Exhibit 10.2
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
2
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.
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
3
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 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
4
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 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 Option(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 Option(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
5
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.
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 August 21, 1998.
This Plan was approved by the Shareholders on September 28, 1998.
6