KCAP Financial, Inc. EXECUTIVE Restricted Stock Award Agreement

Exhibit 10.4

KCAP Financial, Inc.

EXECUTIVE

Restricted Stock Award Agreement

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

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

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

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

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

Notwithstanding any provision to the contrary in the Plan or this Agreement, if any accelerated vesting of Shares pursuant to Section 7(iii), either alone or together with all other payments and benefits received or to be received by the Grantee from the Company or any of its affiliates would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code (or any successor thereto), and the net amount that would be retained by the Grantee after all taxes were paid would be less than if the accelerated vesting of Shares was limited to the greatest amount of acceleration that would result in no amounts being subject to such excise tax, then the accelerated vesting to which the Participant is entitled shall be so limited. The Company shall make all determinations under this paragraph, provided that if the Participant disagrees with any such determinations, the Company shall engage a national accounting firm selected by the Company to make such determinations, and such determinations shall be final and binding on the Participant. To the extent that Shares hereunder are not vested as a consequence of the limitation contained in this paragraph, then the Award (to the extent not so accelerated) shall be deemed to remain outstanding and shall be subject to the provisions hereof and of the Plan as if no acceleration of vesting had occurred.

For purposes of this Award Agreement:

(i)          The acquisition by any person, entity or “group”, within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act (excluding, for this purpose, the Company or its Affiliates) of beneficial ownership of 33% or more of either the then outstanding shares of the Company’s common stock or the combined voting power of the Company’s then outstanding voting securities entitled to vote generally in the election of directors.

(ii)         Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board, provided that any person who first becomes a director subsequent to the date hereof whose recommendation, election or nomination for election by the Company’s stockholders was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company as described in Rule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act) shall be, for the purposes of this agreement, considered as though such person were a member of the Incumbent Board; or

(iii)        Approval by the stockholders of the Company of a reorganization, share exchange, merger or consolidation with respect to which, in any such case, the persons who were the stockholders of the Company immediately prior to such reorganization, share exchange, merger or consolidation do not, immediately thereafter, own more than 50% of the combined voting power entitled to vote in the election of directors of the reorganized, merged or consolidated company;

(iv)        Approval by the stockholders of a plan of complete liquidation or dissolution of the Company; or

(v)         A sale of all or substantially all of the assets of the Company.

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

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

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