Exhibit 10.37

 

NORTHSTAR REALTY FINANCE LIMITED PARTNERSHIP

 

Fifth Amendment to the
Agreement of Limited Partnership of NorthStar Realty Finance Limited Partnership

 

This Amendment is made as of May 29, 2008, 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, as amended by the First
Amendment to the Agreement of Limited Partnership, dated as of March 14, 2006,
the Second Amendment to the Agreement of Limited Partnership, dated
September 14, 2006, the Third Amendment to the Agreement of Limited Partnership,
dated February 7, 2007 and the Fourth Amendment to the Agreement of Limited
Partnership, dated May 24, 2007 (as so amended, the “Partnership Agreement”). 
All capitalized terms used herein and not defined shall have the respective
meanings ascribed to them in the Partnership Agreement.

 

WHEREAS, Section 4.2(a) of the Agreement grants the General Partner authority to
cause the Partnership to issue additional Partnership Interests in one or more
classes or series, with such designations, rights, powers, preferences and
duties as may be determined by the General Partner in its sole and absolute
discretion;

 

WHEREAS, Section 7.3(c) of the Partnership Agreement permits the General
Partner, without the consent of the Limited Partners, to amend the Partnership
Agreement to facilitate the purpose of issuing additional Partnership Interests
in accordance with Section 4.2 of the Partnership Agreement; and

 

WHEREAS, the General Partner desires by this Amendment to amend the Partnership
Agreement as of the date hereof.

 

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.                                       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:

 

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A.                                   ARTICLE I OF THE PARTNERSHIP AGREEMENT IS
AMENDED BY INSERTING THE FOLLOWING DEFINITION IN ALPHABETICAL ORDER:

 

“BOOK-UP TARGET” FOR EACH LTIP UNIT MEANS THE LESSER OF (I) THE PARTNERSHIP
COMMON UNIT ECONOMIC BALANCE AS DETERMINED ON THE DATE SUCH LTIP UNIT WAS
GRANTED AND AS REDUCED (NOT TO LESS THAN ZERO) BY ALLOCATIONS OF LIQUIDATING
GAINS PURSUANT TO SECTION 6.3(B) AND REALLOCATIONS OF ECONOMIC CAPITAL ACCOUNT
BALANCES TO SUCH LTIP UNIT AS A RESULT OF A FORFEITURE OF AN LTIP UNIT, AS
DETERMINED BY THE GENERAL PARTNER AND (II) THE AMOUNT REQUIRED TO BE ALLOCATED
TO SUCH LTIP UNIT FOR THE ECONOMIC CAPITAL ACCOUNT BALANCE, TO THE EXTENT
ATTRIBUTABLE TO SUCH LTIP UNIT, TO BE EQUAL TO THE PARTNERSHIP COMMON UNIT
ECONOMIC BALANCE.  NOTWITHSTANDING THE FOREGOING, THE BOOK-UP TARGET SHALL BE
EQUAL TO ZERO FOR ANY LTIP UNIT FOR WHICH THE ECONOMIC CAPITAL ACCOUNT BALANCE
ATTRIBUTABLE TO SUCH LTIP UNIT HAS, AT ANY TIME, REACHED AN AMOUNT EQUAL TO THE
PARTNERSHIP COMMON UNIT ECONOMIC BALANCE DETERMINED AS OF SUCH TIME.

 

B.                                     SECTION 6.3(B) OF THE PARTNERSHIP
AGREEMENT IS AMENDED BY REPLACING THE EXISTING TEXT WITH THE FOLLOWING:

 

(b) Special Allocations Regarding LTIP Units.

 

(I)                                   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).

 

(II)                                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 LTIP
UNITHOLDERS UNTIL THE ECONOMIC CAPITAL ACCOUNT BALANCES OF SUCH LTIP
UNITHOLDERS, 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.  ANY SUCH ALLOCATIONS OF LIQUIDATING GAIN
SHALL BE MADE AMONG THE LTIP UNITHOLDERS IN PROPORTION TO THE AMOUNTS REQUIRED
TO BE ALLOCATED TO EACH UNDER THIS SECTION 6.3(B).

 

(III)                             LIQUIDATING GAIN ALLOCATED TO AN LTIP
UNITHOLDER UNDER THIS SECTION 6.3(B) WILL BE ATTRIBUTED TO SPECIFIC LTIP UNITS
OF SUCH LTIP UNITHOLDER FOR PURPOSES OF DETERMINING (I) ALLOCATIONS UNDER THIS
SECTION 6.3(B), (II) THE EFFECT OF THE FORFEITURE OR CONVERSION OF SPECIFIC LTIP
UNITS ON SUCH LTIP UNITHOLDER’S ECONOMIC CAPITAL ACCOUNT BALANCE AND (III) THE
ABILITY OF SUCH LTIP UNITHOLDER TO CONVERT SPECIFIC LTIP UNITS INTO COMMON
UNITS.  SUCH LIQUIDATING GAIN WILL BE ATTRIBUTED TO LTIP UNITS IN THE

 

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FOLLOWING ORDER:  (I) FIRST, TO VESTED LTIP UNITS HELD FOR MORE THAN TWO YEARS,
(II) SECOND, TO VESTED LTIP UNITS HELD FOR TWO YEARS OR LESS, (III) THIRD, TO
UNVESTED LTIP UNITS THAT HAVE REMAINING VESTING CONDITIONS THAT ONLY REQUIRE
CONTINUED EMPLOYMENT OR SERVICE TO THE COMPANY, THE PARTNERSHIP OR AN AFFILIATE
OF EITHER FOR A CERTAIN PERIOD OF TIME (WITH SUCH LIQUIDATING GAINS BEING
ATTRIBUTED IN ORDER OF VESTING FROM SOONEST VESTING TO LATEST VESTING), AND
(IV) FOURTH, TO OTHER UNVESTED LTIP UNITS (WITH SUCH LIQUIDATING GAINS BEING
ATTRIBUTED IN ORDER OF ISSUANCE FROM EARLIEST ISSUED TO LATEST ISSUED).  WITHIN
EACH SUCH CATEGORY, LIQUIDATING GAIN WILL BE ALLOCATED SERIALLY (I.E., ENTIRELY
TO THE FIRST UNIT IN THE CATEGORY, THEN ENTIRELY TO THE NEXT UNIT IN THE
CATEGORY, AND SO ON, UNTIL A FULL ALLOCATION IS MADE TO THE LAST UNIT IN THE
CATEGORY) IN THE ORDER OF SMALLEST BOOK-UP TARGET TO LARGEST BOOK-UP TARGET
UNTIL THE ECONOMIC CAPITAL ACCOUNT BALANCE OF SUCH LTIP UNITHOLDER ATTRIBUTABLE
TO SUCH LTIP UNITHOLDER’S OWNERSHIP OF EACH LTIP UNIT IN THE CATEGORY IS EQUAL
TO THE PARTNERSHIP COMMON UNIT ECONOMIC BALANCE;  PROVIDED, HOWEVER, THAT IF
THERE IS NOT SUFFICIENT LIQUIDATING GAIN FOR THE ECONOMIC CAPITAL ACCOUNT
BALANCE OF SUCH LTIP UNITHOLDER ATTRIBUTABLE TO SUCH LTIP UNITHOLDER’S OWNERSHIP
OF EACH LTIP UNIT TO BE EQUAL TO THE PARTNERSHIP COMMON UNIT ECONOMIC BALANCE
AND THE BOOK-UP TARGET FOR ANY LTIP UNIT IS LESS THAT THE AMOUNT REQUIRED TO BE
ALLOCATED TO THE LTIP UNIT FOR THE ECONOMIC CAPITAL ACCOUNT ATTRIBUTABLE TO THE
LTIP UNIT TO EQUAL THE PARTNERSHIP COMMON UNIT ECONOMIC BALANCE, THEN
LIQUIDATING GAINS SHALL BE ALLOCATED PURSUANT TO THE WATERFALL SET FORTH IN
6.3(B) (III)(I) –(IV) ABOVE UNTIL THE BOOK-UP TARGET OF EACH SUCH LTIP UNIT IN
EACH CATEGORY HAS BEEN REDUCED TO ZERO AND, THEREAFTER, ANY REMAINING
LIQUIDATING GAIN SHALL BE FURTHER ALLOCATED PURSUANT TO SUCH WATERFALL UNTIL THE
ECONOMIC CAPITAL ACCOUNT BALANCE OF AN LTIP UNITHOLDER ATTRIBUTABLE TO SUCH LTIP
UNITHOLDER’S OWNERSHIP OF EACH LTIP UNIT IN THE CATEGORY IS EQUAL TO THE
PARTNERSHIP COMMON UNIT ECONOMIC BALANCE.

 

(IV)                            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 LTIP UNITHOLDER, TO THE EXTENT ATTRIBUTABLE TO
THE LTIP UNITHOLDER’S OWNERSHIP OF LTIP UNITS, EXCEEDS THE PARTNERSHIP COMMON
UNIT ECONOMIC BALANCE, THE AMOUNT OF SUCH EXCESS SHALL BE RE-ALLOCATED TO SUCH
LTIP UNITHOLDER’S REMAINING LTIP UNITS TO THE SAME EXTENT AND IN THE SAME MANNER
AS WOULD APPLY PURSUANT TO SECTION 6.3(B)(V) BELOW IN THE EVENT OF A FORFEITURE
OF LTIP UNITS.  TO THE EXTENT SUCH EXCESS MAY NOT BE RE-ALLOCATED, LIQUIDATING
LOSSES SHALL BE ALLOCATED TO SUCH LTIP UNITHOLDER TO THE EXTENT NECESSARY TO
REDUCE OR

 

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ELIMINATE THE DISPARITY; PROVIDED, HOWEVER, THAT IF LIQUIDATING LOSSES ARE
INSUFFICIENT TO COMPLETELY ELIMINATE ALL SUCH DISPARITIES, SUCH LOSSES SHALL BE
ALLOCATED AMONG THE LTIP UNITHOLDERS AS REASONABLY DETERMINED BY THE GENERAL
PARTNER.

 

(V)                               IF AN LTIP UNIT LIMITED PARTNER FORFEITS ANY
LTIP UNITS TO WHICH LIQUIDATING GAIN HAS PREVIOUSLY BEEN ALLOCATED UNDER THIS
SECTION 6.3(B) THE CAPITAL ACCOUNT ASSOCIATED WITH SUCH FORFEITED LTIP UNITS
WILL BE RE-ALLOCATED TO THAT LTIP UNITHOLDER’S REMAINING LTIP UNITS USING A
METHODOLOGY SIMILAR TO THAT DESCRIBED IN SECTION 6.3(B)(III) ABOVE TO THE EXTENT
NECESSARY TO CAUSE SUCH LTIP UNITHOLDER’S  ECONOMIC CAPITAL ACCOUNT BALANCE
ATTRIBUTABLE TO EACH LTIP UNIT TO EQUAL THE PARTNERSHIP COMMON UNIT ECONOMIC
BALANCE.  TO THE EXTENT SUCH LIQUIDATING GAINS ARE NOT RE-ALLOCATED IN
ACCORDANCE WITH THE FORGOING, SUCH LIQUIDATING GAINS WILL BE FORFEITED AND THE
LTIP UNITHOLDER’S ECONOMIC CAPITAL ACCOUNT BALANCE WILL BE REDUCED ACCORDINGLY.

 

(VI)                            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 LTIP UNITHOLDERS 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.

 

(VII)                         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).

 

2.                                       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

 

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Amendment 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]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
Partnership Agreement as of the 29th day of May, 2008.

 

 

 

GENERAL PARTNER:

 

 

 

NORTHSTAR REALTY FINANCE CORP.

 

 

 

 

 

By:

 /s/ Albert Tylis

 

 

 

Name: Albert Tylis

 

 

Title: Executive Vice President & General Counsel

 

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