Document:

Exhibit 10.25

 

FORM OF AMENDED AND RESTATED

INDEMNIFICATION AGREEMENT

 

THIS AMENDED AND RESTATED INDEMNIFICATION AGREEMENT (“Agreement”) is made and entered into as of the           day of                  , 20         , by and between NorthStar Realty Finance Corp., a Maryland corporation (the “Company”), NRFC Sub-REIT Corp., a Maryland corporation (the “Sub-REIT”), and                                         (“Indemnitee”).

 

WHEREAS, at the request of the Company, Indemnitee currently serves as [a director] [and] [an officer] of the Company and may, therefore, be subjected to claims, suits or proceedings arising as a result of [his][her] service; and

 

[WHEREAS, at the request of the Company or the Sub-REIT, Indemnitee currently is serving or may serve as a director or an officer of Sub-REIT and may, therefore, be subjected to claims, suits or proceedings arising as a result of [his][her] service;] and

 

WHEREAS, the Company indirectly owns all of the outstanding stock of Sub-REIT and most of the Company’s business is conducted through the Sub-REIT; and

 

WHEREAS, the Sub-REIT derives substantial benefit from the Board of Directors and management of the Company; and

 

WHEREAS, as an inducement to Indemnitee to serve or continue to serve as [a director] [and] [an officer] of the Company, the Company and the Sub-REIT have agreed to indemnify and to advance expenses and costs incurred by Indemnitee in connection with any such claims, suits or proceedings, to the maximum extent permitted by law[, including pursuant to an existing Indemnification Agreement, if any, by and between the Company and the Indemnitee (the “Prior Agreement”)]; and

 

WHEREAS, the parties by this Agreement desire to [amend and restate the Prior Agreement and] set forth their agreement regarding indemnification and advance of expenses;

 

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

 

Section 1.                                            Definitions.  For purposes of this Agreement:

 

(a)                                  “Change in Control” means a change in control of the Company occurring after the Effective Date of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether or not the Company is then subject to such reporting requirement; provided, however, that, without limitation, such a Change in Control shall be deemed to have occurred if, after the Effective Date (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 15% or more of the combined voting power of all of the Company’s then-outstanding securities entitled to vote

 

 

generally in the election of directors without the prior approval of at least two-thirds of the members of the Board of Directors in office immediately prior to such person’s attaining such percentage interest; (ii) the Company is a party to a merger, consolidation, sale of assets, plan of liquidation or other reorganization not approved by at least two-thirds of the members of the Board of Directors then in office, as a consequence of which members of the Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors thereafter; or (iii) at any time, a majority of the members of the Board of Directors are not individuals (A) who were directors as of the Effective Date or (B) whose election by the Board of Directors or nomination for election by the Company’s stockholders was approved by the affirmative vote of at least two-thirds of the directors then in office who were directors as of the Effective Date or whose election for nomination for election was previously so approved.

 

(b)                                 “Corporate Status” means the status of a person as a present or former director, officer, employee or agent of the Company or as a director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any other foreign or domestic corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise that such person is or was serving in such capacity at the request of the Company.  As a clarification and without limiting the circumstances in which Indemnitee may be serving at the request of the Company service by Indemnitee shall be deemed to be at the request of the Company; (i) if Indemnitee serves or served as a director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any corporation (including the Sub-REIT), partnership, limited liability company, joint venture, trust, or other enterprise (1) of which a majority of the voting power or equity interest is owned directly or indirectly by the Company or (2) of which the Company, directly or indirectly, has the power to direct, manage, oversee or restrict the management, business or assets or (ii) if, as a result of Indemnitee’s service to the Company or any of its affiliated entities, Indemnitee is subject to duties by, or required to perform services for, an employee benefit plan or its participants or beneficiaries, including as a deemed fiduciary thereof.

 

(c)                                  “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification and/or advance of Expenses is sought by Indemnitee.

 

(d)                                 “Effective Date” means the date set forth in the first paragraph of this Agreement.

 

(e)                                  “Expenses” means any and all reasonable and out-of-pocket attorneys’ fees and costs, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, the Bylaws of the Company or D&O insurance policy, ERISA excise taxes and penalties and any other disbursements or expenses incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in or otherwise participating in a Proceeding.  Expenses shall also include Expenses incurred in connection with any appeal resulting from any Proceeding including, without limitation, the premium, security for and other costs relating to any cost bond, supersedeas bond or other appeal bond or its equivalent.

 

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(f)                                    “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither is, nor in the past five years has been, retained to represent:  (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement or of other indemnitees under similar indemnification agreements), or (ii) any other party to or participant or witness in the Proceeding giving rise to a claim for indemnification or advance of Expenses hereunder.  Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

 

(g)                                 “Proceeding” means any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other proceeding, whether brought by or in the right of the Company or otherwise and whether of a civil (including intentional or unintentional tort claims), criminal, administrative or investigative (formal or informal) nature, including any appeal therefrom, except one pending or completed on or before the Effective Date, unless otherwise specifically agreed in writing by the Company and Indemnitee [or if it would have been covered by the Prior Agreement].  If Indemnitee reasonably believes that a given situation may lead to or culminate in the institution of a Proceeding, such situation shall also be considered a Proceeding.

 

Section 2.                                            Services by Indemnitee.  Indemnitee [will serve][serves] as [a director] [and] [an officer] of the Company.  However, this Agreement shall not impose any independent obligation on Indemnitee or the Company to continue Indemnitee’s service to the Company.  This Agreement shall not be deemed an employment contract between the Company (or any other entity) and Indemnitee.

 

Section 3.                                            General.  The Company shall indemnify, and advance Expenses to, Indemnitee (a) as provided in this Agreement and (b) otherwise to the maximum extent permitted by Maryland law in effect on the Effective Date and as amended from time to time; provided, however, that no change in Maryland law shall have the effect of reducing the benefits available to Indemnitee hereunder based on Maryland law as in effect on the Effective Date.  The rights of Indemnitee provided in this Section 3 shall include, without limitation, the rights set forth in the other sections of this Agreement, including any additional indemnification permitted by Section 2-418(g) of the Maryland General Corporation Law (the “MGCL”).

 

Section 4.                                            Standard for Indemnification.  If, by reason of Indemnitee’s Corporate Status, Indemnitee is, or is threatened to be, made a party to any Proceeding, the Company shall indemnify Indemnitee against all judgments, penalties, fines and amounts paid in settlement and all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with any such Proceeding unless it is established that (a) the act or omission of Indemnitee was material to the matter giving rise to the Proceeding and (i) was committed in bad faith or (ii) was the result of active and deliberate dishonesty, (b) Indemnitee actually received an improper personal benefit in money, property or services or (c) in the case of any criminal Proceeding, Indemnitee had reasonable cause to believe that [his][her] conduct was unlawful.

 

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Section 5.                                            Certain Limits on Indemnification.  Notwithstanding any other provision of this Agreement (other than Section 6), Indemnitee shall not be entitled to:

 

(a)                                  indemnification hereunder if the Proceeding was one by or in the right of the Company and Indemnitee is adjudged to be liable to the Company;

 

(b)                                 indemnification hereunder if Indemnitee is adjudged to be liable on the basis that personal benefit was improperly received in any Proceeding charging improper personal benefit to Indemnitee, whether or not involving action in the Indemnitee’s Corporate Status; or

 

(c)                                  indemnification or advance of Expenses hereunder if the Proceeding was brought by Indemnitee, unless: (i) the Proceeding was brought to enforce indemnification under this Agreement, and then only to the extent in accordance with and as authorized by Section 12 of this Agreement, or (ii) the Company’s charter or Bylaws, a resolution of the stockholders entitled to vote generally in the election of directors or of the Board of Directors or an agreement approved by the Board of Directors to which the Company is a party expressly provide otherwise.

 

Section 6.                                            Court-Ordered Indemnification.  Notwithstanding any other provision of this Agreement, a court of appropriate jurisdiction, upon application of Indemnitee and such notice as the court shall require, may order indemnification of Indemnitee by the Company in the following circumstances:

 

(a)                                  if such court determines that Indemnitee is entitled to reimbursement under Section 2-418(d)(1) of the MGCL, the court shall order indemnification, in which case Indemnitee shall be entitled to recover the Expenses of securing such reimbursement; or

 

(b)                                 if such court determines that Indemnitee is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not Indemnitee (i) has met the standards of conduct set forth in Section 2-418(b) of the MGCL or (ii) has been adjudged liable for receipt of an improper personal benefit under Section 2-418(c) of the MGCL, the court may order such indemnification as the court shall deem proper.  However, indemnification with respect to any Proceeding by or in the right of the Company or in which liability shall have been adjudged in the circumstances described in Section 2-418(c) of the MGCL shall be limited to Expenses.

 

Section 7.                                            Indemnification for Expenses of an Indemnitee Who is Wholly or Partially Successful.  Notwithstanding any other provision of this Agreement, and without limiting any such provision, to the extent that Indemnitee was or is, by reason of [his][her] Corporate Status, made a party to any Proceeding and is successful, on the merits or otherwise, in the defense of such Proceeding, Indemnitee shall be indemnified for all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith.  If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee under this Section 7 for all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with each such claim, issue or matter, allocated on a reasonable and proportionate basis.  For purposes of this Section 7 and, without limitation, the

 

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termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

 

Section 8.                                            Advance of Expenses for Indemnitee.  If, by reason of Indemnitee’s Corporate Status, Indemnitee is, or is threatened to be, made a party to any Proceeding, the Company shall, without requiring a preliminary determination of Indemnitee’s ultimate entitlement to indemnification hereunder, advance all reasonable Expenses incurred by or on behalf of Indemnitee in connection with such Proceeding.  Such advance or advances shall be made within ten days after the receipt by the Company of a statement or statements requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding and may be in the form of, in the reasonable discretion of the Indemnitee (but without duplication) (a) payment of such Expenses directly to third parties on behalf of Indemnitee, (b) advancement to Indemnitee of funds in an amount sufficient to pay such Expenses or (c) reimbursement to Indemnitee for Indemnitee’s payment of such Expenses.  Such statement or statements shall reasonably evidence the Expenses incurred or expected to be incurred by Indemnitee and shall include or be preceded or accompanied by a written affirmation by Indemnitee of Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Company as authorized by law and by this Agreement has been met and a written undertaking by or on behalf of Indemnitee, in substantially the form attached hereto as Exhibit A or in such form as may be required under applicable law as in effect at the time of the execution thereof, to reimburse the portion of any Expenses advanced to Indemnitee relating to claims, issues or matters in the Proceeding as to which it shall ultimately be established that the standard of conduct has not been met by Indemnitee and which have not been successfully resolved as described in Section 7 of this Agreement.  To the extent that Expenses advanced to Indemnitee do not relate to a specific claim, issue or matter in the Proceeding, such Expenses shall be allocated on a reasonable and proportionate basis.  The undertaking required by this Section 8 shall be an unlimited general obligation by or on behalf of Indemnitee and shall be accepted without reference to Indemnitee’s financial ability to repay such advanced Expenses and without any requirement to post security therefor.

 

Section 9.                                            Indemnification and Advance of Expenses as a Witness or Other Participant.  Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is or may be, by reason of Indemnitee’s Corporate Status, made a witness or otherwise asked to participate in any Proceeding, whether instituted by the Company or any other party, and to which Indemnitee is not a party, Indemnitee shall be advanced all reasonable Expenses incurred or expected to be incurred and indemnified against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection therewith within ten days after the receipt by the Company of a statement or statements requesting any such advance or indemnification from time to time, whether prior to or after final disposition of such Proceeding.  Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee.

 

Section 10.                                      Procedure for Determination of Entitlement to Indemnification.

 

(a)                                  To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to

 

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what extent Indemnitee is entitled to indemnification.  Indemnitee may submit one or more such requests from time to time and at such time(s) as Indemnitee deems appropriate in Indemnitee’s sole discretion.  The officer of the Company receiving any such request from Indemnitee shall, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that Indemnitee has requested indemnification.

 

(b)                                 Upon written request by Indemnitee for indemnification pursuant to Section 10(a) above, a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall promptly be made in the specific case: (i) if a Change in Control shall have occurred, by Independent Counsel, in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee, which Independent Counsel shall be selected by the Indemnitee and approved by the Board of Directors in accordance with Section 2-418(e)(2)(ii) of the MGCL, which approval shall not be unreasonably withheld; or (ii) if a Change in Control shall not have occurred, (A) by the Board of Directors by a majority vote of a quorum consisting of Disinterested Directors or, if such a quorum cannot be obtained, then by a majority vote of a duly authorized committee of the Board of Directors consisting solely of one or more Disinterested Directors, or (B) if Independent Counsel has been selected by the Board of Directors in accordance with Section 2-418(e)(2)(ii) of the MGCL and approved by the Indemnitee, which approval shall not be unreasonably withheld, by Independent Counsel, in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee.  If it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten days after such determination.  Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination in the reasonable discretion of the Board of Directors or Independent Counsel if retained pursuant to clause (ii)(B) of this Section 10(b).  Any Expenses incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company shall indemnify and hold Indemnitee harmless therefrom.

 

(c)                                  The Company shall pay the reasonable fees and expenses of Independent Counsel, if one is appointed.

 

Section 11.                                      Presumptions and Effect of Certain Proceedings.

 

(a)                                  In making any determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 10(a) of this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making of any determination contrary to that presumption.

 

(b)                                 The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, upon a plea of nolo contendere or its equivalent, or

 

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entry of an order of probation prior to judgment, does not create a presumption that Indemnitee did not meet the requisite standard of conduct described herein for indemnification.

 

(c)                                  The knowledge and/or actions, or failure to act, of any other director, officer, employee or agent of the Company or any other director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any other foreign or domestic corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise shall not be imputed to Indemnitee for purposes of determining any other right to indemnification under this Agreement.

 

Section 12.                                      Remedies of Indemnitee.

 

(a)                                  If (i) a determination is made pursuant to Section 10(b) of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advance of Expenses is not timely made pursuant to Sections 8 or 9 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 10(b) of this Agreement within 60 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Sections 7 or 9 of this Agreement within ten days after receipt by the Company of a written request therefor, or (v) payment of indemnification pursuant to any other section of this Agreement or the charter or Bylaws of the Company is not made within ten days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication in an appropriate court located in the State of Maryland, or in any other court of competent jurisdiction, of Indemnitee’s entitlement to such indemnification or advance of Expenses.  Alternatively, Indemnitee, at Indemnitee’s option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association.  Indemnitee shall commence a proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 12(a); provided, however, that the foregoing clause shall not apply to a proceeding brought by Indemnitee to enforce [his][her] rights under Section 7 of this Agreement.  Except as set forth herein, the provisions of Maryland law (without regard to its conflicts of laws rules) shall apply to any such arbitration.  The Company shall not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

 

(b)                                 In any judicial proceeding or arbitration commenced pursuant to this Section 12, Indemnitee shall be presumed to be entitled to indemnification or advance of Expenses, as the case may be, under this Agreement and the Company shall have the burden of proving that Indemnitee is not entitled to indemnification or advance of Expenses, as the case may be.  The Company shall, to the maximum extent not prohibited by law, be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 12 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all of the provisions of this Agreement.

 

(c)                                  If a determination shall have been made pursuant to Section 10(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 12,

 

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absent a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification.

 

(d)                                 In the event that Indemnitee is successful in seeking, pursuant to this Section 12, a judicial adjudication of or an award in arbitration to enforce Indemnitee’s rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company for, any and all Expenses actually and reasonably incurred by him in such judicial adjudication or arbitration.  If it shall be determined in such judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the indemnification or advance of Expenses sought, the Expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated.

 

(e)                                  Interest shall be paid by the Company to Indemnitee at the maximum rate allowed to be charged for judgments under the Courts and Judicial Proceedings Article of the Annotated Code of Maryland for amounts which the Company pays or is obligated to pay for the period (i) commencing with either the tenth day after the date on which the Company was requested to advance Expenses in accordance with Sections 8 or 9 of this Agreement or the 60th day after the date on which the Company was requested to make the determination of entitlement to indemnification under Section 10(b) of this Agreement, as applicable, and (ii) ending on the date such payment is made to Indemnitee by the Company.

 

Section 13.                                      Defense of the Underlying Proceeding.

 

(a)                                  Indemnitee shall notify the Company promptly in writing upon being served with any summons, citation, subpoena, complaint, indictment, request or other document relating to any Proceeding which may result in the right to indemnification or the advance of Expenses hereunder and shall include with such notice a description of the nature of the Proceeding and a summary of the facts underlying the Proceeding.  The failure to give any such notice shall not disqualify Indemnitee from the right, or otherwise affect in any manner any right of Indemnitee, to indemnification or the advance of Expenses under this Agreement unless the Company’s ability to defend in such Proceeding or to obtain proceeds under any insurance policy is materially and adversely prejudiced thereby, and then only to the extent the Company is thereby actually so prejudiced.

 

(b)                                 Subject to the provisions of the last sentence of this Section 13(b) and of Section 13(c) below, the Company shall have the right to defend Indemnitee in any Proceeding to which Indemnitee is a party by reason of Indemnitee’s Corporate Status, which may give rise to indemnification hereunder; provided, however, that the Company shall notify Indemnitee of any such decision to defend within 15 calendar days following receipt of notice of any such Proceeding under Section 13(a) above.  The Company shall not, without the prior written consent of Indemnitee, which shall not be unreasonably withheld or delayed, consent to the entry of any judgment against Indemnitee or enter into any settlement or compromise which (i) includes an admission of fault of Indemnitee, (ii) does not include, as an unconditional term thereof, the full release of Indemnitee from all liability in respect of such Proceeding, which release shall be in form and substance reasonably satisfactory to Indemnitee or (iii) would impose any Expense,

 

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judgment, fine, penalty or limitation on Indemnitee.  This Section 13(b) shall not apply to a Proceeding brought by Indemnitee under Section 12 of this Agreement.

 

(c)                                  Notwithstanding the provisions of Section 13(b) above, if in a Proceeding to which Indemnitee is a party by reason of Indemnitee’s Corporate Status, (i) Indemnitee reasonably concludes, based upon an opinion of counsel approved by the Company, which approval shall not be unreasonably withheld or delayed, that Indemnitee may have separate defenses or counterclaims to assert with respect to any issue which may not be consistent with other defendants in such Proceeding, (ii) Indemnitee reasonably concludes, based upon an opinion of counsel approved by the Company, which approval shall not be unreasonably withheld, that an actual or apparent conflict of interest or potential conflict of interest exists between Indemnitee and the Company, or (iii) if the Company fails to assume the defense of such Proceeding in a timely manner, Indemnitee shall be entitled to be represented by separate legal counsel of Indemnitee’s choice, subject to the prior approval of the Company, which approval shall not be unreasonably withheld, at the expense of the Company.  In addition, if the Company fails to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any Proceeding to deny or to recover from Indemnitee the benefits intended to be provided to Indemnitee hereunder, Indemnitee shall have the right to retain counsel of Indemnitee’s choice, subject to the prior approval of the Company, which approval shall not be unreasonably withheld, at the expense of the Company (subject to Section 12(d) of this Agreement), to represent Indemnitee in connection with any such matter.

 

Section 14.                                      Non-Exclusivity; Survival of Rights; Subrogation.

 

(a)                                  The rights of indemnification and advance of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the charter or Bylaws of the Company, any agreement or a resolution of the stockholders entitled to vote generally in the election of directors or of the Board of Directors, or otherwise.  Unless consented to in writing by Indemnitee, no amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in [his][her] Corporate Status prior to such amendment, alteration or repeal, regardless of whether a claim with respect to such action or inaction is raised prior or subsequent to such amendment, alteration or repeal.  No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right or remedy shall be cumulative and in addition to every other right or remedy given hereunder or now or hereafter existing at law or in equity or otherwise.  The assertion of any right or remedy hereunder, or otherwise, shall not prohibit the concurrent assertion or employment of any other right or remedy.

 

(b)                                 In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

 

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Section 15.                                      Insurance.

 

(a)                                  The Company will use its reasonable best efforts to acquire directors and officers liability insurance, on terms and conditions deemed appropriate by the Board of Directors, with the advice of counsel, covering Indemnitee or any claim made against Indemnitee by reason of [his][her] Corporate Status and covering the Company for any indemnification or advance of Expenses made by the Company to Indemnitee for any claims made against Indemnitee by reason of [his][her] Corporate Status.  In the event of a Change in Control, the Company shall maintain in force any and all directors and officers liability insurance policies that were maintained by the Company immediately prior to the Change in Control for a period of six years with the insurance carrier or carriers and through the insurance broker in place at the time of the Change of Control; provided, however, (i) if the carriers will not offer the same policy and an expiring policy needs to be replaced, a policy substantially comparable in scope and amount shall be obtained and (ii) if any replacement insurance carrier is necessary to obtain a policy substantially comparable in scope and amount, such insurance carrier shall have an AM Best rating that is the same or better than the AM Best rating of existing insurance carrier; provided, further, however, in no event shall the Company be required to expend annually in excess of 250% of the annual premium or premiums paid by the Company for directors and officers liability insurance in effect on the date of the Change in Control.  In the event that 250% of the annual premium paid by the Company for such existing directors and officers liability insurance is insufficient for such coverage, the Company shall spend up to that amount to purchase such lesser coverage as may be obtained with such amount.

 

(b)                                 Without in any way limiting any other obligation under this Agreement, the Company shall indemnify Indemnitee for any payment by Indemnitee arising out of the amount of any deductible or retention and the amount of any excess of the aggregate of all judgments, penalties, fines, settlements and Expenses incurred by Indemnitee in connection with a Proceeding over the coverage of any insurance referred to in the previous sentence.  The purchase, establishment and maintenance of any such insurance shall not in any way limit or affect the rights or obligations of the Company or Indemnitee under this Agreement except as expressly provided herein, and the execution and delivery of this Agreement by the Company and the Indemnitee shall not in any way limit or affect the rights or obligations of the Company under any such insurance policies.  If, at the time the Company receives notice from any source of a Proceeding to which Indemnitee is a party or a participant (as a witness or otherwise) the Company has director and officer liability insurance in effect, the Company shall give prompt notice of such Proceeding to the insurers in accordance with the procedures set forth in the respective policies.

 

Section 16.                                      Coordination of Payments.  The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable or payable or reimbursable as Expenses hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

 

Section 17.                                      Contribution.  If the indemnification provided in this Agreement is unavailable in whole or in part and may not be paid to Indemnitee for any reason, other than for failure to satisfy the standard of conduct set forth in Section 4 or due to the provisions of Section 5, then, in respect to any Proceeding to which Indemnitee is a party by reason of Indemnitee’s Corporate Status, in which the company is jointly liable with Indemnitee (or would be if joined in such Proceeding), to the maximum extent permissible under applicable law, the Company, in

 

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lieu of indemnifying and holding harmless Indemnitee, shall pay, in the first instance, the entire amount incurred by Indemnitee, whether for Expenses, judgments, penalties, and/or amounts paid or to be paid in settlement, in connection with any Proceeding without requiring Indemnitee to contribute to such payment, and the Company hereby waives and relinquishes any right of contribution it may have at any time against Indemnitee.

 

Section 18.                                      Reports to Stockholders.  To the extent required by the MGCL, the Company shall report in writing to its stockholders the payment of any amounts for indemnification of, or advance of Expenses to, Indemnitee under this Agreement arising out of a Proceeding by or in the right of the Company with the notice of the meeting of stockholders of the Company next following the date of the payment of any such indemnification or advance of Expenses or prior to such meeting.

 

Section 19.                                      Indemnification by the Sub-REIT.  The Sub-REIT shall indemnify, and advance Expenses to, Indemnitee to the same extent as the Company is required to do so under this Agreement; provided, however, that any such indemnification or advancement shall not permit duplication of payments to Indemnitee.  The rights of Indemnitee provided in this Section 19 are (a) without regard to whether Indemnitee is or was an officer or director of the Sub-REIT and (b) in addition to, not in lieu of, any rights Indemnitee may have to indemnification and expense advancement under the MGCL, pursuant to the charter or Bylaws of the Sub-REIT or otherwise.

 

Section 20.                                      Duration of Agreement; Binding Effect.

 

(a)                                  This Agreement shall continue until and terminate on the later of (i) the date that Indemnitee shall have ceased to serve as a director, officer, employee or agent of the Company or as a director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any other foreign or domestic corporation, real estate investment trust, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise that such person is or was serving in such capacity at the request of the Company and (ii) the date that Indemnitee is no longer subject to any actual or possible Proceeding, to which Indemnitee is a party by reason of Indemnitee’s Corporate Status (including any rights of appeal thereto and any Proceeding commenced by Indemnitee pursuant to Section 12 of this Agreement).

 

(b)                                 The indemnification and advance of Expenses provided by, or granted pursuant to, this Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent of the Company or a director, trustee, officer, partner, manager, managing member, fiduciary, employee or agent of any other foreign or domestic corporation, partnership, limited liability company, joint venture, trust, employee benefit plan or other enterprise that such person is or was serving in such capacity at the request of the Company, and shall inure to the benefit of Indemnitee and Indemnitee’s spouse, assigns, heirs, devisees, executors and administrators and other legal representatives.

 

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(c)                                  The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

 

(d)                                 The Company and Indemnitee agree that a monetary remedy for breach of this Agreement, at some later date, may be inadequate, impracticable and difficult of proof, and further agree that such breach may cause Indemnitee irreparable harm.  Accordingly, the parties hereto agree that Indemnitee may enforce this Agreement by seeking injunctive relief and/or specific performance hereof, without any necessity of showing actual damage or irreparable harm and that by seeking injunctive relief and/or specific performance, Indemnitee shall not be precluded from seeking or obtaining any other relief to which Indemnitee may be entitled.  Indemnitee shall further be entitled to such specific performance and injunctive relief, without the necessity of posting bonds or other undertakings in connection therewith.  The Company acknowledges that, in the absence of a waiver, a bond or undertaking may be required of Indemnitee by a court, and the Company hereby waives any such requirement of such a bond or undertaking.

 

Section 21.                                      Severability.  If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable to the maximum extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the maximum extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section, paragraph or sentence of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

 

Section 22.                                      Identical Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement.  One such counterpart signed by the party against whom enforceability is sought shall be sufficient to evidence the existence of this Agreement.

 

Section 23.                                      Headings.  The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

 

Section 24.                                      Modification and Waiver.  No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of

 

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any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

 

Section 25.                                      Notices.  All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, on the day of such delivery, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:

 

(a)                                  If to Indemnitee, to the address set forth on the signature page hereto.

 

(b)                                 If to the Company, to:

 

NorthStar Realty Finance Corp.

399 Park Ave.

New York, NY 10022

 

Attn: General Counsel

 

or to such other address as may have been furnished in writing to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

 

Section 26.                                      Governing Law.  This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Maryland, without regard to its conflicts of laws rules.

 

[SIGNATURE PAGE FOLLOWS]

 

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

 

	
 
    	
NORTHSTAR   REALTY FINANCE CORP.:
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
NRFC   SUB-REIT CORP.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    	
 
    
	
 
    	
Title:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
INDEMNITEE
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Name:
    
	
 
    	
Address:
    
				

 

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EXHIBIT A

 

AFFIRMATION AND UNDERTAKING TO REPAY EXPENSES ADVANCED

 

To:  The Board of Directors of NorthStar Realty Finance Corp. and NRFC Sub-REIT Corp.

 

Re:  Affirmation and Undertaking

 

Ladies and Gentlemen:

 

This Affirmation and Undertaking is being provided pursuant to that certain Indemnification Agreement dated the           day of                        , 20      , by and between NorthStar Realty Finance Corp., a Maryland corporation (the “Company”), NRFC Sub-REIT Corp., a Maryland corporation (the “Sub-REIT”), and the undersigned Indemnitee (the “Indemnification Agreement”), pursuant to which I am entitled to advance of Expenses in connection with [Description of Proceeding] (the “Proceeding”).

 

Terms used herein and not otherwise defined shall have the meanings specified in the Indemnification Agreement.

 

I am subject to the Proceeding by reason of my Corporate Status or by reason of alleged actions or omissions by me in such capacity.  I hereby affirm my good faith belief that at all times, insofar as I was involved as [a director]  [an officer] of the Company, [and [a director] [an officer] of the Sub-REIT] in any of the facts or events giving rise to the Proceeding, I (1) did not act with bad faith or active or deliberate dishonesty, (2) did not receive any improper personal benefit in money, property or services and (3) in the case of any criminal proceeding, had no reasonable cause to believe that any act or omission by me was unlawful.

 

In consideration of the advance of Expenses by the Company for reasonable attorneys’ fees and related Expenses incurred by me in connection with the Proceeding (the “Advanced Expenses”), I hereby agree that if, in connection with the Proceeding, it is established that (1) an act or omission by me was material to the matter giving rise to the Proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty or (2) I actually received an improper personal benefit in money, property or services or (3) in the case of any criminal proceeding, I had reasonable cause to believe that the act or omission was unlawful, then I shall promptly reimburse the portion of the Advanced Expenses relating to the claims, issues or matters in the Proceeding as to which the foregoing findings have been established.

 

IN WITNESS WHEREOF, I have executed this Affirmation and Undertaking on this         day of                                , 20       .

 

 

	
 
    	
Name:Exhibit 10.26

 

EXECUTION COPY

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

This Executive Employment Agreement (the “Agreement”) by and between Debra Hess (“Executive”) and NorthStar Realty Finance Corp. (the “Company”), is dated April 29, 2011.

 

WHEREAS, Executive and the Company desire to memorialize the terms and conditions related to Executive’s employment by the Company herein.

 

NOW THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.                                       Agreements Between the Parties.  This Agreement is intended to memorialize all of the terms and conditions of Executive’s employment by the Company.

 

2.                                       Employment.

 

(a)                                  Term.  The Company shall employ Executive, and Executive agrees to be employed with the Company, upon the terms and conditions set forth in this Agreement, for the period beginning on the Effective Date (as defined below) and ending on the third anniversary of the Effective Date (the “Employment Period”); provided, however, that commencing on the third anniversary of the Effective Date and on each subsequent anniversary of the Effective Date (each such anniversary, a “Renewal Date”), the Employment Period shall automatically be extended for one additional year unless, not later than ninety (90) days prior to such Renewal Date, the Company or Executive shall have given written notice not to extend the Employment Period; provided, further, however, that the Employment Period shall be subject to earlier termination as provided in Section 5(b) hereof (the “Term”).  The term “Effective Date” shall mean the date upon which Executive commences employment with the Company, which shall be immediately following the expiration or earlier termination of any notice period applicable to her employment with her immediately preceding employer.

 

(b)                                 Base Salary.  Executive’s initial base salary shall be $500,000 per annum (pro-rated for partial calendar years), payable in equal bi-monthly installments (as in effect from time to time, the “Base Salary”).  In subsequent years of the Term, the Base Salary shall be subject to annual review and adjustment from time to time by the compensation committee of the Company’s board of directors (the “Compensation Committee”), taking into account such factors as the Compensation Committee deems appropriate, including but not limited to the salaries of executive officers having similar titles and performing similar functions at comparable companies.

 

(c)                                  Annual Cash Bonus.  For fiscal years during Executive’s employment with the Company, Executive shall participate in an annual cash incentive compensation plan as adopted and approved by the board of directors of the Company or a committee thereof acting pursuant to the authority of the board of directors of the

 

 

Company (the “Board”) from time to time, with applicable corporate and individual performance targets and maximum award amounts determined by the Board upon recommendation of the Company’s Chief Executive Officer (the “Annual Cash Bonus”).  Any Annual Cash Bonus payable to Executive will be paid at the time the Company normally pays such bonuses to its senior executives, but in no event later than 90 days following the end of the applicable fiscal year, and will be subject to the terms and conditions of the applicable annual cash incentive compensation plan. For 2011, Executive’s Annual Bonus Pool Percentage (as defined in the Company’s Executive Incentive Bonus Plan) shall equal 2%, and in calculating the amount of Executive’s Annual Cash Bonus, the portion subject to Board discretion shall be awarded in full.

 

(d)                                 Long Term Incentive Plan.  During Executive’s employment with the Company, Executive shall be eligible to receive long term equity incentive compensation awards (which may consist of restricted stock, stock options, stock appreciation rights or other types of equity or cash bonus awards, as determined by the Board in its discretion) pursuant to the Company’s equity incentive compensation plans and programs in effect from time to time including, without limitation, the Company’s Executive Incentive Bonus Plan.  These awards shall be granted in the discretion of the Board and shall include such terms and conditions (including performance objectives) as the Board deems appropriate.  For 2011, Executive’s Long-Term Bonus Pool Percentage (as defined in the Company’s Executive Incentive Bonus Plan) shall equal 2%.

 

(e)                                  Vacation.  Executive shall be eligible for four weeks of annual vacation to be accrued and payable in accordance with the Company’s policy with respect to senior executives.

 

(f)                                    Indemnification.  To the fullest extent permitted by law, the Company will indemnify Executive against any actual or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative, arising out of claims against Executive by Executive’s immediately preceding employer based on any non-competition provisions of Executive’s employment arrangements with such employer or by reason of Executive’s status as a current or former director, officer, employee and/or agent of the Company, any subsidiary or affiliate of the Company or any other entity to which the Company appoints Executive to serve as a director or officer (to the extent such other entity does not indemnify Executive).  Executive shall be covered under any director and officer insurance policy obtained by the Company, if any, and shall be entitled to benefit from any officer indemnification arrangements adopted by the Company, if any, to the same extent as other directors or senior executive officers of the Company (including the right to such coverage or benefit following Executive’s employment to the extent liability continues to exist).  However, Executive agrees to repay any expenses paid or reimbursed by the Company if it is ultimately determined that Executive is not legally entitled to be indemnified by the Company.

 

(g)                                 Other Benefits.  In addition, Executive will be eligible to participate in all fringe benefit plans and retirement plans of the Company, as are

 

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generally available to the other senior management employees of the Company, such as health insurance plans, disability insurance plans, life insurance plans, expense reimbursement and the Company’s 401(k) retirement plan.

 

3.                                       Duties of Executive.

 

(a)                                  Duties of Position.  During the Employment Period, Executive shall serve as Chief Financial Officer of the Company.  Executive shall perform such financial and accounting division duties and responsibilities, consistent with Executive’s title, training and experience, as are from time to time reasonably assigned to Executive by the Chief Executive Officer of the Company, or, at the direction of the Chief Executive Officer, by the President or a Co-President of the Company.  Executive shall report directly to the Chief Executive Officer of the Company, or, at the direction of the Chief Executive Officer, to the President or a Co-President of the Company.  Executive agrees to devote all of Executive’s business time, attention and energies to the performance of the duties assigned to Executive hereunder, and to perform such duties faithfully, diligently and to the best of Executive’s abilities and subject to such laws, rules, regulations and policies from time to time applicable to the Company’s employees.  The Company may assign all or a portion of its rights and obligations under this agreement to any of its affiliates or enter into an agreement with any of its affiliates that provides that Executive will perform services on behalf of such affiliate and Executive agrees to provide such services, as directed by the Company.

 

(b)                                 Confidential Information.  Executive shall hold in confidence for the benefit of the Company all of the information (other than information concerning corporate opportunities) and business secrets in respect of the Company and all of its affiliates, including, but not limited to, all information and data relating to or concerned with the business, finances, pending transactions and other affairs of the Company and all of its affiliates, and Executive shall not at any time before or after Executive’s employment by the Company is terminated for any reason, or Executive resigns for any reason, willfully use or disclose or divulge any such information or data to any other Person (as defined below) except (i) with the prior written consent of the Company, (ii) to the extent necessary to comply with applicable law or the valid order of a court of competent jurisdiction, in which event Executive shall notify the Company as promptly as reasonably practicable (and, if possible, prior to making such disclosure) and (iii) in the performance of Executive’s duties hereunder.  With respect to information concerning corporate opportunities of the Company and all of its affiliates that are developed, initiated or become known to Executive during her employment with the Company, Executive shall hold in confidence for the benefit of the Company all of such information in respect of the Company and all of its affiliates, including, but not limited to, all information and data relating to or concerned with such opportunities of the Company and all of its affiliates, and Executive shall not at any time before or within one (1) year after Executive’s employment by the Company is terminated for any reason, or Executive resigns for any reason, willfully use or disclose or divulge any information relating to any such corporate opportunities to or for the benefit of Executive or any other Person (as

 

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defined below) except (i) with the prior written consent of the Company, (ii) to the extent necessary to comply with applicable law or the valid order of a court of competent jurisdiction, in which event Executive shall notify the Company as promptly as reasonably practicable (and, if possible, prior to making such disclosure) and (iii) in the performance of Executive’s duties hereunder.  The foregoing provisions of this Section 3(b) shall not apply to any information or data which has been previously disclosed to the public or is otherwise in the public domain in each case other than as a result of the breach by Executive of her obligations under this Section 3(b).  For purposes of this Agreement, “Person” means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization, other entity or “group” (as defined in the Securities Exchange Act of 1934).

 

4.                                       Termination of Employment.  Executive’s employment hereunder may be terminated in accordance with this Section 4.

 

(a)                                  Death.  Executive’s employment hereunder shall terminate upon her death.

 

(b)                                 Disability.  If, as a result of Executive’s incapacity due to physical or mental illness, Executive shall have been absent from the full-time performance of her duties hereunder for the entire period of six consecutive months, and within thirty (30) days after written Notice of Termination (as defined in Section 5(a)) is given shall not have returned to the performance of her duties hereunder on a full-time basis, the Company may terminate Executive’s employment hereunder for “Disability.”

 

(c)                                  Cause.  The Company may terminate Executive’s employment hereunder for Cause.  For purposes of this Agreement, the Company shall have “Cause” to terminate Executive’s employment hereunder upon the occurrence of any of the following events:

 

(i)                                     the conviction of, or a plea of nolo contendere by, Executive for the commission of a felony;

 

(ii)                                  continuing willful failure for ten (10) business days to substantially perform her duties hereunder (other than such failure resulting from Executive’s incapacity due to physical or mental illness or subsequent to the issuance of a Notice of Termination by Executive for Good Reason) after demand for substantial performance is delivered by the Company in writing that specifically identifies the manner in which the Company believes Executive has not substantially performed her duties; or

 

(iii)                               willful misconduct by Executive (including, but not limited to, breach by Executive of the provisions of Section 7) that is demonstrably and materially injurious to the Company or its subsidiaries.

 

(d)                                 Good Reason.  Executive may terminate her employment

 

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hereunder for “Good Reason” within thirty (30) days after the occurrence, without her written consent, of one of the following events that has not been cured within ten (10) business days after written notice thereof has been given by Executive to the Company:

 

(i)                                     the assignment to Executive of duties materially inconsistent with her status as a senior executive officer of the Company or the Executive is directed to directly report to other than the Board, the Company’s Chief Executive Officer, the Company’s President and/or one of the Company’s Co-Presidents (or the board of directors, chief executive officer or president of the Successor Person following a Change of Control pursuant to clause (i), (ii) or (iv) of the definition thereof);

 

(ii)                                  following a Change of Control pursuant to clause (i), (ii) or (iv) of the definition thereof, the assignment to Executive of duties with the Successor Person inconsistent with Executive’s title, position, status, reporting relationships, authority, duties or responsibilities to the Company as contemplated by Section 3(a) (including, without limitation, if Executive is not the chief financial officer of the Successor Person), or any other action by the Successor Person which results in a diminution in Executive’s title, position, status, reporting relationships, authority, duties or responsibilities, other than insubstantial or inadvertent actions not taken in bad faith which are remedied by the Successor Person or the Company promptly after receipt of notice thereof given by Executive;

 

(iii)                               a reduction by the Company in Executive’s Base Salary or a failure by the Company to pay any Base Salary or contractually committed cash bonus payment amounts when due;

 

(iv)                              the requirement by the Company that the principal place of performance of Executive’s services be at a location more than fifty (50) miles from the greater New York City metropolitan area;

 

(v)                                 any purported termination of Executive’s employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 5(a); or

 

(vi)                              a material failure by the Company to comply with any other material provision of this Agreement.

 

(e)                                  Change of Control.  For the purposes hereof, a “Change of Control” of the Company shall be deemed to have occurred if an event set forth in any one of the following paragraphs (i) - (v) shall have occurred:

 

(i)                                     any Person is or becomes Beneficial Owner (as defined below), directly or indirectly, of securities of the Company representing thirty-five percent (35%) or more of the combined voting power of the then outstanding securities of

 

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the Company, excluding (A) any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (x) of paragraph (ii) below, and (B) any Person who becomes such a Beneficial Owner through the issuance of such securities with respect to purchases made directly from the Company; or

 

(ii)                                  the consummation of a merger or consolidation of the Company with any other Person or the issuance of voting securities of the Company in connection with a merger or consolidation of the Company (or any direct or indirect subsidiary of the Company) pursuant to applicable stock exchange requirements, other than (x) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof) fifty percent (50%) or more of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (y) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing thirty-five percent (35%) or more of the combined voting power of the then outstanding securities of the Company;

 

(iii)                               the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company;

 

(iv)                              the stockholders of the Company approve an agreement for the sale or disposition by the Company of all or substantially all of the assets of the Company; or

 

(v)                                 individuals who, on the Effective Date, constitute the Board (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the Effective Date, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be deemed to be an Incumbent Director.

 

For purposes of this Agreement, (1) “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act and (2) “Successor Person” shall mean (A) the Person who is or becomes Beneficial Owner of securities of the Company representing thirty-five percent (35%) or more of the combined voting power of the then outstanding

 

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securities of the Company as a result of a Change of Control pursuant to clause (i) of the definition thereof; (B) the Person controlling the Person surviving or resulting from the consummation of a merger or consolidation of the Company with any other Person as a result of a Change of Control pursuant to clause (ii) of the definition thereof, or (C) the Person that is the purchaser or other transferee of all or substantially all of the assets of the Company following a sale or disposition by the Company of all or substantially all of the assets of the Company pursuant to clause (iv) of the definition thereof.

 

(f)                                    The Company may terminate Executive’s employment at any time for any reason, including without Cause.  Executive may terminate Executive’s employment at any time for any reason, including without Good Reason.

 

(g)                                 The Company shall not be required to make the payments and provide the benefits specified in Section 6 below unless Executive executes and delivers to the Company an agreement releasing the Company, its affiliates and its officers, directors and employees from all liability (other than the payments and benefits under this Agreement) (the “Release Agreement”); provided, however, that the Company shall release Executive from all liability to the Company and its affiliates that any Board members (other than Executive) have actual knowledge of on the Date of Termination under the Release Agreement.

 

(h)                                 Unless the Company agrees in writing to waive this requirement, upon the termination of Executive’s employment for any reason, Executive agrees to promptly resign from (i) office as a director of the Company, any subsidiary or affiliate of the Company or any other entity to which the Company appoints Executive to serve as a director, (ii) from all offices held by Executive in any or all of such entities in clause (i) above, and (iii) all fiduciary positions (including as trustee) held by Executive with respect to any pension plans or trusts established by any such entities in clause (i) above.

 

5.                                       Termination Procedure.

 

(a)                                  Notice of Termination.  Any termination of Executive’s employment by the Company or by Executive (other than termination pursuant to Sections 4(a) and 6(a)(i) hereof) shall be communicated by written “Notice of Termination” to the other party hereto in accordance with Section 12.  In connection with a termination pursuant to Section 4(b), 4(c) or 4(d), such “Notice of Termination” shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated.

 

(b)                                 Effect of Date of Termination.  “Date of Termination” of this Agreement shall mean (i) if the Term of this Agreement expires without renewal as of the third anniversary of the Effective Date or any subsequent Renewal Date, the date of such expiration, (ii) if Executive’s employment is terminated pursuant to Section 4(a) above, the date of Executive’s death, (iii) if Executive’s employment is terminated pursuant to

 

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Section 4(b) above, thirty (30) days after delivery to Executive of Notice of Termination (provided that Executive shall not have returned to the performance of her duties on a full-time basis during such thirty (30) day period), (iv) if Executive’s employment is terminated pursuant to Sections 4(c) and 4(f) above, the date specified in the Notice of Termination (which date shall be at least thirty (30) days after delivery to Company of Notice of Termination in the case of a termination by Executive pursuant to Section 4(f)), and (v) if Executive’s employment is terminated pursuant to Section 4(d) above, the date on which a Notice of Termination is given or any later date (within thirty (30) days) set forth in such Notice of Termination, provided that Company shall not have cured the event giving rise to the Notice of Termination within ten (10) business days following delivery of such Notice, and provided, further, that, if within thirty (30) days after any Notice of Termination is given pursuant to Section 4(d)(iii) above, the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding and final arbitration award.  Upon the Date of Termination, the Term of this Agreement shall expire and the Company shall have no further obligation to Executive except to the extent Executive is otherwise entitled to any unpaid salary or benefits hereunder and insurance coverage in accordance with applicable law; provided that the provisions set forth in Sections 2(f), 3(b), 6(b), 6(c), 7, 13, 14 and 15 hereof and this Section 5(b) shall remain in full force and effect after the termination of Executive’s employment, notwithstanding the expiration of the Term of or termination of this Agreement.

 

6.                                       Obligations of the Company Upon Termination of Employment.

 

(a)                                  Expiration of Term and Nonrenewal by Executive, By the Company for Cause or by Executive without Good Reason.  If Executive’s employment shall be terminated (i) due to and upon expiration of the Term of this Agreement because Executive shall have given written notice not to extend the Employment Period pursuant to Section 2(a), (ii) by the Company for Cause or (ii) by Executive without Good Reason, then the Company shall pay Executive her Base Salary (at the rate in effect at the time Notice of Termination is given) through the Date of Termination within 30 days after the Date of Termination, and, except as provided in Section 2(f), the Company shall have no additional obligations to Executive under this Agreement.

 

(b)                                 Death; Disability.  If, during the Employment Period, Executive’s employment shall terminate on account of death (other than on account of death after delivery of a valid Notice of Termination for Cause or by Executive without Good Reason) or Disability, except as provided in Section 2(f), the Company shall have no further obligations to Executive other than to provide Executive (or her estate):

 

(i)                                     within 30 days after the Date of Termination the sum of (A) the executive’s Base Salary through the Date of Termination to the extent theretofore unpaid plus (B) 1.0 times Executive’s Base Salary at the rate in effect at the Date of Termination;

 

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(ii)                                  within 30 days after the Date of Termination a pro-rated bonus based upon the number of days in the year of termination through the Date of Termination relative to 365 and the target Annual Bonus in the year the Date of Termination occurs;

 

(iii)                               the health benefits set forth under Other Benefits in Section 2(g) for a one year period from the Date of Termination;

 

(iv)                              full vesting of all Company equity awards as of the Date of Termination; and

 

(v)                                 continuing exercisability of all stock options and stock appreciation rights for the lesser of (x) 12 months after the Date of Termination or (y) the remainder of their term.

 

(c)                                  For any other reason.  If, during the Employment Period, the Company shall terminate Executive’s employment for any reason other than those provided in Section 6(a) or 6(b) above (including due to and upon expiration of the Term of this Agreement because the Company shall have given written notice not to extend the Employment Period pursuant to Section 2(a)), except as provided in Section 2(f), the Company shall have no further obligations to Executive other than:

 

(i)                                     the Company shall pay to Executive in a lump sum in cash within 30 days after the Date of Termination an amount equal to the sum of (A) the amount equal to Executive’s Base Salary through the Date of Termination to the extent theretofore unpaid plus (B) 1.0 times Executive’s total compensation in effect prior to the Date of Termination (using for this purpose, (x) Executive’s Base Salary at the rate in effect on the Date of Termination, and (y) the average of the annual bonuses (including Annual Cash Bonuses and annual bonuses paid in LTIPs or other securities but excluding any Long-Term Bonus (as defined under the Company’s Executive Incentive Bonus Plan)) earned for the three years prior to the year in which the Date of Termination occurs; provided that if Executive was not employed for three full calendar years prior to the year in which the Date of Termination occurs, the average for purposes of clause (y) shall be computed based on (i) each full calendar year in which Executive was employed prior to the year in which the Date of Termination occurs and (ii) each partial calendar year in which Executive was employed for at least one-half of such calendar year treating the amounts paid in such year as annual amounts for purposes of computing the average amounts);

 

(ii)                                  the Company shall pay to Executive in a lump sum in cash within 30 days after the Date of Termination a pro-rated bonus based upon the number of days in the year of termination through the Date of Termination relative to 365 and the target Annual Bonus in the year the Date of Termination occurs;

 

(iii)                               the health benefits set forth under Other Benefits in Section 2(g)

 

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until the earlier of (x) the one year anniversary of the Date of Termination and (y) the date upon which executive receives similar health benefits from another Person;

 

(iv)                              full vesting of all Company equity awards as of the Date of Termination; and

 

(v)                                 continuing exercisability of all stock options and stock appreciation rights for the lesser of (x) 12 months after the Date of Termination or (y) the remainder of their term.

 

7.                                       Prohibited Activities.

 

(a)                                  Non-Solicitation and Business Relationships.  Executive agrees that during Executive’s employment by the Company and for one (1) year following Executive’s Date of Termination (the “Non-Solicitation Period”), Executive shall not, directly or indirectly, solicit, induce, or attempt to solicit or induce any officer, director, employee, consultant, agent or joint venture partner of the Company or any of its affiliates to terminate his, her or its employment or other relationship with the Company or any of its affiliates for the purpose of associating with any competitor of the Company or any of its affiliates, or otherwise encourage any such person to leave or sever his, her or its employment or other relationship with the Company or any of its affiliates for any other reason, or authorize the taking of such actions by any other person or entity, or assist or participate with any such person or entity in taking such action.

 

(b)                                 Non-Competition.  Executive acknowledges that the services to be rendered by her to the Company are of a special and unique character. In consideration of her employment hereunder, Executive agrees that during Executive’s employment by the Company and for the one-year period following the termination of Executive’s employment hereunder by either party for any reason (other than (i) due to and upon expiration of the Term of this Agreement because the Company has provided written notice not to extend the Employment Period pursuant to Section 2(a), (ii) termination by Executive with Good Reason provided that a Change of Control shall not have occurred prior to the Date of Termination, or (iii) termination by the Company of Executive without Cause), Executive will not engage, directly or indirectly, whether as principal, agent, representative, consultant, employee, partner, stockholder, limited partner, other investor or otherwise (other than a passive investment of not more than five percent (5%) of the stock, equity or other ownership interest of any corporation, partnership or other entity), within the United States of America, in any business that competes directly with the principal businesses conducted by the Company as of the Executive’s Date of Termination.

 

8.                                       Confidentiality.  Each party to this Agreement shall keep strictly confidential the terms of this Agreement, provided, that (i) either party to this Agreement may disclose the terms of this Agreement with the prior written consent of the other party, (ii) either party to this Agreement may disclose the terms of this Agreement to the

 

10

 

extent necessary to comply with law or legal process, in which event the disclosing party shall notify the other party to this Agreement as promptly as practicable (and, if possible, prior to making such disclosure), (iii) either party to this Agreement may disclose the terms of this Agreement to outside counsel, underwriters and accountants and (iv) the Company may disclose the terms of this Agreement in public filings with the Securities and Exchange Commission or other regulatory agencies, without notice to Executive, to the extent that it believes such disclosure to be prudent, necessary or required by applicable law in connection with the operation of the business of the Company and shall have the right to file a copy of this Agreement with such regulating agencies, it being understood that if this Agreement is so disclosed or filed, Executive shall thereafter be released from her obligation in respect of this Section 8.

 

9.                                       No Waiver.  No failure or delay on the part of the Company or Executive in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy.  The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to the Company or Executive at law or in equity.  No waiver of or consent to any departure by either the Company or Executive from any provision of this Agreement shall be effective unless signed in writing by the party entitled to the benefit thereof.  No amendment, modification or termination of any provision of this Agreement shall be effective unless signed in writing by all parties hereto.  Any waiver of any provision of this Agreement, and any consent to any departure from the terms of any provision of this Agreement, shall be effective only in the specific instance and for the specific purpose for which made or given.

 

10.                                 Severability of Provisions.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction.  Moreover, if any one or more of the provisions contained in this Agreement shall be held to be excessively broad as to duration, activity or subject, such provision shall be construed by limiting and reducing it so as to be enforceable to the maximum extent allowed by applicable law.

 

11.                                 Non-Assignability.  The rights and obligations of Executive under this Agreement are personal to Executive and may not be assigned or delegated to any other Person; provided, however, that nothing in this Agreement shall preclude Executive from designating any of her beneficiaries to receive any benefits payable hereunder upon her death, or her executors, administrators or other legal representatives from assigning any rights hereunder to the person or persons entitled thereto.

 

12.                                 Notices.  Any notice given hereunder shall be in writing and shall be deemed to have been given when delivered by messenger or courier service (against appropriate receipt), or mailed by registered or certified mail (return receipt requested),

 

11

 

addressed as follows:

 

	
If   to the Company:
    	
 
    	
NorthStar   Realty Finance Corp.
    
	
 
    	
 
    	
399   Park Avenue, 18th Floor
    
	
 
    	
 
    	
New   York, NY 10022
    
	
 
    	
 
    	
Attention:   General Counsel
    
	
 
    	
 
    	
 
    
	
If   to Executive:
    	
 
    	
Debra   Hess
    
	
 
    	
 
    	
4   Kensington Court
    
	
 
    	
 
    	
Old   Greenwich, CT 06870
    

 

or at such other address as shall be indicated to the parties hereto in writing.  Notice of change of address shall be effective only upon receipt.

 

13.                                 Governing Law.  This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York applicable to contracts made and to be entirely performed within such State.

 

14.                                 Dispute Resolution.

 

(a)                                  Subject to the provisions of Section 14(b), any dispute, controversy or claim arising between the parties relating to this Agreement, or otherwise relating in any way to Executive’s employment by or interest in the Company or any of its affiliate (whether such dispute arises under any federal, state or local statute or regulation, or at common law), shall be resolved by final and binding arbitration in New York, New York, before a single arbitrator, selected by the American Arbitration Association in accordance with its rules pertaining at the time the dispute arises.  In such arbitration proceedings, the arbitrator shall have the discretion, to be exercised in accordance with applicable law, to allocate among the parties the arbitrator’s fees, tribunal and other administrative costs.  If Executive prevails on at least one material issue in dispute, the Company shall reimburse Executive for the reasonable fees and costs of her counsel (and the arbitrator shall be requested to rule on whether Executive has so prevailed).  The award of the arbitrator may be confirmed before and entered as a judgment of any court having jurisdiction over the parties.

 

(b)                                 The provisions of Section 14(a) shall not apply with respect to any application made by the Company for injunctive relief under this Agreement.

 

15.                                 Section 409A.  If any compensation or benefits provided by this Agreement may result in the application of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), the Company shall, in consultation with Executive, modify the Agreement in the least restrictive manner necessary in order to, where applicable, (a) exclude such compensation from the definition of “deferred compensation” within the meaning of such Section 409A or (b) comply with the provisions of such Section 409A, other applicable provision(s) of the Code and/or any rules, regulations or other regulatory guidance issued under such statutory provisions and

 

12

 

to make such modifications, in each case, without any diminution in the value of the payments to Executive.  To the extent required in order to comply with Section 409A of the Code, amounts and benefits to be paid or provided to Executive under Section 6 of this Agreement shall be paid or provided to Executive on the first business day after the date that is six months following the Date of Termination.

 

16.                                 Headings.  The paragraph headings used or contained in this Agreement are for convenience of reference only and shall not affect the construction of this Agreement.

 

17.                                 Entire Agreement.  This Agreement and any agreements executed contemporaneously herewith constitute the entire agreement between the parties with respect to the matters set forth herein, and there are no promises or undertakings with respect thereto relative to the subject matter hereof not expressly set forth or referred to herein or therein.

 

18.                                 Execution in Counterparts.  This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first set forth above.

 

	
 
    	
/s/   Debra Hess
    
	
 
    	
Debra   Hess
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
NORTHSTAR   REALTY FINANCE CORP.
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   David T. Hamamoto
    
	
 
    	
 
    	
Name:
    	
David   T. Hamamoto
    
	
 
    	
 
    	
Title:
    	
Chief   Executive Officer
    

 

14

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