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                                                                    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

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         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


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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


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         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


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         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


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         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.








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