sec document

DEFC14A 1 defc14a01874090_05112005.htm sec document

SCHEDULE 14A
(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )

Filed by the Registrant /_/

Filed by a Party other than the Registrant /X/

Check the appropriate box:

/ / Preliminary Proxy Statement

/_/ Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))

/X/ Definitive Proxy Statement

/_/ Definitive Additional Materials

/_/ Soliciting Material Under Rule 14a-12

BKF CAPITAL GROUP, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

STEEL PARTNERS II, L.P.
STEEL PARTNERS, L.L.C.
WARREN G. LICHTENSTEIN
RONALD LABOW
KURT N. SCHACHT
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(Name of Persons(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

/x/ No fee required.

/_/ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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/_/ Fee paid previously with preliminary materials:

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/_/ Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.

(1) Amount previously paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

-2-

STEEL PARTNERS II, L.P.

May 11, 2005

Dear Fellow Stockholder:

Steel Partners II, L.P. ("Steel Partners") is the beneficial owner
of an aggregate of 727,200 shares of Common Stock of BKF Capital Group, Inc.
("BKF" or the "Company"), representing approximately 9.5% of the outstanding
Common Stock of the Company. Steel Partners does not believe that the current
Board of Directors of the Company is acting in your best interests. Steel
Partners is therefore seeking your support at the annual meeting of stockholders
scheduled to be held at the offices of Paul, Weiss, Rifkind, Wharton &
Garrison LLP, 1285 Avenue of the Americas, New York, New York on Thursday, June
9, 2005, at 8:00 a.m. (local time) for the following:

1. To elect Steel Partners' slate of nominees to the Board of
Directors to serve as Class III directors,

2. To adopt a proposal recommended by the Board of Directors of the
Company and included in the Company's proxy statement to amend
the Restated Certificate of Incorporation of the Company to
declassify the Board of Directors,

3. To adopt a proposal recommended by the Board of Directors of the
Company and included in the Company's proxy statement to amend
the Restated Certificate of Incorporation of the Company to
eliminate the supermajority voting requirements for fundamental
transactions,

4. To adopt a proposal recommended by the Board of Directors of the
Company and included in the Company's proxy statement to ratify
the appointment of Grant Thornton LLP as the Company's
independent registered public accounting firm,

5. To adopt a resolution previously submitted by Steel Partners for
inclusion in the Company's proxy statement recommending that the
Board of Directors declassify the Board of Directors,

6. To adopt a resolution previously submitted by GAMCO Investors,
Inc. for inclusion in the Company's proxy statement recommending
that the Board of Directors redeem the rights issued by the
Company pursuant to its poison pill, and

7. To adopt a resolution previously submitted by Opportunity
Partners L.P. for inclusion in the Company's proxy statement
recommending that the Board of Directors engage an investment
banking firm to pursue a sale of the Company.

Steel Partners urges you to carefully consider the information
contained in the attached Proxy Statement and then support its efforts by
signing, dating and returning the enclosed GOLD proxy card today. The attached
Proxy Statement and the enclosed GOLD proxy card are first being furnished to
the stockholders on or about May 12, 2005.

If you have already voted for the incumbent management slate or
against the business proposals described in the Proxy Statement, you have every
right to change your votes by signing, dating and returning a later dated proxy.

If you have any questions or require any assistance with your vote,
please contact Morrow & Co., Inc., which is assisting us, at their address and
toll-free numbers listed on the following page.

Thank you for your support,

Warren G. Lichtenstein
Steel Partners II, L.P.

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

IF YOU HAVE ANY QUESTIONS, REQUIRE ASSISTANCE IN VOTING YOUR GOLD PROXY CARD,
OR NEED ADDITIONAL COPIES OF STEEL PARTNERS' PROXY MATERIALS, PLEASE CALL
MORROW & CO., INC. AT THE PHONE NUMBERS LISTED BELOW.

MORROW & CO., INC.

445 Park Avenue, 5th Floor
New York, New York 10022
(212) 754-8000

BANKS AND BROKERAGE FIRMS, PLEASE CALL: (800) 654-2468
STOCKHOLDERS CALL TOLL FREE: (800) 607-0088
E-MAIL: STEEL.INFO@MORROWCO.COM

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-2-

ANNUAL MEETING OF STOCKHOLDERS
OF
BKF CAPITAL GROUP, INC.
-------------------------

PROXY STATEMENT
OF
STEEL PARTNERS II, L.P.

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

PLEASE SIGN, DATE AND MAIL THE ENCLOSED GOLD PROXY CARD TODAY

Steel Partners II, L.P., a Delaware limited partnership ("Steel
Partners" or "we"), is a significant stockholder of BKF Capital Group, Inc., a
Delaware corporation ("BKF" or the "Company"). Steel Partners is writing to you
in connection with the election of three nominees to the board of directors of
BKF (the "BKF Board") at the annual meeting of stockholders scheduled to be held
at the offices of Paul, Weiss, Rifkind, Wharton & Garrison LLP, 1285 Avenue
of the Americas, New York, New York on Thursday, June 9, 2005, at 8:00 a.m.
(local time), including any adjournments or postponements thereof and any
meeting which may be called in lieu thereof (the "Annual Meeting"). This proxy
statement (the "Proxy Statement") and the enclosed GOLD proxy card are first
being furnished to stockholders on or about May 12, 2005.

This proxy statement and the enclosed GOLD proxy card are being
furnished to stockholders of BKF by Steel Partners in connection with the
solicitation of proxies from BKF's stockholders for the following:

1. To elect Steel Partners' director nominees, Warren G.
Lichtenstein, Ronald LaBow and Kurt N. Schacht (the "Nominees")
to serve as Class III directors of the Company, in opposition to
BKF's incumbent directors whose terms expire at the Annual
Meeting,

2. To adopt a proposal recommended by the BKF Board and included in
the Company's proxy statement to amend the Restated Certificate
of Incorporation of the Company to declassify the BKF Board,

3. To adopt a proposal recommended by the BKF Board and included in
the Company's proxy statement to amend the Restated Certificate
of Incorporation of the Company to eliminate the supermajority
voting requirements for fundamental transactions,

4. To adopt a proposal recommended by the BKF Board and included in
the Company's proxy statement to ratify the appointment of Grant
Thornton LLP as the Company's independent registered public
accounting firm,

5. To adopt a resolution previously submitted by Steel Partners for
inclusion in the Company's proxy statement recommending that the
BKF Board declassify the BKF Board,

6. To adopt a resolution previously submitted by GAMCO Investors,
Inc. ("GAMCO") for inclusion in the Company's proxy statement
recommending that the BKF Board redeem the rights issued by the
Company pursuant to its poison pill, and

7. To adopt a resolution previously submitted by Opportunity
Partners L.P. ("Opportunity Partners") for inclusion in the
Company's proxy statement recommending that the BKF Board engage
an investment banking firm to pursue a sale of the Company.

Steel Partners, Steel Partners, L.L.C. ("Partners LLC"), Warren G.
Lichtenstein, Ronald LaBow and Kurt N. Schacht are members of a group (the
"Group") formed in connection with this proxy solicitation and are deemed
participants in this proxy solicitation.

BKF has set the record date for determining stockholders entitled to
notice of and to vote at the Annual Meeting as April 25, 2005 (the "Record
Date"). The mailing address of the principal executive offices of BKF is One
Rockefeller Plaza, New York, New York 10020. Stockholders of record at the close
of business on the Record Date will be entitled to vote at the Annual Meeting.
According to BKF, as of the Record Date, there were 7,530,536 shares of common
stock, $1.00 par value per share (the "Shares"), outstanding and entitled to
vote at the Annual Meeting. As of the Record Date, Steel Partners, along with
all of the participants in this solicitation, were the beneficial owners of an
aggregate of 713,300 Shares, which represents approximately 9.5% of the Shares
outstanding (based on the Company's proxy statement). The participants in this
solicitation intend to vote such Shares for the election of the Nominees and the
business proposals described herein.

THIS SOLICITATION IS BEING MADE BY STEEL PARTNERS AND NOT ON BEHALF OF THE BOARD
OF DIRECTORS OR MANAGEMENT OF BKF. STEEL PARTNERS IS NOT AWARE OF ANY OTHER
MATTERS TO BE BROUGHT BEFORE THE ANNUAL MEETING. SHOULD OTHER MATTERS, WHICH
STEEL PARTNERS IS NOT AWARE OF A REASONABLE TIME BEFORE THIS SOLICITATION, BE
BROUGHT BEFORE THE ANNUAL MEETING, THE PERSONS NAMED AS PROXIES IN THE ENCLOSED
GOLD PROXY CARD WILL VOTE ON SUCH MATTERS IN THEIR DISCRETION.

STEEL PARTNERS URGES YOU TO SIGN, DATE AND RETURN THE GOLD PROXY CARD IN FAVOR
OF THE ELECTION OF ITS NOMINEES AND THE BUSINESS PROPOSALS DESCRIBED IN THIS
PROXY STATEMENT.

-2-

IF YOU HAVE ALREADY SENT A PROXY CARD FURNISHED BY BKF MANAGEMENT TO BKF, YOU
MAY REVOKE THAT PROXY AND VOTE FOR THE ELECTION OF STEEL PARTNERS' NOMINEES AND
THE BUSINESS PROPOSALS DESCRIBED HEREIN BY SIGNING, DATING AND RETURNING THE
ENCLOSED GOLD PROXY CARD. THE LATEST DATED PROXY IS THE ONLY ONE THAT COUNTS.
ANY PROXY MAY BE REVOKED AT ANY TIME PRIOR TO THE ANNUAL MEETING BY DELIVERING A
WRITTEN NOTICE OF REVOCATION OR A LATER DATED PROXY FOR THE ANNUAL MEETING TO
STEEL PARTNERS, C/O MORROW & CO., INC. WHICH IS ASSISTING IN THIS SOLICITATION,
OR TO THE SECRETARY OF BKF, OR BY VOTING IN PERSON AT THE ANNUAL MEETING.

-3-

IMPORTANT

YOUR VOTE IS IMPORTANT, NO MATTER HOW MANY OR HOW FEW SHARES YOU
OWN. STEEL PARTNERS URGES YOU TO SIGN, DATE, AND RETURN THE ENCLOSED GOLD PROXY
CARD TODAY TO VOTE FOR THE ELECTION OF STEEL PARTNERS' NOMINEES AND FOR THE
ADOPTION OF THE BUSINESS PROPOSALS DESCRIBED HEREIN.

o If your Shares are registered in your own name, please sign and date
the enclosed GOLD proxy card and return it to Steel Partners, c/o
Morrow & Co., Inc., in the enclosed envelope today.

o If any of your Shares are held in the name of a brokerage firm,
bank, bank nominee or other institution on the Record Date, only it
can vote such Shares and only upon receipt of your specific
instructions. Accordingly, please contact the person responsible for
your account and instruct that person to execute on your behalf the
GOLD proxy card. Steel Partners urges you to confirm your
instructions in writing to the person responsible for your account
and to provide a copy of such instructions to Steel Partners, c/o
Morrow & Co., Inc., who is assisting in this solicitation, at the
address and telephone numbers set forth below, and on the back cover
of this Proxy Statement, so that we may be aware of all instructions
and can attempt to ensure that such instructions are followed.

If you have any questions regarding your proxy,
or need assistance in voting your Shares, please call:

MORROW & CO., INC.

445 Park Avenue, 5th Floor
New York, New York 10022
(212) 754-8000

BANKS AND BROKERAGE FIRMS, PLEASE CALL: (800) 654-2468
STOCKHOLDERS CALL TOLL FREE: (800) 607-0088
E-MAIL: STEEL.INFO@MORROWCO.COM

-4-

BACKGROUND TO SOLICITATION

Steel Partners has been a long term investor in BKF since December
2003 and is currently the beneficial owner of 727,200 Shares, representing
approximately 9.5% of the issued and outstanding Common Stock. The following is
a chronology of events leading up to this proxy solicitation:

o Over the past several months, Steel Partners entered into
discussions with individual members of the Board of Directors to
express Steel Partners' concerns regarding BKF's compensation
arrangements, its failure to control administrative expenses,
its disappointing financial performance and its failure to enact
much needed corporate governance reforms. These discussions did
not result in any substantive reforms by the Company.

o On December 16, 2004, Steel Partners delivered a letter to BKF
expressing its concern with BKF's corporate governance and
operations and encouraging the BKF Board to implement various
reforms.

o On December 16, 2004, Steel Partners delivered a letter to BKF
submitting, pursuant to Rule 14a-8 of the Securities Exchange
Act of 1934, as amended, a proposal to eliminate the
classification of the BKF Board for inclusion in BKF's proxy
statement at the Annual Meeting.

o On December 16, 2004, Steel Partners delivered a letter to BKF
requesting, pursuant to Section 220 of the Delaware General
Corporation Law, a complete list of BKF's stockholders and other
corporate records in order to allow Steel Partners to
communicate with BKF's stockholders on Steel Partners' proposal
to eliminate the classification of the BKF Board.

o On February 11, 2005, Steel Partners delivered a letter to BKF
nominating Warren G. Lichtenstein, Ronald LaBow and Kurt N.
Schacht for election to the BKF Board at the Annual Meeting (the
"Nomination Letter").

o On or around February 15, 2005, Steel Partners received a letter
from BKF (the "BKF Response") requesting additional information
concerning Steel Partners, its affiliates and the Nominees in
order to evaluate the eligibility of the Nominees to be
directors of BKF in accordance with the Company's Bylaws. BKF
reserved the right to object to the eligibility of any of the
Nominees and compliance of the Nomination Letter with the
Company's Bylaws and applicable law, notwithstanding receipt of
the requested information.

o On February 24, 2005, Steel Partners delivered a letter to BKF
containing the additional information requested in the BKF
Response. Steel Partners believes that the information contained
in the Nomination Letter fully complied with the advance notice
requirements of the Company's Bylaws and that no additional
information was required by BKF for Steel Partners to proceed
with its nomination of the Nominees and solicitation of proxies
in furtherance of the election of the Nominees, subject to
filing a definitive proxy statement with the Securities and
Exchange Commission ("SEC"). Steel Partners has not received a
written response from BKF to this letter.

-5-

PROPOSAL NO. 1

ELECTION OF DIRECTORS

The BKF Board is currently composed of nine directors divided into
three equal classes serving staggered three-year terms. It is Steel Partners'
understanding that the terms of three Class III directors of the BKF Board - J.
Barton Goodwin, John A. Levin and Burton G. Malkiel - expire at the Annual
Meeting. Steel Partners expects that the BKF Board will nominate these incumbent
directors for re-election at the Annual Meeting. Steel Partners is seeking your
support at the Annual Meeting to elect its Nominees in opposition to BKF's
director nominees.

REASONS WHY STEEL PARTNERS IS CHALLENGING THE INCUMBENT DIRECTORS

Steel Partners is concerned about BKF's ability to implement a
business plan that will promptly return the Company to consistent profitability.
BKF, as further discussed in its public filings, operates entirely through John
A. Levin & Co., an SEC-registered investment adviser, and its related entities.
According to its Web site, John A. Levin & Co. manages approximately $13 Billion
of assets with a focus on "value-oriented investment services." According to its
public filings, BKF had net losses of approximately $1.8 Million and $8.4
Million for the years ended December 31, 2004 and December 31, 2003,
respectively. It is quite evident from this performance that BKF has failed to
deliver value to its own stockholders.

We also believe that the BKF Board should immediately implement
corporate governance reforms. This is why we previously submitted for inclusion
in the Company's proxy statement for consideration at the Annual Meeting a
proposal requesting that the BKF Board take the steps necessary to eliminate the
classification of the BKF Board and to require that all directors stand for
election annually. After Steel Partners filed its preliminary proxy statement in
support of its proposal to declassify the BKF Board, on April 7, 2005 BKF filed
its preliminary proxy statement with the SEC which includes a binding proposal
to declassify the BKF Board. Although Steel Partners supports BKF's decision to
put the issue of board classification to a binding vote at the Annual Meeting,
the BKF Board does not state in its proxy statement that the individual board
members will vote their shares in favor of this proposal. As approval of this
proposal requires the affirmative vote of the holders of at least 80% of the
outstanding Shares, Steel Partners is concerned that this proposal may not be
approved unless BKF actively and wholeheartedly campaigns for its approval.

Steel Partners is also disappointed with the proposed structure of
the declassification of the BKF Board. If the proposal is approved, the board
structure will be changed so that commencing with the 2006 annual meeting of
stockholders and for each subsequent annual meeting, those directors whose terms
expire at the applicable annual meeting of stockholders will be elected for a
one-year term, such that only at the 2008 annual meeting of stockholders will
the stockholders be able to elect the whole board at once. Steel Partners
believes that the declassification should be done in a manner that does not
affect the term of directors elected prior to the Annual Meeting. This structure
would result in the BKF Board being fully declassified upon conclusion of the
2007 annual meeting of stockholders. The BKF Board's decision to implement the
board declassification over a three-year period calls into question the BKF
Board's purported commitment to sound corporate governance policies.

-6-

We have also publicly recommended that the BKF Board implement the
following corporate governance and operational changes, as further discussed
herein:

o USE EXCESS CASH TO INCREASE DIVIDEND AND/OR REPURCHASE STOCK
AGGRESSIVELY

o APPOINT A SEASONED CHIEF OPERATING OFFICER WHO WILL REDUCE
EXPENSES AND IMPROVE OPERATING PERFORMANCE

o REDEEM BKF'S COMMON SHARE PURCHASE RIGHTS

o ELIMINATE FROM THE CERTIFICATE OF INCORPORATION AND BYLAWS
CERTAIN CLASSIC ANTI-TAKEOVER PROVISIONS

As further described below, we believe that the election of the
Nominees and approval of the stockholder proposals described herein represent
the best means for BKF's stockholders to maximize the value of their Shares.
Steel Partners, as one of the largest stockholders of BKF, has a vested
financial interest in the maximization of the value of your Shares. Our
interests are aligned with the interests of all stockholders. Additionally,
Steel Partners believes that the Nominees have extensive experience in private
and public investment, corporate governance and business management as further
discussed in their biographical extracts below. If elected to the BKF Board, the
Nominees will endeavor to use their collective experience to oversee the Company
with a goal of achieving consistent profitability, implementing the corporate
governance reforms and operational changes espoused by Steel Partners as well as
exploring other alternatives to maximize stockholder value. There can be no
assurance that these goals will be achieved if the Nominees are elected.

-7-

STEEL PARTNERS IS CONCERNED WITH BKF'S FAILURE TO CONSISTENTLY TURN A PROFIT

According to its public filings, BKF had net losses of approximately
$1.8 Million and $8.4 Million for the years ended December 31, 2004 and December
31, 2003, respectively. We do not understand how a money management company that
manages approximately $13 Billion of assets and generated over $225 Million in
revenues during this time period can lose money. BKF's financial performance
during this period is especially alarming when compared to the financial
performance of other publicly-traded money managers in the table set forth
below.

Twelve Months Ended December 31, 2004
-------------------------------------

Operating Income
as a Percentage
Revenues Operating Income of Revenues Return on Equity
-------- ---------------- ----------- ----------------
(dollars in millions)
Affiliated Managers Group Inc. $660 $268 40.6% 11.7%
Eaton Vance Corp.1 $687 $235 34.3% 33.2%
Gabelli Asset Management Inc. $255 $ 99 38.8% 17.1%
Nuveen Investments Inc. $506 $255 50.4% 29.4%
Waddell & Reed Financial Inc. $504 $163 34.5% 51.8%
BKF Capital Group, Inc. $123 $ 3 2.4% (1.9)%

1 All figures for Eaton Vance Corp. are for the twelve months ended January 31,
2005.

We believe the table above demonstrates an immediate need to improve
the Company's financial performance.

STEEL PARTNERS BELIEVES THAT BKF MUST ADOPT APPROPRIATE COMPENSATION
ARRANGEMENTS WITH ITS INVESTMENT PROFESSIONALS

We believe that a fundamental source of the Company's subpar
financial performance is the BKF Board's failure to adopt appropriate
compensation arrangements between BKF and its investment professionals. We have
previously expressed to the BKF Board that the Company must adopt compensation
arrangements that reward its key employees for performance and align their
interests directly with the Company's clients and stockholders. We even
requested from BKF documentation relating to the Company's compensation
arrangements with its investment professionals. The Company has never replied to
our request. On April 22, 2005, the Company publicly disclosed its compensation
arrangements for 2005 for Frank Rango and Henry Levin, two senior portfolio
managers. The Company has not disclosed comparable information with respect to
its other senior investment professionals.

-8-

Various publicly-traded money managers have adopted compensation
programs aligning the interests of key employees with the interests of clients
and stockholders. For example, as recently as January 2005, Janus Capital Group
approved a Mutual Fund Share Investment Plan for certain of its executive
officers and key employees to align the interests of the participants with the
interests of the company's mutual fund shareholders. The plan is designed to
grant eligible employees long-term incentive awards in the form of deferred cash
compensation that is credited with income, gains and losses based on the
performance of the Janus mutual fund investments selected by the participant
from a list of Janus Funds designated by the company. If the Nominees are
elected, they will recommend that the BKF Board explore the adoption of similar
compensation plans.

STEEL PARTNERS BELIEVES THAT BKF SHOULD INCREASE ITS DIVIDEND
TO STOCKHOLDERS AND/OR IMPLEMENT A STOCK REPURCHASE PROGRAM

In order to fully realize the inherent value of the Shares,
substantive changes need to be made in how the BKF Board operates the Company.
As of March 31, 2005, BKF had cash, cash equivalents and U.S. Treasury bills of
approximately $41 Million and no debt. We believe that BKF should utilize this
cash to increase its annual dividend and/or commence a stock repurchase program
which represent fundamentally sound methods to strengthen the Company's return
on invested capital and maximize stockholder value. After Steel Partners filed
its preliminary proxy statement, BKF announced that it had declared a special
dividend of $0.925 per share reflecting a new policy adopted by the BKF Board to
distribute to stockholders approximately 70% of the annual free cash flow
generated by BKF. BKF also announced that it will continue to pay quarterly
dividends (currently $.125 per share), which will be supplemented by an annual
special dividend representing the difference between the quarterly dividends and
approximately 70% of the free cash flow generated by BKF during the year. We
believe that BKF should have distributed a substantial portion of its
approximately $44 Million of cash, cash equivalents and U.S. Treasury bills as
of December 31, 2004 and should also distribute to its stockholders 100% of the
annual free cash flow.

STEEL PARTNERS BELIEVES THAT BKF SHOULD APPOINT AN OPERATING OFFICER WHO
WILL REDUCE EXPENSES AND IMPROVE THE COMPANY'S OPERATING PERFORMANCE

We reiterate our view that John A. Levin & Co. serves its clients
well and we are appreciative of John Levin's historical contribution to the
firm. However, we believe that BKF could better leverage its investment
professionals by filling the Chief Operating Officer position with a seasoned
professional who could bring the Company's bottom-line performance in line with
its industry peers. Mr. Levin also serves as Chairman and Chief Executive
Officer of both John A. Levin & Co., the Company's money management subsidiary,
and Levin Management Co., which owns and provides administrative and management
services to John A. Levin & Co. If the Nominees are elected, they will petition
the BKF Board to retain an executive search firm for the purpose of identifying
a qualified replacement for Mr. Levin at the holding company level.

-9-

STEEL PARTNERS BELIEVES THAT BKF SHOULD TERMINATE ITS SPECIAL ARRANGEMENTS
WITH RELATED PARTIES INCLUDING FAMILY MEMBERS OF JOHN A. LEVIN

Certain members of the BKF Board have made it a practice to engage
in related party transactions at the expense of the Company. We believe that the
following relationships may impair the BKF Board's ability to exercise
independent judgment.

SPECIAL ARRANGEMENT WITH JOHN LEVIN'S SON HENRY LEVIN

According to BKF's public filings, in 2004 Henry Levin, son of BKF
Chairman and CEO John Levin, received compensation of approximately $6.8 Million
as a portfolio manager for the event driven investment team and was allocated
approximately $1.9 Million in incentive fees as the managing member of
investment vehicles affiliated with the Company, or a total of approximately
$8.7 Million in compensation. We question how the compensation paid to Henry
Levin is aligned with the interests of the stockholders in light of the $1.8
Million in losses sustained by BKF in 2004.

SPECIAL ARRANGEMENT WITH JOHN LEVIN'S DAUGHTER JENNIFER LEVIN CARTER

According to BKF's public filings, in 2004 Jennifer Levin Carter,
daughter of Chairman and CEO John Levin, received approximately $175,000 from
the Company for "consulting services rendered to various alternative investment
strategies of the Company." We question the need for the services of Mr. Levin's
daughter.

SPECIAL ARRANGEMENT WITH PETER J. SOLOMON COMPANY OF WHICH PETER J. SOLOMON IS
CHAIRMAN

According to BKF's public filings, in 2003 BKF paid Peter J. Solomon
Company, of which BKF director Peter J. Solomon is Chairman, $100,000 for its
"services as a financial advisor." We call upon BKF to disclose the exact scope
of these advisory services and question whether these services could have been
obtained by the Company on more favorable terms from independent third parties.
In any event, we believe this arrangement brings into question Mr. Solomon's
independence.

SPECIAL ARRANGEMENT WITH TRAXIS PARTNERS OF WHICH BARTON BIGGS IS A MANAGING
PARTNER

According to BKF's public filings, in 2003 Traxis Partners, of which
BKF director Barton Biggs is a Managing Partner, paid BKF $136,000 in rent for
space in the Company's offices in New York City. This arrangement, in our
opinion, creates the appearance of a conflict of interest and brings into
question Mr. Biggs' independence.

-10-

STEEL PARTNERS BELIEVES THAT BKF SHOULD REDEEM THE COMMON SHARE
PURCHASE RIGHTS ISSUED PURSUANT TO ITS "POISON PILL"

In May 2001, the BKF Board adopted, without stockholder approval, a
rights agreement or "poison pill" purportedly to protect stockholders from
coercive or otherwise unfair takeover tactics. Historically, proponents of
poison pills have asserted that they enable a board of directors to respond in
an orderly fashion to unsolicited takeover bids by providing sufficient time to
carefully evaluate the fairness of such a bid. We oppose BKF's poison pill
because we believe that it places such an effective obstacle to a takeover bid
that it serves to entrench the BKF Board and management. We believe that BKF's
poison pill forces a would-be acquirer to negotiate its bid for the Company with
management, instead of making its offer directly to the stockholders. In our
opinion, the power of the BKF Board and management to block any bid that does
not leave them in control adversely affects stockholder value. We further
believe that the effect of the poison pill is to insulate management from the
most fundamental accountability to stockholders by providing management and the
BKF Board with a veto over takeover bids, even when stockholders might favorably
view such bids.

STEEL PARTNERS IS NOT ALONE IN ITS PUBLIC OPPOSITION TO BKF'S POISON
PILL. DURING EACH OF THE LAST THREE ANNUAL MEETINGS OF STOCKHOLDERS OF BKF,
STOCKHOLDER PROPOSALS TO REDEEM THE COMMON SHARE PURCHASE RIGHTS ISSUED PURSUANT
TO THE POISON PILL HAVE BEEN APPROVED BY STOCKHOLDERS BY AN OVERWHELMING
MAJORITY OF THE VOTE. SPECIFICALLY, APPROXIMATELY 66%, 77% AND 66% OF THE VOTES
CAST RESPECTIVELY DURING THE 2004, 2003 AND 2002 ANNUAL MEETINGS WERE VOTED IN
FAVOR OF THE STOCKHOLDER PROPOSALS. After each of these annual meetings, the BKF
Board has reported in its public filings that it recognizes the stockholder vote
in favor of this proposal but "continues to believe that the [poison pill]
supports the objectives of preserving and maximizing the Company's value for all
stockholders." In view of the overwhelming stockholder support this proposal has
received for three straight years, Steel Partners had always been disappointed
with the one-sentence boilerplate reason for rebuffing the stockholders' wishes
and called upon BKF to publicly explain why it believes the poison pill
preserves and maximizes stockholder value.

After Steel Partners filed its preliminary proxy statement, BKF
announced that the BKF Board approved an amendment to its poison pill to permit
tender offers for the entire company should one be made. Specifically, bidders
for 100% of BKF's outstanding shares would be exempt from the scope of the
poison pill if they successfully acquire a majority of the Company's outstanding
shares. The BKF Board also approved a provision mandating that the poison pill
be re-evaluated every three years by the independent directors of the Company.
While this amendment to the poison pill is a step in the right direction, Steel
Partners believes that the amendment does not adequately address all its
concerns with the poison pill, as further discussed in Proposal No. 6, and the
poison pill should be terminated immediately. If the Nominees are elected, they
will encourage the BKF Board to respect the right of the stockholders to
participate in the governance of their company by terminating the poison pill
and requiring that the stockholders approve any new stockholder rights plan.

-11-

STEEL PARTNERS BELIEVES THAT BKF SHOULD ELIMINATE FROM ITS CERTIFICATE
OF INCORPORATION AND BYLAWS CERTAIN ANTI-TAKEOVER PROVISIONS

The Company's Certificate of Incorporation ("Charter") and Bylaws
contain numerous anti-takeover provisions that we believe infringe on the
stockholders' rights to determine what is best for the Company and serve to
entrench current management. These anti-takeover provisions include, but are not
limited to, the following:

o Charter provision requiring approval of holders of at least 80%
of the Shares entitled to vote to remove directors

o Charter provision requiring approval of holders of at least 80%
of the Shares entitled to vote to approve mergers,
consolidations, sales of substantially all the assets or
liquidations not previously approved by at least two-thirds of
the BKF Board

o Charter and Bylaw provisions prohibiting stockholders from
taking action by written consent in lieu of a meeting

o Charter and Bylaws do not permit stockholders to call special
meetings of stockholders

We believe that the foregoing anti-takeover provisions are intended
to disenfranchise stockholders and strip away any semblance of management
accountability which BKF's stockholders deserve. After Steel Partners filed its
preliminary proxy statement, BKF announced that it will submit for a vote at the
Annual Meeting an amendment to its Charter to eliminate the supermajority
stockholder voting requirement for mergers and other business combinations.
Steel Partners supports this proposal. Again, however, Steel Partners is
concerned because the BKF Board does not state in its proxy statement that the
individual board members will vote their shares in favor of this proposal. As
with the proposal to declassify the BKF Board, approval of the proposal to
eliminate the supermajority stockholder voting requirement for fundamental
transactions requires the affirmative vote of the holders of at least 80% of the
outstanding Shares.

If elected, the Nominees will, subject to their fiduciary duties, be
committed to lobbying the BKF Board to eliminate the Company's remaining
anti-takeover provisions.

-12-

THE NOMINEES

The following information sets forth the name, age, business
address, present principal occupation, and employment and material occupations,
positions, offices, or employments for the past five years of each of the
Nominees. This information has been furnished to Steel Partners by the Nominees.
The Nominees are citizens of the United States of America.

WARREN G. LICHTENSTEIN (AGE 39) has been the Chairman of the Board,
Secretary and the Managing Member of Partners LLC, the general partner of Steel
Partners, since January 1, 1996 and the President, Chief Executive Officer and a
director of Steel Partners, Ltd., a management and advisory company that
provides management services to Steel Partners and its affiliates, since June
1999. Mr. Lichtenstein has been a director (currently Chairman of the Board) of
United Industrial Corporation, a company principally focused on the design,
production and support of defense systems and a manufacturer of combustion
equipment for biomass and refuse fuels, since May 2001. Mr. Lichtenstein has
been a director (currently Chairman of the Board) of SL Industries, Inc., a
designer and manufacturer of power electronics, power motion equipment, power
protection equipment, and teleprotection and specialized communication
equipment, since January 2002 and Chief Executive Officer since February 2002.
Mr. Lichtenstein has been a director of Layne Christensen Company, a provider of
products and services for the water, mineral, construction and energy markets,
since January 2004. Mr. Lichtenstein has been a director (currently Chairman of
the Board) of WebFinancial Corporation, a consumer and commercial lender, since
1996 and Chief Executive Officer since December 1997. The business address of
Mr. Lichtenstein is c/o Steel Partners II, L.P., 590 Madison Avenue, 32nd Floor,
New York, New York 10022. By virtue of his position with Partners LLC, Mr.
Lichtenstein has the power to vote and dispose of the Shares owned by Steel
Partners. Accordingly, Mr. Lichtenstein may be deemed to be the beneficial owner
of the Shares owned by Steel Partners. For information regarding purchases and
sales during the past two years by Steel Partners of securities of BKF that may
be deemed to be beneficially owned by Mr. Lichtenstein, see Schedule I.

RONALD LABOW (AGE 70) has been the President of Stonehill Investment
Corp., an investment fund, since February 1990. Mr. LaBow has been an officer
and director of WPN Corp., a financial consulting company, since 1987. From
January 1991 to February 2004, Mr. LaBow served as Chairman of the Board of WHX
Corporation (or its predecessor corporations), a NYSE listed holding company
structured to invest in and/or acquire a diverse group of businesses on a
decentralized basis, whose primary business is Handy & Harman, a diversified
manufacturing company with activities in precious metals fabrication, specialty
wire and tubing and engineered materials. The business address of Mr. LaBow is
c/o WPN Corp., 110 East 59th Street, New York, New York 10022. As of the date
hereof, Mr. LaBow did not beneficially own any securities of BKF. Mr. LaBow has
not purchased or sold any securities of BKF during the past two years.

-13-

KURT N. SCHACHT (AGE 51) has been the Executive Director of the CFA
Centre for Financial Market Integrity, an organization that advocates efficient,
ethical and transparent capital markets, since June 2004. During April and May
of 2004, Mr. Schacht worked for Steel Partners on its compliance procedures.
From April 2001 to March 2004, Mr. Schacht served as Chief Operating Officer and
General Counsel of Wyser-Pratte Asset Management, a New York City based hedge
fund. From September 1999 to March 2001, Mr. Schacht served as Chief Operating
Officer of Evergreen Asset Management, an asset management firm. From 1990 to
October 1999, Mr. Schacht served as the Chief Legal Officer of the State of
Wisconsin Investment Board, a public pension fund. In March 2005, Mr. Schacht
was named as a member of the SEC Advisory Committee on Smaller Public Companies
established to examine the impact of the Sarbanes-Oxley Act and other aspects of
the federal securities laws on smaller companies. He helped draft the Corporate
Governance Handbook released by the New York Society of Security Analysts and
was named its Volunteer of the Year in 2004 for his work on its Corporate
Governance Committee. He has worked on industry panels and programs relating to
corporate governance and board of directors issues for organizations such as the
New York Stock Exchange and the American Society of Corporate Secretaries and
served on the National Association of Corporate Directors Blue Ribbon Task Force
on evaluating director performance. Mr. Schacht received a Bachelor of Science
degree in Chemistry and a law degree from the University of Wisconsin-Madison.
He is a Chartered Financial Analyst and was awarded the CFA(R) designation in
1998. The business address of Mr. Schacht is 10 Old Pound Ridge Road, Pound
Ridge, New York 10576. As of the date hereof, Mr. Schacht did not beneficially
own any securities of BKF. Mr. Schacht has not purchased or sold any securities
of BKF during the past two years.

There can be no assurance that the actions our Nominees intend to
take as described above will be implemented if they are elected or that the
election of our Nominees will improve the Company's business or otherwise
enhance stockholder value. Your vote to elect the Nominees does not constitute a
vote in favor of our value enhancing plans for BKF. Your vote to elect the
Nominees will have the legal effect of replacing three incumbent directors of
BKF with our Nominees. Neither we (nor to our knowledge, any other person on our
behalf) has made or undertaken any analysis or reports as to whether stockholder
value will be maximized as a result of this solicitation or obtained reports
from consultants or other outside parties as to whether the proposals presented
herein would have an effect on stockholder value. There can be no assurance that
stockholder value will be maximized as a result of this solicitation or the
election of the Nominees.

The Nominees will not receive any compensation from Steel Partners
for their services as directors of BKF. Other than as stated herein, there are
no arrangements or understandings between Steel Partners and any of the Nominees
or any other person or persons pursuant to which the nomination described herein
is to be made, other than the consent by each of the Nominees to be named in
this Proxy Statement and to serve as a director of BKF if elected as such at the
Annual Meeting. None of the Nominees is a party adverse to BKF or any of its
subsidiaries or has a material interest adverse to BKF or any of its
subsidiaries in any material pending legal proceedings.

-14-

Steel Partners does not expect that the Nominees will be unable to
stand for election, but, in the event that such persons are unable to serve or
for good cause will not serve, the Shares represented by the enclosed GOLD proxy
card will be voted for substitute nominees. In addition, Steel Partners reserves
the right to nominate substitute persons if BKF makes or announces any changes
to its Bylaws or takes or announces any other action that has, or if consummated
would have, the effect of disqualifying the Nominees. In any such case, Shares
represented by the enclosed GOLD proxy card will be voted for such substitute
nominees. Steel Partners reserves the right to nominate additional persons if
BKF increases the size of the BKF Board above its existing size or increases the
number of directors whose terms expire at the Annual Meeting. Additional
nominations made pursuant to the preceding sentence are without prejudice to the
position of Steel Partners that any attempt to increase the size of the current
BKF Board or to reconstitute or reconfigure the classes on which the current
directors serve constitutes an unlawful manipulation of BKF's corporate
machinery.

YOU ARE URGED TO VOTE FOR THE ELECTION OF THE NOMINEES ON THE ENCLOSED GOLD
PROXY CARD.

-15-

PROPOSAL NO. 2

BKF PROPOSAL TO DECLASSIFY BKF BOARD

Article 6 of BKF's Charter provides that the BKF Board shall be
divided into three classes, with each class having a three-year term. The BKF
Board has adopted, subject to stockholder approval at the Annual Meeting, an
amendment to revise Article 6 of the Charter to declassify the BKF Board. The
proposal would allow for the annual election of directors in the manner
described below.

Steel Partners believes that BKF's classified board structure is not
in the best interests of the stockholders because it reduces accountability of
the BKF Board and, in Steel Partners' view, only serves to entrench current
management. Steel Partners generally believes that all stockholders are entitled
to have the opportunity to vote to elect all directors annually, not just once
every three years.

As discussed in further detail in the Company's proxy statement, the
elimination of the classified board would require an amendment to BKF's Charter.
If this proposal is approved by the stockholders, commencing with the 2006
annual meeting of stockholders and for each subsequent annual meeting, those
directors whose terms expire at the applicable annual meeting of stockholders
will be elected for a one-year term, such that from and after the 2008 annual
meeting of stockholders, the BKF Board would cease to be classified and all
directors would be elected for one-year terms at each annual meeting of
stockholders. Steel Partners supports this proposal although it believes that
the board declassification should be done in a manner that does not affect the
term of directors elected prior to the Annual Meeting. This structure would
result in the BKF Board being fully declassified upon conclusion of the 2007
annual meeting of stockholders.

The amendment to BKF's Charter to implement this proposal is
substantially in the form set forth in Appendix A of the Company's proxy
statement. If approved, this proposal will become effective upon the filing of a
Certificate of Amendment to the Charter with the Secretary of State of the State
of Delaware containing substantially this amendment.

Under BKF's Charter, approval of this proposal requires the
affirmative vote of the holders of at least 80% of the outstanding Shares as of
the Record Date.

YOU ARE URGED TO VOTE FOR BKF'S PROPOSAL TO AMEND BKF'S CHARTER TO DECLASSIFY
THE BKF BOARD.

-16-

PROPOSAL NO. 3

BKF PROPOSAL TO ELIMINATE SUPERMAJORITY VOTING REQUIREMENTS
FOR FUNDAMENTAL TRANSACTIONS

Article 8 of BKF's Charter provides that a favorable vote of the
holders of at least 80% of the shares of the Company then entitled to be voted
on the matter shall be required to approve, adopt or authorize (1) any amendment
to the Charter that makes the Shares a redeemable security (as that term is
defined in the Investment Company Act of 1940), (2) a merger or consolidation of
the Company with another corporation, (3) a sale of all or substantially all of
the assets of the Company, or (4) a liquidation of the Company, unless such
action has previously been approved, adopted or authorized by the affirmative
vote of at least two-thirds of the total number of directors fixed in accordance
with the Bylaws of the Company.

The BKF Board has adopted, subject to stockholder approval, an
amendment to eliminate Article 8 of the Charter in its entirety. The proposal
would mean that the approval of any such transaction by the BKF Board and by
holders of at least a majority of the outstanding stock of BKF entitled to vote
on the matter would be sufficient to approve, adopt and authorize any such
transaction, without the requirement of a supermajority vote by either the BKF
Board or the stockholders.

Steel Partners believes that a majority threshold for stockholder
approval of fundamental transactions rather than a supermajority threshold is
appropriate. Steel Partners believes that the requirement of a supermajority
vote for fundamental transactions can limit the ability of BKF to enter into a
value enhancing transaction such as a merger, consolidation or liquidation by
effectively providing a veto to a large minority stockholder or stockholder
group.

As further discussed in the Company's proxy statement, the
elimination of the supermajority voting requirement with respect to these
transactions would require an amendment to BKF's Charter. The proposed amendment
to BKF's Charter to implement this proposal is substantially in the form set
forth in Appendix A of the Company's proxy statement. If approved, this proposal
will become effective upon the filing of a Certificate of Amendment to BKF's
Charter with the Secretary of State of the State of Delaware containing
substantially this amendment.

Under BKF's Charter, approval of this proposal requires the
affirmative vote of the holders of at least 80% of the outstanding Shares as of
the Record Date.

YOU ARE URGED TO VOTE FOR BKF'S PROPOSAL TO AMEND BKF'S CHARTER TO ELIMINATE THE
SUPERMAJORITY VOTING REQUIREMENTS FOR FUNDAMENTAL TRANSACTIONS.

-17-

PROPOSAL NO. 4

BKF PROPOSAL TO RATIFY APPOINTMENT OF INDEPENDENT
PUBLIC ACCOUNTANTS

As discussed in further detail in the Company's proxy statement,
prior to the Annual Meeting, the Audit Committee of the BKF Board reappointed
Grant Thornton LLP, the independent registered public accounting firm, to audit
the financial statements of the Company for the year ending December 31, 2005.
BKF is asking stockholders to ratify the appointment of Grant Thornton LLP as
the independent registered public accounting firm of the Company.

Steel Partners does not object to the ratification of the
appointment of Grant Thornton LLP for the year ending December 31, 2005.

-18-

PROPOSAL NO. 5

STEEL PARTNERS PROPOSAL TO DECLASSIFY BKF BOARD

On December 16, 2004, Steel Partners delivered a letter to BKF
submitting a proposal for inclusion in BKF's proxy statement at the Annual
Meeting pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, as
amended. The proposal requests that the BKF Board take the steps necessary to
eliminate the classification of the BKF Board and to require that all directors
stand for election annually. BKF's Charter currently requires that the BKF Board
be divided into three classes having staggered three-year terms.

In accordance with Rule 14a-8, Steel Partners submitted to BKF the
following resolution and supporting statement that BKF will also be required to
include in its proxy statement for approval at the Annual Meeting:

RESOLUTION

RESOLVED, that the stockholders of BKF Capital Group,
Inc. request that the Board of Directors take the necessary steps to
declassify the Board of Directors and to require that all directors
stand for election annually. The Board declassification shall be
done in a manner that does not affect the unexpired terms of
directors previously elected.

SUPPORTING STATEMENT

We believe the election of directors is the most
powerful way that stockholders influence the strategic direction of
a public company. Currently, the Board of Directors of BKF Capital
is divided into three classes serving staggered three-year terms. It
is our belief that the classification of the Board of Directors is
not in the best interests of BKF Capital and its stockholders
because it reduces accountability and is an unnecessary
anti-takeover device. The elimination of the staggered board would
require each director to stand for election annually. We believe
that such annual accountability would serve to keep directors
closely focused on the performance of top executives and on
maximizing stockholder value. Concerns that the annual election of
directors would have a destabilizing impact by leaving our company
without experienced board members in the event that all incumbents
are voted out are unfounded. In the unlikely event the owners should
choose to replace the entire board, it would be obvious that the
incumbent directors' contributions were not valued.

A classified board of directors protects the incumbency
of the board of directors and current management, which in turn
limits accountability to stockholders. It is our belief BKF
Capital's corporate governance procedures and practices, and the
level of management accountability they impose, are related to the
financial performance of the company. We believe sound corporate
governance practices, such as the annual election of directors, will
impose the level of management accountability necessary to help
insure that a good performance record continues over the long term.

-19-

Increasingly, classified boards like ours have become
unpopular in recent years. Institutional investors are calling for
the end of this system. California's Public Employees Retirement
System, New York City pension funds, New York State pension funds
and many others including the Council of Institutional Investors,
and Institutional Shareholder Services, one of the most influential
proxy evaluation services, support this position.

During the past few years a majority of stockholders
supported proposals asking their boards to repeal classified board
structures at a number of respected companies, including FedEx,
Baker Hughes, Starwood Hotels, Honeywell International, Morgan
Stanley and Tellabs.

For a greater voice in the governance of BKF Capital and
annual Board of Directors accountability we ask stockholders to vote
YES on this proposal.

As discussed in further detail in the Company's proxy statement,
after Steel Partners submitted this proposal to BKF, the BKF Board adopted,
subject to stockholder approval at the Annual Meeting, an amendment to revise
Article 6 of the Charter to declassify the BKF Board. BKF recommends that the
stockholders vote against Steel Partners' proposal. Steel Partners supports both
BKF's and Steel Partners' proposals to declassify the BKF Board as it believes
the stockholders should not be restricted from voting on both a binding and
non-binding proposal to take such action and that such proposals are not
mutually exclusive.

YOU ARE URGED TO VOTE FOR STEEL PARTNERS' RESOLUTION RECOMMENDING THAT THE BKF
BOARD TAKE THE NECESSARY STEPS TO DECLASSIFY THE BKF BOARD.

-20-

PROPOSAL NO. 6

GAMCO PROPOSAL TO REDEEM POISON PILL

In December 2004, GAMCO Investors, Inc., a significant institutional
stockholder of BKF, submitted a proposal for inclusion in the Company's proxy
statement at the Annual Meeting pursuant to Rule 14a-8 of the Securities
Exchange Act of 1934, as amended. The proposal requests that the BKF Board
redeem the rights issued pursuant to its Rights Agreement, commonly known as a
"poison pill", unless the issuance is approved by the affirmative vote of a
majority of the outstanding shares at a meeting of the stockholders held as soon
as practical.

On May 29, 2001, the BKF Board declared a dividend of one Common
Share Purchase Right pursuant to a Rights Agreement dated as of June 8, 2001.
Generally, the stockholders may exercise their rights under this kind of
agreement (the "Rights") only when a person or group acquires, or through an
exchange or tender offer attempts to acquire, a beneficial interest in 10% or
more of the common stock of a company. Stockholders, other than the person or
group attempting to acquire 10% of the common stock, may then exercise the
Rights and receive stock at a fraction of its fair market value. The Company may
redeem the Rights for $.01 per Right.

The terms of the poison pill have the effect of thwarting an
unwanted potential offer for BKF. While the BKF Board should have appropriate
tools to ensure that all stockholders benefit from any proposal to buy BKF, we
do not believe that the future possibility of responding to any unsolicited
offer justifies the BKF Board's implementation of a poison pill. We believe that
the BKF Board also adopted the poison pill in order to, among other things,
entrench the BKF Board and management. This belief is partially based on John A.
Levin & Company, Inc.'s and certain if its affiliates' exemption from the poison
pill which effectively allows them to purchase an unlimited number of shares of
BKF without triggering the poison pill.

We feel it is appropriate at this time to eliminate
management-entrenching governance structures, particularly the poison pill, in
view of BKF's disappointing financial performance. We note that 2001, the year
the poison pill was adopted, was the last profitable year for BKF. Accordingly,
we believe that the BKF Board should take the necessary steps to redeem the
rights issued pursuant to the Company's poison pill.

Steel Partners is not affiliated with GAMCO and is acting alone, and
not in concert with GAMCO, in its solicitation of stockholders to vote for the
adoption of GAMCO's stockholder proposal to redeem the Company's poison pill.

-21-

After Steel Partners filed its preliminary proxy statement, BKF
announced that the BKF Board approved an amendment to its poison pill to permit
tender offers for the entire company should one be made. As discussed in further
detail in the Company's proxy statement, the amendment provides that bidders for
100% of BKF's outstanding shares would be exempt from the scope of the poison
pill if they successfully acquire a majority of the Company's outstanding
shares. The BKF Board also approved a provision mandating that the poison pill
be re-evaluated every three years by the independent directors of the Company.
While this amendment to the poison pill is a step in the right direction, Steel
Partners believes that the amendment does not adequately address all its
concerns with the poison pill, and the poison pill should be terminated
immediately.

YOU ARE URGED TO VOTE FOR GAMCO'S RESOLUTION RECOMMENDING THAT THE BKF BOARD
TAKE THE NECESSARY STEPS TO REDEEM THE POISON PILL.

-22-

PROPOSAL NO. 7

OPPORTUNITY PARTNERS PROPOSAL TO ENGAGE
INVESTMENT BANKING FIRM

In November 2004, Opportunity Partners L.P., a significant
institutional stockholder of BKF, submitted a proposal for inclusion in the
Company's proxy statement at the Annual Meeting pursuant to Rule 14a-8 of the
Securities Exchange Act of 1934, as amended. The proposal requests that the BKF
Board engage an investment banking firm to pursue a sale of the Company.

In a supporting statement submitted with this proposal, Opportunity
Partners stated that BKF's ratio of market capitalization to assets under
management was less than 2%, well below the ratio of most other investment
management companies. In addition, Opportunity Partners argued that some recent
sales of hedge fund management firms at prices exceeding 10% of assets under
management have occurred and therefore BKF could be an attractive acquisition
candidate for a larger financial institution. We agree with these assertions and
therefore believe that the BKF Board should engage an investment banking firm to
pursue a sale of the Company.

Steel Partners is not affiliated with Opportunity Partners and is
acting alone, and not in concert with Opportunity Partners, in its solicitation
of stockholders to vote for the adoption of Opportunity Partners' stockholder
proposal to engage an investment banking firm to pursue a sale of the Company.

YOU ARE URGED TO VOTE FOR OPPORTUNITY PARTNERS' RESOLUTION RECOMMENDING THAT THE
BKF BOARD ENGAGE AN INVESTMENT BANKING FIRM TO PURSUE A SALE OF THE COMPANY.

-23-

VOTING AND PROXY PROCEDURES

Only stockholders of record on the Record Date will be entitled to
notice of and to vote at the Annual Meeting. Each Share is entitled to one vote.
Stockholders who sell Shares before the Record Date (or acquire them without
voting rights after the Record Date) may not vote such Shares. Stockholders of
record on the Record Date will retain their voting rights in connection with the
Annual Meeting even if they sell such Shares after the Record Date. Based on
publicly available information, Steel Partners believes that the only
outstanding class of securities of BKF entitled to vote at the Annual Meeting is
the Shares.

Shares represented by properly executed GOLD proxy cards will be
voted at the Annual Meeting as marked and, in the absence of specific
instructions, will be voted FOR the election of the Nominees to the BKF Board
and FOR the business proposals described in this Proxy Statement, and in the
discretion of the persons named as proxies on all other matters as may properly
come before the Annual Meeting.

We are asking you to elect our Nominees and to adopt the business
proposals described in this Proxy Statement. The enclosed GOLD proxy card may
only be voted for our Nominees and does not confer voting power with respect to
the Company's nominees. Accordingly, you will not have the opportunity to vote
for any of BKF's nominees. You can only vote for BKF's nominees by signing and
returning a proxy card provided by BKF. Stockholders should refer to the
Company's proxy statement for the names, backgrounds, qualifications and other
information concerning the Company's nominees. The participants in this
solicitation intend to vote all of their Shares in favor of the Nominees and the
business proposals described in this Proxy Statement and will not vote their
Shares in favor of any of BKF's nominees.

QUORUM

In order to conduct any business at the Annual Meeting, a quorum
must be present in person or represented by valid proxies. A quorum consists of
a majority of the Shares issued and outstanding on the Record Date. All Shares
that are voted "FOR", "AGAINST" or "ABSTAIN" (or "WITHHOLD" in the case of
election of directors) on any matter will count for purposes of establishing a
quorum and will be treated as Shares entitled to vote at the Annual Meeting (the
"Votes Present").

VOTES REQUIRED FOR APPROVAL

ELECTION OF DIRECTORS. A plurality of the total votes cast ("Votes
Cast") by holders of the Shares for the Nominees is required for the election of
directors and the three nominees who receive the most votes will be elected
(assuming a quorum is present). A vote to "WITHHOLD" for any nominee for
director will be counted for purposes of determining the Votes Present, but will
have no other effect on the outcome of the vote on the election of directors. A
stockholder may cast such votes for the Nominees either by so marking the ballot
at the Annual Meeting or by specific voting instructions sent with a signed
proxy to either Steel Partners in care of Morrow & Co., Inc. at the address set
forth on the back cover of this Proxy Statement or to BKF at One Rockefeller
Plaza, New York, New York 10020 or any other address provided by BKF.

-24-

PROPOSALS TO AMEND BKF CHARTER. Approval of BKF's proposals to amend
BKF's Charter to declassify the BKF Board and eliminate the supermajority voting
requirements for fundamental transactions require the affirmative vote of at
least 80% of the Shares outstanding as of the Record Date.

STOCKHOLDER PROPOSALS. The vote required for the stockholder
proposals to declassify the BKF Board, redeem the poison pill and engage an
investment banking firm is the affirmative vote of a majority of the Votes
Present.

ABSTENTIONS

Abstentions will count as Votes Present for the purpose of
determining whether a quorum is present. Abstentions will not be counted as
Votes Cast in the election of directors. Abstentions will have the effect of a
vote against the other business matters set forth in this Proxy Statement.

BROKER NON-VOTES

Shares held in street name that are present by proxy will be
considered as Votes Present for purposes of determining whether a quorum is
present. With regard to certain proposals, the holder of record of Shares held
in street name is permitted to vote as it determines, in its discretion, in the
absence of direction from the beneficial holder of the Shares.

The term "broker non-vote" refers to shares held in street name that
are not voted with respect to a particular matter, generally because the
beneficial owner did not give any instructions to the broker as to how to vote
such shares on that matter and the broker is not permitted under applicable
rules to vote such shares in its discretion because of the subject matter of the
proposal, but whose shares are present on at least one matter. Such shares shall
be counted as Votes Present for the purpose of determining whether a quorum is
present, if voting instructions are given by the beneficial owner as to at least
one of the matters to be voted on. Broker non-votes will not be counted as Votes
Present with respect to matters as to which the record holder has expressly not
voted. Accordingly, Steel Partners believes that broker non-votes will have the
effect of a vote against BKF's proposals to amend BKF's Charter to declassify
the BKF Board and eliminate the supermajority voting requirements for
fundamental transactions and no effect upon the outcome of voting on the
stockholder proposals set forth in this Proxy Statement.

-25-

REVOCATION OF PROXIES

Stockholders of BKF may revoke their proxies at any time prior to
exercise by attending the Annual Meeting and voting in person (although
attendance at the Annual Meeting will not in and of itself constitute revocation
of a proxy) or by delivering a written notice of revocation. The delivery of a
subsequently dated proxy which is properly completed will constitute a
revocation of any earlier proxy. The revocation may be delivered either to Steel
Partners in care of Morrow & Co., Inc. at the address set forth on the back
cover of this Proxy Statement or to BKF at One Rockefeller Plaza, New York, New
York 10020 or any other address provided by BKF. Although a revocation is
effective if delivered to BKF, Steel Partners requests that either the original
or photostatic copies of all revocations be mailed to Steel Partners in care of
Morrow & Co., Inc. at the address set forth on the back cover of this Proxy
Statement so that Steel Partners will be aware of all revocations and can more
accurately determine if and when proxies have been received from the holders of
record on the Record Date of a majority of the outstanding Shares. Additionally,
Morrow & Co., Inc. may use this information to contact stockholders who have
revoked their proxies in order to solicit later dated proxies for the election
of the Nominees and approval of the business proposals described herein.

IF YOU WISH TO VOTE FOR THE ELECTION OF THE NOMINEES TO THE BKF BOARD OR FOR THE
BUSINESS PROPOSALS DESCRIBED IN THIS PROXY STATEMENT, PLEASE SIGN, DATE AND
RETURN PROMPTLY THE ENCLOSED GOLD PROXY CARD IN THE POSTAGE-PAID ENVELOPE
PROVIDED.

SOLICITATION OF PROXIES

The solicitation of proxies pursuant to this Proxy Statement is
being made by Steel Partners. Proxies may be solicited by mail, facsimile,
telephone, telegraph, in person and by advertisements. Steel Partners will not
solicit proxies via the Internet.

Steel Partners has entered into an agreement with Morrow & Co., Inc.
for solicitation and advisory services in connection with this solicitation, for
which Morrow & Co., Inc. will receive a fee not to exceed $75,000.00, together
with reimbursement for its reasonable out-of-pocket expenses, and will be
indemnified against certain liabilities and expenses, including certain
liabilities under the federal securities laws. Morrow & Co., Inc. will solicit
proxies from individuals, brokers, banks, bank nominees and other institutional
holders. Steel Partners has requested banks, brokerage houses and other
custodians, nominees and fiduciaries to forward all solicitation materials to
the beneficial owners of the Shares they hold of record. Steel Partners will
reimburse these record holders for their reasonable out-of-pocket expenses in so
doing. It is anticipated that Morrow & Co., Inc. will employ approximately 25
persons to solicit BKF's stockholders for the Annual Meeting.

The entire expense of soliciting proxies is being borne by Steel
Partners pursuant to the terms of the Joint Filing and Solicitation Agreement
(as defined below). Costs of this solicitation of proxies are currently
estimated to be approximately $250,000.00. Steel Partners estimates that through
the date hereof, its expenses in connection with this solicitation are
approximately $125,000.00.

-26-

OTHER PARTICIPANT INFORMATION

Each member of the Group is a participant in this solicitation.
Warren G. Lichtenstein is Chairman of the Board, Secretary and the Managing
Member of Partners LLC, a Delaware limited liability company. Partners LLC is
the general partner of Steel Partners. The principal business of Mr.
Lichtenstein, Partners LLC and Steel Partners is investing in the securities of
small-cap companies. The principal business address of Mr. Lichtenstein,
Partners LLC and Steel Partners is 590 Madison Avenue, 32nd Floor, New York, New
York 10022. As of the date hereof, Steel Partners is the beneficial owner of
727,200 Shares. Partners LLC does not beneficially own any Shares on the date
hereof, except by virtue of its role in Steel Partners. Mr. Lichtenstein may be
deemed to beneficially own the 727,200 Shares of BKF owned by Steel Partners by
virtue of his positions with Partners LLC. For information regarding purchases
and sales of securities of BKF during the past two years by Steel Partners, see
Schedule I.

On February 11, 2005, the members of the Group entered into a Joint
Filing and Solicitation Agreement in which, among other things, (i) the parties
agreed to the joint filing on behalf of each of them of statements on Schedule
13D with respect to the securities of BKF, (ii) the parties agreed to solicit
proxies or written consents for the election of the Nominees, or any other
person(s) nominated by Steel Partners, to the BKF Board at the Annual Meeting
(the "Solicitation"), and (iii) Steel Partners agreed to bear all expenses
incurred in connection with the Group's activities, including approved expenses
incurred by any of the parties in connection with the Solicitation, subject to
certain limitations. Steel Partners intends to seek reimbursement from BKF of
all expenses it incurs in connection with the Solicitation. Steel Partners does
not intend to submit the question of such reimbursement to a vote of security
holders of the Company.

Except as set forth in this Proxy Statement (including the Schedules
hereto), (i) during the past 10 years, no participant in this solicitation has
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors); (ii) no participant in this solicitation directly or indirectly
beneficially owns any securities of BKF; (iii) no participant in this
solicitation owns any securities of BKF which are owned of record but not
beneficially; (iv) no participant in this solicitation has purchased or sold any
securities of BKF during the past two years; (v) no part of the purchase price
or market value of the securities of BKF owned by any participant in this
solicitation is represented by funds borrowed or otherwise obtained for the
purpose of acquiring or holding such securities; (vi) no participant in this
solicitation is, or within the past year was, a party to any contract,
arrangements or understandings with any person with respect to any securities of
BKF, including, but not limited to, joint ventures, loan or option arrangements,
puts or calls, guarantees against loss or guarantees of profit, division of
losses or profits, or the giving or withholding of proxies; (vii) no associate
of any participant in this solicitation owns beneficially, directly or
indirectly, any securities of BKF; (viii) no participant in this solicitation
owns beneficially, directly or indirectly, any securities of any parent or
subsidiary of BKF; (ix) no participant in this solicitation or any of his/its
associates was a party to any transaction, or series of similar transactions,
since the beginning of BKF's last fiscal year, or is a party to any currently
proposed transaction, or series of similar transactions, to which BKF or any of
its subsidiaries was or is to be a party, in which the amount involved exceeds
$60,000; (x) no participant in this solicitation or any of his/its associates
has any arrangement or

-27-

understanding with any person with respect to any future employment by BKF or
its affiliates, or with respect to any future transactions to which BKF or any
of its affiliates will or may be a party; and (xi) no person, including the
participants in this solicitation, who is a party to an arrangement or
understanding pursuant to which the Nominees are proposed to be elected has a
substantial interest, direct or indirect, by security holdings or otherwise in
any matter to be acted on at the Annual Meeting.

OTHER MATTERS AND ADDITIONAL INFORMATION

Steel Partners is unaware of any other matters to be considered at
the Annual Meeting. However, should other matters, which Steel Partners is not
aware of a reasonable time before this solicitation, be brought before the
Annual Meeting, the persons named as proxies on the enclosed GOLD proxy card
will vote on such matters in their discretion.

Steel Partners has omitted from this Proxy Statement certain
disclosure required by applicable law that is already included in the Company's
proxy statement. This disclosure includes, among other things, biographical
information on BKF's directors and executive officers, information concerning
executive compensation, an analysis of cumulative total returns on an investment
in Shares during the past five years and procedures for submitting proposals for
inclusion in the Company's proxy statement at the next annual meeting.
Stockholders should refer to the Company's proxy statement in order to review
this disclosure.

See Schedule II for information regarding persons who beneficially
own more than 5% of the Shares and the ownership of the Shares by the management
of BKF.

The information concerning BKF contained in this Proxy Statement and
the Schedules attached hereto has been taken from, or is based upon, publicly
available information.

STEEL PARTNERS II, L.P.

May 11, 2005

-28-

SCHEDULE I

TRANSACTIONS IN SECURITIES OF BKF
DURING THE PAST TWO YEARS

CLASS QUANTITY PRICE PER DATE OF
OF SECURITY PURCHASED SHARE ($) PURCHASE
----------------- ------------------ ----------------- ----------------------
STEEL PARTNERS II, L.P.
--------------------------------------------------------------------------------
Common Stock 200 23.8000 12/12/03
Common Stock 1,100 24.9873 12/22/03
Common Stock 2,000 24.5000 12/24/03
Common Stock 4,100 25.0000 1/05/04
Common Stock 4,300 25.5000 1/12/04
Common Stock 5,000 25.5000 1/13/04
Common Stock 1,200 25.7000 3/29/04
Common Stock 3,000 25.6300 3/30/04
Common Stock 1,000 25.4000 3/31/04
Common Stock 2,000 26.5000 4/02/04
Common Stock 2,200 26.4964 4/06/04
Common Stock 100,000 26.4900 4/07/04
Common Stock 50,300 26.5296 4/12/04
Common Stock 75,000 26.7800 4/15/04
Common Stock 189,500 26.9799 4/20/04
Common Stock 2,300 27.1430 4/21/04
Common Stock 100 27.2000 4/22/04
Common Stock 6,800 27.4040 4/29/04
Common Stock 800 27.4025 4/30/04
Common Stock 4,700 28.5000 5/27/04
Common Stock 9,000 28.2733 6/03/04
Common Stock 2,000 28.4295 6/08/04
Common Stock 2,400 28.5050 6/10/04
Common Stock 3,000 26.6500 8/13/04
Common Stock 185,000 27.5300 8/16/04

-29-

Common Stock 12,600 39.4141 3/21/05
Common Stock 11,300 39.7027 3/29/05
Common Stock 2,700 39.7500 3/30/05
Common Stock 8,400 37.4223 4/15/05
Common Stock 6,300 37.4629 4/18/05
Common Stock 15,000 37.3767 4/20/05
Common Stock 13,900 35.1820 4/26/05

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

-30-

SCHEDULE II

THE FOLLOWING TABLE IS REPRINTED FROM THE
COMPANY'S PROXY STATEMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION ON MAY 10, 2005

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The table below sets forth the beneficial ownership as of April 25,
2005 of (1) each person known by the Company to be the beneficial owner of more
than 5% of the outstanding shares of the Company's common stock, (2) each
director and nominee for director of the Company, (3) each executive officer of
the Company whose name appears on the summary compensation table below (the
"Named Executive Officers") and (4) all directors and executive officers of the
Company as a group. Each person had sole or shared voting or dispositive powers
with respect to such shares.

PERCENT
NAME OF BENEFICIAL OWNER NUMBER OF SHARES OF CLASS
------------------------ ---------------- --------

John A. Levin............................. 695,860(1) 9.2%
c/o BKF Capital Group, Inc.
One Rockefeller Plaza
New York, NY 10020

Steel Partners II, L.P.................... 669,600(2) 8.9%
590 Madison Avenue
New York, NY 10022

Owl Creek Asset Management, L.P........... 463,600(3) 6.2%
410 Park Avenue, Suite #420
New York, NY 10022

Mario J. Gabelli.......................... 510,100(4) 6.8%
One Corporate Center
Rye, NY 10580

Cannell Capital LLC....................... 360,200(5) 4.8%
150 Capital Street, Fifth Floor
San Francisco, CA 94111

Anson M. Beard, Jr........................ 2,400(6)(7) *

Barton M. Biggs........................... 2,400(6)(7) *

J. Barton Goodwin......................... 55,776(6)(7)(8) *

David D. Grumhaus......................... 11,835(7)(9) *

Burton G. Malkiel......................... 5,900(6) *

Peter J. Solomon.......................... 3,400(6)(7) *

Dean J. Takahashi......................... 2,582(6)(7) *

James S. Tisch............................ 4,400(6)(7) *

Glenn A. Aigen............................ 22,339(10) *

Norris Nissim............................. 7,817(11) *

Henry L. Levin............................ 22,362(12) *

Frank F. Rango............................ 21,455(13) *

Directors and executive
officers as a group (13 persons).......... 858,526 11.4%

* Less than 1%
--------------------
-31-

(1) Includes 18,907 shares of common stock held by family members or
trusts, 20,321 shares of restricted stock granted on March 10, 2004
which will vest on March 10, 2007, 26,465 shares of restricted stock
granted on March 10, 2005 of which one third will vest on December 31,
2005, December 31, 2006 and December 31, 2007, respectively.

(2) The information set forth is based solely on Amendment No. 4 to
Schedule 13D filed with the SEC on March 24, 2005.

(3) The information set forth is based solely upon the Amendment No. 1 to
Form 13F filed with the SEC on May 3, 2005 by Owl Creek Asset
Management, L.P.

(4) The information set forth is based solely on Amendment No. 10 to
Schedule 13D filed with the SEC on April 28, 2005 and includes 193,500
shares held by Gabelli Funds, LLC, 278,700 shares held by GAMCO
Investors Inc., 3,900 shares held by Gabelli Foundation, Inc., 8,000
shares held by Gabelli & Company, Inc. Profit Sharing Plan, 11,500
shares held by Gabelli Advisors, Inc. and 14,500 shares held by MJG
Associates, Inc.

(5) The information set forth is based solely upon the Schedule 13G filed
with the SEC on February 11, 2005 and includes 64,300 shares held by
The Anegada Master Fund, 101,100 shares held by The Cuttyhunk Fund
Limited, 114,900 shares held by Tonga Partners, L.P., 54,900 shares
held by GS Cannell Portfolio, LLC and 25,000 shares held by Pleiades
Investment Partners, L.P. Based upon the Schedule 13G filing on
February 11, 2005, the reporting person beneficially owned 5.1% of the
total outstanding amount of shares of common stock of the Company.

(6) Includes 1,200 shares of restricted stock granted on May 13, 2004
which vested on January 2, 2005 and 1,200 shares of restricted common
stock granted on March 23, 2005 of which one half will vest on April
1, 2005 and one quarter will vest on each of July 1, 2005 and October
1, 2005.

(7) The number of shares does not include any shares underlying the
restricted stock units granted to Messrs. Beard, Biggs, Goodwin,
Grumhaus, Solomon, Takahashi and Tisch. Each of these directors, with
the exception of Mr. Biggs has received 3,500 restricted stock units
(Mr. Biggs has received 1,125), but the shares underlying these
restricted stock units are not deliverable, either by the terms of the
awards regarding vesting and delivery or because of a deferral
election by the directors, within 60 days of March 31, 2005.

The number of shares listed also does not include any shares
underlying 161,725 restricted stock units granted to Mr. Levin. The
shares underlying these restricted stock units are not deliverable,
either by the terms of the awards regarding vesting and delivery or
because of a deferral election by Mr. Levin, within 60 days of March
31, 2005. See "Compensation - Executive Officer Compensation" for a
description of these grants.

(8) Includes 53,376 shares of common stock owned by immediate family
members or trusts.

(9) Includes 9,303 shares of common stock held by family members or trusts
and 1,200 shares of restricted stock granted on May 13, 2004 which
vested on January 2, 2005.

-32-

(10) Includes 19,555 shares of common stock relating to options which have
vested or will vest within 60 days of March 31, 2004 and 1,384 shares
of restricted stock granted on March 10, 2004 which will vest on March
9, 2007 and 1,400 shares of restricted stock granted on March 10,
2005, of which one third will vest on December 31, 2005, December 31,
2006 and December 31, 2007, respectively.

(11) Includes 2,933 shares of restricted stock granted on March 10, 2005 of
which one third will vest on December 31, 2005, December 31, 2006 and
December 31, 2007, respectively.

(12) Henry Levin also owns 61,583 restricted stock units, the shares of
common stock underlying which will vest and be delivered on December
3, 2005.

(13) Frank Rango also owns 61,583 restricted stock units, the shares of
common stock underlying which will vest and be delivered on December
3, 2005.

-33-

IMPORTANT

Tell your Board what you think! Your vote is important. No matter
how many Shares you own, please give Steel Partners your proxy FOR the election
of Steel Partners' Nominees and FOR the adoption of the business proposals
described in this Proxy Statement by taking three steps:

o SIGNING the enclosed GOLD proxy card,

o DATING the enclosed GOLD proxy card, and

o MAILING the enclosed GOLD proxy card TODAY in the envelope
provided (no postage is required if mailed in the United
States).

If any of your Shares are held in the name of a brokerage firm,
bank, bank nominee or other institution, only it can vote such Shares and only
upon receipt of your specific instructions. Accordingly, please contact the
person responsible for your account and instruct that person to execute the GOLD
proxy card representing your Shares. Steel Partners urges you to confirm in
writing your instructions to Steel Partners in care of Morrow & Co., Inc. at the
address provided below so that Steel Partners will be aware of all instructions
given and can attempt to ensure that such instructions are followed.

If you have any questions or require any additional information
concerning this Proxy Statement, please contact Morrow & Co., Inc. at the
address set forth below.

MORROW & CO., INC.

445 Park Avenue, 5th Floor
New York, New York 10022
(212) 754-8000

BANKS AND BROKERAGE FIRMS, PLEASE CALL: (800) 654-2468
STOCKHOLDERS CALL TOLL FREE: (800) 607-0088
E-MAIL: STEEL.INFO@MORROWCO.COM

BKF CAPITAL GROUP, INC.

2005 ANNUAL MEETING OF STOCKHOLDERS

THIS PROXY IS SOLICITED ON BEHALF OF STEEL PARTNERS II, L.P.

THE BOARD OF DIRECTORS OF BKF CAPITAL GROUP, INC.
IS NOT SOLICITING THIS PROXY

P R O X Y

The undersigned appoints Warren G. Lichtenstein and Ronald LaBow, and each of
them, attorneys and agents with full power of substitution to vote all shares of
common stock of BKF Capital Group, Inc. (the "Company") which the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Stockholders of the Company, and including at any adjournments or postponements
thereof and at any meeting called in lieu thereof.

The undersigned hereby revokes any other proxy or proxies heretofore given to
vote or act with respect to the shares of common stock of the Company held by
the undersigned, and hereby ratifies and confirms all action the herein named
attorneys and proxies, their substitutes, or any of them may lawfully take by
virtue hereof. If properly executed, this Proxy will be voted as directed on the
reverse and in their discretion with respect to any other matters as may
properly come before the Annual Meeting.

IF NO DIRECTION IS INDICATED WITH RESPECT TO THE PROPOSALS ON THE REVERSE, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1 - 7.

This Proxy will be valid until the sooner of one year from the date indicated on
the reverse side and the completion of the Annual Meeting.

IMPORTANT: PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY!

CONTINUED AND TO BE SIGNED ON REVERSE SIDE

[X] PLEASE MARK VOTE AS IN THIS EXAMPLE

1. ELECTION OF DIRECTORS:

FOR ALL
WITHHOLD EXCEPT
AUTHORITY TO NOMINEE(S)
FOR VOTE FOR ALL WRITTEN
ALL NOMINEES ALL NOMINEES BELOW
Nominees: Warren G. Lichtenstein [ ] [ ] [ ]
Ronald LaBow
Kurt N. Schacht ----------------

2. APPROVAL OF THE COMPANY'S PROPOSAL TO AMEND THE RESTATED CERTIFICATE OF
INCORPORATION TO DECLASSIFY THE BOARD OF DIRECTORS: