Document:

Exhibit 10.1

 

NORTHSTAR REAL ESTATE INCOME II, INC.

 

FORM OF ESCROW AGREEMENT

 

THIS ESCROW AGREEMENT (the “Agreement”) is made and entered into as of the             day of                                             , 2013, by and among NorthStar Real Estate Income II, Inc., a Maryland corporation (the “Company”), NorthStar Realty Securities, LLC (the “Dealer Manager”) and UMB Bank, N.A., National Association, as escrow agent (the “Escrow Agent”).

 

WHEREAS, the Company proposes to offer for sale (the “Offering”), on a continuing basis, up to $1,100,000,000 in shares of the Company’s common stock, par value $0.01 per share (the “Shares”), pursuant to the terms of the prospectus (the “Prospectus”) attached hereto as Exhibit A and contained in the registration statement on Form S-11, as amended, originally filed with the Securities and Exchange Commission on December 21, 2012 under the Securities Act of 1933;

 

WHEREAS, the Dealer Manager is a registered broker-dealer and member of the Financial Industry Regulatory Authority (“FINRA”) and has entered into an agreement with the Company and NorthStar Real Estate Income Operating Partnership II, LP to serve as the dealer manager for the Offering (the “DMA”) and will offer the Shares through other participating dealers that are registered under applicable federal and state securities laws and that are members of FINRA (the “Dealers”);

 

WHEREAS, it is anticipated that investors will subscribe for the Shares and will provide the Dealers with subscription payments for such Shares (the “Subscription Payments”), which subscriptions will be contingent upon (i) their respective acceptances by the Company and (ii) the Company’s acceptance of Subscription Payments aggregating $2,000,000 (the “Minimum Amount”) deposited into escrow;

 

WHEREAS, the Company, the Dealer Manager (with respect to any sales made by the Dealer Manager) or the Dealers desire to deposit funds contributed by the Subscribers (as defined below) with the Escrow Agent, to be held for the benefit of the Subscribers (as defined below) and the Company until such time as subscriptions for the Minimum Amount have been deposited into escrow or otherwise in accordance with the terms of this Agreement;

 

WHEREAS, the Escrow Agent has agreed to receive and hold in escrow all Subscription Payments until the earlier of (i) such time as subscriptions for the Minimum Amount have been received and accepted by the Company or (ii) the close of business on the date exactly one year after the original effective date of the Prospectus (the Company shall provide written notice of such date to the Escrow Agent) (the “Minimum Subscription Termination Date”), and to hold and distribute such Subscription Payments in accordance with the terms and conditions herein set forth; and

 

WHEREAS, the Escrow Agent is willing to accept appointment as the escrow agent for only the expressed duties, terms and conditions outlined herein.

 

NOW, THEREFORE, in consideration of the premises and agreements set forth herein, the parties hereto agree as follows:

 

1.                                 Appointment of Escrow Agent. The Company and the Dealer Manager hereby appoint the Escrow Agent to serve as escrow agent, and the Escrow Agent hereby accepts such appointment, each in accordance with the terms of this Agreement.

 

2.                                       Subscription Payments. An investor subscribing to purchase Shares (the “Subscriber”) will be instructed by the Dealer Manager (with respect to any sales made by the Dealer Manager) or the Dealers to remit the purchase price in the form of checks, drafts or money orders (the “Payment Instruments”) payable to the order of, or funds wired in favor of, “UMB Bank, N.A., as escrow agent for NorthStar Real Estate Income II, Inc.” or “UMB Bank, N.A., as escrow agent for NorthStar Income II” (the “Escrow Account”), or, after the Company meets the Minimum Amount, payable to the order of, or funds wired in favor of “NorthStar Real Estate Income II, Inc.” or “NorthStar Income II.” By noon of the next business day after receipt of any Payment Instruments, the Dealer Manager (with respect to any sales made by the Dealer Manager) or the Dealers shall remit, or shall cause its

 

 

authorized agent or representative to remit, to the Escrow Agent the Subscription Payments. Such Subscription Payments shall be retained in the Escrow Account by the Escrow Agent and invested as set forth in Section 7 and shall be deposited within one (1) business day of receipt.

 

In the event that any Payment Instruments deposited in the Escrow Account prove uncollectible after the funds represented thereby have been released by the Escrow Agent to the Company, then the Company shall promptly reimburse the Escrow Agent for any and all costs incurred for such, upon request, and the Escrow Agent shall deliver the uncollectible Payment Instrument to the Company. The Escrow Agent shall be under no duty or responsibility to enforce collection of any check delivered to it hereunder. Notwithstanding the foregoing, if any Subscriber exercises any right provided by law to rescind his or her subscription, the Escrow Agent shall, upon notice from the Company or the Dealer Manager, return to such Subscriber all Subscription Payments pertaining to such subscription, together with any earnings thereon during the period that such payments were held by the Escrow Agent under this Agreement.

 

3.                                       Subscriber Identity. By noon of the next business day after receipt of the Payment Instruments, the Dealer Manager shall furnish or shall cause to be furnished to the Escrow Agent each accepted Subscriber’s name, address, social security number or tax identification number, number of Shares purchased and purchase price remitted. All Subscription Payments so deposited shall be considered the property of the Subscribers and shall be held for the benefit of such Subscribers and shall not be: (i) commingled with the monies or become an asset of the Company, (ii) subject to any claim by any affiliate of the Company, any associate of the Company or any underwriter or (iii) subject to any liens or charges by the Company or the Escrow Agent, or judgments or creditors’ claims against the Company, until released to the Company as hereinafter provided. The Escrow Agent will not use the information provided to it by the Company for any purpose other than to fulfill its obligations as the Escrow Agent. The Escrow Agent agrees to treat all Subscriber information as confidential and to treat the Subscriber’s identity and personal information as protected under the Gramm Leach-Bliley Act and the privacy standards and requirements of any other applicable federal or state law, and its own internal privacy policies and procedures, each as may be amended from time to time.

 

4.                                       Disbursement of Subscription Payments and Escrow Income. On a weekly basis, and at the end of the third business day following the Minimum Subscription Termination Date (and more frequently, if requested by the Company), the Escrow Agent shall notify the Company of the amount of Subscription Payments received and collected (the “Collected Funds”) since the last report. If the Collected Funds are in an amount equal to or greater than the Minimum Amount at any time prior to the Minimum Subscription Termination Date, and the Company has delivered a written notice (the “Notice”) stating that the Company has received Collected Funds for the Minimum Amount and the Dealer Manager has confirmed that all of the conditions precedent to the release of the subscriptions from escrow pursuant to Section 6 of the DMA have been satisfied, then the Escrow Agent shall deliver the Collected Funds and all earnings thereon to the Company when and as directed by the Notice. After the Minimum Amount has been raised, the Escrow Account shall remain open for ten business days. At the close of business on the tenth business day following the date on which the Minimum Amount is raised, the Escrow Agent will close the Escrow Account. Until the Escrow Account closes, Subscription Payments may continue to be deposited into the Escrow Account; provided, however, that at the instruction of the Company to the Escrow Agent, Subscription Proceeds shall either be (i) transferred from the Escrow Account to the Company’s transfer agent for deposit into an account designated by the Company or (ii) deposited directly into a commercial account in the name of the Company with the Escrow Agent that has previously been established by the Company.

 

If the Collected Funds are not greater than or equal to the Minimum Amount on the Minimum Subscription Termination Date, the Escrow Agent shall (i) notify the Company and the Dealer Manager immediately following the Minimum Subscription Termination Date and (ii) within a reasonable time following the Minimum Subscription Termination Date, but in no event more than thirty (30) days after the Minimum Subscription Termination Date, promptly refund to each of the Subscribers all sums paid by the Subscribers, with a pro rata portion of any interest earned thereon.

 

In the event the Escrow Agent receives written notice from the Company or the Dealer Manager that the Company or the Dealer Manager has rejected a Subscriber’s subscription, the Escrow Agent shall pay to the applicable Subscriber, within ten (10) business days after receiving notice of the rejection, by first class United States Mail the Subscription Payment paid by the Subscriber for Shares and collected by the Escrow Agent, without interest and without deduction.

 

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5.                                      Duty and Liability of the Escrow Agent. The sole duty of the Escrow Agent, other than as herein specified, shall be to receive the Subscription Payments and hold them subject to release, in accordance herewith, and the Escrow Agent shall be under no duty to determine whether the Company or the Dealer Manager is complying with requirements of this Agreement or the Prospectus in tendering to the Escrow Agent said proceeds of the sale of the Shares. The Escrow Agent shall have the right to perform any of its duties hereunder through its agents, attorneys, custodians or nominees. The Escrow Agent may conclusively rely upon and shall be protected in acting upon any statement, certificate, notice, request, consent, order or other document reasonably believed by it to be genuine and to have been signed or presented by the proper party or parties. The Escrow Agent shall have no duty or liability to verify any such statement, certificate, notice, request, consent, order or other document, and its sole responsibility shall be to act only as expressly set forth in this Agreement. The Escrow Agent shall be under no obligation to institute or defend any action, suit or proceeding in connection with this Agreement unless first indemnified to its satisfaction. The Escrow Agent may consult and hire counsel in respect of any question arising under this Agreement, and the Escrow Agent shall not be liable for any action taken or omitted in good faith upon advice of such counsel.

 

The Escrow Agent is acting solely as escrow agent hereunder and owes no duties, covenants or obligations, fiduciary or otherwise, to any other person by reason of this Agreement, except as otherwise stated herein, and no implied duties, covenants or obligations, fiduciary or otherwise, shall be read into this Agreement against the Escrow Agent. In no event shall the Escrow Agent be liable, directly or indirectly, for any (i) damages, losses or expenses arising out of the services provided hereunder, other than damages, losses or expenses which have been finally adjudicated to have directly resulted from the Escrow Agent’s gross negligence or willful misconduct, or (ii) special, indirect or consequential losses or damages of any kind whatsoever (including without limitation lost profits), even if the Escrow Agent has been advised of the possibility of such losses or damages and regardless of the form of action. The parties agree that the Escrow Agent has no role in the preparation of the Prospectus or other Offering documents, has not reviewed any such documents and makes no representations or warranties with respect to the information contained therein or omitted therefrom. The Escrow Agent agrees that it may be named in the Prospectus and Offering documents, solely to the extent necessary to describe this Agreement and the duties of the Escrow Agent herein. The Escrow Agent shall have no obligation, duty or liability with respect to compliance with any federal or state securities, disclosure or tax laws concerning the Offering documents or the issuance, offering or sale of the Shares. The Escrow Agent shall have no duty or obligation to monitor the application and use of the Subscription Payments once transferred to the Company, that being the sole obligation and responsibility of the Company. No provision of this Agreement shall require the Escrow Agent to risk or advance its own funds or otherwise incur any financial liability in the performance of its duties or the exercise of its rights hereunder.

 

6.                                      Escrow Agent Fee. The Escrow Agent shall be entitled to compensation for its services, as stated in the fee schedule attached hereto as Exhibit B, which compensation shall be paid by the Company. Subject to the provisions of Section 10, the fee agreed upon for the services rendered hereunder in Exhibit B is intended as full compensation for the Escrow Agent’s services as contemplated by this Agreement. Notwithstanding anything contained herein to the contrary, in no event shall any fee, reimbursement for costs and expenses, indemnification for damages incurred by the Escrow Agent or monies whatsoever be paid out of or chargeable to the income of assets of the Escrow Account. The Company’s obligations under this Section 6 shall survive the resignation or removal of the Escrow Agent and the assignment or termination of this Agreement.

 

7.                                           Investment of Subscription Payments. The Escrow Agent shall invest all Collected Funds in a UMB Bank, N.A. Money Market Deposit Account, titled UMB Money Market Special, unless otherwise instructed in writing by the Company.

 

Any interest received by the Escrow Agent with respect to the Collected Funds, including reinvested interest, shall become part of the proceeds of the Escrow Account (the “Escrow Income”), and shall be disbursed to the Company if Collected Funds, including interest earnings, total the Minimum Amount. Any loss or expense incurred as a result of an investment or sale of investment will be borne by the Escrow Account.

 

The parties recognize and agree that the Escrow Agent will not provide supervision, recommendations or advice relating to either the investment of moneys held in the Escrow Account or the purchase, sale, retention or other disposition of any permitted investment.

 

The Escrow Agent is hereby authorized to execute purchases and sales of permitted investments

 

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through the facilities of its own trading or capital markets operations or those of any affiliated entity. The Escrow Agent shall send statements to each of the parties hereto on a monthly basis reflecting activity in  the Escrow Account for the preceding month. No statement need be rendered for the Escrow Account if no activity occurred for such month.

 

The Company and the Dealer Manager acknowledge and agree that the delivery of the escrowed property is subject to the sale and final settlement of permitted investments. Proceeds of a sale of permitted investments will be delivered on the business day on which the appropriate instructions are delivered to the Escrow Agent if received prior to the deadline for same day sale of such permitted investments. If such instructions are received after the applicable deadline, proceeds will be delivered on the next succeeding business day.

 

8.                                           Tax Reporting. As of each calendar year-end, the Escrow Agent shall report to the Internal Revenue Service (the “IRS”) and to the Company or Subscribers all income earned from the investment of any sum held in the Escrow Account against the Company or each Subscriber, as and to the extent required under the provisions of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder (the “Code”). For the avoidance of doubt, all interest or other taxable income earned on the Collected Funds in any tax year shall be taxable to the person or entity receiving the interest or other taxable income.

 

On or before the date hereof, the Company shall provide the Escrow Agent with a certified tax identification number by furnishing appropriate IRS form W-9 or W-8 and other forms and documents that the Escrow Agent may reasonably request, including without limitation a form W-9 or W-8 for each Subscriber. The parties hereto understand that if such tax reporting documentation is not so certified to the Escrow Agent, the Escrow Agent may be required by the Internal Revenue Code of 1986, as amended, to withhold a portion of any interest or other income earned on the Collected Funds pursuant to this Agreement for the Escrow Agent is not required to prepare and file any income or other tax returns applicable to the Escrow Account with the IRS or required state and local departments of revenue for years income is earned in any particular tax year. Any taxes payable on income earned from the investment of any sums held in the Escrow Account shall be paid by the Company or each Subscriber in the year in which disbursed and to the extent required under the provisions of the Code.

 

To the extent that the Escrow Agent becomes liable for the payment of any taxes in respect of income derived from the investment of funds held or payments made hereunder, the Escrow Agent shall satisfy such liability to the extent possible from the Collected Funds. The Company agrees to indemnify and hold the Escrow Agent harmless from and against any taxes, additions for late payment, interest, penalties and other expenses that may be assessed against the Escrow Agent on or with respect to any payment or other activities under this Agreement unless any such tax, addition for late payment, interest, penalties and other expenses shall arise out of or be caused by the gross negligence or willful misconduct of the Escrow Agent. The terms of this paragraph shall survive the assignment or termination of this Agreement and the resignation or removal of the Escrow Agent.

 

9.                                 Notices. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been duly given (i) on the date of service if served personally on the party to whom notice is to be given, (ii) on the day of transmission if sent by electronic transmission, and confirmation of receipt is obtained promptly after completion of transmission, (iii) on the day of transmission if sent by facsimile transmission to the facsimile number given below, and written confirmation of receipt is obtained promptly after completion of transmission, (iv) on the day after delivery to the United Parcel Service or similar overnight courier or the Express Mail service maintained by the United States Postal Service and sent via overnight delivery or (v) on the fifth day after mailing, if mailed to the party to whom notice is to be given, by first class mail, registered or certified, postage prepaid, and properly addressed, return receipt requested, to the party as follows:

 

If to Company:

 

NorthStar Real Estate Income II, Inc.

399 Park Avenue, 18th Floor

New York, New York 10022

Attention: Daniel R. Gilbert, President and Chief Investment Officer

Fax: (212) 547-2700

 

If to the Dealer Manager:

 

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NorthStar Realty Securities, LLC

5299 DTC Blvd., Ste. 900

Greenwood Village, CO 80111

Attention: W. Timothy Toole

Fax: (303) 648-5142

 

If to the Escrow Agent:

 

UMB Bank, N.A.

1010 Grand Blvd, 4th Floor

Corporate Trust & Escrow Services

Attention: Lara L. Stevens

Kansas City, MO 64106

Email: lara.stevens@umb.com

Fax: (816) 860-3029

 

Checks should be delivered to the following address:

 

UMB Bank, N.A.

1010 Grand Blvd, 4th Floor

Corporate Trust & Escrow Services

Attention: Lara L. Stevens

Kansas City, MO 64106

Acct Name: UMB Escrow Agent for NorthStar Real Estate Income II, Inc.

 

Wires to the Escrow Agent should be directed to the following:

 

UMB Bank, N.A.

ABA: [        ]

A/C #: [        ]

Trust Clearing Acct

Ref: NorthStar Real Estate Income II, Inc.

Attention: Lara L. Stevens

 

Any party may change its address for purposes of this paragraph by giving the other party written notice of the new address in the manner set forth above.

 

10.                          Indemnification of the Escrow Agent. The Company and the Dealer Manager hereby jointly and severally indemnify, defend and hold the Escrow Agent (and its officers, directors, employees and agents) harmless from and against any and all loss, claim, liability, cost, damage and expense, including, without limitation, reasonable counsel fees and expenses, which the Escrow Agent may suffer or incur by reason of any action, claim or proceeding brought against the Escrow Agent arising out of or relating in any way to this Agreement or any transaction to which this Agreement relates unless such action, claim or proceeding is the result of the willful misconduct or gross negligence of the Escrow Agent. The provisions of this section shall survive the termination of this Agreement and the resignation or removal of the Escrow Agent.

 

11.                          Attachment of Escrow Account; Compliance with Legal Orders. In the event that any escrow property shall be attached, garnished or levied upon by any court order, or the delivery thereof shall be stayed or enjoined by an order of a court, or any order, judgment or decree shall be made or entered by any court order affecting the property deposited under this Agreement, the Escrow Agent is hereby expressly authorized, in its sole discretion, to obey and comply with all writs, orders or decrees so entered or issued, which it is advised by legal counsel of its own choosing is binding upon it, whether with or without jurisdiction, and in the event that the Escrow Agent obeys or complies with any such writ order or decree it shall not be liable to any of the parties hereto or to any other person, firm or corporation, by reason of such compliance notwithstanding such writ, order or decree being subsequently reversed, modified, annulled, set aside or vacated.

 

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12.                          Successors and Assigns.

 

(i)                                     Except as otherwise provided in this Agreement, no party hereto shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other parties hereto and any such attempted assignment without such prior written consent shall be void and of no force and effect. This Agreement shall inure to the benefit of and shall be binding upon the heirs, executors, administrators, successors and permitted assigns of the parties hereto.

 

(ii)                                  Notwithstanding the above, any corporation or association into which the Escrow Agent may be converted or merged, or with which it may be consolidated, or to which it may sell or transfer all or substantially all of its corporate trust business and assets as a whole or substantially as a whole, or any corporation or association resulting from any such conversion, sale, merger, consolidation or transfer to which the Escrow Agent is a party, shall be and become the successor Escrow Agent under this Agreement and shall have and succeed to the rights, powers, duties, immunities and privileges as its predecessor, without the execution or filing of any instrument or paper or the performance of any further act.

 

13.                          Term. This Agreement shall terminate within thirty (30) days of receipt of written notice of termination by the Company and the Dealer Manager to the Escrow Agent. In the event of the release of all Subscriber funds and all accrued interest in accordance with Section 7 of this Agreement, this Agreement shall terminate and the Escrow Agent shall be relieved of all responsibilities in connection with the Escrow Account, except claims which are occasioned by its gross negligence or willful misconduct.

 

14.                          Governing Law; Jurisdiction. This Agreement shall be construed, performed, and enforced in accordance with, and governed by, the internal laws of the State of New York, without giving effect to the principles of conflicts of laws thereof. Each party hereby consents to the personal jurisdiction and venue of any court of competent jurisdiction in the State of New York.

 

15.                          Severability. In the event that any part of this Agreement is declared by any court or other judicial or administrative body to be null, void or unenforceable, said provision shall survive to the extent it is not so declared, and all of the other provisions of this Agreement shall remain in full force and effect.

 

16.                               Amendments; Waivers. This Agreement may be amended or modified, and any of the terms, covenants, representations, warranties or conditions hereof may be waived, only by a written instrument executed by the parties hereto or, in the case of a waiver, by the party waiving compliance. Any waiver by any party of any condition, or of the breach of any provision, term, covenant, representation or warranty contained in this Agreement, in any one or more instances, shall not be deemed to be nor construed as further or continuing waiver of any such condition, or of the breach of any other provision, term, covenant, representation or warranty of this Agreement.

 

17.                               Entire Agreement; Counterparts. This Agreement contains the entire understanding among the parties hereto with respect to the escrow contemplated hereby and supersedes and replaces all prior and contemporaneous agreements and understandings, oral or written, with regard to such escrow. This Agreement, and any amendments hereto, may be executed by the parties hereto in two or more counterparts, each of which shall be deemed an original.

 

18.                               Section Headings. The section headings in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

 

19.                               Disputes. In the event of a disagreement among any of the parties to this Agreement, or among them or any other person resulting in adverse claims and demands being made in connection with or from any property in the Escrow Account, the Escrow Agent shall be entitled to refuse to comply with any such claims or demands as long as such disagreement may continue, and in so refusing, shall make no delivery or other disposition of any property then held by it in the Escrow Account under this Agreement, and in so doing, the Escrow Agent shall be entitled to continue to refrain from acting until (i) the right of adverse claimants shall have been finally settled by binding arbitration or finally adjudicated in a court assuming and having jurisdiction of the property involved herein or affected hereby or (ii) all differences shall have been adjusted by agreement and the Escrow Agent shall have been notified in writing of such agreement signed by the parties hereto.

 

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In the event of such dispute, the Escrow Agent shall be entitled, in its discretion and judgment, to tender into the registry or custody of any court of competent jurisdiction all money or property in its hands under this Agreement, together with such legal pleadings as the Escrow Agent deems appropriate, and thereupon be discharged from all further duties and liabilities under this Agreement. In the event of any uncertainty as to its duties hereunder, the Escrow Agent may refuse to act under the provisions of this Agreement pending order of a court of competent jurisdiction and the Escrow Agent shall have no liability to the Company, the Dealer Manager or to any other person as a result of such action. Any such legal action may be brought in such court as the Escrow Agent shall determine to have jurisdiction thereof. The filing of any such legal proceedings shall not deprive the Escrow Agent of its compensation earned prior to such filing. All costs, expenses and reasonable attorneys’ fees the Escrow Agent incurs in connection with such proceeding shall be paid by the Company.

 

20.                               Limited Purpose. The Company and the Dealer Manager hereby acknowledge that the Escrow Agent is serving as the escrow agent only for the limited purposes herein set forth, and hereby agree that they will not represent or imply that the Escrow Agent, by serving as the Escrow Agent hereunder or otherwise, has investigated the desirability or advisability of investment in the Company or have approved, endorsed or passed upon the merits of the Shares, nor shall they use its name in any manner whatsoever in connection with the offer or sale of the Shares other than by acknowledgment that the Escrow Agent has agreed to serve as the Escrow Agent for the limited purposes set forth herein.

 

21.                               Resignation. The Escrow Agent may resign upon thirty (30) days’ advance written notice to the Company and the Dealer Manager. Such resignation shall become effective on the date specified in such notice, which shall be not earlier than thirty (30) days after such written notice has been given. In the event of any such resignation, a successor escrow agent, which shall be a bank or trust company organized under the laws of the United States of America, shall be appointed by the mutual agreement of the Company and the Dealer Manager. Any such successor escrow agent shall deliver to the Company and the Dealer Manager a written instrument accepting such appointment, and thereupon shall succeed to all the rights and duties of the Escrow Agent hereunder and shall be entitled to receive the Collected Funds from the Escrow Agent. The Escrow Agent shall promptly pay the Subscription Payments in the Escrow Account, including interest thereon, to the successor escrow agent. If a successor escrow agent is not appointed by the Company or the Dealer Manager within the thirty (30) day period following such notice, the Escrow Agent may petition any court of competent jurisdiction to name a successor escrow agent. All costs, expenses and reasonable attorneys’ fees the Escrow Agent incurs in connection with such proceeding shall be paid by the Company.

 

22.                               Removal. The Escrow Agent may be jointly removed by the Company and the Dealer Manager at any time, by written notice executed by both of them (which may be executed in counterparts) provided to the Escrow Agent, which instrument shall become effective on the date specified in such written notice. The removal of the Escrow Agent shall not deprive the Escrow Agent of its compensation earned prior to such removal. In the event of any such removal, a successor escrow agent, which shall be a bank or trust company organized under the laws of the United States of America, shall be appointed by the mutual agreement of the Company and the Dealer Manager. Any such successor escrow agent shall deliver to the Company and the Dealer Manager a written instrument accepting such appointment, and thereupon shall succeed to all the rights and duties of the Escrow Agent hereunder and shall be entitled to receive the Collected Funds from the Escrow Agent. The Escrow Agent shall promptly pay the Subscription Payments in the Escrow Account, including interest thereon, to the successor escrow agent. If a successor escrow agent is not appointed by the Company or the Dealer Manager within the thirty (30) day period following such notice, the Escrow Agent may petition any court of competent jurisdiction to name a successor escrow agent. All costs, expenses and reasonable attorneys’ fees the Escrow Agent incurs in connection with such proceeding shall be paid by the Company.

 

23.                               Maintenance of Records. The Escrow Agent shall maintain accurate records of all transactions hereunder.  Promptly after the termination of this Agreement, and as may from time to time be reasonably requested by the Company before such termination, the Escrow Agent shall provide the Company with a copy of such records, certified by the Escrow Agent to be a complete and accurate account of all transactions hereunder. The authorized representatives of the Company and the Dealer Manager shall also have access to the Escrow Agent’s books and records to the extent relating to its duties hereunder, during normal business hours upon reasonable notice to the Escrow Agent, and at the requesting party’s expense.

 

24.                               Force Majeure. No party to this Agreement shall be liable to any other party for losses arising out of, or the inability to perform its obligations under the terms of this Agreement, due to acts of God, which

 

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shall include, but shall not be limited to, fire, floods, strikes, mechanical failure, war, riot, nuclear accident, earthquake, terrorist attack, computer piracy, cyber-terrorism or other acts beyond the control of the parties hereto.

 

25.                               Representatives. The applicable persons designated on Exhibit C hereto have been duly appointed to act as its representatives hereunder and have full power and authority to execute and deliver any written directions, to amend, modify or waive any provision of this Agreement and to take any and all other actions on behalf of the Company or the Dealer Manager, as applicable, under this Agreement, all without further consent or direction from, or notice to, it or any other party.

 

26.                               USA PATRIOT Act. The Company and the Dealer Manager acknowledge that a portion of the identifying information set forth on Exhibit C is being requested by the Escrow Agent in connection with the USA Patriot Act, Pub. L. 107-56 (the “Act”), and the Company and the Dealer Manager agree to provide any additional information requested by the Escrow Agent in connection with the Act or any similar legislation or regulation to which Escrow Agent is subject, in a timely manner.

 

27.                               Illegal Activities. The Escrow Agent shall have the rights in its sole discretion to not accept appointment as escrow agent and reject funds and collateral from any party in the event that Escrow Agent has reason to believe that such funds or collateral violate applicable banking practices or applicable laws or regulations, including but not limited to the Patriot Act. In the event of suspicious or illegal activity and pursuant to all applicable laws, regulations and practices, the other parties to this Agreement will assist Escrow Agent and comply with any reviews, investigations and examinations directed against the deposited funds.

 

[Remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to be executed the day and year first set forth above.

 

 

	
 
    	
NORTHSTAR REAL   ESTATE INCOME II, INC., the Company
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name: Daniel R. Gilbert
    
	
 
    	
Title: President and Chief   Investment Officer
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
NORTHSTAR   REALTY SECURITIES, LLC, as Dealer Manager
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name: W. Timothy Toole Title:   President
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
UMB BANK,   N.A., as Escrow Agent
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name: Lara L. Stevens Title:   Vice President
    

 

 

Exhibit A

Prospectus

(See Attached)

 

A-1

 

Exhibit B

 

CORPORATE TRUST SERVICES

 

SCHEDULE OF FEES
 Subscription ESCROW AGENT
 For
 NorthStar Real Estate Income II, Inc.

 

UMB Bank, N.A. Corporate Trust & Escrow Services Fee Schedule for Subscription Escrow Agent for the NorthStar Real Estate Income II, Inc.

 

	
Acceptance Fee
    	
 
    	
 
    
	
Review   escrow agreement, establish account
    	
 
    	
$1,500
    
	
DST   Engagement (establish daily BAI)
    	
 
    	
$ 250
    

 

	
Annual Fees
    	
 
    	
 
    
	
Escrow   Agent
    	
 
    	
$2,000
    
	
Outgoing   Wire Transfer
    	
 
    	
$15 each
    
	
Daily   BAI File to DST
    	
 
    	
$2.50 per Bus Day
    
	
Wire   Ripping to DST
    	
 
    	
$10 per Bus Day
    
	
Web   Exchange Online Access (if applicable)
    	
 
    	
$50 per month
    
	
Overnight   Delivery/Mailings (if applicable)
    	
 
    	
$16.50 each
    
	
IRS   Tax Reporting (if applicable)
    	
 
    	
$10 per 1099
    

 

Fees specified are for the regular, routine services contemplated by the Escrow Agreement, and any additional or extraordinary services, including, but not limited to disbursements involving a dispute or arbitration, or administration while a dispute, controversy or adverse claim is in existence, will be charged based upon time required at the then standard hourly rate. In addition to the specified fees, all expenses related to the administration of the Escrow Agreement (other than normal overhead expenses of the regular staff) such as, but not limited to, travel, postage, shipping, courier, telephone, facsimile, supplies, legal fees, accounting fees, etc., will be reimbursable.

 

Acceptance fee will be payable at the initiation of the escrow.  Annual fees will be billed quarterly in arrears. Other fees and expenses will be billed as incurred.

 

B-1

 

Exhibit C

 

Company Representative: The following individual(s) is hereby appointed as representative of the Company under the Escrow Agreement:

 

 

	
Name:   Debra A. Hess
    	
Specimen Signature:
    	
 
    
	
 
    	
 
    	
 
    
	
Name:   Keith Feldman
    	
Specimen Signature:
    	
 
    
	
 
    	
 
    	
 
    
	
Name:   Matt Brandwein
    	
Specimen Signature:
    	
 
    

 

Dealer Manager Representative: The following individual(s) is hereby appointed as representative of the Dealer Manager under the Escrow Agreement:

 

	
Name:   W. Timothy Toole
    	
Specimen Signature:
    	
 
    

 

C-1Exhibit 10.2

 

FORM OF ADVISORY AGREEMENT

 

AMONG

 

NORTHSTAR REAL ESTATE INCOME II, INC.,

 

NORTHSTAR REAL ESTATE INCOME OPERATING PARTNERSHIP II, LP,

 

NS REAL ESTATE INCOME ADVISOR II, LLC

 

AND

 

NORTHSTAR REALTY FINANCE CORP.

 

 

TABLE OF CONTENTS

 

	
ARTICLE 1 - DEFINITIONS
    	
1
    
	
 
    	
 
    
	
ARTICLE 2 - APPOINTMENT
    	
6
    
	
 
    	
 
    
	
ARTICLE 3 - DUTIES OF THE ADVISOR
    	
6
    
	
 
    	
 
    
	
3.01 Offering Services
    	
6
    
	
3.02 Acquisition Services
    	
7
    
	
3.03 Asset Management Services
    	
7
    
	
3.04 Accounting and Other   Administrative Services
    	
8
    
	
3.05 Stockholder Services
    	
9
    
	
3.06 Financing Services
    	
9
    
	
3.07 Disposition Services
    	
10
    
	
 
    	
 
    
	
ARTICLE 4 - AUTHORITY OF ADVISOR
    	
10
    
	
 
    	
 
    
	
4.01 Powers of the Advisor
    	
10
    
	
4.02 Approval by the Board
    	
10
    
	
4.03 Modification or Revocation   of Authority of Advisor
    	
10
    
	
 
    	
 
    
	
ARTICLE 5 - BANK ACCOUNTS
    	
10
    
	
 
    	
 
    
	
ARTICLE 6 - RECORDS AND ACCESS
    	
11
    
	
 
    	
 
    
	
ARTICLE 7 - LIMITATION ON ACTIVITIES
    	
11
    
	
 
    	
 
    
	
ARTICLE 8 - FEES
    	
11
    
	
 
    	
 
    
	
8.01 Acquisition Fees
    	
11
    
	
8.02 Asset Management Fees
    	
12
    
	
8.03 Disposition Fees
    	
12
    
	
8.04 Operating Partnership   Interests
    	
12
    
	
8.05 Changes to Fee Structure
    	
12
    
	
 
    	
 
    
	
ARTICLE 9 - EXPENSES
    	
13
    
	
 
    	
 
    
	
9.01 General
    	
13
    
	
9.02 Timing of and Additional   Limitations on Reimbursements
    	
14
    
	
 
    	
 
    
	
ARTICLE 10 - OTHER SERVICES
    	
15
    
	
 
    	
 
    
	
ARTICLE 11 - VOTING AGREEMENT
    	
15
    
	
 
    	
 
    
	
ARTICLE 12 - RELATIONSHIP OF ADVISOR AND COMPANY; OTHER   ACTIVITIES OF THE ADVISOR
    	
15
    
	
 
    	
 
    
	
12.01 Relationship
    	
15
    
	
12.02 Time Commitment
    	
15
    
	
12.03 Investment Opportunities   and Allocation
    	
15
    
	
 
    	
 
    
	
ARTICLE 13 —THE NORTHSTAR NAME
    	
16
    

 

i

 

	
ARTICLE 14 - TERM AND TERMINATION OF THE AGREEMENT
    	
16
    
	
 
    	
 
    
	
14.01 Term
    	
16
    
	
14.02 Termination by the Parties
    	
16
    
	
14.03 Payments on Termination   and Survival of Certain Rights and Obligations
    	
17
    
	
 
    	
 
    
	
ARTICLE 15 - ASSIGNMENT
    	
17
    
	
 
    	
 
    
	
ARTICLE 16 - INDEMNIFICATION AND LIMITATION OF   LIABILITY
    	
17
    
	
 
    	
 
    
	
16.01 Indemnification
    	
17
    
	
16.02 Limitation on   Indemnification
    	
18
    
	
16.03 Limitation on Payment of   Expenses
    	
18
    
	
16.04 Indemnification by Advisor
    	
18
    
	
 
    	
 
    
	
ARTICLE 17 - NON-SOLICITATION
    	
19
    
	
 
    	
 
    
	
ARTICLE 18 - MISCELLANEOUS
    	
19
    
	
 
    	
 
    
	
18.01 Notices
    	
19
    
	
18.02 Modification
    	
19
    
	
18.03 Severability
    	
19
    
	
18.04 Construction
    	
20
    
	
18.05 Entire Agreement
    	
20
    
	
18.06 Waiver
    	
20
    
	
18.07 Gender
    	
20
    
	
18.08 Titles Not to Affect   Interpretation
    	
20
    
	
18.09 Counterparts
    	
20
    

 

ii

 

FORM OF ADVISORY AGREEMENT

 

THIS ADVISORY AGREEMENT (this “Agreement”), dated as of                   , 201    , and effective as of the date that the Registration Statement (as defined below) is declared effective by the Securities and Exchange Commission (the “Effective Date”), is entered into by and among NorthStar Real Estate Income II, Inc., a Maryland corporation (the “Company”), NorthStar Real Estate Income Operating Partnership II, LP, a Delaware limited partnership (the “Operating Partnership”), NS Real Estate Income Advisor II, LLC, a Delaware limited liability company (the “Advisor”) and, solely in connection with the obligations set forth in Section 12.03 and Article 13, NorthStar Realty Finance Corp., a Maryland corporation (“NorthStar”).  Capitalized terms used herein shall have the meanings ascribed to them in Section 1 below.

 

W I T N E S S E T H

 

WHEREAS, the Company intends to qualify as a REIT, and to invest its funds in investments permitted by the terms of Sections 856 through 860 of the Code;

 

WHEREAS, the Company is the general partner of the Operating Partnership and intends to conduct all of its business and make all or substantially all Investments through the Operating Partnership;

 

WHEREAS, the Company and the Operating Partnership desire to avail themselves of the knowledge, experience, sources of information, advice, assistance and certain facilities available to the Advisor and to have the Advisor undertake the duties and responsibilities set forth herein, on behalf of, and subject to the supervision of, the Board of the Company, all as provided herein; and

 

WHEREAS, the Advisor is willing to undertake to render such services, subject to the supervision of the Board, on the terms and conditions hereinafter set forth.

 

NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements contained herein, the parties hereto agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

As used in this Agreement, the following terms shall have the meanings specified below:

 

Acquisition Expenses means any and all expenses, excluding Acquisition Fees incurred by the Company, the Operating Partnership, the Advisor or any of their Affiliates in connection with the selection, evaluation, acquisition, origination or development of any Investments, whether or not acquired or originated, as applicable, including, without limitation, legal fees and expenses, travel and communications expenses, costs of appraisals, nonrefundable option payments on properties or other investments not acquired, accounting fees and expenses, title insurance premiums and the costs of performing due diligence.

 

Acquisition Fees means the fee payable to the Advisor pursuant to Section 8.01 plus all other fees and commissions, excluding Acquisition Expenses, paid by any Person to any Person in connection with making or investing in any Investments or the purchase, development or construction of any Property by the Company. Included in the computation of such fees or commissions shall be any real estate commission, selection fee, development fee, construction fee, nonrecurring management fee, loan fees or points or any fee of a similar nature, however designated. Excluded shall be development fees and construction fees paid to Persons not Affiliated with the Advisor in connection with the actual development and construction of a Property.

 

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Advisor means: (i) NS Real Estate Income Advisor II, LLC, a Delaware limited liability company; or (ii) any successor advisor to the Company.

 

Affiliate or Affiliated means with respect to any Person: (i) any Person directly or indirectly controlling, controlled by, or under common control with such other Person; (ii) any Person directly or indirectly owning, controlling, or holding with the power to vote 10.0% or more of the outstanding voting securities of such other Person; (iii) any legal entity for which such Person acts as an executive officer, director, trustee, or general partner; (iv) any Person 10.0% or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held, with power to vote, by such other Person; and (v) any executive officer, director, trustee, or general partner of such other Person. An entity shall not be deemed to control or be under common control with a program sponsored by the sponsor of the Company unless (A) the entity owns 10.0% or more of the voting equity interests of such program or (B) a majority of the Board (or equivalent governing body) of such program is composed of Affiliates of the entity.

 

Asset Management Fee means the fees payable to the Advisor pursuant to Section 8.02.

 

Average Invested Assets means, for a specified period, the average of the aggregate book value of the assets of the Company invested, directly or indirectly, in Investments before reserves for depreciation or bad debts or other similar non-cash reserves, computed by taking the average of such values at the end of each month during such period.

 

Board  means the board of directors of the Company, as of any particular time.

 

Bylaws means the bylaws of the Company, as amended from time to time.

 

Cause  means with respect to the termination of this Agreement, fraud, criminal conduct, misconduct, negligence or breach of fiduciary duty by the Advisor, or a material breach of this Agreement by the Advisor.

 

Charter means the articles of incorporation of the Company, as amended from time to time.

 

Code means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. Reference to any provision of the Code shall mean such provision as in effect from time to time, as the same may be amended, and any successor provision thereto, as interpreted by any applicable regulations as in effect from time to time.

 

Company means NorthStar Real Estate Income II, Inc., a corporation organized under the laws of the State of Maryland.

 

Contract Sales Price means the total consideration received by the Company for the sale of an Investment.

 

Cost of Investments means the sum of: (i) with respect to the acquisition or origination of a Property, Loan or other permitted investment to be wholly owned, directly or indirectly, by the Company, the amount actually paid or allocated to fund the acquisition, origination, development, construction or improvement of the Property, Loan or other permitted investment, inclusive of expenses associated with such Property, Loan or other permitted investment and the amount of any debt associated with, or used to fund the investment in, such Property, Loan or other permitted investment; and (ii) with respect to the acquisition or origination of a Property, Loan or other permitted investment through any Joint Venture, the portion of the amount actually paid or allocated to fund the acquisition, origination, development, construction or improvement of the Property, Loan or other permitted investment, inclusive of expenses associated with such Property, Loan or other permitted investment and expenses of the Joint Venture, plus the amount of any debt associated with, or used to fund the investment in, such Property, Loan or other permitted investment that is attributable to the Company’s investment in such Joint Venture.

 

2

 

Dealer Manager means NorthStar Realty Securities, LLC, a Delaware limited liability company, or such other Person or entity selected by the Board to act as dealer manager for the Offering.

 

Disposition Fee means the fees payable to the Advisor pursuant to Section 8.03.

 

Distribution means any distributions of money or other property by the Company to Stockholders, including distributions that may constitute a return of capital for federal income tax purposes.

 

Excess Amount has the meaning set forth in Section 9.02.

 

Expense Year has the meaning set forth in Section 9.02.

 

FINRA means the Financial Industry Regulatory Authority, Inc.

 

GAAP means generally accepted accounting principles as in effect in the United States of America from time to time.

 

Good Reason means either: (i) any failure by the Company or the Operating Partnership to obtain a satisfactory agreement from any successor to the Company or the Operating Partnership to assume and agree to perform the Company’s or the Operating Partnership’s obligations under this Agreement; or (ii) any material breach of this Agreement of any nature whatsoever by the Company or the Operating Partnership.

 

Gross Proceeds means the aggregate purchase price of all Shares sold for the account of the Company through an Offering, without deduction for Organization and Offering Expenses, and not including Shares sold pursuant to the Company’s distribution reimbursement plan.

 

Independent Directors has the meaning set forth in the Charter.

 

Initial Public Offering means the initial public offering of Shares registered on Registration Statement No. 333-[·]  on Form S-11.

 

Investments means any investments by the Company or the Operating Partnership in Properties, Loans and all other permitted investments in which the Company or the Operating Partnership may acquire an interest, either directly or indirectly, including through ownership interests in a Joint Venture, pursuant to its Charter, Bylaws or operating partnership, as applicable, and the investment objectives and policies adopted by the Board from time to time, other than short-term investments acquired for purposes of cash management.

 

Joint Venture means any joint venture, limited liability company, partnership or other entity pursuant to which the Company is a co-venturer or partner with respect to the ownership of any Investments.

 

Listing means the listing of the Shares on a national securities exchange.  Upon such Listing, the Shares shall be deemed “Listed.”

 

Loans means mortgage loans and other types of debt financing investments made by the Company or the Operating Partnership, either directly or indirectly, including through ownership interests in a Joint Venture, including, without limitation, mezzanine loans, B-notes, bridge loans, convertible debt, wraparound mortgage loans, construction mortgage loans, loans on leasehold interests, and participations in such loans.

 

NASAA REIT Guidelines means the Statement of Policy Regarding Real Estate Investment Trusts published by the North American Securities Administrators Association as in effect on the Effective Date.

 

3

 

Net Income means, for any period, the Company’s total revenues applicable to such period, less the total expenses applicable to such period excluding additions to reserves for depreciation, bad debts or other similar non-cash reserves; provided, however, Net Income for purposes of calculating total allowable Operating Expenses (as defined herein) shall exclude the gain from the sale of the Company’s assets.

 

Offering means any offering of Shares that is registered with the SEC, excluding Shares offered under any employee benefit plan.

 

Operating Expenses means all costs and expenses paid or incurred by the Company, as determined under GAAP, that in any way are related to the operation of the Company or its business, including fees paid to the Advisor, but excluding: (i) the expenses of raising capital such as Organization and Offering Expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and Listing; (ii) interest payments; (iii) taxes; (iv) non-cash expenditures such as depreciation, amortization, bad debt reserves and equity-based compensation; (v) incentive fees paid in compliance with the NASAA REIT Guidelines; and (vi) Acquisition Fees, origination fees, Acquisition Expenses, real estate commissions on the resale of real property and other fees and expenses connected with the acquisition, financing, disposition, management and ownership of real estate interests, loans or other property (other than commissions on the sale of assets other than real property), including the costs of foreclosure, insurance premiums, legal services, maintenance, repair, and improvement of property.  The definition of “Operating Expenses” set forth above is intended to encompass only those expenses which are required to be treated as “Total Operating Expenses” under the NASAA REIT Guidelines.  As a result, and notwithstanding the definition set forth above, any expense of the Company which is not part of Total Operating Expenses under the NASAA REIT Guidelines shall not be treated as part of “Operating Expenses” for purposes hereof.

 

Operating Partnership means NorthStar Real Estate Income Operating Partnership II, LP, a Delaware limited partnership formed to own and operate Investments on behalf of the Company.

 

Operating Partnership Agreement means the agreement among the Company, the Advisor and NorthStar OP Holdings II, LLC.

 

OP Units means the units of limited partnership interest in the Operating Partnership.

 

Organization and Offering Expenses means any and all costs and expenses incurred by or on behalf of the Company and to be paid from the assets of the Company in connection with the formation of the Company and the qualification and registration of an Offering, and the marketing and distribution of Shares, including, without limitation, total underwriting and brokerage discounts and commissions (including fees of the underwriters’ attorneys), expenses for printing, engraving and amending registration statements or supplementing prospectuses, mailing and distributing costs, salaries of employees while engaged in sales activity, telephone and other telecommunications costs, all advertising and marketing expenses, charges of transfer agents, registrars, trustees, escrow holders, depositories and experts and fees, expenses and taxes related to the filing, registration and qualification of the sale of the Shares under federal and state laws, including taxes and fees and accountants’ and attorneys’ fees.

 

Person means an individual, corporation, partnership, estate, trust (including a trust qualified under Section 401(a) or 501(c) (17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity, or any government or any agency or political subdivision thereof, and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.

 

4

 

Property means any real property or properties transferred or conveyed to the Company or the Operating Partnership, either directly or indirectly, including through ownership interests in a Joint Venture.

 

Prospectus means the Company’s final prospectus for any public offering within the meaning of Section 2(10) of the Securities Act of 1933, as amended.

 

Property Manager means an entity that has been retained to perform and carry out property management services at one or more of the Properties, excluding persons, entities or independent contractors retained or hired to perform facility management or other services or tasks at a particular Property, the costs for which are passed through to and ultimately paid by the tenant at such Property.

 

Registration Statement means the registration statement filed by the Company with the SEC on Form S-11 (Reg. No. 333-[·]), as amended from time to time, in connection with the Initial Public Offering.

 

REIT means a “real estate investment trust” under Sections 856 through 860 of the Code.

 

Sale means any transaction or series of transactions whereby: (A) the Company or the Operating Partnership sells, grants, transfers, conveys, or relinquishes its ownership of any Investment or portion thereof, including the transfer of any Property that is the subject of a ground lease, including any event with respect to any Investment that gives rise to a significant amount of insurance proceeds or condemnation awards, and including the issuance by one of the Company’s subsidiaries of any asset-backed securities or collateralized debt obligations as part of a securitization transaction; (B) the Company or the Operating Partnership sells, grants, transfers, conveys, or relinquishes its ownership of all or substantially all of the interest of the Company or the Operating Partnership in any Joint Venture in which it is a partner; or (C) any Joint Venture in which the Company or the Operating Partnership is a co-venturer or partner, sells, grants, transfers, conveys, or relinquishes its ownership of any Investment or portion thereof, including any event with respect to any Investment that gives rise to insurance claims or condemnation awards, and including the issuance by such Joint Venture or one of its subsidiaries of any asset-backed securities or collateralized debt obligations as part of a securitization transaction.

 

SEC means the United States Securities and Exchange Commission.

 

Securities means any Shares, any other stock, shares or other evidences of equity or beneficial or other interests, voting trust certificates, bonds, debentures, notes or other evidences of indebtedness, secured or unsecured, convertible, subordinated or otherwise, or in general any instruments commonly known as “securities” or any certificates of interest, shares or participations in, temporary or interim certificates for, receipts for, guarantees of, or warrants, options or rights to subscribe to, purchase or acquire, any of the foregoing.

 

Shares means shares of common stock of the Company, par value $.01 per share.

 

Special OP Units means the separate series of limited partnership interests to be issued in accordance with Section 8.04.

 

Stockholders means the registered holders of the Shares.

 

Termination Date means the date of termination of the Agreement determined in accordance with Article 14 hereof.

 

Termination Event means the termination or nonrenewal of this Agreement: (i) in connection with a merger, sale of assets or transaction involving the Company pursuant to which a majority of the Board

 

5

 

then in office are replaced or removed; (ii) by the Advisor for Good Reason or (iii) by the Company and the Operating Partnership other than for Cause.

 

2%/25% Guidelines means the requirement pursuant to the NASAA REIT Guidelines that, in any period of four consecutive fiscal quarters, total Operating Expenses not exceed the greater of 2.0% of the Company’s Average Invested Assets during such 12-month period or 25.0% of the Company’s Net Income over the same 12-month period.

 

ARTICLE 2

 

APPOINTMENT

 

The Company and the Operating Partnership hereby appoint the Advisor to serve as their advisor and asset manager on the terms and conditions set forth in this Agreement, and the Advisor hereby accepts such appointment.

 

ARTICLE 3

 

DUTIES OF THE ADVISOR

 

The Advisor is responsible for managing, operating, directing and supervising the operations and administration of the Company and its assets.  The Advisor undertakes to use its commercially reasonable efforts to present to the Company and the Operating Partnership potential investment opportunities, to make investment decisions on behalf of the Company subject to the limitations in the Company’s Charter, the direction and oversight of the Board and Section 4.03 hereof, and to provide the Company with a continuing and suitable investment program consistent with the investment objectives and policies of the Company as determined and adopted from time to time by the Board.  Subject to the limitations set forth in this Agreement, including Article 4 hereof, and the continuing and exclusive authority of the Board over the management of the Company, the Advisor shall, either directly or by engaging an Affiliate or third party, perform the following duties:

 

3.01 Offering Services. The Advisor shall manage and supervise:

 

(i) Development of the Initial Public Offering and any subsequent or simultaneous Offering approved by the Board, including the determination of the specific terms of the securities to be offered by the Company, preparation of all offering and related documents, and obtaining all required regulatory approvals of such documents;

 

(ii) Along with the Dealer Manager, approval of the participating broker-dealers and negotiation of the related selling agreements;

 

(iii) Coordination of the due diligence process relating to participating broker-dealers and their review of the Registration Statement and other Offering and Company documents;

 

(iv) Preparation and approval of all marketing materials contemplated to be used by the Dealer Manager or others relating to the Offering;

 

(v) Along with the Dealer Manager, negotiation and coordination with the transfer agent for the receipt, collection, processing and acceptance of subscription agreements, commissions, and other administrative support functions;

 

6

 

(vi) Creation and implementation of various technology and electronic communications related to the Offering; and

 

(vii) All other services related to the Offering, other than services that (a) are to be performed by the Dealer Manager, (b) the Company elects to perform directly or (c) would require the Advisor to register as a broker-dealer with the SEC, FINRA or any state.

 

3.02 Acquisition Services.

 

The Advisor shall:

 

(i) Serve as the Company’s investment and financial advisor and obtain certain market research and economic and statistical data in connection with the Company’s Investments and investment objectives and policies;

 

(ii) Subject to Article 4 hereof and the investment objectives and policies of the Company: (a) locate, analyze and select potential Investments; (b) structure and negotiate the terms and conditions of transactions pursuant to which the Investments will be made; and (c) acquire Investments on behalf of the Company;

 

(iii) Oversee the due diligence process related to prospective Investments;

 

(iv) Prepare reports regarding prospective investments which include recommendations and supporting documentation necessary for the Board to evaluate the prospective investments;

 

(v) Obtain reports (which may be prepared by the Advisor or its Affiliates), where appropriate, concerning the value of prospective Investments of the Company; and

 

(vi) Negotiate and execute approved Investments and other transactions.

 

3.03 Asset Management Services.

 

The Advisor shall:

 

(i) Investigate, select, and, on behalf of the Company, engage and conduct business with such Persons as the Advisor deems necessary to the proper performance of its obligations hereunder, including but not limited to consultants, accountants, lenders, technical advisors, attorneys, brokers, underwriters, corporate fiduciaries, escrow agents, depositaries, custodians, agents for collection, insurers, insurance agents, developers, construction companies, Property Managers and any and all Persons acting in any other capacity deemed by the Advisor necessary or desirable for the performance of any of the foregoing services;

 

(ii) Monitor applicable markets and obtain reports (which may be prepared by the Advisor or its Affiliates) where appropriate, concerning the value of Investments of the Company;

 

(iii) Monitor and evaluate the performance of Investments of the Company, provide daily management services to the Company and perform and supervise the various management and operational functions related to the Company’s Investments;

 

7

 

(iv) Formulate and oversee the implementation of strategies for the administration, promotion, management, operation, maintenance, improvement, financing and refinancing, marketing, leasing and disposition of Investments on an overall portfolio basis;

 

(v) Oversee the performance by the Property Managers of their duties, including collection and proper deposits of rental payments and payment of Property expenses and maintenance;

 

(vi) Conduct periodic on-site property visits to some or all (as the Advisor deems reasonably necessary) of the Properties to inspect the physical condition of the Properties and to evaluate the performance of the Property Managers;

 

(vii) Review, analyze and comment upon the operating budgets, capital budgets and leasing plans prepared and submitted by each Property Manager and aggregate these property budgets into the Company’s overall budget;

 

(viii) Coordinate and manage relationships between the Company and any Joint Venture partners; and

 

(ix) Provide financial and operational planning services and investment portfolio management functions.

 

3.04 Accounting and Other Administrative Services.

 

The Advisor shall:

 

(i) Manage and perform the various administrative functions necessary for the management of the day-to-day operations of the Company;

 

(ii) From time-to-time, or at any time reasonably requested by the Board, make reports to the Board on the Advisor’s performance of services to the Company under this Agreement;

 

(iii) Make reports to the Board, at least annually, of the Investments that have been purchased by NorthStar and its Affiliates;

 

(iv) Coordinate with the Company’s independent auditors to prepare and deliver to the Company’s audit committee an annual report covering the Advisor’s compliance with certain material aspects of this Agreement;

 

(v) Provide or arrange for administrative services and items, legal and other services, office space, office furnishings, personnel and other overhead items necessary and incidental to the Company’s business and operations;

 

(vi) Provide financial and operational planning services and portfolio management functions;

 

(vii) Maintain accounting data and any other information concerning the activities of the Company as shall be needed to prepare and file all periodic financial reports and returns required to be filed with the SEC and any other regulatory agency, including annual financial statements;

 

(viii) Maintain all appropriate books and records of the Company;

 

8

 

(ix) Oversee tax and compliance services and risk management services and coordinate with appropriate third parties, including independent accountants and other consultants, on related tax matters;

 

(x) Supervise the performance of such ministerial and administrative functions as may be necessary in connection with the daily operations of the Company;

 

(xi) Provide the Company with all necessary cash management services;

 

(xii) Manage and coordinate with the transfer agent the distribution process and payments to Stockholders;

 

(xiii) Consult with the officers of the Company and the Board and assist in evaluating and obtaining adequate insurance coverage based upon risk management determinations;

 

(xiv) Provide the officers of the Company and the Board with timely updates related to the overall regulatory environment affecting the Company, as well as managing compliance with such matters;

 

(xv) Consult with the officers of the Company and the Board relating to the corporate governance structure and appropriate policies and procedures related thereto; and

 

(xvi) Oversee all reporting, record keeping, internal controls and similar matters in a manner to allow the Company to comply with applicable law including the Sarbanes-Oxley Act of 2002.

 

3.05 Stockholder Services.

 

The Advisor shall:

 

(i) Manage communications with Stockholders, including answering phone calls, preparing and sending written and electronic reports and other communications; and

 

(ii) Establish technology infrastructure to assist in providing Stockholder support and service.

 

3.06 Financing Services.

 

The Advisor shall:

 

(i) Identify and evaluate potential financing and refinancing sources, engaging a third-party broker if necessary;

 

(ii) Negotiate terms, arrange and execute financing agreements;

 

(iii) Manage relationships between the Company and its lenders; and

 

(iv) Monitor and oversee the service of the Company’s debt facilities and other borrowings.

 

9

 

3.07 Disposition Services.

 

The Advisor shall:

 

(i) Consult with the Board and provide assistance with the evaluation and approval of potential asset dispositions, sales or other liquidity events; and

 

(ii) Structure and negotiate the terms and conditions of transactions pursuant to which Investments may be sold.

 

ARTICLE 4

 

AUTHORITY OF ADVISOR

 

4.01 Powers of the Advisor.  Subject to the express limitations set forth in this Agreement and the continuing and exclusive authority of the Board over the management of the Company, the power to direct the management, operation and policies of the Company, including making, financing and disposing of Investments, and the performance of those services described in Article 3 hereof, shall be vested in the Advisor, which shall have the power by itself and shall be authorized and empowered on behalf and in the name of the Company to carry out any and all of the objectives and purposes of the Company and to perform all acts and enter into and perform all contracts and other undertakings that it may in its sole discretion deem necessary, advisable or incidental thereto to perform its obligations under this Agreement.  The Advisor shall have the power to delegate all or any part of its rights and powers to manage and control the business and affairs of the Company to such officers, employees, Affiliates, agents and representatives of the Advisor or the Company as it may deem appropriate. Any authority delegated by the Advisor to any other Person shall be subject to the limitations on the rights and powers of the Advisor specifically set forth in this Agreement or the Charter.

 

4.02 Approval by the Board.  Notwithstanding the foregoing, the Advisor may not take any action on behalf of the Company without the prior approval of the Board or duly authorized committees thereof if the Charter or Maryland General Corporation Law require the prior approval of the Board.  If the Board or a committee of the Board must approve a proposed investment, financing or disposition or chooses to do so, the Advisor will deliver to the Board or committee, as applicable, all documents required by it to evaluate such investment, financing or disposition.

 

4.03 Modification or Revocation of Authority of Advisor.  The Board may, at any time upon the giving of notice to the Advisor, modify or revoke the authority or approvals set forth in Article 3 and this Article 4 hereof; provided, however, that such modification or revocation shall be effective upon receipt by the Advisor and shall not be applicable to investment transactions to which the Advisor has committed the Company prior to the date of receipt by the Advisor of such notification.

 

ARTICLE 5

 

BANK ACCOUNTS

 

The Advisor may establish and maintain one or more bank accounts in the name of the Company and the Operating Partnership and may collect and deposit into any such account or accounts, and disburse from any such account or accounts, any money on behalf of the Company or the Operating Partnership, under such terms and conditions as the Board may approve, provided that no funds shall be commingled with the funds of the Advisor.  The Advisor shall from time to time render appropriate accountings of such collections and payments to the Board and the independent auditors of the Company.

 

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ARTICLE 6

 

RECORDS AND ACCESS

 

The Advisor, in the conduct of its responsibilities to the Company, shall maintain adequate and separate books and records for the Company’s operations in accordance with GAAP, which shall be supported by sufficient documentation to ascertain that such books and records are properly and accurately recorded. Such books and records shall be the property of the Company and shall be available for inspection by the Board and by counsel, auditors and other authorized agents of the Company, at any time or from time to time during normal business hours. The Advisor shall at all reasonable times have access to the books and records of the Company and the Operating Partnership.

 

ARTICLE 7

 

LIMITATION ON ACTIVITIES

 

Notwithstanding any provision in this Agreement to the contrary, the Advisor shall not take any action that, in its sole judgment made in good faith, would: (i) adversely affect the ability of the Company to qualify or continue to qualify as a REIT under the Code unless the Board has determined that the Company will not seek or maintain REIT qualification for the Company; (ii) subject the Company to regulation under the Investment Company Act of 1940, as amended; (iii) violate any law, rule, regulation or statement of policy of any governmental body or agency having jurisdiction over the Company, its Shares or its other securities; (iv) require the Advisor to register as a broker-dealer with the SEC or any state; or (v) violate the Charter or Bylaws. In the event an action that would violate (i) through (v) of the preceding sentence but such action has been ordered by the Board, the Advisor shall notify the Board of the Advisor’s judgment of the potential impact of such action and shall refrain from taking such action until it receives further clarification or instructions from the Board. In such event, the Advisor shall have no liability for acting in accordance with the specific instructions of the Board so given.

 

ARTICLE 8

 

FEES

 

8.01 Acquisition Fees.  As compensation for the investigation, selection, sourcing and acquisition or origination (by purchase, investment or exchange) of Investments, the Company shall pay an Acquisition Fee to the Advisor or its Affiliates for each such investment (whether an acquisition or origination).  With respect to the origination of a Loan to be wholly owned, directly or indirectly, by the Company, the Acquisition Fee payable to the Advisor shall be equal to an amount of up to 1.0% of the principal amount, funded or allocated, inclusive of the Acquisition Expenses associated with such Loan and the amount of any debt associated with, or used to fund the investment in, such Loan; With respect to the acquisition of an Investment to be wholly owned, directly or indirectly, by the Company, the Acquisition Fee payable to the Advisor or its Affiliates shall be equal to an amount of up to 1.0% of the cost funded, inclusive of the Acquisition Expenses associated with such Investment and the amount of any debt associated with, or used to fund the investment in, such Investment.  With respect to the acquisition or origination of an Investment through any Joint Venture in which the Company or the Partnership is, directly or indirectly, a partner, the Acquisition Fee payable to the Advisor or its Affiliates shall be equal to an amount of up to 1.0%, of the portion of the amount actually paid to fund the acquisition, origination, development, construction or improvement of the Investment inclusive of the Acquisition Expenses associated with such Investment, plus the amount of any debt associated with, or used to fund the investment in, such Investment that is attributable to the Company’s investment in such Joint Venture. Notwithstanding anything herein to the contrary, the payment of Acquisition Fees by the Company shall be subject to the limitations on acquisition fees contained in (and defined in) the

 

11

 

Company’s Charter. The Advisor shall submit an invoice to the Company following the closing or closings of each acquisition or origination, accompanied by a computation of the Acquisition Fee. Generally, the Acquisition Fee payable to the Advisor or its Affiliates shall be paid at the closing of the transaction upon receipt of the invoice by the Company.  However, payment of the Acquisition Fee may be deferred or waived (or paid in Shares), in whole or in part, as to any transaction in the sole discretion of the Advisor.  Any such deferred or waived Acquisition Fee shall be paid to the Advisor without interest at such subsequent date as the Advisor shall request.

 

8.02 Asset Management Fees.  The Company shall pay the Advisor or its Affiliates as compensation for the services described in Section 3.03 hereof a monthly fee (the “Asset Management Fee”) in an amount equal to one-twelfth of 1.25% of the sum of the Cost of Investments, less any principal repaid by borrowers on Loans or other debt-related investments (or the Company’s proportionate share thereof in the case of an Investment made through a Joint Venture), as of the end of the preceding month. The Advisor shall submit a monthly invoice to the Company, accompanied by a computation of the Asset Management Fee for the applicable period. Generally, the Asset Management Fee payable to the Advisor or its Affiliates shall be paid on the last day of such month, or the first business day following the last day of such month. However, payment of the Asset Management Fee may be deferred or waived, in whole or in part (or received in Shares) as to any transaction in the sole discretion of the Advisor. Any such deferred or waived Asset Management Fees shall be paid to the Advisor or its Affiliates without interest at such subsequent date as the Advisor shall request.

 

8.03 Disposition Fees.  If the Advisor or any of its Affiliates provide a substantial amount of services, and based on the services, as determined by the Independent Directors, in connection with a Sale (except for the Sale of any Securities that are traded on a national securities exchange), the Advisor or such Affiliate shall receive a Disposition Fee in an amount of up to 1.0% of the Contract Sales Price of each Loan, Security or Property sold. The Advisor shall also receive a Disposition Fee upon the maturity, prepayment, workout, modification or extension of a Loan or other debt-related investment if there is a corresponding fee paid by the borrower to the Company, in which event the Advisor shall receive the lesser of (i) 1.0% of the principal amount of the Loan or debt-related investment prior to such transaction or (ii) the amount of the fee paid by the borrower to the Company in connection with such transaction. The payment of any Disposition Fees by the Company shall be subject to the limitations contained in the Company’s Charter. The Advisor shall submit an invoice to the Company following the closing or closings of each disposition, accompanied by a computation of the Disposition Fee. Generally, the Disposition Fee payable to the Advisor shall be paid at the closing of the transaction upon receipt of the invoice by the Company; provided, however, that such Disposition Fee shall be paid to an Affiliate of the Advisor that is registered as a FINRA member broker-dealer if applicable laws or regulations prohibit such payment to be made to a Person that is not a FINRA member broker-dealer. However, payment of the Disposition Fee may be deferred or waived (or accepted in Shares), in whole or in part, as to any transaction in the sole discretion of the Advisor. Any such deferred or waived Disposition Fees shall be paid to the Advisor or its Affiliates without interest at such subsequent date as the Advisor shall request.

 

8.04 Operating Partnership Interests.  The Advisor has made a capital contribution of $1,000 to the Operating Partnership in exchange for OP Units.  In addition, an Affiliate of the Advisor has made a capital contribution of $1,000 to the Operating Partnership in exchange for Special OP Units.  The Special OP Units shall be entitled to the distributions provided for, and shall be subject to redemption by the Operating Partnership, in accordance with the terms of the Operating Partnership Agreement.  To the extent distributions to the Special OP Units are not paid from net sales proceeds, such amounts will count against the limit on Operating Expenses.

 

8.05 Changes to Fee Structure.  In the event of Listing, the Company and the Advisor shall negotiate in good faith to establish a fee structure appropriate for a perpetual-life entity.

 

12

 

8.06  Payment in Shares.  In the event the Advisor, in its sole discretion, elects to be paid any of the fees set forth in this Article 8 in Shares (in lieu of cash payment), the number of Shares shall be equal to (A) the cash amount of such fee; divided by (B) $9.00.

 

ARTICLE 9

 

EXPENSES

 

9.01 General.  In addition to the compensation paid to the Advisor pursuant to Article 8 hereof, the Company shall pay directly or reimburse the Advisor for all of the expenses paid or incurred by the Advisor or its Affiliates on behalf of the Company or in connection with the services provided to the Company pursuant to this Agreement, including, but not limited to:

 

(i)  All Organization and Offering Expenses; provided, however, that the Advisor, or an Affiliate of the Advisor, shall be responsible for the payment of the Company’s Organizational and Offering Expenses to the extent the total of such expenses exceeds the 15% of Gross Proceeds from the Company’s offering; provided that within 60 days after the end of the month in which an Offering terminates, the Advisor shall reimburse the Company to the extent the Company incurred Organization and Offering Expenses exceeding 15.0% of the Gross Proceeds raised in the completed Offering.  The Company shall not reimburse the Advisor for any individual retirement account custodian fees that the Advisor pays on behalf of Stockholders;

 

(ii)  Acquisition Fees and Acquisition Expenses incurred in connection with the selection and acquisition of Investments, including such expenses incurred related to assets pursued or considered but not ultimately acquired by the Company, provided that, notwithstanding anything herein to the contrary, the payment of Acquisition Fees and Acquisition Expenses by the Company shall be subject to the limitations contained in the Company’s Charter;

 

(iii)  The actual out-of-pocket cost of goods and services used by the Company and obtained from entities not Affiliated with the Advisor;

 

(iv)  Interest and other costs for borrowed money or securitization transactions, including discounts, points and other similar fees;

 

(v)  Taxes and assessments on income or Properties, taxes as an expense of doing business and any other taxes otherwise imposed on the Company and its business, assets or income;

 

(vi)  Out-of-pocket costs associated with insurance required in connection with the business of the Company or by its officers and Board;

 

(vii)  Expenses of managing, improving, developing, operating and selling Investments owned, directly or indirectly, by the Company, as well as expenses of other transactions relating to such Investments, including but not limited to prepayments, maturities, workouts and other settlements of Loans and other Investments;

 

(viii)  All out-of-pocket expenses in connection with payments to the Board and meetings of the Board and Stockholders;

 

(ix)  Personnel and related employment costs incurred by the Advisor or its Affiliates in performing the services described in Article 3 hereof, including but not limited to reasonable salaries and wages, benefits and overhead of all employees directly involved in the performance of such services, provided that no reimbursement shall be made for costs of such employees of the Advisor or its Affiliates to the extent that such employees (A) perform services for which the

 

13

 

Advisor receives Acquisition Fees or Disposition Fees or (B) serve as executive officers of the Company;

 

(x)  Out-of-pocket expenses of providing services for and maintaining communications with Stockholders, including the cost of preparation, printing, and mailing annual reports and other Stockholder reports, proxy statements and other reports required by governmental entities;

 

(xi)  Audit, accounting and legal fees, and other fees for professional services relating to the operations of the Company and all such fees incurred at the request, or on behalf of, the Board or any other committee of the Board;

 

(xii)  Out-of-pocket costs for the Company to comply with all applicable laws, regulations and ordinances;

 

(xiii)  Expenses connected with payments of Distributions made or caused to be made by the Company to the Stockholders;

 

(xiv)  Expenses of organizing, redomesticating, merging, liquidating or dissolving the Company or of amending the Charter or the Bylaws; and

 

(xv)  All other out-of-pocket costs incurred by the Advisor in performing its duties hereunder.

 

9.02 Timing of and Additional Limitations on Reimbursements.

 

(i)  Expenses incurred by the Advisor on behalf of the Company and reimbursable pursuant to this Article 9 shall be reimbursed no less than monthly to the Advisor. The Advisor shall prepare a statement documenting the expenses of the Company during each quarter and shall deliver such statement to the Company within 45 days after the end of each quarter.

 

(ii)  Notwithstanding anything else in this Article 9 to the contrary, the expenses enumerated in this Article 9 shall not become reimbursable to the Advisor unless and until the Company has raised $2 million in the Initial Public Offering.

 

(iii)  Commencing upon the fourth fiscal quarter after the commencement of the Initial Public Offering, the following limitation on Operating Expenses shall apply:   The Company shall not reimburse the Advisor at the end of any fiscal quarter for Operating Expenses that in the four consecutive fiscal quarters then ended (the “Expense Year”) exceed (the “Excess Amount”) the greater of 2% of Average Invested Assets or 25% of Net Income (the “2%/25% Guidelines”) for such year unless the Board determines that such excess was justified, based on unusual and nonrecurring factors that the Board deems sufficient. If the Board does not approve such excess as being so justified, any Excess Amount paid to the Advisor during a fiscal quarter shall be repaid to the Company. If the Board determines such excess was justified, then, within 60 days after the end of any fiscal quarter of the Company for which total reimbursed Operating Expenses for the Expense Year exceed the 2%/25% Guidelines, the Advisor, at the direction of the Board, shall cause such fact to be disclosed to the Stockholders in writing (or the Company shall disclose such fact to the Stockholders in the next quarterly report of the Company or by filing a Current Report on Form 8-K with the SEC within 60 days of such quarter end), together with an explanation of the factors the Board considered in determining that such excess expenses were justified. The Company will ensure that such determination will be reflected in the minutes of the meetings of the Board. All figures used in the foregoing computation shall be determined in accordance with GAAP applied on a consistent basis.

 

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ARTICLE 10

 

OTHER SERVICES

 

Should: (i) the Operating Partnership request that the Advisor or any manager, officer or employee thereof render services for the Company other than as set forth in this Agreement; or (ii) there are changes to the regulatory environment in which the Advisor or Company operates that would increase significantly the level of services performed such that the costs and expenses borne by the Advisor for which the Advisor is not entitled to separate reimbursement for personnel and related employment direct costs and overhead under Article 9 of this Agreement would increase significantly, such services shall be separately compensated at such rates and in such amounts as are agreed by the Advisor and the Independent Directors, subject to the limitations contained in the Charter, and shall not be deemed to be services pursuant to the terms of this Agreement.

 

ARTICLE 11

 

VOTING AGREEMENT

 

NS Real Estate Income Advisor II, LLC agrees that, with respect to any Shares now or hereinafter owned by it, it will not vote or consent on matters submitted to the Stockholders of the Company regarding: (i) the removal of NS Real Estate Income Advisor II, LLC or any of its Affiliates as the Advisor; or (ii) any transaction between the Company and NS Real Estate Income Advisor II, LLC or any of its Affiliates.  This voting restriction shall survive until such time that NS Real Estate Income Advisor II, LLC or any of its Affiliates is no longer serving as the Advisor.

 

ARTICLE 12

 

RELATIONSHIP OF ADVISOR AND COMPANY;

OTHER ACTIVITIES OF THE ADVISOR

 

12.01 Relationship.  The Company and the Advisor are not partners or joint venturers with each other, and nothing in this Agreement shall be construed to make them such partners or joint venturers. Nothing herein contained shall prevent the Advisor from engaging in other activities, including, without limitation, the rendering of advice to other Persons (including other REITs) and the management of other programs advised, sponsored or organized by the Advisor or its Affiliates. Nor shall this Agreement limit or restrict the right of any manager, director, officer, employee or equityholder of the Advisor or its Affiliates to engage in any other business or to render services of any kind to any other Person. The Advisor may, with respect to any investment in which the Company is a participant, also render advice and service to each and every other participant therein. The Advisor shall promptly disclose to the Board the existence of any condition or circumstance, existing or anticipated, of which it has knowledge, that creates or could create a conflict of interest between the Advisor’s obligations to the Company and its obligations to or its interest in any other Person.

 

12.02 Time Commitment. The Advisor shall, and shall cause its Affiliates and their respective employees, officers and agents to, devote to the Company such time as shall be reasonably necessary to conduct the business and affairs of the Company in an appropriate manner consistent with the terms of this Agreement. The Company acknowledges that the Advisor and its Affiliates and their respective employees, officers and agents may also engage in activities unrelated to the Company and may provide services to Persons other than the Company or any of its Affiliates.

 

12.03 Investment Opportunities and Allocation. The Advisor shall be required to use commercially reasonable efforts to present a continuing and suitable investment program to the Company that is consistent with the investment policies and objectives of the Company, but neither the Advisor nor any Affiliate of the Advisor shall be obligated generally to present any particular Investment opportunity

 

15

 

to the Company even if the opportunity is of a character that, if presented to the Company, could be taken by the Company. In the event an Investment opportunity is identified, the allocation procedures set forth under the caption “Conflicts of Interest—Allocation of Investment Opportunities” in any Prospectus (as may be amended from time to time) shall govern the allocation of the opportunity among the Company, NorthStar, NorthStar’s Affiliates and any investment vehicles sponsored or managed by NorthStar.

 

ARTICLE 13

 

THE NORTHSTAR NAME

 

NorthStar and its Affiliates have a proprietary interest in the name “NorthStar.”  NorthStar hereby grants to the Company a non-transferable, non-assignable, non-exclusive royalty-free right and license to use the name “NorthStar” during the term of this Agreement. Accordingly, and in recognition of this right, if at any time the Company ceases to retain the Advisor or one of its Affiliates to perform advisory services for the Company, the Company will, promptly after receipt of written request from NorthStar, cease to conduct business under or use the name “NorthStar” or any derivative thereof and the Company shall change its name and the names of any of its subsidiaries to a name that does not contain the name “NorthStar” or any other word or words that might, in the reasonable discretion of NorthStar, be susceptible of indication of some form of relationship between the Company and NorthStar or any its Affiliates.  At such time, the Company will also make any changes to any trademarks, servicemarks or other marks necessary to remove any references to the word “NorthStar.” Consistent with the foregoing, it is specifically recognized that NorthStar or one or more of its Affiliates has in the past and may in the future organize, sponsor or otherwise permit to exist other investment vehicles (including vehicles for investment in real estate loans, real estate-related debt securities and other real estate assets) and financial and service organizations having “NorthStar” as a part of their name, all without the need for any consent (and without the right to object thereto) by the Company.   NorthStar shall govern Company’s use of the name “NorthStar” and the Company’s use of the “NorthStar” name will be in strict accordance with any quality standards and specifications that may be established by Advisor and communicated to Company from time to time.

 

ARTICLE 14

 

TERM AND TERMINATION OF THE AGREEMENT

 

14.01 Term.  This Agreement shall have an initial term of one year from the Effective Date and may be renewed for an unlimited number of successive one-year terms upon mutual consent of the parties. The Company (acting through the Independent Directors) will evaluate the performance of the Advisor annually before renewing this Agreement, and each such renewal shall be for a term of no more than one year.  Any such renewal must be approved by the Independent Directors.

 

14.02 Termination by the Parties.  This Agreement may be terminated:

 

(i)  immediately by the Company or the Operating Partnership for Cause or upon the bankruptcy of the Advisor;

 

(ii)  upon 60 days written notice without Cause and without penalty by a majority of the Independent Directors of the Company; or

 

(iii)  upon 60 days written notice with Good Reason by the Advisor.

 

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The provisions of Article 13, Section 14.03 and Articles 16 through 18 of this Agreement shall survive termination of this Agreement.

 

14.03 Payments on Termination and Survival of Certain Rights and Obligations.   Payments to the Advisor pursuant to this Section 14.03 shall be subject to the 2%/25% Guidelines to the extent applicable.

 

(i)  After the Termination Date, the Advisor shall not be entitled to compensation for further services hereunder except it shall be entitled to receive from the Company or the Operating Partnership within 30 days after the effective date of such termination all unpaid reimbursements of expenses and all earned but unpaid fees payable to the Advisor prior to termination of this Agreement, subject to the 2%/25% Guidelines to the extent applicable.

 

(ii)  The Advisor shall promptly upon termination:

 

(a)  pay over to the Company and the Operating Partnership all money collected and held for the account of the Company and the Operating Partnership pursuant to this Agreement, if any, after deducting any accrued compensation and reimbursement for its expenses to which it is then entitled;

 

(b)  deliver to the Board a full accounting, including a statement showing all payments collected by it and a statement of all money held by it, covering the period following the date of the last accounting furnished to the Board;

 

(c)  deliver to the Board all assets and documents of the Company then in the custody of the Advisor; and

 

(d)  cooperate with the Company to provide an orderly transition of advisory functions.

 

ARTICLE 15

 

ASSIGNMENT

 

This Agreement may be assigned by the Advisor to an Affiliate with the approval of a majority of the Board (including a majority of the Independent Directors). The Advisor may assign any rights to receive fees or other payments under this Agreement without obtaining the approval of the Board. This Agreement shall not be assigned by the Company or the Operating Partnership without the consent of the Advisor, except in the case of an assignment by the Company or the Operating Partnership to a corporation or other organization that is a successor to all of the assets, rights and obligations of the Company or the Operating Partnership, in which case such successor organization shall be bound hereunder and by the terms of said assignment in the same manner as the Company and the Operating Partnership are bound by this Agreement.  Nothing herein shall be deemed to prohibit or otherwise restrict any transfers or additional issuances of equity interests in the Advisor nor shall any such transfer or issuance be deemed an assignment for purposes of this Article 15.

 

ARTICLE 16

 

INDEMNIFICATION AND LIMITATION OF LIABILITY

 

16.01 Indemnification.  Except as prohibited by the restrictions provided in this Section 16.01, Section 16.02 and Section 16.03, the Company and the Operating Partnership shall indemnify, defend and hold harmless the Advisor and its Affiliates, including their respective officers, directors, equity holders,

 

17

 

partners and employees, from all liability, claims, damages or losses arising in the performance of their duties hereunder, and related expenses, including reasonable attorneys’ fees, to the extent such liability, claims, damages or losses and related expenses are not fully reimbursed by insurance. Any indemnification of the Advisor may be made only out of the net assets of the Company and not from Stockholders.

 

Notwithstanding the foregoing, the Company shall not indemnify the Advisors or its Affiliates for any loss, liability or expense arising from or out of an alleged violation of federal or state securities laws by such party unless one or more of the following conditions are met: (i) there has been a successful adjudication on the merits of each count involving alleged securities law violations as to the particular indemnitee; (ii) such claims have been dismissed with prejudice on the merits by a court of competent jurisdiction as to the particular indemnitee; or (iii) a court of competent jurisdiction approves a settlement of the claims against a particular indemnitee and finds that indemnification of the settlement and the related costs should be made, and the court considering the request for indemnification has been advised of the position of the SEC and of the published position of any state securities regulatory authority in which securities of the Company were offered or sold as to indemnification for violations of securities laws.

 

16.02 Limitation on Indemnification.  Notwithstanding the foregoing, the Company and the Operating Partnership shall not provide for indemnification of the Advisor or its Affiliates for any liability or loss suffered by any of them, nor shall any of them be held harmless for any loss or liability suffered by the Company, unless all of the following conditions are met:

 

(i) The Advisor or its Affiliates have determined, in good faith, that the course of conduct that caused the loss or liability was in the best interests of the Company and the Operating Partnership.

 

(ii) The Advisor or its Affiliates were acting on behalf of or performing services for the Company or the Operating Partnership.

 

(iii) Such liability or loss was not the result of negligence or misconduct by the Advisor or its Affiliates.

 

(iv) Such indemnification or agreement to hold harmless is recoverable only out of the Company’s net assets and not from the Stockholders.

 

16.03 Limitation on Payment of Expenses.  The Company shall pay or reimburse reasonable legal expenses and other costs incurred by the Advisors or its Affiliates in advance of the final disposition of a proceeding only if (in addition to the procedures required by the Maryland General Corporation Law, as amended from time to time) all of the following are satisfied: (a) the proceeding relates to acts or omissions with respect to the performance of duties or services on behalf of the Company or the Operating Partnership, (b) the legal proceeding was initiated by a third party who is not a Stockholder or, if by a Stockholder acting in his or her capacity as such, a court of competent jurisdiction approves such advancement and (c)  the Advisor or its Affiliates undertake to repay the amount paid or reimbursed by the Company Operating Partnership, together with the applicable legal rate of interest thereon, if it is ultimately determined that the particular indemnitee is not entitled to indemnification.

 

16.04 Indemnification by Advisor.  The Advisor shall indemnify and hold harmless the Company and the Operating Partnership from contract or other liability, claims, damages, taxes or losses and related expenses including attorneys’ fees, to the extent that such liability, claims, damages, taxes or losses and related expenses are not fully reimbursed by insurance and are incurred by reason of the Advisor’s bad faith, fraud, misfeasance, intentional misconduct, negligence or reckless disregard of its

 

18

 

duties; provided, however, that the Advisor shall not be held responsible for any action of the Board in following or declining to follow any advice or recommendation given by the Advisor.

 

ARTICLE 17

 

NON-SOLICITATION

 

During the period commencing on the Effective Date and ending one year following the Termination Date, the Company shall not, without the Advisor’s prior written consent, directly or indirectly; (i) solicit or encourage any person to leave the employment or other service of the Advisor or its Affiliates; or (ii) hire, on behalf of the Company or any other person or entity, any person who has left the employment within the one year period following the termination of that person’s employment with the Advisor or its Affiliates.  During the period commencing on the date hereof through and ending one year following the Termination Date, the Company will not, whether for its own account or for the account of any other Person, intentionally interfere with the relationship of the Advisor or its Affiliates with, or endeavor to entice away from the Advisor or its Affiliates, any person who during the term of the Agreement is, or during the preceding one-year period, was a tenant, co-investor, co-developer, joint venturer or other customer of the Advisor or its Affiliates.

 

ARTICLE 18

 

MISCELLANEOUS

 

18.01 Notices.  Any notice, report or other communication required or permitted to be given hereunder shall be in writing unless some other method of giving such notice, report or other communication is required by the Charter, the Bylaws or is accepted by the party to whom it is given, and shall be given by being delivered by hand or by overnight mail or other overnight delivery service to the addresses set forth herein:

 

	
To the Board, the Company or the Operating   Partnership:
    	
NorthStar   Real Estate Income II, Inc.
    
	
 
    	
399 Park Avenue
    
	
 
    	
18th Floor
    
	
 
    	
New York, New York 10022
    
	
 
    	
 
    
	
 
    	
 
    
	
To the Advisor:
    	
NS Real   Estate Income Advisor II, LLC
    
	
 
    	
399 Park Avenue
    
	
 
    	
18th Floor
    
	
 
    	
New York, New York 10022
    

 

Either party may at any time give notice in writing to the other party of a change in its address for the purposes of this Section 18.01.

 

18.02 Modification.  This Agreement shall not be changed, modified, terminated or discharged, in whole or in part, except by an instrument in writing signed by both parties hereto, or their respective successors or permitted assigns.

 

18.03 Severability.  The provisions of this Agreement are independent of and severable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.

 

19

 

18.04 Construction.  The provisions of this Agreement shall be construed and interpreted in accordance with the laws of the State of New York.

 

18.05 Entire Agreement.  This Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms hereof. This Agreement may not be modified or amended other than by an agreement in writing.

 

18.06 Waiver.  Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

 

18.07 Gender.  Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.

 

18.08 Titles Not to Affect Interpretation.  The titles of Articles and Sections contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation hereof.

 

18.09 Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.

 

[The remainder of this page is intentionally left blank.

Signature page follows.]

 

20

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written.

 

 

	
 
    	
NorthStar   Real Estate Income II, Inc.
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
NorthStar   Real Estate Income Operating Partnership II, LP
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
NorthStar   Real Estate Income II, Inc.,
    
	
 
    	
 
    	
its   General Partner
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    
	
 
    	
NS Real   Estate Income Advisor II, LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
NRFC   Sub-REIT Corp., its sole member
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
NorthStar   Realty Finance Corp.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:

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