Exhibit 10.2

 

KCAP FINANCIAL, INC.
NON-EMPLOYEE DIRECTOR PLAN
As Amended and Restated June 20, 2014

 

1.Purpose and Certain Defined Terms

 

The purpose of this Non-Employee Director Plan, As Amended and Restated June 20,
2014 (the “Plan”) is to advance the interests of the Company (as defined below)
by providing for the grant to Non-Employee Directors (as defined below) of
Restricted Shares (as defined below) (the “Awards”) to the extent permitted by
exemptive or other relief that may be granted by the Securities and Exchange
Commission (the “Commission”). The Plan is an amendment and restatement of the
2008 Non-Employee Director Plan as adopted on February 5, 2008 (the “Prior
Plan”), and amended and restated effective June 10, 2011. At all times during
such periods as the Company qualifies or intends to qualify as a “business
development company” under the Investment Company Act of 1940, as amended (the
“1940 Act”), the terms of the Plan shall be construed so as to conform to the
share-based compensation requirements applicable to “business development
companies” under the 1940 Act. Any Non-Employee Director selected to receive an
Award under the Plan is referred to as a “participant.”

 

The following terms, when used in the Plan, will have the meanings and be
subject to the provisions set forth below:

 

“Board” means the board of directors of the Company.

 

“Company” means KCAP Financial, Inc., a Delaware corporation. The Company was
formerly known as Kohlberg Capital Corporation.

 

“Continuous Service” means a participant’s uninterrupted service with the
Company as a Non-Employee Director.

 

“Effective Date” means June 10, 2011, the date on which the Prior Plan was
amended and restated in accordance with a resolution of the Board and approved
by a vote of the Company’s shareholders.

 

“Employee Plan” means the Company’s 2006 Equity Incentive Plan, as amended from
time to time.

 

“Executive Compensation Plans” means the Plan, together with any Company
executive compensation plan that did, does, or may in the future, exist.

 

“Non-Employee Director” means any director of the Company who is not an employee
or officer of the Company.

 

“Restricted Shares” means an award of Shares for so long as the Shares remain
subject to restrictions requiring that they be forfeited to the Company if
specified conditions are not satisfied.

 

“Shares” means the common stock, $.01 par value per share, of the Company.

 

“Shareholders” means the shareholders of the Company.

 

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2.Administration

 

The Plan shall be administered by the Board unless and until it delegates
administration to a committee as provided herein. The Board shall have
discretionary authority, subject to the express provisions of the Plan, (a)
subject to Section 9(b), to grant Awards to such Eligible Persons (defined below
in Section 5 hereof) as the Board may select; (b) to prescribe the form or forms
of any instruments evidencing Awards and any other instruments required under
the Plan and to change such forms from time to time; (c) to adopt, amend, and
rescind rules and regulations for the administration of the Plan; and (d) to
interpret the Plan and to decide any questions and settle all controversies and
disputes that may arise in connection with the Plan. Such determinations of the
Board shall be conclusive and shall bind all parties. Subject to Section 9(a)
hereof, the Board shall also have the authority, both generally and in
particular instances, to waive compliance by a participant with any obligation
to be performed by him or her under an Award, to waive any condition or
provision of an Award, and to amend or cancel any Award (and if an Award is
canceled, to grant a new Award on such terms as the Board shall specify),
provided that the Board may not take any action with respect to an outstanding
Award that would adversely affect the rights of the participant under such Award
without such participant’s consent. Nothing in the preceding sentence shall be
construed as limiting the power of the Board to make adjustments required by
Sections 4(d) and 6(e) hereof or by applicable law.

 

The Board may, in its discretion, delegate some or all of its powers with
respect to the Plan to a committee (the “Committee”), in which event all
references (as appropriate) to the Board hereunder shall be deemed to refer to
the Committee.

 

Determinations, interpretations and constructions made by the Board in good
faith shall not be subject to review by any person and shall be final, binding
and conclusive on all persons.

 

3.Effective Date and Term of Plan

 

The Plan is effective as of the Effective Date. For the avoidance of doubt, all
option Awards made under the Prior Plan as in force prior to the Effective Date
are governed in all respects by the terms of the Prior Plan and shall be
construed accordingly.

 

No Awards shall be granted under the Plan after the fifth anniversary of the
Effective Date, but Awards granted prior to the fifth anniversary of the
Effective Date may extend beyond that date.

 

4.Shares Subject to the Plan

 

(a)          Number of Shares. Subject to adjustment as provided in Section
4(d), the aggregate number of Shares that may be the subject of Awards granted
under the Plan shall be 100,000. If any Restricted Share Award granted under the
Plan is forfeited, the number of Shares as to which such Restricted Share Award
was granted shall be available for future grants.

 

(b)         Shares to be Delivered. Shares delivered under the Plan shall be
authorized but unissued Shares, or if the Board so decides in its sole
discretion, previously issued Shares acquired by the Company and held in its
treasury. Any Shares acquired by the Company will be acquired in accordance with
the 1940 Act, including Section 23 of the 1940 Act. No fractional Shares shall
be delivered under the Plan.

 

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(c)           Limits on Number of Awards. The maximum amount of Restricted
Shares that may be issued under the Executive Compensation Plans will be 10% of
the outstanding Shares on the Effective Date, plus 10% of the number of Shares
issued or delivered by the Company (other than pursuant to the Executive
Compensation Plans) during the term of the Plan. No one person shall be granted
more than 25% of the Restricted Shares reserved for issuance under this Plan.
The amount of voting securities that would result from the exercise of all of
the Company’s outstanding warrants, options and rights, together with any
Restricted Shares issued pursuant to the Executive Compensation Plans, at the
time of issuance shall not exceed 25% of the outstanding voting securities of
the Company (excluding the Restricted Shares), except that if the amount of
voting securities that would result from the exercise of all the Company’s
outstanding warrants, options and rights issued to the Company’s directors,
officers and employees (not including any warrants, options or rights issued to
Shareholders of the Company generally), together with any Restricted Shares
issued pursuant to the Executive Compensation Plans, would exceed 15% of the
outstanding voting securities of the Company (excluding the Restricted Shares),
then the total amount of voting securities that would result from the exercise
of all outstanding warrants, options and rights, together with any Restricted
Shares issued pursuant to the Executive Compensation Plans, at the time of
issuance shall not exceed 20% of the outstanding voting securities of the
Company (excluding the Restricted Shares).

 

(d)           Changes in Shares. In the event of a Share dividend, Share split
or combination of Shares, recapitalization, or other change in the Shares, the
number and kind of Shares or securities of the Company subject to Awards then
outstanding or subsequently granted under the Plan, the maximum number of Shares
that may be delivered under the Plan, and other relevant provisions shall be
appropriately adjusted by the Board, whose determination shall be binding on all
persons.

 

The Board may also adjust the number of Shares subject to outstanding Awards and
the terms of outstanding Awards, to take into consideration material changes in
accounting practices or principles, extraordinary dividends, consolidations or
mergers (except those described in Section 6(e)), acquisitions or dispositions
of securities or property, or any other event if it is determined by the Board
that such adjustment is appropriate to avoid distortion in the operation of the
Plan. References in the Plan to Shares will be construed to include any units,
any stock or any other securities resulting from an adjustment pursuant to this
Section 4(d).

 

5.Eligibility for Awards

 

Persons eligible to receive Awards under the Plan (“Eligible Persons”) shall be
Non-Employee Directors.

 

6.Terms and Conditions of Awards

 

(a)           Awards. Each Award shall contain such terms and conditions as the
Board shall deem appropriate. No Awards of Restricted Shares shall be granted
prior to the Effective Date.

 

(b)          Amounts; Vesting of Awards.

 

(1)          Subject to Section 9(b), on and after the Effective Date, each
Non-Employee Director who is a director of the Company on the date of each
annual meeting of Shareholders or meeting in lieu of the annual meeting of
Shareholders, shall automatically be granted 1,000 Restricted Shares on the date
of each such annual meeting of Shareholders during the term of the Plan, or if
no such meeting be held in a year, then on the anniversary of the prior annual
meeting or meeting in lieu of the annual meeting. Such Awards shall immediately
vest as to one-half of the Restricted Share grant and as to the remaining
one-half of the Restricted Share grant on the earlier of (i) the first
anniversary of such grant, or (ii) the date immediately preceding the next
annual meeting of Shareholders (or meeting in lieu of the annual meeting of
Shareholders), provided that the participant is then and since the date of grant
has continuously been a Non-Employee Director (subject to Section 7 hereof).

 

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(2)          Subject to Section 9(b), on and after the Effective Date, a
Non-Employee Director who is appointed to serve on the Board outside of the
annual election cycle shall automatically be granted a pro rata portion of the
Restricted Share Award on the date of such appointment to the Board (i.e., such
Non-Employee Director will receive a grant of Restricted Shares equal to the
product of (x) the number of full months, if any, remaining until the next
annual meeting of Shareholders (or the next annual meeting in lieu of the annual
meeting of Shareholders) divided by twelve and (y) 1,000). One-half of such pro
rata grant will vest immediately and the remaining one-half of such pro rata
grant will vest on the earlier of (i) the first anniversary of the preceding
annual meeting of Shareholders (or the preceding meeting in lieu of the annual
meeting of Shareholders), or (ii) the date immediately preceding the next annual
meeting of Shareholders (or meeting in lieu of the annual meeting of
Shareholders), provided that the participant is then and since the date of such
pro-rata grant has continuously been a Non-Employee Director (subject to Section
7 hereof).

 

(c)           Rights as Shareholder. A participant shall not have the rights of
a Shareholder with regard to an Award under the Plan except as to Shares
actually received by him or her under the Plan. For this purpose, Shares are
received by a participant on the date of record issuance of such Shares in the
books of the Company or the issuance to participant of a stock certificate with
respect to such Shares.

 

(d)          Nontransferability of Awards. No unvested Restricted Shares may be
transferred. Vested Restricted Shares may be sold, assigned, pledged,
hypothecated, encumbered, or transferred or disposed of in any other manner, in
whole or in part, only in compliance with the terms, conditions and restrictions
as set forth in the governing instruments of the Company, applicable federal and
state securities laws or any other applicable laws or regulations and the terms
and conditions hereof.

 

(e)          Mergers, Etc. To the extent permitted under the 1940 Act, the
following provisions shall apply in the event of a Covered Transaction (as
defined below).

 

(1)          Subject to subparagraph (2) below, all outstanding Awards to the
extent not fully vested (including Awards subject to conditions not yet
satisfied or determined) will be forfeited, as of the effective time of the
Covered Transaction (as defined in subparagraph (3) herein), provided that the
Board may in its sole discretion on or prior to the effective date of the
Covered Transaction remove any conditions or restrictions on any Award; or

 

(2)          With respect to an outstanding Award held by a participant who,
following the Covered Transaction, will be employed by or otherwise providing
services to an entity which is a surviving or acquiring entity in the covered
transaction or any affiliate of such an entity, the Board may at or prior to the
effective time of the Covered Transaction, in its sole discretion and in lieu of
the action described in subparagraph (1) above, arrange to have such surviving
or acquiring entity or affiliate assume any Award held by such participant
outstanding hereunder or grant a replacement Award which, in the judgment of the
Board is substantially equivalent to any Award being replaced.

 

(3)          For purposes of this Section 6(e), a “Covered Transaction” is a (i)
Share sale, consolidation, merger, or similar transaction or series of related
transactions in which the Company is not the surviving corporation or which
results in the acquisition of all or substantially all of the Company’s then
outstanding Shares by a single person or entity or by a group of persons and/or
entities acting in concert; (ii) a sale or transfer of all or substantially all
the Company’s assets, or (iii) a dissolution or liquidation of the Company.
Where a Covered Transaction involves a tender offer that is reasonably expected
to be followed by a merger described in clause (i) (as determined by the Board),
the Covered Transaction shall be deemed to have occurred upon consummation of
the tender offer.

 

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(f)          Compliance with Law; Commission Approval. At all times during such
periods as the Company qualifies or intends to qualify as a “business
development company,” no Award may be granted under the Plan if the grant or
terms of such Award would cause the Company to violate any provision of the 1940
Act applicable to “business development companies,” and, if approved for grant,
such an Award will be void and of no effect. Subject to Section 9(b), the grants
of Awards under the Plan will be automatic and will not be changed without
shareholder approval.

 

7.Termination of Continuous Service

 

Unless the Board expressly provides otherwise, immediately upon the cessation of
the participant’s service as a Non-Employee Director (unless upon such
termination or within 90 days thereafter the participant becomes an officer or
employee of the Company or rejoins the Board as a Non-Employee Director) all
Awards, to the extent not already vested, will be forfeited. If a participant
ceases providing services as a Non-Employee Director but within 90 days of such
cessation becomes an officer or employee of the Company or rejoins the Board as
a Non-Employee Director, such participant shall vest in any unvested Restricted
Shares on the later of (i) the next annual shareholders meeting (in accordance
with Section 6(b) hereof) or (ii) the date on which such participant becomes an
officer or employee of the Company or rejoins the Board as a Non-Employee
Director.

 

8.Rights

 

Neither the adoption of the Plan nor the grant of Awards shall confer upon any
participant any right to continue as a Non-Employee Director (or in any other
capacity) of the Company, its parent, or any subsidiary or affect in any way the
right of the Company, its parent, or a subsidiary to terminate the participant’s
relationship at any time. Except as specifically provided by the Board in any
particular case, the loss of existing or potential profit in Awards granted
under this Plan shall not constitute an element of damages in the event of
termination of the relationship of a participant even if the termination is in
violation of an obligation of the Company to the participant by contract or
otherwise.

 

9.Discontinuance, Cancellation, Amendment, and Termination; Board Review

 

(a)           The Board may at any time or times amend the Plan or any
outstanding Award for any purpose which may at the time be permitted by law, and
may at any time terminate the Plan as to any future grants of Awards; provided
that, except as otherwise expressly provided in the Plan the Board may not,
without the participant’s consent, alter the terms of an Award so as to affect
adversely the participant’s rights under the Award, unless the Board expressly
reserved the right to do so at the time of the Award. Any amendments to the Plan
shall be conditioned upon approval of Shareholders and the Commission only to
the extent, if any, such approval is required by law (including the Code), as
determined by the Board.

 

(b)          The Board shall review the Plan from time to time and at least
annually, its reviews to include an assessment of the potential impact that
Awards made or scheduled to be made under the Plan may have on the Company’s
earnings and net-asset value per Share. The Board is authorized to take
appropriate steps to ensure that the granting of Awards would not have an effect
contrary to the interests of Shareholders, including the authority to limit or
eliminate the automatic granting of additional Awards pursuant to Section 6(b).
The Board shall maintain adequate records of any reviews conducted pursuant to
this Section 9(b). For the avoidance of doubt, any action by the Board pursuant
to this Section 9(b) that would affect an already outstanding Award shall, to
that extent, be subject to the limitations of Section 9(a).

 

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10.Waiver of Jury Trial

 

By accepting an Award under the Plan, each participant waives any right to a
trial by jury in any action, proceeding or counterclaim concerning any rights
under the Plan and any Award, or under any amendment, waiver, consent,
instrument, document or other agreement delivered or which in the future may be
delivered in connection therewith, and agrees that any such action, proceedings
or counterclaim shall be tried before a court and not before a jury. By
accepting an Award under the Plan, each participant certifies that no officer,
representative, or attorney of the Company has represented, expressly or
otherwise, that the Company would not, in the event of any action, proceeding or
counterclaim, seek to enforce the foregoing waivers.

 

11.Legal Conditions on Delivery of Shares

 

The Company will not be obligated to deliver any Shares pursuant to the Plan or
to remove any restriction from Shares previously delivered under the Plan until:
(i) the Company is satisfied that all legal matters in connection with the
issuance and delivery of such Shares have been addressed and resolved; (ii) if
the outstanding Shares are at the time of delivery listed on any stock exchange
or national market system, the Shares to be delivered have been listed or
authorized to be listed on such exchange or system upon official notice of
issuance; and (iii) all conditions of the Award have been satisfied or waived.
If the sale of Shares has not been registered under the Securities Act of 1933,
as amended (the “Securities Act”), the Company may require, as a condition to
exercise of the Award, such representations or agreements as counsel for the
Company may consider appropriate to avoid violation of the Securities Act. The
Company may require that certificates evidencing Shares issued under the Plan
bear an appropriate legend reflecting any restriction on transfer applicable to
such Shares, and the Company may hold the certificates pending lapse of the
applicable restrictions.

 

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