Colony Financial, Inc. (Form: 8-K, Received: 04/02/2015 09:01:02)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 2, 2015

COLONY CAPITAL, INC.

(Exact name of registrant as specified in its charter)

Maryland

001-34456

27-0419483

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

2450 Broadway, 6th Floor

Santa Monica, CA 90404

(Address of principal executive offices)

(310) 282-8820

(Registrant’s telephone number, including area code)

Colony Financial, Inc.

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01

Entry into a Material Definitive Agreement.

OP Operating Agreement

In connection with the Closing (as defined below) of the contribution to the Company of substantially all of Colony Capital, LLC’s (“ CC ”) real estate and investment management business and operations (other than CC’s interests in Colony American Homes Inc. (“ CAH ”)), pursuant to the previously announced Contribution Agreement (as defined below) and Mark Transfer Agreement (as defined below), we entered into the Second Amended and Restated Limited Liability Company Agreement of Colony Capital Operating Company, LLC (formerly known as CFI RE Masterco, LLC) (“ OP ”), dated as of April 2, 2015 (the “ OP Operating Agreement ”), by and among the Company, OP and the Contributors (as defined below). The OP Operating Agreement reflects our new structure as an umbrella partnership real estate investment trust, or an UPREIT, in which the OP directly or indirectly holds substantially all of our assets and directly or indirectly conducts substantially all of our business. Immediately following the Closing, we directly owned approximately 81.2% of the units of membership interest in OP (“ OP Units ”) and the Contributors directly owned, collectively, approximately 15.5% of the aggregate OP Units. The remaining 3.3% of the OP Units are held by OP in a separate account for the purposes of OP’s obligations with respect to contingent consideration that may become payable by OP under the Contribution Agreement (as defined below) and the Colony Mark Transfer Agreement (as defined below).

Pursuant to the OP Operating Agreement, we, as the sole managing member in OP, will have sole responsibility and discretion in the management and control of OP, and the non-managing members of OP, in such capacity, will have no authority to transact business for, or take part in the operations, management or control of, OP. We, as the managing member of OP, have the power to cause OP to issue additional units of membership interest in one or more classes or series. These additional units of membership interest may include preferred membership units. Generally, we may issue additional shares of our stock, or rights, options, warrants or convertible or exchangeable securities having the right to subscribe for or purchase shares of our stock, only if we cause OP to issue to us membership interests or rights, options, warrants or convertible or exchangeable securities of OP having economic rights that are substantially similar to the securities that we have issued.

A member or assignee of OP, subject to any restrictions pursuant to any other agreement (including any lock-up agreement) between a member or an assignee and OP, may require OP to redeem part or all of its OP Units for cash based upon the fair market value of an equivalent number of shares of our common stock at the time of the redemption, determined in accordance with and subject to adjustment as provided in the OP Operating Agreement. Alternatively, we may elect to acquire those OP Units in exchange for shares of our common stock. Our acquisition will be on a one-for-one basis, subject to adjustment in the event of stock splits, stock dividends, distributions of warrants or stock rights, specified extraordinary distributions and similar events. Notwithstanding the foregoing, we are not required to redeem such member’s or assignee’s OP Units if our election to acquire such OP Units in exchange for shares of our Class A Common Stock would cause any person to violate the ownership limits or the other restrictions on ownership and transfer of our common stock, after giving effect to any waivers or modifications of such limits granted by our board of directors. With each redemption or exchange, we increase our percentage ownership interest in OP.

The OP Operating Agreement provides that as managing member, we may not voluntarily withdraw from OP or transfer or assign all or any portion of our interest in OP (other than a transfer to us or one of our wholly owned subsidiaries or as provided below) or engage in, or cause or permit a “Termination Transaction,” in each case other than with the consent of members (other than us, the managing member and entities controlled by us or the managing member) holding a majority of all the outstanding OP Units held by all members (other than us, the managing member and entities controlled by us or the managing member) entitled to vote on or consent to such matter, unless the requirements discussed below are satisfied. A “Termination Transaction” generally means any direct or indirect transfer of all or any portion of our membership interest in OP in connection with any merger, sale of assets, recapitalization or similar fundamental transactions. The consent of the non-managing members to a Termination Transaction is not required if:

•

each OP Unit is entitled to receive an amount of cash, securities or other property equal to the product of the number of shares of our common stock into which each OP Unit is then exchangeable and the greatest amount of cash, securities or other property paid to the holder of one share of our common stock in consideration of such share in connection with the Termination Transaction; and

•

all of the following conditions are met: (i) substantially all of the assets directly or indirectly owned by OP prior to the announcement of the Termination Transaction are, immediately after the Termination Transaction, owned directly or indirectly by OP or another limited partnership or limited liability company which is the survivor of a merger, consolidation or combination of assets with OP, which we refer to as the “surviving company,” (ii) the surviving company is classified as a partnership for U.S. federal income tax purposes; (iii) the rights of such members with respect to the surviving company include certain specified UPREIT features, such as the OP Unit redemption right.

The foregoing description of the OP Operating Agreement does not purport to be complete and is qualified in its entirety by reference to the OP Operating Agreement, which is filed as Exhibit 10.1 hereto. The foregoing information is also qualified in its entirety by reference to the text of Exhibit 99.1 hereto, which includes additional disclosure regarding the terms of the OP Operating Agreement that originally was disclosed in a Definitive Proxy Statement, which we filed with the U.S. Securities and Exchange Commission (the “ SEC ”) on February 24, 2015, as supplemented by Definitive Additional Materials filed on March 19, 2015, March 23, 2015 and March 25, 2015 (the “ Definitive Proxy Materials ”).

Agreement Regarding Tax Withholding for Richard B. Saltzman

The Company agreed to withhold 1,368,653 shares of Class A Common Stock from the distribution of shares made at closing to Richard B. Saltzman in the Transaction (as defined below), and to pay directly to the applicable federal, state and local taxing authorities an amount in cash equal to the 1,368,653 shares so withheld multiplied by the closing price of the Company’s Class A Common Stock on April 2, 2015 to satisfy the tax obligations of Mr. Saltzman in connection with the receipt of such shares.

Item 1.02

Termination of a Material Definitive Agreement.

In connection with the consummation of the Transaction (as defined below), we terminated the: (1) Investment Allocation Agreement, dated as of September 29, 2009, by and among CC, the Manager and the Company; (2) Amended and Restated Secondment Agreement, dated as of March 24, 2014, by and between CC and the Company; and (3) License Agreement, dated as of September 29, 2009, by and between New Colony Investors, LLC and the Company.

Item 2.01

Completion of Acquisition or Disposition of Assets.

On April 2, 2015, Colony Capital, Inc. (formerly known as Colony Financial, Inc.) (the “ Company ,” “ we ,” “ us ,” or “ our ”) and CC announced that the parties had completed (the “ Closing ”) the contribution to the Company (the “ Transaction ”) of substantially all of CC’s real estate and investment management business and operations, pursuant to the previously announced Contribution and Implementation Agreement (the “ Contribution Agreement ”), dated as of December 23, 2014, by and among the Company, CC, OP, Colony Capital Holdings LLC (“ CC Holdings ”), Colony Capital OP Subsidiary, LLC (“ NewCo ”), CCH Management Partners I, LLC (“ CCH I ”), FHB Holding LLC (“ FHB LLC ”) and Richard B. Saltzman (“ Mr. Saltzman ” and, collectively with CC Holdings, CC and FHB LLC, the “ Contributors ”), and Colony Mark Transfer Agreement (the “ Colony Mark Transfer Agreement ”), dated as of December 23, 2014, by and between the Company and New Colony Holdings LLC (the “ Mark Transferor ”), which is an affiliate of Thomas J. Barrack, Jr. (“ Mr. Barrack ”). While the Company continues to hold its significant ownership interest in CAH and will receive certain cost reimbursements under a transitional services agreement with CAH, it will not acquire CC’s ownership interest in CAH or receive management fees from CAH due to the internalization of CAH’s management in November 2014.

The consummation of the Transaction was subject to the satisfaction or waiver of conditions, including the requisite approvals of our stockholders on certain matters contemplated by the Contribution Agreement, which as further described below, was received at a special meeting of stockholders (the “ Special Meeting ”) held on March 31, 2015. In connection with the Transaction, we amended our Articles of Amendment and Restatement (the “ Articles ”), which as further described below, among other things, reclassified our common stock as Class A Common Stock and created a new class of common stock, Class B Common Stock. As a result of the Transaction, the new Colony Capital, Inc. will become an integrated real estate investment management platform. As of the Closing, we are no longer externally managed by Colony Financial Manager, LLC and have become an internally managed company. In addition, we are now able to sponsor new investment vehicles as general partner under the Colony name.

In connection with the Closing, the Company changed its name from “Colony Financial, Inc.” to “Colony Capital, Inc.,” but the Company’s Class A Common Stock will continue to be listed on the New York Stock Exchange under the ticker symbol “CLNY.”

Prior to the Transaction, CC was a privately held, independent, global real estate investment firm founded in 1991 by Mr. Barrack. CC sponsored and managed investment funds primarily focused on real estate and real estate-related assets. CC had an extensive global footprint and

corresponding infrastructure, with more than 300 employees operating in a total of 14 offices in the following 10 countries: China, England, France, Germany, Italy, Lebanon, Luxembourg, South Korea, Spain and the U.S. This global infrastructure provided CC’s acquisition team with proprietary market knowledge, sourcing capabilities and the local presence required to identify and execute complex transactions. In the 24 years since its inception, CC managed investments in diverse and complex property, corporate and portfolio transactions across five continents through varied economic cycles. Since its inception, CC has managed over $60 billion of investments in over 37,000 assets and loans and, at the Closing, had more than $19 billion of assets under management (gross) with more than 300 investor relationships.

Since inception, CC adapted its investment strategy to the different market opportunities that arose from time to time. Beginning in 1991, CC became one of the pioneering purchasers of distressed assets from the Resolution Trust Corporation (“ RTC ”), and the Federal Deposit Insurance Corporation (the “ FDIC ”). In the mid-1990s, it identified comparable investment opportunities in Europe. As a result, CC began to build a significant European presence with an initial investment focus on distressed real estate. As the market opportunities again shifted in the mid- to late-1990s, CC broadened its focus to include equity investments in real estate and real estate-related assets in the U.S., Europe and Asia, and expanded its global presence by setting up operations in Asia to capitalize on opportunities arising from the Asian financial crisis of the late 1990s. Since then, CC has established several closed-end investment funds primarily focused on equity investments in real estate and operating businesses significantly dependent on real estate. As the global economy suffered a significant downturn beginning in late 2007 and commercial real estate fundamentals began to deteriorate, CC leveraged its prior experiences to capitalize on distressed real estate debt opportunities.

CC historically targeted three major investment strategies, each executed from separate platforms, but all leveraging CC’s back office infrastructure, which is largely located in Santa Monica, California. Each investment platform has benefited from its synergistic relationship with one another. Because the platforms target different strategies and return profiles, the potential conflicts of interest are reduced. The platforms are:

•

Debt funds that seek primarily distressed investments that CC believed can generate gross mid-teens returns using moderate leverage, with a focus on opportunities emanating from the dislocation in the credit markets, including investments in FDIC loan portfolios, other loan portfolios, originated and acquired loans, special situation investments and CMBS debt securities.

•

Opportunity funds focused on equity investment opportunities that CC believed may generate levered gross returns in excess of 20%, including asset-specific real estate funds and global and regional opportunity funds focused on, among other things, investments in single family residential rental homes, investments in operating companies with a significant dependence upon real estate, investments in commercial developments, direct investments in real estate and investments in performing and non-performing senior and junior mortgages.

•

U.S. value-added real estate funds that were managed by Colony Realty Partners LLC (“ CRP ”) and focused on real estate investments in industrial, office, multifamily and retail properties located in the United States.

At the Closing, the Contributors and the Mark Transferor received the following consideration:


	OP Units		Class A Common Stock		Class B Common Stock
CC		18,399,671		—		—
CCH I		1,621,859		—		—
FHB LLC		939,028		—		—
Saltzman		375,611		1,314,981		—
Mark Transferor		—		112,627		563,987
Total		21,336,169		1,427,608		563,987

The Class A Shares received by Mr. Saltzman above do not include 1,368,653 Class A Shares that would otherwise have been distributed to Mr. Saltzman but instead have been retained by the Company. See Item1.01 above.

CC Holdings and CC are commonly controlled entities and were the parent companies of our manager, which was contributed to OP in the Transaction, and Mr. Saltzman is our Chief Executive Officer. We have certain other relationships with CC and its affiliates (including our Executive Chairman, Mr. Barrack), which are more fully described in our filings with the SEC and Exhibit 99.1 hereto, which includes additional disclosure originally included in the Definitive Proxy Materials.

The foregoing information relating to the completion of the Transaction is qualified in its entirety by reference to Exhibit 99.1 hereto, which includes additional disclosure originally included in the Definitive Proxy Materials regarding the (i) consideration to be received in the Transaction and (ii) the nature of the relationships between the parties to the Contribution Agreement, the Colony Mark Transfer Agreement, the OP Operating Agreement and the other agreements described in the Definitive Proxy Materials, and the Company and its affiliates.

Item 3.02

Unregistered Sales of Equity Securities.

The information contained in Item 2.01 of this Current Report is incorporated by reference in this Item 3.02. The Class A Common Stock, OP Units and Class B Common Stock issued and sold pursuant to the Contribution Agreement and the Colony Mark Transfer Agreement have been issued and sold in reliance on Section 4(a)(2) of the Securities Act.

Item 5.02

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Appointment of Neale W. Redington as Chief Accounting Officer

On April 2, 2015, our Board of Directors appointed Neale W. Redington, age 48, as our Chief Accounting Officer, effective immediately.

Mr. Redington previously served as Senior Vice President, Controller and Chief Accounting Officer of CC, where he was responsible for the financial accounting and reporting for CC-sponsored investments and related affiliates and subsidiaries. Prior to joining CC in 2008, Mr. Redington was an audit partner in the real estate and hospitality practice of Deloitte & Touche LLP, where he was the U.S. partner in charge of hospitality services.

Mr. Redington is a Certified Public Accountant (license inactive) and a Chartered Accountant in England & Wales. Mr. Redington received a bachelor’s degree, with honors, in commerce, with a focus on accounting, in 1987 from the University of Birmingham in England.

Arrangements with Ronald M. Sanders, Darren J. Tangen and Kevin P. Traenkle

On March 16, 2015, we entered into employment agreements with each of: (1) Ronald M. Sanders, our Executive Director and Chief Legal Officer; (2) Darren J. Tangen, our Executive Director and Chief Financial Officer; and (3) Kevin P. Traenkle, our Executive Director and Chief Investment Officer Global Real Estate. Each of these agreements was initially entered into subject to approval by our stockholders of, and the ultimate completion of, the Transaction and became effective upon the completion of the Transaction.

Each of the agreements will be in effect for an initial term of three years following the Closing, subject to automatic renewals of additional successive one-year periods unless either party provides at least 180 days’ advance notice of non-renewal. Each agreement requires that the executive devote his full business time and attention to the performance of his duties to us, but provides that the executive is permitted to engage in certain other outside activities so long as they do not unreasonably interfere with the performance of the executive’s duties to us.

The agreements provide for the payment of a specified base salary to each executive, which is equal to $432,000 for Mr. Sanders, $447,000 for Mr. Tangen and $472,000 for Mr. Traenkle. In addition, the agreements provide that each executive will be eligible to receive a discretionary annual cash bonus with a target amount of $1,062,500 for Mr. Sanders, $1,300,000 for Mr. Tangen and $1,575,000 for Mr. Traenkle, and annual grants of equity-based awards with a target value of $680,000 for Mr. Sanders, $1,000,000 for Mr. Tangen and $990,000 for Mr. Traenkle. In addition, the executives will continue to receive allocations in respect of carried interests relating to funds that we now manage that were granted to them prior to the Closing and are eligible to be granted new allocations in respect of carried interests relating to funds managed by us as is determined by the Board from time to time in consultation with the applicable executive.

The executives are also eligible to participate in our benefit plans made available to our senior executive officers from time to time and to receive certain of the perquisites that the executives were entitled to receive immediately prior to the Closing.

The agreements provide that if the executive’s employment is terminated by us without “cause” (as defined in the agreements and including non-renewal of the agreements by us) or by the executive for “good reason” (as defined in the agreement and described below), and the executive executes a release of claims, he will be eligible to receive: (1) a lump sum cash payment equal to two times the sum of his base salary in effect immediately prior to the date of termination and average annual bonus with respect to the three prior calendar years (or, if any such termination of employment occurs prior to the executive receiving his annual bonus in respect of calendar year 2017, then his target annual bonus); (2) a lump sum cash payment in respect of the annual bonus payable in respect of the year prior to the year of termination, if unpaid as of the date of termination; (3) a pro-rated target bonus for the year of termination; (4) continued medical, dental and vision benefits at active employee rates for 24 months following termination; and (5) full vesting of all equity-based awards, carried interests and other like compensation that he holds, to the extent unvested upon his termination.

The agreements also provide that if an executive provides notice to us of his intention not to renew the agreement upon the scheduled expiration of the initial term or any renewal term, then he will receive: (1) a lump sum cash payment in respect of the annual bonus payable in respect of the year prior to the year of termination, if unpaid as of the date of termination; and (2) a pro-rated target bonus for the year of termination.

For purposes of the agreements, “good reason” includes, in summary: (1) a material diminution in the executive’s duties, authority or responsibilities or a diminution in the executive’s title or position; (2) a requirement that the executive report to any person other than our Chief Executive Officer or Executive Chairman; (3) a reduction in the executive’s base salary, target annual cash bonus or target annual equity incentive grant; (4) a 25-mile relocation of the executive’s principal place of business; or (5) a material breach of the agreement or any other material agreement with the executive by us.

The agreements also include a provision providing that if any payments to be made to the executive, whether under the agreement or otherwise, would subject the executive to the excise tax on so-called “golden parachute payments” in accordance with Sections 280G or 4999 of the Internal Revenue Code, then the payments will be reduced to the extent necessary to avoid the excise tax, but only if the amount of the payments after such reduction would result in the executive receiving a greater net after-tax benefit than if all of the payments were provided and the excise tax were imposed.

In addition, the agreements, through a restrictive covenant agreement that is included as an exhibit to the agreements, provide that the executives will not, subject to certain exceptions, compete with us, or solicit our investors or customers or employees or those of our subsidiaries during their employment with us and for the one-year period following the termination of their employment with us unless their employment is terminated by us without cause (as defined in the agreement and including non-renewal of the employment agreement by us) or by the executive for “good reason” (as defined in the agreement and described above). The agreements also contain covenants relating to the treatment of confidential information and intellectual property matters and restrictions on the ability of the executives and us to disparage the other.

Item 5.03

Amendments to the Articles of Incorporation or Bylaws; Change in Fiscal Year

At our special meeting of stockholders on March 31, 2015, our stockholders approved, among other things, each of the proposed amendments to our Articles of Amendment and Restatement (the “ Prior Charter ”) described in Item 5.07 below and in Proposal 2 in our Definitive Proxy Materials (collectively, the “ Charter Amendments ”).

On April 1, 2015, immediately following this approval, we filed Articles of Amendment (the “ Articles of Amendment ”) with the Maryland State Department of Assessments and Taxation to implement the Charter Amendments and also to change our name to “Colony Capital, Inc.,” as we have previously announced. Immediately after filing the Articles of Amendment, we filed Articles of Restatement (the “ Articles of Restatement ”) to fully restate the Prior Charter. Both the Articles of Amendment and the Articles of Restatement became effective on April 1, 2015.

The foregoing description of the Articles of Amendment and the Articles of Restatement, and the Charter Amendments implemented thereby, is not complete and is subject to and qualified in its entirety by reference to the Articles of Amendment and Articles of Restatement, copies of which are attached hereto as Exhibit 3.1 and Exhibit 3.2, respectively, and is incorporated in this Item 5.03 by reference.

Item 5.07

Submission of Matters to a Vote of Security Holders.

Results of Special Meeting of Stockholders

On March 31, 2015, we held the Special Meeting at which our stockholders approved the following proposals. The final results for the votes regarding each proposal are set forth below.

Proposal 1: Approval of the Issuances

At the Special Meeting, our stockholders approved the issuance, pursuant to the Contribution Agreement and the Mark Transfer Agreement, of (x) shares of our Class A common stock, (y) shares of our newly created Class B common stock, and shares of Class A common stock to be issued upon conversion of such shares of Class B common stock, and (z) OP Units in OP, and shares of Class A common stock to be issued upon redemption of such OP Units in certain circumstances in each case to the applicable contributor and its affiliates and related persons in the Transaction, which includes certain of our directors and officers or affiliates thereof. The table below sets forth the voting results for this proposal:

Votes For

Votes Against

Abstentions

Broker Non-

Votes

90,305,999.52

2,491,556.69

110,309.20

233,403.70

Proposal 2: Approval of the Charter Amendments

At the Special Meeting, our stockholders approved the Charter Amendments, which were voted on separately as Proposal 2(a) and Proposal 2(b), as follows:

Proposal 2(a): Approval of amendments to our Prior Charter to designate, and to set the express terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of conversion and redemption of, our Class B common stock, which entitles the holders to thirty-six and one-half (36.5) votes per share on all matters on which Class A common stockholders are entitled to vote and is designed to give the holders thereof voting rights that are proportional to the economic interests in the Company attributable to such holders or their affiliates that are issued pursuant to the Contribution Agreement in the form of OP Units, and the corresponding re-designation of our common stock as Class A common stock, and conforming and immaterial changes and modifications related thereto. The table below sets forth the voting results for this proposal:


Votes For	Votes Against	Abstentions	Broker Non-Votes
87,027,085.67	6,019,495.24	94,688.20	0

Proposal 2(b): Approval of amendments to our Prior Charter to revise our stock ownership limitations to (a) lower the common stock ownership limit from 9.8% to 8.0% of value or share number, whichever is more restrictive, subject to a “grandfather provision” applicable to certain pre-existing holdings, and (b) establish a separate “designated investment entity” ownership limit of 9.9% in value or share number, whichever is more restrictive, with respect to certain investment entities and, in each case, conforming and immaterial changes and modifications related thereto. The table below sets forth the voting results for this proposal:


Votes For	Votes Against	Abstentions	Broker Non-Votes
90,294,063.22	2,754,682.69	92,552.20	0

Item 8.01

Other Events.

On April 2, 2015, the Company, issued a press release announcing the Closing of the Transaction. A copy of the press release is attached as Exhibit 99.2 hereto, and is incorporated herein by reference.

The Company hereby files as an exhibit hereto pro forma financial information for the year ended December 31, 2014 that gives effect to the Company’s acquisition of a portfolio of light industrial real estate assets and associated operating platform from Cobalt Capital Partners, L.P. and its affiliates (the “ Cobalt Acquisition ”), by purchase agreements executed on November 18, 2014 and previously disclosed under Item 1.01 of that certain Current Report on Form 8-K filed on November 20, 2014, as if such acquisition had occurred on January 1, 2014.

Cautionary Statement Regarding Forward-Looking Statements

This communication may contain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and contingencies, many of which are beyond our control, and may cause actual results to differ significantly from those expressed in any forward-looking statement.

Neither the Company nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements speak only as of the date of this communication. the Company is not under any duty to update any of these forward-looking statements after the date of this communication, nor to conform the Company’s prior statements to actual results or revised expectations, and the Company does not intend to do so.

Item 9.01

Financial Statements and Exhibits.

(a)	No financial statements are required with respect to the Transaction because it involved the acquisition of a business that is not significant pursuant to Regulation S-X Rule 11-01(b).

(b)	The unaudited pro forma financial information of Colony Capital, Inc. giving effect to the Cobalt Acquisition is provided as Exhibit 99.3 to this Form 8-K.

(d)

Exhibits



3.1		Articles of Amendment, dated April 1, 2015

3.2		Articles of Restatement, dated April 1, 2015

10.1		Second Amended and Restated Limited Liability Company Agreement of Colony Capital Operating Company, LLC (formerly known as CFI RE Masterco, LLC), dated as of April 2, 2015.

10.2		Waiver and Acknowledgement to Contribution and Implementation Agreement, entered into as of April 1, 2015.

10.3		Employment Agreement, dated as of March 16, 2015, by and between Colony Capital, Inc. (formerly known as Colony Financial, Inc.) and Ronald M. Sanders, Jr.

10.4		Employment Agreement, dated as of March 16, 2015, by and between Colony Capital, Inc. (formerly known as Colony Financial, Inc.) and Darren J. Tangen.

10.5		Employment Agreement, dated as of March 16, 2015, by and between Colony Capital, Inc. (formerly known as Colony Financial, Inc.) and Kevin Traenkle.



99.1		Excerpts from the Definitive Proxy Statement, filed on February 24, 2015, as supplemented by Definitive Additional Materials filed on March 19, 2015, March 23, 2015 and March 25, 2015

99.2		Press Release, dated as of April 2, 2015.

99.3		Unaudited Pro Forma Financial Information of Colony Capital, Inc.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


COLONY CAPITAL, INC.

By:		/s/ Darren J. Tangen
		Darren J. Tangen
		Executive Director – Chief Financial Officer

Date: April 2, 2015

Exhibit 3.1

ARTICLES OF AMENDMENT

COLONY FINANCIAL, INC.

Colony Financial, Inc., a Maryland corporation (the “ Corporation ”), hereby certifies to the State Department of Assessments and Taxation of Maryland that:

FIRST : The Corporation desires to amend its charter (the “ Charter ”) as currently in effect.

SECOND : The Charter is hereby amended by deleting Article II of the Charter in its entirety and substituting in lieu thereof the following new Article II:

“The name of the corporation is: Colony Capital, Inc.”

THIRD : The Charter is hereby amended by deleting Article VI of the Charter in its entirety and substituting in lieu thereof the new Article VI as set forth in Exhibit A to these Articles of Amendment, which amendment relates to the designation of, and the setting of the express terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of conversion and redemption of, the Corporation’s Class B Common Stock, par value $0.01 per share, which entitles the holders to thirty-six and one-half (36.5) votes per share on all matters on which stockholders of the Corporation’s Class A Common Stock, par value $0.01 per share, are entitled to vote and is designed to give the holders thereof voting rights that are proportional to the economic interests in the Corporation attributable to such holders or their affiliates that are issued pursuant to the Contribution and Implementation Agreement, dated as of December 23, 2014, in the form of membership interests in Colony Capital Operating Company, LLC, and the corresponding re-designation of the Corporation’s common stock, par value $0.01 per share, as newly reclassified Class A Common Stock, and conforming and immaterial changes and modifications related thereto.

FOURTH : The Charter is hereby amended by deleting Article VII of the Charter in its entirety and substituting in lieu thereof the new Article VII as set forth in Exhibit B to these Articles of Amendment, which amendment relates to revising the Corporation’s stock ownership limitations to (a) lower the common stock ownership limit from 9.8% to 8.0% of value or share number, whichever is more restrictive, subject to a “grandfather provision” applicable to certain pre-existing holdings, and (b) establish a separate “designated investment entity” ownership limit of 9.9% in value or share number, whichever is more restrictive, with respect to certain investment entities and, in each case, conforming and immaterial changes and modifications related thereto.

FIFTH : The amendment to the Charter as hereinabove set forth in Paragraph SECOND has been approved by a majority of the entire Board of Directors of the Corporation as required by Section 2-605(a)(1) of the Maryland General Corporation Law. The amendments to the Charter as hereinabove set forth in Paragraphs THIRD and FOURTH have been approved by a majority of the entire Board of Directors of the Corporation.

SIXTH : The amendments to the Charter as hereinabove set forth in Paragraphs THIRD and FOURTH have been duly advised by the Board of Directors and approved by the stockholders of the Corporation as required by law.

SEVENTH : The foregoing amendments do not change the total number of shares of authorized capital stock of the Corporation or the aggregate par value thereof.

EIGHTH : The undersigned acknowledges these Articles of Amendment to be the corporate act of the Corporation and as to all matters or facts required to be verified under oath, the undersigned acknowledges that, to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.

[Signature page follows.]

IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be signed in its name and on its behalf by its President and Chief Executive Officer and attested to by its Secretary on this 1 day of April, 2015.


ATTEST:		COLONY FINANCIAL, INC.

/s/ Ronald M. Sanders		/s/ Darren J. Tangen		(SEAL)
Name:	Ronald M. Sanders	Name:	Darren J. Tangen
Title:	Secretary	Title:	Chief Financial Officer and Chief Operating Officer

EXHIBIT A

ARTICLE VI

STOCK

Section 6.2 Class A Common Stock . Subject to the provisions of Article VII, each share of Class A Common Stock shall entitle the holder thereof to one vote on each matter upon which holders of Class A Common Stock are entitled to vote. The Board of Directors may reclassify any unissued shares of Class A Common Stock from time to time in one or more classes or series of common stock or Preferred Stock.

Section 6.2.1 Dividends and Distributions . The Board of Directors may from time to time authorize and the Corporation shall declare to the holders of Class A Common Stock such dividends or distributions in cash or other assets of the Corporation or in securities of the Corporation or from any other source as the Board of Directors in its discretion shall determine, but only out of funds legally available therefor. The Board of Directors shall endeavor to authorize, and the Corporation shall declare and pay, such dividends and distributions as shall be necessary for the Corporation to qualify as a REIT under the Code (unless the Board of Directors has determined that it is no longer in the best interests of the Corporation to continue to be qualified as a REIT); however, stockholders shall have no right to any dividend or distribution unless and until authorized by the Board of Directors and declared by the Corporation. The exercise of the powers and rights of the Board of Directors pursuant to this Section 6.2.1 shall be subject to the preferences of any class or series of stock at the time outstanding.

Section 6.2.2 Liquidation Rights . In the event of any voluntary or involuntary liquidation, dissolution or winding up of, or any distribution of the assets of, the Corporation, the holders of Class A Common Stock shall be entitled to participate, together with the holders of shares of any other class of stock now existing or hereafter classified or reclassified not having a preference over Class A Common Stock as to distributions in the liquidation, dissolution or winding up of the Corporation, in the distribution of any assets of the Corporation remaining after the Corporation shall have paid, or provided for payment of, all debts and liabilities of the Corporation and after the Corporation shall have paid, or set aside for payment, to the holders of any class of stock having preference over the Class A Common Stock as to distributions in the event of dissolution, liquidation or winding up of the Corporation.

Section 6.2.3 Equal Status . Except as expressly provided in this Article VI, Class A Common Stock and Class B Common Stock shall have the same rights and privileges and rank equally, share ratably and be identical in all respects as to all matters.

Section 6.3 Class B Common Stock . Class B Common Stock shall not be issued except in conjunction with an issuance of OP Units, in a ratio of no more than one (1) share of Class B Common Stock for every thirty-five and one-half (35.5) OP Units, as may be adjusted to take into account any reclassification, stock split, reverse stock split, stock dividend or non-cash distribution, recapitalization or other similar transaction and/or as may be similarly adjusted in accordance with the Partnership Agreement. Subject to the provisions of Article VII, the rights, preferences, privileges and restrictions granted and imposed upon the Class B Common Stock are as follows:

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Section 6.3.1 Definitions . For the purpose of this Section 6.3, the following terms shall have the following meanings:

Affiliate . The term “Affiliate” means, with respect to any Person, (i) any Person directly or indirectly controlling, controlled by or under common control with such Person, or (ii) any officer, director, general partner or trustee of such Person or any Person referred to in the foregoing clause (i).

Beneficial Owner . The term “Beneficial Owner” has the meaning set forth in Rule 13d-3 and Rule 13d-5 of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”).

Beneficial Ownership . The term “Beneficial Ownership” shall mean, with respect to any security, the direct or indirect ownership of such security by any Beneficial Owner of such security, except that, in calculating the beneficial ownership of any particular “person” (as that term is used in Section 13(d)(3) of the Exchange Act), such “person” will be deemed to have beneficial ownership of all securities that such “person” has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time.

Control . The term “Control” means, when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

Exchange Act . The term “Exchange Act” has the meaning set forth in the definition of “Beneficial Owner.”

Executive . The term “Executive” means each Person who is a member of, or an interest holder of, CCH Management Partners I, LLC or CCH Management Partners II, LLC, Colony Capital, LLC or Colony Capital Holdings, LLC, other than Thomas J. Barrack, Jr., in each case for so long as he or she remains employed by the Corporation or any of its Affiliates.

Family Member . The term “Family Member” means, as to any Person that is an individual, (i) such Person’s spouse, ancestors (whether by blood or by adoption or step-ancestors by marriage), descendants (whether by blood or by adoption or step-descendants by marriage), brothers and sisters, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law and descendants (whether by blood or by adoption or step-descendants by marriage) of a brother or sister and (ii) any inter vivos or testamentary trusts (whether revocable or irrevocable) of which only such Person, his or her spouse, ancestors (whether by blood or by adoption or step-ancestors by marriage), descendants (whether by blood or by adoption or step-descendants by marriage), brothers and sisters, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law and descendants (whether by blood or by adoption or step-descendants by marriage) of a brother or sister are the sole initial income beneficiaries.

OP Unit . The term “OP Unit” shall mean “Membership Common Unit” as set forth in the Partnership Agreement.

Operating Partnership . The term “Operating Partnership” shall mean Colony Capital Operating Company, LLC (formerly known as CFI RE Masterco, LLC).

Partnership Agreement . The term “Partnership Agreement” shall mean the Second Amended and Restated Limited Liability Company Agreement of the Operating Partnership, as amended from time to time.

Person . The term “Person” shall mean an individual or a corporation, partnership (general or limited), trust, estate, custodian, nominee, unincorporated organization, association, limited liability company or any other individual or entity in its own or any representative capacity.

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Qualified Transferee . The term “Qualified Transferee” shall mean (a) Colony Capital, LLC and Colony Capital Holdings, LLC, (b) any Executive, (c) any Family Member or Affiliate of an Executive or of the Initial Holder, or (d) any Person (to the extent not included in clause (c)) Controlled by any combination of one or more Executives, the Initial Holder and/or one or more Family Members of an Executive or the Initial Holder. None of the Corporation, the Operating Partnership, or the Charitable Trustee shall be a Qualified Transferee.

Initial Holder . The term “Initial Holder” shall mean Thomas J. Barrack, Jr.

Transfer . The term “Transfer” (and the correlative terms “Transferring” and “Transferred”) has the meaning set forth in Article VII below; provided that for purposes of this Article VI, “Transfer” (and the correlative terms “Transferring” and “Transferred”) shall not include any hypothecation, pledge or security interest that does not include a transfer or sharing of any voting rights of such securities unless and until the secured party gains possession or control of any such voting rights.

Section 6.3.2 Voting Rights . Subject to the provisions of Article VII and except as may otherwise be specified in the Charter, each share of Class B Common Stock shall entitle the holder thereof to thirty-six and one-half (36.5) votes on each matter on which holders of Class A Common Stock are entitled to vote. The Class B Common Stock and Class A Common Stock shall vote together as a single class. The Board of Directors may reclassify any unissued shares of Class B Common Stock from time to time in one or more classes or series of Common Stock or Preferred Stock.

Section 6.3.3 Dividends and Distributions; Subdivisions or Combinations . Subject to the preferences applicable to any series of Preferred Stock, if any, outstanding at any time, if and when the Board of Directors authorizes or declares a dividend or distribution of cash, property or shares of stock of the Corporation with respect to each share of Class A Common Stock out of assets or funds of the Corporation legally available therefor, such authorization or declaration also shall constitute a simultaneous authorization or declaration of an equivalent dividend or distribution with respect to each share of Class B Common Stock. If the Corporation in any manner subdivides or combines the outstanding shares of Class A Common Stock, the outstanding shares of Class B Common Stock will be subdivided or combined in the same manner.

Section 6.3.4 Liquidation Rights . In the event of any voluntary or involuntary liquidation, dissolution or winding up of, or any distribution of the assets of, the Corporation, each holder of Class B Common Stock shall be entitled to participate, together with the holders of shares of any other class of stock now existing or hereafter classified or reclassified not having a preference over Class B Common Stock as to distributions in the liquidation, dissolution or winding up of the Corporation, in the distribution of any assets of the Corporation remaining after the Corporation shall have paid, or provided for payment of, all debts and liabilities of the Corporation and after the Corporation shall have paid, or set aside for payment, to the holders of any class of stock having preference over the Class B Common Stock as to distributions in the event of dissolution, liquidation or winding up of the Corporation.

Section 6.3.5 Equal Status . Except as expressly provided in this Article VI Class A Common Stock and Class B Common Stock shall have the same rights and privileges and rank equally, share ratably and be identical in all respects as to all matters.

Section 6.3.6 Conversion . The Class B Common Stock is not convertible into or exchangeable for any other property or securities of the Corporation, except as provided in this Section 6.3.6.

(a) Automatic Conversion . Shares of Class B Common Stock shall convert automatically into fully-paid and non-assessable shares of Class A Common Stock at a ratio of one share of Class A Common Stock for each share of Class B Common Stock in the following circumstances:

(i) In the event that the Initial Holder or any of his Family Members Transfers or causes to be Transferred, directly or indirectly, Beneficial Ownership of Class B Common Stock, other than to the Initial Holder or any of his Family Members, each share of Class B Common Stock being Transferred shall convert automatically into one share of Class A Common Stock immediately prior to such Transfer; and

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(ii) In the event that:

(x) the Initial Holder Transfers or causes to be Transferred, directly or indirectly, Beneficial Ownership of OP Units held, directly or indirectly, by the Initial Holder, other than to a Qualified Transferee,

(y) a Qualified Transferee Transfers or causes to be Transferred, directly or indirectly, Beneficial Ownership of OP Units held, directly or indirectly, by such Qualified Transferee, other than to the Initial Holder or to another Qualified Transferee; or

(z) a Qualified Transferee that is a Beneficial Owner of OP Units ceases at any time to continue to be a “Qualified Transferee” (as defined above), including, without limitation, as a result of the failure of any Executive to be employed by the Corporation or any of its Affiliates or as a result of divorce or annulment;

then, in each case, one share of Class B Common Stock Beneficially Owned by the Initial Holder (or the Initial Holder’s Family Members, to the extent the Initial Holder does not then Beneficially Own sufficient shares), upon such Transfer (in the case of clause (x) or (y) above) or cessation (in the case of clause (z) above), shall automatically convert into one share of Class A Common Stock for every thirty-five and one-half (35.5) OP Units (x) so Transferred or caused to be so Transferred by the Initial Holder or such Qualified Transferee, or (y) then held by the Person who ceased to continue to be a “Qualified Transferee” (as defined above) (in each case rounding up to the nearest thirty-five and one-half (35.5) OP Units).

Any shares of Class B Common Stock automatically converted pursuant to this paragraph (a) shall be converted as and at the times specified in this paragraph (a) without any further action by the holders thereof and whether or not the certificates representing such shares (if any) are surrendered to the Corporation. Upon the automatic conversion of shares of Class B Common Stock pursuant to this paragraph (a), the Beneficial Owner thereof shall identify for the Corporation the holder of record of the shares so converted.

(b) Conversion at the Option of the Holder . Pursuant to and in accordance with this paragraph (b), each holder of Class B Common Stock shall have the right, at such holder’s option at any time and from time to time, to convert all or a portion of such holder’s shares of Class B Common Stock into an equal number of fully paid and non-assessable shares of Class A Common Stock by delivering the certificates (if any) representing the shares of Class B Common Stock to be converted, duly endorsed for transfer, together with a written conversion notice to the transfer agent for the Class B Common Stock (or if there is no transfer agent, to the Corporation). Such conversion notice shall state: (i) the number of shares of Class B Common Stock to be converted; and (ii) the date on which such conversion shall occur (which date shall be a Business Day no less than five (5) Business Days and not exceeding twenty (20) Business Days from the date of such conversion notice) (the “ Optional Conversion Date ”). Notwithstanding the foregoing, if the shares of Class B Common Stock are held in global form, such notice shall comply with applicable procedures of the Depository Trust Company (“ DTC ”). In connection with the exercise of any Optional Conversion Right, the Corporation shall comply with all U.S. federal and state securities laws and stock exchange rules in connection with any conversion of Class B Common Stock into Class A Common Stock. Holders of Class B Common Stock may withdraw any conversion notice by a written notice of withdrawal delivered to the Corporation’s transfer agent prior to the close of business on the Business Day prior to the Optional Conversion Date. The notice of withdrawal must state: (x) the number of withdrawn shares of Class B Common Stock; (y) if certificated shares of Class B Common Stock have been issued, the certificate numbers of the withdrawn shares of Class B Common Stock; and (z) the number of shares of Class B Common Stock, if any, which remain subject to the conversion notice. Notwithstanding the foregoing, if the shares of Class B Common Stock are held in global form, the notice of withdrawal shall comply with applicable DTC procedures. Each conversion pursuant to this paragraph (b) for which the conversion notice has been given and not properly withdrawn shall be deemed to have been effected immediately prior to the close of business on the Optional Conversion Date.

Section 6.4 Preferred Stock . The Board of Directors may classify any unissued shares of Preferred Stock and reclassify any previously classified but unissued shares of Preferred Stock of any series from time to time, in one or more classes or series of stock.

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Section 6.5 Classification and Reclassification of Shares . Prior to issuance of classified or reclassified shares of any class or series, the Board of Directors by resolution shall: (a) designate that class or series to distinguish it from all other classes and series of stock of the Corporation; (b) specify the number of shares to be included in the class or series; (c) set or change, subject to the provisions of Article VII and subject to the express terms of any class or series of stock of the Corporation outstanding at the time, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption for each class or series; and (d) cause the Corporation to file articles supplementary with the State Department of Assessments and Taxation of Maryland (“ SDAT ”). Any of the terms of any class or series of stock set or changed pursuant to clause (c) of this Section 6.5 may be made dependent upon facts or events ascertainable outside the Charter (including determinations or actions by the Board of Directors or other facts or events within the control of the Corporation) and may vary among holders thereof, provided that the manner in which such facts, events or variations shall operate upon the terms of such class or series of stock is clearly and expressly set forth in the articles supplementary filed with the SDAT.

Section 6.6 Authorization by the Board of Directors of Stock Issuance . The Board of Directors, without approval of the stockholders of the Corporation, may authorize the issuance from time to time of shares of stock of the Corporation of any class or series, whether now or hereafter authorized, or securities or rights convertible into shares of its stock of any class or series, whether now or hereafter authorized, for such consideration (whether in cash, property, past or future services, obligation for future payment or otherwise) as the Board of Directors may deem advisable (or without consideration in the case of a stock split or stock dividend), subject to such restrictions or limitations, if any, as may be set forth in the Charter or the Bylaws.

Section 6.7 Preemptive and Appraisal Rights . Except as may be provided by the Board of Directors in setting the terms of classified or reclassified shares of stock of the Corporation pursuant to Section 6.5 or as may otherwise be provided by contract, no holder of shares of stock shall, as such holder, have any preemptive right to purchase or subscribe for any additional shares of stock of the Corporation or any other security of the Corporation which it may issue or sell. Holders of shares of stock shall not be entitled to exercise any rights of an objecting stockholder provided for under Title 3, Subtitle 2 of the MGCL or any successor statute unless the Board of Directors, upon the affirmative vote of a majority of the Board of Directors, shall determine that such rights apply, with respect to all or any classes or series of stock, to one or more transactions occurring after the date of such determination in connection with which holders of such shares would otherwise be entitled to exercise such rights.

Section 6.8 Transferable Shares; Preferential Dividends . Notwithstanding any other provision in the Charter, no determination shall be made by the Board of Directors nor shall any transaction be entered into by the Corporation that would cause any shares or other beneficial interest in the Corporation not to constitute “transferable shares” or “transferable certificates of beneficial interest” under Section 856(a)(2) of the Code or that would cause any distribution to constitute a preferential dividend as described in Section 562(c) of the Code.

Section 6.9 Stockholders’ Consent in Lieu of Meeting . Any action required or permitted to be taken at any meeting of the stockholders may be taken without a meeting by consent, in writing or by electronic transmission, in any manner permitted by the MGCL and set forth in the Bylaws.

Section 6.10 Charter and Bylaws . All persons who shall acquire a share of stock shall acquire the same subject to the provisions of the Charter and the Bylaws.

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EXHIBIT B

ARTICLE VII

RESTRICTIONS ON TRANSFER AND OWNERSHIP OF SHARES

Section 7.1 Definitions . For the purpose of this Article VII, the following terms shall have the following meanings:

Actual Owner . The term “Actual Owner” has the meaning set forth in Section 7.2.4(a).

Beneficial Ownership . The term “Beneficial Ownership” shall mean ownership of Capital Stock by a Person, whether the interest in the shares of Capital Stock is held directly or indirectly (including by a nominee), and shall include interests that would be treated as owned through the application of Section 544 of the Code, as modified by Sections 856(h)(1)(B) and 856(h)(3) of the Code. The terms “Beneficial Owner,” “Beneficially Owns” and “Beneficially Owned” shall have the correlative meanings.

Business Day . The term “Business Day” shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York, New York are authorized or required by law, regulation or executive order to close.

Capital Stock . The term “Capital Stock” shall mean all classes or series of stock of the Corporation, including, without limitation, Common Stock and Preferred Stock.

Charitable Beneficiary . The term “Charitable Beneficiary” shall mean one or more beneficiaries of the Charitable Trust as determined pursuant to Section 7.3.7, provided that each such organization must be described in Sections 501(c)(3), 170(b)(1)(A) and 170(c)(2) of the Code.

Charitable Trust . The term “Charitable Trust” shall mean any trust provided for in Section 7.2.1(b)(i) and Section 7.3.1.

Charitable Trustee . The term “Charitable Trustee” shall mean the Person unaffiliated with both the Corporation and the relevant Prohibited Owner, that is appointed by the Corporation to serve as trustee of the Charitable Trust.

Charter . The term “Charter” shall mean these Articles of Amendment and Restatement as filed for record with the SDAT, and any amendments and supplements thereto.

Code . The term “Code” shall mean the Internal Revenue Code of 1986, as amended, or any successor statute.

Common Stock Ownership Limit . The term “Common Stock Ownership Limit” shall mean not more than 8.0% (in value or in number of shares, whichever is more restrictive) of the aggregate of the outstanding shares of Common Stock of the Corporation.

Constructive Ownership . The term “Constructive Ownership” shall mean ownership of Capital Stock by a Person who is or would be treated as an owner of such Capital Stock either actually or constructively through the application of Section 318(a) of the Code, as modified by Section 856(d)(5) of the Code. The terms “Constructive Owner,” “Constructively Own,” “Constructively Owns” and “Constructively Owned” shall have the correlative meanings.

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the benefit of its customers, each such customer, would satisfy the Common Stock Ownership Limit if such beneficial owner owned directly its proportionate share of the Common Stock that is held by such Designated Investment Entity

Designated Investment Entity Limit . The term “Designated Investment Entity Limit” shall mean, with respect to Common Stock, 9.9% (in value or number of shares, whichever is more restrictive) of the outstanding Common Stock of the Corporation.

Exchange Act . The term “Exchange Act” shall have the meaning set forth in Article VI above.

Initial Date . The term “Initial Date” shall mean the date that this Charter is filed with the SDAT.

Market Price . The term “Market Price” on any date shall mean, with respect to any class or series of outstanding shares of Capital Stock, the Closing Price for such Capital Stock on such date. The “Closing Price” on any date shall mean the last sale price for such Capital Stock, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, for such Capital Stock, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trade on the NYSE or, if such Capital Stock is not listed or admitted to trade on the NYSE, as reported on the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such Capital Stock is listed or admitted to trade or, if such Capital Stock is not listed or admitted to trade on any national securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the principal automated quotation system that may then be in use or, if such Capital Stock is not quoted by any such system, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such Capital Stock selected by the Board of Directors of the Corporation or, in the event that no trading price is available for such Capital Stock, the fair market value of the Capital Stock, as determined in good faith by the Board of Directors of the Corporation.

NYSE . The term “NYSE” shall mean the New York Stock Exchange.

Person . The term “Person” shall mean an individual, corporation, partnership, limited liability company, estate, trust (including, without limitation, a trust qualified under Sections 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 and also includes a group as that term is used for purposes of Section 13(d)(3) of the Exchange Act.

Preferred Stock Ownership Limit . The term “Preferred Stock Ownership Limit” shall mean not more than 9.8% (in value or in number of shares, whichever is more restrictive) of the aggregate of the outstanding shares of such class or series of Preferred Stock of the Corporation.

Prohibited Owner . The term “Prohibited Owner” shall mean, with respect to any purported Transfer, any Person who, but for the provisions of Section 7.2.1, would Beneficially Own or Constructively Own shares of Capital Stock in violation of the provisions of Section 7.2.1(a), and if appropriate in the context, shall also mean any Person who would have been the record owner of the shares that the Prohibited Owner would have so owned.

Qualified Investment Manager . The term “Qualified Investment Manager” shall mean an entity (i) who for compensation engages in the business of advising others as to the value of securities or as to the advisability of investing in, purchasing, or selling securities; (ii) who purchases securities in the ordinary course of its business and not with the purpose or effect of changing or influencing control of the Corporation, nor in connection with or as a participant in any transaction having such purpose or effect, including any transaction subject to Rule 13d-3(b) under the Exchange Act; and (iii) who has or shares voting power and investment power within the meaning of Rule 13d-3(a) under the Exchange Act. A Qualified Investment Manager shall be deemed to beneficially own all shares of Capital Stock beneficially owned by each of its affiliates, after application of the beneficial ownership rules under Section 13(d)(3) of the Exchange Act, provided such affiliate meets the requirements set forth in the preceding clause (ii).

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REIT . The term “REIT” shall mean a real estate investment trust within the meaning of Sections 856 through 859 of the Code.

Restriction Termination Date . The term “Restriction Termination Date” shall mean the first day after the Initial Date on which the Board of Directors determines that it is no longer in the best interests of the Corporation to attempt to, or continue to, qualify as a REIT or that compliance with the restrictions and limitations on Beneficial Ownership, Constructive Ownership and Transfers of shares of Capital Stock set forth herein is no longer required in order for the Corporation to qualify as a REIT.

SDAT . The term “SDAT” shall mean the State Department of Assessments and Taxation of Maryland.

Substitute Percentage . The term “Substitute Percentage” has the meaning set forth in Section 7.2.1(a)(iv).

Transfer . The term “Transfer” shall mean any issuance, sale, transfer, gift, assignment, devise or other disposition, as well as any other event that causes any Person to acquire or have Beneficial Ownership or Constructive Ownership, or any agreement to take any such actions or cause any such events, of Capital Stock or the right to vote or receive dividends or distributions on shares of Capital Stock, including (a) a change in the capital structure of the Corporation, (b) a change in the relationship between two or more Persons which causes a change in ownership of Capital Stock by application of Section 544 of the Code, as modified by Section 856(h) of the Code, (c) the granting or exercise of any option or warrant (or any acquisition or disposition of any option or warrant), pledge, security interest, or similar right to acquire shares of Capital Stock, (d) any acquisition or disposition of any securities or rights convertible into or exchangeable for Capital Stock or any interest in Capital Stock or any exercise of any such conversion or exchange right and (e) Transfers of interests in other entities that result in changes in Beneficial Ownership or Constructive Ownership of Capital Stock; in each case, whether voluntary or involuntary, whether owned of record, Constructively Owned or Beneficially Owned and whether by operation of law or otherwise. The terms “Transferring” and “Transferred” shall have the correlative meanings.

Section 7.2 Capital Stock .

Section 7.2.1 Ownership Limitations . During the period commencing on the Initial Date and prior to the Restriction Termination Date:

(a) Basic Restrictions .

(i) (1) No Person, other than a Designated Investment Entity, shall Beneficially Own or Constructively Own shares of Common Stock in excess of the Common Stock Ownership Limit;

(2) No Person shall Beneficially Own or Constructively Own shares of Preferred Stock in excess of the Preferred Stock Ownership Limit;

(3) No Designated Investment Entity shall Beneficially Own or Constructively Own shares of Common Stock in excess of the Designated Investment Entity Limit.

(ii) No Person shall Beneficially Own or Constructively Own shares of Capital Stock to the extent that (1) such Beneficial Ownership or Constructive Ownership of Capital Stock would result in the Corporation being “closely held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year), (2) such Beneficial Ownership or Constructive Ownership of Capital Stock would result in the Corporation owning (directly or indirectly) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Corporation (either directly or indirectly through one or more partnerships or limited liability companies) from such tenant for the taxable year of the Corporation during which such determination is being made would reasonably be expected to equal or exceed the lesser of (a) one percent (1%) of the Corporation’s gross income (as determined for purposes of Section 856(c) of the Code), or (b) an amount that would cause the Corporation to fail to satisfy any of the gross income requirements of Section 856(c) of the Code, or (3) such Beneficial Ownership or Constructive Ownership of Capital Stock would result in the Corporation otherwise failing to qualify as a REIT.

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(iii) No Person shall Transfer any shares of Capital Stock if, as a result of the Transfer, the Capital Stock would be beneficially owned by fewer than 100 Persons (determined without reference to the rules of attribution under Section 544 of the Code). Subject to Section 7.4 and notwithstanding any other provisions contained herein, any Transfer of shares of Capital Stock (whether or not such Transfer is the result of a transaction entered into through the facilities of the NYSE or any other national securities exchange or automated inter-dealer quotation system) that, if effective, would result in the Capital Stock being beneficially owned by fewer than 100 Persons (determined under the principles of Section 856(a)(5) of the Code) shall be void ab initio , and the intended transferee shall acquire no rights in such shares of Capital Stock.

(iv) If and to the extent a Person Beneficially Owns or Constructively Owns, at the end of the day immediately before the Initial Date, shares of Common Stock in excess of the Common Stock Ownership Limit, for purposes of applying Section 7.2.1(a)(i)(1) to such Person, “9.8%” (or such lesser percentage of Beneficial Ownership or Constructive Ownership of the Person of shares of Common Stock (in value or in number of shares, whichever is more restrictive), determined at the end of the date before the Initial Date) shall be substituted in the definition of Common Stock Ownership Limit for “8.0%” (in value or in number of shares, whichever is more restrictive) (such substitute percentage, as reduced pursuant to the following proviso, the “ Substitute Percentage ”); provided , however , that if and to the extent that such Person’s Beneficial Ownership or Constructive Ownership, as applicable, of shares of Common Stock (in value or in number of shares, whichever is more restrictive) is reduced for any reason to a percentage below the Substitute Percentage (as reduced pursuant to this proviso) the Substitute Percentage for such Beneficial Ownership or Constructive Ownership, as applicable, as applied to such Person, shall automatically become that reduced percentage (but not below the Common Stock Ownership Limit (as determined without regard to this Section 7.2.1(a)(iv)); and provided further that, for the sake of clarity, this Section 7.2.1(a)(iv) shall not limit the application of Section 7.2.1(a)(i) (other than Section 7.2.1(a)(i)(1)), Section 7.2.1(a)(ii), Section 7.2.1(a)(iii), and Section 7.2(b)).

(b) Transfer in Trust . If any Transfer of shares of Capital Stock (whether or not such Transfer is the result of a transaction entered into through the facilities of the NYSE or any other national securities exchange or automated inter-dealer quotation system) occurs which, if effective, would result in any Person Beneficially Owning or Constructively Owning shares of Capital Stock in violation of Section 7.2.1(a)(i) or (ii),

(i) then that number of shares of Capital Stock the Beneficial Ownership or Constructive Ownership of which otherwise would cause such Person to violate Section 7.2.1(a)(i) or (ii) (rounded up to the nearest whole share) shall be automatically transferred to a Charitable Trust for the benefit of a Charitable Beneficiary, as described in Section 7.3, effective as of the close of business on the Business Day prior to the date of such Transfer, and such Person shall acquire no rights in such shares of Capital Stock; or

(ii) if the transfer to the Charitable Trust described in clause (i) of this sentence would not be effective for any reason to prevent the violation of Section 7.2.1(a)(i) or (ii), or would not prevent the Corporation from failing to qualify as a REIT, then the Transfer of that number of shares of Capital Stock that otherwise would cause any Person to violate Section 7.2.1(a)(i) or (ii) shall be void ab initio , and the intended transferee shall acquire no rights in such shares of Capital Stock.

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deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, without limitation, causing the Corporation to redeem shares, refusing to give effect to such Transfer on the books of the Corporation or instituting proceedings to enjoin such Transfer or other event; provided , however , that any Transfer or attempted Transfer or other event in violation of Section 7.2.1 shall automatically result in the transfer to the Charitable Trust described above, and, where applicable, such Transfer (or other event) shall be void ab initio as provided above irrespective of any action (or non-action) by the Board of Directors or a committee thereof.

Section 7.2.3 Notice of Restricted Transfer . Any Person who acquires or attempts or intends to acquire Beneficial Ownership or Constructive Ownership of shares of Capital Stock that will or may violate Section 7.2.1(a), or any Person who would have owned shares of Capital Stock that resulted in a transfer to the Charitable Trust pursuant to the provisions of Section 7.2.1(b), shall immediately give written notice to the Corporation of such event or, in the case of such a proposed or attempted transaction, shall give at least fifteen (15) days prior written notice, and shall provide to the Corporation such other information as the Corporation may request in order to determine the effect, if any, of such acquisition or ownership on the Corporation’s status as a REIT.

Section 7.2.4 Owners Required To Provide Information . From the Initial Date and prior to the Restriction Termination Date:

(a) every owner of more than five percent (5%) (or such lower percentage as required by the Code or the Treasury Regulations promulgated thereunder) of the outstanding shares of Capital Stock, within thirty (30) days after the end of each taxable year, shall give written notice to the Corporation stating the name and address of such owner, the number of shares of each class or series of Capital Stock Beneficially Owned and a description of the manner in which such shares are held; provided, that a stockholder of record who holds outstanding shares of Capital Stock as nominee for another Person, which other Person is required to include in gross income the dividends or distributions received on such shares (an “ Actual Owner ”), shall give written notice to the Corporation stating the name and address of such Actual Owner and the number of shares of such Actual Owner with respect to which the stockholder of record is nominee. Each such owner shall provide to the Corporation such additional information as the Corporation may request in order to determine the effect, if any, of such Beneficial Ownership on the Corporation’s status as a REIT and to ensure compliance with Section 7.2.1(a) (including information about a Person’s qualification as a Designated Investment Entity); and

(b) each Person who is a Beneficial Owner or Constructive Owner of Capital Stock and each Person (including the stockholder of record) who is holding Capital Stock for a Beneficial Owner or Constructive Owner shall provide to the Corporation such information as the Corporation may request, in good faith, in order to determine the Corporation’s status as a REIT and to comply with requirements of any taxing authority or governmental authority or to determine such compliance and to ensure compliance with Section 7.2.1(a) (including information about a Person’s qualification as a Designated Investment Entity).

Section 7.2.5 Remedies Not Limited . Subject to Sections 5.4 and 7.4 of the Charter, nothing contained in this Section 7.2 shall limit the authority of the Board of Directors to take such other action as it deems necessary or advisable to protect the Corporation and the interests of its stockholders in preserving the Corporation’s qualification as a REIT.

Section 7.2.6 Ambiguity . In the case of an ambiguity in the application of any of the provisions of this Section 7.2, Section 7.3 or any definition contained in Section 7.1, the Board of Directors shall have the power to determine the application of the provisions of this Section 7.2 or Section 7.3 with respect to any situation based on the facts known to it. If Section 7.2 or 7.3 requires an action by the Board of Directors and the Charter fails to provide specific guidance with respect to such action, the Board of Directors shall have the power to determine the action to be taken so long as such action is not contrary to the provisions of Sections 7.1, 7.2 or 7.3.

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Section 7.2.7 Exemptions .

(a) The Board of Directors, in its sole discretion, may exempt, prospectively or retroactively, a Person from the Common Stock Ownership Limit, the Preferred Stock Ownership Limit, or the Designated Investment Entity Limit if: (i) such Person submits to the Board of Directors information satisfactory to the Board of Directors, in its reasonable discretion, demonstrating that such Person is not an individual for purposes of Section 542(a)(2) of the Code (determined taking into account Section 856(h)(3)(A) of the Code); (ii) such Person submits to the Board of Directors information satisfactory to the Board, in its reasonable discretion, demonstrating that no Person who is an individual for purposes of Section 542(a)(2) of the Code (determined taking into account Section 856(h)(3)(A) of the Code) would be considered to Beneficially Own shares of Common Stock in excess of the Common Stock Ownership Limit or Preferred Stock in excess of the Preferred Stock Ownership Limit by reason of such Person’s ownership of Common Stock in excess of the Common Stock Ownership Limit or, for a Designated Investment Entity, the Designated Investment Entity Limit, or Preferred Stock in excess of the Preferred Stock Ownership Limit pursuant to the exemption granted under this subparagraph (a); (iii) such Person submits to the Board of Directors information satisfactory to the Board of Directors, in its reasonable discretion, demonstrating that clauses (1), (2) and (3) of subparagraph (a)(ii) of Section 7.2.1 will not be violated by reason of such Person’s ownership of Common Stock in excess of the Common Stock Ownership Limit or, for a Designated Investment Entity, the Designated Investment Entity Limit, or Preferred Stock in excess of the Preferred Stock Ownership Limit pursuant to the exemption granted under this subparagraph 7.2.7(a); and (iv) such Person provides to the Board of Directors such representations and undertakings, if any, as the Board of Directors may, in its reasonable discretion, require to ensure that the conditions in clauses (i), (ii) and (iii) hereof are satisfied and will continue to be satisfied throughout the period during which such Person owns Common Stock in excess of the Common Stock Ownership Limit or, for a Designated Investment Entity, the Designated Investment Entity Limit, or Preferred Stock in excess of the Preferred Stock Ownership Limit pursuant to any exemption thereto granted under this subparagraph (a), and such Person agrees that any violation of such representations and undertakings or any attempted violation thereof will result in the application of the remedies set forth in Section 7.2 (including without limitation, Section 7.2.5) with respect to shares of Common Stock held in excess of the Common Stock Ownership Limit or, for a Designated Investment Entity, the Designated Investment Entity Limit, or Preferred Stock held in excess of the Preferred Stock Ownership Limit with respect to such Person (determined without regard to the exemption granted such Person under this subparagraph (a));

(b) Prior to granting any exemption pursuant to subparagraph (a), the Board of Directors, in its sole and absolute discretion, may require a ruling from the Internal Revenue Service or an opinion of counsel, in either case in form and substance satisfactory to the Board of Directors, in its sole and absolute discretion as it may deem necessary or advisable in order to determine or ensure the Corporation’s status as a REIT; provided , however , that the Board of Directors shall not be obligated to require obtaining a favorable ruling or opinion in order to grant an exception hereunder.

(c) Subject to Section 7.2.1(a)(ii), an underwriter that participates in a public offering or a private placement of Capital Stock (or securities convertible into or exchangeable for Capital Stock) may Beneficially Own or Constructively Own shares of Capital Stock (or securities convertible into or exchangeable for Capital Stock) in excess of the Common Stock Ownership Limit, Designated Investment Entity Limit, or the Preferred Stock Ownership Limit, but only to the extent necessary to facilitate such public offering or private placement.

(d) In connection with granting any exemption or waiver pursuant to Section 7.2.7(a), the Board of Directors may include such terms and conditions in such waiver as it determines are advisable.

Section 7.2.8 Increase in the Common Stock Ownership, the Designated Investment Entity Limit, and the Preferred Stock Ownership Limits . Subject to the limitations provided in Section 7.2.1(a)(ii) and this Section 7.2.8, the Board of Directors may from time to time increase the Common Stock Ownership Limit, the Designated Investment Entity Limit, and/or the Preferred Stock Ownership Limit; provided , however , that:

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(a) None of the Common Stock Ownership Limit, Designated Investment Entity Limit, and the Preferred Stock Ownership Limit may be increased if, after giving effect to such change, five Persons who are considered individuals pursuant to Section 542 of the Code, as modified by Section 856(h)(3) of the Code, could Beneficially Own, in the aggregate, more than 49.9% of the value of the outstanding Capital Stock; and

(b) Prior to the modification of the Common Stock Ownership Limit, the Designated Investment Entity Limit, or the Preferred Stock Ownership Limit pursuant to this Section 7.2.8, the Board of Directors, in its sole and absolute discretion, may require such opinions of counsel, affidavits, undertakings or agreements as it may deem necessary or advisable in order to determine or ensure the Corporation’s status as a REIT if the modification of the Common Stock Ownership Limit or the Preferred Stock Ownership Limit were to be made.

Section 7.2.9 Legend . Each certificate for shares of Capital Stock shall bear substantially the following legend:

The shares represented by this certificate are subject to restrictions on Beneficial Ownership, Constructive Ownership and Transfer. Subject to certain further restrictions and except as expressly provided in the Corporation’s Charter, (i) no Person, other than a Designated Investment Entity, may Beneficially Own or Constructively Own shares of the Corporation’s Common Stock in excess of eight percent (8.0%) (in value or number of shares, whichever is more restrictive) of the outstanding shares of Common Stock of the Corporation; (ii) no Person may Beneficially Own or Constructively Own shares of Preferred Stock of the Corporation in excess of 9.8 percent (9.8%) (in value or number of shares, whichever is more restrictive) of the total outstanding shares of such class or series of Preferred Stock of the Corporation; (iii) no Designated Investment Entity may Beneficially Own or Constructively Own shares of the Corporation’s Common Stock in excess of 9.8 percent (9.8%) (in value or number of shares, whichever is more restrictive) of the outstanding shares of Common Stock of the Corporation; (iv) no Person may Beneficially Own or Constructively Own shares of the Corporation’s Capital Stock that would result in the Corporation owning (directly or indirectly) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Corporation (either directly or indirectly through one or more partnerships or limited liability companies) from such tenant for the taxable year of the Corporation during which such determination is being made would reasonably be expected to equal or exceed the lesser of (a) one percent (1%) of the Corporation’s gross income (as determined for purposes of Section 856(c) of the Code), or (b) an amount that would cause the Corporation to fail to satisfy any of the gross income requirements of Section 856(c) of the Code; (v) no Person may Beneficially Own Capital Stock that would result in the Corporation being “closely held” under Section 856(h) of the Internal Revenue Code of 1986 (the “Code”) (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise cause the Corporation to fail to qualify as a real estate investment trust under the Code; and (vi) no Person may Transfer shares of Capital Stock if such Transfer would result in the Capital Stock of the Corporation being owned by fewer than 100 Persons (as determined under the principles of Section 856(a)(5) of the Code). Any Person who Beneficially Owns or Constructively Owns, Transfers or attempts to Beneficially Own or Constructively Own shares of Capital Stock which causes or will cause a Person to Beneficially Own or Constructively Own shares of Capital Stock in excess or in violation of the above limitations set forth must immediately notify the Corporation. If certain of the restrictions on transfer or ownership are violated, the shares of Capital Stock represented hereby will be automatically transferred to a Charitable Trustee of a Charitable Trust for the benefit of one or more Charitable Beneficiaries. In addition, upon the occurrence of certain events, attempted Transfers in violation of the restrictions described above may be void ab initio . A Person who attempts to Beneficially Own or Constructively Own shares of Capital Stock in violation of the ownership limitations described above shall have no claim, cause of action, or any recourse whatsoever against a transferor of such shares.

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the Initial Holder or any of the Initial Holder’s Family Members, with each share of Class B Common Stock being Transferred converting automatically into one share of Class A Common Stock immediately prior to such Transfer, and (ii) (x) the Transfer of Beneficial Ownership of OP Units by the Initial Holder, other than to a Qualified Transferee, (y) the Transfer of Beneficial Ownership of OP Units by a Qualified Transferee other than to the Initial Holder or to another Qualified Transferee, and (z) the ceasing by any Person that is a Beneficial Owner of OP Units to continue to be a “Qualified Transferee,” in the case of each of clauses (x), (y) and (z), with one share of Class B Common Stock held by the Initial Holder (or the Initial Holder’s Family Members, to the extent the Initial Holder does not then hold sufficient shares) shall, upon such Transfer (in the case of clauses (x) or (y) above) or cessation (in the case of clause (z) above), as the case may, automatically converting into one share of Class A Common Stock Share for every thirty-five and one-half (35.5) OP Units (x) Transferred or caused to be Transferred by the Initial Holder or such Qualified Transferee, or (y) then held by the Person who ceased to continue to be a “Qualified Transferee” (in each case rounding up to the nearest thirty-five and one-half (35.5) OP Units).

All capitalized terms in this legend have the meanings defined in the Corporation’s Charter, as the same may be amended from time to time, a copy of which, including the restrictions on transfer and ownership, will be furnished to each holder of shares of Capital Stock of the Corporation on request and without charge.

Instead of the foregoing legend, the certificate may state that the Corporation will furnish a full statement about certain restrictions on transferability to a stockholder on request and without charge.

Section 7.3 Transfer of Shares in Trust .

Section 7.3.1 Ownership in Trust . Upon any purported Transfer or other event described in Section 7.2.1(b) that would result in a transfer of shares of Capital Stock to a Charitable Trust, such shares of Capital Stock shall be deemed to have been transferred to the Charitable Trustee as trustee of a Charitable Trust for the exclusive benefit of one or more Charitable Beneficiaries. Such transfer to the Charitable Trustee shall be deemed to be effective as of the close of business on the Business Day prior to the purported Transfer or other event that results in the transfer to the Charitable Trust pursuant to Section 7.2.1(b). The Charitable Trustee shall be appointed by the Corporation and shall be a Person unaffiliated with the Corporation and any Prohibited Owner. Each Charitable Beneficiary shall be designated by the Corporation as provided in Section 7.3.7.

Section 7.3.2 Status of Shares Held by the Charitable Trustee . Shares of Capital Stock held by the Charitable Trustee shall be issued and outstanding shares of Capital Stock of the Corporation. The Prohibited Owner shall have no rights in the shares held by the Charitable Trustee. The Prohibited Owner shall not benefit economically from ownership of any shares held in trust by the Charitable Trustee, shall have no rights to dividends or other distributions and shall not possess any rights to vote or other rights attributable to the shares held in the Charitable Trust. The Prohibited Owner shall have no claim, cause of action, or any other recourse whatsoever against the purported transferor of such shares of Capital Stock.

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provided , however , that if the Corporation has already taken irreversible action, then the Charitable Trustee shall not have the authority to rescind and recast such vote. Notwithstanding the provisions of this Article VII, until the Corporation has received notification that shares of Capital Stock have been transferred into a Charitable Trust, the Corporation shall be entitled to rely on its share transfer and other stockholder records for purposes of preparing lists of stockholders entitled to vote at meetings, determining the validity and authority of proxies and otherwise conducting votes of stockholders.

Section 7.3.4 Rights Upon Liquidation . Upon any voluntary or involuntary liquidation, dissolution or winding up of or any distribution of the assets of the Corporation, the Charitable Trustee shall be entitled to receive, ratably with each other holder of shares of the class or series of Capital Stock that is held in the Charitable Trust, that portion of the assets of the Corporation available for distribution to the holders of such class or series (determined based upon the ratio that the number of shares of such class or series of Capital Stock held by the Charitable Trustee bears to the total number of shares of such class or series of Capital Stock then outstanding). The Charitable Trustee shall distribute any such assets received in respect of the shares held in the Charitable Trust in any liquidation, dissolution or winding up of, or distribution of the assets of the Corporation, in accordance with Section 7.3.5.

Section 7.3.5 Sale of Shares by Charitable Trustee . Within twenty (20) days of receiving notice from the Corporation that shares of Capital Stock have been transferred to the Charitable Trust, the Charitable Trustee shall sell the shares held in the Charitable Trust to a person, designated by the Charitable Trustee, whose ownership of the shares will not violate the ownership limitations set forth in Section 7.2.1(a). In connection with any such sale, the Charitable Trustee shall use good faith efforts to sell such shares at a fair market price. Upon such sale, the interest of the Charitable Beneficiary in the shares sold shall terminate and the Charitable Trustee shall distribute the net proceeds of the sale to the Prohibited Owner and to the Charitable Beneficiary as provided in this Section 7.3.5. The Prohibited Owner shall receive the lesser of (1) the price paid by the Prohibited Owner for the shares or, if the Prohibited Owner did not give value for the shares in connection with the event causing the shares to be held in the Charitable Trust ( e.g. , in the case of a gift, devise or other such transaction), the Market Price of the shares on the day of the event causing the shares to be held in the Charitable Trust and (2) the price per share received by the Charitable Trustee (net of any commissions and other expenses of sale) from the sale or other disposition of the shares held in the Charitable Trust. The Charitable Trustee may reduce the amount payable to the Prohibited Owner by the amount of dividends and distributions which have been paid to the Prohibited Owner and are owed by the Prohibited Owner to the Charitable Trustee pursuant to Section 7.3.3 of this Article VII. Any net sales proceeds in excess of the amount payable to the Prohibited Owner shall be immediately paid to the Charitable Beneficiary. If, prior to the discovery by the Corporation that shares of Capital Stock have been transferred to the Charitable Trustee, such shares are sold by a Prohibited Owner, then (i) such shares shall be deemed to have been sold on behalf of the Charitable Trust and (ii) to the extent that the Prohibited Owner received an amount for such shares that exceeds the amount that such Prohibited Owner was entitled to receive pursuant to this Section 7.3.5, such excess shall be paid to the Charitable Trustee upon demand.

Section 7.3.6 Purchase Right in Stock Transferred to the Charitable Trustee . Shares of Capital Stock transferred to the Charitable Trustee shall be deemed to have been offered for sale to the Corporation, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in such transfer to the Charitable Trust (or, in the case of a devise or gift, the Market Price at the time of such devise or gift) and (ii) the Market Price on the date the Corporation, or its designee, accepts such offer. The Corporation may reduce the amount payable to the Prohibited Owner by the amount of dividends and distributions which have been paid to the Prohibited Owner and are owed by the Prohibited Owner to the Charitable Trustee pursuant to Section 7.3.3 of this Article VII. The Corporation may pay the amount of such reduction to the Charitable Trustee for the benefit of the Charitable Beneficiary. The Corporation shall have the right to accept such offer until the Charitable Trustee has sold the shares held in the Charitable Trust pursuant to Section 7.3.5. Upon such a sale to the Corporation, the interest of the Charitable Beneficiary in the shares sold shall terminate and the Charitable Trustee shall distribute the net proceeds of the sale to the Prohibited Owner.

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interest in the Charitable Trust such that (i) the shares of Capital Stock held in the Charitable Trust would not violate the restrictions set forth in Section 7.2.1(a) in the hands of such Charitable Beneficiary and (ii) each such organization must be described in Sections 501(c)(3), 170(b)(1)(A) or 170(c)(2) of the Code.

Section 7.4 NYSE Transactions . Nothing in this Article VII shall preclude the settlement of any transaction entered into through the facilities of the NYSE or any other national securities exchange or automated inter-dealer quotation system. The fact that the settlement of any transaction takes place shall not negate the effect of any other provision of this Article VII and any transferee in such a transaction shall be subject to all of the provisions and limitations set forth in this Article VII.

Section 7.5 Enforcement . The Corporation is authorized specifically to seek equitable relief, including injunctive relief, to enforce the provisions of this Article VII.

Section 7.6 Non-Waiver . No delay or failure on the part of the Corporation or the Board of Directors in exercising any right hereunder shall operate as a waiver of any right of the Corporation or the Board of Directors, as the case may be, except to the extent specifically waived in writing.

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Exhibit 3.2

ARTICLES OF RESTATEMENT

COLONY CAPITAL, INC.

Colony Capital, Inc., a Maryland corporation (the “ Corporation ”), hereby certifies to the State Department of Assessments and Taxation of Maryland that:

FIRST : The Corporation desires to restate its charter (the “ Charter ”) as currently in effect.

SECOND : The charter of the Corporation is hereby restated in its entirety to read as set forth in Exhibit A attached hereto, and the provisions set forth in these Articles of Restatement are all of the provisions of the Charter currently in effect.

THIRD : The restatement of the Charter has been approved by a majority of the entire Board of Directors of the Corporation.

FOURTH : The Charter is not amended by these Articles of Restatement. These Articles of Restatement do not change the authorized capital stock of the Corporation or the aggregate par value thereof.

FIFTH : The current address of the principal office of the Corporation is as set forth in Article IV of Exhibit A attached hereto.

SIXTH : The name and address of the Corporation’s current resident agent are as set forth in Article IV of Exhibit A attached hereto.

SEVENTH : The number of directors of the Corporation and the names of those currently in office are as set forth in Section 5.2 of Exhibit A attached hereto.

EIGHTH : The undersigned acknowledges these Articles of Restatement to be the corporate act of the Corporation and as to all matters or facts required to be verified under oath, the undersigned acknowledges that, to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.

[Signature page follows.]

IN WITNESS WHEREOF, the Corporation has caused these Articles of Restatement to be signed in its name and on its behalf by its President and Chief Executive Officer and attested to by its Secretary on this 1 day of April, 2015.


ATTEST:		COLONY CAPITAL, INC.

/s/ Ronald M. Sanders		/s/ Darren J. Tangen		(SEAL)
Name:	Ronald M. Sanders	Name:	Darren J. Tangen
Title:	Secretary	Title:	Chief Financial Officer and Chief Operating Officer

EXHIBIT A

RESTATED CHARTER OF COLONY CAPITAL, INC.

ARTICLE I

INCORPORATOR

Joy Mallory, whose address is 1999 Avenue of the Stars, Suite 1200, Los Angeles, California 90067, being a natural person over the age of eighteen, formed a corporation under the provisions and subject to the requirements of the laws of the State of Maryland on June 23, 2009.

ARTICLE II

NAME

The name of the corporation is: Colony Capital, Inc.

ARTICLE III

PURPOSES AND POWERS

Section 3.1 Purposes . The purposes for which the Corporation is formed are to engage in any lawful act or activity, including, without limitation or obligation, engaging in business as a real estate investment trust (“ REIT ”) under the Internal Revenue Code of 1986, as amended, or any successor statute (the “ Code ”), for which corporations may be organized under the general laws of the State of Maryland as now or hereafter in effect. The foregoing enumerated purposes and objects shall be in no way limited or restricted by reference to, or inference from, the terms of any other clause of this or any other article of the Charter and each shall be regarded as independent; and they are intended to be and shall be construed as powers as well as purposes and objects of the Corporation and shall be in addition to and not in limitation of the general powers of corporations under the general laws of Maryland.

Section 3.2 Powers . The Corporation shall have all of the powers granted by law to Maryland corporations and all other powers set forth in the Charter that are not inconsistent with law and are appropriate to promote and attain its purposes.

ARTICLE IV

PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT

The address of the principal office of the Corporation in the State of Maryland is c/o CSC-Lawyers Incorporating Service Company, 7 St. Paul Street, Suite 820, Baltimore, Maryland 21202. The name of the resident agent of the Corporation in the State of Maryland is CSC-Lawyers Incorporating Service Company, whose address is 7 St. Paul Street, Suite 1660, Baltimore, Maryland 21202. The resident agent is a Maryland corporation. The Corporation may have such offices or places of business within or outside the State of Maryland as the board of directors of the Corporation (the “ Board of Directors ”) may from time to time determine.

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ARTICLE V

BOARD OF DIRECTORS

Section 5.1. Powers . Subject to any express limitations contained in the Charter or in the bylaws of the Corporation (the “ Bylaws ”), (a) the business and affairs of the Corporation shall be managed under the direction of Board of Directors and (b) the Board of Directors shall have full, exclusive and absolute power, control and authority over any and all property of the Corporation. The Board of Directors may take any action as in its sole judgment and discretion is necessary or appropriate to conduct the business and affairs of the Corporation. This Charter shall be construed with the presumption in favor of the grant of power and authority to the Board of Directors. Any construction of the Charter or determination made in good faith by the Board of Directors concerning its powers and authority hereunder shall be conclusive. The enumeration and definition of particular powers of the Board of Directors included in the Charter or in the Bylaws shall in no way be limited or restricted by reference to or inference from the terms of this or any other provision of the Charter or the Bylaws or construed or deemed by inference or otherwise in any manner to exclude or limit the powers conferred upon the Board of Directors or the directors under the general laws of the State of Maryland or any other applicable law.

Section 5.2 Number of Directors . The number of directors constituting the entire Board of Directors is currently set at six (6), but may hereafter be increased or decreased only by the Board of Directors in accordance with the provisions set forth in the Bylaws, but shall never be fewer than the minimum number required by the Maryland General Corporation Law (the “ MGCL ”) nor more than fifteen (15). The names of the current directors who shall serve until the next annual meeting of stockholders and until their successors are duly elected and qualify are:

Thomas J. Barrack, Jr.

Richard B. Saltzman

George G.C. Parker

John A. Somers

John L. Steffens

Nancy A. Curtin

The Corporation elects, at such time as it becomes eligible to make the election provided for under Section 3-804(c) of the MGCL, that, except as may be provided by the Board of Directors in setting the terms of any class or series of stock, any and all vacancies on the Board of Directors may be filled only by the affirmative vote of a majority of the remaining directors in office, even if the remaining directors do not constitute a quorum, and any director elected to fill a vacancy shall serve for the remainder of the full term of the directorship in which such vacancy occurred and until a successor is elected and qualifies.

Section 5.3 Removal of Directors . Subject to the rights of holders of one or more classes or series of Preferred Stock, as hereinafter defined, to elect or remove one or more directors, any director may be removed from office at any time, but only for cause and then only by the affirmative vote of at least two-thirds of the votes entitled to be cast generally in the election of directors. For the purpose of this paragraph, “cause” shall mean, with respect to any particular director, conviction of a felony or a final judgment of a court of competent jurisdiction holding that such director caused demonstrable, material harm to the Corporation through bad faith or active and deliberate dishonesty.

Section 5.4 REIT Qualification . The Board of Directors, without any action by the stockholders of the Corporation, shall have the authority to cause the Corporation to elect to qualify for U.S. federal income tax treatment as a REIT. Following such election, if the Board of Directors determines that it is no longer in the best interests of the Corporation to continue to be qualified as a REIT, the Board of Directors, without any action by the stockholders of the Corporation, may revoke or otherwise terminate the Corporation’s REIT election pursuant to Section 856(g) of the Code. In addition, the Board of Directors, without any action by the stockholders of the Corporation, shall have and may exercise, on behalf of the Corporation, without limitation, the power to determine that compliance with any restriction or limitation on stock ownership and transfers set forth in Article VII of this Charter is no longer required in order for the Corporation to qualify as a REIT.

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Section 5.5 Approval of Extraordinary Actions . Except as specifically provided in Section 5.3 (relating to removal of directors) and in Article VII, notwithstanding any provision of law permitting or requiring any action to be taken or approved by the affirmative vote of the holders of shares entitled to cast a greater proportion of votes, any such action shall be effective and valid if declared advisable by the Board of Directors and taken or approved by the affirmative vote of holders of shares entitled to cast a majority of all the votes entitled to be cast on the matter.

ARTICLE VI

STOCK

Section 6.1 Authorized Shares . The total number of shares of stock of all classes which the Corporation has authority to issue is five hundred million (500,000,000), consisting of four hundred forty nine million (449,000,000) shares of Class A Common Stock, $0.01 par value per share (“ Class A Common Stock ”), one million (1,000,000) shares of Class B Common Stock, $0.01 par value per share (“ Class B Common Stock ,” and together with the Class A Common Stock, the “ Common Stock ”), and fifty million (50,000,000) shares of preferred stock, $0.01 par value per share (“ Preferred Stock ”). The Board of Directors of the Corporation has classified 10,400,000 shares of Preferred Stock as 8.50% Series A Cumulative Redeemable Perpetual Preferred Stock with the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption as set forth in Annex I attached hereto; and (ii) 3,450,000 shares of Preferred Stock as 7.50% Series B Cumulative Redeemable Perpetual Preferred Stock with the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption as set forth in Annex II attached hereto. The aggregate par value of all authorized shares of stock having par value is five million dollars ($5,000,000). The Board of Directors, with the approval of a majority of the entire Board of Directors, and without any action by the stockholders of the Corporation, may amend the Charter from time to time to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series that the Corporation has the authority to issue.

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liabilities of the Corporation and after the Corporation shall have paid, or set aside for payment, to the holders of any class of stock having preference over the Class A Common Stock as to distributions in the event of dissolution, liquidation or winding up of the Corporation.

Section 6.3.1 Definitions . For the purpose of this Section 6.3, the following terms shall have the following meanings:

Beneficial Owner . The term “Beneficial Owner” has the meaning set forth in Rule 13d-3 and Rule 13d-5 of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”).

Exchange Act . The term “Exchange Act” has the meaning set forth in the definition of “Beneficial Owner.”

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descendants by marriage), brothers and sisters, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, sister-in-law and descendants (whether by blood or by adoption or step-descendants by marriage) of a brother or sister are the sole initial income beneficiaries.

OP Unit . The term “OP Unit” shall mean “Membership Common Unit” as set forth in the Partnership Agreement.

Operating Partnership . The term “Operating Partnership” shall mean Colony Capital Operating Company, LLC (formerly known as CFI RE Masterco, LLC).

Partnership Agreement . The term “Partnership Agreement” shall mean the Second Amended and Restated Limited Liability Company Agreement of the Operating Partnership, as amended from time to time.

Initial Holder . The term “Initial Holder” shall mean Thomas J. Barrack, Jr.

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dissolution or winding up of the Corporation, in the distribution of any assets of the Corporation remaining after the Corporation shall have paid, or provided for payment of, all debts and liabilities of the Corporation and after the Corporation shall have paid, or set aside for payment, to the holders of any class of stock having preference over the Class B Common Stock as to distributions in the event of dissolution, liquidation or winding up of the Corporation.

Section 6.3.6 Conversion . The Class B Common Stock is not convertible into or exchangeable for any other property or securities of the Corporation, except as provided in this Section 6.3.6.

(ii) In the event that:

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convert all or a portion of such holder’s shares of Class B Common Stock into an equal number of fully paid and non-assessable shares of Class A Common Stock by delivering the certificates (if any) representing the shares of Class B Common Stock to be converted, duly endorsed for transfer, together with a written conversion notice to the transfer agent for the Class B Common Stock (or if there is no transfer agent, to the Corporation). Such conversion notice shall state: (i) the number of shares of Class B Common Stock to be converted; and (ii) the date on which such conversion shall occur (which date shall be a Business Day no less than five (5) Business Days and not exceeding twenty (20) Business Days from the date of such conversion notice) (the “ Optional Conversion Date ”). Notwithstanding the foregoing, if the shares of Class B Common Stock are held in global form, such notice shall comply with applicable procedures of the Depository Trust Company (“ DTC ”). In connection with the exercise of any Optional Conversion Right, the Corporation shall comply with all U.S. federal and state securities laws and stock exchange rules in connection with any conversion of Class B Common Stock into Class A Common Stock. Holders of Class B Common Stock may withdraw any conversion notice by a written notice of withdrawal delivered to the Corporation’s transfer agent prior to the close of business on the Business Day prior to the Optional Conversion Date. The notice of withdrawal must state: (x) the number of withdrawn shares of Class B Common Stock; (y) if certificated shares of Class B Common Stock have been issued, the certificate numbers of the withdrawn shares of Class B Common Stock; and (z) the number of shares of Class B Common Stock, if any, which remain subject to the conversion notice. Notwithstanding the foregoing, if the shares of Class B Common Stock are held in global form, the notice of withdrawal shall comply with applicable DTC procedures. Each conversion pursuant to this paragraph (b) for which the conversion notice has been given and not properly withdrawn shall be deemed to have been effected immediately prior to the close of business on the Optional Conversion Date.

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affirmative vote of a majority of the Board of Directors, shall determine that such rights apply, with respect to all or any classes or series of stock, to one or more transactions occurring after the date of such determination in connection with which holders of such shares would otherwise be entitled to exercise such rights.

Section 6.10 Charter and Bylaws . All persons who shall acquire a share of stock shall acquire the same subject to the provisions of the Charter and the Bylaws.

ARTICLE VII

RESTRICTIONS ON TRANSFER AND OWNERSHIP OF SHARES

Section 7.1 Definitions . For the purpose of this Article VII, the following terms shall have the following meanings:

Actual Owner . The term “Actual Owner” has the meaning set forth in Section 7.2.4(a).

Capital Stock . The term “Capital Stock” shall mean all classes or series of stock of the Corporation, including, without limitation, Common Stock and Preferred Stock.

Charitable Trust . The term “Charitable Trust” shall mean any trust provided for in Section 7.2.1(b)(i) and Section 7.3.1.

Charter . The term “Charter” shall mean these Articles of Amendment and Restatement as filed for record with the SDAT, and any amendments and supplements thereto.

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Code . The term “Code” shall mean the Internal Revenue Code of 1986, as amended, or any successor statute.

Designated Investment Entity . The term “Designated Investment Entity” shall mean either (i) a pension trust that qualifies for look-through treatment under Section 856(h) of the Code, (ii) an entity that qualifies as a regulated investment company under Section 851 of the Code, or (iii) a Qualified Investment Manager; provided that each beneficial owner of such entity, or in the case of a Qualified Investment Manager holding Common Stock solely for the benefit of its customers, each such customer, would satisfy the Common Stock Ownership Limit if such beneficial owner owned directly its proportionate share of the Common Stock that is held by such Designated Investment Entity

Exchange Act . The term “Exchange Act” shall have the meaning set forth in Article VI above.

Initial Date . The term “Initial Date” shall mean the date that this Charter is filed with the SDAT.

NYSE . The term “NYSE” shall mean the New York Stock Exchange.

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REIT . The term “REIT” shall mean a real estate investment trust within the meaning of Sections 856 through 859 of the Code.

SDAT . The term “SDAT” shall mean the State Department of Assessments and Taxation of Maryland.

Substitute Percentage . The term “Substitute Percentage” has the meaning set forth in Section 7.2.1(a)(iv).

Section 7.2 Capital Stock .

Section 7.2.1 Ownership Limitations . During the period commencing on the Initial Date and prior to the Restriction Termination Date:

(a) Basic Restrictions .

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(i) (1) No Person, other than a Designated Investment Entity, shall Beneficially Own or Constructively Own shares of Common Stock in excess of the Common Stock Ownership Limit;

(2) No Person shall Beneficially Own or Constructively Own shares of Preferred Stock in excess of the Preferred Stock Ownership Limit;

(3) No Designated Investment Entity shall Beneficially Own or Constructively Own shares of Common Stock in excess of the Designated Investment Entity Limit.

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Section 7.2.2 Remedies for Breach . If the Board of Directors of the Corporation or any duly authorized committee thereof shall at any time determine in good faith that a Transfer or other event has taken place that results in a violation of Section 7.2.1 or that a Person intends to acquire or has attempted to acquire Beneficial Ownership or Constructive Ownership of any shares of Capital Stock in violation of Section 7.2.1 (whether or not such violation is intended), the Board of Directors or a committee thereof shall take such action as it deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, without limitation, causing the Corporation to redeem shares, refusing to give effect to such Transfer on the books of the Corporation or instituting proceedings to enjoin such Transfer or other event; provided , however , that any Transfer or attempted Transfer or other event in violation of Section 7.2.1 shall automatically result in the transfer to the Charitable Trust described above, and, where applicable, such Transfer (or other event) shall be void ab initio as provided above irrespective of any action (or non-action) by the Board of Directors or a committee thereof.

Section 7.2.4 Owners Required To Provide Information . From the Initial Date and prior to the Restriction Termination Date:

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address of such Actual Owner and the number of shares of such Actual Owner with respect to which the stockholder of record is nominee. Each such owner shall provide to the Corporation such additional information as the Corporation may request in order to determine the effect, if any, of such Beneficial Ownership on the Corporation’s status as a REIT and to ensure compliance with Section 7.2.1(a) (including information about a Person’s qualification as a Designated Investment Entity); and

Section 7.2.7 Exemptions .

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to any exemption thereto granted under this subparagraph (a), and such Person agrees that any violation of such representations and undertakings or any attempted violation thereof will result in the application of the remedies set forth in Section 7.2 (including without limitation, Section 7.2.5) with respect to shares of Common Stock held in excess of the Common Stock Ownership Limit or, for a Designated Investment Entity, the Designated Investment Entity Limit, or Preferred Stock held in excess of the Preferred Stock Ownership Limit with respect to such Person (determined without regard to the exemption granted such Person under this subparagraph (a));

(d) In connection with granting any exemption or waiver pursuant to Section 7.2.7(a), the Board of Directors may include such terms and conditions in such waiver as it determines are advisable.

Section 7.2.9 Legend . Each certificate for shares of Capital Stock shall bear substantially the following legend:

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whichever is more restrictive) of the total outstanding shares of such class or series of Preferred Stock of the Corporation; (iii) no Designated Investment Entity may Beneficially Own or Constructively Own shares of the Corporation’s Common Stock in excess of 9.8 percent (9.8%) (in value or number of shares, whichever is more restrictive) of the outstanding shares of Common Stock of the Corporation; (iv) no Person may Beneficially Own or Constructively Own shares of the Corporation’s Capital Stock that would result in the Corporation owning (directly or indirectly) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Corporation (either directly or indirectly through one or more partnerships or limited liability companies) from such tenant for the taxable year of the Corporation during which such determination is being made would reasonably be expected to equal or exceed the lesser of (a) one percent (1%) of the Corporation’s gross income (as determined for purposes of Section 856(c) of the Code), or (b) an amount that would cause the Corporation to fail to satisfy any of the gross income requirements of Section 856(c) of the Code; (v) no Person may Beneficially Own Capital Stock that would result in the Corporation being “closely held” under Section 856(h) of the Internal Revenue Code of 1986 (the “Code”) (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise cause the Corporation to fail to qualify as a real estate investment trust under the Code; and (vi) no Person may Transfer shares of Capital Stock if such Transfer would result in the Capital Stock of the Corporation being owned by fewer than 100 Persons (as determined under the principles of Section 856(a)(5) of the Code). Any Person who Beneficially Owns or Constructively Owns, Transfers or attempts to Beneficially Own or Constructively Own shares of Capital Stock which causes or will cause a Person to Beneficially Own or Constructively Own shares of Capital Stock in excess or in violation of the above limitations set forth must immediately notify the Corporation. If certain of the restrictions on transfer or ownership are violated, the shares of Capital Stock represented hereby will be automatically transferred to a Charitable Trustee of a Charitable Trust for the benefit of one or more Charitable Beneficiaries. In addition, upon the occurrence of certain events, attempted Transfers in violation of the restrictions described above may be void ab initio . A Person who attempts to Beneficially Own or Constructively Own shares of Capital Stock in violation of the ownership limitations described above shall have no claim, cause of action, or any recourse whatsoever against a transferor of such shares.

Shares of Class B Common Stock convert automatically into fully-paid and non-assessable shares of Class A Common Stock at a ratio of one (1) share of Class A Common Stock for each share of Class B Common Stock upon the following events and in the following amounts: (i) the Transfer of Beneficial Ownership of Class B Common Stock by the Initial Holder or any of his Family Members, other than to the Initial Holder or any of the Initial Holder’s Family Members, with each share of Class B Common Stock being Transferred converting automatically into one share of Class A Common Stock immediately prior to such Transfer, and (ii) (x) the Transfer of Beneficial Ownership of OP Units by the Initial Holder, other than to a Qualified Transferee, (y) the Transfer of Beneficial Ownership of OP Units by a Qualified Transferee other than to the Initial Holder or to another Qualified Transferee, and (z) the ceasing by any Person that is a Beneficial Owner of OP Units to continue to be a “Qualified Transferee,” in the case of each of clauses (x), (y) and (z), with one share of Class B Common Stock held by the Initial Holder (or the Initial Holder’s Family Members, to the extent the Initial Holder does not then hold sufficient shares) shall, upon such Transfer (in the case of clauses (x) or (y) above) or cessation (in the case of clause (z) above), as the case may, automatically converting into one share of Class A Common Stock Share for every thirty-five and one-half (35.5) OP Units (x) Transferred or caused to be Transferred by the Initial Holder or such Qualified Transferee, or (y) then held by the Person who ceased to continue to be a “Qualified Transferee” (in each case rounding up to the nearest thirty-five and one-half (35.5) OP Units).

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Section 7.3 Transfer of Shares in Trust .

Section 7.3.3 Dividend and Voting Rights . The Charitable Trustee shall have all voting rights and rights to dividends or other distributions with respect to shares of Capital Stock held in the Charitable Trust, which rights shall be exercised for the exclusive benefit of the Charitable Beneficiary. Any dividend or other distribution paid prior to the discovery by the Corporation that shares of Capital Stock have been transferred to the Charitable Trustee shall be paid with respect to such shares to the Charitable Trustee upon demand and any dividend or other distribution authorized but unpaid shall be paid when due to the Charitable Trustee. Any dividends or distributions so paid over to the Charitable Trustee shall be held in trust for the Charitable Beneficiary. The Prohibited Owner shall have no voting rights with respect to shares held in the Charitable Trust and, subject to Maryland law, effective as of the date that shares of Capital Stock have been transferred to the Charitable Trustee, the Charitable Trustee shall have the authority (at the Charitable Trustee’s sole discretion) (i) to rescind as void any vote cast by a Prohibited Owner prior to the discovery by the Corporation that shares of Capital Stock have been transferred to the Charitable Trustee and (ii) to recast such vote in accordance with the desires of the Charitable Trustee acting for the benefit of the Charitable Beneficiary; provided , however , that if the Corporation has already taken irreversible action, then the Charitable Trustee shall not have the authority to rescind and recast such vote. Notwithstanding the provisions of this Article VII, until the Corporation has received notification that shares of Capital Stock have been transferred into a Charitable Trust, the Corporation shall be entitled to rely on its share transfer and other stockholder records for purposes of preparing lists of stockholders entitled to vote at meetings, determining the validity and authority of proxies and otherwise conducting votes of stockholders.

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Section 7.3.7 Designation of Charitable Beneficiaries . By written notice to the Charitable Trustee, the Corporation shall designate one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the Charitable Trust such that (i) the shares of Capital Stock held in the Charitable Trust would not violate the restrictions set forth in Section 7.2.1(a) in the hands of such Charitable Beneficiary and (ii) each such organization must be described in Sections 501(c)(3), 170(b)(1)(A) or 170(c)(2) of the Code.

Section 7.5 Enforcement . The Corporation is authorized specifically to seek equitable relief, including injunctive relief, to enforce the provisions of this Article VII.

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ARTICLE VIII

LIMITATION OF LIABILITY AND INDEMNIFICATION

OF DIRECTORS AND OFFICERS

Section 8.1 Limitation of Director and Officer Liability . To the maximum extent that Maryland law in effect from time to time permits limitation of the liability of directors and officers, no present or former director or officer of the Corporation shall be liable to the Corporation or its stockholders for money damages. Neither the amendment nor repeal of this Section 8.1, nor the adoption or amendment of any other provision of the Charter or Bylaws of the Corporation inconsistent with this Section 8.1, shall apply to or affect in any respect the applicability of the preceding sentence with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption. In the absence of any Maryland statute limiting the liability of directors and officers of a Maryland corporation for money damages in a suit by or on behalf of the Corporation or by any stockholder, no director or officer of the Corporation shall be liable to the Corporation or to any stockholder for money damages except to the extent that (a) the director or officer actually received an improper benefit or profit in money, property or services, for the amount of the benefit or profit in money, property or services actually received; or (b) a judgment or other final adjudication adverse to the director or officer is entered in a proceeding based on a finding in the proceeding that the director’s or officer’s action or failure to act was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding.

Section 8.2 Indemnification .

(a) To the maximum extent permitted by Maryland law in effect from time to time, and in accordance with applicable provisions of the Bylaws, the Corporation shall indemnify, and pay or reimburse the reasonable expenses in advance of final disposition of a proceeding to, (i) any present or former director or officer of the Corporation against any claim or liability to which he or she may become subject by reason of service in such capacity, and (ii) any individual who, while a director or officer of the Corporation and at the request of the Corporation, serves or has served as a director, officer, partner or trustee of another corporation, REIT, partnership, joint venture, trust, employee benefit plan, limited liability company or any other enterprise from and against any claim or liability to which such person may become subject or which such person may incur by reason of his or her service in such capacity. In addition, the Corporation may, with the approval of the Board of Directors, provide such indemnification and advancement of expenses to any individual who served a predecessor of the Corporation in any of the capacities described in (i) or (ii) above and to any employee or agent of the Corporation or a predecessor of the Corporation. Any amendment of this Section 8.2 shall be prospective only and shall not affect the applicability of this section with respect to any act or failure to act that occurred prior to such amendment.

(b) The Corporation may, to the fullest extent permitted by law, purchase and maintain insurance on behalf of any person described in the preceding paragraph against any liability which may be asserted against such person.

(c) The indemnification provided herein shall not be deemed to limit the right of the Corporation to indemnify any other person for any such expenses to the fullest extent permitted by law, nor shall it be deemed exclusive of any other rights to which any person seeking indemnification from the Corporation may be entitled under any agreement, vote of stockholders or disinterested directors, or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office.

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ARTICLE IX

DURATION

The Corporation shall continue perpetually unless terminated pursuant to any applicable provision of the MGCL.

ARTICLE X

AMENDMENTS

The Corporation reserves the right from time to time to make any amendment to the Charter, now or hereafter authorized by law, including, without limitation, any amendment altering the terms or contract rights, as expressly set forth in the Charter, of any shares of outstanding stock. All rights and powers conferred by the Charter on stockholders, directors and officers are granted subject to this reservation. Except as set forth below and except for those amendments permitted to be made without stockholder approval under Maryland law or by specific provision in the Charter, any amendment to the Charter shall be valid only if declared advisable by the Board of Directors and approved by the affirmative vote of not less than a majority of all the shares of stock of the Corporation then outstanding and entitled to be cast on the matter. Any amendment to Section 5.3, Article VII or this sentence of the Charter shall be valid only if declared advisable by the Board of Directors and approved by the affirmative vote of two-thirds of all the shares of stock of the Corporation then outstanding and entitled to be cast on the matter.

ARTICLE XI

SEVERABILITY

If any provision of the Charter shall be held invalid or unenforceable in any respect, such holding shall apply only to the extent of any such invalidity or unenforceability and shall not in any manner affect, impair or render invalid or unenforceable any other provision of the Charter in any jurisdiction.

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ANNEX I

8.50% Series A Cumulative Redeemable Perpetual Preferred Stock

(1) Designation and Number . A series of preferred stock, designated as the “8.50% Series A Cumulative Redeemable Perpetual Preferred Stock” (the “Series A Preferred Stock”), is hereby established. The par value of the Series A Preferred Stock is $0.01 per share. The number of shares of the Series A Preferred Stock shall be 10,400,000.

(2) Ranking . The Series A Preferred Stock will, with respect to rights to receive dividends and to participate in distributions or payments upon liquidation, dissolution or winding up of the Corporation, rank (a) senior to the Common Stock (as defined in the Charter) and any other class of capital stock of the Corporation, now or hereafter issued and outstanding, the terms of which provide that such capital stock ranks, as to the payment of dividends or amounts upon liquidation, dissolution or winding up of the Corporation, junior to such Series A Preferred Stock (“Junior Stock”), (b) on a parity with any equity securities the Corporation may authorize or issue in the future that, pursuant to the terms thereof, rank on parity with the Series A Preferred Stock with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding up of the Corporation (“Parity Stock”); and (c) junior to any equity securities the Corporation may authorize or issue in the future that, pursuant to the terms thereof, rank senior to the Series A Preferred Stock with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding up of the Corporation (“Senior Stock”). Any authorization or issuance of Senior Stock would require the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series A Preferred Stock voting together as a single class with all other classes or series of Parity Stock upon which like voting rights have been conferred and are exercisable. Any convertible or exchangeable debt securities that the Corporation may issue are not considered to be equity securities for these purposes.

(3) Dividends .

(a) Holders of the then outstanding shares of Series A Preferred Stock shall be entitled to receive, when, as and if authorized by the Board and declared by the Corporation, out of funds legally available for payment of dividends, cumulative cash dividends at the rate of 8.50% per annum of the $25.00 liquidation preference of each share of Series A Preferred Stock (equivalent to $2.125 per annum per share).

(b) Dividends on each outstanding share of Series A Preferred Stock shall be cumulative from and including March 20, 2012 and shall be payable (i) for the period from March 20, 2012 to July 15, 2012, on July 16, 2012, and (ii) for each quarterly distribution period thereafter, quarterly in equal amounts in arrears on the 15th day of each January, April, July and October, commencing on October 15, 2012 (each such day being hereinafter called a “Series A Dividend Payment Date”) at the then applicable annual rate; provided, however, that if any Series A Dividend Payment Date falls on any day other than a Business Day (as hereinafter defined), the dividend that would otherwise have been payable on such Series A Dividend Payment Date may be paid on the next succeeding Business Day with the same force and effect as if paid on such Series A Dividend Payment Date, and no interest or other sums shall accrue on the amount so payable from such Series A Dividend Payment Date to such next succeeding Business Day. Each dividend is payable to holders of record as they appear on the stock records of the Corporation at the close of business on the record date, not exceeding 30 days preceding the applicable Series A Dividend Payment Date, as shall be fixed by the Board. Dividends shall accumulate from March 20, 2012 or the most recent Series A Dividend Payment Date to which full cumulative dividends have been paid, whether or not in any such dividend period or periods there shall be funds legally available for the payment of such dividends, whether the Corporation has earnings or whether such dividends are authorized. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series A Preferred Stock that may be in arrears. Holders of the Series A Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the Series A Preferred Stock. Dividends payable on the Series A Preferred Stock for any period greater or less than a full dividend period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends

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payable on the Series A Preferred Stock for each full dividend period will be computed by dividing the applicable annual dividend rate by four. After full cumulative distributions on the Series A Preferred Stock have been paid, the holders of Series A Preferred Stock will not be entitled to any further distributions with respect to that dividend period.

(c) So long as any shares of Series A Preferred Stock are outstanding, no dividends, except as described in the immediately following sentence, shall be authorized and declared or paid or set apart for payment on any series or class or classes of Parity Stock for any period unless full cumulative dividends have been declared and paid or are contemporaneously declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Series A Preferred Stock for all prior dividend periods. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends authorized and declared upon the Series A Preferred Stock and all dividends authorized and declared upon any other series or class or classes of Parity Stock shall be authorized and declared ratably in proportion to the respective amounts of dividends accumulated and unpaid on the Series A Preferred Stock and such Parity Stock.

(e) So long as any shares of Series A Preferred Stock are outstanding, no dividends (other than dividends or distributions paid solely in Junior Stock of, or in options, warrants or rights to subscribe for or purchase, Junior Stock) shall be authorized and declared or paid or set apart for payment or other distribution authorized and declared or made upon Junior Stock, nor shall any Junior Stock be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Stock made for purposes of and in compliance with requirements of an employee incentive or benefit plan of the Corporation or any subsidiary, or a conversion into or exchange for Junior Stock or redemptions for the purpose of preserving the Corporation’s qualification as a REIT (as defined in the Charter)), for any consideration (or any monies to be paid to or made available for a sinking fund for the redemption of any such shares) by the Corporation, directly or indirectly (except by conversion into or exchange for Junior Stock), unless in each case full cumulative dividends on all outstanding shares of Series A Preferred Stock and any Parity Stock at the time such dividends are payable shall have been paid or set apart for payment for all past dividend periods with respect to the Series A Preferred Stock and all past dividend periods with respect to such Parity Stock.

(f) Any dividend payment made on the Series A Preferred Stock, including any capital gains dividends, shall first be credited against the earliest accrued but unpaid dividend due with respect to such shares which remains payable.

(g) Except as provided herein, the Series A Preferred Stock shall not be entitled to participate in the earnings or assets of the Corporation.

(h) As used herein, the term “Business Day” shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York, New York are authorized or required by law, regulation or executive order to close.

(i) As used herein, the term “dividend” does not include dividends payable solely in shares of Junior Stock on Junior Stock, or in options, warrants or rights to holders of Junior Stock to subscribe for or purchase any Junior Stock.

(4) Liquidation Preference .

(a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution of the assets of the Corporation shall be made to or set apart for the holders of Junior Stock, the holders of the Series A Preferred Stock shall be entitled to receive $25.00 per share (the “Liquidation Preference”) plus an amount per share equal to all accrued and unpaid dividends (whether or not earned or declared) thereon to, but not including, the date of final distribution to such holders; but such holders of the Series A Preferred Stock shall not be entitled to any further payment. If, upon any such liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of the Series A Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other Parity Stock, then such assets, or the proceeds thereof, shall be distributed among the holders of such Series A Preferred Stock and any such other

Annex I-2

Parity Stock ratably in accordance with the respective amounts that would be payable on such Series A Preferred Stock and any such other Parity Stock if all amounts payable thereon were paid in full. For the purposes of this Section 4, none of (i) a consolidation or merger of the Corporation with one or more entities, (ii) a statutory stock exchange by the Corporation or (iii) a sale or transfer of all or substantially all of the Corporation’s assets shall be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Corporation.

(b) Until payment shall have been made in full to the holders of the Series A Preferred Stock, as provided in this Section 4, and to the holders of Parity Stock, subject to any terms and provisions applying thereto, no payment will be made to any holder of Junior Stock upon the liquidation, dissolution or winding up of the Corporation. Subject to the rights of the holders of Parity Stock, upon any liquidation, dissolution or winding up of the Corporation, after payment shall have been made in full to the holders of the Series A Preferred Stock, as provided in this Section 4, any series or class or classes of Junior Stock shall, subject to any respective terms and provisions applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Series A Preferred Stock shall not be entitled to share therein.

(5) Optional Redemption .

(a) Except as otherwise permitted by the Charter and paragraph (b) below, the Series A Preferred Stock shall not be redeemable by the Corporation prior to March 20, 2017. On and after March 20, 2017, the Corporation, at its option, upon giving notice as provided below, may redeem the Series A Preferred Stock, in whole, at any time, or in part, from time to time, for cash at a redemption price of $25.00 per share, plus any accrued and unpaid dividends on the Series A Preferred Stock (whether or not declared), to, but not including, the redemption date (the “Regular Redemption Right”).

(b) Upon the occurrence of a Change of Control (as defined herein), the Corporation will have the option, upon giving notice as provided below, to redeem the Series A Preferred Stock, in whole, at any time, or in part, from time to time, within 120 days after the first date on which the Change of Control has occurred (the “Special Redemption Right”), for cash at a redemption price of $25.00 per share, plus any accrued and unpaid dividends on the Series A Preferred Stock (whether or not declared), to, but not including, the redemption date (the “Special Redemption Price”). If the Corporation exercises its Special Redemption Right in connection with a Change of Control, holders of Series A Preferred Stock will not be permitted to exercise their Change of Control Conversion Right (as defined herein) in respect of any shares of Series A Preferred Stock that have been called for redemption, and any shares of Series A Preferred Stock subsequently called for redemption that have been tendered for conversion will be redeemed on the applicable date of redemption instead of converted on the Change of Control Conversion Date (as defined herein). Any partial redemption will be selected by lot or pro rata or by any other equitable method the Corporation may choose (including by electing to exercise the Special Redemption Right only with respect to shares of Series A Preferred Stock for which holders have exercised their Change of Control Conversion Right).

A “Change of Control” will be deemed to have occurred at such time after the original issuance of the Series A Preferred Stock when the following has occurred:

(i) the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act, of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of shares of the Corporation entitling that person to exercise more than 50% of the total voting power of all shares of the Corporation entitled to vote generally in elections of directors (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and

(ii) following the closing of any transaction referred to in clause (i) above, neither the Corporation nor the acquiring or surviving entity has a class of common securities or American Depositary Receipts listed on the NYSE, the NYSE Amex Equities, or NYSE Amex, or NASDAQ, or listed on an exchange that is a successor to the NYSE, NYSE Amex or NASDAQ.

Annex I-3

(c) The following provisions set forth the general procedures for redemption applicable to redemptions pursuant to the Regular Redemption Right and the Special Redemption Right:

(i) Upon any redemption date applicable to Series A Preferred Stock, the Corporation shall pay on each share of Series A Preferred Stock to be redeemed any accrued and unpaid dividends (whether or not declared), in arrears, for any dividend period ending on or prior to the redemption date. If a redemption date falls after a record date for a Series A Preferred Stock dividend payment and prior to the corresponding Series A Dividend Payment Date, then each holder of the Series A Preferred Stock at the close of business on such record date shall be entitled to the dividend payable on such Series A Preferred Stock on the corresponding Series A Dividend Payment Date notwithstanding the redemption of such Series A Preferred Stock prior to such Series A Dividend Payment Date. Except as provided above, the Corporation shall make no payment or allowance for unpaid dividends, whether or not in arrears, on any shares of Series A Preferred Stock called for redemption.

(ii) If full cumulative dividends on the Series A Preferred Stock and any class or classes of Parity Stock have not been paid or declared and set apart for payment, the Corporation may not purchase, redeem or otherwise acquire Series A Preferred Stock in part or any Parity Stock other than in exchange for Junior Stock; provided, however, that the foregoing shall not prevent the purchase by the Corporation of shares held in excess of the limits set forth in the Charter in order to ensure that the Corporation continues to meet the requirements for qualification as a REIT.

(iii) On and after the date fixed for redemption, provided that the Corporation has made available at the office of the registrar and transfer agent a sufficient amount of cash to effect the redemption, dividends will cease to accrue on the shares of Series A Preferred Stock called for redemption (except that, in the case of a redemption date after a dividend payment record date and prior to the related Series A Dividend Payment Date, holders of Series A Preferred Stock on the applicable dividend payment record date will be entitled on such Series A Dividend Payment Date to receive the dividend payable on such shares on the corresponding Series A Dividend Payment Date), such shares shall no longer be deemed to be outstanding and all rights of the holders of such shares as holders of Series A Preferred Stock shall cease except the right to receive the cash payable upon such redemption, without interest from the date of such redemption.

(d) The following provisions set forth the procedures for redemption, in addition to those general procedures set forth in Section 5(c) hereof, pursuant to the Regular Redemption Right.

(i) A notice of redemption (which may be contingent upon the occurrence of a future event) shall be mailed, postage prepaid, not less than 30 nor more than 60 days prior to the redemption date, addressed to the holders of record of the Series A Preferred Stock at their addresses as they appear on the Corporation’s stock transfer records. A failure to give such notice or any defect in the notice or in its mailing shall not affect the validity of the proceedings for the redemption of any shares of the Series A Preferred Stock except as to the holder to whom notice was defective or not given. In addition to any information required by law or by the applicable rules of any exchange upon which the Series A Preferred Stock may be listed or admitted to trading, each notice shall state: (A) the redemption date; (B) the redemption price; (C) the number of shares of Series A Preferred Stock to be redeemed and, if fewer than all the shares of Series A Preferred Stock held by such holder are to be redeemed, the number of such shares of Series A Preferred Stock to be redeemed from such holder; (D) the place or places where the certificates, if any, evidencing the shares of Series A Preferred Stock are to be surrendered for payment of the redemption price; and (E) that dividends on the shares to be redeemed will cease to accrue on such redemption date except as otherwise provided herein.

(ii) If fewer than all the outstanding shares of the Series A Preferred Stock are to be redeemed, the shares to be redeemed shall be selected by lot or pro rata (as nearly as practicable without creating fractional shares) or by any other equitable method the Corporation may choose.

(iii) At its election, the Corporation, prior to a redemption date, may irrevocably deposit the redemption price (including accumulated and unpaid dividends to the redemption date) of the Series A

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Preferred Stock so called for redemption in trust for the holders thereof with a bank or trust company, in which case the redemption notice to holders of the Series A Preferred Stock to be redeemed shall (A) state the date of such deposit, (B) specify the office of such bank or trust company as the place of payment of the redemption price and (C) require such holders to surrender the certificates evidencing such shares at such place on or about the date fixed in such redemption notice (which may not be later than the redemption date) against payment of the redemption price (including all accumulated and unpaid dividends to the redemption date). Subject to applicable escheat laws, any monies so deposited which remain unclaimed by the holders of the Series A Preferred Stock at the end of two years after the redemption date shall be returned by such bank or trust company to the Corporation.

(e) The following provisions set forth the procedures for redemption, in addition to those general procedures set forth in Section 5(c) hereof, pursuant to the Special Redemption Right.

(i) A notice of special optional redemption will be mailed, postage prepaid, not less than 30 nor more than 60 days prior to the redemption date, addressed to the holders of record of the Series A Preferred Stock at their addresses as they appear on the Corporation’s stock transfer records. A failure to give such notice or any defect in the notice or in its mailing will not affect the validity of the proceedings for the special optional redemption of the shares of Series A Preferred Stock except as to the holder to whom notice was defective or not given. Each notice will state: (A) the redemption date; (B) the redemption price; (C) the number of shares of Series A Preferred Stock to be redeemed; (D) the place or places where the certificates, if any, evidencing the shares of Series A Preferred Stock are to be surrendered for payment; (E) that the shares of Series A Preferred Stock are being redeemed pursuant to the Corporation’s special optional redemption right in connection with the occurrence of a Change of Control and a brief description of the transaction or transactions constituting such Change of Control; (F) that the holders of shares of Series A Preferred Stock to which the notice relates will not be able to tender such shares of Series A Preferred Stock for conversion in connection with the Change of Control and each share of Series A Preferred Stock tendered for conversion that is selected for redemption, prior to the Change of Control Conversion Date, will be redeemed on the related date of redemption instead of converted on the Change of Control Conversion Date; and (G) that dividends on the shares to be redeemed will cease to accrue on such redemption date except as otherwise provided herein.

(ii) If fewer than all the shares of Series A Preferred Stock held by any holder are to be redeemed, the notice mailed to such holder will also specify the number of shares of Series A Preferred Stock to be redeemed from such holder. If fewer than all of the outstanding shares of Series A Preferred Stock are to be redeemed, the shares to be redeemed shall be selected by lot or pro rata or by any other equitable method the Corporation may choose (including by electing to exercise the Special Redemption Right only with respect to shares of Series A Preferred Stock for which holders have exercised their Change of Control Conversion Right).

(iii) On and after the date fixed for redemption, provided that the Corporation has given a notice of redemption and has paid or set aside sufficient funds for the redemption in trust for the benefit of the holders of shares of Series A Preferred Stock called for redemption, those shares of Series A Preferred Stock will be treated as no longer being outstanding, no further dividends will accrue on the share of Series A Preferred Stock called for redemption and all other rights of the holders of those shares of Series A Preferred Stock will terminate (except that, in the case of a redemption date after a dividend payment record date and prior to the related Series A Dividend Payment Date, holders of Series A Preferred Stock on the applicable record date will be entitled on such Series A Dividend Payment Date to receive the dividend payable on such shares on the corresponding Series A Dividend Payment Date). The holders of those shares of Series A Preferred Stock will retain their right to receive the redemption price for their shares and any accrued and unpaid dividends to (but not including) the redemption date, without interest from the date of such redemption.

(iv) At its election, the Corporation, prior to a redemption date, may irrevocably deposit the redemption price (including accumulated and unpaid dividends to the redemption date) of the Series A Preferred Stock so called for redemption in trust for the holders thereof with a bank or trust company, in

Annex I-5

which case the redemption notice to holders of the Series A Preferred Stock to be redeemed shall (A) state the date of such deposit, (B) specify the office of such bank or trust company as the place of payment of the redemption price and (C) require such holders to surrender the certificates evidencing such shares at such place on or about the date fixed in such redemption notice (which may not be later than the redemption date) against payment of the redemption price (including all accumulated and unpaid dividends to the redemption date). Subject to applicable escheat laws, any monies so deposited which remain unclaimed by the holders of the Series A Preferred Stock at the end of two years after the redemption date shall be returned by such bank or trust company to the Corporation.

(f) Any shares of Series A Preferred Stock that shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board.

(6) Voting Rights . Except as otherwise set forth herein, the Series A Preferred Stock shall not have any relative, participating, optional or other voting rights or powers, and the consent of the holders thereof shall not be required for the taking of any corporate action. In any matter in which the holders of Series A Preferred Stock are entitled to vote, each such holder shall have the right to one vote for each share of Series A Preferred Stock held by such holder.

(a) If and whenever six quarterly dividends (whether or not consecutive) payable on the Series A Preferred Stock are in arrears, whether or not earned or declared, the number of members then constituting the Board will be increased by two and the holders of Series A Preferred Stock, voting together as a class with the holders of any other series of Parity Stock upon which like voting rights have been conferred and are exercisable (any such other series, the “Voting Preferred Stock”), will have the right to elect two additional directors of the Corporation ( the “Preferred Stock Directors”) at an annual meeting of stockholders or a properly called special meeting of the holders of the Series A Preferred Stock and such Voting Preferred Stock and at each subsequent annual meeting of stockholders until all such dividends and dividends for the then current quarterly period on the Series A Preferred Stock and such other Voting Preferred Stock have been paid or declared and set aside for payment. Whenever all arrears in dividends on the Series A Preferred Stock and the Voting Preferred Stock then outstanding have been paid and full dividends on the Series A Preferred Stock and the Voting Preferred Stock for the then current quarterly dividend period have been paid in full or declared and set apart for payment in full, then the right of the holders of the Series A Preferred Stock and the Voting Preferred Stock to elect the two Preferred Stock Directors will cease, the terms of office of the Preferred Stock Directors will forthwith terminate and the number of members of the Board will be reduced accordingly; provided, however, that the right of the holders of the Series A Preferred Stock and the Voting Preferred Stock to elect the Preferred Stock Directors will again vest if and whenever six quarterly dividends are in arrears, as described above. In no event shall the holders of Series A Preferred Stock be entitled pursuant to these voting rights to elect a director that would cause the Corporation to fail to satisfy a requirement relating to director independence of any national securities exchange on which any class or series of the Corporation’s stock is listed. In class votes with other Voting Preferred Stock, preferred stock of different series shall vote in proportion to the liquidation preference of the preferred stock.

(b) So long as any shares of Series A Preferred Stock are outstanding, the approval of two-thirds of the votes entitled to be cast by the holders of outstanding Series A Preferred Stock, voting separately as a class, either at a meeting of stockholders or by written consent, is required (i) to amend, alter or repeal any provisions of the Charter (including these Articles Supplementary ^* ), whether by merger, consolidation or

Explanatory Note: The term “Articles Supplementary” when used in this Annex I of the Restated Charter of Colony Capital, Inc. refers to the Articles Supplementary Establishing and Fixing the Rights and Preferences of a Series of Shares of Preferred Stock filed for record with the Maryland State Department of Assessments and Taxation on March 19, 2012, as supplemented by the Articles Supplementary Establishing Additional Shares of 8.500% Series A Cumulative Redeemable Perpetual Preferred Stock filed for record with the Maryland State Department of Assessments and Taxation on July 13, 2012. This Annex I sets forth all of the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms or conditions of redemption of the 8.50% Series A Cumulative Redeemable Perpetual Preferred Stock as set forth in such Articles Supplementary.

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otherwise, to affect materially and adversely the voting powers, rights or preferences of the holders of the Series A Preferred Stock, unless in connection with any such amendment, alteration or repeal, the Series A Preferred Stock remains outstanding without the terms thereof being materially changed in any respect adverse to the holders thereof or is converted into or exchanged for preferred stock of the surviving entity having preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption thereof that are substantially similar to those of the Series A Preferred Stock, or (ii) to authorize, create, or increase the authorized amount of any class or series of capital stock having rights senior to the Series A Preferred Stock with respect to the payment of dividends or amounts upon liquidation, dissolution or winding up (provided that if such amendment affects materially and adversely the rights, preferences, privileges or voting powers of one or more but not all of the other series of Voting Preferred Stock, the consent of the holders of at least two-thirds of the outstanding shares of each such series so affected is required). However, the Corporation may create additional classes of Parity Stock and Junior Stock, amend the Charter and these Articles Supplementary to increase the authorized number of shares of Parity Stock (including the Series A Preferred Stock) and Junior Stock and issue additional series of Parity Stock and Junior Stock without the consent of any holder of Series A Preferred Stock.

(c) The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding Series A Preferred Stock shall have been redeemed or called for redemption upon proper notice and sufficient funds shall have been deposited in trust to effect such redemption.

(7) Information Rights . During any period in which the Corporation is not subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and any shares of Series A Preferred Stock are outstanding, the Corporation will (i) transmit by mail (or other permissible means under the Exchange Act) to all holders of Series A Preferred Stock, as their names and addresses appear in the record books of the Corporation and without cost to such holders, copies of the annual reports on Form 10-K and quarterly reports on Form 10-Q that the Corporation would have been required to file with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Exchange Act if the Corporation were subject thereto (other than any exhibits that would have been required) and (ii) promptly, upon request, supply copies of such reports to any prospective holder of Series A Preferred Stock. The Corporation will mail (or otherwise provide) the information to the holders of Series A Preferred Stock within 15 days after the respective dates by which a periodic report on Form 10-K or Form 10-Q, as the case may be, in respect of such information would have been required to be filed with the Securities and Exchange Commission if the Corporation were subject to Section 13 or 15(d) of the Exchange Act, in each case, based on the dates on which the Corporation would be required to file such periodic reports if the Corporation were a “non-accredited filer” within the meaning of the Exchange Act.

(8) Other Limitations; Ownership and Transfer of the Series A Preferred Stock. The Series A Preferred Stock constitutes Capital Stock (as defined in the Charter) of the Corporation and is governed by and issued subject to all the ownership and transfer restrictions of the Charter applicable to Capital Stock generally, including but not limited to the terms and conditions (including exceptions and exemptions) of Article VII of the Charter applicable to Capital Stock. The foregoing sentence shall not be construed to limit the applicability to the Series A Preferred Stock of any other term or provision of the Charter.

(9) Conversion Upon a Change of Control . The Series A Preferred Stock is not convertible into or exchangeable for any other property or securities of the Corporation, except as provided in this Section 9.

(a) Upon the occurrence of a Change of Control, each holder of Series A Preferred Stock will have the right, subject to the Special Redemption Right of the Corporation, to convert some or all of the shares of Series A Preferred Stock held by such holder (the “Change of Control Conversion Right”) on the relevant Change of Control Conversion Date (as defined herein) into a number of shares of Common Stock per share of Series A Preferred Stock (the “Common Stock Conversion Consideration”) equal to the lesser of (A) the

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quotient obtained by dividing (i) the sum of (x) $25.00, plus (y) an amount equal to any accrued and unpaid dividends (whether or not declared) to, but not including, the Change of Control Conversion Date (as defined herein), except if such Change of Control Conversion Date is after a record date for a Series A Preferred Stock dividend payment and prior to the corresponding Series A Dividend Payment Date, in which case the amount pursuant to this clause (i)(y) shall equal $0.00 in respect of such dividend payment to be made on such Series A Dividend Payment Date, by (ii) the Common Stock Price (as defined herein) (such quotient, the “Conversion Rate”), and (B) 2.9815 (the “Share Cap”), subject to the immediately succeeding paragraph.

The Share Cap is subject to pro rata adjustments for any share splits (including those effected pursuant to a Common Stock dividend), subdivisions or combinations (in each case, a “Share Split”) with respect to Common Stock as follows: the adjusted Share Cap as the result of a Share Split shall be the number of shares of Common Stock that is equivalent to the product of (i) the Share Cap in effect immediately prior to such Share Split multiplied by (ii) a fraction, the numerator of which is the number of shares of Common Stock outstanding after giving effect to such Share Split and the denominator of which is the number of shares of Common Stock outstanding immediately prior to such Share Split.

For the avoidance of doubt, subject to the immediately succeeding sentence, the aggregate number of shares of Common Stock (or equivalent Alternative Conversion Consideration (as defined herein), as applicable) issuable in connection with the exercise of the Change of Control Conversion Right shall not exceed 15,503,800 shares of Common Stock (or equivalent Alternative Conversion Consideration, as applicable), subject to increase to the extent the underwriters’ over-allotment option to purchase additional Series A Preferred Stock in the initial public offering of Series A Preferred Stock is exercised, not to exceed 17,829,370 shares of Common Stock in total (or equivalent Alternative Conversion Consideration, as applicable) (the “Exchange Cap”). The Exchange Cap is subject to pro rata adjustments for any Share Splits with respect to Common Stock as follows: the adjusted Exchange Cap as the result of a Share Split will be the number of shares of Common Stock that is equivalent to the product of (i) the Exchange Cap in effect immediately prior to such Share Split multiplied by (ii) a fraction, the numerator of which is the number of shares of Common Stock outstanding after giving effect to such Share Split and the denominator of which is the number of shares of Common Stock outstanding immediately prior to such Share Split.

In the case of a Change of Control as a result of which holders of Common Stock are entitled to receive consideration other than solely shares of Common Stock, including other securities, other property or assets (including cash or any combination thereof) with respect to or in exchange for shares of Common Stock (the “Alternative Form Consideration”), a holder of Series A Preferred Stock shall be entitled thereafter to convert (subject to the Corporation’s Special Redemption Right) such Series A Preferred Stock not into Common Stock but solely into the kind and amount of Alternative Form Consideration which the holder of Series A Preferred Stock would have owned or been entitled to receive upon such Change of Control as if such holder of Series A Preferred Stock then held the Common Stock Conversion Consideration immediately prior to the effective time of the Change of Control (the “Alternative Conversion Consideration,” and the Common Stock Conversion Consideration or the Alternative Conversion Consideration, as may be applicable to a Change of Control, shall be referred to herein as the “Conversion Consideration”).

If the holders of Common stock have the opportunity to elect the form of consideration to be received in such Change of Control, the Conversion Consideration will be deemed to be the kind and amount of consideration actually received by holders of a majority of Common Stock that voted for such an election (if electing between two types of consideration) or holders of a plurality of Common Stock that voted for such an election (if electing between more than two types of consideration), as the case may be.

As used herein, “Common Stock Price” will mean (i) if the consideration to be received in the Change of Control by holders of shares of Common Stock is solely cash, the amount of cash consideration per share of Common Stock, (ii) if the consideration to be received in the Change of Control by holders of Common Stock is other than solely cash, the average of the closing price per share of Common Stock on the ten consecutive trading days immediately preceding, but not including, the effective date of the Change of Control, and (iii) if there is not a readily determinable closing price for the Common Stock or Alternative Form Consideration (as defined herein), the fair market value of Common Stock or such Alternative Form Consideration (as determined by the Board or a committee thereof).

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(b) No fractional shares of Common Stock shall be issued upon the conversion of Series A Preferred Stock. In lieu of fractional shares, holders shall be entitled to receive the cash value of such fractional shares based on the Common Stock Price.

(c) Within 15 days following the occurrence of a Change of Control, the Corporation shall provide to holders of Series A Preferred Stock a notice of occurrence of the Change of Control that describes the resulting Change of Control Conversion Right. A failure to give such notice or any defect in the notice or in its mailing shall not affect the validity of the proceedings for the conversion of any Series A Preferred Stock except as to the holder to whom notice was defective or not given. Each notice shall state the following: (i) the events constituting the Change of Control; (ii) the date of the Change of Control; (iii) the last date on which the holders of Series A Preferred Stock may exercise their Change of Control Conversion Right, which shall be the Change of Control Conversion Date; (iv) the method and period for calculating the Common Stock Price; (v) the Change of Control Conversion Date, which will be a business day occurring within 20 to 35 days following the date of the notice; (vi) if applicable, the type and amount of Alternative Conversion Consideration entitled to be received per share of Series A Preferred Stock; (vii) the name and address of the paying agent and the conversion agent; and (viii) the procedures that the holders of Series A Preferred Stock must follow to exercise the Change of Control Conversion Right.

(d) The Corporation shall issue a press release for publication on the Dow Jones & Company, Inc., Business Wire, PR Newswire or Bloomberg Business News (or, if such organizations are not in existence at the time of issuance of such press release, such other news or press organization as is reasonably calculated to broadly disseminate the relevant information to the public), or post notice on the Corporation’s website, in any event prior to the opening of business on the first Business Day following any date on which the Corporation provides notice pursuant to paragraph (c) above to the holders of Series A Preferred Stock.

(e) In order to exercise the Change of Control Conversion Right, a holder of Series A Preferred Stock shall be required to deliver, on or before the close of business on the Change of Control Conversion Date, the certificates (if any) evidencing the shares of Series A Preferred Stock to be converted, duly endorsed for transfer, together with a written conversion notice completed, to the transfer agent. Such conversion notice shall state: (i) the relevant Change of Control Conversion Date; (ii) the number of shares of Series A Preferred Stock to be converted; and (iii) that the shares of Series A Preferred Stock are to be converted pursuant to the applicable provisions of the Series A Preferred Stock. Notwithstanding the foregoing, if the shares of Series A Preferred Stock are held in global form, such notice shall comply with applicable procedures of the Depository Trust Company (“DTC”). The “Change of Control Conversion Date” shall be a Business Day set forth in the notice of Change of Control provided in accordance with paragraph 9(c) hereof that is no less than 20 days nor more than 35 days after the date on which the Corporation gives such notice pursuant to paragraph 9(c) hereof.

(f) Holders of Series A Preferred Stock may withdraw any notice of exercise of a Change of Control Conversion Right (in whole or in part) by a written notice of withdrawal delivered to the Corporation’s transfer agent prior to the close of business on the Business Day prior to the Change of Control Conversion Date. The notice of withdrawal must state: (i) the number of withdrawn shares of Series A Preferred Stock; (ii) if certificated shares of Series A Preferred Stock have been issued, the certificate numbers of the withdrawn shares of Series A Preferred Stock; and (iii) the number of shares of Series A Preferred Stock, if any, which remain subject to the conversion notice. Notwithstanding the foregoing, if the shares of Series A Preferred Stock are held in global form, the notice of withdrawal shall comply with applicable DTC procedures.

(g) Series A Preferred Stock as to which the Change of Control Conversion Right has been properly exercised and for which the conversion notice has not been properly withdrawn shall be converted into the applicable Conversion Consideration in accordance with the Change of Control Conversion Right on the Change of Control Conversion Date.

(h) In connection with the exercise of any Change of Control Conversion Right, the Corporation will comply with all U.S. federal and state securities laws and stock exchange rules in connection with any conversion of Series A Preferred Stock into Common Stock. Notwithstanding anything to the contrary contained herein, no holder of Series A Preferred Stock will be entitled to convert such Series A Preferred

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Stock for Common Stock to the extent that receipt of such Common Stock would cause such holder (or any other person) to Beneficially Own or Constructively Own, within the meaning of the Charter, Common Stock of the Corporation in excess of the Common Stock Ownership Limit, as such term is defined in the Charter.

(11) Record Holders . The Corporation and the transfer agent for the Series A Preferred Stock may deem and treat the record holder of any Series A Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor the transfer agent shall be affected by any notice to the contrary.

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ANNEX II

7.50% Series B Cumulative Redeemable Perpetual Preferred Stock

(1) Designation and Number . A series of preferred stock, designated as the “7.50% Series B Cumulative Redeemable Perpetual Preferred Stock” (the “Series B Preferred Stock”), is hereby established. The par value of the Series B Preferred Stock is $0.01 per share. The number of shares of the Series B Preferred Stock shall be 3,450,000.

(2) Ranking . The Series B Preferred Stock will, with respect to rights to receive dividends and to participate in distributions or payments upon liquidation, dissolution or winding up of the Corporation, rank (a) senior to the Common Stock (as defined in the Charter) and any other class of capital stock of the Corporation, now or hereafter issued and outstanding, the terms of which provide that such capital stock ranks, as to the payment of dividends or amounts upon liquidation, dissolution or winding up of the Corporation, junior to such Series B Preferred Stock (“Junior Stock”), (b) on a parity with the Series A Preferred Stock (as defined in the Charter) and any equity securities the Corporation may authorize or issue in the future that, pursuant to the terms thereof, rank on parity with the Series B Preferred Stock with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding up of the Corporation (“Parity Stock”); and (c) junior to any equity securities the Corporation may authorize or issue in the future that, pursuant to the terms thereof, rank senior to the Series B Preferred Stock with respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding up of the Corporation (“Senior Stock”). Any authorization or issuance of Senior Stock would require the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series B Preferred Stock voting together as a single class with all other classes or series of Parity Stock upon which like voting rights have been conferred and are exercisable. Any convertible or exchangeable debt securities that the Corporation may issue are not considered to be equity securities for these purposes.

(3) Dividends .

(a) Holders of the then outstanding shares of Series B Preferred Stock shall be entitled to receive, when, as and if authorized by the Board and declared by the Corporation, out of funds legally available for payment of dividends, cumulative cash dividends at the rate of 7.50% per annum of the $25.00 liquidation preference of each share of Series B Preferred Stock (equivalent to $1.875 per annum per share).

(b) Dividends on each outstanding share of Series B Preferred Stock shall be cumulative from and including June 19, 2014 and shall be payable (i) for the period from June 19, 2014 to October 14, 2014, on October 15, 2014, and (ii) for each quarterly distribution period thereafter, quarterly in equal amounts in arrears on the 15th day of each January, April, July and October, commencing on January 15, 2015 (each such day being hereinafter called a “Series B Dividend Payment Date”) at the then applicable annual rate; provided, however, that if any Series B Dividend Payment Date falls on any day other than a Business Day (as hereinafter defined), the dividend that would otherwise have been payable on such Series B Dividend Payment Date may be paid on the next succeeding Business Day with the same force and effect as if paid on such Series B Dividend Payment Date, and no interest or other sums shall accrue on the amount so payable from such Series B Dividend Payment Date to such next succeeding Business Day. Each dividend is payable to holders of record as they appear on the stock records of the Corporation at the close of business on the record date, not exceeding 30 days preceding the applicable Series B Dividend Payment Date, as shall be fixed by the Board. Dividends shall accumulate from June 19, 2014 or the most recent Series B Dividend Payment Date to which full cumulative dividends have been paid, whether or not in any such dividend period or periods there shall be funds legally available for the payment of such dividends, whether the Corporation has earnings or whether such dividends are authorized. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series B Preferred Stock that may be in arrears. Holders of the Series B Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the Series B Preferred Stock. Dividends

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payable on the Series B Preferred Stock for any period greater or less than a full dividend period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends payable on the Series B Preferred Stock for each full dividend period will be computed by dividing the applicable annual dividend rate by four. After full cumulative distributions on the Series B Preferred Stock have been paid, the holders of Series B Preferred Stock will not be entitled to any further distributions with respect to that dividend period.

(c) So long as any shares of Series B Preferred Stock are outstanding, no dividends, except as described in the immediately following sentence, shall be authorized and declared or paid or set apart for payment on any series or class or classes of Parity Stock for any period unless full cumulative dividends have been declared and paid or are contemporaneously declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Series B Preferred Stock for all prior dividend periods. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends authorized and declared upon the Series B Preferred Stock and all dividends authorized and declared upon any other series or class or classes of Parity Stock shall be authorized and declared ratably in proportion to the respective amounts of dividends accumulated and unpaid on the Series B Preferred Stock and such Parity Stock.

(e) So long as any shares of Series B Preferred Stock are outstanding, no dividends (other than dividends or distributions paid solely in Junior Stock of, or in options, warrants or rights to subscribe for or purchase, Junior Stock) shall be authorized and declared or paid or set apart for payment or other distribution authorized and declared or made upon Junior Stock, nor shall any Junior Stock be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Stock made for purposes of and in compliance with requirements of an employee incentive or benefit plan of the Corporation or any subsidiary, or a conversion into or exchange for Junior Stock or redemptions for the purpose of preserving the Corporation’s qualification as a REIT (as defined in the Charter)), for any consideration (or any monies to be paid to or made available for a sinking fund for the redemption of any such shares) by the Corporation, directly or indirectly (except by conversion into or exchange for Junior Stock), unless in each case full cumulative dividends on all outstanding shares of Series B Preferred Stock and any Parity Stock at the time such dividends are payable shall have been paid or set apart for payment for all past dividend periods with respect to the Series B Preferred Stock and all past dividend periods with respect to such Parity Stock.

(f) Any dividend payment made on the Series B Preferred Stock, including any capital gains dividends, shall first be credited against the earliest accrued but unpaid dividend due with respect to such shares which remains payable.

(g) Except as provided herein, the Series B Preferred Stock shall not be entitled to participate in the earnings or assets of the Corporation.

(4) Liquidation Preference .

(a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, before any payment or distribution of the assets of the Corporation shall be made to or set apart for the holders of Junior Stock, the holders of the Series B Preferred Stock shall be entitled to receive $25.00 per share (the “Liquidation Preference”) plus an amount per share equal to all accrued and unpaid dividends (whether or not earned or declared) thereon to, but not including, the date of final distribution to such holders; but such holders of the Series B Preferred Stock shall not be entitled to any further payment. If, upon any such liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of the Series B Preferred Stock shall be insufficient to pay in full the

Annex II-2

preferential amount aforesaid and liquidating payments on any other Parity Stock, then such assets, or the proceeds thereof, shall be distributed among the holders of such Series B Preferred Stock and any such other Parity Stock ratably in accordance with the respective amounts that would be payable on such Series B Preferred Stock and any such other Parity Stock if all amounts payable thereon were paid in full. For the purposes of this Section 4, none of (i) a consolidation or merger of the Corporation with one or more entities, (ii) a statutory stock exchange by the Corporation or (iii) a sale or transfer of all or substantially all of the Corporation’s assets shall be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Corporation.

(b) Until payment shall have been made in full to the holders of the Series B Preferred Stock, as provided in this Section 4, and to the holders of Parity Stock, subject to any terms and provisions applying thereto, no payment will be made to any holder of Junior Stock upon the liquidation, dissolution or winding up of the Corporation. Subject to the rights of the holders of Parity Stock, upon any liquidation, dissolution or winding up of the Corporation, after payment shall have been made in full to the holders of the Series B Preferred Stock, as provided in this Section 4, any series or class or classes of Junior Stock shall, subject to any respective terms and provisions applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Series B Preferred Stock shall not be entitled to share therein.

(5) Optional Redemption .

(a) Except as otherwise permitted by the Charter and paragraph (b) below, the Series B Preferred Stock shall not be redeemable by the Corporation prior to June 19, 2019. On and after June 19, 2019, the Corporation, at its option, upon giving notice as provided below, may redeem the Series B Preferred Stock, in whole, at any time, or in part, from time to time, for cash at a redemption price of $25.00 per share, plus any accrued and unpaid dividends on the Series B Preferred Stock (whether or not declared), to, but not including, the redemption date (the “Regular Redemption Right”).

(b) Upon the occurrence of a Change of Control (as defined herein), the Corporation will have the option, upon giving notice as provided below, to redeem the Series B Preferred Stock, in whole, at any time, or in part, from time to time, within 120 days after the first date on which the Change of Control has occurred (the “Special Redemption Right”), for cash at a redemption price of $25.00 per share, plus any accrued and unpaid dividends on the Series B Preferred Stock (whether or not declared), to, but not including, the redemption date (the “Special Redemption Price”). If the Corporation exercises its Special Redemption Right in connection with a Change of Control, holders of Series B Preferred Stock will not be permitted to exercise their Change of Control Conversion Right (as defined herein) in respect of any shares of Series B Preferred Stock that have been called for redemption, and any shares of Series B Preferred Stock subsequently called for redemption that have been tendered for conversion will be redeemed on the applicable date of redemption instead of converted on the Change of Control Conversion Date (as defined herein). Any partial redemption will be selected by lot or pro rata.

A “Change of Control” will be deemed to have occurred at such time after the original issuance of the Series B Preferred Stock when the following has occurred:

Annex II-3

(c) The following provisions set forth the general procedures for redemption applicable to redemptions pursuant to the Regular Redemption Right and the Special Redemption Right:

(i) Upon any redemption date applicable to Series B Preferred Stock, the Corporation shall pay on each share of Series B Preferred Stock to be redeemed any accrued and unpaid dividends (whether or not declared), in arrears, for any dividend period ending on or prior to the redemption date. If a redemption date falls after a record date for a Series B Preferred Stock dividend payment and prior to the corresponding Series B Dividend Payment Date, then each holder of the Series B Preferred Stock at the close of business on such record date shall be entitled to the dividend payable on such Series B Preferred Stock on the corresponding Series B Dividend Payment Date notwithstanding the redemption of such Series B Preferred Stock prior to such Series B Dividend Payment Date. Except as provided above, the Corporation shall make no payment or allowance for unpaid dividends, whether or not in arrears, on any shares of Series B Preferred Stock called for redemption.

(ii) If full cumulative dividends on the Series B Preferred Stock and any class or classes of Parity Stock have not been paid or declared and set apart for payment, the Corporation may not purchase, redeem or otherwise acquire Series B Preferred Stock in part or any Parity Stock other than in exchange for Junior Stock; provided, however, that the foregoing shall not prevent the purchase by the Corporation of shares held in excess of the limits set forth in the Charter in order to ensure that the Corporation continues to meet the requirements for qualification as a REIT.

(iii) On and after the date fixed for redemption, provided that the Corporation has made available at the office of the registrar and transfer agent a sufficient amount of cash to effect the redemption, dividends will cease to accrue on the shares of Series B Preferred Stock called for redemption (except that, in the case of a redemption date after a dividend payment record date and prior to the related Series B Dividend Payment Date, holders of Series B Preferred Stock on the applicable dividend payment record date will be entitled on such Series B Dividend Payment Date to receive the dividend payable on such shares on the corresponding Series B Dividend Payment Date), such shares shall no longer be deemed to be outstanding and all rights of the holders of such shares as holders of Series B Preferred Stock shall cease except the right to receive the cash payable upon such redemption, without interest from the date of such redemption.

(d) The following provisions set forth the procedures for redemption, in addition to those general procedures set forth in Section 5(c) hereof, pursuant to the Regular Redemption Right.

(i) A notice of redemption (which may be contingent upon the occurrence of a future event) shall be mailed, postage prepaid, not less than 30 nor more than 60 days prior to the redemption date, addressed to the holders of record of the Series B Preferred Stock at their addresses as they appear on the Corporation’s stock transfer records. A failure to give such notice or any defect in the notice or in its mailing shall not affect the validity of the proceedings for the redemption of any shares of the Series B Preferred Stock except as to the holder to whom notice was defective or not given. In addition to any information required by law or by the applicable rules of any exchange upon which the Series B Preferred Stock may be listed or admitted to trading, each notice shall state: (A) the redemption date; (B) the redemption price; (C) the number of shares of Series B Preferred Stock to be redeemed and, if fewer than all the shares of Series B Preferred Stock held by such holder are to be redeemed, the number of such shares of Series B Preferred Stock to be redeemed from such holder; (D) the place or places where the certificates, if any, evidencing the shares of Series B Preferred Stock are to be surrendered for payment of the redemption price; and (E) that dividends on the shares to be redeemed will cease to accrue on such redemption date except as otherwise provided herein.

(ii) If fewer than all the outstanding shares of the Series B Preferred Stock are to be redeemed, the shares to be redeemed shall be selected by lot or pro rata (as nearly as practicable without creating fractional shares).

Annex II-4

(ii) At its election, the Corporation, prior to a redemption date, may irrevocably deposit the redemption price (including accumulated and unpaid dividends to the redemption date) of the Series B Preferred Stock so called for redemption in trust for the holders thereof with a bank or trust company, in which case the redemption notice to holders of the Series B Preferred Stock to be redeemed shall (A) state the date of such deposit, (B) specify the office of such bank or trust company as the place of payment of the redemption price and (C) require such holders to surrender the certificates evidencing such shares at such place on or about the date fixed in such redemption notice (which may not be later than the redemption date) against payment of the redemption price (including all accumulated and unpaid dividends to the redemption date). Subject to applicable escheat laws, any monies so deposited which remain unclaimed by the holders of the Series B Preferred Stock at the end of two years after the redemption date shall be returned by such bank or trust company to the Corporation.

(e) The following provisions set forth the procedures for redemption, in addition to those general procedures set forth in Section 5(c) hereof, pursuant to the Special Redemption Right.

(i) A notice of special optional redemption will be mailed, postage prepaid, not less than 30 nor more than 60 days prior to the redemption date, addressed to the holders of record of the Series B Preferred Stock at their addresses as they appear on the Corporation’s stock transfer records. A failure to give such notice or any defect in the notice or in its mailing will not affect the validity of the proceedings for the special optional redemption of the shares of Series B Preferred Stock except as to the holder to whom notice was defective or not given. Each notice will state: (A) the redemption date; (B) the redemption price; (C) the number of shares of Series B Preferred Stock to be redeemed; (D) the place or places where the certificates, if any, evidencing the shares of Series B Preferred Stock are to be surrendered for payment; (E) that the shares of Series B Preferred Stock are being redeemed pursuant to the Corporation’s special optional redemption right in connection with the occurrence of a Change of Control and a brief description of the transaction or transactions constituting such Change of Control; (F) that the holders of shares of Series B Preferred Stock to which the notice relates will not be able to tender such shares of Series B Preferred Stock for conversion in connection with the Change of Control and each share of Series B Preferred Stock tendered for conversion that is selected for redemption, prior to the Change of Control Conversion Date, will be redeemed on the related date of redemption instead of converted on the Change of Control Conversion Date; and (G) that dividends on the shares to be redeemed will cease to accrue on such redemption date except as otherwise provided herein.

(ii) If fewer than all the shares of Series B Preferred Stock held by any holder are to be redeemed, the notice mailed to such holder will also specify the number of shares of Series B Preferred Stock to be redeemed from such holder. If fewer than all of the outstanding shares of Series B Preferred Stock are to be redeemed, the shares to be redeemed shall be selected by lot or pro rata.

(iii) On and after the date fixed for redemption, provided that the Corporation has given a notice of redemption and has paid or set aside sufficient funds for the redemption in trust for the benefit of the holders of shares of Series B Preferred Stock called for redemption, those shares of Series B Preferred Stock will be treated as no longer being outstanding, no further dividends will accrue on the share of Series B Preferred Stock called for redemption and all other rights of the holders of those shares of Series B Preferred Stock will terminate (except that, in the case of a redemption date after a dividend payment record date and prior to the related Series B Dividend Payment Date, holders of Series B Preferred Stock on the applicable record date will be entitled on such Series B Dividend Payment Date to receive the dividend payable on such shares on the corresponding Series B Dividend Payment Date). The holders of those shares of Series B Preferred Stock will retain their right to receive the redemption price for their shares and any accrued and unpaid dividends to (but not including) the redemption date, without interest from the date of such redemption.

(iv) At its election, the Corporation, prior to a redemption date, may irrevocably deposit the redemption price (including accumulated and unpaid dividends to the redemption date) of the Series B Preferred Stock so called for redemption in trust for the holders thereof with a bank or trust company, in which case the redemption notice to holders of the Series B Preferred Stock to be redeemed shall

Annex II-5

(A) state the date of such deposit, (B) specify the office of such bank or trust company as the place of payment of the redemption price and (C) require such holders to surrender the certificates evidencing such shares at such place on or about the date fixed in such redemption notice (which may not be later than the redemption date) against payment of the redemption price (including all accumulated and unpaid dividends to the redemption date). Subject to applicable escheat laws, any monies so deposited which remain unclaimed by the holders of the Series B Preferred Stock at the end of two years after the redemption date shall be returned by such bank or trust company to the Corporation.

(f) Any shares of Series B Preferred Stock that shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued Preferred Stock, without designation as to series until such shares are once more designated as part of a particular series by the Board.

(6) Voting Rights . Except as otherwise set forth herein, the Series B Preferred Stock shall not have any relative, participating, optional or other voting rights or powers, and the consent of the holders thereof shall not be required for the taking of any corporate action. In any matter in which the holders of Series B Preferred Stock are entitled to vote, each such holder shall have the right to one vote for each share of Series B Preferred Stock held by such holder.

(a) If and whenever six quarterly dividends (whether or not consecutive) payable on the Series B Preferred Stock are in arrears, whether or not earned or declared, the number of members then constituting the Board will be increased by two and the holders of Series B Preferred Stock, voting together as a class with the holders of any other series of Parity Stock upon which like voting rights have been conferred and are exercisable (any such other series, the “Voting Preferred Stock”), will have the right to elect two additional directors of the Corporation ( the “Preferred Stock Directors”) at an annual meeting of stockholders or a properly called special meeting of the holders of the Series B Preferred Stock and such Voting Preferred Stock and at each subsequent annual meeting of stockholders until all such dividends and dividends for the then current quarterly period on the Series B Preferred Stock and such other Voting Preferred Stock have been paid or declared and set aside for payment. Whenever all arrears in dividends on the Series B Preferred Stock and the Voting Preferred Stock then outstanding have been paid and full dividends on the Series B Preferred Stock and the Voting Preferred Stock for the then current quarterly dividend period have been paid in full or declared and set apart for payment in full, then the right of the holders of the Series B Preferred Stock and the Voting Preferred Stock to elect the two Preferred Stock Directors will cease, the terms of office of the Preferred Stock Directors will forthwith terminate and the number of members of the Board will be reduced accordingly; provided, however, that the right of the holders of the Series B Preferred Stock and the Voting Preferred Stock to elect the Preferred Stock Directors will again vest if and whenever six quarterly dividends are in arrears, as described above. In no event shall the holders of Series B Preferred Stock be entitled pursuant to these voting rights to elect a director that would cause the Corporation to fail to satisfy a requirement relating to director independence of any national securities exchange on which any class or series of the Corporation’s stock is listed. In class votes with other Voting Preferred Stock, preferred stock of different series shall vote in proportion to the liquidation preference of the preferred stock.

(b) So long as any shares of Series B Preferred Stock are outstanding, the approval of two-thirds of the votes entitled to be cast by the holders of outstanding Series B Preferred Stock, voting separately as a class, either at a meeting of stockholders or by written consent, is required (i) to amend, alter or repeal any provisions of the Charter (including these Articles Supplementary ^* ), whether by merger, consolidation or otherwise, to affect materially and adversely the voting powers, rights or preferences of the holders of the

Explanatory Note: The term “Articles Supplementary” when used in this Annex II of the Restated Charter of Colony Capital, Inc. refers to the Articles Supplementary Establishing and Fixing the Rights and Preferences of a Series of Shares of Preferred Stock filed for record with the Maryland State Department of Assessments and Taxation on June 18, 2014. This Annex II sets forth all of the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms or conditions of redemption of the 7.50% Series B Cumulative Redeemable Perpetual Preferred Stock as set forth in such Articles Supplementary.

Annex II-6

Series B Preferred Stock, unless in connection with any such amendment, alteration or repeal, the Series B Preferred Stock remains outstanding without the terms thereof being materially changed in any respect adverse to the holders thereof or is converted into or exchanged for preferred stock of the surviving entity having preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption thereof that are substantially similar to those of the Series B Preferred Stock, or (ii) to authorize, create, or increase the authorized amount of any class or series of capital stock having rights senior to the Series B Preferred Stock with respect to the payment of dividends or amounts upon liquidation, dissolution or winding up (provided that if such amendment affects materially and adversely the rights, preferences, privileges or voting powers of one or more but not all of the other series of Voting Preferred Stock, the consent of the holders of at least two-thirds of the outstanding shares of each such series so affected is required). However, the Corporation may create additional classes of Parity Stock and Junior Stock, amend the Charter and these Articles Supplementary to increase the authorized number of shares of Parity Stock (including the Series B Preferred Stock) and Junior Stock and issue additional series of Parity Stock and Junior Stock without the consent of any holder of Series B Preferred Stock.

(c) The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding Series B Preferred Stock shall have been redeemed or called for redemption upon proper notice and sufficient funds shall have been deposited in trust to effect such redemption.

(7) Information Rights . During any period in which the Corporation is not subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and any shares of Series B Preferred Stock are outstanding, the Corporation will (i) transmit by mail (or other permissible means under the Exchange Act) to all holders of Series B Preferred Stock, as their names and addresses appear in the record books of the Corporation and without cost to such holders, copies of the annual reports on Form 10-K and quarterly reports on Form 10-Q that the Corporation would have been required to file with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Exchange Act if the Corporation were subject thereto (other than any exhibits that would have been required) and (ii) promptly, upon request, supply copies of such reports to any prospective holder of Series B Preferred Stock. The Corporation will mail (or otherwise provide) the information to the holders of Series B Preferred Stock within 15 days after the respective dates by which a periodic report on Form 10-K or Form 10-Q, as the case may be, in respect of such information would have been required to be filed with the Securities and Exchange Commission if the Corporation were subject to Section 13 or 15(d) of the Exchange Act, in each case, based on the dates on which the Corporation would be required to file such periodic reports if the Corporation were a “non-accelerated filer” within the meaning of the Exchange Act.

(8) Other Limitations; Ownership and Transfer of the Series B Preferred Stock. The Series B Preferred Stock constitutes Capital Stock (as defined in the Charter) of the Corporation and is governed by and issued subject to all the ownership and transfer restrictions of the Charter applicable to Capital Stock generally, including but not limited to the terms and conditions (including exceptions and exemptions) of Article VII of the Charter applicable to Capital Stock. The foregoing sentence shall not be construed to limit the applicability to the Series B Preferred Stock of any other term or provision of the Charter.

(9) Conversion Upon a Change of Control . The Series B Preferred Stock is not convertible into or exchangeable for any other property or securities of the Corporation, except as provided in this Section 9.

(a) Upon the occurrence of a Change of Control, each holder of Series B Preferred Stock will have the right, subject to the Special Redemption Right of the Corporation, to convert some or all of the shares of Series B Preferred Stock held by such holder (the “Change of Control Conversion Right”) on the relevant Change of Control Conversion Date (as defined herein) into a number of shares of Common Stock per share of Series B Preferred Stock (the “Common Stock Conversion Consideration”) equal to the lesser of (A) the quotient obtained by dividing (i) the sum of (x) $25.00, plus (y) an amount equal to any accrued and unpaid dividends (whether or not declared) to, but not including, the Change of Control Conversion Date (as defined herein), except if such Change of Control Conversion Date is after a record date for a Series B Preferred Stock dividend payment and prior to the corresponding Series B Dividend Payment Date, in which case the amount

Annex II-7

pursuant to this clause (i)(y) shall equal $0.00 in respect of such dividend payment to be made on such Series B Dividend Payment Date, by (ii) the Common Stock Price (as defined herein) (such quotient, the “Conversion Rate”), and (B) 2.2462 (the “Share Cap”), subject to the immediately succeeding paragraph.

For the avoidance of doubt, subject to the immediately succeeding sentence, the aggregate number of shares of Common Stock (or equivalent Alternative Conversion Consideration (as defined herein), as applicable) issuable in connection with the exercise of the Change of Control Conversion Right shall not exceed 6,738,600 shares of Common Stock (or equivalent Alternative Conversion Consideration, as applicable), subject to increase to the extent the underwriters’ over-allotment option to purchase additional Series B Preferred Stock in the initial public offering of Series B Preferred Stock is exercised, not to exceed 7,749,390 shares of Common Stock in total (or equivalent Alternative Conversion Consideration, as applicable) (the “Exchange Cap”). The Exchange Cap is subject to pro rata adjustments for any Share Splits with respect to Common Stock as follows: the adjusted Exchange Cap as the result of a Share Split will be the number of shares of Common Stock that is equivalent to the product of (i) the Exchange Cap in effect immediately prior to such Share Split multiplied by (ii) a fraction, the numerator of which is the number of shares of Common Stock outstanding after giving effect to such Share Split and the denominator of which is the number of shares of Common Stock outstanding immediately prior to such Share Split.

In the case of a Change of Control as a result of which holders of Common Stock are entitled to receive consideration other than solely shares of Common Stock, including other securities, other property or assets (including cash or any combination thereof) with respect to or in exchange for shares of Common Stock (the “Alternative Form Consideration”), a holder of Series B Preferred Stock shall be entitled thereafter to convert (subject to the Corporation’s Special Redemption Right) such Series B Preferred Stock not into Common Stock but solely into the kind and amount of Alternative Form Consideration which the holder of Series B Preferred Stock would have owned or been entitled to receive upon such Change of Control as if such holder of Series B Preferred Stock then held the Common Stock Conversion Consideration immediately prior to the effective time of the Change of Control (the “Alternative Conversion Consideration,” and the Common Stock Conversion Consideration or the Alternative Conversion Consideration, as may be applicable to a Change of Control, shall be referred to herein as the “Conversion Consideration”).

Annex II-8

(b) No fractional shares of Common Stock shall be issued upon the conversion of Series B Preferred Stock. In lieu of fractional shares, holders shall be entitled to receive the cash value of such fractional shares based on the Common Stock Price.

(c) Within 15 days following the occurrence of a Change of Control, the Corporation shall provide to holders of Series B Preferred Stock a notice of occurrence of the Change of Control that describes the resulting Change of Control Conversion Right. A failure to give such notice or any defect in the notice or in its mailing shall not affect the validity of the proceedings for the conversion of any Series B Preferred Stock except as to the holder to whom notice was defective or not given. Each notice shall state the following: (i) the events constituting the Change of Control; (ii) the date of the Change of Control; (iii) the last date on which the holders of Series B Preferred Stock may exercise their Change of Control Conversion Right, which shall be the Change of Control Conversion Date; (iv) the method and period for calculating the Common Stock Price; (v) the Change of Control Conversion Date, which will be a business day occurring within 20 to 35 days following the date of the notice; (vi) if applicable, the type and amount of Alternative Conversion Consideration entitled to be received per share of Series B Preferred Stock; (vii) the name and address of the paying agent and the conversion agent; and (viii) the procedures that the holders of Series B Preferred Stock must follow to exercise the Change of Control Conversion Right.

(e) In order to exercise the Change of Control Conversion Right, a holder of Series B Preferred Stock shall be required to deliver, on or before the close of business on the Change of Control Conversion Date, the certificates (if any) evidencing the shares of Series B Preferred Stock to be converted, duly endorsed for transfer, together with a written conversion notice completed, to the transfer agent. Such conversion notice shall state: (i) the relevant Change of Control Conversion Date; (ii) the number of shares of Series B Preferred Stock to be converted; and (iii) that the shares of Series B Preferred Stock are to be converted pursuant to the applicable provisions of the Series B Preferred Stock. Notwithstanding the foregoing, if the shares of Series B Preferred Stock are held in global form, such notice shall comply with applicable procedures of the Depository Trust Company (“DTC”). The “Change of Control Conversion Date” shall be a Business Day set forth in the notice of Change of Control provided in accordance with paragraph 9(c) hereof that is no less than 20 days nor more than 35 days after the date on which the Corporation gives such notice pursuant to paragraph 9(c) hereof.

(f) Holders of Series B Preferred Stock may withdraw any notice of exercise of a Change of Control Conversion Right (in whole or in part) by a written notice of withdrawal delivered to the Corporation’s transfer agent prior to the close of business on the Business Day prior to the Change of Control Conversion Date. The notice of withdrawal must state: (i) the number of withdrawn shares of Series B Preferred Stock; (ii) if certificated shares of Series B Preferred Stock have been issued, the certificate numbers of the withdrawn shares of Series B Preferred Stock; and (iii) the number of shares of Series B Preferred Stock, if any, which remain subject to the conversion notice. Notwithstanding the foregoing, if the shares of Series B Preferred Stock are held in global form, the notice of withdrawal shall comply with applicable DTC procedures.

(g) Series B Preferred Stock as to which the Change of Control Conversion Right has been properly exercised and for which the conversion notice has not been properly withdrawn shall be converted into the applicable Conversion Consideration in accordance with the Change of Control Conversion Right on the Change of Control Conversion Date.

(h) In connection with the exercise of any Change of Control Conversion Right, the Corporation will comply with all U.S. federal and state securities laws and stock exchange rules in connection with any conversion of Series B Preferred Stock into Common Stock. Notwithstanding anything to the contrary

Annex II-9

contained herein, no holder of Series B Preferred Stock will be entitled to convert such Series B Preferred Stock for Common Stock to the extent that receipt of such Common Stock would cause such holder (or any other person) to Beneficially Own or Constructively Own, within the meaning of the Charter, Common Stock of the Corporation in excess of the Common Stock Ownership Limit, as such term is defined in the Charter.

(11) Record Holders . The Corporation and the transfer agent for the Series B Preferred Stock may deem and treat the record holder of any Series B Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor the transfer agent shall be affected by any notice to the contrary.

Annex II-10

Exhibit 10.1

SECOND AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

COLONY CAPITAL OPERATING COMPANY, LLC

(FORMERLY KNOWN AS CFI RE MASTERCO, LLC)

a Delaware limited liability company

THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE COMPANY AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES OR “BLUE SKY” LAWS.

dated as of April 2, 2015

TABLE OF CONTENTS


		Page

ARTICLE 1 DEFINED TERMS			2
Section 1.1	Definitions		2
Section 1.2	Interpretation and Usage		21

ARTICLE 2 ORGANIZATIONAL MATTERS			21
Section 2.1	Formation		21
Section 2.2	Name		21
Section 2.3	Principal Office and Resident Agent		21
Section 2.4	Power of Attorney		22
Section 2.5	Term		23

ARTICLE 3 PURPOSE			23
Section 3.1	Purpose and Business		23
Section 3.2	Powers		23
Section 3.3	Limited Authority and Liability of Members		23
Section 3.4	Representations and Warranties by the Members		24

ARTICLE 4 CAPITAL CONTRIBUTIONS			26
Section 4.1	Capital Contributions of the Members		26
Section 4.2	Issuances of Additional Membership Interests		26
Section 4.3	Additional Funds and Capital Contributions		27
Section 4.4	Stock Option Plans		29
Section 4.5	LTIP Units		30
Section 4.6	Conversion of LTIP Units		33
Section 4.7	Dividend Reinvestment Plan, Stock Incentive Plan or Other Plan		36
Section 4.8	No Interest; No Return		36
Section 4.9	Conversion or Redemption of Preferred Shares; Redemption of REIT Shares		36
Section 4.10	Other Contribution Provisions		37
Section 4.11	Excluded Properties		37
Section 4.12	Contingent Consideration and Indemnification Payment		37

ARTICLE 5 DISTRIBUTIONS			37
Section 5.1	Requirement and Characterization of Distributions		37
Section 5.2	Distributions in Kind		38
Section 5.3	Amounts Withheld		38
Section 5.4	Distributions upon Liquidation		38
Section 5.5	Distributions to Reflect Additional Membership Units		38
Section 5.6	Restricted Distributions		38

ARTICLE 6 ALLOCATIONS			39
Section 6.1	Timing and Amount of Allocations of Net Income and Net Loss		39
Section 6.2	General Allocations		39
Section 6.3	Additional Allocation Provisions		40
Section 6.4	Tax Allocations		43



ARTICLE 7 MANAGEMENT AND OPERATIONS OF BUSINESS		44
Section 7.1	Management	44
Section 7.2	Certificate of Formation	45
Section 7.3	Restrictions on the Managing Member’s Authority	45
Section 7.4	Reimbursement of the Managing Member and CLNY	48
Section 7.5	Outside Activities of the Managing Member	49
Section 7.6	Transactions with Affiliates	49
Section 7.7	Indemnification	50
Section 7.8	Liability of the Managing Member	52
Section 7.9	Title to Company Assets	53
Section 7.10	Reliance by Third Parties	53

ARTICLE 8 RIGHTS AND OBLIGATIONS OF MEMBERS		54
Section 8.1	Limitation of Liability	54
Section 8.2	Management of Business	54
Section 8.3	Outside Activities of Non-Managing Members	54
Section 8.4	Return of Capital	55
Section 8.5	Rights of Non-Managing Members Relating to the Company	55
Section 8.6	No Rights as Objecting Member	55
Section 8.7	No Right to Certificate Evidencing Units; Article 8 Securities	55

ARTICLE 9 BOOKS, RECORDS, ACCOUNTING AND REPORTS		56
Section 9.1	Records and Accounting	56
Section 9.2	Fiscal Year	56
Section 9.3	Reports	56

ARTICLE 10 TAX MATTERS		56
Section 10.1	Preparation of Tax Returns	56
Section 10.2	Tax Elections	57
Section 10.3	Tax Matters Member	57
Section 10.4	Withholding	58
Section 10.5	Organizational Expenses	59

ARTICLE 11 MEMBER TRANSFERS AND WITHDRAWALS		59
Section 11.1	Transfer	59
Section 11.2	Transfer of the Managing Member’s Membership Interest	60
Section 11.3	Non-Managing Members’ Rights to Transfer	60
Section 11.4	Substituted Members	62
Section 11.5	Assignees	62
Section 11.6	General Provisions	62
Section 11.7	Restrictions on Termination Transactions	64

ARTICLE 12 ADMISSION OF MEMBERS		65
Section 12.1	Admission of Successor Managing Member	65
Section 12.2	Admission of Additional Members	65
Section 12.3	Amendment of Agreement and Certificate of Formation	66
Section 12.4	Limit on Number of Members	66
Section 12.5	Admission	66

ARTICLE 13 DISSOLUTION, LIQUIDATION AND TERMINATION		66
Section 13.1	Dissolution	66


Section 13.2	Winding Up	67
Section 13.3	Deemed Contribution and Distribution	68
Section 13.4	Rights of Holders	68
Section 13.5	Notice of Dissolution	69
Section 13.6	Cancellation of Certificate of Formation	69
Section 13.7	Reasonable Time for Winding-Up	69

ARTICLE 14 PROCEDURES FOR ACTIONS AND CONSENTS OF MEMBERS; AMENDMENTS; MEETINGS		69
Section 14.1	Actions and Consents of Members	69
Section 14.2	Amendments	69
Section 14.3	Procedures for Meetings and Actions of the Members	70

ARTICLE 15 GENERAL PROVISIONS		71
Section 15.1	Redemption Rights of Qualifying Parties	71
Section 15.2	Addresses and Notice	77
Section 15.3	Titles and Captions	77
Section 15.4	Further Action	77
Section 15.5	Binding Effect	77
Section 15.6	Waiver	77
Section 15.7	Counterparts	77
Section 15.8	Applicable Law; Consent to Jurisdiction; Jury Trial	78
Section 15.9	Entire Agreement	78
Section 15.10	Invalidity of Provisions	78
Section 15.11	Limitation to Preserve REIT Status	79
Section 15.12	No Partition	79
Section 15.13	No Third-Party Rights Created Hereby	79
Section 15.14	No Rights as Stockholders	80



Exhibit A	EXAMPLES REGARDING ADJUSTMENT FACTOR	A-1

Exhibit B	NOTICE OF REDEMPTION	B-1

Exhibit C	MEMBER NOTICE OF LTIP CONVERSION ELECTION	C-1

Exhibit D	COMPANY NOTICE OF LTIP CONVERSION ELECTION	D-1

Exhibit E	SERIES A COMPANY PREFERRED UNIT DESIGNATION	E-1

Exhibit F	SERIES B COMPANY PREFERRED UNIT DESIGNATION	F-1

Schedule I	MEMBERS AND CAPITAL ACCOUNTS	Sch. I-1

Schedule II	SCHEDULE OF GROSS ASSET VALUES	Sch. II-1

iii

SECOND AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT OF

COLONY CAPITAL OPERATING COMPANY, LLC

(FORMERLY KNOWN AS CFI RE MASTERCO, LLC)

THIS SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF COLONY CAPITAL OPERATING COMPANY, LLC (formerly known as CFI RE MASTERCO, LLC), a Delaware limited liability company (the “ Company ”), dated as of April 2, 2015, is entered into by and among (i) Colony Capital, Inc. (formerly known as Colony Financial, Inc.) (“ CLNY ”), (ii) Colony Capital, LLC (“ CC ”), (iii) CCH Management Partners I, LLC (“ CCH ”), (iv) FHB Holding LLC (“ FHB LLC ”), (v) Richard B. Saltzman (“ Saltzman ”) and (vi) each other Person who at any time after the date hereof becomes a Member of the Company in accordance with the terms of this Agreement and the Act.

RECITALS

WHEREAS, the Company was formed as a limited liability company under the Delaware Limited Liability Company Act, Title 6, Sections 18-101 et seq. (the “ Act ”), by the filing of a Certificate of Formation with the Secretary of State of the State of Delaware on March 25, 2011 (the “ Original Certificate ”);

WHEREAS, on March 25, 2011, CLNY entered into a limited liability company agreement of the Company (the “ Original Agreement ”);

WHEREAS, on January 7, 2015, the name of the Company was changed from “CFI RE Masterco, LLC” to “Colony Capital Operating Company, LLC”, by the filing of a Certificate of Amendment to the Original Certificate with the Secretary of State of the State of Delaware (the “ Certificate of Amendment ”);

WHEREAS, CC, CCH, FHB LLC, Saltzman, CLNY and the Company, concurrently with their execution of this Agreement, consummated the transactions contemplated by that certain contribution agreement, dated as of December 23, 2014 (the “ CC Contribution Agreement ”), by and among CC, CCH, FHB LLC, Saltzman, CLNY, the Company and Colony Capital OP Subsidiary, LLC, pursuant to which (i) each of CC, CCH, FHB LLC and Saltzman has acquired its Membership Interests in the Company; and (ii) CLNY has acquired additional Membership Interests in the Company on the terms and conditions set forth therein; and

WHEREAS, each of CLNY, CC, CCH, Saltzman and FHB LLC now desire to amend and restate the Original Agreement to read in its entirety as set forth herein.

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

ARTICLE 1

DEFINED TERMS

Section 1.1 Definitions . The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement:

“ Act ” has the meaning set forth in the Recitals.

“ Actions ” has the meaning set forth in Section 7.7 hereof.

“ Additional Funds ” has the meaning set forth in Section 4.3.A hereof.

“ Additional Member ” means a Person who is admitted to the Company as a Member pursuant to the Act and Section 12.2 hereof, who is shown as such on the books and records of the Company, and who has not ceased to be a Member pursuant to the Act and this Agreement.

“ Adjusted Available Cash ” means, as of any date of determination, the sum of Available Cash and REIT Available Cash.

“ Adjusted Capital Account Deficit ” means, with respect to any Member, the deficit balance, if any, in such Member’s Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments:

(i) decrease such deficit by any amounts that such Member is obligated to restore pursuant to this Agreement or by operation of law upon liquidation of such Member’s Membership Interest or that such Member is deemed to be obligated to restore pursuant to the penultimate sentence of each of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and

(ii) increase such deficit by the items described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

The foregoing definition of “Adjusted Capital Account Deficit” is intended to comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

“ Adjustment Events ” has the meaning set forth in Section 4.5.A(i) hereof.

“ Adjustment Factor ” means 1.0; provided , however , that in the event that:

(i) CLNY (a) declares or pays a dividend on its outstanding REIT Shares wholly or partly in REIT Shares or makes a distribution to all holders of its outstanding REIT Shares wholly or partly in REIT Shares, (b) splits or subdivides its outstanding REIT Shares or (c) effects a reverse stock split or otherwise combines its outstanding REIT Shares into a smaller number of REIT Shares, the Adjustment Factor shall be adjusted by multiplying the Adjustment Factor then in effect by a fraction, (i) the numerator of which shall be the number of REIT Shares issued and outstanding on the record date for such dividend, distribution, split, subdivision, reverse split or combination (assuming for such purposes that such dividend, distribution, split, subdivision, reverse split or combination has occurred as of such time) and (ii) the denominator of which shall be the actual number of REIT Shares (determined without the above assumption) issued and outstanding on the record date for such dividend, distribution, split, subdivision, reverse split or combination;

(ii) CLNY distributes any rights, options or warrants to all holders of its REIT Shares to subscribe for or to purchase or to otherwise acquire REIT Shares, or other securities or rights convertible into, exchangeable for or exercisable for REIT Shares (other than REIT Shares issuable pursuant to a Qualified DRIP), at a price per share less than the Value of a REIT Share on the record date for such distribution (each a “ Distributed Right ”), then the Adjustment Factor shall be adjusted by multiplying the Adjustment Factor then in effect by a fraction (a) the numerator of which shall be the number of REIT Shares issued and outstanding on the record date plus the maximum number of REIT Shares purchasable under such Distributed Rights and (b) the denominator of which shall be the number of REIT Shares issued and outstanding on the record date plus a fraction (1) the numerator of which is the maximum number of REIT Shares purchasable under such Distributed Rights, multiplied by the minimum purchase price per REIT Share under such Distributed Rights and (2) the denominator of which is the Value of a REIT Share as of the record date; provided , however , that, if any such Distributed Rights expire or become no longer exercisable, then the Adjustment Factor shall be adjusted, effective retroactive to the date of distribution (or, if later, the time the Distributed Rights become exercisable) of the Distributed Rights, to reflect a reduced maximum number of REIT Shares or any change in the minimum purchase price for the purposes of the above fraction; and

(iii) CLNY shall, by dividend or otherwise, distribute to all holders of its REIT Shares evidences of its indebtedness or its assets (including securities, but excluding cash or any dividend or distribution referred to in subsection (i) or (ii) above, or any Units), which evidences of indebtedness or assets relate to assets not received by CLNY pursuant to a pro rata distribution by the Company, then the Adjustment Factor shall be adjusted to equal the amount determined by multiplying the Adjustment Factor then in effect by a fraction (a) the numerator of which shall be such Value of a REIT Share as of the trading day immediately preceding the ex-date for such dividend or distribution and (b) the denominator of which shall be the Value of a REIT Share as of the trading day immediately preceding the ex-date for such dividend or distribution, less the then fair market value (as determined by the Managing Member, whose determination shall be conclusive) of the portion of the evidences of indebtedness or assets so distributed applicable to one REIT Share.

Any adjustment to the Adjustment Factor shall become effective on the first date on which REIT Shares trade at a price that reflects such event (the “ ex-date ”). Notwithstanding the foregoing, if any of the events in clause (i), (ii) or (iii) above occur, no adjustments will be made to the Adjustment Factor for any class or series of Membership Interests to the extent that the Company concurrently makes or effects a correlative distribution or payment to all of the Members holding Membership Interests of such class or series, or effects a correlative split, subdivision, reverse split or combination in respect of the Membership Interests of such class or series. If CLNY effects a dividend that allows holders of REIT Shares to elect to receive cash or additional REIT Shares, the Company may effect a correlative distribution by distributing to all Members holding Membership Interests of such class or series a combination of cash and additional Membership Interests in the same ratio as the ratio of cash and REIT Shares paid by CLNY, without offering Members an opportunity to elect to receive cash or additional Membership Interests. Any adjustments to the Adjustment Factor shall become effective immediately after such event, retroactive to the record date, if any, for such event. For illustrative purposes, examples of adjustments to the Adjustment Factor are set forth on Exhibit A attached hereto.

“ Affiliate ” means, with respect to a specified Person, any Person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with, the specified Person, where “ control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of a Person, whether through the ownership of voting securities, by contract, as trustee or executor or otherwise. For the avoidance of doubt, (i) CC and its Subsidiaries, on the one hand, and CLNY and its Subsidiaries, on the other hand, shall not be deemed Affiliates of the other for purposes of this Agreement and (ii) no fund, investment vehicle, or investment product managed by CLNY or its Subsidiaries shall be deemed an Affiliate of CLNY.

“ Affiliated REIT ” means CLNY and any Affiliate of CLNY or the Company that has elected to be taxed as a REIT under the Code and is a Member.

“ Aggregate Contingent Consideration ” has the meaning set forth in Section 4.12 hereof.

“ Agreement ” means this Second Amended and Restated Limited Liability Company Agreement of Colony Capital Operating Company, LLC (formerly known as CFI RE Masterco, LLC), as now or hereafter amended, restated, modified, supplemented or replaced.

“ Applicable Percentage ” has the meaning set forth in Section 15.1.B hereof.

“ Assignee ” means a Person to whom a Membership Interest has been Transferred but who has not become a Substituted Member, and who has the rights set forth in Section 11.5 hereof.

“ Available Cash ” means, with respect to any period for which such calculation is being made,

(i) the sum, without duplication, of:

(1) the Company’s Net Income or Net Loss (as the case may be) for such period,

(2) Depreciation and all other noncash charges to the extent deducted in determining Net Income or Net Loss for such period,

(3) the amount of any reduction in reserves of the Company established by the Managing Member (including reductions resulting because the Managing Member determines such amounts are no longer necessary),

(4) the excess, if any, of the net cash proceeds from the sale, exchange, disposition, financing or refinancing of Company property for such period over the gain (or loss, as the case may be) recognized from such sale, exchange, disposition, financing or refinancing during such period, and

(5) all other cash received (including amounts previously accrued as Net Income and amounts of deferred income) or any net amounts borrowed by the Company for such period that was not included in determining Net Income or Net Loss for such period;

(ii) less the sum, without duplication, of:

(1) all principal debt payments made during such period by the Company,

(2) capital expenditures made by the Company during such period,

(3) investments in any entity (including loans made thereto) to the extent that such investments are not otherwise described in clause (ii)(1) or clause (ii)(2) above,

(4) the excess, if any, of gain (or loss, as the case may be) recognized from the sale, exchange, disposition, financing or refinancing of Company property for such period over the net cash proceeds from such sale, exchange, disposition, financing or refinancing during such period,

(5) all other expenditures and payments not deducted in determining Net Income or Net Loss for such period (including amounts paid in respect of expenses previously accrued),

(6) any amount included in determining Net Income or Net Loss for such period that was not received by the Company during such period,

(7) the amount of any increase in reserves (including working capital reserves) established by the Managing Member during such period,

(8) any amount distributed or paid in redemption of any Member’s Membership Interest or Membership Units, including any Cash Amount paid, and

(9) all payments received by the Company from the CLNY Management Agreement.

Notwithstanding the foregoing, Available Cash shall not include (a) any cash received or reductions in reserves, or take into account any disbursements made, or reserves established, after dissolution and the commencement of the liquidation and winding up of the Company or (b) any Capital Contributions, whenever received or any payments, expenditures or investments made with such Capital Contributions.

“ Board of Directors ” means the Board of Directors of CLNY.

“ Business Day ” means any day except a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by law to close.

“ Capital Account ” means, with respect to any Member, the Capital Account maintained by the Managing Member for such Member on the Company’s books and records in accordance with the following provisions:

(a) To each Member’s Capital Account, there shall be added such Member’s Capital Contributions, such Member’s distributive share of Net Income and any items in the nature of income or gain that are specially allocated pursuant to Section 6.3 hereof, and the amount of any Company liabilities assumed by such Member or that are secured by any property distributed to such Member.

(b) From each Member’s Capital Account, there shall be subtracted the amount of cash and the Gross Asset Value of any property distributed to such Member pursuant to any provision of this Agreement, such Member’s distributive share of Net Losses and any items in the nature of expenses or losses that are specially allocated pursuant to Section 6.3 hereof, and the amount of any liabilities of such Member assumed by the Company or that are secured by any property contributed by such Member to the Company (except to the extent already reflected in the amount of such Member’s Capital Contribution).

(c) In the event any interest in the Company is Transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Member’s Capital Account of the transferor to the extent that it relates to the Transferred interest.

(d) In determining the amount of any liability for purposes of subsections (a) and (b) hereof, there shall be taken into account Code Section 752(c) and any other applicable provisions of the Code and Regulations.

(e) The provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations promulgated under Code Section 704, and shall be interpreted and applied in a manner consistent with such Regulations. The Managing Member may modify the manner in which the Capital Accounts are maintained in order to comply with such Regulations, provided that the Managing Member determines that such modification is not reasonably likely to have a material effect on the amounts distributable to any Member without such Person’s consent. The Managing Member also may (i) make any adjustments to maintain equality between the Capital Accounts of the Members and the amount of Company capital reflected on the Company’s balance sheet, as computed for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event that unanticipated events might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b) or Section 1.704-2; provided , however , that the Managing Member determines that such changes are not reasonably likely to materially reduce amounts otherwise distributable to the Member as current cash distributions or as distributions on termination of the Company.

“ Capital Account Limitation ” has the meaning set forth in Section 4.6.B hereof.

“ Capital Contribution ” means, with respect to any Member, the amount of money and the initial Gross Asset Value of any Contributed Property that such Member contributes to the Company or is deemed to contribute pursuant to Article 4 hereof.

“ Capital Share ” means a share of any class or series of stock of CLNY now or hereafter authorized, other than a REIT Share.

“ Cash Amount ” means an amount of cash equal to the product of (i) the Value of a Class A REIT Share and (ii) the REIT Shares Amount determined as of the applicable Valuation Date.

“ CC Contribution Agreement ” has the meaning set forth in the Recitals.

“ Certificate ” means the Original Certificate, as amended by the Certificate of Amendment, and as may be further amended from time to time in accordance with the terms hereof and the Act.

“ Charity ” means an entity described in Code Section 501(c)(3), or any trust all the beneficiaries of which are such entities.

“ Charter ” means the charter of CLNY, within the meaning of Section 1-101(e) of the Maryland General Corporation Law.

“ Class A REIT Share ” means a share of class A common stock of CLNY, par value $0.01 per share. Where relevant in this Agreement, “Class A REIT Shares” includes shares of class A common stock of CLNY, par value $0.01 per share, issued upon conversion of Preferred Shares or Class B REIT Shares.

“ Class B REIT Share ” means a share of class B common stock of CLNY, par value $0.01 per share.

“ CLNY Equivalent Shares ” means, with respect to any class or series of Membership Units, REIT Shares or Capital Shares issued by CLNY with preferences, conversion and other rights (other than voting rights), restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption that are substantially the same as (or correspond to) the preferences, conversion and other rights, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption of such Membership Units as appropriate to reflect the relative rights and preferences of such Membership Units as to the other classes and series of Membership Units, but not as to matters such as voting for members of the Board of Directors that are not applicable to the Company.

“ CLNY Management Agreement ” means the Second Amended and Restated Management Agreement, dated as of March 6, 2013, by and among CLNY, Colony Financial TRS, LLC, a Delaware limited liability company and wholly-owned subsidiary of CLNY and Colony Financial Manager, LLC, a Delaware limited liability company.

“ CLNY Member Loan ” has the meaning set forth in Section 4.3.D hereof.

“ Code ” means the Internal Revenue Code of 1986.

“ Company ” means Colony Capital Operating Company, LLC (formerly known as CFI RE Masterco, LLC), the limited liability company formed and continued under the Act and pursuant to this Agreement, and any successor thereto.

“ Company Employee ” means an employee of the Company or an employee of a Subsidiary of the Company, if any.

“ Company Equivalent Units ” means, with respect to any class or series of Capital Shares, Preferred Shares, New Securities or other interests in CLNY (other than REIT Shares), Membership Units with preferences, conversion and other rights (other than voting rights), restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption that are substantially the same as (or correspond to) the preferences, conversion and other rights, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption of such Capital Shares, Preferred Shares, New Securities or other interests as appropriate to reflect the relative rights and

preferences of such Capital Shares, Preferred Shares, New Securities or other interests as to the REIT Shares and the other classes and series of Capital Shares, Preferred Shares, New Securities or other interests as such Company Equivalent Units would have as to Membership Common Units and the other classes and series of Membership Units corresponding to the other classes of Capital Shares, Preferred Shares, New Securities or other interests but not as to matters such as voting for members of the Board of Directors that are not applicable to the Company. For the avoidance of doubt, the voting rights, redemption rights and rights to Transfer Company Equivalent Units need not be similar to the rights of the corresponding class or series of Capital Shares, Preferred Shares, New Securities or other interests, provided , however , with respect to redemption rights, the terms of Company Equivalent Units must be such so that the Company complies with Section 4.9.B of this Agreement.

“ Company Junior Unit ” means a fractional share of the Membership Interests of a particular class or series that the Managing Member has authorized pursuant to Section 4.2 hereof that has distribution rights, or rights upon liquidation, winding up and dissolution, that are inferior or junior to the Membership Common Units.

“ Company Minimum Gain ” has the meaning set forth in Regulations Section 1.704-2(b)(2), and the amount of Member Minimum Gain, as well as any net increase or decrease in Member Minimum Gain, for a Fiscal Year shall be determined in accordance with the rules of Regulations Section 1.704-2(d).

“ Company Preferred Unit ” means a fractional share of the Membership Interests of a particular class or series that the Managing Member has authorized pursuant to Section 4.1 or Section 4.2 or Section 4.3 hereof that has distribution rights, or rights upon liquidation, winding up and dissolution, that are superior or prior to the Membership Common Units, including the Series A Company Preferred Units and the Series B Company Preferred Units.

“ Company Record Date ” means the record date established by the Managing Member for the purpose of determining the Members entitled to notice of or to vote at any meeting of Members or to consent to any matter, or to receive any distribution or the allotment of any other rights, or in order to make a determination of Members for any other proper purpose, which, in the case of a record date fixed for the determination of Members entitled to receive any distribution, shall (unless otherwise determined by the Managing Member) generally be the same as the record date established by CLNY for a distribution to its stockholders of some or all of its portion of such distribution.

“ Consent ” means the consent to, approval of, or vote in favor of a proposed action by a Member given in accordance with Article 14 hereof.

“ Consent of the Members ” means the Consent of a Majority in Interest of the Members, which Consent shall be obtained before the taking of any action for which it is required by this Agreement and, except as otherwise provided in this Agreement, may be given or withheld by Members in their discretion.

“ Consent of the Non-Managing Members ” means the Consent of a Majority in Interest of the Non-Managing Members, which Consent shall be obtained before the taking of any action for which it is required by this Agreement and, except as otherwise provided in this Agreement, may be given or withheld by Members in their discretion.

“ Constituent Person ” has the meaning set forth in Section 4.6.F hereof.

“ Contingent Consideration Members ” has the meaning set forth in Section 4.12 hereof.

“ Contributed Property ” means each Property or other asset, in such form as may be permitted by the Act, but excluding cash, contributed or deemed contributed to the Company (or deemed contributed by the Company to a “new” partnership pursuant to Code Section 708).

“ Controlled Entity ” means, as to any Person, (a) any corporation more than fifty percent (50%) of the outstanding voting stock of which is owned by such Person or such Person’s Family Members or Affiliates, (b) any trust, whether or not revocable, of which such Person or such Person’s Family Members or Affiliates are the sole beneficiaries, (c) any partnership of which such Person or an Affiliate of such Person is the managing partner and in which such Person or such Person’s Family Members or Affiliates hold partnership interests representing at least twenty-five percent (25%) of such partnership’s capital and profits and (d) any limited liability company of which such Person or an Affiliate of such Person is the manager or managing member and in which such Person or such Person’s Family Members or Affiliates hold membership interests representing at least twenty-five percent (25%) of such limited liability company’s capital and profits. For the avoidance of doubt, no fund, investment vehicle, or investment product managed by CLNY or its Subsidiaries shall be deemed to be a Controlled Entity of CLNY.

“ Conversion Date ” has the meaning set forth in Section 4.6.B hereof.

“ Conversion Notice ” has the meaning set forth in Section 4.6.B hereof.

“ Conversion Right ” has the meaning set forth in Section 4.6.A hereof.

“ Credit Agreement ” has the meaning set forth in Section 6.3.D hereof.

“ Cut-Off Date ” means the fifth (5th) Business Day after the Managing Member’s receipt of a Notice of Redemption.

“ Debt ” means, as to any Person, as of any date of determination, (i) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services; (ii) all amounts owed by such Person to banks or other Persons in respect of reimbursement obligations under letters of credit, surety bonds and other similar instruments guaranteeing payment or other performance of obligations by such Person; (iii) all indebtedness for borrowed money or for the deferred purchase price of property or services secured by any lien on any property owned by such Person, to the extent attributable to such Person’s interest in such property, even though such Person has not assumed or become liable for the payment thereof; and (iv) lease obligations of such Person that, in accordance with generally accepted accounting principles, should be capitalized.

“ Declination ” has the meaning set forth in Section 15.1.A hereof.

“ Depreciation ” means, for each Fiscal Year or other applicable period, an amount equal to the federal income tax depreciation, amortization or other cost recovery deduction allowable with respect to an asset for such year or other period, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or period, Depreciation shall be in an amount that bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis; provided , however , that if the federal income tax depreciation, amortization or other cost recovery deduction for such year or period is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Managing Member.

“ Distributed Right ” has the meaning set forth in the definition of “Adjustment Factor.”

“ Economic Capital Account Balances ” has the meaning set forth in Section 6.3.F hereof.

“ Equity Plan ” means any stock or equity purchase plan, restricted stock or equity plan or other similar equity compensation plan now or hereafter adopted by the Company or CLNY.

“ ERISA ” means the Employee Retirement Income Security Act of 1974.

“ Excess Units ” means Tendered Units, the issuance of REIT Shares in exchange for which would result in a violation of the Ownership Limit.

“ Exchange Act ” means the Securities Exchange Act of 1934, and any successor statute thereto, and the rules and regulations of the SEC promulgated thereunder.

“ Excluded Property ” means any asset now or hereafter held directly by CLNY or any direct or indirect wholly owned Subsidiary of CLNY (other than the equity of any direct or indirect wholly owned Subsidiary of CLNY and interests in the Company), in each case, to the extent such asset has not theretofore been contributed to the Company.

“ Family Members ” means, as to a Person that is an individual, such Person’s spouse, ancestors, descendants (whether by blood or by adoption), brothers and sisters and inter vivos or testamentary trusts of which only such Person and his spouse, ancestors, descendants (whether by blood or by adoption), brothers and sisters are beneficiaries.

“ Fiscal Quarter ” means each calendar quarter ending March 31, June 30, September 30 and December 31, or such other quarterly accounting period as may be established by the Managing Member.

“ Fiscal Year ” means the fiscal year of the Company, which shall be the calendar year.

“ Forced Redemption ” has the meaning set forth in Section 4.6.C hereof.

“ Forced Redemption Notice ” has the meaning set forth in Section 4.6.C hereof.

“ Funding Debt ” means any Debt incurred by or on behalf of the Managing Member or CLNY for the purpose of providing funds to the Company.

“ Gross Asset Value ” means, with respect to any asset, the asset’s adjusted basis for federal income tax purposes, except as follows:

(i) The initial Gross Asset Value of any asset contributed by a Member to the Company shall be (1) in the case of any asset listed on Schedule II, the gross asset value of such asset as listed on Schedule II and (ii) in all other cases, the gross fair market value of such asset as determined by the Managing Member using such reasonable method of valuation as it may adopt.

(ii) The Gross Asset Values of all Company assets immediately prior to the occurrence of any event described below shall be adjusted to equal their respective gross fair market values, as determined by the Managing Member using such reasonable method of valuation as it may adopt, as of the following times:

(1) the acquisition of an additional interest in the Company (other than in connection with the execution of this Agreement but including acquisitions pursuant to Section 4.2 hereof or contributions or deemed contributions by the Managing Member pursuant to Section 4.2 hereof) by a new or existing Member in exchange for more than a de minimis Capital Contribution, if the Managing Member reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Members in the Company;

(2) the distribution by the Company to a Member of more than a de minimis amount of Company property as consideration for an interest in the Company if the Managing Member reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Members in the Company;

(3) the liquidation of the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g);

(4) upon the admission of a successor managing member pursuant to Section 12.1 hereof; and

(5) at such other times as the Managing Member shall reasonably determine necessary or advisable in order to comply with Regulations Sections 1.704-1(b) and 1.704-2.

(iii) The Gross Asset Value of any Company asset distributed to a Member shall be the gross fair market value of such asset on the date of distribution as determined by the Managing Member using such reasonable method of valuation as it may adopt.

(iv) The Gross Asset Values of Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m); provided , however , that Gross Asset Values shall not be adjusted pursuant to this subsection (iv) to the extent that the Managing Member reasonably determines that an adjustment pursuant to subsection (ii) above is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this subsection (iv).

(v) If the Gross Asset Value of a Company asset has been determined or adjusted pursuant to subsection (i), subsection (ii) or subsection (iv) above, such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Net Income and Net Losses.

“ Holder ” means either (a) a Member or (b) an Assignee that owns a Membership Unit.

“ Incapacity ” or “ Incapacitated ” means, (i) as to any Member who is an individual, death, total physical disability or entry by a court of competent jurisdiction adjudicating such Member incompetent to manage his or her person or his or her estate; (ii) as to any Member that is a corporation or limited liability company, the filing of a certificate of dissolution, or its equivalent, for the corporation or the revocation of its charter; (iii) as to any Member that is a partnership, the dissolution and commencement of winding up of the partnership; (iv) as to any Member that is an estate, the distribution by the fiduciary of the estate’s entire interest in the Company; (v) as to any trustee of a trust that is a

Member, the termination of the trust (but not the substitution of a new trustee); or (vi) as to any Member, the bankruptcy of such Member. For purposes of this definition, bankruptcy of a Member shall be deemed to have occurred when (a) the Member commences a voluntary proceeding seeking liquidation, reorganization or other relief of or against such Member under any bankruptcy, insolvency or other similar law now or hereafter in effect, (b) the Member is adjudged as bankrupt or insolvent, or a final and nonappealable order for relief under any bankruptcy, insolvency or similar law now or hereafter in effect has been entered against the Member, (c) the Member executes and delivers a general assignment for the benefit of the Member’s creditors, (d) the Member files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the Member in any proceeding of the nature described in clause (b) above, (e) the Member seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator for the Member or for all or any substantial part of the Member’s properties, (f) any proceeding seeking liquidation, reorganization or other relief under any bankruptcy, insolvency or other similar law now or hereafter in effect has not been dismissed within one hundred twenty (120) days after the commencement thereof, (g) the appointment without the Member’s consent or acquiescence of a trustee, receiver or liquidator has not been vacated or stayed within ninety (90) days of such appointment, or (h) an appointment referred to in clause (g) above is not vacated within ninety (90) days after the expiration of any such stay.

“ Indemnitee ” means (i) any Person made, or threatened to be made, a party to a proceeding by reason of its status as (A) the Managing Member or CLNY or (B) a manager, member, officer, director or employee of the Managing Member or CLNY or an employee of the Company and (ii) such other Persons (including Affiliates, employees or agents of the Managing Member, CLNY or the Company) as the Managing Member may designate from time to time (whether before or after the event giving rise to potential liability).

“ IRS ” means the United States Internal Revenue Service.

“ Lead Tendering Party ” has the meaning set forth in Section 15.1.I hereof.

“ Liquidating Event ” has the meaning set forth in Section 13.1 hereof.

“ Liquidating Gains ” has the meaning set forth in Section 6.3.F hereof.

“ Liquidator ” has the meaning set forth in Section 13.2.A hereof.

“ LTIP Award ” means each or any, as the context requires, LTIP Award issued under any Equity Plan.

“ LTIP Unit ” means a Membership Unit which is designated as an LTIP Unit and which has the rights, preferences and other privileges and restrictions, qualifications, and limitations set forth in Section 4.5 hereof (except as may be varied by the designations applicable to any particular class or series of LTIP Units) and elsewhere in this Agreement (including any exhibit hereto creating any new class or series of LTIP Units) or in the Equity Plan or the award, vesting, or other agreement pursuant to which an LTIP Unit is granted to the holder thereof. The allocation of LTIP Units among the Members shall be set forth in the books and records of the Company, as may be amended from time to time.

“ LTIP Unitholder ” means a Member that holds LTIP Units.

“ LV Safe Harbor ” has the meaning set forth in Section 10.2.B hereof.

“ LV Safe Harbor Election ” has the meaning set forth in Section 10.2.B hereof.

“ LV Safe Harbor Interests ” has the meaning set forth in Section 10.2.B hereof.

“ Majority in Interest of the Members ” means Members (including the Managing Member, CLNY and any Controlled Entity of either of them) entitled to vote on or consent to any matter holding more than fifty percent (50%) of all outstanding Membership Units held by all Members (including the Managing Member, CLNY and any Controlled Entity of either of them) entitled to vote on or consent to such matter.

“ Majority in Interest of the Non-Managing Members ” means Members (excluding the Managing Member, CLNY and any Controlled Entity of either of them) entitled to vote on or consent to any matter holding more than fifty percent (50%) of all outstanding Membership Units held by all Members (excluding the Managing Member, CLNY and any Controlled Entity of either of them) entitled to vote on or consent to such matter.

“ Managing Member ” means CLNY, or any of its successors or permitted assigns, or any subsequent successor or permitted assign, in its capacity as the managing member of the Company.

“ Member(s) ” means (i) CLNY, (ii) CC, (iii) CCH, (iv) FHB LLC, (v) Saltzman and (vi) each other Person that is, from time to time, admitted to the Company as a member in accordance with the terms of this Agreement and the Act, and any Substituted Member or Additional Member, each shown as such in the books and records of the Company, in each case, that has not ceased to be a member of the Company pursuant to the Act and this Agreement, in such Person’s capacity as a member of the Company.

“ Member Minimum Gain ” means an amount, with respect to each Member Nonrecourse Debt, equal to the Member Minimum Gain that would result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Regulations Section 1.704-2(i)(3).

“ Member Nonrecourse Debt ” has the meaning set forth in Regulations Section 1.704-2(b)(4).

“ Member Nonrecourse Deductions ” has the meaning set forth in Regulations Section 1.704-2(i)(1), and the amount of Member Nonrecourse Deductions with respect to a Member Nonrecourse Debt for a Fiscal Year shall be determined in accordance with the rules of Regulations Section 1.704-2(i)(1).

“ Membership Common Unit ” means a fractional share of the Membership Interests of all Members issued pursuant to Sections 4.1 and 4.2 hereof, but does not include any Company Junior Unit, Company Preferred Unit or any other Membership Unit specified in a Membership Unit Designation as being other than a Membership Common Unit.

“ Membership Common Unit Economic Balance ” has the meaning set forth in Section 6.3.F hereof.

“ Membership Interest ” means an ownership interest in the Company held by either a Non-Managing Member or the Managing Member and includes any and all benefits to which the holder of such a Membership Interest may be entitled as provided in this Agreement, together with all obligations of such Person to comply with the terms and provisions of this Agreement. There may be one or more classes or series of Membership Interests; however, notwithstanding that the Managing Member, CLNY and any other Member may have different rights and privileges as specified in this Agreement (including differences in rights and privileges with respect to their Membership Interests), the

Membership Interest held by the Managing Member, CLNY or any other Member and designated as being of a particular class or series shall not be deemed to be a separate class or series of Membership Interest from a Membership Interest having the same designation as to class and series that is held by any other Member solely because such Membership Interest is held by the Managing Member, CLNY or any other Member having different rights and privileges as specified under this Agreement. A Membership Interest may be expressed as a number of Membership Common Units, Company Preferred Units, Company Junior Unit or other Membership Units.

“ Membership Unit ” means a Membership Common Unit, a Company Preferred Unit, a Company Junior Unit or any other fractional share of the Membership Interests that the Managing Member has authorized pursuant to Section 4.1, Section 4.2 or Section 4.3 hereof.

“ Membership Unit Designation ” has the meaning set forth in Section 4.2 hereof.

“ Membership Unit Distribution ” has the meaning set forth in Section 4.5.A(ii) hereof.

“ Net Income ” or “ Net Loss ” means, for each Fiscal Year of the Company, an amount equal to the Company’s taxable income or loss for such year, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments:

(i) any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Net Income (or Net Loss) pursuant to this definition of “Net Income” or “Net Loss” shall be added to (or subtracted from, as the case may be) such taxable income (or loss);

(ii) any expenditure of the Company described in Code Section 705(a)(2)(B) or treated as a Code Section 705(a)(2)(B) expenditure pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net Income (or Net Loss) pursuant to this definition of “Net Income” or “Net Loss,” shall be subtracted from (or added to, as the case may be) such taxable income (or loss);

(iii) in the event the Gross Asset Value of any Company asset is adjusted pursuant to subsection (ii) or subsection (iii) of the definition of “Gross Asset Value,” the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Net Income or Net Loss;

(iv) gain or loss resulting from any disposition of property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value;

(v) in lieu of the depreciation, amortization and other cost recovery deductions that would otherwise be taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Fiscal Year;

(vi) to the extent that an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) to be taken into account in determining Capital Accounts, the amount of such adjustment shall be treated as an item of gain (if the

adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) and shall be taken into account for purposes of computing Net Income or Net Loss; and

(vii) notwithstanding any other provision of this definition of “Net Income” or “Net Loss,” any item that is specially allocated pursuant to Section 6.3 hereof shall not be taken into account in computing Net Income or Net Loss. The amounts of the items of Company income, gain, loss or deduction available to be specially allocated pursuant to Section 6.3 hereof shall be determined by applying rules analogous to those set forth in this definition of “Net Income” or “Net Loss.”

“ Net Proceeds ” has the meaning set forth in Section 15.1.I hereof.

“ New Securities ” means (i) any rights, options, warrants or convertible or exchangeable securities that entitle the holder thereof to subscribe for or purchase, convert such securities into or exchange such securities for, REIT Shares, Capital Shares or Preferred Shares, excluding Preferred Shares and grants under the Stock Option Plans, or (ii) any Debt issued by CLNY that provides any of the rights described in clause (i).

“ Non-Managing Member(s) ” means any Member other than the Managing Member.

“ Non-Managing Member Ancillary Agreement ” means, with respect to any Non-Managing Member, any other agreement entered into by such Non-Managing Member or any of its Affiliates or transferee thereof with CLNY, the Company or a Subsidiary of the Company relating to such Non-Managing Member’s Membership Units or any REIT Shares or Capital Shares which such Non-Managing Member holds or has the rights to obtain.

“ Nonrecourse Deductions ” has the meaning set forth in Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Fiscal Year shall be determined in accordance with the rules of Regulations Section 1.704-2(c).

“ Nonrecourse Liability ” has the meaning set forth in Regulations Section 1.752-1(a)(2).

“ Notice of Redemption ” means a Notice of Redemption substantially in the form of Exhibit B attached to this Agreement.

“ Offered Shares ” has the meaning set forth in Section 15.1.I hereof.

“ Offering Units ” has the meaning set forth in Section 15.1.I hereof.

“ Optionee ” means a Person to whom a stock option is granted under any Stock Option Plan.

“ Original Certificate ” has the meaning set forth in the Recitals.

“ Original Agreement ” has the meaning set forth in the Recitals.

“ Ownership Limit ” means the applicable restriction or restrictions on ownership of stock of CLNY imposed under the Charter.

“ Percentage Interest ” means, with respect to each Member, as to any class or series of Membership Interests, the fraction, expressed as a percentage, the numerator of which is the aggregate number of Membership Units of such class or series held by such Member and the denominator of which is the total number of Membership Units of such class or series held by all Members. If not otherwise specified, “ Percentage Interest ” shall be deemed to refer to Membership Common Units.

“ Permitted Lender Transferee ” has the meaning set forth in the definition of Permitted Transferee.

“ Permitted Transfer ” means a Transfer by a Non-Managing Member of all or part of its Membership Interest (i) to any Family Member, Controlled Entity or controlled Affiliate of such Member, or to any trust, partnership, corporation or limited liability company established and held for the direct or indirect benefit of a Family Member, provided that any such Transfer shall not involve a disposition for value other than equity interests in any such trust, partnership, corporation or limited liability company; (ii) as required by applicable law or order; (iii) to a nominee or custodian of a person or entity to whom a disposition or Transfer would be permitted under this Agreement; (iv) that such Non-Managing Member would be expressly authorized to make as a “Permitted Transfer” pursuant to a Non-Managing Member Ancillary Agreement, disregarding any expiration or termination thereof; or (v) in the case of any Permitted Transferee that is a past or present officer or employee of (x) the Company, CLNY or their respective Subsidiaries or (y) CC, CCH or Colony Realty Partners, LLC or their respective Subsidiaries, as may be, or may have been permitted pursuant to the applicable Non-Managing Member Ancillary Agreement to which such Membership Interests were subject at the time of the issuance of such Membership Interests or to which such Permitted Transferee was party (taking into account subsequent amendments thereto), disregarding any expiration or termination of such Non-Managing Member Ancillary Agreement.

“ Permitted Transferee ” means (i) any lender or lenders secured by a Pledge, or agents acting on their behalf, to whom any Membership Interest is transferred pursuant to the exercise of remedies under a Pledge and any special purpose entities owned and used by such lenders or agents for the purpose of holding any such Membership Interest (each a “ Permitted Lender Transferee ”), (ii) any Person, including any Third-Party Pledge Transferee designated by any lender or lenders secured by a Pledge, or agents acting on their behalf, to whom a Membership Interest is transferred pursuant to the exercise of remedies under a Pledge, whether before or after one or more Permitted Lender Transferees take title to such Membership Interest and (iii) any other Person to whom any Membership Interest is transferred pursuant to a Permitted Transfer.

“ Person ” means an individual or a corporation, partnership, trust, unincorporated organization, association, limited liability company or other entity.

“ Pledge ” means a pledge by a Non-Managing Member of all or any portion of its Membership Interest to one or more banks or lending institutions, or agents acting on their behalf, which are not Affiliates of such Non-Managing Member, as collateral or security for a bona fide loan or other extension of credit.

“ Preferred Share ” means a share of stock of CLNY now or hereafter authorized, designated or reclassified that has dividend rights, or rights upon liquidation, winding up and dissolution, that are superior or prior to the REIT Shares, including the Series A Preferred Shares and the Series B Preferred Shares.

“ Pricing Agreements ” has the meaning set forth in Section 15.1.I hereof.

“ Properties ” means any assets and property of the Company and “ Property ” means any one such asset or property.

“ Publicly Traded ” means having common equity securities listed or admitted to trading on any U.S. national securities exchange.

“ Qualified DRIP ” means a dividend reinvestment plan of CLNY that permits participants to acquire REIT Shares using the proceeds of dividends paid by CLNY.

“ Qualified Transferee ” means an “accredited investor,” as defined in Rule 501 promulgated under the Securities Act.

“ Qualifying Party ” means (a) a Member, (b) an Additional Member, (c) an Assignee who is the transferee of a Member’s Membership Interest in a Permitted Transfer, or (d) a Person, including a lending institution as the pledgee of a Pledge, who is the transferee of a Member’s Membership Interest in a Permitted Transfer; provided , however , that a Qualifying Party shall not include the Managing Member or CLNY.

“ Redemption ” has the meaning set forth in Section 15.1.A hereof.

“ Register ” has the meaning set forth in Section 4.1 hereof.

“ Regulations ” means the income tax regulations under the Code, whether such regulations are in proposed, temporary or final form, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

“ Regulatory Allocations ” has the meaning set forth in Section 6.3B(viii) hereof.

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

“ REIT Available Cash ” means, as of any date of determination, all amounts held by CLNY (and not the Company and its Subsidiaries) which would be available for distribution to the holders of REIT Shares (calculated in a manner substantially similar to the manner in which the Company calculates Available Cash, but excluding any distributions from the Company to be made, or which have been made, to CLNY hereunder and without regard to any restriction on distribution imposed on CLNY by any third party).

“ REIT Member ” means any Member which is (a) CLNY or any Affiliate of CLNY to the extent such Person has in place an election to qualify as a REIT and (b) a “qualified REIT subsidiary” (within the meaning of Code Section 856(i)(2)) or disregarded entity (determined for federal income tax purposes) of any such Person, referred to in clause (a).

“ REIT Payment ” has the meaning set forth in Section 15.11 hereof.

“ REIT Requirements ” means the requirements for qualifying as a REIT under the Code and Regulations (the “ REIT Requirements ”).

“ REIT Share ” means Class A REIT Shares and Class B REIT Shares.

“ REIT Shares Amount ” means a number of Class A REIT Shares equal to the product of (a) the number of Tendered Units and (b) the Adjustment Factor; provided , however , that, in the event that CLNY issues to all holders of Class A REIT Shares as of a specified record date rights, options, warrants or convertible or exchangeable securities entitling CLNY’s stockholders to subscribe for or purchase Class A REIT Shares, or any other securities or property (collectively, the “ Rights ”), with the record date for such Rights issuance falling within the period starting on the date of the Notice of Redemption and ending on the day immediately preceding the Specified Redemption Date, which Rights will not be distributed before the relevant Specified Redemption Date, then the REIT Shares Amount shall also include such Rights that a holder of that number of Class A REIT Shares would be entitled to receive, expressed, where relevant hereunder, as a number of Class A REIT Shares determined by the Managing Member.

“ Related Party ” means, with respect to any Person, any other Person to whom ownership of shares of CLNY’s stock would be attributed by or from such first Person under Code Section 544 (as modified by Code Section 856(h)(1)(B)).

“ Rights ” has the meaning set forth in the definition of “REIT Shares Amount.”

“ SEC ” means the Securities and Exchange Commission.

“ Securities Act ” means the Securities Act of 1933, and the rules and regulations of the SEC promulgated thereunder.

“ Series A Company Preferred Unit ” means a Company Preferred Unit with the designations, preferences and relative, participating, optional or other special rights, powers and duties as are set forth in Exhibit E hereto. It is the intention of the Managing Member that each Series A Company Preferred Unit shall be substantially the economic equivalent of one Series A Preferred Share.

“ Series B Company Preferred Unit ” means a Company Preferred Unit with the designations, preferences and relative, participating, optional or other special rights, powers and duties as are set forth in Exhibit F hereto. It is the intention of the Managing Member that each Series B Company Preferred Unit shall be substantially the economic equivalent of one Series B Preferred Share.

“ Series A Preferred Share ” means a share of 8.5% Series A Cumulative Redeemable Perpetual Preferred Stock of CLNY, par value $0.01 per share.

“ Series B Preferred Share ” means a share of 7.5% Series B Cumulative Redeemable Perpetual Preferred Stock of CLNY, par value $0.01 per share.

“ Single Funding Notice ” has the meaning set forth in Section 15.1.I hereof.

“ Specified Membership Units ” means with respect to each Excluded Property, the amount of Membership Common Units, Company Junior Unit and/or Company Preferred Units (as the case may be) which would have been issued to CLNY, pursuant to Section 4.3.B and Section 4.2 hereof, if CLNY had contributed such Excluded Property on the date that such asset was acquired by CLNY or a wholly owned Subsidiary of CLNY, in exchange for Membership Units equal in value to the fair market value of such Excluded Property as of such date.

“ Specified Redemption Date ” means the soonest practicable date after the receipt by the Managing Member of a Notice of Redemption, but in any event not later than the tenth (10th) Business Day following the date of receipt; and provided , further , that, if the Managing Member and CLNY elect a Stock Offering Funding pursuant to Section 15.1.I, such Specified Redemption Date shall be deferred until the next Business Day following the date of the closing of the Stock Offering Funding.

“ Stock Offering Funding ” has the meaning set forth in Section 15.1.I hereof

“ Stock Offering Funding Amount ” has the meaning set forth in Section 15.1.I hereof.

“ Stock Option Plans ” means any stock option plan now or hereafter adopted by the Company or CLNY.

“Subsidiary” means, with respect to a specified Person, any other Person in which more than 50% of the securities or other ownership interests having the power to (a) elect a majority of the other Person’s board of directors or other governing body or (b) otherwise direct the business and policies of the other Person, are owned or controlled, directly or indirectly, by (x) the specified Person, (y) the specified Person and one or more Subsidiaries of the specified Person, or (z) one or more Subsidiaries of the specified Person. For the avoidance of doubt, no fund, investment vehicle, or investment product managed by CLNY or its Subsidiaries shall be deemed to be a Subsidiary of CLNY.

“ Substituted Member ” means a Person who is admitted as a Member to the Company pursuant to Section 11.4 hereof.

“ Successor Shares Amount ” has the meaning set forth in Section 11.7 hereof.

“ Surviving Company ” has the meaning set forth in Section 11.7 hereof.

“ Target Balance ” has the meaning set forth in Section 6.3.F hereof.

“ Tax Items ” has the meaning set forth in Section 6.4.A hereof.

“ Tax Matters Member ” has the meaning set forth in Section 6.4.A hereof.

“ Tendered Units ” has the meaning set forth in Section 15.1.A hereof.

“ Tendering Party ” has the meaning set forth in Section 15.1.A hereof.

“ Termination Transaction ” means any Transfer of all or any portion of CLNY’s Membership Interest or, if the Managing Member is not CLNY, its interest in the Managing Member in connection with, or the other occurrence of, (a) a merger, consolidation or other combination involving CLNY or the Managing Member, on the one hand, and any other Person, on the other, (b) a sale, lease, exchange or other transfer of all or substantially all of the assets of CLNY not in the ordinary course of its business, whether in a single transaction or a series of related transactions, (c) a reclassification, recapitalization or similar change of the outstanding REIT Shares (other than a change in par value, or from par value to no par value, or as a result of a stock split, stock dividend or similar subdivision), (d) the adoption of any plan of liquidation or dissolution of CLNY or the Managing Member, or (e) a Transfer of all or any portion of CLNY’s Membership Interest or, if the Managing Member is not CLNY, its interest in the Managing Member, other than a Transfer effected in accordance with Section 11.2.A.

“ Third-Party Pledge Transferee ” means a Qualified Transferee, other than a Permitted Lender Transferee, that acquires a Membership Interest pursuant to the exercise of remedies by Permitted Lender Transferees under a Pledge and that agrees to be bound by the terms and conditions of this Agreement.

“ Transaction ” has the meaning set forth in Section 4.6.F hereof.

“ Transaction Consideration ” has the meaning set forth in Section 11.7 hereof.

“ Transfer ” means any sale, assignment, bequest, conveyance, devise, gift (outright or in trust), pledge, encumbrance, hypothecation, mortgage, exchange, transfer or other disposition or act of alienation, whether voluntary or involuntary or by operation of law; provided , however , that when the term is used in Article 11 and Section 13.7 hereof, unless otherwise indicated therein, “ Transfer ” does not include (a) any Redemption of Membership Common Units by the Company, or acquisition of Tendered Units by CLNY, pursuant to Section 15.1 hereof, or (b) any redemption of Membership Units pursuant to any Membership Unit Designation. The terms “Transferred” and “Transferring” have correlative meanings.

“ Unvested LTIP Units ” has the meaning set forth in Section 4.5.C(i) hereof.

“ Valuation Date ” means the date of receipt by the Managing Member of a Notice of Redemption pursuant to Section 15.1 herein, or such other date as specified herein, or, if such date is not a Business Day, the immediately preceding Business Day.

“ Value ” means, on any date with respect to a REIT Share, the average of the daily Market Prices for the ten (10) consecutive trading days immediately preceding the Valuation Date (except that the Market Price for the trading day immediately preceding the date of exercise of a stock option under any Stock Option Plans shall be substituted for such average of daily market prices for purposes of Section 4.4 hereof). The term “Market Price” on any date means, with respect to either Class A REIT Shares or Class B REIT Shares, the last sale price for a Class A REIT Share, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, for a Class A REIT Shares, in either case, as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange or, if Class A REIT Shares are not listed or admitted to trading on the New York Stock Exchange, as reported on the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which Class A REIT Shares are listed or admitted to trading or, if Class A REIT Shares are not listed or admitted to trading on any national securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the principal automated quotation system that may then be in use or, if Class A REIT Shares are not quoted by any such system, the average of the closing bid and asked prices as furnished by a professional market maker making a market in Class A REIT Shares selected by the Managing Member or, in the event that no trading price is available for Class A REIT Shares, the fair market value of Class A REIT Shares, as determined in good faith by the Managing Member. In the event that the REIT Shares Amount includes Rights (as defined in the definition of “REIT Shares Amount”) that a holder of REIT Shares would be entitled to receive, then the Value of such Rights shall be determined by the Managing Member acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate.

“ Vested LTIP Units ” has the meaning set forth in Section 4.5.C(i) hereof.

“ Vesting Agreement ” means each or any, as the context implies, Equity Plan entered into by an LTIP Unitholder upon acceptance of an award of LTIP Units under an Equity Plan.

“ Vesting Date ” has the meaning set forth in Section 4.4 hereof.

“ Withdrawing Members ” has the meaning set forth in Section 15.1.I hereof.

Section 1.2 Interpretation and Usage . (a) In this Agreement, unless there is a clear contrary intention: (i) when a reference is made to an article, a section, an exhibit or a schedule, that reference is to an article, a section, an exhibit or a schedule of or to this Agreement; (ii) the singular includes the plural and vice versa; (iii) reference to any agreement, document or instrument means that agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof; (iv) reference to any statute, code, rule, or regulation means that statute, code, rule or regulation as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any statute, code, rule or regulation means that section or provision from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of that section or provision; (v) “hereunder,” “hereof,” “hereto,” and words of similar import will be deemed references to this Agreement as a whole and not to any particular article, section or other provision of this Agreement; (vi) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term; (vii) references to agreements, documents or instruments will be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto; and (viii) the terms “writing,” “written” and words of similar import will be deemed to include communications and documents in e-mail, fax or any other similar electronic or documentary form.

ARTICLE 2

ORGANIZATIONAL MATTERS

Section 2.1 Formation . The Company is a limited liability company previously formed, and continued pursuant to the provisions of the Act and upon the terms and subject to the conditions set forth in this Agreement. Except as expressly provided herein to the contrary, the rights and obligations of the Members and the administration and termination of the Company shall be governed by the Act. The Membership Interest of each Member shall be personal property for all purposes.

Section 2.2 Name . The name of the Company is “Colony Capital Operating Company, LLC”. The Company’s business may be conducted under any other name or names deemed advisable by the Managing Member, including the name of the Managing Member or any Affiliate thereof. The words “Limited Liability Company,” “L.L.C.,” “LLC” or similar words or letters shall be included in the Company’s name where necessary for the purposes of complying with the laws of any jurisdiction that so requires. The Managing Member may change the name of the Company at any time and from time to time.

Section 2.3 Principal Office and Resident Agent . The address of the principal office of the Company in the State of Delaware is located at 2711 Centerville Road, Suite 400, Wilmington, County of New Castle, Delaware 19808, and the name and address of the resident agent of the Company in the State of Delaware are the Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington, County of New Castle, Delaware 19808, or such other principal office and resident agent as the Managing Member may from time to time designate. The Company may maintain offices at such other place or places within or outside the State of Delaware as the Managing Member may approve.

Section 2.4 Power of Attorney .

A. Each Member and Assignee hereby irrevocably constitutes and appoints the Managing Member, any Liquidator, and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead to:

(1) execute, swear to, seal, acknowledge, deliver, file and record in the appropriate public offices (a) all certificates, documents and other instruments (including this Agreement and the Certificate and all amendments, supplements or restatements thereof) that the Managing Member or the Liquidator deems appropriate or necessary to form, qualify or continue the existence or qualification of the Company as a limited liability company (or a company in which the members have limited liability to the extent provided by applicable law) in the State of Delaware and in all other jurisdictions in which the Company may conduct business or own property; (b) all instruments that the Managing Member or any Liquidator deems appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with its terms; (c) all conveyances and other instruments or documents that the Managing Member or the Liquidator deems appropriate or necessary to reflect the dissolution and liquidation of the Company pursuant to the terms of this Agreement, including a certificate of cancellation; (d) all conveyances and other instruments or documents that the Managing Member or the Liquidator deems appropriate or necessary to reflect the distribution or exchange of assets of the Company pursuant to the terms of this Agreement; (e) all instruments relating to the admission, acceptance, withdrawal, removal or substitution of any Member pursuant to the terms of this Agreement or the Capital Contribution of any Member; and (f) all certificates, documents and other instruments relating to the determination of the rights, preferences and privileges relating to Membership Interests; and

(2) execute, swear to, acknowledge and file all ballots, consents, approvals, waivers, certificates and other instruments the Managing Member or any Liquidator determines in its sole and absolute discretion are appropriate, necessary or desirable to make, evidence, give, confirm or ratify any vote, consent, approval, agreement or other action that is made or given by the Members hereunder or is consistent with the terms of this Agreement or to effectuate the terms or intent of this Agreement.

Nothing contained herein shall be construed as authorizing the Managing Member or any Liquidator to amend this Agreement except in accordance with Section 14.2 hereof or as may be otherwise expressly provided for in this Agreement.

B. The foregoing power of attorney is hereby declared to be irrevocable and a special power coupled with an interest, in recognition of the fact that each of the Members and Assignees will be relying upon the power of the Managing Member or the Liquidator to act as contemplated by this Agreement in any filing or other action by it on behalf of the Company, and it shall survive and not be affected by the subsequent Incapacity of any Member or Assignee and the Transfer of all or any portion of such Person’s Membership Units or Membership Interest (as the case may be) and shall extend to such Person’s heirs, successors, assigns and personal representatives. Each such Member and Assignee hereby agrees to be bound by any representation made by the Managing Member or the Liquidator, acting in good faith pursuant to such power of attorney; and each such Member and Assignee hereby waives any and all defenses that may be available to contest, negate or disaffirm the action of the Managing Member or the Liquidator, taken in good faith under such power of attorney. Each Member and Assignee shall execute and deliver to the Managing Member or the Liquidator, within fifteen (15) days after receipt of the Managing Member’s or the Liquidator’s request therefor, such further designation, powers of attorney and other instruments as the Managing Member or the Liquidator (as the case may be) deems necessary to

effectuate this Agreement and the purposes of the Company. Notwithstanding anything else set forth in this Section 2.4.B, no Member shall incur any personal liability for any action of the Managing Member or the Liquidator taken under such power of attorney.

Section 2.5 Term . The term of the Company commenced on March 25, 2011, the date that the original Certificate was filed with the office of the Secretary of State of the State of Delaware in accordance with the Act, and shall continue indefinitely unless the Company is dissolved sooner pursuant to the provisions of Article 13 hereof or as otherwise provided by law.

ARTICLE 3

PURPOSE

Section 3.1 Purpose and Business . The purpose and nature of the Company is to conduct any business, enterprise or activity permitted by or under the Act; provided, however, such business and arrangements and interests shall be limited to and conducted in such a manner as to permit the Managing Member, in its sole and absolute discretion, at all times to be classified as a REIT unless CLNY, in its sole and absolute discretion, has chosen to cease to qualify as a REIT or has chosen not to attempt to qualify as a REIT for any reason or for reasons whether or not related to the business conducted by the Company. Without limiting CLNY’s right in its sole and absolute discretion to cease qualifying as a REIT, the Members acknowledge that the status of CLNY as a REIT inures to the benefit of all Members and not solely to CLNY or its Affiliates. In connection with the foregoing, the Company shall have full power and authority to enter into, perform and carry out contracts of any kind, to borrow and lend money and to issue and guarantee evidence of indebtedness, whether or not secured by mortgage, deed of trust, pledge or other lien and, directly or indirectly, to acquire additional Properties necessary, useful or desirable in connection with its business.

Section 3.2 Powers .

A. The Company shall have the power to do any and all acts and things necessary, appropriate, proper, advisable, incidental to or convenient for the furtherance and accomplishment of the purposes and business described herein and for the protection and benefit of the Company; provided, however, the Company shall not take, and shall refrain from taking, any action that, in the judgment of the Managing Member, in its sole and absolute discretion, (i) could adversely affect the ability of CLNY to continue to qualify as a REIT, (ii) could cause the Company not to be treated as a partnership or disregarded entity for federal income tax purposes, (iii) could subject CLNY to any additional taxes under Code Section 857 or Code Section 4981 or any other related or successor provision of the Code or (iv) could violate any law or regulation of any governmental body or agency having jurisdiction over CLNY, its securities or the Company.

Section 3.3 Limited Authority and Liability of Members . The Company is a limited liability company formed pursuant to the Act, and this Agreement shall not be deemed to create a company, venture or partnership between or among the Members or any other Persons with respect to any activities whatsoever other than the activities specified in Section 3.1 hereof. Except as otherwise provided in this Agreement, no Member shall have any authority to act for, bind, commit or assume any obligation or responsibility on behalf of the Company, its properties or any other Member. No Member, in its capacity as a Member under this Agreement, shall be responsible or liable for any indebtedness or obligation of another Member, nor shall the Company be responsible or liable for any indebtedness or obligation of any Member, incurred either before or after the execution and delivery of this Agreement by such Member, except as to those responsibilities, liabilities, indebtedness or obligations incurred pursuant to and as limited by the terms of this Agreement and the Act.

Section 3.4 Representations and Warranties by the Members .

A. Each Member that is an individual (including each Additional Member or Substituted Member as a condition to becoming an Additional Member or a Substituted Member) represents and warrants to, and covenants with, the Company, the Managing Member and each other Member that (i) the consummation of the transactions contemplated by this Agreement to be performed by such Member will not result in a breach or violation of, or a default under, any material agreement by which such Member or any of such Member’s property is bound, or any statute, regulation, order or other law to which such Member is subject, (ii) except as disclosed in writing to the Managing Member, such Member is neither a “foreign person,” within the meaning of Code Section 1445(f) nor a “foreign partner,” within the meaning of Code Section 1446(e), (iii) to such Member’s knowledge, such Member does not, and for so long as it is a Member will not, own, directly or indirectly, (a) nine percent (9%) or more of the total combined voting power of all classes of stock entitled to vote, or nine percent (9%) or more of the total number of shares of all classes of stock, of any corporation that is a direct or indirect tenant of any of (I) CLNY, determined for purposes of Code Section 856(d)(2)(B), (II) the Company, determined for purposes of Code Section 7704(d)(3), (III) any Affiliated REIT or (IV) any partnership, corporation, or other entity of which CLNY or any “qualified REIT subsidiary” (within the meaning of Code Section 856(i)(2)), with respect to CLNY, or the Company is a member, determined for purposes of Code Section 856(d)(2)(B) and Code Section 7704(d)(3), or (b) an interest of nine percent (9%) or more in the assets or net profits of any direct or indirect tenant of any of (I) CLNY, determined for purposes of Code Section 856(d)(2)(B), (II) the Company, determined for purposes of Code Section 7704(d)(3), (III) any Affiliated REIT or (IV) any partnership, corporation, or other entity of which CLNY or any “qualified REIT subsidiary” (within the meaning of Code Section 856(i)(2)), with respect to CLNY, or the Company is a member, determined for purposes of Code Section 856(d)(2)(B) and Code Section 7704(d)(3); provided , however , that each Member may exceed any of the nine percent limits (9%) set forth in this clause (iii) if such Member obtains the written consent of the Managing Member prior to exceeding any such limits; provided , further , that in no event shall any Member own, directly or indirectly, more than nine point eight percent (9.8%) of the stock described in clause (iii)(a) above or more than nine point eight percent (9.8%) of the assets or net profits described in clause (iii)(b) above, and (iv) this Agreement is binding upon, and enforceable against, such Member in accordance with its terms.

B. Each Member that is not an individual (including each Additional Member or Substituted Member as a condition to becoming an Additional Member or a Substituted Member) represents and warrants to, and covenants with, the Company, the Managing Member and each other Member that (i) all transactions contemplated by this Agreement to be performed by it have been duly authorized by all necessary action, including that of its managing member(s), general partner(s), committee(s), trustee(s), beneficiaries, directors and/or stockholder(s) (as the case may be) as required, (ii) the consummation of such transactions shall not result in a breach or violation of, or a default under, its partnership or operating agreement, trust agreement, charter or bylaws (as the case may be), any material agreement by which such Member or any of such Member’s properties or any of its partners, members, beneficiaries, trustees or stockholders (as the case may be) is or are bound, or any statute, regulation, order or other law to which such Member or any of its partners, members, trustees, beneficiaries or stockholders (as the case may be) is or are subject, (iii) except as disclosed in writing to the Managing Member, such Member is neither a “foreign person,” within the meaning of Code Section 1445(f), nor a “foreign partner,” within the meaning of Code Section 1446(e), (iv) such Member does not, and for so long as it is a Member will not, own, directly or indirectly, (a) nine percent (9%) or more of the total combined voting power of all classes of stock entitled to vote, or nine percent (9%) or more of the total number of shares of all classes of stock, of any corporation that is a direct or indirect tenant of any of (I) CLNY, determined for purposes of Code Section 856(d)(2)(B), (II) the Company, determined for purposes of Code Section 7704(d)(3), (III) any Affiliated REIT or (IV) any partnership,

corporation, or other entity of which CLNY or any “qualified REIT subsidiary” (within the meaning of Code Section 856(i)(2)), with respect to CLNY, or the Company is a member, determined for purposes of Code Section 856(d)(2)(B) and Code Section 7704(d)(3), or (b) an interest of nine percent (9%) or more in the assets or net profits of any direct or indirect tenant of any of (I) CLNY, determined for purposes of Code Section 856(d)(2)(B), (II) the Company, determined for purposes of Code Section 7704(d)(3), (III) any Affiliated REIT or (IV) any partnership, corporation, or other entity of which CLNY or any “qualified REIT subsidiary” (within the meaning of Code Section 856(i)(2)), with respect to CLNY, or the Company is a member, determined for purposes of Code Section 856(d)(2)(B) and Code Section 7704(d)(3); provided, however, that each Member may exceed any of the nine percent limits (9%) set forth in this clause (iii) if such Member obtains the written consent of the Managing Member prior to exceeding any such limits; provided, further, that in no event shall any Member own, directly or indirectly, more than nine point eight percent (9.8%) of the stock described in clause (iii)(a) above or more than nine point eight percent (9.8%) of the assets or net profits described in clause (iii)(b) above, and (iv) this Agreement is binding upon, and enforceable against, such Member in accordance with its terms.

C. Each Member (including each Substituted Member, as a condition to becoming a Substituted Member) represents and warrants that it is an “accredited investor,” as defined in Rule 501 promulgated under the Securities Act, and represents, warrants and agrees that it has acquired and continues to hold its interest in the Company for its own account for investment purposes only and not for the purpose of, or with a view toward, the resale or distribution of all or any part thereof, and not with a view toward selling or otherwise distributing such interest or any part thereof at any particular time or under any predetermined circumstances. Each Member further represents and warrants that it is a sophisticated investor, able and accustomed to handling sophisticated financial matters for itself, particularly real estate investments, and that it has a sufficiently high net worth that it does not anticipate a need for the funds that it has invested in the Company in what it understands to be a highly speculative and illiquid investment. Notwithstanding the foregoing, the representations and warranties contained in the first sentence of this Section 3.4.C shall not apply to any Permitted Lender Transferee, it being understood that a Permitted Lender Transferee may be subject to a legal obligation to sell, distribute or otherwise dispose of any Membership Interest acquired pursuant to the exercise of remedies under a Pledge; provided , however , that such Permitted Lender Transferee must be a Qualified Transferee.

D. The representations and warranties contained in Sections 3.4.A, 3.4.B and 3.4.C hereof shall survive the execution and delivery of this Agreement by each Member (and, in the case of an Additional Member or a Substituted Member, the admission of such Additional Member or Substituted Member as a Member in the Company) and the dissolution, liquidation and termination of the Company.

E. Each Member (including each Substituted Member as a condition to becoming a Substituted Member) hereby acknowledges that no representations as to potential profit, cash flows, funds from operations or yield, if any, in respect of the Company or the Managing Member have been made by any Member or any employee or representative or Affiliate of any Member, and that projections and any other information, including financial and descriptive information and documentation, that may have been in any manner submitted to such Member shall not constitute any representation or warranty of any kind or nature, express or implied.

F. Notwithstanding the foregoing, the Managing Member may permit the modification of any of the representations and warranties contained in Sections 3.4.A, 3.4.B and 3.4.C above as applicable to any Member (including any Additional Member or Substituted Member or any transferee of either) provided that such representations and warranties, as modified, shall be set forth in either (i) a Membership Unit Designation applicable to the Membership Units held by such Member or (ii) a separate writing addressed to the Company and the Managing Member.

ARTICLE 4

CAPITAL CONTRIBUTIONS

Section 4.1 Capital Contributions of the Members . Each Member has previously made Capital Contributions to the Company. Immediately upon execution of this Agreement, all existing limited liability company interests of the Company issued and outstanding as of immediately prior to the execution of this Agreement automatically shall be converted into (i) Membership Common Units, (ii) Series A Company Preferred Units, and (iii) Series B Company Preferred Units, in each case as set forth in the Register. Except as provided by law or in Section 4.2, 4.3, or 10.4 hereof, the Members shall have no obligation or, except with the prior written consent of the Managing Member, right to make any Capital Contributions or loans to the Company. The Managing Member shall cause to be maintained in the principal business office of the Company, or such other place as may be determined by the Managing Member, the books and records of the Company, which shall include, among other things, a register containing the name, address and number of Membership Units of each Member, and such other information as the Managing Member may deem necessary or desirable (the “ Register ”). The Register shall not be deemed part of this Agreement. The Managing Member shall from time to time update the Register as necessary to accurately reflect the information therein, including as a result of any sales, exchanges or other Transfers, or any redemptions, issuances or similar events involving Membership Units. Any reference in this Agreement to the Register shall be deemed a reference to the Register as in effect from time to time. Subject to the terms of this Agreement, the Managing Member may take any action authorized hereunder in respect of the Register without any need to obtain the consent of any other Member. No action of any Non-Managing Member shall be required to amend or update the Register. Except as required by law, no Non-Managing Member shall be entitled to receive a copy of the information set forth in the Register relating to any Member other than itself. Schedule I hereto sets forth the respective Capital Accounts of the Members as of the date hereof.

Section 4.2 Issuances of Additional Membership Interests . Subject to the rights of any Holder of any Membership Interest set forth in a Membership Unit Designation:

A. General . Subject to the provisions of this Agreement (including Section 4.2.D hereof), the Managing Member is hereby authorized to cause the Company to issue additional Membership Interests, in the form of Membership Units, for any Company purpose, at any time or from time to time, to the Members (including the Managing Member and CLNY) or to other Persons, and to admit such Persons as Additional Members, for such consideration and on such terms and conditions as shall be established by the Managing Member, all without the approval of any Member or any other Person. Without limiting the foregoing, the Managing Member is expressly authorized to cause the Company to issue Membership Units (i) upon the conversion, redemption or exchange of any Debt, Membership Units or other securities issued by the Company, (ii) for less than fair market value, (iii) for no consideration, (iv) in connection with any merger of any other Person into the Company, or (v) upon the contribution of property or assets to the Company. Any additional Membership Interests may be issued in one or more classes, or one or more series of any of such classes, with such designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption (including rights that may be senior or otherwise entitled to preference over existing Membership Interests) as shall be determined by the Managing Member, in its sole and absolute discretion and without the approval of any Non-Managing Member or any other Person, and set forth in a written document thereafter attached to and made an exhibit to this Agreement, which exhibit shall be an amendment to this Agreement and shall be incorporated herein by this reference (each, a “ Membership Unit Designation ”) without the approval of any Non-Managing Member or any other Person. Without limiting the generality of the foregoing, the Managing Member shall have authority to specify, in its sole and absolute discretion: (a) the allocations of items of Company income, gain, loss, deduction and credit to each such class or series of Membership Interests; (b) the right

of each such class or series of Membership Interests to share (on a pari passu, junior or preferred basis) in Membership Unit Distributions; (c) the rights of each such class or series of Membership Interests upon dissolution and liquidation of the Company; (d) the voting rights, if any, of each such class or series of Membership Interests; and (e) the conversion, redemption or exchange rights applicable to each such class or series of Membership Interests. Except to the extent specifically set forth in any Membership Unit Designation, a Membership Interest of any class or series other than a Membership Common Unit shall not entitle the holder thereof to vote on, or consent to, any matter. Upon the issuance of any additional Membership Interest, the Managing Member shall amend the Register and the books and records of the Company as appropriate to reflect such issuance.

B. Issuances to the Managing Member or CLNY . No additional Membership Units shall be issued to CLNY unless (i) the additional Membership Units are issued to all Members holding Membership Common Units in proportion to their respective Percentage Interests in the Membership Common Units, (ii) (a) the additional Membership Units are (x) Membership Common Units issued in connection with an issuance of REIT Shares, or (y) Company Equivalent Units (other than Membership Common Units) issued in connection with an issuance of Capital Shares, Preferred Shares, New Securities or other interests in CLNY (other than REIT Shares), and (b) CLNY contributes to the Company the cash proceeds or other consideration received in connection with the issuance of such REIT Shares, Capital Shares, Preferred Shares, New Securities or other interests in CLNY, (iii) the additional Membership Units are issued upon the conversion, redemption or exchange of Debt, Membership Units or other securities issued by the Company, or (iv) the additional Membership Units are issued pursuant to Section 4.3.B, Section 4.3.E, Section 4.4, Section 4.7 or Section 4.11.

C. No Preemptive Rights . Except as expressly provided in this Agreement or in any Membership Unit Designation, no Person, including any Member or Assignee, shall have any preemptive, preferential, participation or similar right or rights to subscribe for or acquire any Membership Interest.

D. Notwithstanding any provision to the contrary contained in this Agreement but subject to the rights of any Holder of any Membership Interest set forth in a Membership Unit Designation, the Company shall not issue, and the Managing Member shall not authorize the issuance of, (i) any Membership Interests issued to CLNY that do not have CLNY Equivalent Shares that are concurrently issued by CLNY for the equivalent contribution to CLNY of cash, property or assets, which are subsequently contributed by CLNY to the Company, or (ii) any Membership Interests unless approved by the Board of Directors.

Section 4.3 Additional Funds and Capital Contributions .

A. General . The Managing Member may, at any time and from time to time, determine that the Company requires additional funds (“ Additional Funds ”) for the acquisition of additional Properties, for the redemption of Membership Units or for such other purposes as the Managing Member may determine. Additional Funds may be obtained by the Company, at the election of the Managing Member, in any manner provided in, and in accordance with, the terms of this Section 4.3 without the approval of any Member or any other Person.

B. Additional Capital Contributions . The Managing Member, on behalf of the Company, may obtain any Additional Funds by accepting Capital Contributions from any Members or other Persons. In connection with any such Capital Contribution (of cash or property), the Managing Member is hereby authorized to cause the Company from time to time to issue additional Membership Units (as set forth in Section 4.2 above) in consideration therefor, and the Percentage Interests of the Managing Member and the other Members shall be adjusted to reflect the issuance of such additional Membership Units.

C. Loans by Third Parties . The Managing Member, on behalf of the Company, may obtain any Additional Funds by causing the Company to incur Debt to any Person (other than, except as contemplated in Section 4.3.D, the Managing Member or CLNY) upon such terms as the Managing Member determines appropriate, including making such Debt convertible, redeemable or exchangeable for Membership Units; provided , however , that the Company shall not incur any such Debt if any Member would be personally liable for the repayment of such Debt (unless such Member otherwise agrees).

D. Managing Member and CLNY Member Loans . The Managing Member, in its sole and absolute discretion on behalf of the Company, may obtain any Additional Funds by causing the Company to incur Debt to the Managing Member and/or CLNY (each, a “ CLNY Member Loan ”) if (i) such Debt is, to the extent permitted by law, on substantially the same terms and conditions (including interest rate, repayment schedule, and conversion, redemption, repurchase and exchange rights) as Funding Debt incurred by the Managing Member or CLNY, as applicable, the net proceeds of which are loaned to the Company to provide such Additional Funds, or (ii) such Debt is on terms and conditions no less favorable to the Company than would be available to the Company from a third party; provided , however , that the Company shall not incur any such Debt if any Member would be personally liable for the repayment of such Debt (unless such Member otherwise agrees).

E. Issuance of Securities by CLNY . CLNY shall not issue any additional REIT Shares, Preferred Shares or New Securities unless CLNY contributes, substantially concurrently with the receipt thereof, the cash proceeds or other consideration received from the issuance of such additional REIT Shares, Preferred Shares or New Securities (as the case may be), and from the exercise of the rights contained in any such additional New Securities, to the Company in exchange for (x) in the case of an issuance of REIT Shares, Membership Common Units, or (y) in the case of an issuance of Preferred Shares or New Securities, Company Equivalent Units; provided , however , that notwithstanding the foregoing, CLNY may issue REIT Shares, Preferred Shares or New Securities (a) pursuant to Section 4.4 or Section 15.1.B hereof, (b) pursuant to a dividend or distribution (including any stock split) of REIT Shares, Preferred Shares or New Securities to all holders of REIT Shares, Preferred Shares or New Securities (as the case may be), (c) upon a conversion, redemption or exchange of Preferred Shares, (d) upon a conversion, redemption, exchange or exercise of New Securities, or (e) in connection with an acquisition of Membership Units or a property or other asset to be owned, directly or indirectly, by CLNY. In the event of any issuance of additional REIT Shares, Preferred Shares or New Securities by CLNY, and the contribution to the Company, by CLNY, of the cash proceeds or other consideration received from such issuance, the Company shall pay CLNY’s expenses associated with such issuance, including any underwriting discounts or commissions. In the event that CLNY issues any additional REIT Shares, Capital Shares, Preferred Shares, New Securities or other interests in CLNY (other than REIT Shares) and contributes the cash proceeds or other consideration received from the issuance thereof to the Company, the Company is authorized to and shall issue a number of Membership Common Units or Company Equivalent Units to CLNY equal to the number of REIT Shares, Capital Shares, Preferred Shares, New Securities or other interests so issued, divided by the Adjustment Factor then in effect, in accordance with this Section 4.3.E without any further act, approval or vote of any Member or any other Persons.

Section 4.4 Stock Option Plans .

A. Options Granted to Persons other than Company Employees . If at any time or from time to time, in connection with any Stock Option Plan, an option to purchase REIT Shares granted to a Person other than a Company Employee is duly exercised:

(1) CLNY, shall, as soon as practicable after such exercise, make a Capital Contribution to the Company in an amount equal to the exercise price paid to CLNY by such exercising party in connection with the exercise of such stock option.

(2) Notwithstanding the amount of the Capital Contribution actually made pursuant to Section 4.4.A(1) hereof, CLNY shall be deemed to have contributed to the Company as a Capital Contribution an amount equal to the Value of a REIT Share as of the date of exercise, multiplied by the number of REIT Shares then being issued in connection with the exercise of such stock option. In exchange for such Capital Contribution, the Company shall issue a number of Membership Common Units to CLNY equal to the quotient of (a) the number of REIT Shares issued in connection with the exercise of such stock option, divided by (b) the Adjustment Factor then in effect.

B. Options Granted to Company Employees . If at any time or from time to time, in connection with any Stock Option Plan, an option to purchase REIT Shares granted to a Company Employee is duly exercised:

(1) CLNY shall sell to the Company, and the Company shall purchase from CLNY, the number of REIT Shares as to which such stock option is being exercised. The purchase price per REIT Share for such sale of REIT Shares to the Company shall be the Value of a REIT Share as of the date of exercise of such stock option.

(2) The Company shall sell to the Optionee (or if the Optionee is an employee of a Company Subsidiary, the Company shall sell to such Company Subsidiary, which in turn shall sell to the Optionee), for a cash price per share equal to the Value of a REIT Share at the time of the exercise, a number of REIT Shares equal to (a) the exercise price paid to CLNY by the exercising party in connection with the exercise of such stock option, divided by (b) the Value of a REIT Share at the time of such exercise.

(3) The Company shall transfer to the Optionee (or if the Optionee is an employee of a Company Subsidiary, the Company shall transfer to such Company Subsidiary, which in turn shall transfer to the Optionee) at no additional cost, as additional compensation, a number of REIT Shares equal to the number of REIT Shares described in Section 4.4.B(1) hereof, less the number of REIT Shares described in Section 4.4.B(2) hereof.

(4) CLNY shall, as soon as practicable after such exercise, make a Capital Contribution to the Company of an amount equal to the proceeds received (excluding any payment in respect of payroll taxes or other withholdings) by CLNY pursuant to Section 4.4.B(1) in connection with the exercise of such stock option. In exchange for such Capital Contribution, the Company shall issue a number of Membership Common Units to CLNY equal to the quotient of (a) the number of REIT Shares issued in connection with the exercise of such stock option, divided by (b) the Adjustment Factor then in effect.

C. Restricted Stock Granted to Company Employees . If at any time or from time to time, in connection with any Equity Plan (other than a Stock Option Plan), any REIT Shares are issued to a Company Employee (including any REIT Shares that are subject to forfeiture in the event such Company Employee terminates his employment by the Company or a Company Subsidiary) in consideration for services performed for the Company or a Company Subsidiary:

(1) CLNY shall issue such number of REIT Shares as are to be issued to the Company Employee in accordance with the Equity Plan;

(2) the following events will be deemed to have occurred: (a) CLNY shall be deemed to have sold such shares to the Company (or if the Company Employee is an employee or other service provider of a Company Subsidiary, to such Company Subsidiary) for a purchase price equal to the Value of such shares, (b) the Company (or such Company Subsidiary) shall be deemed to have delivered the shares to the Company Employee, (c) CLNY shall be deemed to have contributed the purchase price to the Company as a Capital Contribution, and (d) if the Company Employee is an employee of a Company Subsidiary, the Company shall be deemed to have contributed such amount to the capital of the Company Subsidiary; and

(3) the Company shall issue to CLNY a number of Membership Common Units equal to the number of newly issued REIT Shares, divided by the Adjustment Factor then in effect, in consideration for the deemed Capital Contribution pursuant to Section 4.4.C.(2)(c).

D. Restricted Stock Granted to Persons other than Company Employees . If at any time or from time to time, in connection with any Equity Plan (other than a Stock Option Plan), any REIT shares are issued to a Person other than a Company Employee in consideration for services performed for CLNY, the Company or a Company Subsidiary:

(1) CLNY shall issue such number of REIT Shares as are to be issued to such Person in accordance with the Equity Plan; and

(2) CLNY shall be deemed to have contributed the Value of such REIT Shares to the Company as a Capital Contribution, and the Company shall issue to CLNY a number of newly issued Membership Common Units equal to the number of newly issued REIT Shares, divided by the Adjustment Factor then in effect.

E. Future Stock Incentive Plans . Nothing in this Agreement shall be construed or applied to preclude or restrain the Managing Member or CLNY from adopting, modifying or terminating stock incentive plans for the benefit of employees, directors or other business associates of the Managing Member, CLNY, the Company or any of their Affiliates. The Members acknowledge and agree that, in the event that any such plan is adopted, modified or terminated by the Managing Member or CLNY, amendments to this Section 4.4 may become necessary or advisable and that any approval or Consent to any such amendments requested by the Managing Member or CLNY shall be deemed granted.

F. Issuance of Membership Common Units . The Company is expressly authorized to issue Membership Common Units in the numbers specified in this Section 4.4 without any further act, approval or vote of any Member or any other Persons.

Section 4.5 LTIP Units .

A. Issuance of LTIP Units . The Managing Member may from time to time issue LTIP Units, in one or more classes or series established in accordance with Section 4.2, to Persons who provide services to the Company, for such consideration as the Managing Member may determine to be appropriate, and admit such Persons as Members. Any provision herein relating to LTIP Units or LTIP Unitholders may be varied by the provisions applicable to an individual class or series of LTIP Units as set forth in the applicable Membership Unit Designation. Except to the extent a Capital Contribution is

made with respect to an LTIP Unit, each LTIP Unit is intended to qualify as a “profits interest” in the Company within the meaning of the Code, the Regulations, and any published guidance by the IRS with respect thereto. Subject to the following provisions of this Section 4.5 and the special provisions of Sections 4.6, 5.7 and 6.3.F, LTIP Units shall be treated as Membership Common Units, with all of the rights, privileges and obligations attendant thereto. For purposes of computing the Members’ Percentage Interests, holders of LTIP Units shall be treated as holders of Membership Common Units and LTIP Units shall be treated as Membership Common Units. In particular, the Company shall maintain at all times a one-to-one correspondence between LTIP Units and Membership Common Units for conversion, distribution and other purposes, including complying with the following procedures:

(i) If an Adjustment Event occurs, then except as set forth in the applicable Membership Unit Designation, the Managing Member shall make a corresponding adjustment to the LTIP Units to maintain the one-to-one correspondence between Membership Common Units and LTIP Units as existed prior to such Adjustment Event. “ Adjustment Events ” means any of the following events (A) the Company makes a distribution on all outstanding Membership Common Units in Membership Units to the extent the LTIP Unitholder did not participate in the distribution, (B) the Company subdivides the outstanding Membership Common Units into a greater number of units or combines the outstanding Membership Common Units into a smaller number of units, or (C) the Company issues any Membership Units in exchange for its outstanding Membership Common Units by way of a reclassification or recapitalization of its Membership Common Units. If more than one Adjustment Event occurs, the adjustment to the LTIP Units need be made only once using a single formula that takes into account each and every Adjustment Event as if all Adjustment Events occurred simultaneously. For the avoidance of doubt, the following shall not be Adjustment Events: (x) the issuance of Membership Units in a financing, reorganization, acquisition or other similar business transaction, (y) the issuance of Membership Units pursuant to any employee benefit or compensation plan or distribution reinvestment plan, or (z) the issuance of any Membership Units to the Managing Member in respect of a capital contribution to the Company of proceeds from the sale of securities by the Managing Member. If the Company takes an action affecting the Membership Common Units or LTIP Units other than actions specifically described above as Adjustment Events and in the opinion of the Managing Member such action would require an adjustment to the LTIP Units to maintain the one-to-one correspondence described above, the Managing Member shall have the right to make such adjustment to the LTIP Units, to the extent permitted by law and by any Equity Plan, in such manner and at such time as the Managing Member, in its sole and absolute discretion, may determine to be appropriate under the circumstances. If an adjustment is made to the LTIP Units as herein provided the Company shall promptly file in the books and records of the Company an officer’s certificate setting forth such adjustment and a brief statement of the facts requiring such adjustment, which certificate shall be conclusive evidence of the correctness of such adjustment absent manifest error. Promptly after the filing of such certificate, the Company shall mail a notice to each LTIP Unitholder setting forth the adjustment to his or her LTIP Units and the effective date of such adjustment; and

(ii) Unless otherwise provided in an LTIP Award or Vesting Agreement or by the Managing Member with respect to any particular class or series of LTIP Units, the LTIP Unitholders shall, when, as and if authorized and declared by the Managing Member out of assets legally available for that purpose, be entitled to receive distributions in an amount per LTIP Unit equal to the distributions per Membership Common Unit (the “ Membership Unit Distribution ”), paid to holders of Membership

Common Units on such Company Record Date established by the Managing Member with respect to such distribution, provided, however, that until the Economic Capital Account Balance of the LTIP Units is equal to the Target Balance, the LTIP Units shall be entitled to distributions attributable to the sale or other disposition of an asset of the Company only to the extent of any appreciation in value of such asset subsequent to the Award Date, as determined by the Company. Subject to the terms of any LTIP Award or Vesting Agreement or by the Managing Member with respect to any particular class or series of LTIP Units, so long as any LTIP Units are outstanding, no distributions (whether in cash or in kind) shall be authorized, declared or paid on Membership Common Units, unless equal distributions have been or contemporaneously are authorized, declared and paid on the LTIP Units in accordance with the preceding sentence. Subject to the terms of any LTIP Award or Vesting Agreement, or by the Managing Member with respect to any particular class or series of LTIP Units, an LTIP Unitholder shall be entitled to transfer his or her Vested LTIP Units to the same extent, and subject to the same restrictions as holders of Membership Common Units are entitled to transfer their Membership Common Units pursuant to Article XI of this Agreement.

B. Priority . Subject to the provisions of this Section 4.5 and the special provisions of Section 6.3.F, the LTIP Units shall rank pari passu with the Membership Common Units as to the payment of regular and special periodic or other distributions and, subject to Sections 13.2.A(4) and 13.2.C, distribution of assets upon liquidation, dissolution or winding up. As to the payment of distributions and as to distribution of assets upon liquidation, dissolution or winding up, any class or series of Membership Units or Membership Interests which by its terms specifies that it shall rank junior to, on a parity with, or senior to the Membership Common Units shall also rank junior to, or pari passu with, or senior to, as the case may be, the LTIP Units.

C. Special Provisions . LTIP Units shall be subject to the following special provisions:

(i) Vesting Agreements . LTIP Units may, in the sole and absolute discretion of the Managing Member, be issued subject to vesting, forfeiture and additional restrictions on transfer pursuant to the terms of a Vesting Agreement. The terms of any Vesting Agreement may be modified by the Managing Member from time to time in its sole and absolute discretion, subject to any restrictions on amendment imposed by the relevant Vesting Agreement or by the Equity Plan, if applicable. LTIP Units that have vested under the terms of a Vesting Agreement are referred to as “ Vested LTIP Units ;” all other LTIP Units shall be treated as “ Unvested LTIP Units .”

(ii) Forfeiture . Unless otherwise specified in the Vesting Agreement, upon the occurrence of any event specified in a Vesting Agreement as resulting in either the right of the Company or the Managing Member to repurchase LTIP Units at a specified purchase price or some other forfeiture of any LTIP Units, then if the Company or the Managing Member exercises such right to repurchase or forfeiture in accordance with the applicable Vesting Agreement, the relevant LTIP Units shall immediately, and without any further action, be treated as cancelled and no longer outstanding for any purpose. Unless otherwise specified in the Vesting Agreement, no consideration or other payment shall be due with respect to any LTIP Units that have been forfeited, other than any distributions declared with respect to a Company Record Date prior to the effective date of the forfeiture. In connection with any repurchase or forfeiture of LTIP Units, the balance of the portion of the Capital Account of the LTIP Unitholder that is attributable to all of its LTIP Units shall be reduced by the amount, if any, by which such balance exceeds the Target Balance contemplated by Section 6.3.F, calculated with respect to the LTIP Unitholder’s remaining LTIP Units, if any.

(iii) Allocations . LTIP Unitholders shall be entitled to certain special allocations of gain under Section 6.3.F.

(iv) Redemption . The Redemption right provided to Members under Section 15.1 shall not apply with respect to LTIP Units unless and until they are converted to Membership Common Units as provided in clause (v) below and Section 4.6.

(v) Conversion to Membership Common Units . Vested LTIP Units are eligible to be converted into Membership Common Units under Section 4.6.

D. Voting . Unless otherwise provided in an LTIP Award or Vesting Agreement or by the Managing Member with respect to any particular class or series of LTIP Units, LTIP Unitholders shall (a) have the same voting rights as a holder of Membership Common Units with respect to their Vested LTIP Units, with the LTIP Units voting as a single class with the Membership Common Units and having one vote per LTIP Unit; and (b) have the additional voting rights that are expressly set forth below. Unless otherwise provided in an LTIP Award or Vesting Agreement or by the Managing Member with respect to any particular class or series of LTIP Units, so long as any LTIP Units remain outstanding, the Company shall not, without the affirmative vote of the holders of at least a majority of the LTIP Units outstanding at the time that would be adversely affected by the proposed action, given in person or by proxy, either in writing or at a meeting (voting separately as a class), amend, alter or repeal, whether by merger, consolidation or otherwise, the provisions of this Agreement applicable to LTIP Units as such so as to materially and adversely affect any right, privilege or voting power of the LTIP Units or the LTIP Unitholders as such, unless such amendment, alteration, or repeal affects equally, ratably and proportionately in all material respects the rights, privileges and voting powers of the holders of Membership Common Units; but subject, in any event, to the following provisions:

(i) With respect to any Transaction, so long as the LTIP Units are treated in accordance with Section 4.6.F hereof, the consummation of such Transaction shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers of the LTIP Units or the LTIP Unitholders as such; and

(ii) Any creation or issuance of any Membership Units or of any class or series of Membership Interest, including additional Membership Common Units, LTIP Units or Preferred Units, whether ranking senior to, junior to, or on a parity with the LTIP Units with respect to distributions and the distribution of assets upon liquidation, dissolution or winding up, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers of the LTIP Units or the LTIP Unitholders as such.

The foregoing voting provisions will not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required will be effected, all outstanding LTIP Units shall have been converted into Membership Common Units.

Section 4.6 Conversion of LTIP Units .

A. Unless otherwise provided in an LTIP Award or Vesting Agreement or by the Managing Member with respect to any particular class or series of LTIP Units, an LTIP Unitholder shall have the right (the “ Conversion Right ”), at its option, at any time to convert all or a portion of its Vested

LTIP Units into Membership Common Units; provided, however, that a holder may not exercise the Conversion Right for less than 1,000 Vested LTIP Units or, if such holder holds less than 1,000 Vested LTIP Units, all of the Vested LTIP Units held by such holder. LTIP Unitholders shall not have the right to convert Unvested LTIP Units into Membership Common Units until they become Vested LTIP Units; provided, however, that when an LTIP Unitholder is notified of the expected occurrence of an event that will cause his or her Unvested LTIP Units to become Vested LTIP Units, such LTIP Unitholder may give the Company a Conversion Notice conditioned upon and effective as of the time of vesting and such Conversion Notice, unless subsequently revoked by the LTIP Unitholder, shall be accepted by the Company subject to such condition. In all cases, the conversion of any LTIP Units into Membership Common Units shall be subject to the conditions and procedures set forth in this Section 4.6.

B. Notwithstanding the foregoing, in no event may a holder of Vested LTIP Units convert a number of Vested LTIP Units that exceeds (x) the Economic Capital Account Balance of such Member, to the extent attributable to its ownership of LTIP Units, divided by (y) the Membership Common Unit Economic Balance, in each case as determined as of the effective date of conversion (the “ Capital Account Limitation ”). In order to exercise his or her Conversion Right, an LTIP Unitholder shall deliver a notice (a “ Conversion Notice ”) in the form attached as Exhibit C to the Company (with a copy to the Managing Member) not less than 10 nor more than 60 days prior to a date (the “ Conversion Date ”) specified in such Conversion Notice; provided, however, that if the Managing Member has not given to the LTIP Unitholders notice of a proposed or upcoming Transaction (as defined below in Section 4.6.F) at least 30 days prior to the effective date of such Transaction, then LTIP Unitholders shall have the right to deliver a Conversion Notice until the earlier of (x) the 10th day after such notice from the Managing Member of a Transaction or (y) the third business day immediately preceding the effective date of such Transaction. A Conversion Notice shall be provided in the manner provided in Section 15.2. Each LTIP Unitholder covenants and agrees with the Company that all Vested LTIP Units to be converted pursuant to this Section 4.6.B shall be free and clear of all liens. Notwithstanding anything herein to the contrary, a holder of LTIP Units may deliver a Notice of Redemption pursuant to Section 15.1.A of this Agreement relating to those Membership Common Units that will be issued to such holder upon conversion of such LTIP Units into Membership Common Units in advance of the Conversion Date; provided, however, that the redemption of such Membership Common Units by the Company shall in no event take place until after the Conversion Date. For clarity, it is noted that the objective of this paragraph is to put an LTIP Unitholder in a position where, if he or she so wishes, the Membership Common Units into which his or her Vested LTIP Units will be converted can be redeemed by the Company simultaneously with such conversion, with the further consequence that, if the Managing Member elects to assume the Company’s redemption obligation with respect to such Membership Common Units under 15.1.B of this Agreement by delivering to such holder Class A REIT Shares rather than cash, then such holder can have such Class A REIT Shares issued to him or her simultaneously with the conversion of his or her Vested LTIP Units into Membership Common Units. The Managing Member shall reasonably cooperate with an LTIP Unitholder to coordinate the timing of the different events described in the foregoing sentence.

C. The Company, at any time at the election of the Managing Member in its sole and absolute discretion, may cause any number of Vested LTIP Units held by an LTIP Unitholder to be converted (a “ Forced Redemption ”) into an equal number of Membership Common Units, giving effect to all adjustments (if any) made pursuant to Section 4.5; provided, however, that the Company may not cause a Forced Redemption of any LTIP Units that would not at the time be eligible for conversion at the option of such LTIP Unitholder pursuant to Section 4.6.B. In order to exercise its right of Forced Redemption, the Company shall deliver a notice (a “ Forced Redemption Notice ”) in the form attached as Exhibit D to the applicable LTIP Unitholder not less than 10 nor more than 60 days prior to the Conversion Date specified in such Forced Redemption Notice. A Forced Redemption Notice shall be provided in the manner provided in Section 15.2.

D. A conversion of Vested LTIP Units for which the holder thereof has given a Conversion Notice or the Company has given a Forced Redemption Notice shall occur automatically after the close of business on the applicable Conversion Date without any action on the part of such LTIP Unitholder, as of which time such LTIP Unitholder shall be credited on the books and records of the Company with the issuance as of the opening of business on the next day of the number of Membership Common Units issuable upon such conversion. After the conversion of LTIP Units as aforesaid, the Company shall deliver to such LTIP Unitholder, upon his or her written request, a certificate of the Managing Member certifying the number of Membership Common Units and remaining LTIP Units, if any, held by such person immediately after such conversion. The Assignee of any Member pursuant to Article XI hereof may exercise the rights of such Member pursuant to this Section 4.6 and such Member shall be bound by the exercise of such rights by the Assignee.

E. For purposes of making future allocations under Section 6.3.F and applying the Capital Account Limitation, the portion of the Economic Capital Account Balance of the applicable LTIP Unitholder that is treated as attributable to his or her LTIP Units shall be reduced, as of the date of conversion, by the product of the number of LTIP Units converted and the Membership Common Unit Economic Balance.

F. If the Company or the Managing Member shall be a party to any transaction (including a merger, consolidation, unit exchange, self-tender offer for all or substantially all Membership Common Units or other business combination or reorganization, or sale of all or substantially all of the Company’s assets, but excluding any transaction which constitutes an Adjustment Event) in each case as a result of which Membership Common Units shall be exchanged for or converted into the right, or the holders of such Membership Common Units shall otherwise be entitled, to receive cash, securities or other property or any combination thereof (any of the foregoing being referred to herein as a “ Transaction ”), then the Managing Member shall, immediately prior to the consummation of the Transaction, exercise its right to cause a Forced Redemption with respect to the maximum number of LTIP Units then eligible for conversion, taking into account any allocations that occur in connection with the Transaction or that would occur in connection with the Transaction if the assets of the Company were sold at the Transaction price or, if applicable, at a value determined by the Managing Member in good faith using the value attributed to the Membership Common Units in the context of the Transaction (in which case the Conversion Date shall be the effective date of the Transaction). In anticipation of such Forced Redemption and the consummation of the Transaction, the Company shall use commercially reasonable efforts to cause each LTIP Unitholder to be afforded the right to receive in connection with such Transaction in consideration for the Membership Common Units into which his or her LTIP Units will be converted the same kind and amount of cash, securities and other property (or any combination thereof) receivable upon the consummation of such Transaction by a holder of the same number of Membership Common Units, assuming such holder of Membership Common Units is not a Person with which the Company consolidated or into which the Company merged or which merged into the Company or to which such sale or transfer was made, as the case may be (a “ Constituent Person ”), or an affiliate of a Constituent Person. In the event that holders of Membership Common Units have the opportunity to elect the form or type of consideration to be received upon consummation of the Transaction, prior to such Transaction the Managing Member shall give prompt written notice to each LTIP Unitholder of such election, and shall use commercially reasonable efforts to afford the LTIP Unitholders the right to elect, by written notice to the Managing Member, the form or type of consideration to be received upon conversion of each LTIP Unit held by such holder into Membership Common Units in connection with such Transaction. If an LTIP Unitholder fails to make such an election, such holder (and any of its transferees) shall receive upon conversion of each LTIP Unit held by him or her (or by any of his or her transferees) the same kind and amount of consideration that a holder of a Membership Common Unit would receive if such Membership Common Unit holder failed to make such an election. Subject to the rights of the Company and the Managing Member under any Vesting Agreement and any Equity Plan, the

Company shall use commercially reasonable efforts to cause the terms of any Transaction to be consistent with the provisions of this Section 4.6.F and to enter into an agreement with the successor or purchasing entity, as the case may be, for the benefit of any LTIP Unitholders whose LTIP Units will not be converted into Membership Common Units in connection with the Transaction that will (i) contain provisions enabling the holders of LTIP Units that remain outstanding after such Transaction to convert their LTIP Units into securities as comparable as reasonably possible under the circumstances to the Membership Common Units and (ii) preserve as far as reasonably possible under the circumstances the distribution, special allocation, conversion, and other rights set forth in this Agreement for the benefit of the LTIP Unitholders.

Section 4.7 Dividend Reinvestment Plan, Stock Incentive Plan or Other Plan . Except as may otherwise be provided in this Article 4, all amounts retained or deemed received by CLNY in respect of any dividend reinvestment plan, stock incentive or other stock or subscription plan or agreement, either (a) shall be utilized by CLNY to effect open market purchases of REIT Shares, or (b) shall be contributed by CLNY to the Company in exchange for additional Membership Common Units, and upon such contribution, the Company will issue to CLNY a number of Membership Common Units equal to the number of newly issued REIT Shares, divided by the Adjustment Factor then in effect.

Section 4.8 No Interest; No Return . No Member shall be entitled to interest on its Capital Contribution or on such Member’s Capital Account. Except as provided herein or by law, no Member shall have any right to demand or receive the return of its Capital Contribution from the Company.

Section 4.9 Conversion or Redemption of Preferred Shares; Redemption of REIT Shares .

A. Conversion of Preferred Shares . If, at any time, any Preferred Shares are converted into REIT Shares, in whole or in part, then an equal number of Company Equivalent Units held by CLNY that correspond to the class or series of Preferred Shares so converted shall automatically be converted into a number of Membership Common Units equal to the quotient of (i) the number of REIT Shares issued upon such conversion, divided by (ii) the Adjustment Factor then in effect.

B. Redemption of Preferred Shares . If, at any time, any Preferred Shares are redeemed, repurchased or otherwise acquired (whether by exercise of a put or call, automatically or by means of another arrangement) by CLNY for cash, then, immediately prior to such redemption of Preferred Shares, the Company shall redeem an equal number of Company Equivalent Units held by CLNY that correspond to the class or series of Preferred Shares so redeemed, repurchased or acquired upon the same terms and for the same price per Company Equivalent Unit, as such Preferred Shares are redeemed, repurchased or acquired.

C. Redemption, Repurchase or Forfeiture of REIT Shares . If, at any time, any REIT Shares are redeemed, repurchased or otherwise acquired (whether by exercise of a put or call, upon forfeiture of any award granted under any Equity Plan, automatically or by means of another arrangement, including pursuant to any Non-Managing Member Ancillary Agreement) by CLNY, then, immediately prior to such redemption, repurchase or acquisition of REIT Shares, the Company shall redeem a number of Membership Common Units held by CLNY equal to the quotient of (i) the number of REIT Shares so redeemed, repurchased or acquired, divided by (ii) the Adjustment Factor then in effect, such redemption, repurchase or acquisition to be upon the same terms and for the same price per Membership Common Unit (after giving effect to application of the Adjustment Factor) as such REIT Shares are redeemed, repurchased or acquired.

Section 4.10 Other Contribution Provisions . In the event that any Member is admitted to the Company and is given a Capital Account in exchange for services rendered to the Company, such transaction shall be treated by the Company and the affected Member as if the Company had compensated such Member in cash and such Member had contributed the cash to the capital of the Company. In addition, with the consent of the Managing Member, one or more Members (including CLNY) may enter into contribution agreements with the Company which have the effect of providing a guarantee of certain obligations of the Company.

Section 4.11 Excluded Properties . CLNY shall contribute each Excluded Property (or, if applicable, the net proceeds (after payment of all transfer taxes and other transaction costs) received by CLNY from the sale, transfer or other disposition of an Excluded Property to a Person who is not a direct or indirect wholly owned Subsidiary of CLNY) to the Company upon the earlier of (i) such time as it is commercially practicable to contribute such property to the Company without adverse tax or other economic consequence to CLNY, and (ii) any sale, transfer or other disposition of an Excluded Property to a Person who is not a direct or indirect wholly owned Subsidiary of CLNY. Upon any such contribution of an Excluded Property or the proceeds therefrom, CLNY shall receive in exchange for such contribution, notwithstanding the actual value of such Excluded Property or the amount of such proceeds (as the case may be), the Specified Membership Units applicable to such Excluded Property. The Company is expressly authorized to issue the Specified Membership Units in the numbers specified in this Section 4.11 without any further act, approval or vote of any Member or any other Persons.

Section 4.12 Contingent Consideration and Indemnification Payment . In exchange for the contribution of assets to the Company pursuant to the CC Contribution Agreement, CC, CCH, FHB LLC and Saltzman (the “ Contingent Consideration Members ”) are collectively entitled to up to $101,144,012 of contingent consideration (based on the reference price of $22.05) to the extent such contingent consideration is issued as Membership Common Units (the “ Aggregate Contingent Consideration ”) as provided in Section 3.5 of the CC Contribution Agreement. The initial Gross Asset Value of the assets contributed by the Contingent Consideration Members to the Company as reflected on Schedule II includes the value of the Aggregate Contingent Consideration and the respective Capital Accounts, as reflected on Schedule I, of the Contingent Consideration Members includes such value; provided, however , if all or a portion of the Aggregate Contingent Consideration is forfeited as determined by Section 3.5 of the CC Contribution Agreement, the Gross Asset Values of the assets of the Company shall be decreased by the amount of such forfeiture of the Aggregate Contingent Consideration and the Capital Accounts of the Contingent Consideration Members shall be decreased by such decrease. In addition, if any of the Contingent Consideration Members are required to forfeit any consideration as a result of an indemnification obligation under Article X of the CC Contribution Agreement, the Gross Asset Values of the assets of the Company shall be decreased by the amount of such forfeiture and the Capital Accounts of such Contingent Consideration Members shall be decreased by such decrease. The Members acknowledge and agree that the Membership Common Units representing the Aggregate Contingent Consideration have been issued and are being held by the Company and that such Membership Common Units will be treated in the same manner as any other outstanding Membership Common Units.

ARTICLE 5

DISTRIBUTIONS

Section 5.1 Requirement and Characterization of Distributions . Subject to the terms of any Membership Unit Designation that provides for a class or series of Company Preferred Units with a preference with respect to the payment of distributions, the Managing Member shall cause the

Company to distribute quarterly all, or such portion as the Managing Member may determine, of the Available Cash generated by the Company during such quarter to the Holders of Membership Common Units in accordance with their respective Percentage Interests of Membership Common Units on such Company Record Date. Distributions payable with respect to any Membership Units that were not outstanding during the entire quarterly period in respect of which any distribution is made (other than any Membership Units issued to CLNY in connection with the issuance of REIT Shares or Capital Shares by CLNY) shall be prorated based on the portion of the period that such Membership Units were outstanding. Notwithstanding the foregoing, the Managing Member, in its sole and absolute discretion, may cause the Company to distribute Available Cash to the Holders on a more or less frequent basis than quarterly. The Managing Member shall make reasonable efforts to cause the Company to distribute sufficient amounts to enable CLNY, for so long as CLNY has determined to qualify as a REIT, to pay stockholder dividends that will (a) satisfy the REIT Requirements, and (b) eliminate any U.S. federal income or excise tax liability of CLNY.

Notwithstanding the foregoing, if any Excluded Property (or the proceeds therefrom) has not been contributed to the Company pursuant to Section 4.11, the distributions provided for above shall be calculated, to the extent possible, based on Adjusted Available Cash as if each Excluded Property had been contributed to the Company in exchange for Membership Common Units pursuant to Section 4.11; provided , however , that if any Excluded Property (or the proceeds therefrom) has not been contributed to the Company pursuant to Section 4.11, any distributions to be made with respect to CLNY’s Membership Units shall in the aggregate be reduced to the extent of any REIT Available Cash derived from such Excluded Property. Notwithstanding the foregoing, all payments received by the Company from the CLNY Management Agreement (other than any such payments made by any “taxable REIT subsidiary” (within the meaning of Section 856(l) of the Code) of CLNY) shall be distributed to CLNY.

Section 5.2 Distributions in Kind . No Holder may demand to receive property other than cash as provided in this Agreement. The Managing Member may cause the Company to make a distribution in kind of Company assets or Membership Interests to the Holders, and such assets or Membership Interests shall be distributed in such a fashion as to ensure that the fair market value is distributed and allocated in accordance with Articles 5, 6 and 10 hereof.

Section 5.3 Amounts Withheld . All amounts withheld pursuant to the Code or any provisions of any state or local tax law and Section 10.4 hereof with respect to any allocation, payment or distribution to any Holder shall be treated as amounts paid or distributed to such Holder pursuant to Section 5.1 hereof for all purposes under this Agreement.

Section 5.4 Distributions upon Liquidation . Notwithstanding the other provisions of this Article 5, upon the occurrence of a Liquidating Event, the assets of the Company shall be distributed to the Holders in accordance with Section 13.2 hereof.

Section 5.5 Distributions to Reflect Additional Membership Units . In the event that the Company issues additional Membership Units pursuant to the provisions of Article 4 hereof, subject to the rights of any Holder of any Membership Interest set forth in a Membership Unit Designation, the Managing Member is hereby authorized to make such revisions to this Article 5 and to Article 6 as it determines are necessary or desirable to reflect the issuance of such additional Membership Units, including making preferential distributions to certain classes of Membership Units.

Section 5.6 Restricted Distributions . Notwithstanding any provision to the contrary contained in this Agreement, neither the Company nor the Managing Member, on behalf of the Company, shall make a distribution to any Holder if such distribution would violate the Act or other applicable law.

Section 5.7 Restriction on Distributions with Respect to LTIP Units . It is the intention of the Members that distributions in respect of LTIP Units be limited to the extent necessary so that each of the LTIP Units constitutes a “profits interest” for U.S. federal income tax purposes. In furtherance of the foregoing, and notwithstanding anything to the contrary in this Agreement, the Managing Member shall, if necessary, limit distributions to the holders of LTIP Units so that such distributions do not exceed the available profits in respect of such LTIP Units. In the event that distributions in respect of LTIP Units are reduced pursuant to the preceding sentence, an amount equal to such excess distributions shall be treated as instead apportioned to the remaining Members pro rata in accordance with their Membership Common Units for the related Fiscal Year in accordance with the other provisions of this Agreement, and the Managing Member shall make adjustments to future distributions to the holders of LTIP Units as promptly as practicable so that the holders of LTIP Units receive a distribution equal to the amount they would have received, in each case as if this Section 5.7 had not been in effect; provided, however, that any distributions pursuant to this sentence shall be further subject to the provisions of this Section 5.7. For purposes of this Agreement, “profits interest” means a right to receive distributions funded solely by profits of the Company generated after the grant in connection with the performance of services, satisfying the requirements as set forth in IRS Revenue Procedures 93-27 and 2001-43, or any future IRS guidance or other authority that supplements or supersedes the foregoing IRS Revenue Procedures.

ARTICLE 6

ALLOCATIONS

Section 6.1 Timing and Amount of Allocations of Net Income and Net Loss . Net Income and Net Loss of the Company shall be determined and allocated with respect to each Fiscal Year as of the end of each such year. Except as otherwise provided in this Article 6, and subject to Section 11.6.C hereof, an allocation to a Holder of a share of Net Income or Net Loss shall be treated as an allocation of the same share of each item of income, gain, loss or deduction that is taken into account in computing Net Income or Net Loss.

Section 6.2 General Allocations .

A. In General . Subject to Section 11.6.C hereof, Net Income and Net Loss shall be allocated to each of the Holders as follows:

(i) Net Income will be allocated to Holders of Company Preferred Units and Company Equivalent Units in accordance with and subject to the terms of the Membership Unit Designation applicable to such Company Preferred Units and Company Equivalent Units;

(ii) remaining Net Income will be allocated to the Holders of Membership Common Units in accordance with their respective Percentage Interests at the end of each Fiscal Year;

(iii) subject to the terms of any Membership Unit Designation, Net Loss will be allocated to the Holders of Membership Common Units in accordance with their respective Percentage Interests and to the holders of Company Equivalent Units in accordance with and subject to the terms of the Membership Unit Designation applicable to such Company Equivalent Units at the end of each Fiscal Year; and

(iv) for purposes of this Section 6.2.A, the Percentage Interests of the Holders of Membership Common Units shall be calculated based on a denominator equal to the aggregate Membership Common Units outstanding as of the date of determination.

Section 6.3 Additional Allocation Provisions . Notwithstanding the foregoing provisions of this Article 6:

A. Special Allocations Regarding Company Preferred Units . If any Company Preferred Units are redeemed pursuant to Section 4.9.B hereof (treating a full liquidation of the Managing Member’s Membership Interest or of CLNY’s Membership Interest for purposes of this Section 6.3.A as including a redemption of any then outstanding Company Preferred Units pursuant to Section 4.9.B hereof), for the Fiscal Year that includes such redemption (and, if necessary, for subsequent Fiscal Years) (a) gross income and gain (in such relative proportions as the Managing Member shall determine) shall be allocated to the holder(s) of such Company Preferred Units to the extent that the Redemption Amounts paid or payable with respect to the Company Preferred Units so redeemed (or treated as redeemed) exceeds the aggregate Capital Account Balances (net of liabilities assumed or taken subject to by the Company) per Company Preferred Unit allocable to the Company Preferred Units so redeemed (or treated as redeemed) and (b) deductions and losses (in such relative proportions as the Managing Member shall determine) shall be allocated to the holder(s) of such Company Preferred Units to the extent that the aggregate Capital Account Balances (net of liabilities assumed or taken subject to by the Company) per Company Preferred Unit allocable to the Company Preferred Units so redeemed (or treated as redeemed) exceeds the Redemption Amount paid or payable with respect to the Company Preferred Units so redeemed (or treated as redeemed).

B. Regulatory Allocations .

(i) Minimum Gain Chargeback . Except as otherwise provided in Regulations Section 1.704-2(f), notwithstanding the provisions of Section 6.2 hereof, or any other provision of this Article 6, if there is a net decrease in Member Minimum Gain during any Fiscal Year, each Holder shall be specially allocated items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Holder’s share of the net decrease in Member Minimum Gain, as determined under Regulations Section 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Holder pursuant thereto. The items to be allocated shall be determined in accordance with Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 6.3.B(i) is intended to qualify as a “minimum gain chargeback” within the meaning of Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.

(ii) Member Minimum Gain Chargeback . Except as otherwise provided in Regulations Section 1.704-2(i)(4) or in Section 6.3.B(i) hereof, if there is a net decrease in Member Minimum Gain attributable to a Member Nonrecourse Debt during any Fiscal Year, each Holder who has a share of the Member Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(5), shall be specially allocated items of Company income and gain for such year (and, if necessary, subsequent years) in an amount equal to such Holder’s respective share of the net decrease in Member Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Holder pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Sections 1.704-2(i)(4)

and 1.704-2(j)(2). This Section 6.3.B(ii) is intended to qualify as a “chargeback of partner nonrecourse debt minimum gain,” within the meaning of Regulations Section 1.704-2(i), and shall be interpreted consistently therewith.

(iii) Nonrecourse Deductions and Member Nonrecourse Deductions . Any Nonrecourse Deductions for any Fiscal Year shall be specially allocated to the Holders in accordance with their respective Percentage Interests. Any Member Nonrecourse Deductions for any Fiscal Year shall be specially allocated to the Holder(s) who bears the economic risk of loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable, in accordance with Regulations Section 1.704-2(i).

(iv) Qualified Income Offset . If any Holder unexpectedly receives an adjustment, allocation or distribution described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and gain shall be allocated, in accordance with Regulations Section 1.704-1(b)(2)(ii)(d), to such Holder in an amount and manner sufficient to eliminate, to the extent required by such Regulations, the Adjusted Capital Account Deficit of such Holder as quickly as possible, provided that an allocation pursuant to this Section 6.3.B(iv) shall be made if and only to the extent that such Holder would have an Adjusted Capital Account Deficit after all other allocations provided in this Article 6 have been tentatively made as if this Section 6.3.B(iv) were not in the Agreement. It is intended that this Section 6.3.B(iv) qualify and be construed as a “qualified income offset,” within the meaning of Regulations Section 1.704-1(b)(2)(ii)(d), and shall be interpreted consistently therewith.

(v) Gross Income Allocation . If any Holder has a deficit Capital Account at the end of any Fiscal Year that is in excess of the sum of (1) the amount (if any) that such Holder is obligated to restore to the Company upon complete liquidation of such Holder’s Membership Interest (including the Holder’s interest in outstanding Company Preferred Units and other Membership Units), and (2) the amount that such Holder is deemed to be obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), each such Holder shall be specially allocated items of Company income and gain in the amount of such excess to eliminate such deficit as quickly as possible, provided that an allocation pursuant to this Section 6.3.B(v) shall be made if and only to the extent that such Holder would have a deficit Capital Account in excess of such sum after all other allocations provided in this Article 6 have been tentatively made as if this Section 6.3.B(v) and Section 6.3.B(iv) hereof were not in the Agreement.

(vi) Limitation on Allocation of Net Loss . To the extent that any allocation of Net Loss would cause or increase an Adjusted Capital Account Deficit as to any Holder, such allocation of Net Loss shall be reallocated (x) first, among the other Holders of Membership Common Units in accordance with their respective Percentage Interests, and (y) thereafter, among the Holders of other Membership Units, as determined by the Managing Member, subject to the limitations of this Section 6.3.B(vi).

(vii) Section 754 Adjustment . To the extent that an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an

item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such gain or loss shall be specially allocated to the Holders of Membership Common Units in accordance with their respective Percentage Interests in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Holder(s) to whom such distribution was made in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies (or otherwise as described in Regulations Section 1.704-1(b)(2)(iv)(m)(4)).

(viii) Curative Allocations . The allocations set forth in Sections 6.3.B(i), (ii), (iii), (iv), (v), (vi) and (vii) hereof (the “ Regulatory Allocations ”) are intended to comply with certain regulatory requirements, including the requirements of Regulations Sections 1.704-1(b) and 1.704-2. Notwithstanding the provisions of Section 6.1 hereof, the Regulatory Allocations shall be taken into account in allocating other items of income, gain, loss and deduction among the Holders of Membership Common Units so that, to the extent possible without violating the requirements giving rise to the Regulatory Allocations, the net amount of such allocations of other items and the Regulatory Allocations to each Holder of a Membership Common Unit shall be equal to the net amount that would have been allocated to each such Holder if the Regulatory Allocations had not occurred.

C. Special Allocations Upon Liquidation . Notwithstanding any provision in this Article 6 to the contrary, if the Company disposes of all or substantially all of its assets in a transaction that will lead to a liquidation of the Company pursuant to Article 13 hereof, then any Net Income or Net Loss realized in connection with such transaction and thereafter (and, if necessary, constituent items of income, gain, loss and deduction) shall be specially allocated for such Fiscal Year (and to the extent permitted by Code Section 761(c), for the immediately preceding Fiscal Year) among the Holders as required so as to cause liquidating distributions pursuant to Section 13.2.A(4) hereof to be made in the same amounts and proportions as would have resulted had such distributions instead been made pursuant to Article 5 hereof.

D. Allocation of Nonrecourse Liabilities . For purposes of determining a Holder’s proportional share of the “excess nonrecourse liabilities” of the Company within the meaning of Regulations Section 1.752-3(a)(3), each Holder’s respective interest in Company profits shall be equal to such Holder’s Percentage Interest with respect to Membership Common Units. The Company shall maintain on a continuous basis during the five-year period beginning on the Closing Date (as defined in the CC Contribution Agreement) an amount of liabilities payable or owed to third parties that are not guaranteed by CLNY or a related party of CLNY (other than the Company, any Subsidiary or Affiliate of the Company, any Contributor (as defined in the CC Contribution Agreement) or Affiliate thereof or any joint venture or other entity in which the Company owns a direct or indirect interest) and not otherwise recourse to CLNY in an amount that is at least equal to $350,000,000. For purposes of the prior sentence, liabilities shall include (i) any liabilities owed by any joint venture or other entity in which the Company owns a direct or indirect interest, to the extent of such interest and (ii) liabilities incurred under the Credit Agreement, dated August 6, 2013, as amended by the First Amendment, as dated January 29, 2014, and the Second Amendment, as dated December 12, 2014, among CLNY, JPMorgan Chase Bank, N.A., as administrative agent, and certain lenders (the “ Credit Agreement ”), but only to the extent the REIT Guaranty (as defined in the Credit Agreement) has been amended in the manner described in the proviso contained in the definition of “REIT Guaranty”, and in such case, the REIT Guaranty shall not be treated as a guaranty by CLNY or as causing such liability to be recourse to CLNY. The Company shall elect to allocate excess nonrecourse liabilities to CC to the maximum extent permitted under the “additional method” described in Regulations Section 1.752-3(a)(3) as regards to the amount of built-in gain allocated to a Member on section 704(c) property. Notwithstanding the above, the requirements of this

Section 6.3D shall be treated as having been satisfied at any given time so long as $50,000,000 of liabilities are allocated to CC and/or directly or indirectly to Thomas J. Barrack, Jr. in accordance with Section 752 of the Code and the Regulations at such time.

E. All gross income and gain of the Company associated with the CLNY Management Agreement shall, to the extent permitted by law, be specially allocated to CLNY.

F. Special Allocations Regarding LTIP Units . Notwithstanding the provisions of Section 6.2 above, Liquidating Gains shall first be allocated to the LTIP Unitholders until the Economic Capital Account Balances of such Holders, to the extent attributable to their ownership of LTIP Units, are equal to (i) the Membership Common Unit Economic Balance, multiplied by (ii) the number of their LTIP Units (the “ Target Balance ”). For this purpose, “ Liquidating Gains ” means net capital gains realized in connection with the actual or hypothetical sale of all or substantially all of the assets of the Company, including net capital gain realized in connection with an adjustment to the Gross Asset Value of Company assets under Code Section 704(b). The “ Economic Capital Account Balances ” of the LTIP Unitholders will be equal to their Capital Account balances to the extent attributable to their ownership of LTIP Units, plus the amount of their allocable share of any Member Minimum Gain or Company Minimum Gain attributable to such LTIP Units. Similarly, the “ Membership Common Unit Economic Balance ” shall mean (i) the Capital Account balance of the Managing Member, plus the amount of the Managing Member’s share of any Member Minimum Gain or Company Minimum Gain, in either case to the extent attributable to the Managing Member’s ownership of Membership Common Units and computed on a hypothetical basis after taking into account all allocations through the date on which any allocation is made under this Section 6.3.F (including any expenses of the Company reimbursed to the Managing Member pursuant to Section 7.4.B), divided by (ii) the number of the Managing Member’s Membership Common Units. Any such allocations shall be made among the LTIP Unitholders in proportion to the amounts required to be allocated to each under this Section 6.3.F. The parties agree that the intent of this Section 6.3.F is to make the Capital Account balance associated with each LTIP Unit to be economically equivalent to the Capital Account balance associated with the Managing Member’s Membership Common Units (on a per-Membership Common Unit/LTIP Unit basis). The Managing Member shall be permitted to interpret this Section 6.3.F or to amend this Agreement to the extent necessary and consistent with this intention.

Section 6.4 Tax Allocations .

A. In General . Except as otherwise provided in this Section 6.4, for income tax purposes under the Code and the Regulations, each Company item of income, gain, loss and deduction (collectively, “ Tax Items ”) shall be allocated among the Holders in the same manner as its correlative item of “book” income, gain, loss or deduction is allocated pursuant to Sections 6.2 and 6.3 hereof.

B. Section 704(c) Allocations . Notwithstanding Section 6.4.A hereof, Tax Items with respect to Property that is contributed to the Company with a Gross Asset Value that varies from its basis in the hands of the contributing Member immediately preceding the date of contribution shall be allocated among the Holders for income tax purposes pursuant to Regulations promulgated under Code Section 704(c) so as to take into account such variation. The Company shall account for such variation under any method approved under Code Section 704(c) and the applicable Regulations as chosen by the Managing Member; provided , however , items of Company taxable income, gain, loss and deduction with respect to any property contributed to the capital of the Company by CC, CCH, Saltzman or FHB LLC shall be allocated among the Members in accordance with Section 704(c) of the Code so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its initial Gross Asset Value using the “traditional method without curative allocations” as defined in Regulations Section 1.704-3(b). If the Gross Asset Value of any Company asset is adjusted

pursuant to subsection (b) of the definition of “Gross Asset Value,” subsequent allocations of Tax Items with respect to such asset shall take account of the variation, if any, between the adjusted basis of such asset and its Gross Asset Value in the same manner as under Code Section 704(c) and the applicable Regulations and using the method chosen by the Managing Member; provided , however , any such subsequent allocations of Tax Items that are allocated to CC, CCH, Saltzman and FHB LLC shall take account of the variation, if any, between the adjusted basis of such asset and its Gross Asset Value in the same manner as under Code Section 704(c) and the applicable Regulations and using the “traditional method without curative allocations” as defined in Regulations Section 1.704-3(b).

ARTICLE 7

MANAGEMENT AND OPERATIONS OF BUSINESS

Section 7.1 Management .

A. Except as otherwise expressly provided in this Agreement, including any Membership Unit Designation, all management powers over the business and affairs of the Company are and shall be exclusively vested in the Managing Member, and no Member shall have any right to participate in or exercise control or management power over the business and affairs of the Company. No Managing Member may be removed by the Members, with or without cause, except with the consent of the Managing Member. In addition to the powers now or hereafter granted a managing member of a limited liability company under applicable law or that are granted to the Managing Member under any other provision of this Agreement, the Managing Member, subject to the other provisions hereof, including Section 7.3 and the terms of any Membership Unit Designation, shall have full and exclusive power and authority, without the consent of any Member, to conduct or authorize the conduct of the business of the Company, to exercise or direct the exercise of all powers of the Company and the Managing Member under the Act and this Agreement and to effectuate the purposes of the Company, including to cause the Company to enter into agreements or engage in transactions with affiliates of the Company or the Managing Member, issue additional Membership Interests, make distributions, sell, pledge, lease, mortgage or otherwise dispose of its assets, form and conduct all or any portion of its business and affairs through subsidiaries or joint ventures of any form, incur or guarantee debt for any purpose and obtain and maintain casualty, liability and other insurance on the Properties and liability insurance for the Indemnitees hereunder.

B. Except as provided in Section 7.3 hereof and subject to the rights of any Holder of any Membership Interest set forth in a Membership Unit Designation, the Managing Member is authorized to execute and deliver any affidavit, agreement, certificate, consent, instrument, notice, power of attorney, waiver or other writing or document in the name and on behalf of the Company and to otherwise exercise any power of the Managing Member under this Agreement and the Act without any further act, approval or vote of the Members or any other Persons and, in the absence of any specific action on the part of the Managing Member to the contrary, the taking of any action or the execution of any such document or writing by a manager, member, director or officer of the Managing Member, in the name and on behalf of the Managing Member, in its capacity as the managing member of the Company, shall conclusively evidence (1) the approval thereof by the Managing Member, in its capacity as the managing member of the Company, (2) the Managing Member’s determination that such action, document or writing is necessary or desirable to conduct the business and affairs of the Company, exercise the powers of the Company under the Act and this Agreement or effectuate the purposes of the Company, or any other determination by the Managing Member required by this Agreement in connection with the taking of such action or execution of such document or writing, and (3) the authority of such manager, member, director or officer with respect thereto.

C. The determination as to any of the following matters, made by or at the direction of the Managing Member consistent with the Act and this Agreement, shall be final and conclusive and shall be binding upon the Company and every Member: the amount of assets at any time available for distribution or the redemption of Common Units or Preferred Units; the amount and timing of any distribution; any determination to redeem Tendered Units; the amount, purpose, time of creation, increase or decrease, alteration or cancellation of any reserves or charges and the propriety thereof (whether or not any obligation or liability for which such reserves or charges shall have been created shall have been paid or discharged); the fair value, or any sale, bid or asked price to be applied in determining the fair value, of any asset owned or held by the Company; any matter relating to the acquisition, holding and disposition of any assets by the Company; or any other matter relating to the business and affairs of the Company or required or permitted by applicable law, this Agreement or otherwise to be determined by the Managing Member.

D. At all times from and after the date hereof, the Managing Member may cause the Company to establish and maintain working capital and other reserves in such amounts as the Managing Member, in its sole and absolute discretion, deems appropriate and reasonable from time to time.

E. Notwithstanding any other provision of this Agreement or the Act, any action of the Managing Member on behalf of the Company or any decision of the Managing Member to refrain from acting on behalf of the Company, undertaken in the belief that such action or omission is necessary or advisable in order (i) to protect the ability of CLNY to continue to qualify as a REIT, (ii) for CLNY otherwise to satisfy the REIT Requirements, (iii) for CLNY to avoid incurring any taxes under Code Section 857 or Code Section 4981, (iv) to protect the ability of the Company to be treated as a partnership or disregarded entity for federal income tax purposes, or (v) for any wholly owned Subsidiary of CLNY to continue to qualify as a “qualified REIT subsidiary” (within the meaning of Code Section 856(i)(2)) or disregarded entity (determined for federal income tax purposes) thereof, is expressly authorized under this Agreement and is deemed approved by all of the Members.

Section 7.2 Certificate of Formation . To the extent that such action is determined by the Managing Member to be reasonable and necessary or appropriate, the Managing Member shall file amendments to and restatements of the Certificate and do all the things to maintain the Company as a limited liability company (or a company in which the members have limited liability) under the laws of the State of Delaware and each other state, the District of Columbia or any other jurisdiction, in which the Company may elect to do business or own property. Subject to the terms of Section 8.5.A hereof, the Managing Member shall not be required, before or after filing, to deliver or mail a copy of the Certificate or any amendment thereto to any Member. The Managing Member shall use all reasonable efforts to cause to be filed such other certificates or documents as may be reasonable and necessary or appropriate for the formation, continuation, qualification and operation of a limited liability company (or a company in which the members have limited liability to the extent provided by applicable law) in the State of Delaware and any other state, or the District of Columbia or other jurisdiction, in which the Company may elect to do business or own property.

Section 7.3 Restrictions on the Managing Member’s Authority .

A. The Managing Member may not take any action in contravention of this Agreement, including, without limitation:

(1) any action that would make it impossible to carry on the ordinary business of the Company, except as otherwise provided in this Agreement;

(2) admitting a Person as a Member, except as otherwise provided in this Agreement;

(3) performing any act that would subject a Member to liability, except as provided herein or under the Act;

(4) entering into any contract, mortgage, loan or other agreement that expressly prohibits or restricts (a) the Managing Member or the Company from performing its specific obligations under Section 15.1 hereof, or (b) a Member from exercising its rights under Section 15.1 hereof to effect a Redemption, except, in either case, with the written consent of such Member affected by the prohibition or restriction.

B. The Managing Member shall not, without the Consent of the Members, undertake on behalf of the Company, or enter into any transaction that would have the effect of, any of the following actions without the approval of the Board of Directors:

(1) except as provided in Section 7.3.C hereof, terminate this Agreement;

(2) except as otherwise permitted by this Agreement, or in connection with a Termination Transaction effected in accordance with Section 11.7, Transfer any portion of the Membership Interest of the Managing Member or admit into the Company any additional or successor Managing Member;

(3) except as otherwise permitted by this Agreement, or in connection with a Termination Transaction effected in accordance with Section 11.7, voluntarily withdraw as a managing member of the Company;

(4) make a general assignment for the benefit of creditors or appoint or acquiesce in the appointment of a custodian, receiver or trustee for all or any part of the assets of the Company;

(5) institute any proceeding for bankruptcy on behalf of the Company;

(6) a merger or consolidation of the Company with or into any other Person, or a conversion of the Company into any other entity, other than in connection with a Termination Transaction effected in accordance with Section 11.7; or

(7) a sale, lease, exchange or other transfer of all or substantially all of the assets of the Company not in the ordinary course of business, whether in a single transaction or a series of related transactions, other than in connection with a Termination Transaction effected in accordance with Section 11.7.

C. Notwithstanding Section 7.3.B hereof but subject to the rights of any Holder of any Membership Interest set forth in a Membership Unit Designation and Section 7.3.D, the Managing Member shall have the exclusive power, without the Consent of the Members or the consent or approval of any Non-Managing Member, to amend this Agreement as may be required to facilitate or implement any of the following purposes:

(1) to add to the obligations of the Managing Member or surrender any right or power granted to the Managing Member or any Affiliate of the Managing Member for the benefit of the Members;

(2) to reflect the admission, substitution or withdrawal of Members, the Transfer of any Membership Interest or the termination of the Company in accordance with this Agreement, and to amend the Register in connection with such admission, substitution, withdrawal or Transfer;

(3) to reflect a change that is of an inconsequential nature or does not adversely affect the Non-Managing Members in any material respect, or to cure any ambiguity, correct or supplement any provision in this Agreement not inconsistent with law or with other provisions, or make other changes with respect to matters arising under this Agreement that will not be inconsistent with law or with the provisions of this Agreement;

(4) to satisfy any requirements, conditions or guidelines contained in any order, directive, opinion, ruling or regulation of a federal or state agency or contained in federal or state law;

(5) to reflect such changes as are reasonably necessary for CLNY to maintain its status as a REIT or to satisfy the REIT Requirements;

(6) to modify either or both of the manner in which items of Net Income or Net Loss are allocated pursuant to Article 6 or the manner in which Capital Accounts are adjusted, computed or maintained (but in each case only to the extent set forth in the definition of “Capital Account” or Section 5.5 or as contemplated by the Code or the Regulations);

(7) to reflect the issuance of additional Membership Interests in accordance with Article 4;

(8) to set forth or amend the designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications or terms or conditions of redemption of any additional Membership Units issued pursuant to Article 4;

(9) if the Company is the Surviving Company in any Termination Transaction, to modify Section 15.1 or any related definitions to provide the holders of interests in such Surviving Company rights that are consistent with Section 11.7C(v);

(10) to satisfy any requirements, conditions or guidelines contained in any order, directive, opinion, ruling or regulation of a federal or state agency or contained in federal or state law; and

(11) to reflect any other modification to this Agreement that is reasonably necessary for the business or operations of the Company or CLNY and that does not violate Section 7.3.D.

D. Notwithstanding Sections 7.3.B, 7.3.C and Article 14 hereof, this Agreement shall not be amended, and no action may be taken by the Managing Member, without the consent of each

Member, if any, adversely affected thereby, if such amendment or action would (i) convert a Non-Managing Member into a managing member of the Company (except as a result of the Non-Managing Member becoming a Managing Member pursuant to Section 12.1 or 13.1.A of this Agreement), (ii) modify the limited liability of a Member, (iii) adversely alter the rights of any Member to receive the distributions to which such Member is entitled pursuant to Article 5 or Section 13.2.A(4) hereof, or alter the allocations specified in Article 6 hereof (except, in any case, as permitted pursuant to Sections 4.2, 5.5 and 7.3.C hereof), (iv) alter or modify in a manner that adversely affects any Member the Redemption rights, Cash Amount or REIT Shares Amount as set forth in Section 15.1 hereof, or amend or modify any related definitions (except for amendments to this Agreement or other actions that provide rights consistent with Section 11.7C(v)), or (v) amend this Section 7.3.D; provided , however , that the consent of any individual Member adversely affected shall not be required for any amendment or action described in this Section 7.3.D that affects all Members holding the same class or series of Membership Units on a uniform or pro rata basis, if approved by a Majority in Interest of the Members of such class or series. Further, no amendment may alter the restrictions on the Managing Member’s authority set forth elsewhere in this Section 7.3 without the consent specified therein. Any such amendment or action consented to by any Member shall be effective as to that Member, notwithstanding the absence of such consent by any other Member.

Section 7.4 Reimbursement of the Managing Member and CLNY .

A. The Managing Member shall not be compensated for its services as managing member of the Company except as provided in this Agreement (including the provisions of Articles 5 and 6 hereof regarding distributions, payments and allocations to which it may be entitled in its capacity as Managing Member).

B. Subject to Section 7.4.C and Section 15.11, the Company shall be liable for, and shall advance to or reimburse the Managing Member and CLNY, as applicable, on a monthly basis, or such other basis as the Managing Member may determine, for all sums required or expended in connection with the Company’s business, including (i) expenses relating to the ownership of interests in and management and operation of, or for the benefit of, the Company, (ii) compensation of officers and employees, including payments under future compensation plans of CLNY, the Managing Member, the Company, or a Subsidiary of CLNY, the Managing Member, or the Company that may provide for stock units, or phantom stock, pursuant to which employees of CLNY, the Managing Member, the Company, or any such Subsidiary will receive payments based upon dividends on or the value of REIT Shares, (iii) director fees and expenses, (iv) all costs and expenses of CLNY being a public company, including costs of filings with the SEC, reports and other distributions to its stockholders and (v) without limiting the foregoing, all amounts necessary for the timely payment of all interest, principal and any other payment obligations pursuant to CLNY’s 5.00% Convertible Senior Notes due on April 15, 2023 (and any refinancing thereof), 3.875% Convertible Senior Notes due on January 15, 2021 (and any refinancing thereof), and (c) other notes and long-term debt payable or owed during the five-year period beginning on the date hereof; provided , however , that the amount of any reimbursement shall be reduced by any interest earned by the Managing Member or CLNY with respect to bank accounts or other instruments or accounts held by it on behalf of the Company as permitted pursuant to Section 7.5. Such reimbursements shall be in addition to any reimbursement of the Managing Member and CLNY as a result of indemnification pursuant to Section 7.7 hereof.

C. To the extent practicable, Company expenses shall be billed directly to and paid by the Company. If and to the extent any reimbursements to the Managing Member pursuant to this Section 7.4 constitute gross income to the Managing Member (as opposed to the repayment of advances made on behalf of the Company), such amounts shall (unless otherwise required by the Code and the Regulations) constitute guaranteed payments within the meaning of Section 707(c) of the Code, shall be treated consistently therewith by the Company and all Members, and shall not be treated as distributions for purposes of computing the Members’ Capital Accounts.

Section 7.5 Outside Activities of the Managing Member . The Managing Member, for so long as it is the Managing Member of the Company, shall not directly or indirectly enter into or conduct any business, other than in connection with, (a) the ownership, acquisition and disposition of Membership Interests, (b) the management of the business of the Company, (c) its operation as a reporting company with a class (or classes) of securities registered under the Exchange Act, (d) its operations as a REIT, (e) the offering, sale, syndication, private placement or public offering of stock, bonds, securities or other interests, (f) financing or refinancing of any type related to the Company or its assets or activities, (g) the holding, operation, acquisition or disposition of Excluded Properties in accordance with the terms of this Agreement with respect thereto and (h) such activities as are incidental thereto; provided , however , that the Managing Member may from time to time hold or acquire assets in its own name or otherwise other than through the Company so long as the Managing Member takes commercially reasonable measures to insure that the economic benefits and burdens of such Property are otherwise vested in the Company, through assignment, mortgage loan or otherwise or, if it is not commercially reasonable to vest such economic interests in the Company, the Members shall negotiate in good faith to amend this Agreement, including the definition of “Adjustment Factor,” to reflect such activities and the direct ownership of assets by the Managing Member, as applicable. The Managing Member and all “qualified REIT subsidiaries” (within the meaning of Code Section 856(i)(2)) and disregarded entities (determined for federal income tax purposes) thereof, taken as a group, shall not own any assets or take title to assets (other than temporarily in connection with an acquisition prior to contributing such assets to the Company) other than (i) Excluded Properties, (ii) interests in “qualified REIT subsidiaries” (within the meaning of Code Section 856(i)(2)) or disregarded entities (determined for federal income tax purposes), (iii) Membership Interests as the Managing Member or CLNY and (iv) such cash and cash equivalents, bank accounts or similar instruments or accounts as such group deems reasonably necessary, taking into account Section 7.1.D hereof and the requirements necessary for CLNY to qualify as a REIT and for the Managing Member and CLNY to carry out their respective responsibilities contemplated under this Agreement and the Charter. The Managing Member and any Affiliates of the Managing Member may acquire Membership Interests and shall be entitled to exercise all rights of a Member relating to such Membership Interests.

Section 7.6 Transactions with Affiliates .

A. The Company may lend or contribute funds or other assets to CLNY and its Subsidiaries or other Persons in which CLNY has an equity investment, and such Persons may borrow funds from the Company, on terms and conditions no less favorable to the Company in the aggregate than would be available from unaffiliated third parties, as determined by the Managing Member. The foregoing authority shall not create any right or benefit in favor of any Subsidiary or any other Person. It is expressly acknowledged and agreed by each Member that CLNY may (i) borrow funds from the Company in order to redeem, at any time or from time to time, options or warrants previously or hereafter issued by CLNY, (ii) put to the Company, for cash, any rights, options, warrants or convertible or exchangeable securities that CLNY may desire or be required to purchase or redeem, or (iii) borrow funds from the Company to acquire assets that become Excluded Properties or will be contributed to the Company for Membership Units.

B. Except as provided in Section 7.5 hereof and subject to Section 3.1 hereof, the Company may transfer assets to joint ventures, limited liability companies, partnerships, corporations, business trusts or other business entities in which it is or thereby becomes a participant upon such terms and subject to such conditions consistent with this Agreement and applicable law.

C. The Managing Member, CLNY and their respective Affiliates may sell, transfer or convey any property to the Company, directly or indirectly, on terms and conditions no less favorable to the Company, in the aggregate, than would be available from unaffiliated third parties, as determined by the Managing Member.

D. The Managing Member or CLNY, without the approval of the other Members or any of them or any other Persons, may propose and adopt, on behalf of the Company, employee benefit plans funded by the Company for the benefit of employees of the Managing Member, the Company, CLNY, Subsidiaries of the Company or any Affiliate of any of them in respect of services performed, directly or indirectly, for the benefit of the Managing Member, CLNY, the Company or any of the Company’s Subsidiaries.

Section 7.7 Indemnification .

A. To the fullest extent permitted by applicable law, the Company shall indemnify each Indemnitee from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including attorney’s fees and other legal fees and expenses), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, that relate to the operations of the Company (“ Actions ”), as set forth in this Agreement, in which such Indemnitee may be involved, or is threatened to be involved, as a party or otherwise; provided , however , that the Company shall not indemnify an Indemnitee (i) for any Action if it is established by a final judgment of a court of competent jurisdiction that the actions or omissions of the Indemnitee were material to the matter giving rise to the Action and were committed in bad faith, constituted fraud or were the result of active and deliberate dishonesty on the part of the Indemnitee, (ii) for an Action initiated by the Indemnitee (other than an Action to enforce such Indemnitee’s rights to indemnification or advance of expenses under this Section 7.7), (iii) if the Indemnitee actually received an improper personal benefit in money, property or services, or (iv) for a criminal proceeding if the Indemnitee had reasonable cause to believe that the Indemnitee’s act or omission was unlawful. Without limitation, the foregoing indemnity shall extend to any liability of any Indemnitee, pursuant to a loan guaranty or otherwise, for any indebtedness of the Company or any Subsidiary of the Company (including any indebtedness which the Company or any Subsidiary of the Company has assumed or taken subject to), and the Managing Member is hereby authorized and empowered, on behalf of the Company, to enter into one or more indemnity agreements consistent with the provisions of this Section 7.7 in favor of any Indemnitee having or potentially having liability for any such indebtedness. It is the intention of this Section 7.7.A that the Company indemnify each Indemnitee to the fullest extent permitted by law. The termination of any proceeding by judgment, order or settlement does not create a presumption that the Indemnitee did not meet the requisite standard of conduct set forth in this Section 7.7.A. The termination of any proceeding by conviction of an Indemnitee or upon a plea of nolo contendere or its equivalent by an Indemnitee, or an entry of an order of probation against an Indemnitee prior to judgment, does not create a presumption that such Indemnitee acted in a manner contrary to that specified in this Section 7.7.A with respect to the subject matter of such proceeding. Any indemnification pursuant to this Section 7.7 shall be made only out of the assets of the Company, and neither the Managing Member nor any other Holder shall have any obligation to contribute to the capital of the Company or otherwise provide funds to enable the Company to fund its obligations under this Section 7.7.

B. To the fullest extent permitted by law, expenses incurred by an Indemnitee who is a party to a proceeding or otherwise subject to or the focus of or is involved in any Action shall be paid or reimbursed by the Company as incurred by the Indemnitee in advance of the final disposition of the Action upon receipt by the Company of (i) a written affirmation by the Indemnitee of the Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Company, as authorized in Section 7.7.A, has been met, and (ii) a written undertaking by or on behalf of the Indemnitee

to repay the amount if it shall ultimately be determined that the standard of conduct has not been met, provided that such undertaking need not be secured and shall be without reference to the financial ability for repayment.

C. The indemnification provided by this Section 7.7 shall be in addition to any other rights to which an Indemnitee or any other Person may be entitled under any agreement, pursuant to any vote of the Members, as a matter of law or otherwise, and shall continue as to an Indemnitee who has ceased to serve in such capacity and shall inure to the benefit of the heirs, successors, assigns and administrators of the Indemnitee unless otherwise provided in a written agreement with such Indemnitee or in the writing pursuant to which such Indemnitee is indemnified.

D. The Company and/or the Managing Member may, but shall not be obligated to, purchase and maintain, at the Company’s expense, insurance on behalf of any of the Indemnitees and such other Persons as the Managing Member shall determine, against any liability that may be asserted against or expenses that may be incurred by such Person in connection with the Company’s activities, regardless of whether the Company would have the power to indemnify such Person against such liability under the provisions of this Agreement.

E. Any liabilities which an Indemnitee incurs as a result of acting on behalf of the Company, or the Managing Member or CLNY (whether as a fiduciary or otherwise) in connection with the operation, administration or maintenance of an employee benefit plan or any related trust or funding mechanism (whether such liabilities are in the form of excise taxes assessed by the IRS, penalties assessed by the Department of Labor, restitutions to such a plan or trust or other funding mechanism or to a participant or beneficiary of such plan, trust or other funding mechanism, or otherwise) shall be treated as liabilities or judgments or fines under this Section 7.7, unless such liabilities arise as a result of the matters described in the proviso of the first sentence of Section 7.7.A.

F. In no event may an Indemnitee subject any of the Holders to personal liability by reason of the indemnification provisions set forth in this Agreement.

G. An Indemnitee shall not be denied indemnification in whole or in part under this Section 7.7 because the Indemnitee had an interest in the transaction with respect to which the indemnification applies if the transaction was otherwise permitted by the terms of this Agreement.

H. The provisions of this Section 7.7 are for the benefit of the Indemnitees, their heirs, successors, assigns and administrators and shall not be deemed to create any rights for the benefit of any other Persons. Any amendment, modification or repeal of this Section 7.7 or any provision hereof shall be prospective only and shall not in any way affect the Company’s liability to any Indemnitee under this Section 7.7 as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.

I. If and to the extent any payments to the Managing Member pursuant to this Section 7.7 constitute gross income to the Managing Member (as opposed to the repayment of advances made on behalf of the Company), such amounts shall (unless otherwise required by the Code and the Regulations) constitute guaranteed payments within the meaning of Section 707(c) of the Code, shall be treated consistently therewith by the Company and all Members, and shall not be treated as distributions for purposes of computing the Members’ Capital Accounts.

Section 7.8 Liability of the Managing Member .

A. To the maximum extent permitted under the Act, the only duties that the Managing Member owes to the Company, any Member or any other Person (including any creditor of any Member or assignee of any Membership Interest), fiduciary or otherwise, are to perform its contractual obligations as expressly set forth in this Agreement consistently with the implied contractual covenant of good faith and fair dealing. The Managing Member, in its capacity as such, shall have no other duty, fiduciary or otherwise, to the Company, any Member or any other Person (including any creditor of any Member or any assignee of Membership Interest). The provisions of this Agreement shall create contractual obligations of the Managing Member only, and no such provisions shall be interpreted to create, expand or modify any fiduciary duties of the Managing Member.

B. The Non-Managing Members agree that: (i) the Managing Member is acting for the benefit of the Company, the Non-Managing Members and CLNY’s stockholders, collectively; and (ii) in the event of a conflict between the interests of the Company or any Member, on the one hand, and the separate interests of CLNY or its stockholders, on the other hand, the Managing Member may give priority to the separate interests of CLNY and its stockholders (including with respect to the tax consequences to Non-Managing Members, Assignees or CLNY’s stockholders) and, in the event of such a conflict, any action or failure to act on the part of CLNY that gives priority to the separate interests of CLNY or its stockholders that does not result in a violation of the contract rights of the Non-Managing Members under this Agreement and does not violate any duty owed by the Managing Member to the Company or the Members.

C. In exercising its authority under this Agreement, the Managing Member may, but shall be under no obligation to, take into account the tax consequences to any Member of any action taken (or not taken) by it. Except as otherwise agreed by the Company, the Managing Member and the Company shall not have liability to a Non-Managing Member under any circumstances as a result of any income tax liability incurred by such Non-Managing Member as a result of an action (or inaction) by the Managing Member or the Company pursuant to the Managing Member’s authority under this Agreement.

D. Subject to its obligations and duties as managing member of the Company set forth in this Agreement and applicable law, the Managing Member may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its employees or agents. The Managing Member shall not be responsible to the Company or any Member for any misconduct or negligence on the part of any such employee or agent appointed by it in good faith.

E. In performing its duties under this Agreement and the Act, the Managing Member shall be entitled to rely on the provisions of this Agreement and on any information, opinion, report or statement, including any financial statement or other financial data or the records or books of account of the Company or any Subsidiary of the Company, prepared or presented by an officer, employee or agent of the Managing Member or any agent of the Company or any such Subsidiary, or by a lawyer, certified public accountant, appraiser or other person engaged by the Company as to any matter within such person’s professional or expert competence, and any act taken or omitted to be taken in reliance upon any such information, opinion, report or statement as to matters that the Managing Member reasonably believes to be within such Person’s professional or expert competence shall be conclusively presumed to have been done or omitted in good faith and in accordance with such opinion. The Managing Member may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture or other paper or document believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties.

F. Notwithstanding any other provision of this Agreement or the Act, any action of the Managing Member on behalf of the Company or any decision of the Managing Member to refrain from acting on behalf of the Company, undertaken in the good faith belief that such action or omission is necessary or advisable in order (i) to protect the ability of CLNY to continue to qualify as a REIT, (ii) for CLNY otherwise to satisfy the REIT Requirements, (iii) to avoid CLNY incurring any taxes under Code Section 857 or Code Section 4981, (iv) to protect the ability of the Company to be treated as a partnership or disregarded entity for federal income tax purposes, or (v) for any wholly owned Subsidiary of CLNY to continue to qualify as a “qualified REIT subsidiary” (within the meaning of Code Section 856(i)(2)) or disregarded entity (determined for federal income tax purposes) thereof, is expressly authorized under this Agreement, is deemed approved by all of the Non-Managing Members and does not violate any duty of the Managing Member to the Company or any other Member.

G. Notwithstanding anything herein to the contrary, except for the matters described in the proviso of the first sentence of Section 7.7.A, or pursuant to any express indemnities given to the Company by the Managing Member pursuant to any other written instrument, the Managing Member shall not have any personal liability whatsoever, to the Company or to the other Members, for any action or omission taken in its capacity as the Managing Member or for the debts or liabilities of the Company or the Company’s obligations hereunder except pursuant to Section 15.1 hereof. Without limitation of the foregoing, and except for the matters described in the proviso of the first sentence of Section 7.7.A, or pursuant to Section 15.1 hereof or any such express indemnity, no property or assets of the Managing Member, other than its interest in the Company, shall be subject to levy, execution or other enforcement procedures for the satisfaction of any judgment (or other judicial process) in favor of any other Member(s) and arising out of, or in connection with, this Agreement.

H. No manager, member, officer or agent of the Managing Member, and no director, officer or agent of CLNY shall have any duties directly to the Company or any Member. No manager, member, officer or agent of the Managing Member or any director, officer, or agent of CLNY shall be directly liable to the Company for money damages by reason of their service as such.

I. Any amendment, modification or repeal of this Section 7.8 or any provision hereof shall be prospective only and shall not in any way affect the limitations on the liability of the Managing Member, or its managers, members, directors, officers or agents, to the Company and the Members under this Section 7.8, as in effect immediately prior to such amendment, modification or repeal, with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may arise or be asserted.

Section 7.9 Title to Company Assets . Title to Company assets, whether real, personal or mixed and whether tangible or intangible, shall be deemed to be owned by the Company as an entity, and no Member, individually or collectively with other Members or Persons, shall have any ownership interest in such Company assets or any portion thereof. Title to any or all of the Company assets may be held in the name of the Company, the Managing Member or one or more nominees, as the Managing Member may determine, including Affiliates of the Managing Member. The Managing Member hereby declares and warrants that any Company assets for which legal title is held in the name of the Managing Member or any nominee or Affiliate of the Managing Member shall be held by the Managing Member for the use and benefit of the Company in accordance with the provisions of this Agreement. All Company assets shall be recorded as the property of the Company in its books and records, irrespective of the name in which legal title to such Company assets is held.

Section 7.10 Reliance by Third Parties . Notwithstanding anything to the contrary in this Agreement, any Person dealing with the Company shall be entitled to assume that the Managing Member has full power and authority, without the consent or approval of any other Member, or

Person, to encumber, sell or otherwise use in any manner any and all assets of the Company and to enter into any contracts on behalf of the Company, and take any and all actions on behalf of the Company, and such Person shall be entitled to deal with the Managing Member as if it were the Company’s sole party in interest, both legally and beneficially. Each Member hereby waives any and all defenses or other remedies that may be available against such Person to contest, negate or disaffirm any action of the Managing Member in connection with any such dealing. In no event shall any Person dealing with the Managing Member or its representatives be obligated to ascertain that the terms of this Agreement have been complied with or to inquire into the necessity or expediency of any act or action of the Managing Member or its representatives. Each and every certificate, document or other instrument executed on behalf of the Company by the Managing Member or its representatives shall be conclusive evidence in favor of any and every Person relying thereon or claiming thereunder that (i) at the time of the execution and delivery of such certificate, document or instrument, this Agreement was in full force and effect, (ii) the Person executing and delivering such certificate, document or instrument was duly authorized and empowered to do so for and on behalf of the Company, and (iii) such certificate, document or instrument was duly executed and delivered in accordance with the terms and provisions of this Agreement and is binding upon the Company.

ARTICLE 8

RIGHTS AND OBLIGATIONS OF MEMBERS

Section 8.1 Limitation of Liability . No Non-Managing Member, in its capacity as such, shall have any duties or liability under this Agreement except as expressly provided in this Agreement (including Section 10.4 hereof) or under the Act. To the maximum extent permitted by law, no Member, including CLNY, shall have any personal liability whatsoever, to the Company or to the other Members, for any action or omission taken in its capacity as a member or for the debts or liabilities of the Company or the Company’s obligations hereunder except pursuant to any express indemnities given to the Company by such Member pursuant to any other written instrument and except for liabilities of the Managing Member pursuant to Section 7.8 hereof. Without limitation of the foregoing, and except pursuant to any such express indemnity (and, in the case of the Managing Member, pursuant to Section 7.8 hereof), no property or assets of a Member, other than its interest in the Company, shall be subject to levy, execution or other enforcement procedures for the satisfaction of any judgment (or other judicial process) in favor of any other Member(s) and arising out of, or in connection with, this Agreement.

Section 8.2 Management of Business . No Member or Assignee (other than in its separate capacity as the Managing Member, any of its Affiliates or any officer, director, manager, member, employee, partner, agent, representative or trustee of the Managing Member, the Company or any of their Affiliates, in their capacity as such) shall take part in the operations, management or control (within the meaning of the Act) of the Company’s business, transact any business in the Company’s name or have the power to sign documents for or otherwise bind the Company. The transaction of any such business by the Managing Member, any of its Affiliates or any officer, director, manager, member, employee, partner, agent, representative or trustee of the Managing Member, the Company or any of their Affiliates, in their capacity as such, shall not affect, impair or eliminate the limitations on the liability of the Members or Assignees under this Agreement.

Section 8.3 Outside Activities of Non-Managing Members . Subject to any agreements entered into pursuant to Section 7.6 hereof and any other agreements entered into by a Non-Managing Member or any of its Affiliates with the Managing Member, the Company or a Subsidiary (including any employment agreement), any Non-Managing Member and any Assignee, officer, director, employee, agent, representative, trustee, Affiliate, manager, member or stockholder of any Non-Managing Member shall be entitled to and may have business interests and engage in business activities

in addition to those relating to the Company, including business interests and activities that are in direct or indirect competition with the Company or that are enhanced by the activities of the Company. Neither the Company nor any Member shall have any rights by virtue of this Agreement in any business ventures of any Non-Managing Member or Assignee. Subject to such agreements, none of the Non-Managing Members nor any other Person shall have any rights by virtue of this Agreement or the company relationship established hereby in any business ventures of any other Person (other than CLNY, to the extent expressly provided herein), and such Person shall have no obligation pursuant to this Agreement, subject to Section 7.6 hereof and any other agreements entered into by a Non-Managing Member or its Affiliates with the Managing Member, the Company or a Subsidiary, to offer any interest in any such business ventures to the Company, any Non-Managing Member, or any such other Person, even if such opportunity is of a character that, if presented to the Company, any Non-Managing Member or such other Person, could be taken by such Person.

Section 8.4 Return of Capital . Except pursuant to Section 15.1 or any Membership Unit Designation, no Member shall be entitled to the withdrawal or return of its Capital Contribution, except to the extent of distributions made pursuant to this Agreement or upon dissolution of the Company as provided herein. Except to the extent provided in Article 5 or Article 6 hereof or otherwise expressly provided in this Agreement or in any Membership Unit Designation, no Member or Assignee shall have priority over any other Member or Assignee either as to the return of Capital Contributions or as to profits, losses or distributions.

Section 8.5 Rights of Non-Managing Members Relating to the Company .

A. In addition to other rights provided by this Agreement or by the Act, and subject to Section 8.5C, the Managing Member shall deliver to each Non-Managing Member a copy of any information mailed to all of the common stockholders of CLNY as soon as practicable after such mailing.

B. The Company shall notify any Non-Managing Member that is a Qualifying Party, on request, of the then current Adjustment Factor or any change made to the Adjustment Factor.

C. Notwithstanding any other provision of this Section 8.5, the Managing Member may keep confidential from the Non-Managing Members (or any of them), for such period of time as the Managing Member determines to be reasonable, any information that (i) the Managing Member believes to be in the nature of trade secrets or other information the disclosure of which the Managing Member in good faith believes is not in the best interests of the Company or CLNY or (ii) the Company or the Managing Member is required by law or by agreement to keep confidential.

Section 8.6 No Rights as Objecting Member . No Non-Managing Member and no Holder of a Membership Interest shall be entitled to exercise any appraisal rights in connection with a merger, consolidation or conversion of the Company.

Section 8.7 No Right to Certificate Evidencing Units; Article 8 Securities . Membership Units shall not be certificated. No Non-Managing Member shall be entitled to a certificate evidencing the Membership Units held by such Member. Any certificate evidencing Membership Units issued prior to the date hereof shall no longer evidence Membership Units. The Company shall not elect to treat any Membership Unit as a “security” governed by (x) Article 8 of the Delaware Uniform Commercial Code or (y) Article 8 of the Uniform Commercial Code of any other applicable jurisdiction.

ARTICLE 9

BOOKS, RECORDS, ACCOUNTING AND REPORTS

Section 9.1 Records and Accounting .

A. The Managing Member shall keep or cause to be kept at the principal business office of the Company those records and documents, if any, required to be maintained by the Act and other books and records deemed by the Managing Member to be appropriate with respect to the Company’s business, including all books and records necessary to provide to the Members any information, lists and copies of documents required to be provided pursuant to Section 8.5.A, Section 9.3 or Article 13 hereof. Any records maintained by or on behalf of the Company in the regular course of its business may be kept on any information storage device, provided that the records so maintained are convertible into clearly legible written form within a reasonable period of time.

B. The books of the Company shall be maintained, for financial and tax reporting purposes, on an accrual basis in accordance with generally accepted accounting principles, or on such other basis as the Managing Member determines to be necessary or appropriate. To the extent permitted by sound accounting practices and principles, the Company and the Managing Member may operate with integrated or consolidated accounting records, operations and principles.

Section 9.2 Fiscal Year . The Fiscal Year of the Company shall be the calendar year.

Section 9.3 Reports .

A. As soon as practicable, but in no event later than one hundred twenty (120) days after the close of each Fiscal Year, the Managing Member shall cause to be mailed to each Non-Managing Member of record as of the close of the Fiscal Year, financial statements of the Company, or of CLNY if such statements are prepared solely on a consolidated basis with CLNY, for such Fiscal Year, presented in accordance with generally accepted accounting principles, such statements to be audited by a nationally recognized firm of independent public accountants selected by the Managing Member.

B. As soon as practicable, but in no event later than ninety (90) days after the close of each calendar quarter (except the last calendar quarter of each year), the Managing Member shall cause to be mailed to each Non-Managing Member of record as of the last day of the calendar quarter, a report containing unaudited financial statements of the Company, or of CLNY if such statements are prepared solely on a consolidated basis with CLNY, for such calendar quarter, and such other information as may be required by applicable law or regulation or as the Managing Member determines to be appropriate.

C. The Managing Member may satisfy its obligations under Section 9.3.A and Section 9.3.B by posting or making available the reports specified in such sections on a website maintained by CLNY or by filing reports containing the information specified in Sections 9.1.A and 9.1.B on the EDGAR system (or any successor system) of the SEC.

ARTICLE 10

TAX MATTERS

Section 10.1 Preparation of Tax Returns . The Managing Member shall arrange for the preparation and timely filing of all returns with respect to Company income, gains, deductions, losses and other items required of the Company for federal and state income tax purposes and shall use all

reasonable effort to furnish, within ninety (90) days of the close of each taxable year, the tax information reasonably required by Non-Managing Members and for federal and state income tax and any other tax reporting purposes. The Non-Managing Members shall promptly provide the Managing Member with such information relating to the CC Contributed Assets or any other assets contributed by the Contributors (including assets contributed to the Company for income tax purposes pursuant to the CC Contribution Agreement), including tax basis and other relevant information, as may be reasonably requested by the Managing Member from time to time. For purposes of this provision, the terms CC Contributed Assets and Contributors shall have the meaning ascribed thereto in the CC Contribution Agreement.

Section 10.2 Tax Elections .

A. Except as otherwise provided herein, the Managing Member shall determine whether to make any available election pursuant to the Code, including the election under Code Section 754 and the election to use the “recurring item” method of accounting provided under Code Section 461(h) with respect to property taxes imposed on the Company’s Properties; provided , however , that, if the “recurring item” method of accounting is elected with respect to such property taxes, the Company shall pay the applicable property taxes prior to the date provided in Code Section 461(h) for purposes of determining economic performance. The Managing Member shall have the right to seek to revoke any such election (including any election under Code Sections 461(h) and 754).

B. Without limiting the foregoing, the Members, intending to be legally bound, hereby authorize the Managing Member, on behalf of the Company, to make an election (the “ LV Safe Harbor Election ”) to have the “liquidation value” safe harbor provided in Proposed Treasury Regulation § 1.83-3(1) and the Proposed Revenue Procedure set forth in Internal Revenue Service Notice 2005-43, as such safe harbor may be modified when such proposed guidance is issued in final form or as amended by subsequently issued guidance (the “ LV Safe Harbor ”), apply to LTIP Units and any interest in the Company transferred to, or for the benefit of, a service provider while the Safe Harbor Election remains effective, to the extent such interest meets the LV Safe Harbor requirements (collectively, such interests are referred to as “ LV Safe Harbor Interests ”). The Tax Matters Member is authorized and directed to execute and file the LV Safe Harbor Election on behalf of the Company and the Members. The Company and the Members (including any person to whom an LTIP Unit or other interest in the Company is transferred in connection with the performance of services) hereby agree to comply with all requirements of the LV Safe Harbor (including forfeiture allocations) with respect to all LV Safe Harbor Interests and to prepare and file all U.S. federal income tax returns reporting the tax consequences of the issuance and vesting of LV Safe Harbor Interests consistent with such final LV Safe Harbor guidance. The Company is also authorized to take such actions as are necessary to achieve, under the LV Safe Harbor, the effect that the election and compliance with all requirements of the LV Safe Harbor referred to above would be intended to achieve under Proposed Treasury Regulation Section 1.83-3, including amending this Agreement.

Section 10.3 Tax Matters Member .

A. The Managing Member is hereby designated as the tax matters partner within the meaning of Section 6231(a)(7) of the Code (“ Tax Matters Member ”). The Tax Matters Member shall receive no compensation for its services. All third-party costs and expenses incurred by the Tax Matters Member in performing its duties as such (including legal and accounting fees and expenses) shall be borne by the Company in addition to any reimbursement pursuant to Section 7.4 hereof. Nothing herein shall be construed to restrict the Company from engaging a law, advisory, or accounting firm to assist the Tax Matters Member in discharging its duties hereunder. At the request of any Member, the Managing Member agrees to inform such Member regarding the preparation and filing of any returns and with

respect to any subsequent audit or litigation relating to such returns; provided , however , that the Managing Member shall have the exclusive power to determine whether to file, and the content of, such returns.

B. The Tax Matters Member is authorized, but not required:

(1) to enter into any settlement with the IRS with respect to any administrative or judicial proceedings for the adjustment of Company items required to be taken into account by a Member for income tax purposes (such administrative proceedings being referred to as a “ tax audit ” and such judicial proceedings being referred to as “ judicial review ”), and in the settlement agreement the Tax Matters Member may expressly state that such agreement shall bind all Members, except that such settlement agreement shall not bind any Member (i) who (within the time prescribed pursuant to the Code and Regulations) files a statement with the IRS providing that the Tax Matters Member shall not have the authority to enter into a settlement agreement on behalf of such Member (as the case may be) or (ii) who is a “notice partner” (as defined in Code Section 6231) or a member of a “notice group” (as defined in Code Section 6223(b)(2));

(2) in the event that a notice of a final administrative adjustment at the Company level of any item required to be taken into account by a Member for tax purposes (a “ final adjustment ”) is mailed to the Tax Matters Member, to seek judicial review of such final adjustment, including the filing of a petition for readjustment with the United States Tax Court or the United States Claims Court, or the filing of a complaint for refund with the District Court of the United States for the district in which the Company’s principal place of business is located;

(3) to intervene in any action brought by any other Member for judicial review of a final adjustment;

(4) to file a request for an administrative adjustment with the IRS at any time and, if any part of such request is not allowed by the IRS, to file an appropriate pleading (petition or complaint) for judicial review with respect to such request;

(5) to enter into an agreement with the IRS to extend the period for assessing any tax that is attributable to any item required to be taken into account by a Member for tax purposes, or an item affected by such item; and

(6) to take any other action on behalf of the Members or any of them in connection with any tax audit or judicial review proceeding to the extent permitted by applicable law or regulations.

The taking of any action and the incurring of any expense by the Tax Matters Member in connection with any such proceeding, except to the extent required by law, is a matter in the sole and absolute discretion of the Tax Matters Member and the provisions relating to indemnification of the Managing Member set forth in Section 7.7 hereof shall be fully applicable to the Tax Matters Member in its capacity as such.

Section 10.4 Withholding . Each Member hereby authorizes the Company to withhold from or pay on behalf of or with respect to such Member any amount of federal, state, local or foreign taxes that the Managing Member determines that the Company is required to withhold or pay with respect to any amount distributable or allocable to such Member pursuant to this Agreement, including

any taxes required to be withheld or paid by the Company pursuant to Code Section 1441, Code Section 1442, Code Section 1445 or Code Section 1446. Any amount paid on behalf of or with respect to a Member shall constitute an advance by the Company to such Member, which advance shall be repaid by such Member within fifteen (15) days after notice from the Managing Member that such payment must be made except to the extent that (i) the Company withholds such payment from a distribution that would otherwise be made to the Member or (ii) the Managing Member determines that such payment may be satisfied out of the Available Cash of the Company that would, but for such payment, be distributed to the Member, and such amount actually is satisfied out of such cash. Each Member hereby unconditionally and irrevocably grants to the Company a security interest in such Member’s Membership Interest to secure such Member’s obligation to pay to the Company any amounts required to be paid pursuant to this Section 10.4 and subject to the prior sentence. In the event that a Member fails to pay any amounts owed to the Company pursuant to this Section 10.4 when due, the Managing Member may elect to make the payment to the Company on behalf of such defaulting Member, and in such event shall be deemed to have loaned such amount to such defaulting Member and shall succeed to all rights and remedies of the Company as against such defaulting Member (including the right to receive distributions). Any amounts payable (or portion thereof that remain unsatisfied) by a Member hereunder shall bear interest at the base rate on corporate loans at large United States money center commercial banks, as published from time to time in the Wall Street Journal , plus four (4) percentage points (but not higher than the maximum lawful rate) from the date such amount is due (i.e., fifteen (15) days after demand) until such amount is paid in full. Each Member shall take such actions as the Company or the Managing Member shall request in order to perfect or enforce the security interest created hereunder.

Section 10.5 Organizational Expenses . The Managing Member may cause the Company to elect to deduct expenses, if any, incurred by it in organizing the Company ratably over a 180-month period as provided in Code Section 709.

ARTICLE 11

MEMBER TRANSFERS AND WITHDRAWALS

Section 11.1 Transfer .

A. No part of the interest of a Member shall be subject to the claims of any creditor, to any spouse for alimony or support, or to legal process, and may not be voluntarily or involuntarily alienated or encumbered except as may be specifically provided for in this Agreement.

B. No Membership Interest shall be Transferred, in whole or in part, except in accordance with the terms and conditions set forth in this Article 11 and any applicable Non-Managing Member Ancillary Agreement. Any Transfer or purported Transfer of a Membership Interest not made in accordance with this Article 11 and any applicable Non-Managing Member Ancillary Agreement shall be null and void ab initio .

C. No Transfer of any Membership Interest may be made to a lender to the Company or any Person who is related (within the meaning of Section 1.752-4(b) of the Regulations) to any lender to the Company whose loan constitutes a Nonrecourse Liability, without the consent of the Managing Member; provided that as a condition to such consent, the Managing Member may require the lender to enter into an arrangement with the Company and the Managing Member to redeem or exchange for the REIT Shares Amount any Membership Units in which a security interest is held by such lender simultaneously with the time at which such lender would be deemed to be a member in the Company for purposes of allocating liabilities to such lender under Code Section 752.

Section 11.2 Transfer of the Managing Member’s Membership Interest .

A. Subject to compliance with the other provisions of this Article 11, the Managing Member may Transfer all or any portion of its Membership Interest at any time (i) to any Person that is, at the time of such Transfer, a direct or indirect wholly owned Subsidiary of CLNY, including any “qualified REIT subsidiary” (within the meaning of Code Section 856(i)(2)) and that immediately following such Transfer owns, directly or indirectly, all the assets of CLNY and its Subsidiaries, without the Consent of any Member, and may designate the transferee to become the new Managing Member under Section 12.1, or (ii) in connection with a Termination Transaction as permitted under Section 11.7.

B. The Managing Member may not voluntarily withdraw as a managing member of the Company without the Consent of the Non-Managing Members, except in connection with a Transfer of the Managing Member’s entire Membership Interest permitted in this Article 11 (including in accordance with Section 11.7) and the admission of the Transferee as a successor managing member of the Company pursuant to the Act and this Agreement.

C. It is a condition to any Transfer of the entire Membership Interest of a sole Managing Member otherwise permitted hereunder (including in accordance with Section 11.7) that (i) coincident or prior to such Transfer, the transferee is admitted as a Managing Member pursuant to the Act and this Agreement; (ii) the transferee assumes by operation of law or express agreement all of the obligations of the transferor Managing Member under this Agreement with respect to such Transferred Membership Interest; and (iii) the transferee has executed such instruments as may be necessary to effectuate such admission and to confirm the agreement of such transferee to be bound by all the terms and provisions of this Agreement applicable to the Managing Member and the admission of such transferee as a Managing Member.

Section 11.3 Non-Managing Members’ Rights to Transfer .

A. General . Subject to any Non-Managing Member Ancillary Agreement, each Non-Managing Member, and each transferee of such Non-Managing Member’s Membership Interest or Assignee thereof pursuant to a Permitted Transfer, may not Transfer all or any portion of such Membership Interest to any Person without the consent of the Managing Member, which consent may be withheld in the Managing Member’s sole and absolute discretion. Notwithstanding the foregoing, but subject to Section 11.1.C and 11.3.C, any Non-Managing Member may, at any time, without the consent of the Managing Member, Transfer all or any portion of its Membership Interest pursuant to a Permitted Transfer (including, in the case of a Non-Managing Member that is a Permitted Lender Transferee, any Transfer of a Membership Interest to a Third-Party Pledge Transferee). Any Transfer of a Membership Interest by a Non-Managing Member or an Assignee is subject to Section 11.4 and to satisfaction of the following conditions:

(1) Qualified Transferee . Any Transfer of a Membership Interest shall be made only to a single Qualified Transferee; provided , however , that, for such purposes, all Qualified Transferees that are Affiliates, or that comprise investment accounts or funds managed by a single Qualified Transferee and its Affiliates, shall be considered together to be a single Qualified Transferee.

(2) Opinion of Counsel . The Transferor shall deliver or cause to be delivered to the Managing Member an opinion of counsel reasonably satisfactory to it to the effect that the proposed Transfer may be effected without registration under the Securities Act and will not otherwise violate the registration provisions of the Securities Act and the regulations promulgated thereunder or violate any state securities laws or

regulations applicable to the Company or the Membership Interests Transferred; provided, however, that the Managing Member may waive this condition upon the request of the Transferor. If, in the opinion of such counsel, such Transfer would require the filing of a registration statement under the Securities Act or would otherwise violate any federal or state securities laws or regulations applicable to the Company or the Membership Units, the Managing Member may prohibit any Transfer otherwise permitted under this Section 11.3 by a Non-Managing Member of Membership Interests.

(3) Minimum Transfer Restriction . Any Transferring Member must Transfer not less than the lesser of (i) five hundred (500) Membership Units or (ii) all of the remaining Membership Units owned by such Transferring Member; provided, however, that, for purposes of determining compliance with the foregoing restriction, all Membership Units owned by Affiliates of a Member shall be considered to be owned by such Member.

It is a condition to any Transfer otherwise permitted hereunder that the transferee assumes by operation of law or express agreement all of the obligations of the transferor Member under this Agreement with respect to such Transferred Membership Interest, and no such Transfer (other than pursuant to a statutory merger or consolidation wherein all obligations and liabilities of the transferor Member are assumed by a successor corporation by operation of law) shall relieve the transferor Member of its obligations under this Agreement without the approval of the Managing Member. Notwithstanding the foregoing, any transferee of any Transferred Membership Interest shall be subject to any and all ownership limitations (including the Ownership Limit) contained in the Charter that may limit or restrict such transferee’s ability to exercise its Redemption rights, including the Ownership Limit. Any transferee, whether or not admitted as a Substituted Member, shall take subject to the obligations of the transferor hereunder. Unless admitted as a Substituted Member, no transferee, whether by a voluntary Transfer, by operation of law or otherwise, shall have any rights hereunder, other than the rights of an Assignee as provided in Section 11.5 hereof.

B. Incapacity . If a Non-Managing Member is subject to Incapacity, the executor, administrator, trustee, committee, guardian, conservator or receiver of such Member’s estate shall have all the rights of a Non-Managing Member, but not more rights than those enjoyed by other Non-Managing Members, for the purpose of settling or managing the estate, and such power as the Incapacitated Member possessed to Transfer all or any part of its interest in the Company. The Incapacity of a Member, in and of itself, shall not dissolve or terminate the Company.

C. Adverse Tax Consequences . No Transfer by a Non-Managing Member of its Membership Interests (including any Redemption, any other acquisition of Membership Units by the Managing Member or any acquisition of Membership Units by the Company and including any Permitted Transfer) may be made to or by any Person if in the opinion of legal counsel for the Company, (i) such Transfer would create a material risk of the Company being treated as an association taxable as a corporation, (ii) there would be a material risk that such Transfer would be treated as effectuated through an “established securities market” or a “secondary market (or the substantial equivalent thereof),” within the meaning of Code Section 7704 or otherwise create a material risk of the Company being treated as a “publicly traded partnership” within the meaning of Code Section 469(k)(2) or Code Section 7704, (iii) such Transfer would create a material risk that the Company to cease to be classified as a partnership for federal income tax purposes (except as a result of the Redemption (or acquisition by CLNY) of all Membership Units held by all Members (other than CLNY)), or such Transfer would result in a termination of the Company under Code Section 708(b)(1)(B), or (iv) such Transfer would create a material risk that CLNY would cease to comply with the REIT Requirements or any wholly owned Subsidiary of CLNY to cease to qualify as either a “qualified REIT subsidiary” (within the meaning of Code Section 856(i)(2)) or disregarded entity (determined for federal income tax purposes) thereof).

Section 11.4 Substituted Members .

A. A transferee of the interest of a Non-Managing Member shall be admitted as a Substituted Member only with the consent of the Managing Member, which may be withheld in its sole and absolute discretion; provided , however , that a Permitted Transferee that is a past or present employee of the Company, CLNY or their Subsidiaries, CC, CCH or Colony Realty Partners, LLC shall be admitted as a Substituted Member pursuant to a Permitted Transfer without the consent of the Managing Member. The failure or refusal by the Managing Member to permit a transferee of any such interests to become a Substituted Member shall not give rise to any cause of action against the Company or the Managing Member. Subject to the foregoing, an Assignee shall not be admitted as a Substituted Member until and unless it furnishes to the Managing Member (i) evidence of acceptance, in form and substance satisfactory to CLNY, of all the terms, conditions and applicable obligations of this Agreement, (ii) a counterpart signature page to this Agreement executed by such Assignee and (iii) such other documents and instruments as the Managing Member may require to effect such Assignee’s admission as a Substituted Member.

B. Concurrently with, and as evidence of, the admission of a Substituted Member, the Managing Member shall amend the Register and the books and records of the Company to reflect the name, address and number of Membership Units of such Substituted Member and to eliminate or adjust, if necessary, the name, address and number of Membership Units of the predecessor of such Substituted Member.

C. A transferee who has been admitted as a Substituted Member in accordance with this Article 11 shall have all the rights and powers and be subject to all the restrictions and liabilities of a Non-Managing Member under this Agreement.

Section 11.5 Assignees . If the Managing Member’s consent is required for the admission of any transferee as a Substituted Member, as described in Section 11.4 hereof, and the Managing Member withholds such consent, such transferee shall be considered an Assignee for purposes of this Agreement. An Assignee shall be entitled to all the rights of an assignee of a membership interest under the Act, including the right to receive distributions from the Company and the share of Net Income, Net Losses and other items of income, gain, loss, deduction and credit of the Company attributable to the Membership Units assigned to such transferee and the rights to Transfer the Membership Units provided in this Article 11, but shall not be deemed to be a holder of Membership Units for any other purpose under this Agreement (other than as expressly provided in Section 15.1 hereof with respect to a Qualifying Party that becomes a Tendering Party), and shall not be entitled to effect a Consent or vote with respect to such Membership Units on any matter presented to the Non-Managing Members for approval (such right to Consent or vote, to the extent provided in this Agreement or under the Act, fully remaining with the transferor Member). In the event that any such transferee desires to make a further assignment of any such Membership Units, such transferee shall be subject to all the provisions of this Article 11 to the same extent and in the same manner as any Non-Managing Member desiring to make an assignment of Membership Units.

Section 11.6 General Provisions .

A. No Non-Managing Member may withdraw from the Company other than: (i) as a result of a permitted Transfer of all of such Member’s Membership Interest in accordance with this Article 11 with respect to which the transferee becomes a Substituted Member; (ii) pursuant to a

redemption (or acquisition by the Managing Member or CLNY) of all of its Membership Interest pursuant to a Redemption under Section 15.1 hereof and/or pursuant to any Membership Unit Designation; or (iii) as a result of the acquisition by the Managing Member or CLNY of all of such Member’s Membership Interest, whether or not pursuant to Section 15.1.B hereof.

B. Any Member who shall Transfer all of its Membership Units in a Transfer (i) permitted pursuant to this Article 11 where such transferee was admitted as a Substituted Member, (ii) pursuant to the exercise of its rights to effect a redemption of all of its Membership Units pursuant to a Redemption under Section 15.1 hereof and/or pursuant to any Membership Unit Designation, or (iii) to CLNY, whether or not pursuant to Section 15.1.B hereof, shall cease to be a Member.

C. If any Membership Unit is Transferred in compliance with the provisions of this Article 11, or is redeemed by the Company, or acquired by CLNY pursuant to Section 15.1 hereof, on any day other than the first day of a Fiscal Year, then Net Income, Net Losses, each item thereof and all other items of income, gain, loss, deduction and credit attributable to such Membership Unit for such Fiscal Year shall be allocated to the transferor Member or the Tendering Party (as the case may be) and, in the case of a Transfer or assignment other than a Redemption, to the transferee Member, by taking into account their varying interests during the Fiscal Year in accordance with Code Section 706(d), using the “interim closing of the books” method or another permissible method selected by the Managing Member. Solely for purposes of making such allocations, each of such items for the calendar month in which a Transfer occurs shall be allocated to the transferee Member and none of such items for the calendar month in which a Transfer or a Redemption occurs shall be allocated to the transferor Member, or the Tendering Party (as the case may be) if such Transfer occurs on or before the fifteenth (15th) day of the month, otherwise such items shall be allocated to the transferor. All distributions of Available Cash attributable to such Membership Unit with respect to which the Company Record Date is before the date of such Transfer, assignment or Redemption shall be made to the transferor Member or the Tendering Party (as the case may be) and, in the case of a Transfer other than a Redemption, all distributions of Available Cash thereafter attributable to such Membership Unit shall be made to the transferee Member.

D. In addition to any other restrictions on Transfer herein contained or contained in any applicable Non-Managing Member Ancillary Agreement, in no event may any Transfer or assignment of a Membership Interest by any Member (including any Redemption, any acquisition of Membership Units by CLNY or any other acquisition of Membership Units by the Company) be made without the consent of the Managing Member, which may be withheld in its sole and absolute discretion: (i) to any person or entity who lacks the legal right, power or capacity to own a Membership Interest; (ii) in violation of applicable law; (iii) of any component portion of a Membership Interest, such as the Capital Account, or rights to distributions, separate and apart from all other components of a Membership Interest; (iv) in the event that such Transfer would create a material risk that CLNY would cease to comply with the REIT Requirements or any wholly owned Subsidiary of CLNY to cease to qualify as either a “qualified REIT subsidiary” (within the meaning of Code Section 856(i)(2)) or disregarded entity (determined for federal income tax purposes) thereof); (v) if such Transfer would create a material risk that the Company to cease to be classified as a partnership for federal income tax purposes (except as a result of the Redemption (or acquisition by CLNY) of all Membership Units held by all Members (other than CLNY)), or such transfer would result in a termination of the Company under Code Section 708(b)(1)(B); (vi) if such Transfer would cause the Company to become, with respect to any employee benefit plan subject to Title I of ERISA, a “party-in-interest” (as defined in ERISA Section 3(14)) or with respect to a plan subject to Section 4975 of the Code, a “disqualified person” (as defined in Code Section 4975(c)); (vii) if such Transfer would, in the opinion of legal counsel to the Company, cause any portion of the assets of the Company to constitute assets of any employee benefit plan pursuant to Department of Labor Regulations Section 2510.3-101, as modified by Section 3(42) of ERISA; (viii) if such Transfer requires the registration of such Membership Interest pursuant to any applicable federal or

state securities laws; (ix) if such Transfer would create a material risk that the Company would become a “publicly traded partnership,” as such term is defined in Code Section 469(k)(2) or Code Section 7704(b) or would otherwise create a material risk that the Company would be treated as a corporation for federal income tax purposes; (x) if such Transfer would cause the Company to have more than one hundred (100) partners for tax purposes (including as partners those persons indirectly owning an interest in the Company through a partnership, limited liability company, subchapter S corporation or grantor trust); (xi) if such Transfer would cause the Company to become a reporting company under the Exchange Act; (xii) if such Transfer subjects the Company to regulation under the Investment Company Act of 1940, the Investment Advisors Act of 1940 or ERISA, each as amended.

E. Transfers by a Non-Managing Member pursuant to this Article 11 or pursuant to any applicable Non-Managing Member Ancillary Agreement but not pursuant to Article 15, other than a Permitted Transfer to a Permitted Transferee pursuant to the exercise of remedies under a Pledge, may only be made on the first day of a fiscal quarter of the Company, unless the Managing Member otherwise agrees.

Section 11.7 Restrictions on Termination Transactions . Neither CLNY nor the Managing Member shall engage in, or cause or permit, a Termination Transaction, unless the conditions in at least one of the following paragraphs is met:

A. the Consent of the Non-Managing Members is obtained;

B. in connection with any such Termination Transaction, each holder of Membership Common Units (other than CLNY and its wholly owned Subsidiaries) will receive, or will have the right to elect to receive, for each Membership Common Unit, an amount of cash, securities or other property equal to the product of the Adjustment Factor and the greatest amount of cash, securities or other property paid to a holder of one REIT Share in consideration of one REIT Share pursuant to the terms of such Termination Transaction; provided , that if, in connection with such Termination Transaction, a purchase, tender or exchange offer shall have been made to and accepted by the holders of a majority of the outstanding REIT Shares, each holder of Membership Common Units (other than CLNY and its wholly owned subsidiaries) will receive, or will have the right to elect to receive, the greatest amount of cash, securities or other property which such holder of Membership Common Units would have received had it exercised its right to Redemption pursuant to Article 15 hereof and received REIT Shares in exchange for its Membership Common Units immediately prior to the expiration of such purchase, tender or exchange offer and had thereupon accepted such purchase, tender or exchange offer and then such Termination Transaction shall have been consummated (the fair market value, at the time of the Termination Transaction, of the amount specified herein with respect to each Membership Common Unit is referred to as the “ Transaction Consideration ”);

C. all of the following conditions are met: (i) substantially all of the assets directly or indirectly owned by the Company prior to the announcement of the Termination Transaction are, immediately after the Termination Transaction, owned directly or indirectly by the Company or another limited liability company or limited partnership which is the survivor of a merger, consolidation or combination of assets with the Company (in each case, the “ Surviving Company ”); (ii) the Surviving Company is classified as a partnership for U.S. federal income tax purposes; and (iii) the rights of such Members with respect to the Surviving Company include: (x) if CLNY or its successor is a REIT with a single class of Publicly Traded common equity securities, the right to redeem their interests in the Surviving Company on terms substantially comparable to those in Section 15.1 of this Agreement for either: (1) a number of such REIT’s Publicly Traded common equity securities with a fair market value, as of the date of consummation of such Termination Transaction, equal to the Transaction Consideration, subject to anti-dilution adjustments substantially comparable to those set forth in the definition of

“Adjustment Factor” herein (the “ Successor Shares Amount ”); or (2) cash in an amount equal to the fair market value of the Successor Shares Amount at the time of such redemption, determined in a manner consistent with the determination of the “Cash Amount” herein; or (y) if CLNY or its successor is not a REIT with a single class of Publicly Traded common equity securities, the right to redeem their interests in the Surviving Company on terms substantially comparable to those in Section 15.1 of this Agreement for cash in an amount equal to the Transaction Consideration; or

D. in any Termination Transaction that is a merger, consolidation or other combination with or into another Person, immediately following the consummation of such Termination Transaction, the equity holders of the surviving entity are substantially identical to the shareholders of CLNY prior to such transaction.

ARTICLE 12

ADMISSION OF MEMBERS

Section 12.1 Admission of Successor Managing Member . A successor to all or a portion of the Managing Member’s Membership Interest pursuant to Section 11.2.A hereof who the Managing Member has designated to become a successor Managing Member shall be admitted to the Company as the Managing Member, effective immediately upon the Transfer of such Membership Interest to it. Upon any such Transfer and the admission of any such transferee as a successor Managing Member in accordance with this Section 12.1, the transferor Managing Member shall be relieved of its obligations under this Agreement and shall cease to be a Managing Member without any separate Consent of the Members or the consent or approval of any Member. Any such successor shall carry on the business of the Company without dissolution. In each case, the admission shall be subject to the successor Managing Member executing and delivering to the Company an acceptance of all of the terms and conditions of this Agreement and such other documents or instruments as may be required to effect the admission. In the event that the Managing Member withdraws from the Company, or transfers its entire Membership Interest, in violation of this Agreement, or otherwise dissolves or terminates or ceases to be the Managing Member, a Majority in Interest of the Members may elect to continue the Company by selecting a successor Managing Member in accordance with Section 13.1.A hereof.

Section 12.2 Admission of Additional Members .

A. A Person (other than an existing Member) who makes a Capital Contribution to the Company in exchange for Membership Units in accordance with this Agreement shall be admitted to the Company as an Additional Member only upon furnishing to the Managing Member (i) evidence of acceptance, in form and substance satisfactory to the Managing Member, of all of the terms and conditions of this Agreement, including the power of attorney granted in Section 2.4 hereof, (ii) a counterpart signature page to this Agreement executed by such Person, and (iii) such other documents or instruments as may be required by the Managing Member in order to effect such Person’s admission as an Additional Member. Concurrently with, and as evidence of, the admission of an Additional Member, the Managing Member shall amend the Register and the books and records of the Company to reflect the name, address, number and type of Membership Units of such Additional Member.

B. Notwithstanding anything to the contrary in this Section 12.2, no Person shall be admitted as an Additional Member without the consent of the Managing Member. The admission of any Person as an Additional Member shall become effective on the date upon which the name of such Person is recorded on the books and records of the Company, following the consent of the Managing Member to such admission and the satisfaction of all the conditions set forth in Section 12.2.A.

C. If any Additional Member is admitted to the Company on any day other than the first day of a Fiscal Year, then Net Income, Net Losses, each item thereof and all other items of income, gain, loss, deduction and credit allocable among Holders for such Fiscal Year shall be allocated among such Additional Member and all other Holders by taking into account their varying interests during the Fiscal Year in accordance with Code Section 706(d), using the “interim closing of the books” method or another permissible method selected by the Managing Member. Solely for purposes of making such allocations, each of such items for the calendar month in which an admission of any Additional Member occurs shall be allocated among all the Holders including such Additional Member, in accordance with the principles described in Section 11.6.C hereof. All distributions of Available Cash with respect to which the Company Record Date is before the date of such admission shall be made solely to Members and Assignees other than the Additional Member, and all distributions of Available Cash thereafter shall be made to all the Members and Assignees including such Additional Member.

Section 12.3 Amendment of Agreement and Certificate of Formation . For the admission to the Company of any Member, the Managing Member shall take all steps necessary and appropriate under the Act to amend the Register and the books and records of the Company and, if necessary, to prepare as soon as practical an amendment of this Agreement and, if required by law, shall prepare and file an amendment to the Certificate and may for this purpose exercise the power of attorney granted pursuant to Section 2.4 hereof.

Section 12.4 Limit on Number of Members . Unless otherwise permitted by the Managing Member, no Person shall be admitted to the Company as an Additional Member if the effect of such admission would be to cause the Company to have a number of Members (including as Members for this purpose those Persons indirectly owning an interest in the Company through another limited liability company, a partnership, a subchapter S corporation or a grantor trust) that would cause the Company to become a reporting company under the Exchange Act.

Section 12.5 Admission . A Person shall be admitted to the Company as a member of the Company and/or a managing member of the Company only upon strict compliance, and not upon substantial compliance, with the requirements set forth in this Agreement for admission to the Company as a Non-Managing Member or a Managing Member.

ARTICLE 13

DISSOLUTION, LIQUIDATION AND TERMINATION

Section 13.1 Dissolution . The Company shall not be dissolved by the admission of Substituted Members or Additional Members, or by the admission of a successor managing member in accordance with the terms of this Agreement. Upon the withdrawal of the Managing Member, any successor managing member shall continue the business of the Company without dissolution. However, the Company shall dissolve, and its affairs shall be wound up, upon the first to occur of any of the following (each a “ Liquidating Event ”):

A. an event of withdrawal, as defined in the Act, with respect to a Managing Member, unless (i) at the time of the occurrence of such event, there is at least one remaining managing member of the Company who is authorized to and shall carry on the business of the Company, or (ii) within ninety (90) days after the withdrawal, a Majority in Interest of the Members agree in writing to continue the Company and to the appointment, effective as of the date of withdrawal, of a successor managing member;

B. an election to dissolve the Company made by the Managing Member, with or without the Consent of the other Members; or

C. entry of a decree of judicial dissolution of the Company pursuant to the provisions of the Act.

Section 13.2 Winding Up .

A. Upon the occurrence of a Liquidating Event, the Company shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets and satisfying the claims of its creditors and the Holders. After the occurrence of a Liquidating Event, no Holder shall take any action that is inconsistent with, or not necessary to or appropriate for, the winding up of the Company’s business and affairs. The Managing Member (or, in the event that there is no remaining Managing Member or the Managing Member has dissolved, become bankrupt or ceased to operate, any Person elected by a Majority in Interest of the Members (the Managing Member or such other Person being referred to herein as the “ Liquidator ”)) shall be responsible for overseeing the winding up and dissolution of the Company and shall take full account of the Company’s liabilities and property, and the Company property shall be liquidated as promptly as is consistent with obtaining the fair value thereof, and the proceeds therefrom (which may, to the extent determined by the Managing Member, include shares of stock in CLNY) shall be applied and distributed in the following order:

(1) First, to the satisfaction of all of the Company’s debts and liabilities to creditors other than the Holders (whether by payment or the making of reasonable provision for payment thereof);

(2) Second, to the satisfaction of all of the Company’s debts and liabilities to CLNY (whether by payment or the making of reasonable provision for payment thereof), including amounts due as reimbursements under Section 7.4 hereof;

(3) Third, to the satisfaction of all of the Company’s debts and liabilities to the other Holders (whether by payment or the making of reasonable provision for payment thereof); and

(4) Subject to the terms of any Membership Unit Designation, the balance, if any, to the Holders in accordance with and in proportion to their positive Capital Account balances, after giving effect to all contributions, distributions and allocations for all periods.

the Managing Member shall not receive any additional compensation for any services performed pursuant to this Article 13.

B. Notwithstanding the provisions of Section 13.2.A hereof that require liquidation of the assets of the Company, but subject to the order of priorities set forth therein, if prior to or upon dissolution of the Company, the Liquidator determines that an immediate sale of part or all of the Company’s assets would be impractical or would cause undue loss to the Holders, the Liquidator may, in its sole and absolute discretion, defer for a reasonable time the liquidation of any assets except those necessary to satisfy liabilities of the Company (including to those Holders as creditors) and/or distribute to the Holders, in lieu of cash, as tenants in common and in accordance with the provisions of Section 13.2.A hereof, undivided interests in such Company assets as the Liquidator deems not suitable for liquidation. Any such distributions in kind shall be made only if, in the good faith judgment of the Liquidator, such distributions in kind are in the best interest of the Holders, and shall be subject to such

conditions relating to the disposition and management of such properties as the Liquidator deems reasonable and equitable and to any agreements governing the operation of such properties at such time. The Liquidator shall determine the fair market value of any property distributed in kind using such reasonable method of valuation as it may adopt.

C. In the event that the Company is “liquidated,” within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant to this Article 13 to the Holders that have positive Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2) to the extent of, and in proportion to, positive Capital Account balances. If any Holder has a deficit balance in its Capital Account (after giving effect to all contributions, distributions and allocations for all taxable years, including the year during which such liquidation occurs), such Holder shall have no obligation to make any contribution to the capital of the Company with respect to such deficit, and such deficit shall not be considered a debt owed to the Company or to any other Person for any purpose whatsoever. In the sole and absolute discretion of the Managing Member or the Liquidator, a pro rata portion of the distributions that would otherwise be made to the Holders pursuant to this Article 13 may be:

(1) distributed to a trust established for the benefit of the Managing Member and the Holders for the purpose of liquidating Company assets, collecting amounts owed to the Company, and paying any contingent or unforeseen liabilities or obligations of the Company or of the Managing Member arising out of or in connection with the Company and/or Company activities. The assets of any such trust shall be distributed to the Holders, from time to time, in the reasonable discretion of the Managing Member, in the same proportions and amounts as would otherwise have been distributed to the Holders pursuant to this Agreement; or

(2) withheld or escrowed to provide a reasonable reserve for Company liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Company, provided that such withheld or escrowed amounts shall be distributed to the Holders in the manner and order of priority set forth in Section 13.2.A hereof as soon as practicable.

Section 13.3 Deemed Contribution and Distribution . Notwithstanding any other provision of this Article 13, in the event that the Company is liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), but no Liquidating Event has occurred, the Company’s Property shall not be liquidated, the Company’s liabilities shall not be paid or discharged and the Company’s affairs shall not be wound up. Instead, for federal income tax purposes the Company shall be deemed to have contributed all of its assets and liabilities to a new partnership in exchange for an interest in the new partnership; and immediately thereafter, distributed Membership Units to the Members in the new partnership in accordance with their respective Capital Accounts in liquidation of the Company, and the new partnership is deemed to continue the business of the Company. Nothing in this Section 13.3 shall be deemed to have constituted any Assignee as a Substituted Member without compliance with the provisions of Section 11.4 hereof.

Section 13.4 Rights of Holders . Except as otherwise provided in this Agreement and subject to the rights of any Holder of any Membership Interest set forth in a Membership Unit Designation, (a) each Holder shall look solely to the assets of the Company for the return of its Capital Contribution, (b) no Holder shall have the right or power to demand or receive property other than cash from the Company, and (c) no Holder shall have priority over any other Holder as to the return of its Capital Contributions, distributions or allocations.

Section 13.5 Notice of Dissolution . In the event that a Liquidating Event occurs or an event occurs that would, but for an election or objection by one or more Members pursuant to Section 13.1 hereof, result in a dissolution of the Company, CLNY or the Liquidator shall, within thirty (30) days thereafter, provide written notice thereof to each of the Holders and, in the sole and absolute discretion of CLNY or the Liquidator, or as required by the Act, to all other parties with whom the Company regularly conducts business (as determined in the sole and absolute discretion of the Managing Member or the Liquidator), and the Managing Member or the Liquidator may, or, if required by the Act, shall, publish notice thereof in a newspaper of general circulation in each place in which the Company regularly conducts business (as determined in the sole and absolute discretion of the Managing Member or the Liquidator).

Section 13.6 Cancellation of Certificate of Formation . Upon the completion of the liquidation of the Company cash and property as provided in Section 13.2 hereof, the Company shall be terminated, a certificate of cancellation shall be filed with the State of Delaware, all qualifications of the Company as a foreign limited liability company in jurisdictions other than the State of Delaware shall be cancelled, and such other actions as may be necessary to terminate the Company shall be taken.

Section 13.7 Reasonable Time for Winding-Up . A reasonable time shall be allowed for the orderly winding-up of the business and affairs of the Company and the liquidation of its assets pursuant to Section 13.2 hereof, in order to minimize any losses otherwise attendant upon such winding-up, and the provisions of this Agreement shall remain in effect between and among the Members during the period of liquidation.

ARTICLE 14

PROCEDURES FOR ACTIONS AND CONSENTS

OF MEMBERS; AMENDMENTS; MEETINGS

Section 14.1 Actions and Consents of Members . The actions requiring Consent of any Member pursuant to this Agreement, including Section 7.3 hereof, or otherwise pursuant to applicable law, are subject to the procedures set forth in this Article 14.

Section 14.2 Amendments . Except as otherwise required, permitted or prohibited by this Agreement (including Section 7.3 and Section 4.4E), amendments to this Agreement must be approved by the Consent of the Managing Member and, if the amendment substantively and adversely affects the rights of the Non-Managing Members disproportionately as compared to the Managing Member, the Consent of the Members, and may be proposed only by (a) the Managing Member, or (b) Non-Managing Members holding a majority of the Membership Common Units then held by Non-Managing Members (excluding CLNY and any Controlled Entity of CLNY). Following such proposal, the Managing Member shall submit to the Members any proposed amendment that, pursuant to the terms of this Agreement, requires the Consent of the Members. The Managing Member shall seek the Consent of the Members entitled to vote thereon on any such proposed amendment in accordance with Section 14.3 hereof. Upon obtaining any such Consent, or any other Consent required by this Agreement, and without further action or execution by any other Person, including any Member, (i) any amendment to this Agreement may be implemented and reflected in a writing executed solely by the Managing Member, and (ii) the Non-Managing Members shall be deemed a party to and bound by such amendment of this Agreement. Within thirty days after the effectiveness of any amendment to this Agreement that does not receive the Consent of all Members, the Managing Member shall deliver a copy of such amendment to all Members that did not Consent to such amendment. For the avoidance of doubt, notwithstanding anything to the contrary in this Agreement, this Agreement may not be amended without the Consent of the Managing Member.

Section 14.3 Procedures for Meetings and Actions of the Members .

A. Meetings of the Members may be called only by the Managing Member. The call shall state the nature of the business to be transacted. Notice of any such meeting shall be given to all Members entitled to act at the meeting not less than ten (10) days nor more than ninety (90) days prior to the date of such meeting. Members may vote in person or by proxy at such meeting. Unless approval by a different number or proportion of the Members is required by this Agreement, or any Membership Unit Designation, the affirmative vote of a Majority in Interest of the Members shall be sufficient to approve such proposal at a meeting of the Members. Whenever the Consent of any Members is permitted or required under this Agreement, such Consent may be given at a meeting of Members or in accordance with the procedure prescribed in Section 14.3.B hereof.

B. Any action requiring the Consent of any Member or a group of Members pursuant to this Agreement, or that is required or permitted to be taken at a meeting of the Members may be taken without a meeting if a Consent in writing or by electronic transmission setting forth the action so taken or consented to is given by Members whose affirmative vote would be sufficient to approve such action or provide such Consent at a meeting of the Members. Such Consent may be in one instrument or in several instruments, and shall have the same force and effect as the affirmative vote of such Members at a meeting of the Members. Such Consent shall be filed with the Managing Member. An action so taken shall be deemed to have been taken at a meeting held on the effective date so certified. For purposes of obtaining a Consent in writing or by electronic transmission, the Managing Member may require a response within a reasonable specified time, but not less than fifteen (15) days, and failure to respond in such time period shall constitute a Consent that is consistent with the Managing Member’s recommendation with respect to the proposal; provided , however , that an action shall become effective at such time as requisite Consents are received even if prior to such specified time.

C. Each Member entitled to act at a meeting of Members may authorize any Person or Persons to act for it by proxy on all matters in which a Member is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Each proxy must be signed by the Member or its attorney-in-fact. No proxy shall be valid after the expiration of eleven (11) months from the date thereof unless otherwise provided in the proxy (or there is receipt of a proxy authorizing a later date). Every proxy shall be revocable at the pleasure of the Member executing it, such revocation to be effective upon the Company’s receipt of written notice of such revocation from the Member executing such proxy, unless such proxy states that it is irrevocable and is coupled with an interest.

D. The Managing Member may set, in advance, a record date for the purpose of determining the Members (i) entitled to Consent to any action, (ii) entitled to receive notice of or vote at any meeting of the Members or (iii) in order to make a determination of Members for any other proper purpose. Such date, in any case, shall not be prior to the close of business on the day the record date is fixed and shall be not more than ninety (90) days and, in the case of a meeting of the Members, not less than ten (10) days, before the date on which the meeting is to be held. If no record date is fixed, the record date for the determination of Members entitled to notice of or to vote at a meeting of the Members shall be at the close of business on the day on which the notice of the meeting is sent, and the record date for any other determination of Members shall be the effective date of such Member action, distribution or other event. When a determination of the Members entitled to vote at any meeting of the Members has been made as provided in this section, such determination shall apply to any adjournment thereof.

E. Each meeting of Members shall be conducted by the Managing Member or such other Person as the Managing Member may appoint pursuant to such rules for the conduct of the meeting as the Managing Member or such other Person deems appropriate in its sole and absolute discretion. Without limitation, meetings of Members may be conducted in the same manner as meetings of CLNY’s stockholders and may be held at the same time as, and as part of, the meetings of CLNY’s stockholders.

ARTICLE 15

GENERAL PROVISIONS

Section 15.1 Redemption Rights of Qualifying Parties .

A. Subject to any Non-Managing Member Ancillary Agreement, a Qualifying Party shall have the right (subject to the terms and conditions set forth herein) to require the Company to redeem all or a portion of the Membership Common Units held by such Qualifying Party (Membership Common Units that have in fact been tendered for redemption being hereafter referred to as “ Tendered Units ”) in exchange (a “ Redemption ”) for the Cash Amount payable on the Specified Redemption Date. Any Redemption shall be exercised pursuant to a Notice of Redemption delivered to the Managing Member by the Qualifying Party when exercising the Redemption right (the “ Tendering Party ”). The Company’s obligation to effect a Redemption, however, shall not arise or be binding against the Company (i) until and unless CLNY declines or fails to exercise its purchase rights pursuant to Section 15.1.B hereof following receipt of a Notice of Redemption (a “ Declination ”) and (ii) unless CLNY agrees otherwise, until the Business Day following the Cut-Off Date. In the event of a Redemption, the Cash Amount shall be delivered as a certified or bank check payable to the Tendering Party or, in the Managing Member’s sole and absolute discretion, in immediately available funds on or before the Specified Redemption Date.

B. Notwithstanding the provisions of Section 15.1.A hereof, on or before the close of business on the Cut-Off Date, CLNY may, in its sole and absolute discretion, elect to acquire some or all of the Tendered Units (the percentage of the Tendered Units so elected to be acquired, the “ Applicable Percentage ”) from the Tendering Party in exchange for the product of the REIT Shares Amount and the Applicable Percentage. If CLNY so elects, on the Specified Redemption Date the Tendering Party shall sell such number of the Tendered Units to CLNY in exchange for a number of Class A REIT Shares equal to the product of the REIT Shares Amount and the Applicable Percentage. The Tendering Party shall submit (i) such information, certification or affidavit as the CLNY may reasonably require in connection with the application of the Ownership Limit to any such acquisition and (ii) such written representations, investment letters, legal opinions or other instruments necessary, in the CLNY’s view, to effect compliance with the Securities Act. In the event of a purchase of the Tendered Units by CLNY pursuant to this Section 15.1.B, the Tendering Party shall no longer have the right to cause the Company to effect a Redemption of such Tendered Units, and, upon notice to the Tendering Party by CLNY, given on or before the close of business on the Cut-Off Date, that CLNY has elected to acquire some or all of the Tendered Units pursuant to this Section 15.1.B, the obligation of the Company to effect a Redemption of the Tendered Units as to which CLNY’s notice relates shall not accrue or arise. A number of Class A REIT Shares equal to the product of the Applicable Percentage and the REIT Shares Amount, if applicable, shall be delivered by CLNY as duly authorized, validly issued, fully paid and non-assessable Class A REIT Shares and, if applicable, Rights, free of any pledge, lien, encumbrance or restriction, other than the Ownership Limit and other restrictions provided in the Charter, the Securities Act and relevant state securities or “blue sky” laws. If the amount of Class A REIT Shares to be issued in exchange for the Tendered Units is not a whole number of Class A REIT Shares, the Tendering Party shall be paid (i) that number of Class A REIT Shares that equals the nearest whole number less than such amount plus (ii) an amount of cash that CLNY determines, in its reasonable discretion, to represent the fair value of the remaining fractional Class A REIT Share that would otherwise be payable to the Tendering Party. Neither any Tendering Party whose Tendered Units are acquired by CLNY pursuant to this Section 15.1.B, any Member, any Assignee nor any other interested Person shall have any right to require

or cause CLNY to register, qualify or list any Class A REIT Shares owned or held by such Person, whether or not such Class A REIT Shares are issued pursuant to this Section 15.1.B, with the SEC, with any state securities commissioner, department or agency, under the Securities Act or the Exchange Act or with any stock exchange; provided , however , that this limitation shall not be in derogation of any registration or similar rights granted pursuant to any other written agreement (including any Non-Managing Member Ancillary Agreement) between CLNY and any such Person. Notwithstanding any delay in such delivery, the Tendering Party shall be deemed the owner of such Class A REIT Shares and Rights for all purposes, including rights to vote or consent, receive dividends, and exercise rights, as of the Specified Redemption Date. Class A REIT Shares issued upon an acquisition of the Tendered Units by CLNY pursuant to this Section 15.1.B may contain such legends regarding restrictions under the Securities Act and applicable state securities laws as CLNY in good faith determines to be necessary or advisable in order to ensure compliance with such laws and CLNY’s charter.

C. Notwithstanding the provisions of Sections 15.1.A, 15.1.B and 15.1.I hereof, (i) no Person shall be entitled to effect a Redemption for cash or an exchange for Class A REIT Shares to the extent the ownership or right to acquire Class A REIT Shares pursuant to such exchange on the Specified Redemption Date could cause such Person (or any other Person) to violate the restrictions on ownership and transfer of Class A REIT Shares set forth in the Charter, after giving effect to any waivers or modifications of such restrictions by the Board of Directors, and (ii) no Person shall have any rights under this Agreement to acquire Class A REIT Shares which would otherwise be prohibited under the Charter, after giving effect to any waivers or modifications of such restrictions by the Board of Directors.

D. In the event of a Declination:

(1) CLNY shall give notice of such Declination to the Tendering Party on or before the close of business on the Cut-Off Date. The failure of CLNY to give notice of such Declination by the close of business on the Cut-Off Date shall be deemed to be an election by CLNY to acquire the Tendered Units in exchange for REIT Shares.

(2) The Company may elect to raise funds for the payment of the Cash Amount either (a) by requiring that CLNY contribute to the Company funds from the proceeds of a registered public offering by CLNY of Class A REIT Shares sufficient to purchase the Tendered Units or (b) from any other sources (including the sale of any Property and the incurrence of additional Debt) available to the Company.

(3) If the Cash Amount is not paid on or before the Specified Redemption Date, interest shall accrue with respect to the Cash Amount from the day after the Specified Redemption Date to and including the date on which the Cash Amount is paid at a rate equal to the Applicable Federal Short-Term Rate as published monthly by the IRS.

E. Notwithstanding the provisions of Section 15.1B hereof or Section 15.1I hereof, if CLNY’s acquisition of Tendered Units in exchange for the REIT Shares Amount would be prohibited under the Charter, then (i) CLNY shall not elect to acquire such Tendered Units, and (ii) the Company shall not be obligated to effect a Redemption of such Tendered Units. For the avoidance of doubt, unless CLNY’s acquisition of Tendered Units in exchange for the REIT Shares Amount would be prohibited under the Charter, if Tendered Units are not exchanged for Class A REIT Shares, then the Cash Amount will be paid to the Tendering Party in accordance with the terms of Section 15.1.A hereof.

F. Each Non-Managing Member covenants and agrees that all Membership Common Units delivered for redemption shall be delivered to the Company or CLNY, as the case may be, free and clear of all liens; and, notwithstanding anything contained herein to the contrary, neither CLNY nor the Company shall be under any obligation to acquire Membership Common Units which are or may be subject to any liens. Each Non-Managing Member further agrees that, if any stamp, recording, documentary or similar tax is payable with respect to the Membership Common Units as a result of the transfer thereof to the Company or the CLNY, such Tendering Party shall assume and pay such tax.

G. Notwithstanding anything herein to the contrary (but subject to Section 15.1.C hereof), with respect to any Redemption (or any tender of Membership Common Units for Redemption if the Tendered Units are acquired by CLNY pursuant to Section 15.1.B hereof) pursuant to this Section 15.1:

(1) Without the consent of the Managing Member, no Tendering Party may effect a Redemption for less than one thousand sixty-five (1,065) Membership Common Units or for any number of Membership Common Units that is not a multiple of seventy-one (71) or, if such Tendering Party holds less than one thousand sixty-five (1,065) Membership Common Units, all of the Membership Common Units held by such Tendering Party.

(2) If (i) a Tendering Party surrenders Tendered Units during the period after the Company Record Date with respect to a distribution payable to Holders of Membership Common Units, and before the record date established by CLNY for a dividend to its stockholders of some or all of its portion of such Company distribution, and (ii) CLNY elects to acquire any of such Tendered Units in exchange for Class A REIT Shares pursuant to Section 15.1.B, then such Tendering Party shall pay to CLNY on the Specified Redemption Date an amount in cash equal to the Company distribution paid or payable in respect of such Tendered Units.

(3) The consummation of such Redemption (or an acquisition of Tendered Units by CLNY pursuant to Section 15.1.B hereof, as the case may be) shall be subject to the expiration or termination of the applicable waiting period, if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

(4) The Tendering Party shall continue to own (subject, in the case of an Assignee, to the provisions of Section 11.5 hereof) all Membership Common Units subject to any Redemption, and be treated as a Member or an Assignee, as applicable, with respect to such Membership Common Units for all purposes of this Agreement, until the Specified Redemption Date and until such Tendered Units are either paid for by the Company pursuant to Section 15.1.A hereof or transferred to CLNY and paid for, by the issuance of Class A REIT Shares, pursuant to Section 15.1.B. Until a Specified Redemption Date and an acquisition of the Tendered Units by CLNY pursuant to Section 15.1.B hereof, the Tendering Party shall have no rights as a stockholder of CLNY with respect to the REIT Shares issuable in connection with such acquisition.

H. In connection with the exercise of Redemption rights pursuant to this Section 15.1, unless waived by CLNY, the Tendering Party shall submit the following to CLNY, in addition to the Notice of Redemption:

(1) A written affidavit, dated the same date as the Notice of Redemption, (a) disclosing the Beneficial and Constructive ownership (as defined in

CLNY’s charter), as determined for purposes of Code Sections 856(a)(6) and 856(h), of REIT Shares by (i) such Tendering Party and (ii) to the best of such Tendering Party’s knowledge, any Related Party, and (b) representing that, after giving effect to an acquisition of the Tendered Units by CLNY pursuant to Section 15.1B hereof, neither the Tendering Party nor, to the best of such Tendering Party’s knowledge, any Related Party, will Beneficially or Constructively own (as defined in CLNY’s charter) REIT Shares in excess of the Ownership Limit;

(2) A written representation that neither the Tendering Party nor, to the best of such Tendering Party’s knowledge, any Related Party, has any intention to acquire Beneficial or Constructive ownership (as defined in CLNY’s charter) of any additional REIT Shares prior to the Specified Redemption Date; and

(3) An undertaking to certify, at and as a condition to the closing of (i) the Redemption or (ii) the acquisition of the Tendered Units by CLNY pursuant to Section 15.1B hereof on the Specified Redemption Date, that either (a) the Beneficial and Constructive ownership (as defined in CLNY’s charter) of REIT Shares by the Tendering Party and, to the best of such Tendering Party’s knowledge, any Related Party, remain unchanged from that disclosed in the affidavit required by Section 15.1H(1), or (b) after giving effect to the Redemption or an acquisition of the Tendered Units by CLNY pursuant to Section 15.1B hereof, neither the Tendering Party nor, to the best of such Tendering Party’s knowledge, any Related Party, shall Beneficially or Constructively own (as defined in CLNY’s charter) REIT Shares in violation of the Ownership Limit.

(4) In connection with any Special Redemption, CLNY shall have the right to receive an opinion of counsel reasonably satisfactory to it to the effect that the proposed Special Redemption will not cause the Company, the Managing Member or CLNY to violate any Federal or state securities laws or regulations applicable to the Special Redemption or the issuance and sale of REIT Shares to the Tendering Party pursuant to Section 15.1B of this Agreement.

I. Stock Offering Funding Option .

(1) (a) Notwithstanding Sections 15.1.A or 15.1.B hereof (but subject to Sections 15.1.C and 15.1.F hereof), if (i) a Non-Managing Member has delivered to the Managing Member a Notice of Redemption that would result in Excess Units (together with any other Tendered Units that such Non-Managing Member agrees to treat as Excess Units, the “ Offering Units ”), and (ii) CLNY is eligible to file a registration statement under Form S-3 (or any successor form similar thereto), then CLNY may elect, in its sole and absolute discretion, to cause the Company to redeem the Offering Units with the net proceeds of an offering, whether registered under the Securities Act or exempt from such registration, underwritten, offered and sold directly to investors or through agents or other intermediaries, or otherwise distributed (a “ Stock Offering Funding ”) of a number of Class A REIT Shares (“ Offered Shares ”) equal to or greater than the REIT Shares Amount with respect to the Offering Units pursuant to the terms of this Section 15.1.I. CLNY must provide notice of their exercise of the election described in clause (x) above to purchase the Tendered Units through a Stock Offering Funding on or before the Cut-Off Date.

(b) If CLNY elects a Stock Offering Funding with respect to a Notice of Redemption, the Managing Member may give notice (a “ Single Funding Notice ”) of such election to all Non-Managing Members and require that all Members elect whether or not to effect a Redemption to be funded through such Stock Offering Funding. If a Non-Managing Member elects to effect such a Redemption, it shall give notice thereof and of the number of Common Units to be made subject thereto in writing to the Managing Member within 10 Business Days after receipt of the Single Funding Notice, and such Non-Managing Member shall be treated as a Tendering Party for all purposes of this Section 15.1.I.

(2) If CLNY elects a Stock Offering Funding, on the Specified Redemption Date, the Company shall redeem each Offering Unit that is still a Tendered Unit on such date for cash in immediately available funds in an amount (the “ Stock Offering Funding Amount ”) equal to the net proceeds per Offered Share received by CLNY from the Stock Offering Funding, determined after deduction of underwriting discounts and commissions but no other expenses of CLNY or any other Non-Managing Member related thereto, including legal and accounting fees and expenses, SEC registration fees, state blue sky and securities laws fees and expenses, printing expenses, FINRA filing fees, exchange listing fees and other out of pocket expenses (the “ Net Proceeds ”).

(3) If CLNY elects a Stock Offering Funding, the following additional terms and conditions shall apply:

(a) As soon as practicable after CLNY elects to effect a Stock Offering Funding, CLNY shall use its reasonable efforts to effect as promptly as possible a registration, qualification or compliance (including the execution of an undertaking to file post-effective amendments, appropriate qualifications under applicable blue sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act and any other governmental requirements or regulations) as would permit or facilitate the sale and distribution of the Offered Shares; provided , that, if CLNY shall deliver a certificate to the Tendering Party stating that CLNY has determined in the good faith judgment of the Board of Directors that such filing, registration or qualification would require disclosure of material non-public information, the disclosure of which would have a material adverse effect on CLNY, then CLNY may delay making any filing or delay the effectiveness of any registration or qualification for the shorter of (a) the period ending on the date upon which such information is disclosed to the public or ceases to be material or (b) an aggregate period of ninety (90) days in connection with any Stock Offering Funding.

(b) CLNY shall advise each Tendering Party, regularly and promptly upon any request, of the status of the Stock Offering Funding process, including the timing of all filings, the selection of and understandings with underwriters, agents, dealers and brokers, the nature and contents of all communications with the SEC and other governmental bodies, the expenses related to the Stock Offering Funding as they are being incurred, the nature of marketing activities, and any other matters reasonably related to the timing, price and expenses relating to the Stock Offering Funding and the compliance by CLNY with its obligations with respect thereto. CLNY will have reasonable procedures whereby the Tendering Party with the largest number of Offered Units (the “ Lead Tendering Party ”) may represent all the Tendering Parties in connection with the Stock Offering Funding by allowing it to participate in meetings with the

underwriters of the Stock Offering Funding. In addition, CLNY and each Tendering Party may, but shall be under no obligation to, enter into understandings in writing (“ Pricing Agreements ”) whereby the Tendering Party will agree in advance as to the acceptability of a Net Proceeds amount at or below a specified amount. Furthermore, CLNY shall establish pricing notification procedures with each such Tendering Party, such that the Tendering Member will have the maximum opportunity practicable to determine whether to become a Withdrawing Member pursuant to Section 15.1.I(3)(c) below.

(c) CLNY, upon notification of the price per Class A REIT Share in the Stock Offering Funding from the managing underwriter(s), in the case of a registered public offering, or lead placement agent(s), in the event of an unregistered offering, engaged by CLNY in order to sell the Offered Shares, shall immediately use its reasonable efforts to notify each Tendering Party of the price per REIT Share in the Stock Offering Funding and resulting Net Proceeds. Each Tendering Party shall have one hour from the receipt of such written notice (as such time may be extended by CLNY) to elect to withdraw its Redemption (a Tendering Party making such an election being a “ Withdrawing Member ”), and Membership Common Units with a REIT Shares Amount equal to such excluded Offered Shares shall be considered to be withdrawn from the related Redemption; provided , however , that CLNY shall keep each of the Tendering Parties reasonably informed as to the likely timing of delivery of its notice. If a Tendering Party, within such time period, does not notify CLNY of such Tendering Party’s election not to become a Withdrawing Member, then such Tendering Party shall, except as otherwise provided in a Pricing Agreement, be deemed not to have withdrawn from the Redemption, without liability to CLNY. To the extent that CLNY is unable to notify any Tendering Party, such unnotified Tendering Party shall, except as otherwise provided in any Pricing Agreement, be deemed not to have elected to become a Withdrawing Member. Each Tendering Party whose Redemption is being funded through the Stock Offering Funding who does not become a Withdrawing Member shall have the right, subject to the approval of the managing underwriter(s) or placement agent(s) and restrictions of any applicable securities laws, to submit for Redemption additional Membership Common Units in a number no greater than the number of Membership Common Units withdrawn. If more than one Tendering Party so elects to redeem additional Membership Common Units, then such Membership Common Units shall be redeemed on a pro rata basis, based on the number of additional Membership Common Units sought to be so redeemed.

(d) CLNY shall take all reasonable action in order to effectuate the sale of the Offered Shares including the entering into of an underwriting or placement agreement in customary form with the managing underwriter(s) or placement agent(s) selected for such underwriting. Notwithstanding any other provision of this Agreement, if the managing underwriter(s) or placement agent(s) advises CLNY in writing that marketing factors require a limitation of the number of shares to be offered, then CLNY shall so advise all Tendering Parties and the number of Membership Common Units to be sold to CLNY pursuant to the Redemption shall be allocated among all Tendering Parties in proportion, as nearly as practicable, to the respective number of Membership Common Units as to which each Tendering Party elected to effect a Redemption. Notwithstanding anything to the contrary in this Agreement, if CLNY is also offering to sell shares for purposes other than to fund the redemption of Offering Units and to pay related expenses, then those other shares may in CLNY’s sole and absolute discretion be given priority over any shares to be sold in the Stock Offering Funding, and any shares to be sold in the

Stock Offering Funding shall be removed from the offering prior to removing shares the proceeds of which would be used for other purposes of CLNY. No Offered Shares excluded from the underwriting by reason of the managing underwriter’s or placement agent’s marketing limitation shall be included in such offering.

Section 15.2 Addresses and Notice . Any notice, demand, request or report required or permitted to be given or made to a Member or Assignee under this Agreement shall be in writing and shall be deemed given or made when delivered in person or when sent by first class United States mail or by other means of written or electronic communication (including by telecopy, facsimile, electronic mail or commercial courier service) to the Member, or Assignee at the address for such Member set forth in the Register, or such other address of which the Member shall notify the Managing Member in accordance with this Section 15.2.

Section 15.3 Titles and Captions . All article or Section titles or captions in this Agreement are for convenience only. They shall not be deemed part of this Agreement and in no way define, limit, extend or describe the scope or intent of any provisions hereof.

Section 15.4 Further Action . The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.

Section 15.5 Binding Effect . This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.

Section 15.6 Waiver .

A. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach or any other covenant, duty, agreement or condition.

B. The restrictions, conditions and other limitations on the rights and benefits of the Members contained in this Agreement, and the duties, covenants and other requirements of performance or notice by the Members, are for the benefit of the Company and may be waived or relinquished by the Managing Member, in its sole and absolute discretion, on behalf of the Company in one or more instances from time to time and at any time; provided , however , that any such waiver or relinquishment may not be made if it would have the effect of (i) creating liability for any other Member, (ii) causing the Company to cease to qualify as a limited liability company, (iii) reducing the amount of cash otherwise distributable to the Members (other than any such reduction that affects all of the Members holding the same class or series of Membership Units on a uniform or pro rata basis, if approved by a Majority in Interest of the Non-Managing Members holding such class or series of Membership Units), (iv) resulting in the classification of the Company as an association or publicly traded partnership taxable as a corporation or (v) violating the Securities Act, the Exchange Act or any state “blue sky” or other securities laws; provided , further , that any waiver relating to compliance with the Ownership Limit or other restrictions in the Charter shall be made and shall be effective only as provided in the Charter.

Section 15.7 Counterparts . This Agreement may be executed in counterparts, all of which together shall constitute one agreement binding on all the parties hereto, notwithstanding that all such parties are not signatories to the original or the same counterpart. Each party shall become bound by this Agreement immediately upon affixing its signature hereto.

Section 15.8 Applicable Law; Consent to Jurisdiction; Jury Trial .

A. This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law. In the event of a conflict between any provision of this Agreement and any non-mandatory provision of the Act, the provisions of this Agreement shall control and take precedence.

B. Each Member hereby (i) submits to the non-exclusive jurisdiction of the Delaware Court of Chancery or, if such court does not have subject matter jurisdiction, any federal court sitting in the State of Delaware (collectively, the “ Delaware Courts ”), with respect to any dispute arising out of this Agreement or any transaction contemplated hereby to the extent such courts would have subject matter jurisdiction with respect to such dispute, (ii) irrevocably waives, and agrees not to assert by way of motion, defense, or otherwise, in any such action, any claim that it is not subject personally to the jurisdiction of any of the Delaware Courts, that its property is exempt or immune from attachment or execution, that the action is brought in an inconvenient forum, or that the venue of the action is improper, (iii) agrees that notice or the service of process in any action, suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby shall be properly served or delivered if delivered to such Member at such Member’s last known address as set forth in the Company’s books and records, and (iv) IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

Section 15.9 Entire Agreement . This Agreement contains all of the understandings and agreements between and among the Members with respect to the subject matter of this Agreement and the rights, interests and obligations of the Members with respect to the Company. Notwithstanding any provision in this Agreement or any Membership Unit Designation to the contrary, including any provisions relating to amending this Agreement, the Members hereby acknowledge and agree that the Managing Member, without the approval of any other Member, may enter into side letters or similar written agreements with Members that are not Affiliates of the Managing Member or CLNY, executed contemporaneously with the admission of such Member to the Company, which may have the effect of establishing rights under, or altering or supplementing the terms of, this Agreement or any Membership Unit Designation, as negotiated with such Member and which the Managing Member in its sole and absolute discretion deems necessary, desirable or appropriate. The parties hereto agree that any terms, conditions or provisions contained in such side letters or similar written agreements with a Member shall govern with respect to such Member notwithstanding the provisions of this Agreement.

Section 15.10 Invalidity of Provisions . If any provision of this Agreement is or becomes invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby.

Section 15.11 Limitation to Preserve REIT Status . Notwithstanding anything else in this Agreement, with respect to any period in which CLNY has elected to be treated as a REIT for federal income tax purposes, to the extent that the amount paid, credited, distributed or reimbursed by the Company to any REIT Member or its officers, directors, employees or agents, whether as a reimbursement, fee, expense or indemnity (a “ REIT Payment ”), would constitute gross income to the REIT Member (as determined for purposes of Code Section 856(c)(2) or Code Section 856(c)(3)), then, notwithstanding any other provision of this Agreement, the amount of such REIT Payments, as selected by the Managing Member in its discretion from among items of potential distribution, reimbursement, fees, expenses and indemnities, shall be reduced for any Fiscal Year so that the REIT Payments, as so reduced, for or with respect to such REIT Member shall not exceed the lesser of:

(i) an amount equal to the excess, if any, of (a) four and nine-tenths percent (4.9%) of the REIT Member’s total gross income (but excluding the amount of any REIT Payments) for the Fiscal Year that is described in subsections (A) through (I) of Code Section 856(c)(2) over (b) the amount of gross income (within the meaning of Code Section 856(c)(2)) derived by the REIT Member from sources other than those described in subsections (A) through (I) of Code Section 856(c)(2) (but not including the amount of any REIT Payments); or

(ii) an amount equal to the excess, if any, of (a) twenty-four percent (24%) of the REIT Member’s total gross income (but excluding the amount of any REIT Payments) for the Fiscal Year that is described in subsections (A) through (I) of Code Section 856(c)(3) over (b) the amount of gross income (within the meaning of Code Section 856(c)(3)) derived by the REIT Member from sources other than those described in subsections (A) through (I) of Code Section 856(c)(3) (but not including the amount of any REIT Payments);

provided , however , that REIT Payments in excess of the amounts set forth in clauses (i) and (ii) above may be made if the Managing Member, as a condition precedent, obtains an opinion of tax counsel that the receipt of such excess amounts should not adversely affect the REIT Member’s ability to qualify as a REIT. To the extent that REIT Payments may not be made in a Fiscal Year as a consequence of the limitations set forth in this Section 15.11, such REIT Payments shall carry over and shall be treated as arising in the following Fiscal Year if such carry over does not adversely affect the REIT Member’s ability to qualify as a REIT provided, however, that such amounts shall not carry over for more than five Fiscal Years, and if not paid within such five Fiscal Year period, shall expire; and provided further that (i) as REIT Payments are made, such payments shall be applied first to carry over amounts outstanding, if any, and (ii) with respect to carry over amounts for more than one Fiscal Year, such payments shall be applied to the earliest Fiscal Year first. The purpose of the limitations contained in this Section 15.11 is to prevent any REIT Member from failing to qualify as a REIT under the Code by reason of such REIT Member’s share of items, including distributions, reimbursements, fees, expenses or indemnities, receivable directly or indirectly from the Company, and this Section 15.11 shall be interpreted and applied to effectuate such purpose.

Section 15.12 No Partition . No Member nor any successor-in-interest to a Member shall have the right while this Agreement remains in effect to have any property of the Company partitioned, or to file a complaint or institute any proceeding at law or in equity to have such property of the Company partitioned, and each Member, on behalf of itself and its successors and assigns hereby waives any such right. It is the intention of the Members that the rights of the parties hereto and their successors-in-interest to Company property, as among themselves, shall be governed by the terms of this Agreement, and that the rights of the Members and their respective successors-in-interest shall be subject to the limitations and restrictions as set forth in this Agreement.

Section 15.13 No Third-Party Rights Created Hereby . The provisions of this Agreement are solely for the purpose of defining the interests of the Holders, inter se ; and no other person, firm or entity ( i.e. , a party who is not a signatory hereto or a permitted successor to such signatory hereto) shall have any right, power, title or interest by way of subrogation or otherwise, in and to the rights, powers, title and provisions of this Agreement. No creditor or other third party having dealings with the Company (other than as expressly set forth herein with respect to Indemnitees) shall have the right to enforce the right or obligation of any Member to make Capital Contributions or loans to the Company or to pursue any other right or remedy hereunder or at law or in equity. None of the rights or obligations of the Members herein set forth to make Capital Contributions or loans to the Company shall be deemed an asset of the Company for any purpose by any creditor or other third party, nor may any such rights or obligations be sold, Transferred or assigned by the Company or pledged or encumbered by the Company to secure any debt or other obligation of the Company or any of the Members.

Section 15.14 No Rights as Stockholders . Nothing contained in this Agreement shall be construed as conferring upon the Holders of Membership Units any rights whatsoever as stockholders of CLNY, including any right to receive dividends or other distributions made to stockholders of CLNY or to vote or to consent or receive notice as stockholders in respect of any meeting of stockholders for the election of directors of CLNY or any other matter.

IN WITNESS WHEREOF, this Agreement has been executed as of the date first written above.


MEMBERS :

COLONY CAPITAL, INC.

By:		/s/ Darren J. Tangen
		Name: Darren J. Tangen
		Title: Chief Financial Officer, Chief Operating Officer and Treasurer

COLONY CAPITAL, LLC

By:		/s/ Mark M. Hedstrom
Name:		Mark M. Hedstrom
Title:		Vice President

CCH MANAGEMENT PARTNERS I, LLC

By:		/s/ Mark M. Hedstrom
Name:		Mark M. Hedstrom
Title:		Vice President

FHB HOLDING LLC

By:		/s/ Henry G. Brauer
Name:		Henry G. Brauer
Title:		Manager

RICHARD B. SALTZMAN

/s/ Richard B. Saltzman
Name:		Richard B. Saltzman

EXHIBIT A: EXAMPLES REGARDING ADJUSTMENT FACTOR

For purposes of the following examples, it is assumed that (a) the Adjustment Factor in effect on December 31, 2015 is 1.0 and (b) on January 1, 2016 (the “ Company Record Date ” for purposes of these examples), prior to the events described in the examples, there are 100 REIT Shares issued and outstanding.

Example 1

On the Company Record Date, CLNY declares a dividend on its outstanding REIT Shares in REIT Shares. The amount of the dividend is one REIT Share paid in respect of each REIT Share owned. Pursuant to Paragraph (i) of the definition of “Adjustment Factor,” the Adjustment Factor shall be adjusted on the Company Record Date, effective immediately after the stock dividend is declared, as follows:

1.0 * 200/100 = 2.0

Accordingly, the Adjustment Factor after the stock dividend is declared is 2.0.

Example 2

On the Company Record Date, CLNY distributes options to purchase REIT Shares to all holders of its REIT Shares. The amount of the distribution is one option to acquire one REIT Share in respect of each REIT Share owned. The strike price is $4.00 a share. The Value of a REIT Share on the Company Record Date is $5.00 per share. Pursuant to Paragraph (ii) of the definition of “Adjustment Factor,” the Adjustment Factor shall be adjusted on the Company Record Date, effective immediately after the options are distributed, as follows:

1.0 * (100 + 100)/(100 + [100 * $4.00/$5.00]) = 1.1111

Accordingly, the Adjustment Factor after the options are distributed is 1.1111. If the options expire or become no longer exercisable, then the retroactive adjustment specified in Paragraph (ii) of the definition of “Adjustment Factor” shall apply.

Example 3

On the Company Record Date, CLNY distributes assets to all holders of its REIT Shares. The amount of the distribution is one asset with a fair market value (as determined by the Managing Member) of $1.00 in respect of each REIT Share owned. It is also assumed that the assets do not relate to assets received by the Managing Member pursuant to a pro rata distribution by the Company. The Value of a REIT Share on the Company Record Date is $5.00 a share. Pursuant to Paragraph (iii) of the definition of “Adjustment Factor,” the Adjustment Factor shall be adjusted on the Company Record Date, effective immediately after the assets are distributed, as follows:

1.0 * $5.00/($5.00 - $1.00) = 1.25

Accordingly, the Adjustment Factor after the assets are distributed is 1.25.

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EXHIBIT B: NOTICE OF REDEMPTION

Colony Financial, Inc.

2450 Broadway, Sixth Floor

Santa Monica, CA 90404

The undersigned Member or Assignee hereby irrevocably tenders for Redemption Membership Common Units in Colony Capital Operating Company, LLC in accordance with the terms of the Second Amended and Restated Limited Liability Agreement of Colony Capital Operating Company, LLC, dated as of April 2, 2015, as amended (the “ Agreement ”), and the Redemption rights referred to therein. All capitalized terms used and not otherwise defined herein shall have the respective meanings ascribed to them in the Agreement. The undersigned Member or Assignee:

(a) undertakes (i) to surrender such Membership Common Units at the closing of the Redemption and (ii) to furnish to CLNY, prior to the Specified Redemption Date, the documentation, instruments and information required under Section 15.1.H of the Agreement;

(b) directs that the certified check representing the Cash Amount, or the REIT Shares Amount, as applicable, deliverable upon the closing of such Redemption be delivered to the address specified below;

(c) represents, warrants, certifies and agrees that: (i) the undersigned Member or Assignee is a Qualifying Party; (ii) the undersigned Member or Assignee has, and at the closing of the Redemption will have, good, marketable and unencumbered title to such Membership Common Units, free and clear of the rights or interests of any other person or entity; (iii) the undersigned Member or Assignee has, and at the closing of the Redemption will have, the full right, power and authority to tender and surrender such Common Units as provided herein; (iv) the undersigned Member or Assignee, and the tender and surrender of such Common Units for Redemption as provided herein complies with all conditions and requirements for redemption of Membership Common Units set forth in the Agreement; and (v) the undersigned Member or Assignee has obtained the consent or approval of all persons and entities, if any, having the right to consent to or approve such tender and surrender; and

(d) acknowledges that the undersigned will continue to own such Membership Common Units unless and until either (1) such Membership Common Units are acquired by CLNY pursuant to Section 15.1.B of the Agreement or (2) such redemption transaction closes.


Dated:

Name of Member or Assignee:

Signature of Member or Assignee

Street Address

City, State and Zip Code

Social security or identifying number

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Signature Medallion Guaranteed by:

Issue Check Payable to (or shares in the name of):

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EXHIBIT C: MEMBER NOTICE OF LTIP CONVERSION ELECTION

The undersigned holder of LTIP Units hereby irrevocably (i) elects to convert the number of LTIP Units in Colony Capital Operating Company, LLC (the “ Company ”) set forth below into Membership Common Units in accordance with the terms of the Second Amended and Restated Limited Liability Agreement of the Company, as amended; and (ii) directs that any cash in lieu of Membership Common Units that may be deliverable upon such conversion be delivered to the address specified below. The undersigned hereby represents, warrants, and certifies that the undersigned (a) has title to such LTIP Units, free and clear of the rights of interests of any other person or entity other than the Company; (b) has the full right, power, and authority to cause the conversion of such LTIP Units as provided herein; and (c) has obtained the consent or approval of all persons or entities, if any, having the right to consent or approve such conversion.


Name of Holder:
		(Please Print: Exact Name as Registered with Company)



Number of LTIP Units to be Converted:



Date of this Notice:




(Signature of Holder: Sign Exact Name as Registered with Company)


(Street Address)




(City) (State) (Zip Code)

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EXHIBIT D: COMPANY NOTICE OF LTIP CONVERSION ELECTION

Colony Capital Operating Company, LLC (the “ Company ”) hereby irrevocably elects to cause the number of LTIP Units held by the holder of LTIP Units set forth below to be converted into Membership Common Units in accordance with the terms of the Second Amended and Restated Limited Liability Agreement of the Company, as amended.


Name of Holder:
		(Please Print: Exact Name as Registered with Company)



Number of LTIP Units to be Converted:



Date of this Notice:

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EXHIBIT E: SERIES A COMPANY PREFERRED UNIT DESIGNATION

A. Designation and Number . A series of Company Preferred Units, designated as Series A Company Preferred Units, is hereby established. The number of Series A Company Preferred Units shall be 10,400,000.

B. Rank . The Series A Company Preferred Units will, with respect to rights to receive distributions and to participate in distributions or payments upon liquidation, dissolution or winding up of the Company, rank (a) senior to the Membership Common Units and any other class of Membership Units of the Company, now or hereafter issued and outstanding, the terms of which provide that such Membership Units rank, as to distributions and upon liquidation, dissolution or winding up of the Company, junior to such Series A Company Preferred Units (“ Junior Units ”), (b) on a parity with the Series B Company Preferred Units (as defined in the Limited Liability Company Agreement of the Company) and any Membership Units the Company may authorize or issue in the future that, pursuant to the terms thereof, rank on parity with the Series A Company Preferred Units with respect to distributions or payments in the event of the liquidation, dissolution or winding up of the Company (“ Parity Units ”); and (c) junior to all Membership Units of the Company the terms of which specifically provide that such Membership Units rank senior to the Series A Company Preferred Units with respect to distributions or payments in the event of the liquidation, dissolution or winding up of the Company (“ Senior Units ”). Any authorization or issuance of Senior Units would require the affirmative vote of the holders of at least two-thirds of the outstanding Series A Company Preferred Units voting together as a single class with all other classes or series of Parity Units upon which like voting rights have been conferred and are exercisable. Any convertible or exchangeable debt securities that the Company may issue are not considered to be equity securities for these purposes.

C. Distributions .

(i) CLNY, in its capacity as the holder of the then outstanding Series A Company Preferred Units, shall be entitled to receive, when, as and if authorized by the Company, out of funds legally available for payment of distributions, cumulative cash distributions at the rate of 8.50% per annum of the $25.00 liquidation preference of each Series A Company Preferred Unit (equivalent to $2.125 per annum per Series A Company Preferred Unit).

(ii) Distributions on each outstanding Series A Company Preferred Unit shall be cumulative from and including January 15, 2015 and shall be payable (i) for the period from January 15, 2015 to April 14, 2015, on April 15, 2015, and (ii) for each quarterly distribution period thereafter, quarterly in equal amounts in arrears on the 15th day of each January, April, July and October (each such day being hereinafter called a “ Series A Distribution Payment Date ”) at the then applicable annual rate; provided, however, that if any Series A Distribution Payment Date falls on any day other than a Business Day (as defined in Annex I to the Restated Charter of CLNY (which contains the terms of articles supplementary establishing and fixing the rights and preferences of the Series A Preferred Shares) (the “ Series A Preferred Share Terms” )), the distribution that would otherwise have been payable on such Series A Distribution Payment Date may be paid on the next succeeding Business Day with the same force and effect as if paid on such Series A Distribution Payment Date, and no interest or other sums shall accrue on the amount so payable from such Series A Distribution Payment Date to such next succeeding Business Day. Each distribution is payable to holders of record as they appear on the books and records of the Company at the close of business on the record date, not exceeding 30 days preceding the applicable Series A Distribution Payment Date, as shall be fixed by the Company. Distributions shall accumulate from January 15, 2015 or the most recent Series A Distribution Payment Date to which distribution have been paid, whether or not in any such distribution period or periods there shall be funds legally available for the payment of such distributions, whether the Company has earnings or whether

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such distributions are authorized. No interest, or sum of money in lieu of interest, shall be payable in respect of any distribution payment or payments on the Series A Company Preferred Units that may be in arrears. Holders of the Series A Company Preferred Units shall not be entitled to any distributions, whether payable in cash, property or stock, in excess of full cumulative distributions, as herein provided, on the Series A Company Preferred Units. Distributions payable on the Series A Company Preferred Units for any period greater or less than a full distribution period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Distributions payable on the Series A Company Preferred Units for each full distribution period will be computed by dividing the applicable annual distribution rate by four. After full cumulative distributions on the Series A Company Preferred Units have been paid, the holders of Series A Company Preferred Units will not be entitled to any further distributions with respect to that distribution period.

(iii) So long as any Series A Company Preferred Units are outstanding, no distributions, except as described in the immediately following sentence, shall be authorized and declared or paid or set apart for payment on any series or class or classes of Parity Units for any period unless full cumulative distributions have been declared and paid or are contemporaneously declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Series A Company Preferred Units for all prior distribution periods. When distributions are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all distributions authorized and declared upon the Series A Company Preferred Units and all distributions authorized and declared upon any other series or class or classes of Parity Units shall be authorized and declared ratably in proportion to the respective amounts of distributions accumulated and unpaid on the Series A Company Preferred Units and such Parity Units.

(iv) So long as any Series A Company Preferred Units are outstanding, no distributions (other than distributions paid solely in Junior Units of, or in options, warrants or rights to subscribe for or purchase, Junior Units) shall be authorized and declared or paid or set apart for payment or other distribution authorized and declared or made upon Junior Units, nor shall any Junior Units be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Membership Units made for purposes of and in compliance with requirements of an employee incentive or benefit plan of CLNY or any subsidiary, or a conversion into or exchange for Junior Units or redemptions for the purpose of preserving CLNY’s qualification as a REIT (as defined in the Charter), or redemptions of Membership Units pursuant to Article 15 of the Limited Liability Company Agreement of the Company), for any consideration (or any monies to be paid to or made available for a sinking fund for the redemption of any such units) by the Company, directly or indirectly (except by conversion into or exchange for Junior Units), unless in each case full cumulative distributions on all outstanding shares of Series A Company Preferred Units and any Parity Units at the time such distributions are payable shall have been paid or set apart for payment for all past distribution periods with respect to the Series A Company Preferred Units and all past distribution periods with respect to such Parity Units.

(v) Any distribution payment made on the Series A Company Preferred Units shall first be credited against the earliest accrued but unpaid distribution due with respect to such Series A Company Preferred Units which remains payable.

(vi) Except as provided herein, the Series A Company Preferred Units shall not be entitled to participate in the earnings or assets of the Company.

(vii) As used herein, the term “distribution” does not include distributions payable solely in Junior Units on Junior Units, or in options, warrants or rights to holders of Junior Units to subscribe for or purchase any Junior Units.

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D. Liquidation Preference .

(i) In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, before any payment or distribution of the assets of the Company shall be made to or set apart for the holders of Junior Units, the holders of the Series A Company Preferred Units shall be entitled to receive $25.00 per Series A Company Preferred Unit (the “ Liquidation Preference ”) plus an amount per Series A Company Preferred Unit equal to all accrued and unpaid distributions (whether or not earned or declared) thereon to, but not including, the date of final distribution to such holders; but such holders of the Series A Company Preferred Units shall not be entitled to any further payment. If, upon any such liquidation, dissolution or winding up of the Company, the assets of the Company, or proceeds thereof, distributable among the holders of the Series A Company Preferred Units shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other Parity Units, then such assets, or the proceeds thereof, shall be distributed among the holders of such Series A Company Preferred Units and any such other Parity Units ratably in accordance with the respective amounts that would be payable on such Series A Company Preferred Units and any such other Parity Units if all amounts payable thereon were paid in full. For the purposes of this Section D , none of (i) a consolidation or merger of the Company with one or more entities, (ii) a statutory unit exchange by the Company, or (iii) a sale or transfer of all or substantially all of the Company’s assets shall be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Company.

(ii) Until payment shall have been made in full to the holders of the Series A Company Preferred Units, as provided in this Se ction D , and to the holders of Parity Units, subject to any terms and provisions applying thereto, no payment will be made to any holder of Junior Units upon the liquidation, dissolution or winding up of the Company. Subject to the rights of the holders of Parity Units, upon any liquidation, dissolution or winding up of the Company, after payment shall have been made in full to the holders of the Series A Company Preferred Units, as provided in this Section D , any series or class or classes of Junior Units shall, subject to any respective terms and provisions applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Series A Company Preferred Units shall not be entitled to share therein.

E. Redemption . In connection with the redemption by CLNY of any Series A Preferred Shares in accordance with the provisions of the Series A Preferred Share Terms, and at such times as CLNY is required or determines to make, deposit or set aside such payment, the Company shall provide cash to CLNY for such purpose which shall be equal to the redemption price (as set forth in the Series A Preferred Share Terms), plus any accrued and unpaid dividends on the Series A Preferred Shares (whether or not declared), to, but not including, the redemption date, and one Series A Company Preferred Unit shall be concurrently redeemed with respect to each Series A Preferred Share so redeemed by CLNY. If a redemption date for Series A Preferred Shares falls after a record date for a Series A Preferred Shares dividend payment and prior to the corresponding dividend payment date, then the Company shall provide cash to CLNY equal to the dividend payable on such Series A Preferred Shares on such dividend payment date notwithstanding the redemption of such Series A Preferred Shares and corresponding Series A Company Preferred Units prior to such dividend payment date. From and after the applicable redemption date, the Series A Company Preferred Units so redeemed shall no longer be outstanding and all rights hereunder, to distributions or otherwise, with respect to such Series A Company Preferred Units shall cease. Any Series A Company Preferred Units so redeemed may be reissued to CLNY at such time as CLNY reissues a corresponding number of Series A Preferred Shares so redeemed or repurchased, in exchange for the contribution by CLNY to the Company of the proceeds from such reissuance.

F. Voting Rights . Except as required by applicable law or the Limited Liability Company Agreement of the Company, the holder of the Series A Company Preferred Units, as such, shall have no voting rights.

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G. Conversion . The Series A Company Preferred Units are not convertible into or exchangeable for any other property or securities of the Company, except as provided herein.

(i) In the event of a conversion of any Series A Preferred Shares into common stock of CLNY, par value $0.01 per share (“ Common Stock ”), in accordance with the Series A Preferred Share Terms, upon conversion of such Series A Preferred Shares, the Company shall convert an equal whole number of the Series A Company Preferred Units into Membership Common Units as such Series A Preferred Shares are converted into shares of Common Stock. In the event of a conversion of any Series A Preferred Shares into consideration other than Common Stock in accordance with the Series A Preferred Share Terms, the Company shall retire a number of Series A Company Preferred Units equal to the number of Series A Preferred Shares converted into such other form of consideration. In the event of a conversion of the Series A Preferred Shares into Common Stock, to the extent CLNY is required to pay cash in lieu of fractional shares of Common Stock pursuant to the Series A Preferred Share Terms in connection with such conversion, the Company shall distribute an equal amount of cash to CLNY.

(ii) Following any such conversion or retirement by the Company pursuant to this Section G , the Company shall make such revisions to the Limited Liability Company Agreement of the Company as it determines are necessary to reflect such conversion.

H. Restriction on Ownership . The Series A Company Preferred Units shall be owned and held solely by CLNY.

I. Allocations . Allocations of the Company’s items of income, gain, loss and deduction with respect to the Series A Company Preferred Units shall be allocated to CLNY as the sole holder of Series A Company Preferred Units in accordance with Article 6 of the Limited Liability Company Agreement of the Company.

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EXHIBIT F: SERIES B COMPANY PREFERRED UNIT DESIGNATION

A. Designation and Number . A series of Company Preferred Units, designated as Series B Company Preferred Units, is hereby established. The number of Series B Company Preferred Units shall be 3,450,000.

B. Rank . The Series B Company Preferred Units will, with respect to rights to receive distributions and to participate in distributions or payments upon liquidation, dissolution or winding up of the Company, rank (a) senior to the Membership Common Units and any other class of Membership Units of the Company, now or hereafter issued and outstanding, the terms of which provide that such Membership Units rank, as to distributions and upon liquidation, dissolution or winding up of the Company, junior to such Series B Company Preferred Units (“ Junior Units ”), (b) on a parity with the Series A Company Preferred Units (as defined in the Limited Liability Company Agreement of the Company) and any Membership Units the Company may authorize or issue in the future that, pursuant to the terms thereof, rank on parity with the Series B Company Preferred Units with respect to distributions or payments in the event of the liquidation, dissolution or winding up of the Company (“ Parity Units ”); and (c) junior to all Membership Units of the Company the terms of which specifically provide that such Membership Units rank senior to the Series B Company Preferred Units with respect to distributions or payments in the event of the liquidation, dissolution or winding up of the Company (“ Senior Units ”). Any authorization or issuance of Senior Units would require the affirmative vote of the holders of at least two-thirds of the outstanding Series B Company Preferred Units voting together as a single class with all other classes or series of Parity Units upon which like voting rights have been conferred and are exercisable. Any convertible or exchangeable debt securities that the Company may issue are not considered to be equity securities for these purposes.

C. Distributions .

(i) CLNY, in its capacity as the holder of the then outstanding Series B Company Preferred Units, shall be entitled to receive, when, as and if authorized by the Company, out of funds legally available for payment of distributions, cumulative cash distributions at the rate of 7.50% per annum of the $25.00 liquidation preference of each Series B Company Preferred Unit (equivalent to $1.875 per annum per Series B Company Preferred Unit).

(ii) Distributions on each outstanding Series B Company Preferred Unit shall be cumulative from and including January 15, 2015 and shall be payable (i) for the period from January 15, 2015 to April 14, 2015, on April 15, 2015, and (ii) for each quarterly distribution period thereafter, quarterly in equal amounts in arrears on the 15th day of each January, April, July and October (each such day being hereinafter called a “ Series B Distribution Payment Date ”) at the then applicable annual rate; provided, however, that if any Series B Distribution Payment Date falls on any day other than a Business Day (as defined in Annex II to the Restated Charter of CLNY (which contains the terms of articles supplementary establishing and fixing the rights and preferences of the Series B Preferred Shares) (the “ Series B Preferred Share Terms” ), the distribution that would otherwise have been payable on such Series B Distribution Payment Date may be paid on the next succeeding Business Day with the same force and effect as if paid on such Series B Distribution Payment Date, and no interest or other sums shall accrue on the amount so payable from such Series B Distribution Payment Date to such next succeeding Business Day. Each distribution is payable to holders of record as they appear on the books and records of the Company at the close of business on the record date, not exceeding 30 days preceding the applicable Series B Distribution Payment Date, as shall be fixed by the Company. Distributions shall accumulate from January 15, 2015 or the most recent Series B Distribution Payment Date to which distribution have been paid, whether or not in any such distribution period or periods there shall be funds legally available for the payment of such distributions, whether the Company has earnings or whether

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such distributions are authorized. No interest, or sum of money in lieu of interest, shall be payable in respect of any distribution payment or payments on the Series B Company Preferred Units that may be in arrears. Holders of the Series B Company Preferred Units shall not be entitled to any distributions, whether payable in cash, property or stock, in excess of full cumulative distributions, as herein provided, on the Series B Company Preferred Units. Distributions payable on the Series B Company Preferred Units for any period greater or less than a full distribution period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Distributions payable on the Series B Company Preferred Units for each full distribution period will be computed by dividing the applicable annual distribution rate by four. After full cumulative distributions on the Series B Company Preferred Units have been paid, the holders of Series B Company Preferred Units will not be entitled to any further distributions with respect to that distribution period.

(iii) So long as any Series B Company Preferred Units are outstanding, no distributions, except as described in the immediately following sentence, shall be authorized and declared or paid or set apart for payment on any series or class or classes of Parity Units for any period unless full cumulative distributions have been declared and paid or are contemporaneously declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Series B Company Preferred Units for all prior distribution periods. When distributions are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all distributions authorized and declared upon the Series B Company Preferred Units and all distributions authorized and declared upon any other series or class or classes of Parity Units shall be authorized and declared ratably in proportion to the respective amounts of distributions accumulated and unpaid on the Series B Company Preferred Units and such Parity Units.

(iv) So long as any Series B Company Preferred Units are outstanding, no distributions (other than distributions paid solely in Junior Units of, or in options, warrants or rights to subscribe for or purchase, Junior Units) shall be authorized and declared or paid or set apart for payment or other distribution authorized and declared or made upon Junior Units, nor shall any Junior Units be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Membership Units made for purposes of and in compliance with requirements of an employee incentive or benefit plan of CLNY or any subsidiary, or a conversion into or exchange for Junior Units or redemptions for the purpose of preserving CLNY’s qualification as a REIT (as defined in the Charter), or redemptions of Membership Units pursuant to Article 15 of the Limited Liability Company Agreement of the Company), for any consideration (or any monies to be paid to or made available for a sinking fund for the redemption of any such units) by the Company, directly or indirectly (except by conversion into or exchange for Junior Units), unless in each case full cumulative distributions on all outstanding shares of Series B Company Preferred Units and any Parity Units at the time such distributions are payable shall have been paid or set apart for payment for all past distribution periods with respect to the Series B Company Preferred Units and all past distribution periods with respect to such Parity Units.

(v) Any distribution payment made on the Series B Company Preferred Units shall first be credited against the earliest accrued but unpaid distribution due with respect to such Series B Company Preferred Units which remains payable.

(vi) Except as provided herein, the Series B Company Preferred Units shall not be entitled to participate in the earnings or assets of the Company.

F-2

D. Liquidation Preference .

(i) In the event of any liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, before any payment or distribution of the assets of the Company shall be made to or set apart for the holders of Junior Units, the holders of the Series B Company Preferred Units shall be entitled to receive $25.00 per Series B Company Preferred Unit (the “ Liquidation Preference ”) plus an amount per Series B Company Preferred Unit equal to all accrued and unpaid distributions (whether or not earned or declared) thereon to, but not including, the date of final distribution to such holders; but such holders of the Series B Company Preferred Units shall not be entitled to any further payment. If, upon any such liquidation, dissolution or winding up of the Company, the assets of the Company, or proceeds thereof, distributable among the holders of the Series B Company Preferred Units shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other Parity Units, then such assets, or the proceeds thereof, shall be distributed among the holders of such Series B Company Preferred Units and any such other Parity Units ratably in accordance with the respective amounts that would be payable on such Series B Company Preferred Units and any such other Parity Units if all amounts payable thereon were paid in full. For the purposes of this Section D , none of (i) a consolidation or merger of the Company with one or more entities, (ii) a statutory unit exchange by the Company, or (iii) a sale or transfer of all or substantially all of the Company’s assets shall be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Company.

(ii) Until payment shall have been made in full to the holders of the Series B Company Preferred Units, as provided in this Se ction D , and to the holders of Parity Units, subject to any terms and provisions applying thereto, no payment will be made to any holder of Junior Units upon the liquidation, dissolution or winding up of the Company. Subject to the rights of the holders of Parity Units, upon any liquidation, dissolution or winding up of the Company, after payment shall have been made in full to the holders of the Series B Company Preferred Units, as provided in this Section D , any series or class or classes of Junior Units shall, subject to any respective terms and provisions applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Series B Company Preferred Units shall not be entitled to share therein.

E. Redemption . In connection with the redemption by CLNY of any Series B Preferred Shares in accordance with the provisions of the Series B Preferred Share Terms, and at such times as CLNY is required or determines to make, deposit or set aside such payment, the Company shall provide cash to CLNY for such purpose which shall be equal to the redemption price (as set forth in the Series B Preferred Share Terms), plus any accrued and unpaid dividends on the Series B Preferred Shares (whether or not declared), to, but not including, the redemption date, and one Series B Company Preferred Unit shall be concurrently redeemed with respect to each Series B Preferred Share so redeemed by CLNY. If a redemption date for Series B Preferred Shares falls after a record date for a Series B Preferred Shares dividend payment and prior to the corresponding dividend payment date, then the Company shall provide cash to CLNY equal to the dividend payable on such Series B Preferred Shares on such dividend payment date notwithstanding the redemption of such Series B Preferred Shares and corresponding Series B Company Preferred Units prior to such dividend payment date. From and after the applicable redemption date, the Series B Company Preferred Units so redeemed shall no longer be outstanding and all rights hereunder, to distributions or otherwise, with respect to such Series B Company Preferred Units shall cease. Any Series B Company Preferred Units so redeemed may be reissued to CLNY at such time as CLNY reissues a corresponding number of Series B Preferred Shares so redeemed or repurchased, in exchange for the contribution by CLNY to the Company of the proceeds from such reissuance.

F. Voting Rights . Except as required by applicable law or the Limited Liability Company Agreement of the Company, the holder of the Series B Company Preferred Units, as such, shall have no voting rights.

F-3

G. Conversion . The Series B Company Preferred Units are not convertible into or exchangeable for any other property or securities of the Company, except as provided herein.

(i) In the event of a conversion of any Series B Preferred Shares into common stock of CLNY, par value $0.01 per share (“ Common Stock ”), in accordance with the Series B Preferred Share Terms, upon conversion of such Series B Preferred Shares, the Company shall convert an equal whole number of the Series B Company Preferred Units into Membership Common Units as such Series B Preferred Shares are converted into shares of Common Stock. In the event of a conversion of any Series B Preferred Shares into consideration other than Common Stock in accordance with the Series B Preferred Share Terms, the Company shall retire a number of Series B Company Preferred Units equal to the number of Series B Preferred Shares converted into such other form of consideration. In the event of a conversion of the Series B Preferred Shares into Common Stock, to the extent CLNY is required to pay cash in lieu of fractional shares of Common Stock pursuant to the Series B Preferred Share Terms in connection with such conversion, the Company shall distribute an equal amount of cash to CLNY.

H. Restriction on Ownership . The Series B Company Preferred Units shall be owned and held solely by CLNY.

I. Allocations . Allocations of the Company’s items of income, gain, loss and deduction with respect to the Series B Company Preferred Units shall be allocated to CLNY as the sole holder of Series B Company Preferred Units in accordance with Article 6 of the Limited Liability Company Agreement of the Company.

F-4

Exhibit 10.2

WAIVER AND ACKNOWLEDGEMENT TO CONTRIBUTION AND IMPLEMENTATION AGREEMENT

This Waiver and Acknowledgement (this “ Waiver ”) is entered into as of April 2, 2015, and is granted and agreed pursuant to the Contribution and Implementation Agreement (the “ Agreement ”), entered into as of December 23, 2014, by and among Colony Financial, Inc., a Maryland corporation (“ CFI ”), Colony Capital Operating Company, LLC (formerly known as CFI RE Masterco, LLC), a Delaware limited liability company and wholly owned subsidiary of CFI, Colony Capital, LLC, a Delaware limited liability company (“ CC ”), Colony Capital Holdings, LLC, a Delaware limited liability company, and Colony Capital OP Subsidiary, LLC, a Delaware limited liability company and wholly owned subsidiary of CC (“ NewCo ”), CCH Management Partners I, LLC, a Delaware limited liability company, FHB Holding LLC, a Delaware limited liability company and Richard Saltzman.

Each capitalized term used and not defined herein takes its meaning from the Agreement.

WHEREAS , pursuant to Section 11.3 of the Agreement, the parties thereto may waive compliance with any obligation, covenant, agreement or condition of the Agreement;

WHEREAS , Section 7.15 of the Agreement states that “CC and CFI shall, promptly after the [signing] date [t]hereof, prepare and file Form ADV and other forms or schedules required to be filed in order to register a wholly owned Subsidiary of NewCo with the SEC as an investment adviser under the Investment Advisers Act of 1940.”;

WHEREAS , Section 8.1 of the Agreement states, among certain other conditions, that “the respective obligations of each party to effect the Closing shall be subject to the satisfaction or waiver, at or prior to the Closing, of the following conditions: …. (e) A wholly owned Subsidiary of NewCo shall have been registered with the SEC as an investment adviser under the Investment Advisers Act of 1940.”;

WHEREAS , the parties hereto and to the Agreement desire to waive the obligations, covenants, agreements and conditions set forth in Section 7.15 and Section 8.1(e) of the Agreement and provide that CC and CFI shall, promptly following the Closing, file Form ADV and other forms or schedules required to be filed in order to register Colony Capital Investment Advisors, LLC (formerly known as Colony Capital OP Subsidiary TRS, LLC), a Delaware limited liability company and an indirect, wholly owned subsidiary of NewCo (“ CCIA ”) with the SEC as an investment adviser under the Advisers Act;

WHEREAS , Section 2.1(a)(i) of the Agreement provides, among other things, that CC shall contribute to NewCo the CC Contributed Assets, which include all of the equity interests held by CC in each of the Contributed Entities;

WHEREAS , Section 1.1(c) of the CC Disclosure Letter states that Colony Capital Sarl (Lebanon) shall be a CC Contributed Entity;

WHEREAS , Section 7.2 of the Agreement states, among other provisions, that CC will, after the signing of the Agreement, “preserve intact its business organization” and will not “amend the Organizational Documents of any Subject Entity”, nor “sell, pledge, dispose of, transfer, lease, license or encumber any material property or assets that would otherwise be CC Contributed Assets”;

WHEREAS , the parties hereto and to the Agreement desire that Colony Capital Sarl (Lebanon) (“ CC Lebanon ”) be liquidated, that CC retain CC Lebanon as a CC Retained Entity and that CC Lebanon shall not be a CC Contributed Entity;

WHEREAS , Section 7.22(b) of the Agreement states that “(b) [w]ithout limiting CFI’s obligations in Section 7.22(a) above, in the event that the Initial Resale Registration Statement has not been declared effective by the SEC on the date that is five Business Days prior to the anticipated Closing Date, (i) CC shall provide written notice (“ Share Retention Notice ”) to CFI of the percentage of New Shares and corresponding number of New Shares to be retained by CFI to satisfy any Tax obligations of Richard B. Saltzman in respect of the New Shares; (ii) CFI shall retain from New Shares to be delivered to CC pursuant to Section 3.3(b)(ii) a number of New Shares as specified in the Share Retention Notice, as the same may be updated by CC prior to Closing to reflect changes to the Disbursement Schedule and the Estimated Closing Statement in accordance with Section 3.2(b) between the date of the Share Retention Notice and the Closing Date; and (iii) CFI shall, within 30 days following the Closing (or promptly following the Closing, and in any event on or prior to the applicable due date, if Richard B. Saltzman is obligated to pay Tax in respect of the New Shares prior to the 30th day following the Closing), pay an amount in cash to the applicable federal and state taxing authorities equal to the number of New Shares so retained multiplied by the closing price of CFI Common Stock on the Closing Date; provided that any amount so paid to such taxing authorities shall be treated for all purposes of this Agreement as having been paid to Richard B. Saltzman; provided , further that if the Initial Resale Registration Statement is declared effective by the SEC by the earlier of (x) the 30th day following the Closing and (y) the fifth Business Day prior to the applicable due date, then CFI shall deliver to CC the New Shares retained under clause (ii) in lieu of the cash to be paid under clause (iii)”; and

WHEREAS , the parties hereto and to the Agreement desire to waive certain of the provisions of Section 7.22(b) of the Agreement and take the actions specified in Section 1.3 of this Waiver.

NOW, THEREFORE , in consideration of the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, each of the parties hereto agrees as follows:

SECTION 1.

WAIVER AND ACKNOWLEDGEMENT

1.1 Registration of CCIA .

(a) Each of the parties hereto waives hereby all of the obligations, covenants and agreements of each of CC and CFI under Section 7.15 of the Agreement to prepare and file, promptly after the signing date of the Agreement, Form ADV and other forms or schedules required to be filed in order to register a wholly owned Subsidiary of NewCo with the SEC as an investment adviser under the Advisers Act.

(b) Each of the parties hereto waives hereby the condition under Section 8.1(e) of the Agreement that, at or prior to the Closing, a wholly owned Subsidiary of NewCo shall have been registered with the SEC as an investment adviser under the Investment Advisers Act of 1940.

(c) Each of the parties hereto acknowledges and agrees that CC and CFI shall, promptly following the Closing, file Form ADV and other forms or schedules required to be filed in order to register CCIA with the SEC as an investment adviser under the Advisers Act. Each of the parties hereto acknowledges that CCIA is intended to be a successor to CC’s registration as an investment adviser under the Advisers Act and CC agrees to cooperate with CFI’s succession to such registration.

1.2 CC Lebanon .

(a) Each of the parties hereto waives hereby all of the obligations, covenants and agreements of CC (i) under Section 2.1(a)(i) of the Agreement, to contribute the equity interests of CC Lebanon to NewCo in connection with the CC Pre-Closing Contribution and (ii) under Section 7.2 of the Agreement, only to the extent that such obligations, covenants and agreements would prohibit the liquidation of CC Lebanon.

(b) Each of the parties hereto acknowledges hereby that CC Lebanon shall be deemed to be a CC Retained Entity, and shall be deemed not be a CC Contributed Entity for all purposes under the Agreement.

(c) CC represents and warrants to CFI and OP that (i) Exhibit A hereto contains true, correct and complete copies of the statement of financial position of CC Lebanon as of December 31, 2014, the related statements of comprehensive income, changes in equity and cash flows for the fiscal year ended December 31, 2014 and the notes thereto (collectively, the “CC Lebanon Financial Statements”). The CC Lebanon Financial Statements present fairly in all material respects the financial condition and the results of operations of CC Lebanon as of such dates and for such periods, and have been prepared in accordance with the International Financial Reporting Standards (as in effect on the date of the CC Lebanon Financial Statements), applied on a consistent basis during the periods involved and (ii) since December 31, 2014, CC Lebanon has not conducted any operations or business or acquired any assets.

1.3 Actions relating to the Initial Resale Registration Statement . Each of the parties hereto agrees and acknowledges hereby that, notwithstanding that CFI intends to have the Initial Resale Registration Statement declared effective by the SEC on or prior to the earlier of (x) the 30th day following the Closing and (y) the fifth Business Day prior to the applicable due date, (i) CFI shall retain from New Shares to be delivered to CC pursuant to Section 3.3(b)(ii) 1,368,653 New Shares and (ii) CFI shall, on or prior to the applicable due date on which Richard B. Saltzman is obligated to pay Tax in respect of the New Shares (but in no event later than June 15, 2015), pay an amount in cash to the applicable federal and state taxing authorities equal to the number of New Shares so retained multiplied by the closing price of CFI Common Stock on the Closing Date; provided that any amount so paid to such taxing authorities shall be treated for all purposes of this Agreement as having been paid to Richard B. Saltzman.

SECTION 2.

MISCELLANEOUS

(a) Except as expressly provided herein, the Agreement remains unchanged and continues in full force and effect. This Waiver is not an amendment of or waiver to any other provision of the Agreement not expressly referred to herein and is not to be construed as a waiver or consent to any further action by any of the parties to the Agreement except as expressly provided for herein. For the avoidance of doubt, this Waiver shall be subject to the general provisions contained in Article 11 of the Agreement, which are incorporated herein by reference.

(b) This Waiver shall be governed by and construed in accordance with the laws of the State of Delaware with respect to all other matters, issues and questions, without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.

(c) Each party hereto stipulates that any dispute or disagreement between or among any of the parties hereto as to the interpretation of any provision of, or the performance of obligations under, this Waiver shall be commenced and prosecuted in its entirety in, and consents to the exclusive jurisdiction and proper venue of, the Delaware Court of Chancery (and if the Delaware Court of Chancery shall be unavailable, any federal court located within the State of Delaware), and each party hereto consents to personal and subject matter jurisdiction and venue in such courts and waives and relinquishes all right to attack the suitability or convenience of such venue or forum by reason of its present or future domiciles, or by any other reason, for any such dispute or disagreement. The parties hereto acknowledge that all directions issued by the forum court, including all injunctions and other decrees, will be binding and enforceable in all jurisdictions and countries.

(d) This Waiver may be executed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same

instrument. This Waiver will become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. This Waiver may be executed by facsimile or pdf signature and a facsimile or pdf signature will constitute an original for all purposes. At the request of any party, the parties will confirm a facsimile of pdf transmission by signing a duplicate original document.

(e) THE PARTIES WAIVE ANY RIGHT TO A JURY TRIAL OF ANY CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS WAIVER, OR THE MAKING, PERFORMANCE OR INTERPRETATION THEREOF, INCLUDING FRAUDULENT INDUCEMENT THEREOF.

***

IN WITNESS WHEREOF , the parties hereto have caused this Waiver to be duly executed as of the day and year first above written.


COLONY CAPITAL HOLDINGS, LLC

By: Thomas J. Barrack, Jr., its sole managing member

By:	/s/ Thomas J. Barrack, Jr.
	Thomas J. Barrack, Jr.

COLONY CAPITAL, LLC

By:	/s/ Mark M. Hedstrom
	Name:	Mark M. Hedstrom
	Title:	Vice President

COLONY FINANCIAL, INC.

By:	/s/ Darren J. Tangen
	Name:	Darren J. Tangen
	Title:	Chief Operating Officer,
		Chief Financial Officer and
		Treasurer

COLONY CAPITAL OPERATING COMPANY, LLC

By: Colony Financial, Inc., its managing member

By:	/s/ Darren J. Tangen
	Name:	Darren J. Tangen
	Title:	Chief Operating Officer,
		Chief Financial Officer
		and Treasurer

[Signature Page to Waiver under Contribution Agreement]


COLONY CAPITAL OP SUBSIDIARY, LLC

By:	/s/ Mark M. Hedstrom
	Name:	Mark M. Hedstrom
	Title:	Vice President

CCH MANAGEMENT PARTNERS I, LLC

By:	/s/ Mark M. Hedstrom
	Name:	Mark M. Hedstrom
	Title:	Vice President

FHB HOLDING LLC

By:	/s/ Henry G. Brauer
	Name:	Henry G. Brauer
	Title:	Manager

RICHARD B. SALTZMAN

By:	/s/ Richard B. Saltzman
	Richard B. Saltzman

[Signature Page to Waiver under Contribution Agreement]

Exhibit A

December 31, 2014 Financial Statements of Colony Capital (Offshore) SAL

(see attached)

COLONY CAPITAL (OFFSHORE) SAL

FINANCIAL STATEMENTS

31 DECEMBER 2014

Ernst & Young p.c.c.

Commerce & Finance Building

1st Floor

Kantari, Beirut

P.O. Box: 11-1639, Riad el Solh

Beirut -1107 2090, Lebanon

Tel: +961 1 760 800

Fax: +961 1 760 822/3

beirut@lb.ey.com

ey.com/mena

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OF COLONY CAPITAL (OFFSHORE) SAL

We have audited the accompanying financial statements of Colony Capital (Offshore) SAL (‘the Company’), which comprise the statement of financial position as at 31 December 2014 and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of Colony Capital (Offshore) SAL as at 31 December 2014 and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Emphasis of Matter

Without qualifying our opinion, we draw attention to the following:

As discussed in Note 2 to the financial statements, the ability of the Company to continue to carry out its activities is dependent on the availability of adequate financial support. The financial statements have been prepared on a going concern basis which assumes that such financial support will be available from the Parent Company.

2-	Accumulated losses of the Company exceeded 75% of its capital as of 31 December 2014. According to the Lebanese Code of Commerce, the Board of Directors should call for an extraordinary general assembly to take appropriate measures.

Ernst & Young

16 January 2015

Beirut, Lebanon

A member firm of Ernst & Young Global Limited

Civil Register - 61 - Capital L.L. 6,000,000 fully paid

COLONY CAPITAL (OFFSHORE) SAL

STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2014


	Notes	*2014* *US$*			2013 US$

Finance costs			(1,916	)		(67	)
General and administrative expenses	4		(199,242	)		(3,523	)
Depreciation expense	5		(1,519	)		—

LOSS BEFORE TAX			(202,677	)		(3,590	)

Offshore companies’ tax	6		(663	)		(663	)

LOSS FOR THE YEAR			(203,340	)		(4,253	)

Other comprehensive income for the year			—			—

TOTAL COMPREHENSIVE LOSS FOR THE YEAR			(203,340	)		(4,253	)

The attached notes 1 to 13 form part of these financial statements.

COLONY CAPITAL (OFFSHORE) SAL

STATEMENT OF FINANCIAL POSITION

As at 31 December 2014


	Notes	*2014* *US$*			2013 US$
ASSETS
Non currents assets
Property and equipment	5		13,611			—

Current assets
Due from a related party	7		—			247,571
Accounts receivable and prepayments			2,292			—
Bank balances and cash			17,550			125

Total current assets			19,842			247,696

TOTAL ASSETS			33,453			247,696


DEFICIENCY OF ASSETS AND LIABILITIES
Deficiency of assets
Share capital	8		20,000			20,000
Accumulated losses			(1,434,787	)		(1,231,447	)

Total deficiency of assets			(1,414,787	)		(1,211,447	)


Current liabilities
Due to a related party	7		1,423,965			1,451,616
Accounts payable and accruals	9		24,275			7,527

Total liabilities			1,448,240			1,459,143

TOTAL DEFICIENCY OF ASSETS AND LIABILITIES			33,453			247,696

The financial statements were authorized for issue on 16 January 2015 by:

Thomas Barrack, JR

Chairman - General Manager

The attached notes 1 to 13 form part of these financial statements.

COLONY CAPITAL (OFFSHORE) SAL

STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2014


	*Share* *capital* *US$*		*Accumulated* *losses* *US$*			*Total* *US$*
Balance at 1 January 2013		20,000		(1,227,194	)		(1,207,194	)
Total comprehensive loss for 2013		—		(4,253	)		(4,253	)

Balance at 31 December 2013		20,000		(1,231,447	)		(1,211,447	)
Total comprehensive loss for 2014		—		(203,340	)		(203,340	)

Balance at 31 December 2014		20,000		(1,434,787	)		1,414,787

The attached notes 1 to 13 form part of these financial statements

COLONY CAPITAL (OFFSHORE) SAL

STATEMENT OF CASH FLOWS

For the year ended 31 December 2014


	Notes	*2014* *US$*			2013 US$

OPERATING ACTIVITIES
Loss for the year			(203,340	)		(4,253	)

Adjustments for:
Depreciation expense	5		1,519			—

			(201,821	)		(4,253	)

Working capital changes:
Accounts receivable and prepayments			(2,292	)		—
Accounts payable and accruals			16,748			3,523

Net cash used in operating activities			(187,365	)		(730	)

INVESTING ACTIVITIES:
Purchase of property and equipment	5		(15,130	)		—

Net cash used in investing activities			(15,130	)		—

FINANCING ACTIVITY
Balances with related parties			219,920			663

Net cash from financing activity			219,920			663


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			17,425			(67	)

Cash and cash equivalents at 1 January			125			192

CASH AND CASH EQUIVALENTS AT 31 DECEMBER			17,550			125

The attached notes 1 to 13 form part of these financial statements

COLONY CAPITAL (OFFSHORE) SAL

NOTES TO THE FINANCIAL STATEMENTS

31 December 2014

1	CORPORATE INFORMATION

Colony Capital (Offshore) SAL is a shareholding company registered in Beirut under the Commercial Registration No. 1801767 dated 16 February 2007. The objective of the company is to negotiate and sign contracts and agreements in respect of operations and transactions outside the Lebanese territory, and the preparation of studies and consultations which shall be utilized outside Lebanon. The Company is 99.9% owned by Colony Capital LLC, a United States corporation. The Company’s registered head office is at A1 Marfaa, Foche Street, Beirut, Lebanon.

In accordance with the Extraordinary General Assembly held on 23 June 2011, the shareholders decided to dissolve the Company.

In accordance with the Company’s extraordinary General Assembly dated 15 March 2013, the shareholders decided to withdraw the decision related to the dissolution and liquidation of the Company adopted by virtue of the extraordinary General Assembly held on 23 June 2011 and therefore the Company shall continue its activities without interruption.

2	FUNDAMENTAL ACCOUNTING CONCEPT

The Company incurred a loss of US$ 203,340 for the year ended 31 December 2014 which led to a deficiency of assets of US$ 1,414,787 as of 31 December 2014. These factors raise substantial doubt that the Company will be able to continue as a going concern. The continuation of the Company’s activities is dependent on the availability of adequate financial support. The financial statements have been prepared on a going concern basis, because the major shareholder of the Company, Colony Capital LLC, agreed to provide adequate funds for the Company to meet its liabilities as they fall due.

3	SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

The financial statements have been presented in US Dollars.

The financial statements are prepared on a historical cost basis.

Changes in accounting policies

The accounting policies adopted are consistent with those of the previous financial year, except for the following amendments to IFRS effective as of 1 January 2014:

•

Recoverable Amount Disclosures for Non-Financial Assets – Amendments to IAS 36

•

Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)

•

Offsetting Financial Assets and Financial Liabilities - Amendments to IAS 32

•

Novation of Derivatives and Continuation of Hedge Accounting – Amendments to IAS 39

The adoption of the above new standard and amendments to standards did not impact the financial position or performance of the Company.

Income tax

Taxes are accrued for in accordance with the Lebanese Income Tax Law.

Cash and cash equivalents

Cash and cash equivalents comprise of cash on hand and bank balances and short-term deposits with an original maturity of three months or less.

Accounts payable and accruals

Liabilities are recognized for amounts to be paid in the future for goods or services received, whether billed by the supplier or not.

Accounts receivable

Accounts receivable are stated at original invoice amount less a provision for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when there is no possibility of recovery.

COLONY CAPITAL (OFFSHORE) SAL

NOTES TO THE FINANCIAL STATEMENTS

31 December 2014

3	SIGNIFICANT ACCOUNTING POLICIES (continued)

Foreign currency transactions

Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the statement of financial position date. All differences are taken to the statement of comprehensive income.

Fair values

The fair value of interest-bearing items is estimated based on discounted cash flows using interest rates for items with similar terms and risk characteristics.

4	GENERAL AND ADMINISTRATIVE EXPENSES


	*2014* *US$*		2013 US$

Salaries and related benefits		73,259		—
Office rent		55,001		—
Professional fees		18,220		2,860
Transportation and telecommunications		17,919		—
Maintenance		10,826		—
Water and electricity expenses		8,693		—
Office supplies and stationery		6,291		—
Taxes		6,965		—
Gifts		2,012		—
Others		56		663

		199,242		3,523

5	PROPERTY AND EQUIPMENT


	Computer equipment US$		Office equipment US$		Furniture and fixtures US$		Total US$

Cost
At 1 January 2014		—		—		—		—
Additions		3,431		605		11,094		15,130

At 31 December 2014		3,431		605		11,094		15,130


Depreciation
At 1 January 2014		—		—		—		—
Depreciation charge for the year		687		48		784		1,519

At 31 December 2014		687		48		784		1,519


Net carrying value
At 31 December 2014		2,744		557		10,310		13,611

During 2014, the Company purchased fixed assets amounting to US$ 12,758 from Colony Capital SARL, a related party.

COLONY CAPITAL (OFFSHORE) SAL

NOTES TO THE FINANCIAL STATEMENTS

31 December 2014

6	OFFSHORE COMPANIES’ TAX

As required by the legislative decree No 46 dated 24 June 1983 amended by Law No 19 dated 5 September 2008, the Company is exempted from income tax on profits which is set at a fixed annual amount of LL 1 million (equivalent to US$ 663).

7	BALANCES WITH RELATED PARTIES


	*2014* *US$*		2013 US$

Due from related party:
Colony Capital SARL		—		247,571


Due to related party:
Colony Capital LLC (Parent Company)		1,423,965		1,451,616

Transactions with related parties are disclosed under note 5 to the financial statements.

The above balances do not carry interest and have no repayment dates

8	SHARE CAPITAL

Share capital consists of 2,000 shares of US$ 10 each, authorized, issued and fully paid as of 31 December 2014 (2013: same).

9	ACCOUNTS PAYABLE AND ACCRUALS


	2014 US$		2013 US$

Accrued professional services		14,721		6,864
Tax payable		5,271		663
Other		4,283		—

		24,275		7,527

10	RELATED PARTY TRANSACTIONS

Related parties represent associated companies, partners, directors and key management personnel of the Company, and entities controlled, jointly controlled or significantly influenced by such parties. Pricing policies and terms of these transactions are approved by the Company’s management.

Balances with related parties included in the statement of financial position are disclosed under note 7 to the financial statements.

Transactions with related parties included in the statement of comprehensive income are disclosed under note 5 to the financial statements.

11	COMMITMENTS AND CONTINGENCIES

The Company’s books have not been inspected by the Department of Income Tax, Value Added Tax and National Social Security Fund since inception. The ultimate outcome of any review that may take place cannot presently be determined.

COLONY CAPITAL (OFFSHORE) SAL

NOTES TO THE FINANCIAL STATEMENTS

31 December 2014

12	RISK MANAGEMENT

Interest

rate risk

The Company is exposed to minimal interest rate risk on its bank deposits.

Credit risk

Credit risk is the risk that the Company will incur losses because its counterparties fail to discharge their contractual obligations. The Company is exposed to credit risk with respect to its bank balances and due from related parties as recognized in the statement of financial position.

The Company seeks to limit its credit risk with respect to banks by dealing with banks of good reputation.

The Company’s related parties are considered to be highly credit-worthy.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its commitments associated with financial liabilities when they fall due.

The Company limits its liquidity risk by ensuring necessary facilities from the parent company are available.

The table below summarizes the maturities of the Company’s undiscounted financial liabilities based on contractual payment dates and current market interest rates.


At 31 December 2014	Less than 3 months US$

Due to a related party		1,423,965
Accounts payable and accruals		24,275

		1,448,240


At 31 December 2013	Less than 3 months US$

Due to a related party		1,451,616
Accounts payable and accruals		7,527

		1,459,143

Currency risk

Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates.

The majority of the Company’s transactions are denominated in US Dollars which is the Company’s functional and presentation currency. Accordingly, the Company is not exposed to significant currency risks.

13	FAIR VALUES OF FINANCIAL INSTRUMENTS

Financial instruments comprise of financial assets and financial liabilities.

Financial assets consist of cash and bank balances and due from related parties. Financial liabilities consist of payables and due to related parties.

The fair values of financial instruments are not materially different from their carrying values as of the date of the statement of financial position.

Exhibit 10.3

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “ Agreement ”), dated as of March 16, 2015, is made by and between Colony Financial, Inc., a Maryland corporation (“ CFI ”), and Ronald M. Sanders (the “ Executive ”). CFI, together with its subsidiaries is hereinafter referred to as “the Company,” and where the context permits, references to “the Company” shall include the Company and any successor to the Company.

WHEREAS , certain businesses of the Company are currently externally managed and advised by a subsidiary of Colony Capital, LLC (“ CC ”) pursuant to the terms of a management agreement;

WHEREAS, CFI, CC, Colony Capital Holdings, LLC, a Delaware limited liability company (“ CC Holdings ”), Colony Capital OP Subsidiary, LLC, a Delaware limited liability company (“ NewCo ”), CCH Management Partners I, LLC (“ CCH ”), FHB Holding LLC, a Delaware limited liability company, Richard B. Saltzman and CFI RE Masterco LLC, a Delaware limited liability company (the “ OP ”) have entered into that certain Contribution and Implementation Agreement, dated as of December 23, 2014 (the “ Contribution Agreement”), pursuant to which, among other things, CC Holdings, CC and CCH will contribute to the OP and the OP will acquire from CC Holdings, CC and CCH the membership interests in NewCo held by CC Holdings, CC and CCH (which constitute all of the membership interests of NewCo) (along with the other transactions contemplated thereby, the “ Contribution ”) and the management of the Company will be internalized; and

WHEREAS , CFI desires to enter into this Agreement with the Executive, effective as of the closing of the Contribution (the date on which such closing occurs, the “ Effective Date ”), pursuant to which the Executive will become employed by CFI Operating Company, LLC or one of its subsidiaries (as applicable, the “ Operating Entity ”) and will serve as the Executive Director, Chief Legal Officer of CFI.

NOW, THEREFORE , in consideration of the foregoing premises, the mutual covenants, terms and conditions set forth herein, and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1. EMPLOYMENT TERM . The Executive’s employment under the terms and conditions of this Agreement shall commence on the Effective Date and shall expire on the third anniversary of the Effective Date (the “ Initial Term ”); provided , however , that on the third anniversary of the Effective Date and on each subsequent anniversary thereof, the term of this Agreement shall automatically be extended for an additional one-year period (each a “ Renewal Term ”) unless, not later than 180 days prior to the expiration of the Initial Term or the then-current Renewal Term, as applicable, either party provides written notice to the other party hereto that such extension shall not take effect (a “ Non-Renewal Notice ”). The period during which the Executive is employed by the Company during the Initial Term and any Renewal Term pursuant to this Agreement is referred to herein as the “ Employment Term ”. Notwithstanding anything set forth in this Section 1 to the contrary, the Employment Term and the Executive’s employment shall earlier terminate immediately upon the termination of the Executive’s employment pursuant to Section 4 hereof.

2. POSITION; REPORTING AND DUTIES; LOCATION .

(a) Position and Reporting . During the Employment Term, the Executive shall serve as the Executive Director, Chief Legal Officer of CFI. The Executive shall report directly to the Chief Executive Officer of the Company during the Employment Term or, if otherwise determined by the Board of Directors of CFI (the “ Board ”), the Executive Chairman of CFI (the “ Executive Chairman ”).

(b) Duties and Responsibilities .

(i) During the Employment Term, the Executive shall devote his full business time (excepting vacation time, holidays, sick days and periods of disability) and attention to the performance of his duties hereunder, shall faithfully serve the Company and shall have no other employment which is undisclosed to the Company or which conflicts with his duties under this Agreement; provided , that , nothing contained herein shall prohibit the Executive from (A) participating in trade associations or industry organizations, (B) engaging in charitable, civic, educational or political activities, (C) delivering lectures or fulfilling speaking engagements, (D) engaging in personal investment activities and personal real estate-related activities for himself and his family or (E) accepting directorships or similar positions (together, the “ Personal Activities ”), in each case so long as the Personal Activities do not unreasonably interfere, individually or in the aggregate, with the performance of the Executive’s duties to the Company under this Agreement. The Company hereby acknowledges and approves the current activities of the Executive as set forth on Schedule 1 hereto, each of which shall be deemed a Personal Activity. Notwithstanding the foregoing, to the extent that the Personal Activities include the Executive providing services to any for-profit company (excluding CC and CFI, and any subsidiaries or portfolio companies thereof) as a member of such company’s board of directors, only two such directorships shall be permitted as a Personal Activity.

(ii) In serving in his capacity as the Executive Director, Chief Legal Officer of CFI during the Employment Term, the Executive shall (A) perform such duties and provide such services as are reasonably consistent with those provided by the Executive to CFI in his role as its Executive Director, Chief Legal Officer prior to the Effective Date and (B) provide such other duties as are consistent with his role as Executive Director, Chief Legal Officer of CFI, as reasonably requested from time to time by the Board or the Executive Chairman.

(iii) The parties acknowledge and agree that all of the compensation and benefits provided to the Executive hereunder will be in respect of services performed by the Executive for the Operating Entity.

(c) Location of Employment . The Executive’s principal place of business during the Employment Term shall be at the Company’s office in New York, New York; provided , that , the Executive may be required to engage in travel during the Employment Term in the performance of his duties hereunder.

3. COMPENSATION AND BENEFITS .

(a) Base Salary . During the Employment Term, the Company will pay to the Executive a base salary at the annualized rate of not less than $432,000 (the base salary in effect from time to time, the “ Base Salary ”). The Base Salary will be paid to the Executive in accordance with the Company’s customary compensation practices from time to time in effect for the Company’s senior executive officers. The Board (or a committee of directors delegated

by the Board) will review the Base Salary from time to time, but at least annually, during the Employment Term, but may not reduce the Executive’s then-existing Base Salary without the Executive’s prior written consent and agreement.

(b) Annual Cash Bonus .

(i) For each calendar year during the Employment Term beginning with the calendar year in which the Effective Date occurs, the Executive shall be given an opportunity to earn an annual incentive cash bonus based on an evaluation by the Board (or a committee of directors delegated by the Board) of the Executive’s performance in respect of the applicable calendar year; provided , that , the Board or such committee may determine prior to the beginning of any such calendar year to instead condition the payment of all or a portion of the cash bonus with respect to the applicable calendar year upon the achievement of performance measures determined by the Board or such committee in consultation with the Executive (as applicable, the “ Annual Bonus ”). The Executive’s target Annual Bonus for each calendar year during the Employment Term (including the calendar year in which the Effective Date occurs) shall be no less than $1,062,500 (such amount, as increased from time to time, the “ Target Bonus Amount ”). If the Board (or a committee of directors delegated by the Board), establishes reasonable performance measures as provided for above, the actual Annual Bonus amount paid to the Executive in respect of any calendar year during the Employment Term shall be based on the achievement of the applicable performance measures and may be less or more than the applicable Target Bonus Amount. The Board (or a committee of directors delegated by the Board) will review the Target Bonus Amount from time to time, but at least annually, during the Employment Term, but may not reduce the Executive’s then-existing Target Bonus Amount without the Executive’s prior written consent and agreement. The Executive’s Annual Bonus for the calendar year in which the Effective Date occurs shall not be pro-rated.

(ii) Any Annual Bonus payment that becomes payable to the Executive hereunder will be paid to him in a cash lump sum by no later than March 15 of the calendar year following the calendar year to which it relates (and no later than the date on which bonuses are paid to other senior executive officers of CFI); provided , that , except as otherwise set forth in this Agreement, the Executive is an active employee as of, and has not given or received notice of termination of employment as of, the date such payment would otherwise be made.

(i) For each calendar year during the Employment Term beginning with the calendar year in which the Effective Date occurs, the Executive shall be eligible to receive equity and equity-based incentive awards (“ LTIP Awards ”), with an annual target LTIP Award opportunity of no less than $680,000 (the target amount in effect from time to time, the “ Target LTIP Award ”). The Board (or a committee of directors delegated by the Board) will review the Target LTIP Award (and any applicable performance measures) from time to time, but at least annually, during the Employment Term, but may not reduce the Executive’s then-existing Target LTIP Award without the Executive’s prior written consent and agreement.

managed by the Company (collectively, “ Fund Incentives ”). Allocations of all Fund Incentives shall be made as determined by the Board (or a committee of directors delegated by the Board) in consultation with the Executive.

(iii) The terms and conditions (including with respect to vesting) of any LTIP Awards and Fund Incentives shall be no less favorable than the terms and conditions of any LTIP Awards and Fund Incentives, as applicable, granted to the executive officers of the Company during the same calendar year.

(d) Retirement, Welfare and Fringe Benefits . During the Employment Term, the Executive shall be eligible to participate in the retirement savings, medical, disability, life insurance, perquisite and other welfare and fringe benefit plans applicable to senior executive officers of CFI (which will include emergency airlift (if needed) from locations outside the United States to the United States) generally in accordance with the terms of such plans as are in effect from time to time. The foregoing shall not be construed to limit the ability of the Company to amend, modify or terminate any such benefit plans, policies or programs in accordance with their terms or to cease providing such benefit plans, policies or programs at any time and from time to time; provided , that , subject to the last sentence of this Section 3(d), the terms and conditions imposed on Executive’s participation in such plans, policies or programs and any adverse amendments, terminations and modifications are at least as favorable to Executive as those applicable to other senior executives. In addition, the Executive shall continue to receive the other fringe benefits and perquisites provided to the Executive by CC and its affiliates immediately prior to the Effective Date, except that the Executive shall no longer be entitled to receive a car allowance or reimbursement for club membership dues.

(e) Paid Time Off . During the Employment Term, the Executive shall be eligible to participate in the paid time off policies generally applicable to CFI’s senior executives as are in effect from time to time.

(f) Business Expenses . The Company shall pay or reimburse the Executive for all reasonable out-of-pocket expenses that the Executive incurs in connection with his employment during the Employment Term or his employment by CC during the 90-day period prior to the Effective Date upon presentation of expense statements or vouchers and such other information as the Company may require in accordance with the generally applicable policies and procedures of the Company applicable to CFI’s senior executive officers as are in effect from time to time. No expense payment or reimbursement under this Section 3(f) shall be “grossed up” or increased to take into account any tax liability incurred by the Executive as a result of such payment or reimbursement.

(g) Insurance; Indemnification . The Executive shall be covered by such comprehensive directors’ and officers’ liability insurance and errors and omissions liability insurance as the Company shall have established and maintained in respect of its directors and officers generally at its expense, and the Company shall cause such insurance policies to be maintained in a manner reasonably acceptable to the Executive both during and, in accordance with the provisions of Section 4(a)(i)(D) below, after Executive’s employment with the Company. The Executive shall also be entitled to indemnification rights, benefits and related expense advances and reimbursements to the same extent as any other director or officer of CFI and to the maximum extent permitted under applicable law pursuant to an indemnification agreement (the “ Indemnification Agreement ”).

(h) Attorneys’ Fees . The Company shall promptly pay or reimburse the Executive for reasonable attorneys’ fees incurred by the Executive in connection with the review, negotiation, drafting and execution of this Agreement and any related arrangements, and the employment agreements of Darren J. Tangen and Kevin Traenkle and any agreements related thereto, in an aggregate amount not to exceed $50,000, subject to the Executive providing the Company with reasonable documentation of such fees within 30 days following the Effective Date. The Company shall reimburse the Executive for such fees within 10 business days following Executive’s submission to the Company of the documentation evidencing the fees.

4. TERMINATION OF EMPLOYMENT .

(a) General Provisions .

(i) Upon any termination of Executive’s employment with the Company, the Executive shall be entitled to receive the following: (A) any accrued but unpaid Base Salary and vacation (determined in accordance with Company policy) through the date of termination (paid in cash within 30 days (or such shorter period required by applicable law) following the date of termination); (B) reimbursement for expenses and fees incurred by the Executive prior to the date of termination in accordance with Sections 3(f) and 3(h); (C) vested and accrued benefits, if any, to which the Executive may be entitled under the Company’s employee benefit plans as of the date of termination; and (D) any additional amounts or benefits due under any applicable plan, program, agreement or arrangement of the Company (including continuing “tail” indemnification and directors and officers liability insurance for actions and inactions occurring while the Executive provided services for CFI and its affiliates and continued coverage for any actions or inactions by the Executive while providing cooperation under this Agreement), including any such plan, program, agreement or arrangement relating to equity or equity-based awards (the amounts and benefits described in clauses (A) through (D) above, collectively, the “ Accrued Benefits ”). The Accrued Benefits shall in all events be paid in accordance with the Company’s payroll procedures, expense reimbursement procedures or plan terms, as applicable.

(ii) During any notice period required under this Section 4, (A) the Executive shall remain employed by the Company and shall continue to be bound by all the terms of this Agreement and any other applicable duties and obligations to the Company, (B) the Company may direct the Executive not to report to work, and (C) the Executive shall only undertake such actions on behalf of the Company, consistent with his position, as expressly directed by the Company.

(b) Termination for Cause or by the Executive without Good Reason .

(i) The Employment Term and the Executive’s employment hereunder may be terminated at any time either (A) by the Company for “Cause” (as defined and determined below), effective as set forth in Section 4(b)(iii), or (B) by the Executive without Good Reason, effective 30 days following the date on which notice of such termination is given by the Executive to the Company.

(ii) If the Executive’s employment is terminated by the Company for Cause, or by the Executive without Good Reason, the Executive shall only be entitled to receive the Accrued Benefits.

(iii) For purposes of this Agreement, a termination for “ Cause ” shall mean a termination of the Executive’s employment with the Company because of (A) the Executive’s

conviction of, or plea of no contest to, any felony under the laws of the United States or any state within the United States (other than a traffic-related felony) which termination shall become effective immediately as of the date the Board determines to terminate the Agreement, which action must be taken on or after the date of such conviction or plea or within 60 days thereafter; (B) the Executive’s willful and gross misconduct in connection with the performance of his duties to the Company (other than by reason of his incapacity or disability), it being expressly understood that the Company’s dissatisfaction with the Executive’s performance shall not constitute Cause; or (C) a continuous, willful and material breach by the Executive of this Agreement after written notice of such breach has been provided to the Executive by the Board, provided, that , in no event shall any action or omission in subsections (B) or (C) constitute “Cause” unless (1) the Company gives notice to the Executive stating that the Executive will be terminated for Cause, specifying the particulars thereof in reasonable detail and the effective date of such termination (which shall be no less than 10 business days following the date on which such written notice is received by the Executive) and (2) the Executive fails or refuses to materially cure or cease such misconduct or breach within 10 business days after such written notice is given to him. For purposes of the foregoing sentence, no act, or failure to act, on the Executive’s part shall be considered willful unless done or omitted to be done, by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company, and any act or omission by the Executive pursuant to the authority given pursuant to a resolution duly adopted by the Board or on the advice of counsel for the Company will be deemed made in good faith and in the best interests of the Company.

(i) The Employment Term and the Executive’s employment hereunder may be terminated (A) by the Company at any time without Cause, effective four business days following the date on which written notice to such effect is delivered to the Executive, or (B) by the Executive for “Good Reason” (as defined and determined below), effective as set forth in Section 4(c)(iii).

(ii) If the Executive’s employment is terminated by the Company without Cause or by the Executive for Good Reason, the Company shall pay or provide to the Executive (A) the Accrued Benefits and (B) upon the Executive’s execution of a separation agreement containing a general release of claims substantially in the form attached as Exhibit A hereto (the “ Release ”), and the expiration of the applicable revocation period with respect to such Release within 60 days following the date of termination (the date on which the Release becomes effective, the “ Release Effective Date ”):

(A) A lump sum cash payment equal to the product of (i) two and (ii) the sum of (1) the Base Salary in effect immediately prior to the date of termination (without regard to any reduction that gives rise to Good Reason) and (2) (x) if such termination occurs on or after the date on which the Annual Bonus, if any, is paid to the Executive in respect of the second calendar year following the calendar year in which the Effective Date occurs (the “ Third Annual Bonus ”), the average Annual Bonus paid in respect of each of the three calendar years prior to the date of termination or (y) if such termination occurs prior to the date on which the Third Annual Bonus, if any, is paid, the Target Bonus Amount in effect immediately prior to the date of termination (without regard to any reduction that gives rise to Good Reason), payable on the first regularly scheduled payroll date of the Company following the Release Effective Date and in no event later than the 60 ^th day following the date of termination (the actual date of

payment, the “ Severance Payment Date ”); provided, that, if the 60 day period referenced in Section 4(c)(ii) begins in one calendar year and ends in a subsequent calendar year, the Severance Payment Date will in all events occur in the second calendar year;

(B) A lump sum cash payment equal to the Annual Bonus, if any, that the Executive would have received in respect of the calendar year prior to the calendar year in which the termination occurs had the Executive remained an active employee of the Company, based on the achievement of the applicable performance measures, to the extent unpaid as of the termination date, payable on the date such amount would have been paid had the Executive continued in employment (the “ Unpaid Bonus ”);

(C) A lump-sum payment equal to the product of (1) the Target Annual Bonus in effect for the calendar year in which the termination occurs, and (2) a fraction, the numerator of which shall equal the number of days during the year in which the termination date occurs that the Executive was employed by the Company and the denominator of which shall equal 365, payable on the Severance Payment Date (the “ Pro-Rated Bonus ”);

(D) Continuation of the Company’s contributions necessary to maintain the Executive’s coverage for the 24 calendar months immediately following the end of the calendar month in which the termination date occurs under the medical, dental and vision programs in which the Executive participated immediately prior to his termination of employment (and such coverage shall include the Executive’s eligible dependents); provided , that , if the Company determines in good faith that such contributions would cause adverse tax consequences to the Company or the Executive under applicable law, the Company shall instead provide the Executive with monthly cash payments during such 24-month period in an amount that, after reduction for applicable taxes (assuming the Executive pays taxes at the highest marginal rates in the applicable jurisdictions), is equal to the amount of the Company’s monthly contributions referenced above. The applicable period of health benefit continuation under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“ COBRA ”) shall begin on the expiration of such 24-month period; and

(E) Full vesting as of the date of termination of any and all equity or equity-based awards relating to the securities of the Company and any Fund Incentives that are outstanding and unvested immediately prior to the date of such termination.

(iii) For purposes of this Agreement, “ Good Reason ” shall mean any action by the Company, in each case without the Executive’s prior written consent, that (A) results in a material diminution in the Executive’s duties, authority or responsibilities or a diminution in the Executive’s title or position; (B) requires the Executive to report to any person other than the Chief Executive Officer or the Executive Chairman; (C) reduces the Base Salary, Target Annual Bonus or Target LTIP Award then in effect; (D) relocates the Executive’s principal place of employment to a location more than 25 miles from the location in effect immediately prior to such relocation; or (E) constitutes a material breach by the Company of this Agreement or any other material agreement between the Executive and the Company ; provided , that , in no event shall the occurrence of any such condition constitute Good Reason unless (1) the Executive gives notice to the Company of the existence of the Executive’s knowledge of the condition giving rise to Good Reason within 90 days following its initial existence, (2) the Company fails to cure such condition within 30 days following the date such notice is given and (3) the Executive terminates his employment with the Company within 30 days following the expiration of such cure period.

(d) Termination Due to Death or Disability .

(i) The Employment Term and the Executive’s employment hereunder (A) may be terminated by the Company as a result of the Executive’s “Disability” (as defined and determined below) and (B) shall terminate immediately as a result of the Executive’s death.

(ii) If the Executive’s employment is terminated by the Company as a result of the Executive’s Disability or terminates as a result of the Executive’s death, the Company shall provide the Executive (or his estate) with: (A) the Accrued Benefits, (B) the Unpaid Bonus, (C) a lump sum payment equal to the Pro-Rated Bonus with respect to the calendar year in which the termination occurs and (D) full vesting as of the date of termination of any and all equity or equity-based awards relating to the securities of the Company and any Fund Incentives that are outstanding and unvested immediately prior to the date of such termination.

(iii) For purposes of this Agreement, “ Disability ” shall mean a physical or mental incapacity that substantially prevents the Executive from performing his duties hereunder and that has continued for at least 180 consecutive days. Any dispute as to whether or not the Executive is disabled within the meaning of the preceding sentence shall be resolved by a qualified, independent physician reasonably satisfactory to the Executive and the Company, and the determination of such physician shall be final and binding upon both the Executive and the Company. All fees and expenses of any such physician shall be borne solely by the Company.

(e) Non-Renewal of Agreement .

(i) If the Company gives a Non-Renewal Notice to the Executive, the Employment Term and the Executive’s employment hereunder shall terminate as of the expiration of the Initial Term or then-current Renewal Term, as applicable, and the Company shall provide the Executive with all of the payments and benefits set forth in Section 4(c) hereof, subject to his execution and non-revocation of the Release by the Release Effective Date.

(ii) If the Executive gives a Non-Renewal Notice to the Company, the Employment Term and the Executive’s employment hereunder shall terminate as of the expiration of the Initial Term or then-current Renewal Term, as applicable, and the Company shall provide the Executive with (A) the Accrued Benefits, (B) any Unpaid Bonus in respect of the calendar year prior to the calendar year in which the termination occurs and (C) the Pro-Rated Bonus in respect of the calendar year in which the termination occurs.

(f) Return of Property . Upon any termination of the Executive’s employment hereunder, the Executive shall as soon as practicable following such termination deliver or cause to be delivered to the Company the tangible property owned by the Company, which is in the possession or control of the Executive. Notwithstanding the foregoing, the Executive shall be permitted to retain his calendar and his contacts and investor lists, all compensation-related plans and agreements, any documents reasonably needed for personal tax purposes and his personal notes, journals, diaries and correspondence (including personal emails). In addition, the Executive shall be able to retain his mobile phone(s) and personal computer(s) and his cell phone number(s).

officers of the Company of a limited power of attorney to sign in the Executive’s name and on the Executive’s behalf any such documentation as may be required to be executed solely for the limited purposes of effectuating such resignations.

(h) No Set-Off or Mitigation . The Company’s obligations to make payments under this Agreement shall not be affected by any set-off, counterclaim, recoupment or other claim the Company or any of its affiliates may have against the Executive. The Executive does not need to seek other employment or take any other action to mitigate any amounts owed to the Executive under this Agreement, and those amounts shall not be reduced if the Executive does obtain other employment.

5. RESTRICTIVE COVENANTS . The Executive is entering into the Restrictive Covenant Agreement, substantially in the form attached as Exhibit B hereto (the “ Restrictive Covenant Agreement ”), as of the date hereof. The Restrictive Covenant Agreement shall become effective as of the Effective Date and shall continue in effect at all applicable times following the Effective Date in accordance with the terms and conditions thereof.

6. SECTION 280G .

(a) Treatment of Payments . Notwithstanding anything in this Agreement or any other plan, arrangement or agreement to the contrary, in the event that an independent, nationally recognized, accounting firm which shall be designated by the Company with the Executive’s written consent (which consent shall not be unreasonably withheld) (the “ Accounting Firm ”) shall determine that any payment or benefit received or to be received by the Executive from the Company or any of its affiliates or from any person who effectuates a change in control or effective control of the Company or any of such person’s affiliates (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement) (all such payments and benefits, the “ Total Payments ”) would fail to be deductible under Section 280G of the Internal Revenue Code of 1986, as amended (the “ Code ”), or otherwise would be subject (in whole or part) to the excise tax imposed by Section 4999 of the Code (the “ Excise Tax ”) then the Accounting Firm shall determine if the payments or benefits to be received by the Executive that are subject to Section 280G of the Code shall be reduced to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax, but such reduction shall occur if and only to the extent that the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes, and employment, Social Security and Medicare taxes on such reduced Total Payments), is greater than or equal to the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes and employment, Social Security and Medicare taxes on such Total Payments and the amount of Excise Tax (or any other excise tax) to which the Executive would be subject in respect of such unreduced Total Payments). For purposes of this Section 6(a), the above tax amounts shall be determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws which applied (or is likely to apply) to the Executive’s taxable income for the tax year in which the transaction which causes the application of Section 280G of the Code occurs, or such other rate(s) as the Accounting Firm determines to be likely to apply to the Executive in the relevant tax year(s) in which any of the Total Payments is expected to be made. If the Accounting Firm determines that the Executive would not retain a larger amount on an after-tax basis if the Total Payments were so reduced, then the Executive shall retain all of the Total Payments.

(b) Ordering of Reduction . In the case of a reduction in the Total Payments pursuant to Section 6(a), the Total Payments will be reduced in the following order: (i) payments that are payable in cash that are valued at full value under Treasury Regulation Section 1.280G-1, Q&A 24(a) will be reduced (if necessary, to zero), with amounts that are payable last reduced first; (ii) payments and benefits due in respect of any equity valued at full value under Treasury Regulation Section 1.280G-1, Q&A 24(a), with the highest values reduced first (as such values are determined under Treasury Regulation Section 1.280G-1, Q&A 24) will next be reduced; (iii) payments that are payable in cash that are valued at less than full value under Treasury Regulation Section 1.280G-1, Q&A 24, with amounts that are payable last reduced first, will next be reduced; (iv) payments and benefits due in respect of any equity valued at less than full value under Treasury Regulation Section 1.280G-1, Q&A 24, with the highest values reduced first (as such values are determined under Treasury Regulation Section 1.280G-1, Q&A 24) will next be reduced; and (v) all other non-cash benefits not otherwise described in clauses (ii) or (iv) will be next reduced pro-rata.

(c) Certain Determinations . For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax: (i) no portion of the Total Payments the receipt or enjoyment of which the Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code will be taken into account; (ii) no portion of the Total Payments will be taken into account which, in the opinion of tax counsel (“ Tax Counsel ”) reasonably acceptable to the Executive and selected by the Accounting Firm, does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments will be taken into account which, in the opinion of Tax Counsel, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the “base amount” (as set forth in Section 280G(b)(3) of the Code) that is allocable to such reasonable compensation; and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments will be determined by the Accounting Firm in accordance with the principles of Sections 280G(d)(3) and (4) of the Code. The Executive and the Company shall furnish such documentation and documents as may be necessary for the Accounting Firm to perform the requisite calculations and analysis under this Section 6 (and shall cooperate to the extent necessary for any of the determinations in this Section 6(c) to be made), and the Accounting Firm shall provide a written report of its determinations hereunder, including detailed supporting calculations. If the Accounting Firm determines that aggregate Total Payments should be reduced as described above, it shall promptly notify the Executive and the Company to that effect. In the absence of manifest error, all determinations by the Accounting Firm under this Section 6 shall be binding on the Executive and the Company and shall be made as soon as reasonably practicable and in no event later than 15 days following the later of the Executive’s date of termination of employment or the date of the transaction which causes the application of Section 280G of the Code. The Company shall bear all costs, fees and expenses of the Accounting Firm and any legal counsel retained by the Accounting Firm.

(d) Additional Payments . If the Executive receives reduced payments and benefits by reason of this Section 6 and it is established pursuant to a determination of a court of competent jurisdiction which is not subject to review or as to which the time to appeal has expired, or pursuant to an Internal Revenue Service proceeding, that the Executive could have received a greater amount without resulting in any Excise Tax, then the Company shall thereafter pay the Executive the aggregate additional amount which could have been paid without resulting in any Excise Tax as soon as reasonably practicable following such determination.

7. ASSIGNMENT; ASSUMPTION OF AGREEMENT . No right, benefit or interest hereunder shall be subject to assignment, encumbrance, charge, pledge, hypothecation or setoff by the Executive in respect of any claim, debt, obligation or similar process. This Agreement may not be assigned by CFI and CFI will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business or assets of the Company to assume expressly and to agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.

8. PERMITTED TRANSFERS . CFI acknowledges and agrees that any transfer by CC Holdings or CCH of OP Common Units (as defined in the Contribution Agreement) to Executive in compliance with the applicable Lock-Up Agreements (as defined in the Contribution Agreement) will be deemed to constitute a transfer that is “expressly authorized” under a Non-Managing Ancillary Agreement and shall constitute a “Permitted Transfer” for purposes of the OP LLC Agreement (as defined in the Contribution Agreement).

9. MISCELLANEOUS PROVISIONS .

(a) No Breach of Obligation to Others . The Executive represents and warrants that his entering into this Agreement does not, and that his performance under this Agreement and consummation of the transactions contemplated hereby and thereby will not, violate the provisions of any agreement or instrument to which the Executive is a party or any decree, judgment or order to which the Executive is subject, and that this Agreement constitutes a valid and binding obligation of the Executive enforceable against the Executive in accordance with its terms.

(b) Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to agreements entered into and to be performed entirely within such state.

(c) Entire Agreement . This Agreement, together with the documents referred to herein, constitutes and expresses the whole agreement of the parties hereto with reference to any of the matters or things herein provided for or herein before discussed or mentioned with reference to the Executive’s employment with the Company, and it cancels and replaces any and all prior understandings, agreements and term sheets between the Executive and CFI and any of its subsidiaries or affiliates; provided , that , this Agreement shall not alter, amend or supersede (i) any Fund Incentives issued to Executive by CC in connection with his prior employment, (ii) any interest the Executive or any of his affiliates may have in any general partner of any fund or related entity managed by the Company, (iii) any rights the Executive may have under the Contribution Agreement, (iv) the Ancillary Documents (as defined in the Contribution Agreement), (v) the Indemnification Agreement referenced in Section 3(g) of this Agreement to which the Executive or any of his affiliates is a party or beneficiary and (vi) any equity grant made by CFI to the Executive prior to the Effective Date. All promises, representations, collateral agreements and understandings not expressly incorporated in this Agreement are hereby superseded by this Agreement.

(d) Notices . All notices, requests, demands and other communications required or permitted hereunder must be made in writing and will be deemed to have been duly given and effective: (a) on the date of delivery, if delivered personally; (b) on the earlier of the fourth day after mailing or the date of the return receipt acknowledgment, if mailed, postage prepaid, by certified or registered mail, return receipt requested; (c) on the date of transmission, if sent by facsimile; or (d) on the date of requested delivery if sent by a recognized overnight courier:


If to the Company:		Colony Financial, Inc.
		2450 Broadway, 6th Floor
		Santa Monica, CA 90404
		Attention: Chief Executive Officer

If to the Executive:		to the last address of the Executive in the Company’s records specifically identified for notices under this Agreement

With a copy to:		Willkie Farr & Gallagher LLP
		787 Seventh Avenue
		New York, NY 10019
		Attention: Michael A. Katz and Adam Turteltaub

or to such other address as is provided by a party to the other from time to time.

(e) Survival . The representations, warranties and covenants of the Executive contained in this Agreement will survive any termination of the Executive’s employment with the Company.

(f) Amendment; Waiver; Termination . No provision of this Agreement may be amended, modified, waived or discharged unless such amendment, modification, waiver or discharge is agreed to in writing and signed by the Executive and CFI. No waiver by either party hereto at any time of any breach by the other party hereto of compliance with any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement and the transactions contemplated herein shall terminate automatically without any further action by any party upon the termination of the Contribution Agreement.

(g) Further Assurances . The parties hereto will from time to time after the date hereof execute, acknowledge where appropriate and deliver such further instruments and take such other actions as any other party may reasonably request in order to carry out the intent and purposes of this Agreement.

(h) Severability . If any term of provision hereof is determined to be invalid or unenforceable in a final court or arbitration proceeding, (i) the remaining terms and provisions hereof shall be unimpaired and (ii) to the extent permitted by applicable law, the invalid or unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision.

(i) Arbitration . Except as otherwise set forth in the Restrictive Covenant Agreement, any dispute or controversy arising under or in connection with this Agreement that cannot be mutually resolved by the parties hereto shall be settled exclusively by arbitration in New York, New York, before a panel of three neutral arbitrators, each of whom shall be selected jointly by the parties, or, if the parties cannot agree on the selection of the arbitrators, as selected by the American Arbitration Association. The commercial arbitration rules of the American Arbitration Association (the “ AAA Rules ”) shall govern any arbitration between the parties, except that the following provisions are included in the parties’ agreement to arbitrate and override any contrary provisions in the AAA Rules:

(i) The agreement to arbitrate and the rights of the parties hereunder shall be governed by and construed in accordance with the laws of the State of California, without regard to conflict or choice of law rules;

(ii) The California Arbitration Act shall govern the arbitration, the agreement to arbitrate, and any proceedings to enforce, confirm, modify or vacate the award;

(iii) The arbitrators shall apply California law;

(iv) Any petition or motion to modify or vacate the award shall be filed in a Superior Court in California (the “ Court ”);

(iv) The award shall be written, reasoned, and shall include findings of fact as to all factual issues and conclusions of law as to all legal issues;

(v) Either party may seek a de novo review by the Court of the conclusions of law included in the award and any petition or motion to enforce, confirm, modify or vacate the award; and

(vi) The arbitration shall be confidential. Judgment may be entered on the arbitrators’ award in any court having jurisdiction.

The parties hereby agree that the arbitrators shall be empowered to enter an equitable decree mandating specific enforcement of the terms of this Agreement. Each party shall bear its own legal fees and out-of-pocket expenses incurred in any arbitration hereunder and the parties shall share equally all expenses of the arbitrators; provided , that , the arbitrator shall have the same authority to award reasonable attorneys’ fees to the prevailing party in any arbitration as part of the arbitrator’s award as would be the case had the dispute or controversy been argued before a court with competent jurisdiction.

(j) Section 409A . The intent of the parties is that payments and benefits under this Agreement comply with Section 409A of the Code, to the extent subject thereto, and accordingly, to the maximum extent permitted, this Agreement shall be interpreted and administered to be in compliance therewith. In the event that any provision of Agreement or any other agreement or award referenced herein is mutually agreed by the parties to be in violation of Section 409A of the Code, the parties shall cooperate reasonably to attempt to amend or modify this Agreement (or other agreement or award) in order to avoid a violation of Section 409A of the Code while attempting to preserve the economic intent of the applicable provision. Notwithstanding anything contained herein to the contrary, the Executive shall not be considered to have terminated employment with the Company for purposes of any payments under this Agreement which are subject to Section 409A of the Code until the Executive would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A of

the Code. Each amount to be paid or benefit to be provided under this Agreement shall be construed as a separate identified payment for purposes of Section 409A of the Code. Without limiting the foregoing and notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Agreement or any other arrangement between the Executive and the Company during the six-month period immediately following the Executive’s separation from service shall instead be paid on the first business day after the date that is six months following the Executive’s separation from service (or, if earlier, the Executive’s date of death). To the extent required to avoid an accelerated or additional tax under Section 409A of the Code, amounts reimbursable to the Executive under this Agreement shall be paid to the Executive on or before the last day of the year following the year in which the expense was incurred and the amount of expenses eligible for reimbursement (and in kind benefits provided to the Executive) during one year may not affect amounts reimbursable or provided in any subsequent year. CFI makes no representation that any or all of the payments described in this Agreement will be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to any such payment. For purposes of this Section 9(j), Section 409A of the Code shall include all regulations and guidance promulgated thereunder.

(k) Headings . The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.

(l) Construction . The parties acknowledge that this Agreement is the result of arm’s-length negotiations between sophisticated parties, each afforded representation by legal counsel. Each and every provision of this Agreement shall be construed as though both parties participated equally in the drafting of the same, and any rule of construction that a document shall be construed against the drafting party shall not be applicable to this Agreement.

(m) Counterparts . This Agreement may be executed by the parties hereto in counterparts, each of which shall be deemed an original, but both such counterparts shall together constitute one and the same document.

(n) Tax Withholding . The Company may withhold from any amounts payable under this Agreement all federal, state, city or other taxes as the Company is required to withhold pursuant to any applicable law, regulation or ruling. Notwithstanding any other provision of this Agreement, the Company shall not be obligated to guarantee any particular tax result for the Executive with respect to any payment provided to the Executive hereunder, and the Executive shall be responsible for any taxes imposed on Executive with respect to any such payment.

(o) Cooperation . For a period of 12 months following the termination of the Executive’s employment with the Company for any reason, the Executive shall provide reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events during the Executive’s employment hereunder of which the Executive has knowledge. The Company shall reimburse the Executive for the Executive’s reasonable travel expenses incurred in connection with the foregoing, in accordance with the Company’s policies (and consistent with the Executive’s travel practices during the Executive’s employment with the Company) and subject to the delivery of reasonable support for such expenses. Any such requests for cooperation shall be subject to the Executive’s business and personal schedule and the Executive shall not be required to cooperate against his

own legal interests or the legal interests of his employer or partners or business ventures. In the event the Executive reasonably determines that he needs separate legal counsel in connection with his cooperation, the Company shall reimburse the Executive for the reasonable costs of such counsel as soon as practicable (and in any event within 30 days) following its receipt of an invoice for such costs. In the event the Executive is required to cooperate for more than 8 hours in any 12-month period, the Executive shall be paid an hourly consulting fee in an amount mutually agreed between the Company and Executive at the time.

(p) Effectiveness . This Agreement and the transactions contemplated herein shall be conditioned upon the closing of the transactions contemplated by the Contribution Agreement. In the event that the Contribution Agreement terminates prior to the closing of the transactions contemplated thereby, this Agreement shall terminate automatically without any further action by any party and shall be void ab initio . If the Contribution Agreement is amended or modified prior to the Effective Date in a manner that has the effect of reducing the Consideration (as defined in the Contribution Agreement) payable to CCH under the Contribution Agreement, the Executive will have the option of terminating this Agreement during the two business days following such time as CFI notifies the Executive of the amendment or modification (which notice may be given either before or after the date of such amendment or modification). The option to terminate this Agreement must be exercised by the Executive by written notice to CFI within such two (2) business day period, after which time the option to terminate will expire.

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


COLONY FINANCIAL, INC.

By:		/s/ Mark Hedstrom
Name:		Mark Hedstrom
Title:		Vice President

EXECUTIVE

/s/ Ronald M. Sanders
Ronald M. Sanders

[Signature Page to Ronald M. Sanders Employment Agreement]

Schedule 1

Current Activities

None.

Exhibit A

Form of Release

Ronald M. Sanders (“ Executive ”), a former employee of Colony Financial, Inc. (“ CFI ” and together with its subsidiaries, the “ Employer ”), hereby enters into and agrees to be bound by this General Waiver and Release of Claims (the “ Release ”). Executive acknowledges that he is required to execute this Release in order to be eligible for certain post-termination benefits (the “ Post-Termination Benefits ”) as set forth in Section [4(c)(ii)] / [4(e)(i)] of his Employment Agreement with CFI, dated March 16, 2015 (the “ Employment Agreemen t”). Unless otherwise indicated, capitalized terms used but not defined herein shall have the meanings specified in the Employment Agreement.

1. SEPARATION DATE . Executive acknowledges and agrees that his separation from Employer was effective as of , 20XX ( the “ Separation Date ”).

2. WAGES FULLY PAID . Executive acknowledges and agrees that he has received payment in full for all salary and other wages, including without limitation any accrued, unused vacation or other similar benefits earned through the Separation Date.

3. EXECUTIVE’S GENERAL RELEASE OF CLAIMS .

(a) Waiver and Release . Pursuant to Section [4(c)(ii)] / [4(e)(i)] of the Employment Agreement, and in consideration of the Post-Termination Benefits to be provided to Executive as outlined in the Employment Agreement and this Release as set forth herein, Executive, on behalf of himself and his heirs, executors, administrators and assigns, forever waives, releases and discharges Employer, its officers, directors, owners, shareholders and agents (collectively referred to herein as, the “ Employer Group ”), and each of its and their respective officers, directors, shareholders, members, managers, employees, agents, servants, accountants, attorneys, heirs, beneficiaries, successors and assigns (together with the Employer Group, the “ Employer Released Parties ”), from any and all claims, demands, causes of actions, fees, damages, liabilities and expenses (including attorneys’ fees) of any kind whatsoever, whether known or unknown, that Executive has ever had or might have against the Employer Released Parties that directly or indirectly arise out of, relate to, or are connected with, Executive’s services to, or employment by the Company, including, but not limited to (i) any claims under Title VII of the Civil Rights Act, as amended, the Americans with Disabilities Act, as amended, the Family and Medical Leave Act, as amended, the Fair Labor Standards Act, as amended, the Equal Pay Act, as amended, the Employee Retirement Income Security Act, as amended (with respect to unvested benefits), the Civil Rights Act of 1991, as amended, Section 1981 of Title 42 of the United States Code, the Sarbanes-Oxley Act of 2002, as amended, the Worker Adjustment and Retraining Notification Act, as amended, the Age Discrimination in Employment Act, as amended, the Uniform Services Employment and Reemployment Rights Act, as amended, the California Fair Employment and Housing Act, as amended, and the California Labor Code, as amended, and/or any other federal, state or local law (statutory, regulatory or otherwise) that may be legally waived and released and (ii) any tort and/or contract claims, including any claims of wrongful discharge, defamation, emotional distress, tortious interference with contract, invasion of privacy, nonphysical injury, personal injury or sickness or any other harm. Executive acknowledges that

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if the Equal Employment Opportunity Commission or any other administrative agency brings any charge or complaint on his behalf or for his benefit, this Release bars Executive from receiving, and Executive hereby waives any right to, any monetary or other individual relief related to such a charge or complaint. This Release, however, excludes (i) any claims made under state workers’ compensation or unemployment laws, and/or any claims that cannot be waived by law, (ii) claims with respect to the breach of any covenant (including any payments under the Employment Agreement) to be performed by Employer after the date of this Release, (iii) any rights to indemnification or contribution or directors’ and officers’ liability insurance under the Employment Agreement, Indemnification Agreement, any operative documents of the Company or any applicable law, (iv) any claims as a holder of Company equity awards under the Company’s equity incentive plans or as a holder of Fund Incentives; and (v) any claims for vested benefits under any employee benefit plan (excluding any severance plan and including claims under the Consolidated Omnibus Budget Reconciliation Act of 1985) or any claims that may arise after the date Executive signs the Release.

(b) Waiver of Unknown Claims; Section 1542 . Executive intends to fully waive and release all claims against Employer; therefore, he expressly understands and hereby agrees that this Release is intended to cover, and does cover, not only all known injuries, losses or damages, but any injuries, losses or damages that he does not now know about or anticipate , but that might later develop or be discovered, including the effects and consequences of those injuries, losses or damages. Executive expressly waives the benefits of and right to relief under California Civil Code Section 1542 (“ Section 1542 ”), or any similar statute or comparable common law doctrine in any jurisdiction. Section 1542 provides:

Section 1542. ( General Release-Claims Extinguished ) A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.

Executive understands and acknowledges the significance and consequences of this specific waiver of Section 1542 and, having had the opportunity to consult with legal counsel, hereby knowingly and voluntarily waives and relinquishes any rights and/or benefits which he may have thereunder. Without limiting the generality of the foregoing, Executive acknowledges that by accepting the benefits and payments offered in exchange for this Release, he assumes and waives the risks that the facts and the law may be other than he believes and that, after signing this Release, he may discover losses or claims that are released under this Release, but that are presently unknown to him, and he understands and agrees that this Release shall apply to any such losses or claims.

(c) Acknowledgement of ADEA Waiver . Without in any way limiting the scope of the foregoing general release of claims, Executive acknowledges that he is waiving and releasing any rights he may have under the Age Discrimination in Employment Act of 1967 (the “ ADEA ”) and that such waiver and release is knowing and voluntary. This waiver and release does not govern any rights or claims that might arise under the ADEA after the date this Release is signed by Executive. Executive acknowledges that: (i) the consideration given for this Release is in addition to anything of value to which Executive otherwise would be entitled to receive; (ii) he has been advised in writing to consult with an attorney of his choice prior to signing this Release;

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(iii) he has been provided a full and ample opportunity to review this Release, including a period of at least twenty-one (21) days within which to consider it (which will not be lengthened by any revisions or modifications); (iv) he has read and fully understands this Release and has had the opportunity to discuss it with an attorney of his choice; (v) to the extent that Executive takes less than twenty-one (21) days to consider this Release prior to execution, he acknowledges that he had sufficient time to consider this Release with counsel and that he expressly, voluntarily and knowingly waives any additional time; and (vi) Executive is aware of his right to revoke this Release at any time within the seven (7)-day period following the date on which he executes this Release. Executive further understands that he shall relinquish any right he has to Post-Termination Benefits described in the Employment Agreement if he exercises his right to revoke this Release. Notice of revocation must be made in writing and must be received by [Name, Title], no later than 5:00 p.m. Pacific Time on the seventh (7th) calendar day immediately after the day on which Executive executes this Release.

4. NO CLAIMS BY EXECUTIVE . Executive affirms and warrants that he has not filed, initiated or caused to be filed or initiated any claim, charge, suit, complaint, grievance, action or cause of action against Employer or any of the other Employer Released Parties.

5. NO ASSIGNMENT OF CLAIMS . Executive affirms and warrants that he has made no assignment of any right or interest in any claim which he may have against any of the Employer Released Parties.

6. ADVICE OF COUNSEL . Executive acknowledges: (a) that he has been advised to consult with an attorney regarding this Release; (b) that he has, in fact, consulted with an attorney regarding this Release; (c) that he has carefully read and understands all of the provisions of this Release; and (d) that he is knowingly and voluntarily executing this Release in consideration of the Post-Termination Benefits provided under the Employment Agreement.

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By his signature, Ronald M. Sanders hereby knowingly and voluntarily executes this Release as of the date indicated below.



Ronald M. Sanders

Dated:

[Signature page to Ronald M. Sanders Release]

Exhibit B

Form of Restrictive Covenant Agreement

Attached hereto.

RESTRICTIVE COVENANT AGREEMENT

THIS RESTRICTIVE COVENANT AGREEMENT (this “ Agreement ”), dated as of March 16, 2015, and effective as of the Effective Date (as defined below), is made by and between Colony Financial, Inc., a Maryland corporation (“ CFI ”), and Ronald M. Sanders (“ Sanders ”). CFI, together with its Subsidiaries (which, following the Effective Date, shall include NewCo (as defined below) and its subsidiaries) is hereinafter referred to as “the Company,” and where the context permits, references to “the Company” shall include the Company and any successor to the Company. Any capitalized term that is used but not otherwise defined in this Agreement shall have the meaning set forth in the Contribution Agreement (as defined below).

WHEREAS , CFI, CC, Colony Capital Holdings, LLC, a Delaware limited liability company (“ CC Holdings ”), Colony Capital OP Subsidiary, LLC, a Delaware limited liability company (“ NewCo ”), CCH Management Partners I, LLC (“ CCH ”), FHB Holding LLC, a Delaware limited liability company, Richard B. Saltzman and CFI RE Masterco LLC, a Delaware limited liability company (the “ OP ”) have entered into that certain Contribution and Implementation Agreement, dated as of December 23, 2014 (the “ Contribution Agreement ”), pursuant to which, among other things, CC Holdings, CC and CCH will contribute to the OP and the OP will acquire from CC Holdings, CC and CCH the membership interests in NewCo held by CC Holdings, CC and CCH (which constitute all of the membership interests of NewCo) (along with the other transactions contemplated thereby, the “ Contribution ”) and the management of the Company will be internalized;

WHEREAS , effective as of the closing of the Contribution (the date on which such closing occurs, the “ Effective Date ”), Sanders will become employed by the Company and will serve as the Executive Director, Chief Legal Officer of CFI in accordance with terms of the Employment Agreement by and between CFI and Sanders, dated as of the date hereof (the “ Employment Agreement ”);

WHEREAS , Sanders (i) has been actively involved in the management of the business of CC and has thereby acquired significant experience, skill, and confidential and proprietary information relating to the business and operation of CC and (ii) in the course of his participation in the business of CC, has also developed on behalf of CC significant goodwill that is now a significant part of the value of CC;

WHEREAS , the Company desires to protect its investment in the assets, businesses and goodwill of CC to be acquired as part of the Contribution and, accordingly, as a material condition to its willingness to enter into the Contribution Agreement and consummate the Contribution, has required that Sanders agree to limit certain activities by Sanders (as contemplated hereby) that would compete with or otherwise harm such assets, businesses or goodwill;

WHEREAS , as part of the consideration and inducement to CFI to enter into the Contribution Agreement and acquire such assets, businesses and goodwill, Sanders is willing to agree to enter into this Agreement and abide by such restrictions; and

WHEREAS , the parties intend this Agreement to be in compliance with California Business and Professions Code Section 16601 (“ BPC Section 16601 ”) to the extent that it is applicable, and further intend for it to be fully enforceable under any applicable Law.

1. Defined Terms . For purposes of this Agreement, the following terms have the respective meanings set forth below:

(a) “ Business ” means (x) the business of acquiring, originating and managing real estate-related debt and equity investments; provided , that , for purposes of clarification, the Business shall not include debt or equity investments in operating companies primarily engaged in businesses outside of the real estate or hospitality industries even though such businesses may own or lease real property and (y) any alternative asset management business (other than CC) in which more than 25% of the total capital committed is third party capital from passive investors (which term shall exclude natural persons who are partners or employees of the business and are actively engaged in the management of the business) that advises, manages or invests the assets of funds or related investment vehicles or separate accounts.

(b) “ Company Materials ” means all Materials that Sanders makes or conceives, or has made or conceived, solely or jointly, during the period of Sanders’ retention by or employment with the Company, whether or not patentable or registerable under copyright, trademark or similar statutes, which (i) are related to the current or demonstrably (by expenditure of material resources or material time spent by senior management) anticipated business or activities of the Company (which includes any fund managed by the Company during or prior to the period of Sanders’ retention by or employment with the Company); and (ii) are otherwise developed by Sanders through the use of the Company’s confidential information, equipment, software, or other facilities or resources at a time during which Sanders has been a consultant, or employee (temporary or otherwise) of the Company. Notwithstanding the foregoing, Company Materials shall not include any Materials conceived or made, solely or jointly, by Sanders in connection with the performance of Permitted Activities.

(c) “ Confidential Information ” means information that is not generally known to the public and that is or was used, developed or obtained by Sanders (in his capacity as a member or employee of CC); provided, however, Confidential Information will not include any information that is generally available to the public or within the industry prior to the date Sanders proposes to disclose or use such information. For the avoidance of doubt, “Confidential Information” does not include (x) information concerning non-proprietary business or investment practices, methods or relationships customarily employed or entered into by comparable business enterprises, (y) the identity of investors and their investment practices, methods and relationships, financing sources or capital market intermediaries and (z) information that is used, developed or obtained by Sanders exclusively in connection with the performance of Permitted Activities.

(d) “ Inventions ” means any inventions, improvements, developments, ideas or discoveries whether patentable or unpatentable, that meets any one of the following criteria: (i)

relates at the time of conception or reduction to practice to: (A) the business, projects or products of the Company, or to the utilization thereof; or (B) the actual or demonstrably anticipated research or development of the Company; (ii) results from any work performed directly or indirectly by Sanders for the Company; or (iii) results, at least in part, from Sanders’ use of the Company’s time, equipment, supplies, facilities or trade secret information; provided , however , that Inventions shall not include (x) any Invention which qualifies fully under the provisions of California Labor Code Section 2870 (a copy of which is attached as Exhibit 1), including any idea or invention which is developed entirely on Sanders’ own time without using the Company’s equipment, supplies, facilities or trade secret information, and which is not related to the business (either actual or demonstrably anticipated), and which does not result from work performed for the Company and (y) inventions, improvements, developments, ideas or discoveries conceived or reduced to practice by Sanders exclusively in connection with the performance of Permitted Activities.

(e) “ Materials ” means all articles, reports, documents, memoranda, notes, other works of authorship, data, databases, discoveries, designs, developments, ideas, creative works, improvements, inventions, know-how, processes, computer programs, software, source code, techniques and useful ideas of any description whatsoever (or portions thereof).

(f) “ Permitted Activities ” means each of the activities described in Section 2 hereof.

(g) “ Person ” means any individual, company, limited liability company, limited or general partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

(h) “ Restricted Period ” means the period commencing on the Effective Date and ending on the first anniversary of the termination of Sanders’ employment with the Company; provided that the Restricted Period shall immediately cease if such termination of employment is by the Company without Cause, by Sanders for Good Reason or as a result of the Company giving a Non-Renewal Notice to Sanders (in each case, such capitalized term used herein as defined in the Employment Agreement).

(i) “ Restricted Territory ” means (i) any of Austria, Belgium, China, Czech Republic, Denmark, England, Finland, France, Germany, Hungary, Ireland, Italy, Japan, Monaco, Netherlands, Norway, Poland, Portugal, Scotland, South Korea, Spain, Sweden, Switzerland and the United States, (ii) any state in the United States and/or other country listed in clause (i) and (iii) any other jurisdiction in which the Company or its subsidiaries engages in Business in any material respect.

2. Permitted Activities . Notwithstanding anything set forth herein to the contrary, nothing contained herein shall prohibit Sanders from:

(a) engaging in the Personal Activities (as defined in the Employment Agreement);

(b) owning, directly or indirectly, solely as an investment, securities of any such Person which are traded on any national securities exchange or NASDAQ if Sanders (A) is not a controlling person of, or a member of a group which controls, such Person; and (B) does not, directly or indirectly, own five percent (5%) or more of any class of securities of such Person;

(c) managing any capital accounts, or exercising any of the rights and obligations of the general partner, of the upper-tier general partners with respect to the Subject Funds, or any CC Retained Assets or CC Retained Liabilities of CC Parties following the Effective Date;

(d) taking any actions with respect to (x) investments made (or legally committed to be made) on or prior to the date hereof (including investments in Colony AH Member LLC and its subsidiaries, SONIFI Solutions, Inc., Miramax Films, LH-COL Participants, LLC or any other Affiliate of CC that is organized to acquire or invest in Lending Home Corporation and FYH-Bar Holdings, LLC or any other Affiliate of CC that holds an investment in Adaptive Studios) or (y) follow-on investments to the investments described in clause (x) that are not real estate-related or the sourcing of investments for the investments described in clause (x) that are not real-estate related or (z) investments made to refinance or restructure the investments described in clauses (x) and (y) that are not real estate-related;

(e) making passive investments in private equity funds, mutual funds, hedge funds and other managed accounts (provided that such funds or accounts do not have a primary investment strategy, as set forth in the applicable fund’s or account’s published statement of its primary investment strategy, of investments in real estate-related debt and equity investments);

(f) making any passive investment (or group of related passive investments) of less than $20 million in private equity funds, mutual funds, hedge funds and other managed accounts that have a primary investment strategy, as set forth in the applicable fund’s or account’s published statement of its primary investment strategy, of investments in real estate-related debt and equity investments; or

(g) making investments in private companies that are (x) not engaged in the real estate or hospitality industries, (y) do not predominantly make investments in real estate-related debt and equity instruments and (z) do not make investments similar to those made by CFI and the OP equal to the lesser of (A) 5% of the outstanding equity securities of such private company and (B) $30 million per company or group of affiliated companies operating as part of one business.

3. Non-Competition . Sanders shall not, during the Restricted Period, directly or indirectly, in any manner within the Restricted Territory: (i) engage in the Business (other than through the Company and its Affiliates); (ii) render any services as an employee, officer, director or consultant to any Person (other than the Company) engaged in the Business; or (iii) make an investment in a Person engaged in the Business as a partner, shareholder, principal, member or other owner of equity interests (or securities convertible into or exercisable for, equity interests); provided, however, nothing contained in this Agreement shall restrict Sanders from (x) engaging in any activity that he determines in good faith is in furtherance of the interests of the Company in the performance of his duties for the Company and/or (y) engaging in any Permitted Activity. In addition, nothing herein shall prohibit Sanders from providing services to an entity engaged in the Business if Sanders’ services are solely limited to a unit, division, or subsidiary of such entity which does not engage in the Business and Sanders does not provide services directly or indirectly to, or with respect to, the Business.

4. Non-Solicitation . Except as necessary, appropriate or desirable to perform his duties to the Company during his employment, Sanders shall not during the Restricted Period, without

CFI’s prior written consent, (i) directly or indirectly, on his own behalf or for any other Person, knowingly solicit or induce any officer, director, employee or independent contractor who is a natural person that provides consulting or advisory services with respect to sourcing or consummating financings or investments of the Company (A) to terminate his or her relationship with the Company, or (B) hire any such individual whom Sanders knows left the employment of the Company during the previous 12 months or (ii) directly or indirectly, on his own behalf or for any other Person, solicit or induce any investors to terminate (or diminish in any material respect) his, her or its relationship with the Company. For the avoidance of doubt, identification or doing business with or co-investing with any limited partners, investors, financing sources or capital markets intermediaries with regard to activity that is not prohibited by Section 3 above shall not be deemed to be a breach of this Section 4 or otherwise. Sanders shall not be in violation of this Section 4 by reason of providing a personal reference for any officer, director or employee of the Company or soliciting individuals for employment through a general advertisement not targeted specifically to officers, directors or employees of the Company.

5. Confidential Information . At all times on and following the Effective Date, Sanders shall not disclose or use for his benefit or the benefit of others, except in connection with the business and affairs of the Company or any of its affiliates, any Confidential Information except to the extent that (i) such disclosure or use is related to, necessary, appropriate or desirable in connection with Sanders’ performance of his duties to the Company or (ii) is related to any good faith dispute between Sanders and the Company or any of its affiliates or otherwise in connection with any action by Sanders to enforce his rights or defend his actions under this Agreement, the Contribution Agreement, the Employment Agreement or any other agreement with the Company or any of its affiliates. Nothing contained herein shall preclude Sanders from disclosing Confidential Information to his immediate family and personal legal and financial advisor(s), provided that Sanders informs such family member(s) and/or advisor(s) that the information is confidential in nature and receives reasonable assurances that the family member(s) and/or advisor(s) shall not disclose such information except as required by Law or by any Authority with apparent jurisdiction over such Person. Nothing in this Agreement shall be construed to prevent Sanders from complying with applicable Law, or disclosing information pursuant to the valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not in Sanders’ reasonable judgment exceed the extent of disclosure required by such Law. Sanders shall, to the extent legally permitted, promptly provide written notice of any such order to an authorized officer of the Company after receiving such order and reasonably cooperate (at the Company’s expense) with any efforts of the Company to seek a protective order or other measure to protect the confidentiality of such information.

6. Mutual Non-Disparagement .

(a) At all times on and following the Effective Date, Sanders shall refrain from making any disparaging statements about the Company or any of its present or (to the extent such Persons serve in such capacity during Sanders’ employment with the Company) future officers, directors, and, in their capacity as such, employees to any third Persons, including, without limitation, to any press or other media, except (i) to the extent required by Law or legal process, by any Authority with apparent jurisdiction or applicable securities considerations, (ii) related to any good faith litigation or similar proceeding between Sanders and the Company or any of such officers or directors or otherwise in connection with any good faith litigation or similar proceeding or other efforts by Sanders to enforce his rights or defend his actions under

this Agreement, the Contribution Agreement, the Employment Agreement or any other agreement with the Company or any of such officers or directors or (iii) for the making of any critical remarks about any such Person in connection with any analyses made or opinions expressed in the ordinary course of his duties to the Company during his employment therewith.

(b) At all times on and following the Effective Date, the senior executive officers of the Company shall not make, or cause to be made by the Company, any disparaging or negative statements about Sanders to any third Persons, including, without limitation, to any press or other media, except (i) to the extent required by Law or legal process, by any Authority with apparent jurisdiction or applicable securities considerations, (ii) related to any good faith litigation or similar proceeding between Sanders and the Company or otherwise in connection with any good faith litigation or similar proceeding by Sanders to enforce his rights or defend his actions under this Agreement, the Contribution Agreement, the Employment Agreement or any other agreement with the Company or (iii) for the making of any critical remarks about Sanders in connection with any analyses made or opinions expressed in the ordinary course of their respective duties to the Company during their employment therewith.

7. Intellectual Property .

(a) Sanders agrees that all Company Materials shall be deemed “work made for hire” by the Company as the “author” and owner to the extent permitted by United States copyright Law. To the extent (if any) that some or all of the Company Materials do not constitute “work made for hire,” Sanders hereby irrevocably assigns to the Company for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, all right, title and interest in and to such Company Materials (including without limitation any and all copyright rights, patent rights and trademark rights and goodwill associated therewith). The provisions of this paragraph will apply to all Company Materials which are or have been conceived or developed by Sanders, solely or jointly, whether or not further development or reduction to practice may take place after the termination of Sanders’ employment or retention, by the Company.

(b) Sanders further agrees that he will execute and deliver to CFI any and all further documents or instruments and do any and all further acts which the Company reasonably requests in order to perfect, confirm, defend, police and enforce the Company’s intellectual property rights, and hereby grants to the officers of the Company an irrevocable power of attorney, coupled with interest, to such end. Sanders shall be promptly reimbursed by the Company for all costs and expenditures incurred in connection with any cooperation referenced in this Section 7(b).

8. Injunctive Relief; Other Remedies . The parties agree that the remedy at Law for any breach of this Agreement is and will be inadequate, and in the event of a breach or threatened breach by Sanders of the provisions of Sections 3, 4, 5, 6, or 7 of this Agreement, the Company shall be entitled to seek an injunction restraining Sanders from the conduct which would constitute a breach of this Agreement. Nothing herein contained shall be construed as prohibiting the Company from pursuing any other remedies available to it or them for such breach or threatened breach, including, without limitation, specific performance and/or the recovery of damages from Sanders.

9. Reasonableness and Enforceability of Covenants .

(a) The recitals to this Agreement are incorporated herein by this reference. The parties acknowledge and agree with such recitals, and further agree that the value of the consideration paid by the Company in connection with the Contribution is substantial and that preservation of the confidential and proprietary information, goodwill, stable workforce, and client and customer relations of the Company is a material part of the consideration being provided in connection with the Contribution.

(b) The parties expressly agree that the character, duration and geographical scope of this Agreement are reasonable in light of the circumstances as they exist on the date upon which this Agreement has been executed, including, but not limited to, Sanders’ material economic interest in the Contribution, and Sanders’ position of confidence and trust as a stockholder of CFI.

(c) Sanders acknowledges that, (i) in connection with the Contribution, the Company will be vested with the goodwill of, and will directly or indirectly carry on, the business of CC; (ii) the restrictive covenants and the other agreements contained herein (collectively, the “ Restrictive Covenants ”) are an essential part of this Agreement and the contemplated Contribution; (iii) the contemplated Contribution is designed and intended to qualify as a sale (or other disposition) by Sanders within the meaning of BPC Section 16601; and (iv) the covenants contained in this Agreement are intended to be and would be enforceable under BPC Section 16601. Sanders and the Company agree not to challenge the enforceability of the covenants (and the limitations and qualifications included as part thereof) contained in this Agreement.

(d) Sanders agrees to be bound by the Restrictive Covenants and the other agreements contained in this Agreement to the maximum extent permitted by Law, it being the intent and spirit of the parties that the Restrictive Covenants and the other agreements contained herein shall be valid and enforceable in all respects, and, subject to the terms and conditions of, and limitations and qualifications included in, this Agreement.

10. Acknowledgements . Sanders acknowledges that (i) his work for the Company will continue to give him access to the confidential affairs and proprietary information of the Company; (ii) the agreements and covenants of Sanders contained in this Agreement are essential to the business and goodwill of the Company; and (iii) CFI would not have entered into the Contribution Agreement or the Employment Agreement but for the covenants and agreements set forth herein.

11. Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of California applicable to agreements entered into and to be performed entirely within such state.

12. Notices . All notices, requests, demands and other communications required or permitted hereunder must be made in writing and will be deemed to have been duly given and effective: (a) on the date of delivery, if delivered personally; (b) on the earlier of the fourth day after mailing or the date of the return receipt acknowledgment, if mailed, postage prepaid, by certified or registered mail, return receipt requested; (c) on the date of transmission, if sent by facsimile; or (d) on the date of requested delivery if sent by a recognized overnight courier:


If to the Company:		Colony Financial, Inc. 2450 Broadway, 6th Floor Santa Monica, CA 90404 Attention: Chief Executive Officer

If to Sanders:		to the last address of Sanders in the Company’s records specifically identified for notices under this Agreement

With a copy to:		Willkie Farr & Gallagher LLP 787 Seventh Avenue New York, NY 10019 Attention: Michael A. Katz and Adam Turteltaub

or to such other address as is provided by a party to the other from time to time.

13. Survival . The representations, warranties and covenants of Sanders and the Company contained in this Agreement will survive any termination of Sanders’ employment with the Company through the end of the Restricted Period.

14. Amendment; Waiver . No provision of this Agreement may be amended, modified, waived or discharged unless such amendment, modification, waiver or discharge is agreed to in writing and signed by Sanders and CFI. No waiver by either party hereto at any time of any breach by the other party hereto of compliance with any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

15. Severability . Sanders acknowledges and agrees that (i) he has had an opportunity to seek advice of counsel in connection with this Agreement and (ii) the Restrictive Covenants are reasonable in geographic and temporal scope and in all other respects. If any term or provision of this Agreement is determined to be invalid or unenforceable in a final court or arbitration proceeding, (A) the remaining terms and provisions hereof shall be unimpaired and (B) to the extent permitted by applicable Law, the invalid or unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision.

16. Arbitration . Except as otherwise set forth in Section 8, any dispute or controversy arising under or in connection with this Agreement that cannot be mutually resolved by the parties hereto shall be settled exclusively by arbitration in New York, New York before a panel of three neutral arbitrators, each of whom shall be selected jointly by the parties, or, if the parties cannot agree on the selection of the arbitrators, as selected by the American Arbitration Association. The commercial arbitration rules of the American Arbitration Association (the “ AAA Rules ”) shall govern any arbitration between the parties, except that the following provisions are included in the parties’ agreement to arbitrate and override any contrary provisions in the AAA Rules:

(a) The agreement to arbitrate and the rights of the parties hereunder shall be governed by and construed in accordance with the laws of the State of California, without regard to conflict or choice of law rules;

(b) The California Arbitration Act shall govern the arbitration, the agreement to arbitrate, and any proceedings to enforce, confirm, modify or vacate the award;

(d) Any petition or motion to modify or vacate the award shall be filed in a Superior Court in California (the “ Court ”);

(e) The award shall be written, reasoned, and shall include findings of fact as to all factual issues and conclusions of law as to all legal issues;

(f) Either party may seek a de novo review by the Court of the conclusions of law included in the award and any petition or motion to enforce, confirm, modify or vacate the award; and

(g) The arbitration shall be confidential. Judgment may be entered on the arbitrators’ award in any court having jurisdiction.

17. Effectiveness . This Agreement and the transactions contemplated herein shall be conditioned upon the closing of the transactions contemplated by the Contribution Agreement. In the event that the Contribution Agreement terminates prior to the closing of the transactions contemplated thereby, this Agreement shall terminate automatically without any further action by any party and shall be void ab initio . If the Contribution Agreement is amended or modified prior to the Effective Date in a manner that has the effect of reducing the Consideration (as defined in the Contribution Agreement) payable to CCH under the Contribution Agreement, Sanders will have the option of terminating this Agreement during the two business days following such time as CFI notifies Sanders of the amendment or modification (which notice may be given either before or after the date of such amendment or modification). The option to terminate this Agreement must be exercised by Sanders by written notice to CFI within such two (2) business day period, after which time the option to terminate will expire.

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


COLONY FINANCIAL, INC.

By:		/s/ Mark Hedstrom
Name:		Mark Hedstrom
Title:		Vice President

EXECUTIVE

/s/ Ronald M. Sanders
Ronald M. Sanders

[Signature Page to Ronald M. Sanders Restrictive Covenant Agreement]

Exhibit 1

California Labor Code Section 2870

(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an

invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

(1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or

(2) Result from any work performed by the employee for the employer.

(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.

Exhibit 10.4

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “ Agreement ”), dated as of March 16, 2015, is made by and between Colony Financial, Inc., a Maryland corporation (“ CFI ”), and Darren J. Tangen (the “ Executive ”). CFI, together with its subsidiaries is hereinafter referred to as “the Company,” and where the context permits, references to “the Company” shall include the Company and any successor to the Company.

WHEREAS , certain businesses of the Company are currently externally managed and advised by a subsidiary of Colony Capital, LLC (“ CC ”) pursuant to the terms of a management agreement;

2. POSITION; REPORTING AND DUTIES; LOCATION .

(a) Position and Reporting . During the Employment Term, the Executive shall serve as the Executive Director, Chief Financial Officer of CFI. The Executive shall report directly to the Chief Executive Officer of the Company during the Employment Term or, if otherwise determined by the Board of Directors of CFI (the “ Board ”), the Executive Chairman of CFI (the “ Executive Chairman ”).

(b) Duties and Responsibilities .

(ii) In serving in his capacity as the Executive Director, Chief Financial Officer of CFI during the Employment Term, the Executive shall (A) perform such duties and provide such services as are reasonably consistent with those provided by the Executive to CFI in his role as its Executive Director, Chief Financial Officer prior to the Effective Date and (B) provide such other duties as are consistent with his role as Executive Director, Chief Financial Officer of CFI, as reasonably requested from time to time by the Board or the Executive Chairman.

(c) Location of Employment . The Executive’s principal place of business during the Employment Term shall be at the Company’s office in Santa Monica, California; provided , that , the Executive may be required to engage in travel during the Employment Term in the performance of his duties hereunder.

3. COMPENSATION AND BENEFITS .

(a) Base Salary . During the Employment Term, the Company will pay to the Executive a base salary at the annualized rate of not less than $447,000 (the base salary in effect from time to time, the “ Base Salary ”). The Base Salary will be paid to the Executive in accordance with the Company’s customary compensation practices from time to time in effect

for the Company’s senior executive officers. The Board (or a committee of directors delegated by the Board) will review the Base Salary from time to time, but at least annually, during the Employment Term, but may not reduce the Executive’s then-existing Base Salary without the Executive’s prior written consent and agreement.

(b) Annual Cash Bonus .

(i) For each calendar year during the Employment Term beginning with the calendar year in which the Effective Date occurs, the Executive shall be given an opportunity to earn an annual incentive cash bonus based on an evaluation by the Board (or a committee of directors delegated by the Board) of the Executive’s performance in respect of the applicable calendar year; provided , that , the Board or such committee may determine prior to the beginning of any such calendar year to instead condition the payment of all or a portion of the cash bonus with respect to the applicable calendar year upon the achievement of performance measures determined by the Board or such committee in consultation with the Executive (as applicable, the “ Annual Bonus ”). The Executive’s target Annual Bonus for each calendar year during the Employment Term (including the calendar year in which the Effective Date occurs) shall be no less than $1,300,000 (such amount, as increased from time to time, the “ Target Bonus Amount ”). If the Board (or a committee of directors delegated by the Board), establishes reasonable performance measures as provided for above, the actual Annual Bonus amount paid to the Executive in respect of any calendar year during the Employment Term shall be based on the achievement of the applicable performance measures and may be less or more than the applicable Target Bonus Amount. The Board (or a committee of directors delegated by the Board) will review the Target Bonus Amount from time to time, but at least annually, during the Employment Term, but may not reduce the Executive’s then-existing Target Bonus Amount without the Executive’s prior written consent and agreement. The Executive’s Annual Bonus for the calendar year in which the Effective Date occurs shall not be pro-rated.

(i) For each calendar year during the Employment Term beginning with the calendar year in which the Effective Date occurs, the Executive shall be eligible to receive equity and equity-based incentive awards (“ LTIP Awards ”), with an annual target LTIP Award opportunity of no less than $1,000,000 (the target amount in effect from time to time, the “ Target LTIP Award ”). The Board (or a committee of directors delegated by the Board) will review the Target LTIP Award (and any applicable performance measures) from time to time, but at least annually, during the Employment Term, but may not reduce the Executive’s then-existing Target LTIP Award without the Executive’s prior written consent and agreement.

incentive fees and other such remuneration in respect of funds and similar vehicles, as applicable, managed by the Company (collectively, “ Fund Incentives ”). Allocations of all Fund Incentives shall be made as determined by the Board (or a committee of directors delegated by the Board) in consultation with the Executive.

(h) Attorneys’ Fees . The Company shall promptly pay or reimburse the Executive for reasonable attorneys’ fees incurred by the Executive in connection with the review, negotiation, drafting and execution of this Agreement and any related arrangements, and the employment agreements of Ronald M. Sanders and Kevin Traenkle and any agreements related thereto, in an aggregate amount not to exceed $50,000, subject to the Executive providing the Company with reasonable documentation of such fees within 30 days following the Effective Date. The Company shall reimburse the Executive for such fees within 10 business days following Executive’s submission to the Company of the documentation evidencing the fees.

4. TERMINATION OF EMPLOYMENT .

(a) General Provisions .

(b) Termination for Cause or by the Executive without Good Reason .

(ii) If the Executive’s employment is terminated by the Company for Cause, or by the Executive without Good Reason, the Executive shall only be entitled to receive the Accrued Benefits.

(iii) For purposes of this Agreement, a termination for “ Cause ” shall mean a termination of the Executive’s employment with the Company because of (A) the Executive’s conviction of, or plea of no contest to, any felony under the laws of the United States or any state within the United States (other than a traffic-related felony) which termination shall become effective immediately as of the date the Board determines to terminate the Agreement, which action must be taken on or after the date of such conviction or plea or within 60 days thereafter; (B) the Executive’s willful and gross misconduct in connection with the performance of his duties to the Company (other than by reason of his incapacity or disability), it being expressly understood that the Company’s dissatisfaction with the Executive’s performance shall not constitute Cause; or (C) a continuous, willful and material breach by the Executive of this Agreement after written notice of such breach has been provided to the Executive by the Board, provided , that , in no event shall any action or omission in subsections (B) or (C) constitute “Cause” unless (1) the Company gives notice to the Executive stating that the Executive will be terminated for Cause, specifying the particulars thereof in reasonable detail and the effective date of such termination (which shall be no less than 10 business days following the date on which such written notice is received by the Executive) and (2) the Executive fails or refuses to materially cure or cease such misconduct or breach within 10 business days after such written notice is given to him. For purposes of the foregoing sentence, no act, or failure to act, on the Executive’s part shall be considered willful unless done or omitted to be done, by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company, and any act or omission by the Executive pursuant to the authority given pursuant to a resolution duly adopted by the Board or on the advice of counsel for the Company will be deemed made in good faith and in the best interests of the Company.

the first regularly scheduled payroll date of the Company following the Release Effective Date and in no event later than the 60 ^th day following the date of termination (the actual date of payment, the “ Severance Payment Date ”); provided, that, if the 60 day period referenced in Section 4(c)(ii) begins in one calendar year and ends in a subsequent calendar year, the Severance Payment Date will in all events occur in the second calendar year;

(d) Termination Due to Death or Disability .

(e) Non-Renewal of Agreement .

(g) Resignation as Officer or Director . Unless requested otherwise by the Company, upon any termination of the Executive’s employment hereunder the Executive shall resign each

position (if any) that the Executive then holds as an officer or director of the Company. The Executive’s execution of this Agreement shall be deemed the grant by the Executive to the officers of the Company of a limited power of attorney to sign in the Executive’s name and on the Executive’s behalf any such documentation as may be required to be executed solely for the limited purposes of effectuating such resignations.

6. SECTION 280G .

(d) Additional Payments . If the Executive receives reduced payments and benefits by reason of this Section 6 and it is established pursuant to a determination of a court of competent

jurisdiction which is not subject to review or as to which the time to appeal has expired, or pursuant to an Internal Revenue Service proceeding, that the Executive could have received a greater amount without resulting in any Excise Tax, then the Company shall thereafter pay the Executive the aggregate additional amount which could have been paid without resulting in any Excise Tax as soon as reasonably practicable following such determination.

9. MISCELLANEOUS PROVISIONS .


If to the Company:		Colony Financial, Inc.
		2450 Broadway, 6th Floor
		Santa Monica, CA 90404
		Attention: Chief Executive Officer

If to the Executive:		to the last address of the Executive in the Company’s records specifically identified for notices under this Agreement

With a copy to:		Willkie Farr & Gallagher LLP
		787 Seventh Avenue
		New York, NY 10019
		Attention: Michael A. Katz and Adam Turteltaub

or to such other address as is provided by a party to the other from time to time.

(e) Survival . The representations, warranties and covenants of the Executive contained in this Agreement will survive any termination of the Executive’s employment with the Company.

(i) Arbitration . Except as otherwise set forth in the Restrictive Covenant Agreement, any dispute or controversy arising under or in connection with this Agreement that cannot be mutually resolved by the parties hereto shall be settled exclusively by arbitration in Santa Monica, California, before a panel of three neutral arbitrators, each of whom shall be selected jointly by the parties, or, if the parties cannot agree on the selection of the arbitrators, as selected by the American Arbitration Association. The commercial arbitration rules of the American Arbitration Association (the “ AAA Rules ”) shall govern any arbitration between the parties, except that the following provisions are included in the parties’ agreement to arbitrate and override any contrary provisions in the AAA Rules:

(ii) The California Arbitration Act shall govern the arbitration, the agreement to arbitrate, and any proceedings to enforce, confirm, modify or vacate the award;

(iii) The arbitrators shall apply California law;

(iv) Any petition or motion to modify or vacate the award shall be filed in a Superior Court in California (the “ Court ”);

(iv) The award shall be written, reasoned, and shall include findings of fact as to all factual issues and conclusions of law as to all legal issues;

(v) Either party may seek a de novo review by the Court of the conclusions of law included in the award and any petition or motion to enforce, confirm, modify or vacate the award; and

(vi) The arbitration shall be confidential. Judgment may be entered on the arbitrators’ award in any court having jurisdiction.

terminated employment with the Company for purposes of any payments under this Agreement which are subject to Section 409A of the Code until the Executive would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A of the Code. Each amount to be paid or benefit to be provided under this Agreement shall be construed as a separate identified payment for purposes of Section 409A of the Code. Without limiting the foregoing and notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Agreement or any other arrangement between the Executive and the Company during the six-month period immediately following the Executive’s separation from service shall instead be paid on the first business day after the date that is six months following the Executive’s separation from service (or, if earlier, the Executive’s date of death). To the extent required to avoid an accelerated or additional tax under Section 409A of the Code, amounts reimbursable to the Executive under this Agreement shall be paid to the Executive on or before the last day of the year following the year in which the expense was incurred and the amount of expenses eligible for reimbursement (and in kind benefits provided to the Executive) during one year may not affect amounts reimbursable or provided in any subsequent year. CFI makes no representation that any or all of the payments described in this Agreement will be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to any such payment. For purposes of this Section 8(j), Section 409A of the Code shall include all regulations and guidance promulgated thereunder.

(k) Headings . The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.

Executive’s employment with the Company) and subject to the delivery of reasonable support for such expenses. Any such requests for cooperation shall be subject to the Executive’s business and personal schedule and the Executive shall not be required to cooperate against his own legal interests or the legal interests of his employer or partners or business ventures. In the event the Executive reasonably determines that he needs separate legal counsel in connection with his cooperation, the Company shall reimburse the Executive for the reasonable costs of such counsel as soon as practicable (and in any event within 30 days) following its receipt of an invoice for such costs. In the event the Executive is required to cooperate for more than 8 hours in any 12-month period, the Executive shall be paid an hourly consulting fee in an amount mutually agreed between the Company and Executive at the time.

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


COLONY FINANCIAL, INC.

By:		/s/ Mark Hedstrom
Name:		Mark Hedstrom
Title:		Vice President

EXECUTIVE

/s/ Darren J. Tangen
Darren J. Tangen

[Signature Page to Darren J. Tangen Employment Agreement]

Schedule 1

Current Activities

None.

Exhibit A

Form of Release

Darren J. Tangen (“ Executive ”), a former employee of Colony Financial, Inc. (“ CFI ” and together with its subsidiaries, the “ Employer ”), hereby enters into and agrees to be bound by this General Waiver and Release of Claims (the “ Release ”). Executive acknowledges that he is required to execute this Release in order to be eligible for certain post-termination benefits (the “ Post-Termination Benefits ”) as set forth in Section [4(c)(ii)] / [4(e)(i)] of his Employment Agreement with CFI, dated March 16, 2015 (the “ Employment Agreemen t”). Unless otherwise indicated, capitalized terms used but not defined herein shall have the meanings specified in the Employment Agreement.

1. SEPARATION DATE . Executive acknowledges and agrees that his separation from Employer was effective as of , 20XX ( the “ Separation Date ”).

3. EXECUTIVE’S GENERAL RELEASE OF CLAIMS .

A-1

A-2

5. NO ASSIGNMENT OF CLAIMS . Executive affirms and warrants that he has made no assignment of any right or interest in any claim which he may have against any of the Employer Released Parties.

[remainder of page intentionally left blank]

A-3

By his signature, Darren J. Tangen hereby knowingly and voluntarily executes this Release as of the date indicated below.



Darren J. Tangen

Dated:

[Signature page to Darren J. Tangen Release]

Exhibit B

Form of Restrictive Covenant Agreement

Attached hereto.

RESTRICTIVE COVENANT AGREEMENT

THIS RESTRICTIVE COVENANT AGREEMENT (this “ Agreement ”), dated as of March 16, 2015, and effective as of the Effective Date (as defined below), is made by and between Colony Financial, Inc., a Maryland corporation (“ CFI ”), and Darren J. Tangen (“ Tangen ”). CFI, together with its Subsidiaries (which, following the Effective Date, shall include NewCo (as defined below) and its subsidiaries) is hereinafter referred to as “the Company,” and where the context permits, references to “the Company” shall include the Company and any successor to the Company. Any capitalized term that is used but not otherwise defined in this Agreement shall have the meaning set forth in the Contribution Agreement (as defined below).

WHEREAS , effective as of the closing of the Contribution (the date on which such closing occurs, the “ Effective Date ”), Tangen will become employed by the Company and will serve as the Executive Director, Chief Financial Officer of CFI in accordance with terms of the Employment Agreement by and between CFI and Tangen, dated as of the date hereof (the “ Employment Agreement ”);

WHEREAS , Tangen (i) has been actively involved in the management of the business of CC and has thereby acquired significant experience, skill, and confidential and proprietary information relating to the business and operation of CC and (ii) in the course of his participation in the business of CC, has also developed on behalf of CC significant goodwill that is now a significant part of the value of CC;

WHEREAS , the Company desires to protect its investment in the assets, businesses and goodwill of CC to be acquired as part of the Contribution and, accordingly, as a material condition to its willingness to enter into the Contribution Agreement and consummate the Contribution, has required that Tangen agree to limit certain activities by Tangen (as contemplated hereby) that would compete with or otherwise harm such assets, businesses or goodwill;

WHEREAS , as part of the consideration and inducement to CFI to enter into the Contribution Agreement and acquire such assets, businesses and goodwill, Tangen is willing to agree to enter into this Agreement and abide by such restrictions; and

1. Defined Terms . For purposes of this Agreement, the following terms have the respective meanings set forth below:

(b) “ Company Materials ” means all Materials that Tangen makes or conceives, or has made or conceived, solely or jointly, during the period of Tangen’s retention by or employment with the Company, whether or not patentable or registerable under copyright, trademark or similar statutes, which (i) are related to the current or demonstrably (by expenditure of material resources or material time spent by senior management) anticipated business or activities of the Company (which includes any fund managed by the Company during or prior to the period of Tangen’s retention by or employment with the Company); and (ii) are otherwise developed by Tangen through the use of the Company’s confidential information, equipment, software, or other facilities or resources at a time during which Tangen has been a consultant, or employee (temporary or otherwise) of the Company. Notwithstanding the foregoing, Company Materials shall not include any Materials conceived or made, solely or jointly, by Tangen in connection with the performance of Permitted Activities.

(c) “ Confidential Information ” means information that is not generally known to the public and that is or was used, developed or obtained by Tangen (in his capacity as a member or employee of CC); provided, however, Confidential Information will not include any information that is generally available to the public or within the industry prior to the date Tangen proposes to disclose or use such information. For the avoidance of doubt, “Confidential Information” does not include (x) information concerning non-proprietary business or investment practices, methods or relationships customarily employed or entered into by comparable business enterprises, (y) the identity of investors and their investment practices, methods and relationships, financing sources or capital market intermediaries and (z) information that is used, developed or obtained by Tangen exclusively in connection with the performance of Permitted Activities.

(d) “ Inventions ” means any inventions, improvements, developments, ideas or discoveries whether patentable or unpatentable, that meets any one of the following criteria: (i)

relates at the time of conception or reduction to practice to: (A) the business, projects or products of the Company, or to the utilization thereof; or (B) the actual or demonstrably anticipated research or development of the Company; (ii) results from any work performed directly or indirectly by Tangen for the Company; or (iii) results, at least in part, from Tangen’s use of the Company’s time, equipment, supplies, facilities or trade secret information; provided , however , that Inventions shall not include (x) any Invention which qualifies fully under the provisions of California Labor Code Section 2870 (a copy of which is attached as Exhibit 1), including any idea or invention which is developed entirely on Tangen’s own time without using the Company’s equipment, supplies, facilities or trade secret information, and which is not related to the business (either actual or demonstrably anticipated), and which does not result from work performed for the Company and (y) inventions, improvements, developments, ideas or discoveries conceived or reduced to practice by Tangen exclusively in connection with the performance of Permitted Activities.

(f) “ Permitted Activities ” means each of the activities described in Section 2 hereof.

(h) “ Restricted Period ” means the period commencing on the Effective Date and ending on the first anniversary of the termination of Tangen’s employment with the Company; provided that the Restricted Period shall immediately cease if such termination of employment is by the Company without Cause, by Tangen for Good Reason or as a result of the Company giving a Non-Renewal Notice to Tangen (in each case, such capitalized term used herein as defined in the Employment Agreement).

2. Permitted Activities . Notwithstanding anything set forth herein to the contrary, nothing contained herein shall prohibit Tangen from:

(a) engaging in the Personal Activities (as defined in the Employment Agreement);

(b) owning, directly or indirectly, solely as an investment, securities of any such Person which are traded on any national securities exchange or NASDAQ if Tangen (A) is not a controlling person of, or a member of a group which controls, such Person; and (B) does not, directly or indirectly, own five percent (5%) or more of any class of securities of such Person;

3. Non-Competition . Tangen shall not, during the Restricted Period, directly or indirectly, in any manner within the Restricted Territory: (i) engage in the Business (other than through the Company and its Affiliates); (ii) render any services as an employee, officer, director or consultant to any Person (other than the Company) engaged in the Business; or (iii) make an investment in a Person engaged in the Business as a partner, shareholder, principal, member or other owner of equity interests (or securities convertible into or exercisable for, equity interests); provided, however, nothing contained in this Agreement shall restrict Tangen from (x) engaging in any activity that he determines in good faith is in furtherance of the interests of the Company in the performance of his duties for the Company and/or (y) engaging in any Permitted Activity. In addition, nothing herein shall prohibit Tangen from providing services to an entity engaged in the Business if Tangen’s services are solely limited to a unit, division, or subsidiary of such entity which does not engage in the Business and Tangen does not provide services directly or indirectly to, or with respect to, the Business.

4. Non-Solicitation . Except as necessary, appropriate or desirable to perform his duties to the Company during his employment, Tangen shall not during the Restricted Period, without

CFI’s prior written consent, (i) directly or indirectly, on his own behalf or for any other Person, knowingly solicit or induce any officer, director, employee or independent contractor who is a natural person that provides consulting or advisory services with respect to sourcing or consummating financings or investments of the Company (A) to terminate his or her relationship with the Company, or (B) hire any such individual whom Tangen knows left the employment of the Company during the previous 12 months or (ii) directly or indirectly, on his own behalf or for any other Person, solicit or induce any investors to terminate (or diminish in any material respect) his, her or its relationship with the Company. For the avoidance of doubt, identification or doing business with or co-investing with any limited partners, investors, financing sources or capital markets intermediaries with regard to activity that is not prohibited by Section 3 above shall not be deemed to be a breach of this Section 4 or otherwise. Tangen shall not be in violation of this Section 4 by reason of providing a personal reference for any officer, director or employee of the Company or soliciting individuals for employment through a general advertisement not targeted specifically to officers, directors or employees of the Company.

5. Confidential Information . At all times on and following the Effective Date, Tangen shall not disclose or use for his benefit or the benefit of others, except in connection with the business and affairs of the Company or any of its affiliates, any Confidential Information except to the extent that (i) such disclosure or use is related to, necessary, appropriate or desirable in connection with Tangen’s performance of his duties to the Company or (ii) is related to any good faith dispute between Tangen and the Company or any of its affiliates or otherwise in connection with any action by Tangen to enforce his rights or defend his actions under this Agreement, the Contribution Agreement, the Employment Agreement or any other agreement with the Company or any of its affiliates. Nothing contained herein shall preclude Tangen from disclosing Confidential Information to his immediate family and personal legal and financial advisor(s), provided that Tangen informs such family member(s) and/or advisor(s) that the information is confidential in nature and receives reasonable assurances that the family member(s) and/or advisor(s) shall not disclose such information except as required by Law or by any Authority with apparent jurisdiction over such Person. Nothing in this Agreement shall be construed to prevent Tangen from complying with applicable Law, or disclosing information pursuant to the valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not in Tangen’s reasonable judgment exceed the extent of disclosure required by such Law. Tangen shall, to the extent legally permitted, promptly provide written notice of any such order to an authorized officer of the Company after receiving such order and reasonably cooperate (at the Company’s expense) with any efforts of the Company to seek a protective order or other measure to protect the confidentiality of such information.

6. Mutual Non-Disparagement .

(a) At all times on and following the Effective Date, Tangen shall refrain from making any disparaging statements about the Company or any of its present or (to the extent such Persons serve in such capacity during Tangen’s employment with the Company) future officers, directors, and, in their capacity as such, employees to any third Persons, including, without limitation, to any press or other media, except (i) to the extent required by Law or legal process, by any Authority with apparent jurisdiction or applicable securities considerations, (ii) related to any good faith litigation or similar proceeding between Tangen and the Company or any of such officers or directors or otherwise in connection with any good faith litigation or similar proceeding or other efforts by Tangen to enforce his rights or defend his actions under

(b) At all times on and following the Effective Date, the senior executive officers of the Company shall not make, or cause to be made by the Company, any disparaging or negative statements about Tangen to any third Persons, including, without limitation, to any press or other media, except (i) to the extent required by Law or legal process, by any Authority with apparent jurisdiction or applicable securities considerations, (ii) related to any good faith litigation or similar proceeding between Tangen and the Company or otherwise in connection with any good faith litigation or similar proceeding by Tangen to enforce his rights or defend his actions under this Agreement, the Contribution Agreement, the Employment Agreement or any other agreement with the Company or (iii) for the making of any critical remarks about Tangen in connection with any analyses made or opinions expressed in the ordinary course of their respective duties to the Company during their employment therewith.

7. Intellectual Property .

(a) Tangen agrees that all Company Materials shall be deemed “work made for hire” by the Company as the “author” and owner to the extent permitted by United States copyright Law. To the extent (if any) that some or all of the Company Materials do not constitute “work made for hire,” Tangen hereby irrevocably assigns to the Company for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, all right, title and interest in and to such Company Materials (including without limitation any and all copyright rights, patent rights and trademark rights and goodwill associated therewith). The provisions of this paragraph will apply to all Company Materials which are or have been conceived or developed by Tangen, solely or jointly, whether or not further development or reduction to practice may take place after the termination of Tangen’s employment or retention, by the Company.

(b) Tangen further agrees that he will execute and deliver to CFI any and all further documents or instruments and do any and all further acts which the Company reasonably requests in order to perfect, confirm, defend, police and enforce the Company’s intellectual property rights, and hereby grants to the officers of the Company an irrevocable power of attorney, coupled with interest, to such end. Tangen shall be promptly reimbursed by the Company for all costs and expenditures incurred in connection with any cooperation referenced in this Section 7(b).

8. Injunctive Relief; Other Remedies . The parties agree that the remedy at Law for any breach of this Agreement is and will be inadequate, and in the event of a breach or threatened breach by Tangen of the provisions of Sections 3, 4, 5, 6, or 7 of this Agreement, the Company shall be entitled to seek an injunction restraining Tangen from the conduct which would constitute a breach of this Agreement. Nothing herein contained shall be construed as prohibiting the Company from pursuing any other remedies available to it or them for such breach or threatened breach, including, without limitation, specific performance and/or the recovery of damages from Tangen.

9. Reasonableness and Enforceability of Covenants .

(b) The parties expressly agree that the character, duration and geographical scope of this Agreement are reasonable in light of the circumstances as they exist on the date upon which this Agreement has been executed, including, but not limited to, Tangen’s material economic interest in the Contribution, and Tangen’s position of confidence and trust as a stockholder of CFI.

(c) Tangen acknowledges that, (i) in connection with the Contribution, the Company will be vested with the goodwill of, and will directly or indirectly carry on, the business of CC; (ii) the restrictive covenants and the other agreements contained herein (collectively, the “ Restrictive Covenants ”) are an essential part of this Agreement and the contemplated Contribution; (iii) the contemplated Contribution is designed and intended to qualify as a sale (or other disposition) by Tangen within the meaning of BPC Section 16601; and (iv) the covenants contained in this Agreement are intended to be and would be enforceable under BPC Section 16601. Tangen and the Company agree not to challenge the enforceability of the covenants (and the limitations and qualifications included as part thereof) contained in this Agreement.

(d) Tangen agrees to be bound by the Restrictive Covenants and the other agreements contained in this Agreement to the maximum extent permitted by Law, it being the intent and spirit of the parties that the Restrictive Covenants and the other agreements contained herein shall be valid and enforceable in all respects, and, subject to the terms and conditions of, and limitations and qualifications included in, this Agreement.

10. Acknowledgements . Tangen acknowledges that (i) his work for the Company will continue to give him access to the confidential affairs and proprietary information of the Company; (ii) the agreements and covenants of Tangen contained in this Agreement are essential to the business and goodwill of the Company; and (iii) CFI would not have entered into the Contribution Agreement or the Employment Agreement but for the covenants and agreements set forth herein.


If to the Company:		Colony Financial, Inc.
		2450 Broadway, 6th Floor
		Santa Monica, CA 90404
		Attention: Chief Executive Officer

If to Tangen:		to the last address of Tangen
		in the Company’s records specifically identified for notices under this Agreement

With a copy to:		Willkie Farr & Gallagher LLP
		787 Seventh Avenue
		New York, NY 10019
		Attention: Michael A. Katz and Adam Turteltaub

or to such other address as is provided by a party to the other from time to time.

13. Survival . The representations, warranties and covenants of Tangen and the Company contained in this Agreement will survive any termination of Tangen’s employment with the Company through the end of the Restricted Period.

14. Amendment; Waiver . No provision of this Agreement may be amended, modified, waived or discharged unless such amendment, modification, waiver or discharge is agreed to in writing and signed by Tangen and CFI. No waiver by either party hereto at any time of any breach by the other party hereto of compliance with any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

15. Severability . Tangen acknowledges and agrees that (i) he has had an opportunity to seek advice of counsel in connection with this Agreement and (ii) the Restrictive Covenants are reasonable in geographic and temporal scope and in all other respects. If any term or provision of this Agreement is determined to be invalid or unenforceable in a final court or arbitration proceeding, (A) the remaining terms and provisions hereof shall be unimpaired and (B) to the extent permitted by applicable Law, the invalid or unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision.

(b) The California Arbitration Act shall govern the arbitration, the agreement to arbitrate, and any proceedings to enforce, confirm, modify or vacate the award;

(d) Any petition or motion to modify or vacate the award shall be filed in a Superior Court in California (the “ Court ”);

(e) The award shall be written, reasoned, and shall include findings of fact as to all factual issues and conclusions of law as to all legal issues;

(f) Either party may seek a de novo review by the Court of the conclusions of law included in the award and any petition or motion to enforce, confirm, modify or vacate the award; and

(g) The arbitration shall be confidential. Judgment may be entered on the arbitrators’ award in any court having jurisdiction.

17. Effectiveness . This Agreement and the transactions contemplated herein shall be conditioned upon the closing of the transactions contemplated by the Contribution Agreement. In the event that the Contribution Agreement terminates prior to the closing of the transactions contemplated thereby, this Agreement shall terminate automatically without any further action by any party and shall be void ab initio . If the Contribution Agreement is amended or modified prior to the Effective Date in a manner that has the effect of reducing the Consideration (as defined in the Contribution Agreement) payable to CCH under the Contribution Agreement, Tangen will have the option of terminating this Agreement during the two business days following such time as CFI notifies Tangen of the amendment or modification (which notice may be given either before or after the date of such amendment or modification). The option to terminate this Agreement must be exercised by Tangen by written notice to CFI within such two (2) business day period, after which time the option to terminate will expire.

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


COLONY FINANCIAL, INC.

By:		/s/ Mark Hedstrom
Name:		Mark Hedstrom
Title:		Vice President

EXECUTIVE

/s/ Darren J. Tangen
Darren J. Tangen

[Signature Page to Darren J. Tangen Restrictive Covenant Agreement]

Exhibit 1

California Labor Code Section 2870

(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

(1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or

(2) Result from any work performed by the employee for the employer.

Exhibit 10.5

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “ Agreement ”), dated as of March 16, 2015, is made by and between Colony Financial, Inc., a Maryland corporation (“ CFI ”), and Kevin Traenkle (the “ Executive ”). CFI, together with its subsidiaries is hereinafter referred to as “the Company,” and where the context permits, references to “the Company” shall include the Company and any successor to the Company.

WHEREAS , certain businesses of the Company are currently externally managed and advised by a subsidiary of Colony Capital, LLC (“ CC ”) pursuant to the terms of a management agreement;

WHEREAS , CFI desires to enter into this Agreement with the Executive, effective as of the closing of the Contribution (the date on which such closing occurs, the “ Effective Date ”), pursuant to which the Executive will become employed by CFI Operating Company, LLC or one of its subsidiaries (as applicable, the “ Operating Entity ”) and will serve as an Executive Director, Chief Investment Officer Global Real Estate of CFI.

2. POSITION; REPORTING AND DUTIES; LOCATION .

(a) Position and Reporting . During the Employment Term, the Executive shall serve as Executive Director, Chief Investment Officer Global Real Estate of the Company. During the Employment Term, the Executive shall report directly to the Chief Executive Officer of the Company or the Executive Chairman of CFI (the “Executive Chairman”), as determined by the Board of Directors of CFI (the “Board”). In order to fulfill his duties and responsibilities, the Executive will oversee the investment and asset management professionals of the Company who are primarily responsible for real estate and debt related investment activities.

(b) Duties and Responsibilities .

(ii) In serving in his capacity as Executive Director, Chief Investment Officer Global Real Estate of the Company, Executive will serve as the senior investment executive responsible for the administration and management of the Company’s real estate and debt investment portfolio and overall investment program (including funds and other investment vehicles managed by the Company that invest in real estate and real estate related debt). Unless otherwise determined by the Board, Executive will serve on the Company’s Investment Committee. The Executive shall provide such other duties as are consistent with his role as Executive Director, Chief Investment Officer Global Real Estate of the Company, as reasonably requested from time to time by the Board or the Chief Executive Officer .

3. COMPENSATION AND BENEFITS .

(a) Base Salary . During the Employment Term, the Company will pay to the Executive a base salary at the annualized rate of not less than $472,000 (the base salary in effect from time to time, the “ Base Salary ”). The Base Salary will be paid to the Executive in accordance with the Company’s customary compensation practices from time to time in effect for the Company’s senior executive officers. The Board (or a committee of directors delegated by the Board) will review the Base Salary from time to time, but at least annually, during the Employment Term, but may not reduce the Executive’s then-existing Base Salary without the Executive’s prior written consent and agreement.

(b) Annual Cash Bonus .

(i) For each calendar year during the Employment Term beginning with the calendar year in which the Effective Date occurs, the Executive shall be given an opportunity to earn an annual incentive cash bonus based on an evaluation by the Board (or a committee of directors delegated by the Board) of the Executive’s performance in respect of the applicable calendar year; provided , that , the Board or such committee may determine prior to the beginning of any such calendar year to instead condition the payment of all or a portion of the cash bonus with respect to the applicable calendar year upon the achievement of performance measures determined by the Board or such committee in consultation with the Executive (as applicable, the “ Annual Bonus ”). The Executive’s target Annual Bonus for each calendar year during the Employment Term (including the calendar year in which the Effective Date occurs) shall be no less than $1,575,000 (such amount, as increased from time to time, the “ Target Bonus Amount ”). If the Board (or a committee of directors delegated by the Board), establishes reasonable performance measures as provided for above, the actual Annual Bonus amount paid to the Executive in respect of any calendar year during the Employment Term shall be based on the achievement of the applicable performance measures and may be less or more than the applicable Target Bonus Amount. The Board (or a committee of directors delegated by the Board) will review the Target Bonus Amount from time to time, but at least annually, during the Employment Term, but may not reduce the Executive’s then-existing Target Bonus Amount without the Executive’s prior written consent and agreement. The Executive’s Annual Bonus for the calendar year in which the Effective Date occurs shall not be pro-rated.

(i) For each calendar year during the Employment Term beginning with the calendar year in which the Effective Date occurs, the Executive shall be eligible to receive equity and equity-based incentive awards (“ LTIP Awards ”), with an annual target LTIP Award opportunity of no less than $990,000 (the target amount in effect from time to time, the “ Target LTIP Award ”). The Board (or a committee of directors delegated by the Board) will review the Target LTIP Award (and any applicable performance measures) from time to time, but at least annually, during the Employment Term, but may not reduce the Executive’s then-existing Target LTIP Award without the Executive’s prior written consent and agreement.

(ii) The Executive shall (x) continue to receive allocations in respect of carried interests, incentive fees and other such remuneration in respect of funds and similar vehicles, as applicable, managed by the Company that were granted to the Executive prior to the Effective Date and (y) be eligible to be granted new allocations in respect of carried interests, incentive fees and other such remuneration in respect of funds and similar vehicles, as applicable, managed by the Company (collectively, “ Fund Incentives ”). Allocations of all Fund Incentives shall be made as determined by the Board (or a committee of directors delegated by the Board) in consultation with the Executive.

Section 4(a)(i)(D) below, after Executive’s employment with the Company. The Executive shall also be entitled to indemnification rights, benefits and related expense advances and reimbursements to the same extent as any other director or officer of CFI and to the maximum extent permitted under applicable law pursuant to an indemnification agreement (the “ Indemnification Agreement ”).

(h) Attorneys’ Fees . The Company shall promptly pay or reimburse the Executive for reasonable attorneys’ fees incurred by the Executive in connection with the review, negotiation, drafting and execution of this Agreement and any related arrangements, and the employment agreements of Darren Tangen and Ron Sanders and any agreements related thereto, in an aggregate amount not to exceed $50,000, subject to the Executive providing the Company with reasonable documentation of such fees within 30 days following the Effective Date. The Company shall reimburse the Executive for such fees within 10 business days following Executive’s submission to the Company of the documentation evidencing the fees.

4. TERMINATION OF EMPLOYMENT .

(a) General Provisions .

(b) Termination for Cause or by the Executive without Good Reason .

(ii) If the Executive’s employment is terminated by the Company for Cause, or by the Executive without Good Reason, the Executive shall only be entitled to receive the Accrued Benefits.

(iii) For purposes of this Agreement, a termination for “ Cause ” shall mean a termination of the Executive’s employment with the Company because of (A) the Executive’s conviction of, or plea of no contest to, any felony under the laws of the United States or any state within the United States (other than a traffic-related felony) which termination shall become effective immediately as of the date the Board determines to terminate the Agreement, which action must be taken on or after the date of such conviction or plea or within 60 days thereafter; (B) the Executive’s willful and gross misconduct in connection with the performance of his duties to the Company (other than by reason of his incapacity or disability), it being expressly understood that the Company’s dissatisfaction with the Executive’s performance shall not constitute Cause; or (C) a continuous, willful and material breach by the Executive of this Agreement after written notice of such breach has been provided to the Executive by the Board, provided, that , in no event shall any action or omission in subsections (B) or (C) constitute “Cause” unless (1) the Company gives notice to the Executive stating that the Executive will be terminated for Cause, specifying the particulars thereof in reasonable detail and the effective date of such termination (which shall be no less than 10 business days following the date on which such written notice is received by the Executive) and (2) the Executive fails or refuses to materially cure or cease such misconduct or breach within 10 business days after such written notice is given to him. For purposes of the foregoing sentence, no act, or failure to act, on the Executive’s part shall be considered willful unless done or omitted to be done, by him not in good faith and without reasonable belief that his action or omission was in the best interest of the Company, and any act or omission by the Executive pursuant to the authority given pursuant to a resolution duly adopted by the Board or on the advice of counsel for the Company will be deemed made in good faith and in the best interests of the Company.

Annual Bonus ”), the average Annual Bonus paid in respect of each of the three calendar years prior to the date of termination or (y) if such termination occurs prior to the date on which the Third Annual Bonus, if any, is paid, the Target Bonus Amount in effect immediately prior to the date of termination (without regard to any reduction that gives rise to Good Reason), payable on the first regularly scheduled payroll date of the Company following the Release Effective Date and in no event later than the 60 ^th day following the date of termination (the actual date of payment, the “ Severance Payment Date ”); provided, that, if the 60 day period referenced in Section 4(c)(ii) begins in one calendar year and ends in a subsequent calendar year, the Severance Payment Date will in all events occur in the second calendar year;

agreement between the Executive and the Company ; provided , that , in no event shall the occurrence of any such condition constitute Good Reason unless (1) the Executive gives notice to the Company of the existence of the Executive’s knowledge of the condition giving rise to Good Reason within 90 days following its initial existence, (2) the Company fails to cure such condition within 30 days following the date such notice is given and (3) the Executive terminates his employment with the Company within 30 days following the expiration of such cure period.

(d) Termination Due to Death or Disability .

(e) Non-Renewal of Agreement .

(g) Resignation as Officer or Director . Unless requested otherwise by the Company, upon any termination of the Executive’s employment hereunder the Executive shall resign each position (if any) that the Executive then holds as an officer or director of the Company. The Executive’s execution of this Agreement shall be deemed the grant by the Executive to the officers of the Company of a limited power of attorney to sign in the Executive’s name and on the Executive’s behalf any such documentation as may be required to be executed solely for the limited purposes of effectuating such resignations.

6. SECTION 280G .

for the tax year in which the transaction which causes the application of Section 280G of the Code occurs, or such other rate(s) as the Accounting Firm determines to be likely to apply to the Executive in the relevant tax year(s) in which any of the Total Payments is expected to be made. If the Accounting Firm determines that the Executive would not retain a larger amount on an after-tax basis if the Total Payments were so reduced, then the Executive shall retain all of the Total Payments.

9. MISCELLANEOUS PROVISIONS .

Indemnification Agreement referenced in Section 3(g) of this Agreement to which the Executive or any of his affiliates is a party or beneficiary and (vi) any equity grant made by CFI to the Executive prior to the Effective Date. All promises, representations, collateral agreements and understandings not expressly incorporated in this Agreement are hereby superseded by this Agreement.


If to the Company:		Colony Financial, Inc.
		2450 Broadway, 6th Floor
		Santa Monica, CA 90404
		Attention: Chief Executive Officer

If to the Executive:		to the last address of the Executive
		in the Company’s records specifically identified for notices under this Agreement

With a copy to:		Akin Gump Strauss Hauer & Feld
		2029 Century Park East
		24th Floor
		Los Angeles, Ca. 90067
		Attention: Frank Reddick

or to such other address as is provided by a party to the other from time to time.

(e) Survival . The representations, warranties and covenants of the Executive contained in this Agreement will survive any termination of the Executive’s employment with the Company.

(i) Arbitration . Except as otherwise set forth in the Restrictive Covenant Agreement, any dispute or controversy arising under or in connection with this Agreement that cannot be mutually resolved by the parties hereto shall be settled exclusively by arbitration in Santa Monica, California, before a panel of three neutral arbitrators, each of whom shall be selected jointly by the parties, or, if the parties cannot agree on the selection of the arbitrators, as selected by the American Arbitration Association. The commercial arbitration rules of the American Arbitration Association (the “ AAA Rules ”) shall govern any arbitration between the parties, except that the following provisions are included in the parties’ agreement to arbitrate and override any contrary provisions in the AAA Rules:

(ii) The California Arbitration Act shall govern the arbitration, the agreement to arbitrate, and any proceedings to enforce, confirm, modify or vacate the award;

(iii) The arbitrators shall apply California law;

(iv) Any petition or motion to modify or vacate the award shall be filed in a Superior Court in California (the “ Court ”);

(iv) The award shall be written, reasoned, and shall include findings of fact as to all factual issues and conclusions of law as to all legal issues;

(v) Either party may seek a de novo review by the Court of the conclusions of law included in the award and any petition or motion to enforce, confirm, modify or vacate the award; and

(vi) The arbitration shall be confidential. Judgment may be entered on the arbitrators’ award in any court having jurisdiction.

the Code, the parties shall cooperate reasonably to attempt to amend or modify this Agreement (or other agreement or award) in order to avoid a violation of Section 409A of the Code while attempting to preserve the economic intent of the applicable provision. Notwithstanding anything contained herein to the contrary, the Executive shall not be considered to have terminated employment with the Company for purposes of any payments under this Agreement which are subject to Section 409A of the Code until the Executive would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A of the Code. Each amount to be paid or benefit to be provided under this Agreement shall be construed as a separate identified payment for purposes of Section 409A of the Code. Without limiting the foregoing and notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to this Agreement or any other arrangement between the Executive and the Company during the six-month period immediately following the Executive’s separation from service shall instead be paid on the first business day after the date that is six months following the Executive’s separation from service (or, if earlier, the Executive’s date of death). To the extent required to avoid an accelerated or additional tax under Section 409A of the Code, amounts reimbursable to the Executive under this Agreement shall be paid to the Executive on or before the last day of the year following the year in which the expense was incurred and the amount of expenses eligible for reimbursement (and in kind benefits provided to the Executive) during one year may not affect amounts reimbursable or provided in any subsequent year. CFI makes no representation that any or all of the payments described in this Agreement will be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to any such payment. For purposes of this Section 9(j), Section 409A of the Code shall include all regulations and guidance promulgated thereunder.

(k) Headings . The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.

which relates to events during the Executive’s employment hereunder of which the Executive has knowledge. The Company shall reimburse the Executive for the Executive’s reasonable travel expenses incurred in connection with the foregoing, in accordance with the Company’s policies (and consistent with the Executive’s travel practices during the Executive’s employment with the Company) and subject to the delivery of reasonable support for such expenses. Any such requests for cooperation shall be subject to the Executive’s business and personal schedule and the Executive shall not be required to cooperate against his own legal interests or the legal interests of his employer or partners or business ventures. In the event the Executive reasonably determines that he needs separate legal counsel in connection with his cooperation, the Company shall reimburse the Executive for the reasonable costs of such counsel as soon as practicable (and in any event within 30 days) following its receipt of an invoice for such costs. In the event the Executive is required to cooperate for more than 8 hours in any 12-month period, the Executive shall be paid an hourly consulting fee in an amount mutually agreed between the Company and Executive at the time.

[remainder of page intentionally left blank]

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


COLONY FINANCIAL, INC.

By:		/s/ Mark Hedstrom

Name:		Mark Hedstrom
Title:		Vice President

EXECUTIVE

/s/ Kevin Traenkle
Kevin Traenkle

[Signature Page to Kevin Traenkle Employment Agreement]

Schedule 1

Current Activities

None.

Exhibit A

Form of Release

[NAME] (“ Executive ”), a former employee of Colony Financial, Inc. (“ CFI ” and together with its subsidiaries, the “ Employer ”), hereby enters into and agrees to be bound by this General Waiver and Release of Claims (the “ Release ”). Executive acknowledges that he is required to execute this Release in order to be eligible for certain post-termination benefits (the “ Post-Termination Benefits ”) as set forth in Section [4(c)(ii)] / [4(e)(i)] of his Employment Agreement with CFI, dated March 16, 2015 (the “ Employment Agreemen t”). Unless otherwise indicated, capitalized terms used but not defined herein shall have the meanings specified in the Employment Agreement.

1. SEPARATION DATE . Executive acknowledges and agrees that his separation from Employer was effective as of , 20XX ( the “ Separation Date ”).

3. EXECUTIVE’S GENERAL RELEASE OF CLAIMS .

A-1

Equal Employment Opportunity Commission or any other administrative agency brings any charge or complaint on his behalf or for his benefit, this Release bars Executive from receiving, and Executive hereby waives any right to, any monetary or other individual relief related to such a charge or complaint. This Release, however, excludes (i) any claims made under state workers’ compensation or unemployment laws, and/or any claims that cannot be waived by law, (ii) claims with respect to the breach of any covenant (including any payments under the Employment Agreement) to be performed by Employer after the date of this Release, (iii) any rights to indemnification or contribution or directors’ and officers’ liability insurance under the Employment Agreement, Indemnification Agreement, any operative documents of the Company or any applicable law, (iv) any claims as a holder of Company equity awards under the Company’s equity incentive plans or as a holder of Fund Incentives; and (v) any claims for vested benefits under any employee benefit plan (excluding any severance plan and including claims under the Consolidated Omnibus Budget Reconciliation Act of 1985) or any claims that may arise after the date Executive signs the Release.

A-2

he has been provided a full and ample opportunity to review this Release, including a period of at least twenty-one (21) days within which to consider it (which will not be lengthened by any revisions or modifications); (iv) he has read and fully understands this Release and has had the opportunity to discuss it with an attorney of his choice; (v) to the extent that Executive takes less than twenty-one (21) days to consider this Release prior to execution, he acknowledges that he had sufficient time to consider this Release with counsel and that he expressly, voluntarily and knowingly waives any additional time; and (vi) Executive is aware of his right to revoke this Release at any time within the seven (7)-day period following the date on which he executes this Release. Executive further understands that he shall relinquish any right he has to Post-Termination Benefits described in the Employment Agreement if he exercises his right to revoke this Release. Notice of revocation must be made in writing and must be received by [Name, Title], no later than 5:00 p.m. Pacific Time on the seventh (7th) calendar day immediately after the day on which Executive executes this Release.

5. NO ASSIGNMENT OF CLAIMS . Executive affirms and warrants that he has made no assignment of any right or interest in any claim which he may have against any of the Employer Released Parties.

[remainder of page intentionally left blank]

A-3

By his signature, Kevin Traenkle hereby knowingly and voluntarily executes this Release as of the date indicated below.



Kevin Traenkle

Dated:

[Signature page to Kevin Traenkle Release]

Exhibit B

Form of Restrictive Covenant Agreement

Attached hereto.

RESTRICTIVE COVENANT AGREEMENT

THIS RESTRICTIVE COVENANT AGREEMENT (this “ Agreement ”), dated as of March 16, 2015, and effective as of the Effective Date (as defined below), is made by and between Colony Financial, Inc., a Maryland corporation (“ CFI ”), and Kevin Traenkle Traenkle”). CFI, together with its Subsidiaries (which, following the Effective Date, shall include NewCo (as defined below) and its subsidiaries) is hereinafter referred to as “the Company,” and where the context permits, references to “the Company” shall include the Company and any successor to the Company. Any capitalized term that is used but not otherwise defined in this Agreement shall have the meaning set forth in the Contribution Agreement (as defined below).

WHEREAS , effective as of the closing of the Contribution (the date on which such closing occurs, the “ Effective Date ”), Traenkle will become employed by the Company and will serve as the Executive Director, Chief Investment Officer Global Real Estate of CFI in accordance with terms of the Employment Agreement by and between CFI and Traenkle, dated as of the date hereof (the “ Employment Agreement ”);

WHEREAS , Traenkle (i) has been actively involved in the management of the business of CC and has thereby acquired significant experience, skill, and confidential and proprietary information relating to the business and operation of CC and (ii) in the course of his participation in the business of CC, has also developed on behalf of CC significant goodwill that is now a significant part of the value of CC;

WHEREAS , the Company desires to protect its investment in the assets, businesses and goodwill of CC to be acquired as part of the Contribution and, accordingly, as a material condition to its willingness to enter into the Contribution Agreement and consummate the Contribution, has required that Traenkle agree to limit certain activities by Traenkle (as contemplated hereby) that would compete with or otherwise harm such assets, businesses or goodwill;

WHEREAS , as part of the consideration and inducement to CFI to enter into the Contribution Agreement and acquire such assets, businesses and goodwill, Traenkle is willing to agree to enter into this Agreement and abide by such restrictions; and

1. Defined Terms . For purposes of this Agreement, the following terms have the respective meanings set forth below:

(b) “ Company Materials ” means all Materials that Traenkle makes or conceives, or has made or conceived, solely or jointly, during the period of Traenkle’s retention by or employment with the Company, whether or not patentable or registerable under copyright, trademark or similar statutes, which (i) are related to the current or demonstrably (by expenditure of material resources or material time spent by senior management) anticipated business or activities of the Company (which includes any fund managed by the Company during or prior to the period of Traenkle’s retention by or employment with the Company); and (ii) are otherwise developed by Traenkle through the use of the Company’s confidential information, equipment, software, or other facilities or resources at a time during which Traenkle has been a consultant, or employee (temporary or otherwise) of the Company. Notwithstanding the foregoing, Company Materials shall not include any Materials conceived or made, solely or jointly, by Traenkle in connection with the performance of Permitted Activities.

(c) “ Confidential Information ” means information that is not generally known to the public and that is or was used, developed or obtained by Traenkle (in his capacity as a member or employee of CC); provided, however, Confidential Information will not include any information that is generally available to the public or within the industry prior to the date Traenkle proposes to disclose or use such information. For the avoidance of doubt, “Confidential Information” does not include (x) information concerning non-proprietary business or investment practices, methods or relationships customarily employed or entered into by comparable business enterprises, (y) the identity of investors and their investment practices, methods and relationships, financing sources or capital market intermediaries and (z) information that is used, developed or obtained by Traenkle exclusively in connection with the performance of Permitted Activities.

(d) “ Inventions ” means any inventions, improvements, developments, ideas or discoveries whether patentable or unpatentable, that meets any one of the following criteria: (i)

relates at the time of conception or reduction to practice to: (A) the business, projects or products of the Company, or to the utilization thereof; or (B) the actual or demonstrably anticipated research or development of the Company; (ii) results from any work performed directly or indirectly by Traenkle for the Company; or (iii) results, at least in part, from Traenkle’s use of the Company’s time, equipment, supplies, facilities or trade secret information; provided , however , that Inventions shall not include (x) any Invention which qualifies fully under the provisions of California Labor Code Section 2870 (a copy of which is attached as Exhibit 1), including any idea or invention which is developed entirely on Traenkle’s own time without using the Company’s equipment, supplies, facilities or trade secret information, and which is not related to the business (either actual or demonstrably anticipated), and which does not result from work performed for the Company and (y) inventions, improvements, developments, ideas or discoveries conceived or reduced to practice by Traenkle exclusively in connection with the performance of Permitted Activities.

(f) “ Permitted Activities ” means each of the activities described in Section 2 hereof.

(h) “ Restricted Period ” means the period commencing on the Effective Date and ending on the first anniversary of the termination of Traenkle’s employment with the Company; provided that the Restricted Period shall immediately cease if such termination of employment is by the Company without Cause, by Traenkle for Good Reason or as a result of the Company giving a Non-Renewal Notice to Traenkle (in each case, such capitalized term used herein as defined in the Employment Agreement).

2. Permitted Activities . Notwithstanding anything set forth herein to the contrary, nothing contained herein shall prohibit Traenkle from:

(a) engaging in the Personal Activities (as defined in the Employment Agreement);

(b) owning, directly or indirectly, solely as an investment, securities of any such Person which are traded on any national securities exchange or NASDAQ if Traenkle (A) is not a controlling person of, or a member of a group which controls, such Person; and (B) does not, directly or indirectly, own five percent (5%) or more of any class of securities of such Person;

3. Non-Competition . Traenkle shall not, during the Restricted Period, directly or indirectly, in any manner within the Restricted Territory: (i) engage in the Business (other than through the Company and its Affiliates); (ii) render any services as an employee, officer, director or consultant to any Person (other than the Company) engaged in the Business; or (iii) make an investment in a Person engaged in the Business as a partner, shareholder, principal, member or other owner of equity interests (or securities convertible into or exercisable for, equity interests); provided, however, nothing contained in this Agreement shall restrict Traenkle from (x) engaging in any activity that he determines in good faith is in furtherance of the interests of the Company in the performance of his duties for the Company and/or (y) engaging in any Permitted Activity. In addition, nothing herein shall prohibit Traenkle from providing services to an entity engaged in the Business if Traenkle’s services are solely limited to a unit, division, or subsidiary of such entity which does not engage in the Business and Traenkle does not provide services directly or indirectly to, or with respect to, the Business.

4. Non-Solicitation . Except as necessary, appropriate or desirable to perform his duties to the Company during his employment, Traenkle shall not during the Restricted Period, without

CFI’s prior written consent, (i) directly or indirectly, on his own behalf or for any other Person, knowingly solicit or induce any officer, director, employee or independent contractor who is a natural person that provides consulting or advisory services with respect to sourcing or consummating financings or investments of the Company (A) to terminate his or her relationship with the Company, or (B) hire any such individual whom Traenkle knows left the employment of the Company during the previous 12 months or (ii) directly or indirectly, on his own behalf or for any other Person, solicit or induce any investors to terminate (or diminish in any material respect) his, her or its relationship with the Company. For the avoidance of doubt, identification or doing business with or co-investing with any limited partners, investors, financing sources or capital markets intermediaries with regard to activity that is not prohibited by Section 3 above shall not be deemed to be a breach of this Section 4 or otherwise. Traenkle shall not be in violation of this Section 4 by reason of providing a personal reference for any officer, director or employee of the Company or soliciting individuals for employment through a general advertisement not targeted specifically to officers, directors or employees of the Company.

5. Confidential Information . At all times on and following the Effective Date, Traenkle shall not disclose or use for his benefit or the benefit of others, except in connection with the business and affairs of the Company or any of its affiliates, any Confidential Information except to the extent that (i) such disclosure or use is related to, necessary, appropriate or desirable in connection with Traenkle’s performance of his duties to the Company or (ii) is related to any good faith dispute between Traenkle and the Company or any of its affiliates or otherwise in connection with any action by Traenkle to enforce his rights or defend his actions under this Agreement, the Contribution Agreement, the Employment Agreement or any other agreement with the Company or any of its affiliates. Nothing contained herein shall preclude Traenkle from disclosing Confidential Information to his immediate family and personal legal and financial advisor(s), provided that Traenkle informs such family member(s) and/or advisor(s) that the information is confidential in nature and receives reasonable assurances that the family member(s) and/or advisor(s) shall not disclose such information except as required by Law or by any Authority with apparent jurisdiction over such Person. Nothing in this Agreement shall be construed to prevent Traenkle from complying with applicable Law, or disclosing information pursuant to the valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not in Traenkle’s reasonable judgment exceed the extent of disclosure required by such Law. Traenkle shall, to the extent legally permitted, promptly provide written notice of any such order to an authorized officer of the Company after receiving such order and reasonably cooperate (at the Company’s expense) with any efforts of the Company to seek a protective order or other measure to protect the confidentiality of such information.

6. Mutual Non-Disparagement .

(a) At all times on and following the Effective Date, Traenkle shall refrain from making any disparaging statements about the Company or any of its present or (to the extent such Persons serve in such capacity during Traenkle’s employment with the Company) future officers, directors, and, in their capacity as such, employees to any third Persons, including, without limitation, to any press or other media, except (i) to the extent required by Law or legal process, by any Authority with apparent jurisdiction or applicable securities considerations, (ii) related to any good faith litigation or similar proceeding between Traenkle and the Company or any of such officers or directors or otherwise in connection with any good faith litigation or

similar proceeding or other efforts by Traenkle to enforce his rights or defend his actions under this Agreement, the Contribution Agreement, the Employment Agreement or any other agreement with the Company or any of such officers or directors or (iii) for the making of any critical remarks about any such Person in connection with any analyses made or opinions expressed in the ordinary course of his duties to the Company during his employment therewith.

(b) At all times on and following the Effective Date, the senior executive officers of the Company shall not make, or cause to be made by the Company, any disparaging or negative statements about Traenkle to any third Persons, including, without limitation, to any press or other media, except (i) to the extent required by Law or legal process, by any Authority with apparent jurisdiction or applicable securities considerations, (ii) related to any good faith litigation or similar proceeding between Traenkle and the Company or otherwise in connection with any good faith litigation or similar proceeding by Traenkle to enforce his rights or defend his actions under this Agreement, the Contribution Agreement, the Employment Agreement or any other agreement with the Company or (iii) for the making of any critical remarks about Traenkle in connection with any analyses made or opinions expressed in the ordinary course of their respective duties to the Company during their employment therewith.

7. Intellectual Property .

(a) Traenkle agrees that all Company Materials shall be deemed “work made for hire” by the Company as the “author” and owner to the extent permitted by United States copyright Law. To the extent (if any) that some or all of the Company Materials do not constitute “work made for hire,” Traenkle hereby irrevocably assigns to the Company for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, all right, title and interest in and to such Company Materials (including without limitation any and all copyright rights, patent rights and trademark rights and goodwill associated therewith). The provisions of this paragraph will apply to all Company Materials which are or have been conceived or developed by Traenkle, solely or jointly, whether or not further development or reduction to practice may take place after the termination of Traenkle’s employment or retention, by the Company.

(b) Traenkle further agrees that he will execute and deliver to CFI any and all further documents or instruments and do any and all further acts which the Company reasonably requests in order to perfect, confirm, defend, police and enforce the Company’s intellectual property rights, and hereby grants to the officers of the Company an irrevocable power of attorney, coupled with interest, to such end. Traenkle shall be promptly reimbursed by the Company for all costs and expenditures incurred in connection with any cooperation referenced in this Section 7(b).

8. Injunctive Relief; Other Remedies . The parties agree that the remedy at Law for any breach of this Agreement is and will be inadequate, and in the event of a breach or threatened breach by Traenkle of the provisions of Sections 3, 4, 5, 6, or 7 of this Agreement, the Company shall be entitled to seek an injunction restraining Traenkle from the conduct which would constitute a breach of this Agreement. Nothing herein contained shall be construed as prohibiting the Company from pursuing any other remedies available to it or them for such breach or threatened breach, including, without limitation, specific performance and/or the recovery of damages from Traenkle.

9. Reasonableness and Enforceability of Covenants .

(b) The parties expressly agree that the character, duration and geographical scope of this Agreement are reasonable in light of the circumstances as they exist on the date upon which this Agreement has been executed, including, but not limited to, Traenkle’s material economic interest in the Contribution, and Traenkle’s position of confidence and trust as a stockholder of CFI.

(c) Traenkle acknowledges that, (i) in connection with the Contribution, the Company will be vested with the goodwill of, and will directly or indirectly carry on, the business of CC; (ii) the restrictive covenants and the other agreements contained herein (collectively, the “ Restrictive Covenants ”) are an essential part of this Agreement and the contemplated Contribution; (iii) the contemplated Contribution is designed and intended to qualify as a sale (or other disposition) by Traenkle within the meaning of BPC Section 16601; and (iv) the covenants contained in this Agreement are intended to be and would be enforceable under BPC Section 16601. Traenkle and the Company agree not to challenge the enforceability of the covenants (and the limitations and qualifications included as part thereof) contained in this Agreement.

(d) Traenkle agrees to be bound by the Restrictive Covenants and the other agreements contained in this Agreement to the maximum extent permitted by Law, it being the intent and spirit of the parties that the Restrictive Covenants and the other agreements contained herein shall be valid and enforceable in all respects, and, subject to the terms and conditions of, and limitations and qualifications included in, this Agreement.

10. Acknowledgements . Traenkle acknowledges that (i) his work for the Company will continue to give him access to the confidential affairs and proprietary information of the Company; (ii) the agreements and covenants of Traenkle contained in this Agreement are essential to the business and goodwill of the Company; and (iii) CFI would not have entered into the Contribution Agreement or the Employment Agreement but for the covenants and agreements set forth herein.


If to the Company:		Colony Financial, Inc.
		2450 Broadway, 6th Floor
		Santa Monica, CA 90404
		Attention: Chief Executive Officer

If to Traenkle:		to the last address of Traenkle
		in the Company’s records specifically identified for notices under this Agreement

With a copy to:		Akin Gump Strauss Hauer & Feld
		2029 Century Park East
		24th Floor
		Los Angeles, Ca. 90067
		Attention: Frank Reddick

or to such other address as is provided by a party to the other from time to time.

13. Survival . The representations, warranties and covenants of Traenkle and the Company contained in this Agreement will survive any termination of Traenkle’s employment with the Company through the end of the Restricted Period.

14. Amendment; Waiver . No provision of this Agreement may be amended, modified, waived or discharged unless such amendment, modification, waiver or discharge is agreed to in writing and signed by Traenkle and CFI. No waiver by either party hereto at any time of any breach by the other party hereto of compliance with any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.

15. Severability . Traenkle acknowledges and agrees that (i) he has had an opportunity to seek advice of counsel in connection with this Agreement and (ii) the Restrictive Covenants are reasonable in geographic and temporal scope and in all other respects. If any term or provision of this Agreement is determined to be invalid or unenforceable in a final court or arbitration proceeding, (A) the remaining terms and provisions hereof shall be unimpaired and (B) to the extent permitted by applicable Law, the invalid or unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision.

16. Arbitration . Except as otherwise set forth in Section 8, any dispute or controversy arising under or in connection with this Agreement that cannot be mutually resolved by the parties hereto shall be settled exclusively by arbitration in Santa Monica, California before a panel of three neutral arbitrators, each of whom shall be selected jointly by the parties, or, if the parties cannot agree on the selection of the arbitrators, as selected by the American Arbitration Association. The commercial arbitration rules of the American Arbitration Association (the “ AAA Rules ”) shall govern any arbitration between the parties, except that the following provisions are included in the parties’ agreement to arbitrate and override any contrary provisions in the AAA Rules:

(b) The California Arbitration Act shall govern the arbitration, the agreement to arbitrate, and any proceedings to enforce, confirm, modify or vacate the award;

(d) Any petition or motion to modify or vacate the award shall be filed in a Superior Court in California (the “ Court ”);

(e) The award shall be written, reasoned, and shall include findings of fact as to all factual issues and conclusions of law as to all legal issues;

(f) Either party may seek a de novo review by the Court of the conclusions of law included in the award and any petition or motion to enforce, confirm, modify or vacate the award; and

(g) The arbitration shall be confidential. Judgment may be entered on the arbitrators’ award in any court having jurisdiction.

17. Effectiveness . This Agreement and the transactions contemplated herein shall be conditioned upon the closing of the transactions contemplated by the Contribution Agreement. In the event that the Contribution Agreement terminates prior to the closing of the transactions contemplated thereby, this Agreement shall terminate automatically without any further action by any party and shall be void ab initio . If the Contribution Agreement is amended or modified prior to the Effective Date in a manner that has the effect of reducing the Consideration (as defined in the Contribution Agreement) payable to CCH under the Contribution Agreement, Traenkle will have the option of terminating this Agreement during the two business days following such time as CFI notifies Traenkle of the amendment or modification (which notice may be given either before or after the date of such amendment or modification). The option to terminate this Agreement must be exercised by Traenkle by written notice to CFI within such two (2) business day period, after which time the option to terminate will expire.

[remainder of page intentionally left blank]

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


COLONY FINANCIAL, INC.

By:		/s/ Mark Hedstrom
Name:		Mark Hedstrom
Title:		Vice President

EXECUTIVE

/s/ Kevin Traenkle
Kevin Traenkle

[Signature Page to Kevin Traenkle Restrictive Covenant Agreement]

Exhibit 1

California Labor Code Section 2870

(1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer; or

(2) Result from any work performed by the employee for the employer.

Exhibit 99.1

EXCERPTS FROM THE DEFINITIVE PROXY STATEMENT,

FILED ON FEBRUARY 24, 2015, AS SUPPLEMENTED BY

DEFINITIVE ADDITIONAL MATERIALS FILED ON

MARCH 19, 2015, MARCH 23, 2015 AND MARCH 25, 2015

* * * * *

On December 23, 2014, Colony Financial, Inc. (“ CLNY ,” “ we ,” “ us ,” or “ our ”) and Colony Capital Operating Company, LLC (f/k/a CFI RE Masterco, LLC), a wholly-owned subsidiary of CLNY (“ OP ”) entered into (i) the Contribution and Implementation Agreement (the “ Contribution Agreement ”) with Colony Capital, LLC (“ CC ”), Colony Capital Holdings LLC, Colony Capital OP Subsidiary, LLC, CCH Management Partners I, LLC, FHB Holding LLC and Richard Saltzman and (ii) the Colony Mark Transfer Agreement (the “ Colony Mark Transfer Agreement ”) with New Colony Holdings LLC providing for the contribution to CLNY (the “ Combination ”) of substantially all of CC’s real estate and investment management business and operations (other than CC’s interests in Colony American Homes Inc.). The terms and conditions of the Combination have been described in the definitive proxy statement (the “ Definitive Proxy Statement ”) prepared in connection with the Combination filed with the Securities and Exchange Commission (the “ SEC ”) on February 24, 2015. A special meeting of our stockholders (the “ Special Meeting ”) with respect to matters relating to the Combination (as set forth in the Notice of Special Meeting of Stockholders accompanying the Definitive Proxy Statement) will be held on March 31, 2015.

As described in the Definitive Proxy Statement, under the Contribution Agreement and the Colony Mark Transfer Agreement, collectively, up to 151,520 shares of our common stock (to be reclassified as “Class A Common Stock”), 13,494 shares of our newly created Class B Common Stock and 515,258 units of membership interest (“ OP Units ”) in OP, representing $15.0 million of the contingent consideration to be paid in connection with the Combination based on the $22.05 per share reference price (and which would have a current value of approximately $17.6 million when using the volume-weighted average closing price of our common stock over the 10 trading days prior to the tenth calendar day preceding the date of the Special Meeting (the “ VWAP ”)), are subject to reallocation from contingent consideration to upfront consideration if the VWAP were to exceed $24.05, with the full amount reallocated if the VWAP were to equal or exceed $27.05.

As of the close of business on March 20, 2015, we have determined that the VWAP is $25.8212. Therefore, the upfront consideration will be increased, and the contingent consideration will be decreased, in the aggregate, by 89,458 shares of Class A Common Stock, 7,967 shares of Class B Common Stock and 304,208 OP Units (collectively, the “ Reallocated Shares/Units ”), representing a total value of $8.856 million based on the $22.05 per share reference price (and which would have a current value of approximately $10.4 million when using the VWAP). Of these Reallocated Shares/Units, 3,037 shares of Class A Common Stock and 7,967 shares of Class B Common Stock will be payable pursuant to the Colony Mark Transfer Agreement, with the remaining number of Reallocated Shares/Units payable pursuant to the Contribution Agreement.

* * * * *

The Issuances

In connection with the Combination, we will issue up to approximately 3.94 million shares of Class A Common Stock and up to 665,593 shares of Class B Common Stock, and OP will issue up to approximately 25.22 million OP Units. Each share of Class B Common Stock will be, at the holder’s option, convertible into one share of Class A Common Stock and will convert automatically into one share of Class A Common Stock upon the transfer of such share or of certain OP Units to one or more non-qualified transferees or any qualified transferee of such share or OP Units ceasing to be a qualified transferee. See “Proposal 2(a)—Amendment to Create Class B Common Stock” beginning on page 86 for a more detailed description of the terms of the Class B Common Stock. Each OP Unit will be redeemable, subject to the terms and conditions set forth in the operating agreement of OP, at the holder’s option, for cash equal to the average closing price of Class A Common Stock for the ten consecutive trading days immediately preceding the date we receive a notice of redemption; provided , that we may choose, at our sole discretion, to satisfy this redemption right by exchanging such OP Units for shares of Class A Common Stock on a one-for-one basis, in lieu of cash.

The above consideration represented a value of $657.5 million at the time of the announcement of the transaction based on a reference price that equated to $22.05 per share (the “ Reference Price ”) (which would have a current value of approximately $738.3 million when using the volume-weighted average closing price on the NYSE of the Company’s common stock over a 10-day trading period ending February 13, 2015 of $24.76 (the “ VWAP ”)). Pursuant to the Contribution Agreement and the Colony Mark Transfer Agreement, the Reference Price was used to determine the number of shares and OP Units to be issued to the Contributors and the Mark Transferor in the Combination. The Reference Price was the higher of (x) the volume-weighted average closing price of the Company’s common stock over the 30 trading days prior to the initial announcement of the transaction, and (y) the third quarter 2014 “fair value” Company share price, which the parties agreed would be the fair value of the Company’s net assets on a per share basis as of September 30, 2014, or $22.05 per share. Because the volume-weighted average closing price of the Company’s common stock over the 30 trading days prior to the initial announcement of the transaction was lower than $22.05 per share, the Reference Price was $22.05 per share.

The aggregate potential consideration consists of:

•

fixed upfront consideration to be paid in a combination of up to approximately 2.83 million shares of Class A Common Stock, 566,635 shares of Class B Common Stock and approximately 21.44 million OP Units, representing a value of $547.5 million at the time of the announcement of the Combination based on the Reference Price (and which would have a current value equal to approximately $614.8 million when using the VWAP), subject to certain adjustments as described below; and

•

contingent consideration to be paid in a combination of up to approximately 1.11 million shares of Class A Common Stock, 98,958 shares of Class B Common Stock and approximately 3.78 million OP Units, representing a value of up to approximately $110.0 million at the time of announcement based on the Reference Price (and which would have a current value of up to approximately $123.5 million when using the VWAP), subject to multi-year performance targets for achievement of certain FFO per share targets and capital-raising thresholds from the funds management businesses. If the minimum performance target for either of these metrics is not met or exceeded, the contingent consideration paid in respect of the other metric would not be paid out in full.

In connection with the Combination, the upfront consideration is subject to upward and downward adjustments at the Closing in respect of cash, indebtedness and net working capital. If the closing adjustment results in an increase to the upfront consideration, such adjustment will, subject to the applicable cap, be paid in cash and to the extent such adjustment exceeds the applicable cap, will increase the number of OP Units to be issued in the Combination. If the closing adjustment results in a decrease to the upfront consideration, such adjustment will reduce the number of OP Units to be issued in the Combination.

Up to 151,520 shares of Class A Common Stock, 13,494 shares of Class B Common Stock and 515,258 OP Units, representing $15.0 million of the contingent consideration at the time of announcement based on the Reference Price (and which would have a current value of approximately $16.8 million when using the VWAP) may be reallocated to upfront consideration if the volume-weighted average closing price of the Company’s common stock over the 10 trading days prior to the tenth calendar day preceding the date of the Special Meeting were to exceed $24.05, with the full amount reallocated if such volume-weighted average closing price of the Company’s common stock were to equal or exceed $27.05. For example, if the 10-day volume-weighted average closing price of our common stock for such period were $24.76 (VWAP) upfront consideration would be increased, and contingent consideration decreased, by 35,860 shares of Class A Common Stock, 3,194 shares of Class B Common Stock, and 121,944 OP Units representing $3.6 million of the re-allocated consideration based on the Reference Price (and which would have a current value of approximately $4.0 million when using the VWAP).

The number of shares of Class A Common Stock, shares of Class B Common Stock and OP Units issuable as consideration will be subject to reduction for a portion of any transaction expenses of Colony Capital paid on its behalf by the Company.

In connection with the Combination, the Company and OP have entered into the Colony Mark Transfer Agreement with the Mark Transferor pursuant to which the Mark Transferor will transfer the Colony Mark to OP in exchange for consideration to be paid in the form of up to 151,355 shares of our Class A Common Stock and up to 665,593 shares of our Class B Common Stock, including (i) fixed upfront consideration with a value of $15.0 million based on the Reference Price (and $16.8 million based on the VWAP) to be paid at the closing under the Colony Mark Transfer Agreement, subject to certain adjustments, and (ii) contingent consideration with a value of up to approximately $3.0 million based on the Reference Price (and $3.4 million based on the VWAP) if earned over time under the same multi-year performance targets required for receipt of the contingent consideration under the Contribution Agreement. Contingent consideration with a value of up to $410,959 based on the Reference Price (and $461,467 based on the VWAP) will be reallocated to upfront consideration if the volume-weighted average closing price of the Company’s common stock over the 10 trading days prior to the tenth calendar day preceding the date of the Special Meeting were to exceed $24.05.

An illustrative allocation of the upfront consideration and contingent consideration to certain of the Contributors and the Mark Transferor is set forth below. Such illustrative allocation does not reflect any adjustment for transaction expenses that may be paid by the Company on behalf of the Contributors and the Mark Transfer at the Closing, and does not reflect the potential reallocation of contingent consideration to upfront consideration at the Closing.

Upfront Consideration


	OP Units		Class A Common Stock		Class B Common Stock
Colony Capital		18,475,972		—		—
CCH I		1,639,580		—		—
FHB LLC		944,103		—		—
Mr. Saltzman		377,642		2,712,363		—
New Colony Holdings, LLC		—		113,637		566,635

Total		21,437,297		2,826,000		566,635

Contingent Consideration


	OP Units		Class A Common Stock		Class B Common Stock
Colony Capital		2,850,899		—		—
CCH I		662,103		—		—
FHB LLC		189,683		—		—
Mr. Saltzman		75,873		1,073,429		—
New Colony Holdings, LLC		—		37,718		98,958

Total		3,778,558		1,111,147		98,958

* * * * *

Interests of Certain Persons in the Combination

In considering the recommendation of the Board to vote for the proposals described in this proxy statement, you should be aware that certain of our current directors and executive officers, along with Mr. Hedstrom, who will become an executive officer as of the completion of the Combination, have interests in those transactions that may be different from, or in addition to, the interests of our stockholders generally and that may create potential conflicts of interest.

These interests are described in more detail below. In addition, you should be aware that Messrs. Barrack, Saltzman, Traenkle, Tangen, Sanders and Hedstrom are also executive officers or principals of Colony Capital. The respective roles of these individuals in Colony Capital may create additional conflicts of interest in respect of the Combination and the other transactions described in this proxy statement.

The Special Committee was aware of each of these interests in reviewing, considering and negotiating the terms of the Combination and in recommending to the entire Board to pursue the Combination. The Board was also aware of these interests in approving the Contribution Agreement, the Colony Mark Transfer Agreement and the transactions described in this proxy statement, and in recommending the approval of the Contribution Agreement, the Colony Mark Transfer Agreement and those transactions to our stockholders.

Arrangements with Thomas J. Barrack, Jr.

Payment of Combination Consideration to Colony Capital . The Contribution Agreement provides that Colony Capital will receive as consideration in respect of the Combination (i) OP Units at the Closing with a total value of approximately $407.4 million based on the Reference Price (and $457.5 million based on the VWAP), subject to certain adjustments, and (ii) if all contingent consideration payable under the Contribution Agreement is actually paid, additional OP Units with a total value of approximately $62.9 million based on the Reference Price (and $70.6 million based on the VWAP), subject to certain adjustments. Colony Capital is a wholly owned subsidiary of CC Holdings. Mr. Barrack owns a controlling interest in, and is the sole managing member of, CC Holdings, and therefore will have an indirect interest in the OP Units that are received by Colony Capital as consideration in the Combination.

The values in the prior paragraph are estimates that are subject to reduction for a portion of any transaction expenses of Colony Capital paid on its behalf by the Company, and assume that (1) all of the OP Units received by Colony Capital as consideration in the Combination are exchanged for shares of Class A Common Stock, (2) the value of a share of Class A Common Stock is either (i) $22.05 (the Reference Price), which is the value used for purposes of determining the number of shares to be issued in the Combination, or (ii) $24.76 (the VWAP), as indicated, and (3) no portion of the contingent consideration is reallocated to upfront consideration to be issued at the Closing. The actual value of the OP Units received by Colony Capital will be based on the value of such OP Units at the time they are delivered and may be less or more than the amounts listed in the prior paragraph.

Colony Capital may also be eligible to receive a payment in respect of a specified portion of certain closing adjustments under the Contribution Agreement, including in respect of net working capital. While the actual amount that may become payable to Colony Capital in respect of such closing adjustments is not yet determinable, we estimate that the amount that will become payable is between $15.0 million and $20.0 million.

The amounts detailed above reflect the full amount of Mr. Barrack’s interest in the consideration that Colony Capital is entitled to receive as consideration in the Combination, which is the only means by which Mr. Barrack will have any such interest, except as described in the immediately following paragraph. The amounts so described are without reduction for (1) any amounts that will be transferred to Mr. Saltzman as described in “—Arrangements with Richard B. Saltzman” beginning on page 76 or to CCH I or CCH II as described in “—Interests of Executive Officers in CCH I and CCH II” beginning on page 81, (2) any amounts attributable to the interests of minority holders of membership units in CC Holdings, or (3) any amounts that will be transferred to vehicles in which Colony Capital professionals unrelated to Mr. Barrack will hold an interest. Mr. Barrack’s resulting interest in the consideration to be received by Colony Capital after such attribution to minority interest holders and transferees is detailed below in “—Interests of Executive Officers in CC Holdings” beginning on page 83 and “—Interests of Executive Officers in CCH I and CCH II” beginning on page 81.

Payment of Consideration Under Colony Mark Transfer Agreement . In addition, as described in more detail in “—Agreements to be Entered Into Pursuant to the Contribution Agreement—Colony Mark Transfer Agreement” beginning on page 110, the Company and OP have entered into the Colony Mark Transfer Agreement with the Mark Transferor, which is wholly owned by Mr. Barrack, pursuant to which the “Colony” name and mark will be transferred to OP in exchange for (i) shares of Class A Common Stock and shares of Class B Common Stock with a total value of $15.0 million based on the Reference Price (and $16.8 million based on the VWAP) to be paid at the Closing, subject to certain adjustments, and (ii) additional shares of Class A Common Stock and shares of Class B Common Stock with a total value of approximately $3.0 million based on the Reference Price (and $3.4 million based on the VWAP), subject to certain adjustments, if earned over time under the same multi-year performance targets required for receipt of the contingent consideration under the Contribution Agreement.

The values in the prior paragraph are estimates and assume that all of the shares of Class B Common Stock are converted into shares of Class A Common Stock, that the value of a share of Class A Common Stock is either (i) $22.05 (the Reference Price), which is the value used for purposes of determining the number of shares to be issued in the Combination, or (ii) $24.76 (the VWAP), as indicated, and that no portion of the contingent consideration is reallocated to upfront consideration to be issued at the Closing. The actual value of the shares received by Mr. Barrack will be based on the value of such shares at the time they are delivered and may be less or more than the amounts listed in the prior paragraph.

Employment Agreement . We entered into an employment agreement with Mr. Barrack on December 23, 2014, which sets forth the terms and conditions of Mr. Barrack’s service as our Executive Chairman and Chairman of the Board following the Closing. The agreement will become effective as of the Closing and will continue in effect for an initial term of five years following the Closing, subject to automatic renewals of additional successive one-year periods unless either party provides at least 180 days’ advance notice of non-renewal.

The agreement provides that, in his role as our Executive Chairman, Mr. Barrack will perform duties and provide services to us that are reasonably consistent with those he provided to us in that role prior to the Closing. The agreement further provides that Mr. Barrack will devote substantially all of his business time and attention to the performance of his duties to us, but will be permitted to perform duties for CC Holdings and its affiliates and engage in certain other outside activities, so long as those duties and activities do not unreasonably interfere with the performance of his duties to us.

In addition, the agreement provides that Mr. Barrack’s principal place of business during the term of the agreement will generally be in Los Angeles, California. However, the agreement provides that, if Mr. Barrack is required to engage in travel during the term of the agreement that results in him having to perform a significant portion of his duties at a location other than Los Angeles, California, and Mr. Barrack determines to relocate his principal place of residence to a city in proximity to that other location, then we will pay for all reasonable relocation and return expenses that he incurs on a basis which is grossed up for taxes, with such payments subject to the Board’s approval, not to be unreasonably withheld.

The agreement further provides that Mr. Barrack will receive an annual base salary of $1,000,000 and will be eligible to receive an annual cash bonus with a target amount of no less than $4,000,000, which may be based on achievement of reasonable performance measures established by the Board (or a committee thereof). In addition, Mr. Barrack will be eligible to receive annual grants of equity-based awards with a target value of 350% of his base salary. Mr. Barrack will also continue to receive allocations in respect of carried interests in respect of funds managed by us that were granted to Mr. Barrack prior to the Closing, and will be eligible to be granted new allocations in respect of carried interests in respect of funds managed by us as is determined by the Board from time to time in consultation with Mr. Barrack. Mr. Barrack will also be eligible to participate in our benefit plans made available to our senior executive officers from time to time and to receive certain perquisites that he was entitled to immediately prior to the Closing, each as described in the agreement.

The agreement provides that, if Mr. Barrack’s employment is terminated by us without “cause” (as defined in the agreement and including non-renewal of the agreement by us) or by Mr. Barrack for “good reason” (as defined in the agreement and described below), and Mr. Barrack executes a release of claims, he will be eligible to receive (i) a lump sum cash payment equal to three times the sum of his base salary and average annual bonus with respect to the three prior calendar years (or, if any such termination of employment occurs prior to Mr. Barrack receiving his

annual bonus in respect of calendar year 2017, then his target annual bonus), (ii) a lump sum cash payment in respect of the annual bonus payable in respect of the year prior to the year of termination, if unpaid as of the date of termination, (iii) a pro-rated target bonus for the year of termination, (iv) continued medical, dental and vision benefits at active employee rates for 24 months following termination, (v) the continuation of certain benefits for 24 months following termination (or in certain cases, until the end of the term of the employment agreement then in effect (if later)), and (vi) full vesting of all equity-based awards, carried interests and other like compensation that he holds, to the extent unvested upon his termination.

The agreement also provides that if Mr. Barrack provides notice to us of his intention not to renew the agreement upon the scheduled expiration of the initial term or any renewal term, then he will receive (i) a lump sum cash payment in respect of the annual bonus payable in respect of the year prior to the year of termination, if unpaid as of the date of termination, (ii) a pro-rated target bonus for the year of termination, and (iii) if such termination occurs upon his retirement on or after his attainment of age 72, full vesting of all equity-based awards, carried interests and other like compensation that he holds, to the extent unvested upon his termination.

For purposes of the agreement, “good reason” means, in summary, (i) a material diminution in Mr. Barrack’s duties, authority or responsibilities (including failing to maintain Mr. Barrack as a member of the Board) or causing Mr. Barrack to no longer report to the Board or a diminution in his title, (ii) a reduction in Mr. Barrack’s base salary, target annual cash bonus or target annual equity incentive grant, (iii) a 25-mile relocation of Mr. Barrack’s principal place of business, or (iv) a material breach of the agreement by us, including the failure to appoint Mr. Barrack as our Chief Executive Officer if Mr. Saltzman’s employment terminates while Mr. Barrack is serving as our Executive Chairman.

If any payments to be made to Mr. Barrack, whether under the agreement or otherwise, would subject Mr. Barrack to the excise tax on so-called “golden parachute payments” in accordance with Sections 280G or 4999 of the Internal Revenue Code, then the payments will be reduced to the extent necessary to avoid the excise tax, but only if the amount of the payments after such reduction would result in Mr. Barrack receiving a greater net after-tax benefit than if all of the payments were provided and the excise tax were imposed.

The agreement, through a restrictive covenant agreement included as an exhibit to the agreement, also provides that Mr. Barrack will not, subject to certain listed exceptions for permitted and personal activities, compete with us, or solicit our investors or customers or employees or those of our subsidiaries during his employment with us and for the one-year period following the termination of his employment with us unless his employment is terminated by us without cause (as defined in the agreement and including non-renewal of the agreement by us) or by Mr. Barrack for “good reason” (as defined in the agreement and described above). The agreement also contains covenants relating to the treatment of confidential information and intellectual property matters and restrictions on the ability of Mr. Barrack and us to disparage the other.

Lock-Up and Liquidated Damages Agreement. We entered into a Lock-Up and Liquidated Damages Agreement on December 23, 2014 with each of OP, Colony Capital and Mr. Barrack, who holds a controlling interest in Colony Capital. The agreement will become effective as of the Closing and sets forth certain restrictions on the transfer of, and other terms and conditions relating to, the OP Units issued to Colony Capital pursuant to the Contribution Agreement.

The agreement provides that the OP Units issued to Colony Capital pursuant to the Contribution Agreement will be fully vested as of the date on which they are issued, but will generally be subject to restrictions on transfer following their issuance. At each anniversary of the Closing, a portion of the OP Units will be released from the transfer restrictions resulting in an approximately ratable release across a five-year lock-up period, such that all of the OP Units will be freely transferable on the fifth anniversary of the Closing. In addition, the agreement provides for the earlier transferability of OP Units for certain limited purposes, including transfers in respect of pledging activities, gifts, transfers to family estate planning vehicles, transfers required by law, transfers to cover tax obligations relating to the receipt of OP Units and transfers to past or present employees (generally subject to specified vesting conditions and a ratable three-year lock-up so long as the transfer is not made to Messrs. Barrack or Saltzman), among others. While Colony Capital and Mr. Barrack are permitted to make these transfers, they are required to retain sufficient OP Units to satisfy any amount that may come due under the liquidated damages provision described below, as applied to Mr. Barrack.

The agreement generally provides that if Mr. Barrack materially violates or fails to perform his obligations under the restrictive covenant contained in the agreement under certain circumstances prior to the earlier of the fifth anniversary of the Closing and the termination of his employment by us without “cause” (as defined in his employment agreement with us, which is described above, and including non-renewal of his employment agreement by us) or by Mr. Barrack for “good reason” (as defined in his employment agreement with us and described above), and fails to cure and cease the violation within 60 days following the date on which he receives written notice of the violation, then Colony Capital will be required to remit a specified number of OP Units issued to it at the Closing to the OP as liquidated damages for the violation. If the violation occurs prior to the first anniversary of the Closing, then a total of 9,692,058 OP Units will be required to be so remitted to the OP. The amount of OP Units required to be remitted as liquidated damages decreases by 20% upon each anniversary of the Closing, such that no OP Units will be required to be remitted to OP upon any non-competition violation that occurs on or after the fifth anniversary of the Closing. The restrictive covenant contained in the agreement generally restricts Mr. Barrack from directly or indirectly engaging in our business in specified locations in which we carry on our business, subject to certain listed exceptions.

Arrangements with Richard B. Saltzman

Payment of Combination Consideration. In accordance with the terms and conditions of the Share Transfer and Liquidated Damages Agreement and Current Saltzman Agreement, each as described below, and after estimated transaction expenses, Mr. Saltzman will receive (i) shares of Class A Common Stock at the Closing with a total value of approximately $57.7 million based on the Reference Price (and $64.8 million based on the VWAP), subject to certain adjustments, and (ii) if all contingent consideration payable under the Contribution Agreement is actually paid, additional shares of Class A Common Stock with a total value of approximately $23.3 million based on the Reference Price (and $26.2 million based on the VWAP), subject to certain adjustments. These amounts are estimates that are subject to reduction for a portion of any transaction expenses of Colony Capital paid on its behalf by the Company, and assume that the value of a share of Class A Common Stock is either (i) $22.05 (the Reference Price), which is the value used for purposes of determining the number of shares to be issued in the Combination, or (ii) $24.76 (the VWAP), as indicated, and that no portion of the contingent consideration is reallocated to upfront consideration to be issued at the Closing. The actual value of the shares of Class A Common Stock received by Mr. Saltzman will be based on the value of such shares at the time they are delivered and may be less or more than the amounts listed above.

In addition, in accordance with the terms of the Contribution Agreement and as described in “—Description of the Combination—Overview of the Combination—Combination with Colony Capital” beginning on page 92, Mr. Saltzman will contribute to OP his membership interests in CRM in the aggregate equal to 40% of the outstanding membership interests of CRM and in exchange, Mr. Saltzman will receive after estimated transaction expenses (1) OP Units at the Closing with a total value of approximately $8.2 million based on the Reference Price (and $9.2 million based on the VWAP), subject to certain adjustments, and (2) if all contingent consideration payable under the Contribution Agreement is actually paid, additional OP Units with a total value of approximately $1.6 million based on the Reference Price (and $1.8 million based on the VWAP), subject to certain adjustments. These values are estimates and assume that all of the OP Units are exchanged for shares of Class A Common Stock, that the value of a share of Class A Common Stock is either (i) $22.05 (the Reference Price), which is the value used for purposes of determining the number of shares to be issued in the Combination, or (ii) $24.76 (the VWAP), as indicated, and that no portion of the contingent consideration is reallocated to upfront consideration to be issued at the Closing. The actual value of the OP Units received by Mr. Saltzman will be based on the value of such OP Units at the time they are delivered and may be less or more than the amounts listed above.

Mr. Saltzman may also be eligible to receive a payment in respect of a specified portion of certain closing adjustments under the Contribution Agreement, including in respect of net working capital, as a result of the contribution of his membership interests in CRM. While the actual amount that may become payable to Mr. Saltzman in respect of such closing adjustment is not yet determinable, we estimate that the amount that will become payable is less than $1,000,000.

In addition, Mr. Saltzman will have an interest in the OP Units received by Colony Capital following the Closing through his interest in CC Holdings, as described in “—Interests of Executive Officers in CC Holdings” beginning on page 83 and his interest in certain other entities holding OP Units, as described in “—Interests of Executive Officers in CCH I and CCH II beginning on page 81.”

Employment Agreement. We entered into an employment agreement with Mr. Saltzman on December 23, 2014 that sets forth the terms and conditions of Mr. Saltzman’s service as our Chief Executive Officer and President following the Closing. Mr. Saltzman’s current employment and equity agreement by and among Mr. Saltzman, Mr. Barrack and Colony Capital, as amended (the “ Current Saltzman Agreement ”) provided for, among other compensatory terms, carried interests issued by Colony Capital in connection with his prior employment, certain interests in general partners of funds and entities managed by Colony Capital, and equity interests in certain businesses of the Company. The new employment agreement, along with the Share Transfer and Liquidated Damages Agreement described below, generally replaces the Current Saltzman Agreement, except with respect to Mr. Saltzman’s right to fund incentives or other interests granted in connection with his prior employment, including any rights to the payment of combination consideration under the Contribution Agreement, as described in “—Arrangements with Richard B. Saltzman—Payment of Combination Consideration” beginning on page 76. Mr. Saltzman’s employment agreement will become effective as of the Closing and will continue in effect for an initial term of five years following the Closing, subject to automatic renewals of additional successive one-year periods unless either party provides at least 180 days’ advance notice of non-renewal.

The agreement also provides that, in his role as our Chief Executive Officer and President, Mr. Saltzman will perform duties and provide services to us that are reasonably consistent with those he provided to us in that role prior to the Closing. The agreement further provides that Mr. Saltzman will devote substantially all of his full business time and attention to the performance of his duties to us, but will be permitted to engage in certain other outside activities so long as they do not unreasonably interfere with the performance of his duties to us.

In addition, the agreement provides that Mr. Saltzman’s principal place of business during the term of the agreement will be in New York City. However, the agreement provides that if Mr. Saltzman is required to engage in travel during the term of the agreement that results in him having to perform a significant portion of his duties at a location other than in New York City, and Mr. Saltzman determines to relocate his principal place of residence to a city in proximity to such other location, then we will pay for all relocation and return expenses that he incurs on a basis which is grossed up for taxes, with such payments subject to the Board’s approval, not to be unreasonably withheld.

The agreement further provides that Mr. Saltzman will receive an annual base salary of $800,000 and will be eligible to receive an annual cash bonus with a target amount of no less than $2,400,000, which may be based on achievement of reasonable performance measures established by the Board (or a committee thereof). In addition, Mr. Saltzman will be eligible to receive annual grants of equity-based awards with a target value of 350% of his base salary. Mr. Saltzman will also continue to receive allocations in respect of carried interests in respect of funds managed by us that were granted to him prior to the Closing and will be eligible to be granted new allocations in respect of carried interests in respect of funds managed by us as is determined by the Board from time to time in consultation with Mr. Saltzman. Mr. Saltzman will also be eligible to participate in our benefit plans made available to our senior executive officers from time to time and will be entitled to receive certain perquisites that he was entitled to immediately prior to the Closing, each as described in the agreement.

The agreement provides that if Mr. Saltzman’s employment is terminated by us without “cause” (as defined in the agreement and including non-renewal of the agreement by us) or by Mr. Saltzman for “good reason” (as defined in the agreement and described below), and Mr. Saltzman executes a release of claims, he will be eligible to receive (i) a lump sum cash payment equal to three times the sum of his base salary and average annual bonus with respect to the three prior calendar years (or, if any such termination of employment occurs prior to Mr. Saltzman receiving his annual bonus in respect of calendar year 2017, then his target annual bonus), (ii) a lump sum cash payment in respect of the annual bonus payable in respect of the year prior to the year of termination, if unpaid as of the date of termination, (iii) a pro-rated target bonus for the year of termination, (iv) continued medical, dental and vision benefits at active employee rates for 24 months following termination, and (v) full vesting of all equity-based awards, carried interests and other like compensation that he holds, to the extent unvested upon his termination.

The agreement also provides that if Mr. Saltzman provides notice to us of his intention not to renew the agreement upon the scheduled expiration of the initial term or any renewal term, then he will receive (i) a lump sum cash payment in respect of the annual bonus payable in respect of the year prior to the year of termination, if unpaid as of the date of termination, (ii) a pro-rated target bonus for the year of termination, and (ii) if such termination occurs upon his retirement on or after his attainment of age 65, full vesting of all equity-based awards, carried interests and other like compensation that he holds, to the extent unvested upon his termination.

For purposes of the agreement, “good reason” means, in summary, (i) a material diminution in Mr. Saltzman’s duties, authority or responsibilities (including failing to maintain Mr. Saltzman as a member of the Board) or a diminution in his title, (ii) a change in reporting structure such that Mr. Saltzman no longer reports to the Executive Chairman or the Board (or a sub-committee of the Board), (iii) a reduction in Mr. Saltzman’s base salary, target annual cash bonus or target annual equity incentive grant, (iv) a 25-mile relocation of his principal place of business, or (iv) a material breach of the agreement by us.

If any payments to be made to Mr. Saltzman, whether under the agreement or otherwise, would subject Mr. Saltzman to the excise tax on so-called “golden parachute payments” in accordance with Sections 280G or 4999 of the Internal Revenue Code, then the payments will be reduced to the extent necessary to avoid the excise tax, but only if the amount of the payments after such reduction would result in Mr. Saltzman receiving a greater net after-tax benefit than if all of the payments were provided and the excise tax were imposed.

The agreement, through a restrictive covenant agreement included as an exhibit to the agreement, also provides that Mr. Saltzman will not, subject to certain listed exceptions for permitted and personal activities, compete with us, or solicit our investors or our customers or employees or those of our subsidiaries during his employment with us and for the one-year period following the termination of his employment with us unless his employment is terminated by us without cause (as defined in the agreement and including non-renewal of the agreement by us) or by Mr. Saltzman for “good reason” (as defined in the agreement and described above). The agreement also contains covenants relating to the treatment of confidential information and intellectual property matters and restrictions on the ability of Mr. Saltzman and us to disparage the other.

Share Transfer and Liquidated Damages Agreement. We entered into a Share Transfer and Liquidated Damages Agreement with Colony Capital, CC Holdings and Mr. Saltzman on December 23, 2014, which will become effective as of the Closing. The agreement provides that Mr. Saltzman will receive the shares of Class A Common Stock described above in “—Arrangements with Richard B. Saltzman—Payment of Combination Consideration” beginning on page 76, from Colony Capital in accordance with the terms of the Contribution Agreement and the Current Saltzman Agreement. Certain of the shares will be delivered to Mr. Saltzman on or as soon as practicable after the Closing and additional shares may be delivered to Mr. Saltzman in respect of the payment of contingent consideration in accordance with the terms of the Contribution Agreement.

The shares of Class A Common Stock delivered to Mr. Saltzman pursuant to the agreement and the Contribution Agreement will be fully vested as of the date on which they are delivered, but will generally be subject to restrictions on transfer following their delivery. At each anniversary of the date on which they are issued, a portion of the shares delivered to Mr. Saltzman will be released from the transfer restrictions resulting in an approximately ratable release across a five-year lock-up period, such that all of the shares delivered to Mr. Saltzman under the agreement will be freely transferable on the fifth anniversary of the Closing. In addition, the agreement provides for the earlier transferability of the shares delivered to Mr. Saltzman under the agreement and the Contribution Agreement for certain limited purposes, including transfers in respect of pledging activities, gifts, transfers to family estate planning vehicles, transfers required by law and transfers to cover tax obligations relating to the shares, among others. While Mr. Saltzman is permitted to make these transfers, he is required to retain a sufficient number of shares to satisfy any amount that may come due under the liquidated damages provision described below.

The agreement generally provides that if Mr. Saltzman materially violates or fails to perform his obligations under the restrictive covenant contained in the agreement under certain circumstances prior to the earlier of the fifth anniversary of the Closing and the termination of his employment by us without “cause” (as defined in his employment agreement with us and including non-renewal of the employment agreement by us) or by Mr. Saltzman for “good reason” (as defined in his employment agreement with us and described above), and fails to substantially cure and cease the violation within 60 days following the date on which he receives written notice of the violation, then he will be required to remit to us a specified number of shares of Class A Common Stock issued to him at the Closing as liquidated damages for the violation. If the violation occurs prior to the first anniversary of the Closing, then a total of 1,645,810 shares of Class A Common Stock will be required to be so remitted to us.

The amount of shares required to be remitted as liquidated damages decreases by 20% upon each anniversary of the Closing, such that no shares will be required to be remitted to us upon any non-competition violation that occurs on or after the fifth anniversary of the Closing. The restrictive covenant contained in the agreement generally restricts Mr. Saltzman from directly or indirectly engaging in our business in specified locations in which we carry on our business, subject to certain listed exceptions.

In addition, the agreement provides that if Colony Capital is obligated for any applicable losses under the Contribution Agreement, then Mr. Saltzman will be responsible for his pro-rata portion of those losses in accordance with a formula set forth in the agreement.

Employment Agreements with Other Executive Officers

We anticipate that we will enter into employment agreements prior to the Closing, to become effective as of the Closing, with each of (i) Darren J. Tangen, who is expected to continue to serve as our Chief Financial Officer following the Closing, (ii) Kevin P. Traenkle, who is expected to continue to serve as our Chief Investment Officer following the Closing, and (iii) Mr. Sanders, who is expected to continue to serve as our Chief Legal Officer and Secretary following the Closing. These agreements have not yet been executed and their terms have not yet been finalized and there is no assurance that any of these executives will ultimately enter into an employment agreement with us, although the Contribution Agreement does contain certain provisions relating to the requirement that some or all of these or certain other employment and related agreements be executed as a condition to the Closing.

It is anticipated that each of these employment agreements will be in effect for an initial term of three years following the Closing, subject to automatic renewals of additional successive one-year periods unless either party provides at least 180 days’ advance notice of non-renewal. Each agreement is expected to require that the executive will devote his full business time and attention to the performance of his duties to us, but will be permitted to engage in certain other outside activities so long as they do not unreasonably interfere with the performance of the executive’s duties to us.

The agreements are expected to provide for the payment of a specified base salary to each executive, which is expected to be equal to $447,000 for Mr. Tangen, $472,000 for Mr. Traenkle and $432,000 for Mr. Sanders. In addition, the agreements are expected to provide that each executive will be eligible to receive a discretionary annual cash bonus with a target amount of $1,300,000 for Mr. Tangen, $1,575,000 for Mr. Traenkle and $1,062,500 for Mr. Sanders and annual grants of equity-based awards with a target value of $1,000,000 for Mr. Tangen, $990,000 for Mr. Traenkle and $680,000 for Mr. Sanders. In addition, the executives are expected to continue to receive allocations in respect of carried interests in respect of funds managed by us that were granted to them prior to the Closing and to be eligible to be granted new allocations in respect of carried interests in respect of funds managed by us as is determined by the Board from time to time in consultation with the applicable executive. The executives are also expected to be eligible to participate in certain of our benefit plans made available to our senior executive officers from time to time and to receive certain perquisites that the executives were entitled to receive immediately prior to the Closing.

The agreements are expected to provide that if the executive’s employment is terminated by us without “cause” (as defined in the agreements and including non-renewal of the employment agreements by us) or by the executive for “good reason” (as defined in the agreement and described below), and the executive executes a release of claims, he will be eligible to receive (i) a lump sum cash payment equal to two times the sum of his base salary and average annual bonus with respect to the three prior calendar years (or, if any such termination of employment occurs prior to the executive receiving his annual bonus in respect of calendar year 2017, then his target annual bonus), (ii) a lump sum cash payment in respect of the annual bonus payable in respect of the year prior to the year of termination, if unpaid as of the date of termination, (iii) a pro-rated target bonus for the year of termination, (iv) continued medical, dental and vision benefits at active employee rates for 24 months following termination, and (v) full vesting of all equity-based awards, carried interests and other like compensation that he holds, to the extent unvested upon his termination.

The agreements are also expected to provide that if an executive provides notice to us of his intention not to renew the agreement upon the scheduled expiration of the initial term or any renewal term, then he will receive (i) a lump sum cash payment in respect of the annual bonus payable in respect of the year prior to the year of termination, if unpaid as of the date of termination and (ii) a pro-rated target bonus for the year of termination.

For purposes of the agreements, “good reason” is expected to include, in summary, (i) a material diminution in the executive’s duties, authority or responsibilities, (ii) a requirement that the executive report to any person other than our Chief Executive Officer or Executive Chairman, (iii) a reduction in the executive’s base salary, target annual cash bonus or target annual equity incentive grant, (iv) a 25-mile relocation of the executive’s principal place of business, or (v) a material breach of the agreement by us.

The agreements are expected to include a provision providing that if any payments to be made to the executive, whether under the agreement or otherwise, would subject the executive to the excise tax on so-called “golden parachute payments” in accordance with Sections 280G or 4999 of the Internal Revenue Code, then the payments will be reduced to the extent necessary to avoid the excise tax, but only if the amount of the payments after such reduction would result in the executive receiving a greater net after-tax benefit than if all of the payments were provided and the excise tax were imposed.

It is also anticipated that the agreements, through a restrictive covenant agreement that is expected to be included as an exhibit to the agreements, will provide that the executives will not, subject to certain exceptions, compete with us, or solicit our investors or customers or employees or those of our subsidiaries during their employment with us and for the one-year period following the termination of their employment with us unless their employment is terminated by us without cause (as defined in the agreement and including non-renewal of the employment agreement by us) or by the executive for “good reason” (as defined in the agreement and described above). The agreements are also expected to contain covenants relating to the treatment of confidential information and intellectual property matters and restrictions on the ability of the executives and us to disparage the other.

Interests of Executive Officers in CCH I and CCH II

Overview . As described in more detail below, certain of our current executive officers and Mr. Hedstrom will receive Combination proceeds indirectly in the form of membership interests in each of CCH I and CCH II at or prior to the Closing. In addition to Mr. Hedstrom, these potential recipients consist of Messrs. Barrack, Saltzman, Tangen, Traenkle and Sanders.

Description of Membership Interests . The assets of CCH I will consist of OP Units. The assets of CCH II will consist of membership units in CC Holdings representing an indirect interest in OP Units and certain other assets held by CC Holdings and not related to the Combination. The membership interests in these entities that are held by the executive officers (other than Mr. Barrack) are being granted as consideration for past services provided to Colony Capital and for future services to be provided to CC Holdings and its affiliates related to the CC Retained Businesses, and will represent an economic right to each such officer’s respective allocation of the OP Units, as well as the other assets held by the applicable entity, and to the income and earnings on each of those interests.

Following vesting, if applicable, of an executive officer’s membership interests in CCH I or CCH II, the executive officer will be eligible to receive a distribution of OP Units or cash or other property in accordance with the terms and conditions of the OP Operating Agreement (which is described in more detail in the section entitled “—Certain Agreements to be Entered Into in Connection with the Contribution Agreement—OP Operating Agreement” beginning on page 112), and the executive officer will be eligible to request that all or part of any distributed OP Units be redeemed for shares of our Class A Common Stock (or cash in accordance with the terms of the OP Operating Agreement).

The executive officers will receive quarterly distributions of the earnings distributed by OP with respect to their vested interests. Upon the vesting of any membership interests held by an executive officer in CCH I and CCH II that are subject to vesting, the executive officer will receive a payment equal to all applicable earnings distributed by OP prior to the vesting date (net of operating expenses and an allocable share of any transaction expenses) in respect of the executive officer’s membership interests in CCH I and CCH II, and will thereafter receive the quarterly distributions described in the prior sentence.

Vesting of Membership Interests . The membership interests in CCH I and CCH II that are granted to Messrs. Tangen, Traenkle and Sanders will vest ratably over a three-year period based on services to be provided by each of them to the CC Retained Businesses and other factors provided for in the definitive documentation (which will not include continued employment by us), but the vesting may be accelerated in certain circumstances in accordance with the terms of the definitive documentation, including upon a change in control of OP.

In addition, certain of the membership interests held by the executive officers in CCH I and CCH II (but not any OP Units or shares of our common stock which the executive officer has received in respect of his vested equity interests in CCH I or CCH II) will be forfeited (i) if the executive officer competes with or solicits employees or customers of any affiliate of CCH I or CCH II during the time that the executive officer holds membership interests in CCH I or CCH II in violation of certain restrictive covenants to which the executive officer is subject, or (ii) upon the occurrence of an event constituting “cause,” in each case as will be more fully set forth in applicable definitive documentation. Any interests that are so forfeited will revert to CC Holdings and be subject to reallocation by Mr. Barrack in his capacity as the owner of a controlling interest in, and in his capacity as the sole managing member of, CC Holdings.

Allocation of Membership Interests . The potential recipients described above will receive membership interests in CCH I and CCH II (some of which may be held indirectly) at or prior to the Closing. The estimated value of the amounts attributable to the Combination net of estimated transaction costs is set forth below:


Name	Estimated Value of Membership Interests in CCH I ($) ⁽¹⁾				Estimated Value of Membership Interests in CCH II ($) ⁽²⁾				Total Estimated Value of Membership Interests ($) ⁽³⁾
Name	Reference Price		VWAP		Reference Price		VWAP		Reference Price		VWAP
Thomas J. Barrack, Jr. ⁽⁴⁾	$	587,840	$	660,087	$	181,032	$	203,281	$	768,872	$	863,368
Richard B. Saltzman ⁽⁴⁾	$	183,301	$	205,829	$	56,450	$	63,388	$	239,751	$	269,217
Mark M. Hedstrom	$	62,983	$	70,724	$	19,396	$	21,780	$	82,379	$	92,504
Kevin P. Traenkle	$	8,956,725	$	10,057,529	$	2,758,323	$	3,097,328	$	11,715,048	$	13,154,857
Darren J. Tangen	$	6,039,876	$	6,782,192	$	1,860,047	$	2,088,651	$	7,899,923	$	8,870,843
Ronald M. Sanders	$	3,527,838	$	3,961,418	$	1,086,437	$	1,219,963	$	4,614,275	$	5,181,381

(1)

For purposes of the presentation in this table, the estimated value of the membership interests in CCH I received by the applicable executive officer (net of estimated transaction costs) is equal to the sum of (i) the product of (A) $22.05 (the Reference Price) or $24.76 (the VWAP), as indicated, which assumes that the OP Unit to which the membership interest relates is redeemed for a share of Class A Common Stock at the Closing, and (B) the total number of OP Units allocated to the executive officer, which is estimated to be 26,659 for Mr. Barrack, 8,313 for Mr. Saltzman, 2,856 for Mr. Hedstrom, 159,993 for Mr. Sanders, 273,917 for Mr. Tangen and 406,201 for Mr. Traenkle and (ii) the amount of any contingent consideration that may become payable to the executive officers in respect of these interests, which is equal to the following, assuming that all contingent consideration payable under the Contribution Agreement is actually paid: 11,002 for Mr. Barrack, 3,431 for Mr. Saltzman, 1,179 for Mr. Hedstrom, 66,029 for Mr. Sanders, 113,046 for Mr. Tangen and 167,640 for Mr. Traenkle.

(2)

For purposes of the presentation in this table, the estimated value of the membership interests in CCH II received by the applicable executive officer (net of estimated transaction costs) is equal to the sum of (i) the product of (A) $22.05 (the Reference Price) or $24.76 (the VWAP), as indicated, which assumes that the OP Unit to which the membership interest relates is redeemed for a share of Class A Common Stock at the Closing, and (B) the total number of OP Units allocated to the executive officer, which is estimated to be 8,210 for Mr. Barrack, 2,560 for Mr. Saltzman, 880 for Mr. Hedstrom, 49,272 for Mr. Sanders, 84,356 for Mr. Tangen and 125,094 for Mr. Traenkle, (ii) the value, as estimated by Colony Capital, of the other assets held by CCH II and notionally allocated to the applicable executive officer, and (iii) the amount of any contingent consideration that may become payable to the executive officer in respect of the OP Units allocated to the executive officer, which is equal to the following, assuming that all contingent consideration payable under the Contribution Agreement is actually paid: 10,590 for Mr. Barrack, 3,302 for Mr. Saltzman, 1,135 for Mr. Hedstrom, 63,552 for Mr. Sanders, 108,805 for Mr. Tangen and 161,351 for Mr. Traenkle.

(3)

The amounts in this column represent only an estimated value. The actual value on the date of the Closing of the membership interests in CCH I and CCH II that are held by any executive officer will be based on the value of OP Units and the other assets allocated to the executives at the date of the Closing (which are subject to adjustment) and may be less or more than the amounts listed in this column. In addition, an estimated total of approximately $6.0 million of membership interests based on the Reference Price (and $6.7 million based on the VWAP) in CCH I and CCH II remains unallocated (with the respective values determined in accordance with footnotes (1) and (2) above). While no determination has been made regarding whether or how these membership interests will be allocated, it is possible that they will be allocated in whole or in part to one or more of the individuals listed in the table.

(4)	A portion of the membership interests held indirectly by Messrs. Barrack and Saltzman may be reallocated by them at or following the Closing to other holders of membership interests in CCH I and CCH II, including our executive officers.

Interests of Executive Officers in CC Holdings

In addition to interests in CC Holdings held indirectly by our current executive officers and Mr. Hedstrom through CCH II, Messrs. Barrack, Saltzman and Hedstrom hold interests in CC Holdings, which owns Colony Capital. Their ownership of these interests entitles them to a portion of the OP Units received by Colony Capital at the Closing, along with additional OP Units in respect of the contingent consideration payable to Colony Capital under the Contribution Agreement, as set forth in the table below (net of estimated transaction costs).


Name	Number of OP Units ⁽¹⁾		Estimated Value of OP Units ($) ⁽²⁾
Name	Number of OP Units ⁽¹⁾		Reference Price		VWAP
Thomas J. Barrack, Jr.		16,072,224	$	354,392,534	$	397,948,266
Richard B. Saltzman		74,800	$	1,649,350	$	1,852,048
Mark M. Hedstrom		1,884,854	$	41,561,020	$	46,668,985

(1)	The number in this column does not include any interests in OP Units that are held indirectly by the individual through the membership interests he indirectly holds in CCH I.

(2)

The estimated value of the OP Units held by the applicable individual as listed in the “Number of OP Units” column, and assuming that all contingent consideration payable under the Contribution Agreement is actually paid, is equal to the product of (i) $22.05 (the Reference Price) or $24.76 (the VWAP), as indicated, which assumes that the OP Unit to which the membership interest relates is redeemed for a share of Class A Common Stock at the Closing, and (ii) the number of OP Units listed in the “Number of OP Units” column. The amounts in this column represent only an estimated value. The actual value on the date of the Closing of the applicable OP Units will be based on the value of OP Units at the date of the Closing (which are subject to adjustment) and may be less or more than the amounts listed in this column.

Quantification of Potential Payments to Our Named Executive Officers in Connection with the Combination

In accordance with Item 402(t) of Regulation S-K, the table below sets forth the estimated amounts of compensation that is based on or otherwise relates to the Combination that may become payable or realized by each of our named executive officers (as identified in accordance with SEC regulations).

The estimated amounts below are based on multiple assumptions that may not actually occur, including assumptions described in this proxy statement. In addition, the amounts may vary depending on the actual date the Combination is completed. As a result, the actual amounts receive may differ in material respects from the amounts set forth below. The disclosures in the table below and the accompanying footnotes should be read in conjunction with the narrative description of the compensation arrangements set forth above in this section.

Golden Parachute Compensation


Named Executive Officer	Cash ($)		Equity ($)			Pension / Non-qualified Deferred Compensation Benefit ($)		Perquisites /Benefits ($)		Tax Reimbursement ($)		Other ($)		Total ($) ⁽¹⁾
Thomas J. Barrack, Jr. ⁽²⁾		—		—			—		—		—		—		—
Richard B. Saltzman		—		89,769,134	⁽³⁾		—		—		—		—		89,769,134
Kevin P. Traenkle ⁽⁴⁾		—		—			—		—		—		—		—
Darren J. Tangen ⁽⁴⁾		—		—			—		—		—		—		—
Ronald M. Sanders ⁽⁴⁾		—		—			—		—		—		—		—

(1)	The amount listed in this column represents only an estimated value. The actual value of the shares of Class A Common Stock received by Mr. Saltzman will be based on the value of such shares at the time they are delivered to him and may be less or more than the amount listed in this column.

(2)

Mr. Barrack is not entitled to receive the payment of any compensation as set forth in Item 402(t) of Regulation S-K in connection with the Combination. The arrangements that Mr. Barrack has entered into in connection with the Combination and his continuing employment with us following the Combination are described in “—Arrangements with Thomas J. Barrack, Jr.” beginning on page 73.

(3)

The amount listed in this column represents the estimated value of the shares of Class A Common Stock that Mr. Saltzman may receive in connection with the Combination in accordance with the terms and conditions of the Current Saltzman Agreement, as described above in “—Arrangements with Richard B. Saltzman—Payment of Combination Consideration” beginning on page 76, and the Share Transfer and Liquidated Damages Agreement by and between us, Mr. Saltzman, Colony Capital and CC Holdings, which is described above in “—Arrangements with Richard B. Saltzman—Share Transfer and Liquidated Damages Agreement” beginning on page 79 (a “single-trigger” arrangement). The amount listed is based on an estimate that (i) Mr. Saltzman receives 2,616,913 shares of Class A Common Stock on or soon as practicable after the Closing and an additional 1,057,632 shares of Class A Common Stock in respect of the contingent consideration payable under the Contribution Agreement, assuming that all contingent consideration payable under the Contribution Agreement is actually paid, and (ii) the value of a share of Class A Common Stock is equal to $24.43 (the average closing market price of the Company’s securities over the first five business days following the first public announcement of the transaction). Mr. Saltzman is not entitled to receive the payment of any other compensation as set forth in Item 402(t) of Regulation S-K in connection with the Combination, and the other arrangements that Mr. Saltzman has entered into in connection with the Combination and his continuing employment with us following the Combination are described in “—Arrangements with Richard B. Saltzman” beginning on page 76 and “—Interests of Executive Officers in CCH I and CCH II” beginning on page 81.

(4)

Messrs. Traenkle, Tangen and Sanders are not entitled to receive the payment of any compensation as set forth in Item 402(t) of Regulation S-K in connection with the Combination. The arrangements that Messrs. Traenkle, Tangen and Sanders are expected to enter into in connection with the Combination and their continuing employment with us following the Combination are described in “—Employment Agreements with Other Executive Officers” beginning on page 79 and “—Interests of Executive Officers in CCH I and CCH II” beginning on page 81.

* * * * *

Overview of the Combination

Combination with Colony Capital . On December 23, 2014, we entered into the Contribution Agreement, pursuant to which OP will acquire from the Contributors substantially all of Colony Capital’s real estate investment management business and operations, excluding those conducted exclusively in connection with CAH. Also on December 23, 2014, we entered into the Colony Mark Transfer Agreement, pursuant to which OP will acquire from New Colony Holdings LLC the ownership of the Colony Mark, which includes the Colony name.

The assets to be acquired directly or indirectly by OP from CC Holdings, Colony Capital and CCH I pursuant to the Contribution Agreement include the following (collectively, the “ CC Contributed Assets ”):

•

all of the equity interests held by CC Holdings, Colony Capital or CCH I, as applicable, in all of the direct subsidiaries of CC Holdings, Colony Capital, and CCH I, other than the CC Retained Entities (as defined in the Contribution Agreement);

•

all contracts to which CC Holdings, Colony Capital or CCH I is party or under which CC Holdings, Colony Capital or CCH I is bound, or to which any CC Contributed Assets held by Colony Capital, CCH I or CC Holdings are subject (other than any contract exclusively related to Colony Capital’s ownership stake in CAH (the “ CC Retained Business ”));

•

all other assets (other than the CC Retained Assets ) used or held for use in connection with the business conducted by CC Holdings, Colony Capital, CCH I and their respective Subsidiaries, except for the Colony Mark (which will be transferred pursuant to the Colony Mark Transfer Agreement); and

•

all books and records in the possession or control of CC Holdings, Colony Capital or CCH I to the extent pertaining to the CC Contributed Assets.

To effect the contribution to OP of the CC Contributed Assets, (i) prior to the Closing (as defined in the Contribution Agreement), CC Holdings, Colony Capital, CCH I and their respective subsidiaries will contribute to NewCo (or a wholly owned subsidiary of NewCo) the CC Contributed Assets, and (ii) at the Closing, CC Holdings, Colony Capital and CCH I shall contribute to OP all of the issued and outstanding membership interests in NewCo.

In addition, pursuant to the Contribution Agreement, (i) FHB LLC will contribute to OP membership interests of CRP in the aggregate equal to 50.0% of the outstanding membership interests of CRP (the remaining 50.0% of the outstanding membership interests of CRP being owned by CRM), (ii) Mr. Saltzman will contribute to OP membership interests in CRM in the aggregate equal to 40.0% of the outstanding membership interests of CRM, and (iii) Colony Capital and CRM will enter into an investment management agreement pursuant to which Colony Capital will perform certain management functions required of CRM pursuant to the limited liability agreement of CRP.

Internally Managed REIT . Pursuant to the Contribution Agreement, OP will acquire all of the issued and outstanding equity interests in our manager, Colony Financial Manager, LLC, which is a wholly owned subsidiary of Colony Capital. As described in “Interests of Certain Persons in the Combination—Arrangements with Thomas J. Barrack, Jr.,” beginning on page 73, Mr. Barrack, will continue to serve as our Executive Chairman and the Chairman of our Board and has entered into a five-year employment agreement with the Company to become effective at the Closing. As described in “Interests of Certain Persons in the Combination—Arrangements with Richard B. Saltzman,” beginning on page 76, Mr. Saltzman will continue to serve as our Chief Executive Officer and a member of our Board and has also entered into a five-year employment agreement with the Company to become effective at the Closing. Pursuant to Contribution Agreement, by virtue of the contribution of the CC Contributed Assets to NewCo and the subsequent contribution of NewCo to OP, substantially all of Colony Capital’s employees will become employees of the Company following the Closing and we will be an internally managed REIT.

Company Contribution to OP. OP currently holds, directly and indirectly, a substantial majority of the Company’s assets and liabilities. Pursuant to the Contribution Agreement, prior to the Closing, OP will acquire substantially all of the assets and liabilities of the Company that are not currently held by OP or its subsidiaries. Following the Closing, OP will hold, directly and indirectly, substantially all of our assets and conduct, directly and indirectly, substantially all of our business.

Ownership and Management of OP . Immediately following the Combination, we will directly own approximately 84.1% of the aggregate OP Units in OP and the Contributors will directly own, collectively, approximately 15.9% of the aggregate OP Units in OP. At the Closing, the Company, OP and the Contributors will enter into an amended and restated operating agreement of OP. The Company, as the sole managing member in OP, will have sole responsibility and discretion in the management and control in OP, and the non-managing members of OP, in such capacity, will have no authority to transact business for, or take part in the operations, management or control of, OP. See “Certain Agreements to be entered into pursuant to the Contribution Agreement—OP Operating Agreement” beginning on page 112.

Consideration to be Paid in the Combination

The above consideration represented a value of $657.5 million at the time of the announcement of the transaction based on a reference price that equated to $22.05 per share (the “ Reference Price ”) (which would have a current value of approximately $738.3 million when using the VWAP). Pursuant to the Contribution Agreement and the Colony Mark Transfer Agreement, the Reference Price was used to determine the number of shares and OP Units to be issued to the Contributors and the Mark Transferor in the Combination. The Reference Price was the higher of (x) the volume-weighted average closing price of the Company’s common stock over the 30 trading days prior to the initial announcement of the transaction, and (y) the third quarter 2014 “fair value” Company share price, which the parties agreed would be the fair value of the Company’s net assets on a per share basis as of September 30, 2014, or $22.05 per share. Because the volume-weighted average closing price of the Company’s common stock over the 30 trading days prior to the initial announcement of the transaction was lower than $22.05 per share, the Reference Price was $22.05 per share.

The aggregate potential consideration consists of:

•

Upfront Consideration

Consideration to be paid at the Closing . Pursuant to the Contribution Agreement, the Contributors will be entitled to receive approximately 2.71 million shares of Class A Common Stock and approximately 21.44 million OP Units in aggregate upfront consideration at the Closing valued in the aggregate at $532.5 million based on the Reference Price (and $597.9 million based on the VWAP), subject to reduction, in each case, for a portion of any transaction expenses of Colony Capital paid by the Company at the Closing. Mr. Saltzman will be entitled to receive, pursuant to a share transfer agreement with Colony Capital, all of the shares of Class A Common Stock issued as upfront consideration. The OP Units issued as upfront consideration will be allocated to the Contributors as follows: (i) Colony Capital: approximately 18.5 million, (ii) CCH I: approximately 1.6 million, (iii) FHB LLC: approximately 0.9 million, and (iv) Mr. Saltzman: approximately 0.4 million, subject to reduction, in each case, as described above.

Pursuant to the Colony Mark Transfer Agreement, New Colony Holdings, LLC will be entitled to receive 113,637 shares of Class A Common Stock and 566,635 shares of Class B Common Stock in aggregate upfront consideration at the Closing valued in the aggregate at $15.0 million based on the Reference Price (and approximately $16.8 million based on the VWAP), subject to reduction, in each case, for a portion of any transaction expenses of Colony Capital paid by the Company pursuant to the Contribution Agreement at the Closing.

The amount of upfront consideration payable under the Contribution Agreement is subject to separate adjustments at the Closing in respect of cash, indebtedness and net working capital, which are referred to as the “ CC Closing Adjustment ” and the “ CRP Closing Adjustment .”

For purposes of the Contribution Agreement, the CC Closing Adjustment means (i) CC Closing Date Cash (as defined in the Contribution Agreement) minus (ii) CC Closing Unpaid Indebtedness (as defined in the Contribution Agreement) plus (iii) if the CC Working Capital (as defined in the Contribution Agreement) exceeds the CC Reference Working Capital (as defined in the Contribution Agreement), an amount equal to such excess, minus (iv) if the CC Reference Working Capital exceeds the CC Working Capital, an amount equal to such excess. If the CC Closing Adjustment is a positive amount, OP will pay such amount in cash to Colony Capital up to a cap of $25.0 million; provided , that with respect to any excess above $25.0 million, OP will issue to Colony Capital additional OP Units (valued at the Reference Price) equal to the value of such excess amount. If the CC Closing Adjustment is a negative amount, such amount will result in a decrease in the number of OP Units (valued at the Reference Price) issued by OP to Colony Capital equal to value of the shortfall.

For purposes of the Contribution Agreement, the CRP Closing Adjustment means (i) CRP Closing Date Cash (as defined in the Contribution Agreement) minus (ii) CRP Closing Unpaid Indebtedness (as defined in the Contribution Agreement) plus (iii) if the CRP Working Capital (as defined in the Contribution Agreement) exceeds the CRP Reference Working Capital (as defined in the Contribution Agreement), an amount equal to such excess, minus (iv) if the CRP Reference Working Capital exceeds the CRP Working Capital, an amount equal to such excess. If the CRP Closing Adjustment is a positive amount, such amount up to $5.0 million will result in an increase in upfront consideration payable by OP in cash, with any excess above $5.0 million payable in OP Units (valued at the Reference Price) issued by OP under the Contribution Agreement. If the CRP Closing Adjustment is a negative amount, such amount will result in a decrease in the number of OP Units (valued at the Reference Price) issued by OP under the Contribution Agreement. Any cash payable, or increase or decrease of OP Units issuable, in connection with the CRP Closing Adjustment shall be allocated 50% to FHB LLC, 30% to Colony Capital and 20% to Mr. Saltzman.

Contingent Consideration

Pursuant to the Contribution Agreement, the Contributors will be entitled to receive up to approximately 1.07 million shares of Class A Common Stock and approximately 3.78 million OP Units in aggregate contingent consideration post-Closing valued in the aggregate at approximately $107.0 million based on the Reference Price (and $120.1 million based on the VWAP), in each case, subject to adjustment for any reallocated consideration and a portion of any transaction expenses of Colony Capital paid by the Company in connection with such contingent consideration. Mr. Saltzman will be entitled to receive, pursuant to a share transfer agreement with Colony Capital, all of the shares of Class A Common Stock issued as contingent consideration. If the full amount of

contingent consideration were issued, the OP Units would be allocated to the Contributors as follows (i) Colony Capital: approximately 2.85 million, (ii) CCH I: approximately 0.66 million, (iii) FHB LLC: approximately 0.19 million, and (iv) Mr. Saltzman: approximately 0.08 million, subject to reduction, in each case, as described above.

Pursuant to the Colony Mark Transfer Agreement, New Colony Holdings will be entitled to receive up to 37,718 shares of Class A Common Stock and 98,958 shares of Class B Common Stock in aggregate contingent consideration post-Closing valued in the aggregate at approximately $3.0 million based on the Reference Price (and $3.4 million based on the VWAP), in each case, subject to adjustment for any reallocated consideration and a portion of any transaction expenses of Colony Capital paid by the Company in connection with such contingent consideration.

Distribution of Contingent Consideration

Pursuant to the Contribution Agreement, OP shall, at the Closing, issue up to approximately 4.99 million OP Units of aggregate potential contingent consideration to be held, together with any distributions thereon, in a separate account (the “ Contingent Consideration Account ”), which account shall be held and managed by OP. Upon a final determination of the amount of contingent consideration payable in connection with the Combination, OP shall transfer to the Contributors and New Colony Holdings (in accordance with their allocable percentages) from the Contingent Consideration Account such number of OP Units (together with an amount in cash equal to any distributions that would have been declared thereon between Closing and the date of the applicable issuance had such OP Units been issued at Closing). If, following any such final determination, the Contingent Consideration Account holds more OP Units than OP could in any event be obligated to transfer to the Contributors and New Colony Holdings pursuant to the Contribution Agreement, OP shall remove such excess OP Units from the Contingent Consideration Account and cancel such excess OP Units. At any time when OP Units are delivered from OP to the Contributors from the Contingent Consideration Account pursuant to the Contribution Agreement, a portion of such OP Units approximately equal to the amount determined by multiplying the number of such OP Units by 22.123% will be exchanged by Colony Capital for shares of Class A Common Stock, which shares shall be transferred to Mr. Saltzman.

Contingent Consideration Relating to Achievement of Benchmark Cumulative FFO Per Share Target.

Contingent consideration with a value of up to an aggregate $31.6 million based on the Reference Price (and $35.4 million based on the VWAP) (subject to reduction for a portion of any reallocated consideration) of the aggregate contingent consideration (the “ FFO Contingent Consideration ”) is payable based on the achievement of performance targets relating to certain benchmark funds from operations per share target during the three-year period beginning on the first day of the first fiscal quarter beginning on or after the Closing (the “ FFO Measurement Period ”). The full amount of FFO Contingent Consideration would be payable if the Benchmark Cumulative FFO Per Share (as defined below) equals or exceeds $6.06 per share of Class A Common Stock (the “ FFO Target ”). A portion of FFO Contingent Consideration is payable if the Benchmark Cumulative FFO Per Share exceeds 87.5% of the FFO Target, or $5.30 per share of Class A Common Stock, with such portion of FFO Contingent Consideration increasing ratably at approximately $1.262 million based on the Reference Price (and $1.417 million based on the VWAP) (subject to reduction for a portion of any reallocated consideration) per half percentage point above 87.5% until the full amount of potential FFO Contingent Consideration is payable if the Benchmark Cumulative FFO Per Share equals or exceeds the FFO Target.

In the event that the Benchmark Cumulative FFO Per Share exceeds the FFO Target, an additional amount of contingent consideration with a value up to an aggregate $16.0 million based on the Reference Price (and $17.9 million based on the VWAP) (subject to reduction for a portion of any reallocated consideration) (the “ FFO Additional Contingent Consideration ”) is payable as follows: (1) the full amount of FFO Additional Contingent Consideration is payable if the Benchmark Cumulative FFO Per Share equals or exceeds 112.5% of the FFO Target, or approximately $6.82 per share of Class A Common Stock, or (2) a portion of FFO Additional Contingent Consideration is payable if the Benchmark Cumulative FFO Per Share exceeds the FFO Target, with such portion of FFO Additional Contingent Consideration increasing ratably at approximately $638,000 based on the Reference Price (and $716,412 based on the VWAP) (subject to reduction for a portion of any reallocated consideration) per half percentage point above 100% of the FFO Target until the full amount of potential FFO Additional Contingent

Consideration is payable if the Benchmark Cumulative FFO Per Share equals or exceeds 112.5% of the FFO Target. In the event that the FFO Additional Contingent Consideration becomes payable but no RE Capital Raise Contingent Consideration (as defined below) is payable as of the end of the RE Capital Raise Measurement Period (as defined below), then the amount of FFO Additional Contingent Consideration that would have otherwise been payable will be reduced by half.

Benchmark FFO Target—Certain Defined Terms

For purposes of determining the FFO Contingent Consideration and FFO Additional Contingent Consideration payable under the Contribution Agreement and the Colony Mark Transfer Agreement, the terms below are generally defined as follows:

“ Benchmark Cumulative FFO ” means the cumulative Benchmark FFO Per Share during the FFO Measurement Period.

“ Benchmark FFO ” means net income allocable to holders of the Company’s common stock and OP Units (computed in accordance with GAAP), excluding (A) realized gains (or losses) from sales of real estate and non-real estate assets, (B) realized and unrealized performance fees related to the real estate and non-real estate private fund business, net of respective performance compensation expenses, (C) purchase accounting adjustments arising from the transaction, (D) real estate depreciation and amortization and (E) adjustments related to changes in GAAP during the FFO Measurement Period, in all cases after adjustments for the Company’s proportionate share of such items from unconsolidated partnerships and joint ventures. Notwithstanding the foregoing, benchmark FFO will (i) include (A) the unrealized fair value gains and losses from CLNY GP Investments, (B) realized investment income, gains and losses from CLNY GP Investments, and (ii) exclude (A) any potential expenses related to contingent consideration, (B) any payment pursuant to the Colony Mark Transfer Agreement, (C) transaction costs, remeasurement gains and losses arising from the transaction, and amortization of intangible assets, liabilities and step-up adjustments recognized as a result of the transaction, (D) realized gains and losses related to sales of the Company’s interest in the Colony American Homes platform and (E) realized gains and losses from the sale of non-real estate assets other than those related to CLNY GP Investments. Benchmark FFO is not intended to represent FFO or adjusted FFO in accordance with the NAREIT definition.

“ Benchmark FFO Per Share ” means, with respect to the FFO Measurement Period, (A) Benchmark FFO for each individual year, independent of prior and forward years, during such FFO Measurement Period, divided by (B) the benchmark weighted average (weighted quarterly in each year of the FFO Measurement Period by the weighted average shares of the Company’s common stock outstanding in each quarter ending shares outstanding balance and the days in the quarter) number of basic shares of Class A Common Stock outstanding during each year of such FFO Measurement Period, which represents (w) the weighted average (as defined above) number of basic shares of Class A Common Stock outstanding that is used to calculate basic earnings per share (in accordance with GAAP) for each year of such FFO Measurement Period, minus (x) the weighted average (as defined above) number of basic shares of Class A Common Stock then outstanding that were issued as Consideration hereunder (or pursuant to any exchange or redemption of Consideration) already included in weighted average basic shares outstanding for each year during such FFO Measurement Period, plus (y) the fixed amount of 27,691,610 shares of Class A Common Stock outstanding as hypothetical potential equity consideration.

“ CLNY GP Investments ” means any investments made by the Company or its subsidiaries as a general partner, a limited partner, or a member in the private fund business, including real estate and non-real estate funds, vehicles and other investment products.

Contingent Consideration Relating to Real Estate and Non-Real Estate Capital Raising Activities

amount of RE Capital Raise Contingent Consideration would be payable if the RE Cumulative Capital Raise (as defined below) equals or exceeds $3.975 billion (if the RE Capital Raise Measurement Period is two years in duration) and $6.650 billion (if the RE Capital Raise Measurement Period is three years in duration) (the “ RE Capital Raise Target ”). A portion of RE Capital Raise Contingent Consideration is payable if the RE Cumulative Capital Raise exceeds 75% of the RE Capital Raise Target with such portion of RE Capital Raise Contingent Consideration increasing ratably at approximately $1.262 million based on the Reference Price (and $1.417 million based on the VWAP) (subject to reduction for a portion of any reallocated consideration) per percentage point above 75% until the full amount of potential RE Capital Raise Contingent Consideration is payable if the RE Cumulative Capital Raise equals or exceeds the RE Capital Raise Target.

In the event that the RE Cumulative Capital Raise exceeds the RE Capital Raise Target, additional contingent consideration with a value of up to an aggregate $16.0 million based on the Reference Price (or $17.8 million based on the VWAP) (subject to reduction for a portion of any reallocated consideration) (the “ RE Capital Raise Additional Contingent Consideration ”) is payable as follows (i) the full amount of RE Capital Raise Additional Contingent Consideration is payable if the RE Cumulative Capital Raise equals or exceeds 125% of the RE Capital Raise Target, or (ii) a portion of RE Capital Raise Additional Contingent Consideration is payable if the RE Cumulative Capital Raise exceeds the RE Capital Raise Target, with such portion of RE Capital Raise Additional Contingent Consideration increasing ratably at approximately $638,000 based on the Reference Price (and $716,412 based on the VWAP) (subject to reduction for a portion of any reallocated consideration) per percentage point above 100% of the RE Capital Raise Target until the full amount of RE Capital Raise Additional Contingent Consideration is payable if the RE Cumulative Capital Raise equals or exceeds 125% of the RE Capital Raise Target. In the event that the RE Capital Raise Additional Contingent Consideration becomes payable but no FFO Contingent Consideration is payable as of the end of the FFO Measurement Period, then the amount of the RE Capital Raise Additional Contingent Consideration that would have otherwise been payable shall be reduced by half.

Contingent consideration with a value of $15.0 million based on the Reference Price (or $16.8 million based on the VWAP) in the aggregate (subject to reduction for a portion of any reallocated consideration) (the “ Non-RE Capital Raise Contingent Consideration ”) is payable based on the achievement of certain targets for capital raising generally related to non-real estate funds and investment vehicles during the two-year period beginning on the first day of the first full fiscal quarter beginning on or after the Closing. The Non-RE Capital Raise Contingent Consideration is payable if the Non-RE Cumulative Capital Raise (as defined below) equals or exceeds $500.0 million during such two-year period.

For purposes of determining RE Capital Raise Contingent Consideration, RE Capital Raise Additional Contingent Consideration and Non-RE Capital Raise Contingent Consideration, the terms below are generally defined as follows:

“ Non-RE Cumulative Capital Raise ” means, without duplication, the cumulative amount of (i) Qualified Third-Party Capital that is raised in non-real estate investment products, (ii) Qualified Third-Party Capital relating to listed securities hedge fund strategies whether or not real estate-related, and (iii) Qualified Third-Party Capital relating to listed securities non-hedge fund strategies that are not predominantly real estate-related, in each case, during the two-year period beginning on the first day of the first full fiscal quarter beginning on or after the Closing Date. Non-RE Cumulative Capital Raise calculation excludes potential CLNY GP Investment in such non-real estate funds, investment vehicles and other investment products. For clarification purposes, it also excludes any Company stockholder capital raise in the public equity market during the two-year period beginning on the first day of the first full fiscal quarter beginning on or after the Closing, but does not exclude any other form of private or public capital raise for its non-real estate funds, investment vehicles and other investment products.

“ Qualified Third-Party Capital ” for any category of capital means the sum across all funds, investment vehicles and other investment products within such category of capital of an amount equal to, for each such fund, investment vehicle or investment product, (A) the amount of third-party capital committed to such fund, investment vehicle or investment product, multiplied by (B) the sum of: (i) (x) 60% multiplied by (y) the fee to be charged on net funded equity or limited partner capital commitments as an annual management fee expressed in basis points, divided by (z) 125 basis points; plus (ii) (x) 40%, multiplied by (y) the percentage to be charged on investment returns above an IRR hurdle (consistent with market terms for funds, investment vehicles or investment products investing in similar asset classes) as carried interest of such fund, investment vehicle or investment product

expressed as a percentage; provided , that such fund is on other terms consistent with market terms for funds investing in similar asset classes, divided by (z) 17%; provided , further, that third-party capital shall exclude capital raised for Colony Distressed Credit and Special Situation Fund III, L.P. and ColCo Strategic Partners III, L.P. For purposes of this definition, the calculation of any management fee or carried interest with respect to any third-party capital raised in a fund, investment vehicle or other investment product shall be determined on a blended basis within such fund, investment vehicle or investment product.

“ RE Cumulative Capital Raise ” means, without duplication, the cumulative amount of (i) Qualified Third-Party Capital that is raised in real estate funds, vehicles and other investment products during the RE Capital Raise Measurement Period, (ii) to the extent the Non-RE Capital Raise Target is achieved, the cumulative amount of any Qualified Third-Party Capital relating to real estate listed securities hedge fund strategies in excess of the Non-RE Capital Raise Target, and (iii) Qualified Third-Party Capital relating to listed securities non-hedge fund strategies that are predominantly real estate-related; provided , that any such capital raised in the fourth quarter of 2014 will be counted for purposes of calculating the RE Cumulative Capital Raise. RE Cumulative Capital Raise calculation excludes potential CLNY GP Investment in such real estate funds, vehicles and other investment products. For clarification purposes, it also excludes any Company stockholder capital raise in the public equity market during the RE Capital Raise Measurement Period, but does not exclude any other form of private or public capital raise for real estate vehicles and other investment products.

* * * * *

CERTAIN AGREEMENTS TO BE ENTERED INTO PURSUANT TO THE CONTRIBUTION AGREEMENT

OP Operating Agreement

General

Colony Capital Operating Company, LLC (formerly known as CFI RE Masterco, LLC) (the “ OP ”) is currently our wholly-owned subsidiary and a Delaware limited liability company formed on March 25, 2011. Currently, OP holds, directly or indirectly, a substantial majority of the Company’s business and assets. Following the consummation of the Combination, OP will own substantially all of the assets and liabilities of the Company and Colony Capital’s combined business.

In connection with the consummation of the Combination, we, as managing member, will cause OP to issue OP Units to each of Colony Capital, CCH I, FHB LLC and Mr. Saltzman and we will enter into a second amended and restated operating agreement (the “ OP Operating Agreement ”) with such unitholders as non-managing members. Immediately following the Combination, we expect that we will directly own approximately 84.1% of the aggregate OP Units in OP and the non-managing members will directly own, collectively, approximately 15.9% of the aggregate OP Units in OP.

Management of OP

As the managing member of OP, we exercise exclusive and complete responsibility and discretion in its day-to-day management and control. We can cause OP to enter into major transactions, including acquisitions, dispositions and refinancings, subject to certain limited exceptions. The non-managing members of OP may not transact business for, or participate in the management activities or decisions of OP, except as provided in the OP Operating Agreement or as required by applicable law. We, as the managing member of OP may not be removed as managing member by the other members without our consent. The OP Operating Agreement restricts our ability to engage in certain business combinations as more fully described below.

The non-managing members of OP expressly agree that the managing member of OP is acting for the benefit of OP, the non-managing members of OP and our stockholders collectively. The managing member is under no obligation to give priority to the separate interests of the non-managing members in deciding whether to cause OP to take or decline to take any actions. If there is a conflict between the interests of us or our stockholders, on the one

hand, and the non-managing members of OP, on the other, the OP Operating Agreement provides that any action or failure to act by the managing member that gives priority to the separate interests of our stockholders or us does not result in a violation of the contractual rights of the non-managing members of OP under the OP Operating Agreement and does not violate any duty that the managing member owes to OP and its members.

The OP Operating Agreement provides that all of our business activities, including all activities pertaining to the acquisition and operation of properties, must generally be conducted through OP. The OP Operating Agreement does permit us, under certain circumstances, to hold certain assets other than through OP. However, we must take commercially reasonable measures to ensure that the economic benefits and burdens of such assets are vested in OP.

Fiduciary Responsibilities

Our directors and officers have duties under applicable Maryland law to manage us in a manner consistent with the best interests of our stockholders. At the same time, our only duties, fiduciary or otherwise, as managing member of OP, are to perform OP’s contractual obligations as set forth in the OP Operating Agreement consistently with the implied contractual covenant of good faith and fair dealing. As managing member of OP, we shall have no other duty, fiduciary or otherwise. Our duties, as managing member of OP, to OP and its non-managing members of OP, therefore, may come into conflict with the duties of our directors and officers to our stockholders.

In addition, the OP Operating Agreement expressly provides that none of our directors, officers or agents shall have any duties to OP or any of its members and that none of our directors, officers or agents shall be directly liable to OP for money damages by reason of their service as such.

Transferability of Interests

We, as the managing member of OP, may not voluntarily withdraw from OP or transfer or assign all or any portion of our interest in OP (other than a transfer to us or one of our wholly owned subsidiaries or in connection with a permitted Termination Transaction (as defined below)) without the consent of the members (other than us, the managing member and entities controlled by us or the managing member) holding a majority based on the number of OP Units then held by members (other than us, the managing member and entities controlled by us or the managing member) entitled to vote on or consent to such matter. Subject to certain ancillary agreements, a member may not sell, assign, bequest, convey, devise, gift, pledge, encumber, hypothecate, mortgage, exchange or transfer its OP Units in OP without our consent, except (i) to certain family members, certain entities controlled by the member or such persons family, or to any trust, partnership, corporation or limited liability company established and held for the direct or indirect benefit of a certain family members; provided , that any such transfer shall not involve a disposition for value other than equity interests in any such trust, partnership, corporation or limited liability company, (ii) as required by applicable law or order, (iii) to a nominee or custodian of a person or entity to whom a disposition or transfer would be permitted under the OP Operating Agreement, (iv) as expressly authorized by an ancillary agreement (including any lock-up agreement), or (v) in the case of certain transferees that are a past or present officer or employee of (x) OP or the Company (y) Colony Capital, CCH I or CRP or (z) their respective subsidiaries, as may be, or may have been permitted pursuant to the applicable ancillary agreement to which such OP Units were subject at the time of the issuance of such OP Units or to which such transferee was party.

Further, any transfer of membership interests in OP by a non-managing member is subject to satisfaction of the following conditions:

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the transferee is an “accredited investor” as defined under Rule 501 of the Securities Act;

•

the transferor has delivered to us, as managing member, an opinion of counsel reasonably satisfactory to us to the effect that the proposed transfer may be effected without registration under the Securities Act and will not otherwise violate any state securities laws or regulations applicable to OP or the membership interests being transferred. If, in the opinion of such counsel, such transfer would require the filing of a registration statement under the Securities Act or would otherwise violate any federal or state securities laws or regulations applicable to OP or the OP units, we, as managing member, may prohibit such transfer;

•

the transferor is transferring not less than the lesser of (x) 500 membership units and (y) all of the remaining OP units owned by such transferor; and

•

the transfer does not violate any ownership limitations contained in our charter.

Generally, we, as managing member of OP, will have the right to consent to the admission of a transferee of the interest of a non-managing member as a substituted member of OP, which consent may be withheld by us in our sole and absolute discretion. If our consent is required for the admission of a transferee as a substituted member of OP and we withhold such consent, such transferee will be considered an assignee for purposes of the OP Operating Agreement and shall be entitled to all the rights of an assignee of a membership interest under applicable Delaware law, including the right to receive distributions and the share of net income, net losses and other items of income, gain, loss, deduction and credit of OP attributable to the membership interest assigned to such transferee, but shall not be deemed to be a holder of OP units and shall not be entitled to effect a consent or vote OP Units on any matter presented to the non-managing members of OP for a vote. Any further assignment of such membership units, shall cause such transferee to be subject to the foregoing conditions.

Members, including Colony Capital and its controlled entities, may pledge their interests in OP to one or more banks or lending institutions (which are not affiliates of the pledging member) as collateral or security for a bona fide loan or other extension of credit. The transfer of such OP Units pursuant to the lender’s or financial institution’s enforcement of its remedies under the applicable financing documents is permitted by the OP Operating Agreement.

Amendments to the OP Operating Agreement

Amendments to the OP Operating Agreement may be proposed by the managing member or the non-managing members holding a majority of OP units then held by members. All amendments to the OP Operating Agreement must be approved by the managing member.

Generally, the OP Operating Agreement may not be amended, modified or terminated without the approval of both the managing member and if the amendment substantively and adversely affects the rights of the non-managing members disproportionately as compared to the managing member, the members holding a majority of OP units then held by all members (excluding us, the managing member and entities controlled by us or the managing member) entitled to vote on, or consent to such matter. The managing member has the power to unilaterally make certain amendments to the OP Operating Agreement without obtaining the consent of any other members as may be required to:

•

add to its obligations as managing member or surrender any right or power granted to it as managing member for the benefit of the non-managing members;

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reflect the admission, substitution or withdrawal of members or termination of OP in accordance with the terms of the OP Operating Agreement, and to amend the register in connection with such admission, substitution or withdrawal;

•

reflect a change of an inconsequential nature or that does not adversely affect the non-managing members in any material respect, or cure any ambiguity, correct or supplement any provisions of the OP Operating Agreement not inconsistent with law or with other provisions of the OP Operating Agreement, or make other changes concerning matters under the OP Operating Agreement that will not otherwise be inconsistent with law or the OP Operating Agreement;

•

satisfy any requirements, conditions or guidelines contained in any order, directive, opinion, ruling or regulation of a federal or state agency or contained in federal or state law;

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reflect changes that are reasonably necessary for us to maintain our status as a REIT or to satisfy REIT requirements;

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reflect the issuance of additional OP Units;

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make certain modifications to the manner in which capital accounts are adjusted, computed or maintained, or net income or net loss are allocated;

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set forth or amend the designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications or terms or conditions of redemption of any additional class or series of membership interest permitted to be issued under the OP Operating Agreement;

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modify, if OP is the surviving company in any Termination Transaction, certain provisions of the OP Operating Agreement to provide the holders of interests in such surviving company rights that are consistent with the OP Operating Agreement; or

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reflect any other modification as is reasonably necessary for the business or operations of OP or us, which does not violate the restrictions on the managing member described below.

Subject to certain exceptions, amendments that would, among other things, convert a non-managing member into a managing member (except in connection with a permitted transfer of the managing member’s interest), modify the limited liability of a member, adversely alter a member’s right to receive any distributions or allocations of profits or losses, adversely alter or modify the redemption rights of members and qualifying assignees (except as permitted in connection with a permitted Termination Transaction), or amend these restrictions must be approved by each member who would be adversely affected by such amendment; provided, however, that the consent of any individual member adversely affected shall not be required for any amendment or action that affects all members holding the same class or series of OP units on a uniform or pro rata basis, if approved by a majority of the members of such class or series.

Restrictions on the Managing Member’s Authority

The managing member may not take any action in contravention of an express prohibition or limitation contained in the OP Operating Agreement, including:

•

any action that would make it impossible to carry on the ordinary business of OP, except as otherwise provided in the OP Operating Agreement;

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admitting any person as a member, except as otherwise provided in the OP Operating Agreement;

•

perform any act that would subject a member to liability not contemplated in the OP Operating Agreement or under the Delaware Limited Liability Company Act; or

•

enter into any contract, mortgage loan or other agreement that expressly prohibits or restricts us or OP from performing our or its specific obligations in connection with a redemption of OP Units as described below or expressly prohibits or restricts the ability of a member to exercise its redemption rights in full without the written consent of such member.

In addition, without the consent of members (including us, the managing member and entities controlled by us or the managing member) holding a majority of OP units then held by the members (including us, the managing member and entities controlled by us or the managing member), entitled to vote on or consent to such matter, the managing member may not do any of the following, or enter into any transaction that would have the effect of the following, without the approval of our Board:

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terminate the OP Operating Agreement, except as explicitly permitted therein;

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transfer any portion of its membership interest or admit into the company any additional or successor managing member (other than to us or one of our wholly owned subsidiaries or in connection with a permitted Termination Transaction);

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voluntarily withdraw as managing member except in connection with a permitted transfer of its entire interest to an entity that will become the new managing member or in connection with a permitted Termination Transaction;

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make a general assignment for the benefit of creditors, appoint or acquiesce in the appointment of a custodian, receiver or trustee for all or any part of the assets of OP;

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institute any proceeding for bankruptcy by OP;

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undertake a merger or consolidation of OP with or into another person, or a conversion of OP into another entity, other than in connection with a Termination Transaction effected in accordance with the OP Operating Agreement; or

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effect a sale, lease, exchange or other transfer of all or substantially all of the assets of OP in a single transaction or a series of related transactions outside the ordinary course of OP’s business, other than in connection with a Termination Transaction.

Distributions to Holders of OP Units

The OP Operating Agreement requires that we cause OP to distribute quarterly all, or such portions as we may determine, of available cash generated by OP during such quarter to the holders of OP units in accordance with such holders’ respective percentage interests except that all payments received by OP from the management agreement will be distributed to us. We, in our sole and absolute discretion, may cause OP to distribute available cash to the holders of OP units on a more or less frequent basis than quarterly.

We will make reasonable efforts to distribute available cash to us, as managing member, in an amount sufficient to enable us to pay stockholder dividends that will satisfy our requirements for qualifying as a REIT and to avoid any federal income or excise tax liability for us

Upon the liquidation of OP, property shall be liquidated and distributed in the following order: (i) first, to the satisfaction of all of OP’s debts and liabilities other than holders of OP units, (ii) second, to the satisfaction of all of OP’s debts and liabilities to us, (iii) third, to the satisfaction of all of OP’s debts and liabilities to holders of OP units, and (iv) finally, the balance, if any, to the holders of OP units in accordance with their capital account balances, after giving effect to all contributions, distributions and allocations for all periods.

Redemption/Exchange Rights

A member or an assignee has the right, subject to any restrictions pursuant to any other agreement (including any lock-up agreement) between a member or an assignee and OP, to require OP to redeem part or all of its OP Units for cash based upon the fair market value of an equivalent number of shares of our common stock at the time of the redemption, determined in accordance with and subject to adjustment as provided in the OP Operating Agreement. Alternatively, we may elect to acquire those OP Units in exchange for shares of our common stock. Our acquisition will be on a one-for-one basis, subject to adjustment in the event of stock splits, stock dividends, distributions of warrants or stock rights, specified extraordinary distributions and similar events. Notwithstanding the foregoing, we are not required to redeem such member’s or assignee’s OP Units if our election to acquire such OP Units in exchange for shares of our Class A Common Stock would cause any person to violate the ownership limits or the other restrictions on ownership and transfer of our common stock, after giving effect to any waivers or modifications of such limits granted by our board of directors. With each redemption or exchange, we increase our percentage ownership interest in OP.

In addition, if our election to acquire OP Units tendered for redemption in exchange for shares of our common stock would cause any person to violate the restrictions on ownership and transfer of our stock and we are eligible to file a registration statement on Form S-3 under the Securities Act, then we may also elect, in our sole and absolute discretion, to redeem OP units with the proceeds from a public offering or private placement of our common stock. In the event we elect this option, we may require the other members to also elect whether or not to participate. Participating members will receive on the redemption date for each OP Unit (subject to adjustment) the net proceeds per share received in the public offering but will have a limited opportunity to withdraw their OP Units from the redemption immediately prior to the pricing of the public offering.

Issuance of Units, Stock or Other Securities

We, as the managing member of OP, have the power to cause OP to issue additional units of membership interest in one or more classes or series. These additional units of membership interest may include preferred membership units. Generally, we may issue additional shares of our stock, or rights, options, warrants or convertible or exchangeable securities having the right to subscribe for or purchase shares of our stock, only if we cause OP to issue to us membership interests or rights, options, warrants or convertible or exchangeable securities of OP having economic rights that are substantially similar to the securities that we have issued.

LTIP Units

We, as managing member of OP, may from time to time issue LTIP units, in one or more classes or series to persons or entities who provide services to OP, for such consideration as we, as managing member of OP, may determine to be appropriate. Except to the extent a capital contribution to OP is made with respect to a LTIP unit, each LTIP unit is intended to qualify as a “profits interest” in OP for tax purposes.

Subject to the provisions of the OP Operating Agreement, LTIP units shall be treated as OP units, with all of the rights, privileges and obligations attendant thereto. In particular, subject to the terms of any LTIP award or vesting agreement or by us, as managing member of OP, with respect to any particular class or series of LTIP units, a holder of LTIP units shall be entitled to transfer its vested LTIP units to the same extent, and subject to the same restrictions as holders of OP units are entitled to transfer their OP units under the OP Operating Agreement. Further, except as otherwise provided in the OP Operating Agreement, LTIP units rank pari passu with OP Units as to the payment of regular and special periodic or other distributions.

In addition, unless otherwise provided in an LTIP award, vesting agreement or by us, as managing member of OP, with respect to any particular class or series of LTIP units, a holder of LTIP units shall have the right, at its option, at any time to convert all or a portion of its vested LTIP units into OP units; provided that a holder may not exercise such right for less than the lesser of (x) 1,000 vested LTIP units and (y) all of the remaining vested LTIP units owned by such holder.

Capital Contributions

The OP Operating Agreement provides that the managing member may authorize the issuance of additional membership interests in exchange for such capital contributions, if any, as the managing member may approve. Under the OP Operating Agreement, we are generally obligated to contribute the net proceeds we receive from any offering of our shares of stock as additional capital to OP in exchange for additional OP Units.

The OP Operating Agreement provides that we may make additional capital contributions, including the contribution of property or assets, to OP in exchange for additional OP Units. If we contribute additional capital and receive additional OP Units in exchange for the capital contribution, our percentage interest in OP will be increased on a proportionate basis based on the amount of the additional capital contributions and the value of OP at the time of the contributions. In addition, if we contribute additional capital and receive additional OP Units for the capital contribution, the capital accounts of the members may be adjusted upward or downward to reflect any unrealized gain or loss attributable to the properties as if there were an actual sale of the properties at the fair market value thereof.

Preemptive Rights

Except to the extent expressly provided in the OP Operating Agreement or in any membership unit designation, no person or entity, including any member or assignee of OP, has any preemptive, preferential, participation or similar right or rights with to subscribe for or acquire any membership interests of OP.

Borrowing by OP

We, as the managing member of OP, may cause OP to borrow money and to issue and guarantee debt , whether or not secured by mortgage, deed of trust, pledge or other lien and, directly or indirectly, to acquire additional properties necessary, useful or desirable in connection with its business.

Tax Matters

We, as the managing member of OP, are the tax matters partner of OP, and we have the authority under the Internal Revenue Code to handle tax audits on behalf of OP. In addition, we have the authority to arrange for the preparation and filing of OP’s tax returns and to make tax elections under the Internal Revenue Code on behalf of OP.

Allocations of Net Income and Net Losses to Members

The net income or net loss of OP is generally allocated to the managing member and the non-managing members of OP in accordance with their respective ownership of OP Units except gross income and the gain of OP associated with the management agreement will be specially allocated to us. However, in some cases, gains or losses may be disproportionately allocated to members who have contributed property to or guaranteed debt of OP. The allocations described above are subject to special allocations relating to depreciation deductions and to compliance with the provisions of Sections 704(b) and 704(c) of the Code and the associated Treasury regulations.

Operations

We intend to cause the managing member of OP to manage OP in a manner that will enable us to maintain our qualification as a REIT and to minimize any U.S. federal income tax liability.

The OP Operating Agreement provides that OP will assume and pay when due, or reimburse us for payment of, all costs and expenses relating to the operations of, or for the benefit of, OP.

Change of Control and Termination Transactions

As managing member, we may not engage in, or cause or permit, a Termination Transaction, other than with the consent of members (other than us, the managing member and entities controlled by us or the managing member) holding a majority of all the outstanding OP Units held by all members (other than us, the managing member and entities controlled by us or the managing member) entitled to vote on or consent to such matter, unless the requirements discussed below are satisfied. A “Termination Transaction” means any direct or indirect transfer of all or any portion of our membership interest in OP or, if we are not the managing member, any direct or indirect transfer of our interest in the managing member in connection with, or any other occurrence of:

•

a merger, consolidation or other combination transaction involving us or the managing member;

•

a sale, lease, exchange or other transfer of all or substantially all of our assets not in the ordinary course of our business, whether in a single transaction or a series of related transactions;

•

a reclassification, recapitalization or similar change of our outstanding shares of our Class A Common Stock or Class B Common Stock (other than a change in par value, or from par value to no par value, or as a result of a stock split, stock dividend or similar subdivision);

•

the adoption of any plan of liquidation or dissolution of us or the managing member; or

•

a transfer of all or any portion of our membership interest in OP or, if we are not the managing member, any transfer of our interest in the managing member, other than certain permitted transfers to affiliated entities.

The consent of the non-managing members to a Termination Transaction is not required if:

(1) in connection with the Termination Transaction, each OP Unit is entitled to receive the “transaction consideration,” defined as the fair market value, at the time of the Termination Transaction, of an amount of cash, securities or other property equal to the product of:

•

the number of shares of our common stock into which each OP Unit is then exchangeable; and

•

the greatest amount of cash, securities or other property paid to the holder of one share of our common stock in consideration of such share in connection with the Termination Transaction;

•

provided that, if, in connection with the Termination Transaction, a purchase, tender or exchange offer is made to and accepted by the holders of a majority of the outstanding shares of our common stock, the transaction consideration will refer to the fair market value of the greatest amount of cash, securities or other property which such holder would have received had it exercised its redemption right and received shares of our common stock in exchange for its OP Units immediately prior to the expiration of such purchase, tender or exchange offer and had accepted such purchase, tender or exchange offer; or

(2) all of the following conditions are met: (i) substantially all of the assets directly or indirectly owned by OP prior to the announcement of the Termination Transaction are, immediately after the Termination Transaction, owned directly or indirectly by OP or another limited partnership or limited liability company which is the survivor of a merger, consolidation or combination of assets with OP, which we refer to as the “surviving company,” (ii) the surviving company is classified as a partnership for U.S. federal income tax purposes; (iii) the rights of such members with respect to the surviving company include:

(a) if we or our successor is a REIT with a single class of publicly traded common equity securities, the right to redeem their interests in the surviving company on terms substantially comparable to those under the OP Operating Agreement for either: (1) a number of such of REIT’s publicly traded common equity securities with a fair market value, as of the date of consummation of such Termination Transaction, equal to the transaction consideration referred to above, subject to anti-dilution adjustments, which we refer to as the “successor shares amount;” or (2) cash in an amount equal to the fair market value of the successor shares amount at the time of such redemption; or

(b) if we or our successor is not a REIT with a single class of publicly traded common equity securities, the right to redeem their interests in the surviving company for cash in an amount equal to the transaction consideration; or

(c) in any Termination Transaction that is a merger, consolidation or other combination with or into another person, immediately following the consummation of such Termination Transaction, the equity holders of the surviving entity are substantially identical to the shareholders of the Company prior to such transaction.

Term

The OP Operating Agreement will continue indefinitely unless OP is dissolved in accordance with the terms of the OP Operating Agreement or as otherwise provided by law.

Indemnification and Limitation of Liability

To the extent permitted by applicable law, the OP Operating Agreement indemnifies us, our directors, officers and employees, the managing member, officers and employees, employees of OP and any other persons whom the managing member may designate from and against any and all losses, claims, damages, liabilities, joint or several, expenses (including attorney’s fees and other legal fees and expenses), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative, or that relate to the operations of OP in which any indemnitee may be involved, or is threatened to be involved, as a party or otherwise unless:

•

it is established by a final judgment of a court of competent jurisdiction that the act or omission of the indemnitee was material and was committed in bad faith, constituted fraud or was a result of active and deliberate dishonesty on the part of the indemnitee;

•

the claim is brought by the indemnitee (other than to enforce the indemnitee’s rights to indemnification or advance of expenses);

•

the indemnitee received an improper personal benefit in money, property or services; or

•

in criminal proceedings, there are reasonable grounds to believe that the indemnitee’s act or omission was unlawful.

Registration Rights Agreement

In conjunction with the execution of the Contribution Agreement, we entered into a Registration Rights Agreement with Colony Capital, CC Holdings, New Colony Holdings, FHB LLC, CCH I, Mr. Saltzman and the other persons party to the Registration Rights Agreement from time to time. Under the Registration Rights Agreement, we are obligated to file a shelf registration statement under the Securities Act, registering the resale of (i) shares of the Company’s Class A Common Stock, and (ii) shares of the Company’s Class A Common Stock

issued or issuable upon conversion of Class B Common Stock or upon exchange of OP Units, in each case, issued upon the closing of the transactions pursuant to the Contribution Agreement. We have agreed to use commercially reasonable efforts to cause such registration statement to be declared effective by the SEC not later than the date of the closing under the Contribution Agreement.

To the extent that the initial registration statement does not cover all of the shares registrable pursuant to the Registration Rights Agreement, we also are obligated to file one or more additional shelf registration statements under the Securities Act, registering the resale of all other registrable shares. We have agreed to use commercially reasonable efforts to cause any such additional registration statement to be declared effective by the SEC as soon as reasonably practicable. In the case of any registrable shares subject to an earn-out, we must use commercially reasonable efforts to either include such securities on an existing registration statement by filing a post-effective amendment to such registration statement or file an additional registration statement registering such securities. We have agreed to use commercially reasonable efforts to cause such post-effective amendment or additional registration statement to be declared effective promptly following the date such securities are earned.

We have agreed to keep registration statements covering registrable shares continuously effective until the later of (i) six months following the fifth anniversary of the closing under the Contribution Agreement, and (ii) the holders of registrable shares hold, in the aggregate, registrable shares with an aggregate offering price of less than $75.0 million.

We will bear certain costs of registration, including, among other things, registration and filing fees, printing expenses, attorneys’ fees, accountants’ fees and other reasonable expenses.

We may suspend the use of a registration statement (which suspension shall not exceed more than 60 days at any one time or 90 days in any 365-day period) under certain circumstances, such as disclosing material non-public information at a time we determine not to be in our best interests.

CAH License Agreement

Pursuant to a trademark license agreement between OP, as licensor, and CAH Manager, as licensee, OP will grant to CAH a non-exclusive, non-transferable, perpetual (subject to termination as described below), revocable, royalty-free, and worldwide license to use the Colony Mark only in connection with engaging in debt and equity investments in North American residential properties and related operational activities. OP may terminate the agreement in the event of (i) CAH’s material and incurable breach (or, if the breach is curable, if such breach is uncured within a specified period), (ii) CAH’s bankruptcy or insolvency (or certain related proceedings), (iii) certain changes in control of CAH, or (iv) CAH’s discontinuing use of the Colony Mark for 12 consecutive months. Each party indemnifies the other for third party claims arising out of such party’s material breach of the agreement. CAH may not assign the agreement without the prior written consent of OP (which shall not be unreasonably withheld).

* * * * *

CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE COMBINATION

The following is a summary of certain U.S. federal income tax consequences of the Combination to us and to U.S. persons (as defined below) who hold shares of our common stock. The discussion is based upon the Internal Revenue Code, treasury regulations, court decisions, published positions of the Internal Revenue Service (the “ IRS ”) and other applicable authorities, all as in effect on the date hereof and all of which are subject to change or differing interpretations (possibly with retroactive effect). This summary does not address all of the U.S. federal income tax consequences that may be relevant to the Company or to particular stockholders. No ruling has been or will be obtained from the IRS regarding any matter relating to the Combination. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax aspects described below. This summary of U.S. federal income tax consequences is for general information only.

For purposes of this discussion, a U.S. person is a beneficial owner of our common stock who for U.S. federal income tax purposes is:

•

a citizen or resident of the United States;

•

a corporation, or an entity treated as a corporation, created or organized in or under the laws of the United States or any state or political subdivision thereof;

•

a trust that (1) is subject to (A) the primary supervision of a court within the United States and (B) the authority of one or more United States persons to control all substantial decisions of the trust or (2) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person; or

•

an estate that is subject to U.S. federal income tax on its income regardless of its source.

Stockholders are urged to consult their tax advisers regarding the U.S. federal income tax consequences of the Combination, as well as the effects of state, local and non-U.S. tax laws, including possible changes in tax law.

In General

The formation of OP as part of the Combination is intended to constitute, for U.S. federal income tax purposes, a tax-deferred contribution by us to a partnership. As a result, neither we nor holders of our common stock, in respect of those common stock holdings, are expected to recognize significant gain or loss for U.S. federal income tax purposes as a result of the Combination. In addition, the Combination is not expected to adversely affect our ability to continue to qualify as a REIT. Notwithstanding the foregoing, under the “investment company” rules under Section 721 of the Internal Revenue Code, the Combination generally would not qualify for tax-deferred treatment to the extent that it is treated under such rules as a contribution by us to an “investment company.” The investment company rules are complex, and there also is uncertainty regarding other aspects of the U.S. federal tax treatment of the Combination. If the Combination failed to qualify for tax-deferred treatment under the investment company rules or otherwise, we generally would recognize taxable gain for U.S. federal income tax purposes, possibly up to the extent that the fair market value of our assets immediately prior to the Combination exceeded their adjusted tax basis. If and to the extent that we were unable to make distributions for the year in which the Combination occurred at least equal to our taxable income (including our net long term capital gain and also any taxable income or gain recognized in connection with the Combination), we would be subject to U.S. federal income tax (and potentially excise tax) on any undistributed amounts and may also be unable to satisfy the distribution requirements applicable to REITs.

In addition, as a general matter, as a REIT, we generally will be unable to conduct directly a portion of the third-party management business of Colony Capital that we are acquiring in connection with the Combination. We therefore intend to conduct those operations through one or more taxable REIT subsidiaries (each, a “ TRS ”). A TRS is subject to regular corporate income tax on its net income. As a result, the net income generated by those operations generally will be subject to regular corporate income tax. Moreover, as a REIT, stock and other securities of a TRS constitute nonqualifying assets for purposes of the 75% asset test applicable to REITs, and, thus, no more than 25% of our total gross assets may be comprised of the stock or other securities of one or more taxable REIT subsidiaries and other nonqualifying assets (including goodwill and similar assets we are acquiring as a result of the Combination). In addition, dividends payable by taxable REIT subsidiaries constitute qualifying income for purposes of the 95% gross income test applicable to REITs, but nonqualifying income for purposes of the 75% gross income test applicable to REITs. Accordingly, if the value of the business we are acquiring in connection with the Combination and the income generated thereby increases relative to the value of our other, REIT-compliant assets and the income produced thereby, we may fail to satisfy one or more of the requirements applicable to REITs.

Certain Tax Aspects of OP and any Subsidiary Partnerships

Substantially all of our investments are expected to be held indirectly through OP. In general, partnerships are “pass-through” entities that are not subject to U.S. federal income tax. Rather, partners are allocated their shares of the items of income, gain, loss, deduction and credit of a partnership, and are potentially subject to tax on these items, without regard to whether the partners receive a distribution from the partnership. Accordingly, we will include in our income our share of the foregoing partnership items in the computation of our REIT taxable income. Moreover, for purposes of the REIT asset and gross income tests, we will include our proportionate share of assets held by, and the gross income of, OP and subsidiaries of OP that are partnerships (“ Subsidiary Partnerships ”).

Our direct and indirect investment in partnerships involves special tax considerations, including the possibility of a challenge by the IRS of the tax status of any of the Subsidiary Partnerships as a partnership for U.S. federal income tax purposes. If any of these entities were treated as an association for U.S. federal income tax purposes, it would be taxable as a corporation and therefore could be subject to an entity-level tax on its income. In such a situation, the character of our assets and items of gross income would change and could preclude us from satisfying the REIT asset tests and gross income tests, and in turn could prevent us from qualifying as a REIT unless we are eligible for relief from the violation pursuant to relief provisions described above. In addition, any change in the status of any of the Subsidiary Partnerships for tax purposes might be treated as a taxable event, in which case we might incur a tax liability without any related cash distributions.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as of February 17, 2015, regarding the beneficial ownership of (i) our common stock, (ii) our Series A Cumulative Redeemable Preferred Stock, and (iii) our Series B Cumulative Redeemable Preferred Stock by:

•

each of our directors;

•

each of our executive officers; and

•

all of our directors, director nominees and executive officers as a group.

The SEC has defined “beneficial ownership” of a security to mean the possession, directly or indirectly, of voting power and/or dispositive power with respect to such security. In accordance with SEC rules, each listed person’s beneficial ownership includes:

•

all shares the investor actually owns beneficially or of record;

•

all shares over which the investor has or shares voting or dispositive control (such as in the capacity as a general partner of an investment fund); and

•

all shares the investor has the right to acquire within 60 days (such as shares of restricted common stock that are currently vested or which are scheduled to vest within 60 days, the exercise of any option, warrant or right, or the power to revoke a trust, discretionary account or similar arrangement).

Unless otherwise indicated, the address of each named person is c/o Colony Financial, Inc., 2450 Broadway, 6th Floor, Santa Monica, California 90404. The percentages below are based on 110,251,922 shares outstanding as of February 17, 2015. No shares beneficially owned by any executive officer, director or director nominee have been pledged as security.

Additionally, to our knowledge and based upon information available to us in securities filings made by our stockholders with the SEC, the following table sets forth certain information regarding the beneficial owners of more than 5% of our shares of common stock as of February 17, 2015:


	Common Stock						Preferred Stock
Beneficial Owner	Shares Owned			Percentage of Class			Shares Owned		Percentage of Class
Executive Officers and Directors
Thomas J. Barrack, Jr.		526,091	⁽¹⁾⁽²⁾		*			—		—
Richard B. Saltzman		333,833	⁽²⁾		*			—		—
Ronald M. Sanders		90,249	⁽²⁾		*			—		—
Darren J. Tangen		146,389	⁽²⁾		*			—		—
Kevin P. Traenkle		193,727	⁽²⁾		*			—		—
Nancy A. Curtin		3,984	⁽²⁾		*			—		—
George G. C. Parker		12,787	⁽²⁾		*			—		—
John A. Somers		15,287	⁽²⁾		*			500		*
John L. Steffens		20,787	⁽²⁾		*			—		—

All directors and executive officers as a group (9 persons)		1,343,634			1.22	%		500		*


Greater than Five Percent Beneficial Owners
EJF Capital LLC ⁽³⁾	10,794,916	9.8	%	—	—
BlackRock, Inc. ⁽⁴⁾	9,024,566	8.2	%	—	—
The Vanguard Group, Inc. ⁽⁵⁾	6,732,909	6.1	%	—	—
SAB Capital Advisors, L.L.C. ⁽⁶⁾	6,060,980	5.5	%	—	—

*	Represents less than 1.0% of the common stock outstanding as of February 17, 2015.

(1)

Represents shares held in a family trust of which Mr. Barrack is trustee, and shares directly owned by our Manager. Colony Capital is the managing member of our Manager, and Mr. Barrack is the sole managing member of Colony Capital. Accordingly, Mr. Barrack may be deemed to beneficially own all of the reported securities. This filing shall not be deemed an admission that Mr. Barrack is the beneficial owner of any securities beneficially owned by our Manager except to the extent of his pecuniary interest therein.

(2)	Includes shares of restricted common stock subject to time vesting.

(3)

Based on information provided in a Schedule 13G/A filed on February 17, 2015 jointly by EJF Capital LLC, Emanuel J. Friedman, EJF Debt Opportunities Master Fund, L.P., EJF Debt Opportunities GP, LLC and other investment funds and their general partners of which EJF Capital LLC is sole member and manager, EJF Capital LLC and Emanuel J. Friedman have shared voting and dispositive power with respect to 10,794,916 shares of our common stock. According to the Schedule 13G/A, EJF Capital LLC is the sole member and manager of the general partner of various investment funds that hold shares of our common stock and principal amounts of our 3.875% Convertible Senior Notes (“Notes”), including EJF Debt Opportunities Master Fund, L.P., together with its general partner, EJF Debt Opportunities GP, LLC, which have shared voting and dispositive power with respect to 6,499,755 of these shares. EJF Capital LLC therefore may be deemed to share beneficial ownership with those entities as well as with respect to shares in a managed account for which EJF Capital LLC serves as investment manager. In addition, according to the Schedule 13G/A, Emanuel J. Friedman is the controlling member of EJF Capital LLC and therefore may be deemed to share beneficial ownership of the shares of common stock and Notes with respect to which EJF Capital LLC may share beneficial ownership. The Schedule 13G/A indicates that due to the operation of the share ownership limits contained in our charter, certain of the Notes with respect to which EJF Capital LLC shares beneficial ownership are not currently convertible into shares of our common stock and are therefore not included in the total number of shares reported. The address of EJF Capital LLC, Emanuel J. Friedman and these various investment funds and their general partners, as reported by it in the Schedule 13G/A, is 2107 Wilson Boulevard, Suite 410, Arlington, VA 22201.

(4)

Based on information provided in a Schedule 13G/A filed on January 23, 2015, BlackRock, Inc. has sole voting power with respect to 8,776,321 of these shares and sole dispositive power with respect to 9,024,566 of these shares. The address of BlackRock, Inc., as reported by it in the Schedule 13G/A, is 55 East 52 ^nd Street, New York, NY 10022.

(5)

Based on information provided in a Schedule 13G/A filed on February 11, 2015, The Vanguard Group, Inc. has sole voting power with respect to 153,095 of these shares, sole dispositive power with respect to 6,589,514 of these shares and shared dispositive power with respect to 143,395 of these shares. The address of The Vanguard Group, Inc., as reported by it in the Schedule 13G/A, is 100 Vanguard Blvd., Malvern, PA 19355.

(6)

Based on information provided in a Schedule 13G/A filed on February 17, 2015 jointly by SAB Capital Advisors, L.L.C., SAB Capital Management, L.P., SAB Capital Management, L.L.C. and Scott A. Bommer, each of SAB Capital Advisors, L.L.C., SAB Capital Management, L.P., SAB Capital Management, L.L.C. and Scott A. Bommer has sole voting power and sole dispositive power with respect to 0 shares of our common stock and shared voting power and shared dispositive power with respect to 6,060,980 shares of our common stock. The address of each of SAB Capital Advisors, L.L.C., SAB Capital Management, L.P., SAB Capital Management, L.L.C. and Scott A. Bommer is 767 Fifth Avenue, 44th Floor, New York, New York 10153.

* * * * *

Exhibit 99.2

FOR IMMEDIATE RELEASE

Colony Financial, Inc. Completes Combination with Colony Capital, LLC to Form Colony Capital, Inc.

Los Angeles, April 2, 2015—Colony Financial, Inc. (NYSE: CLNY) (the “Company”) announced today that it completed the combination with Colony Capital, LLC, the parent company of its manager, including the contribution of substantially all of Colony Capital, LLC’s real estate and investment management business and operations. The transaction was approved by an overwhelming majority of its shareholders at the Special Meeting on March 31, 2015 in accord with the prior approval and recommendation of a special committee comprised of independent and disinterested members of CLNY’s board of directors.

As a result of the transaction, the Company, which has been renamed Colony Capital, Inc., becomes an internally-managed real estate and investment management company with more than 300 employees in 14 offices around the globe. The Company will continue to be listed as a publicly-traded real estate investment trust on the New York Stock Exchange under the same ticker symbol, “CLNY”.

The Company will now hold and conduct Colony Capital’s real estate and investment management business and operations. The transaction included the formation of an umbrella partnership real estate investment trust (UPREIT) with a subsidiary operating partnership that holds all the assets and directly or indirectly conducts substantially all the business of the Company. The UPREIT structure is tax efficient and provides the Company with more competitive options when making investments. While the Company continues to hold its significant ownership stake in Colony American Homes (“CAH”) and will receive certain cost reimbursements under a transitional services agreement with CAH, it will not acquire Colony Capital, LLC’s ownership interest in CAH or receive management fees from CAH due to the internalization of CAH’s management in November 2014.

The combined company will be led by Colony Capital’s key professionals, including Executive Chairman Thomas J. Barrack, Jr. and Chief Executive Officer Richard B. Saltzman, who have both entered into five-year employment agreements with the Company.

“This combination allows Colony Capital to expand its unique global culture and brand by utilizing its strong balance sheet to create bespoke investment products and platforms in real assets and at opportunistic points in cycles and geographies,” Mr. Barrack said.

“The transaction is seamless for Colony’s employees,” Mr. Saltzman said. “It is business as usual with minimal integration logistics as everyone already works together as a team, albeit previously across separate legal entities.”

Mr. Saltzman noted that the Company plans to continue Colony Capital’s role of forming the general partner or sponsor of private equity funds and other investment vehicles, allowing the Company to capture fees and carried interest from the funds and vehicles it sponsors and manages. Furthermore, the Company intends to invest primarily through these sponsor positions prospectively as opposed to just directly in assets, which the Company expects to generate more accretive economics for its shareholders while simultaneously providing substantially greater alignment for limited partners and other investors in those funds and vehicles.

About Colony Capital, Inc.

Colony Capital, Inc. is a leading global real estate and investment management firm headquartered in Los Angeles, California with 14 offices in 10 countries and more than 300 employees. Prior to its combination with Colony Financial, Inc. in 2015, Colony Capital, LLC sponsored $24 billion of equity across a variety of distinct funds and investment vehicles that collectively invested over $60 billion of total capital. The Company targets attractive risk-adjusted investment returns and its portfolio is primarily composed of: (i) general partner interests in Company sponsored private equity funds and vehicles; (ii) real estate equity; and (iii) real estate and real estate-related debt. The Company has elected to be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes. For more information, visit www.colonyinc.com.

Advisors

Morgan Stanley & Co. LLC acted as financial advisor to the Special Committee of the Board of Directors of the Company in connection with the transaction. Wachtell, Lipton, Rosen & Katz acted as legal advisor to the Special Committee of the Board of Directors in connection with the transaction. Hogan Lovells acted as legal advisor to the Company in connection with the transaction. Goldman, Sachs & Co. acted as financial advisor to Colony Capital, LLC in connection with the transaction. Skadden, Arps, Slate, Meagher & Flom LLP acted as legal advisor to Colony Capital, LLC in connection with the transaction.

Cautionary Statement Regarding Forward-Looking Statements

Neither the Company nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements speak only as of the date of this communication. The Company is not under any duty to update any of these forward-looking statements after the date of this communication, nor to conform the Company’s prior statements to actual results or revised expectations, and the Company does not intend to do so.

Contacts

Investor Contact:

Addo Communications, Inc.

Lasse Glassen

310-829-5400

lasseg@addocommunications.com

Media Contact:

Owen Blicksilver P.R., Inc.

Caroline Luz

203-656-2829

caroline@blicksilverpr.com

Exhibit 99.3

Unaudited Pro Forma Financial Information

On December 18, 2014, certain subsidiaries of Colony Capital, Inc. (formerly known as Colony Financial, Inc.) (the “Company”), including a U.S. light industrial co-investment partnership formed and managed by the Company (“ColFin Industrial Partnership”), completed the acquisition of a portfolio of light industrial real estate assets (the “Light Industrial Portfolio”) and associated operating platform (“Operating Platform”) from Cobalt Capital Partners, L.P. and its affiliates (the “Acquisition”), by purchase agreements executed on November 18, 2014 and previously disclosed under Item 1.01 of the Company’s Current Report on Form 8-K filed on November 20, 2014. The Light Industrial Portfolio consists of 256 light industrial assets totaling 298 buildings, approximately 30 million square feet and one vacant land parcel. Total consideration paid for the Light Industrial Portfolio was $1.595 billion, which was paid in cash (including proceeds from the Financing). The purchase price for the Operating Platform was $20 million, which was 50% paid in cash and the balance through a note in the aggregate principal amount of $10 million (the “Unsecured Note”) issued to Cobalt Capital Management, L.P.

The following unaudited pro forma consolidated financial information has been prepared in accordance with Article 11 of Regulation S-X to give effect to the Acquisition as if it had occurred on January 1, 2014. The unaudited pro forma financial information, including the notes thereto, should be read in conjunction with the Company’s historical financial statements and accompanying notes for the applicable periods included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

The unaudited pro forma consolidated statement of operations for the year ended December 31, 2014 assumes the Acquisition had occurred on January 1, 2014 using the estimates and assumptions set forth in the accompanying notes. The unaudited pro forma financial information is for information purposes only and is not necessarily indicative of the consolidated results of operations of the Company that would have been achieved if the Acquisition had been completed on the date indicated, nor is it necessarily indicative of the results of operations that may occur in the future.

The unaudited pro forma consolidated financial information has been prepared using the acquisition method of accounting for business combinations under accounting principles generally accepted in the United States, or GAAP. The unaudited pro forma adjustments related to the Acquisition are based upon the purchase price allocation using estimates of fair value of the assets acquired and liabilities assumed in connection with the Acquisition. The purchase price allocation may be subject to retrospective adjustment during the measurement period, not to exceed one year, based upon new information obtained about facts and circumstances that existed as of the date of Acquisition.

The unaudited pro forma consolidated financial information does not reflect cost savings or synergies that we may realize after the completion of the Acquisition, nor any non-recurring charges related to integration activity that may be incurred by the Company in connection with the Acquisition.

COLONY CAPITAL, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

For the year ended December 31, 2014

(In thousands, except per share data)


	Historical Colony Capital, Inc.			Historical Operations of the Acquisition		Pro Forma Adjustments			Combined Pro Forma Results
	(a)			(b)
Income
Interest income	$	204,361		$	—	$	—		$	204,361
Rental income and tenant reimbursements		20,962			129,250		(2,960	) (c)		147,252
Equity in income of unconsolidated joint ventures		73,829			—		—			73,829
Other income		1,497			—		—			1,497

Total income		300,649			129,250		(2,960	)		426,939

Expenses
Management fees		43,133			—		—			43,133
Investment and servicing expenses		5,811			—		—			5,811
Transaction costs		21,096			—		(7,405	) (d)		13,691
Interest expense		48,365			—		33,759	(e)		82,124
Property operating expenses		5,563			47,718		—			53,281
Depreciation and amortization		9,177			—		59,489	(f)		68,666
Administrative expenses		11,408			5,051		—			16,459

Total expenses		144,553			52,769		85,843			283,165

Other gain, net		1,216			—		—			1,216

Income before income taxes		157,312			76,481		(88,803	)		144,990
Income tax benefit		(2,399	)		—		—			(2,399	)

Net income		159,711			76,481		(88,803	)		147,389
Net income (loss) attributable to noncontrolling interests		36,562			—		(5,876	) (g)		30,686

Net income attributable to Colony Capital, Inc.		123,149			76,481		(82,927	)		116,703
Preferred dividends		24,870			—		—			24,870

Net income attributable to common stockholders	$	98,279		$	76,481	$	(82,927	)	$	91,833

Net income per common share:
Basic	$	1.01							$	0.94	(h)

Diluted	$	1.01							$	0.94	(h)

Weighted average number of common shares outstanding:
Basic		96,694								96,694	(h)

Diluted		96,699								96,699	(h)

See accompanying notes to unaudited pro forma consolidated financial information

COLONY CAPITAL, INC.

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

Note 1—Consideration Transferred Related to the Acquisition

The following table summarizes the components of and consideration transferred for the Acquisition and related costs:


(In thousands)
Light Industrial Portfolio	$	1,595,315
Operating Platform		20,000

Total consideration		1,615,315
Transaction costs and deferred financing costs		27,141

	$	1,642,456

The sources of payments for the Acquisition and related costs were as follows:


(In thousands)
Cash on hand	$	213,493
Line of credit		124,000
Mortgage financing		1,088,500
Unsecured Note		10,000
Contributions by noncontrolling interests		206,463

	$	1,642,456

In connection with the closing of the Acquisition on December 18, 2014, the Company drew approximately $1.09 billion of approximately $1.13 billion available pursuant to the Loan Agreement. The remaining amount is available for future capital and leasing expenditures.

The Unsecured Note was issued to Cobalt Capital Management, L.P., an affiliate of Cobalt Capital Partners, L.P. and a service provider that will continue to manage the Light Industrial Portfolio and its day-to-day operations. The Unsecured Note will mature on the third anniversary of the date of acquisition and one-third of the initial principal amount of the Unsecured Note is required to be repaid on each of the first, second and third anniversaries of the date of acquisition (each, a “Payment Date”). Principal under the Unsecured Note shall be paid in either (a) shares of the Company’s common stock with a reference price of $24.221; provided that if on any Payment Date, the Company is unable to deliver shares that are registrable pursuant to a registration rights agreement or that can be sold without restriction, in lieu of such shares, the Company shall deliver to the holder of the Unsecured Note either (A) (i) cash in an amount equal to the then value of 40% of the aggregate number of shares that would have been delivered and (ii) 60% of the number of shares that would have been delivered or (B) cash in amount equal to the then value of the shares that would have otherwise been issuable on such date, or (b) units of the Company’s to-be-formed operating partnership which are exchangeable for shares of the Company’s common stock.

In connection with the closing of the Acquisition, the limited partners of ColFin Industrial Partnership contributed approximately $206.5 million.

The following table reflects the allocation of the purchase price to the assets acquired and liabilities assumed with estimated remaining useful lives of the tangible and intangible assets and liabilities:


(Amounts in thousands)	Purchase Price Allocation			Estimated Useful Life (in weighted average years)
Land	$	256,491			n/a
Buildings and improvements		1,232,882			36
Tenant improvements		23,961			6
In-place lease values		35,591			5
Above-market lease values		23,143			5
Deferred leasing costs		33,410			6
Goodwill		20,000			n/a
Below-market lease values		(9,992	)		5
Above-market ground lease obligations		(171	)		30

Total consideration	$	1,615,315

Note 2—Unaudited Pro Forma Adjustments

(a)

Derived from the Company’s consolidated statement of operations for the year ended December 31, 2014.

(b)

Reflects the historical unaudited gross operating income and direct operating expenses of the Light Industrial Portfolio and the Operating Platform for the period from January 1, 2014 to December 17, 2014.

(c)

Represents straight-line amortization of the above- and below-market lease values over the estimated weighted average remaining non-cancelable term of the leases of 56 months for above market leases and 65 months for below market leases.

(d)

Reflects adjustment to remove non-recurring transaction fees and costs related to the Acquisition and included in the Company’s historical operating results for the year ended December 31, 2014.

(e)

Represents interest expense in connection with debt financing obtained in connection with the acquisition. The amount consists of (i) contractual interest expense, administration fee of 0.05% and amortization of approximately $20.5 million of deferred financing costs related to the mortgage financing over the expected fully-extended term of 5 years; (ii) interest expense associated with $124 million borrowed on the Company’s line of credit at closing of the acquisition, net of reduction in unused commitment fees; and (iii) interest expense associated with the Unsecured Note issued to seller, which interest is payable in an amount equivalent to dividends paid on shares that would have been due had the seller held shares of the Company’s common stock in lieu of the note payable.


(In thousands)	January 1, 2014 through Dec 17, 2014
Interest on mortgage financing:
Contractual interest	$	25,521
Administrative fee		531
Amortization of deferred financing costs		3,929

		29,981

Interest on line of credit draw:
Contractual interest		3,814
Reduction of unused commitment fee		(605	)

		3,209

Interest on deferred purchase note:
Contractual interest		569

Total interest expense	$	33,759

A one-eighth percentage point increase or decrease in the 1-month LIBOR would result in a $1.5 million increase or decrease in interest expense for the period from January 1, 2014 to December 17, 2014.

(f)

Represents depreciation and amortization expense adjustment based on the allocation of the purchase price. Depreciation expense is calculated using the straight-line method over the estimated useful lives of the assets specified in Note 1.

(g)

Represents net loss attributable to noncontrolling interests calculated at 37% of operating results of ColFin Industrial Partnership, based on the Limited Partners’ interest in the ColFin Industrial Partnership as of December 31, 2014.

(h)

The following table presents the as reported and pro forma basic and diluted earnings per share after giving effect to the pro forma adjustments to the statements of operations:


	Year Ended December 31, 2014
(In thousands, except per share data)	As Reported			Pro Forma
Numerator:
Net income attributable to common stockholders	$	98,279		$	91,833
Net income allocated to participating securities (nonvested shares)		(990	)		(990	)

Numerator for basic and diluted net income allocated to common stockholders		97,289			90,843
Interest expense attributable to convertible senior notes		—			—

Numerator for diluted net income allocated to common stockholders	$	97,289		$	90,843

Denominator:
Basic weighted average number of common shares outstanding		96,694			96,694
Diluted weighted average number of common shares outstanding ⁽¹⁾		96,699			96,699
Earnings per share:
Net income attributable to common stockholders per share–basic	$	1.01		$	0.94

Net income attributable to common stockholders per share–diluted	$	1.01		$	0.94

(1)	Excluded from the calculation of pro forma diluted income per share for both periods presented is the effect of common shares issuable for the repayment of the Unsecured Note, as their inclusion would be antidilutive.