Document:

Exhibit
10.34

METABASIS EMPLOYEE INCENTIVE

COMPENSATION PLAN FOR 2007

The Metabasis
Employee Incentive Compensation Plan (the “Plan”) is designed to offer
incentive compensation to all eligible employees by rewarding the achievement
of individual and company goals. This plan helps foster an environment that
focuses on the achievement of goals through teamwork, recognition of company
goals and a drive for profitability. The Company reserves the right to
discontinue or modify the Plan at any time at its sole discretion.

I.              Purpose
of the Plan

The Metabasis
Employee Incentive Compensation Plan is designed to:

·                                          Encourage teamwork among all areas within
the Company

·                                          Incorporate an incentive program within
the Company’s overall compensation program designed around the company and
individual goals;

·                                          Reward employees who have a positive
impact on company results;

·                                          Provide an incentive to achieve overall
company goals thereby enhancing shareholder value.

II.            Plan
Governance

The Compensation
Committee of the Board of Directors will govern the Plan. The Chief Executive
Officer of Metabasis will be responsible for administration of the Plan. The
Compensation Committee will be responsible for approving any incentive awards
to officers of the Company and for determining and approving incentive awards
to the President and Chief Executive Officer.

III.           Incentive Compensation Determinations

A.            Incentive Bonus Target

Incentive bonus targets represent the incentive bonus
payable to an employee as a percentage of each eligible participant’s annual
compensation rate (base salary and sales commissions only) assuming attainment
of 100% of individual and company goals and the composition of the employee
workforce. The following are the incentive bonus targets for each respective job
title or group. At the discretion of management, the bonus may be linked to
salary grade rather than a title:

	
  TITLE

  	
   

  	
  BONUS TARGET

  	
   

  
	
  CEO or President

  	
   

  	
  50

  	
  %

  
	
  Executive VP.

  	
   

  	
  40

  	
  %

  
	
  Senior, Officer VP

  	
   

  	
  35

  	
  %

  
	
  Vice President

  	
   

  	
  20

  	
  %

  
	
  Director

  	
   

  	
  15

  	
  %

  
	
  Manager,
  Supervisor

  	
   

  	
  10

  	
  %

  

 

C.            Company and Individual Performance
Goals

1)                                      The Plan provides for incentive bonuses
based on the achievement of annual individual and company goals that have been
submitted and approved as described in point #2 of this section. The relative
weight between individual and company performance factors varies based on job
levels. The weighting will be reviewed prior to the beginning of each calendar
year and adjusted as necessary or appropriate. The plan weighting for calendar
year 2007 are:

	
  TITLE

  	
   

  	
  COMPANY

  	
   

  	
  INDIVIDUAL

  	
   

  
	
  CEO or President

  	
   

  	
  100

  	
  %

  	
  0

  	
  %

  
	
  Executive, Senior,
  Officer VP

  	
   

  	
  85

  	
  %

  	
  15

  	
  %

  
	
  Vice President

  	
   

  	
  70

  	
  %

  	
  30

  	
  %

  
	
  Director

  	
   

  	
  60

  	
  %

  	
  40

  	
  %

  
	
  Manager, Supervisor

  	
   

  	
  50

  	
  %

  	
  50

  	
  %

  

 

2)                                      The President and Chief Executive Officer
will present to the Board of Directors a list of overall company goals for the
year, which are subject to approval by the Board of Directors. All
management-level participants will develop a written list of key

individual goals
to be approved by the responsible vice president and by the President and Chief
Executive Officer.

3)                                      Separate payment “percent multipliers”
will be determined after evaluating both individual and company performance
against goals. The following scale will be used to determine the actual bonus
percent multiplier based upon measurement of individual and company performance
against stated goals:

	
  PERFORMANCE

  	
   

  	
  PERCENT

  	
   

  
	
  MEASUREMENT

  	
   

  	
  MULTIPLIER

  	
   

  
	
  Met/exceeded all
  goals

  	
   

  	
  100%-125

  	
  %

  
	
  Met most goals

  	
   

  	
  75%-99

  	
  %

  
	
  Met some goals

  	
   

  	
  25%-74

  	
  %

  
	
  Performance for the
  year was unacceptable

  	
   

  	
  0

  	
  %

  

 

IV.                          Calculation of Incentive Bonus

Calculation Steps (See
attached example):

1)                                Management determines each participant’s
maximum incentive bonus target (the “Bonus Target”) by multiplying the
participant’s base salary paid during the calendar year by the appropriate
bonus target percentage;

2)                                Management determines each participant’s
maximum incentive bonus target for both individual (Individual Target) and
company (Company Target) categories by multiplying the appropriate percentage
weighting for each participants position by the participant’s Bonus Target;

3)                                Management multiplies the approved
company and individual performance measurement percentages against the
participant’s Company Target and Individual Target respectively.

4)                                Management adds the individual and
company totals together to determine the incentive bonus earned for each
participant.

V.                              Payment of Incentive Bonuses

Annual individual and
company performance reviews will be completed prior to awarding bonuses. This
process requires appropriate management to submit written evaluations of
eligible employee’s individual performance against goals, along with recommended
performance measurement percent multipliers, to their respective department
Vice

Presidents. These
evaluations and recommendations will be reviewed and submitted for approval by
the Chief Executive Officer. The Chief Executive Officer will submit individual
evaluations for all officers and recommendations, along with an evaluation of
the Company’s performance against goals, to the Compensation Committee of the
Board of Directors. The Committee will provide final approval for incentive
compensation bonus pay-outs for the officers. The Chief Executive Officer will
approve all non-officer bonuses.

The Company reserves the
right to make any or all of the incentive bonus pay-out in the form of cash or
company stock. Additionally, the Company, in its sole discretion, may pro-rate
an employees incentive compensation bonus based on the employee’s date of hire,
tenure in position or other factors as deemed appropriate.

INCENTIVE COMPENSATION
PROGRAM- EXAMPLE CALCULATION

 

	
  Name

  	
   

  	
  John Doe

  	
   

  
	
  Title

  	
   

  	
  Director

  	
   

  
	
  Base Salary

  	
   

  	
  $

  	
  100,000

  	
   

  
	
  Bonus Target

  	
   

  	
  15

  	
  %

  
	
  Bonus Target
  Amount

  	
   

  	
  $

  	
  15,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Target Award —
  Company

  	
   

  	
  60%, $9,000

  	
   

  
	
  Target Award —
  Individual

  	
   

  	
  40%, $6,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Performance
  Multiplier — Company

  	
   

  	
  70

  	
  %

  
	
  Performance
  Multiplier — Individual

  	
   

  	
  50

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  INCENTIVE AWARD:

  	
   

  	
   

  	
   

  
	
  Company
  Component

  	
   

  	
  $

  	
  6,300

  	
   

  
	
  Individual
  Component

  	
   

  	
  $

  	
  3,000

  	
   

  
	
  TOTAL
  AWARD

  	
   

  	
  $

  	
  9,300Exhibit
10.1

AMENDED AND
RESTATED MANAGEMENT AGREEMENT

THIS AMENDED AND
RESTATED MANAGEMENT AGREEMENT is entered into as of May 4, 2007 by and among
KKR FINANCIAL HOLDINGS LLC., a Delaware limited liability company (the “Company”),
KKR FINANCIAL CORP., a Maryland corporation (“KKR Corp.”), and KKR FINANCIAL
ADVISORS LLC, a Delaware limited liability company (together with its permitted
assignees, the “Manager”).

WHEREAS, KKR Corp.
was organized in July 2004 and elected to be taxed as a real estate investment
trust for federal income tax purposes;

WHEREAS, the
Company entered into a Management Agreement as of August 12, 2004 (the “Original
Management Agreement”) pursuant to which the Manager was retained to
manage and provide investment advisory services to KKR Corp.;

WHEREAS, on May 4,
2007, KKR Corp. was restructured so that KKR Corp. became a subsidiary of the
Company; and

WHEREAS, KKR Corp.
and the Manager desire to amend and restate the Original Management Agreement
to provide that the Manager will manage and provide investment advisory
services to the Company and its subsidiaries, including KKR Corp.

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

SECTION
1.                                DEFINITIONS. The following terms have the meanings assigned them:

(a)  “Agreement”
means this Amended and Restated Management Agreement, as amended from time to
time.

(b)  “Base
Management Fee” means the base management fee, calculated and paid monthly
in arrears, in an amount equal to (i) 1/12 of Equity multiplied by (ii) 1.75%; provided that the foregoing calculation of
the Base Management Fee shall be adjusted to exclude one-time events pursuant
to changes in GAAP, as well as non-cash charges after discussion between the
Manager and the Independent Directors and approval by a majority of the
Independent Directors in the case of non-cash charges.

(c)  “Board
of Directors” means the Board of Directors of the Company.

(d)  “Change
of Control” means the occurrence of any of the following:

(i)    the
sale, lease or transfer, in one or a series of related transactions, of all or
substantially all of the assets of the Manager, taken as a whole, to any Person
other than Kohlberg Kravis Roberts & Co. L.P. or any of its affiliates; or

(ii)  the acquisition
by any Person or group (within the meaning of Section 13(d)(3) or Section
14(d)(2) of the Exchange Act, or any successor provision), including any group
acting for the purpose of acquiring, holding or disposing of securities (within
the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than Kohlberg
Kravis Roberts & Co. L.P. and its affiliates, in a single transaction or in
a related series of transactions, by way of merger, consolidation or other
business combination or purchase of beneficial ownership (within the meaning of
Rule 13d-3 under the Exchange Act, or any successor provision) of 50% or more
of the total voting power of the voting capital interests of the Manager.

(e)  “Code”
means the Internal Revenue Code of 1986, as amended.

(f)  “Equity”
means, for purposes of calculating the Base Management Fee, for any month the
sum of the net proceeds from any issuance of Shares, after deducting any
underwriting discounts and commissions and other expenses and costs relating to
the issuance, plus the Company’s retained earnings at the end of such month

(without taking
into account any non-cash equity compensation expense incurred in current or
prior periods), which amount shall be reduced by any amount that the Company
pays for repurchases of Shares; provided that
the foregoing calculation of Equity shall be adjusted to exclude one-time
events pursuant to changes in GAAP, as well as non-cash charges after
discussion between the Manager and the Independent Directors and approval by a
majority of the Independent Directors in the case of non-cash charges; provided, further, that for any month
during which there is an issuance of Shares (a “New Issuance”), Equity shall be
equitably adjusted for the month so as to take into consideration the amount of
Equity before and after any New Issuance.

(g)  “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

(h)  “Federal
Reserve Board” means the Board of Governors of the Federal Reserve System.

(i)  “GAAP”
means generally accepted accounting principles, as applied in the United
States.

(j)  “Governing
Instruments” means, with regard to any entity, the articles of
incorporation and bylaws in the case of a corporation, certificate of limited
partnership (if applicable) and the partnership agreement in the case of a
general or limited partnership, the articles of formation and the operating
agreement in the case of a limited liability company, the trust instrument in
the case of a trust, or similar governing documents, in each case as amended from
time to time.

(k)  “Incentive
Compensation” means an incentive management fee calculated and payable each
fiscal quarter in an amount, not less than zero, equal to the product of: (i)
twenty-five percent (25%) of the dollar amount by which (A) the Company’s Net
Income, before Incentive Compensation, for such quarter per Share (based on the
weighted average number of Shares outstanding for such quarter) exceeds (B) an
amount equal to (1) the weighted average of the price per share of common stock
of KKR Corp. in the initial offering and any subsequent offerings and the price
per Share in any subsequent offerings by the Company, in each case at the time
of issuance thereof, multiplied by (2) the greater of (a) 2.00% and (b) 0.50%
plus one-fourth of the Ten Year Treasury Rate for such quarter, multiplied by
(ii) the weighted average number of Shares outstanding during such quarter; provided that the foregoing calculation of
Incentive Compensation shall be adjusted to exclude one-time events pursuant to
changes in GAAP, as well as non-cash charges after discussion between the
Manager and the Independent Directors and approval by a majority of the
Independent Directors in the case of non-cash charges.

(l)  “Independent
Directors” means the members of the Board of Directors who are not officers
or employees of the Manager or any Person directly or indirectly controlling or
controlled by the Manager, and who are otherwise “independent” in accordance
with the Company’s
Governing Instruments and, if applicable, the rules of any national securities
exchange on which the Shares are listed.

(m)  “Investment
Company Act” means the Investment Company Act of 1940, as amended.

(n)  “Investments”
means the investments of the Company and the Subsidiaries.

(o)  “Net
Income” shall be determined by calculating the net income available to
owners of Shares before non-cash equity compensation expense, in accordance
with GAAP.

(p)  “Person”
means any individual, corporation, partnership, joint venture, limited
liability company, estate, trust, unincorporated association, any federal,
state, county or municipal government or any bureau, department or agency
thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.

(q)  “REIT”
means a “real estate investment trust” as defined under the Code.

(r)  “Share”
means a share representing a limited liability company interest in the Company
now or hereafter authorized.

(s)  “Subsidiary”
means any subsidiary of the Company; any partnership, the general partner of
which is the Company or any subsidiary of the Company; and any limited
liability company, the managing member of which is the Company or any
subsidiary of the Company.

 2
 

(t)  “Ten
Year Treasury Rate” means the average of weekly average yield to maturity
for U.S. Treasury securities (adjusted to a constant maturity of ten (10)
years) as published weekly by the Federal Reserve Board in publication H.15, or
any successor publication, during a fiscal quarter.

(u)  “Treasury
Regulations” means the regulations promulgated under the Code from time to
time, as amended.

SECTION
2.                                APPOINTMENT AND DUTIES OF THE MANAGER.

(a)  The
Company hereby appoints the Manager to manage the assets of the Company subject
to the further terms and conditions set forth in this Agreement and the Manager
hereby agrees to use its commercially reasonable efforts to perform each of the
duties set forth herein. The appointment of the Manager shall be exclusive to
the Manager except to the extent that the Manager otherwise agrees, in its sole
and absolute discretion, and except to the extent that the Manager elects,
pursuant to the terms of this Agreement, to cause the duties of the Manager
hereunder to be provided by third parties.

(b)  The
Manager, in its capacity as manager of the assets and the day-to-day operations
of the Company, at all times will be subject to the supervision of the Company’s
Board of Directors and will have only such functions and authority as the
Company may delegate to it including, without limitation, the functions and
authority identified herein and delegated to the Manager hereby. The Manager
will be responsible for the day-to-day operations of the Company and will
perform (or cause to be performed) such services and activities relating to the
assets and operations of the Company as may be appropriate, including, without
limitation:

(i)  serving as
the Company’s consultant with respect to the periodic review of the investment
criteria and parameters for Investments, borrowings and operations, any
modifications to which shall be approved by a majority of the Independent
Directors (such policy guidelines as initially approved, as the same may be
modified with such approval, the “Guidelines”) and other policies for
approval by the Board of Directors;

(ii)  investigation,
analysis and selection of investment opportunities;

(iii)  with
respect to prospective investments by the Company and dispositions of
Investments, conducting negotiations with sellers and purchasers and their
respective agents, representatives and investment bankers;

(iv)  engaging
and supervising, on behalf of the Company and at the Company’s expense,
independent contractors which provide investment banking, mortgage brokerage,
securities brokerage and other financial services and such other services as
may be required relating to the Investments;

(v)  negotiating
on behalf of the Company for the sale, exchange or other disposition of any
Investments;

(vi)  coordinating
and managing operations of any joint venture or co-investment interests held by
the Company and conducting all matters with the joint venture or co-investment
partners;

(vii)  providing
executive and administrative personnel, office space and office services
required in rendering services to the Company;

(viii)  administering
the day-to-day operations of the Company and performing and supervising the
performance of such other administrative functions necessary in the management
of the Company as may be agreed upon by the Manager and the Board of Directors,
including, without limitation, the collection of revenues and the payment of
the Company’s debts and obligations and maintenance of appropriate computer
services to perform such administrative functions;

 3
 

(ix)  communicating
on behalf of the Company with the holders of any equity or debt securities of
the Company as required to satisfy the reporting and other requirements of any
governmental bodies or agencies or trading markets and to maintain effective
relations with such holders;

(x)  counseling
the Company in connection with policy decisions to be made by the Board of
Directors;

(xi)  evaluating
and recommending to the Board of Directors hedging strategies and engaging in
hedging activities on behalf of the Company, consistent with such strategies,
as so modified from time to time, with KKR Corp.’s status as a REIT, with the
Company’s status as a partnership for federal income tax purposes (and not as
an association or publicly traded partnership taxable as a corporation) and
with the Guidelines;

(xii) counseling the
Company regarding the maintenance of its status as a partnership for federal
income tax purposes and monitoring compliance with the various requirements
necessary to avoid treatment of the Company as an association or a publicly
traded partnership taxable as a corporation as set out in the Code and the
Treasury Regulations thereunder;

(xiii)  counseling
the Company regarding the maintenance of KKR Corp.’s status as a REIT and
monitoring compliance with the various REIT qualification tests and other rules
set out in the Code and Treasury Regulations thereunder;

(xiv)  counseling
the Company regarding the maintenance of its exemption from the Investment
Company Act and monitoring compliance with the requirements for maintaining an
exemption from that Act;

(xv)  assisting
the Company in developing criteria for asset purchase commitments that are
specifically tailored to the Company’s investment objectives and making
available to the Company its knowledge and experience with respect to mortgage
loans, real estate, real estate securities, other real estate-related assets
and non-real estate related assets;

(xvi)  representing
and making recommendations to the Company in connection with the purchase and
finance of, and commitment to purchase and finance, mortgage loans (including
on a portfolio basis), real estate, real estate securities, other real
estate-related assets and non-real estate related assets, and in connection
with the sale and commitment to sell such assets;

(xvii)  monitoring
the operating performance of the Investments and providing periodic reports
with respect thereto to the Board of Directors, including comparative
information with respect to such operating performance and budgeted or
projected operating results;

(xviii)  investing
and re-investing any moneys and securities of the Company (including investing
in short-term Investments pending investment in Investments, payment of fees,
costs and expenses, or payments of dividends or distributions to stockholders
and partners of the Company) and advising the Company as to its capital
structure and capital raising;

(xix)  causing
the Company to retain qualified accountants and legal counsel, as applicable,
to assist in developing appropriate accounting procedures, compliance
procedures and testing systems with respect to financial reporting obligations
and compliance with the provisions of the Code applicable to partnerships and
REITs and to conduct quarterly compliance reviews with respect thereto;

(xx)  causing
the Company and the Subsidiaries to qualify to do business in all applicable
jurisdictions and to obtain and maintain all appropriate licenses;

(xxi)  assisting
the Company in complying with all regulatory requirements applicable to the
Company in respect of its business activities, including preparing or causing
to be prepared all financial

 4
 

statements required under applicable regulations and
contractual undertakings and all reports and documents, if any, required under
the Exchange Act;

(xxii)  taking
all necessary actions to enable the Company to make required tax filings and
reports, including soliciting holders for required information to the extent
provided by the provisions of the Code applicable to partnerships and REITs;

(xxiii)  handling
and resolving all claims, disputes or controversies (including all litigation,
arbitration, settlement or other proceedings or negotiations) in which the
Company or any Subsidiary may be involved or to which the Company or any
Subsidiary may be subject arising out of the day-to-day operations of the
Company or any Subsidiary, subject to such limitations or parameters as may be
imposed from time to time by the Board of Directors;

(xxiv)  using
commercially reasonable efforts to cause expenses incurred by or on behalf of
the Company or any Subsidiary to be commercially reasonable or commercially
customary and within any budgeted parameters or expense guidelines set by the
Board of Directors from time to time;

(xxv)  performing
such other services as may be required from time to time for management and
other activities relating to the assets of the Company as the Board of
Directors shall reasonably request or the Manager shall deem appropriate under
the particular circumstances; and

(xxvi)  using
commercially reasonable efforts to cause the Company and each Subsidiary to
comply with all applicable laws.

Without limiting the
foregoing, the Manager will perform portfolio management services (the “Portfolio
Management Services”) on behalf of the Company with respect to the
Investments. Such services will include, but not be limited to, consulting with
the Company on the purchase and sale of, and other investment opportunities in
connection with, the Company’s portfolio of assets; the collection of
information and the submission of reports pertaining to the Company’s assets,
interest rates and general economic conditions; periodic review and evaluation
of the performance of the Company’s portfolio of assets; acting as liaison
between the Company and banking, mortgage banking, investment banking and other
parties with respect to the purchase, financing and disposition of assets; and
other customary functions related to portfolio management. Additionally, the
Manager will perform monitoring services (the “Monitoring Services”) on
behalf of the Company with respect to any loan servicing activities provided by
third parties. Such Monitoring Services will include, but not be limited to,
negotiating servicing agreements; acting as a liaison between the servicers of
the assets and the Company; review of servicers’ delinquency, foreclosure and
other reports on assets; supervising claims filed under any insurance policies;
and enforcing the obligation of any servicer to repurchase assets.

(c)  The
Manager may enter into agreements with other parties, including its affiliates,
for the purpose of engaging one or more parties for and on behalf, and at the
sole cost and expense, of the Company to provide property management, asset
management, leasing, development and/or other services to the Company
(including, without limitation, Portfolio Management Services and Monitoring
Services) pursuant to agreement(s) with terms which are then customary for
agreements regarding the provision of services to companies that have assets
similar in type, quality and value to the assets of the Company; provided that (i) any such agreements
entered into with affiliates of the Manager shall be (A) on terms no more
favorable to such affiliate then would be obtained from a third party on an arm’s-length
basis and (B) to the extent the same do not fall within the provisions of the
Guidelines, approved by a majority of the Independent Directors, (ii) with
respect to Portfolio Management Services, (A) any such agreements shall be
subject to the Company’s prior written approval and (B) the Manager shall
remain liable for the performance of such Portfolio Management Services, and
(iii) with respect to Monitoring Services, any such agreements shall be subject
to the Company’s prior written approval.

(d)  The
Manager may retain, for and on behalf, and at the sole cost and expense, of the
Company, such services of accountants, legal counsel, appraisers, insurers,
brokers, transfer agents, registrars, developers, investment banks, financial
advisors, banks and other lenders and others as the Manager deems necessary or
advisable in connection with the management and operations of the Company.
Notwithstanding anything contained herein to the contrary, the Manager shall
have the right to cause any such services to be rendered by its employees or

 5
 

affiliates. The
Company shall pay or reimburse the Manager or its affiliates performing such
services for the cost thereof; provided
that such costs and reimbursements are no greater than those which would be
payable to outside professionals or consultants engaged to perform such
services pursuant to agreements negotiated on an arm’s-length basis.

(e)  As
frequently as the Manager may deem necessary or advisable, or at the direction
of the Board of Directors, the Manager shall, at the sole cost and expense of
the Company, prepare, or cause to be prepared, with respect to any Investment,
reports and other information with respect to such Investment as may be
reasonably requested by the Company.

(f)  The
Manager shall prepare, or cause to be prepared, at the sole cost and expense of
the Company, all reports, financial or otherwise, with respect to the Company
reasonably required by the Board of Directors in order for the Company to
comply with its Governing Instruments or any other materials required to be
filed with any governmental body or agency, and shall prepare, or cause to be
prepared, all materials and data necessary to complete such reports and other
materials including, without limitation, an annual audit of the Company’s books
of account by a nationally recognized independent accounting firm.

(g)  The
Manager shall prepare regular reports for the Board of Directors to enable the
Board of Directors to review the Company’s acquisitions, portfolio composition
and characteristics, credit quality, performance and compliance with the
Guidelines and policies approved by the Board of Directors.

(h)  Notwithstanding
anything contained in this Agreement to the contrary, except to the extent that
the payment of additional moneys is proven by the Company to have been required as a direct result of the
Manager’s acts or omissions which result in the right of the Company to
terminate this Agreement pursuant to Section 15 of this Agreement, the Manager
shall not be required to expend money (“Excess Funds”) in connection
with any expenses that are required to be paid for or reimbursed by the Company
pursuant to Section 9 in excess of that contained in any applicable Company
Account (as herein defined) or otherwise made available by the Company to be
expended by the Manager hereunder. Failure of the Manager to expend Excess Funds
out-of-pocket shall not give rise or be a contributing factor to the right of
the Company under Section 13(a) of this Agreement to terminate this Agreement
due to the Manager’s unsatisfactory performance.

(i)  In
performing its duties under this Section 2, the Manager shall be entitled to
rely reasonably on qualified experts and professionals (including, without
limitation, accountants, legal counsel and other professional service
providers) hired by the Manager at the Company’s sole cost and expense.

SECTION
3.                                DEVOTION OF TIME; ADDITIONAL ACTIVITIES.

(a)  The
Manager will provide the Company with a management team, including a Chief
Executive Officer, Chief Financial Officer and Chief Operating Officer, along
with appropriate support personnel, to provide the management services to be
provided by the Manager to the Company hereunder, the members of which team
shall have as their primary responsibility the management of the Company and
shall devote such of their time to the management of the Company as the Board
of Directors reasonably deems necessary and appropriate, commensurate with the
level of activity of the Company from time to time. The Chief Financial
Officer provided by the Manager shall be exclusively dedicated to the
operations of the Company.

(b)  The
Manager hereby agrees that neither the Manager nor any entity controlled by or
under common control with the Manager shall raise, advise or sponsor any new
investment fund, company or vehicle, including a REIT, that invests primarily in
domestic mortgage-backed securities; provided that for purposes of the
foregoing limitation, a portfolio company of any private equity fund controlled
by Kohlberg Kravis Roberts & Co. L.P. shall be deemed not to be an entity
under common control with the Manager.  The Company shall have the benefit
of the Manager’s best judgment and effort in rendering services and, in
furtherance of the foregoing, the Manager shall not undertake activities which,
in its judgment, will substantially and adversely affect the performance of its
obligations under this Agreement.

(c)  Except
to the extent set forth in clauses (a) and (b) above, nothing herein shall
prevent the Manager or any of its affiliates or any of the officers and
employees of any of the foregoing from engaging in other

 6
 

businesses or from
rendering services of any kind to any other person or entity, including
investment in, or advisory service to others investing in, any type of
investment, including investments which meet the principal investment
objectives of the Company.

(d)  Managers,
members, partners, officers, employees and agents of the Manager or affiliates
of the Manager may serve as directors, officers, employees, agents, nominees or
signatories for the Company or any Subsidiary, to the extent permitted by their
Governing Instruments
or by any resolutions duly adopted by the Board of Directors pursuant to the
Company’s Governing Instruments. When executing documents or otherwise acting
in such capacities for the Company, such persons shall use their respective
titles in the Company.

SECTION 4.                                AGENCY. The Manager shall act as agent of the Company in making, acquiring,
financing and disposing of Investments, disbursing and collecting the Company’s
funds, paying the debts and fulfilling the obligations of the Company,
supervising the performance of professionals engaged by or on behalf of the
Company and handling, prosecuting and settling any claims of or against the
Company, the Board of Directors, holders of the Company’s securities or the
Company’s representatives or properties.

SECTION 5.                                BANK ACCOUNTS. At the direction of the Board of Directors, the Manager may establish
and maintain one or more bank accounts in the name of the Company or any
Subsidiary (any such account, a “Company Account”), and may collect and
deposit funds into any such Company Account or Company Accounts, and disburse
funds from any such Company Account or Company Accounts, under such terms and
conditions as the Board of Directors may approve; and the Manager shall from
time to time render appropriate accountings of such collections and payments to
the Board of Directors and, upon request, to the auditors of the Company or any
Subsidiary.

SECTION 6.                                RECORDS; CONFIDENTIALITY. The Manager shall maintain appropriate books
of accounts and records relating to services performed under this Agreement,
and such books of account and records shall be accessible for inspection by
representatives of the Company or any Subsidiary at any time during normal
business hours upon one (1) business day’s advance written notice. The Manager
shall keep confidential any and all information obtained in connection with the
services rendered under this Agreement and shall not disclose any such
information (or use the same except in furtherance of its duties under this
Agreement) to nonaffiliated third parties except (i) with the prior written
consent of the Board of Directors, (ii) to legal counsel, accountants and
other professional advisors; (iii) to appraisers, financing sources and
others in the ordinary course of the Company’s business; (iv) to
governmental officials having jurisdiction over the Company; (v) in
connection with any governmental or regulatory filings of the Company or
disclosure or presentations to Company investors; or (vi) as required by
law or legal process to which the Manager or any Person to whom disclosure is
permitted hereunder is a party. The foregoing shall not apply to information
which has previously become publicly available through the actions of a Person
other than the Manager not resulting from the Manager’s violation of this
Section 6. The provisions of this Section 6 shall survive the
expiration or earlier termination of this Agreement for a period of one year.

SECTION 7.                                OBLIGATIONS OF MANAGER; RESTRICTIONS.

(a)  The
Manager shall require each seller or transferor of investment assets to the
Company to make such representations and warranties regarding such assets as
may, in the judgment of the Manager, be necessary and appropriate. In addition,
the Manager shall take such other action as it deems necessary or appropriate
with regard to the protection of the Investments.

(b)  The
Manager shall refrain from any action that, in its sole judgment made in good
faith, (i) is not in compliance with the Guidelines, (ii) would cause the Company
to be treated as an association or publicly traded partnership taxable as a
corporation, (iii) would adversely affect the status of KKR Corp. as a REIT under the Code or
(iv) would violate any law, rule or regulation of any governmental body or
agency having jurisdiction over the Company or any Subsidiary or that would
otherwise not be permitted by the Company’s Governing Instruments. If the
Manager is ordered to take any such action by the Board of Directors, the
Manager shall promptly notify the Board of Directors of the Manager’s judgment
that such action would adversely affect such status or violate any such law,
rule or regulation or the Governing Instruments. Notwithstanding the foregoing,
the Manager, its directors, officers, stockholders and employees shall not be
liable to the Company or any Subsidiary, the Board of Directors,

 7
 

or the Company’s
or any Subsidiary’s shareholders, interest holders or partners, for any act or
omission by the Manager, its directors, officers, stockholders or employees
except as provided in Section 11 of this Agreement.

(c)  The
Manager shall not (i) consummate any transaction which would involve the
acquisition by the Company of an asset in which the Manager or any affiliate
thereof has an ownership interest or the sale by the Company of an asset to the
Manager or any affiliate thereof, or (ii) under circumstances where the Manager
is subject to an actual or potential conflict of interest, in the reasonable
judgment of the Manager, because it manages both the Company and another Person
(not an affiliate of the Company) with which the Company has a contractual
relationship, take any action constituting the granting to such Person of a
waiver, forbearance or other relief, or the enforcement against such Person of
remedies, under or with respect to the applicable contract, unless such
transaction or action, as the case may be and in each case, is approved by a
majority of the Independent Directors.

(d)  The
Board of Directors periodically reviews the Guidelines and the Company’s
portfolio of Investments but will not review each proposed investment, except
as otherwise provided herein. If a majority of the Independent Directors
determine in their periodic review of transactions that a particular
transaction does not comply with the Guidelines (including as a result of
violation of the provisions of Section 7(c) above), then a majority of the
Independent Directors will consider what corrective action, if any, can be
taken. The Manager shall be permitted to rely upon the direction of the
Secretary of the Company to evidence the approval of the Board of Directors or
the Independent Directors with respect to a proposed investment.

(e)  The
Manager shall at all times during the term of this Agreement maintain “errors
and omissions” insurance coverage and other insurance coverage which is
customarily carried by property, asset and investment managers performing
functions similar to those of the Manager under this Agreement with respect to
assets similar to the assets of the Company, in an amount which is comparable
to that customarily maintained by other managers or servicers of similar
assets.

SECTION 8.                                COMPENSATION.

(a)  During
the Initial Term of this Agreement, as the same may be extended from time to
time, the Company shall pay the Manager the Base Management Fee monthly in
arrears.

(b)  The
Manager shall compute each installment of the Base Management Fee within
fifteen (15) business days after the end of the calendar month with respect to
which such installment is payable. A copy of the computations made by the
Manager to calculate such installment shall thereafter, for informational
purposes only and subject in any event to Section 13(a) of this Agreement,
promptly be delivered to the Board of Directors and, upon such delivery,
payment of such installment of the Base Management Fee shown therein shall be
due and payable no later than the date which is twenty (20) business days after
the end of the calendar month with respect to which such installment is
payable.

(c)  The
Base Management Fee is subject to adjustment pursuant to and in accordance with
the provisions of Sections 8(f) and 13(a) of this Agreement.

(d)  In
addition to the Base Management Fee otherwise payable hereunder, the Company
shall pay the Manager quarterly Incentive Compensation. The Incentive
Compensation calculation and payment shall be made for each fiscal quarter in
arrears.

(e)  The
Manager shall compute each installment of the Incentive Compensation within 30
days after the end of each fiscal quarter with respect to which such
installment is payable.  A copy of the computations made by the Manager to
calculate such installment shall thereafter, for informational purposes only
and subject in any event to Section 13(a) of this Agreement, promptly be delivered
to the Board of Directors and, upon such delivery, payment of such installment
of the Incentive Compensation shown therein shall be due and payable no later
than the date which is five (5) business days after the date of delivery to the
Board of Directors of such computations.

(f)  The
Manager shall have the right to allocate any option or restricted share awards
granted to it by the Company or KKR Corp. at its sole and absolute
discretion.  To the extent that such awards (or the Shares

 8
 

relating thereto)
are not eligible to be registered for sale pursuant to a Registration Statement
on Form S-8 relating to the 2004 Amended and Restated Stock Incentive Plan, at
the request of the Manager the Company agrees to file with the Securities and
Exchange Commission as soon as reasonably practicable a shelf registration
statement providing for the sale of such awards (or the Shares relating
thereto) and to use its commercially reasonably efforts to cause such
registration statement to be declared effective as promptly as practicable
following such filing.

(g)  At
the election of the Company, the Manager will allocate the Base Management Fee
and the Incentive Management Fee between the Company and each of its
Subsidiaries, based on an allocation formula determined in good faith by the
Manager, the Company and its Subsidiaries, and shall provide directly to the
Company and each of its Subsidiaries the computation of the amount of the Base
Management Fee and Incentive Management Fee allocated to each such entity.  If that separate computation is provided, the
Company and each of its Subsidiaries will be liable for payment of its
allocable share of the Base Management Fee and the Incentive Management Fee and
shall pay such amount directly to the Manager.

SECTION 9.                                EXPENSES OF THE COMPANY. The Company shall pay all of its expenses and
shall reimburse the Manager for documented expenses of the Manager incurred on
its behalf (collectively, the “Expenses”). Expenses include all costs
and expenses which are expressly designated elsewhere in this Agreement as the
Company’s, together with the following:

(a)  expenses
in connection with the rent, issuance and transaction costs incident to the
acquisitions, disposition and financing of Investments;

(b)  costs
of legal, tax, accounting, consulting, auditing, administrative and other
similar services rendered for the Company by providers retained by the Manager
or, if provided by the Manager’s employees, in amounts which are no greater
than those which would be payable to outside professionals or consultants
engaged to perform such services pursuant to agreements negotiated on an arm’s-length
basis;

(c)  the
compensation and expenses of the Company’s directors and the cost of liability
insurance to indemnify the Company’s directors and officers;

(d)  costs
associated with the establishment and maintenance of any credit facilities and
other indebtedness of the Company or any Subsidiary (including commitment fees,
accounting fees, legal fees, closing and other costs) or any securities offerings
of the Company;

(e)  expenses
connected with communications to holders of securities of the Company or any
Subsidiary and other bookkeeping and clerical work necessary in maintaining
relations with holders of such securities and in complying with the continuous
reporting and other requirements of governmental bodies or agencies, including,
without limitation, all costs of preparing and filing required reports with the
Securities and Exchange Commission, the costs payable by the Company to any
transfer agent and registrar in connection with the listing and/or trading of
the Company’s shares on any exchange, the fees payable by the Company to any
such exchange in connection with its listing, costs of preparing, printing and
mailing the Company’s annual report to the holders of its shares and proxy
materials with respect to any meeting of the interest holders of the Company

(f)  costs
associated with any computer software or hardware, electronic equipment or
purchased information technology services from third party vendors that is used
solely for the Company or any Subsidiary;

(g)  expenses
incurred by managers, officers, employees and agents of the Manager for travel
on behalf of the Company or any Subsidiary and other out-of-pocket expenses
incurred by managers, officers, employees and agents of the Manager in
connection with the purchase, financing, refinancing, sale or other disposition
of an Investment or establishment and maintenance of any credit facilities and
other indebtedness or any securities offerings of the Company or any
Subsidiary;

(h)  costs
and expenses incurred with respect to market information systems and
publications, research publications and materials, and settlement, clearing and
custodial fees and expenses;

(i)  compensation
and expenses of the Company’s custodian, transfer agent or trustee, if any;

 9
 

(j)  the
costs of maintaining compliance with all federal, state and local rules and
regulations or any other regulatory agency;

(k)  all
taxes and license fees;

(l)  all
insurance costs incurred in connection with the operation of the Company’s and
the Subsidiary’s business except for the costs attributable to the insurance
that the Manager elects to carry for itself and its employees;

(m)  costs
and expenses incurred in contracting with third parties, including affiliates
of the Manager, for the servicing and special servicing of assets of the
Company or any Subsidiary;

(n)  all
other costs and expenses relating to the Company’s business and investment
operations, including, without limitation, the costs and expenses of acquiring,
owning, protecting, maintaining, developing and disposing of Investments,
including appraisal, reporting, audit and legal fees;

(o)  expenses
relating to any office(s) or office facilities, including but not limited to
disaster backup recovery sites and facilities, maintained for the Company or
Investments separate from the office or offices of the Manager;

(p)  expenses
connected with the payments of interest, dividends or distributions in cash or
any other form authorized or caused to be made by the Board of Directors to or
on account of the holders of securities of the Company or any Subsidiary,
including, without limitation, in connection with any distribution or dividend
reinvestment plan;

(q)  any
judgment or settlement of pending or threatened proceedings (whether civil,
criminal or otherwise) against the Company or any Subsidiary, or against any
trustee, director or officer of the Company or of any Subsidiary in his or her
capacity as such for which the Company or any Subsidiary is required to
indemnify such trustee, director or officer by any court or governmental
agency, or settlement of pending or threatened proceedings;

(r)  the
Company’s pro rata portion of rent, telephone, utilities, office furniture, equipment,
machinery and other office, internal and overhead expenses of the Manager and
its affiliates required for the Company’s operations; and

(s)  all
other expenses actually incurred by the Manager which are reasonably necessary
for the performance by the Manager of its duties and functions under this
Agreement.

The provisions of
this Section 9 shall survive the expiration or earlier termination of this
Agreement to the extent such expenses have previously been incurred or are
incurred in connection with such expiration or termination.

SECTION 10.                          CALCULATIONS OF EXPENSES.

The
Manager shall prepare a statement documenting the Expenses of the Company and
the Subsidiaries and the Expenses incurred by the Manager on behalf of the
Company and the Subsidiaries during each calendar month, and shall deliver such
statement to the Company within 20 days after the end of each calendar month.
Expenses incurred by the Manager on behalf of the Company or any Subsidiary
shall be reimbursed by the Company to the Manager on the first business day of
the month immediately following the date of delivery of such statement; provided, however, that such
reimbursements may be offset by the Manager against amounts due to the Company.
At the election of the Company, the Manager will allocate the Expenses between
the Company and each of its Subsidiaries, based on an allocation formula
determined in good faith by the Manager, the Company and its Subsidiaries, and
shall provide directly to the Company and each of its Subsidiaries the
computation of the Expenses allocated to each such entity. If that separate
computation is provided, the Company and each of its Subsidiaries will be
liable for payment of its allocable share of Expenses and shall pay such amount
directly to the Manager. The provisions of this Section 10 shall survive
the expiration or earlier termination of this Agreement.

 10
 

SECTION 11.                          LIMITS OF MANAGER RESPONSIBILITY;
INDEMNIFICATION.

(a)  The Manager assumes no responsibility
under this Agreement other than to render the services called for under this
Agreement in good faith and shall not be responsible for any action of the
Board of Directors in following or declining to follow any advice or
recommendations of the Manager, including as set forth in Section 7(b) of this Agreement.
The Manager, its members, managers, officers and employees will not be liable
to the Company or any Subsidiary, to the Board of Directors, or the Company’s
or any Subsidiary’s shareholders, interest holders or partners for any acts or
omissions by the Manager, its members, managers, officers or employees,
pursuant to or in accordance with this Agreement, except by reason of acts
constituting bad faith, willful misconduct, gross negligence or reckless
disregard of the Manager’s duties under this Agreement. The Company shall, to
the full extent lawful, reimburse, indemnify and hold the Manager, its members,
managers, officers and employees and each other Person, if any, controlling the
Manager (each, an “Indemnified Party”), harmless of and from any and all
expenses, losses, damages, liabilities, demands, charges and claims of any
nature whatsoever (including attorneys’ fees) in respect of or arising from any
acts or omissions of such Indemnified Party made in good faith in the
performance of the Manager’s duties under this Agreement and not constituting
such Indemnified Party’s bad faith, willful misconduct, gross negligence or
reckless disregard of the Manager’s duties under this Agreement.

(b)  The
Manager shall, to the full extent lawful, reimburse, indemnify and hold the
Company, its interest holders, directors, officers and employees, and each
other Person, if any, controlling the Company (each, a “Company Indemnified
Party”), harmless of and from any and all expenses, losses, damages,
liabilities, demands, charges and claims of any nature whatsoever (including
attorneys’ fees) in respect of or arising from the Manager’s bad faith, willful
misconduct, gross negligence or reckless disregard of its duties under this
Agreement.

SECTION 12.                          NO JOINT VENTURE. Nothing in this Agreement shall be construed
to make the Company and the Manager partners or joint venturers or impose any
liability as such on either of them.

SECTION
13.                          TERM; TERMINATION.

(a)  Until
this Agreement is terminated in accordance with its terms, this Agreement shall
be in effect until December 31, 2007 (the “Initial Term”) and shall be
automatically renewed for a one-year term each anniversary date thereafter (a “Renewal
Term”) unless
at least two-thirds of the Independent Directors or the holders of a majority
of the outstanding Shares agree that (i) there has been unsatisfactory
performance by the Manager that is materially detrimental to the Company or
(ii) the compensation payable to the Manager hereunder is unfair; provided that the Company shall not have
the right to terminate this Agreement under clause (ii) above if the Manager
agrees to continue to provide the services under this Agreement at a fee that
at least two-thirds of the Independent Directors determines to be fair pursuant
to the procedure set forth below. If the Company elects not to renew this
Agreement at the expiration of the Initial Term or any such one-year extension
term as set forth above, the Company shall deliver to the Manager prior written
notice (the “Termination Notice”) of the Company’s intention not to
renew this Agreement based upon the terms set forth in this Section 13(a) not
less than 180 days prior to the expiration of the then existing term. If the
Company so elects not to renew this Agreement, the Company shall designate the
date (the “Effective Termination Date”), not less than 180 days from the
date of the notice, on which the Manager shall cease to provide services under
this Agreement and this Agreement shall terminate on such date; provided, however, that in the event that
such Termination Notice is given in connection with a determination that the
compensation payable to the Manager is unfair, the Manager shall have the right
to renegotiate such compensation by delivering to the Company, no fewer than
forty-five (45) days prior to the prospective Effective Termination Date,
written notice (any such notice, a “Notice of Proposal to Negotiate”) of
its intention to renegotiate its compensation under this Agreement. Thereupon,
the Company (represented by the Independent Directors) and the Manager shall
endeavor to negotiate in good faith the revised compensation payable to the
Manager under this Agreement. Provided that the Manager and at least two-thirds
of the Independent Directors agree to the terms of the revised compensation to
be payable to the Manager within 45 days following the receipt of the Notice of
Proposal to Negotiate, the Termination Notice shall be deemed of no force and
effect and this Agreement shall continue in full force and effect on the terms
stated in this Agreement, except that the compensation payable to the Manager
hereunder shall be the revised compensation then agreed upon by the parties to
this Agreement. The Company and the Manager agree to execute and deliver an
amendment to this Agreement setting forth such revised compensation

 11
 

promptly upon
reaching an agreement regarding same. In the event that the Company and the
Manager are unable to agree to the terms of the revised compensation to be
payable to the Manager during such 45 day period, this Agreement shall
terminate, such termination to be effective on the date which is the later of
(A) ten (10) days following the end of such 45 day period and (B) the Effective
Termination Date originally set forth in the Termination Notice.

(b)  In
the event that this Agreement is terminated in accordance with the provisions
of Section 13(a) of this Agreement, the Company shall pay to the Manager, on
the date on which such termination is effective, a termination fee (the “Termination
Fee”) equal to the amount of four times the sum of the average annual Base
Management Fee and the average annual Incentive Compensation earned by the
Manager during the two 12-month periods immediately preceding the date of such
termination, calculated as of the end of the most recently completed fiscal
quarter prior to the date of termination. The obligation of the Company to pay
the Termination Fee shall survive the termination of this Agreement.

(c)  No
later than 180 days prior to the anniversary date of this Agreement of any year
during the Initial Term or Renewal Term, the Manager may deliver written notice
to the Company informing it of the Manager’s intention to decline to renew this
Agreement, whereupon
this Agreement shall not be renewed and extended and this Agreement shall
terminate effective on the anniversary date of this Agreement next following
the delivery of such notice.

(d)  If
this Agreement is terminated pursuant to this Section 13, such termination
shall be without any further liability or obligation of either party to the
other, except as provided in Sections 6, 9, 10, 13(b) and 16 of this Agreement.
In addition, Section 11 of this Agreement shall survive termination of this
Agreement.

SECTION
14.                          ASSIGNMENT.

(a)  Except
as set forth in Section 14(b) of this Agreement, this Agreement shall terminate
automatically in the event of its assignment, in whole or in part, by the
Manager, unless such assignment is consented to in writing by the Company with
the consent of a majority of the Independent Directors; provided, however, that no such consent
shall be required in the case of an assignment by the Manager to an entity
whose day-to-day business and operations are managed and supervised by Messrs.
Fanlo and Netjes (collectively, the “Principals”). Any such permitted
assignment shall bind the assignee under this Agreement in the same manner as
the Manager is bound, and the Manager shall be liable to the Company for all
errors or omissions of the assignee under any such assignment. In addition, the
assignee shall execute and deliver to the Company a counterpart of this
Agreement naming such assignee as Manager. This Agreement shall not be assigned
by the Company without the prior written consent of the Manager, except in the
case of assignment by the Company to another organization which is a successor
(by merger, consolidation or purchase of assets) to the Company, in which case
such successor organization shall be bound under this Agreement and by the
terms of such assignment in the same manner as the Company is bound under this
Agreement.

(b)  Notwithstanding
any provision of this Agreement, the Manager may subcontract and assign any or
all of its responsibilities under Sections 2(b), 2(c) and 2(d) of this
Agreement to any of its affiliates in accordance with the terms of this
Agreement applicable to any such subcontract or assignment, and the Company
hereby consents to any such assignment and subcontracting. In addition,
provided that the Manager provides prior written notice to the Company for informational
purposes only, nothing contained in this Agreement shall preclude any pledge,
hypothecation or other transfer of any amounts payable to the Manager under
this Agreement.

SECTION
15.                          TERMINATION FOR CAUSE.

(a)  The
Company may terminate this Agreement effective upon thirty (30) days’ prior
written notice of termination from the Company to the Manager, without payment
of any Termination Fee, if (i) the Manager materially breaches any provision of
this Agreement and such breach shall continue for a period of 30 days after
written notice thereof specifying such breach and requesting that the same be
remedied in such 30 day period, (ii) the Manager engages in any act of fraud,
misappropriation of funds, or embezzlement against the Company or any Subsidiary,
(iii) there is an event of any gross negligence on the part of the Manager in
the performance of its

 12
 

duties under this
Agreement, (iv) there is a commencement of any proceeding relating to the
Manager’s bankruptcy
or insolvency, (v) there is a dissolution of the Manager or (vi) there is a
Change of Control of the Manager.

(b)  The
Manager may terminate this Agreement effective upon sixty (60) days’ prior
written notice of termination to the Company in the event that the Company
shall default in the performance or observance of any material term, condition
or covenant contained in this Agreement and such default shall continue for a
period of 30 days after written notice thereof specifying such default and
requesting that the same be remedied in such 30 day period.

(c)  The
Manager may terminate this Agreement, without payment of any Termination Fee,
in the event the Company becomes regulated as an “investment company” under the
Investment Company Act, with such termination deemed to have occurred immediately
prior to such event.

SECTION 16.                          ACTION UPON TERMINATION. From and after the effective date of
termination of this Agreement, pursuant to Sections 13, 14, or 15 of this
Agreement, the Manager shall not be entitled to compensation for further services
under this Agreement, but shall be paid all compensation accruing to the date
of termination and, if terminated pursuant to Section 13 or Section 15(b), the
applicable Termination Fee. Upon such termination, the Manager shall forthwith:

(i)  after deducting
any accrued compensation and reimbursement for its expenses to which it is then
entitled, pay over to the Company or a Subsidiary all money collected and held
for the account of the Company or a Subsidiary pursuant to this Agreement;

(ii)  deliver to
the Board of Directors a full accounting, including a statement showing all
payments collected by it and a statement of all money held by it, covering the
period following the date of the last accounting furnished to the Board of
Directors with respect to the Company or a Subsidiary; and

(iii)  deliver
to the Board of Directors all property and documents of the Company or any
Subsidiary then in the custody of the Manager.

SECTION 17.                          RELEASE OF MONEY OR OTHER PROPERTY UPON WRITTEN
REQUEST. The Manager agrees
that any money or other property of the Company or Subsidiary held by the
Manager under this Agreement shall be held by the Manager as custodian for the
Company or Subsidiary, and the Manager’s records shall be appropriately marked
clearly to reflect the ownership of such money or other property by the Company
or such Subsidiary. Upon the receipt by the Manager of a written request signed
by a duly authorized officer of the Company requesting the Manager to release
to the Company or any Subsidiary any money or other property then held by the
Manager for the account of the Company or any Subsidiary under this Agreement,
the Manager shall release such money or other property to the Company or any
Subsidiary within a reasonable period of time, but in no event later than sixty
(60) days following such request. The Manager shall not be liable to the
Company, any Subsidiary, the Independent Directors, or the Company’s or a
Subsidiary’s shareholders, interest holders or partners for any acts performed
or omissions to act by the Company or any Subsidiary in connection with the
money or other property released to the Company or any Subsidiary in accordance
with the second sentence of this Section 17. The Company and any Subsidiary
shall indemnify the Manager and its members, managers, officers and employees
against any and all expenses, losses, damages, liabilities, demands, charges
and claims of any nature whatsoever, which arise in connection with the Manager’s
release of such money or other property to the Company or any Subsidiary in
accordance with the terms of this Section 17. Indemnification pursuant to this
provision shall be in addition to any right of the Manager to indemnification
under Section 11 of this Agreement.

SECTION 18.                          NOTICES. Unless expressly provided otherwise in this Agreement, all notices,
requests, demands and other communications required or permitted under this
Agreement shall be in writing and shall be deemed to have been duly given, made
and received when delivered against receipt or upon actual receipt of (i)
personal delivery, (ii) delivery by reputable overnight courier, (iii) delivery
by facsimile transmission with telephonic confirmation or (iv) delivery by
registered or certified mail, postage prepaid, return receipt requested, addressed
as set forth below:

 13
 

(a)  If
to the Company:

KKR Financial Holdings
LLC

555 California Street, 50th Floor

San Francisco, CA 94104

Attention: Chief Executive Officer

(b)  If
to the Manager:

KKR Financial Advisors
LLC

555 California Street, 50th Floor

San Francisco, CA 94104

Attention: Chief Operating Officer

Either party may
alter the address to which communications or copies are to be sent by giving
notice of such change of address in conformity with the provisions of this
Section 18 for the giving of notice.

SECTION 19.                          BINDING NATURE OF AGREEMENT; SUCCESSORS AND
ASSIGNS. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and permitted assigns as
provided in this Agreement.

SECTION 20.                          ENTIRE AGREEMENT. This Agreement contains the entire agreement
and understanding among the parties hereto with respect to the subject matter
of this Agreement, and supersedes all prior and contemporaneous agreements,
understandings, inducements and conditions, express or implied, oral or
written, of any nature whatsoever with respect to the subject matter of this
Agreement. The express terms of this Agreement control and supersede any course
of performance and/or usage of the trade inconsistent with any of the terms of
this Agreement. This Agreement may not be modified or amended other than by an
agreement in writing signed by the parties hereto.

SECTION 21.                          GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

SECTION 22.                          NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in
exercising, on the part of any party hereto, any right, remedy, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege.  The rights, remedies, powers and privileges
herein provided are cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law.  No waiver of any provision hereto
shall be effective unless it is in writing and is signed by the party asserted
to have granted such waiver.

SECTION 23.                          HEADINGS. The headings of the sections of this Agreement have been inserted for
convenience of reference only and shall not be deemed part of this Agreement.

SECTION 24.                          COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original as against any party whose signature
appears thereon, and all of which shall together constitute one and the same
instrument. This Agreement shall become binding when one or more counterparts
of this Agreement, individually or taken together, shall bear the signatures of
all of the parties reflected hereon as the signatories.

SECTION 25.                          SEVERABILITY. Any provision of this Agreement that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction

 14
 

SECTION 26.                          GENDER. Words used herein regardless of the number and gender specifically
used, shall be deemed and construed to include any other number, singular or
plural, and any other gender, masculine, feminine or neuter, as the context
requires.

SECTION 27.                          AMENDMENT
AND RESTATEMENT.  This Agreement
amends and restates the Original Management Agreement in its entirety.  From and after the date hereof, this
Agreement shall supersede the Original Management Agreement in its entirety, it
being understood that, as to all matters arising before the date hereof, the
Original Management Agreement continues to govern and control.

 15
 

IN WITNESS
WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.

	
  

  	
  KKR FINANCIAL HOLDINGS LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ SATURNINO S.
  FANLO

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Saturnino S. Fanlo

  
	
   

  	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KKR FINANCIAL ADVISORS LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DAVID A.
  NETJES

  	
   

  
	
   

  	
   

  	
  Name:

  	
  David A. Netjes

  
	
   

  	
   

  	
  Title:

  	
  Chief Operating Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  KKR FINANCIAL CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ DAVID A.
  NETJES

  	
   

  
	
   

  	
   

  	
  Name:

  	
  David A. Netjes

  
	
   

  	
   

  	
  Title:

  	
  Chief Operating Officer

  
							

 

 16

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