Document:

Exhibit 10.3

 

NONQUALIFIED STOCK OPTION AGREEMENT

 

THIS AGREEMENT (the “Agreement”), is made effective as
of the         day of                  (hereinafter called the “Date
of Grant”), between KKR Financial Corp., a Maryland corporation (hereinafter
called the “Company”), and                         (hereinafter called
the “Participant”):

 

R
E  C  I  T  A  L  S:

 

WHEREAS, the Company has adopted the Amended and
Restated 2004 Stock Incentive Plan for KKR Financial Corp. (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 shareholders 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          Shares.  The purchase price of the Shares subject to
the Option shall be $           per Share
(the “Option Price”).  The Option is
intended to be a non-qualified stock 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 Manger 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; provided, that such Shares have been
held by the Participant for no less than six months (or such other period as
established from time to time by the Committee or United States generally
accepted accounting principles), (iii) partly in cash and, to the extent
permitted by the Committee, partly in such Shares (provided that such
Shares have been held by the Participant for no less than six months, or such
other period as established from time to time by the Committee or United States
generally accepted accounting principles) or (iv) 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 other rights of a stockholder
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 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

 

2

 

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 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

 

3

 

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 not subject to any pledge or other security interest and
which have been vested and held by the Participant for no less than six
months (or such other period as established from time to time by the Committee
or United States generally accepted accounting principles)) 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.

 

4

 

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

 

 

	
   

  	
  KKR FINANCIAL CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  Agreed and acknowledged as of the date first above written:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
					

 

5Exhibit 10.4

 

RESTRICTED
STOCK AWARD AGREEMENT

 

THIS AGREEMENT (the “Agreement”) is made, effective as
of the         day of        (the “Date of Grant”), between KKR
Financial Corp., a Maryland corporation (hereinafter called the “Company”),                         (hereinafter called the “Participant”).

 

R
E  C  I  T  A  L  S:

 

WHEREAS, the Company has adopted the Amended and
Restated 2004 Stock Incentive Plan for KKR Financial Corp. (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 stockholders to grant the
restricted stock 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 stock award (the “Restricted Stock Award”) consisting of                        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
Manger 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 stock 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 Stock Award, the Participant shall deliver to the Company a stock
power, duly endorsed in blank, relating to the Restricted Shares. No
certificates shall be issued for fractional Shares.

 

4.                                       Rights as a
Stockholder.  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 common stockholder of the
Company, including, without limitation, voting rights with respect to the
Restricted Shares and the Participant shall receive, when paid, any dividends
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 stock 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 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

 

2

 

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 not subject to any pledge or other
security interest and which have been vested and held by the Participant for no
less than six months (or such other period as established from time to time by
the Committee or United States generally accepted accounting principles))
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.

 

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
Stock 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 Stock 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.

 

3

 

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.

 

4

 

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

 

	
   

  	
  KKR FINANCIAL CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
  Agreed and acknowledged as of the date first above written:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  
					

 

5

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00086-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00086-of-00352.parquet"}]]