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.


 




    	1



    	 



    

  


		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.


 




    	2



    	 



    

  


(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).


 




    	3



    	 



    

  


(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.


 




    	4



    	 



    

  


(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).


 




    	5



    	 



    

  


		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.


 




    	6