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                                                                   Exhibit 10.15

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT is made as of April 1, 2001, by and between iStar
Financial Inc., a Maryland corporation (the "Company"), and Spencer Haber (the
"Executive").

                          W I T N E S S E T H  T H A T:

         WHEREAS, the Company wishes to provide for the employment by the
Company of Executive, and Executive wishes to serve the Company, in the
capacities and on the terms and conditions set forth in this Agreement;

         NOW, THEREFORE, it is hereby agreed as follows:

         1. EMPLOYMENT PERIOD. The Company shall continue to employ Executive,
and Executive shall continue to serve the Company, on the terms and conditions
set forth in this Agreement. The term of Executive's employment under this
Agreement shall be deemed to have commenced on April 1, 2001 (the "Effective
Date") and, unless earlier terminated in accordance with Section 4 hereof, shall
continue through April 1, 2004; provided that Executive may elect on or before
March 29, 2004 to extend this Agreement for one additional year if the
"Determination Date" (as defined in the restricted stock agreement attached
hereto as Exhibit A (the "Restricted Stock Agreement")) has not occurred by
March 29, 2004 (such period of employment being referred to hereunder as the
"Employment Period").

         2. POSITION AND DUTIES.

         (a) During the Employment Period, Executive shall serve as President
and Chief Financial Officer ("CFO") and, subject to Executive's election to the
Board of Directors of the Company (the "Board") by the Company's shareholders, a
member of the Board. Executive shall have such duties and responsibilities as
are customarily assigned to the president and chief financial officer of a
company of the size and nature of the Company, and such other duties and
responsibilities not inconsistent therewith as may from time to time be assigned
to him by the Board and the Chief Executive Officer of the Company ("CEO");
provided that any CEO or the Board may assign all or a portion of Executive's
duties related to the CFO function to other personnel from time to time,
provided that any such personnel will report to Executive. The Company shall use
all reasonable efforts to maintain Executive as a member of the Board throughout
the Employment Period. Executive agrees that upon the termination of his
employment hereunder for any reason his membership on the Board shall
immediately and automatically terminate, and Executive shall execute such
documents as may be reasonably necessary in order to accomplish such termination
from the Board.

         (b) In his capacity as President and CFO, Executive shall report
directly to the CEO.

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         (c) During the Employment Period, and excluding any periods of vacation
and sick leave to which Executive is entitled, Executive shall devote
substantially all of his business time and attention to the business and affairs
of the Company and perform, faithfully and diligently, his duties and
responsibilities hereunder. It shall not be considered a violation of the
foregoing for Executive to: (i) serve on the board of directors, or board
committees, of Capital Thinking, Inc. and Juice Software, Inc. (ii) serve on
other corporate, industry, civic, social or charitable boards or committees or
engage in charitable activities and community affairs provided that the CEO
approves Executive's service on such corporate or industry boards or committees
which consent shall not be unreasonably withheld; or (iii) manage his own
personal investments and affairs; provided that the foregoing activities do not
materially interfere with the performance of Executive's responsibilities
hereunder. To the extent that Executive receives remuneration for his service on
a board on which his membership is not related to an investment made by the
Company, he may retain such remuneration. Executive shall remit all other board
membership remuneration to the Company.

         3. COMPENSATION.

         (a) RESTRICTED STOCK. On the effective date of this Agreement,
Executive shall receive a restricted stock grant of 500,000 shares of Company
common stock (the "Restricted Stock Grant"). The Restricted Stock Grant will be
granted in accordance with, and subject to, the terms of the Restricted Stock
Agreement. The terms of the Restricted Stock Agreement are hereby incorporated
by reference into this Agreement.

         (b) FRINGE BENEFITS.

            (i) REIMBURSEMENT OF EXPENSES AND ADMINISTRATIVE SUPPORT. The
Company shall pay or reimburse Executive, upon the presentation of appropriate
documentation of such expenses, for all reasonable travel and other expenses
incurred by Executive in the ordinary course of performing his obligations under
this Agreement. The Company further agrees to furnish Executive with office
space, administrative support and other assistance and accommodations as shall
be reasonably required by Executive in the performance of his duties hereunder.

            (ii) PARTICIPATION IN BENEFIT PLANS. Executive shall be entitled to
participate, during the Employment Period, in the Company's benefit plans,
programs and arrangements, including but not limited to qualified and
non-qualified pensions and retirement plans, supplemental pension and retirement
plans, group hospitalization, health, medical, vision, dental care, death
benefit, disability, post-retirement welfare plans, and other present and future
employee benefit plans, programs and arrangements of the Company for which key
executives are or shall become eligible (collectively, the "Benefit Plans"), on
no less favorable terms than other key executives of the Company other than the
CEO. This will confirm that Executive's service with the Company, for purposes
of determining his entitlements and benefits under the Benefit Plans, commenced
on June 15, 1998. The foregoing shall not be construed as a guaranty of, or as
an obligation on the part of the Company to provide, any future awards

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including, but not limited to, stock options, restricted stock or other
performance awards under any Company incentive plans from time to time in effect
for its executives and other employees.

            (iii) VACATION. During the Employment Period, Executive shall be
entitled to four weeks paid vacation per annum. Executive shall not be entitled
to any cash payment in respect of any unused vacation time.

         (c) OTHER COMPENSATION. Executive shall not be entitled to any base
salary or bonus during the Employment Period.

      4. TERMINATION OF EMPLOYMENT.

         (a) DEATH OR DISABILITY. Executive's employment hereunder shall
terminate automatically upon Executive's death. The Company shall be entitled to
terminate Executive's employment hereunder because of Executive's "Disability."
For this purpose, "Disability" means that Executive has been unable, for a
period of not less than (x) 120 consecutive days, or (y) 180 days within any 12
month period, to perform Executive's duties under this Agreement, as a result of
physical or mental illness, injury or impairment. A termination of Executive's
employment by the Company due to Disability shall be communicated to Executive
by written notice, and shall be effective on the 30th day after receipt of such
notice by Executive (the "Disability Effective Date"), unless Executive returns
to full-time performance of his duties hereunder before the Disability Effective
Date.

         (b) BY THE COMPANY.

            (i) The Company may terminate Executive's employment hereunder for
Cause or without Cause. "Cause" means (w) the conviction of Executive (including
a guilty plea) for the commission of any felony, (x) Executive commits a fraud
on the Company which results in material damage to the Company, or (y) willful
and complete abandonment by Executive of his duties hereunder.

            (ii) A termination of Executive's employment hereunder for Cause or
without Cause may only be effected in accordance with the following procedures.
The Company shall give Executive written notice of its intention to terminate
Executive's employment for Cause or without Cause, and, if for Cause, setting
forth in reasonable detail the specific circumstances that it considers
constitute Cause and the specific provision(s) of this Agreement on which it
relies, and stating the date, time and place of the Special Members Meeting
("Notice of Termination"). "Special Members Meeting" means a meeting of the
Board, called and held specifically for the purpose of considering Executive's
termination, that takes place not less than ten, and not more than twenty,
business days after Executive receives the Notice of Termination. Executive
shall be given an opportunity, together with his counsel, to be heard at the
Special Members Meeting if the termination is for Cause. Executive's termination
shall be effective when and if a resolution is duly adopted at the Special
Members Meeting terminating his employment with the affirmative vote of 75% or
more

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of the members of the Board excluding Executive, subject to, if applicable,
DE NOVO review of the question whether Cause existed through arbitration in
accordance with Section 11.

            (iii) A termination of Executive's employment hereunder by the
Company without Cause in accordance with subparagraph (ii) above shall not
constitute a breach of this Agreement.

         (c) BY EXECUTIVE.

            (i) Executive may terminate his employment hereunder for Good Reason
or without Good Reason. "Good Reason" means any of the following that is not
cured within 30 calendar days following written notice thereof from Executive to
the Company in accordance with Section 4(c)(ii) hereof:

                  (A) failure by the Company to maintain Executive as President
and CFO of the Company with such duties as are described in Section 2(a)
(subject to the allowable delegation of Executive's duties as described in
Section 2(a)) or failure of the Executive to be elected or reelected as a member
of the Board (other than in respect of Executive's voluntary resignation from,
or failure to stand for reelection to, the Board);

                  (B) the assignment to Executive of any duties or
responsibilities inconsistent in any respect with those customarily associated
with the positions to be held by Executive pursuant to this Agreement or any
diminution in Executive's position, authority, duties or responsibilities in a
manner inconsistent with the terms and provisions of this Agreement (subject to
the allowable delegation of Executive's duties as described in Section 2(a));

                  (C) any requirement that Executive's services hereunder be
rendered primarily at a location or locations other than Executive offices of
the Company in the borough of Manhattan in New York City; provided, however,
that Executive offices may be relocated within the borough of Manhattan in New
York City;

                  (D) any purported termination of Executive's employment
hereunder by the Company for a reason or in a manner not expressly permitted by
this Agreement;

                  (E) the failure of any successor to all or substantially all
of the assets or business of the Company to promptly assume in writing all of
the obligations of the Company under this Agreement; or

                  (F) any other material breach of this Agreement by the
Company.

            (ii) A termination of employment by Executive for Good Reason shall
be effectuated by his giving the Company a written notice of the

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termination, setting forth in reasonable detail the circumstances that
constitute Good Reason and the specific provision or provisions of this
Agreement on which Executive relies ("Notice of Termination for Good Reason").
The termination shall be effective on the fifth business day following the date
as of which any applicable cure period for the Company, if any, shall have
expired without full cure having occurred.

         (d) NO WAIVER. The failure to set forth any fact or circumstance in a
Notice of Termination for Cause or a Notice of Termination for Good Reason shall
not constitute a waiver of the right to assert, and shall not preclude the party
giving notice from asserting, such fact or circumstance in an attempt to enforce
any right under, or in connection with, this Agreement.

         (e) DATE OF TERMINATION. The "Date of Termination" means the date of
Executive's death, the Disability Effective Date, the date of the termination of
Executive's employment by the Company for Cause or without Cause or by Executive
without Good Reason or with Good Reason is effective, or the date Executive's
employment hereunder terminates pursuant to the provisions of Section 1.

         (f) NOTICE OF TERMINATION. Executive agrees that he will provide a
thirty (30) day advance written notice of termination of employment to the Board
if Executive is terminating employment without Good Reason.

      5. OBLIGATIONS OF THE COMPANY AND EXECUTIVE UPON TERMINATION OF EXECUTIVE.

         (a) RESTRICTED STOCK GRANT AND OTHER COMPENSATION. If Executive's
employment hereunder is terminated, all of Executive's rights and obligations
with respect to the Restricted Stock Grant and other compensation not covered by
this Agreement shall be governed by the terms of Restricted Stock Agreement and
any other agreements relating to such other compensation.

         (b) WITHOUT CAUSE BY THE COMPANY OR FOR GOOD REASON BY EXECUTIVE. If
Executive's employment hereunder is terminated by Executive with Good Reason, or
by the Company without Cause or due to Disability, Executive shall receive:

            (i) Company-paid, continued medical insurance coverage, as then
provided generally to employees of the Company and their eligible dependents,
for Executive and his eligible dependents for a period of one year following the
Date of Termination; which coverage shall be included as part of any required
COBRA coverage; PROVIDED, HOWEVER, that the COBRA coverage shall terminate with
respect to Executive and his eligible dependents as of the earliest date allowed
by law; and

            (ii) Additional rights and benefits of Executive under the benefit
plans and programs of the Company and its affiliates shall be determined in
accordance with the provisions of such plans and programs, if any.

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         (c) OTHER TERMINATION. Except as otherwise provided in this Agreement,
if Executive's employment hereunder is terminated for any reason other than by
Executive with Good Reason, or by the Company without Cause or due to
Disability, the Executive shall receive only such rights and benefits to which
he may be entitled in accordance with the provisions of the benefit plans and
programs of the Company and its affiliates applicable to Executive, if any.

         (d) RELEASE. The Company's obligation to make any payment or provide
any benefit pursuant to Section 5(b) shall be contingent on Executive delivering
to the Company, within thirty (30) business days after the Date of Termination,
the release attached hereto as Exhibit B.

         (e) OTHER OBLIGATIONS. The respective obligations of the Company and
Executive under Sections 5 through 15 shall survive any termination of
Executive's employment.

      6. CHANGE OF CONTROL.

         (a) CHANGE OF CONTROL. For the purpose of this Agreement, a "Change of
Control" shall be deemed to have taken place if:

            (i) individuals who, as of June 1, 2001, are members of the Board
(the "Incumbent Directors") cease for any reason to constitute at least a
majority of the members of the Board, PROVIDED that (x) any individual becoming
a member of the Board subsequent to June 1, 2001 whose election or nomination
for election was approved by a vote of at least two-thirds of the Incumbent
Directors then on the Board (either by a specific vote or by approval of the
proxy statement of the Company in which such person is named as a nominee for
director, without prior written objection to such nomination) shall be deemed to
be an Incumbent Director; (y) no individual initially elected or nominated as a
member of the Board as a result of an actual or threatened election contest with
respect to members of the Board or as a result of any other actual or threatened
solicitation of proxies or consents by or on behalf of any person other than the
Board shall be deemed to be an Incumbent Director, EXCEPT that this clause (y)
shall not apply (i) to any individual who has been designated by any of the
Starwood Entities to succeed to any of the four Board seats occupied as of June
1, 2001 by Mssrs. Dishner, Grose, Kleeman and Sternlicht or (ii) to any other
individual who is proposed or nominated by any of Starwood Capital Group,
L.L.C., Starwood Capital Group, L.P., their affiliates, and related parties
(collectively, "Starwood Entities") , and approved by a vote of at least a
majority of the Incumbent Directors then on the Board (either by a specific vote
or by approval of the proxy statement of the Company in which such person is
named as a nominee for director, without prior written objection to such
nomination), if after such individual's election or appointment, a majority of
all members of the Board are clearly and demonstrably independent of, and not
affiliated with, any of the Starwood Entities; and (z) any individual who
becomes a director in accordance with clause (y)(i) or (y)(ii) shall be deemed
to be an Incumbent Director;

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            (ii) any "Person" (as such term is used as of the Effective Date in
Section 13(d) of the Securities Exchange Act of 1934 (the "Exchange Act") but
excluding any individual or entity to the extent provided pursuant to clauses
(A) through (C) of this Section 6(a)(ii)) is or becomes a "Beneficial Owner" (as
defined as of the Effective Date in Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly, of 50% or more of the Company's "Voting
Securities" (measured either by value or by voting power); PROVIDED that, for
purposes of this Agreement, "Voting Securities" shall mean outstanding
securities eligible (after giving effect to Section 160(c) of the General
Corporation Law of Delaware and any similar or successor provision governing
"treasury shares") to vote for the election of members of the board of
directors, or corresponding governing person or body, of the issuer of such
securities; and PROVIDED, FURTHER, that the following individuals and entities
shall be excluded pursuant to the first parenthetical of this Section 6(a)(ii):

                  (A) any employee benefit plan (or related trust) sponsored or
maintained by the Company or by any entity of which the Company is the
Beneficial Owner of more than fifty percent (50%) of the Voting Securities
(measured both by value and by voting power) (a "Subsidiary");

                  (B) any Starwood Entity; and

                  (C) any individual or entity, other than a Starwood Entity,
that becomes the Beneficial Owner, directly or indirectly, of Voting Securities
of the Company by acquisition from a Starwood Entity, but only with respect to
Voting Securities that are acquired directly from a Starwood Entity, and only
for so long as a majority of the members of the Board are clearly and
demonstrably independent of, and not affiliated with, any Person that includes
any such individual or entity.

            (iii) (x) the Company combines with another entity and is the
surviving entity, or (y) all or substantially all of the business or assets of
the Company is disposed of pursuant to a sale, merger, consolidation or other
transaction or series of transactions, UNLESS the holders of Voting Securities
of the Company immediately prior to such combination, sale, merger,
consolidation or other transaction or series of transactions (each a "Triggering
Event") immediately after such Triggering Event own, directly or indirectly, by
reason of their ownership of Voting Securities of the Company immediately prior
to such Triggering Event, more than fifty percent (50%) of the Voting Securities
(measured both by value and by voting power) of: (q) in the case of a
combination in which the Company is the surviving entity, the surviving entity
and (r) in any other case, the entity (if any) that succeeds to substantially
all of the business and assets of the Company;

            (iv) the holders of Voting Securities of the Company approve a plan
of complete liquidation or dissolution of the Company;

            (v) neither Common Stock of the Company, nor securities into which
Common Stock of the Company may by existing contractual right be converted
without payment of consideration, or for which Common Stock of the

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Company may by existing contractual right be exchanged without payment of
consideration, are listed for trading on a national securities exchange or
national market system in the United States; or

            (vi) any other transaction or event occurs that is, or has been,
designated by the Board as a Change of Control.

         (b) ADDITIONAL PAYMENTS BY THE COMPANY.

            (i) If it is determined (as hereafter provided) that any payment or
distribution by the Company to or for the benefit of Executive, whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise pursuant to or by reason of any other agreement, policy, plan,
program or arrangement, including without limitation any stock option, stock
appreciation right or similar right, or the lapse or termination of any
restriction on or the vesting or exercisability of any of the foregoing (a
"Payment"), would be subject to the excise tax imposed by Section 4999 of the
Code (or any successor provision thereto) or to any similar tax imposed by state
or local law, or any interest or penalties with respect to such excise tax (such
tax or taxes, together with any such interest and penalties, are hereafter
collectively referred to as the "Excise Tax"), then Executive will be entitled
to receive an additional payment or payments (a "Gross-Up Payment") in an amount
such that, after payment by Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including any Excise Tax, imposed
upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment
equal to the Excise Tax imposed upon the Payments.

            (ii) Subject to the provisions of Section 6(b)(ii) hereof, all
determinations required to be made under this Section 6(b), including whether an
Excise Tax is payable by Executive and the amount of such Excise Tax and whether
a Gross-Up Payment is required and the amount of such Gross-Up Payment, will be
made by a nationally recognized firm of certified public accountants (the
"Accounting Firm") selected by the mutual consent of Executive and the Company;
provided that if Executive and the Company cannot agree on the identity of the
Accounting Firm, then the Accounting Firm shall be PriceWaterhouseCoopers unless
that firm is unwilling or unable to provide such services, in which case the
Accounting Firm may be selected by the Company. The Company will direct the
Accounting Firm to submit its determination and detailed supporting calculations
to both the Company and Executive within 30 calendar days after the date of the
Change of Control or the date of Executive's termination of employment, if
applicable, and any other such time or times as may be requested by the Company
or Executive. If the Accounting Firm determines that any Excise Tax is payable
by Executive, the Company will pay the required Gross-Up Payment to Executive no
later than five calendar days prior to the due date for Executive's income tax
return on which the Excise Tax is included. If the Accounting Firm determines
that no Excise Tax is payable by Executive, it will, at the same time as it
makes such determination, furnish Executive with an opinion that he has
substantial

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authority not to report any Excise Tax on his federal, state, local income or
other tax return. Any determination by the Accounting Firm as to the amount of
the Gross-Up Payment will be binding upon the Company and Executive. As a result
of the uncertainty in the application of Section 4999 of the Code (or any
successor provision thereto) and the possibility of similar uncertainty
regarding applicable state or local tax law at the time of any determination by
the Accounting Firm hereunder, it is possible that Gross-Up Payments which will
not have been made by the Company should have been made (an "Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts or fails to pursue its remedies pursuant to Section
6(b)(vi) hereof and Executive thereafter is required to make a payment of any
Excise Tax, Executive shall so notify the Company, which will direct the
Accounting Firm to determine the amount of the Underpayment that has occurred
and to submit its determination and detailed supporting calculations to both the
Company and Executive as promptly as possible. Any such Underpayment will be
promptly paid by the Company to, or for the benefit of, Executive within five
business days after receipt of such determination and calculations.

            (iii) The Company and Executive will each provide the Accounting
Firm access to and copies of any books, records and documents in the possession
of the Company or Executive, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the Accounting Firm in connection
with the preparation and issuance of the determination contemplated by Section
6(b)(ii) hereof.

            (iv) The federal, state and local income or other tax returns filed
by Executive will be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
Executive. Executive will make proper payment of the amount of any Excise Tax,
and at the request of the Company, provide to the Company true and correct
copies (with any amendments) of his federal income tax return as filed with the
Internal Revenue Service and corresponding state and local tax returns, if
relevant, as filed with the applicable taxing authority, and such other
documents reasonably requested by the Company, evidencing such payment. If prior
to the filing of Executive's federal income tax return, or corresponding state
or local tax return, if relevant, the Accounting Firm determines that the amount
of the Gross-Up Payment should be reduced, Executive will within five business
days pay to the Company the amount of such reduction.

            (v) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by Sections
6(b)(ii) and (iv) hereof will be borne by the Company. If such fees and expenses
are initially advanced by Executive, the Company will reimburse Executive the
full amount of such fees and expenses within five business days after receipt
from Executive of a statement therefor and reasonable evidence of his payment
thereof.

            (vi) Executive will notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by

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the Company of a Gross-Up Payment. Such notification will be given as promptly
as practicable but no later than ten (10) business days after Executive actually
receives notice of such claim and Executive will further apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid (in each case, to the extent known by Executive). Executive will not pay
such claim prior to the earlier of (x) the expiration of the 30-calendar-day
period following the date on which he gives such notice to the Company and (y)
the date that any payment of amount with respect to such claim is due. If the
Company notifies Executive in writing prior to the expiration of such period
that it desires to contest such claim, Executive will:

                  (A) provide the Company with any written records or documents
in his possession relating to such claim reasonably requested by the Company;

                  (B) take such action in connection with contesting such claim
as the Company will reasonably request in writing from time to time, including
without limitation accepting legal representation with respect to such claim by
an attorney competent in respect of the subject matter and reasonably selected
by the Company;

                  (C) cooperate with the Company in good faith in order
effectively to contest such claim; and

                  (D) permit the Company to participate in any proceedings
relating to such claim; PROVIDED, HOWEVER, that the Company will bear and pay
directly all costs and expenses (including interest and penalties) incurred in
connection with such contest and will indemnify and hold harmless Executive, on
an after-tax basis, for and against any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limiting the foregoing
provisions of this Section 6(b)(vi), the Company will control all proceedings
taken in connection with the contest of any claim contemplated by this Section
6(b)(vi) and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim (provided that Executive may participate
therein at his own cost and expense) and may, at its option, either direct
Executive to pay the tax claimed and sue for a refund or contest the claim in
any permissible manner, and Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company will determine;
provided, however, that if the Company directs Executive to pay the tax claimed
and sue for a refund, the Company will advance the amount of such payment to
Executive on an interest-free basis and will indemnify and hold Executive
harmless, on an after-tax basis, from any Excise Tax or income tax, including
interest or penalties with respect thereto, imposed with respect to such
advance; and PROVIDED FURTHER, HOWEVER, that any extension of the statute of
limitations relating to payment of taxes for the taxable year of Executive with
respect to which the contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the

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Company's control of any such contested claim will be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and Executive
will be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.

            (vii) If, after the receipt by Executive of an amount advanced by
the Company pursuant to Section 6(b)(vi) hereof, Executive receives any refund
with respect to such claim, Executive will (subject to the Company's complying
with the requirements of Section 6(b)(vi) hereof) promptly pay to the Company
the amount of such refund (together with any interest paid or credited thereon
after any taxes applicable thereto). If, after the receipt by Executive of an
amount advanced by the Company pursuant to Section 6(b)(vi) hereof, a
determination is made that Executive will not be entitled to any refund with
respect to such claim and the Company does not notify Executive in writing of
its intent to contest such denial or refund prior to the expiration of 30
calendar days after such determination, then such advance will be forgiven and
will not be required to be repaid and the amount of such advance will offset, to
the extent thereof, the amount of Gross-Up Payment required to be paid pursuant
to this Section 6(b). If, after the receipt by Executive of a Gross-Up Payment
but before the payment by Executive of the Excise Tax, it is determined by the
Accounting Firm that the Excise Tax payable by Executive is less than the amount
originally computed by the Accounting Firm and consequently that the amount of
the Gross-Up Payment is larger than that required by this Section 6(b),
Executive shall promptly refund to the Company the amount by which the Gross-Up
Payment initially made to Executive exceeds the Gross-Up Payment required under
this Section 6(b).

         7. WITHHOLDING. Notwithstanding any other provision of this Agreement,
the Company may withhold from amounts payable under this Agreement all federal,
state, local and foreign taxes that are required to be withheld by applicable
law or regulation.

         8. CONFIDENTIAL INFORMATION. Executive shall hold all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliates and their respective businesses that Executive obtains during his
employment hereunder and that is not public knowledge (other than as a result of
Executive's violation of this Section 8) ("Confidential Information") in strict
confidence. Executive shall not communicate, divulge or disseminate Confidential
Information at any time during or after Executive's employment with the Company,
except (i) in the course of performing his duties for the Company, (ii) in
confidence to any attorney, accountant or other professional for the purpose of
securing professional advice, (iii) with the prior written consent of the
Company or (iv) as otherwise required by law, regulation or legal process. If
Executive is requested pursuant to, or required by, applicable law, regulation
or legal process to disclose any Confidential Information, Executive shall
provide the Company, as promptly as the circumstances reasonably permit, with
notice of such request or requirement and, unless a protective order or other
appropriate relief is previously obtained, the Confidential Information subject
to such request may be disclosed pursuant to and in accordance with the terms of
such request or requirement, provided that

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Executive shall use his best reasonable efforts, at the Company's request and
expense, to limit any such disclosure to the precise terms of such request or
requirement.

         9. NON-COMPETITION. Executive acknowledges that the services to be
rendered by him to the Company (which, as used in this Section 9, shall be
deemed to include the Company and each of its subsidiaries) are of a special and
unique character. In consideration of his employment hereunder, Executive
agrees, for the benefit of the Company, that he will not (other than in
connection with performing his duties for the Company, or its affiliates):

            (a) during the Initial Employment Period and the Additional
Employment Period, if applicable, and, if Executive's employment hereunder is
terminated for any reason other than a termination by the Company without Cause,
for twelve months thereafter, engage, directly or indirectly, whether as
principal, agent, representative, consultant, employee, partner, stockholder,
limited partner or other investor (other than an investment of not more than (x)
five percent (5%) of the stock or equity of any corporation the capital stock of
which is publicly traded or (y) five percent (5%) of the ownership interest of
any limited partnership or other entity) or otherwise, within the United States
of America, in any business that competes directly and materially with the
Company (a "Competitive Business"); or

            (b) during the Initial Employment Period and the Additional
Employment Period, if applicable, and, if Executive's employment hereunder is
terminated by the Company without Cause for twelve months thereafter, engage
directly or indirectly, whether as principal, employee, partner stockholder,
limited partner or other investor (other than an investment of not more than (x)
five percent (5%) of the stock or equity of any corporation the capital stock of
which is publicly traded or (y) five percent (5%) of the ownership interest of
any limited partnership or other entity) or otherwise, within the United States
of America acting as a principal in the mezzanine and subordinated lending or
credit tenant leasing businesses; or

            (c) during the Initial Employment Period and the Additional
Employment Period, if applicable, and for twelve months thereafter: (i) solicit
or entice, or attempt to solicit or entice, away from the Company any individual
who is known by Executive to then be an officer or employee of the Company
either for his own account or for any individual, firm or corporation, whether
or not such individual would commit a breach of a contract of employment by
reason of leaving the service of the Company, or (ii) employ, directly or
indirectly, any person who is known by Executive to have been, during the twelve
months prior to employment by Executive, an officer, employee or sales
representative of the Company.

None of the following shall be considered a Competitive Business:

                  (i) Originating first mortgage commercial loans on behalf of
third party clients for purposes of securitization of such loans with no
intention to retain junior securities;

                                       12
<Page>

                  (ii) Acting as an advisor or agent, but not a principal, in
merger and acquisition transactions in the real estate industry;

                  (iii) Any business that does not compete in a product line
constituting more than 10% of the assets of the Company based on its most recent
balance sheet as of Executive's termination of employment.

Further, Executive shall not be restricted from engaging in a non-competing
business even if another division, subsidiary or affiliate of that enterprise
does compete with the Company so long as he does not perform any services for
such division, subsidiary or affiliate.

Should Executive be terminated by the Company without Cause, the Executive
understands that the provisions of this Section 9 may limit Executive's ability
to earn a livelihood in a business similar to the business of the Company but
nevertheless agrees and hereby acknowledges that (i) such provisions do not
impose a greater restraint than is necessary to protect the goodwill or other
business interests of the Company, (ii) such provisions contain reasonable
limitations as to time and scope of activity to be restrained, (iii) such
provisions are not harmful to the general public, (iv) such provisions are not
unduly burdensome to Executive, and (v) the consideration provided hereunder is
sufficient to compensate Executive for the restrictions contained in such
provisions. In consideration thereof and in light of Executive's education,
skills and abilities, Executive agrees that Executive will not assert in any
forum that such provisions prevent Executive from earning a living or otherwise
are void or unenforceable or should be held void or unenforceable.

         10. INDEMNIFICATION.

            (a) The Company shall promptly indemnify and hold harmless
Executive, to the fullest extent permitted by Maryland law, against all costs,
expenses, liabilities and losses (including, without limitation, attorneys' fees
reasonably incurred, reasonable costs of investigation, judgments, fines,
penalties, ERISA excise taxes, interest and amounts paid, or to be paid, in
settlement) incurred by Executive in connection with any Proceeding or Claim.

            (b) The Company shall advance to Executive all costs and expenses
(including, without limitation, attorneys' fees) reasonably incurred by him in
connection with a Proceeding or Claim within 20 days after receipt by the
Company of a written request for such advance. Such request shall include an
itemized list of the costs and expenses and a statement evidencing Executive's
agreement to repay the amount of such advance if it shall ultimately be
determined that he is not entitled to be indemnified against such costs and
expenses. Upon a request under this subsection (b), Executive shall be deemed to
have met any standard of conduct required for indemnification of such costs and
expenses unless the contrary shall be established by a court of competent
jurisdiction or through arbitration in accordance with Section 11.

                                       13
<Page>

            (c) For the purposes of this Agreement, (i) the term "Proceeding"
shall mean any action, suit or proceeding, whether civil, criminal,
administrative or investigative, in which Executive is made, or is threatened to
be made, a party or a witness by reason of the fact that he is or was an officer
or employee of the Company or is or was serving as an officer, director, member,
employee, trustee or agent of any other entity at the request of the Company,
whether or not the basis of such Proceeding arises out of or in connection with
Executive's alleged action or omission in an official capacity, and (ii) the
term "Claim" shall mean any claim, demand, investigation, discovery request, or
request for testimony or information that arises out of or relates to
Executive's service as an officer, employer, agent or representative of the
Company or service at the Company's request as a director, officer, employee,
agent, manager, consultant, advisor, or representative of any other entity.

            (d) The Company shall not settle any Proceeding or Claim in any
manner which would impose on Executive any penalty or limitation without his
prior written consent. Executive shall not settle any Proceeding or Claim in a
manner that would impose any indemnification obligation on the Company pursuant
to this Section 10 without the prior written consent of the Company. Neither the
Company nor Executive shall unreasonably delay or withhold its or his consent
under this subsection (d) to any proposed settlement.

            (e) The indemnification, and right to advancement of expenses,
provided in this Section 10 shall continue as to Executive even if he has ceased
to serve in any of the capacities referred to in Section 10(c) and shall inure
to the benefit of Executive's heirs, executors and administrators.

            (f) The indemnification provided in this Section 10 shall not extend
to any claims or disputes arising between the Company and Executive under,
pursuant to, or with respect to, this Agreement or any agreement referred to in
Section 3 above. In the event of any such claim or dispute, such dispute shall
be resolved in accordance with Section 11.

            (g) During the Employment Period and for six years thereafter, the
Company shall keep in place, or cause to be kept in place, a liability insurance
policy (or policies) providing coverage to Executive that is in no respect less
favorable than the coverage provided to any other present or former officer,
director, or trustee of the Company.

         11. ARBITRATION. The provisions of this Section 11 shall apply and
control over any conflicting or inconsistent provisions elsewhere set forth in
this Agreement. In the event of any controversy, dispute or claim arising out of
or relating to this Agreement, the agreements referred to in Section 3, or
Executive's employment by the Company or its affiliates, the parties hereto
agree that all such matters shall be resolved pursuant to arbitration in
accordance with the rules and procedures of the American Arbitration Association
applicable to resolution of employment disputes, provided, however, the parties
shall be allowed to have discovery as provided by the Federal Rules of Civil
Procedure in connection with such arbitration. The Company will

                                       14
<Page>

advance fees and expenses related to such arbitration to Executive; provided
that if Executive does not substantially prevail he will refund such fees and
expenses to the Company.

         12. SUCCESSORS; BENEFICIARIES.

            (a) This Agreement is personal to Executive and, without the prior
written consent of the Company, shall not be assignable by Executive; PROVIDED,
HOWEVER, that any of Executive's rights to compensation hereunder may be
transferred by will or by the laws of descent and distribution or as provided in
Section 12 (d).

            (b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.

            (c) No rights of the Company under this Agreement may be assigned or
transferred by the Company, other than to a successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company that promptly and
expressly agrees to assume and perform this Agreement in the same manner and to
the same extent that the Company would have been required to perform it if no
such succession had taken place. As used in this Agreement, "Company" shall mean
both the Company as defined in the first sentence of this Agreement and any such
successor that assumes and agrees to perform this Agreement, by operation of law
or otherwise.

            (d) Executive shall be entitled, to the extent permitted under any
applicable law, to select and change the beneficiary or beneficiaries to receive
any compensation or benefit payable hereunder following Executive's death by
giving the Company written notice thereof. In the event of Executive's death or
a judicial determination of his incompetence, references in his Agreement to
Executive shall be deemed, where appropriate, to refer to his beneficiary,
estate or other legal representative.

         13. REPRESENTATIONS.

            (a) The Company represents and warrants that (i) it is fully
authorized, by action of any person or body whose action is required, to enter
into this Agreement and to perform its obligations under it; (ii) the execution,
delivery and performance of this Agreement by the Company does not violate any
applicable law, regulation, order, judgment or decree or any agreement, plan or
corporate governance document of the Company; and (iii) upon the execution and
delivery of this Agreement by the parties, this Agreement shall be the valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except to the extent enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally.

            (b) Executive represents and warrants that, to the best of his
knowledge and belief, (i) delivery and performance of this Agreement by him does
not violate any applicable law, regulation, order, judgment or decree or any
agreement to

                                       15
<Page>

which Executive is a party or by which he is bound, and (ii) upon the execution
and delivery of this Agreement by the parties, this Agreement shall be the valid
and binding obligation of Executive, enforceable against him in accordance with
its terms, except to the extent enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally.

         14. LIMITATION ON STOCK PURCHASES. Executive shall obtain the approval
of the CEO and the Chairman of the Compensation Committee prior to any open
market purchases of Company common stock in excess of 10,000 shares on any
individual trading day.

         15. RELEASE. Executive releases the Company and its affiliates and
their respective predecessors, and all current and former members, trustees,
directors, officers and employees of any such entities, from any claims in
respect of accelerated vesting of equity grants on account of any event or
circumstances occurring or existing through and including the Effective Date.

         16. MISCELLANEOUS.

            (a) Except as provided in Section 10(a), this Agreement shall be
governed by, and construed, performed and enforced in accordance with, the laws
of the State of New York, without reference to principles of conflict of laws.
This Agreement may not be amended or modified except by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.

            (b) All notices and other communications under this Agreement shall
be in writing and shall be given (i) by hand delivery or (ii) by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows
or (iii) by nationally recognized overnight courier, addressed as follows:

                           If to Executive:

                           Spencer Haber
                           4 Sound View Terrace
                           Greenwich, Connecticut 06830
                           With copies to:

                           Hogan & Hartson, L.L.P.
                           8300 Greensboro Drive
                           Suite 1100
                           McLean, Virginia 22102
                           Attention: Stanley J. Brown, Esq.

                                       16
<Page>

                           If to the Company:

                           iStar Financial Inc.
                           1114 Avenue of the Americas
                           27th Floor
                           New York, New York 10036
                           Attention: Chief Executive Officer

                           With copies to:

                           Chairman, Compensation Committee
                           of the Board of Directors
                           c/o iStar Financial, Inc.
                           1114 Avenue of the Americas
                           27th Floor
                           New York, NY 10036
                           Attention:  Corporate Secretary

                           and

                           Paul, Weiss, Rifkind, Wharton & Garrison
                           1285 Avenue of the Americas
                           New York, NY 10019-6064
                           Attention:  Michael J. Segal, Esq.

or to such other address or addresses as either party furnishes to the other in
writing in accordance with this Section 16(b). Notices and communications shall
be effective when actually received by the addressee.

            (c) If any provision of this Agreement, including but not limited to
Section 9, or the application of any such provision to any party or
circumstances shall be determined by any court of competent jurisdiction to be
invalid or unenforceable to any extent, the remainder of this Agreement, or the
application of such provision to such person or circumstances other than those
to which it is so determined to be invalid or unenforceable, shall not be
affected thereby, and each provision hereof shall be enforced to the fullest
extent permitted by law. If the final judgment of a court of competent
jurisdiction declares that any provision of this Agreement is invalid or
unenforceable, the parties hereto agree that the court making the determination
of invalidity or unenforceability shall have the power, and is hereby directed,
to reduce the scope, duration or area of the provision, to delete specific words
or phrases and to replace any invalid or unenforceable provision with a
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable provision, and this Agreement shall be
enforceable as so modified.

            (d) The captions and headings in this Agreement are not part of the
provisions hereof and shall have no force or effect.

                                       17
<Page>

            (e) Executive's or the Company's failure to insist upon strict
compliance with any provisions of, or to assert, any right under, this Agreement
shall not be deemed to be a waiver of such provision or right or of any other
provision of or right under this Agreement.

            (f) No individual who is a direct or indirect officer, employer,
owner, member, director or trustee of the Company shall have any personal
liability under this Agreement.

            (g) Executive and the Company acknowledge that this Agreement
represents the entire agreement, and supersedes any other agreement between
them; including the Executive's prior employment agreement dated June 9, 1998,
concerning the specific subject matter hereof. However, this subsection (g)
specifically excludes all equity compensation previously granted to Executive.

            (h) The rights and benefits of Executive under this Agreement may
not be anticipated, assigned, alienated or subject to attachment, garnishment,
levy, execution or other legal or equitable process except as required by law or
as provided in Sections 12(a) or 12(d). Any attempt by Executive to anticipate,
alienate, assign, sell, transfer, pledge, encumber or charge the same, except as
required by law or as provided in Sections 12(a) or l2(d), shall be void.
Payments hereunder shall not be considered assets of Executive in the event of
insolvency or bankruptcy.

            (i) This Agreement may be executed in several counterparts, each of
which shall be deemed an original, and said counterparts shall constitute one
and the same instrument.

                                       18
<Page>

         IN WITNESS WHEREOF, Executive has hereunto set his hand, and the
Company has caused this Agreement to be executed in their name and on their
behalf, all as of the day and year first above written.

                                              /s/ Spencer Haber
                                              ---------------------------------
                                              SPENCER HABER

                                              iSTAR FINANCIAL INC.

                                              By: /s/ Jay Sugarman
                                                  ------------------------------
                                                  Name:  Jay Sugarman
                                                  Title: Chief Executive Officer

                                       19
<Page>

                                                                    Exhibit A

                           RESTRICTED STOCK AGREEMENT

            THIS RESTRICTED STOCK AGREEMENT (the "Agreement"), is made effective
as of the first day of April, 2001, between iStar Financial Inc., a Maryland
corporation (the "Company"), and Spencer Haber (the "Executive").

            WHEREAS, pursuant to the Starwood Financial Trust 1996 Long-Term
Incentive Plan (the "Plan"), the Company desires to grant to Executive the
restricted share award provided for herein (the "Restricted Share Award") as
compensation for performance of services to the Company, such grant to be
subject to the terms set forth herein, the Plan and the employment agreement
between the Company and Executive dated as of April 1, 2001 (the "Employment
Agreement"); and

            WHEREAS, Executive has executed the Employment Agreement as a
condition precedent to the grant to Executive of the Restricted Share Award
hereunder.

            NOW THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the parties hereto agree as follows:

            1. Grant of Restricted Share Award.

            Subject to the terms and conditions of this Agreement, the Plan and
the Employment Agreement, Executive is hereby granted 500,000 shares of the
Company's common stock ("Common Stock"), par value $.01 per share, subject to
the vesting and forfeiture provisions and the other terms and conditions
contained in this Agreement. To the extent that there should be any
inconsistency between the Plan, the Employment Agreement and this Agreement, the
Employment Agreement and this Agreement shall govern.

            2. DEFINED TERMS.

            Except as otherwise specifically provided, capitalized terms shall
have the meanings attributed thereto in the Plan and the Employment Agreement.
Whenever a capitalized term's definition under the Plan differs from such term's
definition under the Employment Agreement, the Employment Agreement's definition
shall control. Additionally, the following terms shall have the meanings set
forth below:

                  (a) "BASE PRICE" shall mean $20.06 per share.

                  (b) "BENEFICIARY" shall mean Executive's designated
beneficiary or beneficiaries pursuant to a written notice to the Administrator
or, if there is no such beneficiary, Executive's estate or legal representative.

                  (c) "CHANGE OF CONTROL PRICE" of a security shall mean, if
such security is publicly traded on a national securities exchange or national
market system in the United States immediately prior to the occurrence of a
Change of Control, then

<Page>
                                                                               2

the closing price for such security, at the end of regular trading on the
national security exchange or national market system on which such security is
principally traded in the United States, on the most recent day prior to the
Change in Control on which regular trading of such security shall have occurred,
and otherwise shall mean Fair Market Value of such security as of the occurrence
of a Change of Control

                  (d) "CONTINGENTLY VESTED RESTRICTED SHARES" shall mean
Restricted Shares that have become contingently vested in accordance with
Section 3, but which remain subject to a risk of forfeiture prior to becoming
Fully Vested Restricted Shares.

                  (e) "DETERMINATION DATE" shall mean the earliest to occur of
(i) the date described in the first sentence of Section 3(c), (ii) the last day
of the Voluntary Determination Period, (iii) the first date on or following
September 30, 2002 on which Executive is no longer employed by the Company, (iv)
the first date following the date hereof on which a Change of Control occurs and
(v) March 31, 2004; provided that if Executive elects the one-time extension of
the Employment Period as described under Section 1 of the Employment Agreement,
then the Determination Date shall occur on March 31, 2005, unless Executive
should voluntarily terminate his employment without Good Reason, or is
terminated by the Company for Cause, after March 31, 2004 and before March 31,
2005, in which case the Determination Date shall be March 31, 2004.

                  (f) "DETERMINATION PERIOD" shall mean, unless otherwise
specifically stated, the 60 consecutive calendar days ending on the
Determination Date.

                  (g) "DETERMINATION PRICE" shall mean the average closing sale
price for Common Stock, on the primary exchange on which Common Stock is traded,
for the trading days occurring during the Determination Period. Period.

                  (h) "FAIR MARKET VALUE" shall mean (x) when used with respect
to a security as of a specified date, the fair market value of such security on
such date, assuming a market consisting of willing and amply-funded strategic
buyers for all outstanding securities of the issuer and determined without
discount for lack of liquidity, lack of control, minority status, contractual
restrictions, or similar factors and (y) when used with respect to any other
property, fair market value as of such date assuming a market consisting of
willing and amply-funded buyers and without discount for lack of liquidity,
contractual restrictions or similar factors.

                  (i) "FULLY VESTED RESTRICTED SHARES" shall mean Restricted
Shares which are no longer subject to a risk of forfeiture, and no longer
subject to the terms, conditions and restrictions of this Agreement.

                  (j) "RESTRICTED SHARES" shall mean the 500,000 shares of
Common Stock granted to Executive under this Agreement.

                  (k) "TRR CALCULATION" shall mean, as of the Determination
Date, the quotient of (i) the sum of (A) the total amount of dividends per share
of

<Page>
                                                                               3

Common Stock declared and paid from January 1, 2001 through the Determination
Date and (B) the net gain or loss per share on the Common Stock between the Base
Price and the relevant Determination Price divided by (ii) the Base Price.

For the purpose of determining the amount of dividends per share of Common
Stock, all dividends on a share of Common Stock shall be assumed to be invested
in additional shares of Common Stock ("Deemed Purchase Shares") at the per-share
closing price one trading day prior to the dividend payment date. Such Deemed
Purchase Shares shall be deemed to generate additional dividends, at the same
time and at the same rate as dividends are paid on actual shares of Common Stock
(and such deemed dividends shall be deemed invested in additional Deemed
Purchase Shares). All such dividends, actual and deemed, paid through the
Determination Date are included in the TRR Calculation.

                  (l) "VOLUNTARY DETERMINATION NOTICE" means a thirty (30) day
advance written notice of the termination of Executive's employment without Good
Reason (other than as described in the second paragraph of Section 3(d)) given
by Executive to the Board, after September 30, 2002 and prior to both the
Determination Date and April 1, 2004.

                  (m) "VOLUNTARY DETERMINATION PERIOD" means the 60 consecutive
calendar day period ending on the date the Company receives the Voluntary
Determination Notice from Executive.

            3. VESTING.

                  (a) TRR CALCULATION. In determining the number of Restricted
Shares which become Contingently Vested Restricted Shares or Fully Vested
Restricted Shares pursuant to certain following provisions of this Agreement
(which are identified by their reference to this Section 3(a)), the following
schedule shall apply:

<Table>
<S>                             <C>
            ---------------------------------------------------------
            TRR Calculation on  Number of Restricted Shares that
            the Determination   become Contingently Vested
            Date                Restricted Shares or Fully Vested
                                Restricted Shares, as Applicable

            ---------------------------------------------------------
            0%-29.99%           0-150,000 Restricted Shares using
                                straight line interpolation
            ---------------------------------------------------------
            30%-60%             250,000-500,000 Restricted Shares
                                using straight line interpolation
            ---------------------------------------------------------
</Table>

                  (b) ORGANIZATION OF SECTION 3 - GENERALLY. Sections 3(c)
through 3(k) describe the vesting and forfeiture of Restricted Shares which
occurs upon the Determination Date. Sections 3(l) through 3(o) describe the
vesting and forfeiture which occurs upon events other than the Determination
Date.

<Page>
                                                                               4

                  (c) DETERMINATION DATE - MAXIMUM VESTING PRE-OCTOBER 1, 2002.
In the event that the TRR Calculation for any 60 consecutive calendar day period
completed during the period from June 1, 2001 through September 30, 2002 (and
the applicable 60-day period shall be the Determination Period, and the last day
thereof the Determination Date described in clause (i) under the definition of
"Determination Date") equals or exceeds 60%, all Restricted Shares shall become
Contingently Vested Restricted Shares on the last day of such period. Such
Contingently Vested Restricted Shares shall become Fully Vested Restricted
Shares on the later of (i) September 30, 2002 or (ii) 180 days following the
first Change of Control completed prior to October 1, 2002 (the "Section 3(c)
Full Vesting Date"); provided that (A) if Executive voluntarily resigns his
employment without Good Reason prior to the Section 3(c) Full Vesting Date, then
such Contingently Vested Shares shall be forfeited on the date of such
termination, and (B) if Executive's employment is terminated prior to the
Section 3(c) Full Vesting Date for any other reason, then such Contingently
Vested Shares shall become Fully Vested Restricted Shares on the date of such
termination.

                  (d) DETERMINATION DATE - VOLUNTARY DETERMINATION PERIOD. If
the Determination Date occurs on the last day of the Voluntary Determination
Period (i.e., the Determination Date described in clause (ii) of the definition
of "Determination Date"), then that number of Restricted Shares determined by
the table in Section 3(a) shall become Fully Vested Restricted Shares on such
Determination Date, and the remaining Restricted Shares shall be forfeited. In
the event Executive issues a Voluntary Determination Notice and then his
employment does not subsequently terminate without Good Reason due to the mutual
agreement of Executive and the Board, the number of Fully Vested Restricted
Shares shall be determined in accordance with this Section 3(d) based on the end
of the Voluntary Determination Period, and not on any other provision of this
Section 3 or this Agreement.

                  (e) DETERMINATION DATE - DEATH OR DISABILITY. If the
Determination Date described in clause (iii) of the definition of "Determination
Date" occurs on account of Executive's death or termination by the Company on
account of Disability, then that number of Restricted Shares determined by the
table in Section 3(a) shall become Fully Vested Restricted Shares on such
Determination Date, and the remaining Restricted Shares shall be forfeited;
provided that if the value of such Fully Vested Restricted Shares as of the date
of termination is less than $1,200,000, Executive or his Beneficiary (as
applicable) shall forfeit all Restricted Shares and in lieu thereof receive from
the Company a cash payment of $1,200,000 within 10 business days following such
termination.

                  (f) DETERMINATION DATE - RESIGNATION WITH GOOD REASON. If the
Determination Date described in clause (iii) of the definition of "Determination
Date" occurs on account of Executive's resignation with Good Reason, then all
Restricted Shares shall become Fully Vested Restricted Shares on such
Determination Date (and the table in Section 3(a) shall not apply).

<Page>
                                                                               5

                  (g) DETERMINATION DATE - RESIGNATION WITHOUT GOOD REASON. This
is the situation described in Section 3(d), and the effects of such a
resignation are described therein.

                  (h) DETERMINATION DATE - TERMINATION FOR CAUSE. If the
Determination Date described in clause (iii) of the definition of "Determination
Date" occurs on account of the Company's termination of Executive's employment
for Cause, then fifty percent (50%) of that number of Restricted Shares
determined by the table in Section 3(a) shall become Fully Vested Restricted
Shares on such Determination Date, and the remaining Restricted Shares shall be
forfeited.

                  (i) DETERMINATION DATE - TERMINATION WITHOUT CAUSE. If the
Determination Date described in clause (iii) of the definition of "Determination
Date" occurs on account of the Company's termination of Executive's employment
without Cause, then that number of Restricted Shares shall become Fully Vested
Restricted Shares equal to the greater of (i) the number determined by the table
in Section 3(a) on such Determination Date, or (ii) the following number of
Restricted Shares:

                        (1)   250,000 if such termination occurs during 2002;

                        (2)   335,000 if such termination occurs during 2003;
                  and

                        (3)   500,000 if such termination occurs subsequent to
                  2003,

and the remaining Restricted Shares shall be forfeited. Notwithstanding the
foregoing, if a Change of Control is consummated within 90 days following the
termination of Executive's employment by the Company without Cause pursuant to
this Section 3(i), or a transaction which, if consummated, would constitute a
Change of Control is publicly announced within 90 days following the termination
of Executive's employment by the Company without Cause pursuant to this Section
3(i) and such Change of Control is subsequently consummated, then an additional
number of Restricted Shares shall be reissued to Executive as Fully Vested
Restricted Shares as of the time of such Change of Control equal to the excess,
if any, of (A) that number of Restricted Shares determined by Section 3(j) as if
the Change of Control were the Determination Date, over (B) that number of
Restricted Shares which became Fully Vested Restricted Shares in accordance with
the first sentence of this Section 3(i).

                  (j) DETERMINATION DATE - CHANGE OF CONTROL. If the
Determination Date described in clause (iv) of the definition of "Determination
Date" occurs on account of the occurrence of a Change of Control, then that
number of Restricted Shares shall become Contingently Vested Restricted Shares
equal to the greatest of (i) if the Change of Control Price is in excess of the
book value per share of Common Stock based on the most recent audited financial
statements dated on or prior to the Change of Control, (A) 250,000 Restricted
Shares if the Change of Control is

<Page>
                                                                               6

consummated on or prior to December 15, 2001 or (B) all of the Restricted Shares
if the Change of Control is consummated after December 15, 2001, (ii) if the
Change of Control Price is less than or equal to the book value per share of
Common Stock based on the most recent audited financial statements dated on or
prior to the Change of Control, then the following number of Restricted Shares:

                        (1)   167,000 if the Change of Control occurs during
                  2001;

                        (2) 250,000 if the Change of Control occurs during 2002;

                        (3) 335,000 if the Change of Control occurs during 2003;
                  or

                        (4) 500,000 if the Change of Control occurs subsequent
                  to 2003,

and (iii) the number determined by the table in Section 3(a) (as if the
Change of Control Price were the Determination Price). Such Contingently
Vested Restricted Shares shall become Fully Vested Restricted Shares on the
earlier of (A) 180 days thereafter, or (B) upon the termination of
Executive's employment, unless Executive voluntarily resigns his employment
without Good Reason during the 180-day period following such Change of
Control, in which case the shares are forfeited.

                  (k) DETERMINATION DATE - CONTINUED EMPLOYMENT. If the
Determination Date described in clause (v) of the definition of "Determination
Date" occurs on account of Executive's continued employment with the Company
through March 31, 2004 or March 31, 2005 (as applicable), then that number of
Restricted Shares determined by the table in Section 3(a) shall become Fully
Vested Restricted Shares on such Determination Date (taking into account the
proviso to clause (v) of the definition of "Determination Date"), and the
remaining Restricted Shares shall be forfeited.

                  (l) NO DETERMINATION DATE - DEATH OR DISABILITY PRIOR TO
OCTOBER 1, 2002. If prior to any Determination Date and prior to October 1,
2002, Executive dies or is terminated by the Company on account of Disability,
Section 3(e) shall apply as is the date of such termination were a Determination
Date.

                  (m) NO DETERMINATION DATE - RESIGNATION WITHOUT GOOD REASON OR
TERMINATION FOR CAUSE PRIOR TO OCTOBER 1, 2002. If, prior to any Determination
Date and prior to October 1, 2002, Executive resigns without Good Reason or is
terminated by the Company for Cause, than all Restricted Shares shall be
forfeited at the time of such termination.

<Page>
                                                                               7

                  (n) NO DETERMINATION DATE - TERMINATION WITHOUT CAUSE PRIOR TO
OCTOBER 1, 2002. If, prior to any Determination Date and prior to October 1,
2002, the Company terminates Executive's employment without Cause, then that
number of Restricted Shares shall become Fully Vested Restricted Shares equal to
the greater of (i) the number determined by the table in Section 3(a) as if the
date of such termination were the Determination Date, or (ii) the following
number of Restricted Shares:

                        (1) 167,000 if such termination occurs during 2001; and

                        (2) 250,000 if such termination occurs during 2002.

and the remaining Restricted Shares shall be forfeited. Notwithstanding the
foregoing, if a Change of Control is consummated within 90 days following the
termination of Executive's employment by the Company without Cause pursuant to
this Section 3(n), or a transaction which, if consummated, would constitute a
Change of Control is publicly announced within 90 days following the termination
of Executive's employment by the Company without Cause pursuant to this Section
3(n) and such Change of Control is subsequently consummated, then an additional
number of Restricted Shares shall be reissued to Executive as Fully Vested
Restricted Shares as of the time of such Change of Control equal to the excess,
if any, of (A) that number of Restricted Shares determined by Section 3(j) as if
the Change of Control were the Determination Date, over (B) that number of
Restricted Shares which became Fully Vested Restricted Shares in accordance with
the first sentence of this Section 3(n).

                  (o) NO DETERMINATION DATE - RESIGNATION WITH GOOD REASON PRIOR
TO OCTOBER 1, 2002. If, prior to any Determination Date and prior to October 1,
2002, Executive resigns with Good Reason, then all Restricted Shares shall
become Fully Vested Restricted Shares on the date of such resignation.

            4. DIVIDENDS.

            Executive shall retain all dividends paid by the Company on and
after April 1, 2001 until the Determination Date in respect of the Restricted
Shares. If there are any Contingently Vested Restricted Shares subsequent to the
Determination Date, Executive shall retain all dividends paid in respect of such
Contingently Vested Restricted Shares (but not dividends paid on Restricted
Shares which have not become Contingently Vested Restricted Shares) until such
Contingently Vested Restricted Shares are either forfeited or become Fully
Vested Restricted Shares. Executive shall not be required to return any
dividends paid on Restricted Shares (including Contingently Vested Restricted
Shares) subsequently forfeited in accordance with this Agreement. For purposes
of clarification, (i) on and after the time that any Restricted Shares become
Fully Vested Restricted Shares, Executive shall be entitled to retain dividends
paid thereon to the same extent as other holders of Common Stock (by virtue of
this Agreement ceasing to apply to Fully Vested Restricted Shares), and (ii) no
dividends shall be paid on any forfeited Restricted Shares.

<Page>
                                                                               8

            5. NO PUBLIC MARKET AFTER A CHANGE OF CONTROL. If, following a
Change of Control, no Public Market exists for the Common Stock or any
securities into which the Common Stock may have been converted or exchanged for
in connection with the Change of Control, Executive shall receive (a) on each of
the 90th and 180th days following the Change of Control, the cash equivalent of
the dividend payments that would have been received by Executive on any
Contingently Vested Restricted Shares and Fully Vested Restricted Shares (or
such securities into which they may have been converted or for which they may
have been exchanged) held by Executive on such days, based on the Company's most
recent quarterly dividend rate prior to the Change of Control, reduced by any
cash dividends or distributions actually paid on such shares or securities and
any base salary and bonus paid to Executive in respect of the period following
the Change of Control; and (b) on the 180th day following the Change of Control,
the Company shall repurchase, for cash, all Contingently Vested Restricted
Shares and Fully Vested Restricted Shares then held by Executive (or such
securities into which they may have been converted or for which they may have
been exchanged) for an amount equal to the Change of Control Price for those
Contingently Vested Restricted Shares and Fully Vested Restricted Shares held by
Executive at the time of the Change of Control (including for this purpose any
Restricted Shares which become those Contingently Vested Restricted Shares and
Fully Vested Restricted Shares by virtue of the Change of Control).

            A "Public Market" will be deemed to exist if (a) on each of the 90th
and 180th days following a Change of Control the Common Stock, or any securities
into which the Common Stock may have been converted or exchanged, is listed on
any recognized national or international securities exchange or the National
Market System of the Nasdaq Stock Market, and (b) for the twenty trading days
prior to each of the 90th and 180th days following a Change of Control, the
average daily trading volume is at least 50,000 shares of Common Stock or the
equivalent number of securities into which the Common Stock may have been
converted or exchanged.

            6. CERTIFICATES/BOOK ENTRY. The grant of Restricted Shares under
this Agreement shall be reflected through electronic book entry. Within 20
business days following the date on which any of the Restricted Shares become
Fully Vested Restricted Shares, the Executive may elect, upon one day's written
notice to the Company, to receive one or more certificates evidencing the
Restricted Shares issued in accordance with the terms of the Plan which have
become Fully Vested Restricted Shares. In the event Executive elects to receive
certificate(s), the Company shall issue one or more certificates to Executive
without any restrictive legends within 5 business days representing such Fully
Vested Restricted Shares. In the event Executive does not elect to receive
certificates or elects to leave the Fully Vested Restricted Shares in electronic
book entry form, Fully Vested Restricted Shares will continue to be reflected
through electronic book entry; provided that the Company shall have any
annotations relating to any prior restrictions thereon removed within 2 business
days following the date on which the Restricted Shares become Fully Vested
Restricted Shares.

            7. TRANSFERABILITY.

<Page>
                                                                               9

            Neither Executive nor his affiliates shall assign, alienate, pledge,
attach, sell or otherwise transfer or encumber any Restricted Share prior to it
becoming a Fully Vested Restricted Share.

            8. WITHHOLDING.

            Executive agrees to make appropriate arrangements with the Company
for satisfaction of any applicable federal, state or local income tax,
withholding requirements or like requirements. Notwithstanding any other
provision of this Agreement, the Company shall be entitled to withhold all
federal, state, local and foreign taxes that are required to be withheld by
applicable law or regulation from amounts payable or Common Stock deliverable
under this Agreement.

            9. ADJUSTMENTS FOR STOCK SPLITS, STOCK DIVIDENDS, ETC.

                  (a) In the event of any recapitalization, reorganization,
merger, consolidation, combination, exchange of shares, stock split, spin-off,
split-up, or other similar event, or any distribution in respect of Common Stock
other than a regular cash dividend, the Restricted Share vesting schedule will
be adjusted, to the extent appropriate, so as to avoid dilution, or enlargement,
of the economic opportunity and value represented by the Restricted Shares.

                  (b) If from time to time during the term of this Agreement
there is any stock split-up, stock dividend, stock distribution or other
reclassification of the Common Stock, any and all new, substituted or additional
securities to which Executive is entitled by reason of his ownership of the
Restricted Shares shall be immediately subject to the terms of this Agreement.

                  (c) If the Common Stock is converted into or exchanged for, or
stockholders of the Company receive by reason of any distribution in total or
partial liquidation, securities of another corporation, or other property
(including cash), pursuant to any merger of the Company or acquisition of its
assets, then the rights of the Company under this Agreement shall inure to the
benefit of the Company's successor and this Agreement shall apply to the
securities or other property received upon such conversion, exchange or
distribution in the same manner and to the same extent as the Restricted Shares.

            10. MISCELLANEOUS.

                  (a) This Agreement shall be governed by, and construed,
performed and enforced in accordance with, the laws of the State of New York,
without reference to principles of conflicts of law. This Agreement may not be
amended or modified except by a written agreement executed by the parties hereto
or their respective successors and legal representatives.

                  (b) All notices and other communications under this Agreement
shall be given in the same manner and to the same parties as required by the
Employment Agreement.

<Page>
                                                                              10

                  (c) Executive may make an election pursuant to Section 83(b)
of the Code in respect of the Restricted Shares and, if he does so, he shall
timely notify the Company of such election and send the Company a copy thereof.
Executive shall be solely responsible for properly and timely completing and
filing any such election.

                  (d) All Restricted Shares shall be registered on a Form S-8 or
otherwise and tradable by Executive and are not subject to any restrictions or
limitations other than those imposed by this Agreement and applicable securities
law. Certificates for Restricted Shares shall not bear any restrictive legends
after all risks of forfeiture have lapsed.

                  (e) If any provision of this Agreement, or the application of
any such provision to any party or circumstances, shall be determined by any
appropriate tribunal or court of competent jurisdiction to be invalid or
unenforceable to any extent, the remainder of this Agreement, or the application
of such provision to such person or circumstances other than those to which it
is so determined to be invalid or unenforceable, shall not be affected thereby,
and each provision hereof shall be enforced to the fullest extent permitted by
law. If the final judgment of an appropriate tribunal or a court of competent
jurisdiction declares that any provision of this Agreement is invalid or
unenforceable, the parties hereto agree that the court making the determination
of invalidity or unenforceability shall have the power, and is hereby directed,
to reduce the scope, duration or area of the provision, to delete specific words
or phrases and to replace any invalid or unenforceable provision with a
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable provision, and this Agreement shall be
enforceable as so modified.

                  (f) Any dispute under this Agreement shall be governed in
accordance with the provisions of Section 11 of the employment agreement between
the Company and the Executive dated as of the date hereof.

                  (g) The captions and headings in this Agreement are not part
of the provisions hereof and shall have no force or effect.

                  (h) The terms of this Agreement shall be binding upon and
inure to the benefit of the Company, its successors and assigns, and of
Executive and the beneficiaries, executors, administrators, heirs and successors
of Executive.

                  (i) Executive and the Company acknowledge that subject matters
hereof, except to the extent necessary to protect existing rights, supersede any
other agreement between them concerning the specific subject matters hereof.

                  (j) This Agreement may be executed in counterparts, each of
which shall be deemed an original, and said counterparts shall constitute one
and the same instrument.

<Page>
                                                                              11

            IN WITNESS WHEREOF, Executive has hereunto set his hand, and the
Company has caused this Agreement to be executed in their name and on their
behalf, all as of the day and year first above written.

                                    iSTAR FINANCIAL INC.

                                    By:__________________________
                                        Name:  Jay Sugarman

                                    -----------------------------
                                             Spencer Haber<Page>

                                                                  Exhibit 10.16

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT is made as of March 31, 2001 (the "EFFECTIVE DATE") by
and between iStar Financial Inc., a Maryland corporation (together with its
successors and assigns, the "Company"), and Jay Sugarman ("EXECUTIVE").

                           W I T N E S S E T H  T H A T

         WHEREAS, Executive has been employed as Chief Executive Officer of the
Company pursuant to an employment agreement made as of May 20, 1999 between
Executive and an affiliate of the Company (the "OLD AGREEMENT"); and

         WHEREAS, the Company wishes to provide for the continued employment by
the Company of Executive, and Executive wishes to continue to serve the Company,
in the capacities and on the terms and conditions set forth in this Agreement;

         NOW, THEREFORE, Executive and the Company (the "PARTIES") hereby agree
as follows:

         1. EMPLOYMENT PERIOD. The Company shall continue to employ Executive,
and Executive shall continue to serve the Company, on the terms and conditions
set forth in this Agreement. The term of Executive's employment under this
Agreement shall be deemed to have commenced as of the Effective Date and, unless
earlier terminated in accordance with Section 5, shall continue through the
later of March 30, 2004 and the first anniversary of the last "Change of
Control" (as defined in Section 7(a)) that occurs on or before March 30, 2004
(the "INITIAL EMPLOYMENT PERIOD"). Upon the expiration of the Initial Employment
Period and upon each anniversary thereof, the term of Executive's employment
hereunder, if not previously ended, shall automatically be extended for an
additional employment period of one year, subject to earlier termination in
accordance with Section 5 (collectively, the "ADDITIONAL EMPLOYMENT PERIOD"),
unless either Party shall have given written notice to the other Party of its
decision not to extend the Initial Employment Period or to further extend the
Additional Employment Period at least ninety (90) days prior to the scheduled
expiration of the Initial Employment Period or the Additional Employment Period,
as the case may be.

         2. POSITION AND DUTIES.

            (a) During the term of his employment hereunder (the "TERM"),
Executive shall serve as Chief Executive Officer of the Company and (subject to
Executive's re-election to the Board of Directors of the Company (the "BOARD")
by the Company's shareholders) as a member of, and the Chairman of, the Board.
Executive shall have the

<Page>

authorities, duties and responsibilities that are customarily assigned to the
chief executive officer and chairman of the board of a company of the size and
nature of the Company; and shall have such other duties and responsibilities,
not inconsistent therewith, as may from time to time reasonably be assigned to
him by the Board. The Company shall use all reasonable efforts to maintain
Executive as a member of, and Chairman of, the Board, and as Chief Executive
Officer of the Company, throughout the Term. Executive agrees that upon the
termination of his employment as Chief Executive Officer of the Company, his
chairmanship of, and membership on, the Board shall immediately and
automatically terminate and he shall promptly execute any documents evidencing
such termination that the Company may reasonably request him to execute.

            (b) In his capacity as Chief Executive Officer of the Company,
Executive shall report solely and directly to the Board. All other senior
executives of the Company shall, during the Term and unless Executive otherwise
directs, report directly to Executive.

            (c) During the Term, and excluding any periods of vacation and sick
leave to which Executive is entitled, Executive shall devote substantially all
of his business time and attention to the business and affairs of the Company
and shall perform, faithfully and diligently, his duties and responsibilities
hereunder. It shall not be considered a violation of the foregoing for Executive
to: (i) serve on corporate, industry, civic, social or charitable boards or
committees or engage in charitable activities and community affairs; (ii) accept
and fulfill a reasonable number of speaking engagements; (iii) manage his own
personal investments and affairs; and/or (IV) engage in business activities,
consistent with past practice, involving one or more of Starwood Capital Group,
L.L.C., Starwood Capital Group, L.P., their affiliates, and related parties
(collectively, "STARWOOD ENTITIES"); provided that the foregoing activities do
not materially interfere with the performance of Executive's responsibilities
hereunder.

            (d) Executive agrees to discharge his duties and obligations under
this Agreement in accordance with such reasonable policies, consistent with the
express terms of this Agreement, as the Company may from time to time (either
before or after the Effective Date) adopt and communicate to Executive.

            (e) During the Term, Executive's principal office, and principal
place of employment, shall be at the Company's principal executive offices in
Manhattan.

         3. COMPENSATION.

            (a) BASE SALARY. During the Term, Executive shall receive a base
salary ("BASE SALARY") at a rate of $1,000,000 per annum, subject to upward (but
not downward)

                                       2
<Page>

adjustment by the Board, or its compensation committee (the "COMPENSATION
COMMITTEE"), in their sole discretion. The Base Salary shall be paid in
accordance with the Company's customary payroll practices for its senior
executives.

            (b) ANNUAL BONUS. Executive shall, to the extent provided in this
Section 3(b), be entitled to receive an annual incentive award in respect of
each fiscal year of the Company that ends during the Term. Executive's target
annual incentive award for any such year shall equal the amount of the Base
Salary earned by Executive in respect of such year, which amount shall be deemed
to be $1,000,000 for calendar year 2001. Such target annual incentive award
shall be awarded for a fiscal year if specified levels of performance are
achieved for such year, which levels the Compensation Committee shall have
established in good faith and in consultation with Executive, with performance
measured solely against one or more of the following criteria: EPS, EBITDA, loan
rating, volume of loan origination, attainment of strategy/personnel development
goals and such other objective or subjective criteria as the Compensation
Committee shall have selected in good faith and in consultation with Executive.
To the extent that the actual performance for a fiscal year, so measured, falls
short of (or exceeds) the specified levels so established, a lesser (or greater)
amount--but in no event more than 200% of the target annual incentive award
for such year--shall be awarded to the extent provided under a formula that
the Compensation Committee shall have established for such year in good faith
and in consultation with Executive. The Compensation Committee shall, in
good-faith consultation with Executive, select the performance criteria,
establish the target levels of performance, and establish the formula for awards
above and below the target level, for any fiscal year prior to the sixtieth
(60th) day of such fiscal year (except in the case of fiscal year 2001, for
which the day shall be July 15, 2001). Executive shall be paid his annual
incentive award (if any) for a fiscal year no later than the earlier of (x) the
date that other senior executives of the Company are paid their annual incentive
awards (if any) for such year and (y) the sixtieth (60th) day following the last
day of such year; provided that any amount otherwise payable for such year
pursuant to this Section 3(b) shall be reduced (but not below zero) by the
aggregate amount of all dividend equivalents received by Executive during such
year pursuant to Section 4(h), and provided further that payment may be
deferred, upon Executive's prior written election, in accordance with any
compensation deferral program of the Company then available to Executive or to
senior executives of the Company generally.

            (c) STOCK OPTION GRANT. The Company confirms that on March 2,
2001, the Company granted to Executive a ten-year option to purchase 750,000
shares of the Company's common stock ("COMMON STOCK") at an exercise price of
$19.69 per share. Concurrently with the execution of this Agreement, the
parties shall memorialize this prior option grant by entering into an
agreement in substantially the form attached hereto as Exhibit A.

                                       3
<Page>

            (d) FRINGE BENEFITS.

                  (i) REIMBURSEMENT OF EXPENSES AND ADMINISTRATIVE SUPPORT. The
Company shall promptly pay or reimburse Executive, upon the presentation of
appropriate documentation of such expenses, for all reasonable travel and other
expenses incurred by Executive in the course of performing services for or on
behalf of the Company. The Company further agrees to furnish Executive with
office space, administrative support and any other assistance and accommodations
as shall be reasonably required by Executive in the performance of services for
or on behalf of the Company.

                  (ii) PARTICIPATION IN BENEFIT PLANS. Executive shall be
entitled to participate, during the Term, in all welfare and retirement benefit
plans, programs and arrangements that are generally available to senior
executives of the Company, including but not limited to qualified and
non-qualified pension and retirement plans, supplemental pension and retirement
plans, group hospitalization, health, medical, vision, dental care, death
benefit, disability, and post-retirement welfare plans, and other present and
future welfare and retirement benefit plans, programs and arrangements
(collectively, the "BENEFIT PLANS"), on no less favorable terms than those that
apply to other senior executives of the Company generally. Executive shall be
credited with seven years of deemed service prior to the Effective Date, as well
as with his actual service on and after the Effective Date, for purposes of
determining his entitlements and benefits under any such Benefit Plans; provide
that in the event that the grant of such deemed service would cause any of the
Benefit Plans to lose its tax qualified or tax favored status, the Executive
shall receive the after-tax cash equivalent of such benefit in lieu thereof. For
avoidance of doubt, the foregoing shall not be construed as a guaranty of, or as
an obligation on the part of the Company to provide, any future awards
(including, but not limited to, stock options, restricted stock, phantom shares,
or other performance awards) under any Company incentive plan from time to time
in effect for its senior executives or other employees.

                  (iii) LIFE INSURANCE. In addition to and without limiting the
generality of the foregoing, the Company shall promptly obtain, and thereafter
maintain, a term life insurance policy on Executive's life in the face amount of
$10,000,000, which policy shall be owned by Executive or his designee, from a
nationally-recognized insurance carrier reasonably acceptable to Executive. Upon
termination of Executive's employment with the Company for any reason, the
Company shall have no further obligation to pay premiums on such policy.

                  (iv) VACATION. During the Term, Executive shall be entitled to
four weeks' paid vacation per annum. Executive shall not be entitled to any cash
payment in respect of any unused vacation time.

                                       4
<Page>

                  (v) OTHER FRINGE BENEFITS AND PERQUISITES. During the Term,
Executive shall be entitled to participate in all fringe benefits and
perquisites available to senior executives of the Company generally at levels,
and on terms and conditions, that are commensurate with his positions and
responsibilities at the Company and shall be entitled to receive such additional
fringe benefits and perquisites as the Company may, in its discretion, from time
to time provide.

         (e) OTHER RIGHTS AND BENEFITS.

                  (i) Nothing in this Agreement shall prevent or limit
Executive's continuing or future participation in any plan, program, policy or
practice provided by the Company or any of its affiliates for which Executive
may qualify (including, without limitation, any compensation deferral plan or
arrangement), nor shall anything in this Agreement limit or otherwise affect
such rights as Executive may have under any contract, agreement or arrangement
with the Company or any of its affiliates.

                  (ii) Without limiting the generality of Section 3(e)(i), the
Company agrees to cause to be amended, as of the Effective Date, the
Non-Qualified Stock Option Agreement, dated as of May 20, 1999, between Starwood
Financial Advisors, L.L.C., a predecessor of the Company ("SFA"), and Executive,
so that (A) all references to the Old Agreement in the preamble, Section 2.2 and
Section 4.8 of that Stock Option Agreement are instead references to this
Agreement (as duly amended from time to time in accordance with its terms) or
any successor thereto and (B) any termination of Executive's employment with the
Company by expiration of the then scheduled term of employment is treated under
that Stock Option Agreement as if it were a termination Without Good Reason by
Executive. The Company further agrees to treat such Stock Option Agreement as
having been so amended, whether or not such amendment is in fact made. The
Company agrees to fully and promptly indemnify Executive, on an after-tax basis,
for any failure by the Company to fulfill its obligations under this Section
3(e)(ii).

         4. PHANTOM SHARES.

            (a) GRANT OF PHANTOM SHARES. Effective as of the Effective Date, the
Company shall grant Executive 2,000,000 phantom shares (the "PHANTOM SHARES").
Each Phantom Share shall represent one share of common stock of the Company of
the class listed on the New York Stock Exchange as of the Effective Date
("COMMON STOCK"), together with any distributions of cash, securities or other
property (other than ordinary-course dividends) made or declared in respect of
such a share (or in respect of any security or property distributed, directly or
indirectly, in respect of such a share) at any time from the Effective Date
through the date on

                                       5
<Page>

which such Phantom Share is settled pursuant to Section 4(f). Each Phantom Share
shall be subject to the vesting and forfeiture conditions described in Sections
4(b) through 4(e).

            (b) CONTINGENT VESTING. The Phantom Shares shall become contingently
vested (but shall remain subject to forfeiture until becoming fully vested
pursuant to Section 4(d)) ("CONTINGENTLY VESTED") as follows:

                  (i) seventeen and one half percent (17.5%) of the Phantom
Shares (I.E., 350,000 Phantom Shares) shall become Contingently Vested on the
first date, no less than sixty (60) calendar days after the Effective Date, on
which the "Sixty-Day Average Closing Price" (as defined in Section 4(c)) or
"Change of Control Price" (as defined in Section 4(c)) is $25.00 or higher;

                  (ii) an additional thirty-two and one-half percent (32.5%) of
the Phantom Shares (I.E., an additional 650,000 Phantom Shares) shall become
Contingently Vested on the first date, no less than sixty (60) calendar days
after the Effective Date, on which the Sixty-Day Average Closing Price or Change
of Control Price is $30.00 or higher;

                  (iii) an additional thirty percent (30%) of the Phantom Shares
(I.E., an additional 600,000 Phantom Shares) shall become Contingently Vested on
the first date, no less than sixty (60) calendar days after the Effective Date,
on which the Sixty-Day Average Closing Price or Change of Control Price is
$34.00 or higher; and

                  (iv) the remaining twenty percent (20%) of the Phantom Shares
(I.E., the remaining 400,000 Phantom Shares) shall become Contingently Vested on
the first date, no less than sixty (60) calendar days after the Effective Date,
on which the Sixty-Day Average Closing Price or Change of Control Price is
$37.00 or higher.

            (c) CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms shall have the following meanings:

                  (i) "SIXTY-DAY AVERAGE CLOSING PRICE" of a security as of a
specified date shall mean, if such security is publicly traded in the United
States on a national securities exchange or national market system as of such
date, then the average of the closing prices for such security, at the end of
regular trading on the national security exchange or national market system on
which such security is then principally traded in the United States, on each day
on which regular trading of such security shall have occurred during the sixty
(60) calendar day period that ends with the specified date, and otherwise shall
mean "Fair Market Value" (as defined in Section 4(c)(iii)) of such security as
of such date;

                                       6
<Page>

                  (ii) "CHANGE OF CONTROL PRICE" of a security shall mean, if
such security is publicly traded on a national securities exchange or national
market system in the United States immediately prior to the occurrence of a
Change of Control, then the closing price for such security, at the end of
regular trading on the national security exchange or national market system on
which such security is principally traded in the United States, on the most
recent day prior to the Change in Control on which regular trading of such
security shall have occurred, and otherwise shall mean Fair Market Value of such
security as of the occurrence of a Change of Control; and

                  (iii) "FAIR MARKET VALUE" shall mean (x) when used with
respect to a security as of a specified date, the fair market value of such
security on such date, assuming a market consisting of willing and amply-funded
strategic buyers for all outstanding securities of the issuer and determined
without discount for lack of liquidity, lack of control, minority status,
contractual restrictions, or similar factors and (y) when used with respect to
any other property, fair market value as of such date assuming a market
consisting of willing and amply-funded buyers and without discount for lack of
liquidity, contractual restrictions or similar factors.

            (d) FULL VESTING. Contingently Vested Phantom Shares that have not
previously become fully vested, and no longer subject to any risk of forfeiture,
("FULLY VESTED") shall become Fully Vested as follows:

                  (i) If Executive remains employed with the Company through
March 30, 2004, then all of the Phantom Shares that are Contingently Vested as
of such date shall become Fully Vested on such date if and only if the Sixty-Day
Average Closing Price equals or exceeds $12.50 as of such date.

                  (ii) If Executive's employment with the Company is terminated
by the Company for Cause in accordance with this Agreement, no Phantom Shares
shall become Fully Vested on or after the "Date of Termination" (as defined in
Section 5(e)).

                  (iii) If Executive's employment with the Company is terminated
Without Good Reason by Executive on or before the later of (x) March 30, 2004
and (y) the first anniversary of the last Change of Control that occurs on or
before such date, then fifty percent (50%) of the Phantom Shares that are
Contingently Vested as of the Date of Termination and that have not previously
become Fully Vested shall become Fully Vested as of the later of the Date of
Termination and the expiration of the fifteen (15) day period referred to in the
second proviso to this Section 4(d)(iii); PROVIDED that such percentage shall be
zero if the Date of Termination occurs on or before December 31, 2001 and the
second proviso to this Section 4(d)(iii) does not apply; and PROVIDED FURTHER,
that such percentage shall be seventy-five percent (75%) if the

                                       7
<Page>

Company elects to extend the non-competition covenant set forth in Section 10(a)
through the first anniversary of the Date of Termination by notice given to
Executive no later than fifteen (15) days after the date that Executive gives
the Company notice, pursuant to Section 5(c), of the termination of his
employment.

                  (iv) If, on or before the later of (x) March 30, 2004 and (y)
the first anniversary of the last Change of Control that occurs on or before
such date, Executive's employment with the Company is terminated by the Company
Without Cause, by Executive with Good Reason in accordance with this Agreement,
by either Party for Disability in accordance with this Agreement, or by reason
of Executive's death (any of such terminations being an "INVOLUNTARY TERMINATION
OF EMPLOYMENT"), then all of the Phantom Shares that are Contingently Vested as
of the Date of Termination shall become Fully Vested as of such date.

                  (v) If Executive's employment with the Company is terminated
Without Cause by the Company, or with Good Reason by Executive in accordance
with this Agreement, on or before the later of (x) March 30, 2004 and (y) the
first anniversary of the last Change of Control that occurs on or before such
date, then all of the Phantom Shares that become Contingently Vested on or
before the thirtieth (30th) day following the Date of Termination, but have not
yet become Fully Vested as of such thirtieth (30th) day, shall become Fully
Vested as of such thirtieth (30th) day.

                  (vi) Notwithstanding anything to the contrary in Section
4(d)(i), Section 4(d)(v) or Section 4(d)(vii), if a Change of Control occurs on
or before March 30, 2004 and while Executive remains employed with the Company,
then 250,000 of any Phantom Shares that become Contingently Vested upon such
Change of Control pursuant to Section 4(b)(ii) through Section 4(b)(iv) shall
become Fully Vested if and only if Executive remains employed with the Company
through the earliest of (x) the first anniversary of such Change of Control, (y)
the occurrence of the next succeeding Change of Control and (z) the occurrence
of an Involuntary Termination of Employment.

                  (vii) If (A) a Potential Change of Control occurs before, or
within ninety (90) days following, any Involuntary Termination of Employment and
(B) a Change of Control that is not wholly unrelated to such Potential Change of
Control occurs within two hundred and seventy (270) days after such Potential
Change of Control, then (C) all of the Phantom Shares that are or become
Contingently Vested as of the date of the first Change of Control described in
clause (B) of this Section 4(d)(vii) shall become Fully Vested as of the date of
such Change of Control. For purposes of this Agreement, a "POTENTIAL CHANGE OF
CONTROL" shall be deemed to have occurred if (m) any "Person" (as defined in
Section (7)(a)(ii)) commences a tender offer for securities representing at
least thirty percent (30%) of the Company's "Voting Securities" (as defined in
Section 7(a)(ii)); (n) the Company or any affiliate

                                       8
<Page>

thereof or any Starwood Entity enters into an agreement the consummation of
which would constitute a Change of Control; (o) proxies for the election of
members of the Board are solicited by anyone other than the Company; or (p) any
other event occurs that the Board deems to be a Potential Change of Control.

                  (viii) If Executive remains employed with the Company through
the first anniversary of any Change of Control that occurs on or before March
30, 2004, then all of the Phantom Shares that are Contingently Vested as of such
first anniversary shall become Fully Vested as of such anniversary.

Notwithstanding the foregoing provisions of this Section 4(d), the first 18,750
of the Phantom Shares that become Contingently Vested shall not become Fully
Vested until such Phantom Shares have become Fully Vested not only pursuant to
the foregoing provisions of this Section 4(d) but also pursuant to the
provisions of the Reimbursement Agreement, dated as of June 14, 2001, by and
between the Company, SOFI IV Management LLC, Starwood Mezzanine Holdings LP,
Starwood Capital Group and the Executive, as such Agreement may from time to
time be amended in accordance with its terms.

            (e) FORFEITURE. Any Phantom Share that has not become, and no longer
can become, Fully Vested pursuant to Section 4(d) shall immediately be
forfeited. Accordingly, unless Section 4(d)(vii) or the last sentence of Section
4(d) applies, any Phantom Share that does not become Fully Vested on or before
the later of (i) March 30, 2004 and (ii) the first anniversary of the last
Change in Control that occurs on or before such date shall be forfeited

            (f) SETTLEMENT. Phantom Shares that are Fully Vested shall be
settled by the Company no later than seven (7) days following the date on which
they become Fully Vested. Such settlement shall be made (I) by delivering to
Executive any cash that is then represented by such Phantom Shares, together
with nine percent (9%) interest thereon compounded daily through the date of
delivery from the date that such Phantom Shares first represented such cash,
(II) at the election of the Board or the Compensation Committee, by delivering
to Executive any securities then represented by such Phantom Shares that, as of
the date of delivery, are (x) fully registered or otherwise qualified, for sale
and resale, under all applicable Federal, state and other securities laws (E.G.,
with respect to Federal securities laws, registered on an SEC Form S-3 or
equivalent) and (y) fully listed or otherwise qualified for trading in the
United States on a national securities exchange or national market system; or
(iii) delivering to Executive in cash an amount equal to the Fair Market Value,
as of the date of delivery, (x) of any securities then represented by such
Phantom Shares that are not delivered to Executive pursuant to the preceding
clause (ii) and (y) of any other property that is then represented by such
Phantom Shares. Executive may defer the settlement of Fully Vested

                                       9
<Page>

Phantom Shares pursuant to the first two sentences of this Section 4(f) by
delivering an election in writing to the Company, not later than six months
prior to the otherwise applicable settlement date and in accordance with such
reasonable procedures as the Company may reasonably establish, on notice to
Executive, so as to ensure that the deferral is effective for income tax
purposes, that (A) specifies the number or percentage of the Phantom Shares,
Contingently Vested Phantom Shares, and/or Fully Vested Phantom Shares, whose
settlement is to be deferred, (B) describes the date on which the deferred
settlement is to take place, and (C) contains such other information as the
Company may reasonably require.

            (g) ADJUSTMENTS. In the event of any recapitalization,
reorganization, merger, consolidation, combination, exchange of securities,
stock split, spin-off, split-up, liquidation, dissolution or other comparable
transaction or event, or any distribution in respect of securities other than an
ordinary course cash dividend, then (i) the dollar figures set forth in Sections
4(b) and 4(d), and the securities, cash and other property represented by each
Phantom Share, shall promptly be adjusted to the extent appropriate to avoid
dilution or enlargement of the economic opportunity and value represented by the
Phantom Shares, (ii) the dollar figure specified in Section 7(b)(i)(A)(y) shall
promptly be adjusted to the extent appropriate to avoid dilution or enlargement
of the economic opportunity and value represented by the payments specified in
Section 7(b), (iii) the number and type of securities specified in Section 15
shall promptly be adjusted to the extent appropriate and (iv) the number of
Phantom Shares specified in the last sentence of Section 4(d) shall be
appropriately adjusted. If any transaction or event occurs that may require an
adjustment pursuant to this Section 4(g), the Company shall promptly deliver to
Executive a notice that (A) describes in reasonable detail (x) the substance of
such transaction or event and (y) the method by which the required adjustment
(if any) was calculated or otherwise determined (or the reasons why no
adjustment was required) and (B) specifies the adjustment (if any) made.

            (h) DIVIDEND EQUIVALENTS. On the date of each payment of any
ordinary-course dividend on any shares or other securities that are then
represented by Phantom Shares that (i) are either Contingently Vested or Fully
Vested and (ii) have neither been forfeited pursuant to Section 4(e) nor settled
pursuant to Section 4(f), the Company shall pay to Executive an amount equal to
the aggregate ordinary-course dividends to which the holder of the shares or
other securities that are represented by such Phantom Shares would have been
entitled if such shares or other securities had actually been issued and
outstanding as of the record date for such dividend.

         5. TERMINATION OF EMPLOYMENT.

            (a) DEATH OR DISABILITY. Executive's employment with the Company
shall terminate automatically upon Executive's death. Either Party shall be
entitled to terminate

                                       10
<Page>

Executive's employment with the Company in the event of Executive's Disability.
"DISABILITY" shall mean that Executive shall have been unable, as determined by
an "Approved Physician" (as defined below), for a period of not less than (x)
120 consecutive days, or (y) 180 days within any 12 month period, to perform his
duties for the Company, as a result of physical or mental illness, injury or
impairment. A termination of Executive's employment by either Party for
Disability shall be communicated to the other Party by written notice, and shall
be effective on the 30th day after receipt of such notice by the other Party
(such 30th day being the "DISABILITY EFFECTIVE DATE"), unless Executive returns
to full-time performance of his duties for the Company before the Disability
Effective Date. For purposes of this Agreement, "APPROVED PHYSICIAN" shall mean
an independent medical doctor selected by the Parties; PROVIDED that if the
Parties cannot promptly agree on such a doctor, each Party shall promptly select
an independent medical doctor and the two medical doctors thus selected shall
promptly select a third independent medical doctor who shall be the "Approved
Physician".

            (b) BY THE COMPANY.

                  (i) The Company may terminate Executive's employment with the
Company for Cause or Without Cause. "CAUSE" shall mean (x) Executive is
convicted of, or pleads guilty or NOLO CONTENDERE to, any felony, (y) Executive
knowingly engages in misconduct that constitutes a willful gross breach of this
Agreement, or in other willful gross misconduct, and in either case such
misconduct results in material and demonstrable damage to the business or
reputation of the Company, or (z) willful and complete abandonment by Executive
of his duties for the Company; PROVIDED, HOWEVER, that no act or failure to act
shall be considered "knowing" for purposes of this Agreement unless it is done,
or omitted to be done, without reasonable belief that such action or omission
was in, or not opposed to, the best interests of the Company; and PROVIDED,
FURTHER, that no abandonment shall constitute Cause under clause (z) unless
Executive shall have failed to fully cure such abandonment no later than ten
(10) days after receiving written notice from the Board requesting full cure.

                  (ii) A termination of Executive's employment for Cause may
only be effected in accordance with the following procedures. The Board shall
give Executive written notice ("NOTICE OF POTENTIAL TERMINATION FOR CAUSE") of
its intention to terminate Executive's employment for Cause, setting forth in
reasonable detail the specific circumstances that it considers constitute Cause
and the specific provision(s) of this Agreement on which it relies, and stating
the date, time and place of a special meeting of the Board called and held
specifically for the purpose of considering Executive's termination for Cause.
Such special meeting shall take place not less than ten (10), and not more than
twenty (20), days after Executive receives the Notice of Potential Termination
for Cause. At such special meeting, Executive shall be given an opportunity,
together with his counsel, to demonstrate to the Board that Cause does not exist
(including, in the case of clause (z) of Section 5(b)(i), an opportunity to

                                       11
<Page>

demonstrate that Executive has fully cured the abandonment that would otherwise
constitute Cause). A termination of Executive's employment with the Company for
Cause shall be effective when and if a resolution is duly adopted at such
special meeting of the Board, by the affirmative vote of three quarters (3/4) of
the members of the Board other than Executive, terminating Executive's
employment for Cause, subject to DE NOVO review of the question whether Cause
existed through arbitration in accordance with Section 12 (PROVIDED, for
avoidance of doubt, that if Cause is determined through such arbitration not to
have existed, the termination of Executive's employment shall not be reversed
and shall instead be treated as a termination "Without Cause" as such term is
defined in Section 5(b)(iii)).

                  (iii) A termination of Executive's employment by the Company
"WITHOUT CAUSE" (that is, neither for Cause nor for Disability, in each case as
determined in accordance with this Agreement, and not by notice of non-extension
in accordance with Section 1) shall be effected by the Company giving Executive
prior written notice of the termination, which notice shall specify the Date of
Termination. Termination of Executive's employment in accordance with this
Section 5(b)(iii). A termination of Executive's employment Without Cause by the
Company shall not constitute a breach of this Agreement.

            (c) BY EXECUTIVE.

                  (i) Executive may terminate his employment with the Company
with Good Reason or Without Good Reason. "GOOD REASON" shall mean the occurrence
of any of the following events without, in the case of clauses (B) through (G)
only, full cure by the Company no later than ten (10) days after receiving
notice from Executive requesting cure:

                        (A) failure by the Company, the Board, and/or the
      holders of the Company's "Voting Securities" (as defined in Section
      7(a)(ii)) to maintain Executive as the Chief Executive Officer of the
      Company and as a member of, and Chairman of, the Board;

                        (B) the assignment to Executive of any duty or
      responsibility that is inconsistent in any respect with those customarily
      associated with the positions to be held by Executive pursuant to this
      Agreement; or any material diminution in Executive's positions,
      authorities, duties or responsibilities;

                        (C) any requirement that Executive's services for the
      Company be rendered primarily at a location or locations other than the
      principal executive offices of the Company in the Borough of Manhattan;

                                       12
<Page>

                        (D) failure of any successor to all or substantially all
      of the assets or business of the Company to promptly assume in writing all
      of the obligations of the Company under this Agreement;

                        (E) any person is appointed by, or at the direction of,
      the Board or any committee thereof to be a senior executive of the Company
      without prior notice to Executive or over his objection; PROVIDED that it
      shall neither be "Good Reason", nor constitute a breach of this Agreement,
      if the Board by a vote of a majority its members directs Executive to
      terminate the employment of another executive of the Company or itself
      acts directly to do so;

                        (F) any failure by the Compensation Committee to
      establish (in consultation with Executive) target performance levels, and
      a formula for determining awards for performance above and below target
      levels, for any fiscal year as provided in Section 3(b) prior to July 15,
      2001 (in the case of fiscal year 2001) or the sixtieth (60th) day of such
      fiscal year (in the case of any other fiscal year);

                        (G) any other material breach of this Agreement by the
      Company; or

                        (H) any election by Executive, on at least ten (10)
      days' notice to the Company, to terminate his employment with the Company
      at any time during the ninety (90) day period that commences on the first
      anniversary of any Change of Control.

                  (ii) A termination of his employment with the Company by
Executive with Good Reason shall be effected by his giving the Company prior
written notice of the termination setting forth in reasonable detail the
circumstances (including expiration of any applicable cure period without full
cure) that constitute Good Reason and the specific provision or provisions of
this Agreement on which Executive relies and specifying the Date of Termination
("NOTICE OF TERMINATION FOR GOOD REASON"). For avoidance of doubt, a termination
of his employment with the Company by Executive shall be treated as with Good
Reason only if Good Reason in fact existed, and otherwise shall be treated as a
termination Without Good Reason.

                  (iii) A termination of his employment with the Company by
Executive "WITHOUT GOOD REASON" (that is, neither with Good Reason nor for
Disability, in each case determined in accordance with this Agreement, and not
by notice of non-extension in accordance with Section 1) shall be effected by
his giving the Company prior written notice, no less than thirty (30) days
before the Date of Termination, specifying the Date of Termination.

                                       13
<Page>

Termination of Executive's employment in accordance with this Section 5(c)(iii)
shall not constitute a breach of this Agreement.

            (d) NO WAIVER. The failure to set forth any fact or circumstance in
a Notice of Potential Termination for Cause or a Notice of Termination for Good
Reason shall not constitute a waiver of the right to assert, and shall not
preclude the Party giving notice from asserting, such fact or circumstance in an
attempt to enforce any right under, or in connection with, this Agreement.

            (e) DATE OF TERMINATION. "DATE OF TERMINATION" means the date of
Executive's death, the Disability Effective Date, the date on which the
termination of Executive's employment with the Company by the Company for Cause
or Without Cause or by Executive with Good Reason or Without Good Reason is
effective, or the date, if different, on which Executive's employment with the
Company terminates pursuant to the provisions of Section 1.

         6. OBLIGATIONS OF THE COMPANY UPON TERMINATION.

            (a) DEATH. In the event that Executive's employment hereunder is
terminated by Executive's death, then:

                  (i) the Company shall, within seven (7) days following the
date of his death, pay to Executive's designated beneficiary or beneficiaries
(or, if there is no such beneficiary, to Executive's estate or legal
representative) a lump-sum amount of $2,000,000; and

                  (ii) the Company shall continue to provide Executive's spouse
and eligible dependents, at its expense, with the medical benefits and insurance
coverages (including, without limitation, dental, vision, prescription drug and
hospital benefits and coverages) then provided generally to spouses and eligible
dependents of senior executives of the Company through the earlier of the first
anniversary of the date of his death and the date that Executive's spouse and
eligible dependents receive equivalent coverages and benefits under any plans,
programs and/or arrangements of another entity. Benefits provided pursuant to
this Section 6(a)(ii) shall be included as part of any required COBRA coverage.

            (b) DISABILITY. In the event that Executive's employment hereunder
is terminated for Disability in accordance with this Agreement, then:

                  (i) the Company shall, within seven (7) days following the
Date of Termination, pay to Executive a lump-sum amount of $2,000,000; and

                                       14
<Page>

                  (ii) the Company shall continue to provide Executive and his
spouse and eligible dependents, at its expense, with the medical benefits and
insurance coverages (including, without limitation, dental, vision, prescription
drug and hospital benefits and insurance coverages) then provided generally to
senior executives of the Company and their spouses and eligible dependents
through the earlier of the first anniversary of the Disability Effective Date
and the date that Executive's spouse and eligible dependents receive equivalent
coverages and benefits under any plans, programs and/or arrangements of another
entity. Benefits provided pursuant to this Section 6(b)(ii) shall be included as
part of any required COBRA coverage.

            (c) WITHOUT CAUSE BY THE COMPANY OR WITH GOOD REASON BY EXECUTIVE.
In the event that Executive's employment hereunder is terminated (x) Without
Cause by the Company or (y) with Good Reason by Executive in accordance with
this Agreement, then:

                  (i) the Company shall, within seven (7) days following the
Date of Termination, pay Executive a lump-sum amount of (A) $2,000,000 in the
case of a termination Without Cause or with Good Reason pursuant to Section
5(c)(i)(H) and (B) $5,000,000 in the case of a termination with Good Reason
other than pursuant to Section 5(c)(i)(H); and

                  (ii) the Company shall continue to provide Executive, his
spouse and his eligible dependents, at its expense, with the medical benefits
and insurance coverages (including, without limitation, dental, vision,
prescription drug and hospital benefits and insurance coverages) then provided
generally to senior executives of the Company and their spouses and eligible
dependents, through the earlier of the first anniversary of the Date of
Termination and the date that Executive, his spouse, and his dependents receive
equivalent coverages and benefits under any plans, programs and/or arrangements
of a subsequent employer. Benefits provided pursuant to this Section 6(c)(ii)
shall be included as part of any required COBRA coverage.

         Except as otherwise provided in this Agreement, if Executive's
employment is terminated by the Company Without Cause or by Executive with Good
Reason neither Executive nor the Company shall have any further rights or
obligations under this Agreement other than those provided for in this Section
6.

            (d) FOR CAUSE BY THE COMPANY OR WITHOUT GOOD REASON BY EXECUTIVE OR
BY EXPIRATION OF THE TERM. In the event that Executive's employment hereunder is
terminated (x) by the Company for Cause in accordance with this Agreement, (y)
by Executive Without Good Reason or (z) by expiration of the Term pursuant to a
notice of non-extension in accordance with Section 1, then Executive shall be
entitled solely to the benefits described in

                                       15
<Page>

Section 6(e) below, except that in the event of a termination that is described
in clause (z) of this sentence, Executive shall, in addition, be entitled to an
amount, in lieu of any annual incentive award for the fiscal year in which his
employment hereunder terminates, determined and paid in accordance with Section
3(b) as if his employment hereunder had continued through the end of such year,
and based (for avoidance of doubt) solely on the aggregate Base Salary actually
earned for such year.

            (e) MISCELLANEOUS. On any termination of Executive's employment with
the Company, he (or his beneficiaries, legal representatives or estate, as the
case may be) shall be entitled to:

                  (i) Base Salary through the Date of Termination;

                  (ii) the balance of any annual, long-term, or other incentive
award earned but not yet paid (including, without limitation, amounts (if any)
due under Section 3(b));

                  (iii) other or additional benefits in accordance with
applicable plans, programs and arrangements of the Company and its affiliates
(including, without limitation, under Sections 3(d), 3(e), 4, 7, 11, 12 and
16(g), under any stock option grant or agreement and under the agreements
referred to in Section 3(b) of the Old Agreement); and

                  (iv) payment, promptly when due, of all amounts owed to
Executive in connection with the termination or otherwise, such payments to be
made by wire transfer of same day funds to the extent reasonably requested by
Executive.

            (f) GENERAL RELEASE. The Company's obligation to make any payment
pursuant to Section 6(c)(i) shall be contingent upon, and is the consideration
for, Executive delivering to the Company, within thirty (30) days following the
Date of Termination, a general release (the "RELEASE"), in customary form,
releasing the Company, its affiliates and all current and former members,
officers and employees of the Company (collectively, the "RELEASEES") from any
claims relating to his employment hereunder, other than claims relating to
continuing obligations under, or preserved by, (x) this Agreement or (y) any
compensation or benefit plan, program or arrangement in which Executive was
participating as of the Date of Termination (including, without limitation, any
stock option grant or agreement and the agreements referred to in Section 3(b)
of the Old Agreement); SUBJECT TO no Releasee initiating or maintaining any
proceeding or claim against Executive or any of his heirs, beneficiaries or
legal representatives or against his estate, other than proceedings and claims
relating solely to enforcing Executive's continuing obligations under this
Agreement or under any of the agreements, plans, programs and arrangements
referred to in clause (y) of this Section 6(f).

                                       16
<Page>

            (g) OTHER OBLIGATIONS. The respective obligations of the Parties
under Sections 4 through 16 shall survive any termination of Executive's
employment.

            (h) NO OFFSET, ETC. The Company's obligation to make the payments
provided for in, and otherwise to perform its obligations under, this Agreement
shall not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action that the Company or any Releasee may have against
Executive or others. In no event shall Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to Executive under any of the provisions of this Agreement, and such amounts
shall not be reduced, regardless of whether Executive obtains other employment
or receives benefits or compensation in connection therewith, other than as
expressly provided in Sections 6(a)(ii), 6(b)(ii) and 6(c)(ii). Amounts due
under this Section 6 are considered to be reasonable by the Company and are not
in the nature of a penalty. The payments and benefits provided for in this
Section 6 are intended to constitute both liquidated damages and, in the case of
the payment described in Section 6(c)(i),consideration for the general release
described in this Section 6(f).

         7. CHANGE OF CONTROL.

            (a) CHANGE OF CONTROL. For purposes of this Agreement, a "CHANGE OF
CONTROL" shall be deemed to have taken place if:

                  (i) individuals who, as of June 1, 2001, are members of the
Board (the "INCUMBENT DIRECTORS") cease for any reason to constitute at least a
majority of the members of the Board, PROVIDED that (x) any individual becoming
a member of the Board subsequent to June 1, 2001 whose election or nomination
for election was approved by a vote of at least two-thirds of the Incumbent
Directors then on the Board (either by a specific vote or by approval of the
proxy statement of the Company in which such person is named as a nominee for
director, without prior written objection to such nomination) shall be deemed to
be an Incumbent Director; (y) no individual initially elected or nominated as a
member of the Board as a result of an actual or threatened election contest with
respect to members of the Board or as a result of any other actual or threatened
solicitation of proxies or consents by or on behalf of any person other than the
Board shall be deemed to be an Incumbent Director, EXCEPT that this clause (y)
shall not apply (i) to any individual who has been designated by any of the
Starwood Entities to succeed to any of the four Board seats occupied as of June
1, 2001 by Mssrs. Dishner, Grose, Kleeman and Sternlicht or (ii) to any other
individual who is proposed or nominated by any Starwood Entity, and approved by
a vote of at least a majority of the Incumbent Directors then on the Board
(either by a specific vote or by approval of the proxy statement of the Company
in which such person is named as a nominee for director, without prior written
objection to such nomination), if after such individual's election or
appointment, a majority of all members of the Board are clearly and demonstrably
independent of, and not affiliated with, any of the Starwood

                                       17
<Page>

Entities; and (z) any individual who becomes a director in accordance with
clause (y)(i) or (y)(ii) shall be deemed to be an Incumbent Director;

                  (ii) any "PERSON" (as such term is used as of the Effective
Date in Section 13(d) of the Securities Exchange Act of 1934 (the "EXCHANGE
ACT") but excluding any individual or entity to the extent provided pursuant to
clauses (A) through (C) of this Section 7(a)(ii)) is or becomes a "BENEFICIAL
OWNER" (as defined as of the Effective Date in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of 50% or more of the Company's "Voting
Securities" (measured either by value or by voting power); PROVIDED that, for
purposes of this Agreement, "VOTING SECURITIES" shall mean outstanding
securities eligible (after giving effect to Section 160(c) of the General
Corporation Law of Delaware and any similar or successor provision governing
"treasury shares") to vote for the election of members of the board of
directors, or corresponding governing person or body, of the issuer of such
securities; and PROVIDED, FURTHER, that the following individuals and entities
shall be excluded pursuant to the first parenthetical of this Section 7(a)(ii):

                        (A) any employee benefit plan (or related trust)
      sponsored or maintained by the Company or by any entity of which the
      Company is the Beneficial Owner of more than fifty percent (50%) of the
      Voting Securities (measured both by value and by voting power) (a
      "SUBSIDIARY");

                        (B) any Starwood Entity; and

                        (C) any individual or entity, other than a Starwood
      Entity, that becomes the Beneficial Owner, directly or indirectly, of
      Voting Securities of the Company by acquisition from a Starwood Entity,
      but only with respect to Voting Securities that are acquired directly from
      a Starwood Entity, and only for so long as a majority of the members of
      the Board are clearly and demonstrably independent of, and not affiliated
      with, any Person that includes any such individual or entity.

                  (iii) (x) the Company combines with another entity and is the
surviving entity, or (y) all or substantially all of the business or assets of
the Company is disposed of pursuant to a sale, merger, consolidation or other
transaction or series of transactions, UNLESS the holders of Voting Securities
of the Company immediately prior to such combination, sale, merger,
consolidation or other transaction or series of transactions (each a "TRIGGERING
EVENT") immediately after such Triggering Event own, directly or indirectly, by
reason of their ownership of Voting Securities of the Company immediately prior
to such Triggering Event, more than fifty percent (50%) of the Voting Securities
(measured both by value and by voting power) of: (q) in the case of a
combination in which the Company is the

                                       18
<Page>

surviving entity, the surviving entity and (r) in any other case, the entity
(if any) that succeeds to substantially all of the business and assets of the
Company;

                  (iv) the holders of Voting Securities of the Company approve a
plan of complete liquidation or dissolution of the Company;

                  (v) neither Common Stock of the Company, nor securities into
which Common Stock of the Company may by existing contractual right be converted
without payment of consideration, or for which Common Stock of the Company may
by existing contractual right be exchanged without payment of consideration, are
listed for trading on a national securities exchange or national market system
in the United States; or

                  (vi) any other transaction or event occurs that is, or has
been, designated by the Board as a Change of Control.

            (b) CHANGE OF CONTROL RETENTION PAYMENT. If Executive remains
employed with the Company through the first anniversary of any Change of Control
that occurs on or before March 30, 2004, or if an Involuntary Termination of
Employment occurs in connection with or following such a Change of Control but
on or before the first anniversary of such Change of Control (the earlier of (x)
such first anniversary and (y) the later of (A) the date of such Involuntary
Termination of Employment and (B) the date of such Change of Control being the
"RETENTION PAYMENT VESTING DATE"), then the following provisions shall apply:

                  (i) If none of the Phantom Shares shall have become
Contingently Vested on or before the date of such Change of Control pursuant to
Section 4(b), the Company shall pay Executive, within seven (7) days following
the Retention Payment Vesting Date, an amount equal to the product of (A) the
excess, if any, of (x) the Change of Control Price for such Change of Control
over (y) $19.69, multiplied by (B) 2,000,000;

                  (ii) If only 17.5 percent (17.5%) of the Phantom Shares shall
have become Contingently Vested on or before the date of such Change of Control
pursuant to Section 4(b), the Company shall pay Executive, within seven (7) days
following the Retention Payment Vesting Date, one half (1/2) of the amount
specified in Section 7(b)(i); and

                  (iii) If more than 17.5 percent (17.5%) of the Phantom Shares
shall have become Contingently Vested on or before the date of such Change of
Control pursuant to Section 4(b), no payment shall be due to Executive pursuant
to this Section 7(b).

                                       19
<Page>

            (c) ADDITIONAL PAYMENTS BY THE COMPANY.

                  (i) If it is determined (as hereafter provided) that any
payment, benefit or distribution that relates to Executive's employment with the
Company or any termination of such employment, or that is made by the Company
(or any of its affiliates) to or for the benefit of Executive (or any of his
successors, assigns, beneficiaries or family members), whether paid or payable
or distributed or distributable pursuant to the terms of this Agreement or
otherwise, including without limitation any stock option, stock appreciation
right or similar right, or the lapse or termination of any restriction on or the
vesting or exercisability of any of the foregoing (a "PAYMENT"), would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code
(or any successor provision thereto) or to any similar tax imposed by foreign,
state or local law, or any interest or penalties with respect to such excise or
similar tax (such tax or taxes, together with any such interest and penalties,
hereinafter being collectively referred to as the "EXCISE TAX"), then Executive
shall be entitled to receive, prior to the time any such Excise Tax is paid
through withholding (pursuant to Section 8 or otherwise) or is due to be paid by
Executive, an additional payment or payments (a "GROSS-UP PAYMENT") in an amount
such that, after payment by Executive of all income, excise, employment and
other taxes (including any interest or penalties imposed with respect to such
taxes and taking into account any loss of deductions attributable to any
Gross-Up Payment) imposed by any jurisdiction upon or by reason of any Gross-Up
Payment (assuming in each case application of the highest applicable marginal
tax rates), Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon or by reason of the Payments.

                  (ii) Subject to the provisions of this Section 7(c), all
determinations required to be made under this Section 7(c), including whether an
Excise Tax is payable by Executive and the amount of such Excise Tax and whether
a Gross-Up Payment is required and the amount of such Gross-Up Payment, shall
initially be made by a "Big Five" firm of certified public accountants (the
"ACCOUNTING FIRM") selected by the Company reasonably and in good faith, which
Accounting Firm may be the Company's regular outside auditors. The Company shall
direct the Accounting Firm to submit its determination and detailed supporting
calculations to both the Company and Executive (x) within thirty (30) days after
the date of the transaction or event giving rise to a possible Excise Tax
liability and (y) at any other time or times as may be requested by the Company
or Executive. The Company shall pay any required Gross-Up Payment to Executive
no later than five (5) days prior to the date that the corresponding Excise Tax
is paid or due to be paid. Any withholding of amounts in respect of Excise Tax,
pursuant to Section 8 or otherwise, shall be deemed to be a payment of Excise
Tax for purposes of this Section 7(c). If the Accounting Firm determines that no
Excise Tax is payable by Executive, it shall, at the same time as it makes such
determination, furnish Executive with an opinion that he has substantial
authority not to report any Excise Tax on his foreign,

                                       20
<Page>

Federal, state and local income and other tax returns. If the Accounting Firm
determines that an Excise Tax is payable by Executive, it shall, at the same
time it makes such determination, furnish Executive with a written opinion that
he has substantial authority not to report Excise Tax in excess of the amount so
determined on his foreign, Federal, state and local income and other tax
returns. As a result of the uncertainty in the application of Section 4999 of
the Code (or any successor provision thereto) and the possibility of similar
uncertainty regarding applicable foreign, state or local tax law at the time of
any determination by the Accounting Firm hereunder, it is possible that one or
more Gross-Up Payments will not have been made by the Company that should have
been made (an "UNDERPAYMENT"). In the event that Executive believes that an
Underpayment has occurred, Executive shall so notify the Company, which shall
then promptly direct the Accounting Firm to determine the amount of the
Underpayment (if any) that has occurred and to submit its determination and
detailed supporting calculations to both the Company and Executive as promptly
as possible, subject to DE NOVO review of such determination and calculations,
at Executive's election, through arbitration in accordance with Section 12
below. Any such Underpayment shall be promptly paid by the Company to, or for
the benefit of, Executive within seven (7) days after receipt of such
determination and calculations.

                  (iii) The Company and Executive shall (at the Company's sole
expense) each provide the Accounting Firm access to, and copies of, any books,
records and documents in the possession of the Company or Executive, as the case
may be, reasonably requested by the Accounting Firm, and otherwise cooperate
reasonably and in good faith with the Accounting Firm in connection with the
preparation and issuance of the determinations and opinions contemplated by
Section 7(c)(ii).

                  (iv) The foreign, Federal, state and local income and other
tax returns filed by Executive shall be prepared and filed on a basis consistent
with the written opinions of the Accounting Firm with respect to the Excise Tax
payable by Executive. Executive shall, upon receipt from the Company of the full
Gross-Up Payment relating thereto, make proper payment of the amount of any
Excise Tax, and shall at the request of the Company, provide to the Company true
and correct copies (with any amendments) of any Federal income tax return
reflecting any Excise Tax as filed with the Internal Revenue Service and of
corresponding foreign, state and local tax returns, if relevant, as filed with
the applicable taxing authorities, together with such other documents evidencing
any Excise Tax payment to any taxing authority as the Company may reasonably
request. If prior to the earlier of (x) the payment to a tax authority of any
Excise Tax to which a Gross-Up Payment previously paid to Executive relates and
(y) the filing by Executive of any Federal income tax return, or corresponding
foreign, state or local tax return, reflecting any Excise Tax to which a
Gross-Up Payment previously paid to Executive relates, the Accounting Firm
determines that the amount

                                       21
<Page>

of such Gross-Up Payment should be reduced and delivers to Executive a reasoned
written opinion to that effect, Executive shall within ten (10) days thereafter
pay to the Company the amount of such reduction on an after-tax basis.

                  (v) All fees and expenses of the Accounting Firm, and all
legal, accounting, copying and other fees and expenses reasonably incurred by
Executive, in connection with any Excise Tax, any Gross-Up Payment, or any
determination or calculation contemplated by Section 7(c)(ii) or 7(c)(iv) shall
be paid by the Company, with payments of fees and expenses reasonably incurred
by Executive being paid on a fully grossed-up after-tax basis. To the extent
that any fees or expenses are initially advanced by Executive, the Company shall
reimburse Executive, on a fully grossed-up after-tax basis, for the full amount
of such fees and expenses within seven (7) days after receipt from Executive of
a statement therefor and reasonable evidence of his payment thereof.

                  (vi) Executive shall notify the Company in writing of any
claim by the Internal Revenue Service or any other tax authority, with respect
to an Excise Tax or otherwise, that, if successful, would require the payment by
the Company of a Gross-Up Payment not previously paid. Such notification shall
be given as promptly as practicable but no later than seven (7) days after
Executive actually receives notice of such claim and Executive shall further
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid (in each case, to the extent known by Executive).
Executive shall not pay such claim prior to the earlier of (x) the expiration of
the thirty (30) day period following the date on which he gives such notice to
the Company and (y) the date that any payment or amount with respect to such
claim is due. If the Company notifies Executive in writing prior to the
expiration of such period that it desires to contest such claim, Executive
shall:

                        (A) provide the Company (at the Company's sole expense)
      with copies of any written records or documents in his possession relating
      to such claim that the Company reasonably requests;

                        (B) take such action (at the Company's sole expense) in
      connection with contesting such claim as the Company shall reasonably
      request from time to time, including without limitation accepting legal
      representation with respect to such claim by an attorney competent in
      respect of the subject matter and reasonably selected by the Company;

                        (C) cooperate with the Company reasonably and in good
      faith (at the Company's sole expense) in order effectively to contest such
      claim; and

                                       22
<Page>

                              (D) permit the Company to participate (at the
      Company's sole expense) in any proceedings relating to such claim;
      PROVIDED, HOWEVER, that the Company shall bear and pay directly all costs
      and expenses (including attorneys' and accountants' fees, interest and
      penalties) incurred by the Company or Executive in connection with such
      claim and shall indemnify and hold harmless Executive, on a fully
      grossed-up after-tax basis, for and against any Excise Tax or income or
      other tax, including interest and penalties with respect thereto, imposed
      in connection with such claim or in connection with any payment of fees,
      costs or expenses, or any provision of services, pursuant to this Section
      7(c). Subject to the provisions of this Section 7(c), the Company may
      control the defense and/or prosecution of any claim described in the first
      sentence of this Section 7(c)(vi) and, in its reasonable good-faith
      discretion, may pursue or forego any and all administrative appeals,
      proceedings, hearings and conferences with the taxing authority in respect
      of such claim and may, in its reasonable good-faith discretion, either
      direct Executive to pay the amounts claimed and sue for a refund or
      contest the claim in any permissible manner, and Executive agrees to
      prosecute such contest (at the Company's sole expense) to a determination
      before any administrative tribunal, in a court of initial jurisdiction and
      in one or more appellate courts, as the Company may reasonably determine;

PROVIDED, HOWEVER, that if the Company directs Executive to pay any Excise Tax
or other amounts claimed and sue for a refund, the Company shall advance the
amount of such payment to Executive on an interest-free basis and shall
indemnify and hold Executive harmless, on a fully grossed-up after-tax basis,
from any Excise Tax or income or other tax, including interest or penalties with
respect thereto, imposed with respect to such advance; and PROVIDED FURTHER,
HOWEVER, that any extension of the statute of limitations relating to payment of
taxes for a tax year of Executive with respect to which any claim or claims
described in the first sentence of this Section 7(c)(vi) is made shall, unless
Executive otherwise consents, be limited solely to such claim or claims.
Furthermore, the Company's control of any such contested claim shall be limited
solely to issues directly relevant to the amount of any Excise Tax or Gross-Up
Payment that would be payable hereunder and Executive shall be entitled, in his
sole discretion, to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.

                  (vii) If, after the receipt by Executive of an amount advanced
by the Company pursuant to Section 7(c)(vi), Executive receives any refund with
respect to any Excise Tax previously paid with funds provided by the Company,
Executive shall (subject to the Company's complying with all of the requirements
of this Section 7(c)) promptly pay to the Company, on an after-tax basis, the
amount of such refund (together with any interest paid or credited thereon after
any taxes applicable thereto). If, after the receipt by Executive of an

                                       23
<Page>

amount advanced by the Company pursuant to Section 7(c)(vi) in respect of a
claim described in the first sentence of Section 7(c)(vi), a determination is
made that Executive is not entitled to any refund with respect to such claim
and, in the event that such determination is made by a tax authority or a court,
the Company does not notify Executive in writing of its intent to contest such
determination prior to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, on a dollar-for-dollar
basis, the amount of Gross-Up Payment otherwise required to be paid pursuant to
this Section 7(c). For purposes of this Agreement, "AFTER-TAX BASIS" shall each
mean (x) when used in respect of a repayment by Executive, that the amount of
any such repayment shall be limited to the net after-tax amount or benefit
realized by Executive from receipt of any payment or benefit to which such
repayment relates, after deducting therefrom all foreign, Federal, state and
local taxes thereon and adding back any reduction in any such taxes attributable
to any deduction on account of such repayment by Executive, assuming in each
case application of the highest applicable marginal tax rates, and (y) when used
in respect of a payment or benefit provided by the Company, that the amount of
such payment or benefit shall be fully grossed up, assuming application of the
highest applicable marginal tax rates, for all foreign, Federal, state and local
taxes imposed on or by reason of (A) such payment or benefit or (B) any gross-up
thereon.

         8. WITHHOLDING. Notwithstanding any other provision of this Agreement,
the Company may withhold from amounts payable under this Agreement all Federal,
state, local and foreign taxes that are required to be withheld by applicable
law or regulation. -

         9. CONFIDENTIAL INFORMATION. Executive shall hold all secret or
confidential information, knowledge or data relating to the Company or any of
its affiliates and their respective businesses that Executive obtains during his
employment hereunder and that is not public knowledge (other than as a result of
Executive's violation of this Section 9) ("CONFIDENTIAL INFORMATION") in strict
confidence. Executive shall not communicate, divulge or disseminate Confidential
Information at any time during or after Executive's employment with the Company,
except (i) in the course of performing his duties for the Company or its
affiliates, (ii) in confidence to any attorney, accountant or other professional
for the purpose of securing professional advice, (iii) to the extent reasonably
necessary to enforce his rights, (iv) with the prior written consent of the
Company or (v) as otherwise required by law, regulation or legal process. If
Executive is requested pursuant to, or required by, applicable law, regulation
or legal process to disclose any Confidential Information, Executive shall
provide the Company, as promptly as the circumstances reasonably permit, with
notice of such request or requirement and, unless a protective order or other
appropriate relief is previously obtained, the Confidential Information subject
to such request may be disclosed pursuant to and in accordance with the terms of
such request or requirement, provided that Executive shall use his best
reasonable

                                       24
<Page>

efforts, at the Company's reasonable request and sole expense, to limit any such
disclosure to the precise terms of such request or requirement.

         10. NON-COMPETITION. Executive acknowledges that the services to be
rendered by him to the Company (which, as used in this Section 10, shall be
deemed to include the Company and each of its Subsidiaries) are of a special and
unique character. In consideration of his employment hereunder, Executive
agrees, for the benefit of the Company, that he will not (other than in
connection with performing his duties for the Company or its affiliates):

                  (a) during the Term and (PROVIDED that the Company shall not,
after the Date of Termination, have remained in material breach of any of its
material obligations to Executive, under this Agreement or otherwise, for more
than ten (10) days after Executive shall have given the Company written notice
requesting cure of such material breach) for twelve (12) months thereafter: (i)
engage, directly or indirectly, whether as principal, agent, representative,
consultant, employee, partner, stockholder, limited partner or other investor
(other than an investment of not more than (x) five percent (5%) of the stock or
equity of any corporation the capital stock of which is publicly traded or (y)
five percent (5%) of the ownership interest of any limited partnership or other
entity) or otherwise, within the United States of America, in any business that
competes directly and materially with the business conducted by the Company as
of the Date of Termination or (ii) solicit or entice, or attempt to solicit or
entice, away from the Company, either for his own account or for any individual,
firm or corporation, any person known by him to have been, at any time during
the twelve (12) months prior to such solicitation, enticement or attempt, a
borrower from, a lender to, or a direct and material participant in a
substantial financial transaction with, the Company, or to have been actively
solicited by the Company to become a borrower from, a lender to, or a direct and
material participant in a substantial financial transaction with, the Company;
PROVIDED, however, that the provisions of this Section 10(a)(ii) shall not apply
to, and thus shall not be deemed to restrict, any solicitation, enticement or
attempt made on behalf of a venture or business that does not compete directly
and materially with the Company in investment activities relating to the real
estate industry; and PROVIDED, further, that the restrictions set forth in this
Section 10(a) shall not apply after the Date of Termination if (x) Executive's
employment with the Company is terminated by the Company Without Cause, or by
Executive with Good Reason in accordance with this Agreement, AND the Company
fails to pay Executive, within seven (7) days following the Date of Termination,
a lump-sum amount that--when added to the amount paid to him under Section
6(c)(i) and disregarding any other amount paid to him--results in his
receiving an aggregate lump-sum amount of $5,000,000 within seven (7) days
following the Date of Termination or (y) Executive's employment with the Company
is terminated by Executive Without Good Reason in accordance with this Agreement
on or before the later of (A) March 30, 2000 and (B) the first

                                       25
<Page>

anniversary of the last Change in Control that occurs on or before such date AND
the Company shall have failed to timely make the election described in Section
4(d)(iii); or

            (b) during the Term and (PROVIDED that the Company shall not, after
the Date of Termination, have remained in material breach of any of its material
obligations to Executive, under this Agreement or otherwise, for more than ten
(10) days after Executive shall have given the Company written notice requesting
cure of such material breach) for twelve (12) months thereafter: (i) solicit or
entice, or attempt to solicit or entice, away from the Company any individual
who is known by Executive to then be an officer or employee of the Company
either for his own account or for any individual, firm or corporation, whether
or not such individual would commit a breach of a contract of employment by
reason of leaving the service of the Company or (ii) employ, directly or
indirectly, any person who is known by Executive to have been, during the twelve
(12) months prior to employment by Executive, an officer, employee or sales
representative of the Company.

         Executive understands that the provisions of this Section 10 may limit
his ability to earn a livelihood in a business similar to the business of the
Company but nevertheless agrees and hereby acknowledges that (A) such provisions
do not impose a greater restraint than is necessary to protect the goodwill or
other business interests of the Company, (B) such provisions contain reasonable
limitations as to time and scope of activity to be restrained, (C) such
provisions are not harmful to the general public, (D) such provisions are not
unduly burdensome to Executive, and (E) the consideration provided hereunder is
sufficient to compensate Executive for the restrictions contained in such
provisions. In consideration thereof and in light of Executive's education,
skills and abilities, Executive agrees that Executive will not assert in any
forum that such provisions prevent Executive from earning a living or otherwise
are void or unenforceable or should be held void or unenforceable.

         11. INDEMNIFICATION.

            (a) The Company shall promptly indemnify and hold harmless
Executive, to the fullest extent permitted by law and to the extent that he
acted neither in deliberate bad faith nor in a manner that he believed to be
opposed to the interests of the Company, against all costs, expenses,
liabilities and losses (including, without limitation, attorneys' fees
reasonably incurred, reasonable costs of investigation, judgments, fines,
penalties, ERISA excise taxes, interest and amounts paid, or to be paid, in
settlement) incurred by Executive in connection with any Proceeding or Claim.

            (b) The Company shall advance to Executive all costs and expenses
(including, without limitation, attorneys' fees) incurred by him in connection
with any Proceeding or Claim within 20 days after receipt by the Company of a
written request for such

                                       26
<Page>

advance. Such request shall include an itemized list of the costs and expenses
and an undertaking by Executive to repay the amount of such advance if it shall
ultimately be determined that he is not entitled to be indemnified against such
costs and expenses. Upon a request under this subsection (b), Executive shall be
deemed to have met any standard of conduct required for indemnification of such
costs and expenses unless the contrary shall be established by a court of
competent jurisdiction or through arbitration in accordance with Section 12.

            (c) For the purposes of this Section 11, (I) the term "PROCEEDING"
shall mean any action, suit or proceeding, whether civil, criminal,
administrative, investigative or other, in which Executive is made, or is
threatened to be made, a party or a witness by reason of the fact that he is or
was an officer or employee of the Company or is or was serving as an officer,
director, member, employee, trustee or agent of any other entity at the request
of, or on behalf of, the Company, whether or not the basis of such Proceeding
arises out of or in connection with Executive's alleged action or omission in an
official capacity, and (II) the term "CLAIM" shall mean any claim, demand,
investigation, discovery request, or request for testimony or information that
arises out of or relates to Executive's service as an officer, employer, agent
or representative of the Company or service at the Company's request, or on the
Company's behalf, as a director, officer, employee, agent, manager, consultant,
advisor, or representative of any other entity.

            (d) The Company shall not settle any Proceeding or Claim in a manner
that would impose on Executive any penalty or limitation without his prior
written consent. Executive shall not settle any Proceeding or Claim in a manner
that would impose any indemnification obligation on the Company pursuant to this
Section 11 without the prior written consent of the Company. Neither the Company
nor Executive shall unreasonably delay or withhold its or his consent under this
Section 11(d) to any proposed settlement.

            (e) The indemnification, and right to advancement of expenses,
provided in this Section 11 shall continue as to Executive even if he has ceased
to serve in any of the capacities referred to in Section 11(c) and shall inure
to the benefit of Executive's heirs, executors and administrators.

            (f) The indemnification provided in this Section 11 shall not extend
to any claims or disputes arising between the Parties under, pursuant to, or
with respect to, this Agreement or any agreement referred to in Section 3 above.
In the event of any such claim or dispute, such claim or dispute shall be
resolved in accordance with Section 12.

            (g) During the Term and for six years thereafter, the Company shall
keep in place, or cause to be kept in place, a directors' and officers'
liability insurance policy (or

                                       27
<Page>

policies) providing coverage to Executive that is in no respect less favorable
than the coverage then provided to any other present or former officer, director
or trustee of the Company.

         12. ARBITRATION. Any claim or dispute arising out of or relating to
this Agreement, any other agreement between Executive and the Company or any of
its affiliates, Executive's employment with the Company or the termination
thereof (collectively, "Covered Claims") shall be resolved by binding
arbitration, to be held in the Borough of Manhattan, in accordance with the
Commercial Arbitration Rules (and not the National Rules for the Resolution of
Employment Disputes) of the American Arbitration Association and this Section
12. Judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof. The Company shall promptly pay all costs and
expenses (including without limitation attorneys' fees and other charges of
counsel) incurred by Executive or his beneficiaries in resolving any such
Covered Claim, subject to receiving a written undertaking from the recipient to
repay any such reimbursed costs or expenses to the extent that it is finally
determined that such recipient failed to substantially prevail with respect to
such Covered Claim. Pending the resolution of any Covered Claim, Executive (and
his beneficiaries) shall, consistent with Section 5(h) and except to the extent
that the arbitrator(s) otherwise expressly provide, continue to receive all
payments and benefits then due under this Agreement or otherwise.

         13. SUCCESSORS; BENEFICIARIES.

            (a) This Agreement is personal to Executive and, without the prior
written consent of the Company, shall not be assignable by Executive; PROVIDED,
HOWEVER, that any of Executive's rights to compensation hereunder may be
transferred by will or by the laws of descent and distribution or as provided in
Section 13(d).

            (b) This Agreement shall inure to the benefit of and be binding upon
the Parties and their respective successors, heirs (in the case of Executive)
and assigns.

            (c) No rights of the Company under this Agreement may be assigned or
transferred by the Company, other than to a successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company that promptly and
expressly agrees to assume and perform this Agreement in the same manner and to
the same extent that the Company would have been required to perform it if no
such succession had taken place. As used in this Agreement, the term "BOARD"
shall include both the "Board" as defined in the first sentence of Section 2(a)
and the board of directors, board of trustees, or analogous governing person or
body of any successor to all or substantially all of the business or assets of
the Company.

                                       28
<Page>

            (d) Executive shall be entitled, to the extent permitted under any
applicable law, to select and change the beneficiary or beneficiaries to receive
any compensation or benefit payable hereunder following Executive's death by
giving the Company written notice thereof. In the event of Executive's death or
a judicial determination of his incompetence, references in this Agreement to
Executive shall be deemed, where appropriate, to refer to his beneficiary,
estate or other legal representative.

            (e) Except to the extent otherwise provided in Sections 13(a) and
13(d), the rights and benefits of Executive under this Agreement may not be
anticipated, assigned, alienated or subjected to attachment, garnishment, levy,
execution or other legal or equitable process. Any attempt by Executive to
anticipate, alienate, assign, sell, transfer, pledge, encumber or charge such
rights or benefits, except as required by law or court order or as provided in
Sections 13(a) and l3(d), shall be void. Payments hereunder shall not be
considered assets of Executive in the event of insolvency or bankruptcy unless
and until paid, or due to be paid, to Executive.

         14. REPRESENTATIONS.

            (a) The Company represents and warrants that (i) it is fully and
specifically authorized, by action of the Board and/or the Compensation
Committee and of any other person or body whose action is required, to enter
into this Agreement and to perform its obligations under it; (ii) the execution,
delivery and performance of this Agreement by the Company does not violate any
applicable law, regulation, order, judgment or decree or any agreement, plan or
corporate governance document to which the Company is a party or by which it is
bound; (iii) SFA is a predecessor of the Company that has, directly or
indirectly, been merged into or consolidated with the Company; and (iv) upon the
execution and delivery of this Agreement by the Parties, this Agreement shall be
the valid and binding obligation of the Company, enforceable against the Company
in accordance with its terms, except to the extent enforceability may be limited
by applicable bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally.

            (b) Executive represents and warrants that, to the best of his
knowledge and belief, (i) delivery and performance of this Agreement by him does
not violate any applicable law, regulation, order, judgment or decree or any
agreement to which he is a party or by which he is bound and (ii) upon the
execution and delivery of this Agreement by the Parties, this Agreement shall be
the valid and binding obligation of Executive, enforceable against him in
accordance with its terms, except to the extent enforceability may be limited by
applicable bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally.

                                       29
<Page>

         15. LIMITATION OF STOCK PURCHASES. Executive shall not, on or before
the first day on which all Phantom Shares are either Fully Vested pursuant to
Section 4(d) or forfeited pursuant to Section 4(e), purchase more than 10,000
shares of the Company's Common Stock on any single day without the prior
approval of the Chairman of the Compensation Committee.

         16. MISCELLANEOUS.

            (a) This Agreement shall be governed, construed, performed and
enforced in accordance with its express terms, and otherwise in accordance with
the laws of the State of New York, without reference to principles of conflict
of laws. No provision of this Agreement may be amended or modified except by a
written agreement that is executed by the Parties or their respective successors
and legal representatives and that expressly refers to the provision(s) of this
Agreement that are being amended or modified. In the event of any inconsistency
between any provision of this Agreement and any provision of any plan, employee
handbook, personnel manual, program, policy, arrangement or agreement of the
Company or any of its affiliates, the provisions of this Agreement shall control
unless Executive otherwise agrees in a writing that expressly refers to the
provision of this Agreement whose control he is waiving.

            (b) All notices, requests, consents and other communications under
this Agreement shall be in writing and shall be given (i) by hand delivery or
(ii) by registered or certified mail, return receipt requested, postage prepaid,
addressed as follows or (iii) by nationally recognized overnight courier,
addressed as follows:

                           IF TO EXECUTIVE:
                           ---------------

                           Jay Sugarman
                           c/o iStar Financial Inc.
                           1114 Avenue of the Americas, 27th Floor
                           New York, NY 10036

                           with a copy to Executive at the address of his
                           primary residence as it then appears in the records
                           of the Company and a copy to:

                           Law Offices of Joseph E. Bachelder
                           780 Third Avenue, 29th Floor
                           New York, NY 10017
                           Attn:  Robert M. Sedgwick, Esq.

                                       30
<Page>

                           IF TO THE COMPANY:
                           -----------------

                           iStar Financial Inc.
                           1114 Avenue of the Americas, 27th Floor
                           New York, NY 10036
                           Attn:  General Counsel

                           with copy each to:

                           iStar Financial Inc.
                           1114 Avenue of the Americas, 27th Floor
                           New York, NY  10036
                           Attn:  Chairman, Compensation Committee of the
                                    Board of Directors

                           and

                           Paul, Weiss, Rifkind, Wharton & Garrison
                           1285 Avenue of the Americas
                           New York, NY 10019-6064
                           Attn: Michael J. Segal, Esq.

or to such other address or addresses as either Party furnishes to the other in
writing in accordance with this Section 16(b). Notices and other communications
shall be effective when actually received by the addressee.

            (c) If any provision of this Agreement, including but not limited to
Section 10, or the application of any such provision to any person or
circumstances shall be determined by any court or arbitrator of competent
jurisdiction to be invalid or unenforceable to any extent, then (i) the
remainder of this Agreement, and the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid or unenforceable, shall not be affected thereby, and each provision
hereof shall be enforced to the fullest extent permitted by law and (ii) such
court or arbitrator shall have the power, and is hereby directed, to reduce the
scope, duration or area of the provision, to delete specific words or phrases
and to replace any invalid or unenforceable provision with a provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable provision, and this Agreement shall be enforced as so
modified.

            (d) The captions and headings in this Agreement are not part of the
provisions hereof and shall have no force or effect.

                                       31
<Page>

            (e) No waiver by any person or entity of any breach of any condition
or provision contained in this Agreement shall be deemed a waiver of any similar
or dissimilar condition or provision at the same or any prior or subsequent
time. To be effective, any waiver must be set forth in a writing signed by (or
on behalf of) the waiving person or entity and must specifically refer to the
condition(s) or provision(s) of this Agreement being waived.

            (f) The Parties acknowledge that this Agreement supersedes any other
agreement between them concerning the specific subject matter hereof (including,
without limitation, the Old Agreement) except to the extent necessary to protect
existing rights.

            (g) The Company shall, upon presentation of appropriate
documentation, pay (or reimburse) all legal fees and expenses incurred by
Executive in connection with the negotiation and/or preparation of this
Agreement up to a maximum of $75,000.

                     [Rest of Page Intentionally Left Blank]

                                       32
<Page>

         This Agreement may be executed in several counterparts, each of which
shall be deemed an original, and said counterparts shall constitute one and the
same instrument. Signatures delivered by facsimile shall be valid and binding
for all purposes.

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

                                          EXECUTIVE

                                          /s/ Jay Sugarman
                                          -------------------------------------
                                               Jay Sugarman

                                          iSTAR FINANCIAL INC.

                                          By: /s/ Spencer B. Haber
                                              ---------------------------------
                                              Name:  Spencer B. Haber
                                              Title: Executive Vice President
                                                     and Chief Executive Officer

                                       33
<Page>

                                                                   Exhibit A

                      NON-QUALIFIED SHARE OPTION AGREEMENT

            THIS AGREEMENT, entered into as of March 31, 2001, by and between
Jay Sugarman (the "PARTICIPANT"), and IStar Financial Inc. (together with its
successors and assigns, the "COMPANY").

                                   WITNESSETH:

            WHEREAS, the Company maintains the Starwood Financial Trust 1996
Long-Term Incentive Plan, as amended and restated as of March 13, 1998 and as
subsequently amended effective as of September 29, 1998 (the "PLAN"), for the
benefit of officers, key employees, consultants, advisors and directors of the
Company and its subsidiaries; and

            WHEREAS, the Company has awarded the Participant a Non-Qualified
Share Option Award;

            WHEREAS, the Non-Qualified Share Option Award is granted under the
Plan, and will be administered in accordance with the terms of the Plan except
to the extent otherwise expressly provided herein;

            NOW, THEREFORE, IT IS AGREED by and between the Company and the
Participant as follows:

            1. AWARD AND PURCHASE PRICE. Subject to the terms of this Agreement
and the Plan, the Participant is hereby granted a non-qualified share option
(this "OPTION") to purchase from the Company 750,000 shares of common stock of
the Company of the class that is listed on the New York Stock Exchange as of
April 1, 2001 (the "SHARES"). The price of each Share subject to this Option
shall be $19.69. This Option is not intended to constitute an "incentive stock
option" as that term is used in Code section 422.

            2. VESTING. Subject to Section 3, this Option shall become vested
and exercisable as follows:

<Table>
<Caption>

                  Number of Shares          Vesting Date
                  ----------------          ------------
<S>                                       <C>
                   250,000 Shares         January 2, 2002
                   250,000 Shares         January 2, 2003
                   250,000 Shares         January 2, 2004
</Table>

if the Participant's employment with the Company has not terminated before such
date; PROVIDED, however, that this Option shall vest and become immediately
exercisable if the Participant's employment with the Company terminates by
reason of death or "Disability" (as defined below), or if the Company terminates
the Participant's employment with the Company

                                       1
<Page>

"Without Cause" (as defined below), or if the Participant terminates his
employment with the Company with "Good Reason" (as defined below) and a new
employment relationship is not established between the Participant and another
iStar Entity immediately thereafter.

            3. EXPIRATION DATE. This Option shall expire on the earliest to
occur of:

            (a) January 2, 2011;

            (b) if the Participant's employment with the Company terminates by
reason of death, then the six-month anniversary of the date of termination;

            (c) if the Participant's employment with the Company terminates by
reason of Disability, then the twelve-month anniversary of the date of
termination;

            (d) if the Participant's employment with the Company is terminated
by the Company other than due to death, for Disability, or for "Cause" (as
defined below) or if the Participant terminates his employment with the Company
for any reason or no reason and, in either case, a new employment relationship
is not established between the Participant and another iStar Entity within 30
days after such termination, then the three-month anniversary of the date of
termination; or

            (e) if the Participant's employment with the Company is terminated
by the Company for Cause, then the date of termination.

            In the event that rights to purchase all or a portion of the Shares
subject to this Option expire or are exercised, canceled, or forfeited, the
Participant shall promptly return this Agreement to the Company for full or
partial cancellation, as the case may be. Such cancellation shall be effective
regardless of whether the Participant returns this Agreement. If the Participant
continues to have rights to purchase Shares hereunder, the Company shall, within
10 days of the Participant's delivery of this Agreement to the Company, either
mark this Agreement to indicate the extent to which this Option has expired or
been exercised, canceled, forfeited or transferred, or issue to the Participant
a substitute option agreement applicable to such rights, which agreement shall
otherwise be identical to this Agreement in form and substance.

            4. DEFINITIONS. For purposes of this Agreement, the following
definitions shall apply:

            (a) "CAUSE" shall mean "Cause" as defined in, and determined in
accordance with, the Employment Agreement.

            (b) "DISABILITY" shall mean "Disability" as defined in, and
determined in accordance with, the Employment Agreement.

                                       2
<Page>

            (c) "EMPLOYMENT AGREEMENT" shall mean the Employment Agreement made
as of April 1, 2001 between the Company and the Participant, as from time to
time amended in accordance with its terms, or any successor to such Employment
Agreement then in effect.

            (d) "GOOD REASON" shall mean "Good Reason" as defined in, and
determined in accordance with, the Employment Agreement.

            (e) "FAIR MARKET VALUE" shall mean "Fair Market Value" as defined
in, and determined in accordance with, the Employment Agreement.

            (f) "ISTAR ENTITY" shall mean the Company and any entity controlled
by, controlling or under common control with the Company.

            (g) Capitalized terms not otherwise defined in this Agreement shall
have the meanings set forth in the Plan.

            5. METHOD OF OPTION EXERCISE. Any portion of this Option that is
then exercisable may be exercised in whole or in part by delivering a written
notice with the Secretary of the Company at its corporate headquarters, provided
that the notice is delivered on or before the expiration date of this Option.
Such notice shall specify the number of Shares which the Participant elects to
purchase, and shall be accompanied by payment of the purchase price for such
Shares indicated by the Participant's election. Payment may be made by cash
(including personal check backed by sufficient funds, wire transfer and/or a
cashless exercise through a broker) or, with the consent of the Administrator
(which consent shall not be unreasonably withheld or delayed), in Shares that
have a Fair Market Value equal to the purchase price, or in any combination of
the foregoing. Promptly upon receipt by the Company of notice of the
Participant's exercise of any portion of this Option and payment therefor, the
Company shall issue to the Participant the number of Shares that the Participant
has elected to purchase.

            6. TAX WITHHOLDING. Delivery of Shares purchased under this
Agreement is subject to withholding of all applicable taxes. At the election of
the Participant, and with the consent of the Administrator (which consent shall
not be unreasonably withheld or delayed), such withholding obligations may be
satisfied through the surrender of Shares which the Participant already owns or
by authorizing the Company to withhold Shares being purchased under this
Agreement; provided, however, that previously-owned Shares that have been held
by the Participant less than six months and Shares being purchased under this
Agreement may only be used to satisfy the minimum tax withholding required by
applicable law.

            7. TRANSFERABILITY. This Option is not transferable except as
designated by the Participant by will or by the laws of descent and distribution
or, subject to such procedures as the Administrator may establish, to or for the
benefit of members of the Participant's family.

                                       3
<Page>

Except to the extent permitted by the Administrator in the case of transfers to
or for the benefit of members of the Participant's family, during the
Participant's lifetime this Option shall be exercisable only by the Participant
or the Participant's legal representative. Except as permitted by the foregoing,
this Option may not be sold transferred, assigned, pledged, hypothecated,
voluntarily encumbered or otherwise disposed of (whether by operation of law or
otherwise) or be subject to execution, attachment or similar process. Any sale,
transfer, assignment, pledge, hypothecation, voluntary encumbrance or other
disposition of the Option not permitted by the foregoing shall be wholly null
and void, and shall transfer no rights in the Option whatsoever to the purported
transferee.

            8. THE PARTICIPANT'S REPRESENTATIONS. Subject to Section 13, the
Participant hereby represents and covenants that (a) any Shares purchased upon
exercise of this Option will be purchased for investment and not with a view to
the distribution thereof within the meaning of the Securities Act of 1933, as
amended (the "SECURITIES ACT"), unless such Shares have been registered under
the Securities Act and any applicable state securities laws; (b) any subsequent
sale of any such Shares shall be made either pursuant to an effective
registration statement under the Securities Act and any applicable state
securities laws, or pursuant to an exemption from registration under the
Securities Act and such state securities laws; and (c) if reasonably requested
by the Company, the Participant shall submit a written statement, in form
satisfactory to the Company, to the effect that such representation (x) is true
and correct as of the date of purchase of any Shares hereunder or (y) is true
and correct as of the date of any sale of any such Shares, as applicable. As a
further condition precedent to any exercise of this Option, and subject to
Section 13, the Participant shall comply with all regulations and requirements
of any regulatory authority having control of or supervision over the issuance
or delivery of the Shares and, in connection therewith, shall execute any
documents which the Company may reasonably request.

            9. NO CHANGE OF CONTROL. The Participant acknowledges and agrees
that, since the Effective Date of the Plan and through and including the Grant
Date, no Change of Control of the Company has occurred under the Plan.

            10. ADJUSTMENT OF OPTION. The number and/or type of securities that
are subject to this Option, the purchase price thereof, and/or other terms of
this Agreement, shall be promptly adjusted by the Administrator in the
circumstances described in Section 6.6 of the Plan so as to neither diminish,
nor enlarge, the rights and economic value represented by this Option and this
Agreement. In the event of any adjustment pursuant to this Section 10, the
Administrator shall promptly deliver to the Participant a notice (a) setting
forth in reasonable detail (i) the transactions and/or events that lead to the
adjustment and (ii) the method by which the adjustment was calculated or
otherwise determined and (b) specifying the adjustment made.

                                       4
<Page>

            11. ADMINISTRATION. The authority to administer and interpret this
Agreement shall be vested in the Administrator, and the Administrator shall have
all the powers with respect to this Agreement as it has with respect to the
Plan, subject in each case to DE NOVO review in accordance with Section 18
below.

            12. COMPLIANCE WITH APPLICABLE LAW. This Option is subject to the
condition that (x) if the listing, registration or qualification of the Shares
subject to this Option upon any securities exchange or under any law, or the
consent or approval of any governmental body, or the taking of any other action
is reasonably necessary as a condition of, or in connection with, the purchase
or delivery of Shares hereunder upon an exercise of this Option, and if (y) the
third sentence of Section 13 does not apply to such exercise, then (z) this
Option may not be exercised, in whole or in part, unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained, free of any conditions not acceptable to the Company. The Company
agrees to use its best reasonable efforts to promptly effect or obtain any such
listing, registration, qualification, consent or approval.

            13. DELIVERY OF CERTIFICATES. Upon any exercise of this Option, in
whole or in part, the Company shall deliver or cause to be delivered one or more
certificates representing the number of Shares purchased against full payment
therefor. Any Shares so delivered shall be fully registered, and/or qualified,
for sale and resale under all applicable securities laws, and shall be listed
for trading on a national securities exchange in the United States, or qualified
for trading on a national market system in the United States, in each case to
the extent that other securities then subject to being delivered pursuant to the
Plan, or pursuant to agreements or awards under the Plan, are so registered,
qualified or listed. In the event the Shares subject to this Option are neither
listed for trading on a national securities market in the United States, nor
qualified for trading on a national market system in the United States, at the
time of any exercise of this Option pursuant to the first sentence of Section 5,
then in lieu of (x) payment by the Participant of the purchase price in
accordance with Section 5, (y) satisfaction of applicable tax withholding
obligations in accordance with Section 6, and (z) delivery of certificate(s), in
accordance with this Section 13, representing the Shares purchased, the Company
shall pay the Participant a cash lump sum, less applicable tax withholding, in
an amount equal to the product of (i) the number of Shares with respect to which
the Option is being exercised multiplied by (ii) the excess of (A) the Fair
Market Value per Share as of the date of exercise over (B) the per Share
purchase price.

            14. OPTION CONFERS NO RIGHTS AS SHAREHOLDER. The Participant shall
not be entitled to any privileges of ownership with respect to Shares subject to
this Option unless and until such Shares are purchased and delivered upon an
exercise of this Option and the Participant becomes a shareholder of record with
respect to such delivered Shares; and the Participant shall

                                       5
<Page>

not be considered a shareholder of the Company with respect to any such Shares
not so purchased and delivered.

            15. OPTION CONFERS NO RIGHTS TO CONTINUED EMPLOYMENT. In no event
shall the granting of this Option or its acceptance by the Participant give or
be deemed to give the Participant any rights to continued employment by the
Company or any affiliate of the Company.

            16. COORDINATION OF PLAN AND AGREEMENT. This Option is granted under
the Plan. The terms of the Plan, a copy of which has been delivered to the
Participant, are incorporated into and form a part of this Agreement, except to
the extent that such terms are inconsistent with the rights of the Participant
set forth in this Agreement. In the event of any inconsistency between the terms
of the Plan and the terms of this Agreement, the terms of this Agreement shall
control.

            17. AMENDMENT AND TERMINATION. The Board of Directors may at any
time amend or terminate the Plan in accordance with the provisions thereof,
which amendment or termination shall be applicable to the Participant and this
Agreement, except to the extent adverse to the rights or interests of the
Participant under this Agreement.

            18. DISPUTE RESOLUTION. Any controversy, dispute or claim arising
out of or related to this Agreement shall be resolved by binding arbitration in
accordance with the dispute resolution provisions of the Employment Agreement.

            19. WAIVER OF RESPONSIBILITY. The Participant understands that the
Company has assumed no responsibility for advising the Participant as to the tax
consequences to the Participant of the grant of this Option. The Participant
should consult with his individual tax advisor concerning the applicability of
Federal, state and local tax laws to this Option and to his personal tax
circumstances.

            20. ADDITIONAL RESTRICTIONS ON TRANSFER.

            (a) RESTRICTIVE LEGEND. Unless Shares purchased under this Agreement
are covered by an effective registration statement under the Securities Act, the
certificates representing such Shares will bear the following legend, which
legend shall be promptly removed upon reasonable request by the Participant:

            THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS AND NEITHER THE SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD,
TRANSFERRED, PLEDGED OR OTHERWISE

                                       6
<Page>

DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR SUCH LAWS OR AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND SUCH LAWS,
WHICH, IN THE OPINION OF COUNSEL FOR THE HOLDER, WHICH COUNSEL AND OPINION ARE
REASONABLY SATISFACTORY TO COUNSEL FOR THIS CORPORATION, IS AVAILABLE.

            (b) OPINION OF COUNSEL. The Participant may not sell, transfer or
dispose of any Shares purchased pursuant to this Agreement (except pursuant to
an effective registration statement under the Securities Act) without first
delivering to the Company an opinion of counsel reasonably acceptable in form
and substance to the Company that registration under the Securities Act or any
applicable state securities law is not required in connection with such
transfer.

            21. THE COMPANY'S REPRESENTATIONS. The Company represents and
warrants that (i) it is fully and specifically authorized, by action of its
board of directors (the "BOARD") and/or the Compensation Committee of the Board,
and of any other person or body whose action is required, to enter into, and
carry out the terms of, this Agreement; (ii) the execution, delivery and
performance of this Agreement by the Company does not violate any applicable
law, regulation, order, judgment or decree or any agreement, plan or corporate
governance document to which the Company is party or by which it is bound; and
(iii) upon the execution and delivery of this Agreement by the Company and the
Participant, this Agreement shall be the valid and binding obligation of the
Company, enforceable in accordance with its terms, except to the extent
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally.

            22. DEFERRAL OF OPTION GAINS. The Participant shall have the right,
by furnishing written notice to the Company at least six months prior to any
exercise of this Option, to elect to defer any gains realized upon or in
connection with such exercise. Any such deferral, including the manner of
exercise of this Option in connection with such deferral, shall be made in such
manner as may reasonably be required by the Company, including without
limitation such requirements as may apply in order to defer such gains for
Federal income tax purposes. At the time the Participant elects to defer such
gains, such gains shall be deferred into any non-qualified deferral plan of the
Company that accepts such deferrals on terms that satisfy the requirements of
the preceding sentence and that are reasonably acceptable to the Participant. If
no such plan is available, the Participant may make an irrevocable election to
defer such gains into Share Units (with a "SHARE UNIT" representing a Share,
including any dividends and other distributions that may be declared or made
thereon during the period of the deferral). Amounts deferred under this Section
22 shall be paid out under the terms of the Participant's election to defer.

                                       7
<Page>

            23. NOTICES AND OTHER MISCELLANEOUS PROVISIONS. The provisions of
Sections 16(a) through 16(e) of the Employment Agreement as in effect when this
Agreement is executed shall apply to this Agreement as if fully set forth
herein, with references to the "Executive" being deemed to be references to the
Participant and with references to the "Parties" being deemed to be references
to the Participant and the Company.

            24. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument. Signatures delivered by
facsimile shall be valid and binding for all purposes.

                    [Rest of Page Intentionally Left Blank.]

                                       8
<Page>

            IN WITNESS WHEREOF, the Participant and the Company have executed
this Agreement, as of the date first above written.

                                    PARTICIPANT

                                    ____________________________________
                                        Jay Sugarman

                                    iSTAR FINANCIAL INC.

                                    By
                                       _________________________________
                                    Spencer B. Haber
                                    Executive Vice President - Finance and
                                    Chief Financial Officer

                                       9

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