Exhibit 4.2


 


FACE
OF SECURITY


 


UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE ISSUER 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 IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.  THIS SECURITY IS A
GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND
IS REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF.  THIS SECURITY IS EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND, UNLESS AND UNTIL
IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN CERTIFICATED FORM,
THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY
TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE
DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY.


 


THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE “SECURITIES ACT”), AND ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER AGREES (1) THAT IT WILL NOT RESELL OR
OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY, EXCEPT (A) TO THE ISSUER,
NORTHSTAR REALTY FINANCE CORP., OR A SUBSIDIARY OF THE ISSUER; OR (B) TO A
PERSON THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A ADOPTED UNDER THE SECURITIES ACT) THAT IS PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER QUALIFIED INSTITUTIONAL BUYER AND
TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE
144A, ALL IN COMPLIANCE WITH RULE 144A (IF AVAILABLE).


 

















 


NRFC
NNN HOLDINGS, LLC


 


11.50%
EXCHANGEABLE SENIOR NOTES DUE 2013


 


FULLY
AND UNCONDITIONALLY GUARANTEED BY


NORTHSTAR
REALTY FINANCE CORP.,


NORTHSTAR
REALTY FINANCE LIMITED PARTNERSHIP


AND
NRFC SUB-REIT CORP.


 


	
  No. 1

  	
   

  	
  CUSIP: 62941QAA2

  



 


NRFC NNN HOLDINGS, LLC, a Delaware limited liability company (the “Issuer”,
which term includes any successor Person under the Indenture referred to on the
reverse hereof), for value received, promises to pay to Cede & Co., or
registered assigns, the principal sum of Eighty Million United States Dollars
(U.S.$ 80,000,000) (which principal amount may from time to time be increased
or decreased to such other principal amounts (which, taken together with the
principal amounts of all other Outstanding Securities, shall not exceed
$100,000,000 solely as a result of the issuance of Additional Securities
pursuant to the terms of the Indenture and Purchase Agreement)) by adjustments
made on the records of the Trustee hereinafter referred to in accordance with
the Indenture) on June 15, 2013 and to pay interest thereon, from May 28,
2008, or from the most recent Interest Payment Date (as defined below) to which
interest has been paid or duly provided for, semi-annually in arrears on June 15
and December 15 in each year (each, an “Interest Payment Date”),
commencing December 15, 2008, at the rate of 11.50% per annum, until the
principal hereof is due, and at the rate of 11.50% per annum, on any overdue
principal and, to the extent permitted by law, on any overdue interest. The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in the Indenture, be paid to the Person in whose
name this Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest, which shall be
the June 1 or December 1 (whether or not a Business Day), as the case
may be, next preceding such Interest Payment Date.  Except as otherwise provided in the
Indenture, any such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Regular Record Date and may
either be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Issuer, notice whereof shall be given to Holders of Securities not less than 10
days prior to the Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any automated quotation
system or securities exchange on which the Securities may be quoted or listed,
and upon such notice as may be required by such exchange, all as more fully
provided in the Indenture. Payment of the principal of and interest, if any, on
the Securities shall be made at the office or agency of the Issuer maintained
for that purpose or at the Corporate Trust Office of the Trustee in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided,
however, that at the option of the
Issuer payment of interest may be made by check mailed to the address of the
Person entitled thereto as such address appears in the Register; provided further that a Holder with an aggregate principal
amount in excess of $5,000,000 will be paid by wire transfer in immediately
available funds at the election of such Holder if such Holder has provided wire
transfer instructions to the 


 


2

















 


Trustee at least 10 Business Days prior to the
payment date.  Any wire transfer
instructions received by the Trustee will remain in effect until revoked by the
Holder.


 


Interest
on this Security will be based on a 360-day year consisting of twelve 30-day
months.  If any Interest Payment Date
(other than an Interest Payment Date coinciding with the Final Maturity Date or
Redemption Date or Change in Control Purchase Date) of this Security falls on a
day that is not a Business Day, such Interest Payment Date will be postponed
until the next succeeding Business Day. 
If the Final Maturity Date, Redemption Date or Change in Control
Purchase Date of this Security would fall on a day that is not a Business Day,
the required payment of interest, if any, and principal will be made on the next
succeeding Business Day and no interest on such payment will accrue for the
period from and after the Final Maturity Date, Redemption Date or Change in
Control Purchase Date to such next succeeding Business Day.


 


Unless
the certificate of authentication hereon has been executed by the Trustee
referred to on the reverse hereof by the manual signature of one of its
authorized signatories, this Security shall not be entitled to any benefit
under the Indenture or be valid or obligatory for any purpose.


 


This
Security is exchangeable as specified on the reverse hereof.


 


As
provided in the Indenture, the obligations of the Issuer under the Indenture
and this Security are fully and unconditionally guaranteed pursuant to the
Guarantees endorsed hereon as provided in the Indenture.  Each Holder, by holding this Security, agrees
to all of the terms and provisions of said Guarantees and the Indenture.


 


Reference
is hereby made to the further provisions of this Security set forth on the
reverse hereof, which further provisions shall for all purposes have the same
effect as if set forth at this place.


 


SIGNATURE
PAGE FOLLOWS


 


3

















 


IN
WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed.


 


	
   

  	
  NRFC NNN HOLDINGS, LLC,
  as Issuer

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  NRFC Sub-REIT Corp., 

  in its capacity as managing member

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  



 


 


Trustee’s Certificate of Authentication:  This is one of the Securities referred to in
the within-mentioned Indenture.


 


Wilmington Trust Company, as Trustee


 


 


	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized Signatory

  



 


 


Dated:  May 28, 2008


 


4

















 


REVERSE
SIDE OF SECURITY


 


NRFC
NNN HOLDINGS, LLC


 


11.50%
EXCHANGEABLE SENIOR NOTES DUE 2013


 


FULLY
AND UNCONDITIONALLY GUARANTEED 

BY NORTHSTAR REALTY FINANCE CORP.,


NORTHSTAR
REALTY FINANCE LIMITED PARTNERSHIP


AND
NRFC SUB-REIT CORP.


 


This Security is one of a duly authorized issue of securities of the
Issuer designated as its “11.50%
Exchangeable Senior Notes due June 15,
2013” (herein called the “Securities”), limited in aggregate principal
amount not to exceed U.S. $80,000,000, as such amount may be increased, but not
to an amount in excess of $100,000,000,
solely as a result of the issuance of Additional Securities pursuant to the
terms of the Indenture and the Purchase Agreement, issued and to be issued under an Indenture, dated as of May 28,
2008 (herein called the “Indenture”), between the Issuer,
NorthStar Realty Finance Corp. (“NRF”), NorthStar Realty Finance Limited
Partnership (“NRF LP”) and NRFC Sub-REIT Corp. (“Sub-REIT”), as
Guarantors (each of NRF, NRF LP and Sub-REIT, a “Guarantor” and,
together, the “Guarantors”), and Wilmington Trust Company, a Delaware
banking corporation, as Trustee (herein called the “Trustee,” which term
includes any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Issuer, the Guarantors, the Trustee and the Holders of the Securities and
of the terms upon which the Securities are, and are to be, authenticated and
delivered.  As provided in the Indenture
and subject to certain limitations therein set forth, Securities are exchangeable
for a like aggregate principal amount of Securities of any authorized
denominations as requested by the Holder surrendering the same upon surrender
of the Security or Securities to be exchanged, at the Corporate Trust Office of
the Trustee.  Upon such surrender by the
Holder, the Issuer will issue and the Trustee will authenticate the new
Securities in the requested denominations. 
Terms used herein without definition and which are defined in the
Indenture have the meanings assigned to them in the Indenture.


 


1.             PAYING
AGENT, EXCHANGE AGENT AND REGISTRAR


 


Initially,
the Trustee shall act as Paying Agent, Exchange Agent and Registrar of the
Securities.  The Issuer hereby initially
designates the Corporate Trust Office of the Trustee in Wilmington, Delaware as
the office to be maintained by it where this Security may be presented for
payment, registration of transfer or exchange, where notices or demands to or
upon the Issuer in respect of this Security or the Indenture may be served and
where the Securities may be surrendered for exchange in accordance with the
provisions of paragraph 6 hereof and the Indenture.


 


5

















 


2.             REDEMPTION
BY THE ISSUER


 


The
Issuer shall not have the right to redeem any Securities prior to June 15,
2011, except as provided in this paragraph. 
If, (i) at any time, the Issuer determines it is necessary to
redeem the Securities in order to preserve the qualification of NRF as a real
estate investment trust under the Internal Revenue Code of 1986, as amended, or
(ii) on or after June 15, 2011, during any period of 30 consecutive
trading days, the closing sale price of a share of NRF’s common stock is
greater than or equal to 130% of the exchange price at the beginning of such
period for at least 20 trading days within such period of 30 consecutive
trading days, the Issuer may redeem all of the Securities then outstanding at
100% of the principal amount of the Securities, plus accrued and unpaid
interest, if any, to but excluding the Redemption Date.


 


Securities
in denominations larger than $1,000 principal amount may be redeemed in part
but only in integral multiples of $1,000 principal amount.


 


3.             REPURCHASE
AT OPTION OF HOLDER


 


If a
Change in Control occurs, a Holder shall have the right, at such Holder’s
option and subject to the terms and conditions of the Indenture, to require the
Issuer to repurchase all or any of such Holder’s Securities having a principal
amount equal to $1,000 or an integral multiple thereof on the date (the “Change
in Control Purchase Date”) specified by the Issuer in the Issuer Notice
(which date shall be no earlier than 30 days and no later than 40 days after
the date of such Issuer Notice) for cash equal to the 100% of the principal
amount of the Securities to be repurchased plus unpaid interest accrued thereon
to but excluding the Change in Control Purchase Date (the “Change in Control
Purchase Price”) by delivering a Change in Control Purchase Price Notice to
the Trustee or any Paying Agent no later than the close of business on the
second business day prior to the Change in Control Purchase Date. A Change in
Control Purchase Price notice is irrevocable and may not be withdrawn.


 


If the
Paying Agent holds, in accordance with the terms of the Indenture, money
sufficient to pay the Change in Control Purchase Price of such Securities on
the Change in Control Purchase Date or the Business Day following such date,
then, on and after such date and set forth in the Indenture, such Securities
shall cease to be Outstanding and interest on such Securities shall cease to
accrue, and all other rights of the Holder shall terminate (other than the
right to receive the Change in Control Purchase Price upon delivery or transfer
of the Securities).


 


4.             EXCHANGE
OF SECURITY FOR COMMON STOCK


 


The
Securities shall be exchangeable into the consideration specified in the
Indenture at such times, upon compliance with such conditions and upon the
terms set forth in the Indenture.


 


The
initial Exchange Rate shall be 83.3333 shares of Common Stock per $1,000 principal amount of
Securities, subject to adjustment in certain circumstances as specified in the
Indenture.  Securities tendered for
exchange by a Holder after the close of business on any Regular Record Date for
an interest payment and on or prior to the corresponding Interest Payment Date
must be accompanied by payment of an amount equal to the interest that such
Holder is to receive on such Securities on such Interest Payment Date; provided, however, that
no such payment of interest shall be required (1) if such Securities have
been called for redemption on a Redemption 


 


6

















 


Date that is after such Regular Record Date and on or
prior to such Interest Payment Date, (2) in connection with a Change in
Control and the Issuer has specified a Change in Control Purchase Date that is
after such Regular Record Date and prior to such Interest Payment Date, (3) if
the Regular Record Date is the last Regular Record Date prior to Maturity of
the Securities or (4) with respect to overdue interest if any overdue
interest exists at the time of exchange with respect to such notes.


 


To
exchange the Securities, a Holder must (a) complete and manually sign the
Exchange Notice on the reverse of the Security (or complete and manually sign a
facsimile of such notice) and deliver such notice to the Exchange Agent at the
office maintained by the Exchange Agent for such purpose, (b) with respect
to Securities that are in certificated form, surrender the Securities to the
Exchange Agent, (c) furnish appropriate endorsements and transfer
documents if required by the Exchange Agent and (d) pay any transfer or
similar tax, if required. The date on which the Holder satisfies all such
requirements shall be deemed to be the date on which the applicable Securities
shall have been tendered for exchange.  A
holder of a beneficial interest in a Global Security must comply with the
Applicable Procedures of the Depositary in connection with an exchange.


 


If a
Holder has delivered a Change in Control Purchase notice requiring the Issuer
to repurchase all or a portion of this Security pursuant to paragraph 3 hereof
then this Security (or portion hereof subject to such Change in Control
Purchase notice) may not be exchanged.


 


5.             RANKING


 


The
Securities are senior unsecured obligations of the Issuer and shall rank
equally in right of payment with all other senior unsecured indebtedness of the
Issuer from time to time outstanding.


 


6.             DENOMINATIONS;
TRANSFER; EXCHANGE


 


(a)           This Security is issuable only in
fully registered in denominations of $1,000 and integral multiples
thereof.  This Security may be exchanged
for a like aggregate principal amount of Securities of other authorized
denominations at the Corporate Trust Office of the Trustee or in the manner and
subject to the limitations provided herein and in the Indenture, but without
the payment of any charge except for any tax or other governmental charge
imposed in connection therewith.  Upon
due presentment for registration of transfer of this Security at the Corporate
Trust Office of the Trustee, one or more new Securities of authorized
denominations in an equal aggregate principal amount will be issued to the
transferee in exchange therefor, and bearing such restrictive legends as may be
required by the Indenture, but without payment of any charge except for any tax
or other governmental charge imposed in connection therewith.  In the event of any redemption in part, the
Issuer shall not be required to:  (i) issue
or register the transfer or exchange of any Security during a period beginning
at the opening of business 15 days before any selection of Securities for
redemption and ending at the close of business on the earliest date on which
the relevant notice of redemption is deemed to have been given to all Holders
of Securities to be so redeemed, or (ii) register the transfer or exchange
of any Security so selected for redemption, in whole or in part, except the
unredeemed portion of any Security being redeemed in part.


 


7

















 


In the event of a deposit or withdrawal of an interest in this
Security, including an exchange, transfer, redemption, or repurchase of this
Security in part only, the Trustee, as custodian of the Depositary, shall make
an adjustment on its records to reflect such deposit or withdrawal in
accordance with the Applicable Procedures.


 


7.             PERSONS
DEEMED OWNERS


 


The
Holder of this Security may be treated as the owner of this Security for all
purposes, and none of the Issuer, any Guarantor or the Trustee nor any
authorized agent of the Issuer, any Guarantor or the Trustee shall be affected
by any notice to the contrary, except as required by law.


 


8.             ADDITIONAL
RIGHTS OF HOLDERS


 


In
addition to the rights provided to Holders of Securities under the Indenture
and each Guarantee endorsed hereon, the Holder of this Security is entitled to
the benefits of a Registration Rights Agreement, dated as of May 28, 2008 (the “Registration Rights
Agreement”) by and between NRF and the Initial Purchasers with respect to
resales of the shares of Common Stock, if any, issuable upon exchange of the
Securities.  A copy of the Registration
Rights Agreement is available to any Holder of Securities upon request to the
Issuer.


 


If a
Registration Default, as defined in the Registration Rights Agreement, occurs
and is continuing during a period of time that the Securities are exchangeable
for shares of Common Stock, liquidated damages consisting solely of additional
interest (“Liquidated Damages”) will be paid to Holders entitled to
interest payments on such dates semi-annually in arrears on each Interest
Payment Date and will accrue from and including the day following such
Registration Default to but excluding the day on which such Registration Default
has been cured at a rate per annum equal to one-quarter of one percent (0.25%)
of the outstanding principal amount of the Securities to and including the 90th
day following such Registration Default and at a rate per annum equal to
one-half of one percent (0.50%) of the outstanding principal amount thereof
from and after the 91st day following such Registration Default.


 


In no
event will any additional interest on the Securities exceed the rate per annum
of one-half of one percent (0.50%) of the outstanding principal amount thereof.
The Issuer will not pay Liquidated Damages on any Security after it has been
exchanged for the shares of Common Stock. If a Security ceases to be
outstanding during any period for which additional interest is accruing, the Issuer
will prorate the Liquidated Damages to be paid with respect to that Security.


 


Whenever
in this Security there is a reference, in any context, to the payment of the
principal of, premium, if any, or interest on, or in respect of, any Security,
such mention shall be deemed to include mention of the payment of Liquidated
Damages payable as described in the preceding paragraph to the extent that, in
such context, Liquidated Damages are, were or would be payable in respect of
such Security and express mention of the payment of Liquidated Damages (if
applicable) in any provisions of this Security shall not be construed as
excluding Liquidated Damages in those provisions of this Security where such
express mention is not made.


 


8

















 


9.             MODIFICATION
AND AMENDMENT; WAIVER


 


The
Indenture permits, with certain exceptions as therein provided, the amendment
thereof and the modification of the rights and obligations of the Issuer and
the Guarantors and the rights of the Holders of the Securities under the
Indenture at any time by the Issuer, the Guarantors and the Trustee with the
consent of the Holders of a majority in the aggregate principal amount of all
Outstanding Securities affected thereby (voting together as a single
class).  The Indenture also provides that
certain amendments or modifications may not be made without the consent of each
Holder to be affected thereby. 
Furthermore, provisions in the Indenture permit the Holders of a
majority in the aggregate principal amount of the Outstanding Securities of any
series, in certain instances, to waive, on behalf of all of the Holders of
Securities of such series, certain past defaults under the Indenture and their
consequences.  Any such waiver by the
Holder of this Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and other Securities issued upon the
registration of transfer hereof or in exchange hereof, or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.


 


10.           DEFAULTS
AND REMEDIES


 


(a)           The Indenture sets forth events that
constitute an Event of Default under the Indenture.  If an Event of Default shall occur and be
continuing, there may be declared due and payable the principal amount
(together with accrued and unpaid interest) on the Securities in the manner and
with the effect provided in the Indenture. 
If certain bankruptcy or insolvency events occur and continue with
respect to the Issuer, the Guarantors, or certain Subsidiaries of the Issuer or
the Guarantors, the Securities shall automatically become due and payable in
accordance with the terms of the Indenture.


 


(b)           Notwithstanding anything in paragraph
(a) of this section, to the extent elected by the Issuer, the sole remedy
for an Event of Default relating to the failure by the Issuer to comply with
the obligation to provide certain reports as set forth in Section 5.03(b) of
the Indenture, will for the first 90 days after the occurrence of such an Event
of Default, consist exclusively of the right for Holders to receive additional
interest on the Securities equal to 0.25% per annum of the outstanding
principal amount of the Securities.  If
the Issuer so elects, such additional interest will be payable in the same manner
and on the same dates as the stated interest payable on the Securities.  The additional interest will accrue on all
outstanding Securities from and including the date on which such Event of
Default first occurs to but not including the 90th day thereafter (or such
earlier date on which such Event of Default shall have been cured or waived).
On such 90th day after such Event of Default (if the Event of Default relating
to such obligation is not cured or waived prior to such 90th day), the
Securities will be subject to acceleration as provided above.  In the event the Issuer does not elect to pay
the additional interest upon such Event of Default in accordance with this
paragraph, the Securities will be subject to acceleration as provided above.


 


(c)           In order to elect to pay the
additional interest in accordance with paragraph (b) of this section, the
Issuer must notify all Holders, the Trustee and the Paying Agent of such
election.  Upon the failure of the Issuer
to give timely such notice or pay the additional interest 


 


9

















 


specified in paragraph (b) of this section, the
Securities will be subject immediately to acceleration as provided in paragraph
(a) of this section.


 


11.           WITHOLDING


 


To the
extent the Issuer determines in its sole discretion that the Issuer is required
to withhold any taxes with respect to a deemed payment or distribution with
respect to this Security on account of an adjustment to the Exchange Rate, the
Issuer shall withhold such amount from payments otherwise due hereunder to the
Holder of such Security and report such withholding to the Holder if and as
required by law.  Any amount withheld by
the Issuer pursuant to Section 5.01(c) of the Indenture with respect
to this Security shall be treated for all purposes of the Indenture and this
Security as if it had been paid directly to the Holder hereof.


 


12.           TRUSTEE
DEALINGS WITH THE ISSUER AND THE GUARANTORS


 


The
Trustee in its individual or any other capacity may become the owner or pledgee
of Securities and may otherwise deal with the Issuer, the Guarantors or an
Affiliate of the Issuer or a Guarantor with the same rights it would have if it
were not Trustee.  Any Agent may do the
same with like rights.


 


13.           CALCULATIONS
IN RESPECT OF THE SECURITIES


 


Except
as otherwise specifically stated herein or in the Indenture, all calculations
to be made in respect of the Securities shall be the obligation of the
Issuer.  All calculations made by the
Issuer or its agent as contemplated pursuant to the terms hereof and of the
Securities shall be made in good faith and be final and binding on the
Securities and the Holders of the Securities absent manifest error.  The Issuer shall provide a schedule of
calculations to the Trustee, and the Trustee shall be entitled to rely upon the
accuracy of the calculations by the Issuer without independent
verification.  The Trustee shall forward
calculations made by the Issuer to any Holder of Securities upon request.


 


14.           GOVERNING
LAW


 


The
Indenture and this Security shall be governed by and construed in accordance
with the internal laws of the State of New York.


 


10
















 


ASSIGNMENT FORM


 


To
assign this Security, fill in the form below:


 


I or
we assign and transfer this Security to


	
   

  
	
   

  
	
  (Insert assignee’s soc.
  sec. or tax I.D. no.)

  
	
   

  
	
   

  
	
  (Print or type
  assignee’s name, address and zip code)

  



 


and irrevocably appoint


 


 


agent to transfer this Security on the books of the Issuer. The agent
may substitute another to act for him or her.


 


	
   

  	
  Your Signature

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
  (Sign exactly as your name appears on the 

  other side of this Security)

  
				



 


* Signature guaranteed by:


 


	
  By:

  	
   

  	
   

  



 






*                 The signature
must be guaranteed by an institution which is a member of one of the following
recognized signature guaranty programs:  (i) the
Securities Transfer Agent Medallion Program (STAMP); (ii) the New York
Stock Exchange Medallion Program (MSP); (iii) the Stock Exchange Medallion
Program (SEMP); or (iv) such other guaranty program acceptable to the
Trustee.


 


11

















 


EXCHANGE
NOTICE


 


To
exchange this Security for Common Stock of NRF, check the box:


 


To exchange
only part of this Security for Common Stock of NRF, state the principal amount
to be exchanged (must be $1,000 or an integral multiple of $1,000): 
$              .


 


The undersigned Holder of this Security hereby irrevocably exercises
the option to exchange this Security, or any portion of the principal amount
hereof (which is U.S. $1,000 or an integral multiple of U.S. $1,000 in excess
thereof, provided that the unconverted portion of
such principal amount is U.S. $1,000 or any integral multiple of U.S. $1,000 in
excess thereof) below designated, into shares of Common Stock in accordance
with the terms of the Indenture referred to in this Security, and directs that
such shares, together with a check in payment for any fractional share, any
Interest Make-Whole Payment, if and as applicable and any Securities
representing any unconverted principal amount hereof, be delivered to and be
registered in the name of the undersigned unless a different name has been
indicated below. If shares of Common Stock or Securities are to be registered
in the name of a Person other than the undersigned, the undersigned will pay
all transfer taxes payable with respect thereto.


 


If you
want the stock certificate made out in another person’s name, fill in the form
below:


 


	
   

  
	
  (Insert assignee’s soc.
  sec. or tax I.D. no.)

  
	
   

  
	
   

  
	
  (Print or type
  assignee’s name, address and zip code)

  



 


	
   

  	
  Your Signature

  
	
   

  	
   

  
	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
  (Sign exactly as your name appears on the 

  other side of this Security)

  
				



 


* Signature guaranteed by:


 


	
  By:

  	
   

  	
   

  



 






*                 The signature
must be guaranteed by an institution which is a member of one of the following
recognized signature guaranty programs:  (i) the
Securities Transfer Agent Medallion Program (STAMP); (ii) the New York
Stock Exchange Medallion Program (MSP); (iii) the Stock Exchange Medallion
Program (SEMP); or (iv) such other guaranty program acceptable to the
Trustee.


 


12

















 


SCHEDULE OF EXCHANGES OF SECURITIES


 


The
following exchanges, redemptions or purchases of a part of this Global Security
have been made:


 


	
  Principal Amount of this

  Global Security

  Following Such Decrease

  Date of Exchange (or

  Increase)

  	
   

  	
  Authorized Signatory of

  Securities Custodian

  	
   

  	
  Amount of Decrease in

  Principal Amount of this

  Global Security

  	
   

  	
  Amount of Increase in

  Principal Amount of this

  Global Security

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


13

















 


CERTIFICATE
TO BE DELIVERED UPON EXCHANGE OR REGISTRATION

OF TRANSFER OF RESTRICTED SECURITIES


 


Re:          11.50% Exchangeable Senior Notes due
2013 (the “Securities”) of NRFC NNN Holdings, LLC.


 


This certificate relates to
$         principal amount of
Securities owned in (check applicable box) 


 


o
book-entry or o
definitive form by (the “Transferor”).


 


The
Transferor has requested a Registrar or the Trustee to exchange or register the
transfer of such Securities.


 


In
connection with such request and in respect of each such Security, the
Transferor does hereby certify that the Transferor is familiar with transfer
restrictions relating to the Securities as provided in Section 2.14 of the
Indenture dated as of May 28, 2008 among NRFC NNN Holdings, LLC, as Issuer, NorthStar
Realty Finance Corp., NorthStar Realty Finance Limited Partnership and NRFC
Sub-REIT Corp., as Guarantors, and Wilmington Trust Company, as trustee (the “Indenture”),
and the transfer of such Security is being made pursuant to (check applicable
box):


 


	
  o

  	
   

  	
  Such Security is being acquired for the Transferor’s
  own account, without transfer.

  
	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  Such Security is being transferred to the Issuer, a
  Guarantor or a Subsidiary (as defined in the Indenture) of the Issuer or a
  Guarantor.

  
	
   

  	
   

  	
   

  
	
  o

  	
   

  	
  Such Security is being transferred to a person the
  Transferor reasonably believes is a “qualified institutional buyer” (as
  defined in Rule 144A or any successor provision thereto
  (“Rule 144A”) under the Securities Act) that is purchasing for its own
  account or for the account of a “qualified institutional buyer”, in each case
  to whom notice has been given that the transfer is being made in reliance on
  such Rule 144A, and in each case in reliance on Rule 144A.

  



 


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  The Transferor acknowledges and agrees that, if the
  transferee will hold any such Securities in the form of beneficial interests
  in a Global Security, then such transfer can only be made pursuant to Rule 144A
  under the Securities Act and such transferee must be a “qualified
  institutional buyer” (as defined in Rule 144A).

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The Transferor hereby acknowledges and agrees that
  its obligation to indemnify the Issuer, each Guarantor and the Trustee under
  the Indenture against any liability that may result from the transfer
  described herein being in violation of the Indenture and/or applicable United
  States federal or state securities laws shall survive the transfer described
  herein.

  



 


	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
  (Insert Name of Transferor)

  
	
   

  	
   

  



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