NORTHSTAR REALTY FINANCE LIMITED PARTNERSHIP First Amendment to the Agreement of Limited Partnership of NorthStar Realty Finance Limited Partnership
NORTHSTAR
REALTY FINANCE LIMITED PARTNERSHIP
First
Amendment to the
Agreement
of Limited Partnership of NorthStar Realty Finance Limited
Partnership
This
Amendment is made as of March 14, 2006, by NORTHSTAR REALTY FINANCE CORP.,
a
Maryland corporation, as general partner (the “General
Partner”),
of
NORTHSTAR REALTY FINANCE LIMITED PARTNERSHIP, a Delaware limited partnership
(the “Partnership”),
for
the purpose of further amending the Agreement of Limited Partnership of the
Partnership dated October 19, 2004 (the “Partnership
Agreement”).
All
capitalized terms used herein and not defined shall have the respective meanings
ascribed to them in the Partnership Agreement.
WHEREAS,
pursuant to Section 4.2 of the Partnership Agreement, the General Partner is
establishing an additional series of LTIP Units, to be referred to as the “OPP
Units” with the rights, preferences and privileges set forth in the Partnership
Unit Designation attached hereto, to certain persons who provide services for
the benefit of the Partnership (the “Grantees”).
NOW,
THEREFORE, in consideration of the mutual covenants set forth herein, and for
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the General Partner hereby amends the Partnership Agreement
as follows:
1. Issuance
of LTIP Units.
A. Pursuant
to Section 4.2 of the Partnership Agreement, the Partnership may from time
to
time issue OPP Units to the Grantees in the respective amounts set forth on
Schedule
A hereto.
The holder of any OPP Units shall have the benefits and obligations under the
Partnership Agreement to which the holder of such a Limited Partner Interest
may
be entitled or obliged under the Partnership Agreement, as supplemented and
amended by the rights, powers, privileges, restrictions, qualifications and
limitations specified in Exhibit
B
to the
Partnership Agreement as added by this Amendment.
B. The
admission of the Grantees as Additional Limited Partners of the Partnership
shall become effective as of the date of this Amendment, which shall also be
the
date upon which the names of the Grantees are recorded on the books and records
of the Partnership, and Exhibit A to the Partnership Agreement is amended to
reflect such admission.
2.
Amendments
to Partnership Agreement.
The
General Partner, as general partner of the Partnership and as attorney-in-fact
for its Limited Partners, hereby amends the Partnership Agreement as
follows:
A.
Article
I
of the Partnership Agreement is amended by inserting the following definitions
in alphabetical order:
“Liquidating
Losses”
has
the
meaning set forth in Section 6.3(b) hereof.
“LTIP
Unit”
means
a
Partnership Unit which is designated as an LTIP Unit, with such further
designation as the General Partner may assign to distinguish any series of
LTIP
Units from other series, and which has the rights, preferences and other
privileges designated in Section 4.5 hereof, in any Partnership Unit Designation
establishing an additional series of LTIP Units and elsewhere in this Agreement
in respect of Holders of LTIP Units. The allocation of LTIP Units among the
Partners shall be set forth on Exhibit
A,
as may
be amended from time to time.
B. Section
6.3(b) of the Partnership Agreement is amended by replacing the existing text
with the following:
E.
Special
Allocations Regarding LTIP Units.
Notwithstanding the provisions of Section 6.2 above, but subject to the prior
allocation of income, gain, deduction and loss under paragraph (a) above and
to
the terms of any Partnership Unit Designation in respect of any class of
Partnership Interests ranking senior to the LTIP Units with respect to return
of
capital or any preferential or priority return, any Liquidating Gains shall
first be allocated to the Holders of LTIP Units until the Economic Capital
Account Balances of such Holders, to the extent attributable to their ownership
of LTIP Units, are equal to (i) the Partnership Common Unit Economic
Balance, multiplied by (ii) the number of their LTIP Units; provided
that no
such Liquidating Gains will be allocated with respect to any particular LTIP
Unit unless and to the extent that such Liquidating Gains, when aggregated
with
other Liquidating Gains realized since the issuance of such LTIP Unit, exceed
Liquidating Losses realized since the issuance of such LTIP Unit.
Notwithstanding the provisions of Section 6.2 above, but subject to the prior
allocation of income, gain, deduction and loss under paragraph (a) above and
to
the terms of any Partnership Unit Designation in respect of any class of
Partnership Interests ranking senior to the LTIP Units with respect to return
of
capital or any preferential or priority return, in the event that, due to
distributions with respect to Common Units in which the LTIP Units do not
participate or otherwise, the Economic Capital Account Balance of any present
or
former Holder of LTIP Units, to the extent attributable to the Holder’s
ownership of LTIP Units, exceeds the target balance specified above, then
Liquidating Losses shall be allocated to such Holder to the extent necessary
to
reduce or eliminate the disparity. In the event that Liquidating Gains or
Liquidating Losses are allocated under this Section 6.3(b), Net Income and
Net
Loss shall be recomputed without regard to the Liquidating Gains or Liquidating
Losses so allocated (subject to any prior allocation of Net Income or Net Loss
otherwise provided for). For this purpose, “Liquidating
Gains”
means
any net capital gain realized in connection with the actual or hypothetical
sale
of all or substantially all of the assets of the Partnership, including but
not
limited to net capital gain realized in connection with an adjustment to the
Gross Asset Value of Partnership Assets under paragraph (b) of the definition
of
“Gross Asset Value.” Similarly, “Liquidating
Losses”
means
any net capital loss realized in connection with any such event. The
“Economic
Capital Account Balances”
of
the
Holders of LTIP Units will be equal to their Capital Account balances, plus
the
amount of their shares of any Partner Minimum Gain or Partnership Minimum Gain,
in either case to the extent attributable to their ownership of LTIP Units.
Similarly, the “Partnership
Common Unit Economic Balance”
shall
mean (i) the Capital Account balance of the General Partner, plus the amount
of
the General Partner’s share of any Partner Minimum Gain or Partnership Minimum
Gain, in either case to the extent attributable to the General Partner’s
ownership of Partnership Common Units and computed on a hypothetical basis
after
taking into account all allocations through the date on which any allocation
is
made under this Section 6.3(b), divided by (ii) the number of the General
Partner’s Partnership Common Units. Any such allocations shall be made among the
holders of LTIP Units in proportion to the amounts required to be allocated
to
each under this Section 6.3(b). The parties agree that the intent of this
Section 6.3(b) is to make the Capital Account balance associated with each
LTIP
Unit economically equivalent to the Capital Account balance associated with
the
General Partner’s Partnership Common Units (on a per-unit basis), but only if
and to the extent that the Partnership has recognized cumulative net gains
with
respect to its assets since the issuance of the relevant LTIP Unit.
2
C.
Section
6.3(c) of the Partnership Agreement is hereby amended by inserting the following
new paragraph (viii), renumbering the existing paragraph (viii) as paragraph
(ix), and revising the first phrase of paragraph (ix) as follows:
(viii) Forfeiture
Allocations.
Upon a
forfeiture of any unvested Partnership Interest by any Partner, gross items
of
income, gain, loss or deduction shall be allocated to such Partner if and to
the
extent required by final Treasury Regulations promulgated after January 1,
2006
to ensure that allocations made with respect to all unvested Partnership
Interests are recognized under Code Section 704(b).
(ix) Curative
Allocations.
The
allocations set forth in Sections 6.3(c)(i) through (viii) above (the
“Regulatory Allocations”) are intended [balance of section
unchanged]
D.
Section
10.2 of the Partnership Agreement is amended by designating the existing text
of
Section 10.2 as paragraph (a), and by appending the following new paragraph
(b):
(b) To
the
extent provided for in Treasury Regulations, revenue rulings, revenue procedures
and/or other IRS guidance issued after the date hereof, the Partnership is
hereby authorized to, and at the direction of the General Partner shall, elect
a
safe harbor under which the fair market value of any Partnership Interests
issued after the effective date of such Treasury Regulations (or other guidance)
will be treated as equal to the liquidation value of such Partnership Interests
(i.e., a value equal to the total amount that would be distributed with respect
to such interests if the Partnership sold all of its assets for their fair
market value immediately after the issuance of such Partnership Interests,
satisfied its liabilities (excluding any non-recourse liabilities to the extent
the balance of such liabilities exceeds the fair market value of the assets
that
secure them) and distributed the net proceeds to the Partners under the terms
of
this Agreement). In the event that the Partnership makes a safe harbor election
as described in the preceding sentence, each Partner hereby agrees to comply
with all safe harbor requirements with respect to transfers of such Partnership
Interests while the safe harbor election remains effective.
3
E.
The
Partnership Agreement is hereby amended by appending Exhibit
B
to this
Amendment as Exhibit
B
to the
Partnership Agreement.
| 3. |
Continuation
of
Partnership Agreement.
|
The
Partnership
Agreement and this Amendment shall be read together and shall have the same
force and effect as if the provisions of the Partnership Agreement and this
Amendment (including Exhibit B hereto) were contained in one document. Any
provisions of the Partnership Agreement not amended by this Amendment shall
remain in full force and effect as provided in the Partnership Agreement
immediately prior to the date hereof.
[Remainder
of page intentionally blank]
4
IN
WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Partnership Agreement as of the 14th day of March 2006.
|
GENERAL
PARTNER
|
||
| NORTHSTAR REALTY FINANCE CORP. | ||
| |
|
|
| By: | /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | |
|
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ |
||
| Title: Chief Financial Officer and Treasurer | ||
| GRANTEES: | ||
| *Individual Counterpart Signature Pages Attached. | ||
[Signature
Page to Amendment to the Partnership Agreement]
Schedule
A to First Amendment to Partnership Agreement
|
Name
and Address
|
Number
of OPP Units
|
EXHIBIT
B
NORTHSTAR
REALTY FINANCE LIMITED PARTNERSHIP
PARTNERSHIP
UNIT DESIGNATION - OPP UNITS
The
following are the terms of the OPP Units:
1. LTIP
Equivalence.
Except
as otherwise expressly provided in this Partnership Unit Designation, OPP Units
shall be treated as LTIP Units, and shall have the rights, privileges,
restrictions, powers and duties applicable to LTIP Units under the Agreement,
including without limitation the provisions of Section 4.5 of the
Agreement.
| 2. |
Distributions.
|
A. OPP
Distributions.
Commencing from the Distribution Participation Date (as defined below)
established for any OPP Units, Holders of such OPP Units shall be entitled
to
receive, if, when and as authorized by the General Partner, any distributions
otherwise payable with respect to LTIP Units and shall be treated as outstanding
LTIP Units for purposes of the distribution provisions of the Agreement. For
the
avoidance of doubt, for purposes of the first distribution to occur after the
Distribution Participation Date, OPP Units issued on or before the relevant
quarterly period shall be treated as having been outstanding for the full
period. Prior to the Distribution Participation Date, OPP Units shall be
entitled to any distributions by the Partnership (i) in connection with an
Adjustment Event as provided in Section 4.5(b) of the Agreement, treating the
OPP Units as outstanding LTIP Units, and (ii) if, when and as authorized by
the
General Partner out of funds or other property legally available for the payment
of distributions, distributions representing proceeds of a sale or other
disposition of all or substantially all of the assets of the Partnership in
an
amount per unit equal to the amount of any such distributions payable on the
Partnership Common Units, provided that the amount of distributions to any
Holder of OPP Units under this clause (ii) shall not exceed the positive
balances of the Capital Account of the Holders of such OPP Units to the extent
attributable to the ownership of such OPP Units.
B. Distribution
Participation Date.
The
“Distribution
Participation Date”
for
each OPP Unit will be either (i) with respect to OPP Units granted pursuant
to the General Partner’s 2006 Outperformance Plan, as it may be amended or
supplemented from time to time or any successor plan under which additional
OPP
Units may be issued (the “Plan”),
the
applicable Valuation Date (as defined in the Award Agreement of each Person
granted OPP Units under the Plan) or (ii) with respect to other OPP Units,
such
date as may be specified in the Award Agreement or other documentation pursuant
to which such OPP Units are issued.
| 3. |
Allocations.
|
A.
Allocations
of Net Income and Net Loss.
Commencing with the portion of the taxable year of the Partnership that begins
on the Distribution Participation Date established for any OPP Units, such
OPP
Units shall be allocated Net Income and Net Loss under Section 6.2 in amounts
per OPP Unit equal to the amounts allocated per Partnership Common Unit
(adjusted to the extent required by any Regulatory Allocations or any curative
allocations under Section 6.3(c)(ix)). The General Partner is authorized in
its
discretion to delay or accelerate the participation of the OPP Units in
allocations of Net Income and Net Loss, or to adjust the allocations made after
the Distribution Participation Date, so that the ratio of (i) the total
amount of Net Income or Net Loss allocated under Section 6.2 with respect to
each OPP Unit in the taxable year in which that OPP Unit’s Distribution
Participation Date falls, to (ii) the total amount distributed to that OPP
Unit with respect to such period, is more nearly equal to such ratio as computed
for the Partnership Common Units held by the General Partner.
B.
Special
Allocations.
OPP
Units shall be treated as outstanding LTIP Units (and the Holders thereof
treated as Holders of LTIP Units) for all purposes of Section
6.3(b).
| 4. |
Voting
Rights.
|
A. Voting
with LTIP Units.
Except
as otherwise provided herein, OPP Units and Partners who hold OPP Units shall
be
treated as LTIP Units and LTIP Unitholders, respectively, for all purposes
of
Section 14.4.
B. Special
Approval Rights.
So long
as any OPP Units remain outstanding, the Partnership shall not, without the
affirmative vote of the Partners who hold at least a majority of the OPP Units
outstanding at the time, given in person or by proxy, either in writing or
at a
meeting (voting separately as a class), amend, alter or repeal, whether by
merger, consolidation or otherwise, the provisions of the Partnership Agreement
applicable to OPP Units so as to materially and adversely affect any right,
privilege or voting power of the OPP Units or the Partners who hold OPP Units
as
such, unless such amendment, alteration or repeal affects equally, ratably
and
proportionately the rights, privileges and powers of the holders of LTIP Units;
but subject, in any case, to the following provisions:
| (i) |
Any
difference in effect between the LTIP Units and the OPP Units that
is
required or reasonably desirable to implement the difference in the
distribution rights with respect to LTIP Units and OPP Units shall
not be
deemed to have an effect that is not equal, ratable or proportionate
to
the effect on the holders of LTIP Units;
|
| (ii) |
Any
creation or issuance of any Partnership Units or of any class or
series of
Partnership Interest, whether ranking senior to, junior to, or on
a parity
with the OPP Units with respect to distributions and the distribution
of
assets upon liquidation, dissolution or winding up shall not be deemed
to
have an effect that is not equal, ratable or proportionate to the
effect
on the holders of LTIP Units; and
|
| (iii) |
any
waiver by the Partnership of restrictions or limitations applicable
to any
outstanding LTIP Units or OPP Units with respect to any Unitholder
or
Unitholders shall not be deemed to materially and adversely alter,
change,
modify or amend the rights, powers or privileges of the LTIP Units
or OPP
Units with respect to other
Unitholders
|
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