Document:

Exhibit
10.4

NONQUALIFIED
SHARE OPTION AGREEMENT

THIS AGREEMENT
(the “Agreement”), is made effective as of the <<DATE>>
(hereinafter called the “Date of Grant”), between KKR Financial Holdings LLC, a
Delaware limited liability company (hereinafter called the “Company”), and <<NAME>> (hereinafter called the “Participant”):

R
E  C  I  T  A  L  S:

WHEREAS, the
Company has adopted the 2007 Share Incentive Plan for KKR Financial Holdings
LLC (the “Plan”), which Plan is incorporated herein by reference and made a
part of this Agreement; capitalized terms not otherwise defined herein shall
have the same meanings as in the Plan; and

WHEREAS, the
Committee has determined that it would be in the best interests of the Company
and its Members to grant the option provided for herein to the Participant
pursuant to the Plan and the terms set forth herein.

NOW THEREFORE, in
consideration of the mutual covenants hereinafter set forth, the parties agree
as follows:

1.             Grant
of the Option.  Subject to the terms and conditions of the Plan and
the additional terms and conditions set forth in this Agreement, the Company
hereby grants to the Participant the right and option (the “Option”) to
purchase all or any part of an aggregate of <<NUMBER>>
Shares.  The purchase
price of the Shares subject to the Option shall be $<<PRICE>> per Share (the “Option Price”).  The
Option is intended to be a non-qualified option, and is not intended to be
treated as an option that complies with Section 422 of the Internal
Revenue Code of 1986, as amended.

2.             Vesting.

(a)           Subject to the Participant’s
continued service with the Company and its Affiliates, the Option shall vest
and become exercisable with respect to one-third of the Shares initially
covered by the Option on each of the first, second and third anniversaries of
the Date of Grant.  At any time, the portion of the Option which has
become vested and exercisable as described above (or pursuant to
Section 2(b) or 2(c) below) is hereinafter referred to as the “Vested
Portion.”

(b)           If the Participant’s service with the
Company and its Affiliates is terminated for any reason, the Option shall, to
the extent not then vested, be canceled by the Company without consideration; provided
that in the event the Participant’s service with the Company and its Affiliates
is terminated by the Company other than for Cause (as defined in the Management
Agreement), including non-renewal of the Management Agreement by the Company,
or by the Manager pursuant to Section 15 of the Management Agreement, the
Option 

shall, to the
extent not then vested and not previously forfeited, immediately become fully
vested and exercisable.

(c)           Notwithstanding any other provisions
of this Agreement to the contrary, in the event a Change in Control occurs
during the period the Participant is providing services to the Company and its
Affiliates, the Option shall, to the extent not then vested and not previously
forfeited, immediately become fully vested and exercisable, subject to
Section 9(b) of the Plan.

(d)           For purposes of this Agreement, “service”
means service provided by the Participant to the Company and its Affiliates
pursuant to the terms of the Management Agreement.

3.             Exercise
of Option.

(a)           Period of Exercise. 
Subject to the provisions of the Plan and this Agreement, the Participant may
exercise all or any part of the Vested Portion
of the Option at any time prior to the tenth anniversary of the Date
of Grant.

(b)           Method of Exercise.

(i)            Subject to Section 3(a), all or
any part of the Vested Portion of the Option may be exercised by delivering to
the Company at its principal office written notice of intent to so exercise; provided
that the Option may be exercised with respect to whole Shares only.  Such
notice shall specify the number of Shares for which the Option is being exercised
and shall be accompanied by payment in full of the Option Price.  The
payment of the Option Price may be made at the election of the Participant
(i) in cash or its equivalent (e.g., by check), (ii) to the extent
permitted by the Committee, in Shares having a Fair Market Value equal to the
aggregate Option Price for the Shares being purchased and satisfying such other
requirements as may be imposed by the Committee, (iii) by authorizing the
Company to withhold Shares otherwise issued pursuant to the exercise of the
Option having a Fair Market Value equal to the aggregate Option Price for the
Shares being purchased and satisfying such other requirements as may be imposed
by the Committee, (iv) partly in cash and, to the extent permitted by the
Committee, partly in such Shares, or (v) to the extent permitted by
applicable law, if there is a public market for the Shares at such time,
through the delivery of irrevocable instructions to a broker to sell Shares
obtained upon the exercise of the Option and to deliver promptly to the Company
an amount out of the proceeds of such sale equal to the aggregate Option Price
for the Shares being purchased.  No Participant shall have any rights to
dividends or distributions or other rights of a Member with respect to Shares
subject to an Option until the Participant has given written notice of exercise
of the Option, paid in full for such Shares and, if applicable, has satisfied
any other conditions imposed by the Committee pursuant to the Plan.

(ii)           Notwithstanding any other provision
of the Plan or this Agreement to the contrary, the Option may not be exercised
prior to the completion of any registration or qualification of the Option or
the Shares under applicable state and federal securities or

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other laws, or under any ruling
or regulation of any governmental body or national securities exchange, in each
case that the Committee shall in its sole discretion determine to be necessary
or advisable.

(iii)          Upon the Company’s determination that
the Vested Portion of the Option has been validly exercised as to any of the
Shares, the Company shall issue certificates in the Participant’s name for such
Shares.  However, the Company shall not be liable to the Participant for
damages relating to any delays in issuing the certificates to the Participant,
any loss of the certificates, or any mistakes or errors in the issuance of the
certificates or in the certificates themselves.

4.             No
Right to Continued Service.  The granting of the Option evidenced
hereby and this Agreement shall impose no obligation on the Company or any
Affiliate to continue the service of the Participant and shall not lessen or
affect the Company’s or any Affiliate’s right to terminate the service of such
Participant.

5.             Legend
on Certificates.  The certificates representing the Shares purchased
by exercise of the Option shall be subject to such stop transfer orders and
other restrictions as the Committee may deem advisable under the Plan or the
rules, regulations, and other requirements of the Securities and Exchange
Commission, any stock exchange upon which such Shares are listed, and any
applicable Federal or state laws, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to
such restrictions.

6.             Transferability. 
The Option may not be assigned, alienated, pledged, attached, sold or otherwise
transferred or encumbered by the Participant and any such purported assignment,
alienation, pledge, attachment, sale, transfer or encumbrance shall be void and
unenforceable against the Company or any Affiliate.  Notwithstanding the
foregoing, subject to such terms and conditions as the Committee shall require
in connection therewith, the Participant may transfer all or part of the Option
to an employee of the Participant and other Persons who perform services for
the Company or its Affiliates (each, a “Permitted Transferee”); provided
that the Participant gives the Committee advance written notice describing the
terms and conditions of the proposed transfer and the Committee notifies the
Participant in writing that such transfer would comply with the requirements of
the Plan, this Agreement, and any other terms and conditions as the Committee
shall require in connection with such transfer.  The Company may issue replacement
Option agreements that reflect such transfer, and may require the applicable
Permitted Transferee to sign such agreement.  Unless otherwise provided
pursuant to a replacement Option agreement which reflects such transfer, the
terms of any Option so transferred in accordance with the immediately preceding
sentence shall apply to the Permitted Transferee and any reference in the Plan
or in this Agreement to the Participant shall be deemed to refer to the
Permitted Transferee, except that (a) Permitted Transferees shall not be
entitled to transfer any Options, other than by will or the laws of descent and
distribution, (b) Permitted Transferees shall not be entitled to exercise
any transferred Options unless there shall be in effect a registration statement
on an appropriate form covering the Shares to be acquired pursuant to the
exercise of such Option if the Committee determines that such a registration
statement is necessary or appropriate, (c) the Committee or the Company
shall not be required to provide any notice to Permitted Transferees, whether
or not such notice is or would otherwise have been

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required to be given to the Participant under the Plan or otherwise,
and (d) the consequences of termination of the Participant’s service with
the Company and its Affiliates under the terms of the Plan and this Agreement
shall continue to be applied with respect to the Participant and the Permitted
Transferees.

7.             Withholding. 
The Participant may be required to pay to the Company or any Affiliate and the
Company or any Affiliate shall have the right and is hereby authorized to
withhold, any applicable withholding taxes in respect of the Option, its grant,
exercise, vesting or any payment or transfer under or with respect to the
Option and to take such other action as may be necessary in the opinion of the
Committee to satisfy all obligations for the payment of such withholding
taxes.  Without limiting the generality of the foregoing, to the
extent permitted by the Committee, the Participant may satisfy, in whole or in
part, the foregoing withholding liability by delivery of Shares held by the
Participant (which are fully vested and not subject to any pledge or other
security interest) or by having the Company withhold from the number of Shares
otherwise issuable pursuant to the exercise of the Option a number of Shares
with a Fair Market Value not in excess of the statutory minimum withholding
liability.

8.             Securities
Laws.  Upon the acquisition of any Shares pursuant to the exercise of
the Vested Portion of the Option, the Participant will make or enter into such
written representations, warranties and agreements as the Committee may
reasonably request in order to comply with applicable securities laws or with
this Agreement.

9.             Notices. 
Any notice necessary under this Agreement shall be addressed to the Company in
care of its Secretary at the principal executive office of the Company and to
the Participant at the address appearing in the corporate records of the
Company for the Participant or to either party at such other address as either
party hereto may hereafter designate in writing to the other.  Any such
notice shall be deemed effective upon receipt thereof by the addressee.

10.           Choice
of Law.  THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO CONFLICTS OF LAWS

11.           Option
Subject to Plan.  By entering into this Agreement the Participant
agrees and acknowledges that the Participant has received and read a copy of
the Plan.  The Option and the Shares issuable upon exercise are subject to
the Plan.  The terms and provisions of the Plan as it may be amended from
time to time are hereby incorporated herein by reference.  In the event of
a conflict between any term or provision contained herein and a term or
provision of the Plan, the applicable terms and provisions of the Plan will
govern and prevail.

12.           Signature
in Counterparts.  This Agreement may be signed in counterparts, each
of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.

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IN
WITNESS WHEREOF, the parties hereto have executed this Agreement.

	
  

  	
  KKR FINANCIAL
  HOLDINGS LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	 

	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 

Agreed and acknowledged as of the date first

above written:

____________________

Name:

 5Exhibit
10.5

RESTRICTED
SHARE AWARD AGREEMENT

THIS AGREEMENT
(the “Agreement”) is made, effective as of the <<DATE>>  (the “Date of Grant”), between KKR
Financial Holdings LLC, a Delaware limited liability company (hereinafter
called the “Company”), <<NAME>>
(hereinafter called the “Participant”).

R
E  C  I  T  A  L  S:

WHEREAS, the
Company has adopted the 2007 Share Incentive Plan for KKR Financial Holdings
LLC (the “Plan”), which Plan is incorporated herein by reference and made a
part of this Agreement; capitalized terms not otherwise defined herein shall
have the same meanings as in the Plan; and

WHEREAS, the
Committee has determined that it would be in the best interests of the Company
and its Members to grant the restricted share award provided for herein to the
Participant pursuant to the Plan and the terms set forth herein.

NOW THEREFORE, in
consideration of the mutual covenants hereinafter set forth, the parties hereto
agree as follows:

1.             Grant
of the Restricted Shares.  Subject to the terms and conditions of the
Plan and the additional terms and conditions set forth in this Agreement, the
Company hereby grants to the Participant a restricted share award (the “Restricted
Share Award”) consisting of <<NUMBER>> Shares (hereinafter called the “Restricted
Shares”).  The Restricted Shares shall
vest and become nonforfeitable in accordance with Section 2 hereof.

2.             Vesting.

(a)           Subject to the Participant’s
continued service with the Company and its Affiliates, the Restricted Shares
shall vest and become nonforfeitable with respect to one-third of the Shares
initially granted hereunder on each of the first, second and third
anniversaries of the Date of Grant.  Notwithstanding the foregoing, in the
event the above vesting schedule results in the vesting of any fractional
Shares, such fractional Shares shall not be deemed vested hereunder but shall
vest and become nonforfeitable when such fractional Shares aggregate whole
Shares.

(b)           If the Participant’s service with the
Company and its Affiliates terminates or is terminated for any reason, the
Restricted Shares shall, to the extent not then vested, be forfeited by the
Participant without consideration; provided that in the event the
Participant’s service with the Company and its Affiliates is terminated by the
Company other than for Cause (as defined in the Management Agreement),
including non-renewal of the Management Agreement by the Company, or by the
Manager pursuant to Section 15 of the Management Agreement, the Restricted
Shares shall, to the extent not then vested and not previously forfeited,
immediately become fully vested.

(c)           Notwithstanding any other provision
of this Agreement to the contrary, in the event a Change in Control occurs
during the period the Participant is providing services to the Company and its
Affiliates, the Restricted Shares shall, to the extent not then vested and not
previously forfeited, immediately become fully vested, subject to
Section 9(b) of the Plan.

(d)           For purposes of this Agreement, “service”
means service provided by the Participant to the Company and its Affiliates
pursuant to the terms of the Management Agreement.

3.             Certificates. 
Certificates evidencing the Restricted Shares shall be issued by the Company
and shall be registered in the Participant’s name on the share transfer books
of the Company promptly after the date hereof, but shall remain in the physical
custody of the Company or its designee at all times prior to the vesting of
such Restricted Shares pursuant to Section 2.  As a condition to the
receipt of this Restricted Share Award, the Participant shall deliver to the
Company a share power, duly endorsed in blank, relating to the Restricted
Shares. No certificates shall be issued for fractional Shares.

4.             Rights
as a Member.  The Participant shall be the record owner of the
Restricted Shares until or unless such Restricted Shares are forfeited pursuant
to Section 2 hereof, and as record owner shall be entitled to all rights
of a member of the Company, including, without limitation, voting rights with
respect to the Restricted Shares and the Participant shall receive, when paid,
any dividends or distributions on all of the Restricted Shares granted
hereunder as to which the Participant is the record holder on the applicable
record date; provided that the Restricted Shares shall be subject to the
limitations on transfer and encumbrance set forth in Section 7. As soon as
practicable following the vesting of any Restricted Shares pursuant to
Section 2, certificates for the Restricted Shares which shall have vested
shall be delivered to the Participant along with the share powers relating
thereto.

5.             Legend
on Certificates.  The certificates representing the vested Restricted
Shares delivered to the Participant shall be subject to such stop transfer
orders and other restrictions as the Committee may deem advisable under the
Plan or the rules, regulations, and other requirements of the Securities and
Exchange Commission, any stock exchange upon which such Shares are listed, and
any applicable Federal or state laws, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to
such restrictions.

6.             No
Right to Continued Service.  The granting of the Restricted Shares
evidenced by this Agreement shall impose no obligation on the Company or any
Affiliate to continue the service of the Participant and shall not lessen or
affect the Company’s or any Affiliate’s right to terminate the service of such
Participant.

7.             Transferability. 
The Restricted Shares may not, at any time prior to becoming vested pursuant to
Section 2, be assigned, alienated, pledged, attached, sold or otherwise
transferred or encumbered by the Participant and any such purported assignment,
alienation, pledge, attachment, sale, transfer or encumbrance shall be void and
unenforceable against the Company or any Affiliate.  Notwithstanding the
foregoing, subject to such terms and

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conditions as the Committee shall require in connection therewith, the
Participant may transfer all or part of the Restricted Share Award to an
employee of the Participant and other Persons who perform services for the
Company or its Affiliates (each, a “Permitted Transferee”); provided
that the Participant gives the Committee advance written notice describing the
terms and conditions of the proposed transfer and the Committee notifies the
Participant in writing that such transfer would comply with the requirements of
the Plan, this Agreement, and any other terms and conditions as the Committee
shall require in connection with such transfer.  The Company may issue
replacement Restricted Share Award agreements that reflect such transfer, and
may require the applicable Permitted Transferee to sign such agreement. 
Unless otherwise provided pursuant to a replacement Restricted Share Award
agreement which reflects such transfer, the terms of any Restricted Share Award
so transferred in accordance with the immediately preceding sentence shall
apply to the Permitted Transferee and any reference in the Plan or in this
Agreement to the Participant shall be deemed to refer to the Permitted
Transferee, except that (a) Permitted Transferees shall not be entitled to
transfer any Restricted Shares, other than by will or the laws of descent and
distribution, (b) Permitted Transferees shall not be entitled to receive
any transferred Restricted Shares unless there shall be in effect a
registration statement on an appropriate form covering the Shares if the
Committee determines that such a registration statement is necessary or
appropriate, (c) the Committee or the Company shall not be required to
provide any notice to Permitted Transferees, whether or not such notice is or
would otherwise have been required to be given to the Participant under the
Plan or otherwise, and (d) the consequences of termination of the
Participant’s service with the Company and its Affiliates under the terms of
the Plan and this Agreement shall continue to be applied with respect to the
Participant and the Permitted Transferees.

8.             Withholding. 
The Participant may be required to pay to the Company or any Affiliate and the
Company or any Affiliate shall have the right and is hereby authorized to
withhold, any applicable withholding taxes in respect of the Restricted Shares,
their grant or vesting or any payment or transfer with respect to the
Restricted Shares and to take such action as may be necessary in the opinion of
the Committee to satisfy all obligations for the payment of such withholding
taxes.  Without limiting the generality of the foregoing, to the
extent permitted by the Committee, the Participant may satisfy, in whole or in
part, the foregoing withholding liability by delivery of Shares held by the
Participant (which are fully vested and not subject to any pledge or other
security interest) or by having the Company withhold from the number of
Restricted Shares otherwise deliverable to the Participant hereunder Restricted
Shares with a Fair Market Value not in excess of the statutory minimum
withholding liability.

9.             Securities
Laws.  Upon the vesting of any Restricted Shares, the Participant will
make or enter into such written representations, warranties and agreements as
the Committee may reasonably request in order to comply with applicable
securities laws or with this Agreement.

10.           Notices. 
Any notice necessary under this Agreement shall be addressed to the Company in
care of its Secretary at the principal executive office of the Company and to
the Participant at the address appearing in the corporate records of the
Company for such Participant or to either party at such other address as either
party hereto may hereafter designate in writing to the other.  Any such
notice shall be deemed effective upon receipt thereof by the addressee.

 3
 

11.           Choice
of Law.  THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO CONFLICTS OF LAWS.

12.           Restricted
Share Award Subject to Plan.  By entering into this Agreement the
Participant agrees and acknowledges that the Participant has received and read
a copy of the Plan.  The Restricted Share Award and the Restricted Shares
granted hereunder are subject to the Plan.  The terms and provisions of
the Plan as it may be amended from time to time are hereby incorporated herein
by reference.  In the event of a conflict between any term or provision
contained herein and a term or provision of the Plan, the applicable terms and
provisions of the Plan will govern and prevail.

13.           Signature
in Counterparts.  This Agreement may be signed in counterparts, each
of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.

IN WITNESS
WHEREOF, the parties hereto have executed this Agreement.

	
  

  	
  KKR FINANCIAL
  HOLDINGS LLC

  
	
   

  	
   

  
	
   

  	
  By: 

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 

Agreed and acknowledged as of the date first

above written:

____________________

Name:

 4

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