EMPLOYMENT AGREEMENT

        THIS AGREEMENT is made as of February 11, 2004 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 March 31, 2001 between Executive and the Company (the "Old Agreement"); and

        WHEREAS, the term of the Old Agreement is due to end on March 30, 2004; and

        WHEREAS, the Company wishes to provide for the continued employment by the Company of Executive upon the expiration of the Old Agreement, 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 shall continue under the Old Agreement through and including 12:00 a.m., New York time, on March 30, 2004, at which time the Executive's term of employment under the Old Agreement shall expire. The term of Executive's employment under this Agreement shall commence at 12:01 a.m., New York time, on March 31, 2004 (the "Effective Date") and, unless earlier terminated in accordance with Section 5, shall continue through the later of March 30, 2007 and the first anniversary of the last "Change of Control" (as defined in Section 6(a)) that occurs on or before March 30, 2007 (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 ending at the later of the first anniversary of the date of extension and the first anniversary of the last Change of Control that occurs on or before that first anniversary of the date of extension, subject to earlier termination in accordance with Section 4 (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. (The Initial Employment Period and Additional Employment Period together are the "Employment Period.")

        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 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 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; provided that Executive shall obtain approval of the Board before commencing service on a board of directors or other governing body of a publicly-traded entity organized for profit; (ii) accept and fulfill a reasonable number of speaking engagements; 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.

        (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) 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. For the fiscal year ending December 31, 2004, Executive's Base Salary under this Agreement and the Old Agreement shall be prorated based upon the term of Executive's employment under each agreement during that fiscal year, such that Executive's aggregate Base Salary under this Agreement and the Old Agreement for the fiscal year ending December 31, 2004 is $1,000,000.


 

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