Exhibit 4.2


 


NORTHSTAR
REALTY FINANCE CORP.


 


NRFC NNN HOLDINGS, LLC

$80,000,000 11.50% EXCHANGEABLE SENIOR NOTES DUE 2013


 


Registration Rights Agreement


 


May 28, 2008


 


WACHOVIA
CAPITAL MARKETS, LLC


JMP
SECURITIES LLC


c/o
Wachovia Capital Markets, LLC


One
Wachovia Center


301
South College Street


Charlotte,
North Carolina 28288


 


Ladies
and Gentlemen:


 


NRFC
NNN Holdings, LLC, a Delaware limited liability company (the “Issuer”), proposes to issue and
sell to Wachovia Capital Markets, LLC and JMP Securities LLC, as the initial
purchasers (the “Initial Purchasers”)
$80,000,000 in aggregate principal amount of its 11.50% Exchangeable Senior
Notes due 2013 (the “Notes”), guaranteed as to payment by the
Guarantors (as defined below) (the “Guarantees” and, together with the Notes, the “Securities”), upon the terms set forth in the Purchase Agreement by and
among the Issuer, NorthStar Realty Finance Corp., a Maryland corporation (the “Company”), NorthStar Realty
Finance Limited Partnership, a Delaware limited partnership (the “Operating
Partnership”), NRFC Sub-REIT Corp., a Maryland corporation (“Sub-REIT”,
the Company, the Operating Partnership and Sub-REIT are collectively referred
to herein as the “Guarantors”), and the Initial Purchasers, dated May 22,
2008 (the “Purchase Agreement”),
relating to the initial placement (the “Initial Placement”) of the Securities.  The Notes will be exchangeable, subject to
certain conditions, at the option of the holder prior to maturity (unless
previously redeemed or otherwise repurchased by the Issuer) for shares of cash,
common stock, $.01 par value, of the Company (the “Common Stock”
and, specifically as to the Common Stock issued or issuable upon exchange of
the Notes, the “Underlying Shares”),
or a combination of cash and shares of Common Stock, at the Issuer’s
option.  To induce the Initial Purchasers
to enter into the Purchase Agreement and to satisfy obligations thereunder, the
holders of the Securities will have the benefit of this registration rights
agreement by and among the Issuer, the Company and the Initial Purchasers
whereby the Company agrees with you for your benefit and the benefit of the
holders from time to time of the Securities (including the Initial Purchasers)
and of the Registrable Securities (as defined below) (each a “Holder” and, collectively, the “Holders”), as follows:


 


1.             Definitions.  Capitalized terms used herein without
definition shall have their respective meanings set forth in the Purchase
Agreement.  As used in this Agreement,
the following capitalized defined terms shall have the following meanings:


 

















 


“Act” shall mean the Securities Act
of 1933, as amended, and the rules and regulations of the Commission
promulgated thereunder.


 


“Affiliate” shall have the meaning
specified in Rule 405 under the Act.


 


“Automatic Shelf Registration Statement”
shall mean a Registration Statement filed by a Well-Known Seasoned Issuer which
shall become effective upon filing thereof pursuant to General Instruction I.D
for Form S-3.


 


“Broker-Dealer” shall mean any
broker or dealer registered as such under the Exchange Act.


 


“Business Day” shall mean any day
other than a Saturday, a Sunday or a legal holiday or a day on which banking
institutions or trust companies are authorized or obligated by law to close in
New York City.


 


“Closing Date” shall mean the date
of the first issuance of the Securities.


 


“Commission” shall mean the
Securities and Exchange Commission.


 


“Company”
shall have the meaning set forth in the preamble hereto.


 


 “Control”
shall have the meaning specified in Rule 405 under the Act and the terms “controlling”
and “controlled” shall have meanings correlative thereto.


 


“Deferral Period” shall have the
meaning indicated in Section 3(h) hereof.


 


“Exchange Act” shall mean the
Securities Exchange Act of 1934, as amended, and the rules and regulations
of the Commission promulgated thereunder.


 


“Exchange Price” shall have the
meaning specified in the Indenture.


 


“Final Circular” shall mean the
offering circular, dated May 22, 2008, relating to the Securities, including
any and all annexes thereto and any information incorporated by reference
therein as of such date.


 


“Guarantors”
shall have the meaning set forth in the preamble hereto.


 


“Holder” shall have the meaning
set forth in the preamble hereto.


 


“Indenture” shall mean the
Indenture relating to the Securities, dated as of May 28, 2008, by and
among the Issuer, the Guarantors and Wilmington Trust Company, as trustee, as
the same may be amended from time to time in accordance with the terms thereof.


 


“Initial Placement” shall have the
meaning set forth in the preamble hereto.


 


“Initial Purchasers” shall have
the meaning set forth in the preamble hereto.


 


“Liquidated Damages” shall have
the meaning set forth in Section 6 hereof.


 


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“Losses” shall have the meaning
set forth in Section 5(d) hereof.


 


“Majority Holders” shall mean, on
any date, Holders of a majority of the aggregate principal amount of the
Securities which, for purposes of this determination, shall include Holders of
Registrable Securities based on the aggregate principal amount of Securities
exchanged for such Registrable Securities.


 


“NASD Rules” shall mean the Conduct Rules and
the By-Laws of the National Association of Securities Dealers, Inc.


 


“Notice and Questionnaire” shall
mean a written notice delivered to the Company substantially in the form
attached as Annex A to the Final Circular.


 


“Notice Holder” shall mean, on any
date, any Holder that has delivered a Notice and Questionnaire and such other
information as the Company shall reasonably request in connection with naming a
holder as a Selling Securityholder to the Company on or prior to such date;
provided that not all of such Holders of Registrable Securities that have been
registered for resale have not been sold in accordance with a Shelf
Registration Statement.


 


“Operating
Partnership” shall have the meaning set forth in the preamble hereto.


 


 “Prospectus”
shall mean a prospectus included in the Shelf Registration Statement
(including, without limitation, a prospectus that discloses information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A or Rule 430B under the Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Underlying Shares covered by the Shelf
Registration Statement, and all amendments and supplements thereto, including
any and all exhibits thereto and any information incorporated by reference
therein.


 


“Purchase Agreement” shall have
the meaning set forth in the preamble hereto.


 


“Registrable Securities” shall
mean all or any portion of the Underlying Shares issued or issuable in exchange
for the Notes initially sold to the Initial Purchasers pursuant to the Purchase
Agreement, other than the Underlying Shares that (i) have been sold
pursuant to the Shelf Registration Statement, (ii) are freely transferable
by persons who are not affiliates (as defined in Rule 144 under the Act)
of the Company without registration under the Act pursuant to the second
sentence of Rule 144(b)(1)(i) under the Act, (iii) are
outstanding one year after the maturity date of the Securities, and (iv) are
no longer outstanding.


 


“Securities” shall have the
meaning set forth in the preamble.


 


“Selling Securityholder” shall
have the meaning set forth in Section 2(e) hereof.


 


“Shelf Registration Period” shall
have the meaning set forth in Section 2(c) hereof.


 


“Shelf Registration Statement”
shall mean a “shelf” registration statement of the Company pursuant to the
provisions of Section 2 hereof which covers some or all of the
Underlying Shares on an appropriate form under Rule 415 under the Act, or
any similar rule that 


 


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may be adopted by the Commission, amendments and
supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.


 


“Sub-REIT”
shall have the meaning set forth in the preamble hereto.


 


 “WKSI”
shall mean a Well-Known Seasoned Issuer, as set forth in Rule 405 under
the Act.


 


2.             Shelf
Registration.


 


(a)           The Company shall,
within 60 days of the Closing Date, file with the Commission a Shelf
Registration Statement (which may be, if the Company is then a WKSI, an
Automatic Shelf Registration Statement) or designate an existing shelf
registration statement filed with the Securities and Exchange Commission
providing for the registration of, and the sale on a continuous or delayed
basis by the Holders of, all of the Registrable Securities, from time to time
in accordance with the methods of distribution set forth therein, pursuant to Rule 415
under the Act or any similar rule that may be adopted by the Commission.


 


(b)           If the Shelf
Registration Statement is not an Automatic Shelf Registration Statement, the
Company shall use its commercially reasonable efforts to cause the Shelf
Registration Statement to become or be declared effective under the Act within
150 days of the Closing Date.


 


(c)           The Company shall use
its commercially reasonable efforts to keep the Shelf Registration Statement
continuously effective, supplemented and amended as required by the Act, in
order to permit the Prospectus forming part thereof to be usable by Holders for
a period (the “Shelf Registration
Period”) from the date the Shelf Registration Statement is declared
effective by the Commission (or becomes effective in the case of an Automatic
Shelf Registration Statement) until the earlier of (i) the date that all
of the Underlying Shares have been sold pursuant to the Shelf Registration
Statement, (ii) the date on which the Underlying Shares are freely
transferable persons who are not affiliates (as defined in Rule 144 under
the Act) of the Company without registration under the Act pursuant to the
second sentence of Rule 144(b)(1)(i) of the Act, (iii) one year
after the maturity date of the Securities, and (iv) the date on which
there are no Registrable Securities outstanding. The Company shall be deemed
not to have used its commercially reasonable efforts to keep the Shelf
Registration Statement effective during the Shelf Registration Period if it
voluntarily takes any action that would result in Holders of Registrable
Securities not being able to offer and sell such Registrable Securities at any
time during the Shelf Registration Period, unless such action is (x) required
by applicable law or otherwise undertaken by the Company in good faith and for
valid business reasons (not including avoidance of the Company’s obligations
hereunder), including the acquisition or divestiture of assets, or (y) permitted
by Section 3(h) hereof.


 


(d)           The Company shall cause
the Shelf Registration Statement and the related Prospectus and any amendment
or supplement thereto, as of the effective date of the Shelf Registration
Statement or such amendment or supplement: (i) to comply in all material
respects with the applicable requirements of the Act; and (ii) not to
contain any untrue statement of a 


 


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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 case of the Prospectus, in the light of the circumstances under
which they were made) not misleading.


 


(e)           Subject to applicable
law, the Company shall issue a press release through a reputable national
newswire service announcing the anticipated effective date of the Shelf
Registration Statement at least 10 Business Days prior to the anticipated
effective date thereof.  Each Holder of
Registrable Securities agrees that if it wishes to be named as a selling
securityholder (“Selling
Securityholder”) in the Prospectus and use the Prospectus for resales
of the Underlying Shares it must in connection with naming such Holder as a
Selling Securityholder in the Shelf Registration Statement deliver a Notice and
Questionnaire and such other information as the Company may reasonably request
in writing, if any, in connection with naming such Holder as a Selling
Securityholder in the Shelf Registration Statement to the Company at least 5
Business Days prior to the anticipated effective date of the Shelf Registration
Statement as announced in the press release. From and after the effective date
of the Shelf Registration Statement, the Company shall use reasonable best
efforts, as promptly as is practicable after the date a Notice and
Questionnaire is delivered, and in any event within 15 Business Days after such
date, (i) if required by applicable law, to file with the Commission a
post-effective amendment to the Shelf Registration Statement (provided, however, that
the Company shall not be required to file more than one post-effective
amendment in any 90-day period in accordance with this Section 2(e)(i))
or to prepare and, if permitted or required by applicable law, to file a
supplement to the related Prospectus or an amendment or supplement to any
document incorporated therein by reference or file any other required document
(including a report filed under the Exchange Act, if permitted by applicable
law) so that the Holder delivering such Notice and Questionnaire is named as a
Selling Securityholder in the Shelf Registration Statement and the related
Prospectus, and so that such Holder is permitted to deliver such Prospectus to
purchasers of the Registrable Securities in accordance with applicable law and,
if the Company shall file a post-effective amendment to the Shelf Registration
Statement, use commercially reasonable efforts to cause such post-effective
amendment to be declared effective under the Act as promptly as is practicable;
(ii) provide such Holder, upon request, copies of any documents filed
pursuant to Section 2(e)(i) hereof; and (iii) notify such
Holder as promptly as practicable after the effectiveness under the Act of any
post-effective amendment filed pursuant to Section 2(e)(i) hereof; provided, however, that if
such Notice and Questionnaire is delivered during a Deferral Period, the
Company shall so inform the Holder delivering such Notice and Questionnaire and
shall take the actions set forth in clauses (i), (ii) and
(iii) above upon expiration of the Deferral Period in accordance
with Section 3(h) hereof. 
The Company shall be under no obligation to name any Holder that is not
a Notice Holder as a Selling Securityholder in the Shelf Registration Statement
or related Prospectus; provided, however,
that any Holder that becomes a Notice Holder pursuant to the provisions of this
Section 2(e) (whether or not such Holder was a Notice Holder
at the effective date of the Shelf Registration Statement) shall be named as a
Selling Securityholder in the Shelf Registration Statement or related
Prospectus in accordance with the requirements of this Section 2(e).  Notwithstanding the foregoing, if (i) the
Notes are called for redemption and the then prevailing market price of the
Common Stock is above the Exchange Price or (ii) the Notes are exchanged
as provided for in the Indenture, then the Company shall use reasonable best
efforts to file the post-effective amendment or supplement within five Business
Days after the redemption date or the end of the exchange 


 


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period, as applicable, or if such Notice and Questionnaire
is delivered during a Deferral Period, upon expiration of the Deferral Period.


 


3.             Registration Procedures.  The following provisions shall apply in
connection with the Shelf Registration Statement.


 


(a)           The Company shall:


 


(i)            furnish to each of the
Initial Purchasers and to counsel for the Notice Holders, not less than four
Business Days prior to the initial filing thereof with the Commission, a copy
of the Shelf Registration Statement and shall use its commercially reasonable
efforts to reflect in each such document, when so filed with the Commission,
such comments as the Initial Purchasers reasonably propose; and


 


(ii)           include information
regarding the Notice Holders and the methods of distribution for the
Registrable Securities provided to the Company in Notices and Questionnaires as
necessary to permit such distribution by the methods specified therein; and


 


(iii)          promptly amend any
post-effective amendment, supplement or Exchange Act report filed with respect
to the Shelf Registration Statement upon being notified of inaccuracies in
Notice Holder information.


 


(b)           The Company shall
advise the Initial Purchasers and the Notice Holders that have provided in
writing to the Company a telephone or facsimile number and address for notices,
and confirm such advice in writing, if requested (which notice pursuant to clauses (ii) through
(v) hereof shall be accompanied by an instruction to suspend the
use of the Prospectus until the Company shall have remedied the basis for such
suspension):


 


(i)            when the Shelf
Registration Statement and any amendment thereto (other than an incorporated
document) has been filed with the Commission and when the Shelf Registration
Statement or any post-effective amendment thereto has become effective;


 


(ii)           of any request by the
Commission for any amendment or supplement to the Shelf Registration Statement
or the Prospectus or for additional information;


 


(iii)          of the issuance by the
Commission of any stop order suspending the effectiveness of the Shelf
Registration Statement or the institution or threatening of any proceeding for
that purpose;


 


(iv)          of the receipt by the
Company of any notification with respect to the suspension of the qualification
of the Underlying Shares included therein for sale in any jurisdiction or the
institution or threatening of any proceeding for such purpose; and


 


(v)           of the happening of any
event that requires any change in the Shelf Registration Statement or the
Prospectus so that, as of such date, they (A) do not contain any untrue
statement of a material fact, and (B) do not omit to state a material fact
required to be stated therein or necessary to make the statements therein (in
the case of the Prospectus, in the light of the circumstances under which they
were made) not misleading.


 


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(c)           The Company shall use
its commercially reasonable efforts to prevent the issuance of any order
suspending the effectiveness of the Shelf Registration Statement or the
qualification of the securities therein for sale in any jurisdiction and, if
issued, to obtain as soon as possible the withdrawal thereof.


 


(d)           Upon request, the
Company shall furnish to each Notice Holder, without charge, at least one copy
of the Shelf Registration Statement and any post-effective amendment thereto,
but not including material incorporated therein by reference, and, if a Notice
Holder so requests in writing, all exhibits thereto (including exhibits
incorporated by reference therein).


 


(e)           During the Shelf
Registration Period, the Company shall promptly deliver to each Notice Holder,
without charge, as many copies of the Prospectus (including the preliminary
Prospectus, if any) included in the Shelf Registration Statement and any
amendment or supplement thereto as any such person may reasonably request.  The Company consents to the use of the
Prospectus or any amendment or supplement thereto by each of the foregoing in
connection with the offering and sale of the Underlying Shares.


 


(f)            Prior to any offering
of the Underlying Shares pursuant to the Shelf Registration Statement, the
Company shall arrange for the qualification of the Underlying Shares for sale
under the laws of such U.S. jurisdictions as any Notice Holder shall reasonably
request and shall maintain such qualification in effect so long as required; provided, however, that in no event shall
the Company be obligated to qualify to do business in any jurisdiction where it
is not then so qualified or to take any action that would subject it to service
of process in suits, other than those arising out of the Initial Placement or
any offering pursuant to the Shelf Registration Statement, in any jurisdiction
where it is not then so subject.


 


(g)           Upon the occurrence of
any event contemplated by Section 3(b)(ii) through (v) above,
the Company shall promptly (or within the time period provided for by Section 3(i) hereof,
if applicable) prepare a post-effective amendment to the Shelf Registration
Statement or an amendment or supplement to the related Prospectus or file any
other required document so that, as thereafter delivered to subsequent
purchasers of the securities included therein, the Prospectus will not include
an untrue statement of a material fact or omit to state any 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.


 


(h)           Upon the occurrence or
existence of any pending corporate development, public filings with the
Commission (except in the case of a suspension period as the result of the
filing of a post-effective amendment solely to add additional Selling
Securityholders), or any other material event that, in the reasonable judgment
of the Company, makes it appropriate to suspend the availability of the Shelf Registration
Statement and the related Prospectus, the Company shall give notice (without
notice of the nature or details of such events) to the Notice Holders that the
availability of the Shelf Registration Statement is suspended and, upon receipt
of any such notice, each Notice Holder agrees (i) not to sell any
Registrable Securities pursuant to the Shelf Registration Statement until such
Notice Holder’s receipt of copies of the supplemented or amended Prospectus
provided for in Section 3(g) hereof, or until it is advised in
writing by the Company that the Prospectus may be used, and has received copies
of any additional or supplemental filings that are incorporated or deemed
incorporated by reference in 


 


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such Prospectus, and (ii) to hold such notice in
confidence.  Except in the case of a
suspension of the availability of the Shelf Registration Statement and the
related Prospectus solely as the result of the filing of a post-effective
amendment or supplement to the Prospectus to add additional Selling
Securityholders therein, the period during which the availability of the Shelf
Registration Statement and any Prospectus is suspended (the “Deferral Period”) shall not
exceed 120 days in any 360-day period;
provided, however, that, if the event triggering the Deferral Period
relates to a proposed or pending material business transaction, the disclosure
of which the board of directors of the Company determines in good faith would
be reasonably likely to impede the ability to consummate the transaction or
would otherwise be seriously detrimental to the Company and its subsidiaries
taken a whole, the Company may extend the Deferral Period from 120 days to
150 days in any 360-day period.


 


(i)            The Company shall
comply with all applicable rules and regulations of the Commission and
shall make generally available to its securityholders an earnings statement
satisfying the provisions of Section 11(a) of the Act as soon as
practicable after the effective date of the Shelf Registration Statement and in
any event no later than 45 days after the end of a 12 month period
(or 90 days, if such period is a fiscal year) beginning with the first
month of the Company’s first fiscal quarter commencing after the effective date
of the Shelf Registration Statement.


 


(j)            The Company may
require each Holder of Underlying Shares to be sold pursuant to the Shelf
Registration Statement to furnish to the Company such information regarding the
Holder and the distribution of such Underlying Shares as the Company may from
time to time reasonably require for inclusion in the Shelf Registration
Statement. The Company may exclude from the Shelf Registration Statement the
Underlying Shares of any Holder that unreasonably fails to furnish such information
within a reasonable time after receiving such request.


 


(k)           Subject to Section 6
hereof, the Company shall take appropriate actions in order to expedite or
facilitate the registration or the disposition of the Underlying Shares, provided, however, that
the Company shall not be required to take any actions to facilitate an
underwritten disposition of Underlying Shares.


 


4.             Registration Expenses.  The Company shall bear all expenses incurred
in connection with the performance of its obligations under Sections 2
and 3 hereof and shall reimburse the Holders for the reasonable fees and
disbursements of one firm or counsel to act as counsel for the Holders in
connection therewith.


 


5.             Indemnification
and Contribution.


 


(a)           The Company agrees to
indemnify and hold harmless each Holder of Underlying Shares covered by the
Shelf Registration Statement, each Initial Purchaser, and the directors,
officers and, employees of each such Holder or Initial Purchaser and each
person who controls any such Holder or Initial Purchaser within the meaning of
either the Act or the Exchange Act against any and all losses, claims, damages
or liabilities, joint or several, to which they or any of them may become
subject under the Act, the Exchange Act or other federal or state statutory law
or regulation, at common law or otherwise, insofar as such losses, claims, 


 


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damages or liabilities (or actions in respect thereof)
are caused by any untrue statement or alleged untrue statement of a material
fact contained in the Shelf Registration Statement as originally filed or in
any amendment thereof, or in any preliminary Prospectus or the Prospectus, or
in any amendment thereof or supplement thereto, or are caused by the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein (in the case of any
preliminary Prospectus or the Prospectus, in the light of the circumstances
under which they were made) not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by it in connection with investigating or defending any such loss,
claim, damage, liability or action;
provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability is caused by
or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of the party
claiming indemnification specifically for inclusion therein.


 


(b)           Each Holder of
securities covered by the Shelf Registration Statement (including each Initial
Purchaser that is a Holder, in such capacity) severally and not jointly agrees
to indemnify and hold harmless the Issuer, the Company and each of the
Guarantors, each of their respective members, directors, and officers who signs
the Shelf Registration Statement and each person who controls the Issuer, the
Company or the other Guarantors within the meaning of either the Act or the
Exchange Act, to the same extent as the foregoing indemnity from the Company to
each such Holder, but only with reference to written information relating to
such Holder furnished to the Company by or on behalf of such Holder
specifically for inclusion in the documents referred to in the foregoing
indemnity. This indemnity agreement shall be acknowledged by each Notice Holder
that is not an Initial Purchaser in such Notice Holder’s Notice and
Questionnaire and shall be in addition to any liability that any such Notice
Holder may otherwise have.


 


(c)           Promptly after receipt
by an indemnified party under this Section 5 or notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against the indemnifying party under this Section 5,
notify the indemnifying party in writing of the commencement thereof; but the
failure so to notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless
and to the extent it did not otherwise learn of such action and such failure
results in the forfeiture by the indemnifying party of substantial rights and
defenses; and (ii) will not, in any event, relieve the indemnifying party
from any obligations to any indemnified party other than the indemnification
obligation provided in paragraph (a) or (b) above.  The indemnifying party shall be entitled to
appoint counsel (including local counsel) of the indemnifying party’s choice at
the indemnifying party’s expense to represent the indemnified party in any
action for which indemnification is sought (in which case the indemnifying
party shall not thereafter be responsible for the fees and expenses of any
separate counsel, other than local counsel if not appointed by the indemnifying
party, retained by the indemnified party or parties except as set forth below); provided, however, that such counsel
shall be satisfactory to the indemnified party. 
Notwithstanding the indemnifying party’s election to appoint counsel
(including local counsel) to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including
local counsel), and the indemnifying party shall bear the reasonable fees,
costs and expenses of such separate counsel if (i) the use of counsel
chosen by 


 


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the indemnifying party to represent the indemnified
party would present such counsel with a conflict of interest; (ii) the
actual or potential defendants in, or targets of, any such action include both
the indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be legal defenses available to
it and/or other indemnified parties that are different from or additional to
those available to the indemnifying party; (iii) the indemnifying party
shall not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice of the
institution of such action; or (iv) the indemnifying party shall authorize
the indemnified party to employ separate counsel at the expense of the
indemnifying party.  An indemnifying
party will not, without the prior written consent of the indemnified parties
(which consent may not unreasonably be withheld), settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties
are actual or potential parties to such claim or action) unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action, suit or
proceeding.


 


(d)           In the event that the
indemnity provided in paragraph (a) or (b) of this
Section 5 is unavailable to or insufficient to hold harmless an indemnified
party for any reason, then each applicable indemnifying party shall have a
joint and several obligation to contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses reasonably incurred
in connection with investigating or defending loss, claim, liability, damage or
action) (collectively “Losses”)
to which such indemnified party may be subject in such proportion as is
appropriate to reflect the relative benefits received by such indemnifying
party, on the one hand, and such indemnified party, on the other hand, from the
Initial Placement and the Shelf Registration Statement which resulted in such
Losses; provided, however, that
in no event shall any Initial Purchaser be responsible, in the aggregate, for any
amount in excess of the purchase discount or commission applicable to the
Securities, as set forth in the Final Circular, nor shall any underwriter be
responsible for any amount in excess of the underwriting discount or commission
applicable to the securities purchased by such underwriter under the Shelf
Registration Statement which resulted in such Losses.  If the allocation provided by the immediately
preceding sentence is unavailable for any reason, the indemnifying party and
the indemnified party shall contribute in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of such
indemnifying party, on the one hand, and such indemnified party, on the other
hand, in connection with the statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations.  Benefits received by the Company and the
Issuer shall be deemed to be equal to the total net proceeds from the Initial
Placement (before deducting expenses) as set forth in the Final Circular.  Benefits received by the Initial Purchasers
shall be deemed to be equal to the total purchase discounts and commissions as
set forth on the cover page of the Final Circular, and benefits received
by any other Holders shall be deemed to be equal to the increase in value in
having their Underlying Shares registered under the Act.  Benefits received by any underwriter shall be
deemed to be equal to the total underwriting discounts and commissions, as set
forth on the cover page of the Prospectus forming a part of the Shelf
Registration Statement which resulted in such Losses.  Relative fault shall be determined by
reference to, among other things, whether any untrue or any alleged untrue statement
of a material fact or omission or alleged omission to state a material fact
relates to information provided by the indemnifying party, on the one hand, or
by the 


 


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indemnified party, on the other hand, the intent of
the parties and their relative knowledge, access to information and opportunity
to correct or prevent such untrue statement or omission.  The parties agree that it would not be just
and equitable if contribution were determined by pro rata allocation (even if
the Holders were treated as one entity for such purpose) or any other method of
allocation which does not take account of the equitable considerations referred
to above.  Notwithstanding the provisions
of this paragraph (d), no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.  For purposes of this Section 5,
each person who controls a Holder within the meaning of either the Act or the
Exchange Act and each director, officer and employee of such Holder shall have
the same rights to contribution as such Holder, and each person who controls
the Company or the Issuer within the meaning of either the Act or the Exchange
Act, each officer or member of the Company or the Issuer who shall have signed
the Shelf Registration Statement and each director or member of the Company or
the Issuer shall have the same rights to contribution as the Company and the
Issuer, subject in each case to the applicable terms and conditions of this paragraph (d).


 


(e)           The provisions of this Section 5
shall remain in full force and effect, regardless of any investigation made by
or on behalf of any Holder or the Company or the Issuer or any of the indemnified
persons referred to in this Section 5, and shall survive the sale
by a Holder of securities covered by the Shelf Registration Statement.


 


6.             Registration Defaults.  Each of the following events shall constitute
a Registration Default:


 


(a)           if the Shelf Registration
Statement (which may be, if the Company is then a WKSI, an Automatic Shelf
Registration Statement) is not filed with the Commission, or if an existing
shelf registration statement is not designated by the Company for the purpose
of registering the Securities, within 60 days following the Closing Date;


 


(b)           if the Shelf
Registration Statement is not declared effective by the Commission (or has not
become effective in the case of an Automatic Shelf Registration Statement)
within 150 days following the Closing Date;


 


(c)           if the Shelf
Registration Statement has been declared or becomes effective but ceases to be
effective or usable for the offer and sale of the Registrable Securities (other
than in connection with (A) a Deferral Period or (B) as a result of a
requirement to file a post-effective amendment or supplement to the
Prospectus to make changes to the information regarding Selling Securityholders
or the plan of distribution provided for therein at any time during the Shelf
Registration Period) and the Company does not cure the lapse of effectiveness
or usability within either (i) ten Business Days or (ii) if a Deferral Period is then in effect and subject to
the 15 Business Day filing requirement and the proviso regarding the filing of
post-effective amendments in Section 2(e) with respect to any Notice
and Questionnaire received during such period, ten Business Days following the
expiration of such Deferral Period or period permitted pursuant to Section 2(e);
or


 


11

















 


(d)           if the Company through
its omission fails to name as a Selling Securityholder any Holder that had
complied timely with its obligations hereunder in a manner to entitle such
Holder to be so named in (i) the Shelf Registration Statement at the time
it first became effective, or (ii) any Prospectus at the later of time of
filing thereof or the time the Shelf Registration Statement of which the
Prospectus forms a part becomes effective, or (iii) if permitted, an
Exchange Act filing or post-effective amendment; or


 


(e)           if the aggregate duration of Deferral Periods in any period exceeds the
number of days permitted in respect of such period pursuant to Section 3(h) hereof;


 


provided, however,
that a Registration Default will be deemed to end upon the day before the
earlier of (i) the day on which such Registration Default has been cured
or waived, and (ii) the date the Shelf Registration Statement is no longer
required to be kept effective for the Underlying Shares;  and provided,
further however, if a Registration Default occurs and is continuing
during a period of time that the Notes are exchangeable for Underlying Shares,
liquidated damages consisting solely of additional interest (“Liquidated Damages”) will be paid
to those entitled to interest payments on such dates semi-annually in arrears
on each interest payment date and will accrue at a rate per year equal to (i) 0.25%
of the outstanding principal amount of the Notes to and including the 90th day
following such registration default, and (ii) 0.50% of the outstanding
principal amount of the Notes from and after the 91st day following such
Registration Default. In no event will any additional interest on the Notes
exceed 0.50% per year.  No Liquidated
Damages will be paid on any Note after it has been exchanged for Underlying
Shares.  If a Note ceases to be
outstanding during any period for which additional interest is accruing, the
Liquidated Damages to be paid with respect to that Note will be prorated.


 


The
occurrence and continuance of a Registration Default shall not have any effect
on the Issuer’s rights with respect to the Securities under the Indenture,
including but not limited to its right to redeem the Securities pursuant to the
Indenture.


 


7.             No Inconsistent Agreements.  The Company has entered into, and agrees not
to enter into, any agreement with respect to its securities that is
inconsistent with the registration rights granted to the Holders herein.


 


8.             Rule 144A and Rule 144.  So long as any Registrable Securities remain outstanding,
the Company shall use its commercially reasonable efforts to file the reports
required to be filed by it under Rule 144A(d)(4) under the Act and
the Exchange Act in a timely manner and, if at any time the Company is not
required to file such reports, it will, upon the written request of any Holder
of Registrable Securities, make available other information so long as
necessary to permit sales of such Holder’s Registrable Securities pursuant to Rules 144
and 144A of the Act.  The Company covenants
that it will take such further action as any Holder of Registrable Securities
may reasonably request, all to the extent required from time to time to enable
such Holder to sell Registrable Securities without registration under the Act
within the limitation of the exemptions provided by Rules 144 and 144A
(including, without limitation, the requirements of Rule 144A(d)(4)).  Upon the written request of any Holder of
Registrable Securities, the Company shall deliver to such Holder a written
statement as to whether it has complied with such requirements.  Notwithstanding the foregoing, nothing in
this Section 8 shall 


 


12

















 


be deemed to require the Company or the Issuer to
register any of its securities pursuant to the Exchange Act.


 


9.             Listing. 
The Company shall use its commercially reasonable efforts to maintain
the approval of the Underlying Shares for listing on the New York Stock
Exchange.


 


10.           Amendments and Waivers.  The provisions of this Agreement may not be
amended, qualified, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless the Company has
obtained the written consent of the Majority Holders; provided, however, that, with respect to any matter that
directly or indirectly affects the rights of any Initial Purchaser hereunder,
the Company shall obtain the written consent of each such Initial Purchaser
against which such amendment, qualification, modification, supplement, waiver
or consent is to be effective; provided,
further, that no amendment, qualification, modification, supplement,
waiver or consent with respect to Section 6 hereof shall be
effective as against any Holder of Registrable Securities unless consented to
in writing by such Holder; and provided,
further, that the provisions of this Section 10 may not
be amended, qualified, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, unless the Company has
obtained the written consent of the Initial Purchasers and each Holder.


 


11.           Notices. 
All notices and other communications provided for or permitted hereunder
shall be made in writing by hand-delivery, first-class mail, telex, telecopier
or air courier guaranteeing overnight delivery:


 


(a)           if to a Holder, at the
most current address given by such holder to the Company in accordance with the
provisions of the Notice and Questionnaire;


 


(b)           if to the Initial
Purchasers, initially at the address or addresses set forth in the Purchase
Agreement; and


 


(c)           if to the Company,
initially at its address set forth in the Purchase Agreement.


 


All
such notices and communications shall be deemed to have been duly given when
received. The Initial Purchasers and the Company by notice to the other parties
may designate additional or different addresses for subsequent notices or
communications.


 


Notwithstanding
the foregoing, notices given to Holders holding Notes in book-entry form may be
given through the facilities of DTC or any successor depository.


 


12.           Remedies. 
Each Holder, in addition to being entitled to exercise all rights
provided to it herein or in the Purchase Agreement or granted by law, will be
entitled to specific performance of its rights under this Agreement.  The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by them of the provisions of this Agreement and hereby agree to waive in any
action for specific performance the defense that a remedy at law would be adequate.


 


13
















 


13.           Successors.  This Agreement shall inure to the benefit of
and be binding upon the parties hereto, their respective successors and
assigns, including, without the need for an express assignment or any consent
by the Company thereto, subsequent Holders of Underlying Shares, and the
indemnified persons referred to in Section 5 hereof.  The Company hereby agrees to extend the
benefits of this Agreement to any Holder of Underlying Shares, and any such
Holder may specifically enforce the provisions of this Agreement as if an
original party hereto.


 


14.           Counterparts.  This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.


 


15.           Headings.  The section headings used herein are for
convenience only and shall not affect the construction hereof.


 


16.           Applicable
Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of New
York.  The parties hereto each hereby waive
any right to trial by jury in any action, proceeding or counterclaim arising
out of or relating to this Agreement.


 


17.           Severability.  In the event that any one of more of the
provisions contained herein, or the application thereof in any circumstances,
is held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.


 


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  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NORTHSTAR REALTY FINANCE CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Albert Tylis

  
	
   

  	
   

  	
  Name:

  	
  Albert Tylis

  
	
   

  	
   

  	
  Title:

  	
  Executive Vice President & General

  Counsel

  



 

















 


Accepted and agreed to as

of the date first above written:


 


	
  WACHOVIA CAPITAL MARKETS,
  LLC

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Lear Beyer

  	
   

  
	
   

  	
  Name:

  	
  Lear Beyer

  	
   

  
	
   

  	
  Title:

  	
  Managing
  Director

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  JMP SECURITIES LLC

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Carter Mack

  	
   

  
	
   

  	
  Name:

  	
  Carter Mack

  	
   

  
	
   

  	
  Title:

  	
  Co-President and Director of Investment Banking