Exhibit 10.17

 

FORTRESS INVESTMENT GROUP LLC

PRINCIPAL COMPENSATION PLAN

 

1.                                      Purposes of the Plan. This Fortress
Investment Group LLC Principal Compensation Plan provides for the payment of
annual incentive compensation to those Principals of the Company designated for
participation in the Plan and is intended to compensate each of such Principals
for his services, contributions and leadership provided to Fortress and further
align his interests with the interests of the Company’s stockholders.
Capitalized terms used but not defined herein have the meanings given to such
terms in Annex A hereto.

 

2.                                      Plan Administration.

 

(a)                                 Compensation Committee. The Plan shall be
administered by the Compensation Committee. The Compensation Committee shall
have the power and authority, without limitation:

 

(i)                                   to construe and interpret the terms and
provisions of the Plan and any Award issued under the Plan (and any Award
Agreement relating thereto) and to otherwise supervise the administration of the
Plan and to exercise all powers and authorities specifically granted under the
Plan or necessary or advisable in the administration of the Plan;

 

(ii)                                to delegate its authority and
responsibilities under the Plan to the Principals Committee and/or members of
management, subject to the requirements of applicable law or any stock exchange
on which Class A Shares are traded;

 

(iii)                             to review and approve all material
recommendations, decisions and determinations of the Principals Committee;

 

(iv)                            to determine the form of Awards granted under
the Plan;

 

(v)                               to determine the terms and conditions, not
inconsistent with the terms of the Plan, which shall govern all Awards under the
Plan (including the amount, manner and time of Payments);

 

(vi)                            to determine the total amount and payment of all
Awards under the Plan in respect of a particular Fiscal Year;

 

(vii)                         to determine the eligibility for participation in
the Plan in accordance with Section 3 below;

 

(viii)                      to prescribe forms and procedures for purposes of
Plan participation and distribution of Awards; and

 

(ix)                            to adopt rules, regulations and bylaws and to
take such actions as it deems necessary or desirable for the proper
administration of the Plan.

 

The powers and authority of the Compensation Committee hereunder shall in all
events be subject to the terms of the Plan and the applicable Award Agreement,
and the Compensation Committee shall in all events honor such terms to the
extent permitted by applicable law.

 

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(b)                                 Principals Committee.  The Principals
Committee shall make recommendations to the Compensation Committee with respect
to the administration of the Plan.  In particular, the Principals Committee
shall recommend (i) whether a Participant shall be treated as the CIO or Sponsor
for a newly-raised fund or assets (which recommendation shall be made at the
time a fund or product is launched) and (ii) interpretations of ambiguous or
disputed material terms of the Plan. As a general principle under the Plan,
Principals are expected to receive compensation in the same form and on the same
schedule (e.g., equity of a public company) as do Fortress employees, subject to
tax and other applicable limitations.

 

(c)                                  All decisions made by the Compensation
Committee pursuant to the provisions of the Plan shall be final, conclusive and
binding on all persons, including the Company and the Participants. No member of
the Board, the Compensation Committee or the Principals Committee, nor any
officer or employee of the Company or any of its Affiliates acting on behalf of
the Board, the Compensation Committee or the Principals Committee, shall be
personally liable for any action, omission, determination, or interpretation
taken or made in good faith with respect to the Plan, and all members of the
Board, the Compensation Committee or the Principals Committee and each and any
officer or employee of the Company and of any of its Affiliates acting on their
behalf shall, to the maximum extent permitted by law, be fully indemnified and
protected by the Company in respect of any such action, omission, determination
or interpretation.

 

3.                                      Eligibility.  The initial Participants
in the Plan are set forth in Schedule 1. Additional persons eligible to
participate in the Plan shall be determined by the unanimous agreement of the
Principals Committee, subject to the approval of the Compensation Committee. 
With respect to each Fiscal Year, the persons who shall participate in the Plan
for such Fiscal Year shall be determined prior to the end of the immediately
preceding Fiscal Year.  The Compensation Committee shall have the authority to
remove a Participant from the Plan upon (i) a termination of the Participant’s
employment with Fortress for Cause or the earlier of (A) such Participant’s
voluntary resignation from Fortress or (B) receipt of notice from such
Participant of such Participant’s voluntary resignation or (ii) the unanimous
vote of the Principals Committee.  Schedule 1 sets forth the list of eligible
Participants for the 2012 Fiscal Year.

 

4.                                      Awards.  An award under this Plan (an
“Award”) may be in such form as is determined by the Compensation Committee,
including in the form of cash compensation and/or one or more equity or other
economic interests in the Company or one or more Affiliates of the Company (any
such equity or economic interest, an “Equity Interest”). Any portion of an Award
comprised of an Equity Interest may be structured as a “profits interest,”
“capital interest” or other type of interest for federal income tax purposes. 
An Award may apply to a single Fiscal Year or multiple Fiscal Years.  An Award
shall also indicate for which Hedge Fund(s), PE Fund(s) and/or Castle(s) a
Participant will be a CIO or Sponsor.  Each Participant who is granted an Award
shall enter into one or more Award Agreements with Fortress, containing such
terms and conditions as are not inconsistent with the Plan, as the Compensation
Committee shall require.  The provisions of each Award need not be the same with
respect to each Participant. The Company shall make reasonable efforts to
structure awards in a tax-efficient manner for the Participants, subject to
compliance with Code Section 409A and other applicable requirements of the

 

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Code.  All obligations in respect of Awards hereunder shall be obligations of
Fortress.  Fortress may cause partnership agreements of the Company’s Affiliates
to be amended to the extent required or desirable to effectuate the terms of the
Plan.

 

5.                                      Determination of Annual Amount. Subject
to the other terms and conditions of the Plan and any Award Agreement, an Award
(whether in the form of cash or Equity Interests) will entitle the applicable
Participant to a Payment equal to the Annual Amount (as defined below), if
positive, in respect of the Fiscal Year to which the Award relates.

 

(a)                                 Annual Amount.  The “Annual Amount” for a
Participant for a particular Fiscal Year shall be equal to the sum of the
following:

 

(i)                                     Existing Hedge Fund AUM:  the sum, for
each Hedge Fund for which the applicable Participant has served as CIO during
the applicable Fiscal Year, of the product of (A) 0.20 times (B) the Promote for
the applicable Hedge Fund that is attributable to Existing Hedge Fund AUM for
the applicable Fiscal Year; plus

 

(ii)                                  New Hedge Fund AUM:  the sum of:

 

(A)                               for each Hedge Fund for which the applicable
Participant has served as CIO during the applicable Fiscal Year, an amount equal
to the product of (1) 0.20 times (2) the NOR for the applicable Hedge Fund that
is attributable to New Hedge Fund AUM for the applicable Fiscal Year; plus

 

(B)                               for each Hedge Fund that was Sponsored by the
applicable Participant, an amount equal to the product of (1) 0.10 times (2) the
NOR for the applicable Hedge Fund that is attributable to New Hedge Fund AUM for
the applicable Fiscal Year; plus

 

(iii)                               New PE Funds:  the sum of:

 

(A)                               for each New PE Fund for which the applicable
Participant has served as CIO during the applicable Fiscal Year, an amount equal
to the product of (1) 0.20 times (2) the NOR for the applicable New PE Fund for
the applicable Fiscal Year; plus

 

(B)                               for each New PE Fund that was Sponsored by the
applicable Participant, an amount equal to the product of (1) 0.10 times (2) the
NOR for the applicable New PE Fund for the applicable Fiscal Year; plus

 

(iv)                              Castles:  the sum of:

 

(A)                               for each Castle that had raised capital on or
prior to January 1, 2012 that was Sponsored by the applicable Participant, an
amount equal to the product of (1) 0.20 times (2) the excess, if any, of (x) the
NOR for the

 

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applicable Castle for the applicable Fiscal Year over (y) the NOR for the
applicable Castle for the 2011 Fiscal Year; plus

 

(B)                               for each Castle that had first raised capital
after January 1, 2012 for which the applicable Participant has served as CIO
during the applicable Fiscal Year, an amount equal to the product of (1) 0.20
times (2) the NOR for the applicable Castle for the applicable Fiscal Year; plus

 

(C)                               for each Castle that had first raised capital
after January 1, 2012 that was Sponsored by the applicable Participant, an
amount equal to the product of (1) 0.10 times (2) the NOR for the applicable
Castle for the applicable Fiscal Year.

 

Any reference to a “sum” or “amount” in this Section 5 may be a positive or
negative number.

 

(b)                                 Shortfall. In the event that the Annual
Amount in respect of a Fiscal Year for a Participant is a negative amount (such
amount, a “Shortfall Amount”), any future Annual Amount shall be reduced by the
Shortfall Amount (and any prior Shortfall Amount that has not been previously
recovered pursuant to this Section 5(b)).

 

(c)                                  Adjustments. In the event that a
Participant serves as CIO for less than all of a Fiscal Year (other than in
circumstances governed by Section 9 of this Plan) , appropriate adjustments
shall be made to this Section 5 to equitably adjust the amount of such
Participant’s Annual Amount for the applicable Fiscal Year.

 

(d)                                 Allocations. The Principals Committee shall
determine the principles and methodology for expense and revenue allocations
required to determine any Annual Amount (or component thereof) or other
allocation described in the immediately following sentence.  For all purposes of
this Plan and any Award Agreement, (i) any allocation of any revenues or
expenses of Fortress and/or (ii) any allocation of any Promote, NOR, Trading P/L
and/or the calculation of any HF Repayment Obligation in respect of any Hedge
Fund that is comprised of Existing Hedge Fund AUM and New Hedge Fund AUM shall,
in each case, be initially determined by a committee comprised of two
representatives (not including a Participant) from each business unit and the
Chief Financial Officer and Controller of the Company, with such determination
based on the principles and methodology that have been established by the
Principals Committee. The Principals Committee shall review and approve each
such determination.

 

6.                                      Determination of Payments.  For each
Fiscal Year, the Principals Committee shall recommend to the Compensation
Committee the Annual Amount in respect of each Participant and the form of each
Participant’s Payment (including any allocations among individual Participants
within a business unit) on or prior to January 31st of the Fiscal Year
immediately following the Fiscal Year to which the applicable Awards relate. 
Mr. Edens shall be responsible for the provision to the Principals Committee of
the allocation of amounts among the Participants within the Private Equity
business unit, and shall make such provision on or prior to January 15th of the
Fiscal Year immediately following

 

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the Fiscal Year to which the applicable Awards relate. The Compensation
Committee shall act to make a final determination of amount and form of each
Participant’s Payment, on the recommendations of the Principals Committee, by no
later than February 10th of such Fiscal Year.

 

7.                                      Form of Payment.

 

(a)                                 General.  A Payment to a Participant may be
made in cash (including cash compensation and cash distributions to a
Participant in respect of any Equity Interests held by the Participant), and/or,
in the discretion of the Compensation Committee based upon the recommendation of
the Principals Committee, Class A shares of the Company or other types of Equity
Interests; provided, however, that if the Annual Amounts payable to a
Participant (or, in the case of a business unit with multiple Participants, all
Participants in such business unit) in respect of a particular Fiscal Year
exceeds 10% of the Company’s Distributable Earnings earned from the applicable
Participant’s (or, if applicable, Participants’) business unit for such Fiscal
Year (determined without reference to any deductions for amounts to be paid
under this Plan for such Fiscal Year), such excess aggregate Annual Amounts
shall be paid to such Participant (or, if applicable, Participants) in the form
of grants of RSUs. In the case of a business unit with multiple Participants,
the foregoing limitation shall be applied to them on a pro rata basis based upon
their relative Annual Amounts.

 

(b)                                 RSUs.  The RSUs shall be subject to the
terms and conditions (including, without limitation, as to vesting and
forfeiture) to be set forth in a definitive grant agreement that shall govern
the Participant’s RSU grant.  The RSUs will vest in three equal installments on
each of the first three anniversaries of the date of grant and will be dividend
paying.  The number of RSUs granted shall be determined based upon the average
closing price of Class A Shares of the Company over the 20 trading day period
preceding the date of Compensation Committee approval of the Annual Amount.

 

8.                                      Timing of Payments.  Subject to Sections
9, 10, 11 and 12, a Payment to a Participant shall generally be made at the same
time as payments of other formula-based or profit-sharing compensation payments
in respect of the Fiscal Year to which the applicable Payment relates are made
to employees of Fortress, but in no event earlier than January 31st or later
than March 15th of the Fiscal Year immediately following the Fiscal Year to
which the applicable Payment relates.

 

9.                                      Vesting of Awards; Termination of
Employment.

 

(a)                                 Payment in Respect of Hedge Funds and
Castles.  Except as provided for in Sections 9(c) and 9(f), a Participant will
not be entitled to any Payment in respect of any portion of an Annual Amount
determined with reference to Sections 5(a)(i) or (ii) unless the Participant is
an employee of Fortress on the date on which any Annual Amount is actually paid
to a Participant.

 

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(b)                                 Private Equity.  Except as provided for in
this Section and Sections 9(c) and 9(f), a Participant will not be entitled to
any Payment in respect of any portion of an Annual Amount determined with
reference to Section 5(a)(iii) or Section 5(a)(iv) unless the Participant is an
employee of Fortress on the date on which any Annual Amount is actually paid to
a Participant. Subject to Sections 9(c), (d) and (e), the right of a Participant
to receive any payment in respect of any portion of Promote granted pursuant to
Section 5(a)(iii) or Section 5(a)(iv) shall vest on the same vesting schedule
and be subject to the other terms and conditions as are applicable to Fortress
employees generally who are granted Promote interests in  the PE Fund(s) or
Castle to which any such portion relates (other than, subject to Section 10(d),
terms and conditions relating to holdback of distributions and the cash
collateralization of clawback obligations). Such vesting schedule shall be set
forth in a Participant’s Award Agreement and/or the governing documents of any
issuer of Equity Interests.

 

(c)                                  Termination without Cause or Due to Death
or Disability.  In the event of a termination of the Participant’s employment by
Fortress without Cause or due to death or Disability, provided that the
Participant (or his estate, if applicable) executes a general release of claims
in the form customarily used by Fortress within forty-five (45) days following
such termination and such release becomes irrevocable, (i) a Participant who
serves as a CIO or Sponsor of an Existing Hedge Fund, a New Hedge Fund or a
Castle shall be entitled to a Payment under the Plan equal to, and payable in
the same manner as, the Payment that would have otherwise been made to such
Participant in respect of the amounts determined with reference to Sections
5(a)(i), (ii), (iv) and 5(b) for the Fiscal Year in which the Participant was
terminated had the Participant’s employment not terminated (and thereafter such
Participant shall not be entitled to any further Payments with respect to such
Existing Hedge Fund, a New Hedge Fund or a Castle under the Plan or any Award
Agreement) and (ii) a Participant who serves as CIO or Sponsor of a New PE Fund
or a Castle shall be entitled to Payments with respect to the portion of any
Award  that is a Promote and that is vested pursuant to Section 9(b) (with such
Payments payable at the same times as they are made to Participants generally
under the Plan), provided that this Section 9(c)(ii) shall apply only with
respect to Awards (or portions thereof) that do not constitute deferred
compensation under Code Section 409A.  For the avoidance of doubt, Invested
Amounts shall not be subject to forfeiture pursuant to this Section 9(c).

 

(d)                                 Termination for Cause.  Notwithstanding any
other provision of the Plan or an Award Agreement to the contrary, in the event
of a termination of a Participant’s employment by Fortress for Cause, the
Participant’s rights to all Awards (whether vested or unvested) and Annual
Amounts shall be forfeited without compensation as of the date the Participant
receives notice of termination from Fortress and such Participant shall have no
further rights under the Plan or any Award.  For the avoidance of
doubt, Invested Amounts shall not be subject to forfeiture pursuant to this
Section 9(d).

 

(e)                                  Voluntary Resignation.  Notwithstanding any
other provision of the Plan or an Award Agreement to the contrary, in the event
a Participant voluntarily resigns from his or her service to Fortress, the
Participant’s rights to all Awards and unpaid Annual Amounts shall be forfeited
without compensation as of the date of resignation and such Participant shall
have no further rights under the Plan or any

 

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Award, except with respect to (i) any interest in a Promote that is vested
pursuant to Section 9(b), (ii) any Invested Amounts or (iii) as set forth in
Section 9(f).

 

(f)                                   Retirement and Consultation. At the
election of a Participant, the Participant may elect to retire and enter into a
consulting agreement of up to three years in duration with Fortress pursuant to
which the Participant provides substantive and ongoing services to the Company.
During the pendency of the consulting agreement, the Participant shall continue
to vest in any RSUs granted to him pursuant to this Plan (subject to the
Participant’s compliance with the Restricted Covenant Obligations for the
pendency of their term), but shall not further vest in any Promote interests or
other Equity Interests granted to him hereunder after the date of such
retirement. For all other purposes under this Agreement, the date of retirement
shall be deemed to be the date of termination or resignation.

 

 

10.                               Certain Clawback and Repayment Obligations.

 

(a)                                 Clawback Obligation in Respect of PE Funds. 
Any Participant that receives a Payment that is comprised, in whole or in part,
of an amount described under Section 5(a)(iii) shall be responsible for his pro
rata share of any clawback or similar requirement applicable to any Promote paid
to Fortress as the general partner of the applicable New PE Fund (or Fortress in
respect thereof) (with respect to any New PE Fund (or Fortress), a “PE Clawback
Obligation”).  The terms and conditions of a PE Clawback Obligation are intended
to be substantially similar, in all material respects (other than, subject to
Section 10(d), with respect to the holdback and cash collateralization of the
obligation), to the terms and conditions applicable to Fortress employees who
are granted or otherwise receive an interest in the promote or carry of the New
PE Fund to which the PE Clawback Obligation relates.  Any PE Clawback Obligation
of a Participant shall not be reduced or otherwise limited by the termination of
the employment of such Participant with Fortress (and any related forfeiture
resulting therefrom).

 

(b)                                 Funding.  A PE Clawback Obligation may be
payable in cash and/or Equity Interests in such proportion between them as shall
be determined pursuant to the principles promulgated by the Compensation
Committee and/or as may be set forth in a Participant’s Award Agreement. Any
ratable portion of a PE Clawback Obligation that relates to Payments made to
Participants in unvested RSUs shall not become due and payable until such time
as the corresponding RSUs have vested and been delivered, provided that such
repayment may in all events be made in cash at the election of the Participant.

 

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(c)                                  Override.  Notwithstanding any other
provision of this Plan or an Award Agreement to the contrary, in the event that
applicable law or the governing documents of any Hedge Fund or New PE Fund
requires (i) a more stringent or burdensome clawback, repayment or similar
obligation or (ii) the use of a deferral, escrow, holdback and/or collateral
obligation, this Plan and the terms of any Award Agreement shall reflect such
obligations and each of them shall be amended to the extent necessary to reflect
such obligations.

 

11.                               Covenant Collateral.

 

(a)                                 An amount equal to 50% of the after-tax
portion (determined assuming the Participant pays state and local income taxes
at the highest marginal rate of taxation applicable to residents of New York,
New York in the applicable Fiscal Year) of each Annual Amount that is paid in
cash shall be invested by the Participant receiving Payment of such Annual
Amount in one or more Fortress Funds (each such amount, an “Invested Amount”). 
Each such amount shall be invested in the Fortress Fund(s) selected by the
applicable Participant in his discretion at the earliest time that an
appropriate fund is available for such investment (as determined in the
reasonable judgment of the Compensation Committee).  In the event that an
appropriate fund is not available for investment at the time of receipt of such
Payment,  the Participant shall invest the applicable amount in a cash or money
market fund that is used by Fortress for the investment of its own cash reserves
until such time as the applicable Participant delivers the written direction
described in the immediately preceding sentence and such amount shall be deemed
to be an Invested Amount for all purposes while invested in such cash or money
market account.  Any Invested Amount shall be subject to the terms and
conditions generally applicable to investments by Fortress employees in the
Fortress Fund(s) in which the Invested Amount is invested, including with
respect to payment of fees and the nature and frequency of any redemption
rights. At the election of a particular Principal, any amount invested by such
Principal in a Fortress managed fund and designated by such Principal as an
“Invested Amount” shall be deemed to count toward the investment obligation
described in the first sentence of this Section 11(a), and any such amount shall
be subject to the security interest described in Section 11(b) below.

 

(b)                                 Each Invested Amount shall secure a
Participant’s obligations under  the restrictive covenants included within his
Employment Agreement or any successor provisions of his Employment Agreement
(with respect to a Participant, his “Restrictive Covenant Obligations”) during
the Collateral Period for the applicable Invested Amount.  As such, each
Invested Amount shall be available to satisfy any judgment or settlement due to
Fortress for any breach of a Participant’s Restrictive Covenant Obligations
during the applicable Collateral Period.  In the event that there is any claim
for any breach of a Participant’s Restrictive Covenant Obligations pending at
the expiration of any Collateral Period, any applicable Invested Amount shall
not be distributed or paid to the

 

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applicable Participant until the final determination or settlement of such
claim.  For the avoidance of doubt, no Invested Amount of one Participant shall
be available to satisfy any judgment or settlement resulting from a breach of
the Restrictive Covenant Obligations of another Participant.

 

(c)                                  Fortress shall have a first priority
security interest in all Invested Amounts during the applicable Collateral
Periods to secure the Restrictive Covenant Obligations.  Upon the request of
Fortress, each Participant shall be required to execute and deliver such
agreements and other instruments as may be necessary or appropriate to give
effect to and maintain such security interest.

 

(d)                                 At the expiration of the Collateral Period
with respect to each Invested Amount, the security interest held by Fortress
over such Invested Amount shall automatically expire and be of no further
effect, except as otherwise expressly set forth in this Plan.

 

12.                               Set-Off.  Notwithstanding any other provision
of this Plan or any Award Agreement to the contrary, to the extent permitted by
Code Section 409A, Fortress shall have the right to offset against any amount
owed to a Participant under this Plan any amounts that are owed by a Participant
to Fortress (including amounts owed under this Plan) at the time of any Payment
hereunder. Invested Amounts and FOG units shall not be subject to the provisions
of this Section 12.

 

13.                               Amendment and Termination of the Plan.  The
Plan shall become effective as of the Effective Date.  The Board may amend,
modify, suspend or terminate the Plan or Awards thereunder, in whole or in part,
at any time, including adopting amendments deemed necessary or desirable to
correct any defect or to supply omitted data or to reconcile any inconsistency
in the Plan or in any Award granted hereunder.  At no time before the actual
distribution of amounts to Participants under the Plan shall any Participant
accrue any vested interest or right whatsoever under the Plan except as
otherwise explicitly stated in this Plan.

 

14.                               Implementation of the Plan.  This Plan sets
forth the material terms and conditions of the subject matter hereof.  Such
terms and conditions will be more fully set forth in (i) such principles and
policies as may be promulgated by the Compensation Committee and/or Principals
Committee from time to time pursuant to Section 2, (ii) each Award Agreement
and/or (iii) such other agreements and documents (whether or not referenced in
this Plan) as may be necessary or appropriate to give effect to the terms and
conditions set forth herein.

 

15.                               Withholding.  Distributions pursuant to this
Plan shall be subject to any applicable tax withholding requirements (federal,
state, local and foreign).

 

16.                               No Guarantee of Employment.  No statement in
this Plan should be construed to grant any employee an employment contract of
fixed duration or any other contractual rights, nor should this Plan be
interpreted as creating an implied or an expressed contract of employment or any
other contractual rights between the Company and its employees.

 

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17.                               Successors.  All obligations of the Company
under the Plan, with respect to Awards granted hereunder, shall be binding on
any successor to the Company, whether the existence of such successor is the
result of a direct or indirect purchase, merger, consolidation, or otherwise, of
all or substantially all of the business or assets of the Company.

 

18.                               Nonassignment.  Except as may be determined by
the Compensation Committee or set forth in the applicable Award Agreement, the
rights of a Participant under this Plan shall not be assignable or transferable
by the Participant except by will or the laws of intestacy.

 

19.                               Right to Receive Payment.  Except as otherwise
provided in the applicable Award Agreement, each Award under the Plan shall be
paid solely from the general assets of Fortress.  Nothing in this Plan shall be
construed to create a trust or to establish or evidence any Participant’s claim
of any right to Payment of an Award other than as an unsecured general creditor
with respect to any Payment to which he or she may be entitled.

 

20.                               Governing Law.  The Plan shall be governed by
the laws of the State of Delaware.

 

21.                               Section 409A.  This Plan and all Awards are
intended to comply with Code Section 409A, to the extent subject thereto, and,
accordingly, to the maximum extent permitted, this Plan and all Awards hereunder
shall be interpreted and be administered to be in compliance therewith. 
Notwithstanding anything contained herein to the contrary, to the extent
required in order to avoid accelerated taxation and/or tax penalties under Code
Section 409A, a Participant shall not be considered to have terminated
employment with the Company for purposes of this Plan, and no Payment shall be
due to a Participant under this Plan, until such Participant would be considered
to have incurred a “separation from service” from the Company within the meaning
of Code Section 409A.  Any Payments described in this Plan that are due within
the “short-term deferral period” as defined in Code Section 409A shall not be
treated as deferred compensation unless applicable law requires otherwise.  Each
amount to be paid or benefit to be provided to a Participant pursuant to this
Plan that constitutes deferred compensation subject to Code Section 409A shall
be construed as a separate identified payment for purposes of Code Section
409A.  Notwithstanding anything to the contrary in this Plan, to the extent that
any Payments to be made upon a Participant’s separation from service would
result in the imposition of any individual penalty tax imposed under Code
Section 409A, the Payment shall instead be made on the first business day after
the earlier of (i) the date that is six (6) months following such separation
from service and (ii) such Participant’s death.

 

22.                               Books and Records. For purposes of resolving
accounting and record-keeping questions under the Plan, the books and records
of the Company will govern in the event of a conflict between those records and
those of any Hedge Fund, PE Fund or Castle (as applicable).  Adjustments from
one Fiscal Year to the next necessitated by audit-related or other adjustments
to the books and records of any Hedge Fund, PE Fund or Castle (as applicable)
after the Payment of any Annual Amount for a particular Fiscal Year will be made
and paid or deducted at the time Payments are made under the Plan with respect
to the Fiscal Year following the Fiscal Year  of the adjustment.

 

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Annex A

 

Defined Terms

 

(a)                                 “Affiliate” means, with respect to any
Person, any other Person that directly or indirectly through one or more
intermediaries controls, is controlled by or is under common control with the
Person in question. As used herein, the term “Control” means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through ownership of voting
securities, by contract or otherwise.

 

(b)                                 “AUM” means the “Management Fee Paying
Assets Under Management” or “AUM” as defined in the most recent quarterly or
annual report filed by the Company with the SEC.

 

(c)                                  “Award” shall have the meaning set forth in
Section 4 hereof.

 

(d)                                 “Award Agreement” means any written
agreement, contract, instrument and/or document evidencing any Award (or portion
thereof) and providing the terms and conditions of such Award.

 

(e)                                  “Board” means the Board of Directors of the
Company.

 

(f)                                   “Castles” means any (i) publicly traded
alternative investment vehicle or (ii) company-like vehicle, in either case
directly managed by Fortress, including the entities noted as “Castles” on
Schedule 2 hereto.

 

(g)                                  “Cause” shall have the meaning set forth in
the applicable Participant’s Employment Agreement.

 

(h)                                 “CIO” means, with respect to a particular
Hedge Fund or PE Fund, the chief investment officer (or person serving in a
comparable capacity) of such fund. For any Hedge Fund, PE Fund or Castle in
existence on the date hereof, the CIO, if any, thereof is noted on Schedule 2
hereto.

 

(i)                                     “Class A Shares” means Class A Shares of
the Company.

 

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

 

(k)                                 “Collateral Period” means, with respect to a
particular Invested Amount, the period beginning either (i) January 1 of the
Fiscal Year such amount was paid to the Participant or (ii) on the date that
such an amount is so designated by a Principal, and, in either case of (i) or
(ii), ending on the eighteen month anniversary of such date.

 

(l)                                     “Company” means Fortress Investment
Group LLC.

 

(m)                             “Compensation Committee” means the Compensation
Committee of the Board.

 

(n)                                 “Disability” shall have the meaning set
forth in the applicable Participant’s Employment Agreement; provided, however,
that, to the extent required in order to avoid accelerated taxation and/or tax
penalties under Code Section 409A, a

 

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Participant shall not be considered to have become “disabled” for purposes of
this Plan until such Participant would be considered to be “disabled” within the
meaning of Code Section 409A.

 

(o)                                 “Distributable Earnings” means, with respect
to a Fiscal Year, the Company’s pre-tax fund management distributable earnings
as reported in the Company’s Form 10-K for such Fiscal Year.

 

(p)                                 “Effective Date” means January 1, 2012.

 

(q)                                 “Employment Agreement” means, for a
particular Participant, that certain Employment, Non-Competition and
Non-Solicitation Agreement between the applicable Participant and the Company
dated as of August 4, 2011, as amended from time to time, or any successor
agreement.

 

(r)                                    “Excluded Assets” means (i), any fund or
account managed by Logan Circle Partners, (ii) Fortress Partners Funds and (iii)
any balance sheet investments of Fortress, including, in each case the funds,
accounts and investments noted as an “Excluded Fund / Account” on Schedule 2
hereto.

 

(s)                                   “Existing Hedge Fund” means a Hedge Fund
noted as an “Existing Hedge Fund” on Schedule 2 hereto.

 

(t)                                    “Existing Hedge Fund AUM” means the AUM
of an Existing Hedge Fund up to the amount of such AUM reported in the December
31, 2011 Report on Form 10-K of Fortress (the “10-K”), adjusted for redemptions
from such fund payable on or before December 31, 2010.  To the extent that the
AUM of such a Hedge Fund increases beyond the amount reported in the 10-K (as
adjusted), such incremental increased amount shall be treated as New Hedge Fund
AUM. The measurement of New Hedge Fund AUM (if any) in an Existing Hedge Fund
shall occur each time that promote is clipped in such fund.

 

(u)                                 “Existing PE Fund” means a PE Fund noted as
an “Existing PE Fund” on Schedule 2 hereto.

 

(v)                                 “Fiscal Year” means a fiscal year of the
Company.

 

(w)                               “FOG” means Fortress Operating Group.

 

(x)                                 “FOG Unit” means a unit in the Fortress
Operating Group, which represents one equity interest in each of the entities
that comprise the Fortress Operating Group.

 

(y)                                 “Fortress” means, collectively, this Company
and its controlled Affiliates.

 

(z)                                  “Fortress Fund” means any fund that is
managed by Fortress that is determined by the Compensation Committee to be
available for investment by a Participant for purposes of Section 11.

 

(aa)                          “Fortress Operating Group” shall have the meaning
assigned to it in the LLC Agreement.

 

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(bb)                          “Hedge Fund” means (a) any fund that is an
unregistered, open-ended fund that provides for periodic, discretionary
redemption rights for an investor that is reported as a hedge fund as part of
Fortress’s financial statements or other public reports and (b) any open-ended
managed account or separate account that provides for periodic, discretionary
redemption rights for a client and is managed by Fortress in a manner similar to
a fund described in the immediately preceding clause (a), including, in each
case, the funds and accounts noted as “Existing Hedge Funds” and “Hedge Funds
Currently in Formation Subject to the Plan” on Schedule 2 hereto. 
Notwithstanding the foregoing, a Hedge Fund shall not include any Excluded
Assets or Castles.

 

(cc)                            “LLC Agreement” means the Amended and Restated
Limited Liability Company Agreement of the Company, as amended from time to
time.

 

(dd)                          “New Hedge Fund AUM” means the AUM of any Hedge
Fund other than Existing Hedge Fund AUM and Excluded Assets.

 

(ee)                            “New PE Fund” means a PE Fund that holds a final
closing after January 1, 2012.  For the avoidance of doubt, no Existing PE Fund
shall be a New PE Fund.

 

(ff)                              “NOR” means, in all cases applying the
principles used for determining “fund management distributable earnings” of
Fortress as disclosed by Fortress on its financial statements publicly filed
with the SEC, with respect to a particular Hedge Fund, PE Fund or Castle (as
applicable) for the applicable Fiscal Year, (a) the amount of the net management
fees plus the amount of net incentive fees actually received by Fortress as
reflected on Fortress internal management accounts in respect of the applicable
Hedge Fund, PE Fund or Castle with respect to the applicable Fiscal Year (in
each case, net of rebates thereof, if any, with respect to investments by
Fortress or its affiliates and revenue sharing arrangements) minus (b) the sum
of (i) the applicable fund’s allocable share of the costs and expenses of
Fortress related to, or incurred for the benefit of, the applicable Hedge Fund,
PE Fund or Castle, including, but not limited to, (A) payroll costs (including
salary, benefits and discretionary bonuses), (B) direct expenses (including
travel and entertainment expenses and marketing), (C) overhead expenses
(including rent), (D) other operating expenses (including reserves), (E)
corporate overhead (including corporate functions and the “capital formation
group”), (F) fixed asset depreciation and (G) payments to employees of Fortress
and its Affiliates and third parties under profit-sharing arrangements and (ii)
any taxes (including payroll and employment taxes, but for the avoidance of
doubt, excluding any income taxes payable by

 

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Fortress) payable in respect of the amounts set forth in clause (a) or clause
(b) above with respect to the applicable Fiscal Year.  For the avoidance of
doubt, (i) the NOR may be negative for a Fiscal Year and (ii) clawback
obligations on funds other than New PE AUM shall not be included within the NOR
calculation.

 

(gg)                            “Participant” means a Principal of the Company
selected by the Principals Committee and approved by the Compensation Committee
in accordance with Section 3 hereof.

 

(hh)                          “Payment” means, with respect to a particular
Annual Amount, the amount received by a Participant in satisfaction of the
applicable Annual Amount, whether in cash (including cash compensation and cash
distributions to a Participant in respect of any Equity Interests held by the
applicable Participant), RSUs or other consideration. Payment does not include
distributions made out of Invested Amounts.

 

(ii)                                  “PE Fund” means (a) any fund that is a
closed-end fund or account with no discretionary redemption rights for an
investor (other than in certain limited circumstances) that is reported as a
private equity fund as part of Fortress’s financial statements or other public
reports and (b) any closed-ended managed account or separate account with no
discretionary redemption rights for a client (other than in certain limited
circumstances) that is managed in a similar manner to a fund described in the
immediately preceding clause (a), including, in each case, the funds and
accounts listed noted as “Existing PE Funds” and “PE Funds Currently in
Formation Subject to the Plan” on Schedule 2 hereto.  Notwithstanding the
foregoing, a PE Fund shall not include any Excluded Assets or Castles.

 

(jj)                                “Person” means any individual, partnership,
limited liability company, corporation, trust or other association or entity.

 

(kk)                          “Plan” means this Fortress Investment Group LLC
Principal Compensation Plan, as may be amended or restated from time to time.

 

(ll)                                  “Principals” means “principals” as defined
in the most recent annual proxy statement filed by the Company with the SEC.

 

(mm)                  “Principals Committee” means the committee that may assist
in the administration of the Plan as described in Section 2 hereof. The
Principals Committee will initially be comprised of Messrs. Wesley R. Edens,
Peter L. Briger, Jr., Michael E. Novogratz and Daniel H. Mudd. The Compensation
Committee shall be responsible for determining whether the replacement of a
member of the Principals Committee is necessary in the event of the Death,
Disability, termination or resignation of any member of the Principals
Committee. In determining a possible replacement, the Compensation Committee
shall ensure that each business unit (i.e., PE, Liquids and Hedge) shall always
maintain at least one representative on the Principals Committee.

 

(nn)                          “Promote” means, (i) with respect to Existing
Hedge Fund AUM for the applicable Fiscal Year, the gross promote that is paid to
Fortress with respect to such Existing Hedge Fund AUM in respect of such Fiscal
Year less any payments to third parties and employees under profit-sharing
arrangements (i.e., EWYK or DCP deals) and (ii) with respect to a particular PE
Fund or Castle for the applicable

 

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Fiscal Year, the gross promote or similar amount (such as an equity interest)
that is paid to Fortress by the applicable PE Fund or Castle in respect of such
Fiscal Year less any payments of such promote or similar amount that is
calculated by reference to such promote or similar amount to third parties and
employees.

 

(oo)                          “RSUs” means restricted share units of the Company
granted pursuant to the Amended and Restated Fortress Investment Group LLC 2007
Omnibus Equity Incentive Plan, as amended from time to time, or a successor
plan.

 

(pp)                          “SEC” means the U.S. Securities and Exchange
Commission.

 

(qq)                          “Sponsor” means the Participant with respect to
any Hedge Fund or PE Fund that is raised, in whole or in part, by making use of
such Participant’s relationships, investment track record, personal reputation
and/or other individual attributes that, individually or in the aggregate,
provide a substantial and necessary contribution to the success of the capital
raise of the particular Hedge Fund or PE Fund. For any Hedge Fund, PE Fund or
Castle in existence on the date hereof, any Sponsor thereof is noted on Schedule
2 hereto. Notwithstanding any other provision of this Plan to the contrary, no
Hedge Fund or PE Fund for which a Participant serves as CIO shall also be deemed
to be Sponsored by such Participant.

 

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Schedule 1

 

Wesley R. Edens

Peter L. Briger, Jr.

Michael E. Novogratz

Randal A. Nardone

Robert I. Kauffman

 

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