Document:

REGISTRATION RIGHTS AGREEMENT

         This Registration Rights Agreement (this "Agreement") is made and
entered into as of October __, 2004, by and among NorthStar Realty Finance
Corp., a Maryland corporation (the "Company"), NS Advisors Holdings LLC, a
Delaware limited liability company ("NA Holdings"), NorthStar Partnership, L.P.,
a Delaware limited partnership ("NPLP") and NorthStar Funding Managing Member
Holdings LLC, a Delaware limited liability company ("NFMM Holdings" and together
with NA Holdings and NPLP, the "Investors").

                                    RECITALS

         WHEREAS, NA Holdings will contribute 100% of its assets and related
liabilities to NorthStar Realty Finance Limited Partnership, a subsidiary and
the operating partnership of the Company (the "Operating Partnership") in
exchange for cash and a certain number of OP Units (as defined below) (the "NA
Holdings OP Units") pursuant to the Contribution Agreement, dated as of October
__, 2004, by and among NA Holdings LLC, Presidio Capital Investment Company, LLC
and the Operating Partnership (the "NA Holdings Contribution Agreement");

         WHEREAS, NFMM Holdings will contribute 100% of its assets and the
related liabilities to the Operating Partnership in exchange for cash and a
certain number of OP Units (the "NFMM Holdings OP Units") pursuant to the
Contribution Agreement, dated as of October __, 2004, by and among NFMM Holdings
LLC, NPLP and the Operating Partnership (the "NFMM Holdings and NPLP
Contribution Agreement" and together with the NA Holdings Contribution
Agreement, the "Contribution Agreements");

         WHEREAS, NPLP will contribute certain of its assets and the related
liabilities to the Operating Partnership in exchange for cash and a certain
number of OP Units (the "NPLP OP Units" and together with the NA Holdings OP
Units and the NFMM Holdings OP Units, the "Contribution OP Units") pursuant to
the NFMM Holdings and NPLP Contribution Agreement; and

         WHEREAS, the Company has agreed to provide the registration rights
provided for in this Agreement to the Investors and their respective direct and
indirect transferees in order to induce the Investors to enter into the
Contribution Agreements.

                                   WITNESSETH

         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:

1.       Definitions. As used in this Agreement, the following terms shall have
the following meanings:

         Affiliate: When used with reference to a specified person, (i) any
person that directly or indirectly controls or is controlled by or is under
common control with the

specified person, (ii) any person that is an officer of, partner in or trustee
of, or serves in a similar capacity with respect to, the specified person or of
which the specified person is an officer, partner or trustee, or with respect to
which the specified person serves in a similar capacity, and (iii) any person
that, directly or indirectly, is the beneficial owner of 5% or more of any class
of equity securities of the specified person or of which the specified person is
directly or indirectly the beneficial owner of 5% or more of any class of equity
securities.

         Agreement:  As defined in the preamble hereto.

         Company:  As defined in the preamble hereto.

         Company Common Stock: Shares of common stock, par value $0.01 per
share, of the Company.

         Contribution Agreements:  As defined in the recitals hereto.

         Contribution OP Units:  As defined in the recitals hereto.

         Electing Holder: A Holder who has included Registrable Shares in the
Shelf Registration Statement pursuant to Section 2(c) hereof.

         Eligibility Date: The date that the Company first becomes eligible to
use a registration statement on Form S-3 under the Securities Act pursuant to
the rules and regulations of the SEC.

         End of Suspension Notice:  As defined in Section 5(e) hereof.

         Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated by the SEC pursuant thereto.

         Holder:  A holder of any Registrable Shares.

         Initiating Holders: As defined in Section 3(c) hereof.

         Investors:  As defined in the preamble hereto.

         Majority of Holders: The Holders of a majority of (1) the then
outstanding Registrable Shares, plus (2) the then outstanding Contribution OP
Units.

         NA Holdings: As defined in the recitals hereto.

         NA Holdings Contribution Agreement: As defined in the recitals hereto.

         NA Holdings OP Units: As defined in the recitals hereto.

         NASD:  National Association of Securities Dealers, Inc.

         NFMM Holdings: As defined in the recitals hereto.

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         NFMM Holdings and NPLP Contribution Agreement: As defined in the
recitals hereto.

         NFMM Holdings OP Units: As defined in the recitals hereto.

         NPLP: As defined in the recitals hereto.

         NPLP OP Units: As defined in the recitals hereto.

         OP Units: Common units of partnership interest in the Operating
Partnership.

         Person: An individual, partnership, corporation, trust, unincorporated
organization, government or agency or political subdivision thereof, or any
other legal entity.

         Piggyback Registration: As defined in Section 3(a) hereto.

         Prospectus: The prospectus included in the Shelf Registration
Statement, including any preliminary prospectus, and all other amendments and
supplements to any such prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference, if
any, in such prospectus.

         Qualified Public Offering: The sale of any common equity securities of
the Company in an underwritten offering registered under the Securities Act in
which the gross proceeds to the Company equal, or exceed, $50 million.

         Qualified Secondary Underwritten Offering: As defined in Section 2(d)
hereto.

         Register, Registered, Registration: Such terms shall refer to a
registration effected by preparing and filing the Shelf Registration Statement
in compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of the Shelf
Registration Statement.

         Registrable Shares: Each share of Company Common Stock that the Company
may issue upon redemption of the Contribution OP Units by the Investors or their
direct and indirect transferees, from the original issuance of such shares to
the earliest to occur of the date upon which such shares are: (i) registered
effectively pursuant to the Securities Act and disposed of in accordance with
the Shelf Registration Statement or a Piggyback Registration, (ii) distributed
to the public pursuant to Rule 144 (or any similar provisions then in effect) or
is saleable pursuant to paragraph (k) of Rule 144, (iii) saleable, without
restriction, pursuant to an available exemption from registration under the
Securities Act, or (iv) sold to the Company.

         Registration Expenses: All out-of-pocket expenses (excluding Selling
Expenses) incurred by the Company in connection with a registration of any and
all Registrable Shares under the Securities Act, including, without limitation,
the following: (a) all registration, filing and listing fees; (b) fees and
expenses of the Company's compliance with federal and state securities or real
estate syndication laws; (c) printing (including,

                                       3

without limitation, expenses of printing or engraving certificates for the
Registrable Shares in a form eligible for deposit with The Depository Trust
Company and otherwise meeting the requirements of any securities exchange on
which they are listed and of printing registration statements and prospectuses),
messenger, telephone, shipping and delivery expenses; (d) fees and disbursements
of counsel for the Company; (e) fees and disbursements of all independent
registered public accountant firms of the Company; (f) Securities Act liability
insurance if the Company so desires; (g) fees and expenses of other Persons
reasonably necessary in connection with the registration, including any experts,
retained by the Company; (h) fees and expenses incurred in connection with the
listing of the Registrable Shares on each securities exchange on which
securities of the same class are then listed; and (i) fees and expenses
associated with any NASD filing required to be made in connection with the Shelf
Registration Statement.

         Required Effectiveness Period: As defined in Section 2(a)(ii) hereof.

         Rule 144: Rule 144 promulgated by the SEC pursuant to the Securities
Act, as such rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such rule.

         Rule 415: Rule 415 promulgated by the SEC pursuant to the Securities
Act, as such rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC as a replacement thereto having
substantially the same effect as such rule.

         SEC:  The Securities and Exchange Commission.

         Securities Act: The Securities Act of 1933, as amended, and the rules
and regulations promulgated by the SEC thereunder.

         Selling Expenses: All legal expenses, underwriting discounts, selling
commissions and stock transfer taxes applicable to any and all sales of
Registrable Shares by the Holders thereof.

         Shelf Registration Statement: A registration statement on Form S-3 or
any other appropriate form under Rule 415 of the Securities Act (or any similar
rule that may be adopted by the SEC from time to time), providing for the resale
of all Registrable Shares which by Electing Holders.

         Suspension Notice: As defined in Section 5(e) hereof.

2.       Required Shelf Registration.

         (a)      Following the Eligibility Date, the Company shall use its
reasonable best efforts to:

                  (i) prepare and file the Shelf Registration Statement with the
         SEC as soon as reasonably practicable but no later than the date that
         is 60 days after the Eligibility Date; and

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                  (ii) maintain the effectiveness of the Shelf Registration
         Statement until the later to occur of: (A) the completion of the
         distribution of the Registrable Shares covered by the Shelf
         Registration Statement in accordance with the intended methods of
         distribution by the Holders of the Registrable Shares as set forth in
         the Shelf Registration Statement, and (B) the date upon which the
         Registrable Shares covered by the Shelf Registration Statement become
         eligible for resale pursuant to Rule 144 under the Securities Act (the
         "Required Effectiveness Period").

         (b)      The Company shall (i) notify each Holder of the proposed
         filing the Shelf Registration Statement with the SEC at least 30 days
         prior to the proposed filing date of the Shelf Registration Statement
         and (ii) afford each Holder with the opportunity to include all or any
         part of the Registrable Shares then owned by such Holder in the Shelf
         Registration Statement.

         (c)      In order to exercise a Holder's right to include all or any
         part of the Registrable Shares then owned by them, such Holder shall
         (i) notify the Company of the number of Registrable Shares such Holder
         wishes to include in the Shelf Registration Statement and complete and
         sign the selling stockholder questionnaire included in the notice
         described in Section 2(b) hereof within twenty (20) days after the
         Company gives such notice in accordance with Section 10(a) hereof, and
         (ii) furnish to the Company such information as the Company shall
         reasonably request, including, but not limited to such Holder's
         proposed method of distribution of the Registrable Shares, or as may be
         required to effect the registration of the Registrable Shares. No
         Holder shall be entitled to be named as a selling stockholder in the
         Shelf Registration Statement or use the Prospectus forming a part
         thereof unless such Holder complies with this Section 2(c).

         (d)      If any Holders propose to distribute their Registrable Shares
         pursuant to the Shelf Registration Statement in an underwritten
         offering in which the anticipated aggregate offering price of their
         Registrable Shares is at least $10 million (a "Qualified Secondary
         Underwritten Offering"), the Company agrees to use its reasonable best
         efforts to effect the registration and the sale of the Registrable
         Shares pursuant to one (1) Qualified Secondary Underwritten Offering,
         and pursuant thereto the Company shall comply with the registration
         procedures set forth in paragraphs (vi), (vii), (x) and (xii) of
         Section 5(a).

3.       Piggyback Registrations.

         (a)      Right to Piggyback For a period of one (1) year from the date
that the Shelf Registration Statement is declared effective by the SEC, if the
Company proposes to register any of its common equity securities under the
Securities Act (other than a registration statement on Form S-8 or on Form S-4
or any similar successor forms thereto), whether for its own account or for the
account of one or more stockholders of the Company, and the registration form to
be used may be used for any registration of Registrable Shares (a "Piggyback
Registration"), the Company shall give prompt written

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notice (in any event within 10 days after its receipt of notice of any exercise
of other demand registration rights) to all Holders of its intention to effect
such a registration and, subject to Sections 3(b) and 3(c), shall include in
such registration all Registrable Shares with respect to which the Company has
received written requests for inclusion therein within 20 days after the receipt
of the Company's notice. The Company may postpone or withdraw the filing or the
effectiveness of a Piggyback Registration at any time in its sole discretion.

         (b)      Priority on Primary Registrations. If a Piggyback Registration
is an underwritten primary offering by the Company, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering and/or that the number of Registrable Shares
proposed to be included in any such registration would adversely affect the
price per share of the Company's equity securities to be sold in such offering,
the Company shall include in such registration (i) first, the securities the
Company proposes to register and the Registrable Shares requested to be included
therein by the Holders, pro rata between the Company and the Holders on the
basis of the number of shares proposed to be registered by the Company and the
number of Registrable Shares requested to be included therein by the Holders,
and (ii) second, any other securities requested to be included in such
registration pro rata among the holders of such securities on the basis of the
number of securities requested to be included therein by such holders or as such
holders may otherwise agree.

         (c)      Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary offering by a holder or holders of the
Company's securities other than Registrable Shares (the "Initiating Holders"),
and the managing underwriters advise the Company and the Initiating Holders in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number which can be sold in such offering
and/or that the number of Registrable Shares requested to be included in any
such registration would adversely affect the price per share of the Company's
equity securities to be sold in such offering, the Company shall include in such
registration (i) first, the securities the Initiating Holders propose to
register and the Registrable Shares requested to be included therein by the
Holders, pro rata among the Initiating Holders and the Holders on the basis of
the number of securities proposed to be registered by such Initiating Holders
and the number of Registrable Shares requested to be included by such Holders,
and (ii) second, other securities requested to be included therein pro rata
among the holders of such securities on the basis of the number of securities
requested to be registered by such holders or as such holders may otherwise
agree.

         (d)      Selection of Underwriters. If any Piggyback Registration is an
underwritten primary offering, the Company shall have the right to select the
managing underwriter or underwriters to administer any such offering.

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4.       Holdback Agreement.

         In connection with a Qualified Public Offering, each Holder agrees not
to sell or otherwise transfer or dispose of any Registrable Shares (or other
securities) of the Company for a period equal to the lesser of one hundred
eighty (180) days following the effective date of a registration statement of
the Company filed under the Securities Act or such shorter period as the
managing underwriter of the Qualified Public Offering shall agree to, provided
that (a) holders of five percent (5%) or more of the outstanding Common Stock of
the Company and (b) all executive officers and directors of the Company also
enter into similar agreements at the time of the Qualified Public Offering. Such
agreement shall be in writing in form satisfactory to the Company and the
managing underwriter. The Company may impose stop-transfer instructions with
respect to the Registrable Shares (or other securities) subject to the foregoing
restriction until the end of said period. The foregoing shall not apply to (i)
the exercise of any warrants or stock options to purchase shares of capital
stock of the Company (provided that such limitation does not affect limitations
on any actions specified in the first sentence of this Section 4 with respect to
the shares issuable upon such exercise), or (ii) transfers to Affiliates where
the transferee agrees to be bound by the terms hereof .

5.       Registration Procedures.

                  (a) The Company shall use its reasonable best efforts to
         effect the registration and sale of the Registrable Shares pursuant to
         Section 2 hereof, and pursuant thereto the Company shall:

                  (i) prepare and file with the SEC the Shelf Registration
                  Statement and use its reasonable best efforts to cause such
                  Shelf Registration Statement to become effective within 60
                  days of the filing thereof;

                  (ii) prepare and file with the SEC such amendments and
                  supplements to the Shelf Registration Statement and the
                  Prospectus used in connection therewith as may be necessary to
                  keep the Shelf Registration Statement effective for the
                  Required Effectiveness Period;

                  (iii) furnish to each Electing Holder of Registrable Shares
                  such number of copies of the Shelf Registration Statement,
                  each amendment and supplement thereto, the Prospectus included
                  in such Shelf Registration Statement (including each
                  preliminary Prospectus) and such other documents as such
                  Electing Holder may reasonably request in order to facilitate
                  the disposition of the Registrable Shares owned by such
                  Electing Holder;

                  (iv) use its reasonable best efforts to register or qualify
                  such Registrable Shares under such other securities or blue
                  sky laws of such jurisdictions as any Electing Holder
                  reasonably requests and do any and all other acts and things
                  which may be reasonably necessary or advisable to enable such
                  Electing Holder to consummate the disposition in such
                  jurisdictions of the Registrable Shares owned by such Electing
                  Holder (provided, that the Company will not be required to (1)
                  qualify generally

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                  to do business in any jurisdiction where it would not
                  otherwise be required to qualify but for this subparagraph
                  (iv), (2) subject itself to taxation in any such jurisdiction
                  or (3) consent to general service of process in any such
                  jurisdiction);

                  (v) notify each Electing Holder, at any time when a Prospectus
                  relating thereto is required to be delivered under the
                  Securities Act, of the occurrence of any event as a result of
                  which the Prospectus included in the Shelf Registration
                  Statement contains an untrue statement of a material fact or
                  omits any fact required to be stated therein or necessary to
                  make the statements therein, in light of the circumstances
                  under which they were made, not misleading, and, at the
                  request of the Holders of a majority of the Registrable
                  Shares included in the Shelf Registration Statement, the
                  Company shall prepare a supplement or amendment to such
                  Prospectus so that, as thereafter delivered to the
                  purchasers of such Registrable Shares, such Prospectus shall
                  not contain an untrue statement of a material fact or omit
                  to state any material fact necessary to make the statements
                  therein not misleading;

                  (vi) in the case of a Qualified Secondary Underwritten
                  Offering, enter into such customary agreements (including
                  underwriting agreements in customary form) and take all such
                  other actions as the Holders of a majority of the Registrable
                  Shares being sold or the underwriters reasonably request in
                  order to expedite or facilitate the disposition of such
                  Registrable Shares (including, without limitation, effecting a
                  stock split or a combination of shares and making members of
                  senior management of the Company available to participate in,
                  and cause them to cooperate with the underwriters in
                  connection with, "road-show" and other customary marketing
                  activities (including one-on-one meetings with prospective
                  purchasers of the Registrable Shares)) and cause to be
                  delivered to the underwriters and such selling Holders
                  opinions of counsel to the Company in customary form, covering
                  such matters as are customarily covered by opinions for an
                  underwritten public offering as the underwriters may request
                  and addressed to the underwriters and such selling Holders;

                  (vii) make available, for inspection by any Electing Holder,
                  any attorney, accountant or other agent retained by any such
                  Electing Holder, and, in the case of a Qualified Secondary
                  Underwritten Offering, any underwriter participating in any
                  disposition pursuant to the Shelf Registration Statement or
                  any attorney, accountant or other agent retained by any such
                  underwriter, all financial and other records, pertinent
                  corporate documents and properties of the Company, and cause
                  the Company's officers, directors, employees and independent
                  accountants to supply all information reasonably requested by
                  any such Holder, underwriter, attorney, accountant or agent in
                  connection with the Shelf Registration Statement;

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                  (viii) use its reasonable best efforts to cause all such
                  Registrable Shares to be listed on each securities exchange on
                  which securities of the same class issued by the Company are
                  then listed or, if no such similar securities are then listed,
                  on Nasdaq or a national securities exchange selected by the
                  Company;

                  (ix) provide a transfer agent and registrar for all such
                  Registrable Shares not later than the effective date of the
                  Shelf Registration Statement;

                  (x) in the case of a Qualified Secondary Underwritten
                  Offering, if requested, cause to be delivered, immediately
                  prior to the effectiveness of the Shelf Registration Statement
                  and, at the time of delivery of any Registrable Shares sold
                  pursuant thereto, letters from the Company's independent
                  certified registered public accounting firm addressed to each
                  selling Holder (unless such selling Holder does not provide to
                  such accountants the appropriate representation letter
                  required by rules governing the accounting profession) and
                  each underwriter, if any, stating that such firm is an
                  independent registered public accounting firm within the
                  meaning of the Securities Act and the applicable rules and
                  regulations adopted by the SEC thereunder, and otherwise in
                  customary form and covering such financial and accounting
                  matters as are customarily covered by letters of the
                  independent certified public accountants delivered in
                  connection with primary or secondary underwritten public
                  offerings, as the case may be;

                  (xi) make generally available to its stockholders a
                  consolidated earnings statement (which need not be audited)
                  for the 12 months beginning after the effective date of the
                  Shelf Registration Statement as soon as reasonably practicable
                  after the end of such period, which earnings statement shall
                  satisfy the requirements of an earning statement under Section
                  11(a) of the Securities Act; and

                  (xii) promptly notify each Electing Holder and, in the case of
                  a Qualified Secondary Underwritten Offering, the underwriter
                  or underwriters, if any:

                  (1)      when the Shelf Registration Statement, any
                           pre-effective amendment, the Prospectus or any
                           Prospectus supplement or post-effective amendment to
                           the Shelf Registration Statement has been filed and,
                           with respect to the Shelf Registration Statement or
                           any post-effective amendment, when the same has
                           become effective;

                  (2)      of any written request by the SEC for amendments or
                           supplements to the Shelf Registration Statement or
                           Prospectus;

                  (3)      of the notification to the Company by the SEC of its
                           initiation of any proceeding with respect to the
                           issuance by the SEC of any stop

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                           order suspending the effectiveness of the Shelf
                           Registration Statement; and

                  (4)      of the receipt by the Company of any notification
                           with respect to the suspension of the qualification
                           of any Registrable Shares for sale under the
                           applicable securities or blue sky laws of any
                           jurisdiction.

              (b) No Shelf Registration Statement (including any amendments or
supplements thereto and Prospectuses contained therein) shall contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein, or necessary to make the statements therein not misleading
(except, with respect to any Holder, for an untrue or alleged untrue statement
of a material fact or omission or alleged omission of a material fact made in
reliance on and in conformity with written information furnished to the Company
by or on behalf of such Holder specifically for use therein).

              (c) The Company shall make available to each Electing Holder (i)
promptly after the same is prepared and publicly distributed or filed with the
SEC, one copy of each Shelf Registration Statement and any amendment thereto,
each preliminary Prospectus and Prospectus and each amendment or supplement
thereto (other than any portion thereof which contains information for which the
Company has sought confidential treatment), and (ii) such number of copies of a
Prospectus, including a preliminary Prospectus, and all amendments and
supplements thereto, and such other documents as such Holder may reasonably
request in order to facilitate the disposition of the Registrable Shares owned
by such Electing Holder. The Company shall promptly notify each Electing Holder
by facsimile of the effectiveness of the Shelf Registration Statement or any
post-effective amendment.

              (d) At all times after the Company has filed the Shelf
Registration Statement with the SEC pursuant to the requirements of either the
Securities Act or the Exchange Act, the Company shall file all reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the SEC thereunder, and take such further action as
any Holders may reasonably request, all to the extent required to enable such
Holders to be eligible to sell Registrable Shares pursuant to Rule 144 (or any
similar rule then in effect).

              (e) Each Holder of Registrable Shares agrees by having its stock
treated as Registrable Shares hereunder that, upon notice by the Company of the
happening of any event as a result of which the Prospectus included in the Shelf
Registration Statement contains an untrue statement of a material fact or omits
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading (a "Suspension Notice"), such Holder will forthwith discontinue
disposition of Registrable Shares for a reasonable length of time not to exceed
30 days until notice by the Company is given that the use of the Prospectus may
be resumed (an "End of Suspension Notice") and is furnished with a supplemented
or amended Prospectus as contemplated by Section 5(c) hereof, and, if so
directed by the Company, such Holder will deliver to the Company (at the
Company's expense) all

                                       10

copies, other than permanent file copies then in such Holder's possession, of
the Prospectus covering such Registrable Shares current at the time of receipt
of such notice; provided, however, that such postponement of sales of
Registrable Shares by the Holders shall not exceed ninety (90) days in the
aggregate in any one year. If the Company shall give any notice to suspend the
disposition of Registrable Shares pursuant to a Prospectus, the Company shall
extend the period of time during which the Company is required to maintain
effectiveness of the Shelf Registration Statement pursuant to Section 2(a)
hereof by the number of days during the period from and including the date of
the giving of such notice to and including the date such Holder either is
advised by the Company that the use of the Prospectus may be resumed or receives
the copies of the supplemented or amended Prospectus contemplated by Section
5(c). In any event, the Company shall not be entitled to deliver more than three
(3) Suspension Notices in any one year.

6.       Expenses.

         As between the Company and the Holders, the Company shall pay all
Registration Expenses in connection with the registration and sale of the
Registrable Shares pursuant to this Agreement. Each of the Holders shall pay the
Selling Expenses and any other expense not specifically allocated to the Company
pursuant to this Agreement in connection with the sale or disposition of such
Holder's Registrable Shares pursuant to the Shelf Registration Statement.

7.       Indemnification.

         (a) The Company shall indemnify, to the fullest extent permitted by
         law, each Holder, its officers, directors and Affiliates and each
         Person who controls such Holder (within the meaning of the Securities
         Act) against all losses, claims, damages, liabilities and expenses
         arising out of or based upon any untrue or alleged untrue statement of
         material fact contained in the Shelf Registration Statement, Prospectus
         or preliminary Prospectus or any amendment thereof or supplement
         thereto or any omission or alleged omission of a material fact required
         to be stated therein or necessary to make the statements therein, in
         light of the circumstances in which they were made, not misleading or
         any violation or alleged violation by the Company of the Securities
         Act, the Exchange Act or applicable "blue sky" laws, except insofar as
         the same are made in reliance and in conformity with information
         relating to such Holder furnished in writing to the Company by such
         Holder expressly for use therein or caused by such Holder's failure to
         deliver to such Holder's immediate purchaser a copy of the Shelf
         Registration Statement or Prospectus or any amendments or supplements
         thereto (if the same was required by applicable law to be so
         delivered).

         (b) In connection with the Shelf Registration Statement in which a
         Holder of Registrable Common Stock is participating, each such Holder
         shall furnish to the Company in writing such information and affidavits
         as the Company reasonably requests for use in connection with such
         Shelf Registration Statement or Prospectus and shall indemnify, to the
         fullest extent permitted by law, the Company, its officers, directors
         and Affiliates and each Person who controls the

                                       11

         Company (within the meaning of the Securities Act) against all losses,
         claims, damages, liabilities and expenses arising out of or based upon
         any untrue or alleged untrue statement of material fact contained in
         the Shelf Registration Statement, Prospectus or preliminary Prospectus
         or any amendment thereof or supplement thereto or any omission or
         alleged omission of a material fact required to be stated therein or
         necessary to make the statements therein, in light of the circumstances
         in which they were made, not misleading, but only to the extent that
         the same are made in reliance and in conformity with information
         relating to such Holder furnished in writing to the Company by such
         Holder expressly for use therein or caused by such Holder's failure to
         deliver to such Holder's immediate purchaser a copy of the Shelf
         Registration Statement or Prospectus or any amendments or supplements
         thereto (if the same was required by applicable law to be so
         delivered) after the Company has furnished such Holder with a
         sufficient number of copies of the same; provided, however, that the
         obligation to indemnify shall be several, not joint and several, among
         such Holders and the liability of each such Holder shall be in
         proportion to and limited to the net amount received by such Holder
         from the sale of Registrable Shares pursuant to such Shelf
         Registration Statement.

         (c) Any Person entitled to indemnification hereunder shall (i) give
         prompt written notice to the indemnifying party of any claim with
         respect to which it seeks indemnification and (ii) unless in such
         indemnified party's reasonable judgment a conflict of interest between
         such indemnified and indemnifying parties may exist with respect to
         such claim, permit such indemnifying party to assume the defense of
         such claim with counsel reasonably satisfactory to the indemnified
         party. If such defense is assumed, the indemnifying party shall not be
         subject to any liability for any settlement made by the indemnified
         party without its consent (but such consent will not be unreasonably
         withheld). An indemnifying party who is not entitled to, or elects not
         to, assume the defense of a claim shall not be obligated to pay the
         fees and expenses of more than one counsel for all parties indemnified
         by such indemnifying party with respect to such claim, unless in the
         reasonable judgment of any indemnified party there may be one or more
         legal or equitable defenses available to such indemnified party which
         are in addition to or may conflict with those available to another
         indemnified party with respect to such claim. Failure to give prompt
         written notice shall not release the indemnifying party from its
         obligations hereunder.

         (d) The indemnification provided for under this Agreement shall remain
         in full force and effect regardless of any investigation made by or on
         behalf of the indemnified party or any officer, director, Affiliate or
         controlling Person of such indemnified party and shall survive the
         transfer of securities.

         (e) If the indemnification provided for in or pursuant to this Section
         7 is due in accordance with the terms hereof, but is held by a court to
         be unavailable or unenforceable in respect of any losses, claims,
         damages, liabilities or expenses referred to herein, then each
         applicable indemnifying party, in lieu of indemnifying such indemnified
         party, shall contribute to the amount paid or payable by such
         indemnified Person as a result of such losses, claims, damages,

                                       12

         liabilities or expenses in such proportion as is appropriate to reflect
         the relative fault of the indemnifying party on the one hand and of the
         indemnified party on the other in connection with the statements or
         omissions which result in such losses, claims, damages, liabilities or
         expenses as well as any other relevant equitable considerations. The
         relative fault of the indemnifying party on the one hand and of the
         indemnified Person on the other shall be determined by reference to,
         among other things, whether the untrue or alleged untrue statement of a
         material fact or the omission or alleged omission to state a material
         fact relates to information supplied by the indemnifying party or by
         the indemnified party, and by such party's relative intent, knowledge,
         access to information and opportunity to correct or prevent such
         statement or omission. In no event shall the liability of any selling
         Holder be greater in amount than the amount of net proceeds received by
         such Holder upon such sale or the amount for which such indemnifying
         party would have been obligated to pay by way of indemnification if the
         indemnification provided for under Section 7(a) or 7(b) hereof had been
         available under the circumstances.

8.       Rule 144.

         The Company covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder, and it will take such further action
as any Holder may reasonably request to make available adequate current public
information with respect to the Company meeting the current public information
requirements of Rule 144(c) under the Securities Act, to the extent required to
enable such Holder to sell Registrable Shares without registration under the
Securities Act within the limitation of the exemptions provided by (i) Rule 144
under the Securities Act, as such Rule may be amended from time to time, or (ii)
any similar rule or regulation hereafter adopted by the SEC. Upon the request of
any Holder, the Company will deliver to such Holder a written statement as to
whether it has complied with such information and requirements.

9.       Participation in Underwritten Registrations.

         No Person may participate in any registration hereunder which is
underwritten unless such Person (a) agrees to sell such Person's securities on
the basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements and (b) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.

10.      Miscellaneous.

         (a)      Notices.

                  All notices, requests, consents and other communications
         required or permitted hereunder shall be in writing and shall be hand
         delivered or mailed

                                       13

         postage prepaid by registered or certified mail or by facsimile
         transmission (with immediate telephone confirmation thereafter):

                  (i)      if to the Company:

                           527 Madison Avenue, 16th Floor
                           New York, NY 10022
                           Attention: General Counsel
                           Facsimile No.: (212) 319-4557

                           with a copy to (which shall not constitute notice):

                           Skadden, Arps, Slate, Meagher & Flom LLP
                           Four Times Square
                           New York, New York 10036-6522
                           Attention: David J. Goldschmidt, Esq.
                           Facsimile No.: (212) 735-2000

                  (ii)     if to a Holder who is an Investor, to:

                           c/o NorthStar Capital Investment Corp.
                           527 Madison Avenue, 16th Floor
                           New York, NY 10022
                           Attention: Chief Executive Officer
                           Facsimile No.: (212) 319-xxxx

                           or, if to a Holder who is a direct or indirect
                           transferee of an Investor, to the address of such
                           Holder set forth in the transfer documentation
                           provided to the Company,

                           in each case with copies to (which shall not
                           constitute notice):

                           Skadden, Arps, Slate, Meagher & Flom LLP
                           Four Times Square
                           New York, New York 10036-6522
                           Attention:  David J. Goldschmidt, Esq.
                           Facsimile No.:  (212) 735-2000

         or at such other address as such party each may specify by written
         notice to the others, and each such notice, request, consent and other
         communication shall for all purposes of the Agreement be treated as
         being effective or having been given when delivered personally, upon
         receipt of facsimile confirmation if transmitted by facsimile, or, if
         sent by mail, at the earlier of its receipt or 72 hours after the same
         has been deposited in a regularly maintained receptacle for the deposit
         of United States mail, addressed and postage prepaid as aforesaid.

                                       14

         (b)      No Waivers

                  No failure or delay by any party in exercising any right,
         power or privilege hereunder shall operate as a waiver thereof nor
         shall any single or partial exercise thereof preclude any other or
         further exercise thereof or the exercise of any other right, power or
         privilege. The rights and remedies herein provided shall be cumulative
         and not exclusive of any rights or remedies provided by law.

         (c)      Successors and Assigns

                  The provisions of this Agreement shall be binding upon and
         inure to the benefit of the parties hereto and their respective
         successors and assigns, it being understood that subsequent Holders of
         the Registrable Shares are intended third party beneficiaries hereof.

         (d)      Governing Law

                  The internal laws, and not the laws of conflicts (other than
         Section 5-1401 of the General Obligations Law of the State of New
         York), of New York shall govern the enforceability and validity of this
         Agreement, the construction of its terms and the interpretation of the
         rights and duties of the parties.

         (e)      Jurisdiction

                  Any suit, action or proceeding seeking to enforce any
         provision of, or based on any matter arising out of or in connection
         with, this Agreement or the transactions contemplated hereby may be
         brought in any federal or state court located in the County and State
         of New York, and each of the parties hereby consents to the
         jurisdiction of such courts (and of the appropriate appellate courts
         therefrom) in any such suit, action or proceeding and irrevocably
         waives, to the fullest extent permitted by law, any objection which it
         may now or hereafter have to the laying of the venue of any such suit,
         action or proceeding in any such court or that any such suit, action or
         proceeding which is brought in any such court has been brought in an
         inconvenient forum. Process in any such suit, action or proceeding may
         be served on any party anywhere in the world, whether within or without
         the jurisdiction of any such court. Without limiting the foregoing,
         each party agrees that service of process on such party as provided in
         Section 10(a) hereof shall be deemed effective service of process on
         such party.

         (f)      Waiver of Jury Trial

                  EACH OF THE PARTIES HERETO HEREBY 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.

         (g)      Counterparts; Effectiveness

                  This Agreement may be executed in any number of counterparts
         (including by facsimile) and by different parties hereto in separate
         counterparts,

                                       15

         with the same effect as if all parties had signed the same document.
         All such counterparts shall be deemed an original, shall be construed
         together and shall constitute one and the same instrument. This
         Agreement shall become effective when each party hereto shall have
         received counterparts hereof signed by all of the other parties hereto.

         (h)      Entire Agreement

                  This Agreement contains the entire agreement among the parties
         hereto with respect to the subject matter hereof and supersedes and
         replaces all other prior agreements, written or oral, among the parties
         hereto with respect to the subject matter hereof.

         (i)      Captions

                  The headings and other captions in this Agreement are for
         convenience and reference only and shall not be used in interpreting,
         construing or enforcing any provision of this Agreement.

         (j)      Severability

                  If any term, provision, covenant or restriction of this
         Agreement is held by a court of competent jurisdiction or other
         authority to be invalid, void or unenforceable, the remainder of the
         terms, provisions, covenants and restrictions of this Agreement shall
         remain in full force and effect and shall in no way be affected,
         impaired or invalidated so long as the economic or legal substance of
         the transactions contemplated hereby is not affected in any manner
         materially adverse to any party. Upon such a determination, the parties
         shall negotiate in good faith to modify this Agreement so as to effect
         the original intent of the parties as closely as possible in an
         acceptable manner in order that the transactions contemplated hereby be
         consummated as originally contemplated to the fullest extent possible.

         (k)      Amendments

                  The provisions of this Agreement, including the provisions of
         this sentence, may not be amended, modified or supplemented, and
         waivers or consents to departures from the provisions hereof may not be
         given without the prior written consent of a Majority of Holders;
         provided, however, that without a Holder's written consent no such
         amendment, modification, supplement or waiver shall affect adversely
         such Holder's rights hereunder in a discriminatory manner inconsistent
         with its adverse effects on rights of other Holders hereunder (other
         than as reflected by the different number of shares held by such
         Holder); provided, further, that the consent or agreement of the
         Company shall be required with regard to any termination, amendment,
         modification or supplement of, or waivers or consents to departures
         from, the terms hereof, which affect the Company's obligations
         hereunder.

                                       16

                            [SIGNATURE PAGE FOLLOWS]

         IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.

                                  NORTHSTAR REALTY FINANCE CORP.

                                  By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                                  NORTHSTAR PARTNERSHIP, L.P.

                                  By: NORTHSTAR CAPITAL
                                      INVESTMENT CORP.,
                                      its General Partner

                                  By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                                  NS ADVISORS HOLDINGS LLC

                                  By: NS ADVISORS LLC, its General Partner

                                  By: ______________________
                                      Name:
                                      Title:

                                  NORTHSTAR FUNDING MANAGING MEMBER HOLDINGS LLC

                                  By: NORTHSTAR FUNDING MANAGING
                                      MEMBER LLC,
                                      its General Partner

                                  By: ___________________________
                                      Name:
                                      Title:

                                       17EXECUTIVE EMPLOYMENT AGREEMENT
                         ------------------------------

     This Executive Employment Agreement (the "Agreement") by and between David
T. Hamamoto ("Executive") and NorthStar Realty Finance Corp. (the "Company"), is
dated as of October 22, 2004 and none of the benefits hereunder shall be payable
unless and until the closing date (the "Effective Date") of the initial public
offering of the shares of common stock, par value $0.01 per share (the "Common
Stock"), of the Company pursuant to the registration statement on Form S-11
(Reg. No. 333-114675) (the "IPO").

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

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

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

     2. Employment.

        (a) Term. The Company shall employ Executive, and Executive agrees to be
employed with the Company, upon the terms and conditions set forth in this
Agreement, for the period beginning on the Effective Date and ending on the
third anniversary of the Effective Date (the "Employment Period"); provided,
however, that commencing on the third anniversary of the Effective Date and on
each subsequent anniversary of the Effective Date (each such anniversary, a
"Renewal Date"), the Employment Period shall automatically be extended for one
additional year unless, not later than ninety (90) days prior to such Renewal
Date, the Company or Executive shall have given written notice not to extend the
Employment Period; provided, further, however, that the Employment Period shall
be subject to earlier termination as provided in Section 5(b) hereof (the
"Term").

        (b) Base Salary. Executive's initial base salary shall be $400,000 per
annum (pro-rated for partial calendar years), payable in equal bi-monthly
installments (as in effect from time to time, the "Base Salary"). In subsequent
years of the Term, the Base Salary shall be subject to annual review and
adjustment from time to time by the compensation committee of the Company's
board of directors (the "Compensation Committee"), taking into account such
factors as the Compensation Committee deems appropriate, including but not
limited to the salaries of chief executive officers of comparable companies.

        (c) Annual Cash Bonus. For fiscal years during the Executive's
employment with the Company, Executive shall participate in an annual cash
incentive compensation plan as adopted and approved by the board of directors of
the Company (the "Board") from time to time, with applicable corporate and
individual performance targets and maximum award amounts determined by the Board
(the "Annual Cash

Bonus"). The initial target amount of the Annual Cash Bonus shall be 175% of
Executive's Base Salary, but the actual Annual Cash Bonus amount shall be
determined by the Board, in its discretion, subject to approval of the
Compensation Committee. Any Annual Cash Bonus payable to Executive will be paid
at the time the Company normally pays such bonuses to its senior executives, but
in no event later than 90 days following the end of the applicable fiscal year,
and will be subject to the terms and conditions of the applicable annual cash
incentive compensation plan.

        (d) Long Term Incentive Plan. During Executive's employment with the
Company, Executive shall be eligible to receive long term equity incentive
compensation awards (which may consist of restricted stock, stock options, stock
appreciation rights or other types of equity or cash bonus awards, as determined
by the Board in its discretion) pursuant to the Company's equity incentive
compensation plans and programs in effect from time to time including, without
limitation, the Company's 2004 Omnibus Stock Incentive Plan and the 2004
Long-Term Incentive Bonus Plan. These awards shall be granted in the discretion
of the Board and shall include such terms and conditions (including performance
objectives) as the Board deems appropriate.

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

        (f) Other Benefits. In addition, Executive will be eligible to
participate in all fringe benefit plans and retirement plans of the Company, as
are generally available to the other senior management employees of the Company,
such as health insurance plans, disability insurance plans, life insurance
plans, expense reimbursement and the Company's 401(k) retirement plan.

     3. Duties of Executive.

        (a) Duties of Position. During the Employment Period, Executive shall
serve as a President & Chief Executive Officer of the Company. Executive's
duties shall include, without limitation, managing the overall business affairs
of the Company and its senior executive team, formulating and implementing the
strategic plan and investment program of the Company, and managing and assisting
in the Company's capital raising efforts together with such other reasonable
assignments as may be assigned to him from time to time by the Board. Executive
shall perform such duties and responsibilities, consistent with Executive's
title, training and experience, as are from time to time reasonably assigned to
Executive by the Board. Executive agrees to devote not less than a majority of
Executive's business time, attention and energies to the performance of the
duties assigned to Executive hereunder, and to perform such duties faithfully,
diligently and to the best of Executive's abilities and subject to such laws,
rules, regulations and policies from time to time applicable to the Company's
employees. Notwithstanding the above, nothing in this Agreement shall preclude
Executive from devoting a portion of Executive's business time, attention and
energies to the performance of Executive's duties as co-CEO of NorthStar Capital
Investment Corp and other business endeavors. The Company may assign all or a
portion of its rights and obligations under

                                       2

this agreement to any of its affiliates or enter into an agreement with any of
its affiliates that provides that Executive will perform services on behalf of
such affiliate and Executive agrees to provide such services, as directed by the
Company.

Confidential Information. Executive shall hold in confidence for the benefit of
the Company all of the information (other than information concerning corporate
opportunities) and business secrets in respect of the Company and all of its
affiliates, including, but not limited to, all information and data relating to
or concerned with the business, finances, pending transactions and other affairs
of the Company and all of its affiliates, and Executive shall not at any time
before or after Executive's employment by the Company is terminated for any
reason, or Executive resigns for any reason, willfully use or disclose or
divulge any such information or data to any other Person (as defined below)
except (i) with the prior written consent of the Company, (ii) to the extent
necessary to comply with applicable law or the valid order of a court of
competent jurisdiction, in which event Executive shall notify the Company as
promptly as reasonably practicable (and, if possible, prior to making such
disclosure) and (iii) in the performance of Executive's duties hereunder. With
respect to information concerning corporate opportunities of the Company and all
of its affiliates that are developed, initiated or become known to Executive
during his employment with the Company, Executive shall hold in confidence for
the benefit of the Company all of such information in respect of the Company and
all of its affiliates, including, but not limited to, all information and data
relating to or concerned with such opportunities of the Company and all of its
affiliates, and Executive shall not at any time before or within one (1) year
after Executive's employment by the Company is terminated for any reason, or
Executive resigns for any reason, willfully use or disclose or divulge any
information relating to any such corporate opportunities to or for the benefit
of the Executive or any other Person (as defined below) except (i) with the
prior written consent of the Company, (ii) to the extent necessary to comply
with applicable law or the valid order of a court of competent jurisdiction, in
which event Executive shall notify the Company as promptly as reasonably
practicable (and, if possible, prior to making such disclosure) and (iii) in the
performance of Executive's duties hereunder. The foregoing provisions of this
Section 3(b) shall not apply to any information or data which has been
previously disclosed to the public or is otherwise in the public domain in each
case other than as a result of the breach by Executive of his obligations under
this Section 3(b). For purposes of this Agreement, "Person" means an individual,
corporation, partnership, limited liability company, joint venture, association,
trust, unincorporated organization, other entity or "group" (as defined in the
Securities Exchange Act of 1934).

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

        (a) Death. Executive's employment hereunder shall terminate upon his
death.

        (b) Disability. If, as a result of Executive's incapacity due to
physical or mental illness, Executive shall have been absent from the full-time
performance of his duties hereunder for the entire period of six consecutive
months, and within thirty (30)

                                       3

days after written Notice of Termination (as defined in Section 8) is given
shall not have returned to the performance of his duties hereunder on a
full-time basis, the Company may terminate Executive's employment hereunder for
"Disability."

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

            (i) the conviction of Executive for the commission of a felony;

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

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

        (d) Good Reason. Executive may terminate his employment hereunder for
"Good Reason" within thirty (30) days after the occurrence, without his written
consent, of one of the following events that has not been cured within ten (10)
business days after written notice thereof has been given by Executive to the
Company:

            (i) the assignment to Executive of duties materially inconsistent
            with his status as the Chief Executive Officer of the Company or the
            Executive is directed to directly report to other than the Board;

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

            (iii) following a Change of Control (as defined below) of the
            Company, the requirement by the Company that the principal place of
            performance of Executive's services be at a location more than fifty
            (50) miles from the greater New York City metropolitan area;

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

                                       4

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

        (e) Change of Control. For the purposes of Section 4(d) above, a "Change
of Control" of the Company shall be deemed to have occurred if an event set
forth in any one of the following paragraphs (i)-(iii) shall have occurred:

            (i) any Person is or becomes Beneficial Owner (as defined below),
            directly or indirectly, of securities of the Company representing
            thirty-five percent (35%) or more of the combined voting power of
            the then outstanding securities of the Company, excluding (A) any
            Person who becomes such a Beneficial Owner in connection with a
            transaction described in clause (x) of paragraph (ii) below, (B) any
            Person who becomes such a Beneficial Owner through the issuance of
            such securities with respect to purchases made directly from the
            Company, and (C) NorthStar Capital Investment Corp. ("NCIC") and its
            controlled affiliates; or

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

            (iii) the stockholders of the Company approve a plan of complete
            liquidation or dissolution of the Company or an agreement for the
            sale or disposition by the Company of all or substantially all of
            the assets of the Company.

For purposes of this Agreement, "Beneficial Owner" shall have the meaning set
forth in Rule 13d-3 under the Exchange Act.

                                       5

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

     5. Termination Procedure.

        (a) Notice of Termination. Any termination of Executive's employment by
the Company or by Executive (other than termination pursuant to Section 6(a)
hereof) shall be communicated by written Notice of Termination to the other
party hereto in accordance with Section 12. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice that shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated.

        (b) Effect of Date of Termination. "Date of Termination" of this
Agreement shall mean (i) if the Term of this Agreement expires without renewal
as of the third anniversary of the Effective Date or any subsequent Renewal
Date, the date of such expiration (ii) if Executive's employment is terminated
pursuant to Section 4(a) above, the date of Executive's death (iii) if the
Executive's employment is terminated pursuant to Section 4(b) above, thirty (30)
days after delivery to the Executive of Notice of Termination (provided that
Executive shall not have returned to the performance of his duties on a
full-time basis during such thirty (30) day period), (iv) if Executive's
employment is terminated pursuant to Sections 4(c) and 4(f) above, the date
specified in the Notice of Termination, and (v) if Executive's employment is
terminated pursuant to Section 4(d) above, the date on which a Notice of
Termination is given or any later date (within 30 days) set forth in such Notice
of Termination, provided, however, that, if within thirty (30) days after any
Notice of Termination is given pursuant to Section 4(d)(iii) above, the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally determined, either by mutual written agreement of
the parties, by a binding and final arbitration award or by a final judgment,
order or decree of a court of competent jurisdiction (the time for appeal
therefrom having expired and no appeal having been perfected). Upon the Date of
Termination, the Term of this Agreement shall expire and the Company shall have
no further obligation to the Executive except to the extent the Executive is
otherwise entitled to any unpaid salary or benefits hereunder and insurance
coverage in accordance with applicable law; provided that the provisions set
forth in Sections 3(b), 6(b), 6(c), 7, and 14 hereof and this Section 5(b) shall
remain in full force and effect after the termination of the Executive's
employment, notwithstanding the expiration of the Term of or termination of this
Agreement.

     6. Obligations of the Company Upon Termination of Employment.

        (a) Expiration of Term, By the Company for Cause or by Executive without
Good Reason. If Executive's employment shall be terminated:

                                       6

            (i) due to and upon expiration of the Term of this Agreement the
            Company shall pay Executive his full salary through the Date of
            Termination at the rate in effect at the time Notice of Termination
            is given, and an amount equal to the product of (x) all bonuses and
            awards that would have been earned by Executive upon completion of
            each award cycle that began during the Term but had not been
            completed as of the Date of Termination, calculated as though the
            full achievement of all goals and targets relating thereto had been
            achieved in full and (y) a fraction, the numerator of which shall be
            the number of days from the beginning of the applicable bonus or
            award cycle to and including the Date of Termination and the
            denominator of which shall be the number of days in such cycle; or

            (ii) if Executive's employment shall be terminated by the Company
            for Cause or by Executive without Good Reason, then the Company
            shall pay Executive his Base Salary (at the rate in effect at the
            time Notice of Termination is given) through the Date of
            Termination, and the Company shall have no additional obligations to
            Executive under this Agreement.

        (b) For any other reason. If Executive's employment shall be terminated
for any reason other than those provided in Section 6(a) above, then:

            (i) the Company shall pay Executive his full salary through the Date
            of Termination at the rate in effect at the time Notice of
            Termination is given, and an amount equal to the product of (x) all
            bonuses and awards that would have been earned by Executive upon
            completion of each award cycle that began during the Term but had
            not been completed as of the Date of Termination, calculated as
            though the full achievement of all goals and targets relating
            thereto had been achieved in full and (y) a fraction, the numerator
            of which shall be the number of days from the beginning of the
            applicable bonus or award cycle to and including the Date of
            Termination and the denominator of which shall be the number of days
            in such cycle; and

            (ii) in lieu of paying any further compensation to Executive for
            periods subsequent to the Date of Termination, the Company shall pay
            to the Executive severance payments in the form of continuation of
            Executive's Base Salary in effect as of the Date of Termination for
            a period of two (2) years following such Date of Termination (the
            "Severance Payment Period").

        (b) Excise Taxes.

                                       7

            (i) If any of the payments or benefits received or to be received by
            Executive, whether pursuant to the terms of this Agreement or any
            other plan, arrangement or agreement with the Company are deemed by
            the Auditor (as defined below), the Company's tax counsel ("Tax
            Counsel") or the Internal Revenue Services to constitute an excess
            parachute payment under Section 280(G) of the Internal Revenue Code
            of 1986, as amended (the "Code") (all such payments and benefits,
            excluding the Gross-Up Payment (which is defined below), being
            hereinafter referred to as the "Total Payments"), the Company shall
            pay to Executive an additional amount (the "Gross-Up Payment") such
            that the net amount retained by Executive, after deduction of any
            total excise tax, together with all applicable interest and
            penalties (collectively, the "Excise Tax") Tax on the Total Payments
            and any federal, state and local income and employment taxes and
            Excise Tax upon the Gross-Up Payment, shall be equal to the Total
            Payments.

            (ii) For purposes of determining whether any of the Total Payments
            will be subject to the Excise Tax and the amount of such Excise Tax,
            (i) all of the Total Payments shall be treated as "parachute
            payments" (within the meaning of section 280G(b)(2) of the Code)
            unless, in the opinion of Tax Counsel reasonably acceptable to
            Executive and selected by the accounting firm which was, immediately
            prior to the change in control, the Company's independent auditor
            (the "Auditor"), such payments or benefits (in whole or in part) do
            not constitute parachute payments, including by reason of section
            280G(b)(4)(A) of the Code, (ii) all "excess parachute payments"
            within the meaning of section 280G(b)(l) of the Code shall be
            treated as subject to the Excise Tax unless, in the opinion of Tax
            Counsel, such excess parachute payments (in whole or in part)
            represent reasonable compensation for services actually rendered
            (within the meaning of section 280G(b)(4)(B) of the Code) in excess
            of the base amount allocable to such reasonable compensation, or are
            otherwise not subject to the Excise Tax, and (iii) the value of any
            noncash benefits or any deferred payment or benefit shall be
            determined by the Auditor in accordance with the principles of
            sections 280G(d)(3) and (4) of the Code. For purposes of determining
            the amount of the Gross-Up Payment, Executive shall be deemed to pay
            federal income tax at the highest marginal rate of federal income
            taxation in the calendar year in which the Gross-Up Payment is to be
            made and state and local income taxes at the highest marginal rate
            of taxation in the state and locality of Executive's residence on
            the Date of Termination (or if there is no Date of Termination, then
            the date on which the Gross-Up Payment is calculated for purposes of
            this Section 6(b)), net of the maximum reduction in federal income
            taxes which could be obtained from deduction of such state and local
            taxes. If there

                                       8

            has not been a Date of Termination with respect to Executive, the
            Company shall cause the Gross-Up Payment to be calculated within 30
            days of a written request to that effect from Executive.

            (iii) Executive and the Company shall each reasonably cooperate with
            the other in connection with any administrative or judicial
            proceedings concerning the existence or amount of liability for
            Excise Tax with respect to the Total Payments.

            (iv) The payments provided in this Section 6(c) shall be made not
            later than the fifth day following the Date of Termination (or if
            there is no Date of Termination, then the fifth day following date
            on which the Gross-Up Payment is calculated for purposes of Section
            6(c), provided, however, that if the amounts of such payments cannot
            be finally determined on or before such day, the Company shall pay
            to Executive on such day an estimate, as determined in good faith by
            the Company, in accordance with Section 6(b), of the minimum amount
            of such payments to which Executive is clearly entitled and shall
            pay the remainder of such payments (together with interest on the
            unpaid remainder) at 120% of the rate provided in section
            1274(b)(2)(B) of the Code) as soon as the amount thereof can be
            determined but in no event later than the thirtieth (30th) day after
            the occurrence of a Date of Termination. At the time that payments
            are made under this Agreement, the Company shall provide Executive
            with a written statement setting forth the manner in which such
            payments were calculated and the basis for such calculations
            including, without limitation, any opinions or other advice the
            Company has received from Tax Counsel, the Auditor or other advisors
            or consultants (and any such opinions or advice which are in writing
            shall be attached to the statement).

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

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

                                       9

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

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

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

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

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

                                       10

               If to the Company:        NorthStar Realty Finance Corp.
                                         527 Madison Avenue, 16th Floor
                                         New York, NY 10022
                                         Attention:  General Counsel

               If to Executive:          David T. Hamamoto
                                         527 Madison Avenue, 16th Floor
                                         New York, NY 10022

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

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

        14. Dispute Resolution:

            (a) Subject to the provisions of Section 14(b), any dispute,
controversy or claim arising between the parties relating to this Agreement, or
otherwise relating in any way to Executive's employment by or interest in the
Company or any of its affiliate (whether such dispute arises under any federal,
state or local statute or regulation, or at common law), shall be resolved by
final and binding arbitration before a single arbitrator, selected by the
American Arbitration Association in accordance with its rules pertaining at the
time the dispute arises. In such arbitration proceedings, the arbitrator shall
have the discretion, to be exercised in accordance with applicable law, to
allocate among the parties the arbitrator's fees, tribunal and other
administrative and litigation costs and, to the prevailing party, attorneys'
fees. The award of the arbitrator may be confirmed before and entered as a
judgment of any court having jurisdiction over the parties.

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

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

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

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

                                       11

                  IN WITNESS WHEREOF, the parties hereto have executed this
Agreement.

                                      ------------------------------------------
                                      David T. Hamamoto

                                      NORTHSTAR REALTY FINANCE CORP.

                                      By:
                                            ------------------------------------
                                            Name:  Mark E. Chertok
                                            Title: Chief Financial Officer
                                                   and Treasurer

                                       12

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