PRELIMINARY PROXY MATERIALS
FOR SEC USE ONLY
Notice of Annual Meeting of Shareholders
To Be Held on February 19, 1997
To the Shareholders:
The Annual Meeting of Shareholders of Elk Associates Funding Corporation
(the "Company") will be held at the offices of Stursberg & Veith, 405 Lexington
Avenue, Suite 4949, New York, New York on February 19, 1997 at 10:30 a.m. to
consider and act upon the following matters:
1. To elect eleven directors to serve until the next Annual Meeting and
until their successors are chosen and qualified.
2. To approve a stock option plan for directors, officers and employees.
3. To amend the Company's certificate of incorporation to allow the Company
to invest in or make loans to non-disadvantaged firms.
4. To ratify the selection by the Board of Directors of Marcum & Kliegman
as the Company's independent public accountants for the fiscal year ending June
30, 1997.
5. To consider and act upon such other matters as may properly come before
the meeting or any adjournment thereof.
Shareholders of record at the close of business on January 15, 1997 will be
entitled to notice of and to vote at the meeting. The stock transfer books of
the Company will remain open.
All shareholders are cordially invited to attend the meeting.
By Order of the Board of Directors
MARGARET CHANCE, Secretary
January ___, 1997
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ASSURE REPRESENTATION OF YOUR SHARES.
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Elk Associates Funding Corporation
747 Third Avenue - 4th Floor
New York, New York 10017
Proxy Statement for
Annual Meeting of Shareholders
February 19, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Elk Associates Funding Corporation (the
"Company") for use at the Annual Meeting of Shareholders to be held on February
19, 1997 and at any adjournment of that meeting. In considering whether or not
to have an adjournment, management will consider what is in the best interest of
the shareholders. All proxies will be voted as marked. Proxies marked as
abstaining (including proxies containing broker non-votes) on any matters to be
acted upon by shareholders will be treated as present at the meeting for
purposes of determining a quorum but will not be counted as votes cast on such
matters. Any proxy may be revoked by a shareholder at any time before it is
exercised by written or oral request to Margaret Chance, Secretary of the
Company. The date of mailing of this Proxy Statement is expected to be on or
about January 20, 1997.
The Board of Directors has fixed January 15, 1997 as the record date for
the determination of shareholders entitled to vote at the Annual Meeting. At the
close of business on January 15, 1997 there were outstanding and entitled to
vote 1,283,600 shares of common stock (the "Common Stock") of the Company. Each
share is entitled to one vote.
The following table sets forth information concerning ownership of the
Company's Common Stock as of January 15, 1997 by each person known by the
Company to be the beneficial owner of more than five (5%) percent of the Common
Stock.
Percent of
Common Stock Common Stock
Name and Address Beneficially Owned Outstanding
- ---------------- ------------------ -----------
Gary C. Granoff (1)(2) 237,446 (3)(4) 18.5%
c/o Elk Associates
Funding Corporation
747 Third Ave.
4th Floor
New York, New York
Paul D. Granoff, M.D. (1) 89,630 (5) 6.98%
132 North Buckingham Drive
Aurora, Illinois
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N. Henry Granoff (1) 80,649 (3)(6) 6.28%
2000 South Ocean Blvd.
Palm Beach, Florida
Marvin Sabesan 72,145 (9) 5.62%
188 Gannet Court
Manhasset, New York
Dan M. Granoff, M.D. (1) 95,130 (3)(8) 7.41%
1085 Creston Road
Berkeley, California
Alexander Nash, M.D. 72,600 (7) 5.66%
12 Ridgeway
Kings Point, New York
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(1) N. Henry Granoff is the father of Gary C., Dan M. and Paul D. Granoff.
(2) Gary Granoff may be deemed a "control person" of the Company within the
meaning of the 1940 Act.
(3) Excludes 10,900 shares owned by a charitable foundation of which N. Henry
Granoff, his wife Jeannette Granoff, Gary C. Granoff and Dan M. Granoff are
the trustees.
(4) Includes 25,218 shares held in various trusts, of which Mr. Granoff is a
trustee and 6,000 shares held for the benefit of one of Mr. Granoff's sons,
with respect to which he is custodian. With respect to these 31,218 shares,
Mr. Granoff disclaims beneficial ownership for purposes other than Rule
13d-3 of the Securities Exchange Act of 1934, as amended. Excludes 7,537
shares owned directly by Mr. Granoff's wife as to which shares he disclaims
beneficial ownership. Also excludes 19,466 shares owned directly by Mr.
Granoff's children as to which shares he does not exercise any control and
disclaims beneficial ownership. Includes 72,875 shares held by a
corporation controlled by Mr. Granoff and 261 shares held by a corporation,
wholly-owned by Mr. Granoff. Excludes 22,800 shares held by various trusts
for the benefit of Mr. Granoff's children, of which shares Mr. Granoff
disclaims beneficial ownership until such time as 21,000 of such shares
revert to him.
(5) Includes 2,000 shares held by Dr. Paul Granoff directly, 77,630 held by
Granoff Family Partners Ltd. of which Dr. Granoff is a general partner, and
10,000 shares held by the Granoff Pediatric Associates Profit Sharing Plan.
Excludes 10,127 shares held by Dr. Paul Granoff's wife as to which shares
he disclaims beneficial ownership. Excludes 9,654 shares owned directly by
Dr. Granoff's children as to which shares he does not exercise any control
and disclaims beneficial ownership.
(6) Excludes 33,499 shares owned by Mr. Granoff's wife, as to which shares Mr.
Granoff disclaims beneficial ownership. Mr. Granoff's shares are registered
in the N. Henry Granoff Revocable Trust dated May 19, 1987.
(7) Includes 1,500 shares held by Alexander Nash, M.D. as custodian for his
daughter. Also includes 42,900 shares held by his wife, as to which shares
Alexander Nash, M.D. disclaims beneficial ownership.
(8) Excludes 12,000 shares owned directly by Dr. Granoff's children as to which
shares he does not exercise any control and disclaims beneficial ownership.
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(9) Includes 21,387 shares held with his wife as joint tenants, 2,207 shares
held with one of his children as joint tenants, and 28,551 shares held by
his wife. Mr. Sabesan disclaims beneficial ownership as to the 28,551
shares held by his wife.
Except as otherwise indicated above, the persons listed in the above table
have voting and investment power with respect to their respective shares.
All of the persons listed above, for as long as they continue to hold five
(5%) percent or more of the Company's outstanding Common Stock, will be deemed
"affiliated persons" of the Company, as such term is defined in the 1940 Act.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The affirmative vote of the holders of a majority of the Common Stock
present or represented at the meeting is required for the election of directors.
The persons named in the proxy will vote, as permitted by the By-Laws of the
Company, to elect as directors the eleven nominees named below, unless authority
to vote for the election of directors is withheld by marking the proxy to that
effect or the proxy is marked with the names of directors as to whom authority
to vote is withheld. The proxy may not be voted for more than eleven directors.
Each director will be elected to hold office until the next annual meeting
of shareholders and until his or her successor is elected and qualified. If a
nominee becomes unavailable, the person acting under the proxy may vote the
proxy for the election of a substitute. It is not presently contemplated that
any of the nominees will be unavailable.
Two of the nominees for director will be completing and submitting
applicable documents to the Small Business Administration for approval of their
becoming directors of the Company. Such approval would occur within ninety days
of submission of the documents. If the nominees are not approved, the Board of
Directors reserves the right to fill any vacancy occurring therefrom.
The following sets forth the name of each nominee and the positions and
offices held by him or her, his or her age, the date on which he or she became a
director of the Company, his or her principal occupation and business experience
for the last five years, the names of other publicly-held companies in which he
or she serves as a director:
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Gary C. Granoff, age 48, has been President and a director of the Company
since its formation in July 1979 and Chairman of the Board of Directors since
December 1995. Mr. Granoff has been a practicing attorney for the past
twenty-three years and is presently an officer in the law firm of Granoff,
Walker & Forlenza, P.C. Mr. Granoff is a member of the bar of the State of New
York and the State of Florida and is admitted to the United States District
Court of the Southern District of New York. Mr. Granoff is also President and
the sole stockholder of GCG Associates, Inc. ("GCG"), the Company's former
investment adviser. He is President and the sole stockholder of Seacrest
Associates, Inc., a hotel operator, since August 1994. Mr. Granoff has also been
President and a director since June 1996 of Gemini Capital Corporation
("Gemini"), a company primarily engaged in the business of making consumer
loans.
Ellen M. Walker, age 41, has been a Vice President and General Counsel of
the Company since July 1983 and a director of the Company from July 1983 to
August 1994. She again became a director of the Company in 1995. Ms. Walker has
been a practicing attorney for more than ten years and she is presently an
officer and shareholder in the law firm of Granoff, Walker & Forlenza, P.C. Ms.
Walker is a member of the Bar of the State of New York and she is admitted to
the United States District Court of the Southern District of New York. Since
August 1983 Ms. Walker has been Vice President of GCG. Ms. Walker has been a
director, Vice President and General Counsel of Gemini since June 1996.
Lee A. Forlenza, age 39, has been a Vice President of the Company since
March 1992. Mr. Forlenza has been a practicing attorney since February 1983 and
is presently an officer and shareholder in the law firm of Granoff, Walker &
Forlenza, P.C. Since March 1992 Mr. Forlenza has been an investment analyst for
GCG. Mr. Forlenza has also been Vice President, Secretary and a director of
Gemini since June 1996. Mr. Forlenza was Vice President of True Type Printing
Co., Inc. from 1976-1995 and President since May 1995. From 1983 through 1986
Mr. Forlenza was an attorney with the SBA.
Marvin Sabesan, age 69, has been a director of the Company since July 1982.
Mr. Sabesan has been employed by Pearl River Textiles, Inc. as an executive
since 1990. He was an Executive Vice President of N.O.L. Inc., a lingerie
company, from 1988 to 1990. Mr. Sabesan was an Executive Vice President of A.J.
Schneierson & Son, a clothing manufacturer from 1971 to 1987.
Herbert G. Kanarick, age 65, has been a director of the Company since
October 1994. Mr. Kanarick has been a partner of S. P. Cooper & Company, an
accounting firm since 1970. Mr. Kanarick serves as a peer reviewer for the
American Institute of
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Certified Public Accountants reviewing the quality of work of other accounting
firms. He is a trustee of the investment program for Long Island Lutheran High
School in Brookville, New York.
Steven Etra, age 48, has been Sales Manager since 1975 of Manufacturer's
Corrugated Box Company, a company owned by Mr. Etra's family for more than
seventy-five years. Mr. Etra has also been a director of Gemini since June 1996.
Steven R. Busch, age 51, has been an independent economic and financial
consultant since May 1994. Since 1995 he has been a Managing Partner of Van Eck
Global, a mutual fund. Previously he was Executive Vice President of Shearson
Lehman Brothers, Inc. and Senior Vice President and Senior Credit Officer of The
Boston Safe Deposit and Trust Company, an affiliate of Shearson Lehman Brothers,
Inc. Prior to that he was Vice President and Manager of Security Pacific
Merchant Bank, a division of Security Pacific National Bank, and Vice President
of J. P. Morgan. He has been a director of Taj Mahal Holding Corporation and
TM/GP Corporation since January 1995.
Paul Creditor, age 61, has been a practicing attorney since 1961, engaging
in general practice law and specializing in corporate law. From 1974 through
1979 he served as an elected Judge in Suffolk County, New York.
Allen Kaplan, age 46, is Vice President and Chief Operating Officer of Team
Systems, Inc., a company which manages and operates more than 200 New York City
Medallion taxicabs. Mr. Kaplan is currently Vice President of the Metropolitan
Taxicab Board of Trade, a trade association consisting of 22 member fleets
representing 1,200 New York City medallions.
Dan M. Granoff, M.D., age 52, has been Vice President of Scientific Affairs
of Chiron Vaccines at Chiron Corporation since September 1993. From 1980 to
1993, Dr. Granoff was a professor of pediatrics and Head of the Infectious
Disease Division of Washington University Medical School in St. Louis, Missouri.
Prior to joining Chiron Corporation, Dr. Granoff was also a consultant to the
pharmaceutical industry and served on the scientific advisory board of Connaught
Laboratories, Inc., one of the largest suppliers of vaccines in the U.S. Dr.
Granoff received both his A.B. and M.D. degrees from Johns Hopkins University.
Alexander Nash, M.D., age 46, has been a practicing physician since 1979
and for the past 15 years an attending anesthesiologist at Franklin Hospital
Medical Center. He has acted as the sole proprietor of the Pain Management
Office since 1986, the first outpatient facility for the treatment of acute and
chronic pain in Western Nassau County, and President and Chief Executive Officer
of
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ADP IC, Inc., a medical supplies and equipment exporting company. In 1973 Dr.
Nash graduated from Moscow Medical School, and immigrated with his family to the
United States.
During the fiscal year ended June 30, 1996, the Company's Board of
Directors held four (4) meetings. Each director attended at least 75% of such
meetings.
The Company does not have standing audit or nominating committees. The
Company has an Audit and Compliance Committee consisting of Marvin Sabesan, Lee
A. Forlenza and Margaret Chance. The Company recently formed a compensation
committee.
The following is information regarding additional officers of the Company:
Margaret Chance, age 41, has been Secretary of the Company since November
1980. Ms. Chance is the office manager of Granoff, Walker & Forlenza, P.C. and
has served as the Secretary of GCG Associates Inc., since January 1982.
Silvia Maria DiGirolamo, age 45, has been the Loan Administrator of the
Company since February 1994. She was elected a Vice President of the Company,
subject to SBA approval, at the meeting of the board of directors held on
December 11, 1996. Prior to joining the Company, she was the Legal Coordinator
for Castle Oil Corporation from September 1991 through June 1993 and from June
1993 through January 1994, a legal assistant specializing in foreclosures in the
law firm of Greenberg & Posner. Ms. DiGirolamo received a B.A. from Fordham
University and an M.B.A. from The Leonard Stern School of Business
Administration.
The following table sets forth information concerning ownership of the
Company's Common Stock as of January 15, 1997 by each existing director, nominee
to become a director and officer of the Company and by all directors and
officers of the Company as a group.
Percent of
Common Stock Common Stock
Name Beneficially Owned Outstanding
- ---- ------------------ -----------
*Gary C. Granoff(1) 237,446(1) 18.5 %
*Ellen M. Walker 31,374(2) 2.44%
*Lee A. Forlenza 18,505 1.44%
*Margaret Chance 2,900(3) (5)
*Silvia DiGirolamo None
Marvin Sabesan 72,145(4) 5.62%
Herbert G. Kanarick 44,205(6) 3.44%
Steven Etra 52,516(7) 4.09%
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Steven R. Busch 2,000(8) (5)
Paul Creditor None
Allen Kaplan 5,000 (5)
Dan M. Granoff 95,130(9) 7.4%
Alexander Nash 72,600(10) 5.7%
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Officers and Directors 633,821 49.4%
of the Company as a
group (11 persons)
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* Messrs. Gary C. Granoff, Ms. Ellen Walker, Mr. Lee A. Forlenza, Ms.
Margaret Chance and Ms. Silvia DiGirolamo are each "interested persons"
with respect to the Company, as such term is defined in the 1940 Act.
(1) Gary C. Granoff, see Notes (3) and (4) on page 2.
(2) Includes 200 shares held by Ms. Walker as custodian for her son. Includes
22,800 shares held by various trusts of which Ms. Walker is a trustee and
as to which she disclaims beneficial ownership.
(3) Includes 200 shares held by Ms. Chance as custodian for her daughter.
(4) Includes 21,387 shares held with his wife as joint tenants, 2,207 shares
held with one of his children as joint tenants, and 28,551 shares held by
his wife. Mr. Sabesan disclaims beneficial ownership as to the 28,551
shares held by his wife.
(5) Less than one (1%) percent.
(6) Includes 200 shares held by Mr. Kanarick's wife, as to which shares he
disclaims beneficial ownership. Includes 44,005 shares owned by J. R.
Realty Corporation, a subsidiary of Murres Corporation, a majority of the
shares of which are owned by a trust of which Mr. Kanarick is the sole
trustee.
(7) Includes 29,022 shares held with his wife as joint tenants and 20,000
shares held by his wife.
(8) Includes 1,000 shares held by Mr. Busch's wife.
(9) Dan M. Granoff, M.D., see Notes (1), (3) and (8) on page 2.
(10) Alexander Nash, M.D., see Note (7) on page 2.
Effective May 1, 1991, the Securities and Exchange Commission promulgated
new rules under Section 16 of the Securities Exchange Act of 1934. The Company
believes that during the preceding year its executive officers and directors
have complied with all Section 16 filings.
Executive Compensation
The following table sets forth all remuneration for services rendered to
the Company during the year ended June 30, 1996 paid to or accrued for the
account of (i) each of the executive officers and (ii) all executive officers as
a group.
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For the period July 1, 1995 through December 31, 1995 the Company paid GCG
an aggregate of $210,000 for management services rendered to the Company. The
Company also paid to Granoff, Walker & Forlenza, P.C. ("GWF") a monthly legal
retainer for performing New York City taxi loan closings which retainer was paid
at the rate of $9,000 per month and constituted $54,000 for the first six months
of the fiscal year. This retainer ended on December 31, 1995. GWF was paid an
additional $48,902 for collection services, litigation of collection of
defaulted loans and certain non-taxi related closings. Finally, $12,047 was paid
to GWF for disbursements or reimbursements of shared costs for office equipment.
Commencing January 1, 1996 and thereafter, the Company has agreed to pay
GWF a monthly reimbursement of $7,250 for shared costs consisting of $3,333.33
for shared rent per month and $3,916.67 for shared employee costs for GWF
employee secretarial, photocopy, banking and receptionist services.
From January 1, 1996 through June 30, 1996 the Company changed from
utilizing the services of GCG to a direct salary basis for the investment
advisor services of its officers and employees. The following individuals were
paid the cash compensation set forth opposite their names for the period January
1, 1996 through June 30, 1996:
Name of Individual
or Number of Persons Capacities in
in Group Which Served Cash Compensation(1)
- -------------------- ------------- --------------------
Gary C. Granoff President $90,797 plus simplified
employee pension plan
("SEP") contributions of
$13,127 and $7,500 of
reimbursable expenses.
Ellen M. Walker Vice President $39,787 plus $5,625 in
Counsel SEP contributions.
Lee A. Forlenza Vice President $12,019 plus $1,803 in
SEP contributions.
Silvia DiGirolamo Vice President $24,038 plus $3,608 in
SEP contributions.
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Margaret Chance Secretary $2,600 plus $390 in SEP
contributions.
All executive officers as
a group (5) persons $201,294
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(1) Officers' salaries constitute a major portion of the Company's total
"management fee compensation" which must be approved by the SBA. The SBA
has approved total officer and employee compensation of $648,000 for the
Company. This amount includes officers' salaries, other salaries and
employee benefits.
For the period July 1, 1996 through June 30, 1997, the Company anticipates
paying cash compensation, excluding future bonuses that may be granted by the
Company's Board of Directors, as follows:
Gary C.Granoff $205,000 plus $15,000 reimbursable
expense and $22,500 in SEP
contributions.
Ellen M. Walker $94,000 plus $14,100 in SEP
contributions.
Lee A. Forlenza $35,000 plus $5,250 in SEP
contributions.
Silvia DiGirolamo $55,500 plus $8,350 in SEP
contributions.
Margaret Chance $49,000 plus $7,350 in SEP
contributions.
All executive offices as
a group (5) persons $511,050
The Company has a policy of paying its directors who are not employees fees
of $750 for each meeting attended. Commencing July 1, 1996 the Company will in
addition, pay each non-affiliated director a minimum fee of $2,000 per year in
addition to the fees paid for each meeting attended. For the year ended June 30,
1996, fees and expenses paid to non-affiliated directors were approximately
$23,400 in the aggregate.
PROPOSAL NO. 2
STOCK OPTION PLAN
The Company's 1996 Stock Option Plan for officers, directors and employees
(the "1996 Plan"), a copy of which is attached hereto as Exhibit A, was adopted
by the Board of Directors, including a majority of the non-interested directors
on December 11, 1996. The 1996 Plan authorizes the grant of incentive stock
options within the meaning of Section 422 of the Code and non-qualified stock
options for the purchase of an aggregate of 90,000 shares of Common Stock to
officers, directors and employees of the Company. As of December 11, 1996, no
non-qualified options to purchase shares of Common Stock and no incentive stock
options had been granted under the 1996 Plan.
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The Board of Directors has appointed the Compensation Committee of the
Board of Directors to administer the 1996 Plan. Awards of options under the 1996
Plan will be granted at the discretion of the Compensation Committee, which
determines the eligible persons to whom, and the times at which, awards shall be
granted, the type of award to be granted, and all other related terms,
conditions and provisions of each award granted. In addition, all questions of
interpretation of the 1996 Plan are determined by the Compensation Committee. In
accordance with the provisions of the 1940 Act, the grant of options under the
1996 Plan will not occur until after the date of the approval of the plan by the
Securities and Exchange Commission (the "Approval Date").
No option may be exercised more than five years after the date on which it
is granted. The number of shares available for options will be adjusted for
changes in outstanding shares such as stock splits and combinations of shares.
Shares purchased upon exercise of options, in whole or in part, must be paid for
in cash or by means of unrestricted shares of Common Stock or any combination
thereof.
The 1996 Plan may be terminated at any time by the Board of Directors, and
will terminate ten years after the effective date of the 1996 Plan. The Board of
Directors may not materially increase the number of shares authorized under the
plan or materially increase the benefits accruing to participants under the plan
without the approval of the stockholders of the Company.
The Board of Directors, including a majority of the directors who are not
interested persons of the Company, recommends a vote FOR Proposal No. 2.
PROPOSAL NO. 3
AMENDMENT TO COMPANY'S CERTIFICATE OF INCORPORATION
On September 30, 1996, the Small Business Programs Improvement Act (the
"Improvement Act") was enacted. The Improvement Act repealed Section 301(d) of
the Small Business Investment Company Act of 1958 (the "1958 Act") which was the
section of the 1958 Act under which the Company was originally licensed as an
SSBIC. The effect of the Improvement Act is that an SSBIC licensee like the
Company may, subject to SBA approval of an amendment to the licensee's articles
of incorporation, make investments in or loans to firms other than
"disadvantaged businesses" as defined by Sec. 107.50 of applicable SBA
Regulation. The proposed amendment is attached hereto as Exhibit B. Because
Congress did not prescribe how Sec. 301(d) licensees like the Company might
operate in the future if they amended their articles of incorporation, the SBA
is
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in the process of developing regulations as to the guidelines a licensee like
the Company must follow if it desires to make investments in and loans to
non-disadvantaged firms. In this regard, the SBA has advised the Company that
the Company must enter into an agreement with the SBA prior to obtaining SBA
approval to the amendment to the articles of incorporation which will provide
among other things that prior to the Company making any non-301(d) investments
that the Company have in its portfolio 301(d) investments with an aggregate cost
at least equal to the sum of the Company's outstanding subsidized leverage,
liquidating interest held by the SBA as a result of the preferred stock buy back
and unamortized dividends,if any. As of November 30, 1996, the Company had
$1,500,000 of outstanding subsidized leverage and $2,094,833 liquidating
interest. The Company had no unamortized dividends. If the amendment to the
Company's certificate of incorporation in the form attached hereto as Exhibit B,
is approved by shareholders and by the SBA, the Company would be able to make a
significant amount of new investments in non-disadvantaged firms, assuming
$3,594,833 in the aggregate of outstanding subsidized leverage and liquidating
interest, is retained in qualifying loans. This amount will diminish at the rate
of $59,287 per month assuming that the SBA's liquidating interest continues to
amortize. The $1,500,000 debenture will be considered unsubsidized in October
1998.
Because the Company's management believes that it would be in the best
interests of the Company to amend its articles of incorporation to provide that
the Company may invest in other than disadvantaged firms, the Company proposes
to amend its articles of incorporation, subject to shareholder approval and to
SBA approval.
The Company's Board of Directors recommends a vote FOR Proposal No. 3.
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, including a majority of Directors who are not
interested persons of the Company, subject to shareholder approval, has selected
Marcum & Kliegman as independent public accountants to be employed by the
Company for the fiscal year ended June 30, 1997 to sign or certify such
financial statements, or any portions thereof, as may be filed by the Company
with the Securities and Exchange Commission or any other authorities at any
time. The employment of such independent public accountants for such purpose is
subject to ratification by the shareholders at this meeting. No member of Marcum
& Kliegman or any associate thereof has a direct or indirect material financial
interest in the Company or any of its affiliates.
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The Board of Directors has chosen to utilize the firm of Marcum & Kliegman
LLP and to discontinue utilizing Deloitte & Touche LLP due to considerable
savings that the Company will obtain. These savings result from the Company
having taken recent steps to generate all of its own accounting data and thereby
allowing it to be able to conduct this aspect of its business operation without
the use of the CPA firm of Tanton and Company LLP which previously acted as the
Company's controller and which rendered bookkeeping services. In addition,
Tanton and Company LLP recently merged into Marcum & Kliegman LLP, and the
combined firm has eight partners and a total professional staff of 90, making it
one of the top 100 accounting firms in the United States. The Company expects to
save approximately $30,000 per year in its total accounting fees as a result of
generating its own accounting data, and by changing audit firms from Deloitte &
Touche LLP to Marcum & Kliegman LLP.
The affirmative vote of a majority of the Common Stock present or
represented at the meeting is required to ratify the selection of Marcum &
Kliegman as independent public accountants for the Company.
A representative of Marcum & Kliegman will not be present at the Annual
Meeting of Shareholders.
The Board of Directors of the Company recommends a vote FOR Proposal No. 4.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the meeting. However, if any other matters are properly presented to the
meeting, it is the intention of the persons named in the accompanying proxy to
vote, or otherwise to act, in accordance with their judgment on such matters.
All costs of solicitation of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone and
personal interview.
Deadline for Submission of Shareholder Proposals
Proposals of shareholders intended to be presented at the 1997 Annual
Meeting of Shareholders must be received by the Company at its principal
executive offices not later than September 22, 1997 for consideration for
inclusion in the proxy statement for that meeting. Further, all shareholder
proposals must meet certain federal securities law requirements before they will
be included in the Company's 1997 proxy statement.
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Requests for Financial Statements
The Company will furnish, without charge, a copy of its financial
statements for the fiscal year ended June 30, 1996 to shareholders who make
written request to the Company at 747 Third Avenue, 4th Floor, New York, NY
10017 or call the Company collect at (212) 355-2449.
The Board of Directors invites shareholders to attend the Annual Meeting.
Whether or not you plan to attend, you are urged to complete, date, sign and
return the enclosed proxy in the accompanying envelope. Prompt response will
greatly facilitate arrangements for the meeting, and your cooperation will be
appreciated. Shareholders who attend the meeting may vote their stock personally
even though they have sent in their proxies.
By Order of the Board of Directors
MARGARET CHANCE, Secretary
January ___, 1997
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PROXY FOR HOLDERS OF COMMON STOCK
Elk Associates Funding Corporation
The undersigned Common Shareholder of Elk Associates Funding Corporation
(the "Company") hereby constitutes and appoints Gary C. Granoff, Ellen M. Walker
and Margaret Chance, and each of them, singly, proxies and attorneys of the
undersigned, with full power of substitution to each, for and in the name of the
undersigned to vote and act upon all matters (unless and except as expressly
limited below) at the Annual Meeting of Shareholders of the Company to be held
on February 19, 1997 at the offices of Stursberg & Veith, 405 Lexington Avenue -
Suite 4949, New York, New York, at 10:30 a.m., and at any and all adjournments
thereof, in respect of all Common Stock of the Company held by the undersigned
or in respect of which the undersigned would be entitled to vote or act, with
all the powers the undersigned would possess if personally present. All proxies
heretofore given by the undersigned in respect of said meeting are hereby
revoked.
PROPOSAL 1. To Elect Directors
FOR electing all nominees listed (as recommended in the
proxy statement) except as marked below _______
Gary C. Granoff, Ellen M. Walker, Lee A. Forlenza,
Marvin Sabesan, Herbert Kanarick, Steven Etra, Steven R.
Busch, Paul Creditor, Allen Kaplan, Dan M. Granoff and
Alexander Nash.
WITHHOLD AUTHORITY to vote for all nominees listed
______
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write that person's name in the space provided.)
- --------------------------------------------------------------------------------
PROPOSAL 2. To approve the 1996 Stock Option Plan for officers,
directors and employees.
____FOR ____AGAINST ____ABSTAIN
PROPOSAL 3. To approve an amendment to the Company's certificate of
incorporation.
____FOR ____AGAINST ____ABSTAIN
(continued and to be signed on reverse side)
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<PAGE>
PROPOSAL 4.
To ratify the appointment of Marcum & Kliegman as
independent public accountants for the fiscal year ended
June 30, 1997.
____FOR ____AGAINST ____ABSTAIN
PROPOSAL 5. To consider such other matters as may properly come
before the meeting.
____FOR ____AGAINST ____ABSTAIN
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
Specify desired action by checkmarks in the appropriate spaces. The Proxy will
be voted as specified. If no specification is made, the Proxy will be voted for
the nominees named in the Proxy Statement to represent the Common Shareholders
and in favor of Proposals 2 and 3. The persons named proxies have discretionary
authority, which they intend to exercise in favor of the proposals referred to
and according to their best judgment as to other matters which properly come
before the meeting.
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE AS
SOON AS POSSIBLE.
Dated:__________________________
--------------------------------
(Signature of Shareholder)
--------------------------------
(Signature of Shareholder)
The signature(s) on this Proxy
should correspond exactly with the
shareholder's name as stencilled
hereon. In the case of joint
tenants, co-executors or
co-trustees, both should sign.
Person(s) signing as Attorney,
Executor, Administrator, Trustee or
Guardian should provide full title.
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<PAGE>
EXHIBIT A PRELIMINARY PROXY MATERIAL
1996 STOCK OPTION PLAN
of
ELK ASSOCIATES FUNDING CORPORATION
1. PURPOSES OF THE PLAN. This stock option plan (the "Plan") is designed to
provide an incentive to key employees (including directors and officers who are
key employees) and to consultants and advisors and directors who are not
employees of Elk Associates Funding Corporation, a New York corporation (the
"Company"), or its present and future Subsidiaries or a Parent (as each such
term is defined in Paragraph 19), and to offer an additional inducement in
obtaining the services of such persons. The Plan provides for the grant of
"incentive stock options" ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and nonqualified stock
options which do not qualify as ISOs ("NQSOs"), but the Company makes no
representation or warranty, express or implied, as to the qualification of any
option as an "incentive stock option" under the Code.
2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Paragraph 12,
the aggregate number of shares of common stock, $.01 par value per share, of the
Company ("Common Stock") for which options may be granted under the Plan shall
not exceed 90,000 Such shares of Common Stock may, in the discretion of the
Board of Directors of the Company (the "Board of Directors"), consist either in
whole or in part of authorized but unissued shares of Common Stock or shares of
Common Stock held in the treasury of the Company. Subject to the provisions of
Paragraph 13, any shares of Common Stock subject to an option which for any
reason expires, is canceled or is terminated unexercised or which ceases for any
reason to be exercisable shall again become available for the granting of
options under the Plan. The Company shall at all times during the term of the
Plan reserve and keep available such number of shares of Common Stock as will be
sufficient to satisfy the requirements of the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by a
committee of the Board of Directors consisting of not less than two directors
(the "Committee"). During such time as the Company has a class of equity
securities registered under Section 12 of the Securities Exchange Act of 1934,
each member of the Committee shall be (a) a "disinterested person" within the
meaning of Rule 16b-3 promulgated under such act until such time as the
amendments to Rule 16b-3 adopted by the Securities and Exchange Commission on
May 30, 1966 in Release No. 34-37260 become effective with respect to the Plan
(the "New Rule Date") and (b) from and after the New Rule Date, a "Non-Employee
Director" within the meaning of Rule 16b-3 (as the same may be in effect and
interpreted from time to time, "Rule 16b-3"). A majority of the members of the
Committee shall constitute a quorum, and the acts of a majority of the members
present at any meeting at which a quorum is present, and any acts approved in
writing by all members without a meeting, shall be the acts of the Committee.
Subject to the express provisions of the Plan, the committee shall have the
authority, in its sole discretion, with respect to Employee Options and
Consultant Options (as defined in Paragraph 19): to determine the key employees
who shall be granted Employee Options and the consultants who shall be granted
Consultant Options; the times when options shall be granted; whether an Employee
Option shall be an ISO or a NQSO; the number of shares of Common Stock to be
subject to each option; the term of each option; the date each option shall
become exercisable; whether an option shall be exercisable in whole, or in part
or in installments and, if in installments, the number of shares of
<PAGE>
Common Stock to be subject to each installment, whether the installments shall
be cumulative, the date each installment shall become exercisable and the term
of each installment; whether to accelerate the date of exercise of an option as
partly paid and, if so, the dates when future installments of the exercise price
shall become due and the amounts of such installments; the exercise price of
each option; the form of payment of the exercise price; whether to restrict the
sale or other disposition of the shares of Common Stock acquired upon the
exercise of an option and, if so, whether to waive any such restriction; whether
to subject the exercise of all or any portion of an option to the fulfillment of
contingencies as specified in the contract referred to in Paragraph 11 (the
"Contract"), including without limitation, contingencies relating to entering
into a covenant not to compete with the Company, any of its Subsidiaries or a
Parent (as defined in Paragraph 19), to financial objectives for the Company,
any of its subsidiaries or a Parent, a division of any of the foregoing, a
product line or other category, and/or the period of continued employment of the
optionee with the Company, any of its Subsidiaries or a Parent, and to determine
whether such contingencies have been met; whether an optionee is Disabled (as
defined in Paragraph 19); and with respect to Employee Options, Consultant
Options and, subject prior to the New Rule Date to the limitations with respect
to formula plans under Rule 16b-3, Non-Employee Director Options (as defined in
Paragraph 19): the amount, if any, necessary to satisfy the obligation of the
Company, a Subsidiary or a Parent to withhold taxes or other amounts, the fair
market value of a share of Common Stock; to construe the respective Contracts
and the Plan, with the consent of the optionee, to cancel or modify an option,
provided, that the modified provision is permitted to be included in an option
granted under the Plan on the date of the modification, and further, provided,
that in the case of a modification (within the meaning of Section 424(h) of the
Code) of an ISO, such option as modified would be permitted to be granted on the
date of such modification under the terms of the Plan; to prescribe, amend and
rescind rules and regulations relating to the Plan; from and after the New Rule
Date, to approve any provisions which under Rule 16b-3 requires approval by the
Board of Directors, a committee of Non-Employee Directors or the stockholders to
be exempt (unless otherwise specifically provided herein); and to make all other
determinations necessary or advisable for administering the Plan. Any
controversy or claim arising out of or relating to the Plan, any option granted
under the Plan or any Contract shall be determined unilaterally by the Committee
in its sole discretion. The determinations of the Committee on the matters
referred to in this Paragraph 3 shall be conclusive and binding on the parties.
No member or former member of the Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any option
granted hereunder. In addition to any other rights of indemnification they may
have as directors or as members or former members of the Committee, each such
member and former member shall be indemnified and held harmless by the Company
from and against any reasonable expenses (including reasonable attorneys' fees)
actually and necessarily incurred in connection with the defense, of any claim,
action, suit, proceeding or appeal (collectively, "Case") to which he is a party
by reason of an action or failure to act under or in connection with the Plan or
any option granted hereunder, and against all amounts paid by him in settlement
of such Case (provided such settlement is approved by the Company) or paid in
satisfaction of a judgment in such Case; provided, however, that such member or
former member shall not be entitled to indemnification (a) if he did not within
60 days after the institution of such Case offer to the Company in writing the
opportunity to handle and defend the Case at its own expense, or (b) to the
extent the Case resulted from his gross negligence or willful misconduct.
4. ELIGIBILITY; GRANTS. The Committee may from time to time, in its sole
discretion, consistent with the purposes of the Plan, grant Employee Options to
key employees (including officers and directors who are key employees) of, and
Consultant Options to consultants and advisors to, the Company or any of its
Subsidiaries or a Parent. Such options granted shall cover such number of shares
of Common Stock as the Committee may determine, in its sole discretion,
provided, however,
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<PAGE>
that the maximum number of shares subject to Employee Options that may be
granted to any individual during any calendar year under the Plan (the "162(m)
Maximum") shall not exceed _____ shares; and further, provided, that the
aggregate market value (determined at the time the option is granted in
accordance with Paragraph 5) of the shares of Common Stock for which any
eligible employee may be granted ISOs under the Plan or any other plan of the
Company, or of a Parent or a Subsidiary of the Company, which are exercisable
for the first time by such optionee during any calendar year shall not exceed
$100,000. Such limitation shall be applied by taking ISOs into account in the
order in which they were granted. Any option (or the option thereof) granted in
excess of such amount shall be treated as a NQSO.
Every individual who, on the date the Plan is adopted or approved by the
Securities and Exchange Commission, whichever shall occur later, is a
Non-Employee Director (as defined in Paragraph 19) shall be granted on such date
a Non-Employee Director Option to purchase such number of shares of Common Stock
as shall be determined by the Committee. Thereafter, on the date an individual
first becomes a Non-Employee Director, he shall be granted an option to purchase
such number of shares of Common Stock as shall be determined by the Committee.
5. EXERCISE PRICE. The exercise price of the shares of Common Stock under
each Employee Option and Consultant Option shall be determined by the Committee
in its sole discretion; provided, however, that the exercise price of an ISO
shall not be less than the fair market value of the Common Stock subject to such
option on the date of grant; and further, provided, that if, at the time an ISO
is granted, the optionee owns (or is deemed to own under Section 424(d) of the
Code) stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company, or any of its Subsidiaries or of a Parent, the
exercise price of such ISO shall not be less than 110% of the fair market value
of the Common Stock subject to such ISO on the date of grant. The exercise price
of the shares of Common Stock under each Non-Employee Director Option shall be
equal to the fair market value of the Common Stock subject to such option on the
date of grant.
The fair market value of a share of Common Stock on any day shall be (a) if
the principal market for the Common Stock is a national securities exchange, the
average between the high and low sales prices per share of Common Stock on such
day as reported by such exchange or on a composite tape reflecting transactions
on such exchange, (b) if the principal market for the Common Stock is not a
national securities exchange and the Common Stock is quoted on The Nasdaq Stock
Market ("Nasdaq"), and (i) if actual sales price information is available with
respect to the Common Stock, the average between the high and low sales prices
per share of Common Stock on such day on Nasdaq, or (ii) if such information is
not available, the average between the highest bid and lowest asked prices per
share of Common Stock on such day on Nasdaq, or (c) if the principal market from
the Common Stock is not a national securities exchange and the Common Stock is
not quoted on Nasdaq, the average between the highest bid and lowest asked
prices per share of Common Stock on such day as reported on the OTC Bulletin
Board Service or by National Quotation Bureau, Incorporated or a comparable
service; provided, however, that if clauses (a), (b) and (c) of this Paragraph
are all inapplicable, or if no trades have been made or no quotes are available
for such day, the fair market value of the Common Stock shall be determined by
the Board by any method consistent with applicable regulations adopted by the
Treasury Department relating to stock options. The determination of the
Committee shall be exclusive in determining the fair market value of the stock.
6. TERM. The term of each Employee Option and Consultant Option granted
pursuant to the Plan shall be such term as is established by the Committee, in
its sole discretion; provided, however, that the term of each ISO granted
pursuant to the Plan shall be for a period not exceeding 10 years from the date
of grant thereof; and further provided, that if, at the time an ISO is granted,
the
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<PAGE>
optionee owns (or is deemed to own under Section 424(d) of the Code) stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company, of any of its Subsidiaries or of a Parent, the term of the
ISO shall be for a period not exceeding five years from the date of grant.
Employee Options and Consultant Options shall be subject to earlier termination
as hereinafter provided. Subject to earlier termination as hereinafter provided,
each Non-Employee Director Option shall be exercisable for a term of five years
commencing on the date of grant.
7. EXERCISE. An option (or any part or installment thereof), to the extent
then exercisable, shall be exercised by giving written notice to the Company at
its principal office (at present 747 Third Avenue, 4th Floor, New York, New York
10017) stating which ISO or NQSO is being exercised, specifying the number of
shares of Common Stock as to which such option is being exercised and
accompanied by payment in full of the aggregate exercise price therefor (or the
amount due on exercise if the Contract with respect to an Employee Option
permits installment payments) (a) in cash or by certified check or (b) in the
case of an Employee Option or a Consultant Option, if the applicable Contract
permits, with previously acquired shares of Common Stock having an aggregate
fair market value on the date of exercise (determined in accordance with
Paragraph 5) equal to the aggregate exercise price of all options being
exercised, or with any combination of cash, certified check or shares of Common
Stock. The Committee may, in its sole discretion, permit payment of the exercise
price of an option by delivery by the optionee of a properly executed notice,
together with a copy of his irrevocable instructions to a broker acceptable to
the Committee to delivery promptly to the Company the amount of sale or loan
proceeds sufficient to pay such exercise price. In connection therewith, the
Company may enter into agreements for coordinated procedures with one or more
brokerage firms.
A person entitled to receive Common Stock upon the exercise of an option
shall not have the rights of a stockholder with respect to such shares of Common
Stock until the date of issuance of a stock certificate to him for such shares;
provided, however, that until such stock certificate is issued, any optionee
using previously acquired shares of Common Stock in payment of an option
exercise price shall continue to have the rights of a stockholder with respect
to such previously acquired shares.
In no case may a fraction of a share of Common Stock be purchased or issued
under the Plan.
8. TERMINATION OF RELATIONSHIP. Except as may otherwise be expressly
provided in the applicable Contract, any holder of an Employee Option or
Consultant Option whose relationship with the Company, its Parent and
Subsidiaries [as an employee, a consultant or advisor] has terminated for any
reason other than in the case of an individual optionee his death or Disability
(as defined in Paragraph 19) may exercise such option, to the extent exercisable
on the date of such termination, at any time within three months after the date
of termination, but not thereafter and in no event after the date the option
would otherwise have expired; provided, however, that if such relationship is
terminated either (a) for cause, or (b) without the consent of the Company, such
option shall terminate immediately. Except as may otherwise be expressly
provided in the applicable Contract, Employee Options and Consultant Options
granted under the Plan shall not be affected by any change in the status of the
optionee so long as the optionee continues to be an employee of, or a consultant
or an advisor to, the Company, or any of the Subsidiaries or a Parent
(regardless of having changed from one to the other or having been transferred
from one corporation to another).
For purposes of the Plan, an employment relationship shall be deemed to
exist between an individual and a corporation if, at the time of the
determination, the individual was an employee of
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<PAGE>
such corporation for purposes of Section 422(a) of the Code. As a result, an
individual on military, sick leave or other bona fide leave of absence shall
continue to be considered an employee for purposes of the Plan during such leave
if the period of the leave does not exceed 90 days, or, if longer, so long as
the individual's right to reemployment with the Company (or a related
corporation) is guaranteed either by statute or by contract. If the period of
leave exceeds 90 days and the individual's right to reemployment is not
guaranteed by statute or by contract, the employment relationship shall be
deemed to have terminated on the 91st day of such leave.
The holder of a Consultant Option whose consulting or advisory relationship
with the Company (and its Parent and Subsidiaries) has terminated for any reason
may exercise such option to the extent exercisable on the date of such
termination, but not thereafter and in no event after the date the option would
otherwise have expired; provided, however, that if such relationship was
terminated either (a) for cause or (b) without the consent of the Company (other
than as a result of the death or Disability of the holder or a key employee of
the holder) the option shall terminate immediately.
Except as provided below, a Non-Employee Director Option may be exercised
at any time during its five year term. The Non-Employee Director Option shall
not be affected by the optionee ceasing to be a director of the Company or
becoming an employee of the Company, any of its Subsidiaries or a Parent;
provided, however, that if he is terminated for cause, such option shall
terminate immediately.
Nothing in the Plan or in any option under the Plan shall confer on any
optionee any right to continue in the employ of, or as a consultant or advisor
to, the Company, any of its Subsidiaries or a Parent, or as a director of the
Company, or interfere in any way with any right of the Company, any of its
Subsidiaries or a Parent to terminate the optionee's relationship at any time
for any reason whatsoever without liability to the Company, any of its
Subsidiaries or a Parent.
9. DEATH OR DISABILITY OF AN OPTIONEE. Except as may otherwise be expressly
provided in the applicable Contract, if an optionee dies (a) while he is an
employee of, or consultant or advisor to, the Company, any of its Subsidiaries
or a Parent, (b) within three months after the termination of such relationship
(unless such termination was for cause or without the consent of the Company) or
(c) within one year following the termination of such relationship by reason of
his Disability, his Employee Option or Consultant Option may be exercised to the
extent exercisable on the date of his death, by his Legal Representative (as
defined in Paragraph 19) at any time within one year after death, but not
thereafter and in no event after the date the option would otherwise have
expired.
Except as may otherwise be expressly provided in the applicable Contract,
any optionee whose relationship as an employee of, or consultant or advisor to,
the Company, its Parent and Subsidiaries has terminated by reason of such
optionee's Disability may exercise his Employee Option or Consultant Option, to
the extent exercisable upon the effective date of such termination, at any time
within one year after such date, but not thereafter and in no event after the
date the option would otherwise have expired.
The term of a Non-Employee Director Option shall not be affected by the
death or Disability of the optionee. If an optionee holding a Non-Employee
Director Option dies during the term of such option, the option may be exercised
at any time during its term by his Legal Representative.
10. COMPLIANCE WITH SECURITIES LAWS. The Committee may require, in its sole
discretion, as a condition to the exercise of any option that either (a) a
Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Common
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<PAGE>
Stock to be issued upon such exercise shall be effective and current at the time
of exercise, or (b) there is an exemption from registration under the Securities
Act for the issuance of the shares of Common Stock upon such exercise. Nothing
herein shall be construed as requiring the Company to register shares subject to
any option under the Securities Act or to keep any Registration Statement
effective or current.
The Committee may require, in its sole discretion, as a condition to the
exercise of any option that the optionee execute and deliver to the Company his
representations and warranties, in form, substance a scope satisfactory to the
Committee, that (a) the shares of Common Stock to be issued upon the exercise of
the option are being acquired by the optionee for his own account, for
investment only and not with a view to the resale or distribution thereof, and
(b) any subsequent resale or distribution of shares of Common Stock by such
optionee will be made only pursuant to (i) a Registration Statement under the
Securities Act which is effective and current with respect to the shares of
Common Stock being sold, or (ii) a specific exemption from the registration
requirements of the Securities Act, but in claiming such exemption, the optionee
shall prior to any offer of sale or sale of such shares of Common Stock provide
the Company with a favorable written opinion of counsel satisfactory to the
Company, in form, substance and scope satisfactory to the Company, as to the
applicability of such exemption to the proposed sale or distribution.
In addition, if at any time the Committee shall determine, in its sole
discretion, that the listing or qualification of the shares of Common Stock
subject to such option on any securities exchange, Nasdaq or under any
applicable law, or the consent or approval of any governmental agency or
regulatory body, is necessary or desirable as a condition to, or in connection
with, the granting of an option or the issue of shares of Common Stock
thereunder, such option may not be exercised in whole or in part unless such
listing, qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Committee.
11. STOCK OPTION CONTRACTS. Each option shall be evidenced by an
appropriate Contract which shall be duly executed by the Company and the
optionee, and shall contain such terms, provisions and conditions not
inconsistent herewith as may be determined by the Committee.
12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. Notwithstanding any other
provisions of the Plan, in the event of any change in the outstanding Common
Stock by reason of a stock dividend, recapitalization, merger in which the
Company is the surviving corporation, split-up, combination or exchange of
shares or the like, the aggregate number and kind of shares subject to the Plan,
the aggregate number and kind of shares subject to each outstanding option and
the exercise price thereof shall be appropriately adjusted by the Board of
Directors, whose determination shall be conclusive.
In the event of (a) the liquidation or dissolution of the Company, or (b) a
merger in which the Company is not the surviving corporation or a consolidation,
any outstanding options shall terminate upon the earliest of any such event,
unless other provision is made therefor in the transaction.
13. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was adopted by the
Board of Directors on December 11, 1996. No ISO may be granted under the Plan
after December 11, 2006. The Board of Directors, without further approval of the
Company's stockholders, may at any time suspend or terminate the Plan, in whole
or in part, or amend it from time to time in such respects as it may deem
advisable, including, without limitation, in order the ISOs granted hereunder
meet the requirements for "incentive stock options" under the Code, to comply
with the provisions of Rule 16b-
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<PAGE>
3, Section 162(m) of the Code, or any change in applicable law, regulations,
rulings or interpretations of administrative agencies; provided, however, that
no amendment shall be effective without the requisite prior or subsequent
stockholder approval which would (a) except as contemplated in Paragraph 12,
increase the maximum number of shares of Common Stock for which options may be
granted under the Plan or the 162(m) Maximum, (b) prior to the New Rule Date,
materially increase the benefits accruing to participants under the Plan or (c)
change the eligibility requirements to receive options hereunder.
Notwithstanding the foregoing, prior to the New Rule Date, the provisions
regarding the selection of directors for participation in, and the amount, the
price or the timing of, Non-Employee Director Options shall not be amended more
than once every six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act or the rules thereunder. No termination,
suspension or amendment of the Plan shall, without the consent of the holder of
an existing and outstanding option affected thereby, adversely affect his rights
under such option. The power of the Committee to construe and administer any
options granted under the Plan prior to the termination or suspension of the
Plan nevertheless shall continue after such termination or during such
suspension.
14. NON-TRANSFERABILITY OF OPTIONS. No option granted under the Plan shall
be transferable otherwise than by will or the laws of descent and distribution,
and options may be exercised, during the lifetime of the optionee, only by the
optionee or his Legal Representatives. Except to the extent provided above,
options may not be assigned, transferred, pledged, hypothecated or disposed of
in any way (whether by operation of law or otherwise) and shall not be subject
to execution, attachment or similar process, and any such attempted assignment,
transfer, pledge, hypothecation or disposition shall be null and void ab initio
and of no force or effect.
15. WITHHOLDING TAXES. The Company (and/or its Subsidiary or Parent, as
applicable) may withhold (a) cash, (b) subject to any limitations under Rule
16b-3, shares of Common Stock to be issued with respect thereto having an
aggregate fair market value on the exercise date (determined in accordance with
Paragraph 5), or (c) any combination thereof, in an amount equal to the amount
which the Committee determines is necessary to satisfy the obligation of the
Company, a Subsidiary or a Parent to withhold Federal, state and local income
taxes or other amounts incurred by reason of the grant or exercise of an option,
its disposition, or the disposition of the underlying shares of Common Stock.
Alternatively, the Company may require the holder to pay to the Company (or to
the Subsidiary or Parent) such amount, in cash, promptly upon demand. The
Company shall not be required to issue any shares of Common Stock pursuant to
any such option until all required payments have been made. Fair market value of
the shares of Common Stock shall be determined in accordance with Paragraph 5.
16. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such legend or
legends upon the certificates for shares of Common Stock issued upon the
exercise of an option under the Plan and may issue such "stop transfer"
instructions to its transfer agent in respect of such shares as it determines,
in its discretion, to be necessary or appropriate to (a) prevent a violation of,
or to perfect an exemption from, the registration requirements of the Securities
Act any applicable securities laws, (b) implement the provisions of the Plan or
any agreement between the Company and the optionee with respect to such shares
of Common Stock, or (c) permit the Company to determine the occurrence of a
"disqualifying disposition," as described in Section 421(b) of the Code, of the
shares of Common Stock issued or transferred upon the exercise of an ISO granted
under the Plan.
The Company shall pay all issuance taxes with respect to the issuance of
shares of Common Stock upon the exercise of an option granted under the Plan, as
well as all fees and expenses incurred by the Company in connection with such
issuance.
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<PAGE>
17. USE OF PROCEEDS. The cash proceeds from the sale of shares of Common
Stock pursuant to the exercise of options under the Plan shall be added to the
general funds of the Company and used for such corporate purposes as the Board
of Directors may determine.
18. SUBSTITUTION AND ASSUMPTIONS OF OPTIONS OF CERTAIN CONSTITUENT
CORPORATIONS. Anything in this Plan to the contrary notwithstanding, the Board
of Directors may, without further approval by the stockholders, substitute new
options for prior options of a Constituent Corporation (as defined in Paragraph
19) or assume the prior options of such Constituent Corporation.
19. DEFINITIONS. For purposes of the Plan, the following terms shall be
defined as set forth below:
(a) Constituent Corporation. The term "Constituent Corporation" shall
mean any corporation which engages with the Company, any of its
Subsidiaries or a Parent in a transaction to which Section 424(a) of the
Code applies (or would apply if the option assumed for substituted were an
ISO), or any Parent or Subsidiary of such corporation.
(b) Consultant Option. The term "Consultant Option" shall mean a NQSO
granted pursuant to the Plan to a person who, at the time of grant, is a
consultant to the Company or a Subsidiary of the Company, and at such time
is neither a common law employee of the Company or any of its Subsidiaries
nor a director of the Company.
(c) Disability. The term "Disability" shall mean a permanent and total
disability within the meaning of Section 22(e)(3) of the Code.
(d) Employee Option. The term "Employee Option" shall mean an option
granted pursuant to the Plan to an individual who, at the time of grant, is
a key employee of the Company or any of its subsidiaries.
(e) Legal Representative. The term "Legal Representative" shall mean
the executor, administrator or other person who at the time is entitled by
law to exercise the rights of a deceased or incapacitated optionee with
respect to an option granted under the Plan.
(f) Non-Employee Director. The term "Non-Employee Director" shall mean
a person who is a director of the Company, but is not a common law employee
of the Company, any of its Subsidiaries or a Parent.
(g) Non-Employee Director Option. The term "Non-Employee Director
Option" shall mean a NQSO granted pursuant to the Plan to a person who, at
the time of the grant, is a Non- Employee Director.
(h) Parent. The term "Parent" shall have the same definition as
"parent corporation" in Section 424(e) of the Code.
(i) Subsidiary. The term "Subsidiary" shall have the same definition
as "subsidiary corporation" in Section 424(f) of the Code.
20. GOVERNING LAW; CONSTRUCTION. The Plan, such options as may be granted
hereunder and all related matters shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without regard to conflict
of law provisions.
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Neither the Plan or any Contract shall be construed or interpreted with any
presumption against the Company by reason of the Company causing the Plan or
Contract to be drafted. Whenever from the context it appears appropriate, any
term stated in either the singular or plural shall include the singular and
plural, and any term stated in the masculine, feminine or neuter gender shall
include the masculine, feminine and neuter.
21. PARTIAL INVALIDITY. The invalidity, illegality or unenforceability of
any provision in the Plan or any Contract shall not affect the validity,
legality or enforceability of any other provision, all of which shall be valid,
legal and enforceable to the fullest extent permitted by applicable law.
22. STOCKHOLDER APPROVAL. The Plan shall be subject to approval by a
majority of the votes present in person or by proxy at the next duly held
meeting of the Company's stockholders at which a quorum is present. No options
granted hereunder may be exercised prior to such approval; provided, however,
that the date of grant of any option shall be determined as if the Plan had not
been subject to such approval. Notwithstanding the foregoing, if the Plan is not
approved by a vote of the stockholders of the Company on or before February 19,
1997, the Plan and any options granted hereunder shall terminate.
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EXHIBIT B PRELIMINARY PROXY MATERIAL
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
ELK ASSOCIATES FUNDING CORPORATION
Under Section 805 of the Business Corporation Law
It is hereby certified that:
FIRST: The name of the Corporation is ELK ASSOCIATES FUNDING CORPORATION.
SECOND: The Certificate of Incorporation of the corporation was filed by
the Department of State on July 9, 1979, under the name of Elk Associates
Funding Corporation.
THIRD: The Certificate of Incorporation of Elk Associates Funding
Corporation is hereby amended deleting subparagraph (a) of Article "THIRD" of
the Certificate of Incorporation of the corporation in its entirety and
substituting a new subparagraph (a) to read as follows:
"(a) To operate under the name set forth in FIRST above and to operate
solely as a small business investment company qualified under the Act to engage
in such business activities as the Small Business Administration shall permit by
applicable regulation or approval."
FOURTH: The amendment to Article "THIRD" of the Certificate of
Incorporation of the corporation was authorized by the Board of Directors of the
corporation and, subsequently by the affirmative vote of the holders of a
majority of the outstanding shares of the corporation entitled to vote on the
said amendment to
<PAGE>
the Certificate of Incorporation and, pursuant to the provisions of Article
SIXTH of the Certificate of Incorporation, by the United States Small Business
Administration.
IN WITNESS WHEREOF, this Certificate of Amendment to the Certificate of
Incorporation has been subscribed to this day of , 1997 by the
undersigned who affirm that the statements made herein are true under the
penalties of perjury.
-------------------------------
GARY C. GRANOFF, PRESIDENT
-------------------------------
MARGARET CHANCE, SECRETARY
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