sec document
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant /_/
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/_/ Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/_/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Under Rule 14a-12
BKF CAPITAL GROUP, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
STEEL PARTNERS II, L.P.
STEEL PARTNERS, L.L.C.
WARREN G. LICHTENSTEIN
RONALD LABOW
KURT N. SCHACHT
--------------------------------------------------------------------------------
(Name of Persons(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required.
/_/ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------
(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:
-2-
PRELIMINARY COPY SUBJECT TO COMPLETION
DATED MARCH 22, 2005
STEEL PARTNERS II, L.P.
_________, 2005
Dear Fellow Stockholder:
Steel Partners II, L.P. ("Steel Partners") is the beneficial owner of an
aggregate of 669,600 shares of Common Stock of BKF Capital Group, Inc. ("BKF" or
the "Company"), representing approximately 9.0% of the outstanding Common Stock
of the Company. Steel Partners does not believe that the current Board of
Directors of the Company is acting in your best interests. Steel Partners is
therefore seeking your support at the annual meeting of stockholders scheduled
to be held at _________________________ on Wednesday, May 18, 2005, at __:___
__.M. (local time) for the following:
1. To elect Steel Partners' slate of nominees to the Board of Directors
to serve as Class III directors,
2. To adopt a resolution previously submitted by Steel Partners for
inclusion in the Company's proxy statement recommending that the Board
of Directors declassify the Board of Directors,
3. To adopt a resolution previously submitted by GAMCO Investors, Inc.
for inclusion in the Company's proxy statement recommending that the
Board of Directors redeem the rights issued by the Company pursuant to
its poison pill, and
4. To adopt a resolution previously submitted by Opportunity Partners
L.P. for inclusion in the Company's proxy statement recommending that
the Board of Directors engage an investment banking firm to pursue a
sale of the Company.
Steel Partners urges you to carefully consider the information contained in
the attached Proxy Statement and then support its efforts by signing, dating and
returning the enclosed GOLD proxy card today. The attached Proxy Statement and
the enclosed GOLD proxy card are first being furnished to the stockholders on or
about _______, 2005.
If you have already voted for the incumbent management slate or against the
stockholder proposals described in the Proxy Statement, you have every right to
change your votes by signing, dating and returning a later dated proxy.
If you have any questions or require any assistance with your vote, please
contact Morrow & Co., Inc., which is assisting us, at their address and
toll-free numbers listed on the following page.
Thank you for your support,
Warren G. Lichtenstein
Steel Partners II, L.P.
--------------------------------------------------------------------------------
IF YOU HAVE ANY QUESTIONS, REQUIRE ASSISTANCE IN VOTING YOUR GOLD PROXY CARD,
OR NEED ADDITIONAL COPIES OF STEEL PARTNERS' PROXY MATERIALS, PLEASE CALL
MORROW & CO., INC. AT THE PHONE NUMBERS LISTED BELOW.
MORROW & CO., INC.
445 Park Avenue, 5th Floor
New York, New York 10022
(212) 754-8000
BANKS AND BROKERAGE FIRMS, PLEASE CALL: (800) 654-2468
STOCKHOLDERS CALL TOLL FREE: (800) 607-0088
E-MAIL: STEEL.INFO@MORROWCO.COM
--------------------------------------------------------------------------------
-2-
ANNUAL MEETING OF STOCKHOLDERS
OF
BKF CAPITAL GROUP, INC.
-------------------------
PROXY STATEMENT
OF
STEEL PARTNERS II, L.P.
-------------------------
PLEASE SIGN, DATE AND MAIL THE ENCLOSED GOLD PROXY CARD TODAY
Steel Partners II, L.P., a Delaware limited partnership ("Steel Partners"
or "we"), is a significant stockholder of BKF Capital Group, Inc., a Delaware
corporation ("BKF" or the "Company"). Steel Partners is writing to you in
connection with the election of three nominees to the board of directors of BKF
(the "BKF Board") at the annual meeting of stockholders scheduled to be held at
__:___ __.M. (local time), on Wednesday, May 18, 2005, at
________________________________, including any adjournments or postponements
thereof and any meeting which may be called in lieu thereof (the "Annual
Meeting").
This proxy statement (the "Proxy Statement") and the enclosed GOLD proxy
card are being furnished to stockholders of BKF by Steel Partners in connection
with the solicitation of proxies from BKF's stockholders for the following:
1. To elect Steel Partners' director nominees, Warren G. Lichtenstein,
Ronald LaBow and Kurt N. Schacht (the "Nominees") to serve as Class
III directors of the Company, in opposition to BKF's incumbent
directors whose terms expire at the Annual Meeting,
2. To adopt a resolution previously submitted by Steel Partners for
inclusion in the Company's proxy statement recommending that the BKF
Board declassify the BKF Board,
3. To adopt a resolution previously submitted by GAMCO Investors, Inc.
("GAMCO") for inclusion in the Company's proxy statement recommending
that the BKF Board redeem the rights issued by the Company pursuant to
its poison pill, and
4. To adopt a resolution previously submitted by Opportunity Partners
L.P. ("Opportunity Partners") for inclusion in the Company's proxy
statement recommending that the BKF Board engage an investment banking
firm to pursue a sale of the Company.
While Steel Partners is aware from public filings that GAMCO's and
Opportunity Partners' proposals were submitted to the Company for inclusion in
its proxy statement, no assurance can be given that these proposals will be put
to a vote at the Annual Meeting. In the event either proposal is not put to a
vote at the Annual Meeting, your vote to adopt such proposal will be
disregarded.
Steel Partners, Steel Partners, L.L.C. ("Partners LLC"), Warren G.
Lichtenstein, Ronald LaBow and Kurt N. Schacht are members of a group (the
"Group") formed in connection with this proxy solicitation and are deemed
participants in this proxy solicitation. This Proxy Statement and the GOLD proxy
card are first being furnished to BKF's stockholders on or about _______, 2005.
BKF has set the record date for determining stockholders entitled to notice
of and to vote at the Annual Meeting as ________, 2005 (the "Record Date"). The
principal executive offices of BKF are located at One Rockefeller Plaza, New
York, New York 10020. Stockholders of record at the close of business on the
Record Date will be entitled to vote at the Annual Meeting. According to BKF, as
of the Record Date, there were _________ shares of common stock, $1.00 par value
per share (the "Shares"), outstanding and entitled to vote at the Annual
Meeting. Steel Partners, along with all of the participants in this
solicitation, are the beneficial owners of an aggregate of 669,600 Shares, which
represents approximately 9.0% of the Shares outstanding (based on information
publicly disclosed by BKF). The participants in this solicitation intend to vote
such Shares for the election of the Nominees and the stockholder proposals
described herein.
THIS SOLICITATION IS BEING MADE BY STEEL PARTNERS AND NOT ON BEHALF OF THE BOARD
OF DIRECTORS OR MANAGEMENT OF BKF. STEEL PARTNERS IS NOT AWARE OF ANY OTHER
MATTERS TO BE BROUGHT BEFORE THE ANNUAL MEETING. SHOULD OTHER MATTERS, WHICH
STEEL PARTNERS IS NOT AWARE OF A REASONABLE TIME BEFORE THIS SOLICITATION, BE
BROUGHT BEFORE THE ANNUAL MEETING, THE PERSONS NAMED AS PROXIES IN THE ENCLOSED
GOLD PROXY CARD WILL VOTE ON SUCH MATTERS IN THEIR DISCRETION.
STEEL PARTNERS URGES YOU TO SIGN, DATE AND RETURN THE GOLD PROXY CARD IN FAVOR
OF THE ELECTION OF ITS NOMINEES AND THE STOCKHOLDER PROPOSALS DESCRIBED IN THIS
PROXY STATEMENT.
IF YOU HAVE ALREADY SENT A PROXY CARD FURNISHED BY BKF MANAGEMENT TO BKF, YOU
MAY REVOKE THAT PROXY AND VOTE FOR THE ELECTION OF STEEL PARTNERS' NOMINEES AND
THE STOCKHOLDER PROPOSALS DESCRIBED HEREIN BY SIGNING, DATING AND RETURNING THE
ENCLOSED GOLD PROXY CARD. THE LATEST DATED PROXY IS THE ONLY ONE THAT COUNTS.
ANY PROXY MAY BE REVOKED AT ANY TIME PRIOR TO THE ANNUAL MEETING BY DELIVERING A
WRITTEN NOTICE OF REVOCATION OR A LATER DATED PROXY FOR THE ANNUAL MEETING TO
STEEL PARTNERS, C/O MORROW & CO., INC. WHICH IS ASSISTING IN THIS SOLICITATION,
OR TO THE SECRETARY OF BKF, OR BY VOTING IN PERSON AT THE ANNUAL MEETING.
-2-
IMPORTANT
YOUR VOTE IS IMPORTANT, NO MATTER HOW MANY OR HOW FEW SHARES YOU OWN. STEEL
PARTNERS URGES YOU TO SIGN, DATE, AND RETURN THE ENCLOSED GOLD PROXY CARD TODAY
TO VOTE FOR THE ELECTION OF STEEL PARTNERS' NOMINEES AND FOR THE ADOPTION OF THE
RESOLUTIONS RECOMMENDING THAT THE BKF BOARD TAKE THE NECESSARY STEPS TO
DECLASSIFY THE BKF BOARD, REDEEM THE RIGHTS ISSUED BY THE COMPANY PURSUANT TO
ITS POISON PILL AND ENGAGE AN INVESTMENT BANKING FIRM TO PURSUE A SALE OF THE
COMPANY.
o If your Shares are registered in your own name, please sign and date the
enclosed GOLD proxy card and return it to Steel Partners, c/o Morrow & Co.,
Inc., in the enclosed envelope today.
o If any of your Shares are held in the name of a brokerage firm, bank, bank
nominee or other institution on the Record Date, only it can vote such
Shares and only upon receipt of your specific instructions. Accordingly,
please contact the person responsible for your account and instruct that
person to execute on your behalf the GOLD proxy card. Steel Partners urges
you to confirm your instructions in writing to the person responsible for
your account and to provide a copy of such instructions to Steel Partners,
c/o Morrow & Co., Inc., who is assisting in this solicitation, at the
address and telephone numbers set forth below, and on the back cover of
this Proxy Statement, so that we may be aware of all instructions and can
attempt to ensure that such instructions are followed.
If you have any questions regarding your proxy,
or need assistance in voting your Shares, please call:
MORROW & CO., INC.
445 Park Avenue, 5th Floor
New York, New York 10022
(212) 754-8000
BANKS AND BROKERAGE FIRMS, PLEASE CALL: (800) 654-2468
STOCKHOLDERS CALL TOLL FREE: (800) 607-0088
E-MAIL: STEEL.INFO@MORROWCO.COM
-3-
BACKGROUND TO SOLICITATION
Steel Partners has been a long term investor in BKF since December 2003 and
is currently the beneficial owner of 669,600 Shares, representing approximately
9.0% of the issued and outstanding Common Stock. The following is a chronology
of events leading up to this proxy solicitation:
o Over the past several months, Steel Partners entered into discussions
with individual members of the Board of Directors to express Steel
Partners' concerns regarding BKF's compensation arrangements, its
failure to control administrative expenses, its disappointing
financial performance and its failure to enact much needed corporate
governance reforms. These discussions did not result in any
substantive reforms by the Company.
o On December 16, 2004, Steel Partners delivered a letter to BKF
expressing its concern with BKF's corporate governance and operations
and encouraging the BKF Board to implement various reforms.
o On December 16, 2004, Steel Partners delivered a letter to BKF
submitting, pursuant to Rule 14a-8 of the Securities Exchange Act of
1934, as amended, a proposal to eliminate the classification of the
BKF Board for inclusion in BKF's proxy statement at the Annual
Meeting.
o On December 16, 2004, Steel Partners delivered a letter to BKF
requesting, pursuant to Section 220 of the Delaware General
Corporation Law, a complete list of BKF's stockholders and other
corporate records in order to allow Steel Partners to communicate with
BKF's stockholders on Steel Partners' proposal to eliminate the
classification of the BKF Board.
o On February 11, 2005, Steel Partners delivered a letter to BKF
nominating Warren G. Lichtenstein, Ronald LaBow and Kurt N. Schacht
for election to the BKF Board at the Annual Meeting (the "Nomination
Letter").
o On or around February 15, 2005, Steel Partners received a letter from
BKF (the "BKF Response") requesting additional information concerning
Steel Partners, its affiliates and the Nominees in order to evaluate
the eligibility of the Nominees to be directors of BKF in accordance
with the Company's Bylaws. BKF reserved the right to object to the
eligibility of any of the Nominees and compliance of the Nomination
Letter with the Company's Bylaws and applicable law, notwithstanding
receipt of the requested information.
o On February 24, 2005, Steel Partners delivered a letter to BKF
containing the additional information requested in the BKF Response.
Steel Partners believes that the information contained in the
Nomination Letter fully complied with the advance notice requirements
of the Company's Bylaws and that no additional information was
required by BKF for Steel Partners to proceed with its nomination of
the Nominees and solicitation of proxies in furtherance of the
election of the Nominees, subject to filing a definitive proxy
statement with the SEC. Steel Partners has not received a written
response from BKF to this letter.
-4-
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
The BKF Board is currently composed of nine directors divided into three
equal classes serving staggered three-year terms. It is Steel Partners'
understanding that the terms of three Class III directors of the BKF Board - J.
Barton Goodwin, John A. Levin and Burton G. Malkiel - expire at the Annual
Meeting. Steel Partners expects that the BKF Board will nominate these incumbent
directors for re-election at the Annual Meeting. Steel Partners is seeking your
support at the Annual Meeting to elect its Nominees in opposition to BKF's
director nominees.
REASONS WHY STEEL PARTNERS IS CHALLENGING THE INCUMBENT DIRECTORS
Steel Partners is concerned about BKF's ability to implement a business
plan that will promptly return the Company to consistent profitability. BKF, as
further discussed in its public filings, operates entirely through John A. Levin & Co.,
an SEC-registered investment adviser, and its related entities. According to its
Web site, John A. Levin & Co. manages approximately $13 Billion of assets with a
focus on "value-oriented investment services." According to its public filings,
BKF had net losses of approximately $1.8 Million and $8.4 Million for the years
ended December 31, 2004 and December 31, 2003, respectively. It is quite evident
from this performance that BKF has failed to deliver value to its own
stockholders.
We also believe that the BKF Board should immediately implement corporate
governance reforms. This is why we previously submitted for inclusion in the
Company's proxy statement for consideration at the Annual Meeting a proposal
requesting that the BKF Board take the steps necessary to eliminate the
classification of the BKF Board and to require that all directors stand for
election annually. We have also publicly recommended that the BKF Board
implement the following corporate governance and operational changes, as further
discussed herein:
o USE EXCESS CASH TO INCREASE DIVIDEND AND/OR REPURCHASE STOCK
AGGRESSIVELY
o APPOINT A SEASONED CHIEF OPERATING OFFICER WHO WILL REDUCE EXPENSES
AND IMPROVE OPERATING PERFORMANCE
o REDEEM BKF'S COMMON SHARE PURCHASE RIGHTS
o ELIMINATE FROM THE CERTIFICATE OF INCORPORATION AND BYLAWS CERTAIN
CLASSIC ANTI-TAKEOVER PROVISIONS
As further described below, we believe that the election of the Nominees
and approval of the stockholder proposals described herein represent the best
means for BKF's stockholders to maximize the value of their Shares. Steel
Partners, as one of the largest stockholders of BKF, has a vested financial
interest in the maximization of the value of your Shares. Our interests are
aligned with the interests of all stockholders. Additionally, Steel Partners
believes that the Nominees have extensive experience in private
-5-
and public investment, corporate governance and business management as further
discussed in their biographical extracts below. If elected to the BKF Board, the
Nominees will endeavor to use their collective experience to oversee the Company
with a goal of achieving consistent profitability, implementing the corporate
governance reforms and operational changes espoused by Steel Partners as well as
exploring other alternatives to maximize stockholder value. There can be no
assurance that these goals will be achieved if the Nominees are elected.
STEEL PARTNERS IS CONCERNED WITH BKF'S FAILURE TO CONSISTENTLY TURN A PROFIT
According to its public filings, BKF had net losses of approximately $1.8
Million and $8.4 Million for the years ended December 31, 2004 and December 31,
2003, respectively. We do not understand how a money management company that
manages approximately $13 Billion of assets and generated over $225 Million in
revenues during this time period can lose money. BKF's financial performance
during this period is especially alarming when compared to the financial
performance of other publicly-traded money managers in the table set forth
below.
Twelve Months Ended December 31, 2004
-------------------------------------
Operating Income
as a Percentage
Revenues Operating Income of Revenues Return On Equity
-------- ---------------- ----------- ----------------
(dollars in millions)
Affiliated Managers Group Inc. $660 $268 40.6% 11.7%
Eaton Vance Corp.1 $687 $235 34.3% 33.2%
Gabelli Asset Management Inc. $255 $ 99 38.8% 17.1%
Nuveen Investments Inc. $506 $255 50.4% 29.4%
Waddell & Reed Financial Inc. $504 $163 34.5% 51.8%
BKF Capital Group Inc. $123 $ 3 ___% ___%
1 All figures for Eaton Vance Corp. are for the twelve months ended January 31,
2005.
We believe the table above demonstrates an immediate need to improve the
Company's financial performance.
STEEL PARTNERS BELIEVES THAT BKF MUST ADOPT APPROPRIATE COMPENSATION
ARRANGEMENTS WITH ITS INVESTMENT PROFESSIONALS
We believe that a fundamental source of the Company's sub par financial
performance is the BKF Board's failure to adopt appropriate compensation
arrangements between BKF and its investment professionals. We have previously
expressed to the BKF Board that the Company must adopt compensation arrangements
that reward its key employees for performance and align their interests directly
with the Company's clients and stockholders. We even requested from BKF
documentation relating to the Company's
-6-
compensation arrangements with its investment professionals but no documentation
has been furnished to date.
Various publicly-traded money managers have adopted compensation programs
aligning the interests of key employees with the interests of clients and
stockholders. For example, as recently as January 2005, Janus Capital Group
approved a Mutual Fund Share Investment Plan for certain of its executive
officers and key employees to align the interests of the participants with the
interests of the company's mutual fund shareholders. The plan is designed to
grant eligible employees long-term incentive awards in the form of deferred cash
compensation that is credited with income, gains and losses based on the
performance of the Janus mutual fund investments selected by the participant
from a list of Janus Funds designated by the company. If the Nominees are
elected, they will recommend that the BKF Board explore the adoption of similar
compensation plans.
STEEL PARTNERS BELIEVES THAT BKF SHOULD INCREASE ITS DIVIDEND TO STOCKHOLDERS
AND/OR IMPLEMENT A STOCK REPURCHASE PROGRAM
Despite BKF's dismal financial performance, we believe that the Company's
Common Stock is undervalued. In order to fully realize the inherent value of the
Shares, substantive changes need to be made in how the BKF Board operates the
Company. As of December 31, 2004, BKF had cash, cash equivalents and U.S.
Treasury bills of approximately $44 Million and no debt. We believe that BKF
should utilize this cash to increase its annual dividend and/or commence a stock
repurchase program which represent fundamentally sound methods to strengthen the
Company's return on invested capital and maximize stockholder value. We credit
the BKF Board for declaring in January 2005 a quarterly dividend of $0.125 per
share but believe the Company can do better.
STEEL PARTNERS BELIEVES THAT BKF SHOULD APPOINT AN OPERATING OFFICER WHO WILL
REDUCE EXPENSES AND IMPROVE THE COMPANY'S OPERATING PERFORMANCE
We reiterate our view that John A. Levin & Co. serves its clients well and
we are appreciative of John Levin's historical contribution to the firm.
However, we believe that BKF could better leverage its investment professionals
by filling the COO position with a seasoned professional who could bring the
Company's bottom-line performance in line with its industry peers. Mr. Levin
also serves as Chairman and Chief Executive Officer of both John A. Levin & Co.,
the Company's money management subsidiary, and Levin Management Co., which owns
and provides administrative and management services to John A. Levin & Co. If
the Nominees are elected, they will petition the BKF Board to retain an
executive search firm for the purpose of identifying a qualified replacement for
Mr. Levin at the holding company level.
STEEL PARTNERS BELIEVES THAT BKF SHOULD TERMINATE ITS SPECIAL ARRANGEMENTS WITH
RELATED PARTIES INCLUDING FAMILY MEMBERS OF JOHN A. LEVIN
Certain members of the BKF Board have made it a practice to engage
themselves in related party transactions at the expense of the Company. We
believe that the following relationships may impair the BKF Board's ability to
exercise independent judgment.
-7-
SPECIAL ARRANGEMENT WITH JOHN LEVIN'S SON HENRY LEVIN
According to BKF's public filings, in 2003 Henry Levin, son of BKF Chairman
and CEO John Levin, received compensation of approximately $4.8 Million as a
portfolio manager for the event driven investment team and was allocated
approximately $2.9 Million in incentive fees as the managing member of
investment vehicles affiliated with the Company, or a total of approximately
$7.7 Million in compensation. We question how the compensation paid to Henry
Levin is aligned with the interests of the stockholders when this amount almost
equates to the $8.4 Million in losses sustained by BKF in 2003.
SPECIAL ARRANGEMENT WITH JOHN LEVIN'S DAUGHTER JENNIFER LEVIN CARTER
According to BKF's public filings, in 2003 Jennifer Levin Carter, daughter
of Chairman and CEO John Levin, received approximately $150,000 from the Company
for "consulting services rendered to various alternative investment strategies
of the Company." We question the need for the services of Mr. Levin's daughter.
SPECIAL ARRANGEMENT WITH PETER J. SOLOMON COMPANY OF WHICH PETER J. SOLOMON IS
CHAIRMAN
According to BKF's public filings, in 2003 BKF paid Peter J. Solomon
Company, of which BKF director Peter J. Solomon is Chairman, $100,000 for its
"services as a financial advisor." We call upon BKF to disclose the exact scope
of these advisory services and question whether these services could have been
obtained by the Company on more favorable terms from independent third parties.
In any event, we believe this arrangement brings into question Mr. Solomon's
independence.
SPECIAL ARRANGEMENT WITH TRAXIS PARTNERS OF WHICH BARTON BIGGS IS A MANAGING
PARTNER
According to BKF's public filings, in 2003 Traxis Partners, of which BKF
director Barton Biggs is a Managing Partner, paid BKF $136,000 in rent for space
in the Company's offices in New York City. This arrangement, in our opinion,
creates the appearance of a conflict of interest and brings into question Mr.
Biggs' independence.
STEEL PARTNERS BELIEVES THAT BKF SHOULD REDEEM THE COMMON SHARE PURCHASE RIGHTS
ISSUED PURSUANT TO ITS "POISON PILL"
In May 2001, the BKF Board adopted, without stockholder approval, a rights
agreement or "poison pill" purportedly to protect stockholders from coercive or
otherwise unfair takeover tactics. Historically, proponents of poison pills have
asserted that they enable a board of directors to respond in an orderly fashion
to unsolicited takeover bids by providing sufficient time to carefully evaluate
the fairness of such a bid. We oppose BKF's poison pill because we believe that
it places such an effective obstacle to a takeover bid that it serves to
entrench the BKF Board and management. We believe that BKF's poison pill forces
a would-be acquirer to negotiate its bid for the Company with management,
instead of making its offer directly to the stockholders. In our opinion, the
power of the BKF Board and management to block any bid that does not leave them
in control adversely affects stockholder value. We further believe that the
-8-
effect of the poison pill is to insulate management from the most fundamental
accountability to stockholders by providing management and the BKF Board with a
veto over takeover bids, even when stockholders might favorably view such bids.
STEEL PARTNERS IS NOT ALONE IN ITS PUBLIC OPPOSITION TO BKF'S POISON PILL.
DURING EACH OF THE LAST THREE ANNUAL MEETINGS OF STOCKHOLDERS OF BKF,
STOCKHOLDER PROPOSALS TO REDEEM THE COMMON SHARE PURCHASE RIGHTS ISSUED PURSUANT
TO THE POISON PILL HAVE BEEN APPROVED BY STOCKHOLDERS BY AN OVERWHELMING
MAJORITY OF THE VOTE. SPECIFICALLY, APPROXIMATELY 66%, 77% AND 66% OF THE VOTES
CAST RESPECTIVELY DURING THE 2004, 2003 AND 2002 ANNUAL MEETINGS WERE VOTED IN
FAVOR OF THE STOCKHOLDER PROPOSALS. After each of these annual meetings, the BKF
Board has reported in its public filings that it recognizes the stockholder vote
in favor of this proposal but "continues to believe that the [poison pill]
supports the objectives of preserving and maximizing the Company's value for all
stockholders." In view of the overwhelming stockholder support this proposal has
received for three straight years, we think it is about time the BKF Board
afford the stockholders the courtesy of a little more than a one-sentence
boilerplate reason for rebuffing the stockholders' wishes and publicly explain
why it believes the poison pill preserves and maximizes stockholder value. If
the Nominees are elected, they will encourage the BKF Board to respect the right
of the stockholders to participate in the governance of their company by
terminating the poison pill and requiring that the stockholders approve any new
stockholder rights plan.
STEEL PARTNERS BELIEVES THAT BKF SHOULD ELIMINATE FROM ITS CERTIFICATE OF
INCORPORATION AND BYLAWS CERTAIN ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation ("Charter") and Bylaws contain
numerous anti-takeover provisions that we believe infringe on the stockholders'
rights to determine what is best for the Company and serve to entrench current
management. These anti-takeover provisions include, but are not limited to, the
following:
o Charter provision requiring approval of holders of at least 80% of
the Shares entitled to vote to remove directors
o Charter provision requiring approval of holders of at least 80% of
the Shares entitled to vote to approve mergers, consolidations, sales
of substantially all the assets or liquidations not previously
approved by at least two-thirds of the BKF Board
o Charter and Bylaw provisions prohibiting stockholders from taking
action by written consent in lieu of a meeting
o Charter and Bylaws do not permit stockholders to call special
meetings of stockholders
We believe that the foregoing anti-takeover provisions are intended to
disenfranchise stockholders and strip away any semblance of management
accountability which BKF's stockholders deserve. Therefore, if elected, the
Nominees will be committed to lobbying the BKF Board to eliminate these
anti-takeover provisions.
-9-
THE NOMINEES
The following information sets forth the name, age, business address,
present principal occupation, and employment and material occupations,
positions, offices, or employments for the past five years of each of the
Nominees. This information has been furnished to Steel Partners by the Nominees.
The Nominees are citizens of the United States of America.
WARREN G. LICHTENSTEIN (AGE 39) has been the Chairman of the Board,
Secretary and the Managing Member of Partners LLC, the general partner of Steel
Partners, since January 1, 1996 and the President, Chief Executive Officer and a
director of Steel Partners, Ltd., a management and advisory company that
provides management services to Steel Partners and its affiliates, since June
1999. Mr. Lichtenstein has been a director (currently Chairman of the Board) of
United Industrial Corporation, a company principally focused on the design,
production and support of defense systems and a manufacturer of combustion
equipment for biomass and refuse fuels, since May 2001. Mr. Lichtenstein has
been a director (currently Chairman of the Board) of SL Industries, Inc., a
designer and manufacturer of power electronics, power motion equipment, power
protection equipment, and teleprotection and specialized communication
equipment, since January 2002 and Chief Executive Officer since February 2002.
Mr. Lichtenstein has been a director of Layne Christensen Company, a provider of
products and services for the water, mineral, construction and energy markets,
since January 2004. Mr. Lichtenstein has been a director (currently Chairman of
the Board) of WebFinancial Corporation, a consumer and commercial lender, since
1996 and Chief Executive Officer since December 1997. The business address of
Mr. Lichtenstein is c/o Steel Partners II, L.P., 590 Madison Avenue, 32nd Floor,
New York, New York 10022. By virtue of his position with Partners LLC, Mr.
Lichtenstein has the power to vote and dispose of the Shares owned by Steel
Partners. Accordingly, Mr. Lichtenstein may be deemed to be the beneficial owner
of the Shares owned by Steel Partners. For information regarding purchases and
sales during the past two years by Steel Partners of securities of BKF that may
be deemed to be beneficially owned by Mr. Lichtenstein, see Schedule I.
RONALD LABOW (AGE 70) has been the President of Stonehill Investment Corp.,
an investment fund, since February 1990. Mr. LaBow has been an officer and
director of WPN Corp., a financial consulting company, since 1987. From January
1991 to February 2004, Mr. LaBow served as Chairman of the Board of WHX
Corporation (or its predecessor corporations), a NYSE listed holding company
structured to invest in and/or acquire a diverse group of businesses on a
decentralized basis, whose primary business is Handy & Harman, a diversified
manufacturing company with activities in precious metals fabrication, specialty
wire and tubing and engineered materials. The business address of Mr. LaBow is
c/o WPN Corp., 110 East 59th Street, New York, New York 10022. As of the date
hereof, Mr. LaBow did not beneficially own any securities of BKF. Mr. LaBow has
not purchased or sold any securities of BKF during the past two years.
KURT N. SCHACHT (AGE 51) has been the Executive Director of the CFA Centre
for Financial Market Integrity, an organization that advocates efficient,
ethical and transparent capital markets, since June 2004. During April and May
of 2004, Mr. Schacht worked for Steel Partners on its compliance procedures.
From April 2001 to March 2004, Mr. Schacht served as Chief Operating Officer and
General
-10-
Counsel of Wyser-Pratte Asset Management, a New York City based hedge fund. From
September 1999 to March 2001, Mr. Schacht served as Chief Operating Officer of
Evergreen Asset Management, an asset management firm. From 1990 to October 1999,
Mr. Schacht served as the Chief Legal Officer of the State of Wisconsin
Investment Board, a public pension fund. He helped draft the Corporate
Governance Handbook released by the New York Society of Security Analysts and
was named its Volunteer of the Year in 2004 for his work on its Corporate
Governance Committee. He has worked on industry panels and programs relating to
corporate governance and board of directors issues for organizations such as the
New York Stock Exchange and the American Society of Corporate Secretaries and
served on the National Association of Corporate Directors Blue Ribbon Task Force
on evaluating director performance. Mr. Schacht received a Bachelor of Science
degree in Chemistry and a law degree from the University of Wisconsin-Madison.
He is a Chartered Financial Analyst and was awarded the CFA(R) designation in
1998. The business address of Mr. Schacht is 10 Old Pound Ridge Road, Pound
Ridge, New York 10576. As of the date hereof, Mr. Schacht did not beneficially
own any securities of BKF. Mr. Schacht has not purchased or sold any securities
of BKF during the past two years.
There can be no assurance that the actions our Nominees intend to take as
described above will be implemented if they are elected or that the election of
our Nominees will improve the Company's business or otherwise enhance
stockholder value. Your vote to elect the Nominees does not constitute a vote in
favor of our value enhancing plans for BKF. Your vote to elect the Nominees will
have the legal effect of replacing three incumbent directors of BKF with our
Nominees. Neither we (nor to our knowledge, any other person on our behalf) has
made or undertaken any analysis or reports as to whether stockholder value will
be maximized as a result of this solicitation or obtained reports from
consultants or other outside parties as to whether the proposals presented
herein would have an effect on stockholder value. There can be no assurance that
stockholder value will be maximized as a result of this solicitation or the
election of the Nominees.
The Nominees will not receive any compensation from Steel Partners for
their services as directors of BKF. Other than as stated herein, there are no
arrangements or understandings between Steel Partners and any of the Nominees or
any other person or persons pursuant to which the nomination described herein is
to be made, other than the consent by each of the Nominees to be named in this
Proxy Statement and to serve as a director of BKF if elected as such at the
Annual Meeting. None of the Nominees is a party adverse to BKF or any of its
subsidiaries or has a material interest adverse to BKF or any of its
subsidiaries in any material pending legal proceedings.
Steel Partners does not expect that the Nominees will be unable to stand
for election, but, in the event that such persons are unable to serve or for
good cause will not serve, the Shares represented by the enclosed GOLD proxy
card will be voted for substitute nominees. In addition, Steel Partners reserves
the right to nominate substitute persons if BKF makes or announces any changes
to its Bylaws or takes or announces any other action that has, or if consummated
would have, the effect of disqualifying the Nominees. In any such case, Shares
represented by the enclosed GOLD proxy card will be voted for such substitute
nominees. Steel Partners reserves the right to nominate additional persons if
-11-
BKF increases the size of the BKF Board above its existing size or increases the
number of directors whose terms expire at the Annual Meeting. Additional
nominations made pursuant to the preceding sentence are without prejudice to the
position of Steel Partners that any attempt to increase the size of the current
BKF Board or to reconstitute or reconfigure the classes on which the current
directors serve constitutes an unlawful manipulation of BKF's corporate
machinery.
YOU ARE URGED TO VOTE FOR THE ELECTION OF THE NOMINEES ON THE ENCLOSED GOLD
PROXY CARD.
-12-
PROPOSAL NO. 2 - DECLASSIFICATION OF THE BKF BOARD
On December 16, 2004, Steel Partners delivered a letter to BKF submitting a
proposal for inclusion in BKF's proxy statement at the Annual Meeting pursuant
to Rule 14a-8 of the Securities Exchange Act of 1934, as amended. The proposal
requests that the BKF Board take the steps necessary to eliminate the
classification of the BKF Board and to require that all directors stand for
election annually. The Company's Certificate of Incorporation currently requires
that the BKF Board be divided into three classes having staggered three-year
terms.
In accordance with Rule 14a-8, Steel Partners submitted to BKF the
following resolution and supporting statement that BKF will also be required to
include in its proxy statement for approval at the Annual Meeting:
RESOLUTION
RESOLVED, that the stockholders of BKF Capital Group, Inc.
request that the Board of Directors take the necessary steps to
declassify the Board of Directors and to require that all
directors stand for election annually. The Board declassification
shall be done in a manner that does not affect the unexpired
terms of directors previously elected.
SUPPORTING STATEMENT
We believe the election of directors is the most powerful
way that stockholders influence the strategic direction of a
public company. Currently, the Board of Directors of BKF Capital
is divided into three classes serving staggered three-year terms.
It is our belief that the classification of the Board of
Directors is not in the best interests of BKF Capital and its
stockholders because it reduces accountability and is an
unnecessary anti-takeover device. The elimination of the
staggered board would require each director to stand for election
annually. We believe that such annual accountability would serve
to keep directors closely focused on the performance of top
executives and on maximizing stockholder value. Concerns that the
annual election of directors would have a destabilizing impact by
leaving our company without experienced board members in the
event that all incumbents are voted out are unfounded. In the
unlikely event the owners should choose to replace the entire
board, it would be obvious that the incumbent directors'
contributions were not valued.
A classified board of directors protects the incumbency of
the board of directors and current management, which in turn
limits accountability to stockholders. It is our belief BKF
Capital's corporate governance procedures and practices, and the
level of management accountability they impose, are related to
the financial performance of the company. We believe sound
corporate governance practices, such as the annual election of
directors, will impose the level of management accountability
necessary to help insure that a good performance record continues
over the long term.
Increasingly, classified boards like ours have become
unpopular in recent years. Institutional investors are calling
for the end of this system. California's Public Employees
Retirement System, New York City pension funds, New York State
pension funds and many others including the Council of
-13-
Institutional Investors, and Institutional Shareholder Services,
one of the most influential proxy evaluation services, support
this position.
During the past few years a majority of stockholders
supported proposals asking their boards to repeal classified
board structures at a number of respected companies, including
FedEx, Baker Hughes, Starwood Hotels, Honeywell International,
Morgan Stanley and Tellabs.
For a greater voice in the governance of BKF Capital and
annual Board of Directors accountability we ask stockholders to
vote YES on this proposal.
We believe that proper corporate governance procedures and practices and
the level of management accountability that the BKF Board imposes are highly
relevant to BKF's Share price performance and the success of its business. As
discussed in further detail in the supporting statement above, we believe that
BKF's classified board structure is not in the best interests of the
stockholders because it reduces accountability of the BKF Board and, in our
view, only serves to entrench current management. We generally believe that all
stockholders are entitled to have the opportunity to vote to elect all directors
annually, not just once every three years.
Accordingly, we believe that the BKF Board should take the necessary steps
to declassify the BKF Board and to require that all directors stand for election
annually.
YOU ARE URGED TO VOTE FOR THE RESOLUTION RECOMMENDING THAT THE BKF BOARD TAKE
THE NECESSARY STEPS TO DECLASSIFY THE BKF BOARD.
-14-
PROPOSAL NO. 3 - REDEMPTION OF POISON PILL
In December 2004, GAMCO Investors, Inc., a significant institutional
stockholder of BKF, submitted a proposal for inclusion in the Company's proxy
statement at the Annual Meeting pursuant to Rule 14a-8 of the Securities
Exchange Act of 1934, as amended. The proposal requests that the BKF Board
redeem the rights issued pursuant to its Rights Agreement, commonly known as a
"poison pill", unless the issuance is approved by the affirmative vote of a
majority of the outstanding shares at a meeting of the stockholders held as soon
as practical.
On May 29, 2001, the BKF Board declared a dividend of one Common Share
Purchase Right pursuant to a Rights Agreement dated as of June 8, 2001.
Generally, the stockholders may exercise their rights under this kind of
agreement (the "Rights") only when a person or group acquires, or through an
exchange or tender offer attempts to acquire, a beneficial interest in 10% or
more of the common stock of a company. Stockholders, other than the person or
group attempting to acquire 10% of the common stock, may then exercise the
Rights and receive stock at a fraction of its fair market value. The Company may
redeem the Rights for $.01 per Right
The terms of the poison pill have the effect of thwarting an unwanted
potential offer for BKF. While the BKF Board should have appropriate tools to
ensure that all stockholders benefit from any proposal to buy BKF, we do not
believe that the future possibility of responding to any unsolicited offer
justifies the BKF Board's implementation of a poison pill. We believe that the
BKF Board also adopted the poison pill in order to, among other things, entrench
the BKF Board and management. This belief is partially based on John A. Levin &
Company, Inc.'s and certain if its affiliates' exemption from the poison pill
which effectively allows them to purchase an unlimited number of shares of BKF
without triggering the poison pill.
We feel it is appropriate at this time to eliminate management-entrenching
governance structures, particularly the poison pill, in view of BKF's
disappointing financial performance. We note that 2001, the year the poison pill
was adopted, was the last profitable year for BKF. Accordingly, we believe that
the BKF Board should take the necessary steps to redeem the rights issued
pursuant to the Company's poison pill.
Steel Partners is not affiliated with GAMCO and is acting alone, and not in
concert with GAMCO, in its solicitation of stockholders to vote for the adoption
of GAMCO's stockholder proposal to redeem the Company's poison pill. While Steel
Partners is aware from public filings that GAMCO's proposal was submitted to the
Company for inclusion in its proxy statement, no assurance can be given that
this proposal will be put to a vote at the Annual Meeting. In the event GAMCO's
proposal is not put to a vote at the Annual Meeting, your vote on this proposal
will be disregarded.
YOU ARE URGED TO VOTE FOR THE RESOLUTION RECOMMENDING THAT THE BKF BOARD TAKE
THE NECESSARY STEPS TO REDEEM THE POISON PILL.
-15-
PROPOSAL NO. 4 - ENGAGEMENT OF INVESTMENT BANKING FIRM
In November 2004, Opportunity Partners L.P., a significant institutional
stockholder of BKF, submitted a proposal for inclusion in the Company's proxy
statement at the Annual Meeting pursuant to Rule 14a-8 of the Securities
Exchange Act of 1934, as amended. The proposal requests that the BKF Board
engage an investment banking firm to pursue a sale of the Company.
In a supporting statement submitted with this proposal, Opportunity
Partners stated that BKF's ratio of market capitalization to assets under
management was less than 2%, well below the ratio of most other investment
management companies. In addition, Opportunity Partners argued that some recent
sales of hedge fund management firms at prices exceeding 10% of assets under
management have occurred and therefore BKF could be an attractive acquisition
candidate for a larger financial institution. We agree with these assertions and
therefore believe that the BKF Board should engage an investment banking firm to
pursue a sale of the Company.
Steel Partners is not affiliated with Opportunity Partners and is acting
alone, and not in concert with Opportunity Partners, in its solicitation of
stockholders to vote for the adoption of Opportunity Partners' stockholder
proposal to engage an investment banking firm to pursue a sale of the Company.
While Steel Partners is aware from public filings that Opportunity Partners'
proposal was submitted to the Company for inclusion in its proxy statement, no
assurance can be given that this proposal will be put to a vote at the Annual
Meeting. In the event Opportunity Partners' proposal is not put to a vote at the
Annual Meeting, your vote on this proposal will be disregarded.
YOU ARE URGED TO VOTE FOR THE RESOLUTION RECOMMENDING THAT THE BKF BOARD ENGAGE
AN INVESTMENT BANKING FIRM TO PURSUE A SALE OF THE COMPANY.
-16-
VOTING AND PROXY PROCEDURES
Only stockholders of record on the Record Date will be entitled to notice
of and to vote at the Annual Meeting. Each Share is entitled to one vote.
Stockholders who sell Shares before the Record Date (or acquire them without
voting rights after the Record Date) may not vote such Shares. Stockholders of
record on the Record Date will retain their voting rights in connection with the
Annual Meeting even if they sell such Shares after the Record Date. Based on
publicly available information, Steel Partners believes that the only
outstanding class of securities of BKF entitled to vote at the Annual Meeting is
the Shares.
Shares represented by properly executed GOLD proxy cards will be voted at
the Annual Meeting as marked and, in the absence of specific instructions, will
be voted FOR the election of the Nominees to the BKF Board and FOR the adoption
of the stockholder proposals described in this Proxy Statement, and in the
discretion of the persons named as proxies on all other matters as may properly
come before the Annual Meeting.
We are asking you to elect our Nominees and to adopt the stockholder
proposals described in this Proxy Statement. The enclosed GOLD proxy card may
only be voted for our Nominees and does not confer voting power with respect to
the Company's nominees. Accordingly, you will not have the opportunity to vote
for any of BKF's nominees. You can only vote for BKF's nominees by signing and
returning a proxy card provided by BKF. Stockholders should refer to the
Company's proxy statement for the names, backgrounds, qualifications and other
information concerning the Company's nominees. The participants in this
solicitation intend to vote all of their Shares in favor of the Nominees and the
stockholder proposals described in this Proxy Statement and will not vote their
Shares in favor of any of BKF's nominees.
QUORUM
In order to conduct any business at the Annual Meeting, a quorum must be
present in person or represented by valid proxies. A quorum consists of a
majority of the Shares issued and outstanding on the Record Date. All Shares
that are voted "FOR", "AGAINST" or "ABSTAIN" (or "WITHHOLD" in the case of
election of directors) on any matter will count for purposes of establishing a
quorum and will be treated as Shares entitled to vote at the Annual Meeting (the
"Votes Present").
VOTES REQUIRED FOR APPROVAL
ELECTION OF DIRECTORS. A plurality of the total votes cast ("Votes Cast")
by holders of the Shares for the Nominees is required for the election of
directors and the three nominees who receive the most votes will be elected
(assuming a quorum is present). A vote to "WITHHOLD" for any nominee for
director will be counted for purposes of determining the Votes Present, but will
have no other effect on the outcome of the vote on the election of directors. A
Stockholder may cast such votes for the Nominees either by so marking the ballot
at the Annual Meeting or by specific voting instructions sent with a signed
proxy to either Steel Partners in care of Morrow & Co., Inc. at the address set
forth on the back cover of this Proxy Statement or to BKF at One Rockefeller
Plaza, New York, New York, 10020 or any other address provided by BKF.
-17-
OTHER PROPOSALS. Other than the election of directors, the vote required
for the other business matters set forth in this Proxy Statement is the
affirmative vote of a majority of the Votes Present.
ABSTENTIONS
Abstentions will count as Votes Present for the purpose of determining
whether a quorum is present. Abstentions will not be counted as Votes Cast in
the election of directors. Abstentions will have the effect of a vote against
the other business matters set forth in this Proxy Statement.
BROKER NON-VOTES
Shares held in street name that are present by proxy will be considered as
Votes Present for purposes of determining whether a quorum is present. With
regard to certain proposals, the holder of record of Shares held in street name
is permitted to vote as it determines, in its discretion, in the absence of
direction from the beneficial holder of the Shares.
The term "broker non-vote" refers to shares held in street name that are
not voted with respect to a particular matter, generally because the beneficial
owner did not give any instructions to the broker as to how to vote such shares
on that matter and the broker is not permitted under applicable rules to vote
such shares in its discretion because of the subject matter of the proposal, but
whose shares are present on at least one matter. Such shares shall be counted as
Votes Present for the purpose of determining whether a quorum is present, if
voting instructions are given by the beneficial owner as to at least one of the
matters to be voted on. Broker non-votes will not be counted as Votes Cast or
Votes Present with respect to matters as to which the record holder has
expressly not voted. Accordingly, Steel Partners believes that broker non-votes
will have no effect upon the outcome of voting on any of the business matters
set forth in this Proxy Statement.
-18-
REVOCATION OF PROXIES
Stockholders of BKF may revoke their proxies at any time prior to exercise
by attending the Annual Meeting and voting in person (although attendance at the
Annual Meeting will not in and of itself constitute revocation of a proxy) or by
delivering a written notice of revocation. The delivery of a subsequently dated
proxy which is properly completed will constitute a revocation of any earlier
proxy. The revocation may be delivered either to Steel Partners in care of
Morrow & Co., Inc. at the address set forth on the back cover of this Proxy
Statement or to BKF at One Rockefeller Plaza, New York, New York, 10020 or any
other address provided by BKF. Although a revocation is effective if delivered
to BKF, Steel Partners requests that either the original or photostatic copies
of all revocations be mailed to Steel Partners in care of Morrow & Co., Inc. at
the address set forth on the back cover of this Proxy Statement so that Steel
Partners will be aware of all revocations and can more accurately determine if
and when proxies have been received from the holders of record on the Record
Date of a majority of the outstanding Shares. Additionally, Morrow & Co., Inc.
may use this information to contact stockholders who have revoked their proxies
in order to solicit later dated proxies for the election of the Nominees and
approval of the stockholder proposals described herein.
IF YOU WISH TO VOTE FOR THE ELECTION OF THE NOMINEES TO THE BKF BOARD OR FOR THE
STOCKHOLDER PROPOSALS DESCRIBED IN THIS PROXY STATEMENT, PLEASE SIGN, DATE AND
RETURN PROMPTLY THE ENCLOSED GOLD PROXY CARD IN THE POSTAGE-PAID ENVELOPE
PROVIDED.
SOLICITATION OF PROXIES
The solicitation of proxies pursuant to this Proxy Statement is being made
by Steel Partners. Proxies may be solicited by mail, facsimile, telephone,
telegraph, in person and by advertisements. Steel Partners will not solicit
proxies via the Internet.
Steel Partners has entered into an agreement with Morrow & Co., Inc. for
solicitation and advisory services in connection with this solicitation, for
which Morrow & Co., Inc. will receive a fee not to exceed $___,000.00, together
with reimbursement for its reasonable out-of-pocket expenses, and will be
indemnified against certain liabilities and expenses, including certain
liabilities under the federal securities laws. Morrow & Co., Inc. will solicit
proxies from individuals, brokers, banks, bank nominees and other institutional
holders. Steel Partners has requested banks, brokerage houses and other
custodians, nominees and fiduciaries to forward all solicitation materials to
the beneficial owners of the Shares they hold of record. Steel Partners will
reimburse these record holders for their reasonable out-of-pocket expenses in so
doing. It is anticipated that Morrow & Co., Inc. will employ approximately __
persons to solicit BKF's stockholders for the Annual Meeting.
The entire expense of soliciting proxies is being borne by Steel Partners
pursuant to the terms of the Joint Filing and Solicitation Agreement (as defined
below). Costs of this solicitation of proxies are currently estimated to be
approximately $___,000.00. Steel Partners estimates that through the date
hereof, its expenses in connection with this solicitation are approximately
$___,000.00.
-19-
OTHER PARTICIPANT INFORMATION
Each member of the Group is a participant in this solicitation. Warren G.
Lichtenstein is Chairman of the Board, Secretary and the Managing Member of
Partners LLC, a Delaware limited liability company. Partners LLC is the general
partner of Steel Partners. The principal business of Mr. Lichtenstein, Partners
LLC and Steel Partners is investing in the securities of small-cap companies.
The principal business address of Mr. Lichtenstein, Partners LLC and Steel
Partners is 590 Madison Avenue, 32nd Floor, New York, New York 10022. As of the
date hereof, Steel Partners is the beneficial owner of 669,600 Shares. Partners
LLC does not beneficially own any Shares on the date hereof, except by virtue of
its role in Steel Partners. Mr. Lichtenstein may be deemed to beneficially own
the 669,600 Shares of BKF owned by Steel Partners by virtue of his positions
with Partners LLC. For information regarding purchases and sales of securities
of BKF during the past two years by Steel Partners, see Schedule I.
On February 11, 2005, the members of the Group entered into a Joint Filing
and Solicitation Agreement in which, among other things, (i) the parties agreed
to the joint filing on behalf of each of them of statements on Schedule 13D with
respect to the securities of BKF, (ii) the parties agreed to solicit proxies or
written consents for the election of the Nominees, or any other person(s)
nominated by Steel Partners, to the BKF Board at the Annual Meeting (the
"Solicitation"), and (iii) Steel Partners agreed to bear all expenses incurred
in connection with the Group's activities, including approved expenses incurred
by any of the parties in connection with the Solicitation, subject to certain
limitations. Steel Partners intends to seek reimbursement from BKF of all
expenses it incurs in connection with the Solicitation. Steel Partners does not
intend to submit the question of such reimbursement to a vote of security
holders of the Company.
CERTAIN TRANSACTIONS BETWEEN STEEL PARTNERS AND BKF
Except as set forth in this Proxy Statement (including the Schedules
hereto), (i) during the past 10 years, no participant in this solicitation has
been convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors); (ii) no participant in this solicitation directly or indirectly
beneficially owns any securities of BKF; (iii) no participant in this
solicitation owns any securities of BKF which are owned of record but not
beneficially; (iv) no participant in this solicitation has purchased or sold any
securities of BKF during the past two years; (v) no part of the purchase price
or market value of the securities of BKF owned by any participant in this
solicitation is represented by funds borrowed or otherwise obtained for the
purpose of acquiring or holding such securities; (vi) no participant in this
solicitation is, or within the past year was, a party to any contract,
arrangements or understandings with any person with respect to any securities of
BKF, including, but not limited to, joint ventures, loan or option arrangements,
puts or calls, guarantees against loss or guarantees of profit, division of
losses or profits, or the giving or withholding of proxies; (vii) no associate
of any participant in this solicitation owns beneficially, directly or
indirectly, any securities of BKF; (viii) no participant in this solicitation
owns beneficially, directly or indirectly, any securities of any parent or
subsidiary of BKF; (ix) no participant in this solicitation or any of his/its
associates was a party to any transaction, or series of similar transactions,
since the beginning of BKF's last fiscal year, or is a party to any currently
proposed transaction, or series of similar transactions, to which BKF or any of
its subsidiaries was or is to be a party, in which the amount involved exceeds
$60,000; (x) no participant in this solicitation or any of his/its associates
has any arrangement or understanding with any person with respect to any future
employment by BKF or its affiliates, or with respect to any future transactions
to which BKF or any of its affiliates will or may be a party; and (xi) no
-20-
person, including the participants in this solicitation, who is a party to an
arrangement or understanding pursuant to which the Nominees are proposed to be
elected has a substantial interest, direct or indirect, by security holdings or
otherwise in any matter to be acted on at the Annual Meeting.
OTHER MATTERS AND ADDITIONAL INFORMATION
Steel Partners is unaware of any other matters to be considered at the
Annual Meeting. However, should other matters, which Steel Partners is not aware
of a reasonable time before this solicitation, be brought before the Annual
Meeting, the persons named as proxies on the enclosed GOLD proxy card will vote
on such matters in their discretion.
Steel Partners has omitted from this Proxy Statement certain disclosure
required by applicable law that is already included in the Company's proxy
statement. This disclosure includes, among other things, biographical
information on BKF's directors and executive officers, information concerning
executive compensation, an analysis of cumulative total returns on an investment
in Shares during the past five years and procedures for submitting proposals for
inclusion in BKF's proxy statement at the next annual meeting. Stockholders
should refer to the Company's proxy statement in order to review this
disclosure.
See Schedule II for information regarding persons who beneficially own more
than 5% of the Shares and the ownership of the Shares by the management of BKF.
The information concerning BKF contained in this Proxy Statement and the
Schedules attached hereto has been taken from, or is based upon, publicly
available information.
STEEL PARTNERS II, L.P.
________, 2005
-21-
SCHEDULE I
TRANSACTIONS IN SECURITIES OF BKF
DURING THE PAST TWO YEARS
CLASS QUANTITY PRICE PER DATE OF
OF SECURITY PURCHASED SHARE ($) PURCHASE
----------------- ------------------ ----------------- ----------------------
STEEL PARTNERS II, L.P.
--------------------------------------------------------------------------------
Common Stock 200 23.8000 12/12/03
Common Stock 1,100 24.9873 12/22/03
Common Stock 2,000 24.5000 12/24/03
Common Stock 4,100 25.0000 1/05/04
Common Stock 4,300 25.5000 1/12/04
Common Stock 5,000 25.5000 1/13/04
Common Stock 1,200 25.7000 3/29/04
Common Stock 3,000 25.6300 3/30/04
Common Stock 1,000 25.4000 3/31/04
Common Stock 2,000 26.5000 4/02/04
Common Stock 2,200 26.4964 4/06/04
Common Stock 100,000 26.4900 4/07/04
Common Stock 50,300 26.5296 4/12/04
Common Stock 75,000 26.7800 4/15/04
Common Stock 189,500 26.9799 4/20/04
Common Stock 2,300 27.1430 4/21/04
Common Stock 100 27.2000 4/22/04
Common Stock 6,800 27.4040 4/29/04
Common Stock 800 27.4025 4/30/04
Common Stock 4,700 28.5000 5/27/04
Common Stock 9,000 28.2733 6/03/04
Common Stock 2,000 28.4295 6/08/04
Common Stock 2,400 28.5050 6/10/04
Common Stock 3,000 26.6500 8/13/04
Common Stock 185,000 27.5300 8/16/04
Common Stock 12,600 39.4141 3/21/05
--------------------------------------------------------------------------------
-22-
SCHEDULE II
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
[TO BE INSERTED FROM BKF'S PROXY STATEMENT, WHEN FILED]
-23-
IMPORTANT
Tell your Board what you think! Your vote is important. No matter how many
Shares you own, please give Steel Partners your proxy FOR the election of Steel
Partners' Nominees and FOR the adoption of the stockholder proposals described
in this Proxy Statement by taking three steps:
o SIGNING the enclosed GOLD proxy card,
o DATING the enclosed GOLD proxy card, and
o MAILING the enclosed GOLD proxy card TODAY in the envelope provided (no
postage is required if mailed in the United States).
If any of your Shares are held in the name of a brokerage firm, bank, bank
nominee or other institution, only it can vote such Shares and only upon receipt
of your specific instructions. Accordingly, please contact the person
responsible for your account and instruct that person to execute the GOLD proxy
card representing your Shares. Steel Partners urges you to confirm in writing
your instructions to Steel Partners in care of Morrow & Co., Inc. at the address
provided below so that Steel Partners will be aware of all instructions given
and can attempt to ensure that such instructions are followed.
If you have any questions or require any additional information concerning
this Proxy Statement, please contact Morrow & Co., Inc. at the address set forth
below.
MORROW & CO., INC.
445 Park Avenue, 5th Floor
New York, New York 10022
(212) 754-8000
BANKS AND BROKERAGE FIRMS, PLEASE CALL: (800) 654-2468
STOCKHOLDERS CALL TOLL FREE: (800) 607-0088
E-MAIL: STEEL.INFO@MORROWCO.COM
PRELIMINARY COPY SUBJECT TO COMPLETION
DATED MARCH 22, 2005
BKF CAPITAL GROUP, INC.
2005 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF STEEL PARTNERS II, L.P.
THE BOARD OF DIRECTORS OF BKF CAPITAL GROUP, INC.
IS NOT SOLICITING THIS PROXY
P R O X Y
The undersigned appoints Warren G. Lichtenstein and Ronald LaBow, and each of
them, attorneys and agents with full power of substitution to vote all shares of
common stock of BKF Capital Group, Inc. (the "Company") which the undersigned
would be entitled to vote if personally present at the Annual Meeting of
Stockholders of the Company, and including at any adjournments or postponements
thereof and at any meeting called in lieu thereof.
The undersigned hereby revokes any other proxy or proxies heretofore given to
vote or act with respect to the shares of common stock of the Company held by
the undersigned, and hereby ratifies and confirms all action the herein named
attorneys and proxies, their substitutes, or any of them may lawfully take by
virtue hereof. If properly executed, this Proxy will be voted as directed on the
reverse and in their discretion with respect to any other matters as may
properly come before the Annual Meeting.
IF NO DIRECTION IS INDICATED WITH RESPECT TO THE PROPOSALS ON THE REVERSE, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES SET FORTH IN THIS PROXY, OR
ANY SUBSTITUTIONS THERETO AND FOR THE STOCKHOLDER PROPOSALS RELATING TO THE
DECLASSIFICATION OF THE COMPANY'S BOARD OF DIRECTORS, REDEMPTION OF THE RIGHTS
ISSUED PURSUANT TO THE COMPANY'S POISON PILL AND ENGAGEMENT OF AN INVESTMENT
BANKING FIRM TO PURSUE THE SALE OF THE COMPANY.
This Proxy will be valid until the sooner of one year from the date indicated on
the reverse side and the completion of the Annual Meeting.
PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS PROXY.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
[X] PLEASE MARK VOTE AS IN THIS EXAMPLE
1. ELECTION OF DIRECTORS:
FOR ALL
WITHHOLD EXCEPT
AUTHORITY TO NOMINEE(S)
FOR VOTE FOR ALL WRITTEN
ALL NOMINEES ALL NOMINEES BELOW
Nominees: Warren G. Lichtenstein [ ] [ ] [ ]
Ronald LaBow
Kurt N. Schacht ----------------
2. APPROVAL OF THE STOCKHOLDER PROPOSAL RELATING TO THE DECLASSIFICATION OF
THE COMPANY'S BOARD OF DIRECTORS:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. APPROVAL OF THE STOCKHOLDER PROPOSAL RELATING TO THE REDEMPTION OF THE
RIGHTS ISSUED PURSUANT TO THE COMPANY'S POISON PILL:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. APPROVAL OF THE STOCKHOLDER PROPOSAL RELATING TO THE ENGAGEMENT OF AN
INVESTMENT BANKING FIRM TO PURSUE A SALE OF THE COMPANY:
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
DATED: ____________________________
____________________________________
(Signature)
____________________________________
(Signature, if held jointly)
____________________________________
(Title)
WHEN SHARES ARE HELD JOINTLY, JOINT OWNERS SHOULD EACH SIGN. EXECUTORS,
ADMINISTRATORS, TRUSTEES, ETC., SHOULD INDICATE THE CAPACITY IN WHICH SIGNING.
IMPORTANT: PLEASE SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY!