VESTING AGREEMENT


Name of Grantee:  _____________________
No. of Units: ________________________, subject to increase upon the issuance of
any Overallotment IPO Shares as described below
Grant Date: _____________ __, 200_
Final Acceptance Date: _____________ __, 200_



         Pursuant to the Operating Agreement, dated as of [______________], as
amended through the date hereof (the "Operating Agreement"), of NRF Employee,
LLC, a Delaware limited liability company (the "Company"), the Company hereby
grants to the Grantee named above Units (as defined in the Operating Agreement)
having the rights, voting powers, restrictions, limitations as to distributions,
qualifications and terms and conditions of redemption and conversion set forth
herein and in the Operating Agreement. Upon acceptance of this Vesting Agreement
(this "Agreement"), the Grantee shall receive the number of Units specified
above, subject to the restrictions and conditions set forth herein and in the
Operating Agreement. In addition, pursuant to this Agreement, upon each issuance
of Overallotment IPO Shares (as defined in the NorthStar Realty Finance Corp.
2004 Omnibus Stock Incentive Plan (the "Plan")), the Grantee shall receive an
additional number of Units equal to __% of the number of such Overallotment IPO
Shares, subject to the restrictions and conditions set forth herein and in the
Operating Agreement. The Units granted herein are being granted in connection
with the issuance of the Initial LTIP Units (as defined in the Operating
Agreement) from NorthStar Realty Finance Limited Partnership, a Delaware limited
partnership (the "Partnership"), to the Company as an Other Award pursuant to
the Plan and the LTIP Unit Vesting Agreement, dated as of [________], by and
between the Partnership and the Company (the "LTIP Unit Vesting Agreement").

         1.    Acceptance of Agreement. The Grantee shall have no rights with
respect to this Agreement unless it has accepted this Agreement prior to the
close of business on the Final Acceptance Date specified above by (i) signing
and delivering to the Company a copy of this Agreement and (ii) unless the
Grantee is already a Member (as defined in the Operating Agreement), signing, as
a Member, and delivering to the Company a counterpart signature page to the
Operating Agreement (attached hereto as Annex A). Upon acceptance of this
Agreement by the Grantee and any automatic grant of Units under this Agreement
as a result of the issuance of any Overallotment IPO Shares, the Operating
Agreement shall be amended to reflect the issuance to the Grantee of the Units
so accepted or automatically granted and the Company shall deliver to the
Grantee a certificate of the Company certifying the number of Units then issued
to the Grantee. Thereupon, the Grantee shall have all the rights of a Member of
the Company with respect to the number of Units then issued to the Grantee, as
set forth in the Operating Agreement, subject, however, to the restrictions and
conditions specified in Section 2 below.






         2.    Restrictions and Conditions.

               (a)    The records of the Company evidencing the Units granted
herein shall bear an appropriate legend, as determined by the Company in its
sole discretion, to the effect that such Units are subject to restrictions as
set forth herein and in the Operating Agreement.

               (b)    Units granted herein may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of by the Grantee prior
to vesting.

               (c)    In the event of the Grantee's termination of employment
with, cessation of consulting relationship with or cessation of service to
NorthStar Realty Finance Corp. ("NRFC") and its Subsidiaries (as defined in the
Plan) for any reason, the Units that have not vested at that time will be
forfeited to the Company without payment of any consideration by the Company,
and neither the Grantee nor any of his successors, heirs, assigns, or personal
representatives will thereafter have any further rights or interests in such
Units. In the event Grantee becomes a consultant, advisor or Non-Employee
Director (as such term is defined in the Plan), such change in status shall not
be deemed a termination of employment or service with the Company at the time of
such change in status.

         3.    Vesting of Units. The restrictions and conditions in Paragraph 2
of this Agreement shall lapse and the Units granted herein shall vest as to
1/12th of the Units granted herein on the [insert the day of the Grant Date] day
of each [insert month that is three months after the Grant Date], [insert month
that is six months after the Grant Date], [insert month that is nine months
after the Grant Date] and [insert month of the Grant Date] beginning [insert the
date that is three months after the Grant Date].

         4.    Acceleration of Vesting in Special Circumstances. If a Change of
Control (as defined in the Plan) occurs, any restrictions and conditions on all
Units subject to this Agreement shall be deemed waived by the Company and all
Units granted hereby shall automatically become fully vested.

         5.    Distributions. Distributions on the Units shall be paid currently
to the Grantee in accordance with the terms of the Operating Agreement.

         6.    Covenants, Representation and Warranties. The Grantee hereby
makes the covenants, representations and warranties and set forth on Annex B
attached hereto as of the date of acceptance of this Agreement and the date of
each automatic grant of additional Units under this Agreement after such date.
All of such covenants, warranties and representations shall survive the
execution and delivery of this Agreement by the Grantee. The Grantee shall
immediately notify the Company upon discovering that any of the representations
or warranties set forth on Annex B were false when made or have, as a result of
changes in circumstances, become false. The Grantee acknowledges and agrees that
as required by the LTIP Unit Vesting Agreement, the covenants, representations
and warranties set forth on Annex B are also made specifically for the benefit
of the Partnership and NRFC, who may rely on such covenants, representations and
warranties as if they were parties hereto.

         7.    Transferability. This Agreement is personal to the Grantee, is
non-assignable and is not transferable in any manner, by operation of law or
otherwise.



                                       2





         8.    Amendment. The Grantee acknowledges that the Plan may be amended
or discontinued in accordance with Section 12 thereof and that the LTIP Unit
Vesting Agreement may be amended or canceled by the Administrator of the Plan,
on behalf of the Partnership, for the purpose of satisfying changes in law or
for any other lawful purpose, provided that no such action shall impair the
Company's rights under the LTIP Unit Vesting Agreement without the Company's
written consent. The Grantee further acknowledges that this Agreement may be
amended or canceled by the Company for the purpose of satisfying changes in law
or for any other lawful purpose, provided that no such action shall impair the
Grantee's rights under this Agreement without the Grantee's written consent.

         9.    No Obligation to Continue Employment. Neither the Company, the
Partnership, NRFC nor any subsidiary of any of them is obligated by or as a
result of the Plan or this Agreement to continue to have the Grantee provide
services to it or to continue the Grantee in employment and neither the Plan nor
this Agreement shall interfere in any way with the right of the Company, the
Partnership, NRFC or any subsidiary of any of them to terminate its relationship
with the Grantee or the employment of the Grantee at any time.

         10.   Notices. Notices hereunder shall be mailed or delivered to the
Company at its principal place of business and shall be mailed or delivered to
the Grantee at the address on file with the Company or, in either case, at such
other address as one party may subsequently furnish to the other party in
writing.

         11.   Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, applied without regard to
conflict of law principles. The parties hereto agree that any action or
proceeding arising directly, indirectly or otherwise in connection with, out of,
related to or from this Agreement, any breach hereof or any action covered
hereby, shall be resolved within the State of New York and the parties hereto
consent and submit to the jurisdiction of the federal and state courts located
within the City of New York, New York. The parties hereto further agree that any
such action or proceeding brought by either party to enforce any right, assert
any claim, obtain any relief whatsoever in connection with this Agreement shall
be brought by such party exclusively in federal or state courts located within
the State of New York.

                                      NRF EMPLOYEE, LLC

                                      By:   NorthStar Realty Finance Limited
                                            Partnership, its manager

                                      By:   NorthStar Realty Finance Corp., its
                                            general partner

                                            By:_________________________________
                                               Name:
                                               Title:









                                       3






The foregoing Agreement is hereby accepted and the terms and conditions thereof
hereby agreed to by the Grantee.



Dated:___________________________      _____________________________________________________
                                       Name:


                                       Grantee's address:

                                       _________________________________________

                                       _________________________________________

                                       _________________________________________

                                       _________________________________________



















                                     ANNEX A
                                     -------

                                NRF EMPLOYEE, LLC

                               OPERATING AGREEMENT

                              MEMBER SIGNATURE PAGE

         The undersigned, desiring to become a Member of NRF Employee, LLC, a
Delaware limited liability company (the "Company"), hereby becomes a party to
the Operating Agreement of the Company (as amended or restated, the "Operating
Agreement"), to which NorthStar Realty Finance Limited Partnership, a Delaware
limited partnership, is a party as the Manager. The undersigned hereby agrees to
all the provisions of the Operating Agreement, and agrees that this signature
page may be attached to any counterpart copy of the Operating Agreement.

                                       MEMBER
                                       ------


                                       _________________________________________
                                       Name:
                                       Date:


           Address of Member:          _________________________________________

                                       _________________________________________




















                                     ANNEX B
                                     -------

               GRANTEE'S COVENANTS, REPRESENTATIONS AND WARRANTIES



         The Grantee hereby represents, warrants and covenants as follows:

               (a)    The Grantee has received and had an opportunity to review
the following documents (the "Background Documents"):

                      (i)    NRFC's latest Annual Report to Stockholders that
         has been provided to stockholders after NRFC's initial public
         offering, if available;

                      (ii)   NRFC's Proxy Statement for its most recent Annual
         Meeting of Stockholders following NRFC's initial public offering, if
         available;

                      (iii)  NRFC's Report on Form 10-K for the fiscal year most
         recently ended following NRFC's initial public offering, if available;

                      (iv)   If any of the documents described in clauses (i) -
         (iii) above is not available, NRFC's Registration Statement on Form
         S-11 registering NRFC's initial public offering of its common stock;

                      (v)    NRFC's Form 10-Q for the most recently ended
         quarter if one has been filed by NRFC with the Securities and Exchange
         Commission since the filing of the Form 10-K described in clause (iii)
         above or, if a Form 10-K has not been filed by NRFC, since the filing
         of the Form S-11 described in clause (iv) above;

                      (vi)   Each of NRFC's Current Report(s) on Form 8-K, if
         any, filed since the later of the end of the fiscal year most recently
         ended for which a Form 10-K has been filed by NRFC or the filing of
         the Form S-11 described in clause (iv) above;

                      (vii)  The Amended and Restated Agreement of Limited
         Partnership dated as of [______](1), of the Partnership, as amended
         through the date hereof (the "Partnership Agreement");

                      (viii) The LTIP Unit Vesting Agreement;

                      (ix)   The Operating Agreement;

                      (x)    The Plan; and

                      (xi)   NRFC's Certificate of Incorporation, as amended.



---------------------
(1)   Insert the date on which the Amended and Restated Agreement of Limited
      Partnership of NorthStar Realty Finance Limited Partnership, as approved
      by the Board of Directors of NorthStar Realty Finance Corp. on September
      14, 2004, is entered into.






                      The Grantee also acknowledges that any delivery of the
Background Documents and other information relating to the Company, the
Partnership and NRFC prior to the determination by the Company of the
suitability of the Grantee as a holder of Units shall not constitute an offer of
Units until such determination of suitability shall be made.

               (b)    The Grantee hereby represents and warrants that

                      (i)    The Grantee either (A) is an "accredited investor"
         as defined in Rule 501(a) under the Securities Act of 1933, as amended
         (the "Securities Act"), or (B) by reason of the business and financial
         experience of the Grantee, together with the business and financial
         experience of those persons, if any, retained by the Grantee to
         represent or advise him, her or it with respect to the grant to him,
         her or it of Units, the potential redemption of Units for LTIP Units
         (as defined in the Operating Agreement), the potential conversion of
         such LTIP Units into common units of the Partnership ("Common Units")
         and the potential ------------ redemption of such Common Units for
         shares of common stock of NRFC ("REIT Shares"), has such knowledge,
         ----------- sophistication and experience in financial and business
         matters and in making investment decisions of this type that the
         Grantee (I) is capable of evaluating the merits and risks of an
         investment in the Company and the Partnership and potential investment
         in the Company and of making an informed investment decision, (II) is
         capable of protecting his, her or its own interest or has engaged
         representatives or advisors to assist him, her or it in protecting
         his, her or its interests, and (III) is capable of bearing the
         economic risk of such investment.

                      (ii)   The Grantee understands that (A) the Grantee is
         responsible for consulting his, her or its own tax advisors with
         respect to the application of the U.S. federal income tax laws, and the
         tax laws of any state, local or other taxing jurisdiction to which the
         Grantee is or by reason of the award of Units may become subject, to
         his, her or its particular situation; (B) the Grantee has not received
         or relied upon business or tax advice from the Company, the
         Partnership, NRFC or any of their respective employees, agents,
         consultants or advisors, in their capacity as such; (C) each Unit
         represents an indirect economic interest in one LTIP Unit; (D) the
         Grantee provides services to the Partnership on a regular basis and in
         such capacity has access to such information, and has such experience
         of and involvement in the business and operations of the Partnership,
         as the Grantee believes to be necessary and appropriate to make an
         informed decision to accept this award of Units; and (E) an investment
         in the Company, the Partnership and/or NRFC involves substantial risks.
         The Grantee has been given the opportunity to make a thorough
         investigation of matters relevant to the Units and has been furnished
         with, and has reviewed and understands, materials relating to the
         Company, the Partnership and NRFC and their respective activities
         (including, but not limited to, the Background Documents). The Grantee
         has been afforded the opportunity to obtain any additional information
         (including any exhibits to the Background Documents) deemed necessary
         by the Grantee to verify the accuracy of information conveyed to the
         Grantee. The Grantee confirms that all documents, records, and books
         pertaining to his, her or its receipt of Units which were requested by
         the Grantee have been made available or delivered to the Grantee. The
         Grantee has had an opportunity to ask questions of and receive answers
         from the Company, the Partnership and NRFC, or from a person or persons
         acting on






         their behalf, concerning the terms and conditions of the Units. THE
         GRANTEE HAS RELIED UPON, AND IS MAKING ITS DECISION SOLELY UPON, THE
         BACKGROUND DOCUMENTS AND OTHER WRITTEN INFORMATION PROVIDED TO THE
         GRANTEE BY THE COMPANY, THE PARTNERSHIP OR NRFC. The Grantee did not
         receive any tax, legal or financial advice from the Company, the
         Partnership or NRFC and, to the extent it deemed necessary, has
         consulted with its own advisors in connection with its evaluation of
         the Background Documents and this Agreement and the Grantee's receipt
         of Units.

                      (iii)  The Units to be issued, the LTIP Units issuable
         upon redemption of the Units, the Common Units issuable upon
         conversion of the LTIP Units and any REIT Shares issued in connection
         with the redemption of any such Common Units will be acquired for the
         account of the Grantee for investment only and not with a current view
         to, or with any intention of, a distribution or resale thereof, in
         whole or in part, or the grant of any participation therein, without
         prejudice, however, to the Grantee's right (subject to the terms of
         the Units, this Agreement, the LTIP Units, the LTIP Unit Vesting
         Agreement and the Plan) at all times to sell or otherwise dispose of
         all or any part of his or her Units, LTIP Units, Common Units or REIT
         Shares in compliance with the Securities Act, and applicable state
         securities laws, and subject, nevertheless, to the disposition of his
         or her assets being at all times within his or her control.

                      (iv)   The Grantee acknowledges that (A) neither the Units
         to be issued, the LTIP Units issuable upon redemption of the Units, nor
         the Common Units issuable upon conversion of the LTIP Units, have been
         registered under the Securities Act or state securities laws by reason
         of a specific exemption or exemptions from registration under the
         Securities Act and applicable state securities laws and, if such Units,
         LTIP Units or Common Units are represented by certificates, such
         certificates will bear a legend to such effect, (B) the reliance by the
         Company, the Partnership and NRFC on such exemptions is predicated in
         part on the accuracy and completeness of the representations and
         warranties of the Grantee contained herein, (C) such Units, LTIP Units,
         or Common Units, therefore, cannot be resold unless registered under
         the Securities Act and applicable state securities laws, or unless an
         exemption from registration is available, (D) there is no public market
         for such Units, LTIP Units and Common Units and (E) neither the
         Company, the Partnership nor NRFC has any obligation or intention to
         register such Units, the LTIP Units issuable upon redemption of the
         Units, or the Common Units issuable upon conversion of the LTIP Units
         under the Securities Act or any state securities laws or to take any
         action that would make available any exemption from the registration
         requirements of such laws, except, that, upon the redemption of the
         Common Units for REIT Shares, the Company currently intends to issue
         such REIT Shares under the Plan and pursuant to a Registration
         Statement on Form S-8 under the Securities Act, to the extent that (I)
         the Grantee is eligible to receive such REIT Shares under the Plan at
         the time of such issuance, (II) the Company has filed a Form S-8
         Registration Statement with the Securities and Exchange Commission
         registering the issuance of such REIT Shares and (III) such Form S-8 is
         effective at the time of the issuance of such REIT Shares. The Grantee
         hereby acknowledges that because of the restrictions on transfer or
         assignment of such Units acquired hereby, the LTIP Units issuable upon
         redemption of the Units, and the Common Units issuable upon conversion
         of the LTIP Units which are set forth in this Agreement, the Operating
         Agreement, the






         LTIP Unit Vesting Agreement and the Partnership Agreement, the Grantee
         may have to bear the economic risk of his, her or its ownership of the
         Units acquired hereby, the LTIP Units issuable upon redemption of the
         Units and the Common Units issuable upon conversion of the LTIP Units
         for an indefinite period of time.

                      (v)    The Grantee has determined that the Units are a
         suitable investment for the Grantee.


                      (vi)   No representations or warranties have been made to
         the Grantee by the Company, the Partnership or NRFC, or any officer,
         director, shareholder, agent, or affiliate of any of them, and the
         Grantee has received no information relating to an investment in the
         Company, the Partnership or the Units except the information specified
         in Paragraph (a) above.

               (c)    So long as the Grantee holds any Units or LTIP Units
issuable upon redemption of the Units, the Grantee shall disclose to the Company
or the Partnership, as applicable, in writing such information as may be
reasonably requested with respect to ownership of Units and LTIP Units as the
Company or the Partnership, as applicable, may deem reasonably necessary to
ascertain and to establish compliance with provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), applicable to the Company or the
Partnership, as applicable, or to comply with requirements of any other
appropriate taxing authority.

               (d)    The Grantee hereby agrees to make an election under
Section 83(b) of the Code with respect to the Units awarded hereunder, and has
delivered with this Agreement a completed, executed copy of the election form
attached hereto as Annex C. The Grantee agrees to file the election (or to
permit the Company to file such election on the Grantee's behalf) within thirty
(30) days after the award of the Units hereunder with the IRS Service Center at
which such Grantee files his or her personal income tax returns, and to file a
copy of such election with the Grantee's U.S. federal income tax return for the
taxable year in which the Units are awarded to the Grantee.

               (e)    The address set forth on the signature page of this
Agreement is the address of the Grantee's principal residence, and the Grantee
has no present intention of becoming a resident of any country, state or
jurisdiction other than the country and state in which such residence is sited.

               (f)    The representations of the Grantee as set forth above are
true and complete to the best of the information and belief of the Grantee, and
the Company shall be notified promptly of any changes in the foregoing
representations.












                                     ANNEX C
                                     -------

                 ELECTION TO INCLUDE IN GROSS INCOME IN YEAR OF
                 TRANSFER OF PROPERTY PURSUANT TO SECTION 83(B)
                          OF THE INTERNAL REVENUE CODE

         The undersigned hereby makes an election pursuant to Section 83(b) of
the Internal Revenue Code with respect to the property described below and
supplies the following information in accordance with the regulations
promulgated thereunder:

         1.    The name, address and taxpayer identification number of the
undersigned are:

               Name:    ______________________________ (the "Taxpayer")

               Address: ________________________________________________________

               _________________________________________________________________

               Social Security No./Taxpayer Identification No.: ________________

         2.    Description of property with respect to which the election is
               being made:

               The election is being made with respect to ________ Units in
               NRF Employee, LLC (the "LLC").

         3.    The date on which the Units were transferred is __________ __,
               200_. The taxable year to which this election relates is
               calendar year 200_.

         4.    Nature of restrictions to which the Units are subject:

               (a)    Until the Units vest, the Taxpayer may not transfer
                      in any manner any portion of the Units without the
                      consent of the LLC.

               (b)    The Taxpayer's Units vest in accordance with the
                      vesting provisions described in the Schedule attached
                      hereto. Unvested Units are forfeited in accordance
                      with the vesting provisions described in the Schedule
                      attached hereto.

         5.    The fair market value at time of transfer (determined without
               regard to any restrictions other than restrictions which by
               their terms will never lapse) of the Units with respect to
               which this election is being made was $0 per Unit.

         6.    The amount paid by the Taxpayer for the Units was $0 per Unit.





         7.    A copy of this statement has been furnished to the LLC, its
               manager, NorthStar Realty Finance Limited Partnership (the
               "Partnership") and the Partnership's general partner,
               NorthStar Realty Finance Corp.

Dated:______________, 200_


                                           _____________________________________
                                           Name:
























         SCHEDULE TO SECTION 83(B) ELECTION - VESTING PROVISIONS OF UNITS

         Units are subject to time-based vesting with 1/12th vesting on the
[insert the day of the Grant Date] day of each [insert month that is three
months after the Grant Date], [insert month that is six months after the Grant
Date], [insert month that is nine months after the Grant Date] and [insert month
of the Grant Date] beginning [insert the date that is three months after the
Grant Date], subject to acceleration in the event of certain extraordinary
transactions. Unvested Units are subject to forfeiture in the event of the
termination of the Taxpayer's employment with NorthStar Realty Finance Corp. and
its subsidiaries.