Bonus for any time period thereafter. Other than the Base
Salaries, Bonus, accrued but unpaid Base Salaries, if any, and the benefits
previously described in this Section 5(d), Merger Subsidiary shall pay Levin any
Bonus as may previously have been awarded in accordance with Section 4(b) hereto
(but which remains unpaid), but the Companies shall otherwise have no further
obligation or liability in respect of Levin under this Agreement.

      Notwithstanding any other provision of this Agreement to the contrary,
Levin acknowledges and agrees that any and all payments to which he is entitled
under this Section 5(d) are conditioned upon and subject to his execution of a
general waiver and release, in such form as may be reasonably acceptable to the
Companies and Levin, of all claims and issues arising under the Employment
Agreement, except for such matters covered by provisions of this Agreement which
expressly survive the termination of this Agreement.

      e. By Levin

            i.    Levin shall provide the Companies ninety (90) days' advance
                  written notice in the event he terminates his employment other
                  than for Good Reason (as hereinafter defined); provided that
                  the Board may, in its sole discretion, terminate Levin's
                  employment with the Companies prior to the expiration of the
                  ninety (90) day notice period. In such event and upon the
                  expiration of such 90-day period (or such shorter period as
                  the Board may in its sole discretion determine), Levin's
                  employment under this Agreement shall immediately and
                  automatically terminate, and the Companies shall pay him any
                  Base Salary earned and unpaid as of his termination date and
                  Merger Subsidiary shall pay him any Bonus as may previously
                  have been awarded to Levin in accordance Section 4(b) (but
                  which remains unpaid), but the Companies shall otherwise have
                  no further obligation or liability in respect of Levin under
                  this Agreement.

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                                                      Levin Employment Agreement

            ii.   Levin may terminate his employment hereunder for "Good Reason"
                  if at any time during the Term the Companies shall be in a
                  material breach of their obligations hereunder. The parties
                  acknowledge and agree that a material breach for purposes of
                  this Section 5(e)(ii) shall include, but not be limited to,
                  (x) any material reduction in Levin's duties, authority,
                  status or responsibilities (whether or not accompanied by a
                  change in title) all as set forth in Section 3 above, (y) a
                  reduction in Levin's Base Salaries, or other material
                  reduction of his other compensation, perquisites or benefits
                  (other than as a result, as determined by the Board in its
                  sole discretion, of decreased earnings of either BKF or Merger
                  Subsidiary as compared to their respective most recently
                  completed fiscal years) or (z) any requirement that Levin be
                  based at a location other than the principal executive
                  officers of Merger Subsidiary in the City of New York. No
                  termination for Good Reason shall be permitted unless the
                  Companies shall have first received written notice from Levin
                  describing the basis of such termination for Good Reason and
                  within ten (10) days following the delivery of such notice the
                  Companies shall not have cured or in good faith commenced the
                  cure of the breach specified in such notice.

A termination of Levin's employment for Good Reason pursuant to Section 5(e)(ii)
shall be treated for purposes of this Agreement as a termination by the
Companies other than for Cause and the provisions of Section 5(d) relating to
the payment of compensation and benefits shall apply.

      6. Effect of Termination. The provisions of this Section 6 shall apply
upon the expiration of the Term, or upon earlier termination pursuant to Section
5.

      a. Except as specifically provided in this Agreement, any benefits which
Levin is entitled to receive under any employee benefit plan of the Companies
shall be determined and paid only in accordance with the terms of such plan as
then in effect; provided that any further accrual of benefits under any such
plan shall terminate pursuant to the terms of such plan based on the date of
termination of Levin's employment and without regard to any continuation of Base
Salaries or other payments to Levin following such date of termination.

      b. Provisions of this Agreement shall survive any termination if expressly
provided in this Agreement or if necessary or desirable to fully accomplish the
purposes of such provision; provided that the provisions of Sections 5,7,8,9,
10, 11, 12 and 15 shall in all events survive any termination of Levin' s
employment and the expiration of the Term.

      c. In the event of termination of Levin, and upon the request of the
Companies, Levin will keep the termination confidential until the Companies have
a reasonable period of time to notify clients and others of such termination.

      d. The obligation of the Companies to make any payments to or on behalf of
Levin under this Agreement shall terminate in the event of Levin's willful or
grossly negligent material breach of his obligations under Sections 8 and 10 if,
within ten (10) days following the delivery

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                                                      Levin Employment Agreement

of written notice to Levin by the Companies describing such alleged material
breach, Levin shall have failed to cease, or in good faith commence to cease,
the activities constituting such material breach of such obligations. The
obligation of the Companies to make any payment to or on behalf of Levin under
this Agreement shall terminate in the event of Levin's willful or grossly
negligent material breach of his obligations under Section 7, provided that if
such breach is curable such termination of payments shall only be effective if,
within ten (10) days following delivery of written notice to Levin by the
Companies describing such alleged material breach, Levin shall have failed to
cure, or in good faith have commenced to cure, the material breach of such
obligations.

      e. Other than as set forth in Section 5(a)(ii) of this Agreement, in the
event of termination of Levin, Levin shall immediately tender his or her
resignation from the Board of Directors of Merger Subsidiary.

      7. Confidential Information.

      a. Levin acknowledges that the Companies and their affiliates have
developed and will continually develop Confidential Information; and that Levin
may have learned or may continue to learn of Confidential Information during the
course of employment with the Companies. Levin will comply with the reasonable
policies and procedures of the Companies and their affiliates, as amended from
time to time, for protecting Confidential Information and for so long as such
information is not publicly available (other than through the act or omission of
Levin), Levin will not disclose to any person (other than his legal
representatives, counsel and accountants and except as required by court order
or applicable law or for the proper performance of Levin's duties and
responsibilities to the Companies or in defense to any claim asserted against
Levin by the Company), or use for the benefit or gain of Levin or any entity
other than the Companies, any Confidential Information without the prior written
consent of specifically authorized representatives of the Companies. Prior to
Levin's disclosure of any Confidential Information pursuant to court order,
applicable law, or in defense to any claim asserted against him, Levin shall
provide reasonable advance notice to the Companies sufficient to enable the
Companies to contest the disclosure or provision of such Confidential
Information. Levin understands that this restriction shall continue to apply
after Levin's employment terminates, regardless of the reason for such
termination.

      b. Levin shall protect the integrity of Confidential Information and shall
use reasonable efforts to keep confidential all documents, records, tapes and
other media of every kind and description relating to the business, present or
otherwise, of the Companies or their affiliates and any copies, in whole or in
part, thereof (the "Documents") containing Confidential Information. All
Documents, whether or not containing Confidential Information and whether or not
prepared by Levin (other than Documents containing exclusively Confidential
Family Information not otherwise required to be maintained by the Companies
under applicable law, including the Advisers Act), shall be the sole and
exclusive property of the Companies and their affiliates. Levin shall use
reasonable efforts to safeguard all Documents, and all Confidential Information
they contain, and shall surrender to BKF at the time his employment terminates
all Documents then in Levin's possession or control, other than Documents
containing exclusively

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                                                      Levin Employment Agreement

Confidential Family Information not otherwise required to be maintained by the
Companies under applicable law, including the Advisers Act.

      c. "Confidential Information" means any and all information of the
Companies and their affiliates that is not generally known by others with whom
they did or do compete or do business, or with whom they plan to compete or do
business, other than (i) information which is publicly available (other than
through the act or omission of Levin) and (ii) Confidential Family Information.
Confidential Information includes without limitation such information relating
to (i) the development, research, marketing and financial activities of the
Companies and their affiliates, (ii) the Products and Services (as hereinafter
defined), (iii) the financial performance and strategic plans of the Companies
and their affiliates (other than Family Members), (xv) the identity and special
needs of the clients of the Companies and their affiliates and (v) the people
and organizations with whom the Companies and their affiliates have had or have
business relationships and those relationships. Confidential Information also
includes comparable information that the Companies or any of their affiliates
have received, belonging to clients or others who do business with the Companies
or any of their affiliates (other than Family Members) or any other information
that is, or has been, received by the Companies or any of their affiliates with
any understanding, express or implied, that it will not be disclosed (other than
Confidential Family Information).

      d. "Products and Services" means all products and services offered,
planned, researched, developed, tested, sold, licensed, marketed or otherwise
provided by the Companies or any of their affiliates during Levin's employment.

      e. The Companies acknowledge that Levin possesses and will continue to
obtain and possess Confidential Family Information and that the Companies may
have learned or may continue to learn Confidential Family Information during the
course of Levin's employment with the Companies. For so long as such information
is not publicly available (other than through the act or omission of either of
the Companies or their affiliates) the Companies will not disclose to any person
or entity (other than their legal representatives, counsel and accountants, and
except as required by court order or applicable law including the Advisers Act,
or for the proper performance of the duties and responsibilities of the
Companies to Levin or in defense to any claim asserted against the Companies by
Levin) or use for the benefit or gain of the Companies or any entity other than
Levin, any Confidential Family Information without the prior written consent of
Levin. Prior to the Companies' disclosure of any Confidential Family Information
pursuant to court order, applicable law, or in defense to any claim asserted
against it by Levin, the Companies shall provide reasonable advance notice to
Levin sufficient to enable Levin to contest the disclosure or provision of such
Confidential Information. The Companies understand that this restriction shall
continue to apply after Levin's employment terminates, regardless of the reason
for such termination.

      f. The Companies shall protect the integrity of the Confidential Family
Information and shall use reasonable efforts to keep confidential all documents.
records, tapes and other media of every kind and description relating to the
business and investments, present or otherwise, of Family Members and any
Documents containing Confidential Family Information.

                                       11
<PAGE>   12

                                                      Levin Employment Agreement

Except with respect to Documents that are required to be maintained by the
Companies under applicable law, including the Advisers Act, all Documents
containing exclusively Confidential Family Information shall be the sole and
exclusive property of Levin. The Companies shall safeguard all such Documents
and all Confidential Family Information and shall surrender to Levin at the time
his employment terminates all such Documents then in the possession or control
of the Companies or their affiliates, other than Documents that are required to
be maintained by the Companies or their affiliates under applicable law,
including the Advisers Act.

      g. "Confidential Family Information" means any personal information
relating to Levin or any Family Members and any information regarding the
management of the Family Assets that is distinctly unique to the Family Assets,
and any other information received by any of the Companies from Levin regarding
any Family Member, except for such information that is publicly available other
than through the act or omission of any of the Companies or their affiliates.

      8. Restricted Activities. Levin agrees that some restrictions on his
activities during and after the termination of employment are necessary to
protect the goodwill, Confidential Information, client relationships and other
legitimate interests of the Companies and their affiliates:

      a. While Levin is employed by the Companies and during a period (i) five
(5) years following the Effective Date, in the event Levin's employment is
terminated by the Companies for Cause or is voluntarily terminated by Levin
without Good Reason or (ii) two (2) years following the date of termination of
Levin's employment by the Companies for reasons other than for Cause or by Levin
for Good Reason (provided that such period shall not extend longer than five (5)
years following the Effective Date) (such period, as applicable, hereinafter
referred to as the "Non-Competition Period"), Levin shall not, directly or
indirectly, whether as owner, partner, principal, investor, consultant, agent,
employee, co-venturer or otherwise, compete with the Companies or any of their
affiliates within the United States in the money management business
("Competitive Endeavors") or undertake any planning for any business which would
constitute a Competitive Endeavor; provided, however, that in no event shall the
management of Family Assets constitute a Competitive Endeavor and provided,
further, that nothing herein shall prohibit Levin from becoming an employee,
director or consultant of any entity which may, directly or through its
affiliates, engage in the money management business, so long as Levin's
responsibilities do not include participation, solicitation, consultation,
marketing, recommendation or advice with respect to such money management
business and Levin does not, directly or indirectly, participate, solicit,
consult, market, recommend or advise or make referrals with respect to such
money management business. Other than as set forth above, restricted activity
includes without limitation accepting employment or a consulting position with
any person who is, or at any time prior to termination of Levin's employment has
been, a client of the Companies or any of their affiliates. For the purposes of
this Section, the business of the Companies and their affiliates shall include
all Products and Services offered by the Companies or any of their affiliates or
under development and Levin's undertaking shall encompass all products and
services that may be used in substitution for Products and Services.

                                       12
<PAGE>   13

                                                      Levin Employment Agreement

      b. Levin agrees that, during his employment with the Companies, he will
not, without the prior written approval of the Board, undertake any outside
activity, whether or not competitive with the business of the Companies or their
affiliates, that could reasonably give rise to a conflict of interest or
otherwise interfere with his duties and obligations to the Companies or any of
their affiliates. Notwithstanding the foregoing, Levin may (i) continue to serve
as a director or member of a committee of any of the entities listed in Schedule
3(c) hereto in accordance with the Codes of Ethics, (ii) to the extent such
activities are not competitive with the business of the Companies or their
affiliates, engage in charitable, civic or other community activities without
compensation to him and (iii) render without compensation investment advisory
and trust services with respect to the Family Assets and to one or more Family
Members.

      c. Levin agrees that, during the Non-Competition Period, he will not hire
or attempt to hire any employee of the Companies or any of their affiliates,
assist in such hiring by any person or encourage any such employee to terminate
his or her relationship with the Companies or any of their affiliates.

      d. Levin further agrees that, during the Non-Competition Period, he will
not, directly or indirectly, solicit or encourage any clients or others who do
business with the Companies or any of their affiliates to terminate or diminish
their relationship with any of them or to violate any agreement with any of
them, and while Levin is employed by the Companies and during the period ending
five (5) years following the Effective Date in the event Levin's employment is
terminated by the Companies for Cause or is voluntarily terminated by Levin
without Good Reason, Levin will not conduct, either directly or indirectly, with
any person any business or activity that such client or other person conducts or
could conduct with the Companies or any of their affiliates.

      e. Levin agrees that he will (i) comply with the Codes of Ethics and (ii)
notify the Board of all directorships or memberships on a board of directors or
board of trustees held by him, regardless of whether (y) such office was held
prior to the date hereof or (z) such office would require prior written consent
of the Board. Levin further agrees that, during his employment with the
Companies, he will not become, without the prior written approval of the Board,
a member of the board of directors or board of trustees of any public company or
of any company that could reasonably be expected to become an appropriate
investment for any client of the Companies in an account managed by the
Companies.

      f. The parties intend that the non-competition, non-solicitation and
non-servicing provisions of this Section 8 shall be deemed to be a series of
separate covenants, one for each and every county of each and every state of the
United States of America and each and every political subdivision of each and
every country outside the United States of America where this provision is
intended to be effective.

      9. Cooperation With Regard to Litigation. Levin agrees to cooperate with
the Companies during the Term and thereafter (including following Levin's
termination of employment for any reason), by making himself reasonably
available to testify on behalf of a

                                       13
<PAGE>   14

                                                      Levin Employment Agreement

Company or any of its affiliates, in any action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, relating to events which
occurred either during Levin's employment with the Companies and/or during
Levin's prior employment with LEVCO and any of its related entities, and to
assist a Company, or any of its affiliates, in any such action, suit, or
proceeding, by providing information and meeting and consulting with the Board
or its representatives or counsel, or representatives or counsel to the
Companies or any of their affiliates, as reasonably requested by the Board or
such representatives or counsel. Either Company, as the case may be, agrees to
reimburse Levin, on an after-tax basis, for expenses reasonably incurred in
connection with such provision of testimony or assistance.

      10. Notification Requirement. Until the conclusion of the Non-Competition
Period, Levin shall give notice to the Companies of any change in his address
and of each new job or other business activity that he plans to undertake, at
least seven (7) days prior to beginning any such activity. Such notice shall
state the nature of the activity, the name and address of the person for whom
such job or activity is undertaken and the nature of Levin's business
relationship(s) and position(s) with such person. Levin shall provide the
Companies with such other pertinent information concerning such business
activity as the Companies may reasonably request in order to determine Levin's
continued compliance with his obligations under Sections 7,8,9 and 10.

      11. Enforcement of Covenants.

      (i) Levin acknowledges that he has carefully read and considered all the
terms and conditions of this Agreement, including the conditions and restraints
imposed upon him pursuant to Sections 7, 8, 9 and 10. Levin agrees that said
conditions and restraints are necessary for the reasonable and proper protection
of the Companies and their affiliates and that each and every one of the
conditions and restraints is reasonable in respect to subject matter, length of
time and geographic area, in view of the receipt of consideration pursuant to
the Merger Agreement, in the transactions contemplated above, the geographic
scope and nature of the business in which the Companies are and will continue to
be engaged, his knowledge of the Companies' business, and his relationships with
the Companies' investment advisory and trust clients. Levin further acknowledges
that, were he to breach any of the covenants contained in Sections 7, 8, 9 or
10, the damage to the Companies would be irreparable. Levin therefore agrees
that the Companies, in addition to any other remedies available to them, shall
be entitled to temporary preliminary and permanent injunctive relief against any
breach or threatened breach by him of any of said covenants, without having to
post bond, in a court of competent jurisdiction. The parties further agree that,
in the event that any provision of Sections 7, 8, 9 or 10 shall be determined by
any court of competent jurisdiction to be unenforceable by reason of its being
extended over too great a time, too large a geographic area or too great a range
of activities, such provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by law. The non-prevailing party in
any action brought pursuant to this Section 11(i) shall indemnify and hold
harmless the prevailing party from and against all reasonable legal fees and
expenses paid or incurred by them in connection with such action.

                                       14
<PAGE>   15

                                                      Levin Employment Agreement

      (ii) The Companies acknowledge that they have carefully read and
considered all the terms and conditions of this Agreement, including the
conditions and restraint imposed upon them in Section 7(e), above. The Companies
further acknowledge that were they to breach the confidentiality provision set
forth in Section 7(e) above, the damage to Levin would be irreparable. The
Companies therefore agree that Levin, in addition to any other remedies
available to him, shall be entitled to preliminary and permanent injunctive
relief against any breach or threatened breach of Section 7(e), without having
to post bond, in a court of competent jurisdiction. The non-prevailing party in
any action brought pursuant to this Section 11(ii) shall indemnify and hold
harmless the prevailing party from and against all reasonable legal fees and
expenses paid or incurred by them in connection with such action.

      12. Arbitration. Other than an action brought under Section 11, which may
be brought directly in any court of competent jurisdiction, any dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration in New York, New York in accordance with the rules of
the American Arbitration Association before a board of three (3) disinterested
persons, consisting of one arbitrator to be appointed by the Companies, one by
Levin, and one by the arbitrators so chosen. Judgment may be entered on the
arbitrators' award in any court having jurisdiction. For purposes of entering
any judgment upon an award rendered by the arbitrators, the Companies hereby
consent to the jurisdiction of any or all of the following courts: (i) the
United States District Court for the Southern District of New York, (ii) any of
the courts of the State of New York, or (iii) any other court having
jurisdiction. The Companies further agree that any service of process or notice
requirements in any such proceeding shall be satisfied if the rules of such
court relating thereto have been substantially satisfied. The Companies and
Levin hereby waive, to the fullest extent permitted by applicable law, any
objection which they may now or hereafter have to such jurisdiction and any
defense of inconvenient forum. The Companies and Levin hereby agree that a
judgment upon an arbitrator's award may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. To the extent Levin
substantially prevails in any arbitration pursuant to this Section 12, the
Companies shall indemnify and hold harmless Levin from and against all
reasonable legal fees and expenses paid or incurred by him in connection with
such arbitration. Notwithstanding any other provision of this Agreement, any
payment to Levin under this Agreement shall be postponed during the pendency of
any dispute or controversy arising under or in connection with this Agreement.

      13. Withholding. All payments made by the Companies under this Agreement
shall be reduced by any tax or other amounts required to be withheld by the
Companies under applicable law.

      14. Assignment. Neither of the Companies nor Levin may make any assignment
of this Agreement, or any interest in it, by operation of law or otherwise,
without the prior written consent of the other; provided, however, that a
Company may assign its rights and obligations under this Agreement without the
consent of Levin in the event that such Company shall effect a reorganization,
consolidate with, or merge into any other entity or transfer all or
substantially all of its properties or assets to any other entity; provided,
further, that in the event of such reorganization, consolidation or merger, the
Company shall require any successor (whether direct

                                       15
<PAGE>   16

                                                      Levin Employment Agreement

or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. This Agreement shall inure to the benefit of and be binding
upon the Companies, their respective successors, and permitted assigns. This
Agreement shall also inure to the benefit of and be binding upon Levin, his
executors, administrators and heirs.

      15. Indemnification The Companies will indemnify Levin to the fullest
extent permitted by the General Corporation Law of the State of Delaware or as
otherwise set forth in their respective certificates of incorporation and
by-laws as of the date hereof, and in accordance with applicable law, including
the 1940 Act. During the Term, the Companies will maintain customary officers
and directors insurance substantially similar to such insurance as is currently
in effect with respect to the senior executives and directors of BKF.

      16. Mitigation. Levin shall have no duty to mitigate the amount of any
payment or benefit provided hereunder by seeking alternative employment
following his termination of employment with the Companies. To the extent that
Levin obtains or undertakes other employment, Levin shall be obligated to
mitigate the amount of any payment or benefit provided for in this Agreement to
the extent of any payment or benefit received from such other employment, and
the amounts contained herein shall be correspondingly reduced.

      17. Severability. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.

      18. Waiver. No waiver of any provision of this Agreement shall be
effective unless made in writing and signed by the waiving party. The failure of
either party to require the performance of any term or obligation of this
Agreement, or the waiver by either party of any breach of this Agreement, shall
not prevent any subsequent enforcement of such term or obligation or be deemed a
waiver of any subsequent breach.

      19. Notices. Any and all notices, requests, demands and other
communications provided for or required by this Agreement shall be in writing
and shall be effective when delivered in person or deposited in the United
States mail, postage prepaid, registered or certified, and addressed to Levin at
his last known address on the books of BKF, in the case of BKF, at its principal
place of business, Attention: Chairman of the Board, or in the case of Merger
Subsidiary, at its principal place of business, Attention: John A. Levin or to
such other address as Levin or the Companies may specify by notice to the
others.

      20. Entire Agreement. This agreement constitutes the entire agreement
between the parties and supersedes all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of
Levin's employment, other than the Merger Agreement.

                                       16
<PAGE>   17

      21. Amendment. This Agreement may be amended or modified only by a written
instrument signed by Levin and by an authorized representative of each of the
Companies, it being understood that any such action on behalf of the Companies
may be taken only with the prior approval of the Board.

      22. Headings. The headings and captions in this Agreement are for
convenience only and in no way define or describe the scope or content of any
provision of this Agreement.

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

      24. Governing Laws. This is a New York contract and shall be construed and
enforced under and be governed in all respects by the substantive laws of The
State of New York, without regard to the conflict of laws principles thereof.

      IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument as of the date first above written.

JOHN A.LEVIN                             BAKER, FENTRESS & COMPANY

/s/ John A. Levin
-------------------------------          By:__________________________
John A. Levin
                                      Title:__________________________

                                            JALC ACQUISITION CORP.

                                         By:__________________________
                                      Title:__________________________

<PAGE>   18

                                                      Levin Employment Agreement

      21. Amendment. This Agreement may be amended or modified only by a written
instrument signed by Levin and by an authorized representative of each of the
Companies, it being understood that any such action on behalf of the Companies
may be taken only with the prior approval of the Board.

      22. Headings. The headings and captions in this Agreement are for
convenience only and in no way define or describe the scope or content of any
provision of this Agreement.

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

      24. Governing Laws. This is a New York contract and shall be construed and
enforced under and be governed in all respects by the substantive laws of The
State of New York, without regard to the conflict of laws principles thereof.

      IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument as of the date first above written.

JOHN A. LEVIN                               BAKER, FENTRESS & COMPANY

/s/ John A. Levin                           By: /s/ James P. Gorter
----------------------------                   ------------------------------
John A. Levin
                                         Title: CHAIRMAN
                                               ------------------------------

                                           JALC ACQUISITION CORP.

                                           By: /s/ James P. Gorter
                                              ------------------------------

                                          Title: CHAIRMAN
                                              ------------------------------

                                       17
<PAGE>   19

                               Schedule 3(c)
                               -------------

1.    Morgan Stanley Africa Investment Fund, Inc.

2.    Morgan Stanley Asia - Pacific Fund, Inc.

3.    Morgan Stanley Emerging Markets Fund, Inc.

4.    Morgan Stanley Emerging Markets Debt Fund, Inc.

5.    Morgan Stanley Global Opportunity Bond Fund, Inc.

6.    The Brazilian Investment Fund, Inc.

7.    The Latin American Discovery Fund, Inc.

8.    The Morgan Stanley High Yield Fund, Inc.

9.    The Morgan Stanley India Investment Fund, Inc.

10.   The Malaysia Fund, Inc.

11.   The Pakistan Investment Fund, Inc.

12.   The Thai Fund, Inc.

13.   The Turkish Investment Fund, Inc.

14.   Lincoln Center for the Performing Arts, Inc.

15.   The National Institute for the Deaf

16.   The Whitney Museum of American Folk Art

17.   Mt. Sinai Medical Center

18.   Yale University<PAGE>   1
                                                                    EXHIBIT 10.3

                              EMPLOYMENT AGREEMENT

                  This Agreement is made and entered into as of December 31,
1999 (the "Effective Date"), among LEVIN MANAGEMENT CO., INC., a Delaware
corporation (the "Company"), BAKER, FENTRESS & COMPANY, a Delaware corporation
and the sole stockholder of the Company ("BKF"), and GREGORY T. ROGERS (the
"Employee").

                  I. Employment. Subject to the terms and conditions set forth
in this Agreement, the Company hereby offers employment to the Employee, and the
Employee hereby accepts such employment, on the terms and conditions contained
herein.

                  II. Term. Subject to earlier termination as provided below,
the Employee shall be employed by the Company hereunder for the period (the
"Term") commencing on the date hereof (the "Effective Date") and ending on
December 31, 2002; provided, however, that , commencing on December 31, 2002,
and on each December 31 thereafter, the term shall automatically be extended for
successive one year periods unless either party shall give the other at least
six months advance written notice of their intention not to extend the Term.

                  III.     Capacity; Performance.

                          A. During the Term, the Employee shall serve the
Company as the Company's Chief Operating Officer and Executive Vice President of
Marketing and Strategy and shall report to the Company's Chief Executive Officer
(the "CEO"). The Employee's day to day responsibilities shall include the
management of marketing, product development, legal, personnel and operations,
and such other senior executive duties as may be directed by the CEO or the
Board of Directors of BKF (the "Board"). The Employee shall be based and shall
perform his duties primarily at the principal executive offices of the Company
in the City of New York, except for reasonable travel as the performance of his
duties hereunder may require.

                          B. Except as provided in Section 8(b), during the
Term, the Employee shall devote the Employee's full business time and best
efforts, business judgment, skill and knowledge exclusively to the advancement
of the business and interests of the Company and its affiliates and to the
discharge of the Employee's duties and responsibilities.

                          C. During the Term, the Company shall furnish the
Employee with office space, secretarial, communication, and services as shall be
appropriate for the Employee's position as reasonably necessary for the
performance of his duties under this Agreement.
<PAGE>   2
                          D. If any employee of the Company other than John A.
Levin is a member of the Board at the time of the mailing of the proxy statement
in respect of the 2001 annual meeting of BKF shareholders (the "2001 Annual
Meeting"), then BKF will use its best efforts to nominate the Employee for
election to the Board at the 2001 Annual Meeting. If any employee of the Company
other than John A. Levin is a member of the Board at the time of the mailing of
the proxy statement in respect of the 2002 annual meeting of BKF shareholders
(the "2002 Annual Meeting"), then BKF will use its best efforts to nominate the
Employee for election to the Board at the 2002 Annual Meeting. During any period
in which the Employee is serving as Executive Vice President and Chief Operating
Officer of the Company and is not a Director of BKF, Employee shall be invited
to attend meetings of the Board; provided that the Board may elect from time to
time to meet without the Employee present.

                  IV. Compensation and Benefits. As compensation for all
services performed by the Employee during the Term:

                          A. Signing Bonus. Upon execution of this Agreement,
the Company shall pay the Employee a one-time signing bonus (the "Signing
Bonus") in the amount of $403,848.

                          B. Base Salary. During the Term, the Company shall pay
the Employee a base salary at the annual rate of Four Hundred Thousand Dollars
($400,000.00). Employee's base salary shall be adjusted annually to reflect
increases in the cost of living to the same extent as other senior executives of
the Company. In addition, as of each anniversary of the Effective Date during
the Term, such base salary shall be reviewed, and may be increased (but not
decreased), in the discretion of the Chairman of the Board, subject to the
review and approval of the Board or a committee thereof, in light of the
Employee's position, responsibilities and performance. Employee's base salary,
as in effect at any given time, is referred to in this Agreement as the "Base
Salary" and shall be payable in regular installments in accordance with the
general payroll practices of the Company, as may be amended from time to time,
for its employees.

                          C. Guaranteed Bonuses. For calendar year 2000 and
2001, the Company shall pay the Employee an additional amount of compensation
equal to at least $600,000 (the "Guaranteed Bonus"). Up to 30% of the amount of
the Guaranteed Bonus shall be paid in stock options or other equity-based units
in accordance with the compensation plan of the Company (the "Deferred
Portion"); provided that the Deferred Portion shall vest at no lesser a rate
than in equal one-third annual installments; and provided, further, that the
deferred Portion for 2000 and 2001 shall be no greater, on a percentage basis,
than portion of the annual bonus deferred in each of such years with respect to
the senior executives of the Company generally. The remainder of the Guaranteed
Bonus shall be paid in cash as soon as practical after the end of 2000 or 2001
(as applicable) in accordance with the Company's established

                                       2
<PAGE>   3
practice for the payment of year-end bonuses to senior management, but in no
event later than March 15, 2001 or 2002 (as applicable).

                          D. Annual Incentive Award. For calendar years
commencing with 2002, the Employee shall be eligible for an "Annual Incentive
Award," as defined in the Baker, Fentress & Company 1998 Incentive Compensation
Plan (the "Incentive Plan"), with a target Annual Incentive Award of no less
than $600,000 based on the attainment of performance criteria established by the
Compensation Committee of the Board (the "Compensation Committee") in
consultation with the Employee with respect to such criteria and the amount of
any minimum bonus. A portion of the Annual Incentive Award shall be paid in
stock options or other equity-based units in accordance with the compensation
plan of the Company; provided that the portion of the Annual Incentive Bonus so
paid shall be no greater than the portion so paid to senior executives of the
Company generally; and provided, further, that any deferred portion of the
Annual Incentive Award shall vest at no lesser rate than in equal one-third
annual installments . The remainder of the Annual Incentive Award shall be paid
in cash as soon as practical after the end of the calendar year in accordance
with the Company's established practice for the payment of year-end bonuses to
senior management, but in no event later than March 15, of the following year.
The Employee acknowledges that, to the extent possible, the Annual Incentive
Award will be designed to be exempt from the application of Section 162(m) of
the Internal Revenue Code, meaning, among other things, that the actual amount
of the Annual Incentive Award will be based on objective performance criteria
established by the Compensation Committee in its sole discretion (and the
Employee understands that he will not be a member of the Compensation Committee
nor will he in any way be involved in the determination of the amount of his
Annual Incentive Award).

                          E. Stock Options.

                             1. The Employee shall be granted, pursuant to the
Incentive Plan, options (the "Stock Options") to purchase one percent (1%) of
the total outstanding common stock of BKF, subject to the conditions hereinafter
set forth. The Stock Options shall be granted no later than the earlier of (i)
March 15, 2000 or (ii) the first date following the Effective Date on which
other senior executives of the Company are granted options to purchase BKF
common stock. The per-share exercise price of the Stock Options shall be the
"Fair Market Value" (as defined in the Incentive Plan) of BKF's common stock as
of the date of grant. The Stock Options shall vest and become exercisable
according to the following schedule, provided that the Employee is still
employed on each such date, and provided further that each Stock Option shall
expire on the tenth anniversary of the date of its grant, or sooner as described
below:

                    VESTING DATE                            STOCK OPTIONS VESTED
       --------------------------------------               --------------------
                  December 31, 2000                           1/3

                                       3
<PAGE>   4
                  December 31, 2001                           1/3

                  December 31, 2002                           1/3

All Stock Options shall immediately vest and become exercisable upon a "Change
in Control" (as defined in Section 13). In the event of the termination of the
Employee's employment due to death or Disability, the Employee shall become
immediately vested in that number of Stock Options that would have been vested
had such termination occurred on the second anniversary of the actual date of
termination, and vested Stock Options shall remain outstanding until the earlier
of their scheduled expiration date, or two years following the date of
termination. In the event of the termination of the Employee's employment by the
Company without Cause or by the Employee for Good Reason, all unvested Stock
Options shall immediately become fully vested and exercisable, and remain
outstanding until the earlier of their scheduled expiration date, or two years
following the date of termination. In the event of the termination of the
Employee's employment by the Company for Cause or by the Employee without Good
Reason, all Stock Options, whether or not vested, shall immediately terminate.

                             2. The Stock Options shall be granted under the
Incentive Plan. The terms and conditions of the Stock Options shall be set forth
in a written stock option agreement between BKF and the Employee, which
agreement shall contain no terms or conditions which conflict with those
described in Section 4(e)(i) and (ii) above, and which otherwise shall contain
other customary terms and conditions.

                             3. The Employee shall be entitled to participate in
any long term incentive compensation programs, including future ordinary course
stock option grants, on the same basis as others senior executives of the
Company.

                          F. Benefit Plans. The Employee shall participate in
all employee benefit plans, programs and arrangements of the Company now or
hereinafter made available to any senior executives of the Company on a basis no
less favorable than is made available to any other such senior executives of the
Company, as such plans, programs and arrangements may be in effect from time to
time (including, without limitation, each plan, program or arrangement providing
for retirement benefits, supplemental retirement benefits, group life insurance,
accident and death insurance, medical insurance, sick leave, disability benefits
and perquisites). The Employee shall be entitled to long term disability
coverage in accordance with Company policy for senior executives. In addition,
the Employee shall be entitled to four weeks paid vacation per calendar year and
shall receive prompt reimbursement from the Company for all out-of-pocket
expenses incurred by the Employee in performing his duties hereunder; provided
that the Employee submits documentation for the reimbursement of such expenses
in accordance with the standard expense reimbursement policy of the Company.

                                       4
<PAGE>   5
                  V. Termination of Employment and Benefits. Notwithstanding the
provisions of Section 2, the Employee's employment under this Agreement shall
terminate prior to the expiration of the Term under the following circumstances:

                          A. Death. In the event of the Employee's death during
the Term, the Employee's employment under this Agreement shall immediately and
automatically terminate, in which event the Company shall pay to the Employee's
designated beneficiary or, if no beneficiary has been designated by him, to his
estate, (i) any Base Salary and other amounts or benefits earned or owing but
unpaid as of his death (the "Accrued Amounts"), along with continuation of
Employee's Base Salary for 90 days after the date of death and (ii) a pro-rata
portion of the Guaranteed Bonus or of the target Annual Incentive Award, as
applicable, for the calendar year of the Employee's death, based on the number
of days in such calendar year preceding and including the date of death.
Payments of any Base Salaries, Signing Bonus, Guaranteed Bonus or Annual
Incentive Award pursuant to the preceding sentence shall be made in a lump sum
within 30 days of the date of death. Except as provided in Section 4(e) above,
this Section 5(a) or Section 5(f) below, the Company shall have no further
obligation or liability under this Agreement upon the death of the Employee.

                          B. Disability.

                             1. The Company, by action of the Board, or the
Employee, may terminate the Employee's employment under this Agreement upon
advance written notice to the other, in the event of the Employee's Disability.
For purposes of this Agreement, "Disability" shall mean the Employee's
inability, due to physical or mental incapacity, to substantially perform his
duties and responsibilities under this Agreement for a period of 180 days in any
nine consecutive month period, as determined by an approved medical doctor. For
this purpose an approved medical doctor shall mean a medical doctor selected by
the parties. If the parties cannot agree on a medical doctor, each party shall
select a medical doctor and the two doctors shall select a third who shall be
the approved medical doctor for this purpose. The determination of whether or
not the Employee shall have suffered a Disability made by such medical doctor in
writing to the Company and the Employee shall be final and conclusive for all
purposes of this Agreement. In addition, the Board may designate another
employee to act in the Employee's place during any period in which the Employee
is unable to substantially perform his duties and responsibilities under this
Agreement due to extended illness or injury, whether or not a Disability.

                             2. Until the Employee's employment has been
terminated on account of a Disability, the Employee shall continue to receive
the Base Salary and there shall be no reduction in any other payments or
benefits which the Employee is entitled to receive.

                                       5
<PAGE>   6
                             3. Following the Company's termination of the
Employee's employment due to Disability, the Employee shall be entitled to
receive (i) the Accrued Amounts, (ii) a pro-rata portion of the Guaranteed Bonus
or target Annual Incentive Award, as applicable, for the calendar year in which
the Employee's termination occurs, based on the number of days in such calendar
year preceding and including the date of termination, and (iii) continued
participation (or, at the Company's election, the after-tax economic equivalent
thereof) in all welfare benefits plans of the Company for the remainder of the
Term. Payments of any Base Salary, Signing Bonus, Guaranteed Bonus or Annual
Incentive Award pursuant to the preceding sentence shall be made in a lump sum
within 30 days of the date of the termination of Employee's employment.

                             4. Except as provided in Section 4(e) above, this
Section 5(b) or Section 5(f) below, the Company shall have no further obligation
or liability under this Agreement to or with respect to the Employee after his
termination of employment for Disability.

                          C. By the Company for Cause. The Company may, by
action of the Board, terminate the Employee's employment under this Agreement
for Cause (as hereinafter defined) at any time upon advance written notice to
the Employee. The following, as determined by the Board in its reasonable
judgment, shall constitute "Cause" for termination:

                             1. the Employee's willful misconduct, other than
inconsequential acts, in the performance of the Employee's duties and
responsibilities with respect to the Company or any of its affiliates unless the
Employee reasonably believed that such conduct was in, or not opposed to, the
best interests of the Company;

                             2. the Employee's willful refusal to carry out any
lawful directions of the Chairman or of the Board which are reasonable in light
of the Employee's duties and responsibilities;

                             3. a willful material breach by the Employee of any
provision of this Agreement unless the Employee reasonably believed that such
conduct was in, or not opposed to, the best interests of the Company;

                             4. the Employee is convicted of, or pleads guilty
or no contest to, a felony or a crime involving moral turpitude

provided that no termination under this Section 5(c) shall be effective unless
the Employee shall have first received written notice from the Company
describing the basis of such termination for Cause and, in the case of clauses
(i) - (iii) above, within ten (10) days following the delivery of such notice
the Employee shall have refused to cure the alleged behavior constituting Cause
or in good faith commence the cure of such behavior. In addition, the Chief
Executive Officer of the Company shall use his

                                       6
<PAGE>   7
best efforts to arrange for the Employee a hearing before the Board prior to any
termination of his employment for Cause. Upon termination of the Employee's
employment for Cause, the Company shall have no further obligation or liability
to the Employee, except for Accrued Amounts and as otherwise provided in Section
5(f). Without limiting the generality of the foregoing, the Employee shall have
no right to receive any Guaranteed Bonus, Annual Incentive Award or any other
bonus for the year in which the termination for Cause occurs.

                          D. By the Company Other than for Cause.

                             1. The Company may, by action by the Board,
terminate the Employee's employment under this Agreement other than for Cause
upon at least 15 days advance written notice to the Employee. In the event of
such termination, the Company shall pay the Employee the Accrued Amounts and, in
addition, pay the Employee an amount equal to the sum of (i) Base Salary that
the Employee would have been entitled to receive had he remained employed with
the Company for the remainder of the Term and (ii) the amount of the target
Annual Incentive Awards, and if applicable, the Guaranteed Bonuses, that the
Employee would have received if he had remained employed with the Company for
the remainder of the Term, in a lump sum within 30 days of the date of the
Employee's termination of employment with the Company.

                             2. Following the termination of the Employee's
employment under this Agreement by the Company other than for Cause, for the
remainder of the Term or, if earlier, until the Employee becomes eligible for
medical insurance coverage with another employer, the Company shall provide for
the Employee's continued participation in the Company's health plans (or, at the
Company's election, a payment equal to the after-tax economic equivalent
thereof), but in either case subject to any employee contribution (on a tax
effected basis) applicable to the Employee on the date of termination and any
subsequent general amendment to the plans. It shall be in the Board's sole
discretion to determine whether, for any period, the Employee will receive
payment in lieu of actual coverage under the Company's medical insurance plan;
provided that the foregoing shall not limit any right the Employee may have
under any applicable federal or state continuation coverage laws or conversion
rights under the medical and dental insurance plan, but any period during which
medical coverage is continued pursuant hereto shall count toward any such
continuation rights.

                             3. Except as provided in Section 4(e) above, this
Section 5(d) or Section 5(f) below, the Company shall have no further obligation
or liability under this Agreement to or with respect to the Employee following a
termination of employment other than for Cause.

                          E. By the Employee.

                                       7
<PAGE>   8
                             1. The Employee shall provide the Company thirty
(30) days' advance written notice in the event the Employee terminates his
employment, other than for Good Reason (as hereinafter defined); provided that
the Board may, in its sole discretion, terminate the Employee's employment with
the Company prior to the expiration of the thirty (30) day notice period. In
such event and upon the expiration of such 30 day period (or such shorter time
as the Board in its sole discretion may determine), the Employee's employment
under this Agreement shall immediately and automatically terminate, and the
Company shall pay the Employee the Accrued Amounts as of the Employee's
termination date. The Employee's voluntary termination in accordance with this
Section 5(e) shall not be a breach of this Agreement.

                             2. The Employee may terminate his employment
hereunder for "Good Reason" if at any time during the Term the Company shall be
in a material breach of its obligations hereunder. The parties acknowledge and
agree that a material breach for purposes of this Section 5(e)(ii) shall
include, but not be limited to, (A) a reduction in his then current Base Salary
or in his target bonus opportunity; (B) a breach of the Company's material
obligations under this Agreement; (C) the termination of, or a material
reduction in, any employee benefit or perquisite enjoyed by him (other than as
part of an across-the-board reduction applying to all executive officers of the
Company); (D) a material diminution in his duties or the assignment to him of
duties that materially impair his ability to perform the duties normally
assigned to a person of his title and position at a corporation of the size and
nature of the Company; provided that the hiring of a President of the Company
with the normal duties and responsibilities associated with such a position
shall not be deemed to constitute a diminution of the Employee's duties; (E) the
failure to appoint the Employee to any of the positions in Section 3(a); (F) the
relocation of the Company's principal office, or of his own office as assigned
to him by the Company, to a location more than 30 miles from New York, New York;
or (G) the failure of the Company to obtain the assumption in writing of its
obligation to perform this Agreement by any successor to all or substantially
all of the business or assets of the Company within 15 days after a merger,
consolidation, sale or similar transaction. No termination for Good Reason shall
be permitted unless the Company shall have first received written notice from
the Employee describing the basis of such termination for Good Reason and within
ten (10) days following the delivery of such notice the Company shall not have
cured or in good faith commenced the cure of the breach specified in such
notice. A termination of the Employee's employment for Good Reason pursuant to
Section 5(e)(ii) shall be treated for purposes of this Agreement as a
termination by the Company other than for Cause and the provisions of Section
5(d) relating to the payment of compensation and benefits shall apply.

                             3. Except as provided in Section 4(e) above, this
Section 5(e) or Section 5(f) below, the Company shall have no further obligation
or liability under this Agreement following a termination of employment by the
Employee.

                                       8
<PAGE>   9
                          F. In addition to any amounts which may be payable
following a termination of employment pursuant to one of the paragraphs of this
Section 5, the Employee or his beneficiaries shall be entitled to receive any
benefits that may be provided for under the terms of any employee benefit plan
or program (other than a severance plan) in which the Employee is participating
at the time of termination, and shall be entitled to continuing benefits under
Section 15 hereof. Notwithstanding any other provision of this Agreement to the
contrary, the Employee acknowledges and agrees that any and all payments to
which the Employee is entitled under this Section 5 are conditioned upon and
subject to the Employee's execution of a mutual general waiver and release, in
substantially the form attached hereto, of all claims and issues arising under
this Agreement, except for such matters covered by provisions of this Agreement
which expressly survive the termination of this Agreement; provided, however,
that the Employee shall not be obligated to execute such release, unless within
30 days following his termination of employment, the Company shall have
delivered an executed copy of such mutual release, which shall be limited to
releasing the Employee from all claims known to the Company at the time, and
which shall only be effective upon the Employee's execution of a release which
shall not be so limited as to known claims.

                  VI. Effect of Termination. The provisions of this Section 6
shall apply upon the expiration of the Term, or upon earlier termination
pursuant to Section 5.

                          A. Except as specifically provided in this Agreement,
any benefits which the Employee is entitled to receive under any employee
benefit plan of the Company or its affiliates shall be determined and paid only
in accordance with the terms of such plan as then in effect; provided that any
further accrual of benefits under any such plan shall terminate pursuant to the
terms of such plan based on the date of termination of the Employee's employment
and without regard to any continuation of Base Salary or other payment to the
Employee following such date of termination.

                          B. Provisions of this Agreement shall survive any
termination expressly provided in this Agreement if necessary or desirable to
fully accomplish the purposes of such provision; provided that the provisions of
Sections 4(e), 5, 7, 8, 9, 10, 11, 12 and 15 shall in all events survive any
termination of the Employee's employment and the expiration of the Term.

                          C. In the event of termination of the Employee, and
upon the request of the Company, the Employee will keep the termination
confidential with respect to the Company's clients and other business
relationships until the Company has a reasonable period of time to notify
clients and others of such termination.

                          D. The obligation of the Company to make any payments
to or on behalf of the Employee under Section 5 (other than Section 5(f)) of
this Agreement shall terminate in the event of the Employee's willful or grossly
negligent material breach of the Employee's obligations under Sections 8 (other
than Section 8(e))

                                       9
<PAGE>   10
and 10 if, within ten (10) days following the delivery of written notice to the
Employee by the Company describing such alleged material breach, the Employee
shall have failed to cease, or in good faith commence to cease, the activities
constituting such material breach of such obligations. The obligation of the
Company to make any payment to or on behalf of the Employee under Section 5
(other than Section 5(f)) of this Agreement shall terminate in the event of the
Employee's willful or grossly negligent material breach of the Employee's
obligations under Section 7, provided that if such breach is curable such
termination of payments shall only be effective if, within ten (10) days
following delivery of written notice to the Employee by the Company describing
such alleged material breach, the Employee shall have failed to cure, or in good
faith not have commenced to cure, the material breach of such obligations.

                          E. In the event of termination of the Employee, the
Employee shall immediately tender his resignation from the Board, if applicable.

                          F. The Company acknowledges and agrees that any
amounts due under Section 5 are in the nature of severance payments considered
to be reasonable by the Company and are not in the nature of a penalty.

                  VII. Confidential Information.

                          A. The Employee acknowledges that the Company and each
of its affiliates have developed and will continually develop Confidential
Information; and that the Employee may have learned or may continue to learn of
Confidential Information during the course of employment with the Company. The
Employee will comply with the reasonable policies and procedures of the Company
and its affiliates, as amended from time to time, for protecting Confidential
Information and for so long as such information is not publicly available or
generally known in the Company's industry (other than through the act or
omission of the Employee), the Employee will not disclose to any person (other
than his legal representatives, counsel and accountants and except as required
by court order or applicable law or for the proper performance of the Employee's
duties and responsibilities to the Company and its affiliates or in respect of
any claim asserted involving the Employee and the Company), or use for the
benefit or gain of the Employee or any entity other than the Company, any
Confidential Information without the prior written consent of a specifically
authorized representative of the Company. Prior to the Employee's disclosure of
any Confidential Information pursuant to court order, applicable law, or in
defense to any claim asserted against him (other than claims asserted against
him by the Company), the Employee shall provide reasonable advance notice to the
Company sufficient to enable the Company to contest the disclosure or provision
of such Confidential Information. The Employee understands that this restriction
shall continue to apply after the Employee's employment terminates, regardless
of the reason for such termination.

                          B. The Employee shall protect the integrity of
Confidential Information and shall use reasonable efforts to keep confidential
all documents,

                                       10
<PAGE>   11
records, tapes and other media of every kind and description relating to the
business, present or otherwise, of the Company or its affiliates and any copies,
in whole or in part, thereof (the "Documents") containing Confidential
Information. All Documents, whether or not containing Confidential Information
and whether or not prepared by the Employee, shall be the sole and exclusive
property of the Company and its affiliates. The Employee shall use reasonable
efforts to safeguard all Documents, and all Confidential Information they
contain, and shall surrender to the Company at the time the Employee's
employment terminates, or at such earlier time or times as the Board or its
designee may specify, all Documents then in the Employee's possession or
control.

                          C. "Confidential Information" means any and all
information of the Company and its affiliates that is not generally known by
others with whom they did or do compete or do business, or with whom they plan
to compete or do business other than information which is publicly known or
generally known in the Company's industry (other than through the act or
omission of the Employee). Confidential Information includes without limitation
such information relating to (i) the development, research, marketing and
financial activities of the Company and its affiliates, (ii) the Products and
Services (as hereinafter defined), (iii) the financial performance and strategic
plans of the Company and its affiliates, (iv) the identity and special needs of
the clients of the Company and its affiliates and (v) the people and
organizations with whom the Company and its affiliates have had or have business
relationships and those relationships. Confidential Information also includes
comparable information that the Company or any of its affiliates have received,
belonging to clients or others who do business with the Company or any of its
affiliates or any other information that is, or has been, received by the
Company or any of its affiliates with any understanding, express or implied,
that it will not be disclosed.

                          D. "Products and Services" means all products and
services offered, planned, researched, developed, tested, sold, licensed,
marketed or otherwise provided by the Company or any of its affiliates during
the Employee's employment.

                  VIII. Restricted Activities. The Employee agrees that some
restrictions on the Employee's activities during and after the termination of
employment are necessary to protect the goodwill, Confidential Information,
client relationships and other legitimate interests of the Company and its
affiliates:

                          A. While the Employee is employed by the Company and ,
in the event of a termination of the Employee's employment by the Company for
Cause or by the Employee without Good Reason, for a period of six months
thereafter, the Employee shall not, directly or indirectly, whether as owner,
partner, principal, investor, consultant, agent, employee, co-venturer or
otherwise, compete with the Company or any of its affiliates within the United
States in the money management business ("Competitive Endeavors") or undertake
any planning for any business which would constitute a Competitive Endeavor. For
the purposes of this Section, the business of the Company and its affiliates
shall include all Products and Services

                                       11
<PAGE>   12
offered by the Company or any of its affiliates or under development and the
Employee's undertaking shall encompass all products and services that may be
used in substitution for Products and Services.

                          B. The Employee agrees that, during the Employee's
employment with the Company, the Employee will not, without the prior written
approval of the Board, undertake any outside activity, whether or not
competitive with the business of the Company or its affiliates, that could
reasonably give rise to a conflict of interest or otherwise interfere with the
Employee's duties and obligations to the Company or any of its affiliates.
Notwithstanding the foregoing, the Employee may (i) to the extent such
activities are not competitive with the business of the Company or its
affiliates, engage in charitable, civic or other community activities without
compensation to the Employee and (ii) render without compensation investment
advisory and trust services to immediate members of the Employee's family, which
shall include the Employee and any trust or account which is comprised primarily
of assets held for the benefit of such Employee and/or immediate members of his
family.

                          C. The Employee agrees that, during his employment
with the Company and for one year thereafter (the "Restricted Period"), the
Employee will not knowingly, directly or indirectly, (A) hire or attempt to hire
any person who, during the six-month period ending on the date of such activity,
was an employee of the Company or any of its affiliates (other than an employee
who employment was terminated by the Company), (B) assist another in hiring or
attempting to hire any such person, (C) encourage any such person to terminate
his or her employment with the Company or any of its affiliates (other than in
the course of the Employee's proper performance of his duties hereunder), (D)
solicit or accept business from any person or entity which, during the six-month
period ending on the date of such activity, was a client of the Company or any
of its affiliates, (E) assist another in soliciting or accepting business from
any such person or entity, or (F) encourage any such person or entity to
terminate its business relationship with the Company or any of its affiliates
(other than in the course of the Employee's proper performance of his duties
hereunder).

                          D. The Employee further agrees that during the
Restricted Period the Employee will not directly or indirectly solicit or
encourage any clients or others who do business with the Company or any of its
affiliates to terminate or diminish their relationship with any of them (other
than in the course of the Employee's proper performance of his duties hereunder)
or to violate any agreement with any of them.

                          E. The Employee agrees that, during the Term, he will
(i) comply with the code of ethics of BKF and the Company, as in effect from
time to time and (ii) notify the Board of all directorships or memberships on a
board of directors or board of trustees held by the Employee, regardless of
whether (y) such

                                       12
<PAGE>   13
office was held by the Employee prior to the date hereof or (z) such office
would require prior written consent of the Board.

                          F. The Employee and the Company explicitly and fully
agree that each will not at any time defame, nor during the Restricted Period
impugn or impair the reputation or public perception of or with respect to, or
disparage the other and, in the case of the Company, any of its employees,
directors or affiliates.

                          G. The parties intend that the foregoing provisions of
this Section 8 shall be deemed to be a series of separate covenants, one for
each and every county of each and every state of the United States of America
and each and every political subdivision of each and every country outside the
United States of America where this provision is intended to be effective.

                          H. The term "affiliate" as used in this Agreement
shall mean any entity in control of, controlled by or under common control with
the Company.

                  IX. Cooperation With Regard to Litigation. The Employee agrees
to cooperate with the Company, during the Term and thereafter (including
following the Employee's termination of employment for any reason), by making
himself reasonably available to testify on behalf of the Company or any of its
affiliates, in any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, relating to events which occurred during the
Employee's employment with the Company, and to assist the Company or any of its
affiliates, in any such action, suit, or proceeding, by providing information
and meeting and consulting with the Board or its representatives or counsel, or
representatives or counsel to the Company or any of its affiliates, as
reasonably requested by the Board or such representatives or counsel. The
Company agrees to reimburse the Employee, on an after-tax basis, for expenses
reasonably incurred in connection with such provision of testimony or
assistance; provided such expenses are approved in advance by the Company.

                  X. Notification Requirement. Until the conclusion of the
Restricted Period, the Employee shall give notice to the Company of any change
in the Employee's address and of each new job or other business activity that
the Employee plans to undertake, prior to beginning any such activity. Such
notice shall state the nature of the activity, the name and address of the
person for whom such job or activity is undertaken and the nature of the
Employee's business relationship(s) and position(s) with such person or the
Employee's change of address. The Employee shall provide the Company with such
other pertinent information concerning such business activity as the Company may
reasonably request in order to determine the Employee's continued compliance
with the Employee's obligations under Sections 7, 8, 9 and 10.

                  XI. Enforcement of Covenants. The Employee acknowledges that
the Employee has carefully read and considered all the terms and conditions of
this Agreement, including the conditions and restraints imposed upon the
Employee

                                       13
<PAGE>   14
pursuant to Sections 7, 8, 9 and 10. The Employee agrees that said conditions
and restraints are necessary for the reasonable and proper protection of the
Company and its affiliates and that each and every one of the conditions and
restraints is reasonable in respect to subject matter, length of time and
geographic area, in view of the receipt of consideration pursuant to this
Agreement, in the transactions contemplated above, the geographic scope and
nature of the business in which the Company is and will continue to be engaged,
the Employee's knowledge of the Company's business, and the Employee's
relationships with the Company's investment advisory and trust clients. The
Employee further acknowledges that, were the Employee to breach any of the
covenants contained in Sections 7, 8, 9 or 10, the damage to the Company would
be irreparable. The Employee therefore agrees that the Company, in addition to
any other remedies available to it, shall be entitled to temporary, preliminary
and permanent injunctive relief against any breach or threatened breach by the
Employee of any of said covenants, without having to post bond, in a court of
competent jurisdiction. The parties further agree that, in the event that any
provision of Sections 7, 8, 9 or 10 shall be determined by any court of
competent jurisdiction to be unenforceable by reason of its being extended over
too great a time, too large a geographic area or too great a range of
activities, such provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by law.

                  XII. Arbitration. Other than an action brought under Section
11, which may be brought directly in any court of competent jurisdiction, any
dispute or controversy arising under or in connection with this Agreement shall
be settled exclusively by arbitration in New York, New York in accordance with
the rules of the American Arbitration Association before a board of three (3)
disinterested persons, consisting of one arbitrator to be appointed by the
Company, one by the Employee, and one by the arbitrators so chosen. Judgment may
be entered on the arbitrators' award in any court having jurisdiction. For
purposes of entering any judgment upon an award rendered by the arbitrators, the
Company and the Employee hereby consent to the jurisdiction of any or all of the
following courts: (i) the United States District Court for the Southern District
of New York, (ii) any of the courts of the State of New York located in New
York, New York, or (iii) any other court having jurisdiction. The Company and
the Employee further agree that any service of process or notice requirements in
any such proceeding shall be satisfied if the rules of such court relating
thereto have been substantially satisfied. The Company and the Employee hereby
waive, to the fullest extent permitted by applicable law, any objection which it
may now or hereafter have to such jurisdiction and any defense of inconvenient
forum. The Company and the Employee hereby agree that a judgment upon an
arbitrator's award may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.

                  XIII. Definition of Change in Control. For purposes of this
Agreement, "Change in Control" shall mean the occurrence of any of the following
events:

                                       14
<PAGE>   15
         (i) any "person," as such term is currently used in Section 13(d) of
         the Securities Exchange Act of 1934, other than John A. Levin or any
         entity directly or indirectly controlled by him, becomes a "beneficial
         owner," as such term is currently used in Rule 13d-3 promulgated under
         that Act, of 50% or more of the "Voting Stock" (as defined below) of
         the Company;

         (ii) a majority of the Board consists of individuals other than
         Incumbent Directors, which term means the members of the Board on the
         Effective Date; provided that any individual becoming a director
         subsequent to such date whose election or nomination for election was
         supported by a majority of the directors who then comprised the
         Incumbent Directors shall be considered to be an Incumbent Director;

         (iii) all or substantially all of the assets or business of the Company
         are disposed of pursuant to a merger, consolidation or other
         transaction (other than the asset distribution transactions
         contemplated in the Company proxy statement dated July 22, 1999),
         unless (A) the shareholders of the Company immediately prior to such
         merger, consolidation or other transactions beneficially own, directly
         or indirectly, in substantially the same proportion as they owned the
         Voting Stock of the Company, all of the Voting Stock or other ownership
         interests of the entity or entities, if any, that succeed to the
         business of the Company or (B) a majority of the Board of Directors of
         the surviving corporation in such a transaction consists of Incumbent
         Directors or directors appointed by Levin Management Co., Inc. but
         excluding directors who were members of the other merger entity's Board
         of Directors;

         (iv) the Board adopts any plan of liquidation providing for the
         distribution of all or substantially all of the Company's assets; or

         (v) the Company combines with another company and is the surviving
         corporation but, immediately after the combination, the shareholders of
         the Company immediately prior to the combination hold, directly or
         indirectly, 50% or less of the Voting Stock of the combined company
         (there being excluded from the number of shares held by such
         shareholders, but not from the Voting Stock of the combined company,
         any shares received by Affiliates of such other company in exchange for
         securities of such other company).

For purposes of the above definition, the term "Voting Stock" shall mean issued
and outstanding capital stock or other securities of any class or classes having
general voting power, under ordinary circumstances in the absence of
contingencies, to elect the directors of a corporation.

                  XIV. Withholding. All payments made by the Company under this
Agreement shall be reduced by any tax or other amounts required to be withheld
by the Company under applicable law.

                                       15
<PAGE>   16
                  XV. Indemnification.

                          A. The Company agrees that if the Employee is made a
party, or is threatened to be made a party, to any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "Proceeding"), by
reason of the fact that he is or was a director, officer or employee of the
Company or is or was serving at the request of the Company as a director,
officer, member, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether or not the basis of such Proceeding is the Employee's
alleged action in an official capacity while serving as a director, officer,
member, employee or agent, the Employee shall be indemnified and held harmless
by the Company to the fullest extent permitted or authorized by the Company's
certificate of incorporation or bylaws or, if greater, by the laws of the State
of Delaware, against all cost, expense, liability and loss (including, without
limitation, attorney's fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) reasonably incurred or suffered by
the Employee in connection therewith, and such indemnification shall continue as
to the Employee even if he has ceased to be a director, member, employee or
agent of the Company or other entity and shall inure to the benefit of the
Employee's heirs, executors and administrators. The Company shall advance to the
Employee all reasonable costs and expenses incurred by him in connection with a
Proceeding within 20 days after receipt by the Company of a written request for
such advance. Such request shall include an undertaking by the Employee to repay
the amount of such advance if it shall ultimately be determined that he is not
entitled to be indemnified against such costs and expenses.

                          B. Neither the failure of the Company (including its
board of directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of any proceeding concerning payment of
amounts claimed by the Employee under Section 15(a) that indemnification of the
Employee is proper because he has met the applicable standard of conduct, nor a
determination by the Company (including its board of directors, independent
legal counsel or stockholders) that the Employee has not met such applicable
standard of conduct, shall create a presumption that the Employee has not met
the applicable standard of conduct.

                          C. The Company agrees to continue and maintain a
directors' and officers' liability insurance policy covering the Employee to the
extent the Company provides such coverage for its other executive officers.

                  XVI. Assignment. Neither the Company nor the Employee may make
any assignment of this Agreement, or any interest in it, by operation of law or
otherwise, without the prior written consent of the other; provided, however,
that the Company may assign its rights and obligations under this Agreement
without the consent of the Employee in the event that the Company shall effect a
reorganization, consolidate with, or merge into any other entity or transfer all
or substantially all of its

                                       16
<PAGE>   17
properties or assets to any other entity. This Agreement shall inure to the
benefit of and be binding upon the Company, its respective successors and
permitted assigns. This Agreement shall also inure to the benefit of and be
binding upon the Employee, his executors, administrators and heirs.

                  XVII. Mitigation. The Employee shall have no duty to mitigate
the amount of any payment or benefit provided hereunder by seeking alternative
employment following his termination of employment with the Company. To the
extent that the Employee obtains or undertakes other employment during the
period that would have been equal to the remainder of the Term had the
employee's employment with the Company not terminated, the Employee shall be
obligated to mitigate the amount of any payment or benefit provided for in
Section 5 (other than Section 5(f)) of this Agreement to the extent of any cash
compensation (whether or not deferred) or health coverage received from such
other employment during such period, and the amounts contained herein shall be
correspondingly reduced.

                  XVIII. Severability. If any portion or provision of this
Agreement shall to any extent be declared illegal or unenforceable by a court of
competent jurisdiction, then the remainder of this Agreement, or the application
of such portion or provision in circumstances other than those as to which it is
so declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.

                  XIX. Waiver. No waiver of any provision of this Agreement
shall be effective unless made in writing and signed by the waiving party. The
failure of either party to require the performance of any term or obligation of
this Agreement, or the waiver by either party of any breach of this Agreement,
shall not prevent any subsequent enforcement of such term or obligation or be
deemed a waiver of any subsequent breach.

                  XX. Notices. Any and all notices, requests, demands and other
communications provided for or required by this Agreement shall be in writing
and shall be effective when delivered in person or deposited in the United
States mail, postage prepaid, registered or certified, and addressed to the
Employee at the Employee's last known address on the books of the Company or, in
the case of the Company, at its principal place of business, attention of Glenn
Aigen or to such other address as the Employee or the Company may specify by
notice to the others.

                  XXI Entire Agreement. This agreement constitutes the entire
agreement between the parties and supersedes all prior communications,
agreements and understandings, written or oral, with respect to the terms and
conditions of the Employee's employment.

                  XXII Amendment. This Agreement may be amended or modified only
by a written instrument signed by the Employee and by an authorized
representative of

                                       17
<PAGE>   18
the Company, it being understood that any such action on behalf of the Company
may be taken only with the prior approval of the Board.

                  XXIII Headings. The headings and captions in this Agreement
are for convenience only and in no way define or describe the scope or content
of any provision of this Agreement.

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

                  XXV Governing Law. This is a New York contract and shall be
construed and enforced under and be governed in all respects by the substantive
laws of the State of New York, without regard to the conflict of laws principles
thereof or such principles of any other jurisdiction which could cause the
application of the law of any jurisdiction other than the State of New York.

                                       18
<PAGE>   19
                  IN WITNESS WHEREOF, this Agreement has been executed as a
sealed instrument as of the date first above written.

EMPLOYEE:                                  BAKER, FENTRESS & COMPANY

/s/ Gregory T. Rogers                      By: /s/ John A. Levin
--------------------------                    ----------------------------------
GREGORY T. ROGERS                             Its President
                                                 -------------------------------

                                           LEVIN MANAGEMENT CO., INC.

                                           By: /s/ John A. Levin
                                              ----------------------------------
                                              Its Chairman
                                                 -------------------------------

                                       19

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