Document:

NORTHSTAR
      REALTY FINANCE CORP.

    2006
      OUTPERFORMANCE PLAN 

    AWARD
      AGREEMENT

    

    

    Name
      of
      Grantee: _____________________ (“Grantee”)

    Participation
      Percentage: ___.__%

    Grant
      Date: _______ __, 2006

     

    

    RECITALS

    

    A.  The
      Grantee is an employee of NorthStar Realty Finance Corp. (the
      “Company”)
      and its
      subsidiary NorthStar Realty Finance Limited Partnership, through which the
      Company conducts substantially all of its operations (the “Partnership”).

     

    B.  The
      Company has adopted the 2006 Outperformance Plan (the “Outperformance
      Plan”)
      to
      provide the Company’s employees with incentive compensation.
      The
      Outperformance Plan was adopted by the Compensation Committee (the “Committee”)
      of the
      Board of Directors of the Compnay (the “Board”)
      pursuant to authority delegated to it by the Board as set forth in the
      Committee’s charter, including authority to make
      grants of equity interests in the Partnership which may, under certain
      circumstances, become exchangeable for shares of the Company’s common stock
      reserved for issuance under the NorthStar
      Realty Finance Corp. 2004 Omnibus Stock Incentive Plan, or any successor plan
      (as
      any
      such plan may be amended, modified or supplemented from time to time,
      collectively the “Stock
      Plan”)).
      This
      award
      agreement (this “Agreement”)
      evidences an award to the Grantee under the Outperformance Plan (the
“Award”),
      which
      is subject to the terms and conditions set forth herein. 

     

    C.  The
      Grantee was selected by the Committee to receive this Award and the Board
      effective as of the grant date specified above, awarded to the Grantee the
      participation percentage in the Outperformance Pool (as defined herein) set
      forth above. 

     

                             
      NOW, THEREFORE,
      the
      Company, the Partnership and the Grantee agree as follows: 

     

    1.  Administration.
      The
      Outperformance Plan and all awards thereunder, including this Award, shall
      be
      administered by the
      Committee, which in the administration of the Outperformance Plan shall have
      the
      same powers and authority it has in the administration of the Stock Plan as
      set
      forth in the Stock Plan.

     

    2.  Definitions.
      Capitalized terms used herein without definitions shall have the meanings given
      to those terms
      in
      the Stock Plan. In addition, as used herein:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Additional
      Share Baseline Value”
means,
      with respect to an Additional Share, the gross proceeds received by the Company
      or the Partnership upon the issuance of such Additional Share, which amount
      shall be deemed to equal, as applicable, (A) if such Additional Share is issued
      in a public offering or private placement, the gross price to the public or
      to
      the purchaser(s), (B) if such Additional Share is issued in exchange for assets
      or upon the acquisition of another entity, the cash value imputed to such
      Additional Share for purposes of such transaction by the parties thereto, as
      determined by the Committee, or, if no such value can be imputed, the Common
      Stock Price on the date of issuance, and (C) if such Additional Shares are
      issued upon exercise of stock options or in exchange (directly or indirectly)
      for LTIP Units, OPP Units or other Units issued to employees, non-employee
      directors, consultants or other persons or entities as incentive compensation
      or
      if such Additional Shares constitute restricted shares of Common Stock issued
      to
      employees or other persons or entities in exchange for services provided to
      the
      Company, zero.

     

    “Additional
      Shares”
means
      (without double-counting) the sum of (A) the number of shares of Common Stock
      plus (B) the product of the Adjustment Factor then in effect multiplied by
      the
      number of Units (other than those issued to the Company), in the case of each
      (A) and (B), to the extent issued after January 1, 2006 and on or before the
      Valuation Date in a capital raising transaction, in exchange for assets or
      upon
      the acquisition of another entity, but specifically excluding, without
      limitation, shares of Common Stock issued upon exercise of stock options or
      upon
      the exchange (directly or indirectly) of LTIP Units, OPP Units or other Units
      issued to employees, non-employee directors, consultants or other persons or
      entities as incentive compensation and restricted shares of Common Stock issued
      to employees or other persons or entities in exchange for services provided
      to
      the Company. 

     

    “Adjustment
      Factor”
has
      the
      meaning given to that term in the Partnership Agreement.

     

    “Award
      OPP Units”
has
      the
      meaning set forth in Section
      3.

     

    “Baseline”
means,
      as of the Valuation Date, an amount representing (without double-counting)
      the
      sum of: (a) the Baseline Value multiplied by (I) the Initial Shares, and (II)
      the sum of 100% plus the Target Return Percentage; plus
      (b) with respect to each Additional Share, the product of (I) the
      Additional Share Baseline Value of such Additional Share, multiplied by (II)
      the
      sum of (A) 100% plus (B) the product of the Target Return Percentage multiplied
      by a fraction the numerator of which is the number of days prior to and
      including the Valuation Date during which such Additional Share has been
      outstanding and the denominator of which is the number of days from and
      including January 1, 2006 to and including the Valuation Date; provided
      that if
      the Valuation Date occurs prior to December 31, 2008 as a result of a Change
      in
      Control, then for purposes of this definition in connection with the calculation
      of the Outperformance Pool as of the Valuation Date, (i) the “Baseline” shall be
      calculated as of the date that such Change of Control is consummated instead
      of
      December 31, 2008 and (ii) the Target Return Percentage to be used in such
      calculation shall be reduced to 30% multiplied by the Fraction.

     

    
      
        
        

      

      
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    “Baseline
      Value”
means
      $9.92, which the Committee determined was the average closing price of the
      Company’s Common Stock for the twenty (20) trading days prior to the
      Effective Date.

     

    "Beneficial
      Owner"
      shall
      have the meaning set forth in Rule 13d-3 under the Exchange Act.

     

    “Change
      of Control”
      means:

     

    (a)  any
      Person is or becomes Beneficial Owner, directly or indirectly, of securities
      of
      the Company representing thirty-five percent (35%) or more of the combined
      voting power of the then outstanding securities of the Company, excluding (I)
      any Person who becomes such a Beneficial Owner in connection with a transaction
      described in clause (I) of paragraph (b) below, (II) any Person who becomes
      such
      a Beneficial Owner through the issuance of such securities with respect to
      purchases made directly from the Company; and (III) NCIC or any of its
      majority-owned or controlled subsidiaries; or 

     

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

     

    (c)
      the
      consummation of an agreement for the sale or disposition by the Company of
      all
      or substantially all of the assets of the Company approved by the stockholders
      of the Company; or

     

    (d)
      the
      stockholders of the Company approve a plan of complete liquidation or
      dissolution of the Company.

     

    
      
        
        

      

      
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    “Code”
means
      the Internal Revenue Code of 1986, as amended.

     

    “Common
      Stock”
means
      Company’s Common Stock, par value $.01 per share, either currently existing or
      authorized hereafter.

     

    “Common
      Stock Price”
means,
      as of a particular date, the average of the Fair Market Value of one share
      of
      Common Stock for the twenty (20) trading days ending on, and including, such
      date (or, if such date is not a trading day, the most recent trading day
      immediately preceding such date); provided,
      however,
      that
      for purposes of determining the Common Stock Price in connection with a
      Transactional Change of Control (but only if in due course such Transactional
      Change of Control is actually consummated by the Company), the Common Stock
      Price shall be equal to the fair market value in cash of the total consideration
      per share of Common Stock to be paid or payable in the transaction resulting
      in
      the Transactional Change of Control, as determined by the Committee as of the
      date on which the Transactional Change of Control is publicly announced (or
      if
      more than a single public announcement is made, as of the date of the latest
      announcement or announcements setting forth the terms and conditions of such
      Transactional Change of Control that are relevant to the Committee’s
      determination of such fair market value).

     

    “Disability”
      means,
      unless otherwise provided in the Grantee’s Service Agreement (if any), a
      disability which renders the Grantee incapable of performing all of his or
      her
      material duties for a period of at least 180 consecutive or non-consecutive
      days
      during any consecutive twelve-month period.

     

    “Dividend
      Unit Equivalent”
has
      the
      meaning set forth in Section
      3.

     

    “Dividend
      Value”
      means,
      as of a particular date of determination, the aggregate amount of dividends
      and
      other distributions paid on one share of Common Stock that was outstanding
      as of
      the Effective Date between January 1, 2006 and such date of determination
      (excluding dividends and distributions paid in the form of additional shares
      of
      Common Stock).

     

    “Effective
      Date”
means
      January 1, 2006.

     

    “Exchange
      Act”
      means
      the
      Securities Exchange Act of 1934, as amended.

     

    “Fair
      Market Value”
      has the
      meaning given to that term in the Stock Plan.

     

    “Fraction”
means
      the number of calendar days that have elapsed since the Effective Date divided
      by 1,096.

     

    “Initial
      Shares”
means
      _____________ shares of Common Stock and Units outstanding to be used for
      purposes of the calculation of the Baseline. 

     

    
      
        
        

      

      
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    “LTIP
      Units”
means
      Partnership Units, as such term is defined in the Partnership Agreement, issued
      as profits interests to employees, non-employee directors, consultants or other
      persons or entities as incentive or other compensation for services provided
      to
      the Company having the rights, voting powers, restrictions, limitations as
      to
      distributions, qualifications and terms and conditions of redemption set forth
      in the Partnership Agreement and any applicable award or similar
      agreement.

     

    “Maximum
      Outperformance Pool Amount”
means
      $40,000,000.

     

    "NCIC"
      means
      NorthStar Capital Investment Corp., a Maryland corporation.

     

    “OPP
      Units”
means
      Partnership Units, as such term is defined in the Partnership Agreement, awarded
      as profits interests under the Outperformance Plan having the rights, voting
      powers, restrictions, limitations as to distributions, qualifications and terms
      and conditions of redemption set forth herein and in the Partnership
      Agreement.

     

    “OPP
      Unit Equivalent”
has
      the
      meaning set forth in Section
      3.

     

    “Outperformance
      Pool”
means,
      as of the Valuation Date, a dollar amount calculated as follows: subtract the
      Baseline from the
      Total
      Return, in each case as of the Valuation Date, and multiply the resulting
      amount (or,
      if
      the resulting amount is a negative number, zero)
      by 10%;
provided,
      however,
      that in
      no event shall the Outperformance Pool as of the Valuation Date exceed the
      Maximum Outperformance Pool Amount.

     

    “Participation
      Percentage”
means
      the Grantee’s share of the Outperformance Pool as set forth on the first page of
      this Agreement.

     

    “Partnership
      Agreement”
means
      the Agreement
      of
      Limited Partnership of the Partnership dated as of October 19, 2004 among the
      Company
      and the
      limited partners party thereto, as amended from time to time.

     

    "Person"
      means
      an individual, corporation, partnership, limited liability company, joint
      venture, association, trust, unincorporated organization, other entity or
      "group" (as defined in the Exchange Act).

     

    “Service
      Agreement”
means,
      as of a particular date, any employment, consulting or similar service
      agreement(s) then in effect between the Grantee, on the one hand, and the
      Company or the Partnership, on the other hand, as amended or supplemented
      through such date.

     

    “Target
      Return Percentage”
means
      30%,
      except
      as otherwise defined for purposes of the definition of Baseline in certain
      circumstances, as described in such definition.

     

    
      
        
        

      

      
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    “Total
      Return”
means
      (without double-counting), as of a particular date, an amount equal to the
      sum
      of (a) the Total Shares multiplied by the Common Stock Price as of such date
      plus (b) an amount equal to the sum of the total dividends and other
      distributions actually paid between January 1, 2006 and such date (excluding
      dividends and distributions paid in the form of additional shares of Common
      Stock or Units), in respect of (I) the Initial Shares and (II) the Additional
      Shares if and to the extent that shares of Common Stock included within the
      definition of “Additional Shares” were outstanding on the record date with
      respect to the applicable dividend or distribution so paid. 

     

    “Total
      Shares”
means
      (without double-counting) the algebraic sum of: (A) the number of shares of
      Common Stock outstanding on the Valuation Date; plus (B) the product of the
      Adjustment Factor then in effect multiplied by the number of Units (other than
      those owned by the Company) outstanding on the Valuation Date; plus (C) shares
      of Common Stock issuable as of the Valuation Date upon exercise of outstanding
      stock options, but only if and to the extent that such options are then
      exercisable and with the number of such shares being calculated on a “net” basis
      after giving pro forma effect to the exercise of such options as if they were
      exercised on a “cashless” basis on the Valuation Date; minus (D) the product of
      the Adjustment Factor then in effect multiplied by the number of LTIP Units,
      OPP
      Units or other Units outstanding on the Valuation Date that were issued to
      employees, non-employee directors, consultants or other persons or entities
      as
      incentive compensation if and to the extent that such LTIP Units, OPP Units
      or
      other Units as of the Valuation Date are subject to time- or performance-based
      vesting restrictions or other risk of forfeiture conditions that have not been
      satisfied; and minus (E) restricted shares of Common Stock or other stock-based
      awards outstanding on the Valuation Date that were granted to employees or
      other
      persons or entities in exchange for services provided to the Company if and
      to
      the extent that such restricted shares or other stock-based awards as of the
      Valuation Date are subject to time- or performance-based vesting restrictions
      or
      other risk of forfeiture conditions that have not been satisfied. 

     

    “Total
      Unit Equivalent”
has
      the
      meaning set forth in Section
      3.

     

    “Transactional
      Change of Control”
means
      (a) a Change of Control described in clause (a) of the definition thereof where
      the “person” or “group” makes a tender offer for Common Stock, or (b) a Change
      of Control described in clauses (b) or (c) of the definition
      thereof.

     

    “Units”
means
      all Partnership Common Units (as defined in the Partnership Agreement),
      Partnership Preferred Units (as defined in the Partnership Agreement) and other
      Partnership Units (as defined in the Partnership Agreement) with economic
      attributes substantially similar to Partnership Common Units and Partnership
      Preferred Units as determined by the Committee, outstanding or issuable upon
      the
      conversion, exercise, exchange or redemption of any securities of any kind
      convertible, exercisable, exchangeable or redeemable for Partnership Common
      Units, Partnership Preferred Units or such other Partnership Units.

     

    
      
        
        

      

      
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    “Valuation
      Date”
      means
      the
      earliest of (i) December 31, 2008, (ii) the date upon which a Change of
Control
      shall occur, and (iii) the last day of a 30 consecutive calendar day period
      during which, on each day in that period, the Outperformance Pool would have
      reached the Maximum Outperformance Pool Amount if such day had been the
      Valuation Date.

     

    3.  Outperformance
      Award.

     

             (a)  Subject
      to Section
      8,
      the
      Grantee is hereby granted an Award consisting of the participation percentage
      in
      the Outperformance Pool set forth on the first page of this Agreement. In
      approving the Outperformance Plan the Committee has resolved that the Grantee’s
      Award be denominated in and settled through the issuance of OPP Units in a
      number calculated to give the Grantee a value equal to the Grantee’s
      participation percentage in the Outperformance Pool (“Award OPP Units”) as of
      the Valuation Date. The timing of issuance of Award OPP Units to the Grantee
      pursuant to this Award will be within the full and exclusive control of the
      Committee, so long as it such issuance occurs on or prior to the Valuation
      Date
      as provided in this Section 3. Without limiting the discretion of the Committee,
      Award OPP Units may be issued to the Grantee: (i) from time to time based on
      a
      determination by the Committee of the extent to which the performance objectives
      established under the Outperformance Plan have been achieved and an estimate
      of
      the value of the Outperformace Pool as of such time or times; (ii) as of the
      Valuation Date based on the final calculations set forth in Section 3(b) of
      this
      Agreement; or (iii) at any other time or times between the date hereof and
      the
      Valuation Date. Award OPP Units, when issued, shall constitute and be treated
      as
      the property of the Grantee, subject to the terms of this Agreement and the
      Partnership Agreement. The issuance of Award OPP Units to the Grantee pursuant
      to this Award shall be set forth in minutes of the meetings of the Committee
      and
      communicted to the Grantee in writing promptly after the approval thereof by
      the
      Committee. Award OPP Units will be: (A) subject to forfeiture or increase to
      the
      extent provided in this Section
      3
      as set
      forth below; and (B) subject to vesting as provided in Sections
      4
      and
8
      hereof.
      In connection with each issuance of Award OPP Units the Grantee shall execute
      and deliver to the Company and the Partnership such documents, comparable to
      the
      documents executed and delivered in connection with this Agreement, as the
      Company and/or the Partnership reasonably request in order to comply with all
      applicable legal requirements, including, without limitation, federal and state
      securities laws.

     

    (b)  As
      soon
      as practicable following the Valuation Date, but as of the Valuation Date,
      the
      Committee will determine the Outperformance Pool (if any) and then perform
      the
      following calculations with respect to this Award:

     

            (i)  multiply
      (w) the Outperformance Pool calculated as of the Valuation Date by (x) the
      Grantee’s Participation Percentage, and then divide the result by the product of
      (y) the Common Stock Price calculated as of the Valuation Date multiplied by
      (z)
      the Adjustment Factor on the Valuation Date; the resulting number is hereafter
      referred to as the “OPP
      Unit Equivalent”;

     

    
      
        
        

      

      
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            (ii)  multiply
      (v) the OPP Unit Equivalent by (w) the Adjustment Factor on the Valuation Date
      and (x) the Dividend Value as of the Valuation Date, and then divide the result
      by the product of (y) the Common Stock Price calculated as of the Valuation
      Date
      multiplied by (z) the Adjustment Factor on the Valuation Date; the resulting
      number is hereafter referred to as the “Dividend
      Unit Equivalent”;
      and

     

            (iii)  add
      the
      OPP Unit Equivalent to the Dividend Unit Equivalent; the resulting number is
      hereafter referred to as the “Total
      Unit Equivalent”.

     

                (c)  If
      the
      Total Unit Equivalent is smaller than the number of Award OPP Units previously
      issued to the Grantee pursuant to Section 3(a) hereof, then the Grantee, as
      of
      the Valuation Date, shall forfeit a number of Award OPP Units equal to the
      difference, and thereafter the term Award OPP Units will refer only to the
      remaining Award OPP Units that were not forfeited. If the Total Unit Equivalent
      is greater than the number of Award OPP Units previously issued to the Grantee
      pursuant to Section 3(a) hereof, then, upon the performance of the calculations
      set forth in Section 3(b) hereof: (A) the Company shall cause the Partnership
      to
      issue to the Grantee, as of the Valuation Date, a number of additional OPP
      Units
      equal to the difference; (B) such additional OPP Units shall be added to the
      Award OPP Units previously issued, if any, and thereby become part of this
      Award; (C) the Company and the Partnership shall take such corporate or
      partnership action as is necessary to accomplish the grant of such additional
      OPP Units; (D) the Grantee shall execute and deliver in connection with such
      grant such documents, comparable to the documents executed and delivered in
      connection with this Agreement, as the Company and/or the Partnership reasonably
      request in order to comply with all applicable legal requirements, including,
      without limitation, federal and state securities laws; and (E) thereafter the
      term Award OPP Units will refer collectively to the Award OPP Units, if any,
      issued prior to such additional grant plus such additional OPP Units. If the
      Total Unit Equivalent is the same as the number of Award OPP Units previously
      issued to the Grantee pursuant to Section 3(a) hereof, then there will be no
      change to the number of Award OPP Units under this Award pursuant to this
      Section 3.

     

    4.  Termination
      of Grantee’s Service Relationship; Vesting; Change of Control.
      

     

                (a)  If
      at any
      time prior to the Valuation Date the Grantee shall cease to be an employee
      of
the
      Company
      for any
      reason other than termination by the Company without cause (as defined in the
      Service Agreement), then this Award Agreement shall automatically and
      immediately be forfeited by the Grantee; provided,
      however,
      that in
      the case of the termination by reason of death or Disability of the
      Grantee,
      the
      provisions of Section
      8 shall
      apply. If at any time prior to vesting pursuant to Section 4(c) hereof the
      Grantee shall cease to be an employee of the
      Company
      for any
      reason other than termination by the Company without cause (as defined in the
      Service Agreement), all Award OPP Units that remain unvested at such time shall
      automatically and immediately be forfeited by the Grantee; provided,
      however,
      that in
      the case of the termination by reason of death or Disability of the
      Grantee,
      the
      provisions of Section
      8 shall
      apply. In
      the
      event Grantee becomes a consultant or advisor to the Company or the Partnership
      or a non-employee director of the Company, such change in status shall not
      be
      deemed a termination of employment or service with the Company at the time
      of
      such change in status for purposes of this Section 4.

     

    
      
        
        

      

      
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                (b)  Notwithstanding
      anything to the contrary in this Section 4 or in any Service Agreement which
      provides for accelerated vesting or payout of the Grantee’s bonuses and
      incentive awards in the event of certain types of terminations of Grantee’s
      service relationship with the Company (such as, for example, termination at
      the
      end of the term, termination without cause by the employer or termination for
      good reason by the Grantee), the Grantee hereby agrees that the treatment of
      this Award and the Grantee’s Award OPP Units shall be governed solely by this
      Agreement and not by the terms of such Service Agreement. For the avoidance
      of
      doubt, the foregoing sentence will be deemed an amendment to any applicable
      Service Agreement to the extent required to avoid application thereof to this
      Award and the Grantee’s Award OPP Units, such that, by way of illustration, any
      such accelerated vesting or payout pursuant to the terms of such Service
      Agreement shall not be interpreted as requiring that any calculations set forth
      in Section 3 hereof be performed with respect to this Award, except as
      specifically provided in Section 8 hereof, prior to the date on which such
      calculations would otherwise be performed pursuant to the terms of the
      Outperformance Plan for all Grantees. If
      at any
      time prior to the Valuation Date the Grantee’s service relationship with the
      Company is terminated by the Company without cause (as defined in the Service
      Agreement), then this Award shall be modified as follows: (A) this Award and
      any
      Award OPP Units issued prior to such termination shall not be forfeited by
      the
      Grantee as of the date of termination;
      (B) the
      calculations set forth in Section 3 hereof shall be performed as of the
      Valuation Date in the same manner as they would have been performed absent
      such
      termination, except that (I) the OPP Unit Equivalent so calculated will then
      be
      multiplied by a fraction the numerator of which is the number of days from
      and
      including January 1, 2006 to the date of such termination and the denominator
      of
      which is the number of days from and including January 1, 2006 to and including
      the Valuation Date, (II) the Dividend Unit Equivalent shall be calculated using
      the adjusted OPP Unit Equivalent calculated pursuant to the foregoing clause
      (I), and (III) the Total Unit Equivalent shall be the sum of the adjusted OPP
      Unit Equivalent and Dividend Unit Equivalent calculated pursuant to the
      foregoing clauses (I) and (II); and (C) all of the Grantee’s Award OPP Units
      issued and not forfeited pursuant to Section 3 hereof shall be automatically
      and
      immediately vested as of the Valuation Date without application of the vesting
      provisions of Section 4(c) below.

     

    
      
        
        

      

      
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                (c)  Subject
      to Section
      8 hereof,
      the
      Grantee’s Award OPP Units issued and not forfeited pursuant to Section 3
      hereof
      shall
      become vested
      as
      follows: (i) fifty percent (50%) of such Award OPP Units shall become vested
      on
      the Valuation Date; and (ii) an additional twenty-five (25%) of such Award
      OPP
      Units shall become vested on each of the first and second anniversaries of
      the
      Valuation Date, provided,
      however,
      that
      all unvested Award OPP Units that have not previously been forfeited pursuant
      to
      Section 3 hereof shall vest immediately upon the occurrence of a Change of
      Control. For the avoidance of doubt, the vesting of the Award OPP Units pursuant
      to this Section 4(c) shall be independent from, and in no way effect, the
      determination of the Outperformance Pool (if any), and the corresponding
      calculation of the Total Unit Equivalent (if any), pursuant to Section 3
      hereof.

     

    5.  Payments
      by Award Recipients. No
      amount
      shall be payable to the Company or the Partnership by the Grantee at any time
      in
      respect of this Award. 

     

    6.  Distributions.
      The
      holder of the Award OPP Units shall be entitled to receive distributions with
      respect to such Award OPP Units to the extent provided for in the Partnership
      Agreement. The Distribution Participation Date (as defined in the Partnership
      Agreement) with respect to Award OPP Units in an amount equal to the Total
      Unit
      Equivalent is the Valuation Date.

     

    7.  Restrictions
      on Transfer.
      None of
      the Award OPP Units shall be sold, assigned, transferred, pledged, hypothecated,
      given away or in any other manner disposed of, encumbered, whether voluntarily
      or by operation of law (each such action a “Transfer”),
      or
      redeemed in accordance with the Partnership Agreement (a) prior to vesting
      and
      (b) unless such Transfer is in compliance with all applicable securities laws
      (including, without limitation, the Securities Act of 1933, as amended (the
      “Securities
      Act”)),
      and
      such Transfer is in accordance with the applicable terms and conditions of
      the
      Partnership Agreement. In connection with any Transfer of Award OPP Units,
      the
      Partnership may require the Grantee to provide an opinion of counsel,
      satisfactory to the Partnership, that such Transfer is in compliance with all
      federal and state securities laws (including, without limitation, the Securities
      Act). Any attempted Transfer of Award OPP Units not in accordance with the
      terms
      and conditions of this Section
      7
      shall be
      null and void, and the Partnership shall not reflect on its records any change
      in record ownership of any OPP Units as a result of any such Transfer, shall
      otherwise refuse to recognize any such Transfer and shall not in any way give
      effect to any such Transfer of any OPP Units. This Agreement is personal to
      the
      Grantee, is non-assignable and is not transferable in any manner, by operation
      of law or otherwise, other than by will or the laws of descent and
      distribution.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    8.  Death
      or Disability.

     

    (a)  Notwithstanding
      any other provision herein, but subject to Section 8(c) below, if, prior to
      the
      Valuation Date, the Grantee shall cease to be an employee, consultant or
      advisor, as applicable, of the Company as a result of his death or Disability,
      then (i) with respect to the Grantee the calculations provided in Section 3
      hereof shall be performed with respect to this Award immediately upon such
      cessation as if a Change of Control had occurred
      (with respect to the Grantee only) on the date of his death or termination
      by
      reason of Disability and (ii) all of the Award OPP Units comprising
      this Award (after giving effect to the issuance of additional OPP Units or
      forfeiture of Award OPP Units pursuant to Section 3 hereof) shall automatically
      and immediately vest.

     

    (b)  Notwithstanding
      any other provision herein, but subject to Section 8(c) below, if, on or after
      the Valuation Date, the Grantee shall cease to be an employee, consultant or
      advisor, as applicable, of the Company as a result of his death or Disability,
      then all of the Grantee’s Award OPP Units shall automatically and immediately
      vest.

     

    (c)  Notwithstanding
      Sections 8(a) and 8(b) above, the provisions of the Grantee’s Service Agreement,
      if any, with respect to death or disability shall govern the treatment of the
      Grantee’s Award OPP Units hereunder.

     

    9.  Changes
      in Capital Structure.
      If (i)
      the Company shall at any time be involved in a merger, consolidation,
      dissolution, liquidation, reorganization, exchange of shares, sale of all or
      substantially all of the assets or stock of the Company or other transaction
      similar thereto, (ii) any stock dividend, stock split, reverse stock split,
      stock combination, reclassification, recapitalization, significant repurchases
      of stock or other similar change in the capital structure of the Company, or
      any
      distribution to holders of Common Stock other than regular cash dividends,
      shall
      occur or (iii) any other event shall occur which in the good faith judgment
      of
      the Committee necessitates action by way of appropriate equitable adjustment
      in
      the terms of this Award, the Outperformance Plan or the OPP Units, then the
      Committee may in its sole discretion take such action as it deems necessary
      to
      maintain the Grantee’s rights hereunder so that they are substantially
      proportionate to the rights existing under this Award, the Outperformance Plan
      and the terms of the OPP Units prior to such event, including, without
      limitation: (A) adjustments in the Award OPP Units, Additional Shares, Baseline
      Value, Dividend Value, Common Stock Price, Maximum Outperformance Pool Amount,
      Total Shares and Total Return; and (B) substitution of other awards under the
      Stock Plan or otherwise. 

     

    10.    
      Miscellaneous.

     

    (a)  Amendments.
      This
      Agreement may be amended or modified only with the consent of the Partnership
      acting through the Committee; provided
      that any
      such amendment or modification adversely affecting the rights of the Grantee
      hereunder must be consented to by the Grantee to be effective
      as against him. 

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (b)  Incorporation
      of Stock Plan; Committee Determinations.
      The
      provisions of the Stock Plan are hereby incorporated by reference as if set
      forth herein. If and to the extent that any provision contained in this
      Agreement is inconsistent with the Stock Plan, this Agreement shall govern.
      The
      Committee will make the determinations and certifications required by this
      Award
      as promptly as reasonably practicable following the occurrence of the event
      or
      events necessitating such determinations or certifications. In the event of
      a
      Change of Control, the Committee will make such determinations within a period
      of time that enables the Company to make any payments due hereunder on or within
      five business days after the consummation of the Change of Control.

     

    (c)  Status
      as a Partner.
      As of
      the grant date set forth on the first page of this Agreement, the Grantee shall
      be admitted as a partner of the Partnership with beneficial ownership of such
      number of Award OPP Units as the Committee elects to issue to the Grantee as
      of
      such date pursuant to Section 3 hereof by: (A) signing and delivering to the
      Partnership a copy of this Agreement; and (B) signing, as a Limited Partner,
      and
      delivering to the Partnership a counterpart signature page to the Partnership
      Agreement (attached hereto as Exhibit
      A).
      The
      Partnership Agreement shall be amended from time to time as applicable to
      reflect the issuance to the Grantee of Award OPP Units pursuant to Section
      3
      hereof, whereupon the Grantee shall have all the rights of a Limited Partner
      of
      the Partnership with respect to the number of OPP Units then held by the
      Grantee, as set forth in the Partnership Agreement, subject, however, to the
      restrictions and conditions specified herein and in the Partnership
      Agreement.

     

    (d)  Status
      of OPP Units under the Stock Plan.
      Award
      OPP Units may, but need not, be issued as equity securities under the Stock
      Plan
      insofar as the Outperformance Plan has been established as an incentive program
      of the Partnership. The Company will have the right, as set forth in the
      Partnership Agreement, to issue shares of Common Stock in exchange for Units
      into which Award OPP Units may have been converted pursuant to the Partnership
      Agreement, subject to certain limitations set forth in the Partnership
      Agreement, and such shares of Common Stock may be issued under the Stock Plan
      if
      the Committee so determines. The Grantee must be eligible to receive the Award
      OPP Units in compliance with applicable federal and state securities laws and
      to
      that effect is required to complete, execute and deliver certain covenants,
      representations and warranties (attached as Exhibit
      B).
      The
      Committee may, in its sole and absolute discretion, determine whether and when
      Award OPP Units issued pursuant to Section 3 hereof become part of the Stock
      Plan, and upon and to the extent of such determination this Award will be
      considered an award under the Stock Plan. The Grantee acknowledges that the
      Grantee will have no right to approve or disapprove such determination by the
      Committee. 

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (e)  Legend.
      The
      records of the Partnership evidencing the Award OPP Units shall bear an
      appropriate legend, as determined by the Partnership in its sole discretion,
      to
      the effect that such OPP Units are subject to restrictions as set forth herein
      and in the Partnership Agreement.

     

    (f)  Compliance
      With Law.
      The
      Partnership and the Grantee will make reasonable efforts to comply with all
      applicable securities laws. In addition, notwithstanding any provision of this
      Agreement to the contrary, no OPP Units will become vested or be paid at a
      time
      that such vesting or payment would result in a violation of any such
      law.

     

    (g)  Investment
      Representation; Registration.
      The
      Grantee hereby makes the covenants, representations and warranties and set
      forth
      on Exhibit
      B
      attached
      hereto. All of such covenants, warranties and representations shall survive
      the
      execution and delivery of this Agreement by the Grantee. The Partnership will
      have no obligation to register under the Securities Act any OPP Units or any
      other securities issued pursuant to this Agreement or upon conversion or
      exchange of OPP Units.

     

    (h)  Section
      83(b) Election.
      In
      connection with each separate issuance of OPP Units under this Award pursuant
      to
      Section 3 hereof the Grantee hereby agrees to make an election to include in
      gross income in the year of transfer the applicable Award OPP Units pursuant
      to
      Section 83(b) of the Code substantially in the form attached hereto as
Exhibit
      C
      and to
      supply the necessary information in accordance with the regulations promulgated
      thereunder. 

     

    (i)  Severability.
      In the
      event that one or more of the provisions of this Agreement may be invalidated
      for any reason by a court, any provision so invalidated will be deemed to be
      separable from the other provisions hereof, and the remaining provisions hereof
      will continue to be valid and fully enforceable.

     

    (j)  Governing
      Law.
      This
      Agreement is made under, and will be construed in accordance with, the laws
      of
      the State of New York, without giving effect to the principle of conflict of
      laws of such State.

     

    (k)  No
      Obligation to Continue Position as an Employee, Consultant or
      Advisor.
      Neither
      the Company nor any affiliate is obligated by or as a result of this Agreement
      to continue to have the Grantee as an employee, consultant or advisor and this
      Agreement shall not interfere in any way with the right of the Company or any
      affiliate to terminate the Grantee’s service relationship at any
      time.

     

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

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (m)  Withholding
      and Taxes.
      No
      later than the date as of which an amount first becomes includible in the gross
      income of the Grantee for income tax purposes or subject to the Federal
      Insurance Contributions Act withholding with respect to this Award, the Grantee
      will pay to the Company or, if appropriate, any of its affiliates, or make
      arrangements satisfactory to the Committee regarding the payment of, any United
      States federal, state or local or foreign taxes of any kind required by law
      to
      be withheld with respect to such amount. The obligations of the Company under
      this Agreement will be conditional on such payment or arrangements, and the
      Company and its affiliates shall, to the extent permitted by law, have the
      right
      to deduct any such taxes from any payment otherwise due to the
      Grantee.

     

    (n)  Successors
      and Assigns.
      This
      Agreement shall be binding upon the Partnership’s successors and assigns,
      whether or not this Agreement is expressly assumed. 

     

    [signature
      page follows]

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the undersigned have caused this Award Agreement to be executed
      as of the __ day of __________, 2006.

     

     

    
      	 	NORTHSTAR REALTY
              FINANCE
              CORP.
	 	 	 	 
	 	By: 	 	 
	 	 	
              
Name:
              Mark E. Chertok
	 	 	Title: Chief
              Financial
              Officer and Treasurer 
	 	 	 	 
	 	 	 	 
	 	NORTHSTAR REALTY
              FINANCE
              LIMITED PARTNERSHIP
	 	 	 	 
	 	By: 	NorthStar Realty
              Finance
              Corp., its general partner
	 	 	 	 
	 	 	By: 	 
	 	 	 	
              
                
Name:
                Mark E. Chertok
                Title:
                  Chief
                  Financial Officer and Treasurer

              

            
	 	 	 	 
	 	 	 	 
	 	GRANTEE
	 	 	 	 
	 	 	 	 
	 	
              
Name:

    

     

     

    
      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

       

    

    EXHIBIT
      A

    
    

     

    FORM
      OF
      LIMITED PARTNER SIGNATURE PAGE

     

    The
      Grantee, desiring to become one of the within named Limited Partners of
      NorthStar Realty Finance Limited Partnership, hereby accepts all of the terms
      and conditions of (including, without limitation, the provisions of Section
      2.4
      titled “Power of Attorney”), and becomes a party to, the Agreement of Limited
      Partnership, dated as of October 19, 2004, of NorthStar Realty Finance Limited
      Partnership, as amended through the date hereof (the “Partnership
      Agreement”).
      The
      Grantee agrees that this signature page may be attached to any counterpart
      of
      the Partnership Agreement.

     

     

     

    
      	 	
              Signature Line for Limited Partner:

               

               

                                                                                    

               

              Name: ______________________

               

              Date: __________ __, 2006

               

               

              Address of Limited Partner:

               

              ________________________

               

              
                ________________________

                 

              

            	 	 
	 	 	 	 
	 	 	 	 

    

     

                                                                                                                         

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      B

     

    GRANTEE’S
      COVENANTS, REPRESENTATIONS AND WARRANTIES

     

    The
      Grantee hereby represents, warrants and covenants as follows:

     

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

     

                (i)   
      The
      Company’s latest Annual Report to Stockholders; 

     

                (ii)  
      The
      Company’s Proxy Statement for its most recent Annual Meeting of Stockholders;

     

                (iii) 
      The
      Company’s Report on Form 10-K for the fiscal year most recently
      ended;

     

                (iv) 
      The
      Company’s Form 10-Q for the most recently ended quarter filed by the Company
      with the Securities and Exchange Commission since the filing of the Form 10-K
      described in clause (iii) above;

     

                (v) 
Each
      of
      the Company’s Current Report(s) on Form 8-K, if any, filed since the end of the
      fiscal year most recently ended for which a Form 10-K has been filed by the
      Company;

     

                (vi)  
      The
      Partnership Agreement; 

     

                (vii) 
      The
      Stock
      Plan; and

     

                (viii) The
      Company’s Certificate of Incorporation, as amended.

     

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

     

            (b)  The
      Grantee hereby represents and warrants that 

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      C

     

    ELECTION
      TO INCLUDE IN GROSS INCOME IN YEAR OF

    TRANSFER
      OF PROPERTY PURSUANT TO SECTION 83(B)

    OF
      THE INTERNAL REVENUE CODE

     

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

     

    
      	 	
              1.

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

            

    

     

    Name: _____________________________
      (the “Taxpayer”)

     

    Address:
      _________________________________

     

    _________________________________________

     

    Social
      Security No./Taxpayer Identification No.: _________________

     

    
      	 	
              2.

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

            

    

     

    The
      election is being made with respect to ____________ OPP Units in NorthStar
      Realty Finance Limited Partnership (the “Partnership”).

     

    
      	 	
              3.

            	
              The
                date on which the OPP Units were transferred is ________ __, 2006.
                The
                taxable year to which this election relates is calendar year
                2006.

            

    

     

    
      	 	
              4.

            	
              Nature
                of restrictions to which the OPP Units are
                subject:

            

    

     

    
      	 	
              (a)

            	
              With
                limited exceptions, until the OPP Units vest, the Taxpayer may not
                transfer in any manner any portion of the OPP Units without the consent
                of
                the Partnership. 

            

    

     

    
      	 	
              (b)

            	
              The
                Taxpayer’s OPP Units vest in accordance with the vesting provisions
                described in the Schedule attached hereto. Unvested OPP Units are
                forfeited in accordance with the vesting provisions described in
                the
                Schedule attached hereto.

            

    

     

    
      	 	
              5.

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

            

    

     

    
      	 	
              6.

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

            

    

     

    
      	 	
              7.

            	
              A
                copy of this statement has been furnished to the Partnership and
                NorthStar
                Realty Finance Corp.

            

    

     

    Dated:
      _____________________

                                                                   

    
      
        	 	
              	                         
	 
	 	
              	Name: 	 

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SCHEDULE
      A

    

    Vesting
      Provisions of OPP Units

    

    The
      OPP
      Units are subject to time-based and performance-based vesting with the final
      vesting percentage equaling the product of the time-based vesting percentage
      and
      the performance-based vesting percentage. Performance-based vesting will be
      from
      0-100% based on NorthStar Realty Finance Corp.’s (the “Company’s”) per-share
      total return to shareholders for the period from January 1, 2006 to December
      31,
      2008 (or earlier in certain circumstances). Under the time-based vesting
      hurdles, fifty-percent (50%) of the OPP Units will vest on the last day of
      the
      performance period and twenty-five percent (25%) of the remaining OPP Units
      will
      vest on each of the first and second anniversaries thereof, provided that the
      Taxpayer remains an employee of the Company through such dates, subject to
      acceleration in the event of certain extraordinary transactions or termination
      of the Taxpayer’s service relationship with the Company under specified
      circumstances. Unvested OPP Units are subject to forfeiture in the event of
      failure to vest based on the passage of time or the determination of the
      performance-based percentage.NORTHSTAR
      REALTY FINANCE LIMITED PARTNERSHIP

     

    First
      Amendment to the

    Agreement
      of Limited Partnership of NorthStar Realty Finance Limited
      Partnership

     

    This
      Amendment is made as of March 14, 2006, by NORTHSTAR REALTY FINANCE CORP.,
      a
      Maryland corporation, as general partner (the “General
      Partner”),
      of
      NORTHSTAR REALTY FINANCE LIMITED PARTNERSHIP, a Delaware limited partnership
      (the “Partnership”),
      for
      the purpose of further amending the Agreement of Limited Partnership of the
      Partnership dated October 19, 2004 (the “Partnership
      Agreement”).
      All
      capitalized terms used herein and not defined shall have the respective meanings
      ascribed to them in the Partnership Agreement.

     

    WHEREAS,
      pursuant to Section 4.2 of the Partnership Agreement, the General Partner is
      establishing an additional series of LTIP Units, to be referred to as the “OPP
      Units” with the rights, preferences and privileges set forth in the Partnership
      Unit Designation attached hereto, to certain persons who provide services for
      the benefit of the Partnership (the “Grantees”).

     

    NOW,
      THEREFORE, in consideration of the mutual covenants set forth herein, and for
      other good and valuable consideration, the receipt and sufficiency of which
      are
      hereby acknowledged, the General Partner hereby amends the Partnership Agreement
      as follows:

     

    1.            Issuance
      of LTIP Units.

     

    A.  Pursuant
      to Section 4.2 of the Partnership Agreement, the Partnership may from time
      to
      time issue OPP Units to the Grantees in the respective amounts set forth on
      Schedule
      A hereto.
      The holder of any OPP Units shall have the benefits and obligations under the
      Partnership Agreement to which the holder of such a Limited Partner Interest
      may
      be entitled or obliged under the Partnership Agreement, as supplemented and
      amended by the rights, powers, privileges, restrictions, qualifications and
      limitations specified in Exhibit
      B
      to the
      Partnership Agreement as added by this Amendment. 

     

    B.  The
      admission of the Grantees as Additional Limited Partners of the Partnership
      shall become effective as of the date of this Amendment, which shall also be
      the
      date upon which the names of the Grantees are recorded on the books and records
      of the Partnership, and Exhibit A to the Partnership Agreement is amended to
      reflect such admission.

     

    2.       
      Amendments
      to Partnership Agreement.

     

    The
      General Partner, as general partner of the Partnership and as attorney-in-fact
      for its Limited Partners, hereby amends the Partnership Agreement as
      follows:

     

    A.    
      Article
      I
      of the Partnership Agreement is amended by inserting the following definitions
      in alphabetical order: 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    “Liquidating
      Losses”
has
      the
      meaning set forth in Section 6.3(b) hereof.

     

    “LTIP
      Unit”
means
      a
      Partnership Unit which is designated as an LTIP Unit, with such further
      designation as the General Partner may assign to distinguish any series of
      LTIP
      Units from other series, and which has the rights, preferences and other
      privileges designated in Section 4.5 hereof, in any Partnership Unit Designation
      establishing an additional series of LTIP Units and elsewhere in this Agreement
      in respect of Holders of LTIP Units. The allocation of LTIP Units among the
      Partners shall be set forth on Exhibit
      A,
      as may
      be amended from time to time.

     

    B.       Section
      6.3(b) of the Partnership Agreement is amended by replacing the existing text
      with the following:

     

    E.   
       Special
      Allocations Regarding LTIP Units.
      Notwithstanding the provisions of Section 6.2 above, but subject to the prior
      allocation of income, gain, deduction and loss under paragraph (a) above and
      to
      the terms of any Partnership Unit Designation in respect of any class of
      Partnership Interests ranking senior to the LTIP Units with respect to return
      of
      capital or any preferential or priority return, any Liquidating Gains shall
      first be allocated to the Holders of LTIP Units until the Economic Capital
      Account Balances of such Holders, to the extent attributable to their ownership
      of LTIP Units, are equal to (i) the Partnership Common Unit Economic
      Balance, multiplied by (ii) the number of their LTIP Units; provided
      that no
      such Liquidating Gains will be allocated with respect to any particular LTIP
      Unit unless and to the extent that such Liquidating Gains, when aggregated
      with
      other Liquidating Gains realized since the issuance of such LTIP Unit, exceed
      Liquidating Losses realized since the issuance of such LTIP Unit.
      Notwithstanding the provisions of Section 6.2 above, but subject to the prior
      allocation of income, gain, deduction and loss under paragraph (a) above and
      to
      the terms of any Partnership Unit Designation in respect of any class of
      Partnership Interests ranking senior to the LTIP Units with respect to return
      of
      capital or any preferential or priority return, in the event that, due to
      distributions with respect to Common Units in which the LTIP Units do not
      participate or otherwise, the Economic Capital Account Balance of any present
      or
      former Holder of LTIP Units, to the extent attributable to the Holder’s
      ownership of LTIP Units, exceeds the target balance specified above, then
      Liquidating Losses shall be allocated to such Holder to the extent necessary
      to
      reduce or eliminate the disparity. In the event that Liquidating Gains or
      Liquidating Losses are allocated under this Section 6.3(b), Net Income and
      Net
      Loss shall be recomputed without regard to the Liquidating Gains or Liquidating
      Losses so allocated (subject to any prior allocation of Net Income or Net Loss
      otherwise provided for). For this purpose, “Liquidating
      Gains”
means
      any net capital gain realized in connection with the actual or hypothetical
      sale
      of all or substantially all of the assets of the Partnership, including but
      not
      limited to net capital gain realized in connection with an adjustment to the
      Gross Asset Value of Partnership Assets under paragraph (b) of the definition
      of
“Gross Asset Value.” Similarly, “Liquidating
      Losses”
means
      any net capital loss realized in connection with any such event. The
“Economic
      Capital Account Balances”
of
      the
      Holders of LTIP Units will be equal to their Capital Account balances, plus
      the
      amount of their shares of any Partner Minimum Gain or Partnership Minimum Gain,
      in either case to the extent attributable to their ownership of LTIP Units.
      Similarly, the “Partnership
      Common Unit Economic Balance”
shall
      mean (i) the Capital Account balance of the General Partner, plus the amount
      of
      the General Partner’s share of any Partner Minimum Gain or Partnership Minimum
      Gain, in either case to the extent attributable to the General Partner’s
      ownership of Partnership Common Units and computed on a hypothetical basis
      after
      taking into account all allocations through the date on which any allocation
      is
      made under this Section 6.3(b), divided by (ii) the number of the General
      Partner’s Partnership Common Units. Any such allocations shall be made among the
      holders of LTIP Units in proportion to the amounts required to be allocated
      to
      each under this Section 6.3(b). The parties agree that the intent of this
      Section 6.3(b) is to make the Capital Account balance associated with each
      LTIP
      Unit economically equivalent to the Capital Account balance associated with
      the
      General Partner’s Partnership Common Units (on a per-unit basis), but only if
      and to the extent that the Partnership has recognized cumulative net gains
      with
      respect to its assets since the issuance of the relevant LTIP Unit.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    C.  
          Section
      6.3(c) of the Partnership Agreement is hereby amended by inserting the following
      new paragraph (viii), renumbering the existing paragraph (viii) as paragraph
      (ix), and revising the first phrase of paragraph (ix) as follows:

     

    (viii) Forfeiture
      Allocations.
      Upon a
      forfeiture of any unvested Partnership Interest by any Partner, gross items
      of
      income, gain, loss or deduction shall be allocated to such Partner if and to
      the
      extent required by final Treasury Regulations promulgated after January 1,
      2006
      to ensure that allocations made with respect to all unvested Partnership
      Interests are recognized under Code Section 704(b).

     

    (ix) Curative
      Allocations.
      The
      allocations set forth in Sections 6.3(c)(i) through (viii) above (the
“Regulatory Allocations”) are intended [balance of section
      unchanged]

     

    D.      
      Section
      10.2 of the Partnership Agreement is amended by designating the existing text
      of
      Section 10.2 as paragraph (a), and by appending the following new paragraph
      (b):

     

    (b) To
      the
      extent provided for in Treasury Regulations, revenue rulings, revenue procedures
      and/or other IRS guidance issued after the date hereof, the Partnership is
      hereby authorized to, and at the direction of the General Partner shall, elect
      a
      safe harbor under which the fair market value of any Partnership Interests
      issued after the effective date of such Treasury Regulations (or other guidance)
      will be treated as equal to the liquidation value of such Partnership Interests
      (i.e., a value equal to the total amount that would be distributed with respect
      to such interests if the Partnership sold all of its assets for their fair
      market value immediately after the issuance of such Partnership Interests,
      satisfied its liabilities (excluding any non-recourse liabilities to the extent
      the balance of such liabilities exceeds the fair market value of the assets
      that
      secure them) and distributed the net proceeds to the Partners under the terms
      of
      this Agreement). In the event that the Partnership makes a safe harbor election
      as described in the preceding sentence, each Partner hereby agrees to comply
      with all safe harbor requirements with respect to transfers of such Partnership
      Interests while the safe harbor election remains effective.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    E.    
      The
      Partnership Agreement is hereby amended by appending Exhibit
      B
      to this
      Amendment as Exhibit
      B
      to the
      Partnership Agreement.

     

    
      	3.  	
                Continuation
                of
                Partnership Agreement.

            

    

     

            The
      Partnership
      Agreement and this Amendment shall be read together and shall have the same
      force and effect as if the provisions of the Partnership Agreement and this
      Amendment (including Exhibit B hereto) were contained in one document. Any
      provisions of the Partnership Agreement not amended by this Amendment shall
      remain in full force and effect as provided in the Partnership Agreement
      immediately prior to the date hereof.

    

    [Remainder
      of page intentionally blank]

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the parties hereto have executed this Amendment to the
      Partnership Agreement as of the 14th day of March 2006.

     

    
      	 	 	 
	 	
              GENERAL
                PARTNER

            
	 	NORTHSTAR
              REALTY FINANCE CORP.
	 
 	 
 	 
 
	 	By:  	/s/ Mark
              E.
              Chertok
	 	
              
Name: Mark
              E. Chertok
	 	Title:
               Chief
              Financial Officer and Treasurer 
	 	 
	 	GRANTEES:
	 	 	 
	 	*Individual Counterpart Signature
              Pages
              Attached.

    

     

     

     

     

    
 

    [Signature
      Page to Amendment to the Partnership Agreement]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Schedule
      A to First Amendment to Partnership Agreement

    

    
      	
              Name
                and Address

            	
              Number
                of OPP Units

            
	 	 
	 	 
	 	 
	 	 
	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      B

    

    NORTHSTAR
      REALTY FINANCE LIMITED PARTNERSHIP

    

    PARTNERSHIP
      UNIT DESIGNATION - OPP UNITS

    

     The
      following are the terms of the OPP Units:

     

    1.  LTIP
      Equivalence.
      Except
      as otherwise expressly provided in this Partnership Unit Designation, OPP Units
      shall be treated as LTIP Units, and shall have the rights, privileges,
      restrictions, powers and duties applicable to LTIP Units under the Agreement,
      including without limitation the provisions of Section 4.5 of the
      Agreement.

     

    
      	2.  	
               Distributions.

            

    

     

    A.  OPP
      Distributions.
      Commencing from the Distribution Participation Date (as defined below)
      established for any OPP Units, Holders of such OPP Units shall be entitled
      to
      receive, if, when and as authorized by the General Partner, any distributions
      otherwise payable with respect to LTIP Units and shall be treated as outstanding
      LTIP Units for purposes of the distribution provisions of the Agreement. For
      the
      avoidance of doubt, for purposes of the first distribution to occur after the
      Distribution Participation Date, OPP Units issued on or before the relevant
      quarterly period shall be treated as having been outstanding for the full
      period. Prior to the Distribution Participation Date, OPP Units shall be
      entitled to any distributions by the Partnership (i) in connection with an
      Adjustment Event as provided in Section 4.5(b) of the Agreement, treating the
      OPP Units as outstanding LTIP Units, and (ii) if, when and as authorized by
      the
      General Partner out of funds or other property legally available for the payment
      of distributions, distributions representing proceeds of a sale or other
      disposition of all or substantially all of the assets of the Partnership in
      an
      amount per unit equal to the amount of any such distributions payable on the
      Partnership Common Units, provided that the amount of distributions to any
      Holder of OPP Units under this clause (ii) shall not exceed the positive
      balances of the Capital Account of the Holders of such OPP Units to the extent
      attributable to the ownership of such OPP Units. 

     

    B.  Distribution
      Participation Date.
      The
“Distribution
      Participation Date”
for
      each OPP Unit will be either (i) with respect to OPP Units granted pursuant
      to the General Partner’s 2006 Outperformance Plan, as it may be amended or
      supplemented from time to time or any successor plan under which additional
      OPP
      Units may be issued (the “Plan”),
      the
      applicable Valuation Date (as defined in the Award Agreement of each Person
      granted OPP Units under the Plan) or (ii) with respect to other OPP Units,
      such
      date as may be specified in the Award Agreement or other documentation pursuant
      to which such OPP Units are issued.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
       

      
        	3.	
                Allocations.
                  

              

      

       

    

    A.    
      Allocations
      of Net Income and Net Loss.
      Commencing with the portion of the taxable year of the Partnership that begins
      on the Distribution Participation Date established for any OPP Units, such
      OPP
      Units shall be allocated Net Income and Net Loss under Section 6.2 in amounts
      per OPP Unit equal to the amounts allocated per Partnership Common Unit
      (adjusted to the extent required by any Regulatory Allocations or any curative
      allocations under Section 6.3(c)(ix)). The General Partner is authorized in
      its
      discretion to delay or accelerate the participation of the OPP Units in
      allocations of Net Income and Net Loss, or to adjust the allocations made after
      the Distribution Participation Date, so that the ratio of (i) the total
      amount of Net Income or Net Loss allocated under Section 6.2 with respect to
      each OPP Unit in the taxable year in which that OPP Unit’s Distribution
      Participation Date falls, to (ii) the total amount distributed to that OPP
      Unit with respect to such period, is more nearly equal to such ratio as computed
      for the Partnership Common Units held by the General Partner.

     

    B.    
      Special
      Allocations.
      OPP
      Units shall be treated as outstanding LTIP Units (and the Holders thereof
      treated as Holders of LTIP Units) for all purposes of Section
      6.3(b).

     

    
      
        	4.	
                Voting
                  Rights.

              

      

    

     

    A.  Voting
      with LTIP Units.
      Except
      as otherwise provided herein, OPP Units and Partners who hold OPP Units shall
      be
      treated as LTIP Units and LTIP Unitholders, respectively, for all purposes
      of
      Section 14.4. 

     

    B.  Special
      Approval Rights.
      So long
      as any OPP Units remain outstanding, the Partnership shall not, without the
      affirmative vote of the Partners who hold at least a majority of the OPP Units
      outstanding at the time, given in person or by proxy, either in writing or
      at a
      meeting (voting separately as a class), amend, alter or repeal, whether by
      merger, consolidation or otherwise, the provisions of the Partnership Agreement
      applicable to OPP Units so as to materially and adversely affect any right,
      privilege or voting power of the OPP Units or the Partners who hold OPP Units
      as
      such, unless such amendment, alteration or repeal affects equally, ratably
      and
      proportionately the rights, privileges and powers of the holders of LTIP Units;
      but subject, in any case, to the following provisions:

     

    
      	(i)  	
              Any
                difference in effect between the LTIP Units and the OPP Units that
                is
                required or reasonably desirable to implement the difference in the
                distribution rights with respect to LTIP Units and OPP Units shall
                not be
                deemed to have an effect that is not equal, ratable or proportionate
                to
                the effect on the holders of LTIP Units;

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	(ii)  	
              Any
                creation or issuance of any Partnership Units or of any class or
                series of
                Partnership Interest, whether ranking senior to, junior to, or on
                a parity
                with the OPP Units with respect to distributions and the distribution
                of
                assets upon liquidation, dissolution or winding up shall not be deemed
                to
                have an effect that is not equal, ratable or proportionate to the
                effect
                on the holders of LTIP Units; and 

            

    

     

    
      	  
              (iii)  	
              any
                waiver by the Partnership of restrictions or limitations applicable
                to any
                outstanding LTIP Units or OPP Units with respect to any Unitholder
                or
                Unitholders shall not be deemed to materially and adversely alter,
                change,
                modify or amend the rights, powers or privileges of the LTIP Units
                or OPP
                Units with respect to other
                Unitholders

            

    

     

    [End
      of Text]

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