
<PAGE>   1


     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 24, 2001


                                  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

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:


<TABLE>
<S>                                            <C>
[ ]  Preliminary Proxy Statement
[ ]  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
[X]  Definitive Proxy Statement
[ ]  Definitive Additional Materials
[ ]  Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>


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

--------------------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X]  No fee required.

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

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

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

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

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

     (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):

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

     (4)  Proposed maximum aggregate value of transaction:

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

     (5)  Total fee paid:

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

[ ]  Fee paid previously with preliminary materials.

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

     (1)  Amount Previously Paid:

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

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

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

     (3)  Filing Party:

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

     (4)  Date Filed:

        ------------------------------------------------------------------------
<PAGE>   2

                            BFK CAPITAL GROUP, INC.
                             ONE ROCKEFELLER PLAZA
                            NEW YORK, NEW YORK 10020
                                 (212) 332-8400


                                                                  April 24, 2001


Dear Stockholder:

     You are cordially invited to attend the Annual Meeting of Stockholders of
BKF Capital Group, Inc. (the "Company") at the Waldorf-Astoria Hotel, 301 Park
Avenue, New York, New York on Thursday, May 24, 2001, at 8:30 a.m., local time.

     At the meeting you will be asked to consider and vote on the election of
three (3) directors, an amendment to the Company's Restated Certificate of
Incorporation, an amendment to the Company's 1998 Incentive Compensation Plan
and the ratification of Ernst & Young LLP as the Company's independent auditors.

     The board of directors has unanimously approved these proposals and
recommends that you vote FOR each of them.

     A copy of the Company's Annual Report for the fiscal year ended December
31, 2000 is also enclosed.

     The formal notice of Annual Meeting and the Proxy Statement follow. It is
important that your shares be represented and voted, regardless of the size of
your holdings. Accordingly, whether or not you plan to attend the meeting in
person, please complete, sign, date and return the enclosed proxy card promptly
so that your shares will be represented. The proxy card is revocable and will
not affect your right to vote in person if you attend the meeting.

                                          Very truly yours,

                                          /s/ JOHN A. LEVIN


                                          John A. Levin

                                          President,
                                          Chief Executive Officer and Chairman
<PAGE>   3


                            BKF CAPITAL GROUP, INC.


                    NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
                           TO BE HELD ON MAY 24, 2001

To Our Stockholders:

     The annual meeting of stockholders (the "Annual Meeting") of BKF Capital
Group, Inc., a Delaware Corporation (the "Company"), will be held at the
Waldorf-Astoria Hotel, 301 Park Avenue, New York, New York, on Thursday, May 24,
2001, at 8:30 a.m., local time, for the following purposes:

     1. to elect three (3) directors to hold office as specified in the
        accompanying Proxy Statement;

     2. to amend the Company's Restated Certificate of Incorporation to reduce
        the authorized shares of common stock of the Company from 60 million to
        15 million shares;

     3. to amend and restate the Company's 1998 Incentive Compensation Plan;

     4. to ratify the appointment of Ernst & Young LLP as independent auditors
        for the Company; and

     5. to transact such other business as may properly come before the meeting
        or any adjournment or postponement thereof.

     Stockholders of record at the close of business on April 16, 2001, the
record date, are entitled to vote at the Annual Meeting.

                                          By Order of the Board of Directors

                                          /s/ NORRIS NISSIM


                                          Norris Nissim

                                          Secretary

New York, NY

April 24, 2001


     YOUR VOTE IS IMPORTANT! WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE. YOU MAY NEVERTHELESS VOTE IN PERSON IF YOU
ATTEND THE ANNUAL MEETING.
<PAGE>   4

                                PROXY STATEMENT


     The board of directors of the Company is soliciting proxies from
stockholders for use at the Annual Meeting that will be held on May 24, 2001 and
at any adjournment or adjournments of that meeting. The Company began mailing
these proxy materials to stockholders on or about April 24, 2001.


     THIS PROXY STATEMENT DESCRIBES EACH OF THE MATTERS ON WHICH THE BOARD OF
DIRECTORS IS ASKING STOCKHOLDERS TO VOTE. THE BOARD OF DIRECTORS RECOMMENDS THAT
YOU VOTE IN FAVOR OF EACH OF THESE PROPOSALS.


ITEM 1.  ELECTION OF DIRECTORS


     The board of directors is asking you to elect three directors at the
meeting. The board of directors has nominated the following persons to serve as
directors for terms expiring at the annual meeting of stockholders in 2004:
Anson M. Beard, Jr., Peter J. Solomon and Dean J. Takahashi. Each currently is a
director of the Company.

     If any nominee should be unable to serve, the persons named as proxies
shall vote for such other person as shall be determined by such persons in
accordance with their judgment.

     Information concerning the nominees and the directors who are continuing in
office appears below.

                        DIRECTORS NOMINATED FOR ELECTION


<TABLE>
<CAPTION>
                                                          EXPIRATION   EXPIRATION
 NAME, AGE, AND PRINCIPAL OCCUPATION   DIRECTOR           OF CURRENT    OF TERM
     DURING THE LAST FIVE YEARS         SINCE     CLASS      TERM      IF ELECTED        OTHER BUSINESS AFFILIATION(S)
 -----------------------------------   --------   -----   ----------   ----------        -----------------------------
<S>                                    <C>        <C>     <C>          <C>           <C>
Anson M. Beard, Jr. -- age 64            2000      II        2001         2004
  Retired; former investment banker.
Peter J. Solomon -- age 62               2000      II        2001         2004       Director of Monro Muffler Brake, Inc.
  Chairman of Peter J. Solomon                                                       (automotive repair services), Office
  Company Limited and Peter J.                                                       Depot, Inc. (supplier of office
  Solomon Securities Co., Ltd.                                                       products) and Phillips-Van Heusen
  (investment banking) since 1995.                                                   Corporation (apparel and footwear
                                                                                     marketer/manufacturer)
Dean J. Takahashi -- age 43              1997      II        2001         2004
  Senior Director of Investments,
  Yale University, since 1996.
</TABLE>


REQUIRED VOTE

     Stockholders are entitled to one vote per share in the election of
directors (called straight voting), with no right of cumulation. A plurality
vote of the shares cast at the meeting is required to elect directors, assuming
a quorum is present.

     THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE THREE (3) NOMINEES
NAMED ABOVE.

                         DIRECTORS CONTINUING IN OFFICE


<TABLE>
<CAPTION>
                                                                EXPIRATION
    NAME, AGE, AND PRINCIPAL OCCUPATION      DIRECTOR           OF CURRENT
        DURING THE LAST FIVE YEARS            SINCE     CLASS      TERM             OTHER BUSINESS AFFILIATION(S)
    -----------------------------------      --------   -----   ----------          -----------------------------
<S>                                          <C>        <C>     <C>          <C>
J. Barton Goodwin -- age 54                    1987     III        2002      Director of Factual Data Corp. (mortgage
  Managing director of BCI Partners, Inc.                                    servicing company)
  (private capital investment group),
  general partner of Bridge Associates II
  and Teaneck Associates and member of
  Glenpointe Associates, LLC, Glenpointe V,
  LLC and BCI Investors, LLC since 1986.
David D. Grumhaus -- age 64                    1988       I        2003      Director of Niche Software Systems, Inc.
  President of Casey Travel Corporation                                      (computer software company)
  (travel agency) since 1991.
</TABLE>

<PAGE>   5


<TABLE>
<CAPTION>
                                                                EXPIRATION
    NAME, AGE, AND PRINCIPAL OCCUPATION      DIRECTOR           OF CURRENT
        DURING THE LAST FIVE YEARS            SINCE     CLASS      TERM             OTHER BUSINESS AFFILIATION(S)
    -----------------------------------      --------   -----   ----------          -----------------------------
<S>                                          <C>        <C>     <C>          <C>
John A. Levin -- age 62                        1996     III        2002      Director of Morgan Stanley group of
  Chairman since February 2000, Chief                                        investment funds (13 funds)
  Executive Officer and President of the
  Company and Chairman and Chief Executive
  Officer of Levin Management Co., Inc and
  John A. Levin & Co., Inc. since June
  1996; prior thereto, President and
  Securities Analyst/Portfolio Manager of
  the predecessor to John A. Levin & Co.,
  Inc. since 1982.
Burton G. Malkiel -- age 68                    1982     III        2002      Director of Prudential Insurance Co. of
  Professor of Economics, Princeton                                          America and Vanguard group of investment
  University since 1964.                                                     funds (12 funds)
James S. Tisch -- age 48                       2000       I        2003      Director of CNA Financial Corp. (holding
  President since October 1994 and Chief                                     company whose subsidiaries consist of
  Executive Officer since January 1999 of                                    insurance companies) and Vail Resorts, Inc.
  Loews Corporation (holding company whose                                   (resort operator)
  subsidiaries are engaged in insurance,
  cigarette manufacturing, hotel
  operations, offshore oil and gas
  operations and distribution of watches
  and clocks) and Chief Executive Officer
  of Diamond Offshore Drilling, Inc.
  (offshore oil and gas company) since
  March 1998; prior thereto, Chief
  Operating Officer of Loews Corporation
  since 1994.
</TABLE>


MEETINGS OF THE BOARD OF DIRECTORS AND CERTAIN COMMITTEES OF THE BOARD OF
DIRECTORS


     During 2000, the board of directors conducted four meetings including
scheduled and special meetings. Each director attended at least 75% of the
meetings of the board of directors and committees of which he served during
2000.


     The Company has standing audit, compensation and nominating committees,
whose current functions and members are described below. It is anticipated that
at its first meeting following the Annual Meeting, the board of directors will
designate the directors who currently serve on these committees to serve on each
of these committees until the next annual meeting of stockholders.

AUDIT COMMITTEE

     The audit committee is composed of David D. Grumhaus, J. Barton Goodwin and
Burton G. Malkiel. This committee makes recommendations regarding the selection
of independent auditors and meets with representatives of the Company's
independent auditors to determine the scope, and review the results, of each
audit. The audit committee had five meetings during 2000. Each of the members of
the audit committee is independent as defined by The New York Stock Exchange's
listing standards.

COMPENSATION COMMITTEE


     The compensation committee is composed of Anson M. Beard, Jr., David D.
Grumhaus and Burton G. Malkiel. Through February 2000, William H. Springer and
Frederick S. Addy, former directors of the company, were members of the
compensation committee. Messrs. Beard, Grumhaus and Malkiel became members of
the compensation committee in February 2000. The compensation committee makes
recommendations regarding compensation policies. The compensation committee also
administers the Company's 1998 Incentive Compensation Plan. The compensation
committee had eight meetings in 2000.


NOMINATING COMMITTEE

     The nominating committee is composed of J. Barton Goodwin, Peter J.
Solomon, James S. Tisch and John A. Levin. The nominating committee makes
recommendations to the board of directors regarding the selection of candidates
to be nominated for election of the board of directors. The nominating committee
does

                                        2
<PAGE>   6

not consider nominees recommended by stockholders. The nominating committee had
one meeting during 2000.


ITEM 2.  AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION



     On January 7, 2000, as part of the Plan For Distribution of Assets pursuant
to which the Company distributed or liquidated substantially all of its assets,
with the exception of Levin Management Co., Inc. ("Levin Management") and its
subsidiaries (collectively, "Levco"), and changed the nature of its business so
that it ceased to operate as an investment company, the Company effected a
one-for-six reverse stock split, reducing the number of its shares outstanding
as of January 7, 2000 to 6,504,852. As of March 31, 2001, the number of shares
outstanding of the Company was 6,518,665. The Restated Certificate of
Incorporation of the Company currently authorizes the issuance of 60,000,000
shares of common stock. The annual franchise tax paid to the State of Delaware
on the basis of the number of authorized shares was $150,000 in 2000. In light
of the reverse stock split and the franchise tax that must be paid on the
authorized shares, the board of directors recommends that the authorized shares
should be reduced to 15,000,000, which would result in a Delaware franchise tax
savings of approximately $88,000.


     The board of directors of the Company has unanimously adopted and approved,
and recommends that the Company's stockholders adopt and approve, the following
amendment (the "Amendment") to Article FOURTH of the Company's Restated
Certificate of Incorporation, as amended, which would change the number of
authorized shares to 15,000,000:

          The Restated Certificate of Incorporation of the Company is hereby
     amended by changing Article FOURTH thereof so that, as amended, Article
     FOURTH of the Certificate of Incorporation of the Company shall read in its
     entirety as follows:

          "FOURTH: The total number of shares of all stock which the corporation
     shall have authority to issue is 15,000,000 shares of common stock, $1 par
     value per share."

     The proposed Certificate of Amendment to the Restated Certificate of
Incorporation of the Company is attached hereto as Exhibit A.

REQUIRED VOTE

     The affirmative vote of the holders of a majority of the outstanding shares
of common stock entitled to vote on this matter is necessary to approve the
proposed Amendment. Unless otherwise instructed, properly executed proxies which
are returned in a timely manner will be voted in favor of adoption of the
proposed Amendment.

     THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE PROPOSED
AMENDMENT.


ITEM 3.  AMENDMENT OF 1998 INCENTIVE COMPENSATION PLAN


     In December 1998, the Company's stockholders approved the Baker, Fentress &
Company 1998 Incentive Compensation Plan (the "ICP"). Among other things, the
ICP allows the Company to:

     - Advance the interests of the Company and its shareholders by providing
       incentives to attract, retain, motivate and reward employees and
       non-employee directors of the Company and its subsidiaries;

     - Create long-term shareholder value by linking the participants'
       compensation to the Company's performance with stock-based and cash-based
       incentives; and

     - Recognize individual contributions and reward achievement of Company
       goals.

     Certain amendments to the ICP were approved by stockholders in April 2000
to eliminate provisions in the ICP that had been required prior to the Company's
deregistration as an investment company. As the Company's name has been changed
and the number of shares previously available for issuance have now

                                        3
<PAGE>   7

largely been granted, the following proposed amendments were adopted by the
board of directors in March, 2001:

     - Change the formal name of the ICP from "Baker, Fentress & Company 1998
       Incentive Compensation Plan (as amended and restated)" to "BKF Capital
       Group, Inc. 1998 Incentive Compensation Plan (as amended and restated on
       March 28, 2001)";

     - Increase the number of shares available for issuance under the ICP from
       1,300,000 to 2,600,000, plus the number of shares (not to exceed 700,000)
       purchased by the Company after March 28, 2001; and

     - Extend the expiration date of the ICP until no shares are available under
       the ICP, subject to earlier termination by the board of directors.

     A summary of the material features of the ICP (including the proposed
amendments) follows. It is subject to, and you should also review, the full text
of the ICP, which can be found at Exhibit B. Please read the full text of the
ICP before you decide how to vote.

     ELIGIBLE PARTICIPANTS.  Employees and non-employee directors of the Company
or its subsidiaries are eligible for awards under the ICP. Any person who is
offered employment will also be eligible but cannot receive any benefit under
his or her award until after beginning employment with the Company or a
subsidiary. Currently, approximately 100 employees and seven non-employee
directors are eligible for awards.


     OVERALL LIMITS.  Upon approval by the Company's stockholders, the ICP will
authorize the Company to issue an additional 1,300,000 shares, for a total of
2,600,000 shares, of Company common stock (about 39.9% of the Company's
currently outstanding common stock), plus 10% of the number of shares of common
stock issued or delivered by the Company during the term of the ICP (excluding
any issuance or delivery in connection with awards under the ICP), plus the
number of shares of common stock (not to exceed 700,000) purchased by the
Company after March 28, 2001. Shares covered by awards granted under the ICP
that wholly or in part are not earned, or that expire or are forfeited,
terminated, cancelled, settled in cash, payable solely in cash or exchanged for
other awards, do not count toward the overall limit. As of the record date of
the Annual Meeting, the Company had 1,099,982 shares reserved for outstanding
awards under the ICP, and 186,205 shares remained available for future awards
under the ICP. Shares may be issued from treasury or other currently authorized
but unissued shares. The closing price of the Company's common stock on the
record date of the Annual Meeting was $21.90 per share.


     SPECIAL LIMITS.  The Company may not grant incentive stock options for more
than 1,000,000 shares. If an incentive stock option expires or is terminated,
the unissued shares will be available for other incentive stock options. The
Company may grant incentive stock options only to individuals who at the time of
grant are employees of the Company or a subsidiary. In each fiscal year, no
individual may receive stock options, stock appreciation rights, restricted
stock, deferred stock, or any other type of award relating to, in each case,
more than 1,000,000 shares of common stock, subject to adjustment. The ICP also
limits the maximum dollar amount of cash awards that a participant may earn in a
single year to $20,000,000.


     ADJUSTMENTS.  The Committee (as defined below) may adjust (1) the number
and kind of shares of stock which may be delivered in connection with awards
granted and outstanding awards, (2) the number and kind of shares of stock by
which annual per-person award limitations are measured, and (3) the exercise
price, grant price or purchase price relating to any award and/or make provision
for payment of cash or other property in respect of any outstanding award in the
event of a dividend, recapitalization, stock split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange, liquidation,
dissolution or other similar corporate transaction or event. In addition, the
Committee is authorized to make adjustments in the terms and conditions of, and
the criteria included in, awards in recognition of unusual or nonrecurring
events.


     PLAN ADMINISTRATION.  A committee (the "Committee") selected by the board
of directors will administer the ICP. The Committee will consist of two or more
directors who are "non-employee directors" within the meaning of Rule 16b-3 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and
"outside directors" within the meaning of Internal Revenue Code Section 162(m)
("Code Sec-

                                        4
<PAGE>   8

tion 162(m)"), unless administration of the ICP by "outside directors" is not
then required in order to qualify for tax deductibility under Code Section
162(m). For convenience, anyone who administers the ICP is referred to as the
"Committee". In general, the Committee has full and final authority to select
participants, determine the type, terms and conditions of awards, and adopt
rules, regulations and guidelines for the proper administration of the ICP. The
Committee may delegate certain of its duties, power and authority to the
Company's officers or managers. The board of directors will perform the
functions of the Committee for purposes of interpreting or otherwise
administering grants to non-employee directors.

     FORM OF AWARDS -- GENERALLY.  Awards made pursuant to the ICP may take a
number of forms, including non-qualified and incentive stock options
("Options"), stock appreciation rights ("SARs") (including freestanding and
tandem stock appreciation rights), restricted stock ("Restricted Stock"),
deferred stock ("Deferred Stock"), bonus stock ("Bonus Stock"), dividend
equivalents ("Dividend Equivalents"), annual incentive awards ("Annual Incentive
Awards"), long-term performance awards ("Performance Awards"), or any
combination of the above.

     STOCK OPTIONS.  Options include both incentive stock options (called
"ISOs"), which may result in favorable tax treatment to the participant, and
non-qualified stock options. The terms of any ISOs that are granted to any
participant will comply with the provisions of Internal Revenue Code Section
422. The Committee will determine exercise prices for Options, but these may not
be less than the fair market value of the Company's common stock on the grant
date. The Committee may adjust the price of an Option to reflect certain
corporate actions or, if the Option is granted in lieu of cash compensation,
discount the exercise price by the amount of cash compensation the participant
gives up in order to receive the Option. Options will have a maximum term of ten
years.

     STOCK APPRECIATION RIGHTS.  A SAR entitles the participant to receive
payment of the amount of appreciation, if any, in the market value of his or her
shares on the exercise date over the grant price, or in the case of a tandem SAR
granted in tandem with an Option, the exercise price of the related Option. The
Committee will determine whether or not an SAR is granted as a tandem award
(which is an award that is combined with another award, usually to provide an
alternative form of compensation of comparable economic value) and any other
terms and conditions of any SAR.

     RESTRICTED STOCK.  Restricted Stock is a grant of shares that is subject to
a risk of forfeiture, transferability restrictions and/or other restrictions as
determined by the Committee. Upon termination of employment or service,
Restricted Stock that is subject to restriction will be forfeited (subject to
the Committee's discretion to make exceptions on a case by case basis).
Restricted Stock generally entitles the recipient to all the rights of a
stockholder, including the right to vote and receive dividends, unless the
participant is limited by the terms of the ICP or any award agreement relating
to the Restricted Stock. During the period of restriction, the participant
generally may not sell, transfer, pledge, hypothecate, margin or otherwise
encumber the Restricted Stock.

     DEFERRED STOCK.  A grant of "Deferred Stock" is the right to receive the
Company's common stock, cash, or a combination of stock or cash at the end of a
time period specified by the Committee. At the end of the deferral period or, if
permitted by the Committee, at the time elected by the participant, the Company
will deliver the Company's common stock (or cash having an equal value, or a
combination of cash and stock) to the participant. Except as the Committee
otherwise determines, if a participant's employment is terminated during the
applicable deferral period, the participant will forfeit all Deferred Stock that
is at that time subject to deferral (other than a deferral at the election of a
participant).

     BONUS STOCK.  The ICP authorizes the Committee to grant Company stock as a
bonus, or to grant such stock or other award in lieu of obligations to pay cash
or deliver other property under the ICP or other plans or compensatory
arrangements.

     DIVIDEND EQUIVALENTS.  Under the ICP, the Committee may grant Dividend
Equivalents to a participant, which entitle a participant to receive cash,
Company stock or other awards equal in value to dividends paid for a specified
number of shares of Company stock or other periodic payments.

                                        5
<PAGE>   9

     ANNUAL INCENTIVE AWARDS AND PERFORMANCE AWARDS.  The ICP permits the
Committee to make Annual Incentive Awards and Performance Awards. The Company
may pay these awards in cash, other awards or Company stock. The grant, exercise
and/or settlement of such award will be contingent upon the achievement of
pre-established performance goals, unless the Committee determines that a
Performance Award or Annual Incentive Award is not intended to qualify as
"performance-based compensation" for purposes of Code Section 162(m). In this
way, the Committee intends to qualify such awards to avoid the limitation on tax
deductibility under Code Section 162(m). The Committee will establish a targeted
level or levels of performance measured by certain general business criteria.
The Committee will measure whether a participant has achieved a performance goal
over a performance period of one year or less for an Annual Incentive Award, or
up to ten years for a Performance Award. The Committee may reduce the amount
paid to a participant in connection with an Annual Incentive Award or
Performance Award, but may not increase the amount unless the Committee
determines at the time of grant that the award is not intended to qualify as
"performance-based compensation" for purposes of Code Section 162(m).

     EXERCISABILITY.  Unless the Committee provides otherwise, an Option, SAR or
grant of Restricted Stock or Deferred Stock will become exercisable or
settleable in three equal installments after each of the first, second and third
anniversaries of the date of grant based on the participant's continued
employment with the Company or any of its subsidiaries. Unless the Committee
provides otherwise, an Option or SAR will have a maximum term of ten years after
the date of grant and will expire 30 days after the participant's termination of
employment with the Company; however, if such termination occurs by reason of
the participant's death, retirement or disability, the Option or SAR will be
immediately exercisable and may be exercised by the participant within one year
following termination. Subject to the terms of the ICP and any applicable
agreement, payments upon the exercise of an Option or other award may be made in
such forms as the Committee determines, including, without limitation, cash,
shares or other awards. The settlement of any award may be accelerated, and cash
paid in lieu of stock in connection with such settlement, in the discretion of
the Committee or upon the occurrence of one or more specified events.

     LOANS.  With the consent of the Committee, the Company or any subsidiary
may lend money to a participant (or arrange or guarantee a loan to a
participant) to give the participant the cash needed to exercise any Option,
purchase Company stock or make any other payment in connection with any award,
including the payment of taxes due in connection with any award. The Committee
shall have the discretion to determine the amount, terms and provisions of any
such loan or loans, including the interest rate to be charged, the terms on
which the loan is to be repaid and the conditions, if any, under which the loan
may be forgiven.

     CHANGE IN CONTROL.  If a Change in Control (as defined in the ICP) of the
Company occurs, all outstanding awards will immediately vest and become fully
exercisable, and any deferral of settlement, forfeiture conditions and/or other
restrictions will lapse and such awards shall be fully payable as of the
effective date of the Change in Control (unless waived or deferred at the
participant's option). Unless a participant's employment is terminated for cause
following a Change in Control, awards carrying a right to exercise will remain
exercisable for the balance of the stated term of such award. In addition,
performance goals and conditions will be deemed to have been met with respect to
Annual Incentive Awards and Performance Awards if the award agreements governing
such awards provide for such treatment.


     TERMINATION AND AMENDMENT OF THE ICP.  Unless earlier terminated by the
board of directors, the ICP will remain in effect until such time as no shares
remain available for delivery under the ICP and the Company has no further
rights or obligations under the ICP. The board of directors may amend, alter,
suspend, discontinue or terminate the ICP or the Committee's authority to grant
awards under the ICP without stockholder approval, except that any amendment or
alteration to the ICP shall be subject to stockholder approval at the annual
meeting next following such board action if stockholder approval is required by
any state or federal law or regulation or the rules of any stock exchange on
which the Company's stock is listed or quoted. The Committee may waive any
conditions or rights, or amend, alter, suspend or discontinue any award granted;
provided that no action may materially and adversely affect the rights of
participants under any granted and outstanding awards without the consent of the
affected participant.


                                        6
<PAGE>   10

     FEDERAL INCOME TAX SUMMARY.  The following is a summary of the general,
current federal income tax consequences of awards under the ICP. It is not
intended to be a comprehensive description of all possible tax consequences
related to awards under the ICP.

     The grant of an Option or SAR will trigger no federal income tax for a
participant or a deduction for the Company. Nor will the participant have
taxable income upon exercising an ISO, although the alternative minimum tax may
apply. Upon the exercise of an Option that is not an ISO, the difference between
the exercise price and the fair market value of the Option shares is taxable to
the participant as ordinary income on the exercise date. On the exercise of a
SAR, the cash or the fair market value of the shares received will also be
taxable as ordinary income.


     If a participant disposes of ISO shares before the end of applicable ISO
holding periods, he or she will be taxed on ordinary income equal to the lesser
of (1) the fair market value of the shares at exercise minus the exercise price,
or (2) the amount realized upon the disposition minus the exercise price. The
applicable ISO holding period for the shareholder to receive long-term capital
gain treatment from the sale of stock received from the exercise of an ISO is
the longer of two years from the date of ISO grant or one year from the date of
ISO exercise. Otherwise, a disposition of shares acquired by exercising an
Option or SAR that does not meet the aforementioned ISO holding period will
result in short-term capital gain or loss equal to the sale price minus the
participant's tax basis in such shares. The tax basis is the exercise price paid
plus any amount previously taxed as ordinary income upon exercise of the award.


     The Company is normally entitled to a tax deduction equal to the amount
taxed as ordinary income to the participant. The Company will not be entitled to
a tax deduction for amounts taxed as capital gain to the participant. Therefore,
the Company will not be entitled to a tax deduction if a participant exercises
an ISO and holds the shares received for the ISO holding period.


     In the case of awards other than Options and SARs, the participant
generally will be taxed on ordinary income equal to the fair market value of
shares, cash or other property received. This tax will accrue at the time of
receipt, except in the case of an award that is non-transferable and subject to
a risk of forfeiture. In that case, the tax may not accrue until the lapse of at
least one of these restrictions, although the participant may elect to be taxed
at the time of grant. Subject to an exception discussed below under "Compliance
with Code Section 162(m)", the Company will be entitled to a tax deduction in an
amount equal to the ordinary income taxed to the participant.


     COMPLIANCE WITH CODE SECTION 162(M).  The Committee intends that some
awards under the ICP should qualify as performance-based, as defined in Code
Section 162(m). Code Section 162(m) imposes a cap of $1 million on the amount of
tax deductions the Company may take for compensation to a particular executive
in a single year, but qualifying performance-based compensation remains fully
deductible regardless of its amount. Under the ICP, awards to employees whom the
Committee expects to be named executives, which are conditioned upon achievement
of performance goals, are intended to qualify as performance-based compensation.

     By approving the amendments to the ICP, stockholders will also be approving
the eligibility of executive officers and others to participate, the per-person
limitations and general business criteria on which performance objectives for
performance-based awards may be based. The ICP imposes per-person limitations so
that a participant may not receive awards intended to qualify as
performance-based in excess of his or her annual limit. For each type of award,
a participant's annual limit is 1,000,000 shares in any fiscal year. In
addition, the maximum cash award that may be earned under the ICP in any fiscal
year is $20,000,000. The annual limit has been set above the Committee's present
anticipated award levels because Code Section 162(m) permits only downward
discretionary adjustments.

     In establishing goals for a performance-based award to an executive who is
subject to Code Section 162(m), the Committee will establish a targeted level or
levels of performance measured by one or more of the following business
criteria: (1) earnings per share; (2) revenues; increase in revenues; the excess
of all or a portion of revenues over operating expenses (excluding expenses
determined by the Committee at the time performance goals are established); (3)
cash flow; (4) cash flow return on investment; (5) return on net

                                        7
<PAGE>   11

assets, return on assets, return on investment, return on capital, return on
equity; (6) economic value added; (7) operating margin; (8) net income; pretax
earnings; pretax earnings before interest, depreciation, amortization and/or
incentive compensation; pretax operating earnings; operating earnings; (9) total
shareholder return; (10) performance of managed fund(s); (11) market share; (12)
assets under management; (13) reduction in costs; (14) increase in the fair
market value of Company stock; and (15) any of the above goals as compared to
the performance of a published or special index deemed applicable by the
Committee including, but not limited to, the Russell 1000 Value Index, the
Standard & Poor's 500 Stock Index, the Standard & Poor's Financial Index, the
SNL Investment Adviser Index or a group of comparator companies.

     A number of other requirements must be met in order for particular
compensation to qualify as performance-based under Code Section 162(m). There
can be no assurance that compensation resulting from awards under the ICP
intended to qualify under Code Section 162(m) will in fact be fully deductible
under all circumstances. The Committee's policy is to preserve corporate tax
deductions attributable to the compensation of executives while maintaining the
flexibility to approve, when appropriate, compensation arrangements which it
deems to be in the best interests of the Company and its stockholders, but which
may not always qualify for full tax deductibility.

     Because of the discretionary nature of the ICP, the benefits and amounts to
be received under the plan, as amended, are not determinable.

REQUIRED VOTE


     Under the Company's by-laws, the affirmative vote of the holders of a
majority of the shares represented in person or by proxy and entitled to vote at
the Annual Meeting will be required to approve the amendments to the ICP. In
addition, the New York Stock Exchange rules require the affirmative vote of a
majority of all of the votes cast on this proposal and further require that the
total number of votes cast on this proposal represent more than 50% of all the
shares entitled to vote on the proposal. Unless otherwise instructed, properly
executed proxies which are returned in a timely manner will be voted in favor of
the adoption of the amendments.


     THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENTS TO
THE ICP.


ITEM 4.  RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS


     The Company's board of directors has selected Ernst & Young LLP,
independent auditors, to audit the financial statements of the Company for the
year ending December 31, 2001. Ernst & Young LLP has served the Company in this
capacity since 1987 and has no direct or indirect financial interest in the
Company except as independent auditors. The Company is asking stockholders to
ratify the selection of Ernst & Young LLP as independent auditors of the
Company. A representative of Ernst & Young LLP is expected to attend the meeting
and will be available to respond to questions raised at the Annual Meeting. The
representative from Ernst & Young LLP also will have the opportunity to make a
statement if he or she desires to do so.

AUDIT FEES

     Ernst & Young LLP received $186,000 in fees for professional services in
connection with the 2000 annual audit, including the audit of the consolidated
financial statements, timely quarterly reviews and audits of consolidated
subsidiaries.

FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES

     Ernst & Young LLP did not render any professional services or receive any
fees in connection with financial information systems design and implementation.

ALL OTHER FEES


     Ernst & Young received $31,800 from the Company for all other services
provided by it in 2000, including audit related services of $25,000 and nonaudit
services of $6,800. Audit related services generally

                                        8
<PAGE>   12

include fees for accounting consultations and SEC registration statements. The
audit committee of the board of directors believes these additional services
were compatible with maintaining the independence of Ernst & Young LLP.

REQUIRED VOTE

     The affirmative vote of the holders of a majority of the shares of common
stock present in person or by proxy and entitled to vote at the Annual Meeting
is necessary to ratify the appointment of Ernst & Young LLP as independent
auditors of the Company. Unless otherwise instructed, properly executed proxies
which are returned in a timely manner will be voted in favor of the ratification
of Ernst & Young LLP.

     THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS OF THE COMPANY.

                                 OTHER MATTERS

     As of the date of this proxy statement, the board of directors does not
intend to bring any other matters before the Annual Meeting and is not aware of
any proposals to be presented to the Annual Meeting by others. If any other
matter comes before the Annual Meeting, however, the persons named in the proxy
solicited by the board of directors will vote thereon in accordance with their
judgment.

                SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

     The table below sets forth the beneficial ownership as of March 31, 2001 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, nominees and executive officers of the Company
as a group. Except as indicated, each person had sole voting and dispositive
powers with respect to such shares.


<TABLE>
<CAPTION>
                                                               NUMBER       PERCENT OF
NAME OF BENEFICIAL OWNER                                      OF SHARES       CLASS
------------------------                                      ---------     ----------
<S>                                                           <C>           <C>
Chilton Investment Company, Inc.
  65 Locust Avenue, 2nd Floor
  New Canaan, CT 06840......................................   384,500(1)       5.9
Mario J. Gabelli
Marc J. Gabelli
  One Corporate Center
  Rye, NY 10580.............................................   453,351(2)       7.0
Newberg Family Trust
  11601 Wilshire Boulevard
  Los Angeles, CA 90025.....................................   357,450(3)       5.5
Royce & Associates, Inc.
Royce Management Company
  1414 Avenue of the Americas
  New York, NY 10019........................................   525,400(4)       8.1
Liberty Wanger Asset Management, L.P.
WAM Acquisition GP, Inc.
  227 West Monroe Street, Suite 3000
  Chicago, Illinois 60606...................................   352,900(5)       5.4
Warren E. Buffett
  1440 Kiewit Plaza
  Omaha, NE 68131...........................................   340,333(6)       5.2
Anson M. Beard, Jr..........................................        --            *
J. Barton Goodwin...........................................   112,947(7)       1.7
David D. Grumhaus...........................................    11,991(8)         *
</TABLE>


                                        9
<PAGE>   13


<TABLE>
<CAPTION>
                                                               NUMBER       PERCENT OF
NAME OF BENEFICIAL OWNER                                      OF SHARES       CLASS
------------------------                                      ---------     ----------
<S>                                                           <C>           <C>
John A. Levin...............................................   634,050(9)       9.7
Burton G. Malkiel...........................................        --            *
Peter J. Solomon............................................     1,000            *
Dean J. Takahashi...........................................       182            *
James S. Tisch..............................................     2,000            *
Gregory T. Rogers...........................................    21,680(10)        *
Glenn A. Aigen..............................................     1,646(11)        *
Norris Nissim...............................................        --            *
Jeffrey A. Kigner...........................................        --            *
Directors and officers as a group (11 persons)..............   785,496         12.0
</TABLE>


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

 (1) The information set forth with respect to Chilton Investment Company, Inc.
     is based solely on the Schedule 13G filed with the Securities and Exchange
     Commission (the "SEC") on January 19, 2001.

 (2) The information set forth with respect to Mario J. Gabelli and Marc J.
     Gabelli is based solely on the Schedule 13D filed with SEC on December 29,
     2000 by Mario J. Gabelli, Marc J. Gabelli and various entities which either
     one directly or indirectly controls or for which either acts as chief
     investment officer. Marc J. Gabelli and Mario J. Gabelli disclaim
     beneficial ownership of any of the common stock included on the Schedule
     13D,

 (3) The information set forth with respect to Newberg Family Trust is based
     solely on the Schedule 13G filed with the SEC on December 12, 2001.

 (4) The information set forth with respect to Royce & Associates, Inc. and
     Royce Management Company is based solely on the Schedule 13G filed with the
     SEC on February 7, 2001 by such entities and Charles M. Royce. Mr. Royce
     may be deemed to be a controlling person of each of the two entities, which
     act as investment advisers, and disclaims beneficial ownership of the
     shares held by such entities. Royce & Associates, Inc. has sole voting and
     dispositive power with respect to 471,000 shares, and Royce Management
     Company exercises sole voting and dispositive power with respect to 54,400
     shares.

 (5) The information set forth with respect to Liberty Wanger Asset Management,
     L.P. and WAM Acquisition GP, Inc. is based solely on the Schedule 13G filed
     by such entities with the SEC on February 14, 2001. Liberty Wanger Asset
     Management is an investment adviser, and WAM Acquisition GP, Inc. is the
     general partner of the investment adviser. They share voting and
     dispositive power over 352,900 shares.


 (6)The information set forth with regard to Warren E. Buffett is based solely
    on the Schedule 13G filed with the SEC on February 14, 2000.



 (7) Includes 112,947 shares of common stock owned by immediate family members.



 (8) Includes 10,759 shares held by family members or family related entities.



 (9) Includes 19,595 shares held by family members or family related entities
     and 17,285 shares relating to options which have vested or will vest within
     60 days of March 31, 2001.



(10) Includes 21,680 shares of common stock relating to options which have
     vested or will vest within 60 days of March 31, 2001.



(11) Includes 1,646 shares of common stock relating to options which have vested
     or will vest within 60 days of March 31, 2001.



     The number of shares listed in the above table does not include any shares
underlying the restricted stock units granted to Messrs. Beard, Goodwin,
Grumhaus, Malkiel, Takahashi and Tisch at the March 28, 2001 meeting of the
board of directors. See "Compensation -- Directors' Compensation" for a
description of these grants.


                                        10
<PAGE>   14

            SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Each director and executive officer of the Company and each beneficial
owner of 10% or more of the Company's common stock is required to report his or
her transactions in shares of Company common stock to the Securities and
Exchange Commission within a specified period following a transaction. Based on
our review of filings with the Securities and Exchange Commission and written
representations furnished to us, during 2000 the directors, executive officers
and 10% beneficial owners filed all such reports within the specified time
period except Mr. Tisch's Form 3 was filed three days late and Mr. Solomon's
Form 3 was filed four days late.

                               EXECUTIVE OFFICERS

     The current executive officers of the Company are:


<TABLE>
<CAPTION>
NAME, AGE, AND PRINCIPAL OCCUPATION
DURING LAST FIVE YEARS                             OFFICE(A)             YEAR FIRST ELECTED
-----------------------------------                ---------             ------------------
<S>                                          <C>                       <C>
John A. Levin -- age 62                      Chairman, Chief           2000 (as Chairman)
  Chairman since February 2000, Chief        Executive Officer and     1996 (as CEO and
  Executive Officer and President of the     President                 President)
  Company and Chairman and Chief Executive
  Officer of Levin Management Co., Inc. and
  John A. Levin & Co., Inc. since June
  1996; prior thereto, President and
  Securities Analyst/ Portfolio Manager of
  the predecessor to John A. Levin & Co.,
  Inc. since 1982.
Gregory T. Rogers -- age 35                  Executive Vice            2000
  Executive Vice President and Chief         President and Chief
  Operating Officer of the Company, Levin    Operating Officer
  Management Co., Inc. and John A. Levin &
  Co., Inc. since February 2000; prior
  thereto, Managing Director of BARRA
  Strategic Consulting since 1994.
Glenn A. Aigen -- age 38                     Senior Vice President,    2000
  Senior Vice President, Chief Financial     Chief Financial
  Officer and Treasurer of the Company,      Officer and Treasurer
  Levin Management Co., Inc. and John A.
  Levin & Co., Inc. since February 2000;
  Vice President, Chief Financial Officer
  and Director of Operations of Levin
  Management Co., Inc. and John A. Levin &
  Co., Inc. from June 1996 to February
  2000; prior thereto, Director of
  Operations of the predecessor to John A.
  Levin & Co., Inc. since 1993.
Norris Nissim -- age 34                      Vice President,           2000
  Vice President, General Counsel and        General Counsel and
  Secretary of the Company and Vice          Secretary
  President and General Counsel of Levin
  Management Co., Inc. and John A. Levin &
  Co., Inc. since February 2000; Director
  of Legal Affairs of Levin Management Co.,
  Inc. and John A. Levin & Co., Inc. from
  August 1996 to February 2000; prior
  thereto, Associate at Schulte Roth &
  Zabel LLP since 1993.
</TABLE>


---------------
(a) Each executive officer of the Company generally holds office until the first
    meeting of the board of directors after the annual meeting of stockholders
    and until his or her successor is elected and qualified.

                                        11
<PAGE>   15

                                  COMPENSATION

DIRECTORS' COMPENSATION


     Company employees who serve as directors of the Company receive no
compensation for such services. The Company pays non-employee directors an
annual retainer of $20,000, payable in quarterly installments. Non-employee
directors receive $1,500 for each board meeting and $500 for each meeting of a
committee of the board that they attend in person or by telephone and $5,000 per
year for serving as the chairman of any committee of the board of directors. The
Company also reimburses directors for their out-of-pocket expenses incurred in
connection with such meetings. On March 28, 2001, each non-employee director
received 1,000 restricted stock units in lieu of $20,800 of future cash
compensation that would be earned pursuant to the fee schedule described above
(including for attendance at the March 28, 2001 meeting of the board of
directors). The restricted stock units vested on March 28, 2001, but the
underlying shares may not be transferred or sold prior to their delivery to the
non-employee directors on December 31, 2001.


EXECUTIVE OFFICER COMPENSATION

     The following table sets forth compensation for the years ended December
31, 2000, December 31, 1999 and December 31, 1998 received by the Company's
Chief Executive Officer, the Company's three other most highly compensated
executive officers serving at the end of fiscal year 2000 and a former executive
officer of the Company who resigned from his position on July 21, 2000 (each of
whom was paid in excess of $100,000 in aggregate compensation by the Company).
These five officers are referred to as the "Named Executive Officers".

                           SUMMARY COMPENSATION TABLE


<TABLE>
<CAPTION>
                                                                            LONG TERM
                                                                       COMPENSATION AWARDS
                                                                  ------------------------------
                                       ANNUAL COMPENSATION                          SECURITIES
                                  -----------------------------     RESTRICTED      UNDERLYING        ALL OTHER
NAME AND PRINCIPAL POSITION       YEAR  SALARY($)    BONUS($)     STOCK AWARD($)   OPTIONS(1)(#)   COMPENSATION($)
---------------------------       ----  ---------   -----------   --------------   -------------   ---------------
<S>                               <C>   <C>         <C>           <C>              <C>             <C>
John A. Levin...................  2000   837,624     1,956,962      1,499,673(4)          --           10,500(8)
  Chairman, Chief                 1999   867,165     1,635,000        189,005         34,570           30,000(9)
  Executive Officer and           1998   990,748     1,614,706             --             --           30,000(9)
  President

Gregory T. Rogers...............  2000   375,883       785,500      1,366,008(5)          --           10,500(8)
  Executive Vice President and    1999        --       403,848(3)          --         65,049(3)            --
  Chief Operating Officer

Glenn A. Aigen..................  2000   192,800       807,200      1,366,008(6)      24,393           10,500(8)
  Senior Vice President and
  Chief Financial Officer

Norris Nissim...................  2000   217,519       124,500        105,000(7)          --           10,500(8)
  Vice President and General
  Counsel

Jeffrey A. Kigner(2)............  2000   334,735       720,187             --             --           10,500(8)
  Former Vice Chairman
</TABLE>


---------------
(1) All option grants were made under the Company's 1998 Incentive Compensation
    Plan.

(2) Mr. Kigner resigned as Vice Chairman of the Company effective July 21, 2000.

(3) Represents a signing bonus paid to Mr. Rogers.


(4) Represents the grant date value of 71,413 restricted stock units (RSU)
    granted on January 12, 2001 with respect to 2000 bonus compensation. The
    shares underlying such RSU's may not be delivered prior to January 12, 2004.
    As of December 31, 2000, Mr. Levin held 14,504 RSU's with an aggregate value
    of $264,968. All of such RSU's have vested, except for 7,252 which vest on
    December 31, 2001. Pursuant to an election made under the Company's Deferred
    Compensation Plan, the shares underlying the RSU's which have vested may not
    be delivered prior to December 31, 2001.


                                        12
<PAGE>   16

(5) Represents the grant date value of 65,048 RSU's granted on January 12, 2001
    with respect to 2000 bonus compensation. The shares underlying such RSU's
    may not be delivered prior to January 12, 2004.


(6) Represents the grant date value of 65,048 RSU's granted on January 12, 2001
    with respect to 2000 bonus compensation. The shares underlying such RSU's
    may not be delivered prior to January 12, 2004. As of December 31, 2000, Mr.
    Aigen held 1,382 RSU's with an aggregate value of $25,222. All of such RSU's
    have vested, except for 691 which vest on December 31, 2001. Pursuant to an
    election made under the Company's Deferred Compensation Plan, the shares
    underlying the RSU's which have vested may not be delivered prior to
    December 31, 2001.


(7) Represents the grant date value of 5,000 RSU's granted on January 12, 2001
    with respect to 2000 bonus compensation. The shares underlying such RSU's
    may not be delivered prior to January 12, 2004.

(8) Represents amounts contributed to the Company's 401(k) plan by the Company.


(9) Represents contributions made with respect to Mr. Levin to the Company's
    target benefit pension plan.


                             OPTION GRANTS IN 2000

     The Company granted the following options in 2000 to the Named Executive
Officers.


<TABLE>
<CAPTION>
                                                PERCENT OF TOTAL
                           NUMBER OF SHARES    OPTIONS GRANTED TO   EXERCISE OR BASE                GRANT DATE
                          UNDERLYING OPTIONS      EMPLOYEES IN          PRICE(1)       EXPIRATION    PRESENT
NAME                          GRANTED(#)         FISCAL YEAR(%)        ($/SHARE)          DATE       VALUE(2)
----                      ------------------   ------------------   ----------------   ----------   ----------
<S>                       <C>                  <C>                  <C>                <C>          <C>
John A. Levin...........        34,570                 9.0               $13.03         01/20/10     $171,813
Glenn A. Aigen..........         3,293                 0.8               $13.03         01/20/10     $ 16,366
                                24,393                 6.3               $15.88         06/30/10     $151,968
Gregory T. Rogers.......        65,049                16.8               $13.03         01/20/10     $323,294
Norris Nissim...........             0                   0                   --               --           --
Jeffrey A. Kigner.......             0                   0                   --               --           --
</TABLE>


---------------
(1) The exercise price of each option is the fair market value of the Company's
    common stock on the date of grant. Each of the options expiring on January
    20, 2010 were subject to a vesting schedule whereby 50% vested on December
    31, 2000 and 50% will vest on December 31, 2001. The options expiring on
    June 30, 2010 are subject to a vesting schedule whereby one third vest on
    June 30, 2001, one third vest on June 30, 2002 and one third vest on June
    30, 2003.

(2) The fair value of each option granted in 2000 was estimated using the
    Black-Scholes option pricing model with the following assumptions: for
    options granted in January 2000 -- 0% dividend yield, 15.45% volatility,
    6.35% risk-free interest, and an exercise period of seven years; for options
    granted in July 2000 -- 0% dividend yield, 19.37% volatility, 6.07%
    risk-free interest, and an exercise period of seven years.

                                        13
<PAGE>   17


                   AGGREGATE OPTION EXERCISES IN LAST FISCAL


                     YEAR AND FISCAL YEAR-END OPTION VALUES


     The following table sets forth certain information concerning the exercise
of options to purchase the Company's common stock during 2000 by the Named
Executive Officers and the value of unexercised in-the-money options to purchase
shares of the Company's common stock granted to the Named Executive Officers
outstanding as of December 31, 2000.


<TABLE>
<CAPTION>
                                                             NUMBER OF SECURITIES        VALUE OF UNEXERCISED
                                                            UNDERLYING UNEXERCISED       IN-THE-MONEY OPTIONS
                              SHARES                           OPTIONS AT FISCAL          AT FISCAL YEAR-END
                             ACQUIRED         VALUE            YEAR-END 2000(#)               2000($)(1)
NAME                        ON EXERCISE    REALIZED($)     EXERCISABLE/UNEXERCISABLE   EXERCISABLE/UNEXERCISABLE
----                        -----------   --------------   -------------------------   -------------------------
<S>                         <C>           <C>              <C>                         <C>
John A Levin..............        0              0              17,285 / 17,285             90,206 /  90,206
Gregory T. Rogers.........        0              0              21,680 / 43,369            113,142 / 226,332
Glenn A. Aigen............        0              0               1,646 / 26,040              8,590 /  66,528
Norris Nissim.............        0              0                          0/0                          0/0
Jeffrey A. Kigner.........        0              0                          0/0                          0/0
</TABLE>


---------------
(1) On December 29, 2000 (the last trading day during fiscal 2000), the closing
    price of the Company's common stock on the New York Stock Exchange was
    $18.25 per share.

EMPLOYMENT CONTRACTS

     John A. Levin.  Mr. Levin entered into an employment agreement with the
Company at the time the Company acquired John A. Levin & Co., Inc. in June 1996.
The contract has a term of five years and expires on June 28, 2001. Under the
contract Mr. Levin is entitled to an annual base salary of at least $825,000, to
be adjusted annually in accordance with the Urban Consumer Price Index for the
New York Metropolitan Area. Mr. Levin is also entitled to participate in all
incentive compensation and benefit plans available to senior executives of the
Company. In the event he is terminated other than for cause, Mr. Levin's
agreement provides that he will receive an amount equal to (1) his base salary
until the earlier of (x) the remainder of the term of the employment agreement
or (y) three years following the termination date, and (2) the bonus
compensation to which he would have been entitled during the year of termination
pursuant to the compensation plan then in effect. In addition, Mr. Levin's
agreement contains confidentiality provisions that prohibit him from disclosing
confidential information relating to the Company and its subsidiaries following
the termination of the employment agreement. Mr. Levin's contract also contains
non-competition and non-solicitation provisions that terminate with the
expiration of the agreement.

     Gregory T. Rogers.  Mr. Rogers is party to an employment agreement with the
Company effective December 31, 1999. The agreement has an initial three year
term, unless otherwise terminated as provided therein, with automatic annual one
year renewals unless either the Company or the employee gives at least six
months written notice of their intention not to extend the term. Under the
contract, Mr. Rogers is entitled to an annual base salary of $400,000, to be
adjusted annually to reflect increases in the cost of living. Mr. Rogers is also
entitled to participate in all incentive compensation and benefit plans
available to senior executives of the Company. With respect to calendar years
2000 and 2001, he is entitled to bonus compensation of at least $600,000, up to
30% of which may be paid in stock options or other equity-based awards.

     In addition, Mr. Rogers received a signing bonus of $403,848 and an award
of stock options to purchase 65,049 shares of common stock of the Company at the
stock price on the date of grant. The stock options vest in three equal annual
installments commencing on December 31, 2001. All the options vest immediately
and become exercisable upon a change of control.

     In the event he is terminated other than for cause, Mr. Rogers' agreement
provides that he will receive an amount equal to the base salary and bonus
compensation he would have been entitled to during the term of the contract. For
these purposes, bonus compensation in the years following 2001 would be deemed
to be at least $600,000.

                                        14
<PAGE>   18

     Mr. Rogers' agreement contains confidentiality provisions that prohibit him
from disclosing confidential information relating to the Company and its
subsidiaries following the termination of the employment agreement. Mr. Rogers'
contract also contains non-competition provisions that apply six months
following the termination of the agreement by the Company for cause or by the
employee without good reason and non-solicitation provisions that apply for one
year following the termination of employment.


TARGET BENEFIT PENSION PLAN



     The Company maintains a target benefit pension plan. Prior to January 1,
2000, contributions were made by the Company on behalf of all employees who had
reached the age of 20.5 and had completed nine months of service to the Company.
The plan has been frozen and no contributions have been made since December 31,
1999. The amount of the contribution made by the Company was based on the
employee's age and compensation, and the amount of the retirement benefit
depends on the amount contributed on behalf of the employee and the performance
of those assets, whose investment may be directed by the employee among the
investment options in the plan.


COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Until February 10, 2000, William H. Springer and Frederick S. Addy served
as members of the compensation committee. They served as directors of the
Company until April 18, 2000. Anson M. Beard, Jr., David D. Grumhaus and Burton
G. Malkiel served as members of the compensation committee commencing on
February 10, 2000. None of these persons were ever officers or employees of the
Company. During 2000, none of the Company's executive officers served on the
board of directors or the compensation committee of any entity which had an
executive officer who served on the Company's board of directors or compensation
committee.


            COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION


     The compensation committee of the board of directors makes decisions on
compensation of the Company's executives. Each member of the compensation
committee is a non-employee director. The compensation committee establishes the
compensation of John A. Levin, Chief Executive Officer, based on its evaluation
of Mr. Levin's performance. It establishes the compensation of the other
officers of the Company in consultation with Mr. Levin. The full board of
directors reviews all decisions by the compensation committee relating to the
compensation of all the Company's officers.

     The Company's executive compensation program reflects the philosophy that
compensation should reward executives for outstanding individual performance
and, at the same time, align the interests of executives closely with those of
shareholders. To implement that philosophy, the Company offers each of its
executives a combination of base salary and annual cash bonuses. Through this
compensation structure, the Company aims to reward above-average corporate
performance and recognize individual initiative and achievements.

     The compensation committee administers the Company's 1998 Incentive
Compensation Plan, as amended, pursuant to which the Company may pay its
employees, based on performance, in cash or in Company stock (including stock
options and restricted stock units).

BASE SALARY

     Base salaries reflect individual positions, responsibilities, experience,
and potential contribution to the success of the Company. Actual salaries vary
according to the compensation committee's subjective assessment of a number of
factors in its review of base salaries of Company executives. The Company
conducts annual reviews to ensure that base salaries are competitive, that they
reflect the specific responsibilities of individual executives and that they
appropriately reward individual executives for their contributions to the
Company's performance.

                                        15
<PAGE>   19

BONUSES

     At the compensation committee's sole discretion, the Company may pay each
executive officer a cash bonus based on the compensation committee's assessment
of the executive officer's individual performance and the performance of the
Company or business unit. In its evaluation of the performance of the officer
and the determination of incentive bonuses, the compensation committee does not
assign quantitative relative weights to different factors or follow mathematical
formulas. Rather, the compensation committee makes its determination in each
case after considering the factors it deems relevant at the time.

COMPENSATION OF CHIEF EXECUTIVE OFFICER

     Mr. Levin received a base salary in 2000 in accordance with the terms of
his employment agreement. His annual bonus was determined by the compensation
committee of the board of directors in accordance with the guidelines
established by it for the executive officers of the firm. These guidelines took
into consideration the overall profitability of the firm, and in the case of Mr.
Levin, the profitability of pooled investment vehicles which earned
performance-based fees and with respect to which he acted as the portfolio
manager.


     Mr. Levin also received a grant of restricted units with regard to 71,413
shares of common stock. This award was made in the context of aggregate grants
of 650,504 restricted stock units to employees of the Company made on November
16, 2000 and to each of the Named Executive Officers in office at the time on
January 12, 2001. These grants of restricted stock units were made as part of an
effort to retain key personnel and develop long-term shareholder value through
the alignment of interests of employees and shareholders.


LIMITS ON DEDUCTIBILITY OF COMPENSATION

     For corporate income tax purposes, the Company may not deduct executive
compensation in excess of $1 million, unless it is performance-based
compensation and is paid pursuant to a plan meeting certain requirements of the
Code. The Committee currently anticipates that, to the extent practicable and in
the Company's best interest, the Company will pay executive compensation in a
manner that satisfies the requirements of the Code to permit the Company to
deduct the compensation.

                                          COMPENSATION COMMITTEE MEMBERS
                                          Anson M. Beard, Jr. (Chairman)
                                          David D. Grumhaus
                                          Burton G. Malkiel

                             AUDIT COMMITTEE REPORT


     The board of directors has adopted a charter for the audit committee.
Pursuant to this charter, the audit committee makes recommendations regarding
the selection of independent auditors and meets with representatives of the
Company's independent auditors to determine the scope, and review the results,
of each audit.


     In March 2001, the audit committee met with Ernst & Young LLP to review the
results of the 2000 audit with members of the Ernst & Young engagement team. The
audit committee also discussed the audited financial statements and the results
of the audit with the Company's management.


     The audit committee discussed the matters required to be discussed by
Statements on Auditing Standards No. 61, as amended, with Ernst & Young.
Further, the Committee has received the written statements required by
Independence Standards Board Standard No. 1. Standard No. 1 requires auditors to
communicate, in writing, at least annually all relationships between the auditor
and the Company that, in the auditor's professional judgment, may reasonably be
thought to affect the auditor's independence. The audit committee has received
this written disclosure and has discussed with Ernst & Young its independence
and considered the compatibility of nonaudit services with the auditor's
independence.


     Based on the above-mentioned review and discussions with management and the
independent auditors, the audit committee recommended to the board of directors
that the Company's audited financial statements

                                        16
<PAGE>   20

be included in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2000 for filing with the Securities and Exchange Commission.

                                          AUDIT COMMITTEE MEMBERS
                                          David D. Grumhaus (Chairman)

                                          J. Barton Goodwin


                                          Burton G. Malkiel


              CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     John A. Levin, the Company's Chairman, Chief Executive Officer and
President, is the managing member of Island Drive Management, LLC, which serves
as a general partner of Island Drive Partners, L.P. and participates in the
performance-based incentive allocation made by the limited partners to the
general partners. Levco GP, Inc., a wholly owned subsidiary of the Company,
serves as the managing general partner of this partnership. Island Drive
Management, LLC received an incentive allocation of $350,799 from Island Drive
Partners, L.P. in 2000.

     In 2000, John A. Levin & Co., Inc. received $99,835 in investment
management fees in connection with accounts owned by Peter J. Solomon, a
director of the Company, and trusts established for the benefit of members of
Mr. Solomon's immediate family.

                COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS


     The following chart shows the Company's annual total returns from December
29, 1995 through December 29, 2000. On August 19, 1999, the Company's
stockholders approved the Plan for Distribution of Assets of the Company,
pursuant to which the Company distributed or liquidated substantially all of its
assets, with the exception of Levco, and changed the nature of the Company's
business so that it no longer operated as a registered investment company.
Currently, the Company's chief operating business is as an investment adviser.
Because the chart that follows contains the Company's returns from 1995 through
2000, the chart includes information about the Company during that period in
which the Company was operating as a registered investment company and during
the period after the August 19, 1999 stockholder meeting in which the Company
distributed or liquidated substantially all of its assets except Levco. To
reflect the changing nature of the Company's business, the chart sets forth a
comparison of the Company's total return with the annual return of (i) all
closed-end, domestic equity investment companies ("Closed-End Funds") reported
by Morningstar, Inc.; (ii) the S&P Financial Index; and (iii) the S&P 500 Index.
The chart is based on an investment of $100 on December 29, 1995, and assumes
that all dividends, capital gain distributions and returns of capital were
reinvested. The chart is not an indicator of the future performance of the
Company. Thus, it should not be used to predict the future performance of the
Company's stock.


                                        17
<PAGE>   21

                COMPARISON OF CUMULATIVE FIVE YEAR TOTAL RETURN

LOGO


<TABLE>
<CAPTION>
                                 12/29/95    12/29/96    12/31/97    12/31/98    12/31/99    12/29/00
                                 --------    --------    --------    --------    --------    --------
<S>                              <C>         <C>         <C>         <C>         <C>         <C>
BKF Capital Group, Inc.........    $100        116         145         150         201         262
Closed-End Funds...............     100        134         138         205         212         240
S&P Financial Index............     100        135         199         221         230         290
S&P 500 Index..................     100        123         164         211         255         232
</TABLE>


     Total returns assume that dividends and capital gain distributions are
reinvested.

                PROXY SOLICITATION; QUORUM; VOTING; ADJOURNMENT

PROXY SOLICITATION

     If you properly sign your proxy and return it on time, your shares will be
voted at the Annual Meeting in accordance with the directions you mark on your
proxy card. If you properly sign and return your proxy, but don't mark any
directions on it, your shares will be voted FOR the election of each of the
nominated directors, FOR approval of the Amendment, FOR approval of the
amendments to the ICP, and FOR the ratification of the appointment of Ernst &
Young LLP as independent auditors of the Company.

     You may revoke your proxy at any time before it is voted, either in person
at the meeting, by written notice to the Company, or by delivery of a later
dated proxy. No appraisal rights exist for any action proposed to be taken at
the Annual Meeting.

     Stockholders of record at the close of business on April 16, 2001 are
entitled to participate in the meeting and to cast one vote for each share held.
The Company had 6,518,665 shares of common stock outstanding on the record date.
There is no other class of stock outstanding. Stockholders are entitled to one
vote per share for each matter eligible to be voted upon.

     Proxies will be solicited by mail. Directors, officers, and a small number
of regular employees may solicit proxies, personally or by telephone, telegraph
or mail, but such persons will not be specially compensated for such services.
In addition, the Company may engage ChaseMellon to render proxy solicitation
services at a cost estimated at $8,000. The Company will inquire of any
stockholder of record known to be a broker, dealer, bank, or other nominee as to
whether other persons were the beneficial owners of shares held of record by
such persons. If so, the Company will supply additional copies of solicitation
materials for forwarding to beneficial owners and will make reimbursement for
reasonable out-of-pocket costs. The Company will bear all costs of solicitation
and related actions.

                                        18
<PAGE>   22

QUORUM

     ChaseMellon Shareholder Services, LLC, the Company's transfer agent,
tabulates the proxies. Under Delaware law (under which the Company is organized)
and the Company's bylaws, a majority of the shares outstanding on the record
date, excluding shares held in the Company's treasury, must be present at the
meeting in person or by proxy to constitute a quorum for the transaction of
business. Shares abstaining from voting and shares present but not voting,
including broker non-votes, are counted as "present" for purposes of determining
the existence of a quorum. Broker non-votes are shares held by a broker or
nominee for which an executed proxy is received by the Company, but which are
not voted as to one or more proposals because instructions have not been
received from the beneficial owners or persons entitled to vote and the broker
or nominee does not have discretionary voting power to vote such shares.

VOTING


     In the election of directors, you may vote FOR all of the nominees or your
vote may be WITHHELD with respect to one or more of the nominees. For the other
proposals, you may vote FOR, AGAINST or ABSTAIN. If you sign your proxy card or
broker voting instruction card with no further instructions, your shares will be
voted in accordance with the recommendations of the board of directors.


     Election of Directors


     The affirmative vote of a plurality of the shares cast at the meeting is
required for the election of directors. A properly executed proxy marked
WITHHOLD AUTHORITY with respect to the election of one or more directors will
not be voted with respect to the director or directors indicated.


     Amendment to Restated Certificate of Incorporation


     The affirmative vote of the majority of the outstanding shares of common
stock entitled to vote is required for approval of the proposed Amendment to the
Company's Restated Certificate of Incorporation. Abstentions and broker
non-votes with respect to this matter will not be voted and will have the effect
of a vote against this proposal.



     Amendments to 1998 Incentive Compensation Plan



     Under the Company's by-laws, the affirmative vote of the holders of a
majority of the shares represented in person or by proxy and entitled to vote at
the Annual Meeting will be required to approve the amendments to the Company's
1998 Incentive Compensation Plan. In addition, the New York Stock Exchange rules
require the affirmative vote of a majority of all of the votes cast on this
proposal and further require that the total number of votes cast on this
proposal represent more than 50% of all the shares entitled to vote on this
proposal. The New York Stock Exchange rules treat abstentions as shares entitled
to vote and as votes cast and treat broker non-votes as shares entitled to vote
but not as votes cast. Accordingly, abstentions will have the effect of a vote
against the proposal. Broker non-votes will also have the effect of a vote
against the proposal, unless more than 50% of the shares entitled to vote are
cast on this proposal, in which case broker non-votes will have no effect on
this proposal.



     Ratification of Appointment of Independent Auditors



     The affirmative vote of the holders of a majority of the shares represented
in person or by proxy and entitled to vote on this proposal will be required to
ratify the appointment of Ernst & Young as independent auditors. Abstentions
will not be voted and will have the effect of a vote against this proposal.
Broker non-votes will not be counted in determining the number of shares
necessary for approval and will have no effect on the outcome of this proposal.


                                        19
<PAGE>   23

ADJOURNMENT

     Any decision to adjourn the meeting would be made by vote of the shares
present at the meeting, in person or by proxy. Proxies would be voted in favor
of adjournment if there were not enough shares present at the meeting to
constitute a quorum. If sufficient shares were present to constitute a quorum,
but insufficient votes had been cast in favor of an item to approve it, proxies
would be voted in favor of adjournment only if the board determined that
adjournment and additional solicitation was reasonable and in the best interest
of shareholders, taking into account the nature of the proposal, the percentage
of votes actually cast, the percentage of negative votes, the nature of any
further solicitation that might be made and the information provided to
stockholders about the reasons for additional solicitation.

                           PROPOSALS OF STOCKHOLDERS

     Under the Company's bylaws, no business may be brought before an annual
meeting of stockholders unless it is specified in the notice of the meeting or
is otherwise brought before the meeting by or at the direction of the board of
directors or by a stockholder entitled to vote who has delivered notice to the
Company (containing certain information specified in the bylaws) not less than
60 days prior to the date on which the Company first mailed its proxy materials
for the prior year's annual meeting; provided, however, that if the date of the
annual meeting has been advanced by more than 30 days from the date of the prior
years annual meeting, then such notice must be received by the Secretary of the
Company not later than the close of business on the tenth day following the date
on which the Company first makes public disclosure of the date of the meeting.
These regulations are separate from and in addition to the SEC's requirements
that a stockholder must meet in order to have stockholder proposal included in
the Company's proxy statement.


     Stockholders interested in submitting a proposal for inclusion in the proxy
materials for the annual meeting of stockholders in 2002 may do so by following
the procedures prescribed in Rule 14a-8 of the Exchange Act. To be eligible for
inclusion, stockholder proposals must be received by the Company's Secretary no
later than December 25, 2001.


                             AVAILABLE INFORMATION

     STOCKHOLDERS OF THE COMPANY WILL RECEIVE WITH THIS PROXY STATEMENT A COPY
OF THE COMPANY ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000.
STOCKHOLDERS OF THE COMPANY MAY OBTAIN, WITHOUT CHARGE, ADDITIONAL COPIES OF THE
COMPANY'S ANNUAL REPORT BY WRITING TO THE COMPANY AT ONE ROCKEFELLER PLAZA, 19TH
FLOOR, NEW YORK, NEW YORK 10020 OR BY CALLING (800) BKF-1891. SHAREHOLDERS MAY
ALSO OBTAIN COPIES OF THE ANNUAL AND QUARTERLY REPORTS ON THE COMPANY'S WEB SITE
AT WWW.BKFCAPITAL.COM.

                                          By Order of the Board of Directors

                                          /s/ NORRIS NISSIM


                                          Norris Nissim

                                          Secretary
New York, New York
April 24, 2001


                                        20

<PAGE>   24

                                                                       EXHIBIT A

                            CERTIFICATE OF AMENDMENT
                                       OF
                     RESTATED CERTIFICATE OF INCORPORATION
                                       OF
                            BKF CAPITAL GROUP, INC.

     BKF Capital Group, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Company"), DOES HEREBY CERTIFY:

          FIRST: That by unanimous vote of the Board of Directors of the
     Company, resolutions were duly adopted setting forth a proposed amendment
     to the Restated Certificate of Incorporation of the Company, declaring such
     amendment to be advisable and calling for the consideration of the proposed
     amendment by the stockholders of the Company at the next annual meeting.
     The resolutions setting forth the proposed amendment are as follows:

             RESOLVED, that the Board of Directors of the Company hereby
        declares it advisable that the Restated Certificate of Incorporation of
        the Company be amended by deletion of article FOURTH and the insertion
        of the following in lieu thereof:

             "FOURTH: The total number of shares of all stock which the
        corporation shall have authority to issue is 15,000,000 shares of common
        stock, $1 par value per share."

          SECOND: That thereafter, pursuant to resolution of its Board of
     Directors, the annual meeting of the stockholders of the Company was duly
     called and held, upon notice in accordance with Section 222 of the General
     Corporation Law of the State of Delaware, at which meeting the necessary
     number of shares as required by statute were voted in favor of the
     amendment.

          THIRD: That said amendment was duly adopted in accordance with the
     provisions of Section 242 of the General Corporation Law of the State of
     Delaware.

          FOURTH: That said amendment shall be effective upon filing of this
     certificate and the amendment provided for herein shall be effective as of
     that time and date.

     IN WITNESS WHEREOF, the Company has caused this certificate to be signed by
Norris Nissim, its Vice President, General Counsel and Secretary, this 24th day
of May 2001.

                                          BKF CAPITAL GROUP, INC.

                                          By:
                                          --------------------------------------
                                            Norris Nissim
                                            Vice President, General Counsel and
                                              Secretary
<PAGE>   25

                                                                       EXHIBIT B

                            BKF CAPITAL GROUP, INC.

                        1998 INCENTIVE COMPENSATION PLAN
                  (AS AMENDED AND RESTATED ON MARCH 28, 2001)
<PAGE>   26

                            BKF CAPITAL GROUP, INC.

                        1998 INCENTIVE COMPENSATION PLAN

                  (AS AMENDED AND RESTATED ON MARCH 28, 2001)



<TABLE>
<CAPTION>
                                                                   PAGE
                                                                   ----
<C>  <S>                                                           <C>
 1.  Purpose.....................................................    1
 2.  Definitions.................................................    1
 3.  Administration..............................................    2
     (a) Authority of the Committee..............................    2
     (b) Manner of Exercise of Committee Authority...............    3
     (c) Limitation of Liability.................................    3
 4.  Stock Subject to Plan.......................................    3
     (a) Overall Number of Shares of Stock Available for
     Delivery....................................................    3
     (b) Application of Limitation to Grants of Awards...........    3
     (c) Availability of Shares Not Delivered under Awards.......    4
 5.  Eligibility; Per-Person Award Limitations...................    4
 6.  Specific Terms of Awards....................................    4
     (a) General.................................................    4
     (b) Options.................................................    4
     (c) Stock Appreciation Rights...............................    5
     (d) Restricted Stock........................................    5
     (e) Deferred Stock..........................................    6
     (f) Bonus Stock and Awards in Lieu of Obligations...........    6
     (g) Dividend Equivalents....................................    6
     (h) Annual Incentive and Performance Awards.................    6
 7.  Certain Provisions Applicable to Awards.....................    7
     (a) Stand-Alone, Additional, Tandem, and Substitute
     Awards......................................................    7
     (b) Term of Awards..........................................    7
     (c) Form and Timing of Payment under Awards; Deferrals......    7
     (d) Exemptions from Section 16(b) Liability.................    7
     (e) Loan Provisions.........................................    7
     (f) General Terms Relating to Awards........................    7
 8.  Performance and Annual Incentive Awards.....................    8
     (a) Performance Conditions..................................    8
     (b) Performance Awards Granted to Designated Covered
     Employees...................................................    8
     (c) Annual Incentive Awards Granted to Designated Covered
     Employees...................................................    9
     (d) Written Determinations..................................   10
     (e) Status of Section 8(b) and 8(c) Awards under Code
     Section 162(m)..............................................   10
 9.  Change in Control...........................................   10
     (a) Effect of "Change in Control" on Non-Performance Based
     Awards......................................................   10
     (b) Effect of "Change in Control" on Performance-Based
     Awards......................................................   11
     (c) Definition of "Change in Control".......................   11
     (d) Definition of "Change in Control Price".................   12
</TABLE>

<PAGE>   27


<TABLE>
<CAPTION>
                                                                   PAGE
                                                                   ----
<C>  <S>                                                           <C>
10.  General Provisions..........................................   12
     (a) Compliance with Legal and Other Requirements............   12
     (b) Limits on Transferability; Beneficiaries................   12
     (c) Adjustments.............................................   12
     (d) Taxes...................................................   13
     (e) Changes to the Plan and Awards..........................   13
     (f) Limitation on Rights Conferred under Plan...............   13
     (g) Unfunded Status of Awards; Creation of Trusts...........   13
     (h) Nonexclusivity of the Plan..............................   14
     (i) Payments in the Event of Forfeitures; Fractional
     Shares......................................................   14
     (j) Governing Law...........................................   14
     (k) Plan Effective Date and Shareholder Approval............   14
</TABLE>

<PAGE>   28

                            BKF CAPITAL GROUP, INC.

                        1998 INCENTIVE COMPENSATION PLAN

                  (AS AMENDED AND RESTATED ON MARCH 28, 2001)



     1.  PURPOSE.  The purpose of this 1998 Incentive Compensation Plan, as
amended and restated on March 28, 2001 (the "Plan"), is to assist BKF Capital
Group, Inc. ("BKF") and its subsidiaries in attracting, retaining, motivating,
and rewarding high-quality executives, employees, and other persons who provide
services to BKF and/or its subsidiaries, enabling such persons to acquire or
increase a proprietary interest in BKF in order to strengthen the mutuality of
interests between such persons and shareholders of BKF, and providing such
persons with annual and long-term performance incentives to expend their maximum
efforts in the creation of shareholder value. The Plan is also intended to
qualify certain compensation awarded under the Plan for tax deductibility under
Code Section 162(m) to the extent deemed appropriate by the Committee (or any
successor committee) of the Board of Directors of BKF. Adoption of the Plan and
the grant of Awards in accordance with the terms of the Plan has been determined
by the Board of Directors of BKF to be in the best interests of BKF and its
shareholders.


     2.  DEFINITIONS.  For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof:

          (a) "Annual Incentive Award" means an Award granted to a Participant
     which is conditioned upon satisfaction, during a period not in excess of
     one year, of performance criteria established by the Committee.

          (b) "Award" means any Option, SAR, Restricted Stock, Deferred Stock,
     Stock granted as a bonus or in lieu of another award, Dividend Equivalent,
     Other Stock-Based Award, Performance Award or Annual Incentive Award,
     together with any other right or interest granted to a Participant under
     the Plan.

          (c) "Beneficiary" means the person, persons, trust or trusts which
     have been designated by a Participant in his or her most recent written
     beneficiary designation filed with the Committee to receive the benefits
     specified under the Plan upon such Participant's death or to which Awards
     or other rights are transferred if and to the extent permitted under
     Section 10(b) hereof. If, upon a Participant's death, there is no
     designated Beneficiary or surviving designated Beneficiary, then the term
     Beneficiary means the Participant's estate.

          (d) "Beneficial Owner" shall have the meaning ascribed to such term in
     Rule 13d-3 under the Exchange Act and any successor to such Rule.

          (e) "Board" means BKF's Board of Directors.

          (f) "Code" means the Internal Revenue Code of 1986, as amended from
     time to time, including regulations thereunder and successor provisions and
     regulations thereto.

          (g) "Committee" means a committee of two or more directors designated
     by the Board to administer the Plan, each of whom shall be (i) a
     "non-employee director" within the meaning of Rule 16b-3 under the Exchange
     Act, and (ii) an "outside director" as defined under Code Section 162(m),
     unless administration of the Plan by "outside directors" is not then
     required in order to qualify for tax deductibility under Code Section
     162(m).

          (h) "Covered Employee" means an Eligible Person who is a Covered
     Employee as specified in Section 8(e) of the Plan.

          (i) "Deferred Stock" means a right, granted to a Participant under
     Section 6(e) hereof, to receive Stock, cash or a combination thereof at the
     end of a specified deferral period.

          (j) "Dividend Equivalent" means a right, granted to a Participant
     under Section 6(g), to receive cash, Stock, other Awards or other property
     equal in value to dividends paid with respect to a specified number of
     shares of Stock, or other periodic payments.

          (k) "Effective Date" means the date on which BKF shareholders approve
     the adoption of the Plan.

                                        1
<PAGE>   29

          (l) "Eligible Person" means each Executive Officer or director of BKF
     and other officers and employees of BKF or any of its subsidiaries. An
     employee on leave of absence may be considered as still in the employ of
     BKF or a subsidiary for purposes of eligibility for participation in the
     Plan. In addition, a person who has been offered employment by BKF or any
     of its subsidiaries or agreed to become a director of BKF is eligible to be
     granted an Award under the Plan; provided, however, that such Award shall
     be canceled if such person fails to commence such employment or service as
     a director, and no payment of value may be made in connection with such
     Award until such person has commenced such employment or service.

          (m) "Exchange Act" means the Securities Exchange Act of 1934, as
     amended from time to time, including rules thereunder and successor
     provisions and rules thereto.

          (n) "Executive Officer" means an executive officer of BKF as defined
     under the Exchange Act.

          (o) "Fair Market Value" means the fair market value of Stock, Awards
     or other property as determined by the Committee or under procedures
     established by the Committee. Unless otherwise determined by the Committee,
     the Fair Market Value of Stock shall be equal to the closing price per
     share reported on a consolidated basis on the principal stock exchange upon
     which Stock is traded on the date on which the value is to be determined
     (or the last immediately preceding date on which Stock was traded).

          (p) "Incentive Stock Option" or "ISO" means any Option intended to be
     and designated as an incentive stock option within the meaning of Code
     Section 422 or any successor provision thereto.

          (q) "Option" means a right, granted to a Participant under Section
     6(b) hereof, to purchase Stock or other Awards at a specified price during
     specified time periods.

          (r) "Participant" means a person who has been granted an Award under
     the Plan which remains outstanding, including a person who is no longer an
     Eligible Person.

          (s) "Performance Award" means an Award granted to a Participant which
     is conditioned upon satisfaction, during a period in excess of one year but
     in no event more than ten years, of performance criteria established by the
     Committee.

          (t) "Person" shall have the meaning ascribed to such term in Section
     3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
     and shall include a "group" as defined in Section 13(d) thereof.

          (u) "Restricted Stock" means Stock granted to a Participant under
     Section 6(d) hereof that is subject to certain restrictions and to a risk
     of forfeiture.

          (v) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and
     applicable to the Plan and Participants, promulgated by the Securities and
     Exchange Commission under Section 16 of the Exchange Act.

          (w) "Stock" means either BKF Common Stock, and such other securities
     as may be substituted (or resubstituted) for BKF Common Stock pursuant to
     Section 10(c) hereof.

          (x) "Stock Appreciation Rights" or "SAR" means a right granted to a
     Participant under Section 6(c) hereof.

     3.  ADMINISTRATION.

     (a) Authority of the Committee.  The Plan shall be administered by the
Committee. A majority of the Committee shall constitute a quorum, and the acts
of a majority of the members present at any meeting at which a quorum is
present, or acts approved in writing by all of the members, shall be the acts of
the Committee. The Committee shall have full and final authority, in each case
subject to and consistent with the provisions of the Plan, to select Eligible
Persons to become Participants, grant Awards, determine the type, number and
other terms and conditions of, and all other matters relating to, Awards,
prescribe Award

                                        2
<PAGE>   30

greements (which need not be identical for each Participant) and rules and
regulations for the administration of the Plan, construe and interpret the Plan
and Award agreements and correct defects, supply omissions or reconcile
inconsistencies therein, and to make all other decisions and determinations as
the Committee may deem necessary or advisable for the administration of the
Plan. Other provisions of the Plan notwithstanding, the Board shall perform the
functions of the Committee for purposes of interpreting or otherwise
administering grants to non-employee directors.


     (b) Manner of Exercise of Committee Authority.  Any action of the Committee
shall be final, conclusive and binding on all persons, including BKF, its
subsidiaries, Participants, Beneficiaries, transferees under Section 10(b)
hereof or other persons claiming rights from or through a Participant, and
shareholders. The express grant of any specific power to the Committee, and the
taking of any action by the Committee, shall not be construed as limiting any
power or authority of the Committee. The Committee may delegate to officers or
managers of BKF or any subsidiary, or committees thereof, the authority, subject
to such terms as the Committee shall determine, to perform such functions,
including administrative functions, as the Committee may determine, to the
extent that such delegation will not result in the loss of an exemption under
Rule 16b-3(d)(1) for Awards granted to Participants subject to Section 16 of the
Exchange Act in respect of BKF and will not cause Awards intended to qualify as
"performance-based compensation" under Code Section 162(m) to fail to so
qualify. The Committee may appoint agents to assist it in administering the
Plan.



     (c) Limitation of Liability.  The Committee and each member thereof shall
be entitled, in good faith, to rely or act upon any report or other information
furnished to him or her by any executive officer, other officer or employee of
BKF or a subsidiary, BKF's independent auditors, consultants or any other agents
assisting in the administration of the Plan. Members of the Committee and any
officer or employee of BKF or a subsidiary acting at the direction or on behalf
of the Committee shall not be personally liable for any action or determination
taken or made in good faith with respect to the Plan, and shall, to the extent
permitted by law, be fully indemnified and protected by BKF with respect to any
such action or determination; provided that nothing herein shall be construed to
protect any such person from any liability to BKF or its shareholders to which
such person would otherwise be subject by reason of willful misfeasance, bad
faith, or gross negligence in the performance of his or her duties, or by reason
of reckless disregard of his or her obligations and duties.


     4.  STOCK SUBJECT TO PLAN.


     (a) Overall Number of Shares of Stock Available for Delivery.  Subject to
adjustment as provided in Section 10(c) hereof, the total number of shares of
Stock reserved and available for delivery in connection with Awards under the
Plan shall be (i) 2,600,000, plus (ii) 10% of the number of shares of Stock
issued or delivered by BKF during the term of the Plan (excluding any issuance
or delivery in connection with Awards, or any other compensation or benefit plan
of BKF), plus (iii) the number of shares of Stock (not to exceed 700,000)
purchased by BKF after March 28, 2001; provided, however, that the total number
of shares of Stock with respect to which ISOs may be granted shall not exceed
one million. Any shares of Stock delivered under the Plan shall consist of
authorized and unissued shares or treasury shares.



     (b) Application of Limitation to Grants of Awards.  No Award may be granted
if the number of shares of Stock to be delivered in connection with such Award
or, in the case of an Award relating to shares of Stock but settleable only in
cash (such as cash-only SARs), the number of shares to which such Award relates,
exceeds the number of shares of Stock remaining available under the Plan minus
the number of shares of Stock issuable in settlement of or relating to
then-outstanding Awards. The Committee may adopt reasonable counting procedures
to ensure appropriate counting, avoid double counting (as, for example, in the
case of tandem or substitute awards) and make adjustments if the number of
shares of Stock actually delivered differs from the number of shares previously
counted in connection with an Award.


     (c) Availability of Shares Not Delivered under Awards.  Shares of Stock
subject to an Award under the Plan that is canceled, expired, forfeited, settled
in cash or otherwise terminated without a delivery of shares to the Participant,
including (i) the number of shares withheld in payment of any exercise or
purchase price of an Award or taxes relating to Awards, and (ii) the number of
shares surrendered in payment of any exercise or

                                        3
<PAGE>   31

purchase price of an Award or taxes relating to any Award, will again be
available for Awards under the Plan, except that if any such shares could not
again be available for Awards to a particular Participant under any applicable
law or regulation, such shares shall be available exclusively for Awards to
Participants who are not subject to such limitation.

     5.  ELIGIBILITY; PER-PERSON AWARD LIMITATIONS.  Awards may be granted under
the Plan only to Eligible Persons. In each fiscal year during any part of which
the Plan is in effect, an Eligible Person may not be granted Awards relating to
more than one million shares of Stock, subject to adjustment as provided in
Section 10(c), under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f), 6(g) and
6(h). For purposes of applying the foregoing limitation to Sections 6(b) and
6(c), any Option or SAR that is canceled shall be treated as remaining
outstanding, and any amendment to an Option or SAR that reduces the exercise or
grant price (other than customary anti-dilution adjustments) shall be treated as
the cancellation of the original Option or SAR and the issuance of a new Option
or SAR. In addition, the maximum cash Award that may be earned under the Plan
pursuant to Section 6(h) in respect of any fiscal year shall be $20 million,
determined on an annualized basis in the case of a Performance Award.

     6.  SPECIFIC TERMS OF AWARDS.

     (a) General.  Awards may be granted on the terms and conditions set forth
in this Section 6. In addition, the Committee may impose on any Award or the
exercise thereof, at the date of grant or thereafter (subject to Section 10(e)),
such additional terms and conditions, not inconsistent with the provisions of
the Plan, as the Committee shall determine, including terms requiring forfeiture
of Awards in the event of termination of employment by the Participant and terms
permitting a Participant to make elections relating to his or her Award. The
Committee shall retain full power and discretion to accelerate, waive or modify,
at any time, any term or condition of an Award that is not mandatory under the
Plan. Except in cases in which the Committee is authorized to require other
forms of consideration under the Plan, or to the extent other forms of
consideration must by paid to satisfy the requirements of the Delaware General
Corporation Law, no consideration other than services may be required for the
grant (but not the exercise) of any Award.

     (b) Options.  The Committee is authorized to grant Options to Participants
on the following terms and conditions:

          (i) Exercise Price.  The exercise price per share of Stock purchasable
     under an Option shall be determined by the Committee, provided that such
     exercise price shall be not less than the Fair Market Value of a share of
     Stock on the date of grant of such Option except as provided under Section
     7(a) hereof.

          (ii) Time and Method of Exercise  The Committee shall determine the
     time or times at which or the circumstances under which an Option may be
     exercised in whole or in part (including based on achievement of
     performance goals and/or future service requirements), the methods by which
     such exercise price may be paid or deemed to be paid, the form of such
     payment, including, without limitation, cash, Stock, other Awards, or other
     property (including notes or other contractual obligations of Participants
     to make payment on a deferred basis), and the methods by or forms in which
     Stock will be delivered or deemed to be delivered to Participants.

          (iii) ISOs.  The terms of any ISO granted under the Plan shall comply
     in all respects with the provisions of Code Section 422. Anything in the
     Plan to the contrary notwithstanding, no term of the Plan relating to ISOs
     (including any SAR in tandem therewith) shall be interpreted, amended or
     altered, nor shall any discretion or authority granted under the Plan be
     exercised, so as to disqualify either the Plan or any ISO under Code
     Section 422, unless the Participant has first requested the change that
     will result in such disqualification.

                                        4
<PAGE>   32

     (c) Stock Appreciation Rights.  The Committee is authorized to grant SARs
to Participants on the following terms and conditions:

          (i) Right to Payment.  A SAR shall confer on the Participant to whom
     it is granted a right to receive, upon exercise thereof, the excess of (A)
     the Fair Market Value of one share of Stock on the date of exercise over
     (B) the grant price of the SAR as determined by the Committee.

          (ii) Other Terms.  The Committee shall determine at the date of grant
     or thereafter, the time or times at which and the circumstances under which
     a SAR may be exercised in whole or in part (including based on achievement
     of performance goals and/or future service requirements), the method of
     exercise, method of settlement, form of consideration payable in
     settlement, method by or forms in which Stock will be delivered or deemed
     to be delivered to Participants, whether or not a SAR shall be in tandem or
     in combination with any other Award, and any other terms and conditions of
     any SAR. SARs may be either freestanding or in tandem with other Awards.

     (d) Restricted Stock.  The Committee is authorized to grant Restricted
Stock to Participants on the following terms and conditions:

          (i) Grant and Restrictions.  Restricted Stock shall be subject to such
     restrictions on transferability, risk of forfeiture and other restrictions,
     if any, as the Committee may impose, which restrictions may lapse
     separately or in combination at such times, under such circumstances
     (including based on achievement of performance goals and/or future service
     requirements), in such installments or otherwise, as the Committee may
     determine at the date of grant or thereafter. Except to the extent
     restricted under the terms of the Plan and any Award agreement relating to
     the Restricted Stock, a Participant granted Restricted Stock shall have all
     of the rights of a shareholder, including the right to vote the Restricted
     Stock and the right to receive dividends thereon (subject to any mandatory
     reinvestment or other requirement imposed by the Committee). During the
     restricted period applicable to the Restricted Stock, subject to Section
     10(b) below, the Restricted Stock may not be sold, transferred, pledged,
     hypothecated, margined or otherwise encumbered by the Participant.

          (ii) Forfeiture.  Except as otherwise determined by the Committee,
     upon termination of employment during the applicable restriction period,
     Restricted Stock that is at that time subject to restrictions shall be
     forfeited and reacquired by the issuing company; provided that the
     Committee may provide, by rule or regulation or in any Award agreement, or
     may determine in any individual case, that restrictions or forfeiture
     conditions relating to Restricted Stock shall be waived in whole or in part
     in the event of terminations resulting from specified causes, and the
     Committee may in other cases waive in whole or in part the forfeiture of
     Restricted Stock.

          (iii) Certificates for Stock.  Restricted Stock granted under the Plan
     may be evidenced in such manner as the Committee shall determine. If
     certificates representing Restricted Stock are registered in the name of
     the Participant, the Committee may require that such certificates bear an
     appropriate legend referring to the terms, conditions and restrictions
     applicable to such Restricted Stock, that the issuing company retain
     physical possession of the certificates, and that the Participant deliver a
     stock power to the issuing company, endorsed in blank, relating to the
     Restricted Stock.

          (iv) Dividends, Distributions and Splits.  As a condition to the grant
     of an Award of Restricted Stock, the Committee may require that any cash
     dividends or distributions paid on a share of Restricted Stock be
     automatically reinvested in additional shares of Restricted Stock or
     applied to the purchase of additional Awards under the Plan. Unless
     otherwise determined by the Committee, Stock distributed in connection with
     a Stock split, Stock dividend or distribution, and other property
     distributed as a dividend, shall be subject to restrictions and a risk of
     forfeiture to the same extent as the Restricted Stock with respect to which
     such Stock or other property has been distributed.

                                        5
<PAGE>   33

     (e) Deferred Stock.  The Committee is authorized to grant Deferred Stock to
Participants, which are rights to receive Stock, cash, or a combination thereof
at the end of a specified deferral period, subject to the following terms and
conditions:

          (i) Award and Restrictions.  Satisfaction of an Award of Deferred
     Stock shall occur upon expiration of the deferral period specified for such
     Deferred Stock by the Committee (or, if permitted by the Committee, as
     elected by the Participant). In addition, Deferred Stock shall be subject
     to such restrictions (which may include a risk of forfeiture) as the
     Committee may impose, if any, which restrictions may lapse at the
     expiration of the deferral period or at earlier specified times (including
     based on achievement of performance goals and/or future service
     requirements), separately or in combination, in installments or otherwise,
     as the Committee may determine. Deferred Stock may be satisfied by delivery
     of Stock, cash equal to the Fair Market Value of the specified number of
     shares of Stock covered by the Deferred Stock, or a combination thereof, as
     determined by the Committee at the date of grant or thereafter.

          (ii) Forfeiture.  Except as otherwise determined by the Committee,
     upon termination of employment during the applicable deferral period or
     portion thereof to which forfeiture conditions apply (as provided in the
     Award agreement evidencing the Deferred Stock), all Deferred Stock that is
     at that time subject to deferral (other than a deferral at the election of
     the Participant) shall be forfeited; provided that the Committee may
     provide, by rule or regulation or in any Award agreement, or may determine
     in any individual case, that restrictions or forfeiture conditions relating
     to Deferred Stock shall be waived in whole or in part in the event of
     terminations resulting from specified causes, and the Committee may in
     other cases waive in whole or in part the forfeiture of Deferred Stock.

          (iii) Dividend Equivalents.  Unless otherwise determined by the
     Committee at date of grant, Dividend Equivalents on the specified number of
     shares of Stock covered by an Award of Deferred Stock shall be either (A)
     paid with respect to such Deferred Stock at the dividend payment date in
     cash or in shares of unrestricted Stock having a Fair Market Value equal to
     the amount of such dividends, or (B) deferred with respect to such Deferred
     Stock and the amount or value thereof automatically deemed reinvested in
     additional Deferred Stock, other Awards or other investment vehicles, as
     the Committee shall determine or permit the Participant to elect.

     (f) Bonus Stock and Awards in Lieu of Obligations.  The Committee is
authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu
of obligations to pay cash or deliver other property under the Plan or under
other plans or compensatory arrangements, provided that, in the case of
Participants subject to Section 16 of the Exchange Act, the amount of such
grants remains within the discretion of the Committee to the extent necessary to
ensure that acquisitions of Stock or other Awards are exempt from liability
under Section 16(b) of the Exchange Act. Stock or Awards granted hereunder shall
be subject to such other terms as shall be determined by the Committee.

     (g) Dividend Equivalents.  The Committee is authorized to grant Dividend
Equivalents to a Participant, entitling the Participant to receive cash, Stock,
or other Awards equal in value to dividends paid with respect to a specified
number of shares of Stock, or other periodic payments. Dividend Equivalents may
be awarded on a free-standing basis or in connection with another Award. The
Committee may provide that Dividend Equivalents shall be paid or distributed
when accrued or shall be deemed to have been reinvested in additional Stock,
Awards, or other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee may specify.

     (h) Annual Incentive and Performance Awards.  The Committee is authorized
to make Annual Incentive Awards and Performance Awards payable in cash, Stock,
or other Awards, on terms and conditions established by the Committee, subject
to Section 8 in the event of Annual Incentive Awards or Performance Awards
intended to qualify as "performance-based compensation" for purposes of Code
Section 162(m).

                                        6
<PAGE>   34

     7.  CERTAIN PROVISIONS APPLICABLE TO AWARDS.

     (a) Stand-Alone, Additional, Tandem, and Substitute Awards.  Awards granted
under the Plan may, in the discretion of the Committee, be granted either alone
or in addition to, in tandem with, or in substitution or exchange for, any other
Award or any award granted under another plan of BKF, any subsidiary, or any
business entity to be acquired by BKF or any subsidiary, or any other right of a
Participant to receive payment from BKF or any subsidiary. Such additional,
tandem, and substitute or exchange Awards may be granted at any time. If an
Award is granted in substitution or exchange for another Award or award, the
Committee shall require the surrender of such other Award or award in
consideration for the grant of the new Award. In addition, Awards may be granted
in lieu of cash compensation, including in lieu of cash amounts payable under
other plans of BKF or any subsidiary, in which the value of Stock subject to the
Award is equivalent in value to the cash compensation (for example, Deferred
Stock or Restricted Stock), or in which the exercise price, grant price or
purchase price of the Award in the nature of a right that may be exercised is
equal to the Fair Market Value of the underlying Stock minus the value of the
cash compensation surrendered (for example, Options granted with an exercise
price "discounted" by the amount of the cash compensation surrendered).

     (b) Term of Awards.  The term of each Award shall be for such period as may
be determined by the Committee; provided that in no event shall the term of any
Option or SAR exceed a period of ten years (or such shorter term as may be
required in respect of an ISO under Code Section 422).

     (c) Form and Timing of Payment under Awards; Deferrals.  Subject to the
terms of the Plan and any applicable Award agreement, payments to be made by BKF
or any subsidiary upon the exercise of an Option or other Award or settlement of
an Award may be made in such forms as the Committee shall determine, including,
without limitation, cash, Stock, or other Awards, and may be made in a single
payment or transfer, in installments, or on a deferred basis. The settlement of
any Award may be accelerated, and cash paid in lieu of Stock in connection with
such settlement, in the discretion of the Committee or upon the occurrence of
one or more specified events. Installment or deferred payments may be required
by the Committee to the extent necessary to qualify payments for deductibility
under Code Section 162(m), or permitted at the election of the Participant on
terms and conditions established by the Committee. Payments may include, without
limitation, provisions for the payment or crediting of reasonable interest on
installment or deferred payments or the grant or crediting of Dividend
Equivalents or other amounts in respect of installment or deferred payments
denominated in Stock. Any payments mandatorily deferred by the Committee to
qualify such payments for deductibility under Code Section 162(m) shall include
a reasonable rate of interest.

     (d) Exemptions from Section 16(b) Liability.  It is the intent of BKF and
its subsidiaries that the grant of any Awards to or other transaction by a
Participant who is subject to Section 16 of the Exchange Act shall be exempt
under Rule 16b-3 (except for transactions acknowledged in writing to be
non-exempt by such Participant). Accordingly, if any provision of this Plan or
any Award agreement does not comply with the requirements of Rule 16b-3 as then
applicable to any such transaction, such provision shall be construed or deemed
amended to the extent necessary to conform to the applicable requirements of
Rule 16b-3 so that such Participant shall avoid liability under Section 16(b).

     (e) Loan Provisions.  With the consent of the Committee, and subject at all
times to, and only to the extent, if any, permitted under and in accordance
with, laws and regulations and other binding obligations or provisions
applicable to BKF and/or any subsidiary, BKF and/or any subsidiary may make,
guarantee or arrange for a loan or loans to a Participant with respect to the
exercise of any Option, purchase of Stock or other payment in connection with
any Award, including the payment by a Participant of any or all federal, state
or local income or other taxes due in connection with any Award. Subject to such
limitations, the Committee shall have full authority to decide whether to make a
loan or loans hereunder and to determine the amount, terms and provisions of any
such loan or loans, including the interest rate to be charged in respect of any
such loan or loans, the terms on which the loan is to be repaid and conditions,
if any, under which the loan or loans may be forgiven.

     (f) General Terms Relating to Awards.  Unless the Committee provides
otherwise at the time of grant or by amendment, an Option, SAR, grant of
Restricted Stock or Deferred Stock will become exercisable or

                                        7
<PAGE>   35

settleable, as the case may be, in three equal installments after each of the
first, second and third anniversaries of the date of grant based on the
Participant's continued employment with BKF or any of its subsidiaries. Unless
the Committee provides otherwise at the time of grant or by amendment, an Option
or SAR will have a maximum term of ten years after the date of grant and will
expire 30 days after the Participant's termination of employment with BKF and
its subsidiaries, except if such termination occurs by reason of the
Participant's death, retirement or disability, in which case the Option or SAR
will be immediately exercisable and may be exercised by the Participant or his
or her Beneficiary within one year following such termination (but in no event
later than the maximum term of the Option or SAR).

     8.  PERFORMANCE AND ANNUAL INCENTIVE AWARDS.

     (a) Performance Conditions.  The right of a Participant to exercise or
receive a grant or settlement of any Award, and the timing thereof, may be
subject to such performance conditions as may be specified by the Committee. The
Committee may use such business criteria and other measures of performance as it
may deem appropriate in establishing any performance conditions, and may
exercise its discretion to reduce or increase the amounts payable under any
Award subject to performance conditions; provided, however, that all Performance
Awards and Annual Incentive Awards shall comply with the requirements of
Sections 8(b) and 8(c) hereof unless the Committee specifically determines at
the time of grant that such Award is not intended to qualify as
"performance-based compensation" under Code Section 162(m).

     (b) Performance Awards Granted to Designated Covered Employees.  Unless the
Committee determines that a Performance Award is not intended to qualify as
"performance-based compensation" for purposes of Code Section 162(m), the grant,
exercise and/or settlement of such Performance Award shall be contingent upon
achievement of preestablished performance goals and other terms set forth in
this Section 8(b).

          (i) Performance Goals Generally.  The performance goals for such
     Performance Awards shall consist of one or more business criteria and a
     targeted level or levels of performance with respect to each of such
     criteria, as specified by the Committee consistent with this Section 8(b).
     Performance goals shall be objective and shall otherwise meet the
     requirements of Code Section 162(m) and regulations thereunder (including
     Regulation 1.162-27 and successor regulations thereto), including the
     requirement that the level or levels of performance targeted by the
     Committee result in the achievement of performance goals being
     "substantially uncertain." The Committee may determine that such
     Performance Awards shall be granted, exercised and/or settled upon
     achievement of any one performance goal or that two or more of the
     performance goals must be achieved as a condition to grant, exercise and/or
     settlement of such Performance Awards. Performance goals may differ for
     Performance Awards granted to any one Participant or to different
     Participants.

          (ii) Business Criteria.  One or more of the following business
     criteria for BKF, on a consolidated basis, and/or for specified
     subsidiaries, business units, funds or partnerships of BKF or any of its
     subsidiaries (except with respect to the total shareholder return and
     earnings per share criteria), shall be used by the Committee in
     establishing performance goals for such Performance Awards: (1) earnings
     per share; (2) revenues; increase in revenues; the excess of all or a
     portion of revenues over operating expenses (excluding expenses determined
     by the Committee at the time performance goals are established); (3) cash
     flow; (4) cash flow return on investment; (5) return on net assets, return
     on assets, return on investment, return on capital, return on equity; (6)
     economic value added; (7) operating margin; (8) net income; pretax
     earnings; pretax earnings before interest, depreciation, amortization
     and/or incentive compensation; pretax operating earnings; operating
     earnings; (9) total shareholder return; (10) performance of managed
     fund(s); (11) market share; (12) assets under management; (13) reduction in
     costs; (14) increase in the Fair Market Value of Stock; and (15) any of the
     above goals as compared to the performance of a published or special index
     deemed applicable by the Committee including, but not limited to, the
     Russell 1000 Value Index, the Standard & Poor's 500 Stock Index, the
     Standard & Poor's Financial Index, the SNL Investment Adviser Index or a
     group of comparator companies. One or more of the foregoing business
     criteria shall also be exclusively used in establishing

                                        8
<PAGE>   36

     performance goals for Annual Incentive Awards granted to a Covered Employee
     under Section 8(c) hereof.

          (iii) Performance Period; Timing for Establishing Performance Goals.
     Achievement of performance goals in respect of such Performance Awards
     shall be measured over a performance period of up to ten years, as
     specified by the Committee. Performance goals shall be established not
     later than 90 days after the beginning of any performance period applicable
     to such Performance Awards, or at such other date as may be required or
     permitted for "performance-based compensation" under Code Section 162(m).

          (iv) Performance Award Pool. The Committee may establish a Performance
     Award pool, which shall be an unfunded pool, for purposes of measuring
     performance of BKF, any subsidiary and/or any business unit of BKF and/or
     any of its subsidiaries in connection with Performance Awards. The amount
     of such Performance Award pool shall be based upon the achievement of a
     performance goal or goals based on one or more of the business criteria set
     forth in Section 8(b)(ii) hereof during the given performance period, as
     specified by the Committee in accordance with Section 8(b)(iii) hereof. The
     Committee may specify the amount of the Performance Award pool as a
     percentage of any of such business criteria, a percentage thereof in excess
     of a threshold amount, or as another amount which need not bear a strictly
     mathematical relationship to such business criteria, provided that the
     amount of the Performance Award pool can be determined by an independent
     third party in possession of all the relevant facts.

          (v) Settlement of Performance Awards; Other Terms.  Settlement of such
     Performance Awards shall be in cash, Stock or other Awards, in the
     discretion of the Committee. The Committee may, in its discretion, reduce
     the amount of a settlement otherwise to be made in connection with such
     Performance Awards, but may not exercise discretion to increase any such
     amount payable to a Covered Employee in respect of a Performance Award
     subject to this Section 8(b). The Committee shall specify the circumstances
     in which such Performance Awards shall be paid or forfeited in the event of
     termination of employment by the Participant prior to the end of a
     performance period or settlement of Performance Awards.

     (c) Annual Incentive Awards Granted to Designated Covered
Employees.  Unless the Committee determines that an Annual Incentive Award is
not intended to qualify as "performance-based compensation" for purposes of Code
Section 162(m), the grant, exercise and/or settlement of such Annual Incentive
Award shall be contingent upon achievement of preestablished performance goals
and other terms set forth in this Section 8(c).

          (i) Annual Incentive Award Pool.  The Committee may establish an
     Annual Incentive Award pool, which shall be an unfunded pool, for purposes
     of measuring performance of BKF, any subsidiary and/or any business unit of
     BKF and/or any of its subsidiaries in connection with Annual Incentive
     Awards. The amount of such Annual Incentive Award pool shall be based upon
     the achievement of a performance goal or goals based on one or more of the
     business criteria set forth in Section 8(b)(ii) hereof during the given
     performance period, as specified by the Committee in accordance with
     Section 8(b)(iii) hereof. The Committee may specify the amount of the
     Annual Incentive Award pool as a percentage of any of such business
     criteria a percentage thereof in excess of a threshold amount, or as
     another amount which need not bear a strictly mathematical relationship to
     such business criteria, provided that the amount of the Annual Incentive
     Award pool can be determined by an independent third party in possession of
     all the relevant facts.

          (ii) Potential Annual Incentive Awards.  Not later than the end of the
     90th day of each fiscal year, or at such other date as may be required or
     permitted in the case of Awards intended to be "performance-based
     compensation" under Code Section 162(m), the Committee shall determine the
     Eligible Persons who will potentially receive Annual Incentive Awards, and
     the amounts potentially payable thereunder, for that fiscal year, either
     out of an Annual Incentive Award pool established by such date under
     Section 8(c)(i) hereof or as individual Annual Incentive Awards. In the
     case of individual Annual Incentive Awards intended to qualify under Code
     Section 162(m), the amount potentially payable shall

                                        9
<PAGE>   37

     be based upon the achievement of a performance goal or goals based on one
     or more of the business criteria set forth in Section 8(b)(ii) hereof in
     the given performance year, as specified by the Committee; in other cases,
     such amount shall be based on such criteria as shall be established by the
     Committee.

          (iii) Payout of Annual Incentive Awards.  After the end of each fiscal
     year, the Committee shall determine the amount, if any, of (A) the Annual
     Incentive Award pool, and the maximum amount of potential Annual Incentive
     Award payable to each Participant in the Annual Incentive Award pool, or
     (B) the amount of potential Annual Incentive Award otherwise payable to
     each Participant. The Committee may, in its discretion, determine that the
     amount payable to any Participant as a final Annual Incentive Award shall
     be increased or reduced from the amount of his or her potential Annual
     Incentive Award, including a determination to make no final Award
     whatsoever, but may not exercise discretion to increase any such amount in
     the case of an Annual Incentive Award intended to qualify under Code
     Section 162(m). The Committee shall specify the circumstances in which an
     Annual Incentive Award shall be paid or forfeited in the event of
     termination of employment by the Participant prior to the end of a fiscal
     year or settlement of such Annual Incentive Award. Settlement of Annual
     Incentive Awards shall be in cash, Stock or other Awards, in the discretion
     of the Committee.

     (d) Written Determinations.  All determinations by the Committee as to the
establishment of performance goals, the amount of any Performance Award pool or
potential individual Performance Awards and as to the achievement of performance
goals relating to Performance Awards under Section 8(b), and the amount of any
Annual Incentive Award pool or potential individual Annual Incentive Awards and
the amount of final Annual Incentive Awards under Section 8(c), shall be made in
writing in the case of any Award intended to qualify under Code Section 162(m).
No Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m) shall be paid until the Committee has certified in writing that
the applicable performance goals have been achieved. The Committee may not
delegate any responsibility relating to such Performance Awards or Annual
Incentive Awards.

     (e) Status of Section 8(b) and Section 8(c) Awards under Code Section
162(m).  It is the intent of BKF and its subsidiaries that Performance Awards
and Annual Incentive Awards under Sections 8(b) and 8(c) hereof granted to
persons who are likely to be Covered Employees within the meaning of Code
Section 162(m) and regulations thereunder (including Regulation 1.162-27 and
successor regulations thereto) shall, if so designated by the Committee,
constitute "performance-based compensation" within the meaning of Code Section
162(m) and regulations thereunder. Accordingly, the terms of Sections 8(b), (c),
(d) and (e), including the definitions of Covered Employee and other terms used
therein, shall be interpreted in a manner consistent with Code Section 162(m)
and regulations thereunder. The foregoing notwithstanding, because the Committee
cannot determine with certainty whether a given Participant will be a Covered
Employee with respect to a fiscal year that has not yet been completed, the term
Covered Employee as used herein shall mean any Eligible Person who receives a
Performance Award or an Annual Incentive Award unless the Committee determines,
at the time of grant, that such Award is not intended to qualify as
"performance-based compensation" for purposes of Code Section 162(m). If any
provision of the Plan as in effect on the date of adoption or any agreements
relating to Performance Awards or Annual Incentive Awards that are designated as
intended to comply with Code Section 162(m) does not comply or is inconsistent
with the requirements of Code Section 162(m) or regulations thereunder, such
provision shall be construed or deemed amended to the extent necessary to
conform to such requirements.

     9.  CHANGE IN CONTROL.

     (a) Effect of "Change in Control" on Non-Performance Based Awards.  In the
event of a "Change in Control," the following provisions shall apply to
non-performance based Awards, including Awards as to which performance
conditions previously have been satisfied or are deemed satisfied under Section
9(b), unless otherwise provided by the Committee in the Award document:

          (i) All deferral of settlement, forfeiture conditions and other
     restrictions applicable to Awards granted under the Plan shall lapse and
     such Awards shall be fully payable as of the time of the Change in Control
     without regard to deferral and vesting conditions, except to the extent of
     any waiver by the

                                        10
<PAGE>   38

     Participant or other express election to defer beyond a Change in Control
     and subject to applicable restrictions set forth in Section 10(a);

          (ii) Any Award carrying a right to exercise that was not previously
     exercisable and vested shall become fully exercisable and vested as of the
     time of the Change in Control and shall remain exercisable and vested for
     the balance of the stated term of such Award without regard to any
     termination of employment or service by the Participant other than a
     termination for "cause" (as defined in any employment or severance
     agreement between the Company or a subsidiary or affiliate and the
     Participant then in effect or, if none, as defined by the Committee and in
     effect at the time of the Change in Control), subject only to applicable
     restrictions set forth in Section 10(a); and

          (iii) The Committee may, in its discretion, determine to extend to any
     Participant who holds an Option the right to elect, during the 60-day
     period immediately following the Change in Control, in lieu of acquiring
     the shares of Stock covered by such Option, to receive in cash the excess
     of the Change in Control Price over the exercise price of such Option,
     multiplied by the number of shares of Stock covered by such Option, and to
     extend to any Participant who holds other types of Awards denominated in
     shares the right to elect, during the 60-day period immediately following
     the Change in Control, in lieu of receiving the shares of Stock covered by
     such Award, to receive in cash the Change in Control Price multiplied by
     the number of shares of Stock covered by such Award.

     (b) Effect of "Change in Control" on Performance-Based Awards.  In the
event of a "Change in Control," with respect to an outstanding Award subject to
achievement of performance goals and conditions, such performance goals and
conditions will be deemed to be met if and to the extent so provided by the
Committee in the Award document governing such Award or other agreement with the
Participant.

     (c) Definition of "Change in Control."  A "Change in Control" shall be
deemed to have occurred if, after the Effective Date, there shall have occurred
any of the following:

          (i) any "person" as such term is currently used in Section 13(d) of
     the Exchange Act, other than John A. Levin or any entity directly or
     indirectly controlled by him, becomes a "beneficial owner," as such term is
     currently used in Rule 13d-3 promulgated under that Act, of 50% or more of
     BKF's Voting Stock, which term means the issued and outstanding capital
     stock or other securities of any class or classes having general voting
     power, under ordinary circumstances in the absence of contingencies, to
     elect the directors of a corporation;

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

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

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

          (v) BKF combines with another company and is the surviving corporation
     but, immediately after the combination, the shareholders of BKF immediately
     prior to the combination hold, directly or indirectly, 50% or less of the
     Voting Stock of the combined company (there being excluded from the number
     of shares held by such shareholders, but not from the Voting Stock of the
     combined company,

                                        11
<PAGE>   39

     any shares received by affiliates of such other company in exchange for
     securities of such other company).

     (d) Definition of "Change in Control Price."  The "Change in Control Price"
means an amount in cash equal to the higher of (i) the amount of cash and fair
market value of property that is the highest price per share paid (including
extraordinary dividends) in any transaction triggering the Change in Control or
any liquidation of shares following a sale of substantially all assets of the
Company, or (ii) the highest Fair Market Value per share at any time during the
60-day period preceding and 60-day period following the Change in Control.

     10.  GENERAL PROVISIONS.

     (a) Compliance with Legal and Other Requirements.  BKF may, to the extent
deemed necessary or advisable by the Committee, postpone the issuance or
delivery of Stock or payment of other benefits under any Award until completion
of such registration or qualification of such Stock or other required action
under any federal or state law, rule or regulation, listing or other required
action with respect to any stock exchange or automated quotation system upon
which the Stock is listed or quoted, or compliance with any other obligation of
BKF as the Committee may consider appropriate, and may require any Participant
to make such representations, furnish such information and comply with or be
subject to such other conditions as it may consider appropriate in connection
with the issuance or delivery of Stock or payment of other benefits in
compliance with applicable laws, rules, and regulations, listing requirements,
or other obligations.

     (b) Limits on Transferability; Beneficiaries.  No Award or other right or
interest of a Participant under the Plan shall be pledged, hypothecated or
otherwise encumbered or subject to any lien, obligation or liability of such
Participant to any party (other than BKF or a subsidiary), or assigned or
transferred by such Participant otherwise than by will or the laws of descent
and distribution or to a Beneficiary upon the death of a Participant, and such
Awards or rights that may be exercisable shall be exercised during the lifetime
of the Participant only by the Participant or his or her guardian or legal
representative, except that Awards and other rights (other than ISOs and SARs in
tandem therewith) may be transferred to one or more Beneficiaries or other
transferees during the lifetime of the Participant to facilitate estate
planning, and may be exercised by such transferees in accordance with the terms
of such Award, but only if and to the extent such transfers are permitted by the
Committee pursuant to the express terms of an Award agreement (subject to any
terms and conditions which the Committee may impose thereon). A Beneficiary,
transferee, or other person claiming any rights under the Plan from or through
any Participant shall be subject to all terms and conditions of the Plan and any
Award agreement applicable to such Participant, except as otherwise determined
by the Committee, and to any additional terms and conditions deemed necessary or
appropriate by the Committee.

     (c) Adjustments.  In the event that any dividend or other distribution
(whether in the form of cash, Stock, or other property), recapitalization,
forward or reverse split, reorganization, merger, consolidation, spin-off,
combination, repurchase, share exchange, liquidation, dissolution or other
similar corporate transaction or event affects the Stock such that an adjustment
is determined by the Committee to be appropriate under the Plan, then the
Committee shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and kind of shares of Stock which may be delivered in connection
with Awards granted thereafter, (ii) the number and kind of shares of Stock by
which annual per-person Award limitations are measured under Section 5 hereof,
(iii) the number and kind of shares of Stock subject to or deliverable in
respect of outstanding Awards and (iv) the exercise price, grant price or
purchase price relating to any Award and/or make provision for payment of cash
or other property in respect of any outstanding Award. In addition, the
Committee is authorized to make adjustments in the terms and conditions of, and
the criteria included in, Awards (including Performance Awards and performance
goals, and Annual Incentive Awards and any Annual Incentive Award pool or
performance goals relating thereto) in recognition of unusual or nonrecurring
events (including, without limitation, events described in the preceding
sentence, as well as acquisitions and dispositions of businesses and assets)
affecting BKF, any subsidiary or any business unit, or the financial statements
of BKF or any subsidiary or business unit, or in response to changes in
applicable laws, regulations, accounting principles, tax rates and regulations
or business conditions or in view of the Committee's assessment of the business
strategy of BKF, any subsidiary or business unit thereof, performance of

                                        12
<PAGE>   40

comparable organizations, economic and business conditions, personal performance
of a Participant, and any other circumstances deemed relevant; provided that no
such adjustment shall be authorized or made if and to the extent that such
authority or the making of such adjustment would cause Options, SARs,
Performance Awards granted under Section 8(b) hereof or Annual Incentive Awards
granted under Section 8(c) hereof to Participants designated by the Committee as
Covered Employees and intended to qualify as "performance-based compensation"
under Code Section 162(m) and regulations thereunder to otherwise fail to
qualify as "performance-based compensation" under Code Section 162(m) and
regulations thereunder.

     (d) Taxes.  BKF and/or any subsidiary is authorized to withhold from any
Award granted, any payment relating to an Award under the Plan, including from a
distribution of Stock, or any payroll or other payment to a Participant, amounts
of withholding and other taxes due or potentially payable in connection with any
transaction involving an Award, and to take such other action as the Committee
may deem advisable to enable BKF and/or any subsidiary and Participants to
satisfy obligations for the payment of withholding taxes and other tax
obligations relating to any Award. This authority shall include authority to
withhold or receive Stock or other property and to make cash payments in respect
thereof in satisfaction of a Participant's tax obligations, either on a
mandatory or elective basis in the discretion of the Committee.

     (e) Changes to the Plan and Awards.  The Board may amend, alter, suspend,
discontinue or terminate the Plan or the Committee's authority to grant Awards
under the Plan without the consent of shareholders or Participants, except that
any amendment or alteration to the Plan shall be subject to the approval of
BKF's shareholders not later than the annual meeting next following such Board
action if such shareholder approval is required by any federal or state law or
regulation or the rules of any stock exchange or automated quotation system on
which the Stock may then be listed or quoted, and the Board may otherwise, in
its discretion, determine to submit other such changes to the Plan to
shareholders for approval; provided that, without the consent of an affected
Participant, no such Board action may materially and adversely affect the rights
of such Participant under any previously granted and outstanding Award. The
Committee may waive any conditions or rights under, or amend, alter, suspend,
discontinue or terminate any Award theretofore granted and any Award agreement
relating thereto, except as otherwise provided in the Plan; provided that,
without the consent of an affected Participant, no such Committee action may
materially and adversely affect the rights of such Participant under such Award.
Notwithstanding anything in the Plan to the contrary, if any right under this
Plan would cause a transaction to be ineligible for pooling of interest
accounting that would, but for the right hereunder, be eligible for such
accounting treatment, the Committee may modify or adjust the right so that
pooling of interest accounting shall be available, including the substitution of
Stock having a Fair Market Value equal to the cash otherwise payable hereunder
for the right which caused the transaction to be ineligible for pooling of
interest accounting.

     (f) Limitation on Rights Conferred under Plan.  Neither the Plan nor any
action taken hereunder shall be construed as (i) giving any Eligible Person or
Participant the right to continue as an Eligible Person or Participant or in the
employ or service of BKF or a subsidiary, (ii) interfering in any way with the
right of BKF or a subsidiary to terminate any Eligible Person's or Participant's
employment or service at any time, (iii) giving an Eligible Person or
Participant any claim to be granted any Award under the Plan or to be treated
uniformly with other Participants and employees, or (iv) conferring on a
Participant any of the rights of a shareholder of BKF unless and until the
Participant is duly issued or transferred shares of Stock in accordance with the
terms of an Award.

     (g) Unfunded Status of Awards; Creation of Trusts.  The Plan is intended to
constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Participant or obligation to deliver
Stock pursuant to an Award, nothing contained in the Plan or any Award shall
give any such Participant any rights that are greater than those of a general
creditor of BKF; provided that the Committee may authorize the creation of
trusts and deposit therein cash, Stock, other Awards or other property, or make
other arrangements to meet BKF's obligations under the Plan. Such trusts or
other arrangements shall be consistent with the "unfunded" status of the Plan
unless the Committee otherwise determines with the consent of each affected
Participant. The trustee of such trusts may be authorized to dispose of trust
assets and reinvest the proceeds in alternative investments, subject to such
terms and conditions as the Committee may specify and in accordance with
applicable law.

                                        13
<PAGE>   41

     (h) Nonexclusivity of the Plan.  Neither the adoption of the Plan by the
Board nor its submission to the shareholders of BKF for approval shall be
construed as creating any limitations on the power of the Board or a committee
thereof to adopt such other incentive arrangements as it may deem desirable
including incentive arrangements and awards which do not qualify under Code
Section 162(m).

     (i) Payments in the Event of Forfeitures; Fractional Shares.  Unless
otherwise determined by the Committee, in the event of a forfeiture of an Award
with respect to which a Participant paid cash or other consideration, the
Participant shall be repaid the amount of such cash or other consideration. No
fractional shares of Stock shall be issued or delivered pursuant to the Plan or
any Award. The Committee shall determine whether cash, other Awards or other
property shall be issued or paid in lieu of such fractional shares or whether
such fractional shares or any rights thereto shall be forfeited or otherwise
eliminated.

     (j) Governing Law.  The validity, construction and effect of the Plan, any
rules and regulations under the Plan, and any Award agreement shall be
determined in accordance with the Delaware General Corporation Law, without
giving effect to principles of conflicts of laws, and applicable federal law.


     (k) Plan Effective Date and Shareholder Approval.  The Plan (as amended and
restated on March 28, 2001) has been adopted by the Board, subject to approval
by the shareholders of BKF at its 2001 annual meeting. Unless earlier terminated
by action of the Board in accordance with Section 10(e), the Plan shall remain
in effect until such time as no Stock remains available for delivery under the
Plan and the Company has no further rights or obligations under the Plan with
respect to outstanding Awards under the Plan. The Plan may be submitted for
re-approval by BKF shareholders from time to time in order to maintain an
exemption for "performance-based compensation" for purposes of Code Section
162(m).


                                        14
<PAGE>   42
PROXY                                                                      PROXY


                            BKF CAPITAL GROUP, INC.

                   PROXY SOLICITED BY THE BOARD OF DIRECTORS

             FOR THE ANNUAL MEETING OF SHAREHOLDERS -- MAY 24, 2001

J. Barton Goodwin, John A. Levin and Burton G. Malkiel, or any of them, each
with the power of substitution and revocation, are hereby authorized to
represent the undersigned, with all powers which the undersigned would possess
if personally present, to vote the Common Stock of the undersigned at the annual
meeting of shareholders of BKF Capital Group, Inc. to be held at the
Waldorf-Astoria Hotel, 301 Park Avenue, New York, New York on Thursday, May 24
at 8:30 a.m., local time, and at any postponements or adjournments of that
meeting, as set forth below, and in their discretion upon any other business
that may properly come before the meeting.


                                          Please indicate change of address here
                                          and mark the box on the other side.


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

All capitalized terms used in this        --------------------------------------
proxy shall have the same meanings
assigned to them in the Proxy Statement.  --------------------------------------


                 (Continued and to be signed on reverse side.)
--------------------------------------------------------------------------------
                            - FOLD AND DETACH HERE -









                            YOUR VOTE IS IMPORTANT.

             PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
                    USING THE ENCLOSED POSTMARKED ENVELOPE.




<PAGE>   43
The Board of Directors recommends that you vote FOR the proposals below.

Please mark     /X/
your votes as
indicated in
this example

1. To elect three directors:

        FOR all nominees                     WITHHOLD
          listed below                      AUTHORITY
        (except as marked            to vote for all nominees
         to the contrary)                 listed below
              /  /                            /  /

Nominees: Anson M. Beard, Jr., Peter J. Solomon and Dean J. Takahashi

(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)

______________________________________________________________________________

                                                     FOR     AGAINST     ABSTAIN
2. To amend the Company's Restated Certificate of   /  /       /  /        /  /
   Incorporation to reduce the authorized shares
   of common stock of the Company from 80 million
   to 15 million shares;

3. To amend and restate the Company's 1998         /  /       /  /        /  /
   Incentive Compensation Plan;

4. To ratify the selection of Ernst & Young        /  /       /  /        /  /
   LLP as independent auditors for the Company;
   and

5. To transact such other business as may properly come before the meeting.



                             Check here if you plan to attend the meeting.  /  /

                                            Check here for address change.  /  /

                              Dated ______________________________________, 2001


                              __________________________________________________

                              Signature(s)

                              Please vote, sign, date and return this proxy card
                              promptly using the enclosed envelope.

-------------------------------------------------------------------------------
                           -- FOLD AND DETACH HERE --
