Exhibit 10.3


 





KCAP Financial, Inc.


Employee Restricted Stock Award Agreement



 


KCAP FINANCIAL, INC. STRONGLY ENCOURAGES YOU TO SEEK THE
ADVICE OF YOUR OWN LEGAL AND FINANCIAL ADVISORS WITH RESPECT TO YOUR AWARD AND ITS TAX CONSEQUENCES.


 


The undersigned Grantee (the “Grantee”) (i)
acknowledges receipt of an award (the “Award”) of restricted stock from KCAP Financial, Inc., a Delaware corporation
(the “Company”), under the Company’s 2006 Equity Incentive Plan as Amended and Restated Effective June
20, 2014 (the “Plan”), subject to the terms set forth below and in the Plan; and (ii) agrees with the Company
as follows:


 


		1.	Effective Date. This Restricted Stock Award Agreement (the “Award Agreement”)
shall take effect as of June 20, 2014, which is the grant date of the Award (the “Grant Date”). The Grantee
shall be the record owner of the Shares on the Grant Date.



 


		2.	Shares Subject to Award. The Award consists of a total of _________________________ shares
of Common Stock of the Company, par value $0.01 per share (the “Shares”). 



 


The Grantee’s rights to the Shares are subject
to the restrictions described in this Award Agreement and the Plan (which is incorporated herein by reference with the same effect
as if set forth herein in full) in addition to such other restrictions, if any, as may be imposed by law.


 


		3.	Nontransferability of Shares. Except as provided in this Award Agreement or the Plan,
the Shares acquired by the Grantee pursuant to this Award Agreement shall not be sold, transferred, pledged, assigned or otherwise
encumbered or disposed and are subject to a substantial risk of forfeiture.



 


		4.	Forfeiture Risk. If the Grantee's employment with the Company and its subsidiaries ceases
for any reason, then, except as provided in Section 7, any and all outstanding and unvested Shares acquired by the Grantee hereunder
shall be automatically and immediately forfeited. 



 


The Grantee hereby (i) appoints the Company as the
attorney-in-fact of the Grantee to take such actions as may be necessary or appropriate to effectuate a transfer of the record
ownership of any Shares that are unvested and forfeited hereunder, (ii) agrees to deliver to the Company, as a precondition to
the issuance of any certificate or certificates with respect to unvested Shares hereunder, one or more stock powers, endorsed in
blank, with respect to such Shares, and (iii) agrees to sign such other powers and take such other actions as the Company may reasonably
request to accomplish the transfer or forfeiture of any unvested Shares that are forfeited hereunder.


 


		5.	Book Entry Form. Unvested Shares are to be held in book entry form and the Grantee agrees
that the Company may give stop transfer instructions to the depositary, stock transfer agent or other keeper of the Company’s
stock records to ensure compliance with the provisions hereof.



 


		6.	Certificates for Unvested Shares. The Company may, upon request, issue the Grantee a certificate
representing unvested Shares. The administrative costs and risk of loss of such certificated shares are the sole responsibility
of the Grantee. In addition to any legend required by applicable law, any certificates issued representing Shares shall contain
a legend substantially in the following form:



 


THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES
OF STOCK REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING FORFEITURE) OF THE KCAP FINANCIAL, INC. 2006 EQUITY
INCENTIVE PLAN AS AMENDED AND RESTATED EFFECTIVE JUNE 20, 2014, AND THE RESTRICTED STOCK AWARD AGREEMENT RELATING TO THE SHARES
ENTERED INTO BETWEEN THE REGISTERED OWNER AND KCAP FINANCIAL, INC. COPIES OF SUCH PLAN AND AWARD AGREEMENT ARE ON FILE IN THE OFFICES
OF KCAP FINANCIAL, INC.


 




    	 



    	 



    

  


		7.	Vesting of Shares. Unless earlier vested pursuant to the Plan, the restrictions on the
Shares granted hereunder shall lapse, i.e., the Shares shall vest, during the Grantee’s employment by the Company or a subsidiary
thereof in accordance with the provisions of this Section 7 and applicable provisions of the Plan, as follows: 



 


		i.	The Shares shall vest in four (4) equal annual installments beginning on the first anniversary of the Grant Date, provided
that the Grantee remains in the continuous employment of the Company or a subsidiary through each vesting date.



		ii.	Notwithstanding the foregoing, if the Grantee’s employment terminates for any reason, then all unvested Shares will be
automatically and immediately forfeited back to the Company. (However, if Grantee has a written employment agreement with the Company
with terms contrary to this provision 7(ii), the terms of the written employment agreement shall govern.)



 


		8.	Settlement of Vested Shares. Each Share that is vested in accordance with this Award Agreement
shall be settled by the issuance of a whole share of Common Stock. 



 


Unless a Section 83(b) election is made within 30 days
of the Grant Date, vested Shares shall be treated as compensation and shall be taxed at normal federal, state and local income
tax rates at the fair value of the Shares on the vesting date.


 


The Company's obligation to deliver a certificate upon
vesting representing such vested Shares shall be subject to the Grantee’s satisfaction of all applicable federal, state and
local income and employment tax withholding obligations. The Grantee may satisfy such obligation(s), in whole or in part, by (i)
delivering to the Company a check for the amount required to be withheld or (ii) if permitted under the 1940 Act and as the Board
in its sole discretion approves in any specific or general case, having the Company withhold Shares or delivering to the Company
already-owned shares of Common Stock, in either case having a fair market value equal to the amount required to be withheld, as
determined by the Company. In addition, to the extent that the Company so chooses, the Company can hold back 100% of the Grantee's
compensation earned after such obligations arose and such held back amount shall be applied by the Company to satisfy such obligations.


 


		9.	Delivery of Vested Shares. Delivery of vested Shares is conditioned on: (i) the Grantee’s
satisfaction of applicable tax withholding requirements as set forth in Section 8 of this Award Agreement; (ii) the completion
of any administrative steps (for example, but without limitation, the transfer of certificates) that the Company may reasonably
impose; and (iii) applicable requirements of federal and state securities laws.



 


For any vested Shares that have been requested to be
settled by the Grantee, the Company will take such steps as it deems necessary or appropriate to record and manifest such Shares
for delivery to the Grantee without restriction on transferability. At the direction of the Grantee, delivery may be either in
book-entry form through the Depository Trust Company (or a nominee thereof) to an account at the Grantee’s direction or certificated,
without the aforesaid legend, and issued and delivered to the Grantee. The Grantee agrees to complete and execute any documents
and to take any additional action that the Company may request to enable it to deliver the vested Shares to the Grantee.


 


		10.	Fractional Shares.
Fractional shares shall not vest hereunder, and when any provision hereof may cause a fractional share to vest, any vesting in
such fractional share shall be postponed until such fractional share and other fractional shares equal a vested whole share.



 




    	 



    	 



    

  


		11.	Dividends, etc. The Grantee shall be entitled to (i) receive any and all dividends or
other distributions paid with respect to those vested and unvested Shares of which the Grantee is the record owner on the record
date for such dividend or other distribution, whether or not vested at such time, in the same form and amount as any holder of
Stock receives, and (ii) vote any Shares of which the Grantee is the record owner on the record date for such vote; provided,
however, that any property (other than cash) distributed with respect to a share of Stock (the “Associated Share”)
acquired hereunder, by reason of a stock dividend, stock split or other similar adjustment to the Stock pursuant to Section 4(d)
of the Plan, shall be subject to the restrictions of this Award Agreement in the same manner and for so long as the Associated
Share remains subject to such restrictions, and shall be promptly forfeited if and when the Associated Share is so forfeited. Notwithstanding
the foregoing, the Grantee shall elect, and hereby irrevocably appoints the Company’s Chairman of the Board and the Company’s
Secretary as the Grantee’s attorneys-in-fact to elect on Grantee’s behalf in the absence of an election from Grantee,
to receive cash distributions under the Company’s dividend reinvestment plan in respect of all unvested Shares under this
Award Agreement.



 


		12.	Sale of Vested Shares. The Grantee acknowledges and agrees that any Common Stock issued
in respect of vested Shares hereunder may be traded only as permitted by the Company’s Codes of Ethics, policies and procedures.




 


		13.	Provisions of the Plan. This Grant is subject in its entirety to the provisions of the
Plan, which are incorporated herein by reference. A copy of the Plan as in effect on the date of the grant of this Award is available
to the Grantee and the Grantee agrees to be bound by the terms of the Plan and this Award. In the event of any conflict between
the terms of this Award and the Plan, the terms of this Award shall control.



 


		14.	Definitions. Capitalized terms defined in this Award Agreement are used herein as so defined.
Capitalized terms used in this Award Agreement and not otherwise defined herein shall have the meaning provided in the Plan.



 


		15.	Change in Capital Structure. In accordance with Section 4(d) of the Plan, the terms of
this Award Agreement shall be adjusted as the Board determines is equitably required in the event the Company effects one or more
stock dividends, stock split-ups, subdivisions or consolidations of shares or other similar changes in capitalization. 



 


		16.	No Employment Commitment; Tax Treatment. Nothing herein contained shall be deemed to be
or constitute an agreement or commitment by the Company or any of its subsidiaries to continue the Grantee in its employ. The Company
makes no representation about the tax treatment to the Grantee with respect to receipt or settlement of the restricted Shares or
acquiring, holding or disposing of the Shares.



 


		17.	Grantee Bound by Plan. The Grantee hereby acknowledges that a copy of the Plan as in effect
on the date hereof has been made available to the Grantee and agrees to be bound by all the terms and provisions thereof (as such
Plan may be amended from time to time in accordance with the terms thereof).



 


		18.	General. For purposes of this Award Agreement and any determinations to be made by the
Board or the Committee, as the case may be, hereunder, the determinations by the Board or the Committee, as the case may be, shall
be binding upon the Grantee and any transferee. 



 


	Agreed as of the Grant Date Shown Above:	 	 
	 	 	 
	KCAP FINANCIAL, INC.	 	GRANTEE
	 	 	 	 
	 	 	 	 
	Name:	Edward U. Gilpin	 	Print Name
	Title:	Chief Financial Officer	 	 
	 	 	 	 
	 	 	 	Signature