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                            BAKER, FENTRESS & COMPANY


                        1998 Incentive Compensation Plan
                            (as amended and restated)





<PAGE>

                            BAKER, FENTRESS & COMPANY


                        1998 Incentive Compensation Plan
                            (as amended and restated)

================================================================================


                                                                            PAGE
                                                                            ----

  1.   Purpose..............................................................   1

  2.   Definitions..........................................................   1

  3.   Administration.......................................................   3
       (a)    Authority of the Committee....................................   3
       (b)    Manner of Exercise of Committee Authority.....................   3
       (c)    Limitation of Liability.......................................   3

  4.   Stock Subject to Plan................................................   4
       (a)    Overall Number of Shares of Stock Available for Delivery......   4
       (b)    Application of Limitation to Grants of Awards.................   4
       (c)    Availability of Shares Not Delivered under Awards ............   4

  5.   Eligibility; Per-Person Award Limitations............................   4

  6.   Specific Terms of Awards.............................................   5
       (a)    General........................................................  5
       (b)    Options........................................................  5
       (c)    Stock Appreciation Rights......................................  5
       (d)    Restricted Stock...............................................  6
       (e)    Deferred Stock.................................................  7
       (f)    Bonus Stock and Awards in Lieu of Obligations..................  7
       (g)    Dividend Equivalents...........................................  7
       (h)    Annual Incentive and Performance Awards........................  8

  7.   Certain Provisions Applicable to Awards...............................  8
       (a)    Stand-Alone, Additional, Tandem, and Substitute Awards ........  8
       (b)    Term of Awards.................................................  8
       (c)    Form and Timing of Payment under Awards; Deferrals ............  8
       (d)    Exemptions from Section 16(b) Liability........................  9
       (e)    Loan Provisions................................................  9
       (f)    General Terms Relating to Awards...............................  9

<PAGE>

                            BAKER, FENTRESS & COMPANY


                        1998 Incentive Compensation Plan
                            (as amended and restated)

================================================================================


                                                                            PAGE
                                                                            ----

  8.   Performance and Annual Incentive Awards...............................  9
       (a)    Performance Conditions.........................................  9
       (b)    Performance Awards Granted to Designated Covered Employees ....  9
       (c)    Annual Incentive Awards Granted to Designated Covered Employees 11
       (d)    Written Determinations......................................... 12
       (e)    Status of Section 8(b) and 8(c) Awards under Code Section 162(m)12


  9.   Change in Control......................................................12
       (a)    Effect of "Change in Control" on Non-Performance Based Awards...12
       (b)    Effect of "Change in Control" on Performance-Based Awards.......13
       (c)    Definition of "Change in Control"...............................13
       (d)    Definition of "Change in Control Price".........................14

10.    General Provisions.....................................................14
       (a)    Compliance with Legal and Other Requirements....................14
       (b)    Limits on Transferability; Beneficiaries........................14
       (c)    Adjustments.....................................................15
       (d)    Taxes...........................................................15
       (e)    Changes to the Plan and Awards..................................16
       (f)    Limitation on Rights Conferred under Plan.......................16
       (g)    Unfunded Status of Awards; Creation of Trusts...................16
       (h)    Nonexclusivity of the Plan......................................16
       (i)    Payments in the Event of Forfeitures; Fractional Shares ........17
       (j)    Governing Law...................................................17
       (k)    Plan Effective Date and Shareholder Approval....................17

<PAGE>

                            BAKER, FENTRESS & COMPANY


                        1998 Incentive Compensation Plan
                            (as amended and restated)

================================================================================

         1.       PURPOSE. The purpose of this 1998 Incentive Compensation Plan,
as amended and restated (the "Plan"), is to assist Baker, Fentress & Company
("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).

<PAGE>

                            BAKER, FENTRESS & COMPANY


                        1998 Incentive Compensation Plan
                            (as amended and restated)

================================================================================

                  (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.

                  (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.

<PAGE>

                  (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 agreements (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 11(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

                                      - 3 -
<PAGE>

         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) 1,300,000, 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);
         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 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,

                                      - 4 -
<PAGE>

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 11(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.

                  (c) STOCK APPRECIATION RIGHTS. The Committee is authorized to
         grant SARs to Participants on the following terms and conditions:

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                           (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
                  11(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

                                      - 6 -
<PAGE>

                  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.

                  (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

                                      - 7 -
<PAGE>

         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).

         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

                                      - 8 -
<PAGE>

         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.

                                      - 9 -

<PAGE>

                  (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 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
         immediately upon 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).

                                     - 10 -
<PAGE>

                           (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)
                  increase in 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 Standard &
                  Poor's 500 Stock Index, the Standard & Poor's Financial Index,
                  the SNL Investment Advisor Index or a group of comparator
                  companies. One or more of the foregoing business criteria
                  shall also be exclusively used in establishing 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

                                     - 11 -
<PAGE>

                  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 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

                                     - 12 -
<PAGE>

                  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

                                     - 13 -
<PAGE>

                  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 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

                                     - 14 -
<PAGE>

                  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, 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

                                     - 15 -
<PAGE>

         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 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.

                                     - 16 -
<PAGE>

                  (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.

                  (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

                                     - 17 -
<PAGE>

         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) has been adopted by the Board, subject to
         approval by the shareholders of BKF at its 2000 annual meeting and
         receipt from the Securities and Exchange Commission of an order
         exempting BKF from the Investment Company Act of 1940. The Plan shall
         remain in effect for the year in which it is approved by BKF
         shareholders and each of the next four succeeding years unless sooner
         terminated by the Board in accordance with Section 10(e). The Plan
         shall be submitted for re-approval by BKF shareholders at the first
         meeting of shareholders held during such fifth succeeding year, and all
         Awards made during such fifth succeeding year shall be contingent upon
         such approval. If the Plan is so approved, it shall continue in effect
         for such year and the next four succeeding years, at which time it will
         again be subject to re-approval by BKF shareholders. The Plan shall
         continue in effect in the same manner for successive cycles of five
         years, subject to re-approval by BKF shareholders every five years in
         accordance with Regulation 1.162-27, until amended or terminated by the
         Board.

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