0001104659-12-019374.txt : 20120320 0001104659-12-019374.hdr.sgml : 20120320 20120320111606 ACCESSION NUMBER: 0001104659-12-019374 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20120320 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20120320 DATE AS OF CHANGE: 20120320 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KKR Financial Holdings LLC CENTRAL INDEX KEY: 0001386926 STANDARD INDUSTRIAL CLASSIFICATION: FINANCE SERVICES [6199] IRS NUMBER: 113801844 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-33437 FILM NUMBER: 12702566 BUSINESS ADDRESS: STREET 1: 555 CALIFORNIA STREET, 50TH FLOOR CITY: SAN FRANCISCO STATE: CA ZIP: 94104 BUSINESS PHONE: (415) 315-3620 MAIL ADDRESS: STREET 1: 555 CALIFORNIA STREET, 50TH FLOOR CITY: SAN FRANCISCO STATE: CA ZIP: 94104 8-K 1 a12-6108_68k.htm 8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 20, 2012

KKR Financial Holdings LLC

(Exact Name of Registrant as specified in its charter)

Delaware		001-33437		11-3801844
(State or other Jurisdiction of Incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

555 California Street, 50th Floor, San Francisco, California		94104
(Address of principal executive office)		(Zip Code)

415-315-3620

Registrant’s telephone number, including area code

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13.e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

On March 20, 2012, KKR Financial Holdings LLC (the “Company”) issued and sold $115 million aggregate principal amount of 7.500% Senior Notes due March 20, 2042 (the “Notes”), including $15 million principal amount that was sold pursuant to an overallotment option described below, in a public offering pursuant to the Company’s Registration Statement on Form S-3 (File No. 333-167479) and a related prospectus, including the related prospectus supplement, dated March 13, 2012, filed with the Securities and Exchange Commission by the Company on March 15, 2012 pursuant to Rule 424(b)(5) under the Securities Act of 1933, as amended (the “Prospectus Supplement”).

The Notes were issued pursuant to an indenture, dated as of November 15, 2011 (the “Base Indenture”), between the Company and Wilmington Trust, National Association, as trustee (the “Trustee”), and the second supplemental indenture thereto among the Company, the Trustee and Citibank, N.A. as authenticating agent, paying agent and security registrar dated as of March 20, 2012 (the “Supplemental Indenture” and, together with the Base Indenture, the “Indenture”). Terms of the Indenture are described in the section entitled “Description of Notes” of the Prospectus Supplement, which is incorporated herein by reference.

The Notes bear interest at a rate of 7.500% per year on the principal amount, accruing from March 20, 2012. Interest is payable quarterly in arrears on March 20, June 20, September 20 and December 20 of each year, beginning on June 20, 2012. The Notes will mature on March 20, 2042 unless previously redeemed or repurchased in accordance with their terms prior to such date.

The Company may redeem the Notes, in whole or in part, at any time on or after March 20, 2017 at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest to the redemption date.

Upon a change of control and reduction in the Notes’ ratings to below investment grade by two nationally recognized statistical ratings organizations, all terms as defined in the Indenture, the Company will be required to make an offer to repurchase all outstanding Notes at a price in cash equal to 101% of the principal amount of the Notes, plus accrued and unpaid interest to, but not including, the repurchase date.

The Notes are the Company’s senior, unsecured obligations and rank equally in right of payment with all of the Company’s existing and future indebtedness that is not contractually subordinated to the Notes. However, the Notes are effectively subordinated to all of the Company’s existing and future secured debt, to the extent of the assets securing such debt, and are structurally subordinated to all indebtedness and preferred equity of the Company’s subsidiaries.

The Notes contain certain restrictions on the Company’s ability to create liens over its equity interests in its subsidiaries and to merge, consolidate or sell all or substantially all of its assets. Otherwise, the Indenture does not contain any provisions that would limit the Company’s ability to incur indebtedness.

The following events are considered “Events of Default,” which may result in the acceleration of the maturity of the Notes:

· if the Company defaults in the payment of interest on the Notes, and such default continues for 30 days;

· if the Company defaults in the payment of the principal of the Notes when the same becomes due and payable upon maturity, upon redemption or otherwise;

· the Company’s failure to pay the repurchase price when due in connection with a change of control repurchase event;

· if the Company fails to comply with any of its other agreements in the Notes or in the Indenture, which failure continues for 90 days after the Company receives notice from the Trustee or the holders of at least 25% of the aggregate principal amount of the Notes then outstanding;

· if the Company defaults after the expiration of any applicable grace period in the payment of principal when due on, or resulting in acceleration of, other indebtedness for borrowed money, other than non-recourse indebtedness, of the Company or any of the Company’s subsidiaries, other than a structured finance subsidiary, where the aggregate principal amount with respect to which the default or acceleration has occurred exceeds $60 million and such indebtedness is not discharged, or such default in payment or acceleration is not cured or rescinded, prior to written notice of acceleration of the Notes; and

· if certain events of bankruptcy or insolvency occur with respect to the Company.

If an Event of Default with respect to the Notes occurs and is continuing, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding may declare the principal of the Notes to be due and payable immediately.

The summary of the foregoing transactions is qualified in its entirety by reference to the text of the Base Indenture and the Supplemental Indenture and related global note, which are included as Exhibits 4.1, 4.2 and 4.3, respectively, hereto and are incorporated herein by reference.

Item 8.01 Other Events.

The Notes were sold pursuant to an underwriting agreement (the “Underwriting Agreement”) among the Company, KKR Financial Advisors LLC, and Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities, LLC, as representatives (the “Representatives”) of the underwriters (collectively, the “Underwriters”). Pursuant to the Underwriting Agreement, the Company granted the Underwriters an option to purchase up to an additional $15 million aggregate principal amount of Notes solely to cover overallotments, which on March 16, 2012, the Representatives exercised in full. Terms of the Underwriting Agreement are described in the section entitled “Underwriting” of the Prospectus Supplement, which is incorporated herein by reference. The Underwriting Agreement is attached hereto as Exhibit 1.1.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

The following documents are attached as exhibits to this Current Report on Form 8-K:

Exhibit Number		Description
1.1		Underwriting Agreement, dated as of March 13, 2012, among the Company, KKR Financial Advisors LLC, Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities, LLC.

4.1		Base Indenture between the Company and Wilmington Trust, National Association, as Trustee (incorporated by reference to Exhibit 4.1 to our Current Report on Form 8-K filed with the SEC on November 15, 2011).

4.2		Supplemental Indenture, dated as of March 20, 2012, between the Company, Wilmington Trust, National Association, as Trustee, and Citibank N.A., as Authenticating Agent, Paying Agent and Security Registrar.

4.3		Form of 7.500% Senior Note due March 20, 2042 (included in Exhibit 4.2 hereto).

99.1		Opinion of Simpson Thacher & Bartlett LLP, relating to the validity of the Notes.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	KKR FINANCIAL HOLDINGS LLC


	By:	/s/ NICOLE J. MACARCHUK
	Name:	Nicole J. Macarchuk
	Title:	Secretary and General Counsel

Date: March 20, 2012

EX-1.1 2 a12-6108_6ex1d1.htm EX-1.1

Exhibit 1.1

KKR FINANCIAL HOLDINGS LLC

7.500% Senior Notes due 2042

Underwriting Agreement

March 13, 2012

Citigroup Global Markets Inc.

Morgan Stanley & Co. LLC

UBS Securities LLC
Wells Fargo Securities, LLC

As Representatives of the

several Underwriters listed

in Schedule 1 hereto

c/o Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York 10013

Morgan Stanley & Co. LLC

1585 Broadway

New York, New York 10036

UBS Securities LLC

677 Washington Boulevard
Stamford, CT 06901

Wells Fargo Securities, LLC

301 S. College Street

Charlotte, NC 28288

Ladies and Gentlemen:

KKR Financial Holdings LLC, a Delaware limited liability company (the “Company”), proposes to issue and sell to the several Underwriters listed in Schedule 1 hereto (the “Underwriters”), for whom you are acting as representatives (the “Representatives”), $100,000,000 aggregate principal amount of its 7.500% Senior Notes due 2042 (the “Underwritten Securities”) and, at the option of the Underwriters, up to an additional $15,000,000 aggregate principal amount of its 7.500% Senior Notes due 2042 (the “Option Securities”) to cover over-allotments, if any, pursuant to Section 2 hereof. The Underwritten Securities and the Option Securities are herein referred to as the “Securities”. The Securities will be issued pursuant to an indenture dated as of November 15, 2011, as

supplemented by a supplemental indenture to be dated as of March 20, 2012 (as supplemented, the “Indenture”) between the Company and Wilmington Trust, National Association, as trustee (the “Trustee”).

The Company hereby confirms its agreement with the several Underwriters concerning the purchase and sale of the Securities, as follows:

1. Registration Statement. The Company has prepared and filed with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively, the “Securities Act”), a registration statement (File No. 333-167479) including a prospectus (the “Basic Prospectus”), relating to the registration of certain securities described therein, including the Securities. Such registration statement, as amended at the time it becomes effective, including the information, if any, deemed pursuant to Rule 430A, 430B or 430C under the Securities Act to be part of the registration statement at the time of its effectiveness (“Rule 430 Information”), is referred to herein as the “Registration Statement”; and as used herein, the term “Preliminary Prospectus” means the Basic Prospectus together with the preliminary prospectus supplement dated March 13, 2012 specifically relating to the Securities; and the term “Prospectus” means the Basic Prospectus as supplemented by the prospectus supplement specifically relating to the Securities in the form first used (or made available upon request of purchasers pursuant to Rule 173 under the Securities Act) in connection with confirmation of sales of the Securities. If the Company has filed an abbreviated registration statement pursuant to Rule 462(b) under the Securities Act (the “Rule 462 Registration Statement”), then any reference herein to the term “Registration Statement” shall be deemed to include such Rule 462 Registration Statement. Any reference in this Agreement to the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Securities Act, as of the effective date of the Registration Statement or the date of such Preliminary Prospectus or the Prospectus, as the case may be, and any reference to “amend”, “amendment” or “supplement” with respect to the Registration Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include any documents filed after such date under the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder (collectively, the “Exchange Act”) that are deemed to be incorporated by reference therein. Capitalized terms used but not defined herein shall have the meanings given to such terms in the Registration Statement and the Prospectus.

At or prior to the time when sales of the Securities were first made (the “Execution Time”), the Company had prepared the following information (collectively, the “Disclosure Package”): a Preliminary Prospectus dated March

13, 2012, and each “free-writing prospectus” (as defined pursuant to Rule 405 under the Securities Act) listed on Annex F hereto.

2. Purchase of the Securities by the Underwriters.

(a) The Company agrees to issue and sell the Underwritten Securities to the several Underwriters as provided in this Agreement, and each Underwriter, on the basis of the representations, warranties and agreements set forth herein and subject to the conditions set forth herein, agrees, severally and not jointly, to purchase from the Company the respective principal amount of Underwritten Securities set forth opposite such Underwriter’s name in Schedule 1 hereto at a price equal to 96.85% of the principal amount thereof with respect to Underwritten Securities sold to retail investors (the “Retail Purchase Price”) and at a price equal to 98.00% of the principal amount thereof with respect to Underwritten Securities sold to institutional investors (the “Institutional Purchase Price”) plus accrued interest, if any, from March 20, 2012 to the Closing Date (as defined below).

In addition, the Company agrees to issue and sell the Option Securities to the several Underwriters as provided in this Agreement to cover over-allotments, if any, and the Underwriters, on the basis of the representations, warranties and agreements set forth herein and subject to the conditions set forth herein, shall have the option to purchase, severally and not jointly, from the Company the Option Securities at the Retail Purchase Price plus accrued interest, if any, from the Closing Date to the date of payment and delivery.

If any Option Securities are to be purchased, the principal amount of Option Securities to be purchased by each Underwriter shall be the principal amount of Option Securities which bears the same ratio to the aggregate principal amount of Option Securities being purchased as the principal amount of Underwritten Securities set forth opposite the name of such Underwriter in Schedule 1 hereto (or such amount increased as set forth in Section 10 hereof) bears to the aggregate principal amount of Underwritten Securities being purchased from the Company by the several Underwriters, subject, however, to such adjustments to ensure that the Option Securities are not issued in minimum denominations of less than $25 and whole multiples of $25 in excess thereof as the Representatives in their sole discretion shall make.

The Underwriters may exercise the option to purchase the Option Securities at any time in whole, or from time to time in part, on or before the thirtieth day following the date of this Agreement, by written notice from the Representatives to the Company. Such notice shall set forth the aggregate principal amount of Option Securities as to which the option is

being exercised and the date and time when the Option Securities are to be delivered and paid for, which may be the same date and time as the Closing Date (as hereinafter defined) but shall not be earlier than the Closing Date or, with respect to Option Securities to be delivered after the Closing Date, no earlier than two or later than ten full business days (as hereinafter defined) after the date of such notice (unless such time and date are postponed in accordance with the provisions of Section 10 hereof).

(b) The Company understands that the Underwriters intend to make a public offering of the Securities as soon after the effectiveness of this Agreement as in the judgment of the Representatives is advisable, and initially to offer the Securities on the terms set forth in the Prospectus. The Company acknowledges and agrees that the Underwriters may offer and sell Securities to or through any affiliate of an Underwriter and that any such affiliate may offer and sell Securities purchased by it to or through any Underwriter.

(c) Payment for the Securities shall be made by wire transfer in immediately available funds to the account specified by the Company to the Representatives in the case of the Underwritten Securities, at the offices of Davis Polk & Wardwell LLP, 450 Lexington Avenue, New York, New York 10017 at 10:00 A.M. New York City time on March 20, 2012, or at such other time or place on the same or such other date, not later than the fifth business day thereafter, as the Representatives and the Company may agree upon in writing or, in the case of the Option Securities, on the date and at the time and place specified by the Representatives in the written notice of the Underwriters’ election to purchase such Option Securities. The time and date of such payment for the Underwritten Securities is referred to herein as the “Closing Date” and the time and date for such payment for the Option Securities, if other than the Closing Date, is herein referred to as the “Additional Closing Date”.

Payment for the Securities to be purchased on the Closing Date or the Additional Closing Date, as the case may be, shall be made against delivery to the nominee of The Depository Trust Company (“DTC”), for the respective accounts of the several Underwriters of the Securities to be purchased on such date of one or more global notes representing the Securities (collectively, the “Global Note”), with any transfer taxes payable in connection with the sale of such Securities duly paid by the Company. The Global Note will be made available for inspection by the Representatives at the office of Davis Polk & Wardwell LLP set forth above not later than 1:00 P.M., New York City time, on the business day prior to the Closing Date or the Additional Closing Date, as the case may be.

(d) The Company acknowledges and agrees that the Underwriters are acting solely in the capacity of an arm’s length contractual counterparty to the Company with respect to the offering of Securities contemplated hereby (including in connection with determining the terms of the offering) and not as a financial advisor or a fiduciary to, or an agent of, the Company or any other person. Additionally, neither the Representatives nor any other Underwriter is advising the Company or any other person as to any legal, tax, investment, accounting or regulatory matters in any jurisdiction. The Company shall consult with its own advisors concerning such matters and shall be responsible for making its own independent investigation and appraisal of the transactions contemplated hereby, and the Underwriters shall have no responsibility or liability to the Company with respect thereto. Any review by the Underwriters of the Company, the transactions contemplated hereby or other matters relating to such transactions will be performed solely for the benefit of the Underwriters and shall not be on behalf of the Company.

3. Representations and Warranties. The Company and KKR Financial Advisors LLC, a Delaware limited liability company (the “Manager”), jointly and severally, represent and warrant to, and agree with, each Underwriter as set forth below in this Section 3 that:

(a) Preliminary Prospectus. No order preventing or suspending the use of any Preliminary Prospectus has been issued by the Commission, and each Preliminary Prospectus included in the Disclosure Package, at the time of filing thereof, complied in all material respects with the Securities Act, and no Preliminary Prospectus, at the time of filing thereof, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation and warranty with respect to any statements or omissions made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by or on behalf of such Underwriter through the Representatives expressly for use in any Preliminary Prospectus, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in Section 7(b) hereof.

(b) Disclosure Package. The Disclosure Package, at the Execution Time, did not, and at the Closing Date and as of the Additional Closing Date, as the case may be, will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that

the Company makes no representation and warranty with respect to any statements or omissions made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by or on behalf of such Underwriter through the Representatives expressly for use in such Disclosure Package, it being understood and agreed that the only such information furnished by or on behalf of any Underwriter consists of the information described as such in Section 7(b) hereof.

(c) Issuer Free Writing Prospectus. Other than the Registration Statement, the Preliminary Prospectus and the Prospectus, the Company (including its agents and representatives, other than the Underwriters in their capacity as such) has not made, used, prepared, authorized, approved or referred to and will not prepare, make, use, authorize, approve or refer to any “written communication” (as defined in Rule 405 under the Securities Act) that constitutes an offer to sell or solicitation of an offer to buy the Securities (each such communication by the Company or its agents and representatives (other than a communication referred to in clause (i) below) (an “Issuer Free Writing Prospectus”)) other than (i) any document not constituting a prospectus pursuant to Section 2(a)(10)(a) of the Securities Act or Rule 134 under the Securities Act or (ii) the documents listed on Annex F hereto, each electronic road show and any other written communications approved in writing in advance by the Representatives. Each such Issuer Free Writing Prospectus complied in all material respects with the Securities Act, has been or will be (within the time period specified in Rule 433) filed in accordance with the Securities Act (to the extent required thereby) and, when taken together with the Preliminary Prospectus filed prior to the first use of such Issuer Free Writing Prospectus, did not, and as of the Closing Date and as of the Additional Closing Date, as the case may be, will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Each such Issuer Free Writing Prospectus, as of its issue date and at all subsequent times through the completion of the public offer and sale of the Securities or until any earlier date that the Company notified or notifies the Representatives as described in Section 4(e), did not, does not and will not include any information that conflicted, conflicts or will conflict with the information contained in the Registration Statement or the Prospectus, including any document incorporated by reference therein and any Preliminary Prospectus deemed to be a part thereof that has not been superseded or modified.

(d) Registration Statement and Prospectus. The Registration Statement has become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act. No order suspending the

effectiveness of the Registration Statement has been issued by the Commission and no proceeding for that purpose or pursuant to Section 8A of the Securities Act against the Company or related to the offering has been initiated or, to the Company’s knowledge, threatened by the Commission; as of the applicable effective date of the Registration Statement and any post-effective amendment thereto, the Registration Statement complied and will comply in all material respects with the Securities Act and the Trust Indenture Act of 1939, as amended, and the rules and regulations of the Commission thereunder (collectively, the “Trust Indenture Act”), and did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading; and as of the date of the Prospectus and any amendment or supplement thereto and as of the Closing Date and as of the Additional Closing Date, as the case may be, the Prospectus does not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation and warranty with respect to (i) that part of the Registration Statement that constitutes the Statement of Eligibility and Qualification (Form T-1) of the Trustee under the Trust Indenture Act or (ii) any statements or omissions made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by or on behalf of such Underwriter through the Representatives expressly for use in the Registration Statement and the Prospectus and any amendment or supplement thereto, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in Section 7(b) hereof.

(e) Incorporated Documents. The documents incorporated by reference in the Registration Statement, the Prospectus or the Disclosure Package, when they were filed with the Commission conformed in all material respects to the requirements of the Securities Act or the Exchange Act, as applicable, and none of such documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and any further documents so filed and incorporated by reference in the Registration Statement, the Prospectus or the Disclosure Package, when such documents are filed with the Commission, will conform in all material respects to the requirements of the Securities Act or the Exchange Act, as applicable, and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the

statements therein, in the light of the circumstances under which they were made, not misleading.

(f) Organization and Good Standing. Each of the Company and its subsidiaries has been duly formed or incorporated, as the case may be, and is validly existing as a limited liability company, business or statutory trust, or corporation, as the case may be, in good standing under the laws of the jurisdiction in which it is formed or incorporated, as the case may be, with full limited liability company, trust or corporate power and authority as a limited liability company, business or statutory trust, or corporation, as the case may be, to own, lease and operate its properties and conduct its business as described in the Disclosure Package and the Prospectus; and each of the Company and its subsidiaries is duly qualified to do business as a foreign limited liability company, business or statutory trust, or corporation, as the case may be, and is in good standing under the applicable laws of each jurisdiction which requires such qualification, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the condition (financial or otherwise), members’ or shareholders’ equity, results of operations, assets or business of the Company and its subsidiaries, taken as a whole (a “Material Adverse Effect”).

(g) Subsidiary Shares. All the outstanding shares of capital stock, trust securities or limited liability company interests, as the case may be, of each subsidiary have been duly and validly authorized and issued and are fully paid and nonassessable, and, except as otherwise set forth in the Disclosure Package and the Prospectus, all outstanding shares, trust securities and limited liability company interests of the subsidiaries are owned by the Company either directly or indirectly, free and clear of any perfected security interest or any other security interests, claims, liens or encumbrances.

(h) Capitalization. The Company’s authorized capitalization is as set forth in the Disclosure Package and the Prospectus under the caption “Capitalization” in the line items “Common shares” and “Preferred shares”.

(i) Description of Notes. The statements set forth under the heading “Description of Notes” in the Preliminary Prospectus and the Prospectus, insofar as such statements purport to summarize certain provisions of the Securities and the Indenture provide a fair summary of such provisions.

(j) No Consents Required. No consent, approval, authorization, filing with or order of any court or governmental agency or body is required

in connection with the transactions contemplated herein, except such as have been obtained under the Securities Act and the Exchange Act and such as may be required under the Blue Sky laws of any jurisdiction in connection with the purchase and distribution of the Securities by the Underwriters in the manner contemplated herein and in the Disclosure Package and the Prospectus.

(k) No Conflicts. None of the execution and delivery of this Agreement, the Indenture, the Securities, the issuance and sale of the Securities nor the consummation of any other of the transactions herein or therein contemplated, nor the fulfillment of the terms hereof or thereof, nor compliance by the Company and the Manager with the terms and provisions of this Agreement, the Indenture, the Securities and the Amended and Restated Management Agreement, dated as of May 4, 2007 (as amended, the “Management Agreement”), as applicable, will conflict with, result in a breach or violation of, or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, (i) the charter or by-laws or other organizational or governing documents, as applicable, of the Company or any of its subsidiaries, including, without limitation, the certificate of formation of the Company and the Amended and Restated Operating Agreement of the Company (as amended, the “Operating Agreement”), (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which the Company or any of its subsidiaries or the Manager is a party or bound or to which any property of the Company or any of its subsidiaries or the Manager is subject, or (iii) any statute, law, rule, regulation, judgment, order or decree applicable to the Company or any of its subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or any of its subsidiaries or any properties of the Company or any of its subsidiaries or the Manager, except (solely in the case of clauses (ii) and (iii) of this paragraph) for such breaches or violations which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect and which would not reasonably be expected to have a material adverse effect on the transactions contemplated by this Agreement.

(l) No Registration Rights. No holders or beneficial owners of securities of the Company have rights to the registration of such securities under the Registration Statement.

(m) Financial Statements. The consolidated financial statements of the Company and its consolidated subsidiaries incorporated by reference in the Preliminary Prospectus, the Prospectus and the Registration Statement present fairly in all material respects the financial condition,

results of operations and cash flows of the Company and its consolidated subsidiaries as of the dates and for the periods indicated, comply as to form with the applicable accounting requirements of the Securities Act and have been prepared in conformity with generally accepted accounting principles applied on a consistent basis (except as otherwise noted therein). The selected financial data set forth under the caption “Selected Consolidated Financial Data” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 presents fairly in all material respects, on the basis stated therein, the information included therein.

(n) Legal Proceedings. No action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries or the Manager or any property of the Company or any of its subsidiaries or of the Manager is pending or, to the knowledge of the Company and the Manager, threatened that if determined adversely to the Company or any of its subsidiaries or the Manager, as the case may be, (i) could, individually or in the aggregate, reasonably be expected to have a material adverse effect on the performance of this Agreement or the consummation of any of the transactions contemplated hereby or (ii) could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, except as set forth in or contemplated in the Disclosure Package and the Prospectus (exclusive of any supplement thereto filed after the Execution Time).

(o) Conduct of Operations. Each of the Company and each of its subsidiaries owns or leases all such properties as are necessary to the conduct of its operations as presently conducted.

(p) No Violation or Default. Neither the Company nor any subsidiary is in violation or default of (i) any provision of its charter or bylaws or other organizational documents, as applicable, including, without limitation, the certificate of formation of the Company or the Operating Agreement, (ii) the terms of any indenture, contract, lease, mortgage, deed of trust, note agreement, loan agreement or other agreement, obligation, condition, covenant or instrument to which it is a party or bound or to which its property is subject, or (iii) any statute, law, rule, regulation, judgment, order or decree of any court, regulatory body, administrative agency, governmental body, arbitrator or other authority having jurisdiction over the Company or such subsidiary or any properties of the Company or any of its subsidiaries, as applicable, except (solely in the case of clauses (ii) and (iii) of this paragraph) for such defaults or violations which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Manager is not in violation or default of any provisions of the Management Agreement.

(q) The Indenture. The Indenture has been duly qualified under the Trust Indenture Act. The Indenture has been duly authorized by the Company and, when duly executed and delivered in accordance with its terms by each of the parties thereto, will constitute a valid and legally binding agreement of the Company enforceable against the Company in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency or similar laws affecting creditors’ rights generally or by general principles of equity including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether considered in a proceeding in equity or at law (collectively, the “Enforceability Exceptions”).

(r) Underwriting Agreement. This Agreement has been duly authorized, executed and delivered by the Company and the Manager.

(s) The Securities. The Securities have been duly authorized by the Company and, when duly executed, authenticated, issued and delivered as provided in the Indenture (assuming due authentication of the Securities by the Trustee) and paid for as provided herein, will be duly and validly issued and outstanding and will constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms, subject to the Enforceability Exceptions, and will be entitled to the benefits of the Indenture.

(t) Independent Accountants. Deloitte & Touche LLP, who have rendered their report of independent registered public accounting firm on certain consolidated financial statements of the Company and its consolidated subsidiaries and delivered their report dated as of February 28, 2012 with respect to the audited consolidated financial statements included in the Disclosure Package and the Prospectus, are an independent registered public accounting firm with respect to the Company within the meaning of the Securities Act and the applicable published rules and regulations thereunder and the rules and regulations of the Public Company Accounting Oversight Board.

(u) Tax and Information Returns. The Company and its subsidiaries have filed all foreign, federal, state and local tax and information returns that are required to be filed or, if applicable, has requested extensions thereof (except in any case in which the failure so to file would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, except as set forth in or contemplated in the Disclosure Package and the Prospectus (exclusive of any supplement thereto filed after the Execution Time)) and have paid all taxes required to be paid by any of them and any other assessment, fine or penalty levied against it, to the extent that any of the foregoing is due and payable, except

for any such assessment, fine or penalty that is currently being contested in good faith or which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect, except as set forth in or contemplated in the Disclosure Package and the Prospectus (exclusive of any supplement thereto filed after the Execution Time).

(v) Insurance. The Company and its subsidiaries carry or are covered by insurance in such amounts and covering such risks as is adequate for the conduct of their respective businesses and the value of their respective assets, except where the failure to maintain such insurance would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(w) No Restrictions on Subsidiaries. No subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such subsidiary’s capital stock or other equity interests, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary’s property or assets to the Company or any other subsidiary of the Company, except as described in or contemplated by the Disclosure Package, the Prospectus (exclusive of any supplement thereto filed after the Execution Time) and the Stock Purchase Agreement dated March 4, 2008 among KKR Financial Corp., the Company and Rock Capital 2 LLC relating to the sale of KKR Financial Corp., as amended and restated on June 30, 2008, except that the Company’s special purpose subsidiaries (KKR Financial CLO 2005-2, Ltd., KKR Financial CLO 2006-1, Ltd., KKR Financial CLO 2007-1, Ltd., KKR Financial CLO 2007-4, Ltd., KKR Financial CLO 2007-A, Ltd., KKR Financial CLO 2008-1, Ltd., KKR Financial CLO 2009-1, Ltd., KKR Financial CDO 2005-1, Ltd., KKR Financial CLO 2005-1, Ltd., KKR Financial CLO 2011-1, Ltd., KFN NR Investors L.P. and Wayzata Funding LLC) are precluded from paying any dividends and/or making any distributions of cash or earnings to the Company except as specifically provided in the respective indentures and/or credit agreements, as the case may be, to which such special purpose subsidiaries are parties.

(x) Licenses and Permits. The Company and its subsidiaries possess all licenses, certificates, permits and other authorizations issued by the appropriate federal, state or foreign regulatory authorities necessary to conduct their respective businesses, and, to the Company’s knowledge, neither the Company nor any such subsidiary has received any notice of proceedings relating to the revocation or modification of any such certificate, authorization or permit which, if the subject of an unfavorable decision, ruling or finding, would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, except as set

forth in or contemplated in the Disclosure Package and the Prospectus (exclusive of any supplement thereto filed after the Execution Time).

(y) Accounting Controls. The Company and each of its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

(z) Disclosure Controls. The Company and its subsidiaries maintain “disclosure controls and procedures” (as such term is defined in Rule 13a-15(e) under the Exchange Act); such disclosure controls and procedures are effective.

(aa) Sarbanes-Oxley Act. The Company is in compliance in all material respects with all applicable requirements of the Sarbanes-Oxley Act of 2002 and the rules and regulations thereunder.

(bb) Compliance with Law. The Company and its subsidiaries are in compliance with all applicable federal, state, local and foreign laws, rules and regulations, orders, decrees and judgments, including those relating to transactions with affiliates, except where the failure to so comply would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(cc) Compliance With Environmental Laws and ERISA. Neither the Company nor its subsidiaries nor the Manager has violated, received notice of or knows of any violation by the Company or its subsidiaries or the Manager with respect to any applicable environmental, safety or similar law, or any federal or state law relating to discrimination in the hiring, promotion or pay of employees performing services for the Company or its subsidiaries, or any applicable federal or state wages and hours law, or any provisions of the Employee Retirement Income Security Act of 1974, as amended, or the rules and regulations promulgated thereunder, the violation of any of which could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(dd) No Unlawful Payments. Neither the Company nor any of its subsidiaries nor, to the knowledge of the Company, any officer or director

purporting to act on behalf of the Company has at any time (i) made any contributions to any candidate for state or national political office, or failed to disclose fully any such contributions, in either case, in violation of law, (ii) made any payment to any state, federal or foreign governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments required or allowed by applicable law, or (iii) engaged in any transactions, maintained any bank account or used any corporate funds except for transactions, bank accounts and funds which have been and are reflected in the Company’s consolidated financial statements.

(ee) No Outstanding Related Party Loans. There are no outstanding loans or advances or guarantees of indebtedness by the Company to or for the benefit of any of the officers, directors, affiliates that are natural persons or representatives that are natural persons of the Company or any of the members of the families of any of them.

(ff) Most Current Data. To the knowledge of the Company, the industry, statistical and market-related data included or incorporated by reference in the Registration Statement and the Prospectus is based on or derived from the most current available sources.

(gg) Intangible Property Rights. To the extent applicable, the Company owns or possesses such licenses or other rights to use all material patents, trademarks, service marks, trade names, copyrights, software, trade secrets, other intangible property rights and know-how (collectively “Intangibles”) as are necessary to entitle the Company to conduct its business, and the Company has not violated or received written notice of any infringement of or conflict with (and the Company does not know of any such infringement of or conflict with) asserted rights of others with respect to any Intangibles that could, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and, without limitation to the foregoing, the Company has a paid-up royalty free and non-exclusive license to use the service mark, corporate name and trade name “KKR.”

(hh) Lending Relationships. Except as disclosed in the Disclosure Package and the Prospectus (exclusive of any supplement thereto filed after the Execution Time), the Company (i) does not have any material lending or other relationship with any bank or lending affiliate of any of the Underwriters and (ii) does not intend to use any of the proceeds from the sale of the Securities hereunder to repay any outstanding loan or credit facility owed to any affiliate of any of the Underwriters.

(ii) Management Agreement. The Management Agreement has been duly authorized, executed and delivered by, and is a valid and binding agreement of, the Company and the Manager, enforceable against the Company and the Manager in accordance with its terms, except as the enforceability thereof may be limited by the Enforceability Exceptions.

(jj) REIT. KKR Financial Corp. has satisfied the requirements for qualification and taxation as a real estate investment trust (a “REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”), for its taxable years ended December 31, 2004 through December 31, 2007 and for the period from January 1, 2008 through June 30, 2008, and KKR Financial Holdings II, LLC has satisfied the requirements for qualification and taxation as a REIT under the Code for its taxable years ended December 31, 2007 through December 31, 2011, and its current and proposed method of operation will enable it to continue to qualify as a REIT for its taxable year ending December 31, 2012 and thereafter and all statements in the Disclosure Package and the Prospectus regarding KKR Financial Corp.’s and KKR Financial Holdings II, LLC’s qualification as a REIT are true, complete and correct in all material respects.

(kk) Investment Advisers Act. The Manager is not prohibited by the Investment Advisers Act of 1940, as amended, or the rules or regulations promulgated thereunder from acting under the Management Agreement as contemplated by the Disclosure Package and the Prospectus; and the Manager is conducting its investment advisory operations as an investment adviser registered under the Investment Advisers Act of 1940, as amended, in reliance on the registration of KKR Asset Management LLC.

4. Further Agreements of the Company. The Company and (for so long as the Manager is the manager under the Management Agreement) the Manager jointly and severally covenants and agrees with each Underwriter that:

(a) Required Filings. The Company will file the final Prospectus with the Commission within the time periods specified by Rule 424(b) and Rule 430A, 430B or 430C under the Securities Act, will file any Issuer Free Writing Prospectus (including the term sheet substantially in the form of Annex G hereto) to the extent required by Rule 433 under the Securities Act; will file promptly all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the Prospectus and for so long as the delivery of a prospectus is required in connection with the offering or sale of the Securities; and the Company will furnish copies of the Prospectus and each Issuer Free Writing Prospectus (to the extent not previously delivered) to the Underwriters in New York City prior to 10:00 A.M., New York City

time, on the business day next succeeding the date of this Agreement in such quantities as the Representatives may reasonably request.

(b) Delivery of Copies. The Company will deliver, without charge, (i) to the Representatives, a conformed copy of the Registration Statement as originally filed and each amendment thereto, in each case including all exhibits and consents filed therewith; and (ii) to each Underwriter (A) a conformed copy of the Registration Statement as originally filed and each amendment thereto (without exhibits) and (B) during the Prospectus Delivery Period (as defined below), as many copies of the Prospectus (including all amendments and supplements thereto and documents incorporated by reference therein) and each Issuer Free Writing Prospectus as the Representatives may reasonably request. As used herein, the term “Prospectus Delivery Period” means such period of time after the first date of the public offering of the Securities as in the opinion of counsel for the Underwriters a prospectus relating to the Securities is required by law to be delivered (or required to be delivered but for Rule 172 under the Securities Act) in connection with sales of the Securities by any Underwriter or dealer.

(c) Amendments or Supplements, Issuer Free Writing Prospectuses. Before making, preparing, using, authorizing, approving, referring to or filing any Issuer Free Writing Prospectus, and before filing any amendment or supplement to the Registration Statement or the Prospectus, the Company will furnish to the Representatives and counsel for the Underwriters a copy of the proposed Issuer Free Writing Prospectus, amendment or supplement for review and will not make, prepare, use, authorize, approve, refer to or file any such Issuer Free Writing Prospectus or file any such proposed amendment or supplement to which the Representatives reasonably object.

(d) Notice to the Representatives. The Company will advise the Representatives promptly, and confirm such advice in writing, (i) when any amendment to the Registration Statement has been filed or becomes effective; (ii) when any supplement to the Prospectus or any Issuer Free Writing Prospectus or any amendment to the Prospectus has been filed; (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or the receipt of any comments from the Commission relating to the Registration Statement or any other request by the Commission for any additional information; (iv) of the issuance by the Commission of any order suspending the effectiveness of the Registration Statement or preventing or suspending the use of any Preliminary Prospectus, any of the Disclosure Package or the Prospectus or the initiation or threatening of any proceeding for that purpose or pursuant to Section 8A of the Securities Act; (v) of the

occurrence of any event within the Prospectus Delivery Period as a result of which the Prospectus, the Disclosure Package or any Issuer Free Writing Prospectus as then amended or supplemented would include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances existing when the Prospectus, the Disclosure Package or any such Issuer Free Writing Prospectus is delivered to a purchaser, not misleading; and (vi) of the receipt by the Company of any notice with respect to any suspension of the qualification of the Securities for offer and sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and the Company will use its best efforts to prevent the issuance of any such order suspending the effectiveness of the Registration Statement, preventing or suspending the use of any Preliminary Prospectus, any of the Disclosure Package or the Prospectus or suspending any such qualification of the Securities and, if any such order is issued, will obtain as soon as possible the withdrawal thereof.

(e) Ongoing Compliance. (1) If during the Prospectus Delivery Period (i) any event shall occur or condition shall exist as a result of which the Prospectus as then amended or supplemented would include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances existing when the Prospectus is delivered to a purchaser, not misleading or (ii) it is necessary to amend or supplement the Prospectus to comply with law, the Company will as soon as reasonably practicable notify the Underwriters thereof and forthwith prepare and, subject to paragraph (c) above, file with the Commission and furnish to the Underwriters and to such dealers as the Representatives may designate, such amendments or supplements to the Prospectus as may be necessary so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances existing when the Prospectus is delivered to a purchaser, be misleading or so that the Prospectus will comply with law and (2) if at any time prior to the Closing Date, (i) any event shall occur or condition shall exist as a result of which the Disclosure Package as then amended or supplemented would include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances existing when the Disclosure Package is delivered to a purchaser, not misleading or (ii) it is necessary to amend or supplement the Disclosure Package to comply with law, the Company will immediately notify the Underwriters thereof and forthwith prepare and, subject to paragraph (c) above, file with the Commission (to the extent required) and furnish to the Underwriters and to such dealers as the Representatives may designate, such amendments or supplements to the Disclosure Package as may be necessary so that the statements in the

Disclosure Package as so amended or supplemented will not, in the light of the circumstances, be misleading or so that the Disclosure Package will comply with law.

(f) Blue Sky Compliance. The Company will qualify the Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions as the Representatives shall reasonably request and will continue such qualifications in effect so long as required for distribution of the Securities; provided that the Company shall not be required to (i) qualify as a foreign corporation or other entity or as a dealer in securities in any such jurisdiction where it would not otherwise be required to so qualify, (ii) file any general consent to service of process in any such jurisdiction or (iii) subject itself to taxation in any such jurisdiction if it is not otherwise so subject.

(g) Clear Market. For a period of 30 days after the date of the offering of the Securities, the Company will not (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, or file with the Commission a registration statement under the Securities Act relating to debt securities issued or guaranteed by the Company that are substantially similar to the Securities, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of any such debt securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of such debt securities, in cash or otherwise, without the prior written consent of the Representatives; provided that the Company may issue and sell the Securities to the Underwriters pursuant to this Agreement.

(h) Use of Proceeds. The Company will apply the net proceeds from the sale of the Securities as described in the Registration Statement, the Disclosure Package and the Prospectus under the heading “Use of Proceeds”.

(i) No Stabilization. The Company will not take, directly or indirectly, any action designed to or that could reasonably be expected to cause or result in any stabilization or manipulation of the price of the Securities and will not take any action prohibited by Regulation M under the Exchange Act in connection with the distribution of the Securities contemplated hereby.

(j) Exchange Listing. The Company will use its best efforts to list, subject to notice of issuance, the Securities on the New York Stock Exchange (the “Exchange”).

(k) Reports. So long as the Securities are outstanding, the Company will furnish to the Representatives, as soon as they are available, copies of all reports or other communications (financial or other) furnished to holders of the Securities, and copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange or automatic quotation system, provided, however, in no event shall the Company be required to furnish copies of any such documents that are filed and publicly accessible via the EDGAR database.

(l) Record Retention. The Company will, pursuant to reasonable procedures developed in good faith, retain copies of each Issuer Free Writing Prospectus that is not filed with the Commission in accordance with Rule 433 under the Securities Act.

5. Certain Agreements of the Underwriters. Each Underwriter hereby represents and agrees that it has not used, authorized use of, referred to or participated in the planning for use of, and will not use, authorize use of, refer to or participate in the planning for use of, any “free writing prospectus”, as defined in Rule 405 under the Securities Act (which term includes use of any written information furnished to the Commission by the Company and not incorporated by reference into the Registration Statement and any press release issued by the Company) other than (i) a free writing prospectus that contains no “issuer information” (as defined in Rule 433(h)(2) under the Securities Act) that was not included (including through incorporation by reference) in the Preliminary Prospectus or a previously filed Issuer Free Writing Prospectus, (ii) any Issuer Free Writing Prospectus listed on Annex F or prepared pursuant to Section 3(c) or Section 4(c) above (including any electronic road show), (iii) any free writing prospectus prepared by such underwriter and approved by the Company in advance in writing or (iv) any free writing prospectus that is not required to be filed with the Commission pursuant to applicable rules.

6. Conditions of Underwriters’ Obligations. The obligation of each Underwriter to purchase the Underwritten Securities on the Closing Date or the Option Securities on the Additional Closing Date, as the case may be as provided herein is subject to the performance by the Company of its covenants and other obligations hereunder and to the following additional conditions:

(a) Registration Compliance; No Stop Order. No order suspending the effectiveness of the Registration Statement shall be in effect, and no proceeding for such purpose or pursuant to Section 8A under the Securities Act shall be pending before or threatened by the Commission;

the Prospectus and each Issuer Free Writing Prospectus shall have been timely filed with the Commission under the Securities Act (in the case of an Issuer Free Writing Prospectus, to the extent required by Rule 433 under the Securities Act) and in accordance with Section 4(a) hereof; and all requests by the Commission for additional information shall have been complied with to the reasonable satisfaction of the Representatives.

(b) Representations and Warranties. The representations and warranties of the Company contained herein shall be true and correct on the date hereof as of the Execution Time and on and as of the Closing Date or the Additional Closing Date, as the case may be; and the statements of the Company and its officers made in any certificates delivered pursuant to this Agreement shall be true and correct on and as of the Closing Date or the Additional Closing Date, as the case may be.

(c) No Downgrade. Subsequent to the earlier of (A) the Execution Time and (B) the execution and delivery of this Agreement, (i) no downgrading shall have occurred in the rating accorded any of the Company’s debt securities by any “nationally recognized statistical rating organization”, as such term is defined under the Exchange Act and (ii) no such organization shall have publicly announced that it has under surveillance or review, or has changed its outlook with respect to, its rating of any of the Company’s debt securities (other than an announcement with positive implications of a possible upgrading), including any notice given of any intended or potential decrease in any such rating or of a possible change in any such rating that does not indicate the direction of the possible change.

(d) No Material Adverse Change. Subsequent to the Execution Time or, if earlier, the dates as of which information is given in the Registration Statement (exclusive of any amendment thereto), the Disclosure Package (exclusive of any amendment or supplement thereto) and the Prospectus (exclusive of any amendment or supplement thereto), there shall not have been (i) any change or decrease specified in the letter or letters referred to in paragraph (f) of this Section 6 or (ii) any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Disclosure Package and the Prospectus (exclusive of any amendment or supplement thereto) the effect of which, in any case referred to in clause (i) or (ii) above, is, in the sole judgment of the Representatives, so material and adverse as to make it impractical or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the Registration Statement (exclusive of any amendment

thereof), the Disclosure Package and the Prospectus (exclusive of any amendment or supplement thereto).

(e) Officer’s Certificate. The Representatives shall have received on and as of the Closing Date or the Additional Closing Date, as the case may be, a certificate of the chief financial officer or chief accounting officer of the Company and one additional senior executive officer of the Company who is satisfactory to the Representatives (i) confirming that such officers have carefully reviewed the Registration Statement, the Disclosure Package and the Prospectus and, to the best knowledge of such officers, the representations set forth in Sections 3(b) and 3(d) hereof are true and correct on and as of the Closing Date or the Additional Closing Date, as the case may be, (ii) confirming that the other representations and warranties of the Company in this Agreement are true and correct and that the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to such Closing Date, and (iii) to the effect set forth in paragraphs (a), (c) and (d) above.

(f) Comfort Letters. On the date of this Agreement and on the Closing Date or the Additional Closing Date, as the case may be, Deloitte & Touche LLP shall have furnished to the Representatives, at the request of the Company, letters, dated the respective dates of delivery thereof and addressed to the Underwriters, in form and substance reasonably satisfactory to the Representatives, containing statements and information of the type customarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained or incorporated by reference in the Registration Statement, the Disclosure Package and the Prospectus; provided, that the letter delivered on the Closing Date or the Additional Closing Date, as the case may be shall use a “cut-off” date no more than three business days prior to such Closing Date or such Additional Closing Date, as the case may be.

(g) Opinion and 10b-5 Statement of Counsel for the Company. Each of (i) Simpson Thacher & Bartlett LLP, counsel for the Company, and (ii) Nicole J. Macarchuk, Esq., General Counsel for the Company, shall have furnished to the Representatives, at the request of the Company, their written opinion and, in the case of Simpson Thacher & Bartlett LLP, its 10b-5 statement, dated the Closing Date or the Additional Closing Date, as the case may be, and addressed to the Underwriters, in form and substance reasonably satisfactory to the Representatives, to the effect set forth in Annexes A and B, respectively, hereto.

(h) Opinion of Delaware Counsel. Richards, Layton & Finger, P.A., Delaware counsel for the Company, shall have furnished to the Representatives their opinion, dated the Closing Date or the Additional Closing Date, as the case may be, and addressed to the Underwriters, in form and substance reasonably satisfactory to the Representatives, to the effect set forth in Annex C hereto.

(i) Opinion Related to Tax Matters. Hunton & Williams LLP, special counsel for the Company, shall have furnished to the Representatives, at the request of the Company, their written opinion, dated the Closing Date or the Additional Closing Date, as the case may be, and addressed to the Underwriters, in form and substance reasonably satisfactory to the Representatives, to the effect set forth in Annex D hereto.

(j) Opinion Related to Other Matters. Willkie Farr & Gallagher LLP, special counsel for the Company, shall have furnished to the Representatives, at the request of the Company, their written opinion, dated the Closing Date or the Additional Closing Date, as the case may be, and addressed to the Underwriters, in form and substance reasonably satisfactory to the Representatives, to the effect set forth in Annex E hereto.

(k) Opinion and 10b-5 Statement of Counsel for the Underwriters. The Representatives shall have received on and as of the Closing Date or the Additional Closing Date, as the case may be, an opinion and 10b-5 statement of Davis Polk & Wardwell LLP, counsel for the Underwriters, with respect to such matters as the Representatives may reasonably request, and such counsel shall have received such documents and information as they may reasonably request to enable them to pass upon such matters.

(l) No Legal Impediment to Issuance. No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any federal, state or foreign governmental or regulatory authority that would, as of the Closing Date or the Additional Closing Date, as the case may be, prevent the issuance or sale of the Securities; and no injunction or order of any federal, state or foreign court shall have been issued that would, as of the Closing Date or the Additional Closing Date, as the case may be, prevent the issuance or sale of the Securities.

(m) Exchange Listing. An application for the listing of the Securities shall have been submitted to the Exchange.

(n) Additional Documents. On or prior to the Closing Date or the Additional Closing Date, as the case may be, the Company shall have

furnished to the Representatives such further certificates and documents as the Representatives may reasonably request.

(o) All opinions, letters, certificates and evidence mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Underwriters.

7. Indemnification and Contribution.

(a) Indemnification of the Underwriters. The Company agrees to indemnify and hold harmless each Underwriter, its affiliates, directors and officers and each person, if any, who controls such Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (including, without limitation, legal fees and other expenses reasonably incurred in connection with any suit, action or proceeding or any claim asserted, as such fees and expenses are incurred), joint or several, that arise out of, or are based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, not misleading, (ii) or any untrue statement or alleged untrue statement of a material fact contained in the Prospectus (or any amendment or supplement thereto), any Issuer Free Writing Prospectus, any “issuer information” filed or required to be filed pursuant to Rule 433(d) or any Disclosure Package (including any Disclosure Package that has subsequently been amended), or caused by any omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case except insofar as such losses, claims, damages or liabilities arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use therein, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in subsection (b) below. This indemnity agreement will be in addition to any liability which the Company may otherwise have.

(b) Indemnification of the Company. Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who signed the Registration Statement and each person, if any, who controls the Company within the meaning of Section 15

of the Securities Act or Section 20 of the Exchange Act to the same extent as the indemnity set forth in paragraph (a) above, but only with respect to any losses, claims, damages or liabilities (including, without limitation, legal fees and other expenses reasonably incurred in connection with any suit, action or proceeding or any claim asserted, as such fees and expenses are incurred) that arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to such Underwriter furnished to the Company in writing by or on behalf of such Underwriter through the Representatives expressly for use in the Registration Statement, the Prospectus (or any amendment or supplement thereto), any Issuer Free Writing Prospectus or any Disclosure Package, it being understood and agreed upon that the only such information furnished by any Underwriter consists of the following information in the Prospectus furnished on behalf of each Underwriter: the third paragraph of text under the caption “Underwriting (Conflicts of Interest)” in the Prospectus Supplement concerning the terms of offering by the Underwriters; and the ninth and tenth paragraphs of text under the caption “Underwriting (Conflicts of Interest)” in the Prospectus Supplement regarding stabilization by the Underwriters. This indemnity agreement will be in addition to any liability which any Underwriter may otherwise have.

(c) Notice and Procedures. If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any person in respect of which indemnification may be sought pursuant to either paragraph (a) or (b) above, such person (the “Indemnified Person”) shall promptly notify the person against whom such indemnification may be sought (the “Indemnifying Person”) in writing; provided that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have under paragraph (a) or (b) above except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided, further, that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have to an Indemnified Person otherwise than under paragraph (a) or (b) above. If any such proceeding shall be brought or asserted against an Indemnified Person and it shall have notified the Indemnifying Person thereof, the Indemnifying Person shall retain counsel reasonably satisfactory to the Indemnified Person (who shall not, without the consent of the Indemnified Person, be counsel to the Indemnifying Person) to represent the Indemnified Person in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding, as incurred. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense

of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the contrary; (ii) the Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Person; (iii) the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the Indemnifying Person; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interest between them. It is understood and agreed that the Indemnifying Person shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be paid or reimbursed as they are incurred. Any such separate firm for any Underwriter, its affiliates, directors and officers and any control persons of such Underwriter shall be designated in writing by the Representatives and any such separate firm for the Company, its directors, its officers who signed the Registration Statement and any control persons of the Company shall be designated in writing by the Company. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Person agrees to indemnify each Indemnified Person from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Person shall have requested that an Indemnifying Person reimburse the Indemnified Person for fees and expenses of counsel as contemplated by this paragraph, the Indemnifying Person shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by the Indemnifying Person of such request and (ii) the Indemnifying Person shall not have reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement. No Indemnifying Person shall, without the written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnification could have been sought hereunder by such Indemnified Person, unless such settlement (x) includes an unconditional release of such Indemnified Person, in form and substance reasonably satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and (y) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Person.

(d) Contribution. If the indemnification provided for in paragraphs (a) and (b) above is unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriters, on the other, from the offering of the Securities or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) but also the relative fault of the Company, on the one hand, and the Underwriters, on the other, in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Underwriters, on the other, shall be deemed to be in the same respective proportions as the net proceeds (before deducting expenses) received by the Company from the sale of the Securities and the total underwriting discounts and commissions received by the Underwriters in connection therewith, in each case as set forth in the table on the cover of the Prospectus, bear to the aggregate offering price of the Securities. The relative fault of the Company, on the one hand, and the Underwriters, on the other, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

(e) Limitation on Liability. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Person in connection with any such action or claim. Notwithstanding the provisions of this Section 7, in no event shall an Underwriter be required to contribute any amount in excess of the amount by which the total underwriting discounts and commissions received by such Underwriter with respect to the offering of the Securities exceeds the amount of any damages

that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters’ obligations to contribute pursuant to this Section 7 are several in proportion to their respective purchase obligations hereunder and not joint.

(f) Non-Exclusive Remedies. The remedies provided for in this Section 7 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any Indemnified Person at law or in equity.

8. Effectiveness of Agreement. This Agreement shall become effective upon the execution and delivery hereof by the parties hereto.

9. Termination. This Agreement may be terminated in the absolute discretion of the Representatives, by notice to the Company, if after the execution and delivery of this Agreement and prior to the Closing Date or, in the case of the Option Securities, prior to the Additional Closing Date (i) trading in the Company’s Common Shares shall have been suspended by the Commission or the Exchange; (ii) trading in securities generally on the Exchange shall have been suspended or limited or minimum prices shall have been established on such exchange; (iii) a banking moratorium shall have been declared either by U.S. federal or New York State authorities; or (iv) there shall have occurred any outbreak or escalation of hostilities in which the United States is involved or is reasonably likely to become involved, declaration by the United States of a national emergency or war, or other calamity or crisis the effect of which on financial markets is such as to make it, in the sole judgment of the Representatives, impractical or inadvisable to proceed with the offering or delivery of the Securities as contemplated in the Disclosure Package and the Prospectus (exclusive of any amendment or supplement thereto filed after the Execution Time).

10. Defaulting Underwriter. (a) If, on the Closing Date or the Additional Closing Date, as the case may be, any Underwriter defaults on its obligation to purchase the Securities that it has agreed to purchase hereunder on such date, the non-defaulting Underwriters may in their discretion arrange for the purchase of such Securities by other persons satisfactory to the Company on the terms contained in this Agreement. If, within 36 hours after any such default by any Underwriter, the non-defaulting Underwriters do not arrange for the purchase of such Securities, then the Company shall be entitled to a further period of 36 hours within which to procure other persons satisfactory to the non-defaulting Underwriters to purchase such Securities on such terms. If other persons become obligated or agree to purchase the Securities of a defaulting Underwriter, either

the non-defaulting Underwriters or the Company may postpone the Closing Date or the Additional Closing Date, as the case may be, for up to five full business days in order to effect any changes that in the opinion of counsel for the Company or counsel for the Underwriters may be necessary in the Registration Statement and the Prospectus or in any other document or arrangement, and the Company agrees to promptly prepare any amendment or supplement to the Registration Statement and the Prospectus that effects any such changes. As used in this Agreement, the term “Underwriter” includes, for all purposes of this Agreement unless the context otherwise requires, any person not listed in Schedule 1 hereto that, pursuant to this Section 10, purchases Securities that a defaulting Underwriter agreed but failed to purchase.

(b) If, after giving effect to any arrangements for the purchase of the Securities of a defaulting Underwriter or Underwriters by the non-defaulting Underwriters and the Company as provided in paragraph (a) above, the aggregate number of Securities that remain unpurchased on the Closing Date or the Additional Closing Date, as the case may be, does not exceed one-eleventh of the aggregate number of Securities to be purchased on such date, then the Company shall have the right to require each non-defaulting Underwriter to purchase the number of Securities that such Underwriter agreed to purchase hereunder on such date plus such Underwriter’s pro rata share (based on the number of Securities that such Underwriter agreed to purchase on such date) of the Securities of such defaulting Underwriter or Underwriters for which such arrangements have not been made.

(c) If, after giving effect to any arrangements for the purchase of the Securities of a defaulting Underwriter or Underwriters by the non-defaulting Underwriters and the Company as provided in paragraph (a) above, the aggregate number of Securities that remain unpurchased on the Closing Date or the Additional Closing Date, as the case may be, exceeds one-eleventh of the aggregate amount of Securities to be purchased on such date, or if the Company shall not exercise the right described in paragraph (b) above, then this Agreement or, with respect to any Additional Closing Date, the obligation of the Underwriters to purchase Securities on the Additional Closing Date, as the case may be, shall terminate without liability on the part of the non-defaulting Underwriters. Any termination of this Agreement pursuant to this Section 10 shall be without liability on the part of the Company, except that the Company will continue to be liable for the payment of expenses as set forth in Section 11 hereof and except that the provisions of Section 7 hereof shall not terminate and shall remain in effect.

(d) Nothing contained herein shall relieve a defaulting Underwriter of any liability it may have to the Company or any non-defaulting Underwriter for damages caused by its default.

11. Payment of Expenses. (a) Whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated, the Company will pay or cause to be paid all costs and expenses incident to the performance of its and the Manager’s obligations hereunder, including without limitation, (i) the costs incident to the authorization, issuance, sale, preparation and delivery of the Securities and any taxes payable in that connection; (ii) the costs incident to the preparation, printing and filing under the Securities Act of the Registration Statement, any Issuer Free Writing Prospectus, any Disclosure Package and the Prospectus (including all exhibits, amendments and supplements thereto) and the distribution thereof; (iii) the fees and expenses of the Company’s counsel and independent accountants; (iv) the fees and expenses incurred in connection with the registration or qualification and determination of eligibility for investment of the Securities under the laws of such jurisdictions as the Representative may reasonably designate and the preparation, printing and distribution of a Blue Sky Memorandum (including the related fees and expenses of counsel for the Underwriters); (v) all expenses and application fees incurred in connection with any filing with, and clearance of the offering by, FINRA and the approval of the Securities for book-entry transfer by DTC; (vi) all expenses incurred by the Company in connection with any “road show” presentation to potential investors (except that the Underwriters shall pay one-half of the expenses of any aircraft chartered by the Company and the Underwriters for such “road show” and all of their own costs and expenses, including all travel, lodging and other expenses of the Underwriters incurred by them in connection with any “road show”); and (ix) all expenses and application fees related to the listing of the Securities on the Exchange.

(b) Notwithstanding the foregoing, if the sale of the Securities provided for herein is not consummated because any condition to the obligations of the Underwriters set forth in Section 6 hereof is not satisfied, because of any termination pursuant to Section 9(i) hereof or because of any refusal, inability or failure on the part of the Company or the Manager to perform any agreement herein or comply with any provision hereof other than by reason of a default by any of the Underwriters, the Company and the Manager, jointly and severally, will reimburse the Underwriters severally through the Representatives on demand for all out-of-pocket expenses (including reasonable fees and disbursements of counsel) that shall have been incurred by them in connection with the proposed purchase and sale of the Securities. If the sale of the Securities provided for herein is not consummated because of any termination pursuant to Sections 9(ii), (iii) or (iv) hereof, the Company and the Manager, jointly and severally, will reimburse the Underwriters severally through the Representatives on

demand for one-half of all out-of-pocket expenses (including reasonable fees and disbursements of counsel) that shall have been incurred by them in connection with the proposed purchase and sale of the Securities.

12. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors and any controlling persons referred to in Section 8 hereof. Nothing in this Agreement is intended or shall be construed to give any other person any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. No purchaser of Securities from any Underwriter shall be deemed to be a successor merely by reason of such purchase.

13. Survival. The respective indemnities, rights of contribution, representations, warranties and agreements of the Company and the Underwriters contained in this Agreement or made by or on behalf of the Company or the Underwriters pursuant to this Agreement or any certificate delivered pursuant hereto shall survive the delivery of and payment for the Securities. The provisions of Section 7 shall remain in full force and effect, regardless of any termination of this Agreement or any investigation made by or on behalf of the Company or the Underwriters.

14. Certain Defined Terms. For purposes of this Agreement, (a) except where otherwise expressly provided, the term “affiliate” has the meaning set forth in Rule 405 under the Securities Act; (b) the term “business day” means any day other than a day on which banks are permitted or required to be closed in New York City; and (c) the term “subsidiary” has the meaning set forth in Rule 405 under the Securities Act.

15. Miscellaneous. (a) Authority of the Representatives. Any action by the Underwriters hereunder may be taken by Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities, LLC on behalf of the Underwriters, and any such action taken by Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities, LLC shall be binding upon the Underwriters.

(b) Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted and confirmed by any standard form of telecommunication. Notices to the Underwriters shall be given to Representatives c/o Citigroup Global Markets Inc., 388 Greenwich Street, New York, New York 10013, (fax: (212) 816-7912), Attention: General Counsel; Morgan Stanley & Co. LLC, 1585 Broadway, New York, New York 10036, Attention: Investment Banking Division; UBS Securities LLC, 677 Washington Boulevard, Stamford, CT 06901, Attention: Fixed Income Syndicate, (tel: (203 719-

1088), (fax: (203) 719-0495) and Wells Fargo Securities, LLC, 301 S. College Street, 6th Floor, Charlotte, North Carolina 28288, (fax (704) 383-9165), Attention: Transaction Management. Notices to the Company shall be given to it at 555 California Street, 50th Floor, San Francisco, CA 94104, (fax: (415) 391-3330), Attention: General Counsel.

(c) Governing Law. This Agreement and any claim, controversy or dispute arising under or related to this Agreement shall be governed by and construed in accordance with the laws of the State of New York.

(d) Counterparts. This Agreement may be signed in counterparts (which may include counterparts delivered by any standard form of telecommunication), each of which shall be an original and all of which together shall constitute one and the same instrument.

(e) Amendments or Waivers. No amendment or waiver of any provision of this Agreement, nor any consent or approval to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by the parties hereto.

(f) Headings. The headings herein are included for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement.

(g) Entire Agreement. This Agreement, together with the exhibits, annexes and schedules hereto, contains the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written, with regard to such matters.

If the foregoing is in accordance with your understanding, please indicate your acceptance of this Agreement by signing in the space provided below.

	Very truly yours,

	KKR FINANCIAL HOLDINGS LLC


	By:	/s/ MICHAEL R. MCFERRAN
		Name: Michael R. McFerran
		Title: Chief Financial and Chief Operating Officer


	KKR FINANCIAL ADVISORS LLC


	By:	/s/ MICHAEL R. MCFERRAN
		Name: Michael R. McFerran
		Title: Chief Financial Officer

Accepted: March 13, 2012

CITIGROUP GLOBAL MARKETS INC.


By	/s/ CHANDRU M. HARJANI
Name:		Chandru M. Harjani
Title:		Director

MORGAN STANLEY & CO. LLC


By	/s/ YURIJ SLYZ
Name:		Yurij Slyz
Title:		Executive Director

UBS SECURITIES LLC

By	/s/ DEMETRIOS TSAPRALIS
Name:		Demetrios Tsapralis
Title:		Executive Director

By	/s/ RISHI MATHUR
Name:		Rishi Mathur
Title:		Associate Director

WELLS FARGO SECURITIES, LLC


By	/s/ CAROLYN HURLEY
Name:		Carolyn Hurley
Title:		Director

For themselves and on behalf of the several Underwriters listed in Schedule 1 hereto.

Schedule 1

Underwriter	Principal Amount
Citigroup Global Markets Inc.	$	21,625,000
Morgan Stanley & Co. LLC	21,625,000
UBS Securities LLC	21,625,000
Wells Fargo Securities, LLC	21,625,000
KKR Capital Markets LLC	5,000,000
RBC Capital Markets, LLC	5,000,000
BNY Mellon Capital Markets, LLC	500,000
FBR Capital Markets & Co.	500,000
Girard Securities, Inc.	500,000
Janney Montgomery Scott LLC	500,000
KeyBanc Capital Markets Inc.	500,000
Morgan Keegan & Company, Inc.	500,000
Oppenheimer & Co. Inc.	500,000
Total	$	100,000,000

Annex A

Form of Opinion of Simpson Thacher & Bartlett LLP

March [ ], 2012

Citigroup Global Markets Inc.

Morgan Stanley & Co. LLC

UBS Securities LLC
Wells Fargo Securities, LLC

and the other several
Underwriters named in Schedule 1
to the Underwriting Agreement
referred to below

c/o Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York 10013

Morgan Stanley & Co. LLC

1585 Broadway

New York, New York 10036

UBS Securities LLC

677 Washington Boulevard
Stamford, CT 06901

Wells Fargo Securities, LLC

301 S. College Street

Charlotte, NC 28288

Ladies and Gentlemen:

We have acted as counsel to KKR Financial Holdings LLC, a Delaware limited liability company (the “Company”), in connection with the purchase by you of $[ ] aggregate principal amount of [ ]% Senior Notes due 2042 (the “Notes”) issued by the Company, pursuant to the Underwriting Agreement dated March [ ], 2012 among the Company, KKR Financial Advisors LLC (the “Manager”) and you (the “Underwriting Agreement”). Capitalized

terms not otherwise defined herein shall have the meaning ascribed to them in the Underwriting Agreement.

We have examined the Registration Statement on Form S-3 (File No. 333-167479) filed by the Company on June 11, 2010 under the Securities Act of 1933, as amended (the “Securities Act”), as amended by Post-Effective Amendment No. 1 to the Registration Statement filed by the Company under the Securities Act on November 7, 2011 (together, the “Registration Statement”); the Company’s prospectus dated November 7, 2011 (the “Base Prospectus”), as supplemented by the prospectus supplement dated March [ ], 2012 (together with the Base Prospectus, the “Prospectus”), filed by the Company pursuant to Rule 424(b) of the rules and regulations of the Securities and Exchange Commission (the “Commission”) under the Securities Act, which pursuant to Form S-3 incorporates by reference the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, the Company’s Current Report on Form 8-K filed with the Commission on February 6, 2012, the portions of the Company’s Proxy Statement for the 2012 annual meeting of holders of the Company’s Common Shares that are incorporated by reference into the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, each as filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); the Company’s preliminary prospectus supplement dated March [ ], 2012 (together with the Base Prospectus, the “Preliminary Prospectus”), filed by the Company pursuant to Rule 424(b) of the rules and regulations of the Commission

under the Securities Act; the pricing term sheet dated March [ ], 2012 relating to the Notes filed by the Company as a free writing prospectus pursuant to Rule 433 of the rules and regulations of the Commission under the Securities Act (the “Pricing Term Sheet” and together with the Preliminary Prospectus, the “Pricing Disclosure Package”); the base indenture dated as of November 15, 2011 (the “Base Indenture”) between the Company and Wilmington Trust, National Association, as trustee (the “Trustee”), as supplemented by the second supplemental indenture dated as of March [ ], 2012 (the “Supplemental Indenture” and together with the Base Indenture, the “Indenture”) among the Company, the Trustee and Citibank, N.A., as authenticating agent, paying agent and security registrar (the “Authenticating Agent”), relating to the Notes; the global note representing the Notes; and the Underwriting Agreement. In addition, we have examined, and have relied as to matters of fact upon, the documents delivered to you at the closing and upon originals, or duplicates or certified or conformed copies, of such records, agreements, documents and other instruments and such certificates or comparable documents of public officials and of officers and representatives of the Company and have made such other investigations, as we have deemed relevant and necessary in connection with the opinions hereinafter set forth.

In such examination, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents

submitted to us as duplicates or certified or conformed copies and the authenticity of the originals of such latter documents.

Based upon the foregoing, and subject to the qualifications, assumptions and limitations stated herein, we are of the opinion that:

1. The Manager has been duly formed and is validly existing and in good standing as a limited liability company under the laws of the State of Delaware and has full limited liability company power and authority to conduct its business as described in the Registration Statement and the Prospectus.

2. The Indenture has been duly authorized, executed and delivered by the Company and duly qualified under the Trust Indenture Act, and, assuming that the Indenture is the valid and legally binding obligation of the Trustee and the Authenticating Agent, the Indenture constitutes a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms, and the Indenture conforms in all material respects to the requirements of the Trust Indenture Act and the applicable rules and regulations thereunder.

3. The Management Agreement has been duly authorized, executed and delivered by the Company and the Manager and constitutes a valid and legally binding obligation of the Company and the Manager, enforceable against the Company and the Manager in accordance with its terms.

4. The Notes have been duly authorized, executed and issued by the Company and, assuming due authentication thereof by the Authenticating Agent

and upon payment and delivery in accordance with the Underwriting Agreement, will constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms and entitled to the benefits of the Indenture.

5. The statements made in each of the Pricing Disclosure Package, the Base Prospectus under the caption “Description of the Senior Notes and Guarantees” and the Prospectus under the caption “Description of the Notes,” including, in the case of the Pricing Disclosure Package, the information set forth in the Pricing Term Sheet, insofar as they purport to constitute summaries of certain terms of documents referred to therein, constitute accurate summaries of the terms of such documents in all material respects.

7. The Underwriting Agreement has been duly authorized, executed and delivered by the Manager.

8. The issue and sale of the Notes by the Company, the execution, delivery and performance by the Company of the Underwriting Agreement and the execution and delivery of the Indenture by the Company will not breach or result in a default under any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument filed or incorporated by reference as an exhibit to the Registration Statement, nor will such action violate the Certificate of Formation or Operating Agreement of the Company or any federal or New York State statute or the Delaware Limited Liability Company Act or any rule or

regulation that has been issued pursuant to any federal or New York State statute or the Delaware Limited Liability Company Act or any order known to us issued pursuant to any federal or New York State statute or the Delaware Limited Liability Company Act by any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties.

9. No consent, approval, authorization, order, registration or qualification of or with any federal or New York governmental agency or body or any Delaware governmental agency or body acting pursuant to the Delaware Limited Liability Company Act or, to our knowledge, any federal or New York court or any Delaware court acting pursuant to the Delaware Limited Liability Company Act is required for the issue and sale of the Notes by the Company and the compliance by the Company with all of the provisions of the Underwriting Agreement and the Indenture, except for the registration under the Securities Act and the Exchange Act of the Notes, and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Notes by the Underwriters.

10. The Registration Statement has become effective under the Securities Act, the Preliminary Prospectus was filed on March [ ], 2012 and the Prospectus was filed on March [ ], 2012, in each case pursuant to Rule 424(b) of the rules and regulations of the Commission under the Securities Act and within the time period required by Rule 424(b) (without reference to Rule 424(b)(8)) of

the rules and regulations of the Commission under the Securities Act and, to our knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued or proceeding for that purpose has been instituted or threatened by the Commission.

Our opinions set forth in paragraphs 2 and 4 above are subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, (ii) general equitable principles (whether considered in a proceeding in equity or at law) and (iii) an implied covenant of good faith and fair dealing. In addition, we express no opinion as to the validity, legally binding effect or enforceability of Section 111 of the Base Indenture relating to the separability of provisions of the Base Indenture, Section 25 of the Management Agreement relating to the severability provisions of the Management Agreement or Section 11.06 of the Supplemental Indenture relating to the severability provisions of the Supplemental Indenture.

Insofar as the opinions expressed herein, other than our opinion set forth in paragraph 1 above, relate to or are dependent upon (i) matters governed by the law of the State of Delaware, we have relied upon the opinion of Richards, Layton & Finger, P.A. dated the date hereof and (ii) matters related to the Investment Company Act of 1940, as amended, we have relied upon the opinion of Willkie Farr & Gallagher LLP dated the date hereof. With respect to United States

federal income tax matters, we understand that you are relying on the opinion of Hunton & Williams LLP dated the date hereof.

This opinion letter is rendered to you in connection with the above-described transaction. This opinion letter may not be relied upon by you for any other purpose, or relied upon by, or furnished to, any other person, firm or corporation without our prior written consent.

	Very truly yours,


	SIMPSON THACHER & BARTLETT LLP

March [ ], 2012

Citigroup Global Markets Inc.

Morgan Stanley & Co. LLC

UBS Securities LLC
Wells Fargo Securities, LLC

and the other several

Underwriters named in Schedule 1

to the Underwriting Agreement

referred to below

c/o Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York 10013

Morgan Stanley & Co. LLC

1585 Broadway

New York, New York 10036

UBS Securities LLC

677 Washington Boulevard
Stamford, CT 06901

Wells Fargo Securities, LLC

301 S. College Street

Charlotte, NC 28288

Ladies and Gentlemen:

We have not independently verified the accuracy, completeness or fairness of the statements made or included in the Registration Statement on Form S-3 (File No. 333-167479) filed by the Company on June 11, 2010 under the Securities Act of 1933, as amended (the “Securities Act”), as amended by Post-Effective Amendment No. 1 to the Registration Statement filed by the Company under the Securities Act on November 7, 2011 (together, the “Registration Statement”); the Company’s prospectus dated November 7, 2011 (the “Base Prospectus”), as supplemented by the prospectus supplement dated March [ ], 2012 (together with the Base Prospectus, the “Prospectus”), filed by the Company pursuant to Rule 424(b) of the rules and regulations of the Securities and Exchange Commission (the “Commission”) under the Securities Act; the Company’s preliminary prospectus supplement dated March [ ], 2012 (together with the Base Prospectus, the “Preliminary Prospectus”), filed by the Company pursuant to Rule 424(b) of the rules and regulations of the Commission under the Securities Act; the pricing term sheet dated March [ ], 2012 relating to the Notes filed by the Company as a free writing prospectus pursuant to Rule 433 of the rules and regulations of the Commission under the Securities Act (such free writing prospectus, together with the Preliminary Prospectus, the “Pricing Disclosure Package”); or the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, the Company’s Current Report on Form 8-K filed with the Commission on February 6, 2012, and the portions of the Company’s Proxy Statement for the 2012 annual meeting of holders of the

Company’s Common Shares that are incorporated by reference into the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, each as filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act” and such filings, collectively, the “Exchange Act Documents”), and incorporated or deemed incorporated by reference in the Registration Statement, the Prospectus and the Pricing Disclosure Package; and we take no responsibility therefor, except as and to the extent set forth in numbered paragraph 5 of our opinion letter to you dated the date hereof.

In connection with, and under the circumstances applicable to, the offering of the Notes, we participated in conferences with certain officers and employees of the Company and the Manager, with representatives of Hunton & Williams LLP, Willkie Farr & Gallagher LLP and Richards, Layton & Finger, P.A., representatives of Deloitte & Touche LLP, and your representatives and your counsel in the course of the preparation by the Company of the Prospectus and the Pricing Disclosure Package (in each case, excluding the Exchange Act Documents) and also reviewed certain records and documents furnished to us, or publicly filed with the Commission, by the Company and the Manager, as well as the documents delivered to you at the closing. Based upon our review of the Registration Statement, the Pricing Disclosure Package and the Exchange Act Documents, our participation in the conferences referred to above, our review of the records and documents as described above, as well as our understanding of the

U.S. federal securities laws and the experience we have gained in our practice thereunder:

(1) we advise you that each of the Registration Statement as of the date it first became effective under the Securities Act, and the Prospectus, as of March [ ], 2012, appeared, on its face, to be appropriately responsive, in all material respects, to the requirements of the Securities Act and the applicable rules and regulations of the Commission thereunder, and the documents incorporated by reference in the Preliminary Prospectus and the Prospectus, as of the date each respective document was filed with the Commission, appeared, on its face, to be appropriately responsive, in all material respects, to the requirements of the Exchange Act and the applicable rules and regulations of the Commission thereunder, except that in each case we express no view with respect to the financial statements or other financial or accounting data contained in, incorporated or deemed incorporated by reference in, or omitted from the Registration Statement, the Prospectus or the Exchange Act Documents; and

(2) nothing has come to our attention that causes us to believe that (a) the Registration Statement (including the Exchange Act Documents incorporated or deemed incorporated by reference therein), as of March [ ], 2012, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary

in order to make the statements therein not misleading, (b) the Pricing Disclosure Package (including the Exchange Act Documents incorporated or deemed incorporated by reference therein), as of : p.m. (New York time) on March [ ], 2012, the time of the pricing of the offer of the Notes, contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading or (c) the Prospectus (including the Exchange Act Documents incorporated or deemed incorporated by reference therein), as of March [ ], 2012 or as of the date hereof, contained or contains any untrue statement of a material fact or omitted or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that we express no belief in any of clauses (a), (b) or (c) above with respect to the financial statements or other financial or accounting data contained in, incorporated or deemed incorporated by reference in, or omitted from the Registration Statement, the Preliminary Prospectus, the Prospectus or the Exchange Act Documents.

This letter is delivered to you in connection with the above-described transaction. This letter may not be relied upon by you for any other purpose, or relied upon by, or furnished to, any other person, firm or corporation.

	Very truly yours,

	SIMPSON THACHER & BARTLETT LLP

Annex B

Form of Opinion of Nicole J. Macarchuk

March[ ], 2012

Citigroup Global Markets Inc.

Morgan Stanley & Co. LLC

UBS Securities LLC
Wells Fargo Securities, LLC

c/o

Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York 10013

Morgan Stanley & Co. LLC

1585 Broadway

New York, New York 10036

UBS Securities LLC

677 Washington Boulevard
Stamford, CT 06901

Wells Fargo Securities, LLC

301 S. College Street

Charlotte, NC 28288

As Representatives of the Underwriters

Ladies and Gentlemen:

I am the General Counsel of KKR Financial Holdings LLC, a Delaware limited liability company (the “Company”), and have advised the Company, in part, in connection with the Company’s public offering (the “Offering”) of $[ ] aggregate principal amount of its [ ]% Senior Notes due 2042 (the “Underwritten Securities”), together with an option to purchase up to $[ ] aggregate principal amount of its [ ]% Senior Notes due 2042 to cover over-allotments (the “Option Securities”). The Underwritten Securities and the Option Securities are herein referred to as the “Securities.” The Securities will be delivered pursuant to an indenture dated as of November 15, 2011 as supplemented by the second supplemental indenture dated as of March [ ], 2012 (as supplemented, the “Indenture”) by and among the Company, Wilmington Trust, National Association, as trustee (the “Trustee”) and Citibank, N.A., as authenticating agent, paying agent and security registrar (the “Authenticating Agent”). This opinion is being delivered pursuant to Section 6(g) of the Underwriting Agreement dated March [ ], 2012 (the “Underwriting Agreement”) among the Company, KKR Financial Advisors LLC, a Delaware limited liability company (the “Manager”),

and Citigroup Global Markets, Inc., Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities, LLC, as representatives of the several underwriters named therein. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Underwriting Agreement.

As such counsel and for purposes of my opinions set forth below, either I or persons that I supervise have examined originals or copies, certified or otherwise identified to my satisfaction, of such documents, corporate records, certificates of public officials and other instruments as I have deemed necessary or appropriate as a basis for the opinions set forth herein, including, without limitation:

(a) the Certificate of Formation of the Company, certified as of March [ ], 2012 by the Secretary of State of the State of Delaware;

(b) the Certificate of Formation of the Manager, as amended, as certified as of March [ ], 2012 by the Secretary of State of the State of Delaware;

(d) the Limited Liability Company Agreement of the Manager, dated as of July 9, 2004;

(e) the Amended and Restated Management Agreement, as amended, dated as of June 15, 2007;

(f) a certificate, dated March [ ], 2012, issued by the Secretary of State of the State of California, with respect to the authorization of the Company to do business in the State of California;

(g) a certificate, dated March [ ], 2012, issued by the Secretary of State of the State of California, with respect to the authorization of the Manager to do business in the State of California;

(h) a good standing certificate for the Company, issued by the Secretary of State of the State of Delaware on March [ ], 2012;

(i) a good standing certificate for the Manager, issued by the Secretary of State of the State of Delaware on March [ ], 2012;

(j) a certificate, dated March [ ], 2012, issued by the Department of State of the State of New York, with respect to the authorization of the Company to do business in the State of New York;

(k) resolutions with respect to the Indenture of (i) the board of directors of the Company adopted on November 3, 2011 and (ii) the pricing committee appointed by the board of directors of the Company adopted on November 7, 2011;

(l) resolutions with respect to the Offering of (i) the board of directors of the Company adopted on February 2, 2012, (ii) the affiliated transactions committee of the board of directors of the Company adopted on March 5, 2012 and (iii) the pricing committee appointed by the board of directors of the Company adopted on March [ ], 2012;

(m) a written consent of the sole member of the Manager, dated as February 9, 2009, authorizing the execution of the Underwriting Agreement by the Manager;

(n) Opinions of Simpson Thacher & Bartlett LLP, Richards, Layton & Finger, P.A., Hunton & Williams LLP and Willkie Farr & Gallagher LLP, each dated as of the date hereof;

(o) the Registration Statement, dated as of June 11, 2010, including the exhibits thereto, the Post-Effective Amendment No. 1 to the Registration Statement, dated as of November 7, 2011, including the exhibits thereto, and the information incorporated by reference therein;

(p) the Preliminary Prospectus, dated as of March [ ], 2012, and the Prospectus dated as of November 7, 2011, and the information incorporated by reference therein;

(q) each “free-writing prospectus” (as defined pursuant to Rule 405 under the Securities Act of 1933, as amended) listed on Annex F to the Underwriting Agreement;

(r) those of the current and periodic reports filed by the Company with the Commission that are specifically incorporated by reference into the Disclosure Package and the Prospectus;

(s) the Underwriting Agreement; and

(t) the form of Indenture;

In addition to the foregoing, either I or persons that I supervise have made such investigations of law as I have deemed necessary or appropriate as a basis for the opinions set forth herein.

As to factual matters, I have relied upon representations included in the Underwriting Agreement, upon certificates of officers of the Company and the

Manager, and upon certificates of public officials. Whenever the phrases “to my knowledge” or “to my attention” are used herein, they refer to my actual knowledge or the attention of the persons that I supervise involved in the representation of the Company and the Manager in the Offering without independent investigation.

In such examination and in rendering the opinions expressed below, I have assumed: (i) the genuineness of all signatures on all documents submitted to me; (ii) the authenticity and completeness of all documents, corporate records, certificates and other instruments submitted to me; (iii) that photocopy, electronic, certified, conformed, facsimile and other copies submitted to me of original documents, corporate records, certificates and other instruments conform to the original documents, records, certificates and other instruments, and that all such original documents, corporate records, certificates and instruments were authentic and complete; (iv) the legal capacity of all individuals executing documents; and (v) that the statements contained in the certificates and comparable documents of public officials, officers and representatives of the Company and the Manager and other persons on which I have relied for the purposes of this opinion are true and correct and that there has not been any change in the good standing status of the Company or the Manager from that reported in the good standing certificates identified above. I have not undertaken any independent investigation to determine the accuracy of any such statement, and any limited inquiry undertaken by me during the preparation of this opinion should not be regarded as such an investigation.

Based upon the foregoing, and in reliance thereon, and subject to the limitations, qualifications and exceptions set forth herein, I am of the following opinion:

1. To my knowledge, each of the Company and the Manager is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification.

2. To my knowledge, there are no statutes or pending or threatened legal or governmental proceedings required to be described in the Registration Statement, the Preliminary Prospectus or the Prospectus which are not described as required, or any contracts or documents required to be described in the Registration Statement, the Preliminary Prospectus or the Prospectus which are not described as required; and the statements made in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 under the caption “Item 1. Business – Management Agreement,” insofar as they purport to constitute summaries of certain terms of documents and certain legal matters referred to therein,

constitute accurate summaries of the terms of such documents and such legal matters in all material respects.

3. To my knowledge, there are no contracts or agreements between the Company, on the one hand, and any other person, on the other hand, granting such person the right to require the Company to include any securities of the Company owned or to be owned by such person in the securities registered pursuant to the Registration Statement.

* * * * *

The opinions set forth in paragraph 1 above with respect to the good standing of each of the Company and the Manager in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification is based solely on the good standing certificates identified above.

In rendering the opinions set forth above, I have relied (A) as to matters involving the application of laws of the Delaware Limited Liability Company Act, upon the opinion of Richards, Layton & Finger, P.A. and (B) as to matters of fact, on certificates of responsible officers of the Company and the Manager and public officials.

This opinion letter deals only with the specified legal issues expressly addressed herein, and you should not infer any opinion that is not explicitly addressed herein from any matter stated in this letter.

This opinion letter is rendered to you and the several Underwriters in connection with the above-described transaction. This opinion letter may not be relied upon by you for any other purpose, or relied upon by, or furnished to, any other person, firm or corporation without my prior written consent, except that the Trustee may rely upon paragraph 1 above, subject to the qualifications, assumptions and limitations relating thereto. This opinion letter is rendered to you as of the date hereof and is not to be deemed to have been reissued by any subsequent delivery as permitted above, and I assume no obligation to advise you or any other person hereafter with regard to any change after the date hereof in the circumstances or the law that may bear on the matters set forth herein even though the change may affect the legal analysis or a legal conclusion or other matters in this opinion letter.

	Very truly yours,

	Nicole J. Macarchuk

Annex C

Form of Opinion of Richards, Layton & Finger, P.A.

March [ ], 2012

Citigroup Global Markets Inc.

Morgan Stanley & Co. LLC

UBS Securities LLC

Wells Fargo Securities, LLC

as representatives of the several underwriters named

in the Underwriting Agreement (as defined below)

c/o Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York 10013

c/o Morgan Stanley & Co. LLC

1585 Broadway

New York, New York 10036

c/o UBS Securities LLC

677 Washington Boulevard

Stamford, CT 06901

c/o Wells Fargo Securities, LLC

301 S. College Street

Charlotte, North Carolina 28288

Re: KKR Financial Holdings LLC

Ladies and Gentlemen:

We have acted as special Delaware counsel for KKR Financial Holdings LLC, a Delaware limited liability company (the “Company”), in connection with the matters set forth herein. This opinion is being furnished to you pursuant to Section 6(h) of the Underwriting Agreement, dated March [ ], 2012 (the “Underwriting Agreement”), between the Company and KKR Financial Advisors LLC (the “Manager”), and accepted by Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities, LLC, for themselves and on behalf of the several underwriters listed on Schedule 1 thereto (collectively, the “Underwriters”), relating to the issuance and sale by the Company to the Underwriters of [$ , ,000] aggregate principal amount of [ . ]% Senior Notes due 2042 of the Company (the “Firm Securities”), and an option for the Underwriters to purchase from the Company up to an additional [$ , ,000] principal amount of [ . ]% Senior Notes due 2042 of the

Company (the “Option Securities”, and together with the Firm Securities, the “Securities”).

For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following:

(a) The Certificate of Formation of the Company, dated January 17, 2007 (the “LLC Certificate”), as filed in the office of the Secretary of State of the State of Delaware (the “Secretary of State”) on January 17, 2007;

(b) The Operating Agreement of the Company, dated as of January 17, 2007, entered into by KKR Financial Corp., as the sole member of the Company (in such capacity, the “Initial Member”);

(c) The Amended and Restated Operating Agreement of the Company, dated as of May 3, 2007, as amended effective March 24, 2009, among the Manager, the Initial Member, and the other persons or entities who become members in the Company, as further amended by Amendment No. 1 thereto, dated as of February 28, 2010 (as so amended, the “Operating Agreement”);

(d) The Directors’ Consent to Action in Lieu of a Meeting of the Board of Directors of the Company (the “Board”), dated May 4, 2007 (the “May 2007 Board Resolutions”), relating to the Management Agreement (as defined below);

(e) The Resolutions of the Board, adopted by the Board at a meeting of the Board on November 16, 2009 (the “November 2009 Board Resolutions”, and together with the May 2007 Board Resolutions, the “Management Agreement Resolutions”), relating to the Management Agreement;

(f) The Amended and Restated Management Agreement, dated as of May 4, 2007, among the Company, the Initial Member and the Manager, as amended by the First Amendment Agreement, dated June 15, 2007 (as so amended, the “Management Agreement”);

(g) An Incumbency Certificate of the Company, dated as of May 4, 2007, executed by the Secretary of the Company;

(h) The Resolutions of the Board, adopted by the Board at a meeting of the Board on November 3, 2011 (the “November 2011 Board Resolutions”), relating to the Base Indenture (as defined below);

(i) The Resolutions of the Pricing Committee of the Board, adopted by the Pricing Committee of the Board at a meeting of the Pricing Committee of the Board on November 7, 2011 (the “November 2011 Pricing Committee Resolutions”), relating to the Base Indenture;

(j) The Resolutions of the Board, adopted by the Board at a meeting of the Board on February 2, 2012 (together with the November 2011 Board Resolutions, the “Board Resolutions”), relating to the authorization of the Securities;

(k) The Resolutions of the Pricing Committee of the Board, adopted by the Pricing Committee of the Board at a meeting of the Pricing Committee of the Board on March [ ], 2012 (together with the November 2011 Pricing Committee Resolutions, the “Pricing Committee Resolutions”), relating to the offering, issuance and sale of the Securities and the approval of the Underwriters and the Underwriting Agreement;

(l) The Underwriting Agreement;

(m) Post-Effective Amendment No. 1 to the Registration Statement on Form S-3 (Registration No. 333-167479), as filed with the Securities and Exchange Commission (the “Commission”) on November 7, 2011 (excluding the exhibits thereto), including a related prospectus, dated November 7, 2011 (the “Base Prospectus”);

(n) The Preliminary Prospectus Supplement to the Base Prospectus, dated March [ ], 2012, as filed with the Commission on March [ ], 2012 (the “Preliminary Prospectus Supplement”), relating to the issuance of the Securities;

(o) The Prospectus Supplement to the Base Prospectus, dated March [ ], 2012, as filed with the Commission on March [ ], 2012 (the “Prospectus Supplement”), relating to the issuance of the Securities;

(p) The free writing prospectus, attached as Annex G to the Underwriting Agreement (the “Free Writing Prospectus”);

(q) The Indenture, dated as of November 15, 2011 (the “Base Indenture”), between the Company, as issuer, and Wilmington Trust, National Association, as trustee (the “Trustee”), relating to the Securities;

(r) The Second Supplemental Indenture, dated as of March [ ], 2012 (the “Indenture Supplement”), among the Company, as issuer, the

Trustee and Citibank, N.A., as authenticating agent, paying agent and security registrar, relating to the Securities;

(s) The [ . ]% Senior Note due 2042, dated March [ ], 2012 (the “Note”), in the principal amount of $[ , ,000], executed by the Company and authenticated by Citibank, N.A., as authenticating agent;

(t) An Officer’s Certificate relating to the Company, dated as of March [ ], 2012, as to certain matters; and

(u) A Certificate of Good Standing for the Company, dated March [ ], 2012, obtained from the Secretary of State.

The Base Prospectus, as amended by the Prospectus Supplement, is hereinafter referred to as the “Prospectus”. The Base Prospectus together with the Preliminary Prospectus Supplement and the Free Writing Prospectus are hereinafter referred to as the “Disclosure Package”. The Base Indenture, as supplemented by the Indenture Supplement, is hereinafter referred to as the “Indenture”.

For purposes of this opinion, we have not reviewed any documents other than the documents listed in paragraphs (a) through (u) above. In particular, we have not reviewed any document (other than the documents listed in paragraphs (a) through (u) above) that is referred to in or incorporated by reference into the documents reviewed by us. We have assumed that there exists no provision in any document that we have not reviewed that is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects.

With respect to all documents examined by us, we have assumed (i) the authenticity of all documents submitted to us as authentic originals, (ii) the conformity with the originals of all documents submitted to us as copies or forms, and (iii) the genuineness of all signatures.

For purposes of this opinion, we have assumed (i) that the LLC Certificate, the Operating Agreement, the Management Agreement Resolutions, the Board Resolutions and the Pricing Committee Resolutions are in full force and effect, have not been amended and no amendment of such documents is pending or has been proposed, (ii) that there are no proceedings pending or contemplated for the merger, consolidation, conversion, dissolution, liquidation or termination of the Company, (iii) except to the extent provided in paragraph 1 below, that

each of the parties to the documents examined by us has been duly created, organized or formed, as the case may be, and is validly existing in good standing under the laws of the jurisdiction governing its creation, organization or formation, (iv) the legal capacity of natural persons who are signatories to the documents examined by us, (v) except to the extent provided in paragraph 2 below, that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (vi) except to the extent provided in paragraph 4 below, that each of the parties to the documents examined by us has duly authorized, executed and delivered such documents, and (vii) that any amendment or restatement of any document reviewed by us has been accomplished in accordance with, and was permitted by, the relevant provisions of such document prior to its amendment or restatement from time to time. We express no opinion with respect to the Base Prospectus, the Preliminary Prospectus Supplement, the Prospectus Supplement or the Free Writing Prospectus, and we assume no responsibility for the contents of any such material.

This opinion is limited to the laws of the State of Delaware (excluding the securities, blue sky and tax laws of the State of Delaware), and we have not considered and express no opinion on the laws of any other jurisdiction, including federal laws and rules and regulations relating thereto. Our opinions are rendered only with respect to Delaware laws and rules, regulations and orders thereunder which are currently in effect.

Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Delaware as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that:

1. The Company has been duly formed and is validly existing in good standing as a limited liability company under the laws of the State of Delaware.

2. The Company has the necessary limited liability company power and authority to own, lease and operate its properties and to conduct its business, as described in the Disclosure Package and the Prospectus, and to execute and deliver the Underwriting Agreement, the Indenture and the Note, and to perform its obligations under the Underwriting Agreement, the Indenture, the Note and the Management Agreement.

3. The total number of Common Shares and Preferred Shares that the Company is authorized to issue pursuant to the Operating Agreement is as set forth in the Base Prospectus under the heading “Authorized Shares” and in the Preliminary Prospectus Supplement and the Prospectus Supplement in the line

items “Preferred shares” and “Common shares” under the heading “Capitalization”.

4. The execution and delivery of the Underwriting Agreement, the Indenture, the Note and the Management Agreement by the Company, and the performance by the Company of its obligations thereunder, have been duly authorized by all necessary limited liability company action on the part of the Company. The Underwriting Agreement, the Indenture, the Note and the Management Agreement have been duly executed and delivered by the Company.

5. No consent, approval, authorization or order of, or filing with, any court of the State of Delaware or governmental agency or body of the State of Delaware is required to be obtained or made by the Company in connection with the issuance and sale of the Securities or the execution, delivery or performance by the Company of the Underwriting Agreement, the Indenture or the Note.

6. The execution, delivery and performance by the Company of the Underwriting Agreement, the Indenture and the Note, the issuance and sale of the Securities by the Company pursuant to the Underwriting Agreement, and the consummation of the other transactions contemplated by the Underwriting Agreement, the Indenture and the Note, do not violate (i) the LLC Certificate or the Operating Agreement, (ii) any Delaware statute, law, rule or regulation, or (iii) after due inquiry on March [ ], 2012, limited to, and solely to the extent reflected on, the results of computer searches of court dockets in the Lexis/Nexis file system for active cases, naming the Company as a party, of the Court of Chancery of the State of Delaware in and for New Castle, Kent and Sussex Counties, Delaware, and of the Superior Court of the State of Delaware in and for New Castle, Kent and Sussex Counties, Delaware, and in the Webpacer efile system of the United States District Court sitting in the State of Delaware and of the United States Bankruptcy Court sitting in the State of Delaware, any judgment, order or decree of any such court.

We understand that you will rely as to matters of Delaware law upon this opinion in connection with the Company’s execution of the Underwriting Agreement. In connection with the foregoing, we hereby consent to your relying as to matters of Delaware law upon this opinion, subject to the understanding that the opinions rendered herein are given on the date hereof and such opinions are rendered only with respect to facts existing on the date hereof and laws, rules and regulations currently in effect. We also consent to Nicole J. Macarchuk, Esq.’s and Simpson Thacher & Bartlett LLP’s relying as to all matters governed by or arising under the laws of the State of Delaware upon this opinion, as if this opinion was addressed to them, in connection with opinions to be rendered by them pursuant to the Underwriting Agreement. Except as stated

above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other person or entity for any purpose.

Very truly yours,

MVP/KEJ

Annex D

Form of Tax Opinion of Hunton & Williams LLP

March [ ], 2012

Citigroup Global Markets Inc.

Morgan Stanley & Co. LLC

UBS Securities LLC

Wells Fargo Securities, LLC

c/o Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York 10013

Morgan Stanley & Co. LLC

1585 Broadway

New York, New York 10036

UBS Securities LLC

677 Washington Boulevard

Stamford, CT 06901

Wells Fargo Securities, LLC

301 S. College Street

Charlotte, NC 28288

KKR Financial Holdings LLC

555 California Street, 50th Floor

San Francisco, CA 94104

KKR Financial Holdings LLC

[ Senior Notes due 2042]

Certain U.S. Federal Income Tax Consequences

Ladies and Gentlemen:

We have acted as special tax counsel to KKR Financial Holdings LLC, a Delaware limited liability company (the “Company”), in connection with the preparation of a preliminary prospectus supplement (the “Preliminary Prospectus Supplement”) dated March [ ], 2012 and a prospectus supplement (the “Final Prospectus Supplement” and together with the Preliminary Prospectus Supplement, the “Prospectus Supplement”) dated March [ ], 2012, to a prospectus (the “Prospectus”) filed with the Securities and Exchange Commission on November 7, 2011 as part of post-effective amendment no. 1 to a registration statement on Form S-3 (File No. 333-167479) (the “Registration Statement”), with respect to the offer and sale of $[ ] aggregate principal amount of

[ % Senior Notes due 2042] (the “Notes”), issued pursuant to an indenture dated November 15, 2011, as supplemented by the second supplemental indenture dated of as March [ ], 2012. This opinion is furnished at the request of the Company pursuant to Section 6(i) of the Underwriting Agreement, dated March [ ], 2012, among the Company, Citigroup Global Markets Inc., Morgan Stanley & Co. LLC, UBS Securities LLC and Wells Fargo Securities, LLC.

In giving this opinion letter, we have examined the following:

1. the Company’s Amended and Restated Operating Agreement;

2. the Registration Statement and the Prospectus and Prospectus Supplement filed as a part of the Registration Statement; and

3. such other documents as we have deemed necessary or appropriate for purposes of this opinion.

In connection with the opinions rendered below, we have assumed, with your consent, that:

1. each of the documents referred to above has been duly authorized, executed, and delivered; is authentic, if an original, or is accurate, if a copy; and has not been amended;

2. during its taxable year ending December 31, 2012, and future taxable years, the Company will operate in a manner that will make the factual representations contained in a certificate, dated the date hereof and executed by a duly appointed officer of the Company (the “Officer’s Certificate”), true for such years, without regard to any qualification as to knowledge or belief;

3. the Company will not make any amendments to its organizational documents after the date of this opinion that would affect the opinions expressed below; and

4. no action will be taken by the Company after the date hereof that would have the effect of altering the facts upon which the opinions set forth below are based.

In connection with the opinions rendered below, we also have relied upon the correctness, without regard to any qualification as to knowledge or belief, of the factual representations contained in the Officer’s Certificate. Where the factual representations in the Officer’s Certificate involve terms defined in the Internal Revenue Code of 1986, as amended (the “Code”), the Treasury regulations thereunder (the “Regulations”), published rulings of the Internal Revenue Service (the “Service”), or other relevant authority, we have reviewed

with the individual making such representations the relevant provisions of the Code, the applicable Regulations, the published rulings of the Service, and other relevant authority. No facts have come to our attention that would cause us to question the accuracy and completeness of such factual representations.

Based solely on the documents and assumptions set forth above, the representations set forth in the Officer’s Certificate, and the discussions incorporated by reference in the Prospectus Supplement from the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 under the caption Item 1A. “Risk Factors—Tax Risks,” in the Prospectus Supplement under the caption “Additional Material U.S. Federal Income Tax Considerations” and in the Prospectus under the caption “Material U.S. Federal Income Tax Considerations” (which are incorporated herein by reference), we are of the opinion that:

(a) the Company will be treated as a partnership, and not as an association or a publicly traded partnership taxable as a corporation, under the Code; and

(b) the descriptions of the law and the legal conclusions incorporated by reference in the Prospectus Supplement from the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 under the caption Item 1A. “Risk Factors—Tax Risks,” and contained in the Prospectus Supplement under the caption “Additional Material U.S. Federal Income Tax Considerations” and in the Prospectus under the caption “Material U.S. Federal Income Tax Considerations” are correct in all material respects and the discussions thereunder fairly summarize the U.S. federal income tax considerations that are likely to be material to a holder of the Notes.

We will not review on a continuing basis the Company’s compliance with the documents or assumptions set forth above, or the representations set forth in the Officer’s Certificate. Accordingly, no assurance can be given that the actual results of the Company’s operations for any given taxable year will allow it to be taxed as partnership, and not as an association or a publicly traded partnership taxable as a corporation, for U.S. federal income tax purposes. Although we have made such inquiries and performed such investigations as we have deemed necessary to fulfill our professional responsibilities as counsel, we have not undertaken an independent investigation of all of the facts referred to in this letter or the Officer’s Certificate.

We do not assume any responsibility for, and make no representation that we have independently verified, the accuracy, completeness, or fairness of the statements contained in the Prospectus Supplement or the Prospectus (other than the descriptions of the law and the legal conclusions

incorporated by reference in the Prospectus Supplement from the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 under the caption Item 1A. “Risk Factors—Tax Risks” and contained in the Prospectus Supplement under the caption “Additional Material U.S. Federal Income Tax Considerations” and in the Prospectus under the caption “Material U.S. Federal Income Tax Considerations,” as set forth in (b) above).

The foregoing opinions are based on current provisions of the Code and the Regulations, published administrative interpretations of any of the foregoing, and published court decisions. The Service has not issued Regulations or administrative interpretations with respect to various provisions of the Code relating to partnership classification. No assurance can be given that the law will not change in a way that could cause the Company to be taxable as a corporation for U.S. federal income tax purposes.

The foregoing opinions are limited to the U.S. federal income tax matters addressed herein, and no other opinions are rendered with respect to other U.S. federal tax matters or to any issues arising under the tax laws of any other country, or any state or locality. We undertake no obligation to update the opinions expressed herein after the date of this letter. This opinion letter is issued to you, and it speaks only as of the date hereof. This opinion letter may not be distributed, relied upon for any purpose by any other person, quoted in whole or in part or otherwise reproduced in any document, or filed with any governmental agency without our express written consent.

CIRCULAR 230 DISCLOSURE

TO ENSURE COMPLIANCE WITH REQUIREMENTS IMPOSED BY THE SERVICE, WE INFORM YOU THAT (A) ANY U.S. FEDERAL TAX ADVICE CONTAINED HEREIN (INCLUDING ANY ATTACHMENTS OR ENCLOSURES) WAS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, FOR THE PURPOSE OF AVOIDING U.S. FEDERAL TAX PENALTIES, (B) ANY SUCH ADVICE WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN AND (C) ANY TAXPAYER TO WHOM THE TRANSACTIONS OR MATTERS ARE BEING PROMOTED, MARKETED OR RECOMMENDED SHOULD SEEK ADVICE BASED ON ITS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

Very truly yours,

Annex E

Form of Opinion of Willkie Farr & Gallagher LLP

March [13], 2012

c/o Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York 10013

Morgan Stanley & Co. LLC

1585 Broadway

New York, New York 10036

UBS Securities LLC

677 Washington Boulevard
Stamford, CT 06901

Wells Fargo Securities, LLC

301 S. College Street

Charlotte, NC 28288

As Representatives of the Underwriters

Re: Status of KKR Financial Holdings LLC under the Investment Company Act of 1940

Ladies and Gentlemen:

We have acted as special investment company counsel to KKR Financial Holdings LLC (“KFN”), a Delaware limited liability company, in connection with the purchase by you of [$ ] aggregate principal amount of [ ] Senior Notes due 2042 (the “Notes”) issued by KFN, pursuant to the Underwriting Agreement dated [March ,] 2012 among KFN, KKR Financial Advisors LLC (the “Manager”) and you (the “Underwriting Agreement”). All capitalized terms used and not otherwise defined in this letter have the meanings given to them in the Underwriting Agreement. We are rendering the opinions expressed in this letter at the request of KFN pursuant to paragraph 6(j) of the Underwriting Agreement.

For purposes of the opinions expressed in this letter, we have relied as to all factual matters on certificates of officers of KFN and its affiliates; the Underwriting Agreement; the portions of the following documents discussing specifically the Investment Company Act of 1940 (the “Investment Company Act”) as applicable to KFN and its subsidiaries: (1) the Registration Statement on Form S-3 (File No. 333-167479), (the “Registration Statement”) filed by KFN on June 11, 2010 under the Securities Act of 1933, as amended (the “Securities Act”), (2) the Post-Effective Amendment No. 1 to the Registration Statement (“Post-

Effective Amendment No. 1”) filed by KFN under the Securities Act on November 7, 2011; (3) KFN’s prospectus dated November 7, 2011 (the “Base Prospectus”), as supplemented by the prospectus supplement dated March [ ], 2012 (together with the Base Prospectus, the “Prospectus”), filed by KFN pursuant to Rule 424(b) of the rules and regulations of the Securities and Exchange Commission (the “Commission”) under the Securities Act; (4) KFN’s preliminary prospectus supplement dated March [ ], 2012 (together with the Base Prospectus, the “Preliminary Prospectus”), filed by KFN pursuant to Rule 424(b) of the rules and regulations of the Commission under the Securities Act; and (5) KFN’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011; and on such other memoranda, instruments, documents and records of KFN and its subsidiaries and affiliates provided to us by KFN or its representatives as we have deemed necessary or appropriate as a basis for the opinions expressed below (collectively, the “Operative Documents”). In our examination and in rendering our opinions, we have assumed (i) the genuineness of all signatures of all parties; (ii) the authenticity of all corporate records, agreements, documents, instruments and certificates of KFN and its subsidiaries and affiliates submitted to us as originals, the conformity to original documents and agreements of all documents and agreements submitted to us as conformed, certified or photostatic copies and the authenticity of the originals of such conformed, certified or photostatic copies; (iii) the due authorization, execution and delivery of all documents and agreements (including, as applicable, the Operative Documents) by all parties to such documents and agreements and the binding effect of such documents and agreements (including, as applicable, the Operative Documents) on all parties; (iv) the legal right and power of all parties under all applicable laws and regulations to enter into, execute and deliver such documents and agreements; and (v) the capacity of natural persons. We have relied, as to all questions of fact material to our opinions, without independent check or verification, upon representations contained in the Operative Documents, the certificates of KFN and its officers and affiliates, and certificates of public officials. We have assumed that KFN will operate its business only as described in the Operative Documents.

The legal bases for our opinions are Section 3 of the Investment Company Act, and relevant reported cases, rules, regulations and orders thereunder, as well as advisory opinions, no-action letters, and published interpretative positions of the Commission and its staff, releases relating thereto, and other authority cited in the aforementioned sources and we have reviewed only those laws, rules and regulations, and those requirements as to regulatory consents, authorizations, registrations, approvals and filings which, in our experience, are normally applicable to the instant scenario. Our opinions are based on our interpretation of these authorities and principles we believe to be applicable to that interpretation. Our opinions are based on our interpretation of the legal authorities we have examined, which are subject to retroactive and prospective changes by legislation, administrative action or judicial decision.

Based on the foregoing, we are of the opinion that:

1. KFN is not, and after receipt of the proceeds from the offering of the Notes and the application thereof as described in the Prospectus will not be, required to register as an “investment company” as such term is defined in the Investment Company Act; and

2. The descriptions of the law and the legal conclusions contained in KFN’s Annual Report on Form 10-K for the year ended December 31, 2011 under the captions “Item 1- Our Investment Company Act Status”; “Risk Factors - Risks Related to our Organization and Structure - Maintenance of our Investment Company Act exemption imposes limits on our operations, which may adversely affect our results of operations.”; “Risk Factors - If the SEC were to disagree with our Investment Company Act determinations, our business could be adversely affected,” and “Item 7- Management’s Discussion and Analysis of Financial Condition and Results of Operations - Our Investment Company Act Status”; insofar as such descriptions relate to the Investment Company Act, are correct in all material respects and fairly summarize the considerations under the Investment Company Act that are likely to be material to holders of the Notes.

The opinions expressed in this letter are limited to the laws of the State of New York and the federal laws of the United States as in effect on the date of this letter typically applicable to transactions of the type contemplated by the Operative Documents and to the specific legal matters expressly addressed in this letter, and no opinion is expressed or implied with respect to the laws of any other jurisdiction or any legal matter not expressly addressed in this letter.

We express no opinion as to provisions of the Operative Documents insofar as such provisions relate to (a) the subject matter jurisdiction of a United States federal court to adjudicate any controversy relating to the Operative Documents, (b) the waiver of inconvenient forum with respect to proceedings in any such United States federal court, (c) the waiver of right to a jury trial, (d) the validity or enforceability under certain circumstances of provisions of the Operative Documents with respect to severability or any right of setoff or (e) limitations on the effectiveness of oral amendments, modifications, consents and waivers.

No person or entity other than you may rely or claim reliance upon this letter, provided, that Nicole J. Macarchuk, Esq. and Simpson Thacher & Bartlett LLP may, in rendering their opinions to the Underwriters pursuant to the Underwriting Agreement, rely on the opinions expressed in this letter as if such

letter were addressed to them, as to all matters relating to the Investment Company Act. This letter may not be quoted, distributed or disclosed, except to your counsel or auditors or as required by law, or otherwise as expressly permitted in the previous sentence, without our prior written consent.

This letter speaks only as of the date above. We undertake no responsibility to update or supplement this letter after the date above.

Very truly yours,

Annex F

Disclosure Package

Term sheet containing the terms of the Securities, substantially in the form of Annex G.

Annex G

Filed pursuant to Rule 433
Registration No. 333-167479

Supplementing the Preliminary

Prospectus Supplement

dated March 13, 2012

(To Prospectus dated November 7, 2011)

KKR Financial Holdings LLC

Pricing Term Sheet

Date: March 13, 2012

Issuer:		KKR Financial Holdings LLC

Security Description:		7.500% Senior Notes due 2042 (the “Notes”)

Principal Amount:		$100,000,000

Over-allotment Option:		$15,000,000

Trade Date:		March 13, 2012

Settlement Date:		T+5; March 20, 2012

Maturity Date:		March 20, 2042

Interest Payment Dates:		March 20, June 20, September 20 and December 20 of each year, beginning June 20, 2012

Coupon (Interest Rate):		The Notes will bear interest from March 20, 2012 at the rate of 7.500% per year, payable quarterly in arrears.

Public Offering Price:		$25 per Note

Optional Redemption:		The Issuer may redeem the Notes, in whole or in part, at any time on or after March 20, 2017 at a redemption price equal to 100% of the principal amount redeemed plus accrued and unpaid interest to, but excluding, the redemption date.

Listing:		The Issuer intends to apply to list the Notes on the New York Stock Exchange and, if the application is approved, expects trading in the Notes to begin within 30 days after the Notes are first issued.

Use of Proceeds:		The net proceeds from the sale of the Notes are estimated to be approximately $96,390,825* (or approximately $110,918,325* if the underwriters exercise their overallotment option in full), after deducting the underwriting discount and estimated offering expenses. The Issuer intends to use the net proceeds for general corporate purposes.

CUSIP/ISIN:		48248A504 / US48248A5048

Anticipated Ratings**:		[INTENTIONALLY OMITTED]

Joint Book-Running Managers:		Citigroup Global Markets Inc.
		Morgan Stanley & Co. LLC
		UBS Securities LLC
		Wells Fargo Securities, LLC

Co-Managers:		KKR Capital Markets LLC
		RBC Capital Markets, LLC

* Reflects sales to certain institutions as described in footnote 2 to the cover page of the Preliminary Prospectus Supplement dated March 13, 2012.

** Note: An explanation of the significance of ratings may be obtained from the rating agencies. Generally, rating agencies base their ratings on such material and information, and such of their own investigations, studies and assumptions, as they deem appropriate. The rating of the notes should be evaluated independently from similar ratings of other securities. A credit rating of a security is not a recommendation to buy, sell or hold securities and may be subject to review, revision, suspension, reduction or withdrawal at any time by the assigning rating agency.

The issuer has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the issuer has filed with the SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the issuer, any underwriter or any dealer participating in the offering will arrange to send you the prospectus if you request it by calling Citigroup Global Markets Inc. toll-free at 1-877-858-5407, Morgan Stanley & Co. LLC toll-free at 1-866-718-1649, UBS Securities LLC toll-free at 1-877-827-6444, ext. 561 3884 or Wells Fargo Securities, LLC toll-free at 1-800-326-5897.

EX-4.2 3 a12-6108_6ex4d2.htm EX-4.2

Exhibit 4.2

KKR FINANCIAL HOLDINGS LLC, as Company,

WILMINGTON TRUST, NATIONAL ASSOCIATION, as Trustee, and

CITIBANK, N.A., Authenticating Agent, Paying Agent and Security Registrar

SECOND SUPPLEMENTAL INDENTURE

Dated as of March 20, 2012

INDENTURE

Dated as of November 15, 2011

7.500% Senior Notes due 2042

TABLE OF CONTENTS

		PAGE

ARTICLE 1
DEFINITIONS

SECTION 1.01.	Scope of Supplemental Indenture	2
SECTION 1.02.	Definitions	2

ARTICLE 2
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES

SECTION 2.01.	Title and Terms; Payments	7
SECTION 2.02.	Book-Entry Provisions for Global Notes	9

ARTICLE 3
REDEMPTION OF NOTES

SECTION 3.01.	Optional Redemption of Notes	9
SECTION 3.02.	Notice of Optional Redemption; Selection of Notes	9
SECTION 3.03.	Payment of Notes Called for Redemption by the Company	11
SECTION 3.04.	Sinking Fund	11

ARTICLE 4
DEFAULT AND REMEDIES

SECTION 4.01.	Events of Default	11
SECTION 4.02.	Payments of Notes on Default; Suit Therefor	13
SECTION 4.03.	Application of Monies Collected by Trustee	15
SECTION 4.04.	Proceedings by Noteholder	15
SECTION 4.05.	Proceedings by Trustee	16
SECTION 4.06.	Remedies Cumulative and Continuing	16
SECTION 4.07.	Direction of Proceedings and Waiver of Defaults by Majority of Noteholders	17
SECTION 4.08.	Notice of Defaults	17
SECTION 4.09.	Undertaking to Pay Costs	18

ARTICLE 5
SUPPLEMENTAL INDENTURES

SECTION 5.01.	Supplemental Indentures Without Consent of Noteholders	18
SECTION 5.02.	Supplemental Indenture With Consent of Noteholders	19
SECTION 5.03.	Effect of Supplemental Indenture	20
SECTION 5.04.	Notation on Notes	20
SECTION 5.05.	Evidence of Compliance of Supplemental Indenture to be Furnished to Trustee	21

ARTICLE 6
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

SECTION 6.01.	Company May Consolidate on Certain Terms	21
SECTION 6.02.	Successor Party to be Substituted	21

ARTICLE 7
SATISFACTION AND DISCHARGE

SECTION 7.01.	Satisfaction and Discharge of Indenture	22
SECTION 7.02.	Covenant Defeasance	22

ARTICLE 8
REPURCHASE OF NOTES

SECTION 8.01.	Obligation to Offer to Repurchase Upon a Change of Control Repurchase Event	22

ARTICLE 9
LIENS

SECTION 9.01.		24

ARTICLE 10
INFORMATION RIGHTS

SECTION 10.01.		24

ARTICLE 11
MISCELLANEOUS PROVISIONS

SECTION 11.01.	Addresses for Notices, etc.	25
SECTION 11.02.	Governing Law	26
SECTION 11.03.	Trust Indenture Act	26
SECTION 11.04.	No Security Interest Created	26
SECTION 11.05.	Execution in Counterparts	26
SECTION 11.06.	Severability	26
SECTION 11.07.	Appointment of Paying Agent, Security Registrar and Authenticating Agent	26
SECTION 11.08.	Money for Securities Payments to Be Held in Trust. The Paying Agent hereby agrees to:	27
SECTION 11.09.	Ratification of Original Indenture	27

EXHIBIT

Exhibit A

Form of Note

A-1

SECOND SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), dated as of March 20, 2012, among KKR Financial Holdings LLC, a Delaware limited liability company (the “Company”), Wilmington Trust, National Association, a banking association duly organized and existing under the laws of the United States of America, as trustee (the “Trustee”), and Citibank, N.A., a banking association duly organized and existing under the laws of the United States of America, as Authenticating Agent, Paying Agent and Security Registrar, to the indenture dated as of November 15, 2011 between the Company and the Trustee (as amended or supplemented from time to time in accordance with the terms thereof, the “Original Indenture”).

RECITALS OF THE COMPANY

WHEREAS, the Company executed and delivered the Original Indenture to the Trustee to provide, among other things, for the issuance, from time to time, of the Company’s unsecured Securities, in an unlimited aggregate principal amount, in one or more series to be established by the Company under, and authenticated and delivered as provided in, the Original Indenture;

WHEREAS, Section 901(4) of the Original Indenture provides for the Company and the Trustee to enter into an indenture supplemental to the Original Indenture to establish the form and terms of Securities of any series as contemplated by Sections 201 and 301 of the Original Indenture;

WHEREAS, the Board of Directors has duly adopted resolutions authorizing the Company to execute and deliver this Supplemental Indenture;

WHEREAS, pursuant to the terms of the Original Indenture, the Company desires to establish a new series of its Securities to be known as its “7.500% Senior Notes due 2042” (the “Notes”), the form and substance of such Notes and the terms, provisions and conditions thereof to be set forth as provided in the Original Indenture and this Supplemental Indenture;

WHEREAS, the Form of Note, the certificate of authentication to be borne by each Note and the Form of Assignment and Transfer contemplated under the terms of the Notes are to be substantially in the forms hereinafter provided; and

WHEREAS, the Company has requested that the Trustee, Authenticating Agent, Paying Agent and Security Registrar execute and deliver this Supplemental Indenture, and all requirements necessary to make (i) this Supplemental Indenture a valid instrument in accordance with its terms, and (ii) the Notes, when executed by the Company and authenticated and delivered by the Authenticating Agent, the valid obligations of the Company, in each case, have been performed, and the execution and delivery of this Supplemental Indenture have been duly authorized in all respects.

NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH, for and in consideration of the premises and the purchases of the Notes by the Holders thereof, it is mutually agreed, for the benefit of the Company and the equal and proportionate benefit of all Holders of the Notes, as follows:

ARTICLE 1
DEFINITIONS

SECTION 1.01. Scope of Supplemental Indenture. The changes, modifications and supplements to the Original Indenture effected by this Supplemental Indenture shall be applicable only with respect to, and shall only govern the terms of, the Notes, which may be issued from time to time, and shall not apply to any other Securities that may be issued under the Original Indenture unless a supplemental indenture with respect to such other Securities specifically incorporates such changes, modifications and supplements. The provisions of this Supplemental Indenture shall supersede any corresponding or conflicting provisions in the Original Indenture.

SECTION 1.02. Definitions. For all purposes of the Indenture, except as otherwise expressly provided or unless the context otherwise requires:

(i) the terms defined in this Article 1 shall have the meanings assigned to them in this Article 1 and include the plural as well as the singular;

(ii) all words, terms and phrases defined in the Original Indenture (but not otherwise defined herein) shall have the same meanings as in the Original Indenture;

(iii) all other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, shall have the meanings assigned to them in the Trust Indenture Act;

(iv) all accounting terms not otherwise defined herein shall have the meanings assigned to them in accordance with generally accepted accounting principles, and, except as otherwise herein expressly provided, the term “generally accepted accounting principles” with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted at the date of this instrument; and

(v) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Supplemental Indenture as a whole and not to any particular Article, Section or other subdivision.

“Additional Notes” has the meaning specified in Section 2.01.

“Below Investment Grade Rating Event” means the rating on the Notes is lowered in respect of a Change of Control and the Notes are rated below Investment Grade by both Rating Agencies on any date from the date of the public notice of an arrangement that could result in a Change of Control until the end of the 60-day period following public notice of the occurrence of a Change of Control (which period shall be extended until the ratings are announced if during such 60 day period the rating of the Notes is under publicly announced consideration for possible downgrade by either of the Rating Agencies); provided that a Below Investment Grade Rating Event otherwise arising by virtue of a particular reduction in rating shall not be deemed to have occurred in respect of a particular Change of Control (and thus shall not be deemed a Below Investment Grade Rating Event for purposes of the definition of Change of Control Repurchase Event hereunder) if the Rating Agencies making the reduction in rating to which this definition

would otherwise apply do not announce or publicly confirm or inform the Company in writing at the Company’s request that the reduction was the result, in whole or in part, of any event or circumstance comprised of or arising as a result of, or in respect of, the applicable Change of Control (whether or not the applicable Change of Control shall have occurred at the time of the Below Investment Grade Rating Event).

“Business Day” means any day other than a Legal Holiday.

“Change of Control” means the occurrence of the following:

(1) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Exchange Act and the rules of the Commission thereunder as in effect on the Issue Date), of Equity Interests representing more than 50% of the aggregate ordinary voting power represented by the Company’s issued and outstanding Equity Interests;

(2) occupation of a majority of the seats (other than vacant seats) on the Company’s Board of Directors by Persons who were neither (i) nominated by the Company’s Board of Directors nor (ii) appointed by directors so nominated; or

(3) the acquisition of direct or indirect Control of the Company by any Person or group (within the meaning of the Exchange Act and the rules of the Commission thereunder as in effect on the Issue Date) not in Control of the Company on the Issue Date (it being understood and agreed that KKR & Co. L.P. and its affiliated companies do not Control the Company solely for purposes of this definition);

provided that, for the purposes of this definition, no Change of Control shall be deemed to occur by reason of the Company becoming a wholly owned Subsidiary of a Successor Parent.

“Change of Control Offer” has the meaning set forth in Section 8.01 of this Supplemental Indenture.

“Change of Control Repurchase Event” means the occurrence of a Change of Control and a Below Investment Grade Rating Event.

“close of business” means 5:00 p.m. (New York City time).

“Company” has the meaning set forth in the first paragraph of this Supplemental Indenture.

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise.

“Credit Facility” means the Credit Agreement dated as of May 3, 2010 among the Company, certain of the Company’s subsidiaries as borrowers, the lenders party thereto and Citibank, N.A., as administrative agent.

“Credit Group” means the Company and the Company’s direct and indirect Subsidiaries (to the extent of the Company’s economic ownership interest in such Subsidiaries) taken as a whole.

“Custodian” means Citibank, N.A, as custodian with respect to the Notes in global form, or any successor entity thereto.

“default” means any event that is, or after notice or passage of time, or both, would be, an Event of Default.

“Depository” means The Depository Trust Company, a New York corporation.

“Equity Interests” means, with respect to any Person, all of the shares of capital stock of (or other ownership or profit interests in) such Person, all of the warrants, options or other rights for the purchase or acquisition from such Person of shares of capital stock of (or other ownership or profit interests in) such Person, all of the securities convertible into or exchangeable for shares of capital stock of (or other ownership or profit interests in) such Person or warrants, rights or options for the purchase or acquisition from such Person of such shares (or such other interests), and all of the other ownership or profit interests in such Person (including partnership, member or trust interests therein), whether voting or nonvoting, and whether or not such shares, warrants, options, rights or other interests are outstanding on any date of determination.

“Existing Indebtedness” means (i) any existing indebtedness on the Issue Date and (ii) indebtedness incurred under the Credit Facility and, with respect to both clauses (i) and (ii), any amendments, supplements, modifications, extensions, renewals, restatements or refundings thereof and any indentures, notes, debentures, credit facilities or commercial paper facilities that replace, refund or refinance any part of the loans, notes, other credit facilities or commitments thereunder, including any such replacement, refunding or refinancing facility or indenture that alters the maturity or interest rate thereof, provided that the aggregate principal amount of Existing Indebtedness outstanding at any one time shall not exceed $250 million, except that the aggregate amount of Existing Indebtedness outstanding at any one time may reach $600 million provided that all Existing Indebtedness outstanding at such time in excess of $250 million is incurred under the Credit Facility or any amendment thereto.

“Fitch” means Fitch Ratings Inc. or any successor thereto.

“Event of Default” means any event specified in Section 4.01 as an Event of Default.

“Form of Assignment and Transfer” shall mean the “Form of Assignment and Transfer” attached to the Form of Note attached hereto as Exhibit A.

“Global Note” means any Note that is a Global Security.

“Governmental Authority” means the government of the United States or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to

government (including any supranational bodies such as the European Union or the European Central Bank).

“Indenture” means the Original Indenture, as originally executed and as supplemented from time to time by one or more indentures supplemental thereto, including this Supplemental Indenture, entered into pursuant to the applicable provisions of the Indenture, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern the Original Indenture and this Supplemental Indenture.

“Initial Notes” has the meaning specified in Section 2.01.

“interest” means, when used with reference to the Notes, any interest payable under the terms of the Notes.

“Interest Payment Date” means March 20, June 20, September 20 and December 20 of each year, beginning on June 20, 2012.

“Investment Grade” means, with respect to Fitch, a rating of BBB- or better (or its equivalent under any successor rating categories of Fitch) and, with respect to S&P, BBB- or better (or its equivalent under any successor rating categories of S&P) (or, in each case, if such Rating Agency ceases to rate the Notes for reasons outside of the Company’s control, the equivalent investment grade credit rating from any Rating Agency selected by the Company as a replacement Rating Agency).

“Issue Date” means the first date the Notes are originally issued as set forth on the face of such Note under this Supplemental Indenture.

“Legal Holiday” means a Saturday, a Sunday or a day on which banking institutions in The City of New York or at the place of payment are not required to be open.

“Non-Recourse Indebtedness” means an obligation for indebtedness that can only be satisfied out of the collateral securing the obligation and not out of the debtor’s other assets.

“Note” or “Notes” has the meaning specified in the fourth paragraph of the recitals of this Supplemental Indenture, and shall include any Additional Notes issued pursuant to Section 2.01.

“Noteholder,” “Holder” or “holder” as applied to any Note, or other similar terms (but excluding the term “beneficial holder”), means any Person in whose name at the time a particular Note is registered in the Security Register.

“Officer” means the Chairman of the Board, the Vice Chairman, the Chief Executive Officer, the President, any Executive Vice President, any Senior Vice President, any Vice President, the Treasurer or the Secretary or any Assistant Treasurer or Assistant Secretary of the Company.

“Original Indenture” has the meaning specified in the first paragraph of this Supplemental Indenture.

“Permitted Liens” means (a) liens on voting stock or profit participating equity interests of any Subsidiary existing at the time such entity becomes a direct or indirect Subsidiary of the Company or is merged into a direct or indirect Subsidiary of the Company (provided such liens are not created or incurred in connection with such transaction and do not extend to any other Subsidiary), (b) statutory liens, liens for taxes or assessments or governmental liens (including liens in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations) not yet due or delinquent or which can be paid without penalty or are being contested in good faith, (c) other liens of a similar nature as those described in subclauses (a) and (b) above, and (d) liens granted to secure Existing Indebtedness.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Prospectus Supplement” means the Company’s prospectus supplement dated March 13, 2012, relating to the Notes.

“Rating Agency” means:

(1) each of Fitch and S&P; and

(2) if either of Fitch or S&P ceases to rate the Notes or fails to make a rating of the Notes publicly available for reasons outside of the Company’s control, a “nationally recognized statistical rating organization” within the meaning of Section 3(a)(62) of the Exchange Act selected by the Company as a replacement agency for Fitch or S&P, or both, as the case may be.

“Redemption Date” means the date fixed by the Company for redemption of all or any portion of the Notes in accordance with the provisions of Section 3.02 hereof.

“Redemption Price” means the price at which the Notes may be redeemed, as set forth in Section 3.01.

“Regular Record Date” for the interest payable on any Interest Payment Date while the Notes remain in the form of a Global Security means one Business Day prior to the relevant Interest Payment Date and otherwise, the fifteenth day prior to such Interest Payment Date (whether or not a Business Day).

“Repurchase Price” has the meaning set forth in Section 8.01 of this Supplemental Indenture.

“Repurchase Price Payment Date” has the meaning set forth in Section 8.01 of this Supplemental Indenture.

“Responsible Officer” means any officer of such Person in its Corporate Trust Office having direct responsibility for matters pertaining to the Indenture and also means, with respect to a particular corporate trust matter, any other officer or employee of such Person to whom such matter is referred because of his or her knowledge of and familiarity with the particular subject.

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., or any successor thereto.

“Stated Maturity” means March 20, 2042.

“Structured Finance Subsidiary” means a Subsidiary the primary function of which is to act as an issuer, depositor or special purpose entity in connection with issuances of obligations collateralized by loans, bonds, mortgages or other debt obligations issued by third parties.

“Subsidiary” of any Person means (a) any corporation, association or other business entity (other than a partnership, joint venture, limited liability company or similar entity) of which more than 50% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests or (b) any partnership, joint venture, limited liability company or similar entity of which more than 50% of the capital accounts, distribution rights, total equity and voting interests or general or limited partnership interests, as applicable, is, in the case of clauses (a) and (b), at the time owned or controlled, directly or indirectly, by (1) such Person, (2) such Person and one or more Subsidiaries of such Person or (3) one or more Subsidiaries of such Person.

“Substantially All Merger” means a merger or consolidation of the Company with or into another Person that would, in one or a series of related transactions, result in the transfer or other disposition, directly or indirectly, of all or substantially all of the combined assets of the Credit Group taken as a whole to a Person that is not within the Credit Group immediately prior to such transaction.

“Substantially All Sale” means a sale, assignment, transfer, lease or conveyance to any other Person, in one or a series of related transactions, directly or indirectly, of all or substantially all of the combined assets of the Credit Group taken as a whole to a Person that is not within the Credit Group immediately prior to such transaction.

“Successor Parent” means any Person for which Equity Interests of such Person representing more than 50% of the aggregate ordinary voting power issued and outstanding of such Person immediately after the time the Company becomes a wholly owned Subsidiary of such Person, are beneficially owned (within the meaning of the Exchange Act and the rules of the Commission thereunder as in effect on the Issue Date) by one or more Persons that beneficially owned Equity Interests representing more than 50% of the aggregate ordinary voting power represented by the Company’s issued and outstanding Equity Interests immediately prior to the Company becoming a wholly owned Subsidiary of such Person and in substantially the same proportion as immediately prior to the Company becoming a wholly owned Subsidiary of such Person.

“Successor Party” has the meaning set forth in Section 6.01 of this Supplemental Indenture.

“Supplemental Indenture” has the meaning specified in the first paragraph hereof.

ARTICLE 2
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND EXCHANGE OF NOTES

SECTION 2.01. Title and Terms; Payments. There is hereby established a series of Securities designated the “7.500% Senior Notes due 2042” initially limited in aggregate principal

amount to $115,000,000, which amount shall be as set forth in a Company Order for the authentication and delivery of Notes pursuant to Section 303 of the Original Indenture. The Notes shall be issued only in fully registered form, in denominations of $25 and integral multiples of $25 in excess thereof.

The principal amount of Notes then Outstanding shall be payable at the Stated Maturity. Interest on the Notes shall accrue at a rate of 7.500% per annum, from and including March 20, 2012 or from the most recent date on which interest has been paid or duly provided for, until the principal thereof is paid or made available for payment. Interest shall be payable in arrears on each Interest Payment Date, beginning on June 20, 2012, to the Person in whose name a Note is registered on the Security Register at the close of business on the Regular Record Date immediately preceding the applicable Interest Payment Date. If any Interest Payment Date is a Legal Holiday, the required payment will be made on the next succeeding day that is not a Legal Holiday as if it were made on the date such payment was due and no interest will accrue on the amount so payable for the period from and after such Interest Payment Date to such next succeeding day. Interest will be computed on the basis of twelve 30-day months and a 360-day year. The amount of interest payable for any period shorter than a full quarterly interest period will be computed on the basis of the number of days elapsed in a 90-day quarter of three 30-day months.

The Company may, without the consent of the Holders of the Notes, hereafter issue additional Notes (“Additional Notes”) under the Indenture with the same terms and conditions, except for any difference in the issue price, issue date and interest accrued prior to the issue date of the Additional Notes, as the Notes issued on the date of this Supplemental Indenture (the “Initial Notes”) in an unlimited aggregate principal amount; provided that if such Additional Notes are not fungible with the Notes for U.S. federal income tax purposes, the Additional Notes will have a separate CUSIP number. Any such Additional Notes shall constitute a single series together with the Initial Notes for all purposes hereunder, including, without limitation, for purposes of any waivers, supplements or amendments to the Indenture requiring the approval of Holders of the Notes and any offers to purchase the Notes.

The Form of Note shall be substantially as set forth in Exhibit A and the Form of Assignment and Transfer shall be substantially as set forth in Attachment 1 to Exhibit A, each of which is incorporated into and shall be deemed a part of this Supplemental Indenture, and in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by the Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined to be necessary or appropriate by the Officers of the Company executing such Notes, as evidenced by their execution of the Notes.

The Company shall pay the principal of and interest on any Global Note in immediately available funds to the Depository or its nominee, as the case may be, as the registered Holder of such Global Note. Holders of certificated Notes, if any, must surrender such certificated Notes to the Paying Agent to collect principal and interest payments at the Stated Maturity. The Company shall pay the principal of and interest on any certificated Notes by wire transfer of immediately available funds to the accounts specified by the Holders thereof or, if no such account is specified the Company shall pay the principal of and interest on those Notes at the

office or agency designated by the Company for that purpose by check mailed to the Holders of those Notes. The Company has initially designated Citibank, N.A. as its Paying Agent, Security Registrar and Authenticating Agent in respect of the Notes and its agency in 111 Wall Street, 15th Floor Window, New York, New York 10005, Attention: Window as a place where Notes may be presented for payment or for registration of transfer. The Company may, however, change the Paying Agent or Security Registrar without prior notice to the Holders thereof, and the Company may act as Paying Agent or Security Registrar.

SECTION 2.02. Book-Entry Provisions for Global Notes. The Notes initially shall be issued in the form of one or more Global Notes without interest coupons (i) registered in the name of Cede & Co., as nominee of the Depository and (ii) delivered to the Paying Agent as custodian for the Depository. Solely for purposes of the Notes, the Global Notes shall be exchangeable for definitive certificated Notes only if (i) the Depository notifies the Company that it is unwilling or unable to continue as a Depository for the Global Notes or at any time the Depository for the Global Notes ceases to be a clearing agency registered as such or in good standing under the Exchange Act, if so required by or other applicable law statute or regulation, and no successor Depository for Global Notes shall have been appointed within 90 days of such notification or of the Company becoming aware of the Depository’s ceasing to be so registered, as the case may be, or (ii) the Company, in its sole discretion, determines that the Notes shall no longer be represented by one or more Global Notes and executes and delivers to the Trustee and Security Registrar a Company Order to the effect that the Global Notes shall be so exchangeable.

ARTICLE 3
REDEMPTION OF NOTES

Solely for the purposes of the Notes, Article Eleven of the Original Indenture shall be deleted and shall be replaced in the entirety by this Article 3.

SECTION 3.01. Optional Redemption of Notes. The Company shall have the right to redeem the Notes on the terms set forth in this Section 3.01. At any time on or after March 20, 2017, the Company may, upon the notice set forth in Section 3.02, redeem the Notes for cash, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus unpaid interest, if any, accrued thereon to, but excluding, the Redemption Date (the “Redemption Price”);

SECTION 3.02. Notice of Optional Redemption; Selection of Notes. In case the Company shall desire to exercise the right to redeem all or, as the case may be, any part of the Notes pursuant to Section 3.01, it shall fix a date for redemption and it or, at its written request received by the Trustee and the Paying Agent not fewer than five (5) Business Days prior (or such shorter period of time as may be acceptable to the Paying Agent) to the date the notice of redemption is to be mailed, the Paying Agent in the name of and at the expense of the Company, shall mail or cause to be mailed (or in the case of Notes held in book-entry form, shall electronically transmit) a notice of such redemption not fewer than fifteen (15) calendar days nor more than sixty (60) calendar days prior to the Redemption Date to each Holder of Notes so to be redeemed in whole or in part at its last address as the same appears on the Security Register; provided that if the Company makes such request of the Paying Agent, the text of the notice shall be prepared by the Company. Such mailing shall be by first class mail. The notice, if mailed in the manner herein provided, shall be conclusively presumed to have been duly given, whether or

not the Holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the Holder of any Note designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Note. Concurrently with the mailing of any such notice of redemption, the Company shall issue a press release through Dow Jones & Company, Inc., Bloomberg Business News or PR Newswire or a substantially equivalent financial news organization announcing such redemption, the form and content of which press release shall be determined by the Company in its sole discretion. The Company shall also publish that information in a newspaper of general circulation in The City of New York, or on its web site, or through such other public medium as it deems appropriate at that time. The failure to issue any such press release to publish such information or any defect therein shall not affect the validity of the redemption notice or any of the proceedings for the redemption of any Note called for redemption.

Each such notice of redemption shall specify: (i) the aggregate principal amount of Notes to be redeemed, (ii) CUSIP number or numbers of the Notes being redeemed, (iii) the Redemption Date, (iv) the Redemption Price at which Notes are to be redeemed, (v) the place or places of payment and that payment will be made upon presentation and surrender of such Notes, and (vi) that interest accrued and unpaid to the Redemption Date will be paid as specified in said notice, and that on and after said date interest thereon or on the portion thereof to be redeemed will cease to accrue. If fewer than all the Notes are to be redeemed, the notice of redemption shall identify the Notes to be redeemed (including CUSIP numbers, if any). In case any Note is to be redeemed in part only, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that, on and after the Redemption Date, upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion thereof will be issued.

Whenever any Notes are to be redeemed, the Company shall give the Trustee and the Paying Agent written notice of the Redemption Date, together with an Officers’ Certificate as to the aggregate principal amount of Notes to be redeemed, not fewer than fifteen (15) calendar days prior to the Redemption Date.

On or prior to the Redemption Date specified in the notice of redemption given as provided in this Section 3.02, the Company shall deposit with the Paying Agent (or, if the Company is acting as its own Paying Agent, set aside, segregate and hold in trust as provided in Section 4.04) an amount of money in immediately available funds sufficient to redeem on the Redemption Date all the Notes (or portions thereof) so called for redemption (other than those theretofore surrendered for exchange) at the appropriate Redemption Price, together with accrued interest to the Redemption Date; provided that if such payment is made on the Redemption Date, it must be received by the Paying Agent, by 10:00 a.m., New York City time, on such date. The Company shall be entitled to retain any interest, yield or gain on amounts deposited with the Paying Agent pursuant to this Section 3.02 in excess of amounts required hereunder to pay the Redemption Price; provided, however, that neither the Trustee nor the Paying Agent shall be under any liability for interest on any money received by it hereunder except as otherwise agreed to with the Company in writing.

If less than all of the Outstanding Notes are to be redeemed, the Trustee shall select the Notes or portions thereof of the Global Note or the Notes in certificated form to be redeemed (in principal amounts of $25 or integral multiples of $25 in excess thereof) (a) if the Notes are listed

on any national securities exchange, in compliance with the requirements of the principal national securities exchange on which the Notes are listed, (b) if the Notes are Global Notes but are not listed on any national securities exchange, by lot or by such other similar method in accordance with the procedures of DTC and (c) if the Notes are not listed on any national securities exchange and are not Global Notes, on a pro rata basis (to the extent practicable).

SECTION 3.03. Payment of Notes Called for Redemption by the Company. If notice of redemption has been given as provided in Section 3.02, the Notes or portion of Notes with respect to which such notice has been given shall become due and payable on the Redemption Date at the place or places stated in such notice at the Redemption Price, and unless the Company shall default in the payment of the amounts owing on the Notes upon such redemption, interest on the Notes or portion of Notes so called for redemption shall cease to accrue on and after such date and the Notes shall cease to be entitled to any benefit or security under this Supplemental Indenture, and the Holders thereof shall have no right in respect of such Notes except the right to receive the Redemption Price thereof. On presentation and surrender of such Notes at a place of payment in said notice specified, the said Notes or the specified portions thereof shall be paid and redeemed by the Company at the Redemption Price.

Upon presentation of any Note redeemed in part only, the Company shall execute and the Authenticating Agent, upon receipt of a Company Request, shall authenticate and make available for delivery to the Holder thereof, at the expense of the Company, a new Note or Notes, of authorized denominations, in principal amount equal to the unredeemed portion of the Notes so presented.

SECTION 3.04. Sinking Fund. There shall be no sinking fund provided for the Notes and the provisions of Article Twelve of the Original Indenture shall not apply to the Notes.

ARTICLE 4
DEFAULT AND REMEDIES

Solely for the purposes of the Notes, Article Five of the Original Indenture shall be deleted and replaced in its entirety by this Article 4.

SECTION 4.01. Events of Default. “Event of Default,” wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(a) default in the payment of interest under the Notes as and when the same shall be due and payable, and continuance of such default for a period of thirty (30) days; or

(b) default in the payment of the principal of the Notes when the same becomes due and payable, regardless of whether such payment became due and payable at its Stated Maturity, upon redemption or otherwise; or

(d) failure on the part of the Company to comply with any term, covenant or agreement in the Notes or in the Indenture (other than a covenant or agreement a default in the performance or breach of which is elsewhere in this Section 4.01 specifically dealt with) and such failure continues for a period of ninety (90) calendar days after the date on which written notice of such failure, requiring the Company to remedy the same, shall have been given to the Company by the Trustee, or to the Company and a Responsible Officer of the Trustee by the Holders of not less than twenty-five percent (25%) of the aggregate principal amount of the Notes then Outstanding; or

(e) default after the expiration of any applicable grace period in the payment of principal when due, or resulting in acceleration of, other indebtedness for borrowed money other than Non-Recourse Indebtedness of the Company or any of its Subsidiaries, other than a Structured Finance Subsidiary, where the aggregate principal amount with respect to which the default or acceleration has occurred exceeds $60.0 million and such indebtedness has not been discharged, or such default in payment or acceleration has not been cured or rescinded, prior to written notice of acceleration of the Notes; or

(f) the Company pursuant to or under or within the meaning of any Bankruptcy Law:

(i) commences a voluntary case or proceeding seeking liquidation, reorganization or other relief with respect to it or its debts or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property; or

(ii) consents to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it; or

(iii) consents to the appointment of a custodian of it or for all or substantially all of its property; or

(iv) makes a general assignment for the benefit of creditors; or

(g) an involuntary case or other proceeding shall be commenced against the Company, seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of sixty (60) consecutive calendar days; or

(h) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

(i) is for relief against the Company in an involuntary case or proceeding; or

(ii) appoints a trustee, receiver, liquidator, custodian or other similar official of the Company, or any substantial part of its properties; or

(iii) orders the liquidation of the Company;

and, in each case in this clause (h), the order or decree remains unstayed and in effect for sixty (60) calendar days.

If an Event of Default (other than an Event of Default specified in Section 4.01(f), 4.01(g) and 4.01(h)) with respect to the Company) shall occur and be continuing, unless the principal of all of the Notes shall have already become due and payable, either the Trustee or the Holders of at least twenty-five percent (25%) in aggregate principal amount of the Notes then Outstanding, by notice in writing to the Company (and to the Trustee if given by Noteholders), may declare the principal of, and interest accrued and unpaid on, all the Notes to be immediately due and payable, and upon any such declaration the same shall be immediately due and payable.

If an Event of Default specified in Section 4.01(f), 4.01(g) or 4.01(h) occurs with respect to the Company, the principal of, and interest accrued and unpaid on, all the Notes shall be immediately and automatically due and payable without necessity of further action.

If, at any time after the principal of and interest on the Notes shall have been so declared due and payable, and before any judgment or decree for the payment of the monies due shall have been obtained or entered as hereinafter provided, Holders of a majority in aggregate principal amount of the Notes then Outstanding on behalf of the Holders of all of the Notes then Outstanding, by written notice to the Company and to the Trustee, may waive all defaults or Events of Default and rescind and annul such declaration and its consequences subject to Section 4.07 if: (a) such rescission would not conflict with any final judgment or decree of a court of competent jurisdiction; (b) interest on overdue installments of interest (to the extent that payment of such interest is lawful) and on overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid; (c) the Company has paid the Trustee and the Agents their reasonable compensation and reimbursed the Trustee and the Agents for their expenses, disbursements and advances (including, without limitation, the reasonable compensation and the expenses and disbursements of their respective agents and counsel) pursuant to Section 606 and Section 601(18) of the Original Indenture; and (d) all Events of Default, other than the nonpayment of the principal amount and any accrued and unpaid interest that has become due solely because of such acceleration, have been cured or waived. No such rescission and annulment shall extend to or shall affect any subsequent default or Event of Default, or shall impair any right consequent thereon. The Company shall notify in writing a Responsible Officer of the Trustee, promptly upon becoming aware thereof, of any Event of Default, as provided in Section 1007 of the Original Indenture.

In case the Trustee shall have proceeded to enforce any right under this Supplemental Indenture and such proceedings shall have been discontinued or abandoned because of such waiver or rescission and annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company, the Holders of Notes, the Agents and the Trustee shall be restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Company, the Holders of Notes, the Agents and the Trustee shall continue as though no such proceeding had been taken.

SECTION 4.02. Payments of Notes on Default; Suit Therefor. The Company covenants that in the case of an Event of Default pursuant to Section 4.01(a), 4.01(b) or 4.01(c), upon demand of the Trustee, the Company will pay to the Trustee (or the Paying Agent on its behalf), for the benefit of the Holders of the Notes, (i) the whole amount that then shall be due

and payable on all such Notes for principal or interest, as the case may be, with interest upon the overdue principal and premium, if any, and (to the extent that payment of such interest is enforceable under applicable law) upon the overdue installments of accrued and unpaid interest at the rate borne by the Notes from the required payment date and, (ii) in addition thereto, any amounts due the Trustee and the Agents under Section 606 and Section 601(18) of the Original Indenture. Until such demand by the Trustee, the Company may pay the principal of and interest on the Notes to the registered Holders, whether or not the Notes are overdue.

In case the Company shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any actions or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Company or any other obligor on the Notes and collect in the manner provided by law out of the property of the Company or any other obligor on the Notes wherever situated the monies adjudged or decreed to be payable.

In case there shall be pending proceedings for the bankruptcy or for the reorganization of the Company or any other obligor on the Notes under any Bankruptcy Law, or any other applicable law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Company or such other obligor, the property of the Company or such other obligor, or in the case of any other judicial proceedings relative to the Company or such other obligor upon the Notes, or to the creditors or property of the Company or such other obligor, the Trustee, irrespective of whether the principal of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 4.02, shall be entitled and empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of principal and accrued and unpaid interest in respect of the Notes, and, in case of any judicial proceedings, to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee, the Agents and of the Noteholders allowed in such judicial proceedings relative to the Company or any other obligor on the Notes, its or their creditors, or its or their property, and to collect and receive any monies or other property payable or deliverable on any such claims, and to distribute the same after the deduction of any amounts due the Trustee and the Agents under Section 606 and Section 601(18) of the Original Indenture, and to take any other action with respect to such claims, including participating as a member of any official committee of creditors, as it reasonably deems necessary or advisable, unless prohibited by law or applicable regulations, and any receiver, assignee or trustee in bankruptcy or reorganization, liquidator, custodian or similar official is hereby authorized by each of the Noteholders to make such payments to the Trustee, and, in the event that the Trustee shall consent to the making of such payments directly to the Noteholders, to pay to the Trustee and the Agents any amount due them for reasonable compensation, expenses, advances and disbursements, including counsel fees and expenses incurred by it up to the date of such distribution. To the extent that such payment of reasonable compensation, expenses, advances and disbursements out of the estate in any such proceedings shall be denied for any reason, payment of the same shall be secured by a lien on, and shall be paid out of, any and all distributions, dividends, monies, securities and other property which the Holders of the

Notes may be entitled to receive in such proceedings, whether in liquidation or under any plan of reorganization or arrangement or otherwise.

All rights of action and of asserting claims under this Supplemental Indenture, or under any of the Notes, may be enforced by the Trustee without the possession of any of the Notes, or the production thereof at any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, the Agents and their respective agents and counsel, be for the ratable benefit of the Holders of the Notes.

In any proceedings brought by the Trustee (and in any proceedings involving the interpretation of any provision of this Supplemental Indenture to which the Trustee shall be a party), the Trustee shall be held to represent all the Holders of the Notes, and it shall not be necessary to make any Holders of the Notes parties to any such proceedings.

SECTION 4.03. Application of Monies Collected by Trustee. Any monies or property collected by the Trustee pursuant to this Article 4, shall be applied, in the following order, at the date or dates fixed by the Trustee or the Paying Agent on its behalf for the distribution of such monies, upon presentation of the several Notes, and stamping thereon the payment, if only partially paid, and upon surrender thereof, if fully paid:

FIRST: To the payment of all amounts due the Trustee, the Agents and any predecessors under Section 606 and Section 601(18) of the Original Indenture;

SECOND: In case the principal of the Outstanding Notes shall not have become due and be unpaid, to the payment of accrued and unpaid interest, if any, on the Notes in default in the order of the maturity of the installments of such interest, with interest (to the extent that such interest has been collected by the Trustee) as provided in Section 4.03 upon the overdue installments of interest at the annual rate borne by the Notes, such payments to be made ratably to the Persons entitled thereto;

THIRD: In case the principal of the Outstanding Notes shall have become due, by declaration or otherwise, and be unpaid to the payment of the whole amount then owing and unpaid upon the Notes for principal and interest, with interest on the overdue principal and (to the extent that such interest has been collected by the Trustee) upon overdue installments of accrued and unpaid interest, as provided in Section 4.03, and in case such monies shall be insufficient to pay in full the whole amounts so due and unpaid upon the Notes, then to the payment of such principal and interest without preference or priority of principal over interest, or of interest over principal, or of any installment of interest over any other installment of interest, or of any Note over any other Note, ratably to the aggregate of such principal and accrued and unpaid interest; and

FOURTH: To the payment of the remainder, if any, to the Company or any other Person lawfully entitled thereto.

SECTION 4.04. Proceedings by Noteholder. No Holder of any Note shall have any right by virtue of or by reference to any provision of the Indenture to institute any suit, action or

proceeding in equity or at law upon or under or with respect to the Indenture, or for the appointment of a receiver, trustee, liquidator, custodian or other similar official, or for any other remedy hereunder, except in the case of a default in the payment of principal of, or interest on, the Notes, unless (a) such Holder previously shall have given to the Trustee written notice of an Event of Default and of the continuance thereof, as hereinbefore provided, (b) the Holders of at least twenty-five percent (25%) in aggregate principal amount of the Notes then Outstanding shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such security or indemnity satisfactory to it as it may require against the costs, liabilities or expenses to be incurred therein or thereby, (c) the Trustee for sixty (60) calendar days after its receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute any such action, suit or proceeding and (d) no direction inconsistent with such written request shall have been given to the Trustee pursuant to Section 4.07; it being understood and intended, and being expressly covenanted by the taker and Holder of every Note with every other taker and Holder and the Trustee, that no one or more Holders of Notes shall have any right in any manner whatever by virtue of or by reference to any provision of this Supplemental Indenture to affect, disturb or prejudice the rights of any other Holder of Notes, or to obtain or seek to obtain priority over or preference to any other such Holder, or to enforce any right under this Supplemental Indenture, except in the manner herein provided and for the equal, ratable and common benefit of all Holders of Notes (except as otherwise provided herein). For the protection and enforcement of this Section 4.04, each and every Noteholder and the Trustee shall be entitled to such relief as can be given either at law or in equity.

Notwithstanding any other provision of the Indenture and any provision of any Note, the right of any Holder of any Note to receive payment of the principal of (including the Redemption Price or Repurchase Price upon redemption or repurchase pursuant to Article 3 or Article 8, respectively) and accrued interest on such Note, on or after the respective due dates expressed in such Note or in the event of redemption or repurchase, or to institute suit for the enforcement of any such payment on or after such respective dates against the Company shall not be impaired or affected without the consent of such Holder.

SECTION 4.05. Proceedings by Trustee. In case of an Event of Default, the Trustee may, in its discretion, proceed to protect and enforce the rights vested in it by this Supplemental Indenture by such appropriate judicial proceedings as are necessary to protect and enforce any of such rights, either by suit in equity or by action at law or by proceeding in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Supplemental Indenture or in aid of the exercise of any power granted in this Supplemental Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Supplemental Indenture or by law.

SECTION 4.06. Remedies Cumulative and Continuing. All powers and remedies given by this Article 4 to the Trustee or to the Noteholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any thereof or of any other powers and remedies available to the Trustee or the Holders of the Notes, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Supplemental Indenture, and no delay or omission of the Trustee or of any Holder of any of the Notes to exercise any right or power accruing upon any default or Event of Default occurring and

continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or any acquiescence therein, and, subject to the provisions of Section 4.05, every power and remedy given by this Article 4 or by law to the Trustee or to the Noteholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Noteholders.

SECTION 4.07. Direction of Proceedings and Waiver of Defaults by Majority of Noteholders. The Holders of not less than a majority in aggregate principal amount of the Notes then Outstanding shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee; provided that (a) such direction shall not be in conflict with any rule of law or with this Supplemental Indenture, (b) the Trustee may take any other action which is not inconsistent with such direction, (c) the Trustee may decline to take any action that would benefit some Noteholder to the detriment of other Noteholders and (d) the Trustee may decline to take any action that would involve the Trustee in personal liability. The Holders of a majority in aggregate principal amount of the Notes at the time Outstanding may, on behalf of the Holders of all of the Notes, waive any past default or Event of Default hereunder and its consequences except (i) a default in the payment of the principal of, or interest on, the Notes when due, (ii) a default in the payment of the Redemption Price on the Redemption Date pursuant to Article 3, (iii) a default in the payment of the Repurchase Price on the Repurchase Price Payment Date pursuant to Article 8 or (iv) a default in respect of a covenant or provisions hereof which under Article 5 cannot be modified or amended without the consent of the Holders of each Outstanding Note affected thereby.

Upon any such waiver, the Company, the Trustee, the Agents and the Holders of the Notes shall be restored to their former positions and rights hereunder; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Whenever any default or Event of Default hereunder shall have been waived as permitted by this Section 4.07, said default or Event of Default shall for all purposes of the Notes and this Supplemental Indenture be deemed to have been cured and to be not continuing; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon.

SECTION 4.08. Notice of Defaults. The Trustee shall, within ninety (90) calendar days after a Responsible Officer of the Trustee has actual knowledge or receives notice of of the occurrence of a default, mail to all Noteholders, as the names and addresses of such Holders appear upon the Security Register (as provided to one Trustee by the Security Register), notice of all defaults actually known to a Responsible Officer, unless such defaults shall have been cured or waived before the giving of such notice; provided that except (i) a default in the payment of the principal of, or interest on, the Notes when due, (ii) a default in the payment of the Redemption Price on the Redemption Date pursuant to Article 3, and (iii) a default in the payment of the Repurchase Price on the Repurchase Price Payment Date pursuant to Article 8, the Trustee shall be protected in withholding such notice if and so long as a trust committee of directors and/or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interest of the Noteholders. For the purpose of this Section, the term “default” means any event which is, or after notice or lapse of time or both would

become, an Event of Default with respect to the Notes. Solely for purposes of the Notes, this Section 4.08 supercedes Section 602 of the Base Indenture.

SECTION 4.09. Undertaking to Pay Costs. All parties to this Supplemental Indenture agree, and each Holder of any Note by its acceptance thereof shall be deemed to have agreed, that any court may, in its discretion, require, in any suit for the enforcement of any right or remedy under this Supplemental Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; provided that the provisions of this Section 4.09 (to the extent permitted by law) shall not apply to any suit instituted by the Trustee, to any suit instituted by any Noteholder, or group of Noteholders, holding in the aggregate more than ten percent in principal amount of the Notes at the time Outstanding determined in accordance with Section 104 of the Original Indenture, or to any suit instituted by any Noteholder for the enforcement of the payment of the principal of, or interest on, any Note on or after the due date expressed in such Note.

ARTICLE 5
SUPPLEMENTAL INDENTURES

Solely for purposes of the Notes, Article Nine of the Original Indenture shall be deleted and replaced in its entirety by this Article 5.

SECTION 5.01. Supplemental Indentures Without Consent of Noteholders. The Company, when authorized by the resolutions of the Board of Directors and the Trustee may, from time to time, and at any time enter into an indenture or indentures supplemental without the consent of the Holders of the Notes hereto for one or more of the following purposes:

(a) cure any ambiguity, defect or inconsistency in the Indenture or the Notes; or

(b) provide for the assumption of all of the Company’s obligations under the Notes and the Indenture by a Person in connection with a Substantially All Merger or Substantially All Sale in which the Company is not the surviving Person pursuant to Section 6.02; or

(d) add to the covenants made by the Company for the benefit of the holders of any series of debt securities, including the Holders of the Notes (and if such covenants are to be for the benefit of less than all series of debt securities, stating that such covenants are included solely for the benefit of such series) or to surrender any right or power conferred upon the Company; or

(e) add to, delete from, or revise the conditions, limitations, and restrictions on the authorized amount, terms, or purposes of issue, authentication and delivery of the Notes, as set forth in the Indenture; or

(f) secure any Notes as provided under Section 9.01; or

(g) provide for the issuance of and establish the form and terms and conditions of a series of debt securities or to establish the form of any certifications required to be furnished pursuant to the terms of the Indenture or any series of debt securities or to add to the rights of the holders of any series of debt securities; or

(h) to modify any provision of the Indenture to conform that provision to the description thereof set forth in the Prospectus Supplement; or

(i) to modify any provision of the Notes or the Indenture that does not adversely affect the rights of any Holder of the Notes in any material respect.

Upon the written request of the Company, accompanied by a copy of the resolutions of the Board of Directors certified by the Company’s Secretary or Assistant Secretary authorizing the execution of any supplemental indenture, the Trustee is hereby authorized to join with the Company in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations that may be therein contained and to accept the conveyance, transfer and assignment of any property thereunder, but the Trustee shall not be obligated to, but may in its discretion, enter into any supplemental indenture that affects the Trustee’s or any Agent’s own rights, duties or immunities under this Supplemental Indenture or otherwise.

Any supplemental indenture authorized by the provisions of this Section 5.01 may be executed by the Company and the Trustee without the consent of the Holders of any of the Notes at the time Outstanding, notwithstanding any of the provisions of Section 5.02.

SECTION 5.02. Supplemental Indenture With Consent of Noteholders. With the consent (evidenced as provided in Section 104 of the Original Indenture) of the Holders of not less than a majority in aggregate principal amount of the Notes at the time Outstanding, the Company, when authorized by the resolutions of the Board of Directors and the Trustee may, from time to time and at any time, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Supplemental Indenture or any supplemental indenture or modifying in any manner the rights of the Holders of the Notes; provided that no such supplemental indenture shall, without the consent of the Holder of each Note so affected:

(a) reduce the percentage in aggregate principal amount of Outstanding Notes required to modify or amend the Notes or Indenture; or

(b) change the manner of calculation or rate of accrual of interest on the Notes or change the time of payment thereof; or

(c) change the principal amount of, or the Redemption Price specified in Article 3 hereof or Repurchase Price specified in Article 8 hereof with respect to, the Notes; or

(d) change the Stated Maturity of the Notes; or

(e) waive a default in the payment of the principal of, or interest on, the Notes when due; or

(f) waive a default in the payment of the Redemption Price on the Redemption Date pursuant to Article 3 or the payment of the Repurchase Price on the Repurchase Price Payment Date pursuant to Article 8; or

(g) make the Notes payable in money or securities other than that stated in the Notes; or

(h) make any change in the provisions of the Indenture concerning rights of Holders of the Notes to receive payment; or

(i) modify Section 4.07 or this Section 5.02.

Upon the written request of the Company, accompanied by a copy of the resolutions of the Board of Directors certified by the Company’s Secretary or Assistant Secretary authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Noteholders as aforesaid, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee’s or an Agent’s own rights, duties or immunities under this Supplemental Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture.

It shall not be necessary for the consent of the Noteholders under this Section 5.02 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof.

SECTION 5.03. Effect of Supplemental Indenture. Any supplemental indenture executed pursuant to the provisions of this Article 5 shall comply with the Trust Indenture Act, as then in effect, provided that this Section 5.03 shall not require such supplemental indenture or the Trustee to be qualified under the Trust Indenture Act prior to the time, if ever, such qualification is in fact required under the terms of the Trust Indenture Act or the Indenture has been qualified under the Trust Indenture Act, nor shall it constitute any admission or acknowledgment by any party to such supplemental indenture that any such qualification is required prior to the time, if ever, such qualification is in fact required under the terms of the Trust Indenture Act or the Indenture has been qualified under the Trust Indenture Act. Upon the execution of any supplemental indenture pursuant to the provisions of this Article 5, this Supplemental Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitation of rights, obligations, duties and immunities under this Supplemental Indenture of the Trustee, the Agents, the Company and the Holders of Notes shall thereafter be determined, exercised and enforced hereunder, subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Supplemental Indenture for any and all purposes.

SECTION 5.04. Notation on Notes. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article 5 may bear a notation in form approved by the Authentication Agent as to any matter provided for in such supplemental indenture. If the Company or the Authentication Agent shall so determine, new Notes so modified as to conform, in the opinion of the Authentication Agent and the Board of

Directors, to any modification of this Supplemental Indenture contained in any such supplemental indenture may, at the Company’s expense, be prepared and executed by the Company, authenticated by the Authentication Agent (or another authenticating agent duly appointed by the Trustee pursuant to Section 611 of the Original Indenture) and delivered in exchange for the Notes then Outstanding, upon surrender of such Notes then Outstanding.

SECTION 5.05. Evidence of Compliance of Supplemental Indenture to be Furnished to Trustee. Prior to entering into any supplemental indenture pursuant to this Article 5, the Trustee and the Agents shall be provided with an Officers’ Certificate and an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant hereto complies with the requirements of this Article 5 and is otherwise authorized or permitted by this Supplemental Indenture.

ARTICLE 6
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

Solely for the purposes of the Notes, Article Eight of the Original Indenture shall be deleted and replaced in its entirety by this Article 6.

SECTION 6.01. Company May Consolidate on Certain Terms. Subject to the provisions of Section 6.02, the Company shall not be a party to a Substantially All Merger or participate in a Substantially All Sale, unless:

(a) the Company is the surviving Person, or the Person formed by or surviving such Substantially All Merger or to which such Substantially All Sale has been made (the “Successor Party”) is an entity organized and existing under the laws of the United States of America, any state thereof or the District of Columbia, and has expressly assumed by supplemental indenture all of the obligations of the Company under the Notes and the Indenture;

(b) immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or the lapse of time, or both would become an Event of Default, shall have occurred and be continuing; and

(c) the Company delivers to the Trustee and the Paying Agent an Officers’ Certificate and an Opinion of Counsel, each stating that such transaction and any supplemental indenture relating thereto comply with this Indenture and that all conditions precedent provided for in this Indenture relating to such transaction have been complied with.

SECTION 6.02. Successor Party to be Substituted . In case of any such consolidation, sale, lease, conveyance, assignment, transfer or merger in which the Company is not the continuing entity and upon the assumption by the Successor Party, by supplemental indenture, executed and delivered to the Trustee and the Paying Agent and reasonably satisfactory in form to the Trustee and the Paying Agent, of the due and punctual payment of the principal of, and interest on, all of the Notes, and the due and punctual performance and observance of all of the covenants and conditions of the Indenture to be performed or satisfied by the Company, such Successor Party shall succeed to and be substituted for, and may exercise every right and power of, the Company, with the same effect as if it had been named herein as the party of this first part, and, except in the case of a lease of all or substantially all of the Company’s consolidated assets, the Company shall be discharged from its obligations under the Notes and the Indenture.

Such Successor Party thereupon may cause to be signed, and may issue either in its own name or in the name of the Company any or all of the Notes, issuable hereunder that theretofore shall not have been signed by the Company and delivered to the Trustee and the Paying Agent; and, upon the order of such Successor Party instead of the Company and subject to all the terms, conditions and limitations in this Supplemental Indenture prescribed, the Authenticating Agent shall authenticate and shall deliver, or cause to be authenticated and delivered, any Notes that previously shall have been signed and delivered by the Officers of the Company to the Authenticating Agent for authentication, and any Notes that such Successor Party thereafter shall cause to be signed and delivered to the Authenticating Agent for that purpose. All the Notes so issued shall in all respects have the same legal rank and benefit under this Supplemental Indenture as the Notes theretofore or thereafter issued in accordance with the terms of this Supplemental Indenture as though all of such Notes had been issued at the date of the execution hereof. In the event of any such consolidation, merger, sale, assignment, conveyance or transfer (but not in the case of any such lease) upon compliance with this Article 6 the Person named as the “Company” in the first paragraph of this Supplemental Indenture or any successor that shall thereafter have become such in the manner prescribed in this Article 6 may be dissolved, wound up and liquidated at any time thereafter and such Person shall be discharged from its liabilities as obligor and maker of the Notes and from its obligations under this Supplemental Indenture.

In case of any such consolidation, sale, assignment, transfer, lease, conveyance or merger, such changes in phraseology and form (but not in substance) may be made in the Notes thereafter to be issued as may be appropriate.

ARTICLE 7
SATISFACTION AND DISCHARGE

SECTION 7.01. Satisfaction and Discharge of Indenture. The provisions of Section 401 of the Original Indenture shall not apply to the Notes.

SECTION 7.02. Covenant Defeasance. The provisions of Section 402(3) of the Original Indenture shall not apply to the Notes.

ARTICLE 8
REPURCHASE OF NOTES

SECTION 8.01. Obligation to Offer to Repurchase Upon a Change of Control Repurchase Event.

(a) If a Change of Control Repurchase Event occurs, unless the Company has exercised its option to redeem the Notes pursuant to Article 3, the Company shall make an offer to each Holder of Notes to repurchase all or any part of that Holder’s Notes (the “Change of Control Offer”) at a repurchase price in cash equal to 101% of the aggregate principal amount of Notes repurchased plus any accrued and unpaid interest on the Notes repurchased to, but excluding, the date of repurchase (the “Repurchase Price”).

(b) In connection with any Change of Control related to a Change of Control Repurchase Event and any particular reduction in the rating on the Notes, the Company shall request from the Rating Agencies each such Rating Agency’s written confirmation that such reduction in the rating on the Notes was the result, in whole or in part, of any event or

circumstance comprised of or arising as a result of, or in respect of, the applicable Change of Control (whether or not the applicable Change of Control shall have occurred at the time of any Below Investment Grade Rating Event). The Company shall promptly certify to the Trustee and the Paying Agent as to whether or not such confirmation has been received or denied.

(c) Within 30 days following any Change of Control Repurchase Event or, at the Company’s option, prior to any Change of Control, but after the public announcement of the Change of Control, the Company shall give notice to each Holder of Notes, with a written copy to the Trustee and the Paying Agent. Such notice shall state:

(i) a description of the transaction or transactions that constitute or may constitute the Change of Control Repurchase Event;

(ii) that the Change of Control Offer is being made pursuant to this Article 8;

(iii) the Repurchase Price and the date on which the Repurchase Price will be paid, which date shall be a Business Day that is no earlier than 30 days and no later than 60 days from the date such notice is mailed, other than as may be required by law (the “Repurchase Price Payment Date”); and

(iv) if the notice is given prior to the date of consummation of the Change of Control, a statement that the offer to purchase is conditioned on the Change of Control Repurchase Event occurring on or prior to the payment date specified in the notice.

At the Company’s request, upon reasonable prior notice, the Security Registrar shall mail such notice in the Company’s name and at the Company’s expense; provided, however, that the form and content of such notice shall be prepared by the Company.

(d) The Company shall comply with the requirements of Rule 14e-1 under the Exchange Act of and any other securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with the repurchase of the Notes as a result of a Change of Control Repurchase Event. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control Repurchase Event provisions of the Notes, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the Change of Control Repurchase Event provisions of the Notes by virtue of such conflict.

(e) On the Repurchase Price Payment Date, the Company shall, to the extent lawful:

(i) accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer;

(ii) deposit prior to 10:00 a.m., New York City time on such date with the Paying Agent an amount equal to the Repurchase Price in respect of all Notes or portions of Notes properly tendered; and

(iii) deliver or cause to be delivered to the Paying Agent the Notes properly accepted together with an Officers’ Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased.

The Paying Agent shall promptly mail to each Holder of Notes properly tendered the Repurchase Price for such Notes, and the Authenticating Agent shall promptly authenticate and mail (or cause to be transferred by book-entry) to each Holder of Notes properly tendered a new Note equal in principal amount to any unpurchased portion of any Notes surrendered; provided that each new Note will be in a principal amount of $25 and integral multiple of $25 in excess thereof.

(f) Notwithstanding the foregoing, the Company shall not be required to make an offer to repurchase the Notes upon a Change of Control Repurchase Event if (i) the Company or such Successor Party has given written notice of a redemption as provided under Section 3.02; provided that the Company has not failed to pay the Redemption Price on the Redemption Date or (ii) a third party makes such an offer in respect of the Notes in the manner, at the times and otherwise in compliance with the requirements for an offer made by the Company and such third party purchases all the Notes properly tendered and not withdrawn under its offer.

ARTICLE 9
LIENS

The Company shall not create, assume, incur or guarantee any indebtedness for money borrowed that is secured by a pledge, mortgage, lien or other encumbrance (other than Permitted Liens) on any voting stock or profit participating equity interests of its Subsidiaries (to the extent of its ownership of such voting stock or profit participating equity interests) or any entity that succeeds (whether by merger, consolidation, sale of assets or otherwise) to all or any substantial part of the business of any of such Subsidiaries (excluding in each case securities issued by the Company’s Structured Finance Subsidiaries which include the subordinated notes that the Company owns of its Structure Finance Subsidiaries), without providing that the Notes (together with, if the Company shall so determine, any other indebtedness of, or guaranteed by, the Company ranking equally with the Notes) will be secured equally and ratably with or prior to all other indebtedness secured by such pledge, mortgage, lien or other encumbrance on the voting stock or profit participating equity interests of any such entities. This Section 9.01 shall not limit the ability of the Company to incur indebtedness or other obligations secured by liens on assets other than the voting stock or profit participating equity interests of the Company’s Subsidiaries.

ARTICLE 10
INFORMATION RIGHTS

During any period in which the Company is not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and any Notes remain Outstanding, the Company will (i) transmit by mail or other permissible means under the Exchange Act to all Holders, as their names and addresses appear in the Security Register and without cost to such Holders, copies of the annual reports and quarterly reports containing information that is substantially similar to the information that is required to be contained in such reports that the Company would have been required to file with the Commission, pursuant to Section 13 or Section 15(d) of the Exchange

Act if the Company were subject thereto (other than any exhibits or any information required by Items 402 and 404 of Regulation S-K pursuant to the Securities Act that would have been required), and (ii) promptly following written request, supply copies of such reports to any prospective Holder of Notes. The Company will mail (or otherwise provide) the information to the Holders within 15 days after the respective dates by which the Company would have been required to file such reports with the Commission if it were subject to Section 13 or 15(d) of the Exchange Act as a non-accelerated filer as such term is defined in Rule 12b-2 under the Exchange Act.

The delivery of such reports, information and documents to the Trustee and any Agent pursuant to this Article 10 is for informational purposes only and the Trustee’s and such Agent’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants hereunder (as to which the Trustee and any Agent is entitled to rely exclusively on Officers’ Certificates).

ARTICLE 11
MISCELLANEOUS PROVISIONS

SECTION 11.01. Addresses for Notices, etc. Any notice or demand which by any provision of this Supplemental Indenture is required or permitted to be given or served by the Trustee by an Agent or by the Holders of Notes on the Company shall be in writing and shall be deemed to have been sufficiently given or made, for all purposes, if given or served by being deposited postage prepaid by registered or certified mail in a post office letter box, or sent by overnight courier, or sent by telecopier transmission addressed as follows:

KKR Financial Holdings LLC
555 California Street
San Francisco, California 94104
Telecopier No.: 415-391-3330
Attention: General Counsel

Any notice, direction, request or demand hereunder to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or served by being deposited, postage prepaid, by registered or certified mail in a post office letter box, or sent by overnight courier, or sent by telecopier transmission, addressed as follows: Wilmington Trust, National Association, Corporate Capital Markets, 50 South Sixth Street, Suite 1290, Minneapolis, Minnesota 55402, Attn: KKR Financial Holdings LLC, Telecopier No. 612-217-5651.

The Trustee, by notice to the Company, may designate additional or different addresses for subsequent notices or communications.

Any notice, direction, request or demand hereunder to or upon the Security Registrar shall be deemed to have been sufficiently given or made, for all purposes, if given or served by being deposited, postage prepaid, by registered or certified mail in a post office letter box, or sent by overnight courier, addressed as follows: Citibank, N.A., 111 Wall Street, 15th Floor, New York, New York 10005, Attention: 15th Floor Window.

Any notice, direction, request or demand hereunder to or upon the Paying Agent or Authenticating Agent shall be deemed to have been sufficiently given or made, for all purposes, if given or served by being deposited, postage prepaid, by registered or certified mail in a post office letter box, or sent by overnight courier, or sent by telecopier transmission, addressed as follows: Citibank, N.A., 388 Greenwich Street, 14th Floor, New York, New York, 10013, Attention: Global Transaction Services - KKR Financial Holdings LLC Telecopier No. 212-816-5527.

The Paying Agent, Security Registrar and Authenticating Agent, by notice to the Company, may designate additional or different addresses for subsequent notices or communications.

Any notice or communication mailed to a Noteholder shall be mailed by first class mail, postage prepaid, at such Noteholder’s address as it appears on the Security Register and shall be sufficiently given to such Noteholder if so mailed within the time prescribed.

Failure to mail a notice or communication to a Noteholder or any defect in it shall not affect its sufficiency with respect to other Noteholders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it.

SECTION 11.02. Governing Law. This Supplemental Indenture and the Notes shall be governed by, and construed in accordance with, the laws of the State of New York.

SECTION 11.03. Trust Indenture Act. This Supplemental Indenture will be subject to, and governed by, the provisions of the Trust Indenture Act that are required to be part of this Supplemental Indenture and shall, to the extent applicable, be governed by such provisions.

SECTION 11.04. No Security Interest Created. Nothing in this Supplemental Indenture or in the Notes, expressed or implied, shall be construed to constitute a security interest under the Uniform Commercial Code or similar legislation, as now or hereafter enacted and in effect, in any jurisdiction in which property of the Company or its subsidiaries is located.

SECTION 11.05. Execution in Counterparts. This Supplemental Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.

SECTION 11.06. Severability. In case any provision in this Supplemental Indenture or in the Notes shall be invalid, illegal or unenforceable, then (to the extent permitted by law) the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

SECTION 11.07. Appointment of Paying Agent, Security Registrar and Authenticating Agent. Citibank N.A. is hereby appointed to act as Paying Agent, Security Registrar and Authenticating Agent subject to and in accordance with the terms and conditions set forth herein and in the Original Indenture and shall have all of the rights, benefits and immunities of a Paying Agent, Security Registrar and Authenticating Agent as set forth herein and therein. The Corporate Trust Office of the Paying Agent and Authenticating Agent is the office at which corporate trust business shall be administered, which office at the date of execution of this

supplemental indenture is located at 388 Greenwich Street, 14th Floor, New York, New York 10013, Attention: Global Transaction Services — KKR Financial Holdings LLC, or any other address that the Paying Agent or Authenticating Agent may designate with respect to itself from time to time by notice to the Company and the Holders. When used with respect to the Authenticating Agent, Paying Agent and Security Registrar, the term Responsible Officer has the meaning set forth in Section 1.02.

SECTION 11.08. Money for Securities Payments to Be Held in Trust. The Paying Agent hereby agrees to:

(i) hold all sums held by it for the payment of the principal of, any premium or interest on or any Additional Amounts with respect to the Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as provided in or pursuant to the Indenture;

(ii) give the Trustee notice of any default by the Company (or any other obligor upon the Notes) in the making of any payment of principal, any premium or interest on or any Additional Amounts with respect to the Notes; and

(iii) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent.

SECTION 11.09. Ratification of Original Indenture. The Original Indenture, as supplemented by this Supplemental Indenture, is in all respects ratified and confirmed, and this Supplemental Indenture shall be deemed part of the Original Indenture in the manner and to the extent herein and therein provided. For the avoidance of doubt, each of the Company and each Holder of the Notes, by its acceptance of such Notes, acknowledges and agrees that all of the rights, privileges, protections, immunities and benefits afforded to the Trustee and the Agents under the Original Indenture are deemed to be incorporated herein, and shall be enforceable by the Trustee and the Agents hereunder, as if set forth herein in full.

Wilmington Trust, National Association hereby accepts the trusts in this Supplemental Indenture declared and provided, upon the terms and conditions herein above set forth.

[Remainder of the page intentionally left blank]

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the day and year first above written.

	KKR FINANCIAL HOLDINGS LLC


	By:	/s/ MICHAEL R. MCFERRAN
	Name:	Michael R. McFerran
	Title:	Chief Financial Officer and Chief Operating Officer

[Trustee Signature Follows]

	WILMINGTON TRUST, NATIONAL ASSOCIATION, as Trustee


	By:	/s/ JANE SCHWEIGER
	Name:	Jane Schweiger
	Title:	Vice President

[Authenticating Agent, Paying Agent and Security Registrar Signature Follows]

	CITIBANK, N.A., as Authenticating Agent, Paying Agent and Security Registrar


	By:	/s/ KAREN SCHLUTER
	Name:	Karen Schluter
	Title:	Vice President

EXHIBIT A

[Include only for Global Notes]

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (THE “DEPOSITORY,” WHICH TERM INCLUDES ANY SUCCESSOR DEPOSITORY FOR THE CERTIFICATES) TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT HEREIN IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

KKR FINANCIAL HOLDINGS LLC
7.500% SENIOR NOTES DUE 2042

		CUSIP: [ ]
		ISIN: [ ]

No. [ ]		$[ ]

KKR Financial Holdings LLC, a Delaware limited liability company (herein called the “Company,” which term includes any successor Person under the Indenture referred to on the reverse hereof), for value received hereby promises to pay to [ ] or its registered assigns, the principal sum of [ ] [or such other principal amount as shall be set forth on Schedule I hereto](1) on March 20, 2042 at the office or agency of the Company maintained for that purpose in accordance with the terms of the Indenture, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, and to pay interest, quarterly, on March 20, June 20, September 20 and December 20 of each year (each, an “Interest Payment Date”), commencing June 20, 2012, on said principal sum at said office or agency, in like coin or currency, at the rate per annum of 7.500%, from and including March 20, 2012 or from the most recent Interest Payment Date in respect of which interest has been paid. If any Interest Payment Date is a Legal Holiday, the required payment will be made on the next succeeding day that is not a Legal Holiday as if it were made on the date such payment was due and no interest will accrue on the amount so payable for the period from and after such Interest Payment Date to such next succeeding day. Interest will be computed on the basis of twelve 30-day months and a 360-day year. The amount of interest payable for any period shorter than a full quarterly interest period will be computed on the basis of the number of days elapsed in a 90-day quarter of three 30-day months.

Reference is made to the further provisions of this Note set forth on the reverse hereof. Such further provisions shall for all purposes have the same effect as though fully set forth at this place.

This Note shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been manually signed by the Trustee or a duly authorized authenticating agent under the Indenture.

(1) For Global Notes only.

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed.

Dated: [ ]

	KKR FINANCIAL HOLDINGS LLC

	By:
		Name:
		Title:

	By
		Name:
		Title:

AUTHENTICATING AGENT’S CERTIFICATE OF AUTHENTICATION

This is one of the Notes referred to in the within-mentioned Indenture.

CITIBANK, N.A.,
as Authenticating Agent

By:
	Authorized Signatory

FORM OF REVERSE OF NOTE

KKR FINANCIAL HOLDINGS LLC
7.500% SENIOR NOTES DUE 2042

This note is one of a duly authorized issue of notes of the Company, designated as its “7.500% Senior Notes due 2042” (herein called the “Notes”), issued under and pursuant to an Indenture, dated as of November 15, 2011 (the “Original Indenture”), between the Company and Wilmington Trust, National Association, as trustee (herein called the “Trustee”), as supplemented with respect to the Notes by the Second Supplemental Indenture, dated as of March 20, 2012 (the “Supplemental Indenture,” and together with the Original Indenture, the “Indenture”), among the Company, the Trustee, as trustee and Citibank, N.A., as authenticating agent, paying agent and security registrar (herein called the “Authenticating Agent, Paying Agent and Security Registrar”), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, Authenticating Agent, Paying Agent, Security Registrar, the Company and the Holders of the Notes. Capitalized terms used but not otherwise defined in this Note shall have the respective meanings ascribed thereto in the Indenture.

At any time on or after March 20, 2017, the Company may, in accordance with the provisions of Article 3 of the Supplemental Indenture, redeem the Notes for cash, in whole or in part, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus unpaid interest, if any, accrued thereon to, but excluding, the Redemption Date.

If a Change of Control Repurchase Event occurs, unless the Company has exercised its option to redeem the Notes pursuant to Article 3 of the Supplemental Indenture, the Company shall make an offer to each Holder of Notes to repurchase all or any part of that Holder’s Notes at a repurchase price in cash equal to 101% of the aggregate principal amount of Notes repurchased plus any accrued and unpaid interest on the Notes repurchased to, but excluding, the date of repurchase.

If an Event of Default (other than an Event of Default specified in Section 4.01(f), 4.01(g) and 4.01(h) of the Supplemental Indenture) with respect to the Company shall occur and be continuing, the principal of, and accrued and unpaid interest on, the Notes may be declared to be due and payable in the manner specified in the Indenture. If an Event of Default specified in Section 4.01(f), 4.01(g) and 4.01(h) of the Supplemental Indenture shall occur with respect to the Company, the principal of, and interest accrued and unpaid on, the Notes shall be immediately and automatically due and payable without necessity of further action.

Subject to the provisions of the Indenture, the Holders of not less than a majority in aggregate principal amount of the Notes at the time Outstanding may, on behalf of the Holders of all of the Notes, waive any past default or Event of Default, subject to exceptions set forth in the Indenture. Upon any such waiver, said default shall for all purposes of this Note and the Indenture be deemed to have been cured and to be not continuing, but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.

The Indenture contains provisions permitting the Company and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Notes at the time Outstanding, to execute supplemental indentures to modify provisions of the Indenture, subject to exceptions permitting the modification of the Indenture without the consent of any Holder of Notes or requiring the consent of each Holder of a Note affected by such modification all as set forth in Article 5 of the Supplemental Indenture.

The Notes are issuable in fully registered form, without coupons, in denominations of $25 principal amount and any multiple of $25 in excess thereof. At the office or agency of the Company referred to on the face hereof, and in the manner and subject to the limitations provided in the Indenture, without payment of any service charge but with payment of a sum sufficient to cover any tax, assessment or other governmental charge that may be imposed in connection with any registration or exchange of Notes, Notes may be exchanged for a like aggregate principal amount of Notes of any other authorized denominations. Upon surrender for registration of transfer of any Note to the Security Registrar or any co-registrar, and satisfaction of the requirements for such transfer set forth in the Indenture, the Company shall execute, and the Authenticating Agent shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes of any authorized denominations and of a like aggregate principal amount. No service charge shall be made to any Holder for any registration of transfer or exchange of Notes, but the Company may require payment by the Holder of a sum sufficient to cover any tax, assessment or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes.

The Company, the Trustee, Authenticating Agent, Paying Agent and Security Registrar may deem the Person in whose name this Note shall be registered upon the Security Register to be, and may treat it as, the absolute owner of this Note (whether or not this Note shall be overdue and notwithstanding any notation of ownership or other writing thereon made by any Person other than the Company or any Security Registrar) for the purpose of receiving payment of or on account of the principal of, and interest on this Note and for all other purposes; and neither the Company or the Trustee nor any Authenticating Agent, Paying Agent or any Security Registrar shall be affected by any notice to the contrary. All such payments so made to any Holder for the time being, or upon its order, shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for monies payable upon this Note.

No recourse under or upon any obligation, covenant or agreement contained in the Indenture or in this Note, or because of any indebtedness evidenced hereby, or for any claim based thereon or otherwise in respect thereof, shall be had against any past, present or future shareholder, incorporator, employee, officer or director, as such, of the Company or any predecessor or successor to the Company, either directly or through the Company or any such predecessor or successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, it being expressly understood that all such liability is hereby expressly waived and released as a condition of, and as consideration for, the execution of the Indenture and the issue of this Note.

In the case of any conflict between the provisions of this Note and the Indenture, the provisions of the Indenture shall control. The Indenture and this Note shall be governed by, and construed in accordance with, the laws of the State of New York.

ABBREVIATIONS

The following abbreviations, when used in the inscription of the face of this Note, shall be construed as though they were written out in full according to applicable laws or regulations.

Additional abbreviations may also be used though not in the above list.

Attachment 1

to Exhibit A

ASSIGNMENT

For value received hereby sell(s) assign(s) and transfer(s) unto (Please insert social security or other Taxpayer Identification Number of assignee) the within Note, and hereby irrevocably constitutes and appoints attorney to transfer said Note on the books of the Company, with full power of substitution in the premises.




	Signature(s)

	Signature(s) must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Security Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Security Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.


	Signature Guarantee

NOTICE: The signature on this Assignment must correspond with the name as written upon the face of the Note in every particular without alteration or enlargement or any change whatever.

Schedule I

KKR FINANCIAL HOLDINGS LLC
7.500% SENIOR NOTES DUE 2042

EX-99.1 4 a12-6108_6ex99d1.htm EX-99.1

Exhibit 99.1

SIMPSON THACHER & BARTLETT LLP

2550 HANOVER STREET

PALO ALTO, CA 94304

(650) 251-5000

FACSIMILE (650) 251-5002

March 20, 2012

KKR Financial Holdings LLC

555 California Street, 50th Floor

San Francisco, California 94104

Ladies and Gentlemen:

We have acted as counsel to KKR Financial Holdings LLC, a Delaware limited liability company (the “Company”), in connection with the Post-Effective Amendment No. 1 (the “Amendment”) to the Company’s Registration Statement on Form S-3 (together with the Amendment, the “Registration Statement”) filed by the Company with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended (the “Securities Act”), relating to the issuance by the Company of $115 million aggregate principal amount of 7.500 % Senior Notes due 2042 (the “Notes”). The Notes will be issued under an indenture dated as of November 15, 2011 (the “Base Indenture”) between the Company and Wilmington Trust Company, as trustee (the “Trustee”), as supplemented by the Second Supplemental Indenture dated as of March 20, 2012 (the “Supplemental Indenture” and together with the Base Indenture, the “Indenture”), among the Company, the Trustee and Citibank, N.A., as authenticating agent, paying agent and securities registrar (the “Authenticating Agent”).

We have examined the Registration Statement and the Indenture. We also have examined the originals, or duplicates or certified or conformed copies, of such other records, agreements, documents and other instruments and have made such other investigations as we have deemed relevant and necessary in connection with the opinions hereinafter set forth. As to questions of fact material to this opinion, we have relied upon certificates or comparable documents of public officials and of officers and representatives of the Company.

In rendering the opinion set forth below, we have assumed the genuineness of all signatures, the legal capacity of natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as duplicates or certified or conformed copies and the authenticity of the originals of such latter documents. We also have assumed that the Indenture is the valid and legally binding obligation of the Trustee and Authenticating Agent.

Based upon the foregoing, and subject to the qualifications, assumptions and limitations stated herein, we are of the opinion that the Notes constitute valid and legally binding obligations of the Company enforceable against the Company in accordance with their terms.

Our opinion set forth above is subject to (i) the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, (ii) general equitable principles (whether considered in a proceeding in equity or at law) and (iii) an implied covenant of good faith and fair dealing. In addition, we express no opinion as to the validity, legally binding effect or enforceability of Section 111 of the Base Indenture relating to the separability of provisions of the Base Indenture or Section 11.06 of the Supplemental Indenture relating to the severability of provisions of the Supplemental Indenture.

We do not express any opinion herein concerning any law other than the law of the State of New York, the federal law of the United States and, to the extent set forth herein, the Delaware Limited Liability Company Act (including the statutory provisions, all applicable provisions of the Delaware Constitution, and reported judicial decisions interpreting the foregoing).

We hereby consent to the filing of this opinion letter as Exhibit 5 to the Registration Statement and to the use of our name under the caption “Legal Matters” in the Prospectus included in the Registration Statement

	Very truly yours,

	/s/ SIMPSON THACHER & BARTLETT LLP

	SIMPSON THACHER & BARTLETT LLP

as tenants in common

UNIF GIFT MIN ACT
Custodian

as tenant by the entireties

(Cust) (Minor)

as joint tenants with right of survivorship and not as tenants in common

under Uniform Gifts to Minors Act