Exhibit 8.1
ELK ASSOCIATES FUNDING CORPORATION
1998 INCENTIVE STOCK OPTION PLAN
The purpose of the 1998 Incentive Stock Option Plan (the "Plan") is to
attract and retain key employees of Elk Associates Funding Corporation (the
"Company") and its affiliates, to provide an incentive for them to achieve
long-range performance goals, and to enable them to participate in the long-term
growth of the Company by the granting of Incentive Stock Options (individually
referred to herein as an "Option" and collectively as "Options") to purchase the
Company's common stock, par value $0.01 par value (the "Common Stock").
1. Administration of the Plan.
The administration of the Plan shall be under the general supervision of
the 1998 Employee Plan Committee of the Board of Directors of the Company (the
"1998 Employee Plan Committee"). Within the limits of the Plan, the 1998
Employee Plan Committee shall determine the individuals to whom, and the times
at which, Options shall be granted, the type of Option to be granted, the
duration of each Option, the price and method of payment for each Option, and
the time or times within which (during its term) all or portions of each Option
may be exercised. The 1998 Employee Plan Committee may establish such rules as
it deems necessary for the proper administration of the Plan, make such
determinations and interpretations with respect to the Plan and Options granted
under it as may be necessary or desirable and include such further provisions or
conditions in Options granted under the Plan as it deems advisable. To the
extent permitted by law, the 1998 Employee Plan Committee may delegate its
authority under the Plan to a sub-committee of the 1998 Employee Plan Committee.
2. Shares Subject to the Plan.
(a) Number of Shares. The aggregate number of shares of Common Stock of the
Company which may be optioned under the Plan is 125,000 shares. In the event
that the 1998 Employee Plan Committee in its discretion determines that any
stock dividend, split-up, combination or reclassification of shares,
recapitalization or other similar capital change affects the Common Stock such
that adjustment is required in order to preserve the benefits or potential
benefits of the Plan or any Option granted under the Plan, the maximum aggregate
number and kind of shares or securities of the Company as to which Options may
be granted under the Plan and as to which Options then outstanding shall be
exercisable, and the option price of such Options, shall be appropriately
adjusted by the 1998 Employee Plan Committee (whose determination shall be
conclusive) so that the proportionate number of shares or other securities as to
which Options may be granted and the proportionate interest of holders of
outstanding Options shall be maintained as before the occurrence of such event.
(b) Effect of Certain Transactions. In order to preserve a Participant's
(as defined below) rights under an Option in the event of a change in control of
the Company, the 1998 Employee Plan Committee in its discretion may, at the time
an Option is made or at any time thereafter, take one or more of the following
actions: (i) provide for the acceleration of any time period relating to the
exercise or payment of the Option, (ii) provide for payment to the Participant
of cash or other property with a fair market value equal to the amount that
would have been received upon the exercise or payment of the Option had the
Option been exercised or paid upon the change in control, (iii) adjust the terms
of the Option in a manner determined by the 1998 Employee Plan Committee to
reflect the change in control,
(iv) cause the Option to be assumed, or new rights substituted therefor, by
another entity, or (v) make such other provision as the 1998 Employee Plan
Committee may consider equitable to the Participant and in the best
interests of the Company, provided such action shall comply with Section
424 of the Code and will not render any Incentive Stock Option granted
hereunder to be other than an incentive stock option for purposes of
Section 422 of the Code.
(c) Restoration of Shares. If any Option expires or is terminated
unexercised or is forfeited for any reason, the shares subject to such Option,
to the extent of such expiration, termination or forfeiture, shall again be
available for granting pursuant to Options under the Plan, subject, however, in
the case of Incentive Stock Options, to any requirements under the Code (as
defined below).
(d) Reservation of Shares. The Company shall at all times while the Plan is
in force reserve such number of shares of Common Stock as will be sufficient to
satisfy the requirements of the Plan. Shares issued under the Plan may consist
in whole or in part of authorized but unissued shares or treasury shares.
3. Grant of Options; Eligible Persons.
(a) Types of Options. Options shall be granted under the Plan either as
incentive stock options ("Incentive Stock Options"), as defined in Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), or as Options
that do not meet the requirements of Section 422 ("Nonstatutory Stock Options").
Options may be granted from time to time by the 1998 Employee Plan Committee,
within the limits set forth in Sections 1 and 3 of the Plan, to all employees of
the Company or of any parent corporation or subsidiary corporation of the
Company (as defined in Sections 424(e) and (f), respectively, of the Code) (such
individuals collectively referred to herein as "Participants").
(b) Date of Grant. The date of grant for each Option shall be the date on
which it is approved by the 1998 Employee Plan Committee or such later date as
the 1998 Employee Plan Committee may specify. No Incentive Stock Options shall
be granted hereunder after ten years from the date on which the Plan was
approved by the Board of Directors.
4. Form of Options.
Options granted hereunder shall be evidenced by a writing delivered to the
optionee specifying the terms and conditions thereof and containing such other
terms and conditions not inconsistent with the provisions of the Plan as the
1998 Employee Plan Committee considers necessary or advisable to achieve the
purposes of the Plan or comply with applicable tax and regulatory laws and
accounting principles. The form of such Options may vary among optionees.
5. Option Price.
The price at which shares may from time to time be optioned shall be determined
by the 1998 Employee Plan Committee, provided that such price shall not be less
than the current market value of the Common Stock on the date of grant, and
provided further that no Incentive Stock Option shall be granted to any
individual who is ineligible to be granted an Incentive Stock Option because his
ownership of stock of the Company or its parent or subsidiary corporations
exceeds the limitations set forth in Section 422(b)(6) of the Code unless such
option price is at least 110% of the current market value of the Common Stock on
the date of grant.
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To the extent permitted by law, the 1998 Employee Plan Committee may in its
discretion permit the option price to be paid in whole or in part by a note or
in installments or with shares of Common Stock of the Company or such other
lawful consideration as the 1998 Employee Plan Committee may determine.
6. Term of Option and Dates of Exercise.
(a) Exercisability. The 1998 Employee Plan Committee shall determine the
term of all Options, the time or times that Options are exercisable and whether
they are exercisable in installments, provided that the term of each Option
granted under the Plan shall not exceed a period of ten years from the date of
its grant, and provided further that no Incentive Stock Option shall be granted
to any individual who is ineligible to be granted such Option because his
ownership of stock of the Company or its parent or subsidiary corporations
exceeds the limitations set forth in Section 422(b)(6) of the Code unless the
term of his Incentive Stock Option does not exceed a period of five years from
the date of its grant. In the absence of such determination, the Option shall be
exercisable at any time or from time to time, in whole or in part, during a
period of ten years from the date of its grant or, in the case of an Incentive
Stock Option, the maximum term of such Option.
(b) Effect of Disability, Death or Termination of Employment. The 1998
Employee Plan Committee shall determine the effect on an Option of the
disability, death, retirement or other termination of employment of an optionee
and the extent to which, and during the period which, the optionee's estate,
legal representative, guardian, or beneficiary on death may exercise rights
thereunder. Any beneficiary on death shall be designated by the optionee, in the
manner determined by the 1998 Employee Plan Committee, to exercise rights of the
optionee in the case of the optionee's death.
(c) Other Conditions. The 1998 Employee Plan Committee may impose such
conditions with respect to the exercise of Options, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable.
(d) Withholding. The optionee shall pay to the Company, or make provisions
satisfactory to the 1998 Employee Plan Committee for payment of, any taxes
required by law to be withheld in respect of any Options under the Plan no later
than the date of the event creating the tax liability. The Company and any
parent corporation or subsidiary corporation of the Company (as defined in
Sections 424(e) and (f), respectively, of the Code) may, to the extent permitted
by law, deduct any such tax obligations from any payment of any kind otherwise
due to the optionee.
(e) Amendment of Options. The 1998 Employee Plan Committee may amend,
modify or terminate any outstanding Option, including substituting therefor
another Option of the same or different type, changing the date of exercise or
realization and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the optionee's consent to such action shall be required
unless the 1998 Employee Plan Committee determines that the action, taking into
account any related action, would not materially and adversely affect the
optionee.
7. Non-transferability.
Options granted under the Plan shall not be transferable by the holder thereof
otherwise than by will or the laws of descent and distribution or, in the case
of a Nonstatutory Stock Option, to the extent consistent with qualifying for the
exemption provided by Rule 16b-3 under the Securities Exchange Act
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of 1934 (the "Exchange Act"), pursuant to a qualified domestic relations order,
and shall be exercisable, during the holder's lifetime, only by him or her or
such permitted transferee.
8. No Right to Employment.
No persons shall have any claim or right to be granted an Option, and the grant
of an Option shall not be construed as giving an optionee the right to continued
employment. The Company expressly reserves the right at any time to dismiss an
optionee free from any liability or claim under the Plan, except as specifically
provided in the applicable Option.
9. No Rights as a Shareholder.
Subject to the provisions of the applicable Option, no optionee or any person
claiming through an optionee shall have any rights as a shareholder with respect
to any shares of Common Stock to be distributed under the plan until he or she
becomes the holder thereof.
10. Amendment or Termination.
The Board of Directors of the Company may amend, suspend or terminate the Plan
or any portion thereof at any time, subject to any shareholder approval that the
Board of Directors determines to be necessary or advisable, provided that the
Participant's consent will be required for any amendment, suspension or
termination that would adversely affect the rights of the Participant under any
outstanding Options.
11. Adjustment of Shares; Merger or Consolidation, Etc. of the Company.
(a) Recapitalization, Etc. In the event there is any change in the
outstanding Common Stock of the Company by reason of any reorganization,
recapitalization, stock split, stock dividend, combination of shares, or
otherwise, there shall be substituted for or added to each share of Common Stock
theretofore appropriated or thereafter subject, or which may become subject, to
any Option, the number and kind of shares of stock or other securities into
which each outstanding share of Common Stock shall be so changed or for which
each such share shall be exchanged, or to which each such share shall be
exchanged, or to which each such share shall be entitled, as the case may be,
and the per share price thereof also shall be appropriately adjusted.
Notwithstanding the foregoing, (i) each such adjustment with respect to an
Incentive Stock Option shall comply with the rules of Section 424(a) of the Code
and (ii) in no event shall any adjustment be made which would render any
Incentive Stock Option granted hereunder to be other than an incentive stock
option for purposes of Section 422 of the Code.
(b) Merger, Consolidation, or Change in Control of Company. Upon (i) the
merger or consolidation of the Company with or into another corporation
(pursuant to which the stockholders of the Company immediately prior to such
merger or consolidation will not, as of the date of such merger or
consolidation, own a beneficial interest in shares of voting securities of the
corporation surviving such merger or consolidation having at least a majority of
the combined voting power of such corporation's then outstanding securities), if
the agreement of merger or consolidation does not provide for (1) the
continuance of the Options granted hereunder or (2) the substitution of new
options for Options granted hereunder, or for the assumption of such Options by
the surviving corporation, (ii) the dissolution, liquidation, or sale of all or
substantially all the assets of the Company to a person unrelated to the Company
or to a direct or indirect owner of a majority of the voting power of the
Company's then outstanding voting securities (such sale of assets being referred
to as an "Asset Sale") or (iii) the Change
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in Control of the Company, then the holder of any such Option theretofore
granted and still outstanding (and not otherwise expired) shall have the right
immediately prior to the effective date of such merger, consolidation,
dissolution, liquidation, Asset Sale, or Change in Control of the Company to
exercise such Options(s) in whole or in part without regard to any installment
provision that may have been made part of the terms and conditions of such
Options(s); provided that all conditions precedent to the exercise of such
Option(s), other than the passage of time, have occurred. The Company, to the
extent practicable, shall give advance notice to affected Optionees of such
merger, consolidation, dissolution, liquidation, Asset Sale, or Change in
Control of the Company. Unless otherwise provided in the subject award agreement
or merger, consolidation, or Asset Sale agreement, all such Options which are
not so exercised shall be forfeited as of the effective time of such merger,
consolidation, dissolution, liquidation, or Asset Sale (but not in the case of a
Change in Control of the Company). In the event the Company becomes a subsidiary
of another corporation (the "Parent Company") with respect to which the
stockholders of the Company (as determined immediately before such transaction)
own, immediately after such transaction, a beneficial interest in shares of
voting securities of the Parent Company having at least a majority of the
combined voting power of such Parent Company's then outstanding securities,
there shall be substituted for Options granted hereunder, options to purchase
common stock of the Parent Company. The substitution described in the
immediately preceding sentence shall be effected in a manner such that any
option granted by the Parent Company to replace an incentive stock option
granted hereunder shall satisfy the requirements of Section 422 of the Code.
Notwithstanding the foregoing, the holder of any such Option shall not have the
right to exercise such Option if such exercise would render any Incentive Stock
Options granted hereunder to be other than an incentive stock option for
purposes of Section 422 of the Code.
(c) Definition of Change in Control of the Company. As used herein, a
"Change in Control of the Company" shall be deemed to have occurred if any
person (including any individual, firm, partnership or other entity), together
with all Affiliates and Associates (as defined under Rule 12b-2 of the General
Rules and Regulations promulgated under the Exchange Act) of such person (but
excluding (i) a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any subsidiary of the Company, (ii) a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of the Company, (iii) the
Company or any subsidiary of the Company, or (iv) only as provided in the
immediately following sentence, a Participant together with all Affiliates and
Associates of the Participant) who is not a stockholder or an Affiliate or
Associate of a stockholder of the Company on the date of stockholder approval of
the Plan is or becomes the beneficial Owner (as defined in Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of securities of
the Company representing 40% or more of the combined voting power of the
Company's then outstanding securities. The provisions of clause (iv) of the
immediately preceding sentence shall apply only with respect to the Option(s)
held by the Participant who, together with his Affiliates or Associates, if any,
is or becomes the direct or indirect Beneficial Owner of the percentage of
securities set forth in such clause.
12. Stockholder Approval.
The Plan is subject to approval by the stockholders of the Company by the
affirmative vote of the holders of a majority of the shares of capital stock of
the Company entitled to vote thereon and present or represented at a meeting
duly held in accordance with the laws of the State of New York, or by any other
action that would be given the same effect under the laws of such jurisdiction,
which action in either case shall be taken within twelve (12) months from the
date the Plan was adopted by the Board of Directors.
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In the event such approval is not obtained, all Options granted under the Plan
shall be void and without effect.
13. Governing Law.
The provisions of the plan shall be governed by and interpreted in accordance
with the laws of the State of New York.
This Plan was approved by the Board of Directors on _________, 1998. This Plan
was approved by the Shareholders on September ___, 1998.
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